PetMed boosts bottom line on increased reorders and stepped-up cost cutting

PetMed Express ($PETS) said Monday that its sales in its fiscal fourth quarter rose 3% year over year to $50 million, while its net income minus a one-time charge related to a discontinued project was also up 3%, to $18.5 million, or 92 cents per diluted share. For the year ended March 31, PetMed's sales fell nearly 2% to $229.4 million and its net income dipped slightly to $17.5 million.

The Florida company, which consumers know as 1-800-PetMeds, has been struggling over the past year to control its costs and boost sales of high-priced prescription drugs for pets. The company's stock price, which had hit a 52-week high of $17.50 just last week, has since dropped to $15.82.

PetMed CEO Menderes Akdag said in a press release that the company's operating expenses fell by 300 basis points in the last quarter, which he attributed to a reduction in advertising spending and the company's ability to leverage its general and administrative costs. Furthermore, he said, reorders grew.

PetMed's net income (including one-time charges) of 25 cents per share in the most recent quarter did beat the expectations of analysts polled by Thomson Reuters, who were expecting earnings of 23 cents. The company also boosted its quarter dividend nearly 6% to 18 cents per share.

Last fall, Akdag blamed missed earnings targets on bad weather dampening the demand for over-the-counter products to fight flea and ticks, though analysts worried that those products were falling out of favor to more convenient--and lucrative--chewable products. Akdag reiterated Monday that the company is focused on improving its marketing efforts going forward.

Akdag has consistently declined to elaborate on PetMed's marketing plans, however, often showing reluctance to tip his hand to the competition. During a conference call with analysts after the company's third-quarter release in January, Akdag was asked if the company's profit margins were improving because of an increase in sales of prescription drugs, and if so, whether or not that trend was sustainable.

The CEO replied that the company was putting more emphasis on database marketing and had a new advertising campaign in place. As for PetMed's ability to continue shifting customers to higher-priced items, Akdag was non-committal. "It's going to depend on the sales mix going forward if we can sustain it or not," he said.

- here's the fourth-quarter earnings release
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