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Press release from Business Wire

PetSmart Reports Results for the Second Quarter 2011

<p class='bwalignc'> <b>Q2 Earnings up 32% to $0.54 per Share; Comp Sales of 5.0%; Total Sales up 7.0%; Comp Transactions of 2.0%</b> </p>

Wednesday, August 17, 2011

PetSmart Reports Results for the Second Quarter 201116:02 EDT Wednesday, August 17, 2011 PHOENIX (Business Wire) -- PetSmart, Inc. (NASDAQ: PETM) today reported earnings of $0.54 per share, up 32% compared to $0.41 per share in the second quarter of 2010. Net income totaled $61 million in the second quarter of 2011, compared to $48 million in the second quarter of 2010. Total sales for the second quarter of 2011 increased 7.0% to $1.5 billion. The increase in net sales was partially impacted by $6 million in favorable foreign currency fluctuations. Comparable store sales, or sales in stores open at least a year, grew 5.0%, benefiting from comparable transactions growth of 2.0%. Services sales, which are included in total sales, grew 7.6% to $178 million. During the second quarter, the company generated $109 million in operating cash flow, spent $20 million in capital expenditures, distributed $14 million in dividends, and repurchased $63 million of PetSmart stock. The Company ended the quarter with $321 million in cash, cash equivalents and restricted cash and zero borrowings on its credit facility. “The strength of our brand was evident with another quarter of solid performance,” said Bob Moran, Chief Executive Officer and President, “and validates the work that we are doing on our journey to becoming a best-in-class specialty retailer.” “For all of 2011, we expect comparable store sales growth in the low- to mid-single digit range, and total sales growth in the mid-single digit range. We are raising our earnings per share guidance from a previous range of $2.32 to $2.42 to our current expectations of $2.40 to $2.48,” said Chip Molloy, Senior Vice President and Chief Financial Officer. “For the third quarter of 2011, we are expecting comparable store sales growth in the 3-4% range, and earnings per share between $0.41 and $0.45.” Conference call information PetSmart management has scheduled a teleconference for 4:30 p.m. EDT on August 17, 2011 to discuss results for the second quarter 2011. 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 third quarter of 2011. In addition, you can listen to the call live by dialing 866-802-4290 (within the United States and Canada) or 703-639-1316 (for international callers), code 1543612. A phone replay will be available through September 17, 2011, 11:59 p.m. EDT, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1543612. About PetSmart PetSmart, Inc. (NASDAQ: PETM) is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company employs approximately 48,000 associates and operates more than 1,197 pet stores in the United States, Canada and Puerto Rico, over 185 in-store PetSmart® PetsHotel® dog and cat 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 dog training, pet grooming, pet boarding, PetSmart Doggie Day CampSM 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 $134 million in grants and programs benefiting animal welfare organizations. Through its in-store pet adoption partnership with PetSmart Charities®, PetSmart has helped save the lives of more than 4.5 million pets. Forward-looking statements This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2011 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/PetSmartTLCFind PetSmart on Facebook www.facebook.com/PetSmart                   PetSmart, Inc. and SubsidiariesCondensed Consolidated Balance Sheets (In thousands, except par value) (Unaudited)   July 31,January 30,August 1,201120112010   Assets Cash and cash equivalents $ 259,180 $ 291,949 $ 239,413 Short-term investments 11,833 9,708 - Restricted cash 61,439 61,439 46,515 Receivables, net 63,991 53,971 54,042 Merchandise inventories 638,294 615,841 622,483 Deferred income taxes 44,999 44,999 36,805 Prepaid expenses and other current assets   84,177     46,022     