SOURCE: PetSmart

November 19, 2008 16:02 ET

PetSmart Reports Results for the Third Quarter 2008

Earnings of $0.28 per Share; Comp Sales Growth of 5.4 Percent; Net Sales Growth of 12.1 Percent; Services Sales Growth of 15.2 Percent

PHOENIX, AZ--(Marketwire - November 19, 2008) - PetSmart, Inc. (NASDAQ: PETM) today reported net income of $35.8 million, or $0.28 per share, for the third quarter of 2008. That compares with net income of $29.5 million, or $0.23 per share, for the third quarter of 2007.

Net sales for the third quarter of 2008 increased 12.1 percent to $1.3 billion, compared to the third quarter of 2007. Comparable store sales -- or sales in stores open at least a year -- grew 5.4 percent in the third quarter, on top of 1.4 percent growth in the same period in 2007. During the third quarter, pet services sales were $127.8 million, up 15.2 percent from the third quarter of last year.

"The unique blend of staples and discretionary items inherent to our business model has allowed us to manage through this challenging environment and deliver on our guidance for the quarter," said Phil Francis, Chairman and Chief Executive Officer. "But we are not immune to the pressures of a slowing economy. We have decided to pull back even further on our capital spending in 2009 and focus on consistent execution and on outperforming in those areas of the business that differentiate PetSmart from the competition."

Guidance

"In the fourth quarter we expect to deliver earnings per share between 59 and 62 cents and comparable store sales in the low to mid-single digits," said Chip Molloy, Chief Financial Officer. "Our guidance assumes that current trends continue, including some inflation benefit on the top line, product margin pressure and ongoing expense leverage."

2008 Full Year Guidance

-- Total sales growth: High-single digits
-- Comparable store sales growth: Low- to mid-single digits
-- Operating income percentage: Down approximately 20 to 30 basis points as a percentage of sales
-- Net interest expense: Approximately $15 million per quarter
-- Income tax rate: 38 to 39 percent
-- Earnings per share: $1.49 to $1.52 per share
-- Capital expenditures: $285 million or lower
-- Net new store growth: 100 to 104
-- PetsHotel growth: 45

Conference call information

PetSmart management has scheduled a teleconference for 4:30 p.m. (EST) today to discuss results for the third quarter of 2008 as well as the current outlook. This teleconference will be webcast live for all investors at www.petm.com or www.streetevents.com. The webcast will be available until the company announces results for the fourth quarter of 2008. In addition, you can listen to the call live by dialing 866-238-1645 (within the United States and Canada) or 703-639-1163 (for international callers), code 1298971. A phone replay will be available through December 3, 2008, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1298971.

About PetSmart

PetSmart, Inc. is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company operates more than 1,107 pet stores in the United States and Canada, 132 in-store PetSmart PetsHotels® cat and dog boarding facilities, and is a leading online provider of pet supplies and pet care information (www.petsmart.com). PetSmart provides a broad range of competitively priced pet food and pet products; and offers complete pet training, pet grooming, pet boarding, doggie day camp and pet adoption services. Since 1994, PetSmart Charities®, Inc., an independent 501(c)(3) non-profit animal welfare organization, has funded more than $70 million in grants and programs benefiting animal welfare organizations and, through its in-store pet adoption programs, has helped save the lives of more than 3 million pets.

Forward-looking statements

This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2008 guidance. These "forward-looking statements" are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in general economic conditions; conditions affecting customer transactions and average ticket including, but not limited to, weather conditions or other seasonal events; our ability to compete effectively; disruption of our supply chain; our ability to effectively manage our growth and operations; changes in our cost structure; and changes in the legal or regulatory environment. Undue reliance should not be placed on such forward-looking statements as they speak only as of the date hereof, and we undertake no obligation to update these statements to reflect subsequent events or circumstances except as may be required by law. For additional information on these and other factors that arise when investing in PetSmart, please see our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.

                      PetSmart, Inc. and Subsidiaries
                  Condensed Consolidated Balance Sheets
                     (in thousands, except par value)
                                Unaudited


                                     November 2,  February 3,  October 28,
                                         2008         2008         2007
                                     -----------  -----------  -----------

Assets
   Cash and cash equivalents         $    54,317  $    58,322  $    57,493
   Receivables, net                       39,352       49,341       42,881
   Merchandise inventories               612,246      501,212      530,131
   Deferred income taxes                  46,947       46,765       45,189
   Prepaid expenses and other
    current assets                        77,787       73,231       65,053
                                     -----------  -----------  -----------

        Total current assets             830,649      728,871      740,747

   Property and equipment, net         1,328,554    1,230,770    1,194,909
   Equity investment in affiliate         26,242       23,346       23,269
   Deferred income taxes                 111,837      108,544       85,733
   Goodwill                               39,057       44,333       43,543
   Intangible assets, net                  1,081        1,457        1,012
   Other noncurrent assets                23,010       29,936       31,276
                                     -----------  -----------  -----------

        Total assets                 $ 2,360,430  $ 2,167,257  $ 2,120,489
                                     ===========  ===========  ===========

