- Operating Earnings Increase 42% to $0.52 per share for the Quarter
- Operating Earnings Increase 54% to $1.13 per share for the Year
- Comparable Store Sales Up 8.5% for the Quarter and 11.1% for the Year
- Gross Profit Margin Improves 160 Basis Points for the Year
SAN DIEGO, March 9 /PRNewswire/ -- PETCO Animal Supplies, Inc.
(Nasdaq: PETC) today reported that continued strong comparable store sales
growth and gross profit margin improvement led to record sales and net
earnings for its fourth quarter and fiscal year ended January 29, 2000.
Net sales for the fourth quarter increased 14% to a record $275.4 million
from $241.2 million in the fourth quarter last year. During the fourth
quarter, comparable store sales rose 8.5%.
For the fiscal year ended January 29, 2000, net sales increased 18% to a
record $990.3 million from $839.6 million in the prior year. Comparable store
sales increased 11.1% for the year.
Gross profit margin improved 130 basis points to 29.4% in the fourth
quarter, from 28.1% in the prior year. For the fiscal year, gross profit
margin improved 160 basis points to 27.2%, from 25.6% in the prior year.
Operating income climbed to $20.7 million for the fourth quarter compared
with $15.2 million in the prior year. Operating income for the fiscal year
increased to $48.8 million from $3.9 million in the prior year.
Net earnings for the fourth quarter were $9.2 million, or $0.43 per
diluted share, compared with $7.8 million, or $0.37 per diluted share, in the
prior year. Net earnings include Internet operations expense and equity in
loss of unconsolidated affiliates, and related tax effects, of $0.09 per
diluted share, for the fourth quarter 1999.
Net earnings for the fourth quarter, excluding Internet operations and
equity in loss of unconsolidated affiliates, and related tax effects,
increased to $11.1 million, or $0.52 per diluted share, a 42% increase over
net earnings in the prior year of $7.8 million, or $0.37 per diluted share.
For fiscal year 1999, net earnings were $21.8 million, or $1.02 per
diluted share, compared with a loss of $2.4 million, or $0.11 per diluted
share, in the prior year. Net earnings, excluding Internet operations and
equity in loss of unconsolidated affiliates, and related tax effects,
increased to $24.1 million, or $1.13 per diluted share, a 54% increase over
net earnings in the prior year, excluding merger and business integration
costs and other charges, and related tax benefits, of $15.6 million, or
$0.74 per diluted share.
Cash provided by operating activities for the fiscal year expanded
significantly to $77.1 million from $27.9 million in the prior year.
Brian K. Devine, Chairman, President, and Chief Executive Officer, said,
"By executing our strategy, PETCO achieved record results for the quarter and
closed out the best year in our history. The Company's exceptional
performance indicates that we are harvesting the benefits of the strong brand
we have established nationally. With our strong sales performance and
continuing gross margin improvements, we are well positioned for continued
success in fiscal 2000."
Store Expansion Program
PETCO opened 42 new superstores during fiscal 1999, compared with 40 new
superstores opened in fiscal 1998. The addition of the 42 new superstores,
including 17 in the west, eight in the midwest, and 17 in the east, has
reinforced PETCO's national brand presence. PETCO plans to continue its store
expansion program at the current rate for the foreseeable future as the
Company remains in the early stages of its store expansion program.
As part of this program, PETCO will also continue to identify
opportunistic acquisitions. During the fourth quarter of fiscal 1999, two
stores were acquired, and, in March 2000, PETCO acquired the six superstores
of Premium Pet. These acquisitions were both accounted for as asset
purchases. The eight stores acquired were located in Northern California and
gave PETCO a dominant presence in this area.
Improved Gross Profit Margins
PETCO's continuing strategy is to expand the sales of its pet supplies and
services categories, which now represent more than 60% of sales, up more than
150 basis points on a year over year basis. "Our superstore design and
marketing programs have made other companion animal categories PETCO's fastest
growing product area, shifting the sales mix further away from pet food sales.
Gross profit margins are increasing in part because higher margin pet supplies
sales continue to grow at a pace faster than that of pet food, and we expect
this trend to continue," said Mr. Devine.
Return on Invested Capital ("ROIC") Improves Over Last Year
PETCO's pre-tax ROIC improved over last year. As a result of improved
EBIT and improved capital turns, the Company's pre-tax ROIC for fiscal 1999
improved to 13.1%, up from 12.1% for the prior year. "We are pleased to
report further improvement in ROIC, a trend we expect to continue as we
improve our gross margins and capital turns," said Mr. Devine.
Internet Investment
PETCO has a strategic alliance with and an investment in Petopia.com, a
comprehensive pet commerce destination on the Internet. The relationship
provides PETCO customers with content, commerce and community via the
Internet, while enabling Petopia.com to benefit from PETCO's industry
leadership position, strong customer base and supplier relationships. "PETCO
is continuing to expand its relationship with Petopia.com. PETCO now provides
fulfillment services to Petopia.com at its three main distribution centers in
the east, west and midwest. We are pleased and encouraged by Petopia's
progress to date," said Mr. Devine. PETCO customers can shop on-line by
visiting PETCO's Petopia at http://www.petco.com.
