1-800-Flowers Q2

[CHR]

The numbers are out. (Note: 'prior period' means the same quarter last year.)

Floral:

During the second quarter, revenues were $97.1 million, compared with $114.0 million in the prior year period.

BloomNet:

Revenues increased 19 percent to $15.2 million compared with $12.7 million in the year ago period.

Gourmet & Gift Baskets:

Revenues increased 28.3 percent to $141.9 million compared with $110.6 million in the prior year period.

Home & Children's Gifts:

Revenues for the quarter were $77.8 million compared with $98.0 million in the prior year period, reflecting the significant weakness in the overall home sector.

I believe this quarter marks the first time in the company's history that floral product sales fell below gifts & gourmet. 1-800 purchased Design Pack (gift basket wholesale operation) last summer so the added revenues from that company pushed the category to #1 in sales.

Customer Count:

the Company attracted approximately 1 million new customers, of whom 72 percent, or more than 715,000, came to the Company through its online channels... Approximately 2.4 million customers placed orders during the quarter, of which 57.2 percent were repeat customers.

compared to the same quarter 1 year ago:

the Company added approximately 1,259,000 ....new e-commerce customers. Of the 2,760,000...total customers who placed e-commerce orders during the three.... months ended December 30,
2007, approximately 54.4%... were repeat customers.

1-800 wrote down approx. $20M in Goodwill from its Home and Children’s Gifts business segment, so the earnings (losses) for the quarter are -.08 per share vs. +.29 per share 1 year ago.

The press release also describes how the company is reducing expenses, including:

- A 10% reduction in our salaried, full-time labor force implemented at the beginning of January, as well as reductions in our variable labor commensurate with lower order volumes.

- Further virtualization of our customer service platform, utilizing technology to expand our successful HAN (home agent network) and increased utilization of outsource service providers to reduce fixed facility and labor costs.

Not sure if either of these measures impact BloomNet staff.

Conference call at 11:00 am (EST) this morning.

 

[Bigted]

57% repeat customers. I guess it's better than last year, but it's not great. It either shows that online flower customers have no loyalty, or that people are not happy with the service.

Maybe both.

 

[BOSS]

57% repeat customers. I guess it's better than last year, but it's not great. It either shows that online flower customers have no loyalty, or that people are not happy with the service.

Maybe both.

Probably some of both, 800F looses some and FTD picks them up, FTD looses some and TF pickes them up, TF looses some and 800F pickes them up, and still some find their way to local florists directly...

The churn rate is amazing, I could not survive on 57% repeat business...

 

[bloomz]

am I wrong when I extrapolate 10 million orders per year?

 

[Bigted]

am I wrong when I extrapolate 10 million orders per year?

Seems like it including gourmet and gift baskets and all that other junk.

 

[flowerman]

Do you know the results for FTD or Proflowers?

 

[CHR]

PF is part of Liberty Media and the numbers are no longer broken out.

FTD is part of United Online and they're not scheduled to report until after V Day. hmmm....

 

[Chezbloom]

"increased utilization of outsource service providers to reduce fixed facility and labor costs"

Ich bin ein Floralbot.

 

[goldfish]

57% repeat customers. I guess it's better than last year, but it's not great. It either shows that online flower customers have no loyalty, or that people are not happy with the service.

As a matter of pure math, this "repeat customers" may not mean anything.

Let's say a guy orders flowers several times a year. He selects the website randomly. Chances are that this guy will be counted as "repeat customer" by all of the big 3, because he will be choosing them at least once a year by chance.

If you have one-third of market share, 33% of random customers will be "repeat" customers.

 

[BOSS]

"increased utilization of outsource service providers to reduce fixed facility and labor costs"

It means they're going to hire more stay at home folks (no labor shortage) and not pay them benefits (lower their labor cost) to answer their electronically routed calls from their order gathering operation.

 

[Chezbloom]

Oi, I get it now

I thought it was referring to having more filling florists (Floral Bots) instead of Local filling Centers. I see. So even more non-florists answering calls who don't know a Peony from a Peanut. Ok.

 

[BOSS]

I thought it was referring to having more filling florists (Floral Bots) instead of Local filling Centers.

Well, you may have a point there... how 'bout we combine both theories and take over Cuba... I think it's warm there

 

[CHR]

The transcript from yesterday's conference call is out.

