January 19, 2001, 12:00 AM

PetSmart takes a $6 million hit on its dot-com acquisition

Don Davis

Editor in Chief

PETsMART Inc. today announced a $6 million non-cash equity loss resulting from PETsMART.com adjusting certain balance sheet assets to current, realistic market values. As a result of its recent decision to acquire a controlling interest in PETsMART.com, PETsMART, Inc. is required to report 100% of those losses. For the third fiscal quarter, PETsMART reported a net loss of $2.4 million or 2 cents per share on a fully diluted basis. Those results compare with a reported net loss of $33.2 million, or 29 cents per share for the same period last year. On a comparable basis, the company's operating net income was $500,000. That compares with third quarter 1999 net operating income of $5.6 million, which excluded the equity loss on PETsMART.com and the loss from the sale of a United Kingdom subsidiary.

Net sales for the third quarter were $541.3 million, compared to $511.8 million reported for the same period last year. "While our decision to acquire a controlling interest in PETsMART.com resulted in a one-time, non-cash charge in the third quarter, the e-commerce division can now join us with a balance sheet that is sound, clean and has appropriate asset valuations, and we are poised to capitalize on the synergies of a unique, three-channel retail model," said Philip L. Francis, chairman, president and chief executive officer. Year to date, consolidated net sales increased 4.8% to $1.6 billion from $1.5 billion for the first three quarters of 1999. The company reported a net loss of $3.7 million for the nine months ended October 29, 2000, compared to a net loss of $27.6 million for the same period last year.

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