PetMed’s last hope is lowering costs by fixing direct relationships with manufacturers. However, the company has been struggling to hook accord under its hoods as stiff competition continues to steal away the clients. Also, the competition is expected to increase the spending on online advertising that the company expects to be more efficient.
For shrinking costs, the company could cut down dividends due to weakness in the pricing and volumes. The current dividend payout ratio stood at 72.97% with the forward annual dividend yield at 5.80%. Investors believe that a dividend cut could be the first step to dividend withdrawal in the future.
Analysts expect the company’s earnings to plunge by 50% to $0.26 per share and revenue will decline by 2.5% to $69.65 million for the second quarter. The company has missed analysts’ expectations thrice in the past four quarters.
For the first quarter, PetMed Express reported a 58% dip in earnings due to higher online competition and aggressive pricing in the market. Net sales decreased by 8.5% year-over-year. The company’s average order value declined by 4% to $86 in the previous-year quarter.
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 its advertising spending.