Industry Description
The florists industry retails cut flowers, floral arrangements and potted plants (NAICIS 453100). Industry players purchase products from domestic and international flower farms and wholesalers then sell them to the public. This industry excludes players who primarily serve as electronic shopping websites or do mail-order.
The following are some basic characteristics of the florists industry:
- Florists industry has a combined revenue of $5.4 billion, with a decline rate of 5.5% in 2016-2021
- There are approximately 33,000 businesses as of 2021
- The florists industry employs approximately 65,000
Industry Trends
The florists industry is highly fragmented and has low levels of market share concentration with no single industry player comprising over 5.0% of the industry revenue in 2021. Small players are independently operated and owned in one or more states with less than 2 employees, while the biggest players have multiple locations across the US with more than 2 employees. Some key external forces influencing the industry are (i) e-commerce sales, (ii) demand from core industries, and (iii) special occasion sales. Each of these is described in further detail below.
The increasing demand for e-commerce sales is leading to the expansion of the industry. E-commerce sales are expected to increase due to the number of consumers embracing technology. The COVID-19 pandemic created the need for e-commerce, which led to changing shopping behavior of consumers. In 2021, e-commerce sales total $5.1 billion which depicted a significant growth of 5.1% on an annual basis from 2016 to 2021. Industry players have realized the importance of having an online presence in their business and using the platform as a means of conducting their sales.
The demand from core industries such as funeral homes and wedding services is leading to industry growth. Funeral homes are a core source of revenue for the industry which has seen consistent market share growth over recent years. As the disposable income of consumers increases, consumers spend more on funeral expenses for their loved ones, including buying flowers. Wedding service providers are another core source of revenue for the industry because they need flowers for things such as table arrangements and bridal bouquets. Like funeral homes when consumers’ disposable income increases, consumers spend more for their weddings, including buying flowers. The rapid growth of these core industries has contributed to the increase in demand and expansion of the industry.
The biggest industry sales are recorded during special occasions such as Valentine’s Day, Christmas, Hannukah and Mother’s Day. These events, when combined, account for approximately 70% of the industry revenue. There are also other sales where 77% are during specific occasions that include anniversaries and birthdays and 60% as a gift to a person, which includes funerals and weddings. Special occasions thus increase the demand for flowers, which increases the number of sales. Consumers seem to always purchase flowers during special occasions, so industry players should adjust themselves appropriately to this.
The industry in the U.S. has been impacted heavily by external factors that include e-commerce sales, demand from core industries, and special occasion sales. E-commerce allows industry players to meet consumers’ need for flowers but prefer to shop online. Flowers will always have a role to play in events such as funerals and weddings which are core industries. Industry sales are mostly accounted for during special occasions when flowers are bought as gifts. Industry players adjusting themselves to these trends meet an increased industry demand.
Key Performance Metrics
In evaluating florists, the following metrics can provide useful information in comparing a subject company to guideline companies and transactions:
- Average flower arrangement sale
- Bouquets sold
- Profit margins
- Sales per month
- Inventory turnover rate
- Client satisfaction and retention
Industry Organizations & Publications
The following organizations publish useful information:
- American Floral Endowment
- Society of American Florists
- National Alliance of Floral Associations
- American Insititue of Floral Designers
- Real Local Florists
- AmericanHort
Guideline Information: Private Purchase Transactions
Most florists are privately owned. While there are publicly traded companies, data regarding the sale of 100% of closely held florists is generally the best source of information to appraise a subject company.
The following are typical appraisal multiples from sale of florists:
- Revenue multiple between 0.14 and 0.53 times
- Gross profit multiples between 0.20 and 0.81 times
- EBITDA multiples between 0.8 and 5.6 times
In selecting guideline transactions, it is of critical importance to select transactions that are similar to the subject company. Unique factors for any subject company must be considered to yield credible results. Additionally, industry economic conditions also vary over time, which must also be considered.
Guideline Information: Publicly Traded Companies
Most florists are privately owned; however, there are a few that are publicly traded, meaning it is possible to compare a subject company based on industry metrics and appraise using industry multiples. However, as with the guideline transactions described above, it is of critical importance to select publicly traded companies that are similar to the subject company. Also be aware that multiples of certain publicly traded companies may not accurately reflect a subject company.
The largest publicly traded US florists is:
- 1-800-FLOWERS.COM, Inc. (FLWS) – $701.2 million market capitalization
The Price-to-Earnings (P/E) ratio of this company is 17.9 times.
Appraisal Rules of Thumb
Please note you should never use a Rule of Thumb in place of a professional appraisal. You will never see a competent professional appraiser do their work using a Rule of Thumb. The professional standards that govern professional appraisal practice, which all professional appraisers should follow, specifically prohibit the use of Rules of Thumb.
Florists are businesses sold based on sound economics. These economic considerations can be measured using the key performance indicators described above, but such economics cannot be accurately summarized in these simple formulae.