Dreams, Inc (DRJ), a vertically integrated sports memorabilia and licensed products enterprise, continues to witness upside in its e-commerce division, which accounts for the largest portion of its total revenue.
The online division recorded sales of $37.4 million in the month of December 2011 compared with $29.4 million in the year-ago period, implying a rise of 27% year over year. The upside in sales was primarily driven by growth at the company’s FansEdge.com website along with the increased portfolio of syndication clients.
In the months of October and November, the online division’s sales soared 32% and 30%, respectively. Thus, the company’s revenue as expected remained robust in the holiday season benefiting from double-digit growth in the e-commerce business throughout the fourth quarter of 2011. Dreams thus remains on track to achieve its target of 25% revenue growth in 2011.
During the third quarter, total revenue jumped 23% to $24.4 million and online sales surged 39.0% year over year to $18.7 million. The company’s e-commerce revenues were primarily driven by the web syndication platform (up 25%) and a 49% increase in organic growth of the company’s owned brands led by FansEdge.com website.
The Internet division remains the fastest growing segment and the company has always emphasized on improving the performance of the segment and as a result sales from this business continue to mount.
The Plantation, Florida-based company believes that internet growth has transformed it from a technology company to a company driving its sales from the eCommerce channel.
Dreams is expected to release its fourth quarter 2011 results on March 29, 2012. The Zacks Consensus Estimate for sales is pegged at $79 million for the fourth quarter and $146 million for fiscal 2011. We believe that the company will be able to achieve the estimate in the fourth quarter, owing to higher sales in its e-commerce division.
The Zacks Consensus EPS estimates for the fourth quarter and fiscal 2011 are pegged at 15 cents and 6 cents, respectively. The estimates have not budged in the last 30 days, implying that analysts do not see any near-term catalysts.
Dreams currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Build-A-Bear Workshop Inc. (BBW) holds a Zacks #1 Rank, implying a short-term Strong Buy Rating.
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