Mixed Q1 for PetMed, Reorder Sales Gain While New Orders Dip
On Aug 24, 2015, we issued an updated research report on PetMed Express, Inc. PETS. PetMed exhibited a mixed performance in the first quarter of fiscal 2016 with earnings beating the Zacks Consensus Estimate while revenues missed the same. This nationwide pet pharmacy presently carries a Zacks Rank #2 (Buy).
Despite a drag in new order sales, we are impressed with PetMed’s consistent performance with reorder sales. In the reported quarter, reorder sales increased by 1.8% to $59.6 million. Besides, average order size increased to $82 from $78 in the year-ago period on the back of a change in product mix to a higher priced item and increased doses.
The company is also working on issues like limited consumer spending and a change in product mix to lower-priced items, mainly generics. The company is asking veterinarians to prescribe additional brands.
We are also 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.
Meanwhile, the company continues to face competitive pressure in the competitive and fragmented pet medications market. In Jan 2015, Eli Lilly and Company acquired Novartis’ animal health division. The acquisition has thrown more challenges for PetMed in the pet pharmacy industry. The deal has combined two large pet pharmacies, with which Eli Lilly has now moved up to the second position in the animal health market in terms of global revenues, entailing a more competitive landscape for PetMed.
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