American Greetings Narrows 1Q Profit on Acquisition, Overhaul Charges
American Greetings (NYSE:AM) revealed a disappointing decline in first-quarter sales and profit on Thursday as it continued to restructure the newly-acquired Clinton Cards business.
The greetings card maker reported net income of $7.25 million, or 20 cents a share, compared with a year-earlier $32.6 million, or 78 cents, widely short of average analyst estimates of 69 cents, according to a Thomson Reuters poll.
Revenue for the three months ended May 25 was $393.1 million, down from $403.7 million a year ago, missing the Street’s view of $415.7 million. The decline was attributed to “scan-based trading conversions” that occurred during the quarter.
Shares of American Greetings fell 1.5% to $14.04 out of the bell on Thursday.
American Greetings, which bought one of the largest greeting card retailers in the U.K. during the quarter for $56.6 million, said it incurred “multiple charges” by placing the company, called Clinton Cards, into bankruptcy so that it could better manage its restructuring.
Revenue was reduced by $4 million as a result of a non-cash impairment related to Clinton Cards' Birthdays subsidiary, and American said it incurred some $17.2 million in costs related to Clinton’s bad debt.
The card maker said it acquired Clinton’s assets on June 7, including about 400 stores and overhead as well as related brands, and expects to see the impacts of the transaction in its second quarter.
"I am pleased with the overall performance of our core business in the first fiscal quarter, holding aside the impact of Clinton Cards,” American Greetings CEO Zev Weiss said in a statement.
The company’s mobile and online brands have been expanding. During its latest quarter, American Greetings surpassed one million downloads of its justWink app and had successful customer acquisition for Cardstore.com.
“Despite seeing competitors like Shutterfly and others trying to duplicate our formula for success for personalized greeting cards, our momentum fuels our confidence that we will lead in this area,” Weiss said.