1.800.FLOWERS.COM 2019-09-10T07:56:09-07:00

FEATURED COMPANY

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Celebrate Success

1-800-FLOWERS.COM, Inc. (FLWS:NASDAQ) has developed a unique Celebratory Ecosystem comprised of e-commerce mainstays including Harry & David®, The Popcorn Factory®, Cheryl’s Cookies®, 1-800-Baskets.com®, Wolferman’s®, Moose Munch®, Simply Chocolate®, Stock Yards®, and Shari’s Berries®. The company’s focus remains on consumer satisfaction, which has driven strong revenue growth over the past year. New product development and continued innovation in e-commerce technologies, such as its Progressive Web App technology, ensure the company will retain its appeal to investors and customers alike.

  • Total revenues in fiscal year 2019 increased 8.4% to $1.25 billion
  • New customer growth across all brands increased more than 10%
  • Commitment to continued investment in product development and customer engagement technology
  • A strong balance sheet and strong cash flow

Advisor Access spoke with Chris McCann, president and CEO of 1-800-FLOWERS.COM, Inc.

Advisor Access: How would you describe 1-800-FLOWERS.COM, Inc.? What do you feel makes the company a compelling investment opportunity?

Chris McCann: We are the leading provider of gifts designed to inspire more human expression, connection and celebration. Our Celebratory Ecosystem includes an all-star family of brands across a broad variety of product categories, including gourmet foods, gift baskets, and floral gifts for every occasion, making us a one-stop destination for our customers’ gifting needs.

The company just announced strong growth for our fiscal year (FY) 2019 across all three of our business segments. We entered the year with a plan to invest behind our lead brands to accelerate revenue growth and we exceeded our goals, with total revenues increasing 8.4% to $1.25 billion. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for FY 2019 was $82.1 million, compared with $78.9 million in the prior year, primarily reflecting the strong revenue growth. And free cash flow for the year was a very strong $45.5 million. 

In addition to strong revenue growth, our focus on innovation, execution in digital marketing and merchandising programs, as well as the adoption of exciting technologies, helped drive significant growth in our customer files. For the year, new customer growth across the enterprise was up more than 10%. 

As we begin FY 2020, we expect to continue the momentum we have in our revenue growth and accelerate our bottom-line growth.

AA: What are the three business segments of 1-800-FLOWERS.COM, Inc., and which brands are within each segment?

CM: Gourmet Foods & Gift Baskets is our largest business segment and we have a unique collection of brands and product lines versus single-product competition. Fiscal 2019 revenues in this segment increased 7.1% to $648.4 million. 

Our iconic gift brands in this segment include:

  • Top quality fruits and other gourmet items from Harry & David®; gift baskets and towers from 1-800-Baskets.com®; 
  • Cookies and baked gifts from Cheryl’s Cookies®; 
  • Popcorn and specialty treats from The Popcorn Factory® and Moose Munch®; 
  • Premium English muffins and other breakfast treats from Wolferman’s®; 
  • Premium chocolate gifts from Simply Chocolate®; and 
  • Top-quality steaks and chops from Stock Yards®. 

Just recently, we further expanded our Celebratory Ecosystem with the acquisition of the Shari’s Berries® brand. Shari’s Berries has strong brand awareness as a leading provider of dipped berries and other gourmet treats, and we see it as an excellent fit in our family of brands.

Our Consumer Floral segment is the category leader, and our 1-800-Flowers.com® floral brand has powerful brand equity. Fiscal 2019 revenues in this segment increased 8.8% to $497.8 million, further extending our market leadership position. The business model is largely virtual, with thousands of local professional florists across the nation confecting and delivering floral gifts made to our creative design and high-quality specifications, and deliveries are often on a same-day basis. 1-800-Flowers.com is very strong in the “everyday gifting” business, with highly leverageable everyday site traffic, which we use to build sales throughout our brands.

Our BloomNet® Wire Service segment achieved FY 2019 revenue growth of 14.9%, with revenues for the year increasing to $102.9 million. Revenues in this segment are generated through membership fees, as well as other product and service offerings sold to local florists. Our BloomNet network of professional florists provides design and delivery on a local basis, and BloomNet offers its member florists innovative technologies and services designed to help them grow their businesses profitably. Revenue growth at BloomNet is accelerating through increasing order volumes from the 1-800-Flowers.com brand, growing shop-to-shop orders from florists and third-party online floral companies.

AA: What strategies is 1-800-FLOWERS.COM, Inc. using to optimize revenue growth beyond seasonal selling opportunities such as Valentine’s Day, Mother’s Day, and the October-through-December holiday season?

