Very Near Term View A Little Less Rosy

Benefitting From Moderating Inflation

Off To A Good Start

Gross Margins Surprise On The Upside

Michael Kupinski

Virtual & In-person Roadshows / Conferences

Channelchek Premium. Access more at no cost. 

The site "channelcheck" is opened on the phone

Join the Channelchek Investor Community. Your name, email, zip, and investor type is all it takes to open the door to research reports, favorites tracking, and virtual and in-person roadshows / conferences. Even exclusive investment opps.

Take it to the next level. It doesn’t cost a penny.

Click “Log In” to agree to Channelchek.com <a href="#">Terms of Use</a> and acknowledge that Channelchek.com <a href="#">Privacy Policy</a> applies to you.

Welcome to the Channelchek Investor Community

Informed investors make more money. And it’s all about timing. Get it when it happens.

Inbox Intel from Channelchek.

Consumer Cyclical

Retail - Cyclical

1-800 FLOWERS.COM Inc.

Investment Appraisal
We believe that investors were focused more so on the company&#8217;s fiscal fourth quarter guidance than the strong, even robust, fiscal third quarter operating performance. In our view, there were plenty of skeptics that the company could grow revenues against the difficult comps from the Pandemic &#8220;lift&#8221;. But, the fiscal third quarter reflected strong operating momentum on both revenue and cash flow, as measured by adjusted EBITDA. Total company Q3 revenues increased 70.1%, in spite of headwinds that included Valentine&#8217;s Day falling on a Sunday, typically a lower revenue day of the week, and severe weather. Total company revenues of $472.4 million beat our expectations of $445.6 million. Cash flow, or adj. EBITDA, was strong as well, $15.4 million, beating our expectation of $4.1 million. Figure #1 illustrates our estimates versus the reported results.&nbsp;
Importantly, management guided fiscal fourth quarter revenues to increase 10% to 15%. This guidance is against the backdrop of an exceptionally difficult comp with revenue growth of 61% in the year earlier quarter, a quarter that was bolstered by strong gourmet food sales at Harry &amp; David. Recall the surge in online food orders as consumers became frightened to even go to grocery stores. Harry &amp; David revenue in the year earlier fiscal fourth quarter increased a whopping 112%. Of course, in the upcoming quarter, the company is expected to benefit from its recent acquisition of PersonalizationMall.com. Nonetheless, the company is not expected to see revenues decline in the upcoming quarter, as some investors and analysts feared.&nbsp;
Furthermore, the company guided adjusted EBITDA in the fiscal Q4 to be between $25 million and $30 million, which is down modestly from the year earlier quarter of $31.1 million. In our view, the cash flow guide is surprisingly strong and above our expectations of $18.2 million. Management indicated that the cash flow is constrained by higher Marketing expenses. In the year earlier quarter, marketing costs significantly dropped as advertisers stopped campaigns and rates fell across all mediums. We look at this difficult comp as virtually one time in nature as advertising rates meaningfully improved throughout 2020 and into the calendar first quarter 2021. As such, the company is not likely to have as difficult a comp in coming quarters. We are raising our fiscal Q4 revenue estimate from $445.6 million to $472.4 million and our adj. EBITDA estimate from $18.2 million to $29.9 million.&nbsp;
Flowing through the fiscal third quarter upside and the Q4 revisions, we are raising our full year fiscal 2021 revenue estimate to $2.107 billion from $2.011 billion. In addition, we are raising our adjusted EBITDA estimate from $188.4 million to $208.9 million. The following Figure illustrates our Q4 and full year 2021 revisions. In our view, there is favorable operating momentum that should carry into fiscal 2022. In addition, we believe that the company should benefit from revenue growth in PMall and continue to take share in its floral businesses. Notably, the company is expected to benefit from a substantial increase in its active customer files, which now exceeds 12 million. As such, we are raising our fiscal 2022 revenue and cash flow estimates to $2.29 billion and $229.3 million from $2.05 billion and $192.2 million, respectively.&nbsp;
Given a sanguine outlook for the company&#8217;s fundamentals and recent weakness in the stock price, the company&#8217;s board approved a share repurchase authorization of $40 million, an increase from the previous authorization of $30 million. There remained roughly $4 million under the previous repurchase authorization. The company has the financial flexibility to repurchase shares and to pursue acquisitions. As of March 31, the company had $256 million in cash and reasonable debt levels of $166 million, or less than one times our fiscal 2022 adj. EBITDA estimate.&nbsp;
The FLWS shares drifted from its previous highs in January near $32 to lows near $23 in April. We believe that the weakness reflected concern over the company&#8217;s fundamental outlook as it lapped the enhance revenue and cash flow from the pandemic. As the latest quarter illustrates, we believe that the company&#8217;s operating momentum appears favorable and that the lift from e-commerce sales was not temporary. We believe e-commerce and shopping online will be the new norm, with its growth trajectory accelerated by the pandemic.&nbsp;
Near current levels, the FLWS shares trade at 8.6 times Enterprise Value to our upwardly revised 2022 cash flow estimate. In our view, the shares do not fully reflect the double digit cash flow growth potential and trade at a substantial discount to its e-commerce peers. In addition, we believe that the company has the financial flexibility to pursue accretive acquisition fueled growth, enhancing its long term revenue and cash flow growth profile. Our price target of $47 reflects a target multiple of 13.8 times our upwardly revised fiscal 2022 cash flow estimate.&nbsp;

 
Behind the numbers&#8230;
 The fiscal third quarter results were strong, with revenues surging 70% to $474.2 million, well ahead of our $404.8 million estimate. This was a strong consumer floral quarter, benefiting from Valendine&#8217;s Day. Notably, in spite of Valentine&#8217;s Day falling on a lower revenue Sunday, consumer floral revenues increased a solid 70.6%. Even factoring out the benefit from PMall, the company&#8217;s consumer floral business increased a strong 40%plus.&nbsp; But, the biggest variance to our estimates was Gourmet Food &amp; Gift, which increased revenues 82.7%. Adjusted EBITDA was $15.4 million, which was better than our estimate of $4.1 million.&nbsp;

 
 <img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/flwsq3results.jpg" style="width: 390px;height: 736px" />
Management provided guidance for the upcoming fiscal fourth quarter that was better than our expectations. Importantly, management anticipates revenue growth on top of the year earlier revenue lift from the Pandemic. The company benefited from strong demand for its gourmet food at Harry &amp; David given stay at home mandates and concern over in person shopping. In addition, there was strong demand for e-commerce given social distancing and stay at home mandates. Management guided Q4 revenues to increase 10% to 15%, which is expected to reflect the acquisition of PMall and growth in that business. We estimate that Harry &amp; David revenues will be roughly flat in the quarter, substantially keeping the 112% revenue growth from the year earlier quarter.&nbsp;
Cash flow, as measured by adjusted EBITDA is expected to be modestly lower, due to the year earlier benefit from lower marketing costs. The company took advantage of the significant drop in advertising rates as companies cancelled advertising plans. Advertising rates sequentially increased in subsequent quarters as advertising demand strengthened throughout the year. As such, market expense comps should moderate in coming quarters.&nbsp;
 <img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/flwsq42021.jpg" style="width: 580px;height: 746px" />

1-800 FLOWERS.COM Inc. (FLWS)

Revenue Growth Expected On Top Of The Pandemic Lift

Fundamental Analysis:

Rating: Log in to view

Very Near Term View A Little Less Rosy (FLWS)

Benefitting From Moderating Inflation (FLWS)

Off To A Good Start (FLWS)

Gross Margins Surprise On The Upside (FLWS)

Inbox Intel from Channelchek.