PetMed's sales fall but profit margins expand on rising demand for pricier products

PetMed Express ($PETS) announced Tuesday that sales in its third fiscal quarter, ended Dec. 31, fell 1.6% to $49.3 million from the same period a year ago, while net income rose 5.6% to $4.8 million, or 24 cents per share. The Florida-based company, known to consumers as 1-800-PetMeds, declared a quarterly dividend of 17 cents.

The results surpassed the expectations of analysts, who had predicted $48.8 million in sales and a per-share profit of 21 cents, according to Zacks Investment Research. Investors--who had pushed the company's stock down 7% in the last year--were pleased with the results, nudging shares up almost 1% in pre-market trading to $14.17.

PetMed CEO Menderes Akdag said in an earnings release from the company that gross profit margins increased by 98 basis points during the quarter, thanks to a growth in the average order size--to $76 from $72 in the same period a year ago. The company also reduced its advertising expenses, he said.

Akdag raised more than a few eyebrows on Wall Street on October 20, when he told investors his company missed second-quarter sales and earnings targets largely because last winter's frigid temperatures dampened the demand for over-the-counter topical flea-and-tick fighters. But some analysts worried that the real culprit was that those products were losing ground to newer, more convenient chewable anti-parasitics such as Merck's ($MRK) long-lasting Bravecto.

For the nine months ended Dec. 31, PetMed's revenues fell nearly 3% to $179.4 million. Akdag admits he has his work cut out for him. "For the remainder of fiscal 2015 we are focusing on improving our marketing efforts to increase sales," he said in the earnings release.

- here's the earnings release
- read more at the Associated Press

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