On Jan 22, 2015, we issued an updated research report on PetMed Express (PETS). PetMed posted a mixed fiscal third quarter with earnings missing the Zacks Consensus Estimate but revenues beating the mark. This nationwide pet pharmacy presently carries a Zacks Rank #1 (Strong Buy).
PetMed’s earnings per share (EPS) of 24 cents in the third quarter of fiscal 2015 were up 4.3% year over year. However, EPS fell short of the Zacks Consensus Estimate by a penny. Net sales dropped 1.6% to $49.3 million but exceeded the benchmark of $49 million.
Although we are encouraged by the company’s efforts to revive the topline, lower new order and re-order sales were a drag. However, we are impressed by the fact that PetMed is striving to expand its portfolio to drive the top line. The strategies undertaken include focus on advertising efficiency to improve new order sales and shifting sales to higher margin items.
We are also encouraged by the fact that after a series of disappointing quarterly operating margin numbers, the company showed a turnaround in the reported quarter. This was mainly because of the company’s ongoing cost reduction initiatives.
Meanwhile, the company continues to face competitive pressure in the competitive and fragmented pet medications market. We expect the impending acquisition of Novartis’ animal health division by Eli Lilly to create market concentration in the entire economy, leading to an anti-competitive landscape for PetMed.
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