Petsmart 2006 Annual Report Download - page 13

PART I
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future
events or our future financial performance. We have attempted to identify forward-looking statements by termi-
nology including: “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,”
“plan,” “potential,” “predict,” “should,” or “will” or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks, uncertainties and other factors,
including the risks outlined under “Item 1A. Risk Factors” contained in Part I of this Annual Report that may cause
our actual results, levels of activity, performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this
Annual Report on Form 10-K is filed, and we do not intend to update any of the forward-looking statements after the
date this Annual Report on Form 10-K is filed to conform these statements to actual results, unless required by law.
Our fiscal year consists of the 52 or 53 weeks ending on the Sunday nearest January 31 of the following year.
Unless otherwise specified, all references in this Annual Report on Form 10-K to years are to fiscal years. The 2006,
2005 and 2004 fiscal years were 52-week years. The 2007 fiscal year is a 53-week year.
Item 1. Business
General
In fiscal 2006, we generated net sales of $4.2 billion, making PetSmart North America’s leading specialty
provider of products, services and solutions for the lifetime needs of pets. We have identified a large group of pet
owners we call “pet parents,” who are passionately committed to their pets and consider their pets family members.
Our strategy is to attract and keep these customers by becoming the preferred provider of Total Lifetime Care
SM
for
pets. As part of this strategy, we focus on driving efficiencies in our stores, on our processes and our systems, on
growing our pet services business and on delighting our customers by providing a superior store environment, a
superior shopping experience and superior service.
We opened 82 net new stores in fiscal 2006 and, at the end of the fiscal year, operated 908 retail stores in North
America. Square footage in fiscal 2006 increased 1.8 million to 20.8 million compared to 19.0 million in fiscal
2005. Our stores typically range in size from 19,000 to 27,000 square feet, and carry a broad and deep selection of
high-quality pet supplies at everyday low prices. We offer more than 13,400 distinct items, including nationally
recognized brand names, as well as an extensive selection of private brands across a range of product categories.
We complement our strong product assortment with value-added pet services, including grooming, training,
boarding and day camp. All our stores offer complete pet training services and virtually all our stores feature pet
styling salons that provide high-quality grooming services. As of January 28, 2007, we offered pet boarding at 62 of
our stores through our PetsHotels
TM
. As of January 28, 2007, there were full-service veterinary hospitals in 608 of
our stores. Medical Management International, Inc., a third-party operator of veterinary hospitals, operated 596 of
the hospitals under the registered trade name of Banfield, The Pet Hospital. The remaining 12 hospitals are located
in Canada and operated by other third-parties.
Our PetPerks»loyalty campaign allows us to understand the needs of our customers and target offers directly
to them. We also reach customers through our direct marketing channels, including PetSmart.com, our pet
e-commerce site, StateLineTack.com, our equine e-commerce site and an equine catalog. On February 28, 2007, we
announced our intent to exit the equine product line, including the sale or discontinuation of StateLineTack.com and
the equine catalog. We expect to complete the exit of the equine product line in the fourth quarter of fiscal 2007.
The Pet Products Industry
The pet products industry serves a large and growing market. The American Pet Products Manufacturers
Association, or APPMA, estimated the 2005 market at approximately $35.9 billion, an increase of more than 100%
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