1-800-FLOWERS.COM, Inc. ( FLWS) F1Q2010 Earnings Call October 21, 2010 11:00 am ET Executives Joseph Pititto - VP, IR & Corporate Communications Jim McCann - Chairman & CEO Bill Shea - SVP, Finance & Administration, Treasurer & CFO Chris McCann - President, Director Analysts Ingrid Chung - Goldman Sachs Eric Beder - Brean Murray David Cannon - First Midwest Securities Presentation Operator
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In addition, this morning, we will discuss certain supplemental financial measures that were not prepared in accordance with the Generally Accepted Accounting Principles. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release this morning.The company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call, or any recordings of today's call, the press release issued earlier today or any of it’s SEC filings except as maybe otherwise stated by the company. I'll now turn the call over to Jim McCann. Jim McCann Good morning everyone. Our first quarter’s results were in line with our expectations and with the trends that we have seen in our business segments. During the quarter which is typically our lowest in terms of revenues, we saw continued soft demand in our consumer floral business. This was somewhat offset by stronger sales in our BloomNet wire service business and solid e-commerce growth in our Gourmet Food and Gift Basket segments. A little later in the call, Chris will highlight some of the initiatives we are implementing to help stimulate demand in our consumer floral business including new product development efforts and a re-tooling of our marketing programs. In terms of gross profit margin, we’ve told you that we are keenly focused on driving stronger margins across the enterprise and particularly in our consumer floral business. During quarter, we increased gross margin in the consumer floral by 120 basis points and consolidated gross margin grew a 130 basis points compared with the prior year period. This was achieved through a combination of initiatives including among others more efficient use of promotion strategy we discussed in our last conference call. Combined with strong gross margins we are seeing our Gourmet Food and Gift Basket businesses that we have seen in those basket businesses. We expect to see continued improvement in consolidated gross margins throughout the fiscal year.
In terms of operating expenses, this is another key focus area for us where we have been successfully leveraging our business platform to reduce costs. Through the first quarter, we were able to keep operating expenses flat compared with the prior year period. We achieved this while continuing to innovate and invest for the future across a number of initiatives that we believe will help us drive growth in the years ahead.Among these initiatives, our efforts in franchising, our technology investments in mobile and social commerce where we are recognized leader in this space. Our program is to enhance the floral industry supply chain and in Celebrations.com, our party planning, content and customer engagement sight where we are currently attracting more than 1 million unique business a month. Now we are the number one search result for the Keyboard Halloween parties. We believe these efforts and others like them that we have underway, position us well for growth opportunities in the future. Regarding our investments as we head into our key yearend holiday season, we continue to see the benefits of the investments we have made and continue to make in our Gourmet Food and Gift Basket businesses, we have seen solid e-commerce growth in this category particularly in our Cheryl’s and [1-800-Baskets springs]. This growth is largely offsetting the softer demand we have seen in wholesale baskets. Importantly gross margins and contributions margins in our Gourmet Food and Gift Baskets category continue and increased to a combination of sales growth, product mix, manufacturing efficiencies and reduced shipping costs. We expect these positive trends to continue throughout the fiscal year. I think it’s important to note that our newest brand in this category, 1-800-BASKETS.COM is still very much in infancy with significant growth opportunities in the years ahead. Read the rest of this transcript for free on seekingalpha.com