Petsmart 2002 Annual Report Download - page 5

Our strength and reliability come from a
potent combination I like to call “young
initiatives”— strategic imperatives
that can generate traffic, repeat visits,
sales and financial returns now and
for several quarters to come. These
initiatives give us the gift of time to
develop and test new ideas that will
sustain our momentum going forward.
With six forward distribution centers
now open, our work to build a
state-of-the-art distribution system is
complete, and can handle our growth
for at least the next three to four years.
The distribution system improves
in-stocks, reduces inventory, and allows
us to reformat our stores around the
needs and aspirations of our customers.
With more than two-thirds of the chain
now in the new format and the rest
to be completed in 2003, we believe
the remodeling program, coupled
with our other young initiatives, can
drive sales growth for at least the
next 24 months.
In 2003, we’re adding at least 60 net
new stores in the new format. We
currently believe our ultimate build-out
in North America can be approximately
1,200 PETsMART stores.
We have the industry’s broadest
product selection and, using category
management, we’re better aligning our
buying and merchandising decisions
with the needs of our customers.
We’re constantly reviewing various
product categories and we believe
there is plenty of room for additional
sales and margin expansion.
Pet services continue to be an engine of
profitable growth. With our grooming
and training businesses growing at
nearly 30 percent a year for the past
two years, we're now testing new
service adjacencies. Initial test results in
two stores of a boarding and daycare
business called PETsMART PETsHOTEL™
suggest we may have found a profitable
venture that can expand the trading
area and drive growth in other services.
In fact, we’re confident enough in the
PETsHOTEL concept to expand the
test in 2003, with seven new hotels
in key markets.
Finally, there is our work to provide
superior service and an exceptional
customer experience. We’ve made
enormous strides in transforming
PETsMART from a task-driven company
to a culture of customer focus. While
we’ve made much progress, there’s
plenty of work to do and we believe
there's also plenty of upside. So,
everyone’s yearly bonuses—starting
with store managers and ending
with Bob and me—are tied in part
to our performance in key customer
service metrics.
With the business strong and growing,
we’re keenly focused on driving
profitability and building our financial
strength. As promised, we began to
leverage general and administrative
expenses in 2002 and expect that
trend to continue. In July 2002, we
completed a successful secondary
offering of PETsMART stock and we
continue to improve our strong
balance sheet.
We accomplished a great deal in
2002, but we’ve only just begun to
explore our potential. We refuse
to rest on our laurels or become
complacent. We have a sharp,
unwavering focus on our strategic
priorities and we’re intent on
executing them at every level of the
business. When it comes to driving
profitable growth and creating
shareholder value, we’re still hungry.
Sincerely,
Philip L. Francis
Chairman and CEO
“We’ve made enormous strides in transforming
PETsMART from a task-driven company to a
culture of customer focus.”
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