-- Comparable Store Sales Up 13.2% for the Quarter, Overall Sales
Increase 22%
-- Operating Earnings More Than Doubled to $0.25 per share
-- 18 New Superstores Opened in Q3 and 54 New Superstores Opened in
Last 12 Months
-- Gross Profit Margin Improvement Continues
SAN DIEGO, Nov. 19 /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 third quarter and nine month period ended October 30, 1999.
Net sales for the third quarter increased 22% to a record $249.0 million
from $204.8 million in the third quarter last year. During the third quarter,
comparable store sales rose 13.2%, the largest increase reported in the
premium pet food and supplies sector in the past three years.
For the nine months (39 weeks) ended October 30, 1999, net sales increased
19% to a record $714.8 million from $598.4 million in the same period last
year. Comparable store sales increased 12.1% for the nine month period.
Gross profit margin improved 180 basis points to 27.2% in the third
quarter, from 25.4% in the prior year. Improved execution in inventory
management resulted in a favorable adjustment to the shrinkage accrual which
contributed 60 basis points of the improvement in the third quarter. Gross
profit margin increased 120 basis points to 26.6% without this favorable
adjustment.
Operating income climbed to $11.4 million for the third quarter compared
with an operating loss of $0.8 million in the prior year. Operating income
for the nine month period increased to $28.1 million from an operating loss of
$11.3 million in the prior year.
Net earnings for the third quarter were $4.9 million, or $0.23 per diluted
share, compared with a loss of $1.8 million, or $0.09 per diluted share, in
the prior year. Net earnings include internet operations expense and equity
in loss of unconsolidated affiliates of $0.8 million, or $0.02 per diluted
share, for the third quarter 1999.
Net earnings for the third quarter, excluding internet operations and
equity in loss of unconsolidated affiliates, increased to $5.3 million, or
$0.25 per diluted share, a 112% increase over net earnings in the prior year,
excluding merger and business integration costs and other charges, and related
tax benefits, of $2.5 million, or $0.12 per diluted share.
For the year to date (39 weeks), net earnings were $12.6 million, or
$0.59 per diluted share, compared with a loss of $10.2 million, or
$0.48 per diluted share, in the prior year period. During the period, net
earnings, excluding internet operations and equity in loss of unconsolidated
affiliates of $0.8 million, increased to $13.0 million, or $0.61 per diluted
share, a 67% increase over net earnings in the prior year, excluding merger
and business integration costs and other charges, and related tax benefits, of
$7.8 million, or $0.37 per diluted share.
Cash provided by operating activities for the year to date (39 weeks) was
$30.4 million compared with $12.1 million of cash provided by operating
activities in the prior year period.
Brian K. Devine, Chairman, President, and Chief Executive Officer, said,
"PETCO's strong performance reflects our ability to capitalize on the positive
demographic trends driving the pet food and supply industry, most notably the
expansion of the pet population and the number of households with children
which represent strong pet product consumers. We enter the holiday selling
season well positioned to continue to execute our strategy in an environment
of strong reported consumer confidence."
Store Expansion Program
During the third quarter PETCO opened 18 new superstores and has now
opened 39 new superstores in the first nine months of 1999. This compares
with 25 new superstores opened in the first nine months of 1998. The 39 new
superstores opened during the first nine months of 1999 further establish
PETCO's national brand presence with 17 new superstores in the west, eight in
the midwest, and 14 in the east. PETCO has opened 54 new superstores over the
last 12 months. During the fourth quarter of this fiscal year, PETCO expects
to open up to five new stores, including its first store in the state of
Maine. 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.
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
200 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," said Mr. Devine.
Commenting on the improved gross profit margins, Mr. Devine stated, "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." Mr. Devine added, "Moreover, PETCO increasingly enjoys
the benefits of the infrastructure initiatives completed a year ago.
Continued improvement of gross profit margins is expected as we leverage our
investments in the new point of sale systems and distribution center network.
These resources are supporting the increase in inventory turns to 6.5 times, a
15% improvement over the prior year quarter."
Return on Invested Capital ("ROIC") Improves Over Same Period Last Year
PETCO's pre-tax ROIC improved over the same period last year. As a result
of improved EBIT and improved capital turns, the Company's pre-tax ROIC for
the trailing twelve months of the third quarter improved to 12.8%, up from
12.2% for the same period last year. "This improvement in ROIC is
attributable to PETCO's strong execution of its industry-leading retail
concept. This trend is expected 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 which launched in July
1999. The relationship provides 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.
The 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.
"PETCO's working relationship with Petopia.com allows us to participate in
a new channel of distribution and reach the emerging class of on-line
customers," said Mr. Devine. PETCO customers can shop on-line by visiting
PETCO's Petopia at http://www.petco.com .
PETCO is a leading specialty retailer of premium pet food and supplies.
PETCO operated 494 stores in 38 states and the District of Columbia as of
October 30, 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 39 Weeks Ended
10/30/99 10/31/98 10/30/99 10/31/98
Net sales $249,007 $204,785 $714,848 $598,399
Cost of sales and
occupancy costs 181,369 152,830 526,208 451,426
Gross profit 67,638 51,955 188,640 146,973
Selling, general
and administrative
expenses 56,251 47,145 160,552 135,297
Merger and business
integration costs -- 5,629 -- 22,963
Operating income
(loss) 11,387 (819) 28,088 (11,287)
Interest expense, net 2,545 1,983 6,547 4,529
Earnings (loss)
before internet
operations and
equity in loss of
unconsolidated
affiliates and
income taxes 8,842 (2,802) 21,541 (15,816)
Internet operations
and equity in loss
of unconsolidated
affiliates (761) -- (761) --
Earnings before
income taxes 8,081 (2,802) 20,780 (15,816)
Income taxes (benefit) 3,192 (953) 8,208 (5,639)
Net earnings (loss) $4,889 $(1,849) $12,572 $(10,177)
Operating earnings
(loss) per share,
basic $0.25 $(0.09) $0.62 $(0.48)
Operating earnings
(loss) per share,
diluted $0.25 $(0.09) $0.61 $(0.48)
Net earnings (loss)
per share, basic $0.23 $(0.09) $0.60 $(0.48)
Net earnings (loss)
per share, diluted $0.23 $(0.09) $0.59 $(0.48)
Basic weighted average
number of common
shares outstanding 21,106 21,074 21,090 21,073
Diluted weighted
average number of
common shares
outstanding 21,366 21,074 21,324 21,073
PETCO Animal Supplies, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
10/30/1999 01/30/1999
(unaudited)
ASSETS
Cash and cash equivalents $5,504 $2,324
Receivables 12,493 7,638
Inventories 118,706 104,789
Deferred tax assets 9,238 16,769
Other 6,258 5,993
Total current assets 152,199 137,513
Fixed assets, net 192,033 187,510
Goodwill 37,080 37,804
Deferred tax assets 9,681 9,681
Investment in affiliates 20,266 3,862
Other assets 13,116 10,765
$424,375 $387,135
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $42,343 $51,099
Accrued expenses 28,257 23,783
Accrued salaries and employee benefits 15,890 9,792
Current portion of long-term debt 7,300 4,500
Current portionase and
other obligations 7,690 9,023
Total current liabilities 101,480 98,197
Long-term debt, excluding current portion 92,700 65,375
Capital lease and other obligations,
excluding current portion 14,737 20,982
Accrued store closing costs 5,423 7,005
Deferred rent and other liabilities 13,332 11,735
Stockholders' equity 196,703 183,841
$424,375 $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, Inc.,
858-677-3005
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