The web-to-print giant missed expected growth targets in its results for the three months to 31 December 2018, with overall sales up 8% at $825.6m (£628.6m), compared with last year’s sales increase of 32%. Although net operating profit increased to $115.1m from $93.7m, this figure was boosted by some one-off accounting gains as well as a contribution from latest acquisition BuildASign, which masked “underlying weakness”.
In a typically candid letter to investors, Keane said the Q2 results had followed Q1 figures that also disappointed: “We had a poor quarter, the worst in a long time”.
“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,” he stated.
“Many of our challenges are within our control. Others are external in nature: competitors that drive up the cost of advertising and drive down the price to customers, and key input costs such as paper are increasing.”
Keane outlined a host of issues at Vistaprint, the business born out of the original company he founded in 1994. These included a customer experience that was “not good enough” and suffered from bugs and glitches; inadequate tools and processes for decision-making; and a lack of world-class capabilities in analytically-driven marketing, merchandising and pricing.
Vistaprint sales nudged up by just 1.2% to $434.3m, while profits at the business fell from $99m to $83.8m.
Vistaprint CEO Trynka Shineman – who was the only woman on the Cimpress executive team – has left the business after 15 years working at the brand, the past two as CEO. Keane said “it was the right time” for Shineman (pictured below) to “transition out of Cimpress”. He said that her departure had been under discussion for some time and was not a direct result of the Q2 results.
“I will be taking on the additional role of Vistaprint CEO for the foreseeable future until a permanent successor is named,” Keane said.
Cimpress chief technology officer Maarten Wensveen will also step in as interim CTO at Vistaprint.
The departure of Shineman, along with some further personnel changes at one of the group’s other businesses, will result in restructuring charges of around $6.5m, including $3m in severance pay.
At the group’s Upload & Print division, a layer of management has been eliminated with the disbanding of its central team, and the operation has been split between two new subsidiary groups, each headed by a senior vice president.
Paolo Roatta will oversee the Tradeprint, Exagroup and Pixartprinting businesses, while Kees Arends will head up WirMachenDruck, Druck.at, Easyflyer, and Printdeal.
Profits were effectively flat at Upload & Print at $22.45m (prior year: $22.47m), while expected sales growth “decelerated” with sales up 5.8% at $203.8m.
The increase in sales at National Pen, acquired two years ago, was also described as “disappointing”, and the division’s profits would have declined were it not for the adoption of a new financial reporting standard.
Keane concluded his Q2 remarks with some reasons for optimism, as he emphasised the huge size of the group’s potential market. He stated that most of the issues facing the business were “within our control and boil down to execution”.
He also revealed that he will forego his usual salary as a show of faith in the group’s future performance.
“As an indication of my strong belief in the future of Cimpress I have stopped taking any cash compensation other than the legally required minimum salary of $455 per week,” he revealed.
Keane will be awarded performance shares instead, which will be worthless unless the Cimpress share price hits a compound annual growth rate of “at least 11%” over a rolling six- to ten-year period.
Shares in Cimpress were at a 52-week low of $99.16 prior to Christmas, and were at $115.95 at the time of writing (high: $171.76).
Cimpress shares went on to fall by 28% to $83.17 in trading following the results announcement.