What happened

Shares of Cimpress (NASDAQ:CMPR) were down 27.3% as of 2:48 p.m. EST Thursday, after the parent company of Vistaprint delivered disappointing holiday-quarter results and reduced its forward growth expectations.

More specifically for its fiscal second quarter ended Dec. 31, 2018, Cimpress' revenue climbed 8.3% year over year to $825.6 million, translating to net income of $69 million, or $2.17 per share. Cimpress doesn't provide specific quarterly guidance; for perspective, most investors watching the stock were anticipating significantly higher earnings of $2.38 per share on revenue of $855 million.

Cimpress employees working on its mass-customization platform

IMAGE SOURCE: CIMPRESS.

So what

Within Cimpress' top line, Vistaprint revenue rose just 1.3% to $434.3 million, below expectations given a 2% drop in constant-currency consumer product bookings. Sales in the upload and print segment climbed 5.9%, to $203.8 million, again below expectations due to competitive pricing and advertising pressure. National Pen revenue rose 5.4%, missing management's estimates, as higher investments in direct-mail prospecting failed to yield expected returns.

"We had a poor quarter, the worst in a long time," stated Cimpress chairman and CEO Robert Keane. Later in the letter to investors he said, "Our deteriorating performance over the past six plus months led to some serious soul searching about the root causes and what we will do about them."

Now what

In particular, Cimpress is refocusing resources at Vistaprint to improve its "foundational basics," such as improving its customer experience, analytical marketing, and decision-making processes. Keane noted these areas "either have not progressed rapidly enough or have deteriorated while Vistaprint focused on evolving its customer value proposition."

In the meantime, for "the foreseeable future," Cimpress is now modeling:

  • flat to negative growth from Vistaprint (down from previous outlook for annualized growth of between 9% and 10%)
  • high single-digit growth from both the upload and print segment and National Pen (down from low double-digit growth before)
  • double-digit growth from all other businesses (consistent with its prior guidance)

Put simply, investors are rightly upset that Cimpress so badly fell short in its crucial holiday quarter. Given that underperformance and the uncertainty surrounding its turnaround, the stock is responding in kind.

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