BusinessWire, Tuesday, August 25, 1998 at 16:23
PHOENIX--(BUSINESS WIRE)--Aug. 25, 1998--PETsMART Inc.,
(NASDAQ:PETM) Tuesday announced the financial results for its fiscal
1998 second quarter and 26 weeks ended Aug. 2, 1998.
Net sales for the quarter were $509.8 million, an increase of
19.7% over the $425.9 million reported for the second quarter last
year. Comparable store sales for North American stores increased 8.0%
for the quarter, while comparable store sales for United
Kingdom stores decreased 3.3% for the same period.
During the quarter, the company opened 28 stores, relocated four
stores and closed two under-performing stores in North America, and
opened one store and closed one store in the United Kingdom. As of
Aug. 2, 1998, the company operated 432 stores in North America and 89
stores in the United Kingdom.
The company reported a net loss of $1.7 million (or $(0.01) per
share) for second quarter 1998, as compared to a net loss for second
quarter 1997 of $35.7 million (or ($0.31) per share), which included
merger, restructuring and business integration charges.
The second quarter 1998 net loss included $4.7 million related to
legal and settlement costs and costs incurred for executive severance
which are included in general and administrative expenses. Excluding
the nonrecurring charges, net income from operations for second
quarter 1997 was $2.5 million or $0.02 per share.
PETsMART North American stores, including veterinary services,
reported net sales of $436.1 million for second quarter 1998, an
increase of 20.7% over the $361.4 million in sales for second quarter
1997. North American stores recorded operating income of $4.1 million
in the second quarter, compared with operating income of $5.5 million,
excluding nonrecurring charges, in the 1997 second quarter.
The increase in North American store sales reflected new store
openings, positive comparable store sales momentum resulting from
increased customer traffic, and continuing strong response from
customers to the company's initiatives.
Operating income, net of unanticipated costs for executive
severance and legal and settlement costs, improved to $8.8 million
versus $5.5 million for second quarter 1997 as operating expenses
declined primarily due to lower store payroll resulting from the
decrease in North American store inventories.
PETsMART U.K. stores and PETsMART DIRECT, our direct marketing
subsidiary, reported net sales of $48.4 million and $25.4 million,
respectively, versus net sales of $39.3 million and $25.2 million,
respectively, for the 1997 second quarter.
PETsMART U.K. recorded an operating loss of $3.4 million, and
PETsMART DIRECT recorded operating income of $1.5 million in second
quarter 1998, versus operating income of $0.6 million, before merger
and business integration charges for PETsMART U.K., and operating
income of $1.3 million for PETsMART DIRECT in second quarter 1997.
PETsMART U.K. store sales and operating earnings were affected by
a general weakening of the United Kingdom retail environment and
decreased gross profit margins resulting primarily from increased
occupancy costs in new stores.
PETsMART DIRECT operating results improved from last year due to
the elimination of non-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 20.0% to
$1.0 billion from $838.5 million reported for the first two quarters
of last year. Comparable store sales for the company's North American
stores increased 7.2%, and comparable store sales for United Kingdom
stores decreased 1.3% for the same period.
For the 26 weeks ended Aug. 2, 1998, PETsMART North American
stores reported net sales of $858.4 million, an increase of 20.6% over
the $711.9 million in sales for first half 1997. Operating income for
North American stores totaled $12.0 million versus $14.0 million for
first half 1997, net of nonrecurring charges.
PETsMART U.K. stores and PETsMART DIRECT reported net sales of
$97.0 million and $51.1 million, respectively, versus net sales of
$73.2 million and $53.5 million, respectively, for first half 1997.
PETsMART U.K. recorded an operating loss of $7.1 million for
first half 1998 versus operating income, before merger and integration
charges, of $1.7 million last year. PETsMART DIRECT recorded operating
income of $2.2 million versus operating income of $3.7 million for
first half 1997.
The company reported a net loss of $1.5 million (or ($0.01) per
share) for the 26 weeks ended Aug. 2, 1998, as compared to a net
loss of $36.5 million (or ($0.32) per share) last year. Excluding the
nonrecurring charges recorded in 1997, net income from operations for
the first half of 1997 was $8.2 million (or $0.07 per share).
