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With more consumers shopping for flowers online and more competition from grocery stores that stock flowers and bouquets, FTD needed to broaden its consumer business, says CEO Robert Apatoff.
Consumers that increasingly do more flower shopping online and increased competition from grocers and others that now sell a wider array of bouquets and plants helped spur FTD Inc.’s planned $430 million acquisition of Provide Commerce, FTD CEO Robert Apatoff told Wall Street analysts yesterday on the company’s second quarter earnings call.
FTD, No. 105 in the 2014 Internet Retailer Top 500 Guide, announced July 30 plans to acquire the floral and gifting businesses, including the e-commerce sites, of Provide Commerce from Liberty Interactive Corp. (No. 6). Provide Commerce’s floral and gifting portfolio includes flower retailer ProFlowers, online dipped berry company Shari's Berries and personalization retailer Personal Creations.
FTD made the acquisition, which FTD expects to finalize by the end of the year, because FTD had a pressing need to diversify its product line and react more quickly to consumers that increasingly are turning to the web to buy their flowers and gifts for special occasions. “Shopping behavior continues to migrate to e-commerce and mobile platforms, and floral offerings are more commonly positioned at retail locations including grocery and mass market stores,” Apatoff told Wall Street analysts. “In the face of this changing landscape, it is our responsibility to understand and correctively adapt to the changes and attract as much consumer demand as possible to FTD and our number of florists.”
When the acquisition is complete the combined company will have annual revenue of $1 billion, Apatoff said. But more important, the deal will eventually help FTD diversify its consumer business segment, which has been flat in recent quarters, the company says. “Together FTD and Provide Commerce will offer consumers an enhanced shopping experience through an expanded selection of innovative floral and gift products providing them with greater choice and convenience,” Apatoff told analysts. “Provide Commerce's brand portfolio has become its destination of choice for consumer gifting needs and occasions. And combined with our brands, we expect to have one of the most compelling floral and gifting portfolios in the world.”
For the quarter ended June 30, FTD reported:
- A decrease in consumer revenue of 2.2% to $96.05 million from $98.26 million in the second quarter of 2013. FTD does not break out quarterly web sales.
- An increase in floral sales of 0.8% from $41.36 million in the second quarter of 2013 to $41.71 million.
- Total revenue increased year over year 2.3% to $168.09 million from $164.27 million.
- Net income decreased to $4.70 million from $5.46 million.
In the second quarter FTD’s consumer business was impacted by fewer orders around Mother’s Day. “The consumer segment was challenged from a top-line perspective in the second quarter, driven by a decline in order volume during the Mother's Day holiday,” Apatoff told analysts. “In our consumer segment, we continue to see heightened levels of spending across the broader competitive industry on media, marketing, online and search functions and certain partner programs that become more expensive to secure and maintain.” FTD did not break out Mother’s Day order volume but total orders for the second quarter declined 6% to 1.34 million from 1.42 million while the average ticket was $67.55 compared with $64.92 in the second quarter of 2013.
The acquisition of Provide Commerce will eventually help FTD develop a stronger and more diversified consumer business, Apatoff said. “The floral and gift industry continues to evolve and like most every consumer goods industry, consumers are in control of where and how they shop,” Apatoff told analysts. “This acquisition will advance FTD's business strategy by uniting two dynamic and highly complementary businesses.”