10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Thirteen Weeks Ended November 2, 2008

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission file number: 0-21888

PetSmart, Inc.

(Exact name of registrant as specified in its charter)

Delaware	94-3024325
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

(PETSMART LOGO)

19601 N. 27th Avenue
Phoenix, Arizona	85027
(Address of principal executive offices)	(Zip Code)

(623) 580-6100
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date:

Common Stock, $.0001 Par Value, 127,118,305 Shares at November 18, 2008

PetSmart, Inc. and Subsidiaries
INDEX

	Page
	Number
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Report of Independent Registered Public Accounting Firm		3
Condensed Consolidated Balance Sheets as of November 2, 2008, February 3, 2008, and October 28, 2007		4
Condensed Consolidated Statements of Operations and Comprehensive Income for the thirteen and thirty-nine weeks ended November 2, 2008, and October 28, 2007		5
Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended November 2, 2008, and October 28, 2007		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Quantitative and Qualitative Disclosures About Market Risk		27
Item 4. Controls and Procedures		27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		28
Item 1A. Risk Factors		29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 6. Exhibits		30
Signatures		31
EX-10.12
EX-10.13
EX-10.16
EX-15.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
PetSmart, Inc.
Phoenix, AZ

We have reviewed the accompanying condensed consolidated balance sheets of PetSmart, Inc. and subsidiaries (the “Company”) as of November 2, 2008 and October 28, 2007, and the related condensed consolidated statements of operations and comprehensive income for the thirteen week and thirty-nine week periods ended November 2, 2008 and October 28, 2007, and of cash flows for the thirty-nine week periods ended November 2, 2008 and October 28, 2007. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of PetSmart, Inc. and subsidiaries as of February 3, 2008, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 31, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of February 3, 2008 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Phoenix, AZ
November 26, 2008

3

PetSmart, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)

	November 2,			February 3,			October 28,
	2008			2008			2007
ASSETS
Cash and cash equivalents	$	54,317		$	58,322		$	57,493
Receivables, net		39,352			49,341			42,881
Merchandise inventories		612,246			501,212			530,131
Deferred income taxes		46,947			46,765			45,189
Prepaid expenses and other current assets		77,787			73,231			65,053
Total current assets		830,649			728,871			740,747
Property and equipment, net		1,328,554			1,230,770			1,194,909
Equity investment in affiliate		26,242			23,346			23,269
Deferred income taxes		111,837			108,544			85,733
Goodwill		39,057			44,333			43,543
Intangible assets, net of accumulated amortization of $1,941, $1,935 and $1,776		1,081			1,457			1,012
Other noncurrent assets		23,010			29,936			31,276
Total assets	$	2,360,430		$	2,167,257		$	2,120,489
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and bank overdraft	$	196,903		$	172,352		$	200,438
Accrued payroll, bonus and employee benefits		144,341			132,768			139,074
Accrued occupancy expenses and deferred rents		58,718			46,955			52,254
Short-term debt		50,000			30,000			—
Current maturities of capital lease obligations		30,873			24,982			23,654
Other current liabilities		139,659			148,832			102,170
Total current liabilities		620,494			555,889			517,590
Long-term debt		—			—			80,000
Capital lease obligations		558,518			508,765			498,707
Deferred rents		92,071			88,954			87,116
Other noncurrent liabilities		28,584			27,052			32,428
Total liabilities		1,299,667			1,180,660			1,215,841
Commitments and contingencies
Stockholders’ equity:
Preferred stock; $.0001 par value; 10,000 shares authorized, none issued and outstanding		—			—			—
Common stock; $.0001 par value; 625,000 shares authorized, 159,556, 158,104 and 157,930 shares issued		16			16			16
Additional paid-in capital		1,108,260			1,079,190			1,067,338
Retained earnings		861,527			758,674			687,111
Accumulated other comprehensive (loss) income		(2,217	)		5,585			7,051
Less: treasury stock, at cost, 32,408, 30,066 and 29,289 shares		(906,823	)		(856,868	)		(856,868	)
Total stockholders’ equity		1,060,763			986,597			904,648
Total liabilities and stockholders’ equity	$	2,360,430		$	2,167,257		$	2,120,489

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

PetSmart, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share data)
(Unaudited)

	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	November 2,			October 28,			November 2,			October 28,
	2008			2007			2008			2007
Net sales	$	1,251,144		$	1,115,916		$	3,706,023		$	3,344,222
Cost of sales		893,448			784,387			2,625,553			2,327,892
Gross profit		357,696			331,529			1,080,470			1,016,330
Operating, general and administrative expenses		285,571			271,920			852,678			795,401
Operating income		72,125			59,609			227,792			220,929
Gain on sale of investment		—			—			—			95,363
Interest income		130			1,028			387			6,496
Interest expense		(14,899	)		(13,774	)		(44,109	)		(36,799	)
Income before income tax expense and equity in income from investee		57,356			46,863			184,070			285,989
Income tax expense		(22,492	)		(18,223	)		(72,684	)		(104,299	)
Equity in income from investee		959			812			2,896			1,593
Net income		35,823			29,452			114,282			183,283
Other comprehensive (loss) income, net of income tax:
Foreign currency translation adjustments		(6,436	)		4,001			(7,802	)		5,923
Comprehensive income	$	29,387		$	33,453		$	106,480		$	189,206
Earnings per common share:
Basic	$	0.29		$	0.23		$	0.92		$	1.40
Diluted	$	0.28		$	0.23		$	0.90		$	1.37
Weighted average shares outstanding:
Basic		124,122			127,431			124,308			130,979
Diluted		126,795			130,528			126,761			134,216

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

PetSmart, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

	For the Thirty-Nine Weeks Ended
	November 2,			October 28,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	114,282		$	183,283
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		166,402			144,545
Gain on sale of investment		—			(95,363	)
Loss on disposal of property and equipment		4,357			5,531
Stock-based compensation expense		18,562			12,010
Deferred income taxes		(3,475	)		9,136
Equity in income from investee		(2,896	)		(1,593	)
Tax benefits from tax deductions in excess of the compensation cost recognized		(2,912	)		(8,864	)
Non-cash interest expense		4,075			1,757
Changes in assets and liabilities excluding the effect of the acquisition of store locations in Canada:
Receivables, net		10,942			(6,019	)
Merchandise inventories		(109,684	)		(36,439	)
Prepaid expenses and other current assets		(5,272	)		(14,440	)
Other noncurrent assets		6,906			(4,731	)
Accounts payable		34,372			31,383
Accrued payroll, bonus and employee benefits		13,469			17,842
Accrued occupancy expenses and current deferred rents		12,315			7,011
Other current liabilities		(12,577	)		(66,063	)
Deferred rents		4,138			2,575
Other noncurrent liabilities		3,595			12,832
Net cash provided by operating activities		256,599			194,393
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for short-term available-for-sale investments		—			(285,205	)
Proceeds from sales of short-term available-for-sale investments		—			304,405
Decrease in restricted cash and short-term investments		—			60,700
Cash paid for property and equipment		(194,562	)		(207,991	)
Cash paid for acquisition of store locations in Canada		—			(36,883	)
Proceeds from sales of property and equipment		2,980			405
Proceeds from sale of equity investment		—			111,752
Net cash used in investing activities		(191,582	)		(52,817	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments for) common stock traded under stock incentive plans		8,642			27,817
Cash paid for treasury stock		(49,955	)		(315,027	)
Payments of capital lease obligations		(26,665	)		(18,928	)
Proceeds from short-term debt		464,000			100,000
Payments on short-term debt		(444,000	)		(20,000	)
Decrease in bank overdraft		(7,871	)		(14,265	)
Tax benefits from tax deductions in excess of the compensation cost recognized		2,912			8,864
Cash dividends paid to stockholders		(11,451	)		(12,175	)
Net cash used in financing activities		(64,388	)		(243,714	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(4,634	)		10,832
DECREASE IN CASH AND CASH EQUIVALENTS		(4,005	)		(91,306	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		58,322			148,799
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	54,317		$	57,493

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

PetSmart, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 — GENERAL:

     PetSmart, Inc., including its wholly owned subsidiaries (the “Company,” “PetSmart” or “we”), is a leading specialty provider of products, services and solutions for the lifetime needs of pets. We offer a broad line of products for all the life stages of pets and offer various pet services, including professional grooming, training, boarding and day camp. We also offer pet products through an e-commerce site. As of November 2, 2008, we operated 1,107 retail stores and had full-service veterinary hospitals in 726 of our stores. Medical Management International, Inc. operated 714 of the veterinary hospitals under the registered trade name of “Banfield, The Pet Hospital.” See Note 4 for a discussion of our ownership interest in Medical Management International, Inc. The remaining 12 hospitals are operated by other third-parties in Canada.

     Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or “GAAP,” for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for annual financial statements. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (which are of a normal, recurring nature) necessary for the fair statement of results of the interim periods presented. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended February 3, 2008. In order to provide information in greater detail, we have presented “Deferred rents” and “Other noncurrent liabilities” as separate line items instead of the previously reported single line item of “Deferred rents and other noncurrent liabilities” in the Consolidated Balance Sheets.

     Due to the seasonal nature of our business, the results of operations for the thirteen and thirty-nine weeks ended November 2, 2008, are not necessarily indicative of the results expected for the full year. Our fiscal year consists of 52 or 53 weeks and ends on the Sunday nearest January 31. Fiscal 2008 ends on February 1, 2009, and consists of 52 weeks, while fiscal 2007 ended on February 3, 2008, and consisted of 53 weeks. Unless otherwise specified, all references in these condensed consolidated financial statements to years are to fiscal years.

NOTE 2 — ADOPTION OF SFAS NO. 157:

     Financial Accounting Standards Board, or “FASB,” Statement of Financial Accounting Standards, or “SFAS,” No. 157, “Fair Value Measurements,” defines and establishes a framework for measuring fair value and expands related disclosures. This Statement does not require any new fair value measurements. SFAS No. 157 is effective for our financial assets and financial liabilities beginning in 2008. In February 2008, FASB Staff Position, or “FSP,” No. 157-2, “Effective Date of Statement 157,” deferred the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008.

     SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities;

Level 2: Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

Level 3: Unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.

     We adopted SFAS No. 157 as of February 4, 2008, for the recorded financial assets and financial liabilities. This adoption of SFAS No. 157 did not have a material impact on our fair value measurements of financial assets and financial liabilities. We will adopt the provisions of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities in the first quarter of 2009 and are currently evaluating the impact of the provisions of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities.

7

     The following table provides the fair value hierarchy for financial assets measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements at November 2, 2008, using:
					Significant		Significant
	Total Carrying		Quoted Prices in		Observable		Unobservable
	Value at November 2,		Active Markets		Other Inputs		Other Inputs
	2008		(Level 1)		(Level 2)		(Level 3)
Non-current investments	$	15,551		—	$	15,551		—

     Our non-current investments are related to our non-qualified deferred compensation program and are required to be measured at fair value on a recurring basis. The fair value of these investments is based on the quoted prices of the trading securities for the assets underlying the investment and is defined as a Level 2 input in the fair value hierarchy.

NOTE 3 — INCOME TAXES:

     We establish deferred income tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. We record a valuation allowance on the deferred income tax assets to reduce the total to an amount we believe is more likely than not to be realized.

     As of January 29, 2007, we adopted FASB Interpretation, or “FIN,” No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN No. 48, the tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.

     In accordance with FIN No. 48, we continue to recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense in the Condensed Consolidated Statements of Operations and Comprehensive Income. We believe it is reasonably possible that approximately $4.5 million of our current remaining unrecognized tax positions may be recognized by the end of the third quarter of 2009 as a result of settlements or a lapse of the statute of limitations.

     As of November 2, 2008, our FIN No. 48 gross tax liabilities, excluding interest and penalties, were $8.1 million. Based on the uncertainties associated with the settlement of these types of items, we are unable to make reasonably reliable estimates of potential cash settlements, if any, with taxing authorities.

     We do not materially adjust deferred tax assets as part of our interim income tax provision. During the interim periods, we recognize the provision for income taxes in other current liabilities in the Condensed Consolidated Balance Sheets. A reclassification between other current liabilities and deferred income tax assets and liabilities is likely to occur in the last quarter of 2008.

NOTE 4 — INVESTMENTS:

     We have an investment in MMI Holdings, Inc., a provider of veterinary and other pet-related services. MMI Holdings, Inc., through a wholly owned subsidiary, Medical Management International, Inc., collectively referred to as “MMIH,” operates full-service veterinary hospitals inside 714 of our stores under the registered trade name “Banfield, The Pet Hospital.”

     During the thirteen weeks ended April 29, 2007, we sold a portion of our non-voting shares in MMIH for $111.8 million. The cost basis of the non-voting shares was $16.4 million, which resulted in a pre-tax gain of $95.4 million, or an after-tax gain of approximately $64.3 million. In connection with this transaction, we also converted our remaining MMIH non-voting shares to voting shares. The increase in voting shares caused us to exceed the significant influence threshold as defined by GAAP, which required us to account for our investment in MMIH using the equity method of accounting instead of the previously applied cost method, in accordance with Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.”

8

     Our ownership interest in the stock of MMIH was as follows (in thousands):

	As of November 2, 2008				As of February 3, 2008
	Amount		Shares		Amount		Shares
Voting common stock and convertible preferred stock	$	21,675		4,693	$	21,675		4,693
Equity in income from investee		4,567		—		1,671		—
Total equity investment in affiliate	$	26,242		4,693	$	23,346		4,693

     All of our investment as of November 2, 2008, and February 3, 2008, consisted of voting common stock, totaling 21.5% ownership of that class of stock. Our ownership percentage as of November 2, 2008, and February 3, 2008, considering all classes of stock, was 21.0%. Our investment in MMIH includes goodwill of $15.9 million. The goodwill is calculated as the excess of the purchase price for each step of our acquisition of our ownership interest in MMIH relative to that step’s portion of MMIH’s net assets at the respective acquisition date.

     MMIH’s financial data, which is recorded one month in arrears, is summarized as follows (in thousands):

	As of		As of
	November 2, 2008		February 3, 2008
Current assets	$	184,493	$	163,083
Noncurrent assets		126,474		120,204
Current liabilities		197,195		183,540
Noncurrent liabilities		14,226		13,631

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 2, 2008		October 28, 2007		November 2, 2008		October 28, 2007
Net sales	$	127,147	$	103,996	$	374,318	$	300,426
Gross profit		17,419		14,437		56,960		42,682
Net income before minority interest		2,521		2,783		13,349		7,755

     In June 2007, we entered into a new master operating agreement with MMIH that has an initial 15-year term and is retroactive to February 2007. We charge MMIH license fees for the space used by the veterinary hospitals and for their portion of utilities costs. We treat these amounts as a reduction of the retail stores’ occupancy costs, which are included as a component of cost of sales in the Condensed Consolidated Statements of Operations and Comprehensive Income. We also charge MMIH for its portion of specific operating expenses and treat the reimbursement as a reduction of the retail stores’ operating expense.

     We recognized license fees, utilities and other cost reimbursements of $7.6 million and $8.7 million during the thirteen weeks ended November 2, 2008, and October 28, 2007, respectively, and $22.6 million and $26.1 million during the thirty-nine weeks ended November 2, 2008, and October 28, 2007, respectively. The thirteen weeks ended July 29, 2007, included an adjustment to recognize the cumulative difference in reimbursements due to the new master operating agreement. Receivables from MMIH totaled $3.2 million and $4.5 million at November 2, 2008, and February 3, 2008, respectively, and were included in receivables in the Condensed Consolidated Balance Sheets.

     The master operating agreement also includes a provision for the sharing of profits on the sales of therapeutic pet foods sold in all stores with an operating Banfield hospital.

NOTE 5 — DISCONTINUATION OF EQUINE PRODUCT LINE:

     On February 28, 2007, we announced plans to exit our equine product line, including the sale or discontinuation of StateLineTack.com and our equine catalog, and the sale of a warehouse, call center and store facility in Brockport, New York.

     On April 29, 2007, we entered into an agreement to sell a portion of the equine product line, including the State Line Tack brand, certain inventory, customer lists and certain other assets to a third-party. The gain we recognized was not material.

     During the thirteen weeks ended April 29, 2007, we performed an impairment analysis on the remaining assets supporting the equine product line, including the Brockport, New York facility, in accordance with SFAS No. 144, “Accounting for the Impairment or

9

Disposal of Long-Lived Assets,” that indicated no impairment existed. We accelerated the depreciation on these assets, and they were fully depreciated to their estimated salvage value as of February 3, 2008.

     We recognized a charge to income to reduce the remaining equine inventory to the lower of cost or market value and recorded operating expenses related to the exit of the equine product line, remerchandising of the store space previously used for equine inventory and severance costs in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The net effect of the gain on sale of the assets, inventory valuation adjustments, accelerated depreciation, severance and operating expenses was an after-tax loss of $3.8 million for the thirteen weeks ended April 29, 2007. The net effect of the discontinuation of the equine product line in 2007 was an after-tax loss of $9.8 million. The inventory valuation adjustments and accelerated depreciation of certain assets were recorded in cost of sales, and the operating expenses, severance and accelerated depreciation on certain assets were recorded in operating, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income.

NOTE 6 — STOCK-BASED COMPENSATION:

     The stock-based compensation expense and the total income tax benefit recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income were as follows (in thousands):

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 2, 2008		October 28, 2007		November 2, 2008		October 28, 2007
Stock options expense	$	1,963	$	1,619	$	6,048	$	1,544
Restricted stock expense		3,854		3,403		11,070		8,977
Employee stock purchase plan expense		494		506		1,444		1,489
Total stock-based compensation expense	$	6,311	$	5,528	$	18,562	$	12,010
Tax benefit	$	2,239	$	1,878	$	6,458	$	3,838

     Stock options and restricted stock expense have been adjusted to reflect both actual and estimated forfeitures as follows (in thousands):

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	November 2, 2008			October 28, 2007			November 2, 2008			October 28, 2007
Stock options forfeiture expense (benefit)	$	106		$	9		$	290		$	(3,687	)
Restricted stock forfeiture expense (benefit)		(787	)		(1,059	)		(2,914	)		(5,231	)
Total forfeiture expense (benefit)	$	(681	)	$	(1,050	)	$	(2,624	)	$	(8,918	)

     At November 2, 2008, the total unrecognized stock options expense and restricted stock expense, net of estimated forfeitures, was $42.0 million and is expected to be recognized over a weighted average period of 2.2 years.

     In accordance with our equity incentive plans, we granted the following (in thousands, except per option or per share information):

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 2, 2008		October 28, 2007		November 2, 2008		October 28, 2007
Stock options awarded		17		59		1,807		972
Weighted average fair value per option	$	8.59	$	10.53	$	6.43	$	10.91
Weighted average exercise price per option	$	23.71	$	31.58	$	19.11	$	31.49
Restricted stock awarded		31		37		966		869
Weighted average fair value per share of restricted stock	$	23.85	$	31.24	$	19.37	$	31.50

     We estimated the fair value of stock option grants using a lattice option pricing model. The following assumptions were used to value stock option grants:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	November 2, 2008			October 28, 2007			November 2, 2008			October 28, 2007
Dividend yield		0.42	%		0.42	%		0.42	%		0.42	%
Expected volatility		38.7	%		31.8	%		36.2	%		31.9	%
Risk-free interest rate		2.28	%		4.19	%		1.96	%		4.86	%
Expected life	5.2 years			5.1 years			5.2 years			5.2 years
Vesting period	4.0 years			4.0 years			4.0 years			4.0 years
Term	7.0 years			7.0 years			7.0 years			7.0 years

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     We have an Employee Stock Purchase Plan, or “ESPP,” that allows employees who meet certain service requirements to purchase our common stock on semi-annual offering dates at 85% of the fair market value of the shares on the offering date or, if lower, at 85% of the fair market value of the shares on the purchase date. ESPP expense is recognized evenly over the six-month window. During the thirteen weeks ended November 2, 2008, there were no shares purchased through the ESPP, while 0.1 million shares were purchased through the ESPP during the thirteen weeks ended October 28, 2007. The number of shares purchased through the ESPP was 0.2 million in each of the the thirty-nine weeks ended November 2, 2008, and October 28, 2007.

