NEW YORK (The Deal) -- Customization e-commerce retailer CafePress (PRSS) could be an enticing acquisition target to the likes of Amazon.com Inc. (AMZN) and Wal-Mart Stores (WMT) if it launches a sale process, despite failing to impress investors since raising $86 million in its initial public offering almost two years ago, according to sources.
Raymond James & Associates' Bob Lockwood and Jason Harkness are providing financial advice to CafePress, while Pillsbury Winthrop Shaw Pittman is providing outside counsel, CafePress CEO Bob Marino said in a Feb. 14 email.
Meanwhile, in a Feb. 14 statement, CafePress announced the departure of Monica Johnson as chief financial officer. Beginning in the second quarter, CafePress chief information officer, Garrett Jackson, will be the interim CFO.
One CafePress shareholder who described the company's post-IPO tenure as a "big disappointment" said he thinks a sale could turn things around, noting that the market for online retailers that are focused on product customization still has a lot of room to grow.
"This management team has failed to perform since the first day of going public," the shareholder said by phone.
This investor, who asked to go unnamed, expected Johnson to depart almost a year ago after CafePress missed its financial expectations in its first two quarters as a public company.
"Right now, the company is trading at a market value that reflects a view of ineptitude," the shareholder said.
Since its $19 per share debut in March 2012 on the Nasdaq, CafePress shares have plunged more than 65%, finishing at $6.64 on Feb. 13, the day before a strategic review was announced. The stock, which is listed under the symbol PRSS, has since slumped another 20%, to a $5.29 finish on Tuesday. CafePress' all-time low was $4.96 on Nov. 8, 2012.
The 25-year-old company, which recently moved its headquarters to Louisville, Ky., from San Mateo, Calif., lets shoppers customize everything from hoodies and posters to shot glasses and yoga mats, and also allows users to create online shops to sell their own products.
Despite its lackluster share performance, sources still think CafePress would draw quite a bit of interest if it pursues a sale, given that it has still managed to increase revenue and already has a good operational system in place.
CafePress generated revenue of $245.9 million for the 12 months ended Dec. 31, up from $217.8 million a year earlier. But it lost $13.5 million last year, as compared with a $3.1 million profit in 2012.
Jefferies analyst Brian Fitzgerald notes that two likely suitors are Wal-Mart and Amazon, which already have partnerships with CafePress. Given that Amazon already has a photo storage business and Wal-Mart already offers online photo printing, sharing, and personalized photo gifts, CafePress would "be a good tack-on business" for both companies, Fitzgerald said in a phone interview.
Other broad-based e-commerce companies such as eBay (EBAY) could also be interested in CafePress, the shareholder noted.
Both Fitzgerald and the shareholder feel CafePress' combination with one of its larger peers in the customized e-commerce space could benefit from production efficiencies.
Sources named Redwood City, Calif.-based Shutterfly, (SFLY) which specializes in personalized photo books, photo cards and stationary, and Venlo, Limburg-based Vistaprint, which specializes in personalized business cards and postcards, as potential suitors.
"All three of these guys essentially have the same business model but just attack different segments of the market," Fitzgerald explained.
Officials from Amazon, Wal-Mart and Vistaprint couldn't be reached Tuesday. Officials at eBay and Shutterfly declined to comment.
Shutterfly, in particular, has proven to be acquisitive. The company, which has a market capitalization north of $1.8 billion, last bought photo printing company R and R Images on Sept. 1, for undisclosed terms. It also snatched up BorrowLenses, MyPublisher and ThisLife in 2013. Terms of the deals weren't disclosed.
Vistaprint, with a market capitalization of about $1.7 billion, hasn't made any acquisitions since it bought Webs.com for almost $118 million on Dec. 19, 2011.
Given that its Ebitda growth is lagging most in the e-commerce space, Fitzgerald suspects CafePress would probably command only about about 5 times Ebitda in a sale, which he noted is a lower multiple than most deals in the space.
Based upon market expectations of about $19.2 million in Ebitda during fiscal 2014, that would value a transaction at approximately $96 million. (CafePress, meanwhile, anticipates adjusted Ebitda to fall between $7 million and $11 million for the year).
In his email, Marino, the CEO, wouldn't comment on whether CafePress has already received any buyer interest or any other specific options the company is considering.
"As the leader in customized e-commerce, we believe that CafePress has value that may not currently be recognized in the market," Marino said in the email. "We are focused on building our business and improving results. We saw strong growth in several categories including Art, Groups, and Home during Q4 and intend to focus our marketing efforts in 2014 on those areas, as well as continuing to build other aspects of our business such as mobile and social to drive our business moving forward."