PetMed Express (PETS) reported another disappointing quarter with EPS of $0.20, in line with the Zacks Consensus Estimate although lower than the year-ago quarter’s $0.25. Revenues continued to slide with a decline in new order sales and fewer new customers.
Moreover, both gross and operating margins declined driven by higher product and advertising costs. This is a big blow for the company, as it depends on advertising to increase its customer base. Moreover, 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. We have lowered our estimates for 2012 and reiterate Underperform recommendation.