NOTE 7 — RESERVES FOR CLOSED STORES:

     The reserves for closed stores were as follows (in thousands):

	As of			As of
	November 2,			February 3,
	2008			2008
Total remaining gross occupancy costs	$	35,452		$	34,376
Less:
Expected gross sublease income		(27,950	)		(27,167	)
Interest costs		(1,191	)		(1,052	)
Reserves for closed stores	$	6,311		$	6,157

     The reserves for closed stores are recorded in other current liabilities and other noncurrent liabilities in the Condensed Consolidated Balance Sheets. We can make no assurances that additional charges related to closed stores will not be required based on the changing real estate environment.

     The activity related to the reserves for closed stores was as follows (in thousands):

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	November 2, 2008			October 28, 2007			November 2, 2008			October 28, 2007
Opening balance	$	5,919		$	7,405		$	6,157		$	7,689
Charges, net		1,379			1,095			3,266			3,226
Payments, net		(987	)		(815	)		(3,112	)		(3,230	)
Ending balance	$	6,311		$	7,685		$	6,311		$	7,685

NOTE 8 — OTHER COMPREHENSIVE INCOME:

     Foreign currency translation adjustments were the only component of other comprehensive income and are reported separately in stockholders’ equity in the Condensed Consolidated Balance Sheets. The income tax (benefit) or expense related to the foreign currency translation adjustments was $(4.1) million and $2.6 million for the thirteen weeks ended November 2, 2008, and October 28, 2007, respectively, and $(5.0) million and $3.8 million for the thirty-nine weeks ended November 2, 2008, and October 28, 2007, respectively.

NOTE 9 — STOCKHOLDERS’ EQUITY:

     Share Purchase Program

     In August 2007, the Board of Directors approved a new share purchase program authorizing the purchase of up to $300.0 million of our common stock through August 2, 2009. On August 19, 2007, we entered into a $225.0 million fixed dollar accelerated share repurchase, or “ASR,” agreement. The ASR agreement contained provisions that established the minimum and maximum number of shares to be purchased during its term. Pursuant to the terms of the ASR agreement, on August 20, 2007, we paid $225.0 million to the ASR counterparty for the purchase of shares and $0.2 million in related fees. We received 7.0 million shares of common stock under the ASR agreement, which was completed on January 31, 2008. The ASR agreement was funded with $125.0 million in cash and $100.0 million in borrowings under our $350.0 million revolving credit facility. The company did not purchase any shares of common stock for the thirteen weeks ended November 2, 2008. During the thirty-nine weeks ended November 2, 2008, we purchased 2.3 million shares of our common stock for $50.0 million. As of November 2, 2008, the amount remaining under the August 2007 share purchase authorization was $25.0 million.

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     Dividends

     The Board of Directors declared the following dividends:

Date	Dividend Amount		Stockholders of	Date
Declared	per Share		Record Date	Paid
March 25, 2008	$	0.03	May 2, 2008	May 16, 2008
June 18, 2008	$	0.03	August 1, 2008	August 15, 2008
September 24, 2008	$	0.03	October 31, 2008	November 14, 2008

NOTE 10 — EARNINGS PER COMMON SHARE:

     The following table presents a reconciliation of the weighted average shares outstanding used in the earnings per common share calculations (in thousands):

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 2, 2008		October 28, 2007		November 2, 2008		October 28, 2007
Basic		124,122		127,431		124,308		130,979
Effect of dilutive securities:
Stock options, restricted stock and ESPP shares		2,673		3,097		2,453		3,237
Diluted		126,795		130,528		126,761		134,216

     Certain stock-based compensation awards representing 4.1 million and 1.0 million shares of common stock in the thirteen weeks ended November 2, 2008, and October 28, 2007, respectively, and 4.8 million and 0.9 million shares of common stock in the thirty-nine weeks ended November 2, 2008, and October 28, 2007, respectively, were not included in the calculation of diluted earnings per common share because the inclusion of the awards would have been antidilutive for the periods presented.

NOTE 11 — SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION:

     Supplemental cash flow information was as follows (in thousands):

	Thirty-Nine Weeks Ended
	November 2, 2008		October 28, 2007
Interest paid	$	41,276	$	36,549
Income taxes paid, net of refunds		81,097		157,124
Assets acquired using capital lease obligations		81,235		82,440
Accruals and accounts payable for capital expenditures		34,035		42,250
Dividends declared but unpaid		3,815		3,860

NOTE 12 — RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” SFAS No. 141(R) establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date fair value. SFAS No. 141(R) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted.

     In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets.” FSP No. FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” The intent of FSP No. FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R), and other GAAP. FSP No. FAS 142-3 is effective for our interim and annual financial statements beginning in fiscal 2009. We are evaluating the impact of adopting FSP No. FAS 142-3 on our consolidated financial statements.

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     In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” FSP No. EITF 03-6-1 clarifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and requires such awards be included in the computation of earnings per share pursuant to the two-class method. FSP No. EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. FSP No. EITF 03-6-1 requires all prior-period earnings per share data presented to be adjusted retrospectively and early application is not permitted. We believe the adoption of FSP No. EITF 03-6-1 will not have a material impact on our consolidated financial statements or disclosures.

     In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active.” FSP FAS No. 157-3 clarifies the application of SFAS No. 157, “Fair Value Measurements,” in a market that is not active and defines additional key criteria in determining the fair value of a financial asset when the market for that financial asset is not active. FSP No. FAS 157-3 applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with SFAS No. 157. FSP No. FAS 157-3 was effective upon issuance and the application of FSP No. FAS 157-3 did not have a material impact on our consolidated financial statements.

NOTE 13 — LITIGATION AND SETTLEMENTS:

     In October 2006, two lawsuits were filed against us in California State Court on behalf of putative classes of current and former California employees. The first suit, Sorenson v. PetSmart, was filed on October 3, 2006. The plaintiff, a former dog groomer, alleges that she and other non-exempt employees failed to receive their meal and rest breaks as required by law. The second suit, Enabnit v. PetSmart, was filed on October 12, 2006, and alleges meal and rest period violations and that employee paychecks were not compliant with the California Labor Code. The plaintiff seeks compensatory damages, penalties under the California Labor Code, restitution, attorney’s fees, costs and prejudgment interest. In November 2006, we removed both actions to the United States District Court for the Eastern District of California. The parties have reached an agreement in principle to settle both of these matters for an amount that will not be material to our consolidated financial statements and has been accrued for. The Sorenson settlement was preliminarily approved by the court on August 5, 2008, while the Enabnit settlement has been submitted for preliminary approval and is currently pending with the court.

     We are also a party to several lawsuits arising from the pet food recalls announced by several manufacturers beginning in March 2007. The named plaintiffs sued the major pet food manufacturers and retailers claiming that their pets suffered injury and/or death as a result of consuming allegedly contaminated pet food and pet snack products.

Bruski v. Nutro Products, et al., USDC, N.D. IL (filed 3/23/07)
Rozman v. Menu Foods, et al., USDC, MN (filed 4/9/07)
Blaszkowski v. Mars Inc., et al., USDC, S.D. FL (filed 5/9/07)
Ford v. Menu Foods, et al., USDC, S.D. CA (filed 4/23/07)
Wahl, et al. v. Wal-Mart Stores Inc., et al., USDC, C.D. CA (filed 4/10/07)
Demith v. Nestle, et al., USDC, N.D. IL (filed 4/23/07)
Thompkins v. Menu Foods, et al., USDC, CO (filed 4/11/07)
McBain v. Menu Foods, et al., Judicial Centre of Regina, Canada (filed 7/11/07)
Dayman v. Hills Pet Nutrition Inc., et al. Ontario Superior Court of Justice (filed 8/8/07)
Esau v. Menu Foods, et al., Supreme Court of Newfoundland and Labrador (filed 9/5/07)
Ewasew v. MenuFoods, et al., Supreme Court of British Colombia (filed 3/23/07 )
Silva v. Menu foods, et al., Canada Province of Manitoba (filed 3/30/07)
Powell v. Menu Foods, et al., Ontario Superior Court of Justice (filed 3/28/07)

     By order dated June 28, 2007, the Bruski, Rozman, Ford, Wahl, Demith and Thompkins cases were transferred to the U.S. District Court for the District of New Jersey and consolidated with other pet food class actions under the federal rules for multi-district litigation (In re: Pet Food Product Liability Litigation, Civil No. 07-2867). The Canadian cases and the Blaszkowski case were not consolidated.

     On May 21, 2008, the parties to the U.S. lawsuits comprising the In re: Pet Food Product Liability Litigation and the Canadian cases jointly submitted a comprehensive settlement arrangement for court approval. Preliminary court approval was received from the U.S. District Court on May 3, 2008, and from all of the Canadian courts as of July 8, 2008. On October 14, 2008, the U.S. court gave final

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approval of the settlement, and the Canadian courts gave final approval on November 3, 2008. Upon expiration of the prescribed appeal periods, these cases should be resolved with no material adverse impact on our consolidated financial statements.

     With respect to Blaszkowski v. Mars Inc., et al., on September 12, 2008, the court dismissed with prejudice all of the retailer defendants, including the Company.

     We are involved in the defense of various other legal proceedings that we do not believe are material to our consolidated financial statements.

NOTE 14 — COMMITMENTS AND CONTINGENCIES:

     Letters of Credit

     As of November 2, 2008, a total of $70.4 million was outstanding under letters of credit to guarantee insurance policies, capital lease agreements and utilities.

     Advertising Purchase Commitments

     As of November 2, 2008, we had obligations to purchase $7.7 million of advertising during the remainder of 2008, and $15.4 million through 2009.

     Product Purchase Commitments

     On May 31, 2007, we entered into a three-year product purchase agreement with a vendor. Based on the terms of the agreement, we estimate the purchase obligation to be $18.1 million for the remainder of 2008, and $41.8 million and $14.0 million for 2009 and 2010, respectively. If we do not purchase the minimum requirements in a year, the shortfall in purchases is carried to the following year. If our purchases exceed the minimums required, the surplus purchases are applied to the following year’s requirement.

NOTE 15 — SHORT-TERM DEBT:

     In August 2007, we replaced our existing $125.0 million credit facility with a $350.0 million five-year revolving credit facility that expires on August 15, 2012. Borrowings under the credit facility are subject to a borrowing base and bear interest, at our option, at a bank’s prime rate plus 0% to 0.25% or LIBOR plus 0.875% to 1.25%. We are subject to fees payable to lenders each quarter at an annual rate of 0.20% of the unused amount of the credit facility. The credit facility also gives us the ability to issue letters of credit, which reduce the amount available under the credit facility. Letter of credit issuances under the credit facility are subject to interest payable to the lenders and bear interest of 0.875% to 1.25% for standby letters of credit or 0.438% to 0.625% for commercial letters of credit.

     In August 2007, we borrowed $100.0 million under the credit facility to fund a portion of our $225.0 million ASR agreement. As of November 2, 2008, we had $50.0 million in short-term debt and $70.4 million in letter of credit issuances outstanding under our $350.0 million revolving credit facility. In accordance with Accounting Research Bulletin, or “ARB,” No. 43, “Restatement and Revisions of Accounting Research Bulletins,” the borrowings under the revolving credit facility are classified as short-term debt in the Condensed Consolidated Balance Sheets as we intend to repay the borrowings within 12 months. However, we could continue to utilize the revolving credit facility to fund short-term cash needs.

     We also have a $70.0 million stand-alone letter of credit facility that expires on June 30, 2009. We are subject to fees payable to the lenders each quarter at an annual rate of 0.20% of the average daily face amount of the letters of credit outstanding during the preceding calendar quarter. In addition, we are required to maintain a cash deposit with the lenders equal to the amount of outstanding letters of credit or we may use other approved investments as collateral. If we use other approved investments as collateral, we must have an amount on deposit which, when multiplied by the advance rate of 85%, is equal to the amount of the outstanding letters of credit under this stand-alone letter of credit facility. As of November 2, 2008, we had no outstanding letters of credit under this stand-alone letter of credit facility, no restricted cash or short-term investments on deposit with the lenders, and no other investments related to this credit facility.

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     As of November 2, 2008, we were in compliance with the terms and covenants of our credit facility and letter of credit facility. The credit facility and letter of credit facility are secured by substantially all our personal property assets, our subsidiaries and certain real property.

NOTE 16 — ACQUISITION OF STORE LOCATIONS IN CANADA:

     We completed the purchase of 19 store locations, which added 18 net new stores, in Canada on May 31, 2007, for approximately $37.0 million after all adjustments. The acquisition has been accounted for pursuant to SFAS No. 141, “Business Combinations,” and accordingly, the operating results of the acquired stores are included in the consolidated financial statements from the date of acquisition. In connection with the acquisition, we initially recorded $27.5 million of goodwill. During the thirteen weeks ended October 28, 2007, we decreased our preliminary purchase price by $0.5 million as a result of adjustments to inventory. The purchase price allocation was finalized during the fourteen weeks ended February 3, 2008, with further adjustments to the carrying values of assets and liabilities acquired, the useful lives of intangible assets, and the residual amount allocated to goodwill. The impact of the acquisition on our results of operations is immaterial, and the goodwill is expected to be deductible for tax purposes.

     During the thirty-nine weeks ended November 2, 2008, goodwill decreased approximately $5.3 million due to changes in the Canadian dollar exchange rate.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Except for historical information, the following discussion contains forward-looking statements that involve risks and uncertainties. In the normal course of business, our financial position is routinely subjected to a variety of risks, including market risks associated with store expansion, investments in information systems, international expansion, vendor reliability, competitive forces and government regulatory actions. Our actual results could differ materially from projected results due to some or all of the factors discussed below. You should carefully consider the risks and uncertainties described below:

• Comparable store sales growth may decrease as stores grow older. If we are unable to increase sales at our existing stores, our results of operations could be harmed.

• We may be unable to continue to open new stores and enter new markets successfully. If we are unable to successfully reformat existing stores and open new stores, our results of operations could be harmed. Also, store development may place increasing demands on management and operating systems and may erode sales at existing stores.

• A decline in consumers’ discretionary spending or a change in consumer preferences could reduce our sales and harm our business.

• Our quarterly operating results may fluctuate due to seasonal changes associated with the pet retail industry and the timing of expenses, new store openings and store closures.

• The pet products retail industry is very competitive and continued competitive forces may adversely impact our business and financial results.

• Failure to successfully manage and execute our marketing initiatives could have a negative impact on our business.

• Our operating margins at new stores may be lower than those of existing stores.

• A disruption, malfunction or increased costs in the operation, expansion or replenishment of our distribution centers or our supply chain would impact our ability to deliver to and effectively merchandise our stores or increase our expenses, which could harm our sales and results of operations.

• If our information systems fail to perform as designed or are interrupted for a significant period of time, our business could be harmed.

• If we fail to protect the integrity and security of customer and associate information, we could be exposed to litigation and our business could be adversely impacted.

• The disruption of the relationship with or the loss of any of our key vendors, a decision by our vendors to make their products available in supermarkets or through warehouse clubs and other mass and retail merchandisers, or the inability of our vendors to provide quality products in a timely or cost-effective manner or risks associated with the suppliers from whom products are sourced, could harm our business.

• Our expanded offering of proprietary branded products may not improve our financial performance and may expose us to product liability claims.

• Our failure to successfully anticipate merchandise returns might have a negative impact on our business.

• We depend on key executives, store managers and other personnel and may not be able to retain or replace these employees or recruit additional qualified personnel, which could harm our business.

• Our international operations may result in additional market risks, which may harm our business.

• Our business may be harmed if the operation of veterinary hospitals at our stores is limited or fails to continue.

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• We face various risks as an e-commerce retailer.

• Our business could be harmed if we are unable to effectively manage our cash flow and raise any needed additional capital on acceptable terms.

• Failure to successfully integrate any business we acquire could have an adverse impact on our financial results.

• Changes to estimates related to our property and equipment, or operating results that are lower than our current estimates at certain store locations, may cause us to incur impairment charges.

• Our inability or failure to protect our intellectual property could have a negative impact on our operating results.

• A determination of a violation of any contractual obligations or government regulations could result in a disruption to our operations and could harm our business.

• Failure of our internal controls over financial reporting could harm our business and financial results.

• Changes in laws, accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.

• An unfavorable determination by tax regulators may cause our provision for income and other taxes to be inadequate and may result in a material impact to our financial results.

• Our business exposes us to claims, litigation and risk of loss that could result in adverse publicity, harm to our brand and impact our financial results.

• Our inability to obtain commercial insurance at acceptable prices or our failure to adequately reserve for self-insured exposures might have a negative impact on our business.

• Pending legislation, weather, catastrophic events, disease or other factors could disrupt our operations, supply chain and the supply of the small pets and products we sell, which could harm our reputation and decrease sales.

• Food safety, quality and health concerns could affect our business.

• Fluctuations in the stock market, as well as general economic and market conditions may impact our operations, sales, financial results and market price of our common stock.

• Our operating and financial performance in any given period may differ from the guidance we have provided to the public.

• We have implemented some anti-takeover provisions that may prevent or delay an acquisition of us that may not be beneficial to our stockholders.

     For more information about these risks, see the discussion under the heading “Risk Factors” in our Form 10-K for the year ended February 3, 2008, filed with the Securities and Exchange Commission on March 31, 2008, which is incorporated herein by reference.

Overview

     Based on our 2007 net sales of $4.7 billion, we are North America’s leading specialty provider of products, services and solutions for the lifetime needs of pets. As of November 2, 2008, we operated 1,107 stores, and we anticipate opening approximately 5 net new stores in the remainder of 2008. Our stores carry a broad and deep selection of high-quality pet supplies at everyday low prices. We offer more than 11,400 distinct items, including nationally recognized brand names, as well as an extensive selection of proprietary brands across a range of product categories.

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     We complement our extensive product assortment with a wide selection of value-added pet services, including grooming, training, boarding and day camp. All our stores offer complete pet training services, and virtually all our stores feature pet styling salons that provide high-quality grooming services. Our PetsHotels provide boarding for dogs and cats, with 24-hour supervision, an on-call veterinarian, temperature controlled rooms and suites, daily specialty treats and play time, as well as day camp for dogs. As of November 2, 2008, we operated 132 PetsHotels, and we anticipate opening approximately 10 additional PetsHotels during the remainder of 2008.

     We make full-service veterinary care available through our strategic relationships with certain third-party operators. As of November 2, 2008, we had full-service veterinary hospitals in 726 of our stores. MMI Holdings, Inc., through a wholly owned subsidiary, Medical Management International, Inc., collectively referred to as “MMIH,” in which we have a 21.0% stock ownership interest, operated 714 of the veterinary hospitals under the registered trade name of “Banfield, The Pet Hospital.” The remaining 12 hospitals are operated by other third-parties in Canada.

Executive Summary

• Diluted earnings per common share were $0.28, on net income of $35.8 million, for the thirteen weeks ended November 2, 2008, compared to diluted earnings per common share of $0.23 on net income of $29.5 million for the thirteen weeks ended October 28, 2007. Diluted earnings per common share were $0.90 and $1.37 for the thirty-nine weeks ended November 2, 2008, and October 28, 2007, respectively.

• Net sales increased 12.1% to $1.3 billion for the thirteen weeks ended November 2, 2008, compared to $1.1 billion for the thirteen weeks ended October 28, 2007. Net sales increased 10.8% to $3.7 billion for the thirty-nine weeks ended November 2, 2008, compared to $3.3 billion for the thirty-nine weeks ended October 28, 2007.

• We added 32 and 99 net new stores during the thirteen and thirty-nine weeks ended November 2, 2008, respectively.

• Comparable store sales, or sales in stores open at least one year, increased 5.4% and 4.1% for the thirteen and thirty-nine weeks ended November 2, 2008, respectively.

• Services sales increased 15.2% to $127.8 million for the thirteen weeks ended November 2, 2008, representing 10.2% of net sales, compared to 9.9% of net sales for the thirteen weeks ended October 28, 2007. Services sales increased 19.1% to $399.3 million for the thirty-nine weeks ended November 2, 2008, representing 10.8% of net sales, compared to 10.0% of net sales for the thirty-nine weeks ended October 28, 2007.

• We did not purchase any shares of our common stock for the thirteen weeks ended November 2, 2008. We purchased 2.3 million shares of our common stock for $50.0 million during the thirty-nine weeks ended November 2, 2008.

Critical Accounting Policies and Estimates

     We discuss our critical accounting policies and estimates in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended February 3, 2008. We have made no significant change in our critical accounting policies since February 3, 2008.

