1-800-Flowers Q4 & FY 2010 Numbers Continue to Slide

[CHR]

1-800-Flowers numbers came out this morning.

Key Points:

Consumer Floral: For fiscal 2010, revenues were $366.5 million compared with $394.8 million in the prior year. Revenues for the fiscal fourth quarter were $117.3 million compared with $124.1 million in the prior year period. Gross profit margin for fiscal 2010 was 35.3 percent, down 170 basis points compared with 37 percent in fiscal 2009. For the fourth quarter, gross profit margin was 33.8 percent, down 320 basis points compared with 37 percent in the prior year period. The decline in gross profit margin, particularly in the fourth quarter, was primarily related to one-time charge of $1.9 million for the early termination of the Company’s marketing agreement with Martha Stewart Living Omnimedia and the loss of high-margin revenues, compared with the prior year period, associated with a third-party marketing program that was ended in December 2009. Category contribution margin for the fiscal year was $22.1 million compared with $38.8 million in the prior year. For the fiscal fourth quarter, category contribution margin was $7.5 million, compared with $13.3 million in the prior year period.

Emphasis mine. I'm hoping McCann will talk about the Martha deal in the conference call this morning. Just like FTD, 1-800's bottom line took a large hit after the loss of the post-transaction marketing scam program.

BloomNet Wire Service: For fiscal 2010, revenues were $61.9 million, compared with $63.5 million in the prior year. Revenues for the fiscal fourth quarter were $15.6 million, compared with $16.1 million in the prior year period.

So income from florist services was down, but not as significantly as the slide in consumer sales.

Gourmet Food and Gift Baskets: For fiscal 2010, revenues were $239.9 million, compared with $258.7 million in the prior year. Revenues for the fiscal fourth quarter were $32.4 million, compared with $32.8 million in the prior year period.

The company has put a lot of emphasis on this division, yet it still is not producing real growth.

Number of transactions:

In terms of its key customer metrics from continuing operations, the Company said 4.9 million e-commerce customers placed orders during fiscal 2010, of which approximately 52.0 percent were repeat customers. During fiscal 2010, the Company attracted more than 2.3 million new customers. For the fiscal fourth quarter, approximately 1.7 million e-commerce customers placed orders with repeat customers representing 61 percent of the total. During the quarter, the Company attracted more than 650,000 new e-commerce customers.

Odd. Last Year's report said

The Company fulfilled approximately 8.6 million...orders through its e-commerce (combined online and telephonic) sales channel during fiscal 2009...

I realize there were some discontinued opertaions, but that's a huge drop in order volume.

You can listen to the conference call starting at 11 AM Eastern this morning by registering here.

 

[Kristine]

thanks!

so did the program Undercover Boss help or hurt?

 

[Mikey the Flower Guy]

thanks!

so did the program Undercover Boss help or hurt?

the "show" probably had NO impact.....what's evident, is that consumers have turned AWAY from floral gift giving, BECAUSE of, and in retaliation OF, all the stupidity that our industry has HAD to endure......maybe, just maybe, florists WILL be the "ambassadors" that bring this scenario back in line with reality, however, our industry has been tarnished, and we're ALL responsible!

 

[prestonway]

I'll take a contrarian view.

I don't think the sky is falling.

I think that consumer confidence on BOTH sides of the border is down considerably.

People are not spending much money on anything in this economy, but particularly on non-essentials such as flowers.

Talk to a realtor or mortgage broker and you will find the same thing with big ticket items.

When people face uncertainty, the wallets & purses slam shut.

It'll be a slow "bounce-back" and it hasn't started yet.

Hopefully the Christmas season will result in some rebound, but we can only hope.

It's just a matter of hanging in there!!!

 

[Mikey the Flower Guy]

I'll take a contrarian view.

I don't think the sky is falling.

I think that consumer confidence on BOTH sides of the border is down considerably.

People are not spending much money on anything in this economy, but particularly on non-essentials such as flowers.

Talk to a realtor or mortgage broker and you will find the same thing with big ticket items.

When people face uncertainty, the wallets & purses slam shut.

It'll be a slow "bounce-back" and it hasn't started yet.

Hopefully the Christmas season will result in some rebound, but we can only hope.

It's just a matter of hanging in there!!!

I think we are on the same page, so, no, your assessment is NOT "contrarian", HOWEVER, since we are on the subject, consumers STILL "want" our products and services, but, so much bad "press" regarding the economy,AND the online scams, HAVE INDEED, forced them to park their wallets.
This is NOT about that...this is about how many people have been taken advantage of in OUR particular industry!!

 

[bootcampguy]

I'll take a contrarian view. I don't think the sky is falling.

