Amazon Is Planting Seeds Against its Competitors

In fiscal 2012, United Online posted earnings per share of $0.67. Analysts see that number dropping to $0.56 in the current fiscal year. Revenue is also expected to drop 2% to $856 million. In the second quarter, total revenue fell 2%, including a 2% drop in the FTD business segment. The company’s other business segments saw even larger declines in the second quarter.

United Online looks to be in an alarming situation, and the Amazon entry into flowers certainly won’t help. The company pays out 75% of profits in the form of dividends, is seeing shrinking revenue, and is spinning-off its only strong asset.

Conclusion
The big advantage of FTD and 1-800-Flowers is their earlier entry into the flower market. However, with Amazon’s size and large customer databases, the company can likely put a dent in both companies’ profits and gain significant market share.

Another plus for existing flower companies is their ability to ship flowers out on a certain day, a benefit that Amazon doesn’t offer. However, in true Amazon fashion, the company is “working to bring you this feature as soon as possible.”

I have written several articles about Amazon taking on companies like Sotheby’s, Dick’s Sporting Goods, Bed Bath & Beyond, and Carter’s. In many of the markets, there is plenty of room for competition. Amazon takes a small market share and strengthens its position as the leading Internet retailer.

However, when it comes to flowers and taking on small-cap companies like FTD and 1-800-Flowers, Amazon could do some damage to existing shareholders. I remain bullish on Amazon despite its high price-to-earnings multiple. United Online and the resulting FTD spin-off are not worth investing in, despite the high dividend yield. I would also stay away from 1-800-Flowers.

The article Amazon Is Planting Seeds Against its Competitors originally appeared on Fool.com and is written by Chris Katje.

Chris Katje has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and United Online.

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