The bear case against 1-800-Flowers.com
CAPS players don't like 1-800-Flowers.com. I mean they really don't like it. Among the 165 investors who've rated the stock, 59% rate it a likely underperformer. What's more, the "smart money" -- our CAPS All-Star investors -- waxes even more negative, with 66% expecting Flowers to wilt. Why all the negativity?
- The Fool's own TMFMapleLeaf argues that: "Terrible customer service will catch up with them. Poor choice and/or no control over the local flower companies that they use to deliver."
- All-Star investor Jeffreyw echoes the sentiment: "Freshness and quality are not best in the industry, customer service is slipping. Uses contractors in the network like FDS and doesn't have the quality control of Calyx and Corolla who keeps it mostly in house from the growers."
- Meanwhile, fellow All-Star CyberPawn says: "You can't help but wonder when you see Net Tangible Assets, Operating Income and Nett [sic] Income all decrease on a year-on-year basis. Yet Stockholder Equity remains the same due to an ever increasing Goodwill (34 to 63 to 131) ..."
- Special mention for style over content, though, must go to CAPS player Brxcqqq, with the inventive pitch: "1-800-UNDERPERFORM.COM, STINC."
Before I close, I should mention that I have an underperform rating of my own on Flowers, in which I pan the firm's "negative free cash flow and Enron-like margins." To which I should add two caveats:
First, I've been consistently wrong on the stock, which has outperformed the market by 124 percentage points over the year since I rated it. Second, part of the reason I rated Flowers an underperformer -- its failure to produce free cash flow -- is no longer accurate. The firm generated
$14.3 million in free cash flow over the past 12 months. While that's not as much as it reported in net income during the period, it's undeniably a positive number.