Results of Operations

     The following table presents the percent of net sales of certain items included in our unaudited Condensed Consolidated Statements of Operations and Comprehensive Income:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	November 2, 2008			October 28, 2007			November 2, 2008			October 28, 2007
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		71.4			70.3			70.8			69.6
Gross profit		28.6			29.7			29.2			30.4
Operating, general and administrative expenses		22.8			24.4			23.0			23.8
Operating income		5.8			5.3			6.1			6.6
Gain on sale of investment		—			—			—			2.9
Interest income		0.0			0.1			0.0			0.2
Interest expense		(1.2	)		(1.2	)		(1.2	)		(1.1	)
Income before income tax expense and equity in income from investee		4.6			4.2			5.0			8.6
Income tax expense		(1.8	)		(1.6	)		(2.0	)		(3.1	)
Equity in income from investee		0.1			0.1			0.1			—
Net income		2.9	%		2.6	%		3.1	%		5.5	%

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Thirteen Weeks Ended November 2, 2008, Compared with the Thirteen Weeks Ended October 28, 2007

     Net Sales

     Net sales increased $135.2 million, or 12.1%, to $1.3 billion for the thirteen weeks ended November 2, 2008, compared to $1.1 billion for the thirteen weeks ended October 28, 2007. The sales increase was primarily due to 115 net new stores and 45 new PetsHotels added since October 28, 2007, and a 5.4% increase in comparable store sales for the thirteen weeks ended November 2, 2008. The increase in comparable store sales was primarily due to inflation.

     Services sales, which are included in the net sales amount discussed above and include grooming, training, boarding and day camp, increased 15.2%, or $16.9 million, to $127.8 million for the thirteen weeks ended November 2, 2008. Services sales represented 10.2% and 9.9% of total sales for the thirteen weeks ended November 2, 2008, and October 28, 2007, respectively.

     Gross Profit

     Gross profit decreased to 28.6% of net sales for the thirteen weeks ended November 2, 2008, from 29.7% for the thirteen weeks ended October 28, 2007.

     The decrease in gross profit for the thirteen weeks ended November 2, 2008, was due to a decrease in merchandise and services margins, and higher store occupancy costs, partially offset by lower warehouse and distribution costs.

     Merchandise margin decreased due to an increase of consumables merchandise sales relative to total net sales. Consummables merchandise sales, which includes pet food, treats, and litter, typically generate a lower gross margin as compared to hardgoods merchandise. Hardgoods merchandise includes pet supplies such as collars, leashes, health and beauty aids, shampoos, medications, pet carriers, pet houses, and other goods. Macro economic conditions, including a decrease in discretionary spending, are challenging our merchandise margins as we have experienced softness in our higher margin hardgoods merchandise sales. The merchandise margin decline resulting from the shift in product mix was partially offset by the continued positive effects of pricing initiatives and buying practices.

     In addition, services sales increased as a percentage of net sales. Services sales generally generate lower gross margins than merchandise sales as service-related labor is included in cost of sales; however, services generate higher operating margins than merchandise sales. We have opened 45 PetsHotels since October 28, 2007. PetsHotels typically have higher costs as a percentage of net sales in the first several years of operations.

     Store occupancy costs increased as a percentage of net sales due to the addition of new stores in higher rent regions, as well as higher real property taxes and lower reimbursements from MMIH for vet clinic expenses.

     Warehouse and distribution costs, and other fixed costs, decreased as a percentage of net sales. The thirteen weeks ended October 28, 2007, included start-up costs for our new Newnan, Georgia distribution center. The thirteen weeks ended November 2, 2008, included the cost savings realized from increased productivity and efficiency across the distribution network, partially offset by start-up costs associated with the new Reno, Nevada distribution center.

     Operating, General and Administrative Expenses

     Operating, general and administrative expenses were 22.8% and 24.4% of net sales for the thirteen weeks ended November 2, 2008, and October 28, 2007, respectively.

     The decrease in operating, general and administrative expenses as a percentage of net sales during the thirteen weeks ended November 2, 2008 was due to various cost-savings initiatives including a new store labor management process, combined with reduced

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professional fees, and renegotiated maintenance and supply contracts. The thirteen weeks ended October 28, 2007, included the recognition of $5.5 million of gift card breakage income. The thirteen weeks ended October 28, 2007, was the first period in which we recognized gift card breakage income related to gift cards sold since the inception of the gift card program in fiscal 2000. Also included in the thirteen weeks ended October 28, 2007 were expenses related to the exit of our equine product line, including accelerated depreciation of assets, severance and costs to remerchandise the equine sections of our stores.

     Interest Income

     Interest income decreased to $0.1 million during the thirteen weeks ended November 2, 2008, compared to $1.0 million during the thirteen weeks ended October 28, 2007, as cash available for short-term investments was lower than in the thirteen weeks ended October 28, 2007. The lower cash availability was primarily due to cash used to partially fund our accelerated stock repurchase, or “ASR,” in August 2007, payments on the revolving line of credit, as well as the purchase of 3.1 million shares for approximately $75.8 million since October 28, 2007.

     Interest Expense

     Interest expense increased to $14.9 million during the thirteen weeks ended November 2, 2008, compared to $13.8 million for the thirteen weeks ended October 28, 2007. This increase is primarily due to continued increases in capital lease obligations.

     Income Tax Expense

     In the thirteen weeks ended November 2, 2008, the $22.5 million income tax expense represents an effective tax rate of 39.2%, compared with the thirteen weeks ended October 28, 2007, when we had income tax expense of $18.2 million, which represents an effective tax rate of 38.9%. The increase in the effective tax rate is primarily due to unfavorable tax adjustments related to losses on our corporate owned life insurance policies. The effective tax rate is calculated by dividing our income tax expense, which includes the income tax expense related to our equity in income from investee, by income before income tax expense and equity in income from investee.

     Equity in Income from Investee

     Our equity in income from our investment in MMIH was $1.0 million and $0.8 million for the thirteen weeks ended November 2, 2008, and October 28, 2007, respectively.

     Thirty-Nine Weeks Ended November 2, 2008, Compared with the Thirty-Nine Weeks Ended October 28, 2007

     Net Sales

     Net sales increased $361.8 million, or 10.8%, to $3.7 billion for the thirty-nine weeks ended November 2, 2008, compared to $3.3 billion for the thirty-nine weeks ended October 28, 2007. The sales increase was primarily due to 115 net new stores added since October 28, 2007 and to a 4.1% increase in comparable store sales for the thirty-nine weeks ended November 2, 2008. The increase in comparable store sales was primarily due to inflation. Net sales for the thirty-nine weeks ended October 28, 2007, included the impact of several announcements regarding the recall of certain pet food products, which occurred during the twenty-six weeks ended July 29, 2007, and the reduced sales of equine products as a result of our decision to exit that product line.

     Services sales, which are included in the net sales amount discussed above and include grooming, training, boarding and day camp increased 19.1%, or $63.9 million, to $399.3 million during the thirty-nine weeks ended November 2, 2008, compared to $335.4 million for the thirty-nine weeks ended October 28, 2007.

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     Gross Profit

     Gross profit decreased to 29.2% of net sales for the thirty-nine weeks ended November 2, 2008, from 30.4% for the thirty-nine weeks ended October 28, 2007.

     The decrease in gross profit for the thirty-nine weeks ended November 2, 2008, was due to a decrease in merchandise and services margins, higher store occupancy costs, and higher warehouse and distribution costs versus the thirty-nine weeks ended October 28, 2007.

     Merchandise margin decreased due to an increase of consumables merchandise sales relative to total net sales for the thirty-nine weeks ended November 2, 2008. The thirty-nine weeks ended October 28, 2007, included expenses related to the exit of our equine product line. Consumables merchandise sales typically generate a lower gross margin as compared to hardgoods merchandise. Macro economic conditions, including a decrease in discretionary spending, are challenging our merchandise margins. As a result, we have experienced softness in our higher margin hardgoods merchandise sales.

     In addition, services sales increased as a percentage of net sales. Services sales generally generate lower gross margins than merchandise sales as service-related labor is included in cost of sales; however, services generate higher operating margins than merchandise sales. In addition, we have opened 45 PetsHotels since October 28, 2007. PetsHotels typically have higher costs as a percentage of net sales in the first several years of operation.

     Store occupancy costs increased as a percentage of net sales due to the addition of new stores in more higher-rent regions, as well as higher real property taxes and lower reimbursements from MMIH for vet clinic expenses.

     Warehouse and distribution costs, and other fixed costs, increased as a percentage of net sales due to our new replacement distribution centers in Newnan, Georgia and Reno, Nevada as well as pressure from rising fuel prices.

     Operating, General and Administrative Expenses

     Operating, general and administrative expense was 23.0% of net sales for the thirty-nine weeks ended November 2, 2008, compared to 23.8% in the thirty-nine weeks ended October 28, 2007.

     The decrease in operating, general and administrative expenses as a percentage of net sales was attributable to various cost savings initiatives, including reduced store expenses and lower professional fees. Those decreases were partially offset by higher payroll and benefits for additional headcount at our corporate headquarters, and higher stock-based compensation expense for the thirty-nine weeks ended November 2, 2008. Stock compensation expense for the twenty-six weeks ended July 29, 2007, included a benefit for higher actual and estimated forfeitures. We recognized $5.5 million in gift card breakage income during the thirty-nine weeks ended October 28, 2007, comprising the total breakage from the program’s inception in 2000 through the thirty-nine weeks ended October 28, 2007. Also included in the thirty-nine weeks ended October 28, 2007 were expenses related to the exit of our equine product line, including accelerated depreciation of assets, severance and costs to remerchandise the equine sections of our stores.

     Gain on Sale of Investment and Equity in Income from Investee

     During the thirteen weeks ended April 29, 2007, we sold a portion of our non-voting shares in MMIH resulting in a pretax gain of $95.4 million. In connection with this transaction, we also converted our remaining MMIH non-voting shares to voting shares. The increase in voting shares caused us to exceed the significant influence threshold as defined by GAAP, which required us to account for our investment in MMIH using the equity method of accounting instead of previously applied cost method in accordance with Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.”

     Interest Income

     Interest income decreased to $0.4 million during the thirty-nine weeks ended November 2, 2008, compared to $6.5 million during the thirty-nine weeks ended October 28, 2007, as our investments were limited to short-term, highly liquid, money market funds. Cash available for short-term investments was lower than in the thirty-nine weeks ended October 28, 2007, primarily due to cash used to partially fund our ASR, in August 2007, payments on the revolving line of credit, as well as the purchase of 3.1 million shares for approximately $75.8 million since October 28, 2007.

     Interest Expense

     Interest expense increased to $44.1 million during the thirty-nine weeks ended November 2, 2008, compared to $36.8 million during the thirty-nine weeks ended October 28, 2007. The increase is primarily due to an increase in capital lease obligations.

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     Income Tax Expense

     In the thirty-nine weeks ended November 2, 2008, the $72.7 million income tax expense represents an effective tax rate of 39.5%, compared with income tax expense of $104.3 million for the thirty-nine weeks ended October 28, 2007, which represented an effective tax rate of 36.5%. The increase in the effective tax rate is primarily due to a benefit recorded in the thirteen weeks ended April 29, 2007, from the utilization of capital loss carryforwards to reduce the tax gain on the sale of MMIH non-voting shares. The effective tax rate is calculated by dividing our income tax expense, which includes the income tax expense related to our equity in income from investee, by income before income tax expense and equity in income from investee.

     Equity in Income from Investee

     Our equity in income from our investment in MMIH was $2.9 million and $1.6 million for the thirty-nine weeks ended November 2, 2008, and October 28, 2007, respectively.

Liquidity and Capital Resources

     We finance our operations, new store and PetsHotel growth, store remodels and other expenditures to support our growth initiatives primarily through cash generated by operating activities. Additionally, we may use borrowings under our $350.0 million revolving credit facility to fund expenditures.

     Global capital and credit markets have recently experienced increased volatility and disruption. Despite this volatility and disruption, we have continued to have full access to our credit facility and to generate operating cash flow sufficient to meet our financing needs. We believe that our operating cash flow, together with our credit facility, will be adequate to meet our operating, investing and financing needs in the foreseeable future, although there can be no assurance that continued or increased volatility and disruption in the global capital and credit markets will not impair our ability to access these markets on commercially acceptable terms.

     Net cash provided by operating activities was $256.6 million for the thirty-nine weeks ended November 2, 2008, compared to $194.4 million for the thirty-nine weeks ended October 28, 2007. Receipts from our sales come from cash, checks and third-party debit and credit cards, and therefore provide a significant source of liquidity. Cash is used in operating activities primarily to fund procurement of merchandise inventory and other assets, net of accounts payable and other accrued liabilities.

     Net cash used in investing activities was $191.6 million for the thirty-nine weeks ended November 2, 2008, compared to $52.8 million for the thirty-nine weeks ended October 28, 2007. Cash used in investing activities consisted primarily of expenditures associated with opening or acquiring new stores, reformatting existing stores, expenditures associated with equipment and computer software in support of our system initiatives, PetsHotel construction costs, costs to expand our distribution network and other expenditures to support our growth plans and initiatives. The primary differences between the thirty-nine weeks ended October 28, 2007, and the thirty-nine weeks ended November 2, 2008, were cash received from the sale of MMIH stock during the thirty-nine weeks ended October 28, 2007, the cash used to purchase the Canadian store locations during the thirty-nine weeks ended October 28, 2007, no purchases of short-term investments during the thirty-nine weeks ended November 2, 2008, and less cash used to purchase property and equipment during the thirty-nine weeks ended November 2, 2008.

     Net cash used in financing activities was $64.4 million for the thirty-nine weeks ended November 2, 2008, and consisted primarily of the purchase of treasury stock, a decrease in our bank overdraft, payments on capital lease obligations, payments of cash dividends and net payments from common stock issued under equity incentive plans. These activities were partially offset by proceeds from tax deductions in excess of the compensation cost recognized and a net increase in our credit facility borrowings. Net cash used in financing activities for the thirty-nine weeks ended October 28, 2007, was $243.7 million. The primary differences between the thirty-nine weeks ended October 28, 2007, and the thirty-nine weeks ended November 2, 2008, were lower purchases of treasury stock, lower proceeds from common stock issued under stock incentive plans, a smaller decrease in bank overdrafts and lower tax deductions in excess of the compensation cost recognized.

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Operating Capital and Capital Expenditure Requirements

     Substantially all our stores are leased facilities. We opened 104 new stores in the thirty-nine weeks ended November 2, 2008, and closed 5 stores. Generally, each new store requires capital expenditures of approximately $0.7 million for fixtures, equipment and leasehold improvements, approximately $0.3 million for inventory and approximately $0.1 million for preopening costs. We expect total capital spending to be $285 million or less for 2008 based on our plan to open 104 net new stores and 35 new PetsHotels, to fixture and equip a new distribution center in Reno, Nevada that opened in April 2008, to continue our investment in the development of our information systems, to add to our services capacity with the expansion of certain grooming salons, to remodel or replace certain store assets and to continue our store refresh program.

     We believe our existing cash and cash equivalents, together with cash flows from operations, borrowing capacity under our credit facility and available lease financing, will provide adequate funds for our foreseeable working capital needs and planned capital expenditures. Our ability to fund our operations and make planned capital expenditures depends on our future operating performance and cash flow, which are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

     The following table presents our capital expenditures (in thousands):

	Thirty-Nine Weeks Ended
	November 2, 2008		October 28, 2007
Capital Expenditures:
New stores	$	68,623	$	83,692
Store-related projects(1)		46,288		52,626
PetsHotel(2)		34,459		28,370
Information technology		16,253		22,900
Supply chain		18,482		19,036
Other		10,457		1,367
Total capital expenditures	$	194,562	$	207,991

(1)	Includes store remodels, grooming salon expansion, equipment replacement, relocations, and various merchandising projects.
(2)	For new and existing stores.

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Commitments and Contingencies

     On May 31, 2007, we entered into a three-year product purchase agreement with a vendor. Based on the terms of the agreement, we estimate the purchase obligation to be approximately $18.1 million for the remainder of 2008, and approximately $41.8 million and $14.0 million for 2009 and 2010, respectively. If we do not purchase the minimum requirements in a year, the shortfall in purchases is carried to the following year. If our purchases exceed the minimums required, the surplus purchases are applied to the following year’s requirement.

     As of November 2, 2008, we had obligations to purchase $7.7 million of advertising during the remainder of 2008, and $15.4 million in 2009.

     There have been no other material changes in our contractual obligations since February 3, 2008. Information regarding our contractual obligations is provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended February 3, 2008.

Credit Facilities

     In August 2007, we replaced our existing $125.0 million credit facility with a $350.0 million five-year revolving credit facility which expires on August 15, 2012. Borrowings under the credit facility are subject to a borrowing base and bear interest, at our option, at a bank’s prime rate plus 0% to 0.25% or LIBOR plus 0.875% to 1.25%. We are subject to fees payable to lenders each quarter at an annual rate of 0.20% of the unused amount of the credit facility. The credit facility also gives us the ability to issue letters of credit, which reduce the amount available under the credit facility. Letter of credit issuances under the credit facility are subject to interest payable to the lenders and bear interest of 0.875% to 1.25% for standby letters of credit and 0.438% to 0.625% for commercial letters of credit. In August 2007, we borrowed $100.0 million under the credit facility to fund a portion of our $225.0 million ASR. The remaining portion of the ASR was funded using existing cash and cash equivalents.

     As of November 2, 2008, we had $50.0 million in borrowings and $70.4 million in letter of credit issuances outstanding under our $350.0 million revolving credit facility.

     We also have a $70.0 million stand-alone letter of credit facility that expires on June 30, 2009. We are subject to fees payable to the lenders each quarter at an annual rate of 0.20% of the average daily face amount of the letters of credit outstanding during the preceding calendar quarter. In addition, we are required to maintain a cash deposit with the lenders equal to the amount of outstanding letters of credit or we may use other approved investments as collateral. If we use other approved investments as collateral, we must have an amount on deposit which, when multiplied by the advance rate of 85%, is equal to the amount of the outstanding letters of credit under this stand-alone letter of credit facility. As of November 2, 2008, we had no outstanding letters of credit under this stand-alone letter of credit facility, no restricted cash and short-term investments on deposit with the lenders, and no other approved investments related to this credit facility.

     We issue letters of credit for guarantees provided for insurance programs, capital lease agreements and utilities.

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     The credit facility and letter of credit facility permit the payment of dividends, so long as we are not in default and the payment of dividends would not result in default of the credit facility and stand-alone letter of credit facility. As of November 2, 2008, we were in compliance with the terms and covenants of our credit facility and letter of credit facility. The credit facility and letter of credit facility are secured by substantially all our personal property assets, our wholly owned subsidiaries and certain real property.

Common Stock Dividends

     We believe our ability to generate cash allows us to invest in the growth of our business and, at the same time, distribute a quarterly dividend.

     During the thirty-nine weeks ended November 2, 2008, the Board of Directors declared the following dividends:

Date	Dividend Amount		Stockholders of	Date
Declared	per Share		Record Date	Paid
March 25, 2008	$	0.03	May 2, 2008	May 16, 2008
June 18, 2008	$	0.03	August 1, 2008	August 15, 2008
September 24, 2008	$	0.03	October 31, 2008	November 14, 2008

Share Purchase Program

     In June 2005, the Board of Directors approved a program authorizing the purchase of up to $270.0 million of our common stock through 2006. In August 2006, the Board of Directors increased the amount remaining under that share purchase program by $141.7 million, to bring the share purchase capacity under the program to $250.0 million and extended the term of the program to August 9, 2007. From January 29, 2007 through June 4, 2007, we purchased 2.8 million shares of our common stock for $89.9 million under the $250.0 million program, completing the program.

     In August 2007, the Board of Directors approved a new share purchase program authorizing the purchase of up to $300.0 million of our common stock through August 2, 2009. On August 19, 2007, we entered into a $225.0 million fixed dollar ASR agreement. The ASR agreement contained provisions that established the minimum and maximum number of shares to be purchased during its term. Pursuant to the terms of the ASR agreement, on August 20, 2007, we paid $225.0 million to the ASR counterparty for the purchase of shares and $0.2 million in related fees. We received 7.0 million shares of common stock under the ASR agreement, which was completed on January 31, 2008. The ASR agreement was funded with $125.0 million in cash and $100.0 million in borrowings under our $350.0 million revolving credit facility.

