America's largest pet pharmacy,
) is off to a solid start in fiscal 2014. The company reported
earnings per share of 24 cents in the first quarter, 2 cents
ahead of the Zacks Consensus Estimate and up 22% year over
Net sales in the quarter were up 7.6% year over year to $74.2
million and surpassed the Zacks Consensus Estimate of $69
million. The improvement was on the back of strong new order and
reorder sales for the reported quarter. Average order size
increased to $77 in the quarter from $73 in the year-ago period.
This was mainly the result of a favorable reaction to
During the reported quarter, PetMed acquired 207,000 new
customers versus 197,000 in the first quarter of 2012.
Additionally, the company's online sales were up 11% year over
year to $58.4, with 79% of orders generated from website (77% in
the prior year quarter).
Gross margin remained flat year over year at 32.4% during the
quarter as the company used the gains from generics shift in
order to discount some of the major brands. A 1% drop in general
and administrative expenses (to $5.9 million) and a 5.5% increase
in advertising expenses (to $5.6 million) as well as a 4.8% drop
in general and administrative expenses (to $10.4 million) led to
a 3.1% increase in operating expenses (without depreciation) to
$16.3 million. In spite of that, adjusted operating margin
improved 97 bps to 10.4%.
PetMed exited the first quarter of fiscal 2014 with cash and
cash equivalents and short-term investments of $50.5 million
compared with $33.6 million at the end of fiscal 2013.
After quarters of drag in sales, we are encouraged with the
company's solid first-quarter fiscal 2014 performance. Throughout
the last fiscal, the sales were adversely affected by the
unavailability of branded products from
) due to the suspension of its production.
However, 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
Health Net, Inc.
). Both the stocks carry a Zacks Rank #1 (Strong Buy).
HEALTH NET INC (HNT): Free Stock Analysis
NOVARTIS AG-ADR (NVS): Free Stock Analysis
PETMED EXPRESS (PETS): Free Stock Analysis
WELLPOINT INC (WLP): Free Stock Analysis
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