Phil Francis, chairman and CEO, said in the conference call that the company will reallocate the State Line Tack space for higher-margin pet products or PetsHotels, both of which are more profitable than the equine lines and both of which are more in demand by customers. PetSmart is also trying to decide what to do with its State Line Tack horse catalog and e-commerce operation, which together with the in-store horse business represented about 2% of the company's sales in 2006.

Explaining the reasons for quitting State Line Tack, Francis commented that, "The horse business operates quite differently than our core pet business, attracts a different customer and doesn't perform as well." He said that the company is not organized to focus on the horse business, so that exiting the State Line Tack business will prove more profitable for the long-term and will help earnings eventually, probably beginning in 2008.

In connection with the closing of its equine line, PetSmart also will close the retail store portion of its Brockport, NY facility and is considering alternatives for what to do with the rest of the 396,000-sf combination warehouse, call center and e-commerce facility. The Brockport facility houses both the equine and the pet catalog and e-commerce businesses. PetSmart acquired the Brockport warehouse and catalog fulfillment center in 1995 and opened the retail portion of the facility in 2002.

The company employs about 425 workers in State Line Tack departments inside its stores and about 270 at the Brockport facility. Francis says the company will try to find jobs for the State Line workers in other areas of the store or in nearby PetSmart stores, and that the fate of the Brockport workers "will depend entirely on the outcome of our strategic review of the business." If no jobs are available for any of the workers, they'll be eligible for severance pay and outplacement services.

PetSmart also reported during the conference call that it opened 22 new stores and closed one during the fourth quarter of 2006, which compares with 36 new stores and one closing during the fourth quarter of 2005. During 2006, the company opened 92 new stores and closed 10 locations, compared with 107 new stores and seven closings in 2005.

For the fourth quarter ended Jan. 28, PetSmart reported net income of $76.9 million, or 56 cents per diluted share, compared with net income of $70.9 million, or 50 cents per diluted share, for the fourth quarter of fiscal 2005. For all of fiscal 2006, the company reported net income of $185.1 million, or $1.33 per diluted share, compared with fiscal 2005 net income of $182.5 million, or $1.25 per diluted share.

Sales for the fourth quarter totaled $1.17 billion, compared with $1.05 billion for the same period in 2005, and comparable store sales grew 4.6% on top of 4.5% in the fourth quarter of 2005. For the year, sales totaled $4.23 billion, up from $3.76 billion a year ago. Comparable store sales grew 5% in 2006, on top of 4.2% in 2005.