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PetMed Express Inc. Reports Operating Results (10-Q)

October 31, 2012 | About:
10qk

10qk

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PetMed Express Inc. (PETS) filed Quarterly Report for the period ended 2012-09-30.

Petmed Express, Inc. has a market cap of $219.5 million; its shares were traded at around $10.86 with a P/E ratio of 13.6 and P/S ratio of 0.9. The dividend yield of Petmed Express, Inc. stocks is 5.6%. Petmed Express, Inc. had an annual average earning growth of 28.2% over the past 10 years. GuruFocus rated Petmed Express, Inc. the business predictability rank of 3-star.

Highlight of Business Operations:

The Company markets its products through national television, online, and direct mail/print advertising campaigns which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.1800petmeds.com, acquire new customers, and maximize repeat purchases. Approximately 77% of all sales were generated via the Internet for the quarter ended September 30, 2012, compared to 74% for the quarter ended September 30, 2011. The Company s sales consist of products sold mainly to retail consumers. The three-month average purchase was approximately $72 and $76 per order for the quarters ended September 30, 2012 and 2011, respectively, and the six-month average purchase was approximately $73 and $78 per order for the period ended September 30, 2012 and 2011, respectively.

Sales were $58.1 million for the quarter ended September 30, 2012, slightly down from approximately $58.2 million for the quarter ended September 30, 2011. For the six months ended September 30, 2012, sales decreased by approximately $4.7 million, or 3.6%, to approximately $127.1 million compared to $131.8 million for the six months ended September 30, 2011. For both the three and six months ended September 30, 2012, sales were negatively impacted because of the unavailability of Novartis brands during the period due to the manufacturer s suspended production. Our sales for both periods were also down because of a decline in average order size which was due to additional discounts given, a change in product mix to lower priced items, mainly generics, and increased competition, and for the six months due to customers purchasing smaller quantities, such as a 3-month supply instead of 6 months. The Company acquired approximately 177,000 new customers for the quarter ended September 30, 2012, compared to approximately 184,000 new customers for the same period the prior year. For the six months ended September 30, 2012 the Company acquired approximately 374,000 new customers, compared to 410,000 new customers for the six months ended September 30, 2011. The following chart illustrates sales by various sales classifications:

Cost of sales increased by approximately $484,000, or 1.3%, to approximately $38.8 million for the quarter ended September 30, 2012, from approximately $38.3 million for the quarter ended September 30, 2011. For the six months ended September 30, 2012, cost of sales decreased by approximately $2.4 million, or 2.7%, to approximately $85.4 million compared to $87.8 million for the same period in the prior year. The increase to cost of sales for the quarter ended September 30, 2012 can be related to increased shipping costs in the period, compared to the same period in the prior year, and the decrease to cost of sales for the six months ended September 30, 2012 is directly related to decreased sales. Cost of sales as a percent of sales was 66.7% and 65.8% for the quarters ended September 30, 2012 and 2011, respectively, and for the six months ended September 30, 2012 and 2011 the cost of sales was 67.2% and 66.6%, respectively. The percentage increases can be mainly attributed to an increase to shipping expenses.

Gross profit decreased by approximately $564,000, or 2.8%, to approximately $19.4 million for the quarter ended September 30, 2012, from approximately $19.9 million for the quarter ended September 30, 2011. For the six months ended September 30, 2012 gross profit decreased by approximately $2.3 million, or 5.4%, to approximately $41.7 million, compared to $44.0 million for the same period in the prior year. Gross profit as a percentage of sales was 33.3% and 34.2% for the three months ended September 30, 2012 and 2011, respectively, and for the six months ended September 30, 2012 and 2011, gross profit was 32.8% and 33.4%, respectively. The percentage decreases can be mainly attributed to an increase to shipping expenses.

Advertising expenses decreased by approximately $480,000, or 6.1%, to approximately $7.4 million for the quarter ended September 30, 2012, from approximately $7.9 million for the quarter ended September 30, 2011. For the six months ended September 30, 2012, advertising expenses decreased by approximately $730,000, or 4.1%, to approximately $17.3 million compared to advertising expenses of approximately $18.0 million for the six months ended September 30, 2011. The decrease in advertising expenses for the three and six months ended September 30, 2012 can be attributed to reduced advertising due to the unavailability of television remnant space inventory. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, decreased to $42 for the quarter ended September 30, 2012, compared to $43 for the quarter ended September 30, 2011. For the six months ended September 30, 2012 the advertising costs of acquiring a new customer increased to $46, compared to $44 for the same period in the prior year. Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, increased advertising spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future new order sales, whereas a less favorable advertising environment may negatively impact future new order sales.

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