October 19, 2009 / 12:40 PM / 10 years ago

UPDATE 2-PetMed Q2 revenue trails market, shares fall

* Q2 EPS $0.28 in line with estimates

* Sales $62.4 mln vs est $66 mln

* Customer additions down 3 pct

* New order sales down 8 pct

* Shares fall as much as 14 pct (Recasts; Adds details, analyst comments; updates share movement)

By Abhishek Takle

BANGALORE, Oct 19 (Reuters) - PetMed Express Inc (PETS.O) posted a quarterly profit in line with market expectations, but sales trailed analysts’ estimates as the pet pharmacy added fewer customers and new orders fell in the quarter.

Shares of the company fell as much as 14 percent to $16.89 Monday morning on Nasdaq, but pared some losses and were down 12 percent at $17.37 later in the session.

For the second quarter ended Sept. 30, the company said customer additions fell 3 percent to 233,000 while new order sales fell 8 percent to $16.7 million from the same period last year.

The decrease was mainly due to a reduction in advertising spending, which fell 10 percent to $7.8 million, as the company could not book remnant television advertising space as it typically does.

“It’s physically not there for us at the prices that we’re willing to pay,” Chief Executive Menderes Akdag said on a conference call with analysts.

“Typically, large advertisers buy in advance but this year they did not. And they’re buying in the scatter market and using the remnants of inventory that we used to get,” he said.

Wedbush Morgan Securities analyst Edward Woo said this was a concern: “As an investor you want your revenue to increase and if they can’t find any ways to advertise, then the implication is that the new customer additions, going forward, will remain lighter than what investors are hoping for.”

The company said average order for the quarter was down to about $78 from $81 a year ago due to customers buying smaller quantities of products.

PROFIT IN LINE, REVENUE MISSES

For the second-quarter the company earned $6.3 million, or 28 cents a share, compared with $5.8 million, or 25 cents a share, last year.

Revenue at the company, which ships its products directly to customers, rose 5 percent to $62.4 million.

Analysts on average were expecting PetMed to earn 28 cents a share, before items, on revenue of $66 million, according to Thomson Reuters I/B/E/S. (Reporting by Abhishek Takle in Bangalore; Editing by Anne Pallivathuckal and Unnikrishnan Nair)

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