Strong Growth in Challenging Times
As markets and retailers have been buffeted by 2020’s unique challenges, 1-800-FLOWERS.COM, Inc. (FLWS:NASDAQ) has managed to meet the needs of its investors and customers by enhancing its Celebratory Ecosystem and fortifying its business strategy with new acquisitions. Leveraging the popularity of its e-commerce mainstays, which include Harry & David®, The Popcorn Factory®, Cheryl’s Cookies®, 1-800-Baskets.com®, Simply Chocolate®, and Shari’s Berries®, as well as the most recent addition to its brand portfolio, PersonalizationMall.com, the company’s focus on consumer satisfaction drove strong revenue growth over the past fiscal year.
- ~$1.5 billion total net revenues in fiscal year 2020, a 19.3% increase over 2019
- Net income in fiscal year 2020 of $65 million
- New customer growth over the fiscal year of more than 30%
- Increased revenue growth in the Gourmet Foods and Gift Baskets segment of more than 112% in Q4/FY 2020
- Acquisition of PersonalizationMall.com and additional services and products developed for vendors and customers
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. and what factors were instrumental in driving record revenue and profit growth for the company’s recently completed fiscal 2020 fourth quarter and full year?
Chris McCann: We are the leading provider of gifts designed to help customers express, connect, and celebrate. Our total net revenues for our fiscal 2020 fourth quarter (Q4) increased 61.1% to $418 million, and our total net revenues for the full year increased 19.3% to $1.49 billion. It’s important to note that through the first three quarters of our fiscal year—before the impact of the COVID-19 pandemic—we achieved solid top- and bottom-line growth, as well as strong growth in our customer files.
- This reflects our ability to leverage our business platform, including:
- Our all-star family of brands;
- Our focus on innovation in technology and product development;
- Our digital marketing experience and expertise;
- Our dedication to providing truly exemplary customer service.
We entered Q4 with this momentum, which was further accelerated by the impact of the pandemic as customers increasingly turned to our trusted brands and innovative products to help them remain connected and express themselves during a very difficult period. As a result, already strong customer demand levels rose dramatically across our floral and gourmet gift brands.
AA: 1-800-FLOWERS.COM, Inc. has three business segments. What are the revenues for each segment and which brands are within each segment?
CM: Gourmet Foods and Gift Baskets is our largest business segment, with the highest revenue and gross profit margin (GPM) growth potential. Fiscal 2020 revenues in this segment increased 21.1% to $785.5 million. We have a unique collection of brands and product lines versus single-product competition. There are multichannel growth opportunities for this segment—for example, organic growth via cross-brand marketing and merchandising through our multibrand website and combined databases, as well as acquisitions, such as the recently acquired Shari’s Berries® brand.
Our iconic gift brands in the Gourmet Foods and Gift Baskets 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®; dipped berries and other gourmet treats from Shari’s Berries®; premium English muffins and other breakfast treats from Wolferman’s Bakery™; premium chocolate gifts from Simply Chocolate®; and top-quality steaks and chops from Stock Yards®.
Our Consumer Floral segment is the category leader, and our 1-800-Flowers.com® floral brand has powerful brand equity. Fiscal 2020 revenues in this segment increased 19.2% to $593.2 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. Deliveries are often on a same-day basis. 1-800-Flowers.com is very strong in the “everyday gifting” business, using efficient customer acquisition and highly leverageable everyday site traffic to build sales throughout our brands.
Our BloomNet® Wire Service segment achieved fiscal 2020 revenue growth of 8.6%, with revenues for the year increasing to $111.8 million. BloomNet is the category leader in quality and innovation. Revenues in our BloomNet Wire Service 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: Which specific products and programs can you highlight in the record revenue growth of 1-800-FLOWERS.COM, Inc. during the company’s fiscal 2020 fourth quarter?
CM: In our Gourmet Foods and Gift Baskets segment, revenue growth for the fiscal 2020 fourth quarter increased more than 112%, as products and product collections that had already been showing strong growth became go-to purchases for our customers. This includes products such as:
- The Harry & David Gourmet line of prepared foods, from charcuterie boards to complete family meals;
- The Popcorn Factory’s Tins With Pop, featuring relevant memes like “A Socially-Distant Hug”;
- Cheryl’s Cookies Sentiments Collection, featuring sentiments for every moment, such as “Here for You,” “Great Job,” “You’re Awesome,” and more;
- Shari’s Berries, which continues to perform ahead of our expectations.
These products, along with our expanded offerings from 1-800-Baskets.com, Simply Chocolate, and Wolferman’s Bakery, helped our customers satisfy their need to connect and express themselves, for both holidays and everyday occasions throughout the quarter.
Our focus on operational excellence was on full display during the quarter, as we expanded our production and fulfillment capacity to meet rising customer demand while concurrently adapting our facilities to protect the health and safety of our associates, our vendors, and our customers. As a result, even while absorbing increased operating costs associated with the pandemic, we achieved record segment contribution margin for the quarter.
In our Consumer Floral business, during the fiscal 2020 fourth quarter, the 1-800-Flowers.com brand benefited from strong growth for the Easter and Mother’s Day holiday periods, combined with increasing demand for everyday occasions such as birthdays, anniversaries, sympathy, and get well. During the quarter, customers also responded well to our continued focus on product innovation, including:
- The expansion of the 1-800-Flowers Plant Shop, featuring a growing assortment of highly popular succulents and large-format house plants;
- Our new Conversation Roses collection, with heartfelt sentiments literally printed right on the rose petals themselves;
- The launch of our new Jason Wu Wild Beauty line, featuring the exclusive floral creations of one of the hottest fashion trendsetters on the scene today.
