PetMed Express, Inc. (NASDAQ:PETS) Q1 2020 Earnings Conference Call - Final Transcript

Jul 20, 2020 • 08:30 am ET

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PetMed Express, Inc. (NASDAQ:PETS) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And the first question comes from Anthony Lebiedzinski of Sidoti & Company. Sir, please go ahead.

Analyst
Anthony Lebiedzinski

Good morning and thank you for taking the questions.

Executive
Menderes Akdag

Sure.

Analyst
Anthony Lebiedzinski

So first, as far as the sales increase, part of the sales increase was an increase in AOV. Some -- perhaps, Mendo, if you could maybe expand on what drove the increase in the average order value.

Executive
Menderes Akdag

Our campaigns have encouraged the upselling and cross-selling, so that was the reason for the increase.

Analyst
Anthony Lebiedzinski

Got it. Okay. And as far as the gross margin, obviously, it was up from a year ago, but sequentially down from the last, really three quarters. You were tracking above 29% the last couple of quarters. So, can you just expand on that? Are you seeing more competition? Or is something else is driving the sequential downtick in the gross margin?

Executive
Menderes Akdag

Sure. Product mix was different. We had more over-the-counter sales that has lower margins. Also, reorders [Indecipherable] the quarter that caused higher loyalty program or on-credit [Phonetic] accruals which negatively impacted gross margins.

Analyst
Anthony Lebiedzinski

Okay. Great. Thank you for that. And then the last question from me. As far as the inventory increase, was this across the board or were there any certain product categories that you focused on thus far as for your inventory increases?

Executive
Menderes Akdag

Fast-movers were the ones that we increased the inventory. We intend to return to normal inventory levels starting in this quarter. With that, we are in.

Analyst
Anthony Lebiedzinski

Okay. All right. Thank you and best of luck.

Executive
Menderes Akdag

Thank you.

Operator
Operator

[Operator Instructions] Our next question comes from Ben Rose of Battle Road Research.

Analyst
Ben Rose

Yes. Good morning, Mendo, and good morning, Bruce.

Executive
Menderes Akdag

Good morning.

Analyst
Ben Rose

So, I don't know that the actual results have come across the wire. But could you repeat the new order sales number, if you don't mind?

Executive
Menderes Akdag

Sure. New orders, they increased by 29% to $15.8 million for the quarter compared to $12.2 million for the same quarter last year.

Analyst
Ben Rose

Okay. Great. So this is obviously by far and away the largest percentage increase that you've had in new order sales. Reorder sales have been trending up. But just to focus on the new order sales for a moment, could you maybe just speak to what accounts for such a dramatic shift? Was it in part this shift to the over-the-counter medications or was it perhaps a change in the way your advertising or reaching out to new customers?

Executive
Menderes Akdag

Demand has been strong for e-commerce and that coincided with our peak season. So that helped new orders. Also, we advertised -- our advertising was more effective. Advertising pricing was more favorable in the quarter, and demand was strong, as I said.

Analyst
Ben Rose

Okay. Just in a general sense, I think what may be on the mind of many investors is, kind of looking out over the next year or so, year and a half, what is the general plan for PetMeds to sustain and perhaps extend its market share gains that you've seen now for