PetSmart Reports Results for the Fourth Quarter and Fiscal 2008

Fourth Quarter Earnings of $0.62 per Share; Comp Sales Growth of 3.0 Percent for the Fourth Quarter and 3.8 Percent for the Fiscal Year

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Symbol	Price	Change
PETM	27.21	-0.09

{"s" : "petm","k" : "c10,l10,p20,t10","o" : "","j" : ""}

PHOENIX, AZ--(MARKET WIRE)--Mar 4, 2009 -- PetSmart, Inc. (NasdaqGS:PETM - News) today reported net income of $78.4 million, or $0.62 per share, for the fourth quarter of 2008. That compares with net income of $75.4 million, or $0.59 per share, for the fourth quarter of 2007, which included a 14th week as fiscal 2007 was a 53-week year. For all of fiscal 2008, the company reported net income of $192.7 million, or $1.52 per share.

Net sales for the 13-week fourth quarter of 2008 increased 2.3 percent to $1.36 billion, compared to the 14-week fourth quarter of 2007. The impact of the 14th week on net sales was approximately $90 million, including $8 million in pet services sales. Comparable store sales -- or sales in stores open at least a year -- grew 3.0 percent in the fourth quarter. During the fourth quarter, pet services sales were $130.7 million, up 6.9 percent from the 14-week fourth quarter of last year.

"Despite the macro economic pressures, I am proud to announce that PetSmart was still able to deliver on both sales and earnings per share growth for the quarter," said Phil Francis, Chairman and Chief Executive Officer. "We are very fortunate here at PetSmart. We are a leader in an industry that services a strong emotional bond between pet parents and their loved ones. Our associates understand that bond and take pride in supporting it."

PetSmart generated $5.07 billion in net sales in the 52-week fiscal 2008, up from $4.67 billion in net sales for the 53-week fiscal 2007. Comparable store sales grew 3.8 percent in 2008. For the 52-week fiscal 2008, pet services sales were $526.7 million, or a 15.8 percent growth over the 53-week fiscal 2007.

Guidance

"We continue to remain cautious about the economic climate. For the year, we anticipate low-single digit sales comps, total sales growth in the mid- to high-single digits, services growth in the mid- to high-single digits and earnings per share of $1.40 to $1.50," said Chip Molloy, Senior Vice President and Chief Financial Officer. "We believe we have the combination of a strong balance sheet and a business model that generates significant cash flow. This should allow us to manage through a challenging economic environment and gain strength along the way."

PetSmart increased cash and cash equivalents to $126 million and had zero borrowings on its credit facility at the end of the fiscal year. During the year, the company purchased 2.3 million PetSmart shares for $50 million and distributed $15 million in dividend payments.

2008 Highlights

-- Opened 112 new stores and closed 8 stores
-- Opened 45 new PetsHotels
-- Cash and cash equivalents of $126 million and zero outstanding borrowing on our credit facility
-- Purchased 2.3 million shares
-- Paid quarterly dividends of $0.03 per share

2009 Annual Guidance

-- Total sales growth: Mid- to high-single digits
-- Comparable store sales growth: Low-single digits
-- Services sales growth: Mid- to high-single digits
-- Net interest expense: Approximately $60 million for the fiscal year
-- Income tax rate: 38.5 percent to 39 percent
-- Earnings per share: $1.40 to $1.50 per share
-- Capital expenditures: Between $115 million to $125 million
-- Net new store growth: 40 to 42
-- PetsHotel growth: 20

Conference call information

PetSmart management has scheduled a teleconference for 4:30 p.m. (EST) today to discuss results for the fourth quarter and fiscal year 2008 as well as the current outlook for 2009. 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 first quarter of 2009. In addition, you can listen to the call live by dialing 866-835-8845 (within the United States and Canada) or 703-639-1408 (for international callers), code 1325708. A phone replay will be available through March 20, 2009, 11:59 p.m. EDT, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1325708.

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 1,112 pet stores in the United States and Canada, 142 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 $87 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 3.5 million pets.

Forward-looking statements

This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2009 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


                                                  February 1,  February 3,
                                                      2009         2008
                                                  -----------  -----------
Assets
   Cash and cash equivalents                      $   126,314  $    58,322
   Receivables, net                                    48,609       49,341
   Merchandise inventories                            584,011      501,212
   Deferred income taxes                               28,223       28,644
   Prepaid expenses and other current assets           87,677       73,231
                                                  -----------  -----------

       Total current assets                           874,834      710,750

   Property and equipment, net                      1,302,245    1,230,770
   Equity investment in affiliate                      25,938       23,346
   Deferred income taxes                               93,128      126,665
   Goodwill                                            38,645       44,333
   Intangible assets, net                                 993        1,457
   Other noncurrent assets                             21,870       29,936
                                                  -----------  -----------

       Total assets                               $ 2,357,653  $ 2,167,257
                                                  ===========  ===========

Liabilities and Stockholders' Equity
   Accounts payable and bank overdraft            $   194,630  $   172,352
   Accrued payroll bonus and employee benefits         88,337       84,727
   Accrued occupancy expenses and deferred rents       55,642       46,955
   Short-term debt                                          -       30,000
   Current maturities of capital lease
    obligations                                        32,233       24,982
   Other current liabilities                          107,315      137,330
                                                  -----------  -----------
       Total current liabilities                      478,157      496,346

