PetMed Express, Inc. (NASDAQ:PETS) Q3 2019 Earnings Conference Call - Final Transcript

Oct 21, 2019 • 08:30 am ET

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PetMed Express, Inc. (NASDAQ:PETS) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Certainly, we will now begin the question-and-answer session. [Operator Instructions]. One moment for the first question. Our first question is from Erin Wright of Credit Suisse. Your line is open.

Analyst
Erin Wright

All right, thanks. I'm curious, curious if you could speak to how the MAP pricing is being implemented and how that's playing out relative to your expectations? Is the pricing shaking out higher than expected, obviously the margin profile -- obviously said that to some extent. And then, what percentage of your overall sales are under MAP pricing and what percentage would you consider more flexible, in terms of promotional activity? Thanks.

Executive
Menderes Akdag

MAP pricing on an average is higher than our -- are higher than our prior pricing.

Analyst
Erin Wright

And what percent of your sales, would you say are under those sort of MAP pricing strategies?

Executive
Menderes Akdag

Much [Indecipherable] down.

Analyst
Erin Wright

Okay, great. And then can you speak to the latest on sort of the advertising strategies for you and marketing campaign. I guess, how should we be thinking about your advertising spend for the remainder of the year, in light of the competitive landscape and where do you stand now with the TV spot advertising strategy, particularly as we head into an election cycle? I'm just curious, your thoughts there. Thanks.

Executive
Menderes Akdag

Our budget is about 10% higher than what we spent in the prior year. We are working on optimizing our advertising, and we intend to be more efficient with our advertising spending, Television advertising spending will likely be -- is going to be minimal for the next year.

Analyst
Erin Wright

Okay, great. Thank you.

Executive
Menderes Akdag

You are welcome.

Operator
Operator

Thank you. Our next question is from Kevin Ellich from Craig-Hallum. Your line is open.

Analyst
Kevin Ellich

Thanks, good morning. Menderes, so you said that you now have direct relationships with all the major manufacturers, did the Zoetis contract, did that go in effect just this morning, or when did that actually happen?

Executive
Menderes Akdag

This month.

Analyst
Kevin Ellich

Excuse me?

Executive
Menderes Akdag

This month in October.

Analyst
Kevin Ellich

Got you, got you. Okay, great. Great. And then, I mean clearly, we saw a nice improvement sequentially in the gross margin. Do you think we will continue to see a ramp sequentially with MAP or do you think -- I guess, can you give us any help in terms of how gross profit should kind of move forward -- improve from here?

Executive
Menderes Akdag

We anticipate that it's going to improve from the September quarter. I think we'll have a better picture in the next two -- in the next couple of quarters.

Analyst
Kevin Ellich

Got you, got you, okay. Any update on potential white label project -- white label deals maybe, with a big-box retailer like Target or Costco?

Executive
Menderes Akdag

We do not have anything pending.

Analyst
Kevin Ellich

Nothing pending? Are you in any discussions ?

Executive
Menderes Akdag

Yeah.

Analyst
Kevin Ellich

Okay. And then inventory and the balance sheet, clearly down sequentially, is this kind of the levels we should be thinking about, given your direct purchasing from the manufacturers?

Executive
Menderes Akdag

When there is a cost advantage buying opportunity, we will carry higher inventories. So it will depend.