Strong direct marketing performance helped offset an overall decline in revenue for Deluxe Corp., the check printer, during the first quarter.
The firm’s DM unit, Direct Checks, experienced a 14.9% sales increase in revenue, to $80.1 million, compared with the same period last year.
In a conference call this morning, CEO Lawrence J. Mosner attributed the hike to price increases, increased Internet sales and the acquisition of Designer Checks in February 2000, which added $5 million in revenue during the quarter.
In contrast, overall revenue declined by 1.8% to $321.6 million, compared with the first quarter of 2000. CFO Trapp said this was due to a 4% decline in units sold. However, this was partially offset by a 2.3% increase in revenue per unit.
Contributing to the direct marketing success was a return to aggressive customer acquisition spending.
“We started cutting back in the second half of [last] year, and are now ramping back up in first quarter,” Mosner said.
Internet sales totaled 15% of direct channel sales, a doubling over last year’s total.
In addition, the firm has received a “very positive response” to its Disney check packages, Mosner said. Sales of Disney checks totaled more than $7 million through Direct Checks.
The firm’s FI Checks division, which offers checks through financial institutions, suffered a 9.3% decline in revenue to $186.2 million. CFO Doug Treff said it was due to “competitive pricing pressure and a shift to the direct channel.”
Another factor was “the lingering effect of our decision” not to pursue some unprofitable business, Mosner said.
Meanwhile, the Business Forms unit, which sells checks and forms to small businesses, increased its revenue by 6.2% to $49.5 million. The unit sells through financial institutions, and through direct mail and the Internet.
Earlier this month, Business Forms launched a pilot Internet program, in which additional products are offered online. “Based on the results of the pilot, we will evaluate whether to broaden he rollout,” said Treff.
Starting this year, the Shoreview, MN-based company will report all three units as three separate business segments in filings with the Securities and Exchange Commission.
Overall, the firm reported diluted first-quarter income from continuing operations of .59 cents per share, up from .58 cents diluted per share during the same period last year.
Deluxe’s gross margin was 63.1% of revenue for the quarter, down from 64.1% in 2000. The firm attributed the decline to an increase in delivery costs for checks sold through financial institutions.
This quarter was the first in which Deluxe operated without its eFunds business.
The firm’s business strategy includes “leveraging the core competencies of personalization, e-commerce and direct marketing in our existing businesses,” Mosner said. The company also plans to expand its product offerings, consideration acquisitions that leverage our competencies, and “invest in technology and processes that will lower our cost structure,” he continued.
Earlier this year, Deluxe announced a repurchase of 14 million shares. To date, two million shares have been repurchased.