   Capital lease obligations                          553,760      508,765
   Deferred rents                                      92,155       88,954
   Other noncurrent liabilities                        89,445       86,595
                                                  -----------  -----------

       Total liabilities                            1,213,517    1,180,660
                                                  -----------  -----------

   Stockholders' Equity:
     Preferred stock; $.0001 par value                      -            -
     Common stock; $.0001 par value                        16           16
     Additional paid-in capital                     1,117,557    1,079,190
     Retained earnings                                936,100      758,674
     Accumulated other comprehensive income            (2,714)       5,585
     Treasury stock                                  (906,823)    (856,868)
                                                   -----------  -----------

      Total stockholders' equity                    1,144,136      986,597
                                                  -----------  -----------

      Total liabilities and stockholders' equity  $ 2,357,653  $ 2,167,257
                                                  ===========  ===========




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


                               Thirteen Weeks Ended  Fourteen Weeks Ended
                               --------------------  --------------------
                               February 1,    % of   February 3,    % of
                                   2009      Sales       2008      Sales
                               -----------  -------  -----------  -------
Merchandise sales              $ 1,228,542     90.4% $ 1,206,183     90.8%
Services sales                     130,728      9.6%     122,251      9.2%
                               -----------  -------  -----------  -------
Net sales                        1,359,270    100.0%   1,328,434    100.0%

Cost of merchandise sales          849,040     62.5%     813,973     61.3%
Cost of services sales              95,267      7.0%      93,971      7.1%
                               -----------  -------  -----------  -------
Total cost of sales                944,307     69.5%     907,944     68.3%

                               -----------  -------  -----------  -------
Gross profit                       414,963     30.5%     420,490     31.7%

Operating, general and
 administrative expenses           272,902     20.1%     289,907     21.8%
                               -----------  -------  -----------  -------
Operating income                   142,061     10.5%     130,583      9.8%

Gain on sale of investment               -      0.0%           -      0.0%
Interest income                        192      0.0%         316      0.0%
Interest expense                   (15,227)    -1.1%     (14,696)    -1.1%
                               -----------  -------  -----------  -------
Income before income tax
 expense and equity in income
 from investee                     127,026      9.3%     116,203      8.7%

Income tax expense                 (48,334)    -3.6%     (40,881)    -3.1%
Equity in income from investee        (304)     0.0%          78      0.0%
                               -----------  -------  -----------  -------
Net income                     $    78,388      5.8% $    75,400      5.7%
                               ===========  =======  ===========  =======

Earnings per common share:
   Basic                       $      0.63           $      0.60
                               ===========           ===========
   Diluted                     $      0.62           $      0.59
                               ===========           ===========

Weighted average shares
 outstanding:
   Basic                           124,444               126,134
   Diluted                         126,783               128,867

                               -----------           -----------
Stores open at beginning of
 each period                         1,107                   992
Stores opened during each
 period                                  8                    21
Stores closed during each
 period                                 (3)                   (5)
Stores open at end of each
 period                              1,112                 1,008
                               -----------           -----------





                                 Fifty-Two Weeks       Fifty-Three Weeks
                                       Ended                 Ended
                               --------------------  --------------------
                               February 1,    % of   February 3,    % of
                                  2009       Sales       2008      Sales
                               -----------  -------  -----------  -------
Merchandise sales              $ 4,538,563     89.6% $ 4,217,716     90.3%
Services sales                     526,730     10.4%     454,940      9.7%
                               -----------  -------  -----------  -------
Net sales                        5,065,293    100.0%   4,672,656    100.0%

Cost of merchandise sales        3,184,819     62.9%   2,901,415     62.1%
Cost of services sales             385,041      7.6%     334,420      7.2%
                               -----------  -------  -----------  -------
Total cost of sales              3,569,860     70.5%   3,235,835     69.3%

                               -----------  -------  -----------  -------
Gross profit                     1,495,433     29.5%   1,436,821     30.7%

Operating, general and
 administrative expenses         1,125,579     22.2%   1,085,308     23.2%
                               -----------  -------  -----------  -------
Operating income                   369,854      7.3%     351,513      7.5%

Gain on sale of investment               -      0.0%      95,363      2.0%
Interest income                        579      0.0%       6,813      0.1%
Interest expense                   (59,336)    -1.2%     (51,496)    -1.1%
                               -----------  -------  -----------  -------
Income before income tax
 expense and equity in income
 from investee                     311,097      6.1%     402,193      8.6%

Income tax expense                (121,019)    -2.4%    (145,180)    -3.1%
Equity in income from investee       2,592      0.1%       1,671      0.0%
                               -----------  -------  -----------  -------
Net income                     $   192,670      3.8% $   258,684      5.5%
                               ===========  =======  ===========  =======

Earnings per common share:
   Basic                       $      1.55           $      1.99
                               ===========           ===========
   Diluted                     $      1.52           $      1.95
                               ===========           ===========

Weighted average shares
 outstanding:
   Basic                           124,342               129,851
   Diluted                         126,751               132,954

                               -----------           -----------
Stores open at beginning of
 each period                         1,008                   908
Stores opened during each
 period                                112                   115
Stores closed during each
 period                                 (8)                  (15)
Stores open at end of each
 period                              1,112                 1,008
                               -----------           -----------

     CONTACT:
     PetSmart Investor Relations
     (623) 587-2025