“As we look ahead to the second half of our fiscal year, which is largely floral in nature due to the Valentine and Mother’s Day holidays as well as other spring gifting occasions, we believe we are well positioned to build on the positive trends that we have seen since the second half of last year, particularly in terms of increasing revenues and gross margin in our Consumer Floral business,” said McCann. “In addition, we anticipate BloomNet will continue to grow its market share and generate solid profitability as it further leverages its increased shop-to-shop order volume and expanded suite of products and services while our Gourmet Food and Gift Baskets business will perform well, albeit at seasonally lower levels.”
McCann also noted that the company has continued to strengthen its balance sheet, finishing the second quarter with $30 million in cash and net-debt of approximately $7 million. “Since our peak in fiscal 2008, we have paid down more than $90 million on our term debt despite a challenging environment. This provides us with significant flexibility to grow our business going forward,” he said.
CATEGORY RESULTS FROM CONTINUING OPERATIONS
The Company provides selected financial results for its Consumer Floral, BloomNet and Gourmet Foods & Gift Baskets business categories in the tables attached to this release and as follows:
- 1-800-FLOWERS.COM Consumer Floral: During the fiscal 2012 second quarter, revenues in this category grew 10.3 percent to $91.0 million compared with $82.6 million in the prior year period. This was driven by our core 1-800-FLOWERS.COM ecommerce business and contributions from two small acquisitions (FineStationery.com and Flowerama) which were completed in late fiscal 2011 and early in the first quarter of fiscal 2012, respectively. Gross margin for the fiscal second quarter increased 40 basis points to 39.0 percent compared with 38.6 percent in last year’s second quarter. Category contribution margin increased 22.1 percent, or $1.8 million, to $10.0 million compared with $8.2 million in the prior year period. ( The Company defines Category contribution margin as earnings before interest, taxes, depreciation and amortization and before allocation of corporate overhead expenses.)
- BloomNet Wire Service: Revenues increased 12.7 percent to $18.3 million compared with $16.2 million in the prior year period, primarily reflecting increased shop-to-shop order volume and wholesale product sales. Gross margin for the quarter was 49.2 percent compared with 56.0 percent in the prior year period, primarily reflecting the increase in lower margin shop-to-shop order volume and wholesale product sales. Category contribution margin was $5.1 million compared with $5.4 million in the prior year period.
- Gourmet Food and Gift Baskets: Revenues increased 0.7 percent to $131.0 million compared with $130.1 million in the prior year period. This reflected ecommerce growth of approximately 5 percent including contributions from two new brands, Mrs. Beasley’s and Stockyards.com, which were added in the fiscal 2011 fourth quarter and the fiscal 2012 second quarter, respectively. This growth was largely offset by reduced wholesale basket orders from mass market customers which also impacted category contribution margin. Gross margin was 42.4 percent compared with 43.0 percent. Category contribution margin was $30.2 million (including the $3.8 million pre-tax gain on the sale of the 17 Fannie May stores during the quarter) compared with $27.7 million in the prior year period.
The Company said that it is increasing its revenue guidance to mid-to-upper single digit growth from low-to-mid single digit growth for the full fiscal year. This is based on the 8.0 percent growth achieved during the first half of its fiscal year and a positive outlook for the second half of fiscal 2012. The Company said that it continues to expect bottom-line results (EBITDA, EPS and Free Cash Flow*) to grow at rates in excess of its anticipated revenue growth.
(*The Company defines free cash flow as net cash provided by operating activities less capital expenditures)
: Net income before interest, taxes, depreciation, amortization.
Free Cash Flow
: net cash provided by operating activities less capital expenditures.
