Shares of Deluxe Corp., the nation's largest check printer, have tumbled since it reduced its full-year earnings guidance and warned that it expected to post a loss for the second quarter.
The Shoreview, Minn., company said Friday that it was abandoning an effort to replace major portions of its order capture, billing, and pricing systems in its financial services division and part of its small-business services division.
As a result, Deluxe said, it would take a pretax impairment charge of about $45 million, or 56 cents a share, and it expects to show a quarterly loss of 9 to 11 cents.
As of last week the average estimate of two analysts who follow the company had called for Deluxe to report earnings of 54 cents.
It lowered its full-year earnings outlook to $1.37 to $1.47, from the $2.70 to $2.80 that it had projected in April when it reported first-quarter results.
Investors quickly sold their shares after the announcement, and the selloff continued Monday. Deluxe shares fell 18.2% Friday, and another 14.1% Monday, to close at $15.02.
The company said that each of its business units was showing "performance shortfalls," and that it cancelled the technology project to focus on business fundamentals.
"We are extremely disappointed in how the second quarter is coming in," Lee Schram, the company's chief executive officer since May, said Friday in a press release. He succeeded Lawrence J. Mosner, the longtime CEO who retired in November.
Mr. Schram said Deluxe dropped the project because it needed to "simplify our business processes before we make further large-scale investments in automation" and to cut additional costs.
The project has suffered cost overruns and delays, and Deluxe said it decided the project would not meet its requirements in light of the simplification effort.
Deluxe said it would cut costs for the checks it sells through banks, modestly increase its marketing for checks sold directly to consumers, and improve the marketing strategy for its small-business division. (In 2004, Deluxe bought the Groton, Mass., catalog office supply company and printer New England Business Service Inc.)
