FLWS

1-800-Flowers ($FLWS) Major Shareholder's $30M Contrarian Buying Spree Despite 50% Crash...Value Investment or Value Trap?

06/25/2025 21:01

1-800-Flowers.Com Inc. ($FLWS) is drawing investor attention as its major shareholder embarks on an aggressive buying spree amid a devastating 50%+ stock decline. 1-800-Flowers is America's largest online flower delivery and gift service company. Founded in 1976 and famous for delivering flowers and gifts on special occasions like Valentine's Day and Mother's Day, the company has recently expanded into gourmet foods, wine, and personalized gifts. With a market cap of approximately $361 million, it's classified as a small-cap stock. The remarkable investment behavior of major shareholder Fund 1 Investments LLC stands out dramatically. This fund, managed by Pleasant Lake Partners LLC, sold 40,000 shares at $7.80 per share on November 4, 2024, but has completely reversed course since then. The buying spree that began on January 10, 2025, continues to this day, and the scale is overwhelming. Insider trading analysis reveals that Fund 1 Investments has purchased approximately 2.7 million shares across 68 transactions from January to June 2025. The total investment amounts to about $29 million. Particularly notable was January's concentrated buying of about 1.7 million shares ($13 million), followed by consistent accumulation whenever the stock declined. The most recent purchase on June 24 suggests this is not short-term speculation but a long-term conviction-based investment. However, the company's fundamentals remain challenging. The June 2024 quarter showed a loss of 31 cents per share with revenue declining 9.5% year-over-year to $360 million. The September 2024 quarter saw losses widen to 53 cents per share with revenue falling 10% year-over-year. Most shocking was the March 2025 quarter results, where analysts expected a 34-cent loss but the company reported a massive $2.80 per share loss. Revenue of $331.45 million also fell significantly short of the $365 million estimate. Amid this poor performance, CEO Jim McCann's resignation was announced. The departure of the founder-CEO who led the company since 1986 marks a major turning point in company history. Business restructuring under new management is anticipated. Despite this, the major shareholder's persistent buying suggests several scenarios. Fund 1 Investments may value the company's intrinsic worth far above the current stock price, considering the long-term growth potential of the online gift delivery market or brand value. There's also the possibility of plans to secure management control or enhance value through business restructuring. The stock has fallen over 50% from $9.69 in June 2024 to $5.06 in June 2025, reflecting poor performance and CEO transition uncertainty. However, considering the major shareholder's average purchase price of around $6.50, further downside may be limited from current levels. Fund 1 Investments' buying pattern shows a reverse pyramiding strategy, purchasing larger quantities as prices decline. This reflects a long-term investment approach based on firm investment philosophy and substantial capital resources. The May 9 purchase of 350,000 shares at $4.42 was the year's largest single transaction. Investors should monitor whether the major shareholder continues buying and the new management's business plans. If restructuring leads to improved profitability or new growth drivers, significant upside potential exists from current undervalued levels. Conversely, if poor performance persists and the major shareholder stops buying, additional downward pressure could intensify. Seasonal factors are also important. Given 1-800-Flowers' business characteristics with sales concentrated around Valentine's Day, Mother's Day, and Christmas, Q4 and Q1 performance is crucial. This year's holiday season results will be an important barometer for the company's future direction. The current situation sits at the boundary between a classic "contrarian investment" opportunity and a "value trap." While the major shareholder's confident buying is clearly a positive signal, stock recovery will remain challenging unless fundamental business issues are resolved.

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