: earnings before interest, taxes, depreciation and amortization and before allocation of corporate overhead expenses. The Company presents EBITDA, EBITDA excluding stock based compensation, adjusted financial information (Adjusted Net Income from continuing operations, Adjusted EPS from continuing operations, Adjusted EBITDA from continuing operations, and Adjusted EPS – collectively “adjusted financial information”) and Free Cash Flow because it considers such information a meaningful supplemental measure of its performance and believes it is frequently used by the investment community in the evaluation of similarly situated companies. The Company also uses EBITDA as one of the factors used to determine the total amount of incentive compensation available to be awarded to executive officers and other employees. The Company’s credit agreement uses EBITDA to measure compliance with covenants such as interest coverage and debt incurrence. EBITDA is also used by the Company to evaluate and price potential acquisition candidates. EBITDA and Free Cash Flow have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of the limitations of EBITDA are: (a) EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and EBITDA does not reflect any cash requirements for such capital expenditures. EBITDA and Free Cash Flow should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.
About 1-800-FLOWERS.COM, Inc.
1-800-FLOWERS.COM, Inc. is the world’s leading florist and gift shop. For more than 30 years, 1-800-FLOWERS® (1-800-356-9377 or
) has been helping deliver smiles for our customers with gifts for every occasion, including fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, candles, balloons and plush stuffed animals. As always, our 100% Smile Guarantee backs every gift. 1-800-FLOWERS.COM’s Mobile Flower & Gift Center was named winner of the Mobile Shopping Summit’s “Best Mobile Site of 2011.” 1-800-FLOWERS.COM was also rated number one vs. competitors for customer satisfaction by STELLAService and named by the E-Tailing Group as one of only nine online retailers out of 100 benchmarked to meet the criteria for
Excellence in Online Customer Service
. 1-800-FLOWERS.COM has been honored in Internet Retailer’s “Hot 100: America’s Best Retail Web Sites” for 2011. The Company’s BloomNet® international floral wire service (
) provides a broad range of quality products and value-added services designed to help professional florists grow their businesses profitably. The 1-800-FLOWERS.COM “Gift Shop” also includes gourmet gifts such as popcorn and specialty treats from The Popcorn Factory® (1-800-541-2676 or
); cookies and baked gifts from Cheryl’s® (1-800-443-8124 or
); premium chocolates and confections from Fannie May® confections brands (
); gift baskets and towers from 1-800-Baskets.com® (
); wine gifts from Winetasting.com® (
); top quality steaks and chops from Stockyards.com (
); as well as premium branded customizable invitations and personal stationery from FineStationery.com (
). The Company’s Celebrations® brand (
) is a premier online destination for fabulous party ideas and planning tips. 1-800-FLOWERS.COM, Inc. is involved in a broad range of corporate social responsibility initiatives including continuous expansion and enhancement of its environmentally-friendly “green” programs as well as various philanthropic and charitable efforts. Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS.
Special Note Regarding Forward-Looking Statements:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events and can generally be identified by the use of statements that include words such as “estimate,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “goal,” “target” or similar words or phrases. Forward-looking statements include, but are not limited to, statements regarding the Company’s expectations for: improved gross profit margin and enhanced bottom line results for its Consumer Floral category and on a consolidated basis for the fiscal third quarter and second half of fiscal 2011 compared with the prior year and continued market share growth and solid profitability in its BloomNet wire service business. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements, including, among others: the Company’s ability to leverage its operating platform and reduce operating expenses; its ability to grow its 1-800-Baskets.com business; its ability to manage the increased seasonality of its businesses; its ability to cost effectively acquire and retain customers; the outcome of contingencies, including legal proceedings in the normal course of business; its ability to compete against existing and new competitors; its ability to manage expenses associated with sales and marketing and necessary general and administrative and technology investments; its ability to reduce promotional activities and achieve more efficient marketing programs; and general consumer sentiment and economic conditions that may affect levels of discretionary customer purchases of the Company’s products. The Company undertakes no obligation to publicly update any of the forward-looking statements, whether as a result of new information, future events or otherwise, made in this release or in any of its SEC filings except as may be otherwise stated by the Company. For a more detailed description of these and other risk factors, please refer to the Company’s SEC filings including the Company’s Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q. Consequently, you should not consider any such list to be a complete set of all potential risks and uncertainties.