The pre-tax financial impact of PETCO's relationship with Petopia.com is
reflected in "Internet operations and equity in loss of unconsolidated
affiliates" in the accompanying consolidated statements of operations. For
the fourth quarter of fiscal 1999, PETCO recognized $3.2 million of equity in
the losses of Petopia.com, partially offset by the recognition of $2.7 million
earned by PETCO in its support of Petopia.com under the terms of its alliance
agreement. PETCO does not recognize any tax benefit for its share of the
losses of Petopia.com, which impacts the effective tax rate. PETCO's
effective tax rate before Internet operations and equity in loss of
unconsolidated affiliates was 39.5%. The impact of Internet operations and
equity in loss of unconsolidated affiliates, and the related tax effects,
reduced PETCO's operating earnings per diluted share from $0.52 to the
$0.43 of net earnings reported for the fourth quarter, and reduced operating
earnings per diluted share from $1.13 to the $1.02 of net earnings reported
for fiscal 1999.
Operating Cash Flow
PETCO generated a record $77.1 million cash from operating activities in
fiscal 1999, ending the year with cash and cash equivalents of $36.1 million.
James M. Myers, Senior Vice President and Chief Financial Officer, said, "We
are pleased to report that cash provided by operating activities exceeded cash
used in investing activities by a wide margin for the fiscal year. We
consider this an important milestone."
PETCO is a leading specialty retailer of premium pet food and supplies.
PETCO operated 490 stores in 39 states and the District of Columbia as of
January 29, 2000.
Certain statements in this news release that are not historical fact
constitute "forward-looking statements" within the meaning of Section 21E of
the Securities and Exchange Act of 1934 and the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results of
PETCO to be materially different from historical results or from any results
expressed or implied by such forward-looking statements. These factors, such
as integration of operations as a result of acquisitions, competition,
reliance on vendors, product lines and exclusive distribution arrangements,
dependence on senior management and performance of new superstores, are
discussed under the caption "Certain Cautionary Statements" in PETCO's Annual
Report on Form 10-K for the year ended January 30, 1999.
PETCO Animal Supplies, Inc.
Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
13 Weeks Ended 52 Weeks Ended
1/29/00 1/30/99 1/29/00 1/30/99
Net sales $275,441 $241,223 $990,289 $839,622
Cost of sales and occupancy
costs 194,504 173,393 720,711 624,818
Gross profit 80,937 67,830 269,578 214,804
Selling, general and
administrative expenses 60,248 52,640 220,800 187,938
Merger and business integration
costs -- -- -- 22,963
Operating income 20,689 15,190 48,778 3,903
Interest expense, net 2,388 2,189 8,936 6,718
Earnings (loss) before
internet operations and
equity in loss of
unconsolidated affiliates
and income taxes 18,301 13,001 39,842 (2,815)
Internet operations and equity
in loss of unconsolidated
affiliates (493) -- (1,254) --
Earnings (loss) before income
taxes 17,808 13,001 38,588 (2,815)
Income taxes (benefit) 8,623 5,200 16,831 (438)
Net earnings (loss) $9,185 $7,801 $21,757 $(2,377)
Operating earnings (loss) per
share, basic $0.52 $0.37 $1.14 $(0.11)
Operating earnings (loss) per
share, diluted $0.52 $0.37 $1.13 $(0.11)
Net earnings (loss) per share,
basic $0.44 $0.37 $1.03 $(0.11)
Net earnings (loss) per share,
diluted $0.43 $0.37 $1.02 $(0.11)
Basic weighted average number of
common shares outstanding 21,107 21,074 21,094 21,073
Diluted weighted average number
of common shares outstanding 21,413 21,082 21,338 21,073
PETCO Animal Supplies, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
01/29/2000 01/30/1999
(unaudited)
ASSETS
Cash and cash equivalents $36,059 $2,324
Receivables 8,721 7,638
Inventories 116,913 104,789
Deferred tax assets 20,262 16,769
Other 4,844 5,993
Total current assets 186,799 137,513
Fixed assets, net 192,403 187,510
Goodwill 36,362 37,804
Deferred tax assets -- 9,681
Investment in affiliates 26,360 3,862
Other assets 13,546 10,765
$455,470 $387,135
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $52,147 $51,099
Accrued expenses 32,407 23,783
Accrued salaries and employee benefits 15,285 9,792
Current portion of long-term debt 9,125 4,500
Current portion of capital lease and
other obligations 7,854 9,023
Total current liabilities 116,818 98,197
Long-term debt, excluding current portion 89,050 65,375
Capital lease and other obligations,
excluding current portion 12,436 20,982
Accrued store closing costs 5,378 7,005
Deferred income taxes 8,181 --
Deferred rent and other liabilities 17,717 11,735
Stockholders' equity 205,890 183,841
$455,470 $387,135
SOURCE PETCO Animal Supplies, Inc.
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Related links:
http://www.petco.com
CONTACT:
James M. Myers, Senior Vice President and
Chief Financial Officer of PETCO Animal Supplies, 858-677-3005
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