     We did not purchase any of our common stock during the thirteen weeks ended November 2, 2008. During the thirty-nine weeks ended November 2, 2008, we purchased 2.3 million shares of our common stock for $50.0 million. As of November 2, 2008, $25.0 million remained available under the $300.0 million program.

Related Party Transactions

     We have an investment in MMI Holdings, Inc., who through a wholly-owned subsidiary, Medical Management International, Inc., operates full-service veterinary hospitals inside 714 of our stores. Our investment consists of common and convertible preferred stock.

     During the thirteen weeks ended April 29, 2007, we sold a portion of our non-voting shares in MMIH resulting in a pre-tax gain of $95.4 million. In connection with this transaction, we also converted our remaining MMIH non-voting shares to voting shares. The increase in voting shares caused us to exceed the significant influence threshold as defined by GAAP, which required us to account for our investment in MMIH using the equity method of accounting instead of the previously applied cost method in accordance with Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” As of November 2, 2008, we owned approximately 21.5% of the voting stock and approximately 21.0% of all classes of stock of MMIH.

     Our equity in income from our investment in MMIH, which is recorded one month in arrears, was $1.0 million and $0.8 million for the thirteen weeks ended November 2, 2008, and October 28, 2007, respectively, and $2.9 million and $1.6 million for the thirty-nine weeks ended November 2, 2008, and October 28, 2007, respectively.

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     In June 2007, we entered into a new master operating agreement with MMIH that has an initial 15-year term and is retroactive to February 2007. We charge MMIH license fees for the space used by the veterinary hospitals and for their portion of utilities costs. We treat these amounts as a reduction of the retail stores’ occupancy costs, which are included as a component of cost of sales in the Condensed Consolidated Statements of Operations and Comprehensive Income. We also charge MMIH for its portion of specific operating expenses and treat the reimbursement as a reduction of the stores’ operating expense.

     We recognized license fees, utilities and other cost reimbursements of $7.6 million and $8.7 million during the thirteen weeks ended November 2, 2008, and October 28, 2007, respectively, and $22.6 million and $26.1 million during the thirty-nine weeks ended November 2, 2008, and October 28, 2007, respectively. The thirteen weeks ended July 29, 2007, included an adjustment to recognize the cumulative difference in reimbursements due to the new master operating agreement. Receivables from MMIH totaled $3.2 million and $4.5 million at November 2, 2008, and February 3, 2008, respectively, and were included in receivables in the Condensed Consolidated Balance Sheets.

     The master operating agreement also includes a provision for the sharing of profits on the sales of therapeutic pet foods sold in all stores with an operating Banfield hospital.

Seasonality and Inflation

     Our business is subject to seasonal fluctuations. We typically realize a higher portion of our net sales and operating profits during the fourth quarter. As a result of this seasonality, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful, and that these comparisons cannot be relied upon as indicators of future performance. Controllable expenses could fluctuate from quarter-to-quarter in a fiscal year. Sales of certain products and services are seasonal. Because our stores typically draw customers from a large trade area, sales also may be impacted by adverse weather or travel conditions, which are more prevalent during certain seasons of the year. As a result of our expansion plans, the timing of new store and PetsHotel openings and related preopening costs, the amount of revenue contributed by new and existing stores and PetsHotels and the timing and estimated obligations of store closures, our quarterly results of operations may fluctuate. Finally, because new stores tend to experience higher payroll, advertising and other store level expenses as a percentage of sales than mature stores, new store openings will also contribute to lower store operating margins until these stores become established. We expense preopening costs associated with each new location as the costs are incurred.

     While we have experienced inflationary pressure in fiscal 2008, we have been able to largely mitigate the effect by increasing retail prices accordingly. Although neither inflation nor deflation has had a material impact on net operating results, we can make no assurance that our business will not be affected by inflation or deflation in the future.

Recent Accounting Pronouncements

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” SFAS No. 141(R) establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date fair value. SFAS No. 141(R) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted.

     In April 2008, the FASB issued FASB Staff Position, or “FSP,” No. FAS 142-3, “Determination of the Useful Life of Intangible Assets.” FSP No. FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” The intent of FSP No. FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R), and other GAAP. FSP No. FAS 142-3 is effective for our interim and annual financial statements beginning in fiscal 2009. We are evaluating the impact of adopting FSP No. FAS 142-3 on our consolidated financial statements.

     In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” FSP No. EITF 03-6-1 clarifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and requires such awards be included in the computation of earnings per share pursuant to the two-class method. FSP No. EITF 03-6-1 is effective for financial

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statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. FSP No. EITF 03-6-1 requires all prior-period earnings per share data presented to be adjusted retrospectively and early application is not permitted. We believe the adoption of FSP No. EITF 03-6-1 will not have a material impact on our consolidated financial statements or disclosures.

     In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active.” FSP No. FAS 157-3 clarifies the application of SFAS No. 157, “Fair Value Measurements,” in a market that is not active and defines additional key criteria in determining the fair value of a financial asset when the market for that financial asset is not active. FSP No. FAS 157-3 applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with SFAS No. 157. FSP No. FAS 157-3 was effective upon issuance and the application of FSP No. FAS 157-3 did not have a material impact on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

     As of November 2, 2008, there have been no material changes in any of the market risk information disclosed by us in our Annual Report on Form 10-K for the year ended February 3, 2008. More detailed information concerning market risk can be found in Part II, Item 7A., “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended February 3, 2008. Recent developments in the global capital and credit markets, however, have rendered risks less predictable, and liquidity concerns and credit risks have increased.

Item 4. Controls and Procedures

     Management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of November 2, 2008. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

     No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the thirteen weeks ended November 2, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation of our disclosure controls and procedures as of November 2, 2008, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     In October 2006, two lawsuits were filed against us in California State Court on behalf of putative classes of current and former California employees. The first suit, Sorenson v. PetSmart, was filed on October 3, 2006. The plaintiff, a former dog groomer, alleges that she and other non-exempt employees failed to receive their meal and rest breaks as required by law. The second suit, Enabnit v. PetSmart, was filed on October 12, 2006, and alleges meal and rest period violations and that employee paychecks were not compliant with the California Labor Code. The plaintiff seeks compensatory damages, penalties under the California Labor Code, restitution, attorney’s fees, costs and prejudgment interest. In November 2006, we removed both actions to the United States District Court for the Eastern District of California. The parties have reached an agreement in principle to settle both of these matters for an amount that will not be material to our consolidated financial statements and has been accrued for. The Sorenson settlement was preliminarily approved by the court on August 5, 2008, while the Enabnit settlement has been submitted for preliminary approval and is currently pending with the court.

     We are also a party to several lawsuits arising from the pet food recalls announced by several manufacturers beginning in March 2007. The named plaintiffs sued the major pet food manufacturers and retailers claiming that their pets suffered injury and/or death as a result of consuming allegedly contaminated pet food and pet snack products:

Bruski v. Nutro Products, et al., USDC, N.D. IL (filed 3/23/07)
Rozman v. Menu Foods, et al., USDC, MN (filed 4/9/07)
Blaszkowski v. Mars Inc., et al., USDC, S.D. FL (filed 5/9/07)
Ford v. Menu Foods, et al., USDC, S.D. CA (filed 4/23/07)
Wahl, et al. v. Wal-Mart Stores Inc., et al., USDC, C.D. CA (filed 4/10/07)
Demith v. Nestle, et al., USDC, N.D. IL (filed 4/23/07)
Thompkins v. Menu Foods, et al., USDC, CO (filed 4/11/07)
McBain v. Menu Foods, et al., Judicial Centre of Regina, Canada (filed 7/11/07)
Dayman v. Hills Pet Nutrition Inc., et al. Ontario Superior Court of Justice (filed 8/8/07)
Esau v. Menu Foods, et al., Supreme Court of Newfoundland and Labrador (filed 9/5/07)
Ewasew v. MenuFoods, et al., Supreme Court of British Colombia (filed 3/23/07 )
Silva v. Menu foods, et al., Canada Province of Manitoba (filed 3/30/07)
Powell v. Menu Foods, et al., Ontario Superior Court of Justice (filed 3/28/07)

     By order dated June 28, 2007, the Bruski, Rozman, Ford, Wahl, Demith and Thompkins cases were transferred to the U.S. District Court for the District of New Jersey and consolidated with other pet food class actions under the federal rules for multi-district litigation (In re: Pet Food Product Liability Litigation, Civil No. 07-2867). The Canadian cases and the Blaszkowski case were not consolidated.

     On May 21, 2008, the parties to the U.S. lawsuits comprising the In re: Pet Food Product Liability Litigation and the Canadian cases jointly submitted a comprehensive settlement arrangement for court approval. Preliminary court approval was received from the U.S. District Court on May 3, 2008, and from all of the Canadian courts as of July 8, 2008. On October 14, 2008, the U.S. court gave final approval of the settlement, and the Canadian courts gave final approval on November 3, 2008. Upon expiration of the prescribed appeal periods, these cases should be resolved with no material adverse impact on our consolidated financial statements.

     With respect to Blaszkowski v. Mars Inc., et al., on September 12, 2008, the court dismissed with prejudice all of the retailer defendants, including the Company.

     We are involved in the defense of various other legal proceedings that we do not believe are material to our consolidated financial statements.

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Item 1A. Risk Factors

     In addition to the other information in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended February 3, 2008, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     In August 2007, the Board of Directors approved a share purchase program authorizing the purchase of up to $300.0 million of our common stock through August 2, 2009. We did not purchase any of our common stock during the thirteen weeks ended November 2, 2008. As of November 2, 2008 the value that may yet be purchased under the program is $25.0 million.

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Item 6. Exhibits

(a) Exhibits

Exhibit 10.12	Employment Agreement between PetSmart and Philip L. Francis, Chairman of the Board of Directors and Chief Executive Officer, as amended.
Exhibit 10.13	Employment Agreement between PetSmart and Robert F. Moran, President and Chief Operating Officer, as amended.
Exhibit 10.16	Amended and Restated Executive Change in Control and Severance Benefit Plan.
Exhibit 15.1	Awareness Letter from Deloitte & Touche LLP regarding unaudited interim financial statements.
Exhibit 31.1	Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
Exhibit 31.2	Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
Exhibit 32.1*	Certification of Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
Exhibit 32.2*	Certification of Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.

* The certifications attached as Exhibit 32.1 and Exhibit 32.2 accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of PetSmart, Inc., under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 26, 2008

/s/ Lawrence P. Molloy Lawrence P. Molloy
Senior Vice President and Chief Financial Officer

(Principal Financial Officer and Duly Authorized Officer of the Registrant)

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EX-10.12

EXHIBIT 10.12

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This Amended and Restated Employment Agreement (this “Agreement”) is made and entered into as of the 24^th day of September, 2008 (the “Effective Date”) by and between PetSmart, Inc., a Delaware corporation (the “Company”), and Philip L. Francis (“Executive”). As of the Effective Date, this Agreement shall replace and supersede in its entirety that certain Employment Agreement between Executive and the Company entered into effective as of May 15, 1999 (the “Prior Agreement”).

RECITALS

     WHEREAS, the Company and Executive previously entered into the Prior Agreement and desire to amend and restate the Prior Agreement in its entirety as set forth herein, effective as of the Effective Date, in order to, among other things, clarify the application of Section 409A of the Internal Revenue Code (the “Code”) to the benefits provided to Executive under the Prior Agreement, clarify Employee’s participation in the Executive Short Term Incentive Plan as such plan may amended from time to time hereafter (the “ESTIP”) and clarify Employee’s participation in the Change in Control and Severance Benefit Plan, as amended and restated on September 24, 2008 (the “CinC/SBP”).

     WHEREAS, the Company desires to continue to employ Executive as Chief Executive Officer on the terms and conditions set forth herein and Executive desires to accept such continued employment with the Company.

     NOW, THEREFORE, in consideration of the foregoing premises, the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. EMPLOYMENT AND DUTIES. The Company hereby engages Executive in the capacity of Chief Executive Officer. Executive shall perform such duties and functions as shall be specified from time to time by the Company’s Board of Directors (the “Board”) or its Compensation Committee. Executive hereby accepts such employment and agrees to perform such duties. During the term of the Agreement, Executive shall not be required without Executive’s consent to undertake responsibilities not at least commensurate with Executive’s position as the Company’s Chief Executive Officer. In connection with any termination of Executive’s employment by the Company as Chief Executive Officer, Executive shall resign from the Board effective simultaneously with the effective date of such termination, unless such requirement is waived by the remainder of the Board members.

     2. COMPENSATION.

          (a) Base Salary. For all services to be rendered by Executive hereunder, Executive shall be paid a base salary at the rate of Nine Hundred Seventy Five Thousand Dollars ($975,000) per year. Executive’s base compensation shall be reviewed at least annually and may be increased at the discretion of the Board, but during the term of this Agreement may not be decreased below the then-effective base salary. Executive’s salary shall be paid on such basis as

is the normal payment pattern for executive officers of the Company. The base salary payable under this Section 2(a) shall be in addition to and exclusive of any payments to Executive from time to time under formal or informal bonus, incentive compensation or similar plans now in effect or which hereafter may be adopted.

          (b) Performance Bonus. With respect to each full fiscal year of the Company during which Executive is an officer of the Company pursuant to this Agreement (each, a “Bonus Year”), Executive shall be entitled to participate in the ESTIP. The calculation and payment to Executive of a performance bonus contemplated by this Section 2(b), if any, shall be determined and paid in accordance with the terms of the ESTIP.

     3. CHANGE IN CONTROL AND SEVERANCE BENEFITS.

          (a) While Executive remains an officer of the Company, Executive shall be a participant in the CinC/SBP. The terms and conditions of the CinC/SBP as in effect on the date hereof with respect to Executive are hereby incorporated by reference herein.

          (b) In the event the CinC/SBP is amended after the date hereof to provide Executive greater benefits, Executive shall received such greater benefits. In the event the CinC/SBP is amended after the date hereof in a manner that would result in Executive receiving lesser benefits, Executive shall receive the benefits provided by the CinC/SBP as in effect on the date hereof.

     4. EQUITY AWARDS.

          (a) Executive shall, in accordance with Company policy and the terms of the applicable plan documents, be eligible to receive discretionary grants of equity awards, as determined by the Board or its Compensation Committee in its sole discretion. Executive shall be entitled to participate in any performance equity award plan approved annually for other executive officers of the Company by the Compensation Committee of the Board.

          (b) In the event of Executive incurs an Involuntary Termination Without Cause, as defined in the CinC/SBP as in effect on the date hereof, Executive shall receive the following benefits:

               (i) Vesting of each Company equity award held by Executive shall accelerate on such date of termination by the number of shares that would have vested in accordance with the applicable vesting schedule had Executive remained employed by the Company for an additional twelve (12) months as of the date of termination. Notwithstanding the foregoing, this Section 4(b)(i) shall not apply to equity awards issued under or held in any plan that is intended to be qualified under Section 401(a) of the Code (“Qualified Plan”).

               (ii) Executive shall have continued exercisability of each Company stock option and stock appreciation right held by the Executive (if any) until the earlier of (A) a period of fifteen (15) months following the date of termination, or (B) the expiration of the maximum term of the award. Notwithstanding the foregoing, nothing in this Section 4(b) prohibits the Company or a successor organization (or its parent) from causing such awards to early terminate in connection with a merger, consolidation or other corporate transaction

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pursuant to the terms of the applicable equity plan or award agreements, except to the extent such early termination would be inconsistent with any continued exercisability benefits available to Executive under the CinC/SBP.

     5. BENEFITS.

          (a) Executive shall be entitled to participate in such fringe benefits and perquisites as are generally made available to executive officers of the Company, and such other fringe benefits as may be approved by the Board for executive officers of the Company during the term hereof including, without limitation, medical, dental and disability insurance, group term life insurance at least equal in face amount to the base salary payable pursuant to Section 2(a), and annual vacation time of at least four weeks.

          (b) Nothing contained herein is intended or shall be deemed to be granted to Executive in lieu of any rights or privileges to which Executive may currently be or become entitled as an employee of the Company under any medical, dental, disability, life insurance, retirement, stock option, stock bonus or purchase, incentive compensation or other plan or arrangement of the Company which may now be in effect or which may hereafter be adopted, it being understood that Executive shall have the same rights and privileges to participate in such plans as any other similarly situated executive officer of the Company.

     6. REIMBURSEMENT OF EXPENSES. The Company shall reimburse Executive for all reasonable business expenses incurred by Executive in connection with the performance of Executive’s duties hereunder and consistent with Company policy and practice, provided that Executive furnishes to the Company receipts and other documentation reasonably acceptable to the Company evidencing such expenditures no later than three (3) months following the date such expenditures were incurred. The Company shall reimburse such expenses within ninety (90) days after receiving such documentation.

     7. PERFORMANCE OF DUTIES.

          (a) In consideration of the payments to be made hereunder, Executive agrees to devote Executive’s entire business time and attention to the performance of Executive’s duties hereunder, to serve the Company diligently and to the best of Executive’s abilities, and not to compete with the Company or any of its Affiliates (as defined below) in any manner whatsoever. Without limiting the generality of the foregoing, Executive shall not, during the term of Executive’s employment by the Company, directly or indirectly (whether for compensation or otherwise), alone or as an agent, principal, partner, officer, employee, trustee, director, shareholder or in any other capacity, own, manage, operate, join, control or participate in the ownership, management, operation or control of or furnish any capital to or be connected in any manner with or provide any services as a consultant for any business which competes directly or indirectly with any of the businesses of the Company or any of its Affiliates (as defined below) as they may be conducted from time to time (including any pet food, pet supplies, or pet services superstore business within the meaning of Sections 12(a)); provided, however, that notwithstanding the foregoing, nothing contained in this Agreement shall be deemed to preclude Executive from owning not more than one percent of the publicly-traded capital stock of an entity which is in competition with any of such businesses. “Affiliate” of the Company means

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any person, association or entity: (a) that, in whole or in part, materially owns or is materially owned by, or otherwise has a material interest (whether debt, equity or otherwise) in, the Company; (b) that controls or is controlled by the Company; (c) that is a subsidiary (whether owned in whole or in part) of the Company; or (d) to which the Company is a “related taxpayer” as defined in Section 1313(c) of the Code.

          (b) Executive may conduct civic, educational and charitable activities and may also serve on boards of directors of other companies, if consistent with this Section 7 and if Executive’s service on the boards of directors of other companies is approved by the Board.

     8. TERM AND TERMINATION.

          (a) The term of Executive’s employment with the Company hereunder shall continue until Executive resigns or is terminated under this Section 8 or under Section 9 of this Agreement.

          (b) In the event of Executive’s death, this Agreement shall terminate. In the event of Executive’s Total Disability during the term of this Agreement, the Company may at its sole option thereafter (unless Executive shall have resumed Executive’s duties in full prior to such termination) terminate this Agreement, to the extent permitted by applicable laws. In the event of the Executive’s death or termination due to Total Disability, the sole right hereunder of Executive, Executive’s widow or Executive’s legal representative, as the case may be, shall be to receive the following benefits:

               (i) A lump sum severance payment equal to one (1) times the annual Base Salary at the rate in effect immediately preceding the date of Executive’s termination plus the Base Salary for the remainder of the calendar month in which the Executive’s employment terminated, payable within three (3) business days following the date of termination;

               (ii) Payment of any amounts due Executive pursuant to the ESTIP;

               (iii) Vesting of each Company equity award held by Executive shall fully accelerate on such date of termination. Notwithstanding the foregoing, this Section 8(b)(iii) shall not apply to equity awards issued under or held in any Qualified Plan; and

               (iv) Assuming the Executive and/or the Executive’s spouse or eligible dependents timely and accurately elect to continue health insurance benefits under COBRA, the Company shall pay the COBRA premiums for Executive, and/or his/her spouse and covered dependents, as applicable, for continued medical, dental and vision insurance benefits until the earliest of (A) the one (1) year anniversary of the date of termination, (B) the expiration of the applicable continuation coverage rights under COBRA and any applicable state COBRA-like statute that provides mandated continuation coverage, or (C) the date the Executive becomes eligible for health insurance benefits of a subsequent employer. Executive agrees to immediately notify the Company in writing of any such eligibility. For purposes of this Section 8(b)(iv), references to COBRA premiums shall not include any amounts payable under a Code Section 125 health care reimbursement plan.

