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Press release from Business Wire

PetSmart Reports Results for the Third Quarter 2010

<p class='bwalignc'> <b>Q3 Earnings up 23% to $0.38 per Share; Comp Sales of 5.6%; Total Sales of 7.2%; Comp Transactions of 3.6%; Raising 2010 Annual EPS Guidance</b> </p>

Wednesday, November 17, 2010

PetSmart Reports Results for the Third Quarter 201016:02 EST Wednesday, November 17, 2010 PHOENIX (Business Wire) -- PetSmart, Inc. (NASDAQ: PETM) today reported earnings of $0.38 per share, up 23% compared to $0.31 per share in the third quarter of 2009. Net income totaled $45.6 million in the third quarter of 2010, compared to $38.1 million in the third quarter of 2009. Total sales for the third quarter of 2010 increased 7.2% to $1.4 billion. The increase in net sales was partially impacted by $3.1 million in favorable foreign currency fluctuations. Comparable store sales, or sales in stores open at least a year, grew 5.6% in the third quarter, benefiting from comparable transactions growth of 3.6%. Services sales, which are included in total sales, grew 8.5% to $148 million. “We are pleased to report another quarter of solid earnings growth,” said Bob Moran, Chief Executive Officer and President. “During the quarter, our performance remained strong as we continued to execute on our strategic priorities by providing innovative and differentiated products, services and solutions for our pet parents.” “For the full year, we are raising our comparable store sales expectations to mid-single digits, and we are raising our earnings per share guidance from a previous range of $1.91 to $1.99 to our current expectations of $1.96 to $2.00,” said Chip Molloy, Senior Vice President and Chief Financial Officer. “For the fourth quarter, we expect comparable store sales of mid-single digits, and earnings per share of $0.71 to $0.75.” During the third quarter, the company purchased $56 million of PetSmart stock and distributed $15 million in dividend payments. Conference call information PetSmart management has scheduled a teleconference for 4:30 p.m. EST today to discuss results for the third quarter 2010. 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 2010. In addition, you can listen to the call live by dialing (866) 793-1342 (within the United States and Canada) or (703) 639-1313 (for international callers), code 1493622. A phone replay will be available through December 17, 2010, 11:59 p.m. EST, at (888) 266-2081 in the United States and Canada, or at (703) 925-2533 for international callers, code 1493622. About PetSmart PetSmart, Inc. is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company employs approximately 47,000 associates and operates more than 1,172 pet stores in the United States and Canada, 172 in-store PetSmart PetsHotel(R) cat and dog boarding facilities, and is a leading online provider of pet supplies and pet care information (http://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, PetSmart(R) Doggie Day Camp(SM) pet day care services and pet adoption services. Since 1994, PetSmart Charities, Inc., an independent 501(c)(3) non-profit animal welfare organization and the largest funder of animal welfare efforts in North America, has provided more than $110 million in grants and programs benefiting animal welfare organizations. Through its in-store pet adoption partnership with PetSmart Charities(R), PetSmart has helped save the lives of more than 4 million pets. Forward-looking statements This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2010 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. Follow PetSmart on Twitter www.twitter.com/PetSmartTLC Find PetSmart on Facebook www.facebook.com/PetSmart PetSmart, Inc. and SubsidiariesCondensed Consolidated Statements of Operations (in thousands, except per share and store data) (Unaudited)                 Thirteen Weeks Ended Thirteen Weeks Ended Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended October 31, 2010   % of Sales November 1, 2009   % of Sales October 31, 2010   % of Sales