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Why PetMed Express Stock Just Dropped 10%

Rich Smith, The Motley Fool

What happened

PetMed Express (NASDAQ: PETS) stock is looking sick as a dog this morning, with shares of the online pet pharmacy down 10.2% as of noon EST after the report of fiscal Q3 2018 earnings results that fell short of expectations.

Sales for Q3 came in flat against last year at $60.1 million. (Analysts were expecting $64.3 million.) Purr-ofits of $0.38 likewise fell short of the mark. (Analysts wanted to see $0.48.)

Terrier pup with a hot water bottle on its head and a thermometer in its mouth

Image source: Getty Images.

So what

Sales held firm year over year, yet PetMed said its profits declined 14%, a fact CEO Menderes Akdag blamed on a "much more competitive" market that forced PetMed to give customers "additional discounts ... to stimulate sales" -- but in which those discounts did not, in fact, result in additional sales.

Now what

Arguably worse, PetMed's CEO indicated that the company will have to "continue to be aggressive with pricing and promotions" to maintain market share, and even "increase advertising to address this more competitive online market." That means that profits, down already in Q3, probably won't be recovering anytime soon.

Conclusion: Analysts who were predicting PetMed would grow its earnings 12% in Q4 are bound to be disappointed.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.