I think that consumer confidence on BOTH sides of the border is down considerably.

The marketing research agrees with this, that both sides are down. However any florist of small business that patricipates in "personal marketing strategies" will be the benefactor. In CHR's post the order volume being down is huge, but they will find new ways to sell. (1800-baskets).....................thing only thing I dispute is the 52% CRR. I've been told that it's closer to 40%................average retail florist (marketing right) should be at 65-70%........

 

[steve]

I agree with what Preston wrote although I do think it will be a poor Xmas as the press has printed enough negative stories to put us back into a tail spin. Look at how little positive press the GM making profit and prepareing to sell stock again got. Yes the Goverment bailed them out but they turned it around and saved all those jobs. I do think 800 has damaged their name just as FTD has and I think social media has gone a long ways towards bringing that to the consumers attention. There will be a silver lining in those clouds at some point in the near future.

 

[Mikey the Flower Guy]

i agree with what preston wrote although i do think it will be a poor xmas as the press has printed enough negative stories to put us back into a tail spin. Look at how little positive press the gm making profit and prepareing to sell stock again got. Yes the goverment bailed them out but they turned it around and saved all those jobs. I do think 800 has damaged their name just as ftd has and i think social media has gone a long ways towards bringing that to the consumers attention. There will be a silver lining in those clouds at some point in the near future.

bravo!!

 

[BOSS]

I too concur with Preston...except....

We are going to have a double dip recession in the US, it will magnify itself in late 2011 and most of 2012 with another 1.5 million foreclosures (on top of the 2.2 empty homes we have now) as the ARM's that were given out in 2007 and 2008 begin to mature and the 0% interest rate and teaser payment become reality and payments double or triple for many.

Consumer confidence will not begin to improve until several things come about:

1) Our border issues are resolved
2) Obamacare is beaten down
3) New housing starts out pace foreclosures (not likely for 10 years)
4) the 2012 elections are over
5) interest rates remain below 4-5%

(in no particular order)

 

[spentflowers]

I too concur with Preston...except....

We are going to have a double dip recession in the US, it will magnify itself in late 2011 and most of 2012 with another 1.5 million foreclosures (on top of the 2.2 empty homes we have now) as the ARM's that were given out in 2007 and 2008 begin to mature and the 0% interest rate and teaser payment become reality and payments double or triple for many.

Consumer confidence will not begin to improve until several things come about:

1) Our border issues are resolved
2) Obamacare is beaten down
3) New housing starts out pace foreclosures (not likely for 10 years)
4) the 2012 elections are over
5) interest rates remain below 4-5%

(in no particular order)

All the more reason to vote carefully this coming November. Stay with what we have in office and accept this nonsense going forward. Shake things up and elect officials willing to make tougher decisions and protect what use to be American pride and we can turn this around faster. Now more then ever the consumer is beginning to take the blinders off and see what is happening around them and making better choice decisions with their wallet. While I agree with earlier comments about economy and consumer spending slowing floral arrangements are a smaller ticket then trips, expensive dinners and other higher ticket items. Florists can position themselves very effectively by marketing themselves to their customer base and garnishing the business. Stop with the wire service providing you orders and start building a more profitable order stream from local customers.

 

[bootcampguy]

All the more reason to vote carefully this coming November. Stay with what we have in office and accept this nonsense going forward. Shake things up and elect officials willing to make tougher decisions and protect what use to be American pride and we can turn this around faster.

Harry Dent sopke this year at our national marketing conv. and said some of the same things. The only factor he added was the reason behind a predicted bad "holiday and spring season"......is because fo the "toilet flush" theory. When the investment tax credits expire (end of the year) people who spend money (or have money) are wathcing closely and by October, if they are note extended, then in early Nov. you will begin to see the "toilet flush" theory, investors will send their money out of the country by the groves. That will then trickle down to us, the press we tell everyone that money is leaving at a rate of 6 times faster than being invested.............the dow will dip to under 6000 and hover for 3 months or so. So "the wallets will stay closed"...........the good news is every "changing economy" has a turn. If the tax credits are extended.....then the toilet flush won't be so bad............the only clear thing is that good/honest entrpenuership will "florish"........and yes, all those other issues "boss" said are in the "toilet" game also.........

 

[steve]

Only thing I don't agree with you on Boss is Obamacare> Health care is a must for everyone and if we don't make that program fly then our problems are going to be much worst then they currently are.

 

[BOSS]

Only thing I don't agree with you on Boss is Obamacare> Health care is a must for everyone and if we don't make that program fly then our problems are going to be much worst then they currently are.

