Amazon Is Planting Seeds Against its Competitors

Since its launch in 1994, Amazon.com, Inc. (NASDAQ:AMZN) has taken on rivals in almost every industry imaginable. The company has helped to create a world in which you can buy everything online that you could get in a retail store. The company appears to be taking that a step further with its launch of fresh-cut flowers delivered directly to your door. The move is the latest in a long line of Amazon’s battles against retail and online competitors.

Amazon has six flower offerings available on its website. They range in price from $28.92 to $41.02. and feature 12-to-25 flowers per arrangement. The flower bouquets ship for free to the contiguous 48 states. An Amazon executive had this to say of the new venture: “At Amazon, we continually look for ways to delight our customers and we are pleased to provide them this opportunity to conveniently purchase fresh-cut flowers.”

The entry into flowers by Amazon won’t have a material impact on the company’s financial outlook, though I believe it further strengthens the company’s push into produce and fresh items. Amazon has made it a goal to offer fresh products and continues to step-up its competition when it comes to delivering items to consumers. The company’s entry into flowers should have shareholders of two publicly traded companies worried.

Hang up on 1-800-Flowers?
Appropriately-named 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) is the world’s leading florist and gift shop. The company offers flowers for sale online, as well as in more than 125 retail locations. Along with flowers, 1-800 Flowers owns assets like Popcorn Factory and Fruitbouquets.com.

Several positives exist for the company. 1-800-Flowers is a debt-free company and continues to divest non-performing assets like winetasting.com, which it shed in the fourth quarter. The company is also expected to produce revenue growth of 5% in fiscal 2014 and 2015.

Consumer floral sales were up 3.7% in fiscal 2013. Gourmet food and gift basket revenue saw 7% growth in fiscal 2013. Despite its name, 1-800-Flowers is balanced enough that it could take a hit from Amazon. In fiscal 2013, only 56% of total revenue came from consumer flowers. The company will also share the hit with franchise owners.

However, shares of the company trade at a high price-to-earnings multiple in the 20’s based on current expected earnings of $0.28 per share.

Spin-off won’t help United Online
United Online, Inc. (NASDAQ:UNTD) is a small $700 million company that owns the FTD brand. The company’s other assets include Classmates, My Points, Net Zero, and Juno.

In the most recent second quarter, FTD made up a significant 74% of United Online’s total revenue. Despite this high percentage, United Online is actually spinning-off the flower company into a separate publicly traded venture.