Petsmart 2012 Annual Report Download - page 34

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Recently Issued Accounting Pronouncements
See Note 2, Recently Issued Accounting Pronouncements, in the Notes to the Consolidated Financial Statements included in
this Annual Report on Form 10-K for a description of recently issued accounting pronouncements, including the impact to our
consolidated financial statements.
Results of Operations
The following table presents the percent to net sales of certain items included in our Consolidated Statements of Income and
Comprehensive Income:
Year Ended
February 3, 2013 January 29, 2012 January 30, 2011
(53 weeks) (52 weeks) (52 weeks)
Net sales.......................................................................................................... 100.0% 100.0% 100.0%
Total cost of sales............................................................................................ 69.5 70.5 70.9
Gross profit ..................................................................................................... 30.5 29.5 29.1
Operating, general and administrative expenses............................................. 20.9 21.3 21.5
Operating income............................................................................................ 9.6 8.2 7.5
Interest expense, net........................................................................................ (0.8)(0.9)(1.0)
Income before income tax expense and equity income from Banfield........... 8.8 7.3 6.5
Income tax expense......................................................................................... (3.3)(2.7)(2.5)
Equity income from Banfield.......................................................................... 0.2 0.2 0.2
Net income...................................................................................................... 5.7% 4.7% 4.2%
2012 (53 weeks) Compared to 2011 (52 weeks)
Net Sales
Net sales increased 10.5% to $6.8 billion in 2012, compared to net sales of $6.1 billion in 2011. The increase in net sales
included an estimated impact of the additional week of $126.0 million and an unfavorable impact from foreign currency fluctuations
of $1.9 million. Approximately 60% of the sales increase is due to a 6.3% increase in comparable store sales for 2012, 20% of the
sales increase is due to the addition of 46 net new stores and 4 new PetsHotels since January 29, 2012, and 20% of the sales
increase is due to the 53rd week.
Comparable store sales growth was driven by an increase in comparable transactions and average sales per comparable
transaction. Comparable transactions were 2.4% for 2012, including the impact of the additional week, and 2.5% for 2011.
During 2012, we have implemented several initiatives to increase traffic and continue to improve average sales per transaction.
We continue to see strength in our super premium/natural food category and sales of our channel exclusive foods represented more
than 75% of our food sales. We expanded the space in these categories with a consumables reset during the thirteen weeks ended
April 29, 2012, adding innovative new formulations and expanded grain-free and limited ingredient assortments in dog and cat.
In hardgoods, we refreshed and rebranded the dog toy aisle during the thirteen weeks ended July 29, 2012, with the PetSmart Toy
Chest reset. Also during the thirteen weeks ended July 29, 2012, we reset the aquatics and small animal categories to support the
growing trends by adding hundreds of new items and improving the category adjacencies and flow. We also added solutions-based
signage designed to inspire and educate in order to drive continued momentum in this category. During the thirteen weeks ended
October 28, 2012, we began expanding our offerings of exclusive and proprietary brands. Finally, we have made more than twenty
website enhancements this year and during the thirteen weeks ended October 28, 2012, we launched our Canada site on
PetSmart.com.
Services sales, which include grooming, training, day camp for dogs and boarding, increased 9.7%, or $65.6 million, to $740.5
million for 2012, compared to $674.9 million for 2011. Services sales represented 11.0% of net sales for 2012 and 2011. The
increase in services sales is primarily due to continued strong demand for our quality grooming services, the addition of 46 net
new stores and 4 new PetsHotels since January 29, 2012, and the additional week, which increased services sales by $12.8 million.
Other revenue included in net sales during 2012, represents license fees and reimbursements for utilities and specific operating
expenses charged to Banfield under the master operating agreement which comprised 0.6% of net sales, or $38.2 million, in 2012,
compared to 0.6% of net sales, or $36.7 million, during 2011. There was no impact of the additional week on other revenue.