PetMed Express(US:PETS)2019-07-22 15:21Financial Data and Key Metrics Changes - For Q1 2019, sales were $80 million, a decrease of 8.5% from $87.4 million in Q1 2018, attributed to declines in new order and reorder sales [8][9] - Net income for the quarter was $5.3 million or $0.26 diluted per share, down 57% from $12.6 million or $0.62 diluted per share in the same quarter last year [9][10] - Gross profit as a percentage of sales was 27.3%, down from 34.3% year-over-year, primarily due to price reductions in response to increased competition [12] Business Line Data and Key Metrics Changes - New order sales decreased by 23% to $12.2 million compared to $15.9 million in the prior year [10] - Reorder sales decreased by 5% to $67.7 million from $71.5 million year-over-year [10] - The average order value was approximately $86, down from $90 in the same quarter last year, reflecting price reductions [9] Market Data and Key Metrics Changes - Approximately 84% of sales were generated online, slightly down from 85% in the previous year [11] - The company acquired approximately 140,000 new customers in Q1 2019, compared to 169,000 in the same period last year [11] Company Strategy and Development Direction - The company plans to invest $5 million in its e-commerce platform to enhance user experience and competitiveness, with a target launch by late November or early December 2019 [23][50] - The company aims to establish direct relationships with all major manufacturers, expecting to complete this by the end of 2019 [21][40] - The focus will be on optimizing marketing strategies and improving advertising efficiency in a competitive environment [50] Management's Comments on Operating Environment and Future Outlook - Management indicated that gross margins may have bottomed out and expect pricing to stabilize due to manufacturers implementing minimum advertised price policies [19] - The company acknowledged increased online competition and aggressive pricing as significant challenges impacting sales and margins [9][10] Other Important Information - The company had $83.4 million in cash and cash equivalents and $30.2 million in inventory, with no debt as of June 30, 2019 [15] - Advertising expenses increased by 29% to $8.6 million, attributed to the re-addition of television advertising [13] Q&A Session Summary Question: What is the outlook for gross margins? - Management believes gross margins may have bottomed out and expects improvements in the next six months due to market stabilization [19][20] Question: Are volume-based discounts impacting gross margins? - Management anticipates that gross margins should improve in future quarters despite current discounts [20] Question: What is the status of direct relationships with manufacturers? - Only one manufacturer remains to establish a direct relationship, expected to be completed within two months [21] Question: What is the competitive landscape like? - The primary competition is from online retailers, affecting both prescription and OTC products [37] Question: What strategies are in place to retain customers? - The company is focusing on improving customer retention through better marketing and a high net promoter score of 83% [29] Question: What are the cash flow priorities? - The company has approximately $29 million remaining in its stock buyback plan and continues to pay dividends while investing in the e-commerce platform [31]