FLWS

1-800-Flowers.Com($FLWS): Why Is This Major Shareholder Pouring $32 Million Into Stock Despite 57% Crash and CEO Exit?

05/19/2025 21:49

Amid a sharp decline in 1-800-Flowers.Com Inc's ($FLWS) stock price this year, major shareholder Fund 1 Investments, LLC has been aggressively purchasing shares over the past four months, drawing significant investor attention. According to recent insider trading disclosures, Fund 1 Investments has purchased more than 4.3 million shares through approximately 44 separate transactions from January to May 2025, totaling around $32 million. Notably, the fund's purchasing volume has tended to increase as $FLWS stock price falls. These substantial purchases stand in stark contrast to 1-800-Flowers.Com's severe financial underperformance and stock decline. In its Q1 2025 earnings report released on May 8, the company posted a loss of $2.80 per share, significantly worse than analysts' expected loss of $0.34. Revenue also declined by 12.6% year-over-year to $331.45 million, well below market expectations of $365.02 million. Following these disappointing results, $FLWS shares plummeted further, dropping approximately 18% from $5.67 on May 7 to $4.65 as of May 16. The current price represents a decline of over 57% from the 52-week high of $11 reached in July 2024. Further compounding market concerns, The Wall Street Journal reported on May 9 that CEO Jim McCann plans to step down amid declining sales, adding another layer of uncertainty for investors. Despite these challenges, Fund 1 Investments has actually accelerated its purchasing as the stock price deteriorates. In May alone, the fund acquired more than 540,000 shares, including over 170,000 shares in the days immediately following the earnings announcement between May 9 and May 16. 1-800-Flowers.Com Inc operates as an online flower delivery and gift service provider, owning brands such as Harry & David, The Popcorn Factory, and Cheryl's Cookies. While the company has focused on expanding its e-commerce platform and strengthening subscription services in recent years, it has struggled with changing consumer spending patterns post-COVID and reduced discretionary spending due to inflation. Industry experts offer varying interpretations of Fund 1 Investments' aggressive purchasing strategy. Jefferies retail sector analyst Randy Johnson notes, "$FLWS currently trades at just 0.8 times book value, representing a historical undervaluation. Considering its brand value and customer base, it could be attractive from a long-term value investment perspective." Some market observers suggest Fund 1 Investments may be positioning itself to advocate for management changes or restructuring initiatives. Through its recent purchases, the fund has estimated to have increased its stake in the company to approximately 18%. However, Morgan Stanley analyst Sarah Chen cautions, "Revenue recovery appears challenging in the near term, and considering the uncertainty surrounding the CEO transition and consumer spending slowdown trends, there may be further downside risk in the short term." $FLWS has significantly underperformed the S&P 500 index during the first half of 2025, weighed down by both sector-wide retail weakness and company-specific performance issues. Recent consumer sentiment data paints a concerning picture, with the University of Michigan consumer sentiment index dropping to 50.8, its second-lowest reading on record, while consumers anticipate 7.8% inflation over the next year—factors that could create additional headwinds for discretionary consumer goods companies like 1-800-Flowers.Com. With the spring season and Mother's Day behind us, the company's next critical sales period will be the year-end holiday season. However, U.S. retailers are planning fewer seasonal hires compared to last year, indicating cautious outlooks regarding consumer spending. In this context, Fund 1 Investments' persistent share purchases appear to be a bet on long-term value and potential restructuring rather than short-term performance. The appointment of a new CEO, changes in business strategy, and potential activism from Fund 1 Investments will likely be key variables determining $FLWS's future direction.

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