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          (c) “Total Disability” shall mean the inability of the Executive to perform the Executive’s duties under this Agreement, even with reasonable accommodation, because the Executive has become permanently disabled within the meaning of any policy of disability income insurance covering employees of the Company then in force. In the event the Company has no policy of disability income insurance covering employees of the Company in force when the Executive becomes disabled, the term “Total Disability” shall mean the inability of the Executive to perform the Executive’s duties under this Agreement, whether with or without reasonable accommodation, by reason of any incapacity, physical or mental, which the Board, based upon medical advice or an opinion provided by a licensed physician acceptable to the Board, determines to have incapacitated the Executive from satisfactorily performing all of the Executive’s usual services for the Company, with or without reasonable accommodation, for a period of at least nine (9) consecutive months during any twelve (12) month period. Based upon such medical advice or opinion, the determination of the Board shall be final and binding and the date such determination is made shall be the date of such Complete Disability for purposes of this Agreement.

          (d) Subject to the terms of this Agreement regarding benefits to be received by Executive upon a Covered Termination, as defined in the CinC/SBP as in effect on the date hereof, the Company shall be entitled to terminate Executive’s employment with or without cause at any time upon thirty (30) days written notice and to establish the services which Executive shall perform during such notice period.

     9. [RESERVED].

     10. TAX TREATMENT

Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with Executive’s termination of employment unless and until Executive has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to Executive without causing Executive to incur the additional 20% tax under Section 409A. For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation
Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits constitute “deferred compensation” under Section 409A and Executive is, on the termination of his service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be

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delayed until the earlier to occur of: (i) the date that is six months and one day after Executive’s Separation From Service) or (ii) the date of Executive’s death that occurs after the Executive’s Separation From Service.

     11. CONFIDENTIALITY.

          (a) The Company (which for purposes of this Section 11 shall mean the Company and its Affiliates (as defined in Section 7(a)) and Executive recognize that during the course of Executive’s employment with the Company he will accumulate certain proprietary and confidential information and trade secrets for use in the Company’s business and will have divulged to him certain crucial confidential and proprietary information and trade secrets about the business, operations and prospects of the Company, which constitute valuable business assets providing the Company the opportunity to obtain an advantage over competitors who do not know or use such information or have access to it without the investment of considerable resources. Executive hereby acknowledges and agrees that such information (the “Proprietary Information”) is confidential and proprietary and a trade secret and that such information shall include, without limitation:

                    (1) The Company’s customer and prospective customer lists (including rolodex/address book information);

                    (2) The Company’s vendor and prospective vendor lists (including rolodex/address information);

                    (3) Confidential correspondence, notes, files, memoranda, notebooks, drawings, schematics, specifications, plans, forecasts, programs, price lists, inventory control lists, materials, data, devices, records, research and development information, computer-recorded information of any kind, videotapes, tangible property, equipment, entry cards, identification badges and keys;

                    (4) Confidential information regarding the Company’s operations, finances, methods, strategies, plans, forecasts and results;

                    (5) The Company’s confidential arrangements with suppliers and distributors;

                    (6) The Company’s confidential plans and strategies for research, development, expansion, store design, staffing and management systems, new products, purchasing, budgets, priorities, marketing and sales;

                    (7) The Company’s confidential financial statements and data regarding sales, profits, productivity, purchasing arrangements, prices and costs;

                    (8) Confidential information regarding the Company’s computer systems and programs;

                    (9) Third party confidential information which the Company has a duty to maintain as confidential;

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                    (10) Confidential personnel information such as the identities, capabilities, activities, compensation, performance, and ratings of employees;

                    (11) Confidential information regarding employee hiring, incentive, evaluation and discipline practices and programs;

                    (12) Confidential training programs, techniques, and materials;

                    (13) Confidential grooming methods and practices;

                    (14) Confidential marketing and promotional plans, methods, budgets and targets; and

                    (15) Confidential cost-control methods and practices.

          (b) Executive understands that this list is not all-inclusive and that other information may qualify as proprietary information. In the event that Executive is not sure whether certain information is proprietary information, Executive shall treat it as confidential unless the Company informs him to the contrary.

          (c) Executive agrees that both during Executive’s employment and afterwards, Executive will not use or disclose any proprietary information without the Company’s express written authorization except that Executive may do so during Executive’s employment for the purposes of conducting the business of the Company and performing Executive’s duties.

          (d) Termination of Employment. When Executive leaves the employment of the Company, Executive agrees to deliver to the Company the originals and all copies of any and all notes, memoranda, records, computer recorded information and documentation and any other material containing or disclosing any Confidential Information of the Company that are in the Executive’s possession or under the Executive’s control. Prior to leaving, Executive agrees to comply with the Company’s exit interview procedures.

          (e) Confidential Information of Other Employers. Executive agrees, during employment at the Company, not to improperly use or disclose any Confidential Information or trade secrets, if any, of any former or concurrent employer.

          (f) Inventions. In the event that, alone or with others, Executive conceives, develops or reduces to practice any invention, discovery, development, improvement, method, process, or trade secret (“Inventions”) during the period of time Executive is employed by the Company, Executive hereby assigns to the Company all of Executive’s rights, title and interest to such Inventions. (This paragraph, however, shall not be interpreted to require the assignment of any Invention which Executive can prove Executive developed entirely on Executive’s own time, without the use of any equipment, supplies, facilities or Confidential Information of the Company, and which neither results from the work Executive performs for the Company nor is related to the actual or anticipated business of the Company).

          (g) Assistance in Protection of Inventions. In the event the Company ever needs Executive’s assistance to secure copyrights or patent protection for any Invention, in the

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United States or abroad, Executive agrees to assist the Company in every proper way. In the event that the Company is unable, after reasonable effort, to secure Executive’s signature on any documents needed to apply for or prosecute a patent or copyright on an Invention, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and on Executive’s behalf to execute, verify and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents and copyrights with the same legal force and effect as if executed by the Executive.

          (h) Duration. The obligations imposed by Sections 11(a), (b), (c), (e) and (f) of this Agreement shall remain in force indefinitely, even if Executive’s employment with the Company terminates for any reason.

     12. NON-SOLICITATION OF EMPLOYEES/NON-COMPETE. Executive agrees to the following terms:

          (a) As used in the Agreement, to “compete” shall include any action by Executive, directly or indirectly, to own, manage, operate, join, control, be employed by, participate in, or become a director, officer, shareholder (holding more than 1% of shares) of, consultant to, or otherwise a participant in, any pet food, pet supplies or pet services superstore business. For the purposes of this Agreement, “superstore business” is defined to means a business with: (a) at least one store with at least 10,000 square feet of retail space; or (b) more than one store with at least 8,000 square feet of retail space.

          (b) During the term of Executive’s employment by the Company and continuing for a period of one (1) year after the termination of Executive’s employment for any reason (whether by resignation, dismissal, retirement or otherwise), Executive shall not compete with the Company anywhere within the Company’s sales territory as it exists during the period of Executive’s employment or in any sales territory added by the Company during the one (1) year period after Executive’s departure provided that during Executive’s employment with the Company, the Company distributes to Executive information indicating a plan to add such sales territory or publicly announces such a plan; or Executive or Executive’s subsequent employer otherwise acquires knowledge of such a plan. In view of the Company’s business style and character, its marketing methods, and its strategy, Executive agrees that it is reasonable to reconsider that the Company’s sales territory extends throughout each state in which it is doing business and Executive shall not Compete within such area.

          (c) Executive understands that while this Agreement allows Executive to compete with the Company following the expiration of the one-year period, it does not give Executive license to engage in acts which would constitute unfair competition in violation of the applicable law.

          (d) Executive acknowledges and agrees that in the event of a breach or threatened breach of this Agreement, the Company will suffer an irreparable injury and remedies at law may be inadequate. Accordingly, Executive agrees that in such event the Company shall be entitled to apply for an injunction restraining Executive from rendering any services to any person, company or other entity in violation of the Agreement, without bond. (This clause, however, shall not be interpreted as prohibiting the Company from pursuing any other available remedies, including the recovery of damages.)

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     13. MISCELLANEOUS.

          (a) Executive represents and warrants to the Company that Executive is not now under any obligation of a contractual or other nature to any person, firm or corporation which is inconsistent or in conflict with this Agreement, or which would prevent, limit or impair in any way the performance by Executive of Executive’s obligations hereunder.

          (b) The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any subsequent breach thereof.

          (c) This Agreement constitutes the entire Agreement of Executive and the Company and supersedes the Prior Agreement and all prior and contemporaneous oral agreements, understandings, promises, representations and negotiations between the parties with respect to the subject matter hereof. This Agreement does not supersede the ESTIP, the CinC/SBP or other written plans of the Company in which Executive participates.

          (d) Any and all notices referred to herein shall be sufficiently furnished if in writing, and sent by registered or certified mail, postage prepaid, or by facsimile transmission (but only if confirmation of receipt is subsequently received by the sender either orally or in writing), or by overnight courier (if such overnight courier guarantees next day delivery and such notice is sent for delivery on a day on which such courier guarantees such overnight delivery), to the respective parties at the following addresses or such other address, or facsimile number as either party may from time to time designate in writing in the manner set forth in this Section 13(d):

     THE COMPANY:

PetSmart, Inc.
Attn: General Counsel
19601 North 27th Avenue
Phoenix, Arizona 85027
Phone #: (623) 580-6100
Facsimile #:(623) 580-6103

     EXECUTIVE:

Philip L. Francis
[address]

          (e) If any portion or provision of this Agreement shall be invalid or unenforceable for any reason, there shall be deemed to be made such minor changes (and only such minor changes) in such provision or portion as are necessary to make it valid and enforceable. The invalidity or unenforceability of any provision or portion of this Agreement

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shall not affect the validity or enforceability of any other provisions or portions of this Agreement. If any such unenforceable or invalid provision or provisions shall be rendered enforceable and valid by changes in applicable law, then such provision or provisions shall be deemed to read as they presently do in this Agreement without change.

          (f) This Agreement, and the rights and obligations of Executive and the Company hereunder, shall inure to the benefit of and shall be binding upon, Executive, Executive’s heirs and representatives, and upon the Company and the Company’s successors and assigns. Because of the unique and personal nature of the Executive’s duties under this Agreement, neither this Agreement nor any rights or obligations under this Agreement shall be assignable by the Executive. As a condition to effecting any merger, acquisition or similar corporate transaction, the Company shall require any successor to the Company to assume the Company’s obligations under this Agreement.

          (g) The waiver by either party of a breach of a provision of this Agreement shall not operate or be construed as a waiver of a subsequent breach thereof.

          (h) This Agreement is intended to and shall be governed by, and interpreted under and construed in accordance with, the laws of the State of Arizona, without reference to any conflict of laws or principles.

          (i) If any litigation, arbitration or any other proceedings is instituted in connection with or related to this Agreement, the non-prevailing party in such litigation, arbitration or other proceeding shall pay the expenses, including, without limitation, the attorney’s fees and expenses of investigation, of the prevailing party.

          (j) Arbitration. To ensure rapid and economical resolution of any disputes which may arise under this Agreement, Executive and the Company agree that any and all disputes or controversies of any nature whatsoever, regarding the interpretation, performance, enforcement or breach of this Agreement shall be resolved by confidential, final and binding arbitration (rather than trial by jury or court or resolution in some other forum) under the then-existing rules of Judicial Arbitration and Mediation Services (“JAMS”).

          (k) The Company and Executive expressly agree that the provisions of Sections 11, 12, 13 and any action providing for the payment of severance benefits shall survive the termination of this Agreement.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

THE COMPANY:	PETSMART, INC.
	By:
		Gregory P. Josefowicz
		Lead Director of the Board of Directors
EXECUTIVE:	By:
		Philip L. Francis

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EX-10.13

EXHIBIT 10.13

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This Amended and Restated Employment Agreement (this “Agreement”) is made and entered into as of the 24^th day of September, 2008 (the “Effective Date”) by and between PetSmart, Inc., a Delaware corporation (the “Company”), and Robert F. Moran (“Executive”). As of the Effective Date, this Agreement shall replace and supersede in its entirety that certain Employment Agreement between Executive and the Company entered into effective as of August 25, 1999 (the “Prior Agreement”).

RECITALS

     WHEREAS, the Company and Executive previously entered into the Prior Agreement and desire to amend and restate the Prior Agreement in its entirety as set forth herein, effective as of the Effective Date, in order to, among other things, clarify the application of Section 409A of the Internal Revenue Code (the “Code”) to the benefits provided to Executive under the Prior Agreement, clarify Executive’s participation in the Executive Short Term Incentive Plan as such plan may amended from time to time hereafter (the “ESTIP”) and clarify Executive’s participation in the Change in Control and Severance Benefit Plan, as amended and restated on September 24, 2008 (the "CinC/SBP”).

     WHEREAS, the Company desires to continue to employ Executive as Chief Operating Officer on the terms and conditions set forth herein and Executive desires to accept such continued employment with the Company.

     NOW, THEREFORE, in consideration of the foregoing premises, the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. EMPLOYMENT AND DUTIES. The Company hereby engages Executive in the capacity of Chief Operating Officer. Executive shall perform such duties and functions as shall be specified from time to time by the Company’s Board of Directors (the “Board”) or its Compensation Committee. Executive hereby accepts such employment and agrees to perform such duties. During the term of the Agreement, Executive shall not be required without Executive’s consent to undertake responsibilities not at least commensurate with Executive’s position as the Company’s Chief Operating Officer. In connection with any termination of Executive’s employment by the Company as Chief Operating Officer, Executive shall resign from any Board position that may be then held by Executive effective simultaneously with the effective date of such termination, unless such requirement is waived by the remainder of the Board members.

     2. COMPENSATION.

          (a) Base Salary. For all services to be rendered by Executive hereunder, Executive shall be paid a base salary at the rate of Seven Hundred Fifty Thousand Dollars ($750,000) per year. Executive’s base compensation shall be reviewed at least annually and may be increased at the discretion of the Board, but during the term of this Agreement may not be

1

decreased below the then-effective base salary. Executive’s salary shall be paid on such basis as is the normal payment pattern for executive officers of the Company. The base salary payable under this Section 2(a) shall be in addition to and exclusive of any payments to Executive from time to time under formal or informal bonus, incentive compensation or similar plans now in effect or which hereafter may be adopted.

          (b) Performance Bonus. With respect to each full fiscal year of the Company during which Executive is an officer of the Company pursuant to this Agreement (each, a “Bonus Year”), Executive shall be entitled to participate in the ESTIP. The calculation and payment to Executive of a performance bonus contemplated by this Section 2(b), if any, shall be determined and paid in accordance with the terms of the ESTIP.

     3. CHANGE IN CONTROL AND SEVERANCE BENEFITS.

          (a) While Executive remains an officer of the Company, Executive shall be a participant in the CinC/SBP. The terms and conditions of the CinC/SBP as in effect on the date hereof with respect to Executive are hereby incorporated by reference herein.

          (b) In the event the CinC/SBP is amended after the date hereof to provide Executive greater benefits, Executive shall received such greater benefits. In the event the CinC/SBP is amended after the date hereof in a manner that would result in Executive receiving lesser benefits, Executive shall receive the benefits provided by the CinC/SBP as in effect on the date hereof.

     4. EQUITY AWARDS.

          (a) Executive shall, in accordance with Company policy and the terms of the applicable plan documents, be eligible to receive discretionary grants of equity awards, as determined by the Board or its Compensation Committee in its sole discretion. Executive shall be entitled to participate in any performance equity award plan approved annually for other executive officers of the Company by the Compensation Committee of the Board.

          (b) In the event of Executive incurs an Involuntary Termination Without Cause, as defined in the CinC/SBP as in effect on the date hereof, Executive shall receive the following benefits:

               (i) Vesting of each Company equity award held by Executive shall accelerate on such date of termination by the number of shares that would have vested in accordance with the applicable vesting schedule had Executive remained employed by the Company for an additional twelve (12) months as of the date of termination. Notwithstanding the foregoing, this Section 4(b)(i) shall not apply to equity awards issued under or held in any plan that is intended to be qualified under Section 401(a) of the Code (“Qualified Plan”).

               (ii) Executive shall have continued exercisability of each Company stock option and stock appreciation right held by the Executive (if any) until the earlier of (A) a period of fifteen (15) months following the date of termination, or (B) the expiration of the maximum term of the award. Notwithstanding the foregoing, nothing in this Section 4(b) prohibits the Company or a successor organization (or its parent) from causing such awards to

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early terminate in connection with a merger, consolidation or other corporate transaction pursuant to the terms of the applicable equity plan or award agreements, except to the extent such early termination would be inconsistent with any continued exercisability benefits available to Executive under the CinC/SBP.

     5. BENEFITS.

          (a) Executive shall be entitled to participate in such fringe benefits and perquisites as are generally made available to executive officers of the Company, and such other fringe benefits as may be approved by the Board for executive officers of the Company during the term hereof including, without limitation, medical, dental and disability insurance, group term life insurance at least equal in face amount to the base salary payable pursuant to Section 2(a), and annual vacation time of at least four weeks.

          (b) Nothing contained herein is intended or shall be deemed to be granted to Executive in lieu of any rights or privileges to which Executive may currently be or become entitled as an employee of the Company under any medical, dental, disability, life insurance, retirement, stock option, stock bonus or purchase, incentive compensation or other plan or arrangement of the Company which may now be in effect or which may hereafter be adopted, it being understood that Executive shall have the same rights and privileges to participate in such plans as any other similarly situated executive officer of the Company.

     6. REIMBURSEMENT OF EXPENSES. The Company shall reimburse Executive for all reasonable business expenses incurred by Executive in connection with the performance of Executive’s duties hereunder and consistent with Company policy and practice, provided that Executive furnishes to the Company receipts and other documentation reasonably acceptable to the Company evidencing such expenditures no later than three (3) months following the date such expenditures were incurred. The Company shall reimburse such expenses within ninety (90) days after receiving such documentation.

     7. PERFORMANCE OF DUTIES.

          (a) In consideration of the payments to be made hereunder, Executive agrees to devote Executive’s entire business time and attention to the performance of Executive’s duties hereunder, to serve the Company diligently and to the best of Executive’s abilities, and not to compete with the Company or any of its Affiliates (as defined below) in any manner whatsoever. Without limiting the generality of the foregoing, Executive shall not, during the term of Executive’s employment by the Company, directly or indirectly (whether for compensation or otherwise), alone or as an agent, principal, partner, officer, employee, trustee, director, shareholder or in any other capacity, own, manage, operate, join, control or participate in the ownership, management, operation or control of or furnish any capital to or be connected in any manner with or provide any services as a consultant for any business which competes directly or indirectly with any of the businesses of the Company or any of its Affiliates (as defined below) as they may be conducted from time to time (including any pet food, pet supplies, or pet services superstore business within the meaning of Sections 12(a)); provided, however, that notwithstanding the foregoing, nothing contained in this Agreement shall be deemed to preclude Executive from owning not more than one percent of the publicly-traded capital stock of an

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entity which is in competition with any of such businesses. “Affiliate” of the Company means any person, association or entity: (a) that, in whole or in part, materially owns or is materially owned by, or otherwise has a material interest (whether debt, equity or otherwise) in, the Company; (b) that controls or is controlled by the Company; (c) that is a subsidiary (whether owned in whole or in part) of the Company; or (d) to which the Company is a “related taxpayer” as defined in Section 1313(c) of the Code.

          (b) Executive may conduct civic, educational and charitable activities and may also serve on boards of directors of other companies, if consistent with this Section 7 and if Executive’s service on the boards of directors of other companies is approved by the Board.

     8. TERM AND TERMINATION.

          (a) The term of Executive’s employment with the Company hereunder shall continue until Executive resigns or is terminated under this Section 8 or under Section 9 of this Agreement.

