Strong Q4 For PetMed (PETS), New Order & Reorder Sales Gain

On May 13, 2016, we issued an updated research report on PetMed Express (NASDAQ:PETS) . PetMed exhibited better-than-expected fourth-quarter fiscal 2016 performance, exceeding the Zacks Consensus Estimate on both lines. This nationwide pet pharmacy presently flaunts a Zacks Rank #1 (Strong Buy).

After several quarters of drag in new order sales, we are impressed with PetMed’s improved performance in the last two quarters. In the fourth quarter, new order sales increased by 24% to $9.4 million. In addition, reorder sales continue to show consistent growth, witnessing an 8.4% rise in the quarter to $46 million.

Further, average order size improved to $83 from $81 in the year-ago period on the back of a change in product mix to higher priced items and increased doses. The company is also working on issues like limited consumer spending and a change in product mix to lower priced items, mainly generics. The company is asking veterinarians to prescribe additional brands.

Although we are encouraged by PetMed’s efforts to revive the top line, barring the last two quarters, new order sales have been persistently sluggish over the last few quarters, hit by a reduction in advertising. Although the company is optimistic about the latest increase, the primary reason behind this is the unusually warm climate experienced last December compared to other years, which boosted sales. Hence, sustainability of this growth remains a concern.

Meanwhile, the company continues to face pressure in the competitive and fragmented pet medications market.

Key Picks from the Sector

Medical stocks such as Masimo Corporation (NASDAQ:MASI) , Edwards Lifesciences Corp. (NYSE:EW) and SurModics, Inc. (NASDAQ:SRDX) , all with a Zacks Rank #1, are expected to do well over the short term.

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