E-commerce florist and gift retailer 1-800-FLOWERS (NASDAQ:FLWS) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 5.7% year on year to $775.5 million. Its non-GAAP profit of $1.08 per share was 9.2% below analysts’ consensus estimates.
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1-800-FLOWERS (FLWS) Q4 CY2024 Highlights:
- Revenue: $775.5 million vs analyst estimates of $802.5 million (5.7% year-on-year decline, 3.4% miss)
- Adjusted EPS: $1.08 vs analyst expectations of $1.19 (9.2% miss)
- Adjusted EBITDA: $116.3 million vs analyst estimates of $124.4 million (15% margin, 6.5% miss)
- EBITDA guidance for the full year is $70 million at the midpoint, below analyst estimates of $86.51 million
- Operating Margin: 11.7%, down from 13.5% in the same quarter last year
- Free Cash Flow Margin: 41%, down from 42.1% in the same quarter last year
- Market Capitalization: $563.8 million
“Our second quarter revenue declined 5.7%, showing year-over-year improvement, but not at the pace that we had been anticipating,” said Jim McCann, Chairman and Chief Executive Officer of 1-800-FLOWERS.COM,
Company Overview
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 sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, 1-800-FLOWERS grew its sales at a sluggish 6.2% compounded annual growth rate. This was below our standard for the consumer discretionary sector 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 9.7% annually. 
This quarter, 1-800-FLOWERS missed Wall Street’s estimates and reported a rather uninspiring 5.7% year-on-year revenue decline, generating $775.5 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 3.3% over the next 12 months. Although this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.
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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 2.3%, lousy for a consumer discretionary business.
1-800-FLOWERS’s free cash flow clocked in at $317.6 million in Q4, equivalent to a 41% margin. The company’s cash profitability regressed as it was 1.1 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends trump temporary fluctuations.
Over the next year, analysts predict 1-800-FLOWERS’s cash conversion will improve. Their consensus estimates imply its breakeven free cash flow margin for the last 12 months will increase to 2.1%, giving it more optionality.
Key Takeaways from 1-800-FLOWERS’s Q4 Results
We struggled to find many resounding positives in these results. Its revenue and EPS in the quarter missed expectations. Adding to the bad news, the company's full-year EBITDA guidance missed Wall Street's estimates significantly. Overall, this was a weaker quarter with very few positives to hang your hat on. The stock traded down 15.1% to $7.48 immediately following the results.
1-800-FLOWERS underperformed this quarter, but does that create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.