PetMed Express (NASDAQ: PETS) is set to release its earnings results for the first quarter of 2020 on Monday before the market opens. Sales could be adversely affected by higher competition and consumers giving more considerations to price. The majority of product sales are impacted by the seasons due to the seasonality of mainly flea, tick, and heartworm medications.
The pet industry is experiencing significant and sustainable growth. The animal health industry is more attractive due to superior growth, less regulation, cheaper R&D projects and lack of third-party payers. PetMed Express generates revenue by selling pet medication products and pet supplies.
Gross profit could fall due to increases in discounts given to customers to stimulate sales in response to increased online competition and a rise in product costs. The intention to stimulate sales and promote brand awareness could drive advertising expenses higher for the first quarter.
Analysts expect the company’s earnings to plunge by 25.80% to $0.46 per share and revenue will decline by 1.70% to $85.92 million for the first quarter. In comparison, during the previous year quarter, PetMed posted a profit of $0.62 per share on revenue of $87.39 million. The company had missed analysts’ expectations thrice in the past four quarters.
For the fourth quarter, the company reported a 35% dip in earnings due to . Net sales decreased by 4.1% year-over-year due to the negative effect from the more competitive online pet medication market.
In fiscal 2020, the company plans to continue to be price competitive, and to increase advertising to promote brand awareness and reinforce brand loyalty to address this more competitive online market. In addition, PetMed will be investing in its e-commerce platform.
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The company attracted about 30 million visitors to its website during fiscal 2019, about 10% of those visitors placed an order, and its website generated about 85% of its total sales for the same time period. As part of multichannel strategy, PetMed also offers mobile versions of its website and an application for mobile phones, tablets, and other devices.
Pet spending in the US increased 4.4% to $72.6 billion in 2018, according to the American Pet Products Manufacturers Association. Pet supplies and medications represented $18.1 billion, or 25% of the total spending on pets in the US. The pet medication market is estimated to be about $5 billion, with veterinarians having the majority of the market share. The dog and cat population is about 184 million, with about 68% of all households having a pet.