FTD Looks to Headquarters Move, Tech Investments to Grow Business
发布时间:2018年06月26日
发布人:nanyuzi  

As Rivals Bloom, FTD Looks to Headquarters Move, Tech Investments to Grow Business

 

Corilyn Shropshire

 

Earlier this month FTD Cos. CEO John Walden cut the ribbon on the floral and gifting company’s still-under-construction 40,000-square-foot headquarters in the Loop, closer to the city’s hip tech firms.

 

For the nearly 110-year-old flower and gifting business, the pending move of roughly 200 jobs from Downers Grove to the city signaled not only a new space, but the beginning of a pivotal year.

 

Despite buying Internet flower firm ProFlowers and its sister gifting brands such as Shari’s Berries and Personal Creations for $430 million in 2014, the deal hasn’t worked out as planned.

 

Revenues doubled initially when the sale was completed later that year, largely due to the added revenue of the new businesses.

 

But last year sales slid to $1 billion, down 7 percent from 2016. And in this year’s first quarter, FTD reported a $6.5 million loss, compared with a profit of $9 million in the year-ago period. First-quarter revenues rose less than 1 percent, to almost $319 million. Year-over-year, FTD’s stock price is down 70 percent.

 

The company had hoped to renegotiate its banking relationships by the end of last year and is still involved in those conversations, Walden said. In FTD’s 2017 annual report, the company said its outside accounting firm had emphasized it had “substantial doubt” about the company’s ability to remain an ongoing concern.

 

Still, Walden, who served as CEO of British retailer Home Retail Group before being hired by FTD in March 2017, is optimistic. “This is not a company that’s teetering,” he said.

 

FTD, like its rivals, sells pre-designed floral arrangements directly to consumers online. Since its beginning in 1910, FTD has relied on its member-florists to fulfill its orders, and then FTD takes a cut of the sales revenue. It also operates floral distribution centers.

 

Walden described FTD’s model as “the Internet before the Internet.” Now, he said, FTD’s technology systems are outdated, making it less competitive.

 

“Technology creates new leaders, so it’s just a lack of investment over many, many years,” he said.

 

While FTD was aiming to grow by acquiring other gifting businesses, it neglected its bread and butter – flowers – as competitors, including some newcomers, nipped at its heels, said Linda Bolton Weiser, a senior analyst at D.A. Davidson & Co.

 

Floral delivery startups, such as BUQS.com, UrbanStems and FlowersforDreams.com, among others, began offering modern floral arrangements at lower prices, disrupting the market.

 

“Established companies have long-ingrained practices and it’s harder for them as large companies to quickly pivot and change,” said Anya Cohen, retail analyst at market research firm IBISWorld. “These smaller companies have more mobility in terms of being able to follow the demands and interest from consumers.”

 

Meanwhile, FTD’s main rival remains 1-800-Flowers. Last year that company, which also owns Harry & David and Moose Munch Gourmet Popcorn, reported revenue of $1.2 billion in revenue, up 1.5 percent from the prior year. Income rose slightly, to $486.9 million, according to regulatory filings.

 

Flowers represent only a fraction of FTD’s business. The bulk of its revenues come from its gift-related product business, such as specialty foods, wine, champagne and personalized gifts like monogrammed kitchen supplies and jewelry.

 

Walden, who was perceived by industry watchers to be the surge of energy FTD needed become more agile, said after taking the reins that he planned to do a full review of the company’s operations and develop a five-year turnaround plan.

 

“It seems that FTD has focused on short-term profit objectives to such a degree that it compromised its investments in customer experiences, marketing, technology and other capabilities required for a contemporary digital business,” Walden wrote in a 2017 letter to shareholders. “I believe that this approach has constrained FTD’s growth.”

 

In short, Walden said, the strategy of acquiring more gifting brands instead of modernizing the business didn’t work. Over the next five years, FTD will spend roughly $40 million to hire tech talent, improve customer service and organize its supply chain, he said during a recent interview.

 

“Technology will be the vehicle that changes the business,” he said. “It will be the heart of the business, servicing consumers or organizing our supply chain.”

 

The improvement plan, he said, will be a process of trial, error and learning. A case in point: the company launched a new mobile app and website for Valentine’s Day, developing in six months what might previously have taken 18 months. However, it didn’t yield the success that had been hoped for: Its Valentine’s Day offering, selling a combination of two-dozen roses and chocolates for $79.99 fell flat, Walden said.

 

More competitors for FTD means florists have more partners from which to choose.

 

Eric Phillips, manager of Dilly Lily in Lincoln Park, said the company has never done business with FTD. “Their designs are kind of generic and it doesn’t give our florists an opportunity to showcase their talents,” he said. “Wire services,” he added, “have a bum rap in the florist industry.” The company uses the B Brooks Fine Flowers network.

 

Even though the FTD’s startup rivals, which are privately held, have less than 1 percent of the floral market share, they are growing, industry analysts note.

 

“They are disruptive,” said IBISWorld’s Cohen. “Historically these larger companies were really the only players in online flower space. With strong marketing campaigns they’ve taken consumers, leading to pressure for revenue gains.”

 

1-800-Flowers holds 30.2 percent of the online flower business while FTD’s share of online floral orders is 24.8 percent, according to IBISWorld.

 

Even though the number of bricks-and-mortar florists has shrunk and that trend is expected to continue, the floral industry at large is growing. “The macroeconomic climate has been beneficial for discretionary things like flowers,” Cohen said. But intense competition within the industry has made it more difficult for companies to claim bigger portion of the pie.

 

Therein lies FTD’s great challenge: holding back the competition while it spends tens of millions of dollars reinventing itself.

 

“When you’re trying to fix a challenged business and restore its growth, you have to have the courage to invest,” Walden said. “And you have to take a less-than-stellar financial performance if you believe (that) in the long term, it’s right for the company.”