The ratings reflect PetsMart Inc.'s participation in the competitive and highly fragmented pet supplies retail industry and its inconsistent operating history. These risks are mitigated somewhat by the company's leading position in the industry and significantly improved operating performance over the past two years. As the leading operator of specialty pet supply stores, Phoenix, Ariz.-based PetsMart has made significant progress in turning around its operations, resulting in solid same-store sales increases of 6.8% in the first nine months of 2003, 9.6% in 2002, and 6.5% in 2001. This is attributed to PetsMart's successful store reformatting, expanded focus on pet services, and improved operating efficiency. The reformatting of the company's store base into the Eagle format (which offers customers an easier