As a result, our Consumer Floral segment achieved strong revenue growth of more than 46% during the quarter, and further expanded the 1-800-Flowers brand’s market leadership position. This growth, combined with enhanced operating leverage, enabled us to more than double segment contribution margin compared with last year’s fourth quarter.
In our BloomNet business, during the fiscal 2020 fourth quarter we continued to focus on providing a broad range of programs and services to help our local florist members weather a very challenging environment. For example, in addition to waiving membership fees for the month of April, we provided florists with information and assistance related to state and federal support programs.
As we headed into the key Mother’s Day period, we worked closely with florists throughout the country to help them navigate the pandemic impacts so that they could safely expand their fulfillment capacity and achieve much-needed boosts to their businesses. The strong performance of the 1-800-Flowers brand helped us deliver significant order volume to our florists during the Mother’s Day period and throughout the quarter.
As a result, BloomNet grew revenues nearly 11% during a very challenging period.
During the fiscal 2020 fourth quarter we also launched several new programs to help our florist members, including:
- On-demand personalized greeting cards that enable florists to achieve additional revenue on 1-800-Flowers orders;
- Floriology NOW, a digital learning platform for continuing education;
- BloomNet Works, a collection of cost-saving and profit-enhancing programs.
These programs, among others, are designed to help our florist members weather the current pandemic crisis and grow their businesses profitably going forward.
AA: In addition to substantial growth from existing customers, 1-800-FLOWERS.COM, Inc. is significantly growing its new customer file. What do these gains reflect?
CM: Through the first three quarters of fiscal 2020, we achieved more than 10% growth in our new customer file. This reflects:
- The trust customers have in our great family of brands;
- Our expanded offering of truly original products, designed specifically to help our customers express themselves;
- The evolution of our marketing messaging, which included messaging crafted to be more relevant; engaging directly with our customers in a two-way dialog; and a focus on the experience of connection.
These factors positioned us well as we entered the fourth quarter of fiscal 2020, enabling us to respond effectively to rising customer demand and interest. As a result, new customer growth accelerated dramatically during the quarter, driving full-year, new customer growth to more than 30%.
Further, there was even stronger growth in our Passport Loyalty program (where customers enjoy free shipping with no service charge across our portfolio of brands), as well as stronger growth in Multi-Brand Customers (our best performing customer cohorts). These trends, along with strong demand from existing customers, have continued into fiscal 2021.
AA: What advantages does the recently completed acquisition of PersonalizationMall.com bring to 1-800-FLOWERS.COM, Inc.?
CM: We are very pleased to have closed the acquisition of PersonalizationMall.com well ahead of the key holiday season, with the business up and running and already growing nicely on a year-over-year basis. The extensive product offering of PersonalizationMall.com includes a wide variety of personalization processes such as sublimation, embroidery, digital printing, engraving and sandblasting.
The addition of PersonalizationMall to our all-star family of brands, on our unique business platform, significantly enhances our ability to help our customers engage and stay connected with the important people in their lives. Similar to our market-leading positions in Floral and Gourmet Foods, the broad assortment of products and personalization processes offered by PersonalizationMall makes us a leader in the growing market for personalized gifts.
AA: In what ways is 1-800-FLOWERS.COM, Inc. positioned to continue meeting the challenges of the current environment, and also to sustain future growth?
CM: We entered fiscal 2021 with a combination of:
- Strong growth, in revenues and in our customer files, that has continued into our new fiscal year;
- A strong balance sheet and significant cash flows, giving us continued confidence in our ability to manage our business in this unprecedented and rapidly changing environment;
- Proven leveragability in the unique operating platform we’ve built;
- The strength of our brands and our diverse product offerings;
- The innovative application of technology;
- Marketing and product strategies designed to deepen the relationships we have with our customers and drive customer lifetime value.
The strong momentum built during the past year continues in our fiscal 2021 first quarter, and it bodes well for our key holiday season in Q2.
To sum things up, we believe we are well positioned to drive sustainable, long-term growth as we continue to engage with our customers to inspire more human expression, connection, and celebration—sentiments that the current environment has taught us are more important than ever.
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 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. Mr. McCann 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 helped 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., Mr. McCann was named to the National Retail Federation’s “List of People Shaping Retail’s Future 2018.” Additionally, 1-800-FLOWERS.COM, Inc. was recognized as the 2019 Mid-Market Company of the Year by CEOConnection.
Mr. McCann currently serves as vice chairman of the board of IGHL, a facility dedicated to the enrichment of the lives of developmentally disabled adults. In 2005, together with his brother Jim, he helped found Smile Farms Inc., a nonprofit organization dedicated to providing meaningful job opportunities for individuals with developmental disabilities. Today, Smile Farms operates eight campuses and employs over 150 individuals. Mr. McCann also serves as a member of the Board of Trustees of Marist College, where he earned a Bachelor of Arts in Political Science.
“1-800-FLOWERS.com recorded a stunning 61% revenue growth quarter, headlined by over 100% growth at both Harry & David ecommerce and the Gourmet Food segment as a whole. Of equal importance, in our view, management called for a largely unabated trend line for consumer interest and demand through August, leading to F1Q21 (September) guidance well above the Street.”
—Daniel L. Kurnos, Benchmark
Aug. 28, 2020
“E-commerce trends remain very strong so far in FY21, with