1-800-FLOWERS.COM, Inc. ($FLWS)
"Flowers and much much more...maybe too much more..."
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In 1976, company founder James Francis McCann purchases his first retail floral shop in Manhattan (one of the 14 stores he will open in the New York metro area over the next 10 years). In 1986, company acquires the 1-800-Flowers phone number and subsequently renames itself after its phone number. In 1995, 1-800-Flowers.com® eCommerce website goes live & you can now buy flowers online:
In 1999, 1-800-Flowers renames itself to 1-800-FLOWERS.COM, Inc. in conjunction with its IPO. Shares in the company are traded on the NASDAQ, ticker symbol: FLWS.
(side note) Reaching a high of $20.75 in 1999 and not seeing those numbers for another 20 years … next time FLWS 0.00%↑ had reached $20 area was in 2019.
So what does 1-800-FLOWERS.COM (going forward will refer to as FLWS) actually do?
As you can (hopefully) guess by the name, for the most part FLWS sells DTC (Direct To Consumer) flowers and other type of gifts and baskets (cheese, fish, chocolates, fruits, etc) that you can think of, for all type of occasions like Mother’s Day, Birthdays, Christmas, Get Well, Corporate, etc.
Current 17 brands of FLWS:
From 2002 to 2023, FLWS has acquired eight companies and the rest developed in-house.
FLWS consists of Three Business Segments that offer customers a premier mix of brands to meet customers gifting needs, which are:
CONSUMER FLORAL & GIFTS SEGMENT
GOURMET FOODS & GIFT BASKETS SEGMENT
Currently there is around 11M+ active customers with about 70% of total revenue generated by existing customers.
Lastly, Celebrations Passport (CP) loyalty program that FLWS has enhanced since the first time when it was introduced in 2013. “Update” happened around 2022. CP loyalty program rewards customers with free standard shipping and no service charge for one full year on purchases made across the FLWS’s family of brands and provides the ability to unlock additional perks and benefits that grow as members gift.
There are currently around 1.3 Million CP Members.
Majority of business is done in US.
“The Company’s net revenues from international sources were not material during fiscal years 2023, 2022 and 2021.”
As mentioned in the beginning, the company was started by its founder James Francis McCann also known as Jim McCann and he was the CEO of the company from 1976 to June 30, 2016 and in 2016 Jim’s brother Christopher G. McCann took over as CEO until 2023 when in July 2023 Chris stepped down due to health reasons and Jim took over as CEO again.
No matter how you spin it (be it under leadership of Jim or Chris) … from the IPO date and until January of 2024 the stock has compounded at -2% CAGR and yes I understand that stock price is not telling you how the company is really doing “under the hood” but market is pretty good at showing you that if Mr Market is not rewarding the stock with higher prices there is probably something wrong (and if there is not then you have yourself an opportunity).
Jim McCann is the largest shareholder at about 50% of all outstanding shares (Jim owns 28,898,017 & 1999 Mccann Family Limited Partnership owns 3,875,000 & The Mccann Family Limited Partnership owns 2,000,000) while Chris owns 1,822,030 shares.
No other members of the team or the board owns any significant amount of shares.
Whenever I think of buying flowers/baskets, it mostly comes down to:
How fast I need it & who is the cheapest option ?
FTD - offers almost all the same things as FLWS
Teleflora is part of The Wonderful Company LLC (privately held $5 billion company)
Proflowers - offers almost all the same things as FLWS
fromyouflowers.com - offers almost all the same things as FLWS
bouqs.com - mostly flowers with a bit of corporate gifts
sendsmiles.com - florist website created with Shopify
When I need a bouquet for my wife, mother, a local party/occasion the easiest option for me is to just get a bouquet from local florist that is just around the corner. Also, local florists are (most of the time) are the cheapest option too! Selection is great and I get to actually see and smell the bouquet which adds a bit of “personal touch”.
When I can’t give flowers in person that means I usually would have to order via FLWS or FTD and usually it just comes down to who is the cheapest option. Because currently I have FLWS’s CP I would just order through 1-800-FLOWERS.COM to get free shipping so that makes FLWS’s products a bit more stickier BUT the thing is FTD actually offers the same thing with their FTD Plus so if I would get FTD Plus I would obviously not go with FLWS’s CP , in that sense both companies have similar products / offers.
