PETSMART, INC. REPORTS THIRD QUARTER RESULTS
Business Wire
November 24, 1998, 4:17 p.m. ET
Business Editors
PHOENIX--(BUSINESS WIRE)--November 24, 1998--PETsMART, Inc.
(Nasdaq:PETM) today announced the financial results for its fiscal
1998 third quarter and thirty-nine weeks ended November 1, 1998.
Net sales for the quarter were $521.2 million, an increase of
18.1% over the $441.5 million reported for the third quarter last
year. Comparable store sales for North American stores increased 6.1%
for the quarter, while comparable store sales for United Kingdom
stores decreased 4.1% for the same period. During the quarter, the
Company opened seven stores, relocated one store, and closed one
under-performing store in North America, and opened five stores and
closed one store in the United Kingdom. At November 1, 1998, the
Company operated 439 stores in North America and 93 stores in the
United Kingdom.
The Company reported net income of $5.3 million (or $0.05 per
share) for third quarter 1998, as compared to net income for third
quarter 1997 of $0.2 million (or $0.00 per share), which included
merger, restructuring and business integration charges. Excluding the
nonrecurring charges last year, net income for third quarter 1997 was
$1.2 million or $0.01 per share.
PETsMART North American stores, including veterinary services,
reported net sales of $444.3 million for third quarter 1998, an
increase of 18.4% over the $375.1 million in sales for third quarter
1997. North American stores recorded operating income of $14.3 million
in the third quarter, compared with operating income of $6.0 million,
excluding nonrecurring charges, in the 1997 third quarter. The
increase in North American store sales reflected new store openings
and continued positive comparable store sales momentum resulting from
increased customer traffic. The improvement in operating income
resulted primarily from improved gross margins and general store cost
controls.
PETsMART U.K. stores and PETsMART DIRECT, the Company's direct
marketing subsidiary, reported net sales of $52.4 million and
$24.5 million, respectively, for the 1998 third quarter, versus net
sales of $44.0 million and $22.4 million, respectively, for the 1997
third quarter. PETsMART U.K. recorded an operating loss of
$1.3 million, and PETsMART DIRECT recorded operating income of
$1.1 million in third quarter 1998, versus an operating loss of
$0.7 million, before merger and business integration charges for
PETsMART U.K., and operating income of $0.0 million for PETsMART
DIRECT, in third quarter 1997. PETsMART U.K. store sales and operating
earnings continued to be adversely impacted by the United Kingdom's
deteriorating economic environment, which has negatively affected
sales, and by decreased gross profit margins resulting primarily from
increased occupancy costs in newer locations.
PETsMART DIRECT operating results improved from last year due to
the continuation of more productive catalog mailings, higher customer
response rates, good expense control and initial sales from PETsMART
DIRECT's Internet commerce sites.
For the year-to-date, consolidated net sales increased 19.3% to
$1.5 billion from $1.3 billion reported for the first three quarters
of last year. Comparable store sales for the Company's North American
stores increased 6.8%, and comparable store sales for United Kingdom
stores decreased 2.3% for the same period.
For the 39 weeks ended November 1, 1998, PETsMART North American
stores reported net sales of $1.3 billion, an increase of 18.0% over
the $1.1 billion in sales for the first three quarters of 1997.
Operating income for North American stores totaled $26.3 million
versus $19.9 million for the first three quarters of 1997, before
nonrecurring charges. PETsMART U.K. stores and PETsMART DIRECT
reported net sales of $149.4 million and $75.6 million, respectively,
for the first three quarters of 1998, versus net sales of
$117.2 million and $75.9 million, respectively, for the first three
quarters of 1997. PETsMART U.K. recorded an operating loss of
$8.4 million for year-to-date 1998 versus operating income, before
merger and integration charges, of $1.0 million last year. PETsMART
DIRECT recorded operating income of $3.4 million versus operating
income of $3.7 million for the first three quarters of 1997.
The Company reported net income of $3.8 million (or $0.03 per
share) for the thirty-nine weeks ended November 1, 1998, as compared
to a net loss of $36.3 million (or ($0.32) per share) last year.
Excluding the nonrecurring charges recorded in 1997, net income for
the first three quarters of 1997 was $9.4 million (or $0.08 per
share).
