10 Hotline: 410 528 8228 TAIPAN When I see a company with a
high P/E ratio, I’m usually skepti-
cal. With the collapse of the dot-
com sector still fresh in memory,
my first thought is, “Overvalued,
too expensive, too dangerous.”
And I swiftly move to a better
candidate. So if I told you there’s
a stock out there with a P/E ratio
of 53 that’s considered underval-
ued, you’d probably be surprised. And if I recommended you add the stock to your
portfolio, you might be shocked! But let me explain
why I’m willing to make an exception in this case… Keeping the punters
flocking back for more I’ve personally given this company my business before and received goods and services second to
none. So I feel comfortable with it. Others do too.
Repeat buyers represented over 58% of orders dur-
ing the company’s recent first quarter. The company
also attracted 484,000 new customers. And after tak-
ing a closer look, what I found really piqued my
interest. Your play is 1-800-Flowers.com (FLWS:NASDAQ).
Now, put aside any preconceived notions you may
have about companies with high P/E ratios. Don’t get
jittery at the “dot-com” part either. Here’s the point:
With 27 years of retail experience under his belt,
chairman and CEO Jim McCann acquired FLWS in
1986. He quickly set about growing the business,
ensuring it was viable and trustworthy, and boosting
profits through a solid customer base. In 1992, he
took the company online and launched the full “
1-800-flowers.com” website in 1995. FLWS has a
proven business model. Diversity breeds sales And despite the name, it’s not all about flowers. Thanks to its subsidiaries, FLWS is a diverse compa-
ny offering a wide range of products like gift bas-
kets, plants, candles, gourmet candy and stuffed
toys. Its subdivisions include: - Plow and Hearth, which sells home and garden products. - Children’s Group, which operates under the HearthSong and Magic Cabin Dolls umbrella
and sells toys and games. -GreatFood.com and The Popcorn Factory, which sell the company’s gourmet food
products.
In August 2003, 1-800-Flowers went into partner- ship with stylish designer Jane Carroll (you may
have seen her on Oprah, or read about her in USA
Today or People magazine). Thanks to strong sales,
the alliance has now expanded to include Carroll’s
full range of products. Because of this strong business model, sales
have risen consistently for the past six fiscal years: - 1998: US$220.6 million
- 1999: US$295.9 million
- 2000: US$385.3 million
- 2001: US$442.2 million
-
2002: US$497.2 million
- 2003: US$565.6 million This year’s revenue translates to a healthy US$8.43 per share. During the first quarter of fiscal 2004 (June-
September), a sharp 20% increase in website traffic
helped sales continue the upward trend, bringing in a
rise of 7% to US$95.2 million over Q1 of fiscal 2003. And speaking of the web… ’Tis the season for online retailers While traditional bricks-and-mortar stores failed
to shine in November, web retailers took a bigger
slice of the pie. According to BizRate.com, which
tracks sales at 2,000 online companies, e-tailers
enjoyed a 30% sales increase on Thanksgiving Day
alone— almost US$200 million worth of merchan-
dise. Over the four-day Thanksgiving holiday, sales
zoomed to US$820 million— an 11.5% gain over
Thanksgiving 2002. And Forrester Research says
online sales from Thanksgiving to Christmas this
year will surge by a massive 42% ($12.2 billion) over
2002 numbers. As an online retailer, 1-800-Flowers is able to cut
overhead and market to a massive global consumer
base through its worldwide network of partners. So
you can expect the company to take profitable
advantage of the current gift-giving season and
extend its success into 2004 and beyond. Second quarter solidity In addition, 1-800-Flowers is approaching the end Martin Denholm A flourishing portfolio in 2004
