PETM

PetSmart, Inc (PETM)

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PetSmart (PETM)

Q3 2012 Earnings Call

November 14, 2012 4:30 pm ET

Executives

April Lenhard

Robert F. Moran - Chairman, Chief Executive Officer and Member of Disclosure & Ethics Committee

Lawrence P. Molloy - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Member of Disclosure & Ethics Committee

David K. Lenhardt - President and Chief Operating Officer

Analysts

Alan M. Rifkin - Barclays Capital, Research Division

Matthew J. Fassler - Goldman Sachs Group Inc., Research Division

Christopher Horvers - JP Morgan Chase & Co, Research Division

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Gary Balter - Crédit Suisse AG, Research Division

Kate Wendt - Wells Fargo Securities, LLC, Research Division

Michael Lasser - UBS Investment Bank, Research Division

Peter S. Benedict - Robert W. Baird & Co. Incorporated, Research Division

David Gober - Morgan Stanley, Research Division

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to PetSmart's Third Quarter 2012 Analyst Conference Call. [Operator Instructions] Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms. April Lenhard, Head of Investor Relations. Ma'am?

April Lenhard

Good afternoon, and welcome to PetSmart's conference call to announce our results for the third quarter of fiscal 2012. With me on the call today are Chairman and Chief Executive Officer, Bob Moran; President and Chief Operating Officer, David Lenhardt; as well as Chip Molloy, Executive Vice President and Chief Financial Officer. Bob will kick off the call with an overview of our results, and then Chip will take you through the financial review, as well as our earnings guidance. David will review the operations of the business. And finally, we'll take your questions.

Please keep in mind, everything we cover during today's call, including the question-and-answer session, is subject to the Safe Harbor statement for forward-looking information you'll find in today's news release. Thanks.

And I'll now turn the call over to Bob.

Robert F. Moran

Thanks, April, and good afternoon, everyone.

We are pleased to report another quarter of solid earnings growth.

For the third quarter, earnings per share were $0.75, up 50% when compared to $0.50 for the same period last year. Comparable store sales, or sales in stores open at least a year, grew 6.5%. And comp transactions, which we use as a proxy for traffic, were up 2.3%.

Our performance in the third quarter was due to the strength across all 3 merchandising categories: consumables, hard goods and live goods, as well as across services. We are executing well and continue to define the pet specialty customer experience, because we are much more than a store that just sells products.

As North America's leading pet specialty retailer, we provide a full range of services, including professional grooming, training, boarding, day camp and full-service veterinary care, all under one roof. And we are privileged to have the most passionate associates in the industry, who engage with our pet parents to offer solutions. We have also built a culture of innovation and differentiation that sets us apart from the competition. Through our partnership with PetSmart Charities, the largest funder of animal welfare efforts in all of North America, we are proud that nearly 1,100 homeless pets are saved each day in our stores. All these things define the PetSmart brand. It is strong, and it resonates with our customers.

As a side note, we recently signed a product license agreement with E-mart, a leading retailer in South Korea, to sell a limited number of proprietary-branded hard goods products in select pet stores in South Korea. We view this partnership as a low-risk learning exercise to gain a better understanding of how our brand is received in emerging Asian markets without investing significant resources.

Now I would like to take a moment to express our deepest sympathy to those affected by the devastation of Hurricane Sandy. We hope that you and your families are well and safe. I would like to thank our associates, who pulled together during the crisis; and especially to those who so generously contributed to PetSmart's Associate Assistance Foundation to provide financial support to help their fellow associates, who were personally affected by the storm's devastation. Approximately 200 of our stores in the Northeast were closed on Monday, October 29, when Hurricane Sandy made landfall on the greater Northeastern Coast. And we're pleased to report that by November 10, all of our stores were once again open for business.

And now, I would like to shift to a different subject matter before turning the call over to Chip. I am sure most of you saw, as part of our release, our announcement that Chip will be resigning. It is difficult for us professionally, and for me personally, to see Chip leave our company. However, we are fortunate that he has agreed to stay with us through the transition. He will continue as CFO until replacement is in position and has agreed to stay with the company as a Special Advisor until March of 2014. Chip has been an invaluable member of our management team over the past 5 years and has been instrumental in designing a framework and creating a culture within the company that consistently pushes us to always consider our shareholders. It is this foundation of focus and discipline that has contributed to our success over the past 4 years and will remain a key pillar of our strategy well into the future. He has also built a tremendous finance team that is going to serve PetSmart for many years to come.

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