CM: We continue to invest behind our lead brands, Harry & David and the 1-800-Flowers.com consumer floral brand, where we’re driving very strong revenue growth as well as double-digit growth in our customer files. Our strategies include placing a strong focus on everyday gifting through cross-brand marketing and merchandising, leveraging the market dominance of Harry & David and 1-800-Flowers.com, and extending that leadership to our other brands. This enables us to solve for more of our customers’ year-round gifting and celebratory needs, such as birthdays, anniversaries, sympathy, get well, and new baby. Additionally, in our Gourmet Foods & Gift Baskets segment, we are creating product collections specifically targeted for everyday occasions, and revenues are growing in double-digits for these occasions.

Our multi-brand website is another key element of our cross-brand marketing and merchandising strategy, introducing site visitors to all our brands and prompting them to explore all gift offerings. We are also generating multi-brand loyalty through our “Celebrations Passport” program, where customers enjoy free shipping, with no service charge, across our portfolio of brands. This is enhancing customer behavior by significantly increasing purchase frequency, annual spend, and retention, while maximizing the lifetime value metrics of our customers. Importantly, we saw these customer growth trends gaining momentum throughout FY 2019, and we expect to carry this momentum into FY 2020.

AA: In what ways is 1-800-FLOWERS.COM, Inc. innovating to broaden its sales and revenue growth?

CM: Our truly original product designs encompass a continual stream of new and innovative choices across all our gourmet food and floral brands, offering great value to our customers and enabling customers to “wow” their gift recipients with exciting products at a wide variety of price points. Product innovation at 1-800-FLOWERS.COM, Inc. also includes expanded product offerings and product-line extensions resulting from listening carefully to our customers, as well as closely watching and acting on buying trends. Among these offerings are personalized gifts, along with organic and gluten-free products, all of which are product areas growing in demand.

AA: Can you give some examples of how the company is working to enhance the customer experience?

CM: Customer experience is our number one product, and we continually explore and embrace new ideas and innovations that enable us to best engage with our customers and serve their celebratory needs. 

For example: 

  • Our online customer service hub offers self-service and live chat support for order tracking and more, as well as delivery windows allowing customers to schedule specific hours for order arrival; 
  • Our Google Assistant transaction feature provides gift-givers the ease of voice or text ordering;
  • An online gift list feature for our Harry & David brand provides a dedicated portal for business-to-business gift-givers.

Furthermore, in merchandising, we are continuing to focus on developing truly original gifts at both entry level and luxury price points. Some of the customer-favorite hits during FY 2019 included: 

  • Expansion of our Unicorn line, based on the success of our Enchanting Unicorn floral arrangement, including Magical Unicorn Truffle Cake Pops and the Dazzling Unicorn Fruit Bouquet; 
  • Our 1-800-Flowers.com succulents collection—a big hit with millennials; 
  • New flavor profiles, including Cheryl’s Chocolate-Chip Brookie (a unique brownie-cookie combo), along with The Popcorn Factory Cookies & Cream and Texas Toast flavors; 
  • Continued expansion of the Harry & David Gourmet line, including award winning Harry & David wines that customers have embraced for both gifting and home entertaining.  

We also introduced our enterprise-wide “Gifts That Give Back” collection in support of our signature philanthropic partner, Smile Farms, which is focused on creating meaningful employment opportunities for individuals with developmental disabilities—an organization we are proud to have founded and one where we are seeing exciting growth. 

AA: How is 1-800-FLOWERS.COM, Inc. taking advantage of the latest technologies to engage customers?

CM: It all comes back to innovation, and innovation is part of our DNA. We are focused on being where our customers are connecting and interacting, making it quick and convenient for customers to engage with us through multiple, innovative technologies.

For instance, in FY 2019:

  • We expanded our category-leading position in Conversational Commerce, where we are now one of the few companies with applications running on all five leading platforms, including Apple, Samsung, Facebook, Google, and Amazon;
  • We continued to roll out PWA (Progressive Web App) technology across our mobile and desktop platforms, significantly increasing site speeds and enhancing the customer experience;
  • We expanded our integration with SmartGift. This highly personalized, experiential gifting feature allows customers to notify their recipient via text, e-mail, or any messaging platform that a gift is on the way—and then gives the recipient the option of modifying the delivery preference, further involving them in the total gifting experience;
  • We launched an interactive, telephonic virtual assistant, integrating artificial intelligence and human understanding to reduce average time on hold and increase our already high customer satisfaction metrics; 
  • We continued to invest in new technology innovations designed to help our customers express themselves with the launch of Smart Message, an augmented-reality, gift-messaging feature available on our iOS mobile app.

AA: In summarizing how 1-800-FLOWERS.COM, Inc. is building on the positive trends of its business, what would you say to investors?

