U.S. Markets closed

PetMed (PETS) Q1 Earnings Lag Estimates, Reorder Sales Solid

Zacks Equity Research
1 / 2

PetMed (PETS) Q1 Earnings Lag Estimates, Reorder Sales Solid

We are encouraged by growth in PetMed's (PETS) reorder and new order sales in Q1. Increased online sales buoy optimism.

PetMed Express, Inc. PETS announced earnings per share (EPS) of 62 cents for the first quarter of fiscal 2019, up from the year-ago quarter’s 45 cents. However, the bottom line missed the Zacks Consensus Estimate of 64 cents by 3.2%. The year-over-year upside was driven by higher gross profit margin. Further, a tax cut owing to the recent U.S. tax reform provided an impetus.

Net sales in the reported quarter rose 9.7% year over year to $87.4 million. Sales also steered past the consensus estimate of $86.1 million by 1.5%.

According to this leading pet pharmacy in the Americas, the sales upside was a result of increased reorders as well as new orders.

In the reported quarter, reorder sales increased 10.9% to $71.5 million on a year-over-year basis, while new order sales rose 4.6% to $15.9 million.

PetMed Express, Inc. Price, Consensus and EPS Surprise

 

PetMed Express, Inc. Price, Consensus and EPS Surprise | PetMed Express, Inc. Quote

Average order value was approximately $90 in the quarter compared with $87 in the year-earlier quarter. Per the company, the seasonality in its business is mainly because of the proportion of flea, tick and heartworm medications in the product mix. Spring and summer are considered peak seasons, while fall and winter represent off-seasons.

During the quarter under review, PetMed acquired 69,000 new customers, similar to the year-ago period. Roughly 85% of all orders was generated from its website (compared with 84% a year ago).

Gross margin contracted a marginal 20 basis points (bps) year over year to 34.3% in the quarter under review. The decline was due to additional discounts offered to customers to accelerate sales.

General and administrative expenses rose 11.3% year over year to $6.9 million. Further, advertising expenses increased 6.3% to $6.7 million. Adjusted operating margin (without including depreciation expenses) remained flat at 18.8% with the year-ago quarter level

PetMed exited the fiscal first quarter with cash and cash equivalents of $94.6 million, compared with $77.9 million at the end of fiscal 2018. The company also declared a quarterly dividend of 27 cents per share, payable to shareholders on record as of Aug 3, 2018.

Our Take

PetMed exited the fiscal first quarter on a mixed note. However, we are encouraged by the growth in reorder and new order sales. Further, increase in online sales buoys optimism.

The company is also looking to implement strategies to revitalize its top line. These include increased focus on advertising efficiency to boost new order sales as well as shifting sales to higher margin items while also expanding its product line.

Zacks Rank & Key Picks

PetMed currently carries a Zacks Rank #3 (Hold).  A few better-ranked stocks in the broader medical space are Insulet Corporation PODD, Align Technology, Inc ALGN and Integer Holdings Corporation ITGR.

Insulet Corporation is expected to release second-quarter fiscal 2018 results on Aug 2. The Zacks Consensus Estimate for the quarter's loss per share is pegged at 13 cents and for revenues at $132.9 million. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Integer Holdings is slated to release second-quarter 2018 results on Apr 25. The Zacks Consensus Estimate for EPS is pinned at 90 cents and for revenues at $381.8 million. The stock is a Zacks #1 Ranked player.

Align Technology is expected to release second-quarter 2018 results on Jul 25. The Zacks Consensus Estimate for adjusted EPS is $1.09 and for revenues $469.2 million. The stock carries a Zacks Rank of 1.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


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
 
PetMed Express, Inc. (PETS) : Free Stock Analysis Report
 
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
 
Insulet Corporation (PODD) : Free Stock Analysis Report
 
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.