Though FCers might find these comments of interest: (all bolded emphasis is mine)

Revenue for the period, revenues were $329.3 million down 1.5% compared to the prior year. This included the contribution from DesignPac Gifts which we acquired last April, which performed well during the quarter. Excluding these contributions revenues declined 14% compared to the second quarter last year.

-
Kristine Koerber - JMP Securities

Okay. And then just briefly. Martha Stewart, did Martha Stewart perform during the quarter?

James McCann

Well, as we're still pretty early in that multi-year relationship with the Martha Stewart product. It think it was impacted as we were overall by two facts, one we had a low to large range, but a broad range of SKUs in the Martha line and there was a higher average price points. The average higher price points were the area we were most impacted by, although on two of the initiatives lower price points did much better.
So what we could see around the course of this calendar year an increase in the marketing and the joint venture of marketing with the markets to a company through its calendar year. So it wasn't up to our expectation certainly in the last quarter. The Gift Baskets we introduced clearly wasn't up to our expectations. It did quite well. The flower pack was facing a couple of initiatives to narrow the range of SKUs and to moderate the price point that we think will help us to do quite a bit better got a better even promptly during this second half of the fiscal year and beyond.

-
Jeffrey Stein - KeyBanc Capital Markets

Guys could you talk a little bit about the credit risk amongst your floral shop customers. It looks to me like you really saw very dramatic slowdown in revenue growth in that category in the quarter if you back out the acquisition you made, so I am wondering number one, how much of the slowdown is due to just florist in your network just shutting down and going away. How much of the slowdown is due to perhaps just a lack of additions of new florists? And the thirdly, are any of them either scaling back, I mean, number of services they are taking from you or are they just cutting out one of the wire service?


James McCann

Overall, Jeff I'm focused on (inaudible) and growing to start the network. We think, you're right that the number of retail florists will continue to contract. That's why we are not focused on growing the network, we already have the scale we want, we already have the coverage we want, we already have the capabilities in terms of the quality and performance. And we want to improve that overtime. But, it's not working by growing business in top-line number of course. That's been inside, we think that there is still some decline in common in number of retail for us. So we're very, very sensitive on the credit side to not increasing our exposure there. The good news is, we're on the positive side of the flow with regard to open the florist because we have such a large of number of volumes that we're putting into those shops on the basis, which is a big focus of our to continue to improve that.


Then we have an increasing number of shops who send their orders have to delivered in other markets exclusive from that network. In fact, increasing the number of orders in the system with that kind of a rotation. But, what we saw in this quarter, when you say an increase, an increase in the number of credit service to the base purchase amount, this is not a quarter where we expect it this being the top-line growth because we're not growing the top-line number.


We didn't have a special product that you might have seen throughout the last quarter of last fiscal year a new directory. So overall, our BloomNet steady, consistent, growing with the depth of our relationship with our customers. And you'll see us increasing our development efforts in term of major products and services. We just introduced the whole new line of products and service products for them that were introduced through BloomNet products to our florist, which has been very well received in the first step, first few weeks, it was new offering.

 

[BOSS]

One could expect that FTD and Teleflora are seeing similar events in their camps over all. Ya think?

 

[goldfish]

In terms of category results; in our 1-800-Flowers.com consumer floral business, during the quarter revenues were $97.1 million compared with $114 million in the prior year period. The lower revenues reflected the pronounced weakness in the consumer economy during the holiday period. Gross profit margin for the quarter was 37%, compared with 39.4% in the prior year period, primarily reflecting promotional pricing.

<snip>

In our BloomNet Wire Service business, revenues increased 19% to $15.2 million compared with $12.7 million in the prior year period. This increase primarily reflects the contributions from a small floral hardgoods business that we acquired this past summer. Gross profit margin was 57.9% compared with 57.1% in the prior year period. As a result, category contribution was $4.8 million, compared with $4.5 million in the prior year period

Does this mean that BloomNet florists individually bought more services/products from 1-800-flowers?

Or 1-800 recruited more members?

Either way, this part stunned me. Unbelievable. They are easting independent florists alive so that they can stay alive. That's what it means.

 

[Bigted]

Does this mean that BloomNet florists individually bought more services/products from 1-800-flowers?

Or 1-800 recruited more members?

Either way, this part stunned me. Unbelievable. They are easting independent florists alive so that they can stay alive. That's what it means.

No, It seems to be related to selling more vases. Maybe they were third party before? Or, maybe it's that nice preferred florist program where they force feed you big piles of vases? Either way, it doesn't seem to be related to more orders or more florists.

