Demandware Inc. shares jumped Thursday after the online retail services company said that it has struck a deal with beauty products company L'Oreal S.A.
THE SPARK: The company, which helps companies create and manage online stores, said Thursday that L'Oreal is expanding its relationship with Demandware.
L'Oreal will use the company's commerce platform to promote its brands around the globe. Under this agreement, Demandware will help promote sales of 25 brands through online, mobile and social media. The value of the deal was not disclosed.
THE BIG PICTURE: L'Oreal first began working with Demandware in 2010 to promote several luxury brands in North America — including Kiehl's, Lancôme, and Yves Saint Laurent Beauté — and later added its professional products division in the U.S. The company said that, based on that success, it is expanding the relationship to its business worldwide.
Demandware will provide L'Oreal with a single platform for developing and managing multiple sites with support for multiple languages and currencies.
THE ANALYSIS: Janney Capital Markets analysts Shawn Milne said that Demandware is poised to take advantage of strong online spending, bucking the slowdown in retail.
"We believe the rapidly changing online environment is forcing retailers to re-platform at an accelerating pace - fueling stronger customer/site growth," he said in a research note.
He said the expanded deal with L'Oreal is a major win, given the scope of brands and services it will be providing. The analyst estimated that in the next five years, L'Oreal could represent revenue of $10 million to $15 million for the company.
SHARE ACTION: Demandware shares jumped $3.87, or 8.5 percent, to $49.37 in afternoon trading. Its stock is nearing the top of its 52-week trading range of $23.90 to $50.60.