Web retailer Shutterfly increases its sales nearly 17% in the first quarter

May 1, 2015 11:51 AM

Shutterfly Inc., the online retailer of scrapbooks and other photography services, reported a 16.7% increase in revenue in the first quarter but a rare decline in average order value.

CEO Jeffrey Housenbold attributed the decline in average order value to “a number of new large nationally recognized branded partners who also were doing co-marketing on our behalf, offering free product to get people who traditionally aren’t in our category to try.” Because Shutterfly does its own processing and charges for shipping it breaks even on most of these offers, Housenbold told investment analysts, “and so it’s a great way to get these great brands to push our brand to their user base.”

For the first quarter, which ended March 31, Shutterfly, No. 50 in the Internet Retailer 2015 Top 500 Guide, reported:

  • Net revenue of $160 million, a 16.8% increase compared with $137 million in Q1 of 2014.
  • B2B sales totaled $11.2 million, a 72.8% increase year over year from $6.48 million.
  • The number of orders increased 33.3% to 5.2 million from nearly 3.9 million.
  • The number of customers grew 24.6% to 3.19 million from 2.56 million.
  • The overall average order value decreased about 14.5% to $28.86 from $33.76. Excluding GrooveBook, the mobile app that sends subscribers a scrapbook of their mobile photos each month, average order value declined 4% to $32.40 from $33.76.
  • The first quarter of 2015 was the 57th consecutive quarter of year-over-year sales growth.
  • Net loss of $45.1 million compared with a net loss of $34.2 million in the same quarter last year.

“Shutterfly delivered a strong start to 2015, with key financial metrics ahead of our expectations and strong customer activity across our consumer brands and in our emerging enterprise business,” Shutterfly CEO Jeffrey Housenbold said. “Our teams are executing well and making good progress on our strategic imperatives to deliver a combination of innovation and operating scale that we believe will further enhance our competitive leadership and drive near- and long-term shareholder value."

Analysts at Cantor Fitzgerald Equity Research said, “We believe that the competitive landscape for Shutterfly continues to be favorable, enabling the company to focus on driving growth in customers and orders through controlled promotions and channel partnerships.”

Nonetheless, the e-retailer likely faces a fight from an activist investor at its upcoming shareholder meeting in June. Marathon Partners Equity Management LLC, a New York hedge fund, to nominate three board members. Cantor Fitzgerald analysts say that sets the stage “for what is likely to be a controversial shareholder meeting in early June.” Marathon reportedly was unhappy with Shutterfly acquiring GrooveBook last fall for $14.5 million, the e-retailer’s tenth acquisition in less than three years.

For the second quarter of 2015 Shutterfly is forecasting an increase in net revenue ranging from $175.5 million to $179.5 million, a year-over-year increase of 10.3% to 12.8%.





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