Philip L. Francis, President and Chief Executive Officer of
PETsMART, Inc. stated: "We are pleased with our overall performance
for the 1998 third quarter, especially with the continuing improvement
in the performance of our North American stores despite the seasonal
'back-to-school' sales distractions. We will continue to focus on our
store level execution and supply chain initiatives throughout the 1998
fourth quarter and into fiscal 1999. Our United Kingdom stores showed
modest improvement in the third quarter versus the first half of 1998
and we are beginning to see the positive impact of the initiatives
made to improve store operating performance. PETsMART DIRECT continued
as a solid performer, and we plan to expand our electronic commerce
offerings in fiscal 1999 to further strengthen PETsMART DIRECT's
leadership position in that rapidly emerging market. We believe we are
well-positioned as we enter the fourth quarter and we look forward to
a good holiday selling season."
PETsMART, Inc. is a leading worldwide operator of superstores
specializing in pet food, supplies and services. As of November 22,
1998, PETsMART operated 440 superstores in North America and
93 superstores in the United Kingdom.
The Company's common stock trades on The Nasdaq Stock Market
under the symbol PETM. General information about PETsMART, including
corporate background and press releases, is available through
PETsMART's web site at www.petsmart.com or by contacting Business Wire
News on Demand at (888) 588-PETM.
"This news release contains forward-looking statements that
involve substantial risks and uncertainties. Actual results and
developments may therefore differ materially from those described in
this release. For more information about PETsMART and risks arising
when investing in PETsMART, you are directed to the Company's most
recent Annual Report on Form 10-K filed with the Securities and
Exchange Commission."
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*T
PETsMART, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Nov. 1, Feb. 1,
1998 1998
Cash and cash equivalents $119,912 $125,082
Merchandise inventories 339,383 317,547
Other current assets 73,724 73,081
-------- --------
Total current assets 533,019 515,710
Property held for sale and leaseback 9,253 2,212
Property and equipment, net 256,911 242,384
Other assets 80,680 79,381
-------- --------
Total assets $879,863 $839,687
======== ========
Accounts payable $144,783 $114,692
Other current liabilities 101,394 103,577
-------- --------
Total current liabilities 246,177 218,269
6 3/4% Subordinated convertible notes 200,000 200,000
Capital lease obligations and other liabilities 90,773 86,724
-------- --------
Total liabilities 536,950 504,993
Stockholders' equity 342,913 334,694
-------- --------
Total liabilities and stockholders' equity $879,863 $839,687
======== ========
PETsMART, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts and operating data)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Nov. 1, Nov. 2, Nov. 1, Nov. 2,
1998 1997 1998 1997
Net sales $521,191 $441,456 $1,527,601 $1,279,970
Cost of sales 395,572 337,378 1,158,247 977,764
-------- -------- ---------- -----------
Gross profit 125,619 104,078 369,354 302,206
Store operating
expenses 97,409 85,955 292,035 250,351
Store preopening
expenses 862 1,916 8,396 7,925
General and
administrative
expenses 13,251 10,844 47,694 35,345
Merger and
restructuring
charges -- 1,466 -- 55,988
-------- -------- ---------- -----------
Operating
income (loss) 14,097 3,897 21,229 (47,403)
Interest
expense, net 5,138 3,423 14,751 9,426
-------- ----------- ----------- -----------
Income (loss)
before income
taxes 8,959 474 6,478 (56,829)
Income tax
expense
(benefit) 3,628 294 2,672 (20,547)
-------- ----------- ----------- -----------
Net income
(loss) $5,331 $180 $3,806 $(36,282)
======== =========== =========== ===========
Basic
earnings
per share $0.05 $0.00 $0.03 $(0.32)
======== =========== =========== ===========
Diluted
earnings
per share $0.05 $0.00 $0.03 $(0.32)
======== =========== =========== ===========
Weighted
average number
of shares
outstanding
- basic 116,432 115,225 116,115 114,642
Weighted
average number
of shares
outstanding
- diluted 116,808 115,853 116,867 114,642
Stores opened
during each
period 13 23 82 91
Stores closed
during each
period 2 5 18 9
Stores open at
end of each
period 532 458 532 458
*T
--30--dlc/ix*
CONTACT: PETsMART, Inc., Phoenix
Neil T. Watanabe, 602/587-2019
William D. Spoehr, 602/587-2056
KEYWORD: ARIZONA
INDUSTRY KEYWORD: RETAIL EARNINGS
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