Petsmart 2014 Annual Report Download - page 47

Table of Contents
Recently Issued Accounting Pronouncements
See Note 2, Recently Issued Accounting Pronouncements, in the Notes to the Consolidated Financial Statements included
in this Annual Report on Form 10-K for a description of recently issued accounting pronouncements, including the impact to
our consolidated financial statements.
Results of Operations
The following table presents the percent to net sales of certain items included in our Consolidated Statements of Income
and Comprehensive Income:
Year Ended
February 2, 2014 February 3, 2013 January 29, 2012
(52 weeks) (53 weeks) (52 weeks)
Net sales 100.0 % 100.0 % 100.0 %
Total cost of sales 69.4 69.5 70.5
Gross profit 30.6 30.5 29.5
Operating, general, and administrative expenses 20.6 20.9 21.3
Operating income 10.0 9.6 8.2
Interest expense, net (0.7) (0.8) (0.9)
Income before income tax expense and equity income from Banfield 9.3 8.8 7.3
Income tax expense (3.5) (3.3) (2.7)
Equity income from Banfield 0.3 0.2 0.2
Net income 6.1 % 5.7 % 4.7 %
2013 (52 weeks) Compared to 2012 (53 weeks)
Net Sales
Net sales increased 2.3% to $6.9 billion in 2013, compared to $6.8 billion in 2012. During 2013, net sales included an
unfavorable impact from foreign currency fluctuations of $15.3 million, as compared to 2012 net sales, which included sales
from the extra week of $126.0 million and an unfavorable impact from foreign currency fluctuations of $1.9 million.
Comparable store sales growth for 2013 was 2.7% and was the primary driver of the increase in net sales. Internet sales, which
are included in comparable store sales, were not material to net sales or comparable store sales in 2013 or 2012. We also
added 55 net new stores and 3 new PetsHotels since February 3, 2013.
Comparable store sales are comprised of average sales per comparable transaction and comparable transactions. Average
sales per comparable transaction grew 2.7% for 2013, and grew 3.9% for 2012, including the impact of the extra week.
Comparable transactions remained flat for 2013, and grew 2.4% for 2012, including the impact of the extra week.
During 2013, we implemented initiatives to drive traffic and average sales per transaction. We expanded the space
dedicated to certain brands of natural foods, including our proprietary brand Simply Nourish. We also introduced new
formulations in both dog and cat foods across our top channel-exclusive brands, which further expanded the grain-free and
high protein offerings. Additionally, we expanded the assortment of natural chews and treats, as well as channel-exclusive
treats. We continued to see strength in our natural foods, and stabilization in the science category in both dog and cat foods
across top channel-exclusive brands, as a result of these initiatives.
In hardgoods, we introduced new brands of pet apparel and toys available exclusively at PetSmart, and refreshed the
assortments of existing brands. We focused on innovation and newness in hardgoods, and continued to build our portfolio of
exclusive and proprietary brands across key categories. We also reset the space dedicated to reptiles, our fastest growing
species in specialty. We focused on solutions in this space by improving adjacencies and layouts and educational signage to
provide an easier shopping experience for our customers.
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