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PHOENIX-PetSmart executives pointed to an emphasis on merchandising over growth when explaining the company’s strong Q2 showing. The company reported net income of $39 million, or $0.31 per share for the quarter, versus net income of $37.2 million, or $0.30 per share during the second quarter of 2008.

During Q2, the company opened 10 stores and closed two, while opening four pet hotels within the stores. During the same time last year, the company opened 37 new stores and closed five.

“We’ve slowed store growth and reduced capital store spend,” said Bob Moran, the company’s CEO and president. “We’re focusing on becoming a better merchandising company. Though he acknowledged that the pet hotel sector remains “challenged,” he said that during holiday seasons, the hotels are filled and require waiting lists. The company’s doggie day camp, however, demonstrated strength during the quarter, as did the company’s in-store grooming services.

PetSmart increased cash, cash equivalents and restricted cash to $236 million and had zero borrowings on its credit facility at the end of the quarter. During the second quarter, the company purchased $25 million of PetSmart stock and distributed $3.8 million in dividend payments.

Moran said it likely wouldn’t be until the back end of 2010 when real movement came about. Though “all of us have seen glimmers of hope in the macro environment,” he said, the combination of a weak economy and consumer confidence volatility challenges the idea that consumer spending is going to be high any time soon.

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