PetMed Express Inc. (NASDAQ: PETS) is slated to report its third-quarter 2020 earnings results on Tuesday, January 21, before the market opens. The pet pharmacy operator’s results are likely to be pressurized by lower prices arising from the stiff competition in the market.
The stock remained on the positive momentum as it has risen over 11% in the past year and over 39% in the past three months. The shares have been trading near the 52-week high of $27.80, which exceeded the 50-day and 200-day moving average of $23.34 and $19.81, respectively.
The company’s top-line will be benefited by the sale of its products through the Internet. Internet sales represented 84% of the total amount in 2018 and 2019. The company’s financial position remained healthy as it had $94.9 million of cash without any debt under its hoods. PetMed has been slowly regaining the top-line growth through e-commerce and the holiday season sales are likely to drive growth.
The company continues to spend more on advertising expenses for surviving in the stiff competition against Chewy (NASDAQ: CHWY). The online advertising expenses are likely to increase for the third quarter that could be offset by the elimination of television advertising. The advertising environment, the effectiveness of advertising creative, spending, and price competition could impact the advertising cost of acquiring a new customer.
Also, the company continues to be hurt by the seasonality of its business that is due to the proportion of flea, tick, and heartworm medications in its product mix. Spring and summer are considered peak season with fall and winter being the offseason.
Analysts expect the company’s earnings to dip by 21.10% to $0.30 per share while revenue will rise by 2.1% to $61.31 million for the third quarter. The company has missed analysts’ expectations thrice in the past four quarters. The market analysts remained neutral on the stock recommendation to the investors as half were recommending a “strong-buy” and rest were at “hold” rating.
For the second quarter, PetMed Express posted a 38% dip in earnings due to lower sales and an increase in online competition. Net sales decreased by 2% year-over-year while reorder sales rose by 1.4%. The results were hurt by stiff competition from Chewy.
The company plans to continue investing in its e-commerce platform to better serve its customers and continue to be price competitive in fiscal 2020. For the year, the company will focus on optimizing its marketing in this more competitive environment and being more efficient with advertising spending.
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