Googling “buy flowers online” and you get multiple companies that will sell you flowers at competitive price and most with free shipping and/or same day delivery.
With everyone having access to the internet means that local florists too have access to selling their flowers online (via Shopify) or receiving orders online and fulfilling them with their own drivers, cutting out the companies like FLWS and FTD out of equation or at least getting some bargaining power.
Financials & Metrics
As of January 26, 2024:
Market Cap: $698.3M | EV: $1,047.86M | Shares Out: 64.9M | Employees: 4,200 | HQ in Jericho, NY.
After reviewing Financials & Metrics section, lets discuss some risks…
Competition - as we saw from “competition section” there are a lot of players in this space and FLWS is not really providing with anything unique that can’t be copied by competition. FLWS does have a bigger selection of variety, but that is not always the best option, it all depends on what you are offering.
Pricing - It seems that FLWS’s products are a bit more expensive but they are not really any better so with things like gifting flowers or corporate baskets, my guess most people will go with the cheapest and “okay” looking items rather then what is the best looking and most expensive. Roses are roses all over America and so are strawberries that are dipped in chocolate.
Flowers/Foods - Shortage of flowers, rising commodity prices, food related sickness.
Macro / margins - As we can see covid / post covid FLWS relies heavily on its partners and on logistics. Price hikes in supplies / labor / logistics (FedEx raised prices so FLWS had to notify that they would be raising prices on certain things because they cant “eat up” the cost) are reflected in lower margins.
Macro / consumers - FLWS is not See’s Candies. We can see that with FLWS disappointing numbers.
"They had taken a box on Valentine's Day to some girl and she had kissed him … See's Candies means getting kissed. If we can get that in the minds of people, we can raise prices." - Warren Buffett
When See’s raises prices, people just smile and buy more candies, but when FLWS raises prices, people go to a different website or to their local florist.
Too many (and unnecessary) acquisitions - Looking at FLWS’s “brands” and I believe that management could have easily developed most in house without buying out companies like Cheryl’s Cookies, Shari’s Berries and I really think there was no need going into acquiring Vital Choice and PersonalizationMall.com and lastly acquiring Alice's Table in 2022 was in my mind a questionable acquisition.
An easy thesis is betting that management can maneuver current macro environment and that over the long term things will go back to “normal” and growth will stabilize.
Management being able to profitably combine all of the brands and out-perform the competition by doing additional acquisitions of competitors or just driving out other competitors because there just wont be enough margin for everyone to go around.
Expending into Canada or overseas for growth (this is a weak thesis, but over the long run is probably on the table).
Growing Celebrations Passport (CP) loyalty program and using it as float to generate (reoccurring) cash flow and do more acquisitions or expend into different verticals / markets (something similar to Amazon, Coscto, etc.) There are currently around 1.3 Million CP Members (which is about 10% of all active users), so this number would have to keep going “up” in order to make a difference in the revenue numbers at $29.99 x 1.3M = $38,987,000. FLWS is around $700 Million Market Cap with EV of around $1B. Not impossible thesis but FTD also has its own exact same loyalty program for $39.99.
When I just start looking into FLWS around 2020 it seemed like a great business to me and I thought that FLWS had a moat (being publicly traded + largest player, having diverse portfolio and thinking its capital light + having management owning a big chunk of the company) but after looking deeper under the hood, my mind has changed … not fully but I’m definitely not as excited about FLWS as I was before, and I would like to see couple of things play out / develop before getting excited again.
Gross Margins above 40%
ROIC above 15%
Paying down debt / having no debt.
I wouldn’t mind seeing management maybe selling off a few units, like Vital Choice and Personalization Mall. I might be wrong on saying that, but these two stand out to me as not really being “core” of what FLWS has been doing and focusing on.
Increasing / doubling the CP would get things interesting.
Leaning in into BloomNet and expending the network/franchise, I think there is more room for improvements and expansions and execution on win-win scenarios with local florists.
Lastly, and this one is a bit a wild card BUT getting a new / different CEO. Not that I have anything against Jim, but maybe someone (young-ish) preferably within a company or an outsider with a passion for what FLWS stands for to bring company to the next level of innovation and reinvention.
At the time of this publication, I do own some shares of FLWS 0.00%↑ in my IRA.
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