FTD Companies Inc. Lowers Sales Outlook Again

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On Monday, floral and gifting specialist FTD (NASDAQ: FTD)announced third-quarter earnings results that showed worsening revenue trends but steady profitability. The retailer struggled with falling demand across its business segments, and the pace of that decline caught management by surprise.

Here's a look at how the headline results stacked up against the prior-year period.

Data source: FTD's financial filing. YOY = year over year.

What happened this quarter?

FTD's 8% sales dip represents a further slowdown from last quarter's 7% drop. Meanwhile, good execution around costs protected overall profitability as the company improved net income over the past nine-month period.

Here are the key highlights of the quarter:

  • Consumer revenue dove by 14% compared to the prior quarter's 7%. Much of that decline had to do with one-time benefits that lifted last year's results, though. Excluding those, the consumer business fell at an 8% pace. FTD managed a slight uptick in average order value that was swamped by a 9% drop in order volume.
  • Provide Commerce shrank by 6%, which marked the second straight improvement in trends in that division. Operating loss improved to $2 million from $7 million in this seasonally slow period for FTD.
  • Florist segment sales were flat, but the segment continued to churn out FTD's highest margins. It produced $11 million of profits, equating to 31% of revenue.
  • The international division reported an 11% decline that translates into a 5% increase after accounting for currency changes. The segment enjoyed upticks in both order volume and average order value. Although, at $46.32, the average order is well below the U.S. consumer segment's $74.58 mark.
  • Operating expenses fell sharply, dropping 9% to outpace the revenue decline.

What management had to say

"Our performance for the quarter showed improved segment operating income, reflecting our ongoing cost management discipline," interim CEO Christopher Shean said in a press release. Commenting on the company's overall rebound plans, Shean continued:"Our goal is to achieve the appropriate balance between revenue growth and profitability through our strategic initiatives. As part of our strategies, we intend to strengthen and differentiate the market positions of ProFlowers as a leader in providing consumers with great value, fresh flowers, andFTDas a leader in premium flowers, celebrating the artistry of our member florists."

Looking forward

FTD lowered its 2016 sales outlook for the second straight quarter. Executives now see revenue falling by nearly 8%, compared to the 6% they projected three months ago and the 2% drop they expected back in May. Profit forecasts held steady, though, with net income projected to stop at $6 million.

While it's encouraging news that costs are trending lower and that the Provide Commerce business is becoming more profitable, the stubborn sales decline has management's full attention. FTD earlier in the week announced a change of leadership at the CEO position, with Robert Apatoff stepping away from the company after eight years.

He is being replaced by Shean, who has strong e-commerce experience, until the board of directors can find a more permanent person. In the meantime, Shean faces a major challenge in arresting FTD's sales slide and getting the company back to market share growth in the critical U.S. geography.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends FTD Companies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.