PetMed Express (PETS 31.87, +3.88, +13.87%), which refers to itself as America's Largest
Pet Pharmacy, trades higher after reporting 2Q19 (Sep) earnings this morning. PETS
sells prescription and non-prescription pet medications and other health
products for dogs and cats at competitive prices direct to the consumer through
its 1-800-PetMeds toll free number and online. PETS markets its products
through national television, online, and direct mail/print advertising
campaigns. Generally, its medication prices are competitive and often lower
than what veterinarians and retailers charge.
PETS distributes and doesn’t manufacture the products. In fact, many major pharmaceutical manufacturers have declined to sell pet medications directly to PETS. They would rather the meds be sold directly by the veterinarian to the consumer, probably to have a trained vet explain the medication. This is probably also because they want to charge more money. As a result, PETS purchases many medications indirectly from secondary sources, including distributors.
Turning to today's SepQ earnings report, EPS rose 21% yr/yr to $0.52. Revenue rose 7.0% yr/yr to $71.4 mln. EPS was slightly above market expectations while revenue was in-line. There was no guidance, as is usually the case. In term of margins, operating margin came in at 18.5%, up slightly from 18.4% in the prior year period.
A metric that is followed with PETS is its reorder sales, which basically means these are returning customers to order more product. Reorder sales increased 11% in SepQ to $61.0 mln. Online sales were approximately 85% of all sales compared to 84% for the same quarter the prior year. Online sales increased 7.4%. Average order value increased to $87 for the quarter compared to $85 for the same quarter the prior year.
In sum, investors are pretty happy with the SepQ results. Last quarter, PETS missed EPS expectations for the first time in five quarters which led to a sell-off in the stock. And the stock has been trending lower in recent months, going from above $45 in late June to close around $28 on Friday. That tells us investors had low expectations heading into this SepQ report. As such, even a modest EPS beat is leading to a nice move in the stock today.
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