Petsmart 2001 Annual Report Download - page 6

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PETsMART Stores
PETsMART's stores are generally located in sites co-anchored by strong destination superstores, and
typically are in or near major regional shopping centers.
The Company's expansion strategy is to increase its share in existing markets, establish a leading position
in each market it serves and achieve operating eÇciencies and economies in advertising, distribution and
management. By February 3, 2002, PETsMART expects to operate 570 stores in North America.
PETsMART believes there is a potential for an aggregate of 900 to 1,000 PETsMART stores in North
America. See ""Business Risks Ì Store Expansion Plans.''
PETsMART.com
PETsMART.com is the Internet's most visited pet-related e-commerce site as rated by independent
Internet sources. It features a broad range of merchandise, expert advice and community activities for
consumers who care about pets. PETsMART.com also sells pet supplies through three catalogs: R.C. Steele,
Pedigrees and Groomer Direct (the ""Pet Catalog Business''). Prior to December 20, 2000, the Pet Catalog
Business was part of PETsMART Direct.
The Company invested approximately $50 million in PETsMART.com from the web site's inception in
the spring of 1999, through December 19, 2000. On December 20, 2000, the Company acquired a controlling
interest in PETsMART.com. in exchange for $10 million in cash, a promissory note for $10 million, and the
contribution of the Company's Pet Catalog Business with assets which are valued at book value of
approximately $9.2 million to form an integrated direct marketing subsidiary. The Company held an equity
ownership of approximately 46% prior to this transaction. As a result of this transaction and the purchase of
shares of capital stock directly from certain employees and other shareholders of PETsMART.com for
approximately $3.8 million in aggregate consideration, the Company now holds more than an 81% voting
ownership interest in PETsMART.com, and has assumed control. See Note 2 in the Notes to Consolidated
Financial Statements.
PETsMART Direct
PETsMART Direct (""Direct''), the Company's catalog operation, is the leading direct marketing retailer
of equine products in North America. Direct oÅers discount brand name tack, riding apparel and equine
supplies through four catalogs: State Line Tack Western, State Line Tack English, Wiese Equine Supply and
National Bridle Shop. Until December 20, 2000, Direct also sold pet supplies through its Pet Catalog Business
through three catalogs: R.C. Steele, Pedigrees and Groomer Direct. The Pet Catalog Business was contributed
to PETsMART.com on December 20, 2000 as part of the Company's acquisition of a controlling interest in
PETsMART.com. See Note 2 in the Notes to Consolidated Financial Statements. Including the Pet Catalog
Business, Direct circulated more than 30 million catalogs during Ñscal 2000. Direct's proprietary customer
database, which was also contributed to PETsMART.com on December 20, 2000, contains the names of
approximately 1.1 million customers who have made a purchase from Direct catalogs within the past
24 months. Direct uses its marketing and customer database to attract new customers and to generate
additional sales. In Ñscal 2000, Direct's average transaction was approximately $85.00. During Ñscal 2000,
Direct recorded sales of $6.7 million through statelinetack.com, which oÅers equine products over the
Internet. Direct services PETsMART.com's e-commerce fulÑllment needs via Direct's Brockport, New York
distribution facility. In Ñscal 2000, 773,000 orders were fulÑlled and shipped by Direct for PETsMART.com.
Distribution
The Company currently employs a hybrid distribution system including, as appropriate, full truckload
shipments to individual stores, the splitting of full truckloads among several closely located stores, consolida-
tion centers to service regional clusters of stores and central distribution centers. The Company leases and
operates a 613,000 square foot distribution center in Columbus, Ohio, which began operations in Septem-
ber 2000, and a 447,000 square foot distribution center in Phoenix, Arizona. The Company also has a 230,000
square foot leased facility in Ennis, Texas, which was redesigned in November 1999, as a forward distribution
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