PetMed Express, Inc. PET, a leading pet pharmacy in the Americas, announced earnings per share (EPS) of 32 cents in the first quarter of fiscal 2017, up 10.3% from the year-ago quarter. Earnings also sailed past the Zacks Consensus Estimate of 30 cents.
PETMED EXPRESS Price, Consensus and EPS Surprise
PETMED EXPRESS Price, Consensus and EPS Surprise | PETMED EXPRESS Quote
Net sales in the reported quarter, although improved 1.2% year over year to $72.5 million, it remained below the Zacks Consensus Estimate of $72.9 million. According to the company, the improvement was driven by a solid increase in new order sales, offset by sluggish reorder sales in the quarter.
In the reported quarter, reorder sales declined 0.7% year over year to $59.2 million, while new order sales increased 10% to $13.3 million.
Average order was approximately $82 for the quarter, at par with the year-ago quarter. We have noted that, variation in average order value takes place mainly due to a change in product mix to higher priced items and increased doses.
According to the company, the seasonality in the business is due to the proportion of flea, tick and heartworm medications in the product mix. This is because spring and summer are considered peak seasons in this regard as while fall and winter represent off-seasons.
During the quarter under review, PetMed acquired 158,000 new customers, up from 148,000 in the first quarter of fiscal 2016. Roughly 82% of all orders were generated from its website (versus 81% in the prior-year quarter).
Gross margin contracted 109 basis points (bps) year over year to 30.9% in the reported quarter. General and administrative expenses were up 5.2% year over year at $6.1 million, while there was 26.9% decline in advertising expenses to $5.8 million. This led to a 13.3% reduction in adjusted operating expenses (without depreciation expense), which amounted to $11.9 million. Despite the fall, adjusted operating margin in the quarter contracted 140 bps to 22.6%.
PetMed exited the first quarter of fiscal 2017 with cash and cash equivalents of $44.3 million compared with $37.6 million in fiscal 2016. The company also declared a quarterly dividend of 19 cents per share, payable to its shareholders on Aug 19, 2016.
Our Take
PetMed exhibited a better-than-expected earnings performance in its first quarter of fiscal 2017, while revenues remained below the Zacks Consensus Estimate. We note that, after continued drag in new order sales, the last three quarters saw a rebound in the number primarily on the back of more aggressive pricing. However, the re-order sales still remain sluggish acting as a major cause of worry.
We are, also apprehensive about the pressure on margins despite the company’s ongoing cost-reduction initiatives. Furthermore, lesser advertising raises concerns.
The company is presently trying to implement several strategies to revitalize its top line. These include focusing on advertising efficiency to improve new order sales and shifting sales to higher margin items, while also expanding product offerings.
PetMed currently offers a wide range of products catering to dogs, cats and horses, and is working persistently on upgrading its existing portfolio. The stock presently sports a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some of the top-ranked stocks in the broader Medical sector are Boston Scientific Corp. BSX, EVINE Live Inc. EVLV and Stamps.com Inc. STMP. All the three stocks carry a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment