Moody’s rates Shutterfly B+

Moody’s Investors Service has completed a periodic review of the ratings of Shutterfly, LLC, and maintained the companies B3 rating. In June, Moody’s downgraded the company’s rating from B2 to B3, from June 20. The service cited the key rating considerations:

Shutterfly’s B3 Corporate Family Rating (CFR) reflects the company’s high financial leverage, exposure to cyclical consumer discretionary spending, highly seasonal business with idled capacity during non-peak selling periods and absence of meaningful international diversification. Shutterfly operates in an intensely competitive marketplace and lacks pricing power, evidenced by low single-digit operating margins. The company is highly dependent on fourth quarter earnings to offset operating losses in the first nine months of the year due to large product discounting when consumer demand is seasonally weak. The rating is supported by Shutterfly’s: leadership position and manufacturing scale as a provider of personalized photo products and services increasingly via online customer engagement; broad range of customized products and seamless user experience that facilitate recurring customer usage; and vertically-integrated operation with low customer acquisition costs. Business line diversification is provided by Lifetouch, the U.S. market leader in school photography, and Snapfish, a global online retailer of digital photography and personalized photo-based products, which provides greater exposure to the faster growth value segment. Shutterfly’s rating also reflects the impact of the coronavirus outbreak on its profitability given its exposure to the US, which has left it vulnerable to shifts in market demand and sentiment in these unprecedented operating conditions.