Petsmart 2011 Annual Report Download - page 34

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(1) The year ended February 3, 2008 consisted of 53 weeks while all other periods presented consisted of
52 weeks. As a result, all comparisons for the year ended February 3, 2008, other than comparable store
sales, which was calculated on an equivalent 52 week basis, also reflect the impact of one additional week.
The estimated impact of this additional week resulted in the following increases: net sales, $89.7 million;
gross profit, $34.4 million; operating, general and administrative expenses, $18.3 million; income before
income tax expense and equity in income from Banfield, $16.0 million; net income, $9.8 million; and diluted
earnings per common share, $0.07.
(2) Net sales per square foot were calculated by dividing net sales, excluding catalog and e-commerce sales, by
average square footage.
(3) Sales in stores open at least one year. For the year ended February 3, 2008, includes sales through week 52.
(4) Represents merchandise inventories divided by stores open at end of period.
(5) Represents borrowings under credit facility and capital lease obligations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains forward-looking statements that involve risks and uncertainties. Our
actual results could materially differ from those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section, as well as in the sections entitled
“Competition,” “Distribution” and “Government Regulation” included in Item 1, Part I and Risk Factors
included in Item 1, Part 1A of this Annual Report on Form 10-K.
Overview
Based on our 2011 net sales of $6.1 billion, we are North America’s leading specialty provider of products,
services and solutions for the lifetime needs of pets. As of January 29, 2012, we operated 1,232 stores, and we
anticipate opening 45 to 50 net new stores in 2012. Our stores carry a broad assortment of high-quality pet sup-
plies at everyday low prices. We offer approximately 10,000 distinct items, including nationally recognized
brand names, as well as an extensive selection of proprietary brands across a range of product categories.
We complement our extensive product assortment with a wide selection of pet services, including grooming,
training, boarding and day camp. All our stores feature pet styling salons that provide high-quality grooming
services and offer comprehensive pet training services. PetsHotels provide boarding for dogs and cats, which
includes 24-hour supervision by caregivers who are PetSmart trained to provide personalized pet care, an on-call
veterinarian, temperature controlled rooms and suites, daily specialty treats and play time, as well as day camp
for dogs. As of January 29, 2012, we operated 192 PetsHotels, and we plan to open 5 net new PetsHotels in 2012.
We make full-service veterinary care available through our strategic relationship with certain third-party
operators. As of January 29, 2012, full-service veterinary hospitals were in 799 of our stores. Banfield operated
791 of the veterinary hospitals. The remaining 8 hospitals are operated by other third parties in Canada.
The principal challenges we face as a business are the highly competitive market in which we operate and
the continuing changes in the macro-economy. However, we believe we have a competitive advantage in our
solutions for the Total Lifetime CareSM of pets, including pet services and proprietary brands, which we believe
cannot be easily duplicated. Additionally, we believe that our cash flow from operations and cash on hand will be
adequate to meet our operating, investing and financing needs in the foreseeable future and we continue to have
access to our revolving credit facility. We expect to continuously assess the economic environment and market
conditions to guide our decisions regarding our uses of cash, including capital expenditures, investments, divi-
dends and share repurchases.
Executive Summary
• Diluted earnings per common share for 2011 increased 26.9% to $2.55 on net income of $290.2 million
compared to diluted earnings per common share of $2.01 on net income of $239.9 million in 2010.
• Net sales increased 7.4% to $6.1 billion in 2011 compared to $5.7 billion in 2010 due to new store open-
ings and an increase in comparable store sales, or sales in stores open at least one year.
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