PetMed Express Inc. (NASDAQ: PETS) reported a 38% dip in earnings for the second quarter of 2020 due to lower sales and an increase in online competition. The results missed analysts’ expectations.
Net income plunged by 38% to $6.7 million or $0.33 per share. Net sales decreased by 2% to $69.9 million. However, reorder sales rose by 1.4% to $61.9 million.
In fiscal 2020, the company will continue to be price competitive and will focus on optimizing its marketing in this more competitive environment and being more efficient with advertising spending. Also, PetMed will be investing in its e-commerce platform to better serve its customers.
The company’s board of directors declared a quarterly dividend of $0.27 per share on its common stock. The dividend will be payable on November 15, 2019, to shareholders of record at the close of business on November 4, 2019.
For the second quarter, the company’s gross margins improved by 130 basis points to 28.6% from 27.3% last quarter. The growth is attributed to success in obtaining direct purchasing relationships with the major manufacturers and the implementation of the minimum advertised price (MAP) policy by some of the major manufacturers.
The company anticipates MAP pricing to stabilize pet medication prices throughout the online channel. PetMed made further progress in October, and now has direct relationships with all of the major manufacturers, which may help further improve its gross margins in the future.
The results were hurt by stiff competition from Chewy (NASDAQ: CHWY). PetMed is recovering from the margins dip that it experienced previously. The stock has recovered by over 19% in the past three months after falling over 47% in the past two years and over 30% in the past year.