PetMed Express, Inc. Navigates Challenges in Fiscal Year 2025

PetMed Express, Inc., a leading nationwide direct-to-consumer pet pharmacy and online provider, has released its financial results for the fiscal year ended March 31, 2025. The company faced a number of challenges during the year, including a strategic reduction in advertising, broader macroeconomic factors, and higher consumer promotional usage, which led to a decrease in sales and profitability.

Financial Performance Overview

For the fiscal year ended March 31, 2025, PetMed Express reported sales of approximately $227.0 million, a decrease of 17.2% compared to the prior fiscal year. This decline was driven by a 15.5% decrease in reorder sales to $188.0 million and a 25.5% decrease in new order sales to $31.1 million.

The company’s gross profit decreased by 18.4% to $69.1 million, with gross profit margin declining slightly from 30.9% to 30.5%. This was primarily due to an increase in discount activity, which put pressure on profit margins.

On the expense side, general and administrative expenses decreased by 30.0% to $38.6 million, largely due to a $16.2 million decrease in payroll and payroll-related expenses, including a $13.5 million decrease in stock compensation expense. Advertising expenses also decreased by 22.2% to $23.8 million, as the company reduced its gross media spend and increased the proportion of spending funded by third-party partners.

Despite these cost savings, PetMed Express reported a net loss of $6.3 million for the fiscal year, compared to a net loss of $7.5 million in the prior year. The primary driver of the net loss was an increase in the provision for income taxes, which rose from $1.2 million to $5.7 million due to the establishment of a full valuation allowance against the company’s net deferred tax assets.

Liquidity and Capital Resources

At the end of fiscal year 2025, PetMed Express had $54.7 million in cash and cash equivalents and no debt obligations. The company’s working capital decreased from $21.5 million to $16.1 million, primarily due to a $12.4 million decrease in inventory and a $9.5 million decrease in accounts payable and accrued expenses.

Net cash provided by operating activities remained relatively stable at $4.7 million, compared to $4.3 million in the prior year. The company used $5.1 million in investing activities, a significant decrease from the $40.7 million used in the prior year, which included the acquisition of PetCareRx.

PetMed Express suspended its quarterly dividend in February 2024, as the board of directors decided to focus the company’s cash flow on growth initiatives and other higher-return investments.

Strengths and Weaknesses

One of PetMed Express’s key strengths is its strong brand recognition and reputation as a leading provider of pet medications and supplies. The company’s online platform and direct-to-consumer model provide convenience and value for customers, which has helped drive customer loyalty and repeat business.

However, the company has faced challenges in recent years, including increased competition, changes in consumer behavior, and broader macroeconomic factors. The strategic reduction in advertising spending, while necessary to manage costs, has also contributed to the decline in new customer acquisitions and sales.

Additionally, the company’s investigation into accounting irregularities and the resulting management changes have raised concerns about the company’s internal controls and culture. The identification of material weaknesses in internal controls over financial reporting is a significant weakness that the company will need to address to regain investor confidence and ensure the reliability of its financial reporting.

Outlook and Future Prospects

Looking ahead, PetMed Express faces a number of uncertainties and challenges. The company’s sales may continue to be adversely affected by increased competition and changes in consumer behavior, making future sales growth difficult to predict.

To address these challenges, the company has implemented a number of remediation measures, including the replacement of the CEO, CFO, and Audit Committee Chair, as well as the implementation of enhanced policies, procedures, and training on the company’s Code of Ethics & Conduct. These actions are intended to strengthen the company’s internal controls and foster a culture of integrity and accountability.

Additionally, the company’s focus on growth initiatives and higher-return investments, rather than dividend payments, may help to position it for long-term success. However, the success of these efforts will depend on the company’s ability to execute effectively and adapt to the evolving market conditions.

Overall, PetMed Express faces a challenging road ahead, but the company’s strong brand, loyal customer base, and efforts to address its internal control weaknesses provide a foundation for potential future growth and profitability, if executed well.