E-commerce florist and gift retailer 1-800-FLOWERS (NASDAQ:FLWS) missed analysts’ expectations in Q2 CY2024, with revenue down 9.5% year on year to $360.9 million. It made a GAAP loss of $0.32 per share, improving from its loss of $0.35 per share in the same quarter last year.
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1-800-FLOWERS (FLWS) Q2 CY2024 Highlights:
- Revenue: $360.9 million vs analyst estimates of $374.4 million (3.6% miss)
- EPS: -$0.32 vs analyst expectations of -$0.27 (20.8% miss)
- EBITDA guidance for the upcoming financial year 2025 is $90 million at the midpoint, below analyst estimates of $99.44 million
- Gross Margin (GAAP): 38.4%, up from 37.1% in the same quarter last year
- EBITDA Margin: -2.4%, up from -15.6% in the same quarter last year
- Free Cash Flow was -$17.2 million, down from $28.99 million in the same quarter last year
- Market Capitalization: $577.9 million
“In a dynamic consumer environment that impacted discretionary consumer spending, especially amongst lower income households, our organization was able to grow year-over-year adjusted EBITDA, which benefitted from our significant gross margin recovery and our expense optimization efforts that more than offset the top line decline,” said Jim McCann, Chairman and Chief Executive Officer of 1-800-FLOWERS.COM.
Founded in 1976, 1-800-FLOWERS (NASDAQ:FLWS) is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.
Specialized Consumer Services
Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Over the last five years, 1-800-FLOWERS grew its sales at a weak 8% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis. 
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. 1-800-FLOWERS’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 8.9% annually.
This quarter, 1-800-FLOWERS missed Wall Street’s estimates and reported a rather uninspiring 9.5% year-on-year revenue decline, generating $360.9 million of revenue. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
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Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
1-800-FLOWERS has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.3%, lousy for a consumer discretionary business.
1-800-FLOWERS burned through $17.2 million of cash in Q2, equivalent to a negative 4.8% margin. The company’s quarterly cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Over the next year, analysts predict 1-800-FLOWERS’s cash conversion will slightly fall. Their consensus estimates imply its free cash flow margin of 3.1% for the last 12 months will decrease to 2%.
Key Takeaways from 1-800-FLOWERS’s Q2 Results
We struggled to find many strong positives in these results. Its revenue and EPS fell short of Wall Street’s estimates and its full-year EBITDA guidance was underwhelming. Overall, this was a weaker quarter. The stock traded up 1.7% to $9.13 immediately after reporting.
So should you invest in 1-800-FLOWERS right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.