Pet Smart

“Every Pet, Every Parent, Every Time”
Trinity Autumn Stone

History
Founded in 1986 by Jim and Janice Dougherty
In 1987, opened their first two stores in Arizona
PetSmart Charities, Inc., a nonprofit organization that’s dedicated to ending euthanasia and finding homes for homeless pets
Went “public” in 1993 on the NASDAQ market

History
In 1996, PetSmart made their Internet debut
Added pet boarding services, PetsHotels in 2000
As of today, there are over than 1,192 pet stores in the United States, Canada and Puerto Rico with over 184 in-store PetsHotel facilities

The Vision of PetSmart

What is PetSmart’s strategy?
To be the preferred provider for the lifetime needs of pets
Create differentiation that drives brand preference
Offer superior customer service
Focus on operating excellence
Grow our pet services business
Add stores and provide the right store format to meet the needs of our customers

Internal Environment of PetSmart
Resources and Capabilities
PetPerks® - giving them direct insight into the wants and needs of “pet parents”

Internal Environment of PetSmart
Resources and Capabilities
Variety of pet services offered under one roof
Examples:
PetSmart Grooming
PetSmart PetsHotel®
PetSmart Training
PetSmart Doggie Day Camp℠
Banfield Veterinary Clinics
PetSmart Charities

External Environment of PetSmart
Threat of Substitutes
Warehouse clubs
Grocery stores
Specialty pet supply stores
Independent pet stores
Veterinarians
E-commerce retailers

External Environment of PetSmart
Rivalry
Large amount of competitors creates intense rivalry for PetSmart
Establishing a strong identity
Creating brand loyalty

Business Strategies
Convenience
generally located at sites co-anchored by strong destination mass merchandisers
In or near major regional shopping centers
Also engaged in an ongoing expansion program, opening stores in new and existing markets

Business Strategies
Differentiation
Wide variety of product lines
Store exclusive brands
Martha Stewart Pets and GNC Pets

Reconfiguring Value
Radically New Value Chain
In 2000, PetSmart evaluated their mission and vision and changed it
Changed from a warehouse mindset to a more service driven pet retailer
Expanding pet services

First Movers
First movers in the pet industry in almost every service offered
PetSmart Charities
Veterinary Services
Pet Training
PetsHotels

Types of Diversification
Vertical Scope
Adding pet services to their existing business structure
Subsidiary companies of PetSmart
Provided the company with increased control and power in the market
Fortunate in the successes of the integrations

Types of Diversification
Geographic Scope
Acquired an established pet retailer in the United Kingdom
Eliminated some of the start up risks in the market
“Bit off a little more than they can chew."
Opened new stores in the Canadian market
Eight stores
Ontario Market

CAGE Framework
Cultural distances
PetSmart chose to enter markets with a similar culture as the U.S. market
Value of having a pet
Language and social norms
Administration distances
European Pet Food Industry Federation
European Union

CAGE Framework
Geographic distances
Locations of the stores purchased
Distribution centers
Possible shipping from U.S.
Economic distances
Consumer buying trends
Consumer incomes

Entry Vehicles
Nonequity Vehicles
Opening the new stores in Canada
Licensing
Franchising
Equity Vehicles
Acquisition
Pet City Holdings, plc

Alliances
In 2010, PetSmart teamed up with two major retail companies
Martha Stewart
GNC
Smart business move
Opened up different segments in the market

Martha Stewart Pets
“Exclusive Product Line Combines Martha's Dedication to Pets with Quality and Style”
Product line hit the shelves in June 2010
Expanded the pet accessory division
apparel, collars, leashes, bedding, feeding, grooming and bathing supplies
Products designed, tested and approved by Martha and her pets

GNC Pets
Designed a dietary and supplement product line for dogs and cats
Targeted for health consensus pet parent
Partnership came from the customer requests
Demonstrates the shift in the view of pets by our society

Acquisitions
Started acquiring companies in 1993
UniPet Distributors
The whole pet product warehouse idea got started with this company
Almost every year of business since 1993, PetSmart has been involved in an acquisition

More Acquisitions
PetStuff, Inc in 1996
Pet Food Giant in 1996
Sporting Dog Specialties, Inc in 1996
Medical Management International, Inc (MMI) in 1999
PetsHotel Plus in 2000

Creating Synergy
Adding the specialty product lines increased PetSmart market share and power
Increased their financial strength, especially during the current economic standings
Creating the alliances helped PetSmart gain access to others’ capabilities

New Venture Creation
PetSmart started as an opportunity in 1986
Knowledgeable management staff
Constantly generating new “ideas”

PetSmart’s Management
Multidivisional organizational structure
finances, marketing, counsel, store operations, supply chain, real estate, human resources, and strategic planning and development
All divisional leaders report to the President and CEO
Bob Moran elected in 2009

Changes in Our Economy
In 2008, our economy took a downward turn for the worse
“Great Recession”
Luxury market
However, pet industry seems to be unaffected the recession

Recession

Pet Industry Statistics
Total U.S. Pet Industry Expenditures
Year Billion
2011 $50.84 Est.
2010 $48.35 Actual
2009 $45.5 2008 $43.2 2007 $41.2 2006 $38.5 2005 $36.3 2004 $34.4 2003 $32.4 2002 $29.5 2001 $28.5 1998 $23 1996 $21 1994 $17
http://americanpetproducts.org/press_industrytrends.asp

PetSmart Statistics
Reported strong first quarter 2011 results
Net income of $71 million on $1.5 billion in revenues, with earnings up 33%.
12% dividend yield, based on closing stock price of $45.37 as of 7/5/2011

PetSmart’s Stock

Recommendations
Be conscious of individual margins on sales of high and low end merchandise
Continue to track product trends with the PetPerks program
Monitor services that have outgrown their profitability or their marketability cause budget cuts may be looming
Explore new niche markets

Sources
www.petsmart.com
http://phx.corporate-ir.net/phoenix.zhtml?c=93506&p=irol-timeline
http://phx.corporate-ir.net/phoenix.zhtml?c=93506&p=irol-govManage
http://phx.corporate-ir.net/phoenix.zhtml?c=196265&p=irol-newsArticle&ID=1425177&highlight=
http://phx.corporate-ir.net/phoenix.zhtml?c=196265&p=irol-newsArticle&ID=1443008&highlight=
http://phx.corporate-ir.net/phoenix.zhtml?c=196265&p=factset15
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9OTE5MDB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
http://www.dividend.com/blog/?p=34613
http://en.wikipedia.org/wiki/Late-2000s_recession
http://www.fediaf.org/self-regulation/
http://www.forbes.com/2011/06/20/daily-dividend-report-petm-stt-bxp-rop-wtw-marketnewsvideo.html?partner=yahootix
http://weeklypets.blogspot.com/
http://smallbiztrends.com/2010/01/pet-industry-trends-for-2010.html
http://www.ritholtz.com/blog/wp-content/uploads/2010/06/Recession-Recovery.png
http://www.tickerspy.com/stockcharts.cgi?&symbol=PETM&size=medium

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