PetMed Express Inc. Earnings: Shrinking Margins for Fifth Consecutive Quarter, Net Income Falls

The Cheat Sheet

Rising costs hurt PetMed Express Inc.

in the third quarter as profit dropped from a year earlier. PetMed Express is a nationwide pet pharmacy. The company markets prescription and non-prescription pet medications and other health products for dogs, cats, and horses direct to the consumer.

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PetMed Express Earnings Cheat Sheet for the Third Quarter .

Results: Net income for PetMed Express Inc. fell to $3.9 million (19 cents per share) vs. $4.5 million (20 cents per share) a year earlier. This is a decline of 13.8% from the year earlier quarter.

Revenue: Rose 12% to $50.5 million from the year earlier quarter.

Actual vs. Wall St. Expectations: PETS beat the mean analyst estimate of 16 cents per share. It beat the average revenue estimate of $44.8 million.

Quoting Management: Menderes Akdag, President and CEO, commented: “We are pleased to report that we acquired 150,000 new customers in the quarter ended December 31, 2011, compared to 111,000 new customers acquired for the same period in the prior year, a 35% increase. Our advertising cost to acquire a new customer decreased by 11% to $36 for the quarter ended December 31, 2011, compared to $40 for the same period in the prior year. ”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 3.6 percentage points to 34% from the year earlier quarter. Over that time, margins have contracted on average 3.3 percentage points per quarter on a year-over-year basis.

A year-over-year revenue increase last quarter snaps a streak of two consecutive quarters of revenue declines. Revenue fell 4.9% in the second quarter and fell 1.1% in the first quarter.

The company has now beaten estimates the last two quarters. In the second quarter, it topped expectations with net income of 19 cents versus a mean estimate of net income of 14 cents per share.

Net income has dropped 23.7% year over year on average across the last five quarters. Performance was hurt by a 33.1% decline in the first quarter from the year earlier quarter.

Looking Forward: Analysts have a more positive outlook about the company’s results for next quarter. The average estimate for fourth quarter is 18 cents per share, an increase from 17 cents sixty days ago. Over the past three months, the average estimate for the fiscal year has climbed from 69 cents per to share to 75 cents.

Competitors to Watch: Rite Aid Corporation , Walgreen Company , drugstore.com, inc. , China Nepstar Chain Drugstore Ltd. , Graymark Healthcare Inc , CVS Caremark Corporation , PetSmart, Inc , Wal-Mart and Target .

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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