Petsmart 2000 Annual Report Download - page 8

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before giving consideration to any lease financing that may be available, will cost approximately $70 million
through fiscal 2000. The Company believes that certain hardware and software components of the new system
will continue to be financed through lease transactions, although there can be no assurance that adequate
financing will be available to the C ompany on acceptable terms. See “Business Risks — C ompetition”.
Competition
Based on total sales, the Company is the largest specialty retailer of pet food, supplies and services in N orth
America. The pet food and pet supply retail business is highly competitive and can be categorized into four
different segments: (i) supermarkets, warehouse clubs and other mass merchandisers, (ii) specialty pet supply
chains and pet supply superstores and (iii) independent pet stores and (iv) Internet retailers. The Company
believes that the principal competitive factors influencing the Company’ s business are product selection and
quality, convenience of store locations, customer service and price. In this regard, many of the major premium
pet food brands offered by the Company, such as Science Diet, Nutro, ProPlan, and Eukanuba, are not
currently available to grocery stores, warehouse clubs or other mass merchandisers due to manufacturers’
restrictions. U.S. consumer spending over the Internet is expected to increase from $37.2 billion in 1998 to
$407.2 billion in 2002, according to the International Data Corporation. See “Business Risks — Electronic
Commerce Initiatives”. PETsMART believes that it competes effectively within its various markets; however,
some of the Company’ s competitors are larger in terms of overall sales volume and have access to greater capital
and management resources than the Company. See “Business Risks — Competition.”
Government Regulation
The C ompany is subject to laws governing its relationship with employees, including minimum wage
requirements, overtime, working conditions and citizenship requirements. Statutes and regulations in certain
states, and Canadian provinces affecting the ownership of veterinary practices or the operation of veterinary
clinics within retail stores or the operation of superstores may impact the Company’ s ability to operate veterinary
clinics within certain of its Canadian facilities. Substantially all of PETsMART’ s U.S. veterinary clinics are owned
by MMI, an independent third-party operator who then leases the retail space from PETsMART.
A determination that the Company is in violation of applicable restrictions on the practice of veterinary
medicine could require the Company to restructure its operations to comply with the requirements of the local
government or render it unable to operate veterinary clinics in their jurisdiction. See “Business Risks —
Government Regulations.”
Insurance
The Company maintains standard product and casualty insurance on all of its superstores, as well as product
liability insurance covering the sale of live animals.
Trademarks
The Company owns several service marks and trademarks registered with the United States Patent and
Trademark Office (“USPTO”), including “PETsMART®,” “Santa Claws®,” “Grreat Choice®,” “Sophista-
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