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Even in today’s challenging economic environment, in addition, our commitment to fiscal discipline and focus on creating shareholder value continues to strengthen our business model. Since our decision in late 2007, the slow store growth and focused on store productivity, we have continued to produce significant sales and earnings growth. For fiscal year 2010, we reported total revenues of $5.7 billion and earnings per share of $2.01 and for 2011 we anticipate total revenues of more than $6 billion and an EPS of between $2.46 and $2.52.Our goal of becoming a best-in-class specialty retailer is the journey that continues to evolve. Up until 2007, much of our focus was primarily centered around store growth. In late 2007, we began to focus our efforts on driving operational efficiencies. We also slowed store growth, reduced capital spend, and then created a culture of cost control throughout the organization. We continue to build on the success of becoming an improved operating company by focusing on becoming a better merchandizing company through strengthening and refining our merchandizing capabilities. These efforts have strengthened our brand and created the foundation for us to continue to differentiate ourselves from the competition as we take another step forward on our journey becoming a best-in-class specialty retailer. Our focus is on providing solutions for our pet parents to help them, help their pets with long, healthy, and happy lives. So, how we do this? We do it by providing the broadest assortment with an unmatched customer experience all at great value. It’s differentiation that ties it altogether and makes us a pet specialty leader. It all starts with a strong leadership team. Our seasoned management team is strategically aligned across the company and I am confident in their ability to execute on our strategic priorities. We monitor customer behaviors and industry trends and use those customer insights to design our marketing strategy to tell compelling stories. Our merchandized assortment provides an unmatched selection of products, including innovative and exclusive offerings all at great value.
A key differentiator for us is our unique in-store experience, which includes our passion associates and suite of services offerings. Our financial framework sets the parameters of how we operate our business with the goal of achieving top quartile returns of between 13% and 18% total shareholder returns.And finally, our commitment to saving the lives of homeless pets keeps us ever inspired as we partner with PetSmart charity to adopt more than 1000 pets per day in our stores. Today, you will have the opportunity to hear from our senior management team on how each piece of the puzzle fits together to clearly differentiate PetSmart as the leading pet specialty retailer. First, you will hear from John Alpaugh, he is our Chief Marketing Officer as he will take us through the customer insights and our marketing strategy. And John has brought to the team the best of both worlds with his experience at P&G. He brings the best to CBG and retail marketing to our company. John has been with the company nearly 12 years in a number of leadership roles including marketing, merchandizing, and strategic planning and business development. Next, you will hear from Joe O’Leary, Head of Merchandizing with an update on our merchandized assortment strategy. And as a merchant, he has provided fresh thinking and has acquired talented merchants to drive our pipeline of both innovative and differentiated products. Prior to joining us five years ago, Joe worked in supply chain strategy and logistics at the Gap. When he joined PetSmart in 2006, he ran the supply chain and over time he has taken on merchandising and marketing as well. And then David Lenhardt, Head of Store Operations will hear some insights with you on our store experience and services. And I’ve know David Lenhardt for more than 16 years and I started to know him as a consultant with Bain & Company. And through that experience he has provided both strategic thinking and operating excellence inside our everyday business.
David joined us 11 years ago, originally in the service, strategic planning and business development area. David took over store operations and services five years ago and he also oversees human resources and information system.Then you will hear from Chip Molloy, our CFO, who joined us four years ago. With a well rounded financial background, Chip has been (intricle) in defining our financial framework of consistently delivering tough quartile shareholder returns of between 13% and 18%. Chip also leads a real estate team and by the way Chip has provided a foundation of discipline inside our company, which enables us to do our most and best creative work and thinking towards our business model on an everyday basis. And finally, you will hear from Susana Della Maddalena, who is with PetSmart Charities, who has successfully led the organization to over $40 million in contribution income on an annual basis. And I have to tell you the great work that Sue and her team does through PetSmart Charities, provides the company with a platform that clearly demonstrates our passion for pets, and it has made our culture even stronger. Sue has also spearheaded several multimillion dollar fund raising campaigns for non-profit organizations and before joining PetSmart Charities, Sue also held Senior Marketing in Advertisings positions with agencies across the company. Following the presentation, I will return to wrap it up and then we will open up the floor for your questions. With that, I’d like to have John Alpaugh, to come up and share his customer insights with us. Thank you. John Alpaugh – Chief Marketing Officer Thanks Bob, good morning everyone. I am going to begin with an overview of the pet industry and an introduction to the PetSmart customer. Then I’m going to share our marketing strategy and some of the results we’ve been able to achieve thus far.
We are fortunate to compete in a very large and healthy industry. Pet is about a $47 billion year industry and we compete most directly in the $34 billion which consists of products, as well as services like grooming, chaining, hotel and day care. We also compete through our partnership with Banfield, the pet hospital in the $13 billion veterinary care segment. Now the pet industry is projected to grow at about 3% to 5% per year over the next three years.Let’s turn to market share, on the product side, we have about 14% market share with Max being our largest competitor with 47% market share. When it comes to services we have a 15% market share and the remaining 85% is spread across a series of fragmented independent service providers. Now let’s take a look at our customer. PetSmart attracts the best pet parent in the industry. PetSmart’s customers are predominantly female with a very strong emotional relationship with her pet, often treating her pet like a child. In fact PetSmart customers are significantly less likely than the average US household have children under the age of 18 living at home. The PetSmart customer is also very good, earnings about 30% more than the average US household and it’s really the combination of that plus the desire to have the best for her pet that means that PetSmart customers spend about 78% more on their pets than the average pet owning household. Now judging by the fact that there are lot of men in this room, I think it’s safe to say that most people in the audience probably don’t fit the typical PetSmart customer profile I just outlined. So what I’d like to do is give you a deeper understanding of our customer because I don’t think you can understand the PetSmart story without having a true appreciation for the PetSmart customer.
Now, earlier this year we had a social media contest, in which we asked our customers to share stories about how they and their pets had happy experiences in our store. We got over 7,000 submissions. One of the submissions I am going to share with you in a minute in the form of a video. Now, this is not a TV ad that our agency produced and scripted, this is Kelly’s personal story about her and her dog, Emma, the relationship they have as well as the relationship they have with their local PetSmart store.Now, the video I’d like to share with you is very representative of the other submissions they were received. I think it’s also very representative of our overall PetSmart customer. So, let’s go ahead and watch the video of Kelly and Emma. [Video Presentation] I think we can all agree what comes through loud and clear in that video is the emotional relationship that Kelly has with Emma and the photograph that she shared and the way she speaks about the relationship. She is Emma’s new mommy with all the new mommy worries. And what I’d like to do now is to introduce and spend a little time at how we are using marketing to attract more customers like Kelly and Emma to our business model. Read the rest of this transcript for free on seekingalpha.com