PetMed Express, Inc. (PETS) reported first-quarter fiscal 2011 EPS of $0.32, way below the Zacks Consensus Estimate of $0.38 and the year-ago quarter’s $0.36. The company witnessed a decline in revenues due to a lack of television remnant space availability at affordable rates.
Moreover, both gross and operating margins declined during the quarter driven by increase in higher product costs and higher advertising cost to acquire a new customer.
Economic uncertainty is taking a toll on the company, forcing consumers to switch to cheaper alternatives. We do no expect the situation to improve significantly in the near future. On account of these factors we have lowered our estimates and downgraded the stock to Underperform.