PetMed Express, Inc. (PETS): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
PetMed's EPS of $0.25 during the first quarter of fiscal 2015 was $0.01 higher than the year-ago figure but was in line with the Zacks Consensus Estimate. Net sales dropped 2.2% but coincided with the estimate. Although we are encouraged by the company's efforts to revive the top line, lower new order and re-order sales was a drag. Moreover, increasing product costs and discounts pressurized margins. The company continues to face competition which may increase further with the impending acquisition of Novartis' animal health by Eli Lilly. The dearth of any near-term catalyst might make it difficult for PetMed to overcome these challenges. Accordingly, we are Neutral on PetMed.

Overview:

PetMed Express, operating as 1-800-PetMeds, is a leading nationwide pet pharmacy. The company, founded in 1996, is headquartered at Pompano Beach, FL. PetMed Express' product line contains approximately 750 SKUs catering to dogs, cats, and horses. These products include brands of medication such as Frontline Plus, K9 Advantix, Advantage, Heartgard Plus, Sentinel and Interceptor.

The company offers two types of products:

Non-prescription medications (over-the-counter or OTC): These include flea and tick control, bone and joint care, vitamins, nutritional supplements, and hygiene products.

Prescription medications: These include heartworm treatments, thyroid and arthritis medications and antibiotics in addition to other specialty medications as well as generic substitutes.

These two product types accounted for 59% and 40% of total sales in fiscal 2013, respectively, while 1% was derived from shipping and handling fees.

PetMed Express markets its health products directly to consumers through national television, online, and direct mail/print advertising campaigns in order to increase the awareness of the 1-800-PetMeds brand name. These efforts are aimed at increasing traffic to its website, maximizing repeat customers and acquiring new customers. The company has been successful in increasing its sales over the Internet. During the first quarter of fiscal 2015, 80% of the sales were generated through its website compared with 79% in the year-ago period.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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