What To Expect From Shutterfly’s Q1?

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Shutterfly (NASDAQ:SFLY) will report its Q1 earnings on Tuesday, May 1. Due to the cyclical nature of the business, the company tends to generate losses in the first three quarters, while the fourth quarter helps recover a large portion of these losses.  While its revenue saw around 5% growth in 2017, consensus estimates guide for marginal growth in the first quarter. For the FY 2018, we expect net revenue of $1.3 billion, 9% above the previous year’s comparable quarter. We have created an interactive dashboard which shows our forecasts for the company’s revenues. You can modify the different revenue drivers to see how changes impact the company’s expected revenues.

The completion of its restructuring initiatives and platform consolidation strategy should improve its customer experience by consolidating its platform and creating an integrated offering. While this might create issues in the short term, we believe this strategy should drive some growth over the long run with the optimization of technology initiatives and a better focus on brands. Additionally, the company’s plan to continue making investments in improving the mobile and consumer platforms and infrastructure upgrades should further drive the sales.

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Mobile App Penetration Crucial For Success

The percentage of revenues coming from mobile sources for the Shutterfly brand increased over the last few years, from 10% in 2014 to 25% in 2017. The company launched a new app in 2016, allowing users to create and purchase cards and stationery (the company’s largest category by annual revenue) in addition to a variety of other products and services. Furthermore, due to the ease of use and accessibility, the number of orders per customer may have increased.

Restructuring Could Drive Growth

Over the years, Shutterfly has expanded its product portfolio significantly. From cards to stationery to home decor, the company has several different brands to meet specific customer needs and cater to separate segments. However, this has caused some operational difficulties, as different brands operate on different technology platforms, and the demand for the existing products has decreased in recent years.

The company is likely to lose some customers in the near term, as it migrates its brands to a new platform. Consequently, we expect slower growth in the third quarter. However, a simplified platform can ensure focus and technology optimization, which in turn could lead to consumer growth and cost savings over the long term.

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