PETCO Announces Strategic Partnership With petopia.com to Launch the Premier Online Pet Commerce Site

Business Wire, July 13, 1999

SAN DIEGO--(BUSINESS WIRE)--July 13, 1999--

PETCO Animal Supplies, Inc., (Nasdaq:PETC) one of the nation's largest specialty retailers of premium pet food, supplies and services with 485 stores, today announced a strategic partnership with petopia.com, a comprehensive pet commerce destination on the Internet.

The alliance allows PETCO to extend its high quality brick-and-mortar based pet-care brand. The relationship will provide customers with content, commerce and community via the Internet, while enabling petopia.com to benefit from PETCO's industry leadership position, strong customer base, and supplier relationships. This partnership is the culmination of an extensive investigation of potential partners and Internet platforms by PETCO. The launch of the petopia.com site is scheduled to occur by the end of July.

The investment and alliance agreement is part of petopia.com's total investment arrangements that now exceed $79 million. This funding is to support the development and expansion of the petopia.com site. Other partners in petopia.com's investment arrangement are Groupe Arnault and Technology Crossover Ventures. Groupe Arnault, an affiliate of European consumer products giant LVMH Moet Hennessey Louis Vuitton (LVMH) has invested in e-commerce companies such as Planet Rx, WebVan and Spring Street. Technology Crossover Ventures, a Palo-Alto-based venture capital firm has invested in many e-commerce companies including Ariba, iVillage and Copper Mountain.

PETCO's investment along with its strategic alliance agreement would allow the company to have approximately a 20 percent equity interest in petopia.com, with warrants providing the opportunity for increased ownership. This equity investment is expected to initially have a minimal impact on PETCO's net earnings and is consistent with the company's business strategy to become the leading specialty retailer of pet food, supplies and services.

"This partnership will provide PETCO with e-commerce capabilities almost immediately and at a significantly lower cost than establishing those functions ourselves," said Brian Devine, Chairman, President and Chief Executive Officer of PETCO. "Moreover, based on the expertise of our partners and our ability to leverage PETCO's size and experience in the industry, we expect petopia.com to emerge as one of the leaders in the online pet food and supply market. E-commerce was a logical next step in driving a business strategy designed to build shareholder value."

"This alliance is exciting for us because the site will be a reflection of PETCO's community-based brand, where we not only offer our customers the highest quality products and services in the industry, but also represent an important source of information about their pet's care," Mr. Devine added. "Being able to offer this same experience to customers online reinforces our goal to provide consumers with the best possible pet care products anywhere."

Products and services such as food, healthcare and grooming items will be available through petopia.com. In addition, customers can participate in community forums and access expert advice from leading pet professionals. petopia.com has established relationships with many of the web's premier portals, including America Online and Yahoo.

"With a strategic investment from LVMH and a long-term partnership with PETCO, we are taking the leadership role in the pet commerce market - a very promising market in the e-commerce arena, created in just the past few months," said Andrea Reisman, petopia.com's co-founder and CEO. "We've hired top talent in brand marketing, site development, and pet merchandising, and will use this funding and partnership to realize our vision even faster."

About petopia.com

Launching in July 1999, petopia.com (http://www.petopia.com) aims to be the most comprehensive pet commerce site on the Internet. A spirited on-line destination aimed at pet-lovers, petopia.com provides all things pet-related, from pet food, grooming and healthcare products to community forums and expert advice.

About PETCO

PETCO is a leading specialty retailer of premium pet food and supplies. PETCO operates 485 stores in 38 states and the District of Columbia and had net sales of $840 million in 1998. PETCO stores offer a complete assortment of pet-related products and services. To locate the store nearest you, visit the company's website at www.petco.com.

Certain statements in this news release that are not historical fact constitute "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of PETCO to be materially different from historical results or from any results expressed or implied by such forward-looking statements. These factors are discussed under the caption "Certain Cautionary Statements" in PETCO's Annual Report on Form 10-K for the year ended January 30, 1999.