Eleven states now allow same-sex marriages, and that number is expected to grow over the next few years. A recent Supreme Court ruling in California has overturned the ban on same-sex marriages and has served to echo a growing acceptance. In fact, a recent poll conducted by the USA Today found that 55% of those surveyed believe same-sex marriages should be legally recognized.
UCLA estimates 37,000 same-sex couples in California will marry in the next three years. As additional states begin recognizing civil unions and same-sex marriages, the couples won’t be the only beneficiaries of the change. Wedding-related businesses are gearing up for the rush of business as couples plan to make things official.
Let the planning begin
XO Group Inc (NYSE:XOXO), operator of one of the most popular wedding sites, as well as WeddingChannel.com, celebrated the news with a special double-issue digital magazine called Gay Weddings from The Knot. Gay.Weddings.com features photos from same-sex weddings, an etiquette Q&A section, and tips on finding gay-friendly wedding vendors.
The company has beaten earnings estimates over the past couple of years, but it has also disappointed a couple of times, as well. The wedding industry was hit hard by the recession, as couples scaled back plans or put them off entirely. As the economy continues to recover, however, gradual prosperity, coupled with the growing demand for same-sex weddings, will help it thrive.
XO Group Inc (NYSE:XOXO)’s problems center around its merchandise, with the e-commerce segment of its business depressing profits. The company sells products through its various websites, including The Wedding Channel Shop and The Knot Wedding Shop. In its most recent earnings announcement, XO Group Inc (NYSE:XOXO) reported a 2% increase in revenue, which it attributed to publishing revenue. ECommerce revenue declined 31% in its most recent quarter.
The outlook for XO Group Inc (NYSE:XOXO) depends on the future value of online ad revenue. Since much of the company’s content is offered free of charge, most of its revenue comes from ad placement. In 2012, XO Group Inc (NYSE:XOXO) earned 60% of its revenue from online ads while merchandise and magazine revenue accounted for the remaining 40%. Analysts cite the lack of reliability of any company with a sole revenue base of online ad revenue, especially with so many sites competing for ad dollars.
Put a ring on it
More weddings means more proposals. As a result, jewelry stores stand to gain from the sale of two engagement rings to female couples. Even male couples are starting new trends, purchasing engagement rings for both members of the couple.
Signet Jewelers Ltd. (NYSE:SIG), which operates some of the biggest jewelry stores in the country, including Kay Jewelers, Jared, Marks & Morgan Jewelers, and more, is hardly reaching out to same-sex couples through ads. But with the marriage rate having fallen 20% in recent years, the company could stand to benefit from an increased interest in engagement and wedding rings.
Revenue for the jeweler were up 10% in its most recent quarter, but missed analyst expectations for the period. Same store sales at both Jared and Kay were up and quarterly revenue reached $993.6 million. But where the company is really suffering is in its U.K. market, where sales are down more than 9%. Since same-sex marriage is not legal in the U.K., the company may shift its focus to other areas of its business.
Also negatively impacting the company was its acquisition of Ultra Stores. As the company continues to transition, analysts expect earnings to remain low in the upcoming quarter, but expectations of long-term growth are positive as the economy continues to improve.
More weddings mean more flowers
Florists are already poised to gain from an increase in wedding business, but the industry isn’t without controversy. The Washington state attorney general’s office is suing a florist in the state who refused to provide flowers for a same-sex wedding. The shop owner cited her religious beliefs as her reason for the refusal.
National floral retailer 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) may find itself in a similar dilemma, as it uses a network of florists throughout the country to fill customer orders. The company offers a section dedicated to floral arrangements for weddings on its Wedding Collection page, with local florists often bringing flowers to the wedding venue. That means there may be more cases of refusal in the coming months.
1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) recently announced an increase in revenue of 7.2% in its most recent quarter, thanks largely to an 11% increase due to Valentine’s Day. But as the June wedding season comes to a close, the company will continue to focus on its line of unique gifts.
For 2013, 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) expects revenue growth to be in the mid-single-digit range, with double-digit year-over-year increases in EBITDA and EPS. The company expects to generate cash flow of more than $20 million.
Targeted Marketing
Of the three companies, only XO Group Inc (NYSE:XOXO) has made a deliberate effort to reach out to same-sex couples. By continuing to create content specifically for this new segment, XO Group Inc (NYSE:XOXO) should see increased ad revenue. 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) and Signet Jewelers Ltd. (NYSE:SIG) may also choose to shift their focus to same-sex couples, but neither company needs to work overtime to create products for same-sex weddings. Chances are, wedding-related companies of all types will see a pop in business as gay couples are given the chance to get married.
The article Wedding Stocks May Benefit from Same-Sex Wedding Ruling originally appeared on Fool.com and is written by Stephanie Faris.
Stephanie Faris has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Stephanie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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