The COVID-19 pandemic has sparked robust e-commerce adoption around the globe, and it’s a trend that probably will not end anytime soon. With more businesses and individuals prioritizing digital channels amid an accelerating shift away from the physical stores, online retail stores will only gain more momentum this year and beyond.
With economic recovery being the main focus of 2021, incoming U.S. President Joe Biden has announced ambitious plans to rejuvenate consumer spending through direct fiscal stimulus. He has already outlined a $1.9 trillion economic rescue package. This should bode well for online retailers.
Also, adequate government support in the form of subsidiaries and tax cuts to small companies should help them to recover from pandemic-driven losses incurred during the initial days of lockdown last year. As e-commerce giants face restrictions from the regulators, small-cap companies with unique business models are poised to garner greater investor attention.
We believe that betting on appropriate small-cap stocks now could be extremely rewarding.
1-800-FLOWERS.COM, Inc. (FLWS), e.l.f. Beauty, Inc. (ELF) and Lands’ End, Inc. (LE) are some of the top small-cap e-commerce stocks that should continue to bring heated competition to their peers in the coming months through their strategic expansion policies and growing footprint in global markets.
1-800-FLOWERS.COM, Inc. (FLWS)
FLWS offers gifts for various occasions in the U.S.. The company operates in three segments - Consumer Floral, Gourmet Foods & Gift Baskets, and BloomNet. It provides a range of products, such as floral and fruit arrangements, cookies, chocolates, candies, and plush stuffed animals, under the brand names Personalization Universe, Simply Chocolate, Goodsey and others.
On January 7, BloomNet, a wholly owned subsidiary of FLWS, announced that it had partnered with Card Isle to offer BloomNet Members exclusive access to a customizable greeting card gifting solution. We believe this will help the company attract new customers and drive business growth.
In October 2020, the company introduced a new multi-brand corporate gifting website that enables business customers to seamlessly access an expansive catalog of gift offerings. The customization features offered should allow FLWS to cater to a wide range of customers and elevate user experience.
FLWS’s revenue has increased 51.5% year-over-year to $283.77 million for the fiscal first quarter ended September 27, 2020. It performance was driven by strong growth in its three business segments and contributions from PersonalizationMall.com, which the company acquired in August 2020. Its Gross profit rose 51.7% year-over-year to $115.48 million over this period.
The consensus EPS estimate of $1.29 for the current year indicates a 35.8% improvement from the year-ago value. Moreover, FLWS has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.78 billion for 2021 represents a 19.4% growth from the same period last year. The stock has gained 101.9% over the past year.
How does FLWS stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating.
The stock is also ranked #27 of 69 stocks in the Internet industry.
e.l.f. Beauty, Inc. (ELF)
Formerly known as J.A. Cosmetics Holdings, ELF offers cosmetic and skincare products worldwide, under the brand names e.l.f. and W3LL PEOPLE. The company sells its products through national and international retailers and direct-to-consumer channels.
Last November , ELF teamed with Loserfruit, one of the leading social media influencers, to reach millions of Gen Z fans. The partnership should enable the company to provide inclusive, positive, and energetic beauty to its customers globally, and build connections with new audiences in an authentic way.
ELF’s net sales have increased 7% year-over-year to $72.4 million, driven by strength in digital, as well as growth internationally in the third quarter ended September 30, 2020. Its gross margin has increased 100 basis points to 65% over this period.
The consensus EPS estimate of $0.68 for next year indicates a 9.7% increase year-over-year. Moreover, ELF beat the Street’s EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $321.65 million for 2022 represents a 6.7% increase from the same period last year. The stock has gained 58.6% over the past year.
ELF’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade, and a “B” for Buy & Hold Grade and Industry Rank. It is ranked #44 of 70 stocks in the Fashion & Luxury industry.
Lands’ End, Inc. (LE)
LE is a uni-channel retailer of casual clothing, footwear, accessories, and home products in the U.S., Europe, Asia, and internationally. The company operates through segments including U.S. e-commerce, Retail, Lands' End Outfitters, Europe e-commerce, and Japan e-commerce.
In September, the company launched Lands’ End products on Kohls.com and in 150 Kohl’s stores. It plans to expand the Lands’ End assortment and increase the number of points of distribution to 300 Kohl’s stores in 2021. This expansion should further support LE’s long-term growth and help it to broaden its portfolio.
On September 9, LE announced the completion of refinancing of a term loan. It closed a $275 million term loan facility and expanded an ABL facility by $75 million. This should further enhance the company’s strong liquidity position with a more flexible balance sheet.
LE’s revenue for the fiscal third quarter ended October 31, 2020 has increased 5.9% year-over-year to $359.98 million. Its gross profit has risen 6% from the year-ago value to $163.46 million, while its net income nearly doubled year-over-year to $7.18 million. The company’s diluted EPS grew 100% from the prior-year quarter to $0.22. And its adjusted EBITDA has increased 52.3% to $28.57 million over this period.
The consensus EPS estimate for the next quarter ending April 30, 2021 represents a 26.6% improvement year-over-year. Moreover, LE beat the Street’s EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $241.05 million for the next quarter represents a 10.6% increase year-over-year. The stock has gained 102% over the past year.
It’s no surprise that LE is rated “Strong Buy” in our POWR Ratings system. It has an “A” for Trade Grade, Buy & Hold Grade and Peer Grade, and a “B” for Industry Rank. Among the 70 stocks in the Fashion & Luxury industry, it is ranked #17.
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FLWS shares were trading at $31.94 per share on Wednesday afternoon, up $1.51 (+4.96%). Year-to-date, FLWS has gained 22.85%, versus a 2.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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