Presented by

1. Presented by Peng Liang Yongxiang Mao Richie Hartz Xiaosi Song Shengkun Wang November 29, 2012

2. Agenda • Introduction • Recent Stock Performance • Company Overview • Industry Overview • Financial Analysis • Projections • Valuation • Recommendation

3. Current Position • 100 shares bought on May 3, 2012 @ $58.88 • Current Price: $69.91 as of 11/28 • Unrealized Gain: $1,103 with a return on investment of 18.73%

4. Recent Stock Performance Source: Pet Smart 2011 Annual report P32

5. Recent Company News • October 1, PetSmart was added to the S&P 500, replacing Sunoco • October 15, the vice president of investor relations and treasury post, David Cone, left PetSmart and joined private home builder, Taylor Morrison, as the CFO • November 14, PetSmart unveiled its 3rd quarter results: Sales increased to $1.6B by 9%; EPS up by 50% to $0.75/share; Expected annual sales for FY 2012 $6.5B • November 26, CEO Robert Moran told CNBC that PetSmart grabbed a big share of holiday spending, about 76% of pet owners were expected to buy their pet a holiday gift. The company was ready to pounce on a housing recovery, explaining home sales are closely correlated to pet acquisition.

6. Company Overview • PetSmart, Inc. is the largest specialty provider of pet products, services and solutions • Founded in 1986 and public in 1993 on the NASDAQ • In 2005, name rebranded from PETsMART to PetSmart • FY 2011, 50,000 associates & 1,232 pet stores • Net Sales: $6.1 Billion • Services Sales: $0.67 Billion

7. Business Segments • Merchandise • Consumables • Hardgoods • Pets • Services • Grooming • Training • Hotel/Day Camping • Veterinary Services

8. Consumables • Consumables merchandise sales include pet food, treats and litter • PetSmart emphasizes super-premium, premium and therapeutic dog and cat foods • Proprietary labels like Grreat Choice, Authority, and Simply Nourish >70% Source: PetSmart Q2 2012 Presentation, P12

9. Hardgoods • Hardgoods include pet suppliers and other goods • Collars, leashes, health care supplies, toys and apparel, as well as pet beds and carriers • Higher margin and lower turnover than consumables • Established strategic cooperation with Martha Stewart, GNC and Toys R US Source: PetSmart Q2 2012 Presentation, P13

10. Pets • No Dogs or Cats, but space in store for adoption • Only Fish, Reptiles, Birds and Small Pets

11. Services Largest pet services provider in North America • Grooming: precision cuts, baths, nail trimming and grinding, and teeth brushing (900 sq ft / store) • Training ranges from puppy classes to advanced or private courses • PetsHotels: 24-hour supervision, temperature controlled rooms and suites • Veterinary hospitals: routine examinations and vaccinations, dental care, and surgical procedures • As of Jan. 2012, owns 192 PetsHotels Source: PetSmart Q2 2012 Presentation, P17

12. Pet Store Industry - Segmentation • Pet food • A variety of premium pet foods are available to consumers today • Pet supplies • Revenue has been declining in the last five years due to competition, • Increasingly sold at retail outlets • Services • Fastest-growing product segment • Includes full service grooming, haircuts, baths, toenail trimming, and tooth brushing, but excludes veterinary services • Other services may include training, boarding and day camp. • Live animal purchases • Relatively small and stable sales as a one-off purchase without repetitive spending Source: Pet Stores in the US, WWW.IBISWORLD.COM

13. Pet Stores Industry People between 45 to 54 with steady income streams look for pet companions to fill the empty space in their households after their children leave home. Source: Pet Stores in the US, WWW.IBISWORLD.COM

14. Major Players in This Industry IBISWorld estimates that by the end of 2012, the industry will have about 13,853 firms. Source: Pet Stores in the US, WWW.IBISWORLD.COM

15. Porter’s Five Forces Source: Pet Stores in the US, WWW.IBISWORLD.COM; Global Specialty Retail, MarketLine; 10-K

16. Demand Determinants • Pet ownership • 62% of U.S. households are estimated to own a pet in 2012 compared with 56% in 1998 • Income • Pet owning households with high disposable income have been the main customers for luxury and trendy pet products • People with higher income tend to travel more and are more likely to utilize pet boarding industry operators • Demographics and lifestyle • Aging population may increase demand for pets for companionship • Households that are frequently relocating, working longer hours, or living in apartments are less likely to have pets Source: Pet Stores in the US, WWW.IBISWORLD.COM

17. Macroeconomic Condition Recovering consumer confidence and strengthening retail sales since 2009. Source: http://dailycapitalist.com/2012/01/31/income-and-spending-slowed-to-a-crawl-in-2011/

18. Industry Outlook Rising pet ownership serves as a strong driver for demand and boosts sales Slowly improving economic conditions allows customers to spend more on premium pet products and services Strong competition from grocery stores and mass merchandisers Higher demand for pets over the next five years driven by more common single-person households and the aging population Profit margins are forecasted to increase from 4.3% in 2012 to 4.5% in 2017 with expected growing profitability, thus also bringing new entrant into the industry Source: Pet Stores in the US, WWW.IBISWORLD.COM

19. Financial Performance of Competitors

20. Comparative Equity Performance • Services • Merchandise

21. PetSmart’s Strategy • Create meaningful differentiation to drive brand preference • Offer superior customer service • Focus on operating excellence • Grow pet services business • Add stores and provide the right format to meet the needs of customers Focus is on SOLUTIONS! Source: PetSmart 10-k and Q2 2012 Presentation, P5

22. Market Differentiation

23. SWOT Analysis

24. Risk & Uncertainty • Quarterly operating results may fluctuate due to seasonal changes associated with the pet products and services retail industry, and new store openings and store closures. • A higher portion of our net sales and operating profit during the fourth fiscal quarter • Lower operating margins for new stores that tend to experience higher payroll, advertising and other store level expenses, as a percentage of net sales, than mature stores • Disruption of the relationship with or the loss of any of our key vendors • Sales of premium pet food for dogs and cats comprise a significant portion of our net sales. Currently, most major vendors of premium pet food (exclusive relationships) do not permit their products to be sold in supermarkets, warehouse clubs, or through other mass and retail merchandisers. • Two of our largest vendors account for a material amount of products sold • Food safety, quality and health concerns • costly recalls and a loss of consumer confidence Source: 10-K

25. Sales & EPS Growth Sales growth rate: 7% per year; EPS growth rate: 7% per year

26. Sales Penetration Merchandise sales accounts for the largest portion of PetSmart’s sales, but keeps decreasing as % of net sales due to higher growth rate in services segment

27. Services Growth Source: PetSmart Q2 2012 Presentation, P18

28. Dupont Analysis

29. Strategic Transition in 2009 • Pursue existing store profitability instead of blindly opening new stores • 37 new stores opened in 2009, less than half of the number in the previous level • Promote in-store management and improve pricing, space and assortment process • Rely more on the growth in sales of pet services

30. New Stores and Capital Expenditure Net sales/square feet decreased from $210 in 2007 to $205 in 2009, but recovered up to $224 in 2011

31. Comparable Store Sales Growth

32. Financial Projection Sales growth rates

33. Discount Rate

34. DCF Model

35. Multiples Valuation

36. Recommendation