Manhattan Associates (NASDAQ:MANH) provides supply chain management tools that help its customers manage their operations more effectively, and the company boasts an impressive list of well-known clients throughout the retail and shipping industries that have helped lift its stock dramatically over the long run. However, when its customers are under financial pressure due to a weak retail environment, Manhattan Associates feels the pain as well, and recent results have reflected the sluggishness in key client industries.

Coming into Thursday's second-quarter financial report, Manhattan investors were prepared for slight declines in sales and earnings, and that was generally consistent with what the company's results actually were. What investors weren't prepared to see, however, was further deterioration in the company's guidance for the remainder of the year. Let's take a closer look at Manhattan Associates and what its latest results mean for the company's future.

Manhattan Associates platform for clients.

Image source: Manhattan Associates.

Manhattan Associates keeps fighting a tough environment

Manhattan Associates' second-quarter results were about as sluggish as most had expected from the company. Revenue eased downward by 0.5% to $154.1 million, which was almost exactly what those following the stock were looking to see. Net income was down almost 7% to $31.1 million, but a declining share count limited the damage on the bottom line, and adjusted earnings of $0.50 per share were actually $0.02 higher than the consensus forecast among investors.

Looking more closely at Manhattan's numbers, the company's segments again showed disparate results. The services side of the business suffered a 2.5% revenue decline, and a slight uptick in costs hurt segment gross margin figures slightly as well. The software license business enjoyed a nearly 9% revenue gain, with expanding margin thanks to the low-cost nature of the business. The hardware segment also posted modest gains of just over 3% on its top line.

Geographically, Manhattan Associates once again saw most of its pain come from its home market. The Americas segment saw revenue fall almost 6%, and adjusted operating income dropped by more than twice that. Yet in the Europe, Middle East, and Africa segment, sales climbed by a fifth, and operating income jumped by nearly half from year-ago levels. The Asia-Pacific region did even better, posting nearly 50% gains in segment revenue and coming close to tripling its operating income.

Manhattan Associates' overall sales performance remained slow. The company matched its results last quarter by bringing in only four new contracts with licensing revenue of $1 million or more. New customers included French automaker Renault, while Manhattan also expanded relationships with existing clients that included recreational equipment retailer REI.

Can Manhattan Associates bounce back?

CEO Eddie Capel was measured in his view of the company's current status. "Q2 represented a strong quarter of solid license revenue and pipeline activity well balanced across all three regions," Capel said. The CEO noted that retail market headwinds will challenge decision-makers, but he thinks that they'll "present meaningful growth potential for Manhattan as many retailers address strategic challenges with enterprise transformation." New products and platforms should help Manhattan connect more directly with investors.

Manhattan Associates nevertheless reduced its 2017 guidance for the second quarter in a row despite those positive comments. The company now expects revenue to fall between 1% and 2% to a range of $590 million to $600 million, down from previous calls for flat to 3% growth in revenue that would have left the top line between $16 million and $20 million higher. Similarly, Manhattan reduced its earnings guidance for the full year by $0.04 per share, creating a new range of $1.85 to $1.89 per share. That will leave the company roughly flat on the bottom line, suggesting that strategic changes to respond to tough industry conditions will take time to implement.

Shareholders in Manhattan Associates were disappointed with the news, and the stock dropped 8% in after-hours trading following the announcement. As long as retailers face struggles of their own, it'll be a tough sell for Manhattan to suggest that prospective clients spend money on what they might see as a lower-priority item for their businesses.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.