1-800-Flowers.Com: Efforts Managed to Deliver Smiles

Despite reporting net loss, the company is well positioned with enhanced customer experience and partnerships

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Flowers are the perfect gift idea for celebrating any occasion. With the introduction of ecommerce, now people can just order flowers online and have them delivered almost anywhere in the same day. 1-800-Flowers.Com Inc. (FLWS, Financial), the leading provider of gourmet food and floral gifts, is playing well.

This leading provider has posted excellent quarterly results, including a $2.0 million increase in total net revenues from continuing operations. Further, during the third quarter, the company attracted 821,000 new customers.

The company began in 1976 and now 1-800-Flowers.Com has grown to become a multibrand, omni-channel gift leader, offering an unmatched family of iconic-branded gifts for every occasion. The company’s array of gifts includes fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, candles, balloons and plush stuffed animals. The company operates in three segments:

  1. 1-800-FLOWERS.COM Consumer Floral.
  2. BloomNet Wire Service.
  3. Gourmet Food and Gift Baskets.

Mixed third-quarter results

On April 26, this Carle Place, New York-based company reported its financial results for the third quarter of fiscal 2016 ended on March 27. The company’s total net revenue increased 0.85% to $234.21 million, compared to $232.24 million for the comparable prior-year period. The company’s gross profit increased 1.47% to $96.72 million, compared to $95.32 million in the same quarter of the previous year. Further, gross profit margin increased 30 basis points to 41.3%, compared to 41% in the prior-year period.

The company’s EBITDA, excluding stock-based compensation, improved $2.76 million to a loss of $4.04 million, compared with a loss of $6.8 million in the year-ago quarter. 1-800-Flowers.Com reported a net loss of $9.13 million for the reported quarter. Net loss improved $1.68 million or 15.54%, or (14 cents) per share, compared with a loss of $10.81 million, or (16 cents) per share, in the prior-year period. Further, on an adjusted basis, the company’s net loss for the year-ago quarter was $8.46 million, or (13 cents) per share.

The company’s general and administrative expenses for the reported quarter decreased 7.77% to $21 million, compared to $22.77 million for the comparable prior-year period. Further, total operating expenses improved 110 basis points to 46.9% of total net revenues, compared to 48% in the prior-year period.

1-800-Flowers.Com ended the quarter with cash and cash equivalents of $61.7 million, a sharp increase of 120.83% compared to the year-ago quarter. Further, the company’s long-term debt also decreased by 12.12% to $103.31 million, compared to $117.56 million for the comparable prior-year period.

Segments’ performance

Ă‚ 1-800-Flowers.com Consumer Floral BloomNet Wire Service Gourmet Food and Gift Baskets
Q3 2016 Q3 2015 % change Q3 2016 Q3 2015 % change Q3 2016 Q3 2015 % change
Revenues $113.18 million $116.70 million (3.02)% $22.52 million $22.95 million (1.87)% $99.1 million $92.95 million 6.62%
Gross profit $45.97 million $45.72 million 0.55% $12.39 million $12.57 million (1.43)% $38.04 million $36.85 million 3.23%
Gross profit margin 40.6% 39.2% ---- 55.0% 54.8% ---- 38.4% 39.6% ----
Category Contribution Margin $13.75 million $12.56 million 9.47% $7.75 million $7.29 million 6.31% $(6.75) million $(5.41) million 24.77%

Strong customer base

During the reported quarter, 1-800-Flowers.Com attracted 821,000 new customers, and approximately 1.8 million customers placed orders, out of which 55.3% were repeat customers. This proves that the company has been able to deliver smiles successfully. Further, to enhance customer experience, the company has engaged relevant marketing programs, truly original product designs and powerful brand equity.

Projections

For fiscal 2016, 1-800-Flowers.Com expects consolidated revenue and EBITDA growth in the range of 4% to 5% and 5% to 7%. The company expects to achieve synergy cost savings of $20 million over three years related to its integration of the Harry & David business (acquired in September 2014). Further, the company expects free cash flow of approximately $35 million.

Growth and partnerships

From fiscal 2010 to fiscal 2015, the company’s revenue and EBITDA grew at a CAGR of 9.64% and 18.01%. To enhance broader customer base, the company is extending its market leadership by growing at a faster rate off larger base vs. competitors.

Recently, the company announced its partnership with Facebook (FB, Financial), which will help customers place gift orders from within the Facebook Messenger service through new “bot” technology. Further, on April 26, 1-800-Flowers.Com announced its partnership with Amazon (AMZN, Financial) to enable its customers to place orders via voice commands on Amazon’s Alexa platform.

(Source: Company website)

On a concluding note

Overall, 1-800-Flowers.Com is a rock-solid company with significant growth opportunities, increasing revenues and free cash flows, strong balance sheet, proven ability to leverage business platform and drive operating efficiencies and experienced management team.

Earlier this year, 1-800-Flowers.com was awarded a Silver Stevie “e-Commerce Customer Service” Award, recognizing the company’s innovative use of online technologies and social media to service the needs of customers. In addition, 1-800-Flowers.Com was recognized as one of Internet Retailer’s Top 300 B2B e-commerce companies and was also recently named in Internet Retailer’s 2016 Top Mobile 500 as one of the world’s leading mobile commerce sites.

With the recent quarterly release, the company is aiming for a better future and is expected to create greater shareholder returns.

Disclosure: I do not hold any position in the company.