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PetMed Express Earnings Seem Immune to Coronavirus

By Rich Smith - May 5, 2020 at 8:30AM

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But acquiring new customers remains difficult.

The coronavirus pandemic has done a number on a number of American retailers -- but PetMed Express (PETS 0.57%) is not one of them.

As the name implies, PetMed Express is in the business of selling prescription and non-prescription medicine for pets, and by all indications, business is (mostly) booming. The company's fiscal fourth-quarter 2020 earnings results, released Monday morning, showed sales up a big 15% in Q4, with profits up a more modest 9%. 

Veterinarian holding a puppy holding a stethoscope

Image source: Getty Images.

CEO Menderes Akdag confirmed that "due to COVID-19, demand has been strong for the e-commerce channel," which makes up about 85% of PetMeds' total sales, "with consumers shifting their purchases to online." The CEO notes that this "positively impacted our sales." Also helpful was that the company has apparently been lucky enough to avoid "any material disruptions in our supply chain." 

Repeat customers are remaining a loyal and profitable part of PetMed's business during the pandemic. "Reorder sales" of medicines previously bought via the service increased faster than overall sales, rising 17%. "New order sales" grew at a slower 5% rate. Customer growth was similarly slow -- up 6% year over year.

Still, this big difference between "reorder sales" and "new order sales" -- a three-fold difference in growth rates -- is curious. Management did not address the disparity, either in its earnings release or in its follow-up call with analysts. One wonders, however, if the requirement that a customer obtain a veterinarian's prescription -- and therefore visit a veterinarian to get a prescription -- before making a first order from PetMed may be hindering growth on that side of the company's business.

For as long as vet offices remain closed, or operating on restricted schedules during the pandemic, "new order sales" growth may be hard to come by.

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