          (b) In the event of Executive’s death, this Agreement shall terminate. In the event of Executive’s Total Disability during the term of this Agreement, the Company may at its sole option thereafter (unless Executive shall have resumed Executive’s duties in full prior to such termination) terminate this Agreement, to the extent permitted by applicable laws. In the event of the Executive’s death or termination due to Total Disability, the sole right hereunder of Executive, Executive’s widow or Executive’s legal representative, as the case may be, shall be to receive the following benefits:

               (i) A lump sum severance payment equal to one (1) times the annual Base Salary at the rate in effect immediately preceding the date of Executive’s termination plus the Base Salary for the remainder of the calendar month in which the Executive’s employment terminated, payable within three (3) business days following the date of termination;

               (ii) Payment of any amounts due Executive pursuant to the ESTIP;

               (iii) Vesting of each Company equity award held by Executive shall fully accelerate on such date of termination. Notwithstanding the foregoing, this Section 8(b)(iii) shall not apply to equity awards issued under or held in any Qualified Plan; and

               (iv) Assuming the Executive and/or the Executive’s spouse or eligible dependents timely and accurately elect to continue health insurance benefits under COBRA, the Company shall pay the COBRA premiums for Executive, and/or his/her spouse and covered dependents, as applicable, for continued medical, dental and vision insurance benefits until the earliest of (A) the one (1) year anniversary of the date of termination, (B) the expiration of the applicable continuation coverage rights under COBRA and any applicable state COBRA-like statute that provides mandated continuation coverage, or (C) the date the Executive becomes eligible for health insurance benefits of a subsequent employer. Executive agrees to immediately notify the Company in writing of any such eligibility. For purposes of this Section 8(b)(iv), references to COBRA premiums shall not include any amounts payable under a Code Section 125 health care reimbursement plan.

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          (c) “Total Disability” shall mean the inability of the Executive to perform the Executive’s duties under this Agreement, even with reasonable accommodation, because the Executive has become permanently disabled within the meaning of any policy of disability income insurance covering employees of the Company then in force. In the event the Company has no policy of disability income insurance covering employees of the Company in force when the Executive becomes disabled, the term “Total Disability” shall mean the inability of the Executive to perform the Executive’s duties under this Agreement, whether with or without reasonable accommodation, by reason of any incapacity, physical or mental, which the Board, based upon medical advice or an opinion provided by a licensed physician acceptable to the Board, determines to have incapacitated the Executive from satisfactorily performing all of the Executive’s usual services for the Company, with or without reasonable accommodation, for a period of at least six (6) consecutive months during any twelve (12) month period. Based upon such medical advice or opinion, the determination of the Board shall be final and binding and the date such determination is made shall be the date of such Complete Disability for purposes of this Agreement.

          (d) Subject to the terms of this Agreement regarding benefits to be received by Executive upon a Covered Termination, as defined in the CinC/SBP as in effect on the date hereof, the Company shall be entitled to terminate Executive’s employment with or without cause at any time upon thirty (30) days written notice and to establish the services which Executive shall perform during such notice period.

     9. [RESERVED].

     10. TAX TREATMENT. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with Executive’s termination of employment unless and until Executive has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to Executive without causing Executive to incur the additional 20% tax under Section 409A. For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits constitute “deferred compensation” under Section 409A and Executive is, on the termination of his service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed until the earlier to occur of: (i) the

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date that is six months and one day after Executive’s Separation From Service) or (ii) the date of Executive’s death that occurs after the Executive’s Separation From Service.

     11. CONFIDENTIALITY.

          (a) The Company (which for purposes of this Section 11 shall mean the Company and its Affiliates (as defined in Section 7(a)) and Executive recognize that during the course of Executive’s employment with the Company he will accumulate certain proprietary and confidential information and trade secrets for use in the Company’s business and will have divulged to him certain crucial confidential and proprietary information and trade secrets about the business, operations and prospects of the Company, which constitute valuable business assets providing the Company the opportunity to obtain an advantage over competitors who do not know or use such information or have access to it without the investment of considerable resources. Executive hereby acknowledges and agrees that such information (the “Proprietary Information”) is confidential and proprietary and a trade secret and that such information shall include, without limitation:

                    (1) The Company’s customer and prospective customer lists (including rolodex/address book information);

                    (2) The Company’s vendor and prospective vendor lists (including rolodex/address information);

                    (3) Confidential correspondence, notes, files, memoranda, notebooks, drawings, schematics, specifications, plans, forecasts, programs, price lists, inventory control lists, materials, data, devices, records, research and development information, computer-recorded information of any kind, videotapes, tangible property, equipment, entry cards, identification badges and keys;

                    (4) Confidential information regarding the Company’s operations, finances, methods, strategies, plans, forecasts and results;

                    (5) The Company’s confidential arrangements with suppliers and distributors;

                    (6) The Company’s confidential plans and strategies for research, development, expansion, store design, staffing and management systems, new products, purchasing, budgets, priorities, marketing and sales;

                    (7) The Company’s confidential financial statements and data regarding sales, profits, productivity, purchasing arrangements, prices and costs;

                    (8) Confidential information regarding the Company’s computer systems and programs;

                    (9) Third party confidential information which the Company has a duty to maintain as confidential;

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                    (10) Confidential personnel information such as the identities, capabilities, activities, compensation, performance, and ratings of employees;

                    (11) Confidential information regarding employee hiring, incentive, evaluation and discipline practices and programs;

                    (12) Confidential training programs, techniques, and materials;

                    (13) Confidential grooming methods and practices;

                    (14) Confidential marketing and promotional plans, methods, budgets and targets; and

                    (15) Confidential cost-control methods and practices.

          (b) Executive understands that this list is not all-inclusive and that other information may qualify as proprietary information. In the event that Executive is not sure whether certain information is proprietary information, Executive shall treat it as confidential unless the Company informs him to the contrary.

          (c) Executive agrees that both during Executive’s employment and afterwards, Executive will not use or disclose any proprietary information without the Company’s express written authorization except that Executive may do so during Executive’s employment for the purposes of conducting the business of the Company and performing Executive’s duties.

          (d) Termination of Employment. When Executive leaves the employment of the Company, Executive agrees to deliver to the Company the originals and all copies of any and all notes, memoranda, records, computer recorded information and documentation and any other material containing or disclosing any Confidential Information of the Company that are in the Executive’s possession or under the Executive’s control. Prior to leaving, Executive agrees to comply with the Company’s exit interview procedures.

          (e) Confidential Information of Other Employers. Executive agrees, during employment at the Company, not to improperly use or disclose any Confidential Information or trade secrets, if any, of any former or concurrent employer.

          (f) Inventions. In the event that, alone or with others, Executive conceives, develops or reduces to practice any invention, discovery, development, improvement, method, process, or trade secret (“Inventions”) during the period of time Executive is employed by the Company, Executive hereby assigns to the Company all of Executive’s rights, title and interest to such Inventions. (This paragraph, however, shall not be interpreted to require the assignment of any Invention which Executive can prove Executive developed entirely on Executive’s own time, without the use of any equipment, supplies, facilities or Confidential Information of the Company, and which neither results from the work Executive performs for the Company nor is related to the actual or anticipated business of the Company).

          (g) Assistance in Protection of Inventions. In the event the Company ever needs Executive’s assistance to secure copyrights or patent protection for any Invention, in the

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United States or abroad, Executive agrees to assist the Company in every proper way. In the event that the Company is unable, after reasonable effort, to secure Executive’s signature on any documents needed to apply for or prosecute a patent or copyright on an Invention, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and on Executive’s behalf to execute, verify and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents and copyrights with the same legal force and effect as if executed by the Executive.

          (h) Duration. The obligations imposed by Sections 11(a), (b), (c), (e) and (f) of this Agreement shall remain in force indefinitely, even if Executive’s employment with the Company terminates for any reason.

     12. NON-SOLICITATION OF EMPLOYEES/NON COMPETE. Executive agrees to the following terms:

          (a) As used in the Agreement, to “compete” shall include any action by Executive, directly or indirectly, to own, manage, operate, join, control, be employed by, participate in, or become a director, officer, shareholder (holding more than 1% of shares) of, consultant to, or otherwise a participant in, any pet food, pet supplies or pet services superstore business. For the purposes of this Agreement, “superstore business” is defined to means a business with: (a) at least one store with at least 10,000 square feet of retail space; or (b) more than one store with at least 8,000 square feet of retail space.

          (b) During the term of Executive’s employment by the Company and continuing for a period of one (1) year after the termination of Executive’s employment for any reason (whether by resignation, dismissal, retirement or otherwise), Executive shall not compete with the Company anywhere within the Company’s sales territory as it exists during the period of Executive’s employment or in any sales territory added by the Company during the one (1) year period after Executive’s departure provided that during Executive’s employment with the Company, the Company distributes to Executive information indicating a plan to add such sales territory or publicly announces such a plan; or Executive or Executive’s subsequent employer otherwise acquires knowledge of such a plan. In view of the Company’s business style and character, its marketing methods, and its strategy, Executive agrees that it is reasonable to reconsider that the Company’s sales territory extends throughout each state in which it is doing business and Executive shall not Compete within such area.

          (c) Executive understands that while this Agreement allows Executive to compete with the Company following the expiration of the one-year period, it does not give Executive license to engage in acts which would constitute unfair competition in violation of the applicable law.

          (d) Executive acknowledges and agrees that in the event of a breach or threatened breach of this Agreement, the Company will suffer an irreparable injury and remedies at law may be inadequate. Accordingly, Executive agrees that in such event the Company shall be entitled to apply for an injunction restraining Executive from rendering any services to any person, company or other entity in violation of the Agreement, without bond. (This clause,

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however, shall not be interpreted as prohibiting the Company from pursuing any other available remedies, including the recovery of damages.)

     13. MISCELLANEOUS.

          (a) Executive represents and warrants to the Company that Executive is not now under any obligation of a contractual or other nature to any person, firm or corporation which is inconsistent or in conflict with this Agreement, or which would prevent, limit or impair in any way the performance by Executive of Executive’s obligations hereunder.

          (b) The waiver by either party of a breach of any provision of this Agreement must be in writing and shall not operate or be construed as a waiver of any subsequent breach thereof.

          (c) This Agreement constitutes the entire Agreement of Executive and the Company and supersedes the Prior Agreement and all prior and contemporaneous oral agreements, understandings, promises, representations and negotiations between the parties with respect to the subject matter hereof. This Agreement does not supersede the ESTIP, the CinC/SBP or other written plans of the Company in which Executive participates.

          (d) Any and all notices referred to herein shall be sufficiently furnished if in writing, and sent by registered or certified mail, postage prepaid, or by facsimile transmission (but only if confirmation of receipt is subsequently received by the sender either orally or in writing), or by overnight courier (if such overnight courier guarantees next day delivery and such notice is sent for delivery on a day on which such courier guarantees such overnight delivery), to the respective parties at the following addresses or such other address, or facsimile number as either party may from time to time designate in writing in the manner set forth in this Section 13(d):

     THE COMPANY:

PetSmart, Inc.
Attn: Chief Executive Officer
19601 North 27th Avenue
Phoenix, Arizona 85027
Phone #: (602) 587-2000, Assistant to the CEO
Facsimile #: (602) 580-6513, for CEO

     EXECUTIVE:

Robert F. Moran
[Address]

          (e) If any portion or provision of this Agreement shall be invalid or unenforceable for any reason, there shall be deemed to be made such minor changes (and only such minor changes) in such provision or portion as are necessary to make it valid and enforceable. The invalidity or unenforceability of any provision or portion of this Agreement shall not affect the validity or enforceability of any other provisions or portions of this

9

Agreement. If any such unenforceable or invalid provision or provisions shall be rendered enforceable and valid by changes in applicable law, then such provision or provisions shall be deemed to read as they presently do in this Agreement without change.

          (f) This Agreement, and the rights and obligations of Executive and the Company hereunder, shall inure to the benefit of and shall be binding upon, Executive, Executive’s heirs and representatives, and upon the Company and the Company’s successors and assigns. Because of the unique and personal nature of the Executive’s duties under this Agreement, neither this Agreement nor any rights or obligations under this Agreement shall be assignable by the Executive. As a condition to effecting any merger, acquisition or similar corporate transaction, the Company shall require any successor to the Company to assume the Company’s obligations under this Agreement.

          (g) The waiver by either party of a breach of a provision of this Agreement shall not operate or be construed as a waiver of a subsequent breach thereof.

          (h) This Agreement is intended to and shall be governed by, and interpreted under and construed in accordance with, the laws of the State of Arizona, without reference to any conflict of laws or principles.

          (i) If any litigation, arbitration or any other proceedings is instituted in connection with or related to this Agreement, the non-prevailing party in such litigation, arbitration or other proceeding shall pay the expenses, including, without limitation, the attorney’s fees and expenses of investigation, of the prevailing party.

          (j) Arbitration. To ensure rapid and economical resolution of any disputes which may arise under this Agreement, Executive and the Company agree that any and all disputes or controversies of any nature whatsoever, regarding the interpretation, performance, enforcement or breach of this Agreement shall be resolved by confidential, final and binding arbitration (rather than trial by jury or court or resolution in some other forum) under the then-existing rules of Judicial Arbitration and Mediation Services (“JAMS”).

          (k) The Company and Executive expressly agree that the provisions of Sections 11, 12, 13 and any action providing for the payment of severance benefits shall survive the termination of this Agreement.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

THE COMPANY:	PETSMART, INC.
	By:
		Philip L. Francis
		Chief Executive Officer
EXECUTIVE:	By:
		Robert F. Moran

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EX-10.16

Exhibit 10.16

PETSMART, INC.

AMENDED AND RESTATED EXECUTIVE CHANGE IN CONTROL AND SEVERANCE BENEFIT PLAN

SECTION 1. Introduction.

     The PetSmart, Inc. Amended and Restated Executive Change in Control and Severance Benefit Plan (the “Plan”) hereby amends and restates through September 24, 2008 (the “Effective Date”) the PETsMART, Inc. Executive Change in Control and Severance Benefit Plan that was originally established effective March 25, 2003, and last amended and restated on December 12, 2006 (the “Prior Plan”). The purpose of the Plan is to provide for the payment of severance benefits and/or change in control benefits to certain eligible employees of PetSmart, Inc. (“PetSmart”) and its wholly owned subsidiaries (PetSmart and such subsidiaries being collectively referred to as the “Company”). As of the Effective Date, the Plan supersedes and replaces in its entirety the Prior Plan. This Plan also supersedes any unwritten severance plan, policy or practice of the Company and any unwritten change of control plan, policy or practice of the Company. However, except as set forth above, this Plan does not supersede any written severance benefit or written change in control benefit plan or policy of the Company or any written agreement between the Company and any employee that provides for payments or benefits in the event of termination of employment or a change in control of the Company; subject, however, to the provisions of this Plan providing for certain offsets or reduction of benefits under this Plan on account of such other benefits. This document also is the Summary Plan Description for the Plan.

SECTION 2. Definitions.

     For purposes of the Plan, the following terms are defined as follows except as may otherwise be provided in a Participation Notice:

     (a) “Alternative Benefits” means Covered Benefits that are provided by a program, plan or arrangement other than this Plan. Accordingly, for example, an “Alternative Cash Severance Benefit” means a Cash Severance Benefit that is an Alternative Benefit; an “Alternative Continued Medical Benefit” means a Continued Medical Benefit that is an Alternative Benefit; and an “Alternative Continued Life Insurance Benefit” means a Continued Life Insurance Benefit that is an Alternative Benefit. Notwithstanding the foregoing, a benefit that is designated an Alternative Benefit in a Participant’s Participation Notice shall be deemed to be an Alternative Benefit with respect to such Participant, and a benefit that is designated as not an Alternative Benefit in a Participant’s Participation Notice shall not be deemed to be an Alternative Benefit with respect to such Participant. Any benefit provided to a Participant other than by this Plan which is not addressed in the Participant’s Participation Notice shall be deemed to be an Alternative Benefit if such benefit is described in the first sentence of this Section 2(a).

     (b) “Base Salary Amount” means the greater of (i) the Participant’s base salary as determined on a monthly basis at the time of the Measurement Date multiplied by twelve (12) or (ii) the greatest amount of base salary received by the Participant in any consecutive twelve (12)

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month period that occurred within the thirty-six (36) month period immediately preceding the Measurement Date. For clarity purposes, any amount that a Participant elects to have withheld from the Participant’s base salary, for example, contributions to the PetSmart, Inc. SaveSmart 401(k) Plan or the PetSmart, Inc. Amended and Restated Deferred Compensation Plan, shall not reduce the Participant’s Base Salary Amount.

     (c) “Basic Severance Benefit” means the Participant’s Base Salary Amount multiplied by the Participant’s Multiplier. Except as may be set forth in the Participant’s Participation Notice, in the event the Participant has received or is entitled to an Alternative Cash Severance Benefit, the Basic Severance Benefit shall be reduced (but not below zero) by the present value, as determined by the Plan Administrator, of the Alternative Cash Severance Benefit.

     (d) “Board” means the Board of Directors of PetSmart.

     (e) “Cash Severance Benefit” means one or more cash payments by the Company to, or on behalf of, a Participant on account of the employee’s termination of employment with the Company or in lieu of severance benefits. Such payments may be paid in a lump sum or over time. The manner by which the amount of such benefit is determined shall not affect the characterization of the benefit as a Cash Severance Benefit; provided, however, that salary, vacation pay and bonuses that are earned but unpaid as of the date of such termination of employment and distributions from the PetSmart, Inc. SaveSmart 401(k) Plan and/or the PetSmart, Inc. Amended and Restated Deferred Compensation Plan shall not constitute Cash Severance Benefits. For example, payments pursuant to Section 4(a) shall constitute Cash Severance Benefits.

     (f) “Change in Control” is defined as one or more of the following events:

          (i) there is consummated a sale or other disposition of all or substantially all of the assets of the Company, as determined on a consolidated basis, (other than a sale to an entity where at least seventy-five percent (75%) of the combined voting power of the voting securities of such entity are owned by the stockholders of PetSmart in substantially the same proportions as their ownership of PetSmart immediately prior to such sale);

          (ii) any person, entity or group (other than PetSmart, a subsidiary or affiliate of PetSmart, or a Company employee benefit plan, including any trustee of such plan acting as trustee) becomes the beneficial owner, directly or indirectly, of securities of PetSmart representing twenty-five percent (25%) or more of the combined voting power of PetSmart’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction;

          (iii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) PetSmart and, immediately after the consummation of such transaction, the stockholders of PetSmart immediately prior to the consummation of such transaction do not own, directly or indirectly, outstanding voting securities representing more than seventy five percent (75%) of the combined outstanding voting power of the surviving entity in such transaction or more than seventy five percent (75%) of the combined outstanding voting power of the parent of the surviving entity in such transaction, in each case in

2.

substantially the same proportions as their ownership of PetSmart immediately prior to such transaction; or

          (iv) when the individuals who, at the beginning of any period of two years or less, constituted the Board of Directors of PetSmart cease, for any reason, to constitute at least a majority thereof, unless the election or nomination for election of each new director was approved by the vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period.

     (g) “Code” means the Internal Revenue Code of 1986, as amended.

     (h) “Company” means PetSmart, Inc. and its wholly owned subsidiaries or, following a Change in Control, the surviving entity resulting from such transaction.

     (i) “Constructive Termination” means a voluntary termination of employment by a Participant after one of the following is undertaken without the Participant’s express written consent:

          (i) the assignment to the Participant of duties or responsibilities that results in a material diminution in the Participant’s authority, duties, or responsibilities with the Company as in effect at any time during the twelve (12) month period preceding such assignment;

          (ii) a material reduction in the duties, authority or responsibilities of the supervisor to whom the Participant is required to report, including a requirement that the Participant report to a corporate officer instead of the Board;

          (iii) a material reduction in the Participant’s Base Salary Amount;

          (iv) a change in the Participant’s business location from the business location prior to such change that requires a one-way increase in the Participant’s driving distance of more than 35 miles, except for required travel for the Company’s business to an extent substantially consistent with Participant’s prior business travel obligations; or

          (v) a material breach by the Company of any provisions of the Plan, including without limitation Section 15(b) of the Plan, or any enforceable written agreement between the Company and the Participant.

     Notwithstanding the foregoing, a Participant’s voluntary termination shall not be deemed a Constructive Termination unless (x) the Participant provides the Company with written notice (the “Constructive Termination Notice”) that the Participant believes that an event described in this Section 2(i) has occurred, (y) the Constructive Termination Notice is given within the first ninety (90) days of the date the event occurred, and (z) the Company does not rescind or cure the conduct giving rise to the event described in this Section 2(i) within thirty (30) days of receipt by the Company of the Constructive Termination Notice (the “Cure Period”); and Participant voluntarily terminates his employment within thirty (30) days following the end of the Cure Period.