CM: Our company is deeply focused on constantly exploring and introducing new product innovations designed to “Deliver Smiles” by offering our customers an ever-widening range of unique and thoughtful gift options for all the special occasions in their lives. We will continue to invest in truly original product development, along with customer engagement technology. We are driving accelerated revenue growth. Our balance sheet is strong, we are net cash positive, and we are generating significant free cash flow. Our management team is highly experienced, focused, and aligned with our shareholders.

AA: Thank you, Chris.


Chris McCann, president and chief executive officer of 1-800-FLOWERS.COM, Inc., is responsible for the company’s operations across all of its brands and businesses. He oversees the company’s strategic, operational and organizational processes, including the development, implementation, and execution of annual and longer-term strategic, operating and budget plans. Chris joined the organization in 1984, helping lead the disruption of the flower industry with the company’s innovative use of 800# watts-line technology and subsequently helping transform the company with the adoption of online technology as a pioneer in e-commerce. He served as president of 1-800-FLOWERS.COM, Inc. for several years and was named CEO in 2016. As a result of his leadership in driving a culture of innovation at 1-800-FLOWERS.COM, Inc., Chris was named to the National Retail Federation’s “The List of People Shaping Retail’s Future 2018.” Additionally, the company was named one of 2017’s most innovative e-retailers on the Internet Retailer ‘Hot 100’ list.
Chris currently serves as Vice Chairman of the Board of IGHL, a facility dedicated to the enrichment of the lives of developmentally disabled adults, a cause that is near to his heart. In 2005, together with his brother Jim, he helped found Smile Farms Inc., a non-profit organization dedicated to providing meaningful job opportunities for individuals with developmental disabilities. Chris also serves as a member of the Board of Trustees of Marist College, where he earned a Bachelor of Arts in Political Science.

 Analyst Commentary

“We continue to believe FLWS is in a unique position to grow its market share across its floral and gourmet food channels while leveraging customers into further holiday and everyday gifting opportunities . . . We envision more significant market share gains ahead for FLWS as it leans further into strategic marketing and merchandising investments.”

—Alex J. Fuhrman, Craig-Hallum
Aug. 22, 2019


“In our view, 1-800-FLOWERS.COM ended F2019 on a solid note with year-over-year revenue growth of 12.8% . . . we think FLWS is in a favorable position to continue to benefit from a more favorable competitive landscape following the recent bankruptcy of its closest competitor FTD Companies, Inc.”

—Anthony C. Lebiedzinski, Sidoti and Company
Aug. 22, 2019


“F4Q revenue of $259.4 million came in nearly $3 million ahead of consensus, driven by a 10% y/y increase in Consumer Floral, BloomNet growth of 9%, and Easter-adjusted Harry & David growth of high-single digits (we estimate 8%) also came in slightly better than expected, with the latter continuing the trend of recording high-single to low-double digit ecommerce growth despite tougher comparisons and a growing base.”

—Daniel L. Kurnos, Benchmark
Aug. 23, 2019 


“The company had a solid quarter in spite of an incremental $2.5 mil. in compensation expenses year over year. Furthermore, with the acquisition of Shari’s Berries in August, the company is expected to reflect an acceleration in revenue growth in fiscal 2020 from 2019 levels.”

—Michael Kupinski, Noble Capital Markets
Aug. 23, 2019


“FLWS reported F4Q19 sales and EBITDA upside surprises, and guided to FY20 organic sales +6%–7% and EBITDA +8%–10% to $89M–$90M; consensus was $90M. FLWS reaffirmed its FY21 EBITDA target of $100M, implying 10%–11% growth. If the U.S. economy is still healthy, we believe FLWS can hit its targets for accelerated EBITDA growth in FY20-FY21.”

—Linda Bolton Weiser, DA Davidson
Aug. 26, 2019


Disclosures

Investors and others should note that 1-800-FLOWERS.COM, Inc. posts important financial information using the investor relations section of the 1-800-FLOWERS.COM, Inc. website,  www.1-800-FLOWERS.COM, and Securities and Exchange Commission filings.
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The material, information and facts discussed in this report are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. This is not an offer or solicitation of the securities discussed. Advisor-Access LLC and/or its employees, contractors and owners, may purchase or sell the securities mentioned in this report from time to time. Any opinions or estimates in this report are subject to change without notice. This report contains forward-looking statements under the federal securities law. These statements are based on current expectations, estimates and projections about the industry and markets in which 1-800-FLOWERS.COM, Inc. operates, management’s beliefs, and assumptions made by management. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. The securities discussed may involve a high degree of risk and may not be suitable for all investors. 1-800-FLOWERS.COM, Inc.has paid Advisor Access a fee to distribute this email. By clicking on any of the links in this email you agree that your contact information may be shared with 1-800-FLOWERS.COM, Inc. Chris McCann had final approval of the content and is wholly responsible for the validity of the statements and opinions.

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