November 1, 2009   % of Sales   Merchandise sales $ 1,230,911 88.7 % $ 1,157,647 89.4 % $ 3,681,188 88.2 % $ 3,496,995 89.0 % Services sales 148,282 10.7 % 136,703 10.6 % 466,874 11.2 % 433,714 11.0 % Other revenue   8,877     0.6 %   -     0.0 %   25,701     0.6 %   -     0.0 %   Net sales   1,388,070     100.0 %   1,294,350     100.0 %   4,173,763     100.0 %   3,930,709     100.0 %   Cost of merchandise sales 880,556 63.4 % 837,875 64.7 % 2,619,624 62.8 % 2,516,378 64.0 % Cost of services sales 109,652 7.9 % 100,299 7.7 % 338,866 8.1 % 311,491 7.9 % Cost of other revenue   8,877     0.6 %   -     0.0 %   25,701     0.6 %   -     0.0 %   Total cost of sales   999,085     72.0 %   938,174     72.5 %   2,984,191     71.5 %   2,827,869     71.9 %   Gross profit 388,985 28.0 % 356,176 27.5 % 1,189,572 28.5 % 1,102,840 28.1 %   Operating, general and administrative expenses   305,345     22.0 %   284,896     22.0 %   910,664     21.8 %   867,902     22.1 %   Operating income 83,640 6.0 % 71,280 5.5 % 278,908 6.7 % 234,938 6.0 %   Interest expense, net   (14,289 )   -1.0 %   (15,031 )   -1.2 %   (44,222 )   -1.1 %   (44,975 )   -1.1 %   Income before income tax expense and equity in income from investee 69,351 5.0 % 56,249 4.3 % 234,686 5.6 % 189,963 4.8 %   Income tax expense (26,386 ) -1.9 % (20,453 ) -1.6 % (91,300 ) -2.2 % (71,594 ) -1.8 %   Equity in income from investee   2,648     0.2 %   2,274     0.2 %   6,205     0.1 %   4,927     0.1 %   Net income $ 45,613     3.3 % $ 38,070     2.9 % $ 149,591     3.6 % $ 123,296     3.1 %   Earnings per common share: Basic $ 0.39   $ 0.31   $ 1.27   $ 1.00   Diluted $ 0.38   $ 0.31   $ 1.25   $ 0.98     Weighted average shares outstanding: Basic 116,943 121,661 117,333 123,163 Diluted 119,360 123,781 119,771 125,396                                   Stores open at beginning of each period 1,164 1,145 1,149 1,112 Stores opened during each period 10 7 29 43 Stores closed during each period (2 ) (3 ) (6 ) (6 ) Stores open at end of each period     1,172           1,149           1,172           1,149         PetSmart, Inc. and SubsidiariesCondensed Consolidated Balance Sheets (In thousands, except par value) (Unaudited)       October 31,January 31,November 1,201020102009   Assets Cash and cash equivalents $ 235,407 $ 308,360 $ 185,215 Restricted cash 46,515 48,172 55,250 Receivables, net 43,108 52,232 52,144 Merchandise inventories 687,825 563,389 608,274 Deferred income taxes 36,805 36,805 29,333 Prepaid expenses and other current assets   91,822     57,652     88,126     Total current assets 1,141,482 1,066,610 1,018,342   Property and equipment, net 1,150,286 1,201,857 1,225,116 Equity investment in investee 38,691 32,486 30,865 Deferred income taxes 86,199 94,901 83,631 Goodwill 43,555 42,200 41,882 Other noncurrent assets   29,140     23,932     24,192     Total assets $ 2,489,353   $ 2,461,986   $ 2,424,028     Liabilities and Stockholders' Equity Accounts payable and bank overdraft $ 201,564 $ 212,121 $ 179,709 Accrued payroll, bonus and employee benefits 125,563 105,162 103,526 Accrued occupancy expenses and deferred rents 67,606 63,142 65,495 Current maturities of capital lease obligations 43,503 37,839 36,151 Other current liabilities   155,655     146,965     126,745     Total current liabilities 593,891 565,229 511,626   Capital lease obligations 528,270 533,635 545,226 Deferred rents 87,479 91,030 91,695 Other noncurrent liabilities   107,078     99,377     97,225     Total liabilities   1,316,718     1,289,271     1,245,772     Stockholders' Equity: Preferred stock; $.0001 par value - - - Common stock; $.0001 par value 16 16 16 Additional paid-in capital 1,201,158 1,148,228 1,137,132 Retained earnings 1,201,957 1,093,708 1,030,753 Accumulated other comprehensive income 4,478 2,369 2,053 Less: Treasury stock   (1,234,974 )   (1,071,606 )   (991,698 )   Total stockholders' equity   1,172,635     1,172,715     1,178,256     Total liabilities and stockholders' equity $ 2,489,353   $ 2,461,986   $ 2,424,028   PetSmart, Inc.Investor Relations, 623-587-2025