Liabilities and Stockholders' Equity
   Accounts payable and bank
    overdraft                        $   196,903  $   172,352  $   200,438
   Accrued payroll bonus and
    employee benefits                    144,341      132,768      139,074
   Accrued occupancy expenses and
    deferred rents                        58,718       46,955       52,254
   Short-term debt                        50,000       30,000            -
   Current maturities of capital
    lease obligations                     30,873       24,982       23,654
   Other current liabilities             139,659      148,832      102,170
                                     -----------  -----------  -----------
        Total current liabilities        620,494      555,889      517,590

   Long-term debt                              -            -       80,000
   Capital lease obligations             558,518      508,765      498,707
   Deferred rents                         92,071       88,954       87,116
   Other noncurrent liabilities           28,584       27,052       32,428
                                     -----------  -----------  -----------

        Total liabilities              1,299,667    1,180,660    1,215,841
                                     -----------  -----------  -----------

   Stockholders' Equity:
      Preferred stock; $.0001 par
       value                                   -            -            -
      Common stock; $.0001 par value          16           16           16
      Additional paid-in capital       1,108,260    1,079,190    1,067,338
      Retained earnings                  861,527      758,674      687,111
      Accumulated other
       comprehensive income               (2,217)       5,585        7,051
      Treasury stock                    (906,823)    (856,868)    (856,868)
                                     -----------  -----------  -----------

        Total stockholders' equity     1,060,763      986,597      904,648
                                     -----------  -----------  -----------

        Total liabilities and
         stockholders' equity        $ 2,360,430  $ 2,167,257  $ 2,120,489
                                     ===========  ===========  ===========





                      PetSmart, Inc. and Subsidiaries
              Condensed Consolidated Statements of Operations
              (in thousands, except per share and store data)
                                (Unaudited)


                                      Thirteen Weeks      Thirteen Weeks
                                          Ended               Ended
                                    ------------------  ------------------
                                    November 2,  % of   October 28,  % of
                                        2008     Sales      2007     Sales
                                    -----------  -----  -----------  -----

Net sales                           $ 1,251,144  100.0% $ 1,115,916  100.0%
Cost of sales                           893,448   71.4%     784,387   70.3%
                                    -----------  -----  -----------  -----
Gross profit                            357,696   28.6%     331,529   29.7%

Operating, general and
 administrative expenses                285,571   22.8%     271,920   24.4%
                                    -----------  -----  -----------  -----
Operating income                         72,125    5.8%      59,609    5.3%

Gain on sale of investment                    -    0.0%           -    0.0%
Interest expense, net                   (14,769)  -1.2%     (12,746)  -1.1%
                                    -----------  -----  -----------  -----
Income before income tax expense
 and equity in income from investee      57,356    4.6%      46,863    4.2%

Income tax expense                      (22,492)  -1.8%     (18,223)  -1.6%
Equity in income from investee, net
 of tax                                     959    0.1%         812    0.1%
                                    -----------  -----  -----------  -----
Net income                          $    35,823    2.9% $    29,452    2.6%
                                    ===========  =====  ===========  =====

Earnings per common share:
    Basic                           $      0.29         $      0.23
                                    ===========         ===========
    Diluted                         $      0.28         $      0.23
                                    ===========         ===========

Weighted average shares
 outstanding:
    Basic                               124,122             127,431
    Diluted                             126,795             130,528

                                    -----------  -----  -----------  -----
Stores open at beginning of each
 period                                   1,075                 966
Stores opened during each period             32                  31
Stores closed during each period              -                  (5)
Stores open at end of each period         1,107                 992
                                    -----------  -----  -----------  -----



                                    Thirty-Nine Weeks   Thirty-Nine Weeks
                                          Ended               Ended
                                    ------------------  ------------------
                                    November 2,  % of   October 28,  % of
                                        2008     Sales      2007     Sales
                                    -----------  -----  -----------  -----

Net sales                           $ 3,706,023  100.0% $ 3,344,222  100.0%
Cost of sales                         2,625,553   70.8%   2,327,892   69.6%
                                    -----------  -----  -----------  -----
Gross profit                          1,080,470   29.2%   1,016,330   30.4%

Operating, general and
 administrative expenses                852,678   23.0%     795,401   23.8%
                                    -----------  -----  -----------  -----
Operating income                        227,792    6.1%     220,929    6.6%

Gain on sale of investment                    -    0.0%      95,363    2.9%
Interest expense, net                   (43,722)  -1.2%     (30,303)  -0.9%
                                    -----------  -----  -----------  -----
Income before income tax expense
 and equity in income from investee     184,070    5.0%     285,989    8.6%

Income tax expense                      (72,684)  -2.0%    (104,299)  -3.1%
Equity in income from investee, net
 of tax                                   2,896    0.1%       1,593    0.0%
                                    -----------  -----  -----------  -----
Net income                          $   114,282    3.1% $   183,283    5.5%
                                    ===========  =====  ===========  =====

Earnings per common share:
    Basic                           $      0.92         $      1.40
                                    ===========         ===========
    Diluted                         $      0.90         $      1.37
                                    ===========         ===========

Weighted average shares
 outstanding:
    Basic                               124,308             130,979
    Diluted                             126,761             134,216

                                    -----------  -----  -----------  -----
Stores open at beginning of each
 period                                   1,008                 908
Stores opened during each period            104                  94
Stores closed during each period             (5)                (10)
Stores open at end of each period         1,107                 992
                                    -----------  -----  -----------  -----

Contact Information

  • CONTACT:
    PetSmart Investor Relations
    (623) 587-2025

    PetSmart Media Line
    623-587-2177