Philip L. Francis, president and chief executive officer of
PETsMART Inc. stated: "Our 1998 second quarter performance reflects
continued improvement and positive operating and earnings momentum in
our core North American stores and direct marketing operations. Our
focus on improving the shopping experience for our customers by
reorganizing merchandise presentation in the consumables area and
improving customer service levels continues to drive solid increases
in our customer transaction counts and sales.
"Additionally, our planned inventory reductions are beginning to
provide benefits through leveraging of our store operating expenses,
as well as improving our cash flow and strengthening our balance
sheet. PETsMART DIRECT continues to generate positive earnings.
"The opportunity for increasing our market share via electronic
retailing through the Internet is yielding very favorable results
based on the two catalogs we have initiated this year through our
existing website. Our United Kingdom management team is executing
several operational and merchandising improvements designed to improve
sales and margins and reduce operating expenses, particularly in newer
stores.
"We will continue our efforts to improve stockholder returns
during the rest of 1998 and we remain confident in our strategies and
initiatives."
PETsMART Inc. is a leading worldwide operator of superstores
specializing in pet food, supplies and services. As of Aug. 24,
1998, PETsMART operated 437 superstores in North America and 90
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."
*T
PETsMART Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
Aug. 2 Feb. 1
1998 1998
Cash and cash
equivalents $120,166 $125,082
Merchandise
inventories 309,740 317,547
Other current
assets 81,020 73,081
-------- --------
Total current
assets 510,926 515,710
Property held for
sale and leaseback 6,752 2,212
Property and
equipment, net 252,504 242,384
Other assets 81,333 79,381
-------- --------
Total assets $851,515 $839,687
======== ========
Accounts payable $121,492 $114,692
Other current
liabilities 101,295 103,577
-------- --------
Total current
liabilities 222,787 218,269
6 3/4% Convertible
subordinated notes 200,000 200,000
Capital lease
obligations and
other liabilities 90,618 86,724
-------- --------
Total liabilities 513,405 504,993
Stockholders' equity 338,110 334,694
-------- --------
Total liabilities
and stockholders' equity $851,515 $839,687
======== ========
PETsMART Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts and operating data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Aug. 2, Aug. 3, Aug. 2, Aug. 3,
1998 1997(a) 1998 1997
Net sales $ 509,846 $ 425,860 $1,006,410 $ 838,514
Cost of sales 388,252 329,413 762,675 640,386
--------- --------- --------- ---------
Gross profit 121,594 96,447 243,735 198,128
Store
operating
expenses 96,579 87,257 194,626 164,396
Store
preopening
expenses 3,276 2,827 7,534 6,009
General and
administrative
expenses 19,637 15,082 34,443 24,501
Merger and
restructuring
charges - 44,891 - 54,522
--------- --------- --------- ---------
Operating
income (loss) 2,102 (53,610) 7,132 (51,300)
Interest
expense, net 4,831 3,341 9,613 6,003
--------- --------- --------- ---------
Income (loss)
before income
taxes (2,729) (56,951) (2,481) (57,303)
Income tax
expense
(benefit) (1,051) (21,235) (956) (20,841)
--------- --------- --------- ---------
Net income
(loss) $ (1,678) $ (35,716) $ (1,525) $ (36,462)
========= ========= ========= =========
Basic
earnings
per share $ (0.01) $ (0.31) $ (0.01) $ (0.32)
========= ========= ========= =========
Diluted
earnings
per share $ (0.01) $ (0.31) $ (0.01) $ (0.32)
========= ========= ========= =========
Weighted
average
number of
shares
outstanding -
basic 116,104 114,758 115,984 114,475
Weighted
average
number of
shares
outstanding -
diluted 116,104 114,758 115,984 114,475
Stores
opened
during
each period 29 32 69 68
Stores
closed
during
each period 7 2 16 4
Stores
open
at end of
each period 521 440 521 440
*T
(a) Second quarter 1997 includes total charges of $61.0 million
reported as $44.9 million for restructuring, $9.4 million as cost of
goods sold, $3.3 million as store operating expenses, and $3.4 million
as general and administrative expenses.
CONTACT: PETsMART, Phoenix
Neil T. Watanabe, 602/587-2019
William D. Spoehr, 602/587-2056
KEYWORD: ARIZONA
INDUSTRY KEYWORD: RETAIL EARNINGS
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Copyright 1998, Business Wire
Companies or Securities discussed in this article:
SymbolNameNASDAQ:PETMPetsmart Inc |
