America's largest pet pharmacy,
) reported earnings of 23 cents per share in the fourth quarter
of fiscal 2013, 2 cents ahead of the Zacks Consensus Estimate and
up 15% year over year. Fiscal 2013 earnings per share were 86
cents, up 7.5% year over year.
Net sales in the quarter were down 8.6% year over year to
$51.1 million, way below the Zacks Consensus Estimate of $55
million. The decline was a result of the negative impact of the
colder-than-normal weather on sales. For the full year, the
company reported $227.8 million in sales, a decline of 4.4%. The
fiscal sales were adversely affected by the unavailability of
branded products from
) due to the suspension of its production. However, the company
noted that the loss from this suspension was to some extent
compensated by certain brands. Moreover, online sales at the end
of the fiscal, occupied 77% of total sales, compared with 75% in
the year-ago period.
Gross margin expanded 176 basis points (bps) to 35.7% during
the quarter on the back of a shift toward higher margin product
mix, including generics. A 19.7% decline in advertising expenses
(to $5.6 million) as well as a 4.8% drop in general and
administrative expenses (to $5.2 million) led to a 13.1%
reduction in operating expenses (without depreciation) to $10.7
million. Consequently, operating margin improved 285 bps to
PetMed exited the fiscal with cash and cash equivalents and
short-term investments of $33.6 million compared with $57.1
million at the end of fiscal 2012.
Although PetMed is still struggling with sales, we are
encouraged with the company's cost reduction initiatives, which
aided margin expansion. PetMed is currently trying to implement
several strategies to revive its top line. These strategies
include focus on advertising efficiency to improve new order
sales and shifting sales to higher margin items, including
generics, while expanding its product offerings. The company
currently offers a wide range of products for dogs, cats, and
horses, and is working on expanding its portfolio. The stock
retains a Zacks Rank #3 (Hold).
Other Stocks to Consider
While we prefer to remain on the sidelines on PetMed, other
medical device stocks worth a look are
). Both the stocks carry a Zacks Rank #1 (Strong Buy).
CONCEPTUS INC (CPTS): Free Stock Analysis
MYRIAD GENETICS (MYGN): Free Stock Analysis
NOVARTIS AG-ADR (NVS): Free Stock Analysis
PETMED EXPRESS (PETS): Free Stock Analysis
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