Petsmart 2003 Annual Report Download - page 26

upon as indicators of future performance. In addition, controllable expenses, such as advertising, could Öuctuate
from quarter-to-quarter in a Ñscal year. Also, sales of certain products and services designed to address pet health
needs are seasonal. Because our stores typically draw customers from a large trade area, sales also may be impacted
by adverse weather or travel conditions, which are more prevalent during certain seasons of the year. Finally, as a
result of our expansion plans, the timing of new store openings and related preopening expenses, the amount of
revenue contributed by new and existing stores, and the timing and estimated obligations of store closures may cause
our quarterly results of operations to Öuctuate.
The pet food and pet supply retailing industry is highly competitive, and continued competitive forces may reduce
our sales and proÑtability.
The pet food and pet supply retailing industry is highly competitive. We compete with supermarkets,
warehouse clubs, and mass merchandisers, many of which are larger and have signiÑcantly greater resources than we
have. We also compete with a number of pet supply warehouse or specialty stores, smaller pet store chains, catalog
retailers, internet retailers, and pet stores. The industry has become increasingly competitive due to the entrance of
other specialty retailers into the pet food and pet supply market, some of which have developed store formats similar
to ours, and due to the expansion of pet-related product oÅerings by certain supermarkets, warehouse clubs, and
mass merchandisers. There can be no assurance we will not face greater competition from these or other retailers in
the future. In particular, if any of our major competitors seek to gain or retain market share by reducing prices, we
would likely reduce our prices in order to remain competitive, which may result in a decrease in our sales and
proÑtability and require a change in our operating strategies.
The loss of any of our key vendors, a decision by our vendors to make their products available in supermarkets or
through warehouse clubs and mass merchandisers, or the inability of our vendors to provide products in a timely
or cost-eÅective manner, could harm our business.
We have no long-term supply commitments from our vendors. We buy from several hundred vendors
worldwide and, together, our two largest vendors accounted for approximately 16.2% of our total sales for Ñscal
2003. Sales of premium pet food for dogs and cats comprise a signiÑcant portion of our revenues. Currently, most
major vendors of premium pet foods do not permit their products to be sold in supermarkets, warehouse clubs, or
through other mass merchandisers. If any premium pet food or pet supply vendors were to make their products
available in supermarkets or through warehouse clubs and mass merchandisers, our business could be harmed. In
addition, if the grocery brands currently available to such retailers were to gain market share at the expense of the
premium brands sold only through specialty pet food and pet supply outlets, our business could be harmed.
We purchase signiÑcant amounts of pet supplies from a number of vendors with limited supply capabilities.
There can be no assurance that our current pet supply vendors will be able to accommodate our anticipated needs or
comply with existing or any new regulatory requirements. In addition, we purchase signiÑcant amounts of pet
supplies from vendors outside of the United States. There can be no assurance our overseas vendors will be able to
satisfy our requirements including, but not limited to, timeliness of delivery, acceptable product quality, packaging
and labeling requirements. Any inability of our existing vendors to provide products in a timely or cost-eÅective
manner could harm our business. While we believe our vendor relationships are satisfactory, any vendor could
discontinue selling to us at any time.
We depend on key personnel and may not be able to retain or replace these employees or recruit additional
qualiÑed personnel, which could harm our business.
Our success is largely dependent on the eÅorts and abilities of our senior executive group. The loss of the
services of one or more of our key executives could adversely impact our Ñnancial performance and our ability to
execute our strategies. In addition, our future success will depend on our ability to attract highly skilled store
managers and qualiÑed services personnel such as pet trainers and groomers. There is a high level of competition for
these employees and our ability to operate our stores and expand these services depends on our ability to attract and
retain these personnel. In addition, historically there has been a shortage of qualiÑed veterinarians. If BanÑeld
cannot attract and retain a suÇcient number of veterinarians, BanÑeld's ability to provide veterinary services in our
stores, and increase the number of stores in which BanÑeld provides veterinary services, may be impacted.
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