Steve I agree with you too.... we DO need a comprehensive health care plan for every **legal** US citizen... however we also need reform in the medical community, with things like cost effective mal-practice insurance, realistic drug costs and much more reform. Costs are out of control, service is below par, and it's just plain unsafe to go to a hospital for the most part these days, unless you can afford a private one...

Case in point: The Midland hospital is adding 535 private rooms to the 265 doubles already existing and supposed to open in the fall of 2011, they just canned 25% of their housekeeping staff, laid off 10% of security, and got rid of the Valet Parking folks (these were for seniors so they did not have to walk the 1/4 mile from the parking lot)... makes no sense to me...

IMO Obamacare (don't like that name) is not the answer...too many holes in the coverage from what I know, but I could be wrong. We do need a solution.

It seems everyone is living beyond their mean except florists....

Eventually those in charge right now, I think want to take us to the European extreme of providing all we need in exchange for a tax rate around 65% across the board....and removing our freedom of choice from the mix...

Things are going to deteriorate further than they already have before they start to improve... sadly....

 

[CHR]

Back to 1-800... From the Barron's Blog today:

But the ugliest results were from 1-800-Flowers (FLWS), whose shares are currently off 41 cents, or 17%, at $2.01, after missing fiscal Q4 revenue estimates and reporting a surprise net loss per share of 2 cents. The company said it would no longer provide specific revenue and EPS forecasts, and that it doesn’t expect things to get better anytime soon: “The Company does not anticipate significant improvements in consumer demand for discretionary purchases and therefore expects continued challenges to top line growth,” in 2011, management said.

 

[CHR]

From the Wall Street Journal today:

1-800-FLOWERS.COM Inc. topped the list of Biggest Percentage Price Decliners among common stocks on the Nasdaq Stock Market. See the full list .

Yes, discretionary spending is down, but IMO 1-800's problems have more to do with product quality and customer service.

 

[BOSS]

800's comments I think are right in line with reality... at least they do not seem to be trying to blow smoke at this point...

Financial markets globally are going to continue to tighten, and consumers already hard hit with everyday needs/expenses are facing back to school (having to bring your own TP and Kleenex) needs and the approaching holiday season.

In the floral industry, as we (here) have seen, unless you have sympathy, wedding or corporate work there's not a lot going on. I'm pretty sure that wedding work is a local thing, and sympathy work too for the most part is locally based with a few wire orders thrown in. It's going to be a long haul...

800 (and others eventually) may be acknowledging this without saying it...their sales are generally generic or holiday based for the most part.

 

[CHR]

I listened in on most of the conference call and a few things stood out:

- Very committed to growing the gift and gourmet segment - including opening franchises of Fannie May chocolates

- Incorporate more 'gift' items into the floral designs - Yankee Candles were specifically mentioned - and have a distribution agreement with a balloon company. They know they need more florists to carry the items in order to offer the products nationally, but it sounded like Christmas would see the roll-out of these new offerings.

- Working to offer more 'creative designs' (McCann's words).

- Less low-price promotion and discounts with more emphasis on overall 'value'

- Mentioned both 'Spot-a-Mom' and 'Summer of Smiles' campaigns were successful. Pulling in influential bloggers with free flowers and gift card giveaways has certainly gotten them A LOT of exposure at a very low cost.

 

[Bigted]

Thanks Cathy - your constant work in this area is appreciated.

One thing, when a company says "Things really suck and we are going to stop providing forecasts" that's not a good sign.

 

[BOSS]

One thing, when a company says "Things really suck and we are going to stop providing forecasts" that's not a good sign.

Depends on who the company is

 

[anytimeflowers]

By this list of improvements 1800 is planning is an indication to me that they are finally, (too late?) listening to the real world that we walk in every day.

I was shocked to find out that Bloomnet is hosting a program at one of our local wholesalers, (not a fresh product wholesale house). I adore going to programs whenever I can, and would actually be able to go, but I still have a distaste for anything involving that name. Gotta get over that, education is education. I am especially interested simply because this is NOT fresh. I imagine that this will be a starting point to "train" florists to think outside of the fresh flowers, which would naturally lead to those very gift items Bloomnet wishes to boost. They actually began rolling out their Yankee Candle program last year. I imagine that the hope is that florists will be an easier sell once they attend these programs and "see" for themselves how much "value" they will be adding.

I have NEVER heard of them doing any programs before. Anybody else?

The creative designs part will be extremely interesting to me. My best guess is that the "creative" as well as "value" will have more to do with adding gift items to blase' vases and baskets.

Less low-price promotion probably has more to do with the post-transactional hullaballoo than anything approaching value to the consumer. I am quite sure that 1800 realizes that any of those promotions now carry a taint.