PetMed Q2 Margins Hit By Lower Sales, Higher Costs

PetMed Q2 Margins Hit By Lower Sales, Higher Costs
  • PetMed Express Inc PETS reported a Q2 EPS of $0.31, missing the consensus of $0.34 and lower than $0.42 posted a year ago.
  • Net sales were $67.4 million, down 10.7% Y/Y and far below the consensus of $72.45 million.
  • Since some pet owners purchased medications directly from their vets during their visit, PetMed believes that this negatively impacted sales, especially reorder sales during the quarter.
  • "The decrease in sales was due to reductions in both new order and reorder sales. Our sales were negatively impacted by a much more competitive market and credit advertising space with substantially higher costs than the same quarter last year," said Bruce S. Rosenbloomm, CFO, in the Q2 earnings conference call.
  • Reorder sales decreased by 8.5% to $62 million. New order sales fell to $5.4 million.
  • PetMed acquired approximately 65,000 new customers in Q2 compared to 96,000 for the same period the prior year. 
  • The gross margin contracted from 30.5% to 28.5%. Overall operating margin declined from 13.9% to 12.0%.
  • The Board of Directors declared a quarterly dividend of $0.30 per share, payable on November 19 for the record date of November 8.
  • Outlook: PetMed expects to see more robust reorder sales in the back half of FY 2022, as it anticipates more prescriptions being renewed.
  • The company expects an opportunity to improve gross margins in 2H of FY22 if the shift to prescription medications continues.
  • Price Action: PETS shares closed higher by 3.44% at $27.98 on Monday.

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