Shutterfly Responds to Increased Demand for Custom Products

According to a recent report by IbisWorld, sales of traditional greeting cards in the country fell 60% over the past ten years to $5.4 billion in 2012. The decline in printed greeting cards has been driven by an increase of the use of online cards and sales of electronic cards, including custom-printed ones. Sales of such cards has grown from $65 million in 2002 to $3.5 billion in 2012. The researcher also found an increased use of hybrid e-cards that are created using photographs from a consumer’s smartphones and sent via post.

Shutterfly’s Financials
One vendor providing access to customized photo driven prints and other stationery is Shutterfly. (NASDAQ:SFLY) Recently, they announced stellar quarterly results confirming the growth of the online photo printing market. Q2 revenues of $133.5 million grew 35% over the year and managed to surpass market expectations of $122.1 million. This was the 50th consecutive quarter of growth in net revenues. The loss of $0.04 per share was also significantly better than the Street’s projections of loss of $0.17 per share for the quarter.

During the quarter, consumer net revenues grew 32% over the year to $124.9 million, while Enterprise net revenues grew 86% to $8.6 million. Total transacting customers grew 24% over the year to 2.3 million with orders recording a growth of 20% over the year to 3.6 million transactions. The average order value grew 10% over the year to $34.96.

For the current quarter, Shutterfly projects revenues of $115.5 million-$117.5 million with a loss of $0.58-$0.62 per share. They expect to end the year with revenues of $776.0-$781.0 million with earnings of $0.23-$0.33 per share.

Shutterfly’s Growing Products
During the quarter, Shutterfly continued to expand their product line. They improved the algorithm behind their Custom Photo Book Creation Paths by adding features such as auto-fill capabilities, automatically improving photo, layout and background selection and improving auto-cropping and the final results. They also released a new service called, Magic Shop, which automatically analyzes uploaded pictures and creates new products using the best available photos. Further, to improve customer satisfaction and improved user interface, they released a new shortened Cart & Checkout flow that reduces the average purchase process steps from five to seven steps to 2 steps.

As part of their mobile offerings, they upgraded their application for the iPad to include e-commerce capabilities and enabling users to see photos in an enhanced photo viewer while using popular photo filters and enabled viewing of Photo Book projects at improved full-screen resolution. They also released their first App for Android devices.

Shutterfly’s Acquisitions
As part of their inorganic growth, they recently announced the acquisition of photo book software firm, MyPublisher. Founded in 1994, MyPublisher develops photo book-making software and has published more than 5 million photo books since 2002. The terms of the deal were not disclosed. Earlier this year, they also acquired start-up, ThisLife. ThisLife’s products help their users organize and share their photo and video content.

The market is pleased with Shutterfly’s performance. Their stock touched a year high of $59.93 earlier this month. It is currently trading at $51.58 with a market capitalization of $1.95 billion.