The days of wine and roses are just beginning at 1-800-Flowers.com
The purveyor of flowers and gifts announced on Tuesday that it will acquire the Winetasting Network, a provider of wine distribution services and a direct-to-consumer wine marketer. Terms of the deal were not disclosed.
The logic of the acquisition seems pretty clear. Flowers and wine are common gift items that complement each other nicely. By offering wine as another option for its shoppers, 1-800-Flowers.com has improved its chances of generating higher sales per customer. Further, the company probably won't have to make huge investments to make the combination work. The Winetasting Network already has a well-built-out distribution network -- in late 2003, the private company disclosed that it ships more than a million packages a year directly to wine consumers. 1-800-Flowers.com's pairing of its database of 15 million customers with this distribution capacity seems to be a formula for fast sales growth.
1-800-Flowers.com disappointed investors by warning of slower growth in its fourth quarter. In its latest quarter, meanwhile, revenue edged up just 2.5% to $97.5 million. Despite the anemic top-line growth, the firm did make progress, as its net loss narrowed to $2.7 million from $5.1 million from the same quarter in the prior year. Further, the company continued to win converts in the quarter, brining in 460,000 new customers, even as its repeat customers contributed 60.5% to the period's orders.
As a niche player, 1-800-Flowers.com doesn't grab the same attention as more diversified players such as Amazon.com
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.