-- Sales Increased 20% and Comparable Store Sales Up 12.1% for the Quarter
-- Net Earnings Increased 78% from Prior Year
-- 10 New Superstores Opened in Q2 and 51 New Superstores Opened in Last
12 Months
-- Decentralized Regional Management Improves Store Productivity
SAN DIEGO, Aug. 26 /PRNewswire/ -- PETCO Animal Supplies, Inc.
(Nasdaq: PETC) today reported that continued success in its store expansion
and margin improvement programs have generated record sales and net earnings
for its second quarter and six month period ended July 31, 1999.
Net sales for the second quarter increased 20% to a record $236.2 million
from $197.3 million in the second quarter last year. Comparable store sales
rose 12.1% during the second quarter. Gross profit margin improved 170 basis
points to 26.2% from 24.5% in the prior year.
For the six months (26 weeks) ended July 31, 1999, net sales increased 18%
to a record $465.8 million from $393.6 million in the same period last year.
Comparable store sales have increased 11.5% for the year to date.
Operating income climbed to $8.9 million for the second quarter compared
with an operating loss of $10.1 million in the prior year. Net earnings for
the second quarter were $4.1 million, or $0.19 per diluted share, compared
with a loss of $7.3 million, or $0.34 per diluted share, in the prior year.
Net earnings for the second quarter, excluding merger and business
integration costs and other charges, and related tax benefits, in the prior
year, increased 78% to $4.1 million, or $0.19 per diluted share, from
$2.3 million, or $0.11 per diluted share.
Cash provided by operating activities for the year to date (26 weeks) was
$18.3 million compared to $0.9 million of cash used in operating activities in
the prior year period.
For the year to date (26 weeks), net earnings were $7.7 million, or $0.36
per diluted share, compared with a loss of $8.3 million, or $0.40 per diluted
share, in the prior year. Net earnings, excluding merger and business
integration costs and other charges, and related tax benefits, in the prior
year, increased 45% to $7.7 million, or $0.36 per diluted share, from
$5.3 million, or $0.25 per diluted share.
Brian K. Devine, Chairman, President, and Chief Executive Officer, said,
"These results reflect strength in all aspects of our business. Sales,
margins and earnings all continued to trend positively, and we are very
pleased that acquired stores are now contributing to our strong performance.
This marks the second quarter in a row and the 20th time in the last 24
quarters that we have delivered double digit comparable store sales reflecting
the strength of PETCO's retail concept and the exceptional fundamentals of the
pet supply industry. This sales and comp sales momentum has continued into
the current quarter," concluded Mr. Devine.
Store Expansion Program
During the second quarter PETCO opened 10 new superstores and has now
opened 21 new superstores in the first half of 1999. This compares with 10
new superstores opened in the first half of 1998. PETCO has opened 51 new
superstores over the last twelve months. During the second half of this
fiscal year, PETCO expects to open at least 20 new stores. PETCO should be
able to continue its store expansion program at the current rate for a
considerable period of time as the Company remains in the early stages of its
store expansion program.
Shifting Sales Mix
PETCO's continuing strategy has been to expand the sales of pet supplies
and services, which now represent more than 60% of sales, up approximately 250
basis points on a year over year basis. Sales of other companion animal
categories are PETCO's fastest growing product area and this shifting of its
sales mix has been driven through its superstore design and marketing
programs. "As we have noted over the past several years, we expect pet food
sales will continue to decline as a percent of our total sales for the
foreseeable future," said Mr. Devine.
Commenting on the recently announced acquisition of a premium pet food
manufacturer by a major consumer goods company, Mr. Devine stated "Premium pet
food is an important part of our business but it is only part of our business.
Gross margins are increasing as higher margin pet supplies sales continue to
grow at a faster pace than the growth in pet food." Mr. Devine added,
"Customers will continue to visit our stores with increasing frequency for the
same reasons they have visited our stores in the past: for an outstanding
selection of pet foods, pet supplies and pet services with a pet-loving and
knowledgeable sales staff."
Decentralized Regional Management Improves Store Productivity
PETCO said it continues to reap the rewards of its decentralized regional
management model. The efforts of the Company's regional inventory managers in
particular have been very successful in improving store-level productivity,
and PETCO in general has been more responsive to customer needs with better
in-stocks. This greater productivity has been accomplished while reducing
overall inventory levels and increasing turns more than 10% over the prior
year quarter.
Internet Investment
As previously announced, PETCO entered into a strategic alliance with and
made an investment in Petopia.com, a comprehensive pet commerce destination on
the Internet which launched in July 1999. The relationship will provide
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. Currently, PETCO customers
have the ability to shop on-line by going to http://www.petco.com .
Petopia.com is very pleased with customer response to date and was ranked
#1 Overall Internet Pet Site by Gomez Advisors, Inc. --
http://www.gomez.com/Scorecards/index.cfm?topcat id-35.
PETCO is a leading specialty retailer of premium pet food and supplies.
PETCO operated 485 stores in 38 states and the District of Columbia as of
July 31, 1999.
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 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 26 Weeks Ended
7/31/99 8/1/98 7/31/99 8/1/98
Net sales $236,184 $197,318 $465,841 $393,614
Cost of sales
and occupancy costs 174,304 148,975 344,839 298,596
Gross profit 61,880 48,343 121,002 95,018
Selling, general and
administrative
expenses 52,991 47,524 104,301 88,152
Merger and business
integration costs -- 10,949 -- 17,334
Operating income
(loss) 8,889 (10,130) 16,701 (10,468)
Interest expense, net 2,078 1,424 4,002 2,546
Earnings (loss)
before income
taxes 6,811 (11,554) 12,699 (13,014)
Income taxes (benefit) 2,690 (4,293) 5,016 (4,686)
Net earnings (loss) $4,121 $(7,261) $7,683 $(8,328)
Basic earnings (loss)
per common share $0.20 $(0.34) $0.36 $(0.40)
Diluted earnings (loss)
per common share $0.19 $(0.34) $0.36 $(0.40)
Basic weighted average
number of common shares
outstanding 21,090 21,073 21,082 21,072
Diluted weighted average
number of common
shares outstanding 21,497 21,073 21,303 21,072
PETCO Animal Supplies, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
7/31/1999 1/30/1999
(unaudited)
ASSETS
Cash and cash equivalents $13,941 $2,324
Receivables 11,729 7,638
Inventories 104,398 104,789
Deferred tax assets 12,216 16,769
Other 5,899 5,993
Total current assets 148,183 137,513
Fixed assets, net 190,418 187,510
Goodwill 36,316 37,804
Deferred tax assets 9,682 9,681
Investment in affiliates 18,492 3,862
Other assets 12,485 10,765
$415,576 $387,135
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $42,036 $51,099
Accrued expenses 27,629 23,783
Accrued salaries and employee
benefits 10,400 9,792
Current portion of long-term debt 7,300 4,500
Current portion of capital lease
and other obligations 8,475 9,023
Total current liabilities 95,840 98,197
Long-term debt, excluding
current portion 92,700 65,375
Capital lease and other obligations,
excluding current portion 17,246 20,982
Accrued store closing costs 4,946 7,005
Deferred rent and other liabilities 13,040 11,735
Stockholders' equity 191,804 183,841
$415,576 $387,135
SOURCE PETCO
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Related links:
http://www.petco.com
CONTACT:
James M. Myers, Senior Vice President and
Chief Financial Officer of PETCO, 858-677-3005
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