FLWS - 1-800-Flowers.com (FLWS) - What To Do Now?

Fiscal Q3 miss. The company reported fiscal Q3 2022 revenue of $469.6 million, missing our estimate of $478.8 million by 1.9%. Adj. EBITDA also missed our expectation in the quarter at a seasonal loss of $12 million compared with our forecast of a loss of $8 million.Costs challenges. Gross profit margin was down in all three business segments compared with the prior year period. The sharpest gross margin decline was in the Gourmet Foods & Gift Baskets segment. The decline in company wide gross margins, down over 600 basis points, was due to increased labor costs, higher inbound and outbound shipping costs, and write-offs of inventories.Building on its customer base. The company added 225,000 new members to its Celebrations Passport loyalty program and 1.5 million new customers in the quarter. Management noted that Passport members continue to be strong multi-brand customers. Although business has been softer with new customers, retention rates are still slightly higher than pre-pandemic norms. Lowers fiscal full year guidance. Full fiscal year 2022 revenue guidance is 3% to 5%, with Adj. EBITDA in a range of $110.0 million to $115.0 million and EPS between $0.55 to $0.60. We are lowering our 2022 estimates to be in line with current guidance, but, more importantly, taking a more cautious approach to fiscal 2023. We are posting fiscal 2023 revenues of $2.19 billion and Adj. EBITDA of $89.1 million, 10% decline from fiscal 2022 expectations. Do the shares already reflect a recession? Near current levels, the FLWS shares trade at an attractive 8.2 times EV to FY 2023 adj. EBITDA, which reflects recession type valuations. We are tweaking our price target from $20 to $17 to reflect the lowered expectations. But, we believe that the shares offer a compelling risk reward relationship and maintain our Outperform rating. Read More >>