Note 13– Accrued Expenses
Accrued expenses consisted of the following:
| | | March 31, 2024 | | | July 2, 2023 | |
| | | (in thousands) | |
Payroll and employee benefits | | $ | 25,786 | | | $ | 33,927 | |
Deferred revenue | | | 31,661 | | | | 30,811 | |
Accrued marketing expenses | | | 15,190 | | | | 13,679 | |
Accrued florist payout | | | 12,733 | | | | 13,437 | |
Accrued purchases | | | 16,578 | | | | 18,351 | |
Other | | | 36,056 | | | | 31,709 | |
Accrued Expenses | | $ | 138,004 | | | $ | 141,914 | |
17
Note 14– Commitments and Contingencies
Litigation
There are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the ultimatefinal resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidityliquidity.
Note 15– Subsequent Events
Acquisition of Card Isle
On April 3, 2024, the Company completed its acquisition of Card Isle, an e-commerce greeting card company, expanding the Company’s presence in the greeting card category across all brands.
The Company used cash on its balance sheet to fund the approximate $3.5 million purchase. Card Isle annual revenue, based on its most recently available financial information, is deemed immaterial to the Company’s consolidated financial statements.
ITEM 2.2. MANAGEMENT’S’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.OPERATIONS
Forward Looking Statements
This “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A)Operations” ("MD&A") is intended to provide an understanding of our financial condition, change in financial condition, cash flow, liquidity, and results of operations. The following MD&A discussion should be read in conjunction with the consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-Q and in the Company’s Company’s Annual Report on Form 10-K.10-K, for the year ended July 2, 2023. The following discussion contains forward-looking statements that reflect the Company’sCompany’s plans, estimates and beliefs. The Company’sCompany’s actual results could differ materially from those discussed or referred to in the forward-looking statements. Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the caption “Forward-Looking“Forward-Looking Information and Factors That May Affect Future Results” andResults,” under Part I, Item 1A, of the Company’s Company’s Annual Report on Form 10-K, for the year ended July 2, 2023under the heading “Risk Factors.“Risk Factors” and Part II-Other Information, Item 1A in this Form 10-Q.
Business Overview
1-800-FLOWERS.COM, Inc. and its subsidiariessubsidiaries (collectively, the “Company”) is a leading provider of gifts for all celebratory occasions. Fordesigned to help inspire customers to give more, connect more, and build more and better relationships. The Company’s e-commerce business platform features an all-star family of brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Things Remembered®, Moose Munch®, The Popcorn Factory®, Wolferman’s Bakery®, Vital Choice®, Simply Chocolate®, and Card Isle®. Through the past 40 years, 1-800-Flowers.com® has been helping deliver smilesCelebrations Passport® loyalty program, which provides members with free standard shipping and no service charge on eligible products across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to customersdeepen relationships with a 100% Smile Guarantee® backing every gift. In addition to the 1-800-Flowers.com brand, which offers fresh flowers, plants, fruitcustomers. The Company also operates BloomNet®, an international floral and gift baskets, as well as balloons, plush and keepsake gifts, the Company’s BloomNet® international floral wireindustry service (www.mybloomnet.net) and Napco brands provideprovider offering a broad rangebroad-range of quality products and value-added services designed to help professional floristsmembers grow their businesses profitably. The 1-800-FLOWERS.COM, Inc. familyprofitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of brands also offers everyday gifting and entertaining products such as premium, gift-quality fruits and other gourmet items from Harry & David® (1-877-322-1200 or www.harryanddavid.com), popcorn and specialty treats from The Popcorn Factory® (1-800-541-2676 or www.thepopcornfactory.com); cookies and baked gifts from Cheryl’s® (1-800-443-8124 or www.cheryls.com); gift baskets and towers from 1-800-Baskets.com® (www.1800baskets.com)towers; and DesignPac; premium English muffinsAlice’s Table®, a lifestyle business offering fully digital floral, culinary and other breