1-800-FLOWERS (FLWS)

E-commerce florist and gift retailer 1-800-FLOWERS (NASDAQ:FLWS) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 12.6% year on year to $331.5 million. Its non-GAAP loss of $0.71 per share was significantly below analysts’ consensus estimates.

Company Overview

Founded in 1976, 1-800-FLOWERS (NASDAQ:FLWS) is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.

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.

Competitors operating in the online retail of flowers and gifts industry include Amazon (NASDAQ:AMZN), Kroger (NYSE:KR), and Walmart (NYSE:WMT).

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, 1-800-FLOWERS’s sales grew at a sluggish 5.1% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector and is a tough 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 performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 9.9% annually.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Gift Baskets and Flowers, which are 32.3% and 59.1% of revenue. Over the last two years, 1-800-FLOWERS’s Gift Baskets revenue (food and fruits) averaged 81,656% year-on-year growth while its Flowers revenue (floral products) averaged 88,508% growth.

This quarter, 1-800-FLOWERS missed Wall Street’s estimates and reported a rather uninspiring 12.6% year-on-year revenue decline, generating $331.5 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 6% over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

1-800-FLOWERS’s operating margin has shrunk over the last 12 months and averaged negative 4.5% over the last two years. Unprofitable consumer discretionary companies with falling margins deserve extra scrutiny because they’re spending loads of money to stay relevant, an unsustainable practice.

This quarter, 1-800-FLOWERS generated a negative 58.4% operating margin. The company's consistent lack of profits raise a flag.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for 1-800-FLOWERS, its EPS declined by 24.2% annually over the last five years while its revenue grew by 5.1%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

In Q1, 1-800-FLOWERS reported EPS at negative $0.71, down from negative $0.28 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast 1-800-FLOWERS’s full-year EPS of negative $0.58 will reach break even.

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 1.5%, lousy for a consumer discretionary business.

1-800-FLOWERS burned through $160 million of cash in Q1, equivalent to a negative 48.3% margin. The company’s cash burn increased from $121.4 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

1-800-FLOWERS historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.4%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, 1-800-FLOWERS’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

1-800-FLOWERS reported $84.68 million of cash and $279.2 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $44.63 million of EBITDA over the last 12 months, we view 1-800-FLOWERS’s 4.4× net-debt-to-EBITDA ratio as safe. We also see its $7.94 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results as its revenue, EPS, and EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 8.4% to $5.31 immediately after reporting.

Updated: May 15, 2025 at 10:06 PM EDT

Before making an investment decision, investors should account for 1-800-FLOWERS’s business fundamentals and valuation in addition to what happened in the latest quarter.

1-800-FLOWERS doesn’t pass our quality test. For starters, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its operating margins reveal poor profitability compared to other consumer discretionary companies.

1-800-FLOWERS’s P/E ratio based on the next 12 months is 16.1x. This valuation tells us a lot of optimism is priced in - we think there are better investment opportunities out there.

Wall Street analysts have a consensus one-year price target of $9 on the company (compared to the current share price of $4.65).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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