PetMed Express: Begging for attention

Talk about an industry with a thick, warm coat: the pet business is shaking off the chill of the economy as owners, er, guardians cut back on everything but their little rascals’ well-being. And that’s good news for PetMed Express, Inc. (Nasdaq:PETS), which mails health products directly to the doggy door.

Let your own teeth rot and your broken toes mend on their own. But get your baby (no, not that one, the furry one) those drops for fleas, medicine to stave off heartworm and vitamins so he can grow to be like Rin-Tin-Tin. Freshen his breath, perfume him and swab out his ears. Who cares if the market is at the end of its leash when you’ve got a bouncing bundle of joy at the end of yours?

These are the attitudes behind PetMed Express’s success. In its current fiscal 2009 second quarter through September, the Pompano Beach, Florida, company raised earnings per diluted share 33% to $0.25, from $0.18 in the same quarter the previous year. Net revenue in the period was $59.6 million, up from $51.5 million a year earlier, an increase of 16%. PetMed Express also repurchased about 90,000 shares of outstanding stock for $1.1 million in the second quarter.  

The leading pet pharmacy company is now focused on adding market share and improving reorders. Started in 1996, it delivers prescription and non-prescription pet medications and other health products for dogs, cats, and horses direct to buyers via an 800 number and through the Internet. 

The market is full of opportunity: The American Pet Products Manufacturers Association says spending in 2007 topped $41 billion, more than twice the $21 billion spent in 1996. For 2008, the association early this year projected the market at a record $43.4 billion. The pet medication market that PetMed Express competes in is estimated near $3.4 billion, with veterinarians holding the majority of market share. The dog and cat population is approximately 163 million, with 63% of households enjoying animal companionship.

PetMed Express, which now has market capitalization of $419 million, has taken advantage. Its three-year sales growth rate is 20%, while its three-year growth rate for net income is 34%. Year to date the company’s shares have gained 46%, compared with losses in the S&P 1500 and in many other Internet and drug retailers. PetMed Express had no debt at the end of September and has cash and equivalents of $29 million.

Shares of PetMed Express closed Friday at $17.66, not far from its 52-week high at $18.50; the low is $10.45. For the current 2009 fiscal year, analysts expect PetMed Express to earn $0.97, a big jump from $0.82 in 2008. Earnings are seen growing to $1.07 in 2010.

Look for PetMed Express to continue its success. If the current economic crisis can’t shake our devotion to our four-legged friends, nothing will.

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