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Why 1-800-Flowers Stock Fell 20% at the Open Today

By Reuben Gregg Brewer – Oct 29, 2020 at 11:54AM

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Shares of the online retailer nose-dived as investors digested its earnings, even though they were pretty good.

What happened

Shares of 1-800-Flowers.com (FLWS 28.38%), which sells flowers and other special occasion goods, fell nearly 20% in the first hour of trading on Oct. 29. The big news was earnings, which were actually pretty upbeat.

So what

The online retailer reported fiscal first-quarter 2021 revenue of $283.8 million, up 51.5% year over year. Earnings improved from an adjusted loss of $0.24 per share a year ago to a loss of $0.10 in the current quarter. Despite the bottom line still landing in the red, that's a material improvement. The company beat Wall Street estimates on both the top and bottom lines. This news would normally suggest a stock increase, not a stock drop.  

A man holding his head with a candlestick chart heading lower behind him

Image source: Getty Images.

Digging in a little bit, however, there was some negative news to digest. For example, 1-800-Flowers believes that its strong sales performance is being helped along by the broad increase in online shopping because of the COVID-19 pandemic. That could prove a temporary benefit as the world starts to get a handle on the coronavirus. Backing that thought up, the company projected that fiscal second-quarter revenue was likely to rise by around 24%, with earnings advancing roughly 20% over the prior year.

That sounds great on an absolute basis, but it would actually represent a material slowdown compared with the company's recent performance. So, in some ways, 1-800-Flowers appears to be suggesting that the boost it has received from the coronavirus-related shift toward online shopping is already looking like it's starting to peter out. If that's the lens through which you view this earnings report, then it makes sense that investors were pessimistic today.  

Now what

The earnings news from 1-800-Flowers was really something of a mixed bag. The big revenue gain was nice, but the company still landed in the red. And the outlook for the fiscal second quarter, a key selling period for the company, was good but perhaps not as great as some investors had hoped. Long-term investors should probably be cautious, noting that the stock was up more than 120% in 2020 at one point but is now up only about 40%, including today's price drop. The online shopping story that had sounded so good earlier in the year may be starting to unravel.   

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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