New York – Is 1-800-FLOWERS a gift? Or will you get wilted flowers? If you had any doubt economic pressures are impacting consumer spending, one should look at the earnings results of 1800 Flowers (NASDAQ: FLWS).
First quarter revenues were down 1.9% vs. last year. Excluding the impact of acquisitions, revenue declined 3.6%. First quarter Adjusted EBITDA loss was $28 million compared with an Adjusted EBITDA loss of $5.3 million for Q1 last year.
In short, it was ugly. but for 1800Flowers – it was better than expected.
Consumer behavior continues to reflect the significant inflationary pressures in the macro economy that are affecting both discretionary and nondiscretionary spending and reflects a continuation of the trends that we saw beginning last December. Softness was experienced in consumer floral and the gift business which for unknown reasons was somewhat offset by the growth of gourmet foods and gifts basket businesses. I must confess, I may have contributed to that latter growth as I’ve been munching on tins of 3-flavored popcorns sold by 1800FLOWERS sister website – the Popcorn Factory. All kidding aside, consumers are clearly cautious as they have stopped spending on gifts.
1800FLOWERS management is expecting this trend to continue with sales down in the mid-single digits. This to us is disappointing as one would expect management to be able to raise prices on items such as flowers. After all, when people die and get sick – you get flowers.
Right now – the stock is punished hard. Trading at around $8.15 per share as we write this brief. That is down 77% in the past year. That said, we believe that as consumers settle into the new reality —in about a year so — Mom will be getting higher priced flowers on Mother’s Day. Girlfriends (or boyfriends) will be getting higher priced flowers on Valentine’s Day. And for me, I’ll still be nibbling on some popcorn – but maybe I’ll buy the smaller size. In the meantime, we like acquiring a position now in 1800FLOWERS as the business model can’t be replicated by Amazon, is unaffected by technology spending and is just a good old cyclical consumer stock.
Note: This article was originally published on November 29, 2022, with grammatical corrections made December 9, 2022.
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