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PHOENIX—”We’re in the front of the pack in a fast-growing, highly fragmented industry,” said Philip L. Francis, chairman and CEO of PetSmart, at Wednesday’s third-quarter earnings conference call. “We continued to grow in the third quarter, in the midst of hurricanes in the Southeast, where 44 of our stores were affected, and some of the highest fuel prices on record. That’s a testament to the inherent attractiveness of the pet industry.”

Net income for the pet-accoutrement retailer came in at of $35.9 million in Q3 2004, or $0.24 per share, compared with $29.6 million, or $0.20 per share, in the third quarter of 2003. Net sales for the third quarter were $826.8 million, compared with $732.7 million for the same period last year. Comparable store sales grew 6.7%, compared with 7.5% in the third quarter of 2003.

At the end of the third quarter, the retailer had 702 stores nationwide, and according to Francis, “we’ll on our way to an ultimate buildout of 1,400 PetSmart stores in North America,” though he did not specify a timetable. By the end of this year, the company will have opened a net of 83 new stores, and Francis projected that a net of about 100 new stores will open in 2005.

Besides growing the mainline PetSmart stores, the company also has ambitious plans for a related pet-services concepts, including grooming, animal training, and the PetsHotel, 15 of which are open in Arizona, Texas, Georgia and other states, offering overnight boarding services to dogs and cats. Francis estimates that eventually there will be 270 of the PetsHotels.

“We’re finding new ways to sustain 20%-plus growth in our high-margin pet services business,” said Francis, such as is the “Doggie Day Camp,” a test of which is open in at a PetSmart store in California. Third quarter sales in the company’s pet services business were $57.8 million, up 23.5% from the third quarter of last year.

Other company initiatives include its new main distribution center near Chicago opening early next year, which Francis said would improve supply-chain efficiencies and “help us make better buying decisions.” PetSmart is also in the midst of a $150 million stock re-purchase program, buying back 466,000 of its shares at an average purchase price of $28.97 during the third quarter.

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