The ratings on PetsMart Inc. reflect the operating challenges associated with its aggressive growth strategy, a highly competitive and fragmented pet food supplies and services industry, and the company's highly leveraged capital structure. These risks are mitigated, somewhat, by PetsMart's leading industry position. Standard&Poor's believes PetsMart's aggressive growth in recent years has contributed to operating challenges that have slowed improvement in financial performance. Operating issues related to new SAP retail management information systems and mass distribution of Iams premium dog food by Procter&Gamble Co. have negatively affected sales and EBITDA. Comparable-store sales increased only 1.5% for the first nine months of fiscal 2000 (ending January 2001), compared with a 4.6% increase for the full fiscal year
