PetMed Express Earnings Cheat Sheet: Unhealthy Profits As Stock Sinks Over 10%

PetMed Express, Inc. (NASDAQ:PETS) saw a decrease in net income in the fourth quarter, causing Wall Street to react with a steep drop. 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 Fourth Quarter

Results: Net income for PetMed Express, Inc. fell to $4.1 million (19 cents/share) vs. $6.1 million (26 cents/share) a year earlier. A decline of 31.7% from the year earlier quarter.

Revenue: Rose 1.2% to $50.9 million YoY.

Actual vs. Wall St. Expectations: PETS fell short of the mean analyst estimate of 23 cents/share. Estimates ranged from 21 cents per share to 25 cents per share.

Quoting Management: Menderes Akdag, President and CEO, commented: “It has been a challenging year, which can be attributed to increased customer acquisition costs and decreased new order sales due to increased competition, along with consumers giving greater consideration to price and a softer demand for some of the product categories we offer. To address the decline in sales we implemented a more aggressive pricing strategy combined with increased advertising, while continuing to expand our product offerings into pet supplies. Our cash flows from operations increased to $30.1 million for the year ended March 31, 2011 from $27.7 million for the prior fiscal year. During the quarter we bought back approximately 465,000 shares of our common stock for $7.0 million, and for the fiscal year we bought back approximately 791,000 shares of our common stock for $12.2 million. During the fiscal year, we increased our quarterly dividends to $0.125 per share, an increase of 25% from the prior year.”

Key Stats: Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 5.6 percentage points to 34.3% from the year earlier quarter. Over that time, margins have contracted on average two percentage points per quarter on a year-over-year basis.

A year-over-year revenue increase last quarter snaps a streak of three consecutive quarters of revenue declines. Revenue fell 6.7% in the third quarter, 1.9% in the second quarter and 3.6% in the first quarter.

Net income has dropped 14.9% year over year on average across the last five quarters. Performance was hurt by a 31.7% decline in the most recent quarter from the year earlier quarter.

Competitors to Watch: Rite Aid Corporation (NYSE:RAD), Walgreen Company (NYSE:WAG), drugstore.com, inc. (NASDAQ:DSCM), China Nepstar Chain Drugstore Ltd. (NYSE:NPD), Graymark Healthcare Inc (NASDAQ:GRMH), PetSmart (NASDAQ:PETM) and CVS Caremark Corporation (NYSE:CVS).

Stock Performance: Shares closed down 10.8% to $13.13 per share from a previous close of $14.72.


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