Two years into a five-year plan to beef up its earnings and
sales growth, online marketing firm
has found that reality has a way of shifting your
The company provides online customized marketing products and
services to small businesses and consumers in more than 130
countries around the world.
Its products include printed business cards, brochures,
postcards, calendars, apparel and other promotional
) also offers services ranging from creative design and direct
mail to signage and website design.
One of Vistaprint's latest ideas is
, an online content hub of marketing help for business owners. It
, a do-it-yourself suite of online tools that businesses can use
to market onFacebook (
Vistaprint has achieved steady sales and earnings growth over
the years. Still, a couple years ago, management decided it
In July 2011, the company announced an initiative to swap
near-term earnings growth for heavy upfront investments that were
designed to deliver greater customer value, long-term scale
advantages, higher organic revenue growth and operational
advantages over the competition.
Window On Growth
Among other things, Vistaprint boosted its payroll by 30% over
a 12-month period in 2011 and 2012 to help drive sales higher,
and also spent more on advertising.
At the time, Vistaprint said if the strategy was executed
correctly, the company would reach $2 billion in annual revenue
and $5 a share in earnings by fiscal 2016. The target was a
five-year compound annual growth rate of 20% or better.
Two years later, Vistaprint has scaled back those
expectations, mainly due to slower-than-expected growth in
Europe, which accounts for about 40% of its revenue.
Vistaprint Chief Executive Robert Keane addressed those issues
during an analyst/investor day presentation in New York on Aug.
"Given the challenges we face in Europe, we no longer expect
to grow at 20% as we expected to when we started this project two
years ago," Keane said. "And we do acknowledge that the revenue
growth makes our previously stated net income targets less likely
to be achieved."
However, Keane added, Vista-print is set to exit "the most
intensive investment period" of its multiyear strategy, and the
company should begin a period of much stronger earnings growth in
"We are at the beginning of what we believe will be a
consistent, sustained and multiyear ramp of both our net income
margins and our earnings per share," Keane said.
It's not like Vistaprint has been struggling. On Aug. 1, it
reported solid results for its fiscal fourth quarter and year,
which ended in June.
For the whole year, Vistaprint logged a 10% gain in earnings
and a 14% rise in sales. Although the sales increase was its
lowest rise in at least eight years, the EPS gain was an
improvement for the firm over fiscal 2012, when yearly profit
fell by 15%.
The company logged fourth-quarter earnings of 41 cents a
share, up 3% from the prior year and well above consensus
estimates for 33 cents. Revenue climbed 12% to $280.1 million,
topping views for $273 million.
On a geographic basis, Vistaprint's quarterly sales climbed
18% in North America, which accounts for more than half of
overall revenue. Revenue grew 4% in Asia-Pacific and 3% in
Victor Anthony, an analyst at Topeka Capital Markets, noted
that average bookings per active customer grew 1.5% to $69 during
"Average bookings is a critical metric to watch as a measure
of the health of the overall business," Anthony said. "It
decelerated from the low $70 range on pressures in Europe."
While Vistaprint management expects flat revenue growth in
Europe for this fiscal year, there are reasons to believe the
situation is improving.
"Recent data point to improving macroconditions in several key
European markets," Anthony noted. "Our view is that a recovery
could provide upside to guidance."
EPS Gains Despite Europe
Wall Street seems happy enough with Vistaprint's performance.
The day after the company reported Q4 results, its shares rose 5%
to a three-year closing high of 55.01. Vistaprint has since
gained even more ground in the stock market and established a new
three-year high of 57.54 on Aug. 6.
Despite its lowered expectations for long-term sales and
earnings growth, Vistaprint remains committed to returning to net
margins of 10% in the next few years. That compares to 2.5% in
fiscal 2013 and an estimated 4% this fiscal year.
"Vistaprint has made significant progress on its plan to
reform its brand image through better materials and customer
service, faster delivery and transparent pricing," Kevin
Kopelman, analyst at Cowen & Co., noted in a recent
Vistaprint is expected to deliver 9% overall revenue growth in
fiscal 2014 as solid results in its North America operations help
offset sluggishness in Europe.
"We are projecting EBITDA growth of 17% and non-GAAP EPS
growth of 26%, driven largely by advertising reductions in
Europe," Kopelman added.
Analysts polled by Thomson Reuters expect Vistaprint to grow
annual earnings 26% this fiscal year and 29% in fiscal 2015.
Vistaprint is the third largest company by market cap in the
hot Commercial Services-Document Management industry, which is
currently ranked No. 10 of 197 industries that IBD tracks.
The larger two firms areIron Mountain (
) andR.R. Donnelly & Sons (
) .Quad/Graphics (
) is a little smaller. Vistaprint has the highest
in the whole group, 97 out of a possible 99.