New York - Update January 2, 2024 - Everyone enjoys flowers, and we also appreciate the stock of 1800FLOWERS. Opening 2024 at a price of $10.66, the stock is up 15.7% since our May 1, 2023 update, and 30.7% since our initial report in November 2023.
In early November 2023, 1800FLOWERS reported results in line with their expectations. Notably, gross margins improved as the company recovered from supply-chain issues through productivity changes and ongoing technology and automation efforts. However, the company has yet to report a quarter showing improvement in everyday discretionary sales from consumers. In other words, sales outside of major holiday periods continue to be tempered.
Our assessment of the December 2023 holiday season is positive. We anticipate seeing solid performance, particularly from higher-income customers. Additionally, with falling gas prices and more consumers traveling, impulse purchases of flowers and candy likely increased. The company has also enhanced its website, allowing customers to add wines and cheesecakes to flower orders. Although this update might have been expected earlier, we welcome these improvements.
What we find concerning is the need for more non-family external management. In June 2023, Christopher McCann, the company's CEO, stepped down for personal health reasons and was succeeded by Chairman Jim McCann. Given that Jim is nearing 70, we believe he may not be as attuned to the social media habits of younger generations, and we would like to see better efforts in this area. Additionally, our discussions with knowledgeable sources suggest that the company's spending habits are poorly maintained. Frankly, family-dominated companies often struggle to advance beyond a certain level without fresh perspectives from external management. While we respect Jim's contributions, we advocate for an expanded and new management team with a more agile market approach.
With the upcoming Valentine's Day season, we expect further momentum and value expansion for the stock.
New York - Update May 1, 2023 - With 1800Flowers' stock trading at $9.21, up 13% since our last positive update on February 13, 2023, it's time for another update ahead of the Q3 results, which are expected to be reported on May 11, 2023. We're eagerly anticipating these results, which will include the numbers from the Valentine's Day holiday, which was NOT a success for the company last year.
The 2022 Valentine's Day holiday was a rough one for 1800Flowers, with shares ultimately plummeting 15% due to poor results and missed expectations. However, we believe the company may have learned from its mistakes and is now better prepared to face any supply chain issues and other business challenges. This year, 1800Flowers made it easy for customers to choose gifts with a "Valentine's Day Gift Guide" that included classic Valentine's Day flowers, candle gifts, aromatherapy gifts, and more.
We see 1800FLOWERS as an undervalued and good value stock. The company operates through multiple brands, including Harry & David, Shari's Berries, The Popcorn Factory, Cheryl's Cookies, Simply Chocolate, Personalization Mall, Stock Yards, and Vital Choice, among others. With such a diverse product line, 1800Flowers is well-positioned to thrive in various markets. While some of the smaller brands may not be performing as well as others, they could still provide an opportunity for capital deployment or sale.
1800Flowers has a loyal customer base, with existing clients representing 70% of its sales. With plenty of time to navigate supply chain issues and right-size costs, we believe the current quarter could deliver an upside surprise. All in all, we remain positive about 1800Flowers' potential and believe it's a solid investment choice for a long-term portfolio.
Recently, the company reported its Q2 2023 financial results for the period ending January 1, 2023. Total consolidated revenues were $897.9 million, representing a 4.8% decrease from the previous year. Despite this decrease, the gross profit margin improved by 90 basis points to 41.0%. Operating expenses were 28.1% of total sales, a slight increase from the prior year. The company's net income for the quarter was $82.5 million, or $1.27 per diluted share, compared to $88.5 million in the prior year. The company's adjusted EBITDA was $131.4 million, compared to $133.1 million in the prior year period.
As a result of these strong financial results and our updated outlook for the company, 1800 Flowers' stock has risen by 36% since our initial report, now trading at around $11.14. We believe that the stock still has a lot of upside potential, with a 52-week high of $16.65 in sight. With the upcoming Valentine's Day and Mother's Day holidays, we believe that consumers will be in spending mode, due to the recent decrease in fuel prices.
We believe that 1800 Flowers is well-positioned to recover from the negative impact of inflation, increased labor costs, and a decrease in consumer spending. We expect the company to see growth during the upcoming holiday season, and believe that the stock has the potential to grow from its current levels.
In conclusion, we continue to be bullish on 1800 Flowers and recommend that investors consider adding it to their portfolios.
Editors Note: The original research post can be found at this link https://theadviser.com/trusted-buyside-stock-research/is-1-800-flowers-nasdaq-flws-a-gift/
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