The rating on PetSmart Inc. reflects Standard&Poor's Ratings Services' expectation that profitability will continue to benefit from good same-store sales performance, improving sales mix (as consumers are gradually shifting back to higher margin discretionary products), and operational efficiencies at PetsHotels. This, combined with the company's well-established position as the largest player in the highly fragmented and competitive pet supply retail industry, contributes to our assessment that the business risk profile is "fair." We anticipate that operational gains will likely propel a modest improvement of the company's credit profile, with leverage decreasing toward the low-2x area over the near term and cash flow protection measures improving to above 5x. These measures, in our view, are characteristic of a "significant"
