Petsmart 2003 Annual Report Download - page 25

To the extent we are unable to accomplish any of the above, our ability to open new stores may be harmed. In
addition, there can be no assurance that we will be able to operate our new stores proÑtably.
New stores may erode sales at existing stores and comparable store sales growth may decrease as stores grow
older.
We currently operate stores in most of the major market areas of the United States and Canada. Our plans for
2004 include opening 90 net new stores, primarily in existing multi-store markets. Approximately 40% of those store
openings are planned in markets in the Northeast and California where we are signiÑcantly under-represented. It
has been our experience that opening new stores may attract some customers away from other stores already
operated by us in those markets and diminish their sales. Our comparable store sales increases were 7.0% and 9.6%
for the Ñscal years ended February 1, 2004, and February 2, 2003, respectively. As a result of new store openings in
existing markets, and because older stores will represent an increasing proportion of our store base over time, our
comparable store sales increases may be lower or sales could decrease in future periods.
Our operating margins at new stores may be lower than those of existing stores.
Preopening expenses and lower sales volumes associated with newly opened stores can impact operating
margins. In certain geographic regions, we have experienced lower comparable store sales increases and lower levels
of store contribution compared to results achieved in other regions. In addition, we expect certain operating costs,
particularly those related to occupancy, to be higher than in the past in some newly entered geographic regions. As a
result of a possible slower overall rate of comparable store sales increases or decreases in comparable store sales, and
the impact of these rising costs, our total store contribution and operating margins may be lower in future periods
than they have been in the past.
A disruption or malfunction in the operation of our distribution centers would impact our ability to deliver
merchandise to our stores, which could harm our sales and results of operations.
Our suppliers generally ship our merchandise to one of our distribution centers, which receive and allocate
merchandise to our stores. Any interruption or malfunction in our distribution operations could harm our sales and
the results of our operations. We have two Ñsh distribution centers that are operated by a third-party vendor, and an
interruption or malfunction to their business could harm our sales and results of operations. In such an event, there
can be no assurance that we could contract with another third party to operate the Ñsh distribution centers on
favorable terms, if at all, or that we could successfully operate the Ñsh distribution centers ourselves.
If our information systems fail to perform as designed, our business could be harmed.
The eÇcient operation of our business is dependent on our information systems. In particular, we rely on our
information systems to eÅectively manage our sales, warehousing, distribution, merchandise planning and replenish-
ment functions, and to maintain our in-stock positions. Our information systems are centrally located at our
headquarters in Phoenix, Arizona, and we possess oÅsite redundancy capabilities. The failure of our information
systems to perform as designed could disrupt our business and harm our sales and proÑtability.
We continue to invest in our information systems. There can be no assurance that the costs of investments in
our information systems will not exceed estimates or that they will be as beneÑcial as predicted. If we are unable to
realize the beneÑts of improved systems, our results of operations could be harmed.
A decline in consumers' discretionary spending could reduce our sales and harm our business.
Our sales depend on consumer spending, which is inÖuenced by factors beyond our control, including general
economic conditions, the availability of discretionary income, weather, consumer conÑdence, and unemployment
levels. We may experience declines in sales during economic downturns. Any material decline in the amount of
discretionary spending could reduce our sales and harm our business.
Our results may Öuctuate as a result of seasonal changes associated with the pet food and pet supply retailing
industry and the timing of controllable expenses, new store openings, and store closures.
Our business is subject to seasonal Öuctuation. We typically realize a higher portion of our net sales and
operating proÑt during the fourth Ñscal quarter. As a result of this seasonality, we believe that quarter-to-quarter
comparisons of our operating results are not necessarily meaningful and that these comparisons cannot be relied
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