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     (j) “Continuation Period” means the period for which a Participant is entitled to receive the benefits described in Section 4(b)(ii) and Section 4(b)(iii). The Continuation Period for a Participant shall be that number of months equal to 12 multiplied by the Participant’s Multiplier. For example, the Continuation Period for a Senior Vice President shall be eighteen (18) months. Notwithstanding the foregoing, if the Covered Termination occurs within the twelve (12) month period immediately following the commencement of a Participant’s employment with the Company, the Continuation Period determined pursuant to this paragraph shall be reduced by fifty percent (50%); provided, however, that if a Change in Control occurs in the period commencing with such Participant’s commencement of employment with the Company and ending three (3) months after such Participant’s Covered Termination, this sentence shall not apply.

     (k) “Continued Medical Benefits” means the Company’s direct provision of coverage, or payment of insurance premiums to a third-party insurer, in whole or in part, whether pursuant to the Plan or otherwise, for cost of medical, dental or vision insurance coverage for the Participant or the Participant’s family members, where such premium or coverage is paid by the Company after the Participant’s termination of employment with the Company and such premium or coverage covers a period extending beyond such termination of employment. For the purposes of the preceding sentence, a wholly or partially self-insured plan or arrangement maintained by the Company shall be considered insurance coverage. For example, the benefits pursuant to Section 4(b)(ii) shall constitute Continued Medical Benefits.

     (l) “Continued Life Insurance Benefits” means the Company’s direct provision of coverage, or payment of insurance premiums to a third-party insurer, in whole or in part, whether pursuant to the Plan or otherwise, for the cost of life insurance coverage on the Participant’s life, where such premium or coverage is paid by the Company after the Participant’s termination of employment with the Company and such premium or coverage covers a period extending beyond such termination of employment. For example, the benefits pursuant to Section 4(b)(iii) shall constitute Continued Life Insurance Benefits.

     (m) “Covered Benefits” means the following benefits: (i) Cash Severance Benefits, (ii) Continued Medical Benefits, (iii) Continued Life Insurance Benefits, (iv) outplacement services, (v) accelerated vesting of Company stock awards, and (vi) extended exercisability of options granted by the Company for the purchase of Company stock.

     (n) “Covered Termination” means an Involuntary Termination Without Cause or a Constructive Termination (as defined in Section 2(i) above). Termination of employment of a Participant due to death or disability shall not constitute a Covered Termination unless a voluntary termination of employment by the Participant immediately prior to the Participant’s death or disability would have qualified as a Constructive Termination (i.e., such termination occurs within the first thirty (30) days following the expiration of the “Cure Period” described in Section 2(i)).

     (o) “Eligible Employee” means (i) the Chief Executive Officer, (ii) the Chief Operating Officer, (iii) a Senior Vice President, or (iv) a Vice President of the Company. In addition to the foregoing, “Eligible Employee” means any other current or former employee of the Company (x) who has been designated by the Board as eligible for benefits under the Plan

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and (y) whose highest seniority level was at least the equivalent of a Vice President; provided, however, that the Board shall not designate more than ninety-nine (99) persons as Eligible Employees at any one time.

     (p) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     (q) “Involuntary Termination Without Cause” means an involuntary termination of employment by the Company other than for one of the following reasons:

          (i) a refusal or failure to follow the lawful and reasonable directions of the Board or individual to whom the Participant reports, which refusal or failure is not cured within 30 days following delivery of written notice of such conduct to the Participant;

          (ii) a material failure by the Participant to perform his or her duties in a manner reasonably satisfactory to the Board that is not cured within 30 days following delivery of written notice of such failure to the Participant; or

          (iii) participation in, a conviction of or a plea of guilty or nolo contendere to a felony or any crime involving moral turpitude, fraud or dishonesty that is likely to have or has had a material adverse effect on the Company.

     (r) “Measurement Date” means, for the purposes of determining a Participant’s benefits payable pursuant to Section 4, the date of the Participant’s Covered Termination and, for the purposes of determining a Participant’s benefits payable pursuant to Section 5, the effective date of the applicable Change in Control.

     (s) “Multiplier” means (i) 2.0 in the case of a Participant who served as the Chief Executive Officer or the Chief Operating Officer of the Company at any time during the four month period immediately preceding the applicable Measurement Date, (ii) 1.5 in the case of a Participant not described in clause (i) who served as a Senior Vice President of the Company at any time during the four month period immediately preceding the applicable Measurement Date, and (iii)1.0 in the case of a Participant not described in clause (i) or (ii) who served as a Vice President of the Company at any time during the four month period immediately preceding the applicable Measurement Date. For all Participants not described in the preceding sentence, “Multiplier” means 1.0 unless another Multiplier is specified by the Participant’s Participation Notice.

     (t) “Option” means any and all options granted to a Participant by the Company to acquire common stock of the Company other than any options granted to a Participant which expressly provide that this Plan shall not apply to such option. For the purposes of this Plan, the term “Option” shall also include stock appreciation rights measured by the Company’s common stock provided that the exercise or strike price of such stock appreciation right is at least equal to the fair market value of the Company’s common stock on the date the stock appreciation right was granted.

     (u) “Participant” means an Eligible Employee who has received a Participation Notice that the employee is eligible to receive benefits pursuant to this Plan.

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     (v) “Participation Notice” means the latest notice delivered by the Company to an Eligible Employee informing the employee that the employee is a Participant in the Plan. A Participation Notice shall be in such form as may be determined by the Company. Notwithstanding the foregoing, once a Participation Notice has been delivered to a Participant, neither the Company nor any successor may amend a Participation Notice in any way that is adverse to a Participant, without the written consent of the Participant, unless (x) the amendment is made more than six (6) months prior to an applicable Measurement Date and (y) the amendment does not reduce any benefits the Participant would receive under the Plan to an amount that is less than the benefits the Participant would receive if the Participation Notice did not address such benefit.

     (w) “Payment Commencement Date” means, with respect to a Covered Termination, (i) if such Covered Termination occurs prior to the effective date of the applicable Change in Control, the later of (A) the effective date of such Change in Control or (B) the effective date of the release required by Section 6(a) or (ii) if such Covered Termination occurs on or after the effective date of the applicable Change in Control, the later of (X) the date of such Covered Termination or (Y) the effective date of the release required by Section 6(a).

     (x) “Plan Administrator” means the Board or any committee duly authorized by the Board to administer the Plan. The Plan Administrator may, but is not required to be, the Compensation Committee of the Board. The Board may at any time administer the Plan, in whole or in part, notwithstanding that the Board has previously appointed a committee to act as the Plan Administrator.

     (y) “Stock Award” means any and all stock awards (including Options) granted to a Participant by the Company which entitle the Participant to receive common stock of the Company (or cash measured in whole or in part by reference to the value of the Company’s common stock) other than any stock awards granted to a Participant which expressly provide that this Plan shall not apply to such stock awards.

     (z) “Vested” means that the relevant portion of the Stock Award is (i) in the case of an Option, exercisable in full and (ii) in the case of any Stock Award, the Stock Award is not subject to the Company’s right (whether conditionally or unconditionally) to reacquire the Stock Award due to forfeiture or repurchase at less than the fair market value of the stock or Stock Award.

SECTION 3. Eligibility For Benefits.

     (a) General Rules. Subject to the provisions set forth in this Section and Section 6, in the event of a Covered Termination, the Company will provide the severance benefits described in Section 4 of the Plan to the affected Participant. Subject to the provisions set forth in this Section and Section 6, in the event of a Change in Control, the Company will provide the change in control benefits described in Section 5 of the Plan to the affected Participants.

     (b) Exceptions to Benefit Entitlement. An employee who otherwise is a Participant will not receive benefits under the Plan in any of the following circumstances, as determined by the Company in its sole discretion:

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          (i) The employee voluntarily terminates his or her employment with the Company in order to accept employment with another entity that is controlled (directly or indirectly) by the Company or is otherwise an affiliate of the Company.

          (ii) The Participant does not confirm in writing that Participant shall be subject to the Company’s Confidentiality Agreement and Non-Compete Agreement.

          (iii) Except as may be set forth in a Participant’s Participation Notice, the Participant shall not be entitled to receive the benefit set forth in Section 4(b)(ii) if the Participant has either (i) previously received an Alternative Continued Medical Benefit or (ii) is eligible for and has not waived an Alternative Continued Medical Benefit.

          (iv) Except as may be set forth in a Participant’s Participation Notice, the Participant shall not be entitled to receive the benefit set forth in Section 4(b)(iii) if the Participant has either (i) previously received an Alternative Continued Life Insurance Benefit or (ii) is eligible for and has not waived an Alternative Continued Life Insurance Benefit.

     (c) Termination of Benefits. A Participant’s right to receive the payment of benefits under this Plan shall terminate immediately if, at any time prior to or during the period for which Participant is receiving benefits hereunder, the Participant, without the prior written approval of the Company:

          (i) willfully breaches a material provision of the Participant’s proprietary information or confidentiality agreement with the Company, as referenced in Section 3(b)(ii);

          (ii) owns, manages, operates, joins, controls or participates in the ownership, management, operation or control of, is employed by or connected in any manner with, any person, enterprise or entity which is engaged in any business competitive with that of the Company; provided, however, that such restriction will not apply to any passive investment representing an interest of less than two percent (2%) of an outstanding class of publicly-traded securities of any corporation or other entity or enterprise;

          (iii) encourages or solicits any of the Company’s then current employees to leave the Company’s employ for any reason or interferes in any other manner with employment relationships at the time existing between the Company and its then current employees;

          (iv) induces any of the Company’s then current clients, customers, suppliers, vendors, distributors, licensors, licensees or other third party to terminate their existing business relationship with the Company or interferes in any other manner with any existing business relationship between the Company and any then current client, customer, supplier, vendor, distributor, licensor, licensee or other third party.

SECTION 4. Amount of Severance Benefit.

     (a) Cash Severance Benefits. A Participant who incurred a Covered Termination shall receive the following benefits:

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          (i) Covered Termination at Least 12 Months Following Commencement of Employment with the Company. If the Covered Termination occurs after the twelve (12) month period immediately following the commencement of the Participant’s employment with the Company (the “Participant’s Initial Year”), the Participant shall receive a cash bonus equal to the Participant’s Basic Severance Benefit. Any amounts paid pursuant to this Section 4(a)(i) shall be subject to all applicable income tax and employment tax withholding amounts as well as other applicable withholding amounts, and shall be paid within ten (10) days following the effective date of the release required by Section 6(a).

          (ii) Covered Termination within 12 Months Following Commencement of Employment with the Company. If the Covered Termination occurs within the Participant’s Initial Year, then the Participant shall receive a cash bonus equal to (a) fifty percent (50%) of the Participant’s Basic Severance Benefit if no Change in Control occurred after the commencement of the Participant’s employment with the Company and prior to three months after the Participant’s Covered Termination or (b) one hundred percent (100%) of the Participant’s Basic Severance Benefit if a Change in Control occurred after the commencement of the Participant’s employment with the Company and prior to three months after the Participant’s Covered Termination. Such cash bonus amounts shall be paid within ten (10) days following the effective date of the release required by Section 6(a); provided, however, that in connection with the foregoing clause (b) of the preceding sentence, in the event a Change in Control has not occurred prior to the Covered Termination, but the Change in Control does occur within the three (3) months following the Covered Termination, then 50% of the Participant’s Basic Severance Benefit shall be paid on or before the tenth (10^th) day following the effective date of the release required by Section 6(a), and the remaining 50% shall be paid on or before the tenth (10^th) day following the later of (A) the effective date of the release required by Section 6(a), or (B) the effective date of the Change in Control. Any amounts payable pursuant to this Section 4(a)(ii) shall be subject to all applicable income tax and employment tax withholding amounts as well as other applicable withholding amount.

     (b) Other Severance Benefits. A Participant who incurs a Covered Termination shall receive the following benefits:

          (i) Outplacement Services. The Participant shall be entitled to outplacement services to assist in the Participant’s transition. Such outplacement services shall be provided by the outplacement firm typically used by the Company provided that the firm is well recognized in the industry, accessible and diligent in its efforts. In the case of a Participant whose Multiplier is greater than one (1), the Company shall pay the costs of such outplacement services for a period of twelve (12) months following the Covered Termination. In the case of a Participant whose Multiplier is one (1) or less, the Company shall pay the costs of such outplacement services for a period of six (6) months following the Covered Termination. Notwithstanding the foregoing, if the Covered Termination occurs within the twelve (12) month period immediately following the commencement of a Participant’s employment with the Company, then the period for outplacement services for a Participant shall be reduced by fifty percent (50%) from the amount calculated pursuant to this Section; provided, however, that if a Change in Control occurs in the period commencing with such Participant’s commencement of employment with the Company and ending three (3) months after such Participant’s Covered Termination, this sentence shall not apply.

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          (ii) Continued Medical Benefits. Provided that the Participant timely elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall pay the portion of premiums of each Participant’s group medical, dental and vision coverage, including coverage for those persons who are eligible for COBRA continuation coverage as a result of the Participant’s termination of employment, that the Company paid prior to the Covered Termination for the Continuation Period; provided, however, that no such premium payments (or any other payments for medical, dental or vision coverage by the Company) shall be made following the effective date of the Participant’s coverage by a medical, dental or vision insurance plan of a subsequent employer. Each Participant shall be required to notify the Company immediately if the Participant becomes covered by a medical, dental or vision insurance plan of a subsequent employer. No provision of this Plan will affect the continuation coverage rules under COBRA, except that the Company’s payment of any applicable insurance premiums during the Continuation Period will be credited as payment by the Participant for purposes of the Participant’s payment required under COBRA. Therefore, the period during which a Participant may elect whether or not to continue the Company’s group medical, dental or vision coverage under COBRA, the length of time during which COBRA continuation coverage will be made available to the Participant, and all other rights and obligations of the Participant under COBRA will be applied in the same manner that such rules would apply in the absence of this Plan. At the conclusion of the Continuation Period, the Participant will be responsible for the entire payment of premiums required under COBRA for the remainder, if any, of the COBRA continuation period. For purposes of this Section 4(b)(ii), applicable premiums paid by the Company during the Continuation Period shall not include any amounts payable by the Participant under a Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of the Participant. If the Participant or his spouse or his dependents cannot remain eligible for continued COBRA coverage for the entire Continuation Period, the Company shall provide individual medical, dental and vision coverage for the individual(s) who cease to be eligible for the remaining Continuation Period in such manner and form as determined by the Company in its sole discretion.

          (iii) Continued Life Insurance Benefit. If (x) the Participant’s life was insured through a plan or program sponsored by the Company other than a plan described in Section 401(a) of the Code or Section 409A of the Code, (y) the Company was paying immediately prior to the Covered Termination the premiums for such life insurance (other than through a payroll reduction or a withholding program), and (z) the Company was not, directly or indirectly, the primary beneficiary of the insurance policy, the Company will provide the Participant with equivalent term life insurance coverage for the Continuation Period. At the Company’s option, such term life insurance coverage can be obtained by conversion or portability of existing policies or through purchase by the Company of a policy or policies of insurance, which obtain substantially similar term life coverage as the policy in effect on the date of the Covered Termination. During the period (the “Initial Period”) commencing with the Participant’s Covered Termination and ending ten (10) days prior to the termination of any conversion privilege election period, the Company shall have the sole discretion to determine the method for coverage for the Participant. If the Company has not obtained such coverage within the Initial Period and notifies the Participant of the same, the Participant will have ten (10) days to make an affirmative election to convert the existing policy of life insurance. Thereafter, the Company shall have a continuing right to obtain substantially similar term life insurance coverage for the Participant. As a condition to any obligation of the Company pursuant to this

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Section 4(b)(iii), the Participant and all persons with an interest in any existing coverage at the time of termination of employment shall cooperate and assist the Company, as necessary, in any continuation coverage or any change to other life insurance coverage, including the timely completion of enrollment and/or application materials and any medical examination as may be reasonably requested by the Company. The Company will pay any life insurance premiums and any charges for converting or changing the life insurance coverage, if applicable.

          (iv) Other Executive Benefit Programs. The Company shall pay each Participant within ten (10) days of the effective date of the release required by Section 6(a) the dollar amount of any financial planning and related services and yearly medical examinations for which the Participant was eligible to have paid by the Company for the year in which occurs the Covered Termination. In addition, each Participant shall receive those executive benefits that have been specifically designated from time to time by the Board as to be paid pursuant to this Section. Such additional benefits shall be paid at the time and in the manner as specified by the Board.

SECTION 5. Amount of Change in Control Benefit.

     (a) Cash Benefit. Upon a Covered Termination of a Participant that occurs within the three (3) months prior to or within the thirty-six (36) months after a Change in Control, such Participant shall receive a cash bonus from the Company equal to the Change in Control Cash Benefit (as defined below) which shall be paid on or before the tenth (10^th) day following the Payment Commencement Date.

          For the purposes of this Section 5(a), the “Change in Control Cash Benefit” for a Participant is equal to the Participant’s Multiplier multiplied by the Participant’s Bonus Amount. For the purposes of the preceding sentence, the “Participant’s Bonus Amount” shall be equal to the highest level of Bonuses Received by the Participant attributable to any consecutive twelve (12) month period that occurred within the thirty-six (36) month period immediately preceding the Measurement Date. For the purposes of this Section 5(a), (i) “Bonuses Received” shall mean cash bonuses and the amount of cash that would have been received by the Participant pursuant to the Short Term Incentive Plan or the Executive Short Term Incentive Plan but for the fact that restricted stock or restricted stock units were awarded instead of cash, and (ii) in the event more than one payment representing Bonuses Received are received or deemed received by the Participant in a twelve (12) month period, the Plan Administrator shall determine the twelve (12) month periods to which such payments are attributable.

          Any amounts paid pursuant to this Section 5(a) shall be subject to all income tax and employment tax withholding amounts as well as other applicable withholding amounts.

     (b) Accelerated Stock Award Vesting and Extended Exercisability of Options. Effective upon a Change in Control, a Participant shall receive the following benefits associated with any Stock Awards which remain outstanding as of the effective date of the Change in Control:

          (i) With respect to any Options that are unexercised and outstanding, the post-termination of employment exercise period of the Option shall be extended, if necessary, such that the post-termination of employment exercise period shall not terminate prior to the later

10.

of (x) the date twelve (12) months after the effective date of the Change in Control or (y) the post-termination exercise period provided for in the Option; provided, however, that the Option shall not be exercisable after the expiration of its maximum term. Notwithstanding the foregoing, in the event the extended exercise period shall result in a portion of an Option becoming subject to the provisions of Section 409A of the Code, the extended exercise period of such portion of such Option shall be automatically shortened to the minimum extent necessary to prevent such portion of such Option from becoming subject to Section 409A of the Code. In further limitations of the provisions of this Section 5(b)(i), the following provisions shall apply:

               (1) If the Option was granted pursuant to the 2006 Equity Incentive Plan (the “06 EIP”) and pursuant to the Change in Control substantially all of the options outstanding pursuant to the 06 EIP will be terminated at the effective date of such Change in Control pursuant to Section 13(b) of the 06 EIP, the provisions of this Section 5(b)(i) shall not apply to such Option.

               (2) If the Option was granted pursuant to the 2003 Equity Incentive Plan (the “03 EIP”) and pursuant to the Change in Control substantially all of the options outstanding pursuant to the 03 EIP will be terminated at the effective date of such Change in Control pursuant to Section 13(b) of the 03 EIP, the provisions of this Section 5(b)(i) shall not apply to such Option.

               (3) If the Option was granted pursuant to the 1997 Equity Incentive Plan (the “97 EIP”) and pursuant to the Change in Control substantially all of the options outstanding pursuant to the 97 EIP will be terminated at the effective date of such Change in Control pursuant to Section 12(b) of the 97 EIP, the provisions of this Section 5(b)(i) shall not apply to such Option.

          (ii) If the Participant is still employed on the effective date of the Change in Control, to the extent the Participant holds any Stock Award that is not fully Vested, fifty percent (50%) of each vesting installment shall immediately become Vested. If the Participant remains continuously employed by the Company from the effective date of the Change in Control until the first to occur of (x) the date of the Participant’s Covered Termination, (y) the date that is thirty-six (36) months after the effective date of the Change in Control, or (z) the date the vesting installment would have Vested in accordance with its terms, the balance of each vesting installment shall become Vested on the first to occur of such dates.