92,585     Total current assets 1,163,913 1,123,929 1,091,843   Property and equipment, net 1,072,269 1,132,435 1,158,509 Equity investment in Banfield 32,256 42,858 36,043 Deferred income taxes 92,198 96,215 87,561 Goodwill 45,428 44,111 43,323 Other noncurrent assets   37,553     30,672     26,566     Total assets $ 2,443,617   $ 2,470,220   $ 2,443,845     Liabilities and Stockholders' Equity Accounts payable and bank overdraft $ 189,959 $ 168,776 $ 198,093 Accrued payroll, bonus and employee benefits 123,557 139,359 107,203 Accrued occupancy expenses and deferred rents 65,704 64,328 62,046 Current maturities of capital lease obligations 49,362 45,277 41,147 Other current liabilities   142,081     156,065     128,807     Total current liabilities 570,663 573,805 537,296   Capital lease obligations 514,724 521,552 534,928 Deferred rents 83,675 86,027 88,279 Other noncurrent liabilities   118,620     118,194     105,223     Total liabilities   1,287,682     1,299,578     1,265,726     Stockholders' Equity: Preferred stock; $.0001 par value - - - Common stock; $.0001 par value 16 16 16 Additional paid-in capital 1,268,297 1,222,340 1,181,647 Retained earnings 1,379,937 1,277,803 1,171,039 Accumulated other comprehensive income 7,964 5,380 4,091 Less: Treasury stock   (1,500,279 )   (1,334,897 )   (1,178,674 )   Total stockholders' equity   1,155,935     1,170,642     1,178,119     Total liabilities and stockholders' equity $ 2,443,617   $ 2,470,220   $ 2,443,845                                               PetSmart, Inc. and SubsidiariesCondensed Consolidated Statements of Operations (in thousands, except per share and store data) (Unaudited)   Thirteen Weeks Ended Thirteen Weeks Ended Twenty-Six Weeks Ended Twenty-Six Weeks Ended July 31, 2011     % of Sales August 1, 2010     % of Sales July 31, 2011     % of Sales August 1, 2010     % of Sales   Merchandise sales $ 1,300,473 87.4 % $ 1,216,682 87.5 % $ 2,614,822 87.8 % $ 2,450,277 88.0 % Services sales 177,945 12.0 % 165,305 11.9 % 345,041 11.6 % 318,592 11.4 % Other revenue   9,135       0.6 %   8,553       0.6 %   18,056       0.6 %   16,824       0.6 %   Net sales   1,487,553       100.0 %   1,390,540       100.0 %   2,977,919       100.0 %   2,785,693       100.0 %   Cost of merchandise sales 916,736 61.6 % 869,226 62.5 % 1,836,212 61.7 % 1,739,068 62.4 % Cost of services sales 124,698 8.4 % 116,466 8.4 % 245,252 8.2 % 229,214 8.2 % Cost of other revenue   9,135       0.6 %   8,553       0.6 %   18,056       0.6 %   16,824       0.6 %   Total cost of sales   1,050,569       70.6 %     994,245       71.5 %   2,099,520       70.5 %     1,985,106       71.3 %   Gross profit 436,984 29.4 % 396,295 28.5 % 878,399 29.5 % 800,587 28.7 %   Operating, general and administrative expenses   326,708       22.0 %   304,288       21.9 %   646,440       21.7 %   605,319       21.7 %   Operating income 110,276 7.4 % 92,007 6.6 % 231,959 7.8 % 195,268 7.0 %   Interest expense, net   (14,255 )     -1.0 %   (14,590 )     -1.0 %   (28,702 )     -1.0 %   (29,933 )     -1.1 %   Income before income tax expenseand equity in income from Banfield 96,021 6.5 % 77,417 5.6 % 203,257 6.8 % 165,335 5.9 %   Income tax expense (37,624 ) -2.5 % (31,150 ) -2.2 % (76,530 ) -2.6 % (64,914 ) -2.3 %   Equity in income from Banfield   2,783       0.2 %   2,119       0.2 %   5,358       0.2 %   3,557       0.1 %   Net income $ 61,180       4.1 % $ 48,386       3.5 % $ 132,085       4.4 % $ 103,978       3.7 %   Earnings per common share: Basic $ 0.54   $ 0.41   $ 1.17   $ 0.88   Diluted $ 0.54   $ 0.41   $ 1.15   $ 0.87     Weighted average shares outstanding: Basic 112,396 117,079 112,972 117,528 Diluted 114,341 119,423 115,039 119,917                                                           Stores open at beginning of each period 1,192 1,160 1,187 1,149 Stores opened during each period 8 5 13 19 Stores closed during each period   (3 )   (1 )   (3 )   (4 ) Stores open at end of each period         1,197                 1,164                 1,197                 1,164         PetSmart, Inc.Investor Relations, 623-587-2025