Fool.com: Rosy Outlook for Online Florists? (News) August 3, 1999

Rosy Outlook for Online Florists?

August 3, 1999

Mother's Day had crept up again, but this time -- for perhaps the first time in my young life -- I was ready. The gift and card were purchased, the car was gassed up and ready to be driven out to Rockville, Md., for a quiet family dinner. Nothing, it seemed, could go wrong.

Nobody told that to my immune system, which condemned me to a day of sweating, exhaustion, and feverishness. Dinner was missed, and I was disgraced yet again. Delirious but determined to save some face, I somehow managed to claw my way over to my desk, flip on the laptop, and punch three letters into the search window of my Web browser:

"F-T-D."

The plan worked.

While my choice of companies might not exactly thrill the people at 1-800-Flowers.com (Nasdaq: FLWS) -- which begins trading today -- it's the kind of story they otherwise love to hear. The ordering experience was a snap: just scan the pages until a picture and price (money was no object in Mom's case) look nice, click, enter sending information, and wait for the love.

The company's sales come not only from the website, but also from a network of stores, both company-owned and franchised, and its "BloomNet" network of more than 1,500 independent florists, which doubles as both a revenue source and a marketing presence -- potentially more important than the sales, with online revenues growing rapidly.

But it's the online sales that are growing like weeds: for the nine months ended March 28, online revenues were $30.2 million, up 85.3% from the same period in the previous fiscal year. Total sales were $203.7 million for the same time frame, up 58% from the year before. The company has been profitable in years past, but that's bound to end for a while as Internet-related expenses skyrocket.

1-800-Flowers.com's backing is solid: equity stakeholders include Benchmark Capital Partners, an affiliate of French luxury goods maker LVMH Moet Hennessy Louis Vuitton (Nasdaq: LVMHY) and ubiquitous Japanese tech investors Softbank. The company plans to add the $101.6 million it was given by that group to the proceeds of its IPO (it's selling 6 million shares for $21 apiece) to increase marketing expenditures, obtain strategic online partnerships, and expand product offerings.

That last bit should prove crucial: just as Amazon.com (Nasdaq: AMZN) didn't stop with books, 1-800-Flowers.com isn't stopping with flowers: it's branching out into gifts, gourmet foods, and home and garden products, including garden accessories
and casual lifestyle furnishings.

The company's ability to identify new product categories and effectively market itself will be telling, particularly with so many options available for unreliable sons and other gift givers: perhaps uncoincidentally, FTD.com is slated to begin trading later this week. The company, which will trade on the Nasdaq under the symbol "EFTD," plans to sell 5.5 million shares to the public for between $13 and $15 each. Among its backers is Walt Disney (NYSE: DIS) unit Buena Vista Internet Group.

While FTD.com's revenues are significantly smaller than 1-800-Flowers.com's, the company stands to benefit considerably from its network of more than 50,000 florists in the U.S. and abroad, which should help with fulfillment. With flowers, timing can be everything.

By Dave Marino-Nachison (TMF Braden) (TMF Braden)

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