• Net Sales: $53 million, a 19% decline from $65.3 million last year.
• Gross Profit: $14.9 million, compared to $17.9 million last year.
• Gross Profit Margin: 28.1%, an 80 basis point improvement year-over-year.
• General and Administrative Expenses: $10.8 million, a 19.7% decrease from last year.
• Advertising Expenses: $3 million, down from $5.8 million last year.
• Net Loss: $700,000 or $0.03 per diluted share, improved from a $2 million loss or $0.10 per diluted share last year.
• Adjusted EBITDA: $2 million, up from $900,000 in the prior year period.
• Cash and Cash Equivalents: $50 million with no debt as of December 31, 2024.
• New Customers: Approximately 63,000 new customers with orders shipped during the quarter.
• Average Order Value (AOV): Increased by 7% to $108 from $101 last year.
• Inventory Reduction: 66% reduction in total inventory on hand, totaling $11.8 million at the end of Q3 versus $34.6 million last year.

• Warning! GuruFocus has detected 3 Warning Signs with PETS.

Release Date: February 10, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PetMed Express Inc (NASDAQ:PETS) achieved $2 million in adjusted EBITDA for Q3, marking a $1.1 million improvement year-over-year.
• The company successfully implemented cost-cutting measures and consolidation strategies, targeting $5 million in annualized savings.
• PetMed Express Inc (NASDAQ:PETS) enhanced its digital shopping experience and relaunched its iOS and Android mobile apps, improving customer engagement.
• The company reported a 7% increase in average order value (AOV) to $108, indicating higher spending per customer.
• Inventory efficiency improved significantly, with inventory turn rising to 1.5% in Q3 compared to 0.9% last year, and a 66% reduction in total inventory on hand.

Negative Points

• Net sales for Q3 were $53 million, a 19% decline compared to the same period last year, primarily due to reduced advertising spend.
• The company experienced a decrease in new customer acquisition, with sales and new customer numbers falling short of expectations during the holiday period.
• PetMed Express Inc (NASDAQ:PETS) reported a net loss of $700,000 for the third quarter, although this was an improvement from the previous year.
• The competitive and promotional holiday environment led to a strategic decision to prioritize margin protection over aggressive promotions, impacting sales.
• Despite improvements, the company is still facing challenges in capturing younger demographics, such as millennials and Gen Z, which are crucial for future growth.

Q & A Highlights

Q: Can you clarify the new customer count and its growth rate year-over-year? A: We had 63,000 new customers with shipped orders this quarter. The growth rate wasn't specified, but these are new customers who received orders.

Q: How did the SKU rationalization impact revenue growth? A: The SKU rationalization did not significantly impact revenues. The removed SKUs were underperforming and often drop-shipped, so their removal had minimal effect on sales.

Q: What trends are you seeing in customer behavior, especially regarding price increases in pet prescriptions? A: Customers are pressured, with reduced visits to veterinarians and prescriptions. However, our higher-income customers continue to spend consistently, maintaining compliance with prescriptions.

Q: What are the remaining cost savings opportunities from the PetCareRx transaction? A: We are in Phase II of cost optimization, focusing on technology consolidation. This will continue over the next few quarters to improve expenditure balance.

Q: Given the revenue decline, what strategies are you employing to drive growth? A: We are modernizing our website and marketing to capture younger demographics like millennials and Gen Z. This includes enhancing digital experiences and refining our marketing strategies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.