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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