We expect specialty pet retailer PetSmart Inc.'s operating performance will be softer than we anticipated and persist into next year based on intense competition from other retailers including those operating in the mass channel and supermarkets. We think these weak operating trends will delay the pace of deleveraging we previously anticipated, and we expect debt to EBITDA to remain above 7x on a prolonged basis. As a result, we are lowering our corporate credit rating to 'B' from 'B+'. The negative outlook reflects a 1-in-3 chance we could lower our ratings if the company's operating performance deteriorates more than our forecast, causing leverage to remain at current elevated levels or interest coverage to decline to about 2x. On Sept. 18,
