Shares of 1-800-Flowers.com Inc. fell Wednesday as analysts said the online floral and gift retailer's acquisition of DesignPac may pressure results in the near term.
Shares fell 53 cents, or 7.4 percent, to $6.67 during midday trading. The stock has traded between $6.34 and $13.42 during the past year.
In April, 1-800-Flowers.com said it acquired DesignPac Gifts LLC, a designer of gourmet gift baskets, for $36 million in cash.
On Wednesday, JMP Securities analyst Kristine Koerber lowered her estimates on the Carle Place, N.Y.-based merchant due to the acquisition. She lowered her fourth-quarter earnings estimate to 4 cents from 8 cents per share, and her fiscal 2008 estimate to 29 cents from 33 cents per share. However, she kept her "Market Outperform" rating.
In a note to investors, Koerber said she lowered the estimates because "the wholesale gift basket business is highly seasonal, with most, if not all, profits generated in the December quarter."
Meanwhile, Morgan Joseph analyst James Leahy lowered his price target on the company amid a consumer spending slowdown.
"The rise in prices for everything from gas to food has significantly eaten into discretionary spending over the past few months," he wrote in a client note on Wednesday. "Given that 1-800-Flowers.com is closely tied to this spending, we are concerned about the impact on the company's business."
He cut his price target to $11 from $13 but kept his "Buy" rating on the stock.
He added the DesignPac acquisition will carry a "near-term financial drag a bit larger than initially expected," but said the deal will bring benefits as well, including new distribution partners.
"We believe 1-800-Flowers.com's ability to continually reduce operating expenses, the lack of significant overhead and the move in recent years to diversify its business should help it weather the current economic storm," Leahy wrote.
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