 

[lori042499]

Does this mean that BloomNet florists individually bought more services/products from 1-800-flowers?

Or 1-800 recruited more members?

Either way, this part stunned me. Unbelievable. They are easting independent florists alive so that they can stay alive. That's what it means.

Bloomnet is 800's marketplace, that would mean that they sold more products to florists....it doesn't surprise me because the containers are less expensive than other wire service containers, the new card program force feeds them to those florists in that program, the containers are in smaller quantities than other WS and they sell better than WS containers....

 

[CHR]

I agree with Ted. It appears the top line growth in BloomNet was through the purchase of Napco (container company). Bottom line growth was much smaller in the segment.

I didn't post the portion of the conference call addressing 1-800's issue with excessive inventory. One of the callers asked about the increase on the balance sheet and was told the merchandise was not particularly date/fashion sensitive and would be able to be moved out in the coming year.

 

[BOSS]

{{excessive inventory}}. One of the callers asked about the increase on the balance sheet and was told the merchandise was not particularly date/fashion sensitive and would be able to be moved out in the coming year.

I would bet the excessive inventory is un-shipped Premiere Program product as I do not think as many florists signed up for it as they thought would for one thing, and 2) many dropped the program after the first few months leaving the remaining months product in the warehouse.

Also, it could be "Martha" product...or could it be candy, wine, cookies and such from the other companies they own, but attributed to Bloomnet/800Flowers as that's their main vehicle for distribution?

 

[BOSS]

Fy 09

From InternetRetailer.com:

1-800-Flowers.com sales fell 16.1% in FY 2009 Q2 and cost pruning looms
E-commerce sales in the second quarter of fiscal 2009 for flower and gift retailer 1-800-Flowers.com Inc. were $230.1 million, down by 16.1%, or $44.1 million, from $274.2 million year over year.
To offset declining sales, the company plans to continue cost-cutting initiatives that reduced operating expenses by $25 million from 2006 to 2008. Past cuts included consolidating its service and supply vendors and renegotiating contracts, optimizing its customer service platform by expanding its home-based agent network, and closing its Midwest service center, says CEO Jim McCann.
For the six months ended Dec. 28, 2008, web sales were $337.9 million, down by 13.1% from $388.7 million in the first half of fiscal 2008.
1-800-Flowers.com reported overall sales of $329.3 million for its fiscal 2009 second quarter, compared with revenue of $334.2 million in the prior year period. The revenue decline of 1.5% reflected weakness in the economy during the key holiday period, the company says. For the first half of fiscal 2009, total revenue was $487.4 million, up by 1.5% from $480 million in the prior year period.
Net loss for Q2 of fiscal 2009 was $5.1 million vs. net income of $19.3 million in the prior year quarter. Net loss for the first six months of fiscal 2009 was $10.4 million compared with net income of $13.5 million in the prior year period.
The company, No. 36 in the Internet Retailer Top 500 Guide, projects that overall sales for the full fiscal year will be down about 5% to 10% vs. the prior fiscal year.
Continuing cost-management efforts include a 10% reduction in salaried, full-time employees since the beginning of January, and reductions in variable labor in synch with lower order volumes, McCann says. The company also is downsizing its Home and Children’s Gifts business category including a reduction in catalog marketing and resizing of the business in light of the continued weakness in home decor retailing.
Other cutbacks include revamping the company’s information technology infrastructure, such as consolidating hosting sites and revisiting maintenance and support applications, to reduce costs while maintaining performance and availability. 1-800-Flowers also is trimming marketing spending companywide, McCann says, along with tapping more outsource service providers to reduce fixed facility and labor costs.
McCann says the latest initiatives, and others to be announced, will be implemented throughout the remainder of fiscal 2009. The company also is reducing capital expenditure plans for the remainder of fiscal 2009, with more to come in fiscal 2010.
During Q2 of fiscal 2009, 1-800-Flowers attracted approximately 1 million new customers, with 72%, or more than 715,000, coming in through online channels, the company says. Approximately 2.4 million customers placed orders during the quarter, of which 57% were repeat customers.
Kevin Ranford, director of web marketing at 1-800-Flowers.com, is speaking at the Internet Retailer Conference & Exhibition, June 15-18 in Boston, in an m-commerce workshop session titled 1-click checkout: The key to m-commerce success.