Frontdoor says sales up, profits down
Memphis-based Frontdoor Inc. said quarterly profits slipped on rising sales costs.
The home services firm said secondquarter profits fell 18% while sales revenue rose as customers sheltered at home amid the coronavirus pandemic.
Frontdoor split away from Memphisbased Servicemaster Global Holdings Inc. and became a standalone company in 2018.
Frontdoor employs 2,300 people, including 730 in Memphis, and operates the brands American Home Shield, Landmark, Oneguard, Candu Home Solutions and Streem.
In a quarterly earnings report released Wednesday afternoon, publicly traded Frontdoor said revenue reached $417 million for the three-month period, a 7.5% gain compared with 2019's second quarter. After-tax income totaled $49 million, down from $60 million in the same quarter last year.
Profits were reduced this summer by a $21 million increase in sales costs and a $13 million rise in contract claims costs, the company said.
In a statement released by the company, Frontdoor Chief Executive Rex Tibbens said: “In this challenging external environment, our services are more essential than ever as customers spend additional time in their homes.
“We have a resilient business model that performs well throughout the economic cycle,” Tibbens said, “and our value proposition is enhanced during these extraordinary times. We are also opportunistically investing in the longterm success of the business and remain well positioned to deliver strong future growth as the macroeconomic environment recovers."
Rising sales costs in part reflected near-term investments, especially in marketing, to accelerate long-term growth, a Frontdoor spokeswoman said.
"We've also seen increased demand for our services since the pandemic, which speaks to the value we provide our customers. Absent our opportunistic investments marketing and covidrelated demand, we would have beat prior year" results, the spokeswoman said.
Frontdoor executives estimated third-quarter sales would total $430 million to $440 million, outpacing the $407 million in sales recorded in 2019's third quarter.
Frontdoor's stock price closed Wednesday at $40.74 per share, down $1.50 from Tuesday's close.
Frontdoor handles 2.2 million U.S. customers through a network of 17,000 contractors employing about 60,000 technicians.
American Home Shield warranties appliances against defects. Candu offers members home repairs and maintenance. Streem provides customers an enhanced augmented reality, computer vision and machine learning platform.
In June, Oregon-based Streem formed an alliance with hardware chain Lowe's to enable Lowe's workers to confer with customers in their homes using computers.