There wasn't much excitement the last time PetMed Express, Inc. (NASDAQ:PETS) reported its quarterly earnings results, in May. Revenue fell by 4.1% year over year while earnings dropped 35% from the prior-year period.

Investors learned how PetMed performed in the first quarter with the company providing an update on Monday before the market opened. Yet again, the company didn't give investors much to be excited about. Here's what you need to know about PetMed's first-quarter results.

A dog licking lips while looking at spoon full of pills

Image source: Getty Images.

By the numbers

PetMed Express reported revenue in the first quarter of $80 million. This reflected a decline of 8.5% from the prior-year period revenue total of $87.4 million. It was also well below the consensus Wall Street analysts' Q1 revenue estimate of $85.92 million.

The company's net income reported under generally accepted accounting principles (GAAP) was $5.3 million, or $$0.26 per share. This was a significant deterioration from PetMed's result in the prior-year period when the company announced GAAP net income of $12.6 million, or $0.62 per share. Wall Street analysts predicted net income would come in at $0.46 per share.

PetMed ended the first quarter with cash and cash equivalents of $83.4 million. This was a decrease from the $100.5 million on hand as of March 31, 2019.

Behind the numbers

Why did PetMed's revenue decline yet again? CEO Menderes Akdag said sales fell because of "increased online competition and aggressive pricing in the market" that forced the company to reduce its prices. The average order value from its customers dropped from $90 in the prior-year period to $86 in the first quarter. 

PetMed's bottom line worsened even more than its revenue for a couple of reasons. First, the company's cost of sales increased from the prior-year period, causing significantly lower gross profit. Second, PetMed's spending increased. Operational expenses rose to $15.7 million in Q1 compared to $14.2 million in the same quarter of 2018.

The company's earnings per share (EPS) decline would have been even greater. However, PetMed bought back around 613,000 shares of its common stock during the first quarter for $11.5 million.

Looking ahead

Investors have to be wondering when PetMed Express might turn things around. Akdag provided some reason for optimism that the company's gross margins could improve. He noted that PetMed has made progress on its initiative of establishing direct purchase relationships with major manufacturers, a move that could lead to higher gross margins.

Akdag acknowledged that the increased competition on price isn't likely to go away. However, he stated that PetMed will be competitive on price and plans to focus on optimizing its marketing and increasing the efficiency of its advertising spending. The company is also investing to enhance its e-commerce platform, an initiative Akdag thinks will enable PetMed to better service its customers and boost its net promoter score, which is already at a relatively high level of 83%.

There's also at least a little murkiness surrounding PetMed's dividend. The company declared a dividend of $0.27 per share that's payable on Aug. 9, 2019, to shareholders of record at the close of business on Aug. 2, 2019. But while the company stated that it intends to keep the quarterly dividends coming, the dividend program "will be subject to a determination by the Board of Directors each quarter following its review of the company's financial performance."

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