PetMed: Q2 Revenues Hit; New Orders Dip on Low Advertising
On Jan 13, 2015, we issued an updated research report on PetMed Express, Inc. PETS. PetMed exhibited a mixed performance in the second quarter of fiscal 2016 with earnings beating the Zacks Consensus Estimate while revenues fell in line with the same. This nationwide pet pharmacy presently carries a Zacks Rank #4 (Sell).
PetMed posted disappointing top-line performance primarily on poor new order sales. In fact, over the past few quarters, new order sales have remained sluggish for the company owing to reduced advertising. Although the company is taking various measures to improve its top line, the still sluggish quarterly numbers again proved that the actions undertaken are not enough to nullify the pessimism of the investors.
Meanwhile, the company continues to face pressure in the competitive and fragmented pet medications market. Eli Lilly and Company’s acquisition of Novartis’ animal health division has posed major challenges for PetMed in the pet pharmacy industry.
However, we are impressed with PetMed’s consistent performance with respect to reorder sales. Although reorder sales were flat year over year in the reported quarter, over the last six months, they have shown an improvement. This apart, average order size increased to $80 from $75 in the second quarter of fiscal 2015, on the back of change in product mix to a higher priced item and increased doses.
PetMed 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.
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