Why FTD Companies Inc. Stock Has Dropped 19% This Year So Far

What happened

Floral and gifting specialist FTD Companies (NASDAQ: FTD) saw its stock clipped by 19% through the first half of 2017, according to data provided by S&P Global Market Intelligence.

Shares managed slight gains early in the year before falling as much as 30%, then climbing back slightly through the month of June.

So what

Most of the 2017 slump came following FTD's fiscal fourth-quarter earnings report that in mid-March paired weak sales growth with a deteriorating profit outlook. FTD's revenue fell 6% during the critical holiday quarter and net loss worsened to $86 million from $83 million a year ago.

Incoming CEO John Walden expressed optimism that the business would recover but was realistic about the major challenges it faced. "Although I believe the company has recently performed below its potential," he said in a press release, "it has several assets to build upon -- strong brands, reliable partners including our member florists, and financial flexibility."

Two months later, investors received more disappointing news, as FTD announced a 4% revenue drop for the first quarter driven by falling order volume. Walden and his team also warned that profitability would decline due to ramped-up spending -- especially on advertising -- aimed at recapturing lost market share.

Now what

FTD faces serious threats to its gifting business from online rivals. In that context, it's understandable that management would focus on defending its industry perch even at the expense of short-term profits. Its biggest initiatives moving forward are improving the online shopping experience and driving traffic through more aggressive marketing campaigns.

The spending on these strategies will likely cause adjusted earnings to fall to as low as 8% this year from 10.6% in 2016. The key question for the company now is whether that big decline is temporary or just a new normal that reflects FTD's fragile position in a highly competitive industry.

10 stocks we like better than FTD CompaniesWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and FTD Companies wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of July 6, 2017

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.