PetMed marketing overhaul pays off as orders continue to rise in Q3

Shares of PetMed Express ($PETS) were up 5 cents in premarket trading Monday to $18.75, as the Florida company announced that its ongoing efforts to cut costs and attract customers to high-margin products paid off in its third fiscal quarter. The company said that its net sales grew 3.3% year over year to $49.3 million and its net income rose 1.9% to $4.9 million, or $0.24 per share. Earnings were in line with expectations while revenues came in slightly better than expected, according to Capital IQ.

PetMed CEO Menderes Akdag said in a press release announcing the results that the company's average order size during the quarter increased to $78, from $76 in the same period a year ago. New orders and reorders were both up, 6.8% and 2.8% respectively.

Despite the company's long-standing consumer identity as 1-800-PetMeds, it seems to be successfully transitioning its customers to more efficient sales channels--particularly the Internet. Online sales jumped 5.4% to $41.5 million, boosting the proportion of transactions made through the company's website from 80% to 81%. "We were also encouraged with our advertising efficiency, as our new customer acquisition costs were reduced to $41 for the quarter ended December 31, 2015, compared to $45 for the same quarter in the prior year," Akdag said in the release.

PetMed vowed over a year ago to completely change its marketing approach. It cut back on TV ads and doubled down on database marketing, which helped it reduce its marketing spend by 20% going into its 2015 fiscal year. That has helped it weather revenue fluctuations over the past year.

Investors have made their high hopes for PetMed's continued turnaround clear on Wall Street. Shares of the company, which opened January 19 at $16.25, hit a one-year high of $18.74 in anticipation of the earnings release.

PetMed also announced that on January 19 it completed a purchase of a 14.6-acre facility in Delray Beach, CA. The company plans to move there later in the year, locating its corporate headquarters and a distribution center in the 185,000-square-foot facility.

- here's PetMed's earnings release

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