          (iii) If the Participant is not employed on the effective date of the Change in Control but the Participant’s employment terminated pursuant to a Covered Termination within the three (3) month period ending on the effective date of the Change in Control, the Stock Awards held by the Participant that were not Vested on the date of the Participant’s Covered Termination shall become Vested as of the effective date of the Change in Control. If this Section applies to Options, then such Options shall have a post-termination exercise period as provided for under Section 5(b)(i). Notwithstanding the provisions of the Stock Awards or the equity compensation plans under which such Stock Awards were granted, in order to effectuate the terms of this Section (except as otherwise provided for in the last sentence of Section 5(b)(i)), such Stock Awards shall not expire, terminate or be forfeited until three months after a Covered Termination.

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          (iv) If a Stock Award is outstanding on the effective date of a Change in Control, the provisions of this Section 5(b) shall not apply to such Stock Award upon a subsequent Change in Control that occurs within three (3) years of the effective date of the Change in Control.

          (v) In the event the provisions of this Section 5(b) would adversely affect a Stock Award outstanding on the date the Eligible Employee becomes a Participant, this Section 5(b) shall not apply to such Stock Award without the consent of the Participant.

SECTION 6. Limitations on Benefits.

     (a) Release. In order to be eligible to receive benefits under Sections 4 and 5 of the Plan, a Participant (or, in the case of Participant’s death or disability that qualifies as a Covered Termination, the Participant’s legal representative) must execute and return to the Company, a general waiver and release in substantially the form attached hereto as Exhibit A, Exhibit B or Exhibit C, as appropriate, within the applicable time period set forth therein, but in no event later than forty-five (45) days following the Covered Termination, and such release must become effective in accordance with its terms. The Company, in its sole discretion, may modify the form of the required release to comply with applicable federal and state law and shall determine the form of the required release.

     (b) Certain Reductions and Offsets. Notwithstanding any other provision of the Plan to the contrary, a Covered Benefit payable to a Participant under this Plan shall be reduced (but not below zero) by any Alternative Benefit to such Covered Benefit payable by the Company to such individual under any other policy, plan, program or arrangement, including, without limitation, a contract between the Participant and any entity, covering such individual. Furthermore, to the extent that any federal, state or local laws, including, without limitation, so-called “plant closing” laws or statutory severance requirements, require the Company to give advance notice or make a payment of any kind to a Participant because of that Participant’s involuntary termination due to a layoff, reduction in force, plant or facility closing, sale of business, change in control, or any other similar event or reason, the benefits payable under this Plan shall either be reduced or eliminated. The benefits provided under this Plan are intended to satisfy any and all statutory obligations that may arise out of a Participant’s involuntary termination of employment for the foregoing reasons, and the Plan Administrator shall so construe and implement the terms of the Plan.

     (c) Mitigation. Except as otherwise specifically provided herein, a Participant shall not be required to mitigate damages or the amount of any payment provided under this Plan by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Plan be reduced by any compensation earned by a Participant as a result of employment by another employer or any retirement benefits received by such Participant after the date of the Participant’s termination of employment with the Company.

     (d) Non-Duplication of Benefits. Except as otherwise specifically provided for herein, no Participant is eligible to receive benefits under this Plan more than one time. This Plan is designed to provide certain severance pay and change of control benefits to Participants pursuant to the terms and conditions set forth in this Plan and any associated Participation

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Notice. The payments pursuant to this Plan are in addition to, and not in lieu of, any unpaid salary, bonuses or benefits to which a Participant may be entitled for the period ending with the Participant’s Covered Termination and/or a Change in Control.

     (e) Indebtedness of Participants. If a terminating employee is indebted to the Company or an affiliate of the Company at his or her termination date, the Company reserves the right to offset any Covered Benefits under the Plan by the amount of such indebtedness.

     (f) Parachute Payments.

          (i) Gross-Up Benefits. If any payment or benefit a Participant would receive, whether or not pursuant to this Plan, in connection with a Change in Control from the Company or otherwise, but determined without regard to any additional payments required under Section 6(f)(i) (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable federal, state, or local excise tax (such excise taxes, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Participant shall be entitled to receive an additional payment (a “Gross-Up Payment”) in such an amount that after the payment of all taxes (including, without limitation, any interest and penalties on such taxes and the Excise Tax) on the Payment and on the Gross-Up Payment, the Participant shall retain an amount equal to the Payment minus all applicable income and employment taxes on the Payment. The intent of this Section 6(f)(i) is that the Company shall be solely responsible for, and shall pay, any Excise Tax on the Payment and Gross-Up Payment and any income, employment and other taxes (including, without limitation, penalties and interest) imposed on the Gross-Up Payment, as well as any loss of tax deduction caused by the Gross-Up Payment or any applicable provisions of the Code. All determinations required to be made hereunder, including, without limitation, whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determinations, shall be made in accordance with the provisions set forth Section 6(f)(ii).

          (ii) Use of Third Party Expert. The accounting firm engaged by the Company for the purpose of rendering general tax advice as of the day prior to the effective date of the Change in Control shall perform the calculations required by this Section 6(f)(ii). If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and the Participant within fifteen (15) calendar days after the date on which the Participant’s right to a Payment is triggered (if requested at that time by the Company or the Participant) or such other time as requested by the Company or the Participant. If the accounting firm determines that no Excise Tax is payable with respect to a Payment to a Participant, it shall furnish the Company and the Participant with an opinion reasonably acceptable to Participant that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and the Participant.

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     (g) Application of Section 409A. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with a Participant’s termination of employment unless and until the Participant has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to the Participant without causing the Participant to incur the additional 20% tax under Section 409A. For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits constitute “deferred compensation” under Section 409A and the Participant is, on the termination of his service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed until the earlier to occur of: (i) the date that is six months and one day after the Participant’s Separation From Service) or (ii) the date of the Participant’s death that occurs after the Participant’s Separation From Service.

SECTION 7. Right To Interpret Plan; Amendment and Termination.

     (a) Exclusive Discretion. The Plan Administrator shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of the Plan, including, but not limited to, the eligibility to participate in the Plan and amount of benefits paid under the Plan. The rules, interpretations, computations and other actions of the Plan Administrator shall be binding and conclusive on all persons.

     (b) Amendment or Termination. The Company reserves the right to amend or terminate this Plan or the benefits provided hereunder at any time; provided, however, that, once a Participation Notice has been delivered to a Participant, no such amendment or termination of this Plan following a Change in Control or a Covered Termination shall be effective as to any such Participant unless (i) such Participant would not be adversely affected by such amendment or termination or (ii) such Participant consents in writing to such amendment or termination. Subject to the restrictions set forth in Section 2(v),Any action amending or terminating the Plan shall be in writing and executed by a duly authorized officer of the Company. Unless otherwise required by law, no approval of the shareholders of the Company shall be required for any amendment or termination including any amendment that increases the benefits provided under any Stock Award.

14.

SECTION 8. Termination of Certain Employee Benefits.

     Except as provided herein, all employee benefits other than health insurance and life insurance (such as disability and 401(k) plan coverage) terminate as of a Participant’s employment termination date (except to the extent that a conversion privilege may be available thereunder).

SECTION 9. No Implied Employment Contract.

     The Plan shall not be deemed (i) to give any employee or other person any right to be retained in the employ of the Company or (ii) to interfere with the right of the Company to discharge any employee or other person at any time, with or without cause, which right is hereby reserved.

SECTION 10. Legal Construction.

     This Plan shall be governed by and construed under the laws of the State of Arizona (without regard to principles of conflict of laws), except to the extent preempted by ERISA.

SECTION 11. Claims, Inquiries And Appeals.

     (a) Applications for Benefits and Inquiries. Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan Administrator (as set forth in Section 13(d) in writing. The Plan Administrator’s contact information is set forth in Section 13(d).

     (b) Denial of Claims. In the event that any application for benefits is denied in whole or in part, the Plan Administrator must provide the applicant with written or electronic notice of the denial of the application, and of the applicant’s right to review the denial. Any electronic notice will comply with the regulations of the U.S. Department of Labor. The notice of denial will be set forth in a manner designed to be understood by the applicant and will include the following:

               (1) the specific reason or reasons for the denial;

               (2) references to the specific Plan provisions upon which the denial is based;

               (3) a description of any additional information or material that the Plan Administrator needs to complete the review and an explanation of why such information or material is necessary; and

               (4) an explanation of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the applicant’s right, if any, to bring a civil action under section 502(a) of ERISA following a denial on review of the claim, as described in Section 11(d) below.

15.

          This notice of denial will be given to the applicant within ninety (90) days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an additional ninety (90) days for processing the application. If an extension of time for processing is required, written notice of the extension will be furnished to the applicant before the end of the initial ninety (90) day period.

          This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the application.

     (c) Request for a Review. Any person (or that person’s authorized representative) for whom an application for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Plan Administrator within sixty (60) days after the application is denied. A request for a review shall be in writing and shall be addressed to:

PetSmart, Inc.
Attn: Senior Vice President of People
19601 N. 27^th Avenue
Phoenix, AZ 85027

          A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant feels are pertinent. The applicant (or his or her representative) shall have the opportunity to submit (or the Plan Administrator may require the applicant to submit) written comments, documents, records, and other information relating to his or her claim. The applicant (or his or her representative) shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim. The review shall take into account all comments, documents, records and other information submitted by the applicant (or his or her representative) relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

     (d) Decision on Review. The Plan Administrator will act on each request for review within sixty (60) days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional sixty (60) days), for processing the request for a review. If an extension for review is required, written notice of the extension will be furnished to the applicant within the initial sixty (60) day period. This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the review. The Plan Administrator will give prompt, written or electronic notice of its decision to the applicant. Any electronic notice will comply with the regulations of the U.S. Department of Labor. In the event that the Plan Administrator confirms the denial of the application for benefits in whole or in part, the notice will set forth, in a manner calculated to be understood by the applicant, the following:

     (1) the specific reason or reasons for the denial;

16.

     (2) references to the specific Plan provisions upon which the denial is based;

     (3) a statement that the applicant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim; and

     (4) a statement of the applicant’s right, if any, to bring a civil action under section 502(a) of ERISA.

     (e) Rules and Procedures. The Plan Administrator will establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities in reviewing benefit claims. The Plan Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the denial of benefits to do so at the applicant’s own expense.

     (f) Exhaustion of Remedies. No legal action for benefits under the Plan may be brought until the claimant (i) has submitted a written application for benefits in accordance with the procedures described by Section 11(a) above, (ii) has been notified by the Plan Administrator that the application is denied, (iii) has filed a written request for a review of the application in accordance with the appeal procedure described in Section 11(c) above, and (iv) has been notified that the Plan Administrator has denied the appeal. Notwithstanding the foregoing, if the Plan Administrator does not respond to a Participant’s claim or appeal within the relevant time limits specified in this Section 11, the Participant may bring legal action for benefits under the Plan. To the extent the benefit would be covered by ERISA, such legal action may be brought pursuant to Section 502(a) of ERISA.

SECTION 12. Basis Of Payments To And From Plan.

     All benefits under the Plan shall be paid by the Company. The Plan shall be unfunded, and benefits hereunder shall be paid only from the general assets of the Company. A Participant’s right to receive payments under the Plan is no greater than that of the Company’s unsecured general creditors. Therefore, if the Company were to become insolvent, Participant’s might not receive benefits under the Plan.

SECTION 13. Other Plan Information.

     (a) Employer and Plan Identification Numbers. The Employer Identification Number assigned to the Company (which is the “Plan Sponsor” as that term is used in ERISA) by the Internal Revenue Service is 94-3024325. The Plan Number assigned to the Plan by the Plan Sponsor pursuant to the instructions of the Internal Revenue Service is 503.

     (b) Ending Date for Plan’s Fiscal Year. The date of the end of the fiscal year for the purpose of maintaining the Plan’s records is December 31.

     (c) Agent for the Service of Legal Process. The agent for the service of legal process with respect to the Plan is PetSmart, Inc., Attn: Senior Vice President of People, 19601 N. 27^th Avenue, Phoenix, AZ 85027.

17.

     (d) Plan Sponsor and Administrator. The “Plan Sponsor” is the Company, and the “Plan Administrator” of the Plan is the Board of Directors of PetSmart or a duly appointed committee as set forth in Section 2(u). The mailing address of the Plan Sponsor and the Plan Administrator is: PetSmart, Inc., Attn: Senior Vice President of People, 19601 N. 27^th Avenue, Phoenix, AZ 85027. The Plan Sponsor’s and Plan Administrator’s telephone number is (623) 580-6100. The Plan Administrator is the named fiduciary charged with the responsibility for administering the Plan.

SECTION 14. Statement Of ERISA Rights.

          Participants in this Plan (which is a welfare benefit plan sponsored by PetSmart, Inc.) are entitled to certain rights and protections under ERISA. If you are an Eligible Employee, you are considered a participant in the Plan for the purposes of this Section 14 and, under ERISA, you are entitled with respect to benefits covered by ERISA to:

Receive Information About Your Plan And Benefits

          (a) Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as worksites, all documents governing the Plan and a copy of the latest annual report (Form 5500 Series), if any, filed by the Plan (note: the Plan, as of the date of its adoption, is not subject to the requirement of filing such an annual report) with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration;

          (b) Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series), if any, (note: the Plan, as of the date of its adoption, is not subject to the requirement of filing such an annual report) and an updated (as necessary) Summary Plan Description. The Administrator may make a reasonable charge for the copies; and

          (c) Receive a summary of the Plan’s annual financial report, if any, (note: the Plan, as of the date of its adoption, is not subject to the requirement of providing a summary annual report). The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report, if any.

Prudent Actions By Plan Fiduciaries

          In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your employer, your union or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a Plan benefit or exercising your rights under ERISA.

18.

Enforce Your Rights

          If your claim for a Plan benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

          Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan, if any, (note: the Plan, as of the date of its adoption, is not subject to the requirement of filing such an annual report) and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Administrator.

          If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the Plan’s decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support order, you may file suit in Federal court.

          If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

Assistance With Your Questions

          If you have any questions about the Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in the local telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration or accessing its website at http://www.dol.gov/ebsa/.

SECTION 15. General Provisions.

     (a) Notices. Any notice, demand or request required or permitted to be given by either the Company or a Participant pursuant to the terms of this Plan shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties, in the case of the Company, at the address set forth in Section 11(a) and, in the case of a Participant, at the address as set forth in the Company’s employment file maintained for the Participant as previously furnished by the Participant or such other address as a Party may request by notifying the other in writing.

19.

     (b) Transfer and Assignment. The rights and obligations of Participant under this Plan may not be transferred or assigned without the prior written consent of the Company. This Plan shall be binding upon any surviving entity resulting from a Change in Control and upon any other person who is a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company without regard to whether or not such person or entity actively assumes the obligations hereunder. As a condition to effecting any merger, acquisition, consolidation or similar corporate transaction, the Company shall require any successor to the Company to assume the Company’s obligations under this Agreement.

     (c) Waiver. Any Party’s failure to enforce any provision or provisions of this Plan shall not in any way be construed as a waiver of any such provision or provisions, nor prevent any Party from thereafter enforcing each and every other provision of this Plan. The rights granted the Parties herein are cumulative and shall not constitute a waiver of any Party’s right to assert all other legal remedies available to it under the circumstances.

     (d) Severability. Should any provision of this Plan be declared or determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

     (e) Section Headings. Section headings in this Plan are included for convenience of reference only and shall not be considered part of this Plan for any other purpose.

SECTION 16. Execution.

     To record the adoption of the Plan as set forth herein, PetSmart, Inc. has caused its duly authorized officer to execute the same as of the Effective Date.

PetSmart, Inc.

By:

Title:

20.

Exhibit A

RELEASE
(Individual Termination, age 40 and older)

     I understand and agree completely to the terms set forth in the PetSmart, Inc. Amended and Restated Executive Change in Control and Severance Benefit Plan (the “Plan”). I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Plan.

          I hereby confirm my obligations under the Company’s Confidentiality Agreement and Non-Compete Agreement.

     Except as otherwise set forth in this Release, I hereby generally and completely release PetSmart, Inc. and its current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Agreement. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, and the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”); provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to agreement or applicable law.

     I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”). I also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply to any rights or claims that arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release; (c) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the date I sign this Release to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth day after I sign this Release (“Effective Date”). Nevertheless, my general release of claims, except for the ADEA Waiver, is effective immediately, and not revocable.

1.

     I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder.

I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than twenty-one (21) days following the date it is provided to me.

Employee

Name:

Date:

2.

Exhibit B

RELEASE
(Individual and Group Termination, under age 40)

     I understand and agree completely to the terms set forth in the PetSmart, Inc. Amended and Restated Executive Change in Control and Severance Benefit Plan (the “Plan”). I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Plan.

          I hereby confirm my obligations under the Company’s Confidentiality Agreement and Non-Compete Agreement.

     Except as otherwise set forth in this Release, I hereby generally and completely release PetSmart, Inc. and its current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Agreement. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), and the federal Americans with Disabilities Act of 1990; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to agreement or applicable law.

     I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder.

1.

I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than fourteen (14) days following the date it is provided to me.

Employee

Name:

Date:

2.

Exhibit C

RELEASE
(Group Termination, age 40 and older)

     I understand and agree completely to the terms set forth in the PetSmart, Inc. Amended and Restated Executive Change in Control and Severance Benefit Plan (the “Plan”). I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Plan.

          I hereby confirm my obligations under the Company’s Confidentiality Agreement and Non-Compete Agreement.

     Except as otherwise set forth in this Release, I hereby generally and completely release PetSmart, Inc. and its current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Agreement. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, and the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”); provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to agreement or applicable law.

     I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”). I also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply to any rights or claims that arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release; (c) I have forty-five (45) days to consider this Release (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the date I sign this Release to revoke the ADEA Waiver; and (e) the ADEA Waiver will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth day after I sign this Release (“Effective Date”). Nevertheless, my general release of claims, except for the ADEA Waiver, is effective immediately, and not revocable.

1.

     I have received with this Release all of the information required by the ADEA, including without limitation a detailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of all employees of the Company in the same job classification or organizational unit who were not terminated, along with information on the eligibility factors used to select employees for the group termination and any time limits applicable to this group termination program.

     I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder.

     I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than forty-five (45) days following the date it is provided to me.

Employee

Name:

Date:

2.

EX-15.1

EXHIBIT 15.1

November 26, 2008

PetSmart, Inc.
19601 North 27th Avenue
Phoenix, Arizona 85027

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of PetSmart, Inc. and subsidiaries for the thirteen week and thirty-nine week periods ended November 2, 2008 and October 28, 2007, as indicated in our report dated November 26, 2008; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended November 2, 2008, is incorporated by reference in Registration Statement Nos. 33-66738, 33-86946, 33-92878, 33-95050, 33-98170, 333-01632, 333-15655, 333-29431, 333-52417, 333-58605, 333-62828, 333-92160, 333-108160, and 333-135651 on Form S-8.

We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Philip L. Francis, certify that:

1.	I have reviewed this report on Form 10-Q of PetSmart, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 26, 2008

/s/ Philip L. Francis Philip L. Francis
Chairman of the Board of Directors and Chief
Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Lawrence P. Molloy, certify that:

1.	I have reviewed this report on Form 10-Q of PetSmart, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 26, 2008

/s/ Lawrence P. Molloy Lawrence P. Molloy
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

In connection with the Quarterly Report of PetSmart, Inc. (the “Company”) on Form 10-Q for the period ended November 2, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip L. Francis, the Chairman of the Board of Directors and Chief Executive Officer of the Company, certify, pursuant to the requirement set forth in Rule 13a-14(b) of the Securities and Exchange Act of 1934, as amended and 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 26, 2008

/s/ Philip L. Francis Philip L. Francis

Chairman of the Board of Directors and Chief Executive Officer

A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), has been provided to PetSmart, Inc. and will be retained by PetSmart, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of PetSmart, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

     In connection with the Quarterly Report of PetSmart, Inc. (the “Company”) on Form 10-Q for the period ended November 2, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lawrence P. Molloy, the Senior Vice President, and Chief Financial Officer of the Company, certify, pursuant to the requirement set forth in Rule 13a-14(b) of the Securities and Exchange Act of 1934, as amended and 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 26, 2008

/s/ Lawrence P. Molloy Lawrence P. Molloy
Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), has been provided to PetSmart, Inc. and will be retained by PetSmart, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of PetSmart, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.