FLWS - 1-800-Flowers.com (FLWS) - In For A Rough Spell
Outlook takes a turn. Consumer confidence has waned, there is worsening inflation, and continued supply chain disruptions, all indicate that the company has entered into a challenging operating environment. As such, we are lowering our revenue and adj. EBITDA expectations for the company for fiscal 2022 and taking a sobering view of fiscal 2023.Cost reductions provide benefit. The company continues to automate its operations where possible to lower costs. Recently the company reduced its labor force by 40% at an Ohio facility as a result of automation. We believe such steps are especially important for the company during the current economic environment, which is expected to impact margins.Lowering estimates. We are lowering our fiscal third quarter ended March 31st revenue estimate from $493.1 million to $478.8 million and revising our adj. EBITDA estimate from $17.9 million to a loss of $8.0 million. For the fiscal full year 2022, we are lowering our revenue estimate from $2.29 billion to $2.26 billion and revising our adj. EBITDA estimate from $146.2 million to $133.4 million. Our fiscal 2023 revenue estimate is $2.31 billion, up 2.4%, and adj. EBITDA estimate is $129.9 million.Strong financial position. As of December 31, 2021, the company had $271 million cash and $151.8 million in long-term debt. Additionally, despite our lowered forecast, we expect the company to generate cash flow of $133.4 million in fiscal 2022. As such, we believe the strong balance sheet and cash flow generation puts the company in a good position to weather the expected challenging environment.Lowering price target to $20. We are lowering our price target from $25 to $20 to reflect our lowered expectations for 2022. Near current levels, the FLWS shares trade at a compelling 6.3 times enterprise value to our 2022 adj. EBITDA forecast and 6.4 times enterprise value to our 2023 estimate. Given the recent pullback, we believe that the shares offer a favorable risk/reward relationship. Read More >>