May 11, 2009 / 3:19 PM / 8 years ago

UPDATE 2-PetMed Q4 profit beats estimates, shares rise

4 IN. DI LETTURA

* Q1 EPS $0.25 vs est $0.23

* Reorders, new orders sales grow

* Advertising spend up 12 pct

* Stock up 14 pct (Adds CEO and analyst comments, details, stock activity)

By Amitha Rajan

BANGALORE, May 11 (Reuters) - PetMed Express Inc (PETS.O) posted a fourth-quarter profit that exceeded analysts' estimates, helped mainly by growth in reorders and new orders and effective cost controls, sending the pet pharmacy's shares up 14 percent.

"We are focusing on efficiency as far as payroll is concerned and that helped us. We are more efficient with payroll, maximizing the capacity of each resource that we have," CEO Mendo Akdag said on a conference call with analysts.

Analyst Edward Woo of Wedbush Morgan Securities said the company also benefitted from their aggressive advertising initiatives and earlier warmer weather.

"Warmer weather increases people's desire to go outside as well as increases flea and tick population, so it causes more consumers to buy the medication earlier," Woo told Reuters.

Advertising spend rose 12 percent to $5.1 million in the fourth quarter.

The company has been faring well over the past few quarters, amid the financial turmoil, despite catering to the needs of pets, which can be difficult to afford in the current environment.

"I think they benefit more from people trying to save money first, people who are buying products not at their vets but online just trying to save some money. They are benefitting from more people doing that than from people just giving up pets," Woo said.

The Pompano Beach, Florida-based company's shares were up $2.12 at $17.51 in morning trade on Nasdaq.

Competition Looms

Despite Monday's performance, Woo was concerned about the competitive pressures the company is likely to face from other online retailers, particularly from Amazon (AMZN.O).

"If you look at the flea and tick medication, which is non-prescription, Amazon is about 30 percent cheaper than PetMed," Woo said, adding that flea and tick medication accounted for a bulk of PetMed's sales.

"Flea and tick is highly competitive, so obviously a lot of retailers have entered the business," PetMed CEO Akdag said on the call.

"We are a one-stop shop for pet medications, prescription and over-the-counter. Flea and tick preventatives are over-the-counter. The vast majority of retailers do not participate in the prescription medication. So that gives us a competitive advantage," Akdag added.

PetMed Express retails pet medications and health products -- prescription and non-prescription -- online through a toll-free number and a website as well as a catalog of items. The company ships its products directly to customers.

For the fourth quarter, the company earned $5.6 million, or 25 cents a share, compared with $4.9 million, or 20 cents a share, a year earlier. Net sales rose 19 percent to $48.1 million.

Analysts were expecting earnings of 23 cents a share, before special items, on revenue of $46 million, according to Reuters Estimates.

Reorder sales in the quarter ended March 31 increased 20 percent, while new order sales rose 16 percent.

The company acquired about 142,000 new customers during the quarter, compared to 126,000 a year ago. (Editing by Deepak Kannan, Jarshad Kakkrakandy)

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