Petsmart 2004 Annual Report Download - page 19

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We transitioned our PETsMART PETsHOTELSM test in 2004 to a full-scale rollout,
ending the year with 16 of the overnight boarding facilities. We will open 12 more
PETsHOTELs inside our stores in 2005 and another 20 in 2006 on the way to an
ultimate buildout of 270. Using what we have learned from the Doggie Day Camps
in our existing hotels, we initiated a test of a stand-alone Doggie Day Camp™
inside our Pasadena, Calif., store in late 2004. Initial results have been positive
and we plan to expand that test in up to five more stores in 2005.
We’ve worked hard to earn our customers’ trust. And we’re committed to keep
it that way. That’s why operating excellence is a key strategic focus for us in 2005.
As our existing stores mature, and we continue to add new ones at a rapid pace,
we know we have to continue to deliver consistently the promises inherent in our
brand. These are the basics such as understanding customers’ needs and delivering
solutions, store appearance, short checkout lines, in-stocks and employing passionate,
well-trained associates.
The PetPerks®savings card, our customer relationship marketing program, has
exceeded our expectations since its launch in 2004. The initial results were so
positive we accelerated the rollout so we’ll have all of our stores fully enrolled by
mid-2005. Then we’ll shift our focus to analyzing the customer data captured by the
program, and we’ll continue to test a series of campaigns targeted to the specific
needs of our customers and their pets.
We continue to maintain a firm grip on inventories and to further strengthen our
balance sheet. Our cash reserves and our ongoing ability to generate cash—we
generated $283 million in cash from operations in 2004, an increase of $37
million over 2003—give us tremendous financial flexibility to invest in profitable
growth and our own company. On that note, in 2005 we will complete a board
authorized buy-back of $150 million of our stock, 30 percent of which was
completed by the end of 2004.
We’re proud of our accomplishments in 2004. The core business continues to
perform well, leaving us extremely optimistic about this business and its ability to
grow and gain share. We look forward with great excitement to 2005 and beyond,
confident in our ability to take advantage of this growing industry, to further
differentiate ourselves from our competition and to return value to our shareholders.
We have the mind, the will and the heart to do it.
Sincerely,
Philip L. Francis
Chairman and Chief Executive Officer
Robert F. Moran
President and Chief Operating Officer
17
200
15 0
10 0
50
0
2002 2003 2004
SALES PER
SQUARE FOOT
35
30
20
10
0
2002 2003 2004
GROSS MARGIN
(by percentage)