Despite the retrenchment and financial struggles noted in retail news headlines, many retailers are showing strong demand for omnichannel supply chain technology from SPS Commerce Inc. that provides consistent order and fulfillment services across online and offline channels, CEO Archie Black says.
That demand was behind a 14% year-over-year increase in SPS revenue in the first quarter ended March 31, to $51.9 million, SPS says.
SPS attributes much of that growth to the spread of omnichannel technology and strategies. An omnichannel operation is designed to let consumers shop across e-commerce sites, mobile devices, contact centers and stores, then receive their order in the quickest and most efficient manner. In turn, retailers with cross-channel purchasing data can share that demand information with merchandise suppliers to better plan supply chain activity and product assortments, and to more effectively deliver goods regardless of where the consumer shopped, SPS says.
But Black said there are still a number of retailers that have not invested in such omnichannel technology and strategies, posing a limitation on his company’s revenue growth. “There is a lot of uncertainty,” he said on a conference call with stock analysts last week, according to a transcript from Seeking Alpha, adding: “You need to be very strong operationally and merchandising-wise in today’s retail environment to compete, and some [retailers] aren’t doing that.”
Black added that, with retail industry retrenchment resulting in store closings and bankruptcies, SPS has already lost out on some retailer account activity that “cost us a point or so of growth” in the first quarter. He added that, with some retailers holding back on investing in new omnichannel technology, it was difficult for SPS to forecast when it will return to a targeted growth rate of 20% in recurring revenue. That growth rate was 15% year over year in the first quarter. Recurring revenue is revenue that a company can count on to come in at regular intervals, based on, for example, multi-year contracts with customers.
Among SPS’s client base, many retailers with an omnichannel selling strategy are growing their in-store along with their online sales, Black said. He further noted that increases in store revenue are largely “because of web-influenced sales.”
For the first quarter ended March 31, SPS reported:
- Revenue of $51.932 million, up 13.9% from $45.599 million;
- Gross profit of $34.602 million, up 12.6% $30.718 million;
- Sales and marketing expense of $17.079 million, up 7.5% from $15.889 million;
- Research and development expenses of $5.105 million, up 0.7% from $5.069 million;
- Net income of $2.971 million, up 184.6% from $1.044 million.
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