Petsmart 2010 Annual Report Download - page 19

product, it may be difficult to establish vendor relationships, determine appropriate product selection, and
accurately forecast demand. We carry a broad selection of certain products and we may be unable to sell products
in sufficient quantities or during the relevant selling seasons. Any one of the inventory risk factors set forth above
may adversely affect our operating results.
If our information systems fail to perform as designed or are interrupted for a significant period of time,
our business could be harmed.
The efficient operation of our business is dependent on our information systems. In particular, we rely on our
information systems to effectively manage our financial and operational data, process payroll and to maintain our
in-stock positions. We possess disaster recovery capabilities for our key information systems and take measures to
prevent security breaches and computer viruses. The failure of our information systems to perform as designed, loss
of data or any interruption of our information systems for a significant period of time could disrupt our business.
We continue to invest in our information systems. Enhancement to or replacement of our major financial or
operational information systems could have a significant impact on our ability to conduct our core business
operations and increase our risk of loss resulting from disruptions of normal operating processes and procedures that
may occur during the implementation of new information systems. We can make no assurances that the costs of
investments in our information systems will not exceed estimates, that the systems will be implemented without
material disruption, or that the systems will be as beneficial as predicted. If any of these events occur, our results of
operations could be harmed.
If we fail to protect the integrity and security of customer and associate information, we could be exposed
to litigation and our business could be adversely impacted.
The increasing costs associated with information security, such as increased investment in technology, the
costs of compliance with consumer protection laws, and costs resulting from consumer fraud, could adversely
impact our business. We also routinely possess sensitive customer and associate information and, while we have
taken reasonable and appropriate steps to protect that information, if our security procedures and controls were
compromised, it could harm our business, reputation, operating results and financial condition and may increase the
costs we incur to protect against such information security breaches.
The disruption of the relationship with or the loss of any of our key vendors, including our vendors with
whom we have exclusive relationships, a decision by our vendors to make their products available in
supermarkets or through warehouse clubs and other mass and retail merchandisers, the inability of our
vendors to provide quality products in a timely or cost-effective manner, the availability of generic products,
or risks associated with the suppliers from whom products are sourced, all could harm our business.
Sales of premium pet food for dogs and cats comprise a significant portion of our net sales. Currently, most
major vendors of premium pet food do not permit their products to be sold in supermarkets, warehouse clubs, or
through other mass and retail merchandisers. If any premium pet food or pet supply vendor were to make its
products available in supermarkets, warehouse clubs and other mass or retail 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 a substantial amount of pet supplies from a number of vendors with limited supply capabilities,
and two of our largest vendors account for a material amount of products sold. We can make no assurances that we
will be able to find new qualified vendors who meet our standards, or 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 a substantial amount of pet supplies from vendors outside of the United States. Effective global sourcing of
many of the products we sell is an important factor in our financial performance. We can make no assurances that
our international vendors will be able to satisfy our requirements including, but not limited to, timeliness of
delivery, acceptable product quality, and accurate packaging and labeling. Any inability of our existing vendors to
provide products meeting such requirements in a timely or cost-effective manner could harm our business. While
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