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PETMED EXPRESS, INC.

QUARTER ENDED DECEMBER 31, 2005

CONFERENCE CALL TRANSCRIPT

JANUARY 23, 2006 AT 8:30 A.M. EDT

Coordinator Welcome to the PetMed Express, Inc., doing business as

1-800-PetMeds, conference call to review the financial

results for the third fiscal quarter ended on December 31,

2005. At the request of the company, this conference call

Founded in 1996, 1-800-PetMeds is America's largest pet

pharmacy, delivering prescription and nonprescription pet

medications and other health products for dogs, cats, and

horses, direct to the customer. 1-800-PetMeds markets its

products through national television, online, and direct

mail advertising campaigns, which direct customers to order

by phone or on the Internet and aim to increase the

recognition of the 1-800-PetMeds brand name. 1-800-PetMeds

provides an attractive alternative for obtaining pet

medications in terms of convenience, price, ease of ordering

and rapid home delivery.

At this time, I would like to turn the call over to the

company's Chief Financial Officer, Mr. Bruce Rosenbloom.

B. Rosenbloom Thank you. I would like to welcome everyone here today.

Before I turn the call over to Mendo, our Chief Executive

Officer and President, I would like to remind everyone that

the first portion of this conference call will be listen-

only until the question-and-answer session, which will be

Also, certain information that will be included in this

press conference may include forward-looking statements

within the meaning of the Private Securities Litigation

Reform Act of 1995, or the Securities and Exchange

Commission that may involve a number of risks and

uncertainties. These statements are based on our beliefs,

as well as assumptions we have used, based upon information

currently available to us. Because these statements reflect

our current views concerning future events, these statements

involve risks, uncertainties and assumptions. Actual future

results may vary significantly, based on a number of factors

that may cause the actual results or events to be materially

different from future results, performance, or achievements

expressed or implied by these statements. We have

identified various risk factors associated with our

operations in our most recent annual report and other

filings with the Securities and Exchange Commission.

Now let me introduce today's speaker, Mendo Akdag, Chief

Executive Officer and President of 1-800-PetMeds. Mendo.

M. Akdag Thank you, Bruce. Welcome, everyone. Today we'll review

the highlights of our financial results. We'll compare our

third fiscal quarter and nine months ended on December 31,

2005 to last year's quarter and nine months ended on

For the third fiscal quarter ended on December 31, 2005,

sales were $25.9 million compared to sales of $20.8 million

for the same period the prior year, an increase of 25%. For

the nine months ended on December 31, 2005, sales were

$108.2 million compared to $84.8 million for the nine months

the prior year, an increase of 28%. The increase was

primarily due to increased retail reorders, retail new

orders, and wholesale sales.

For the third fiscal quarter, net income was $2.7 million or

$0.11 diluted per share, compared to $2 million or $0.08

diluted per share for the same quarter the prior year, an

increase to net income of 37%. For the nine months, net

income was $8.9 million or $0.37 diluted per share, compared

to $5.6 million or $0.23 diluted per share a year ago, an

increase to net income of 60%.

Retail reorder sales increased by 25% to $18.1 million for

the quarter compared to reorder sales of $14.5 million for

the same quarter the prior year. For the nine months, the

reorder sales increased by 29% to $66.7 million, compared to

$51.7 million for the same period a year ago.

Retail new order sales increased by 26% to $7.3 million for

the quarter compared to $5.8 million for the same period the

prior year. For the nine months, the new order sales

increased by 22% to $38.4 million, compared to $31.6 million

for the same period last year.

Wholesale sales were approximately the same, $500,000, for

the quarter ended on December 31, 2005 and 2004. For the

nine months, wholesale sales were $3.1 million, compared to

$1.6 million for the same period a year ago.

We acquired approximately 105,000 new customers in our third

fiscal quarter compared to 85,000 for the same period the

prior year; and we acquired approximately 530,000 new

customers in nine months compared to 430,000 for the same

Our average retail order was approximately $74 for the

quarter and approximately 57% of our sales were generated on

our Web site. The seasonality in our business is due to the

proportion of flea, tick and heartworm medications in our

product mix. Spring and summer are considered peak seasons,

with fall and winter being the off seasons.

For the third fiscal quarter our gross profit as a percent

of sales was 39.7%, compared to 40.6% for the same period a

year ago. For the nine months, our gross profit as a

percent of sales was 38.8%, compared to 40% for the nine

months a year ago. The percentage decrease can mainly be

attributed to increases to our product and freight costs;

discounts given to our customers; and increases in wholesale

sales, which have lower gross profit margins for the nine

Our general and administrative expenses as a percent of

sales decreased to 11.8% for the quarter, compared to 12.2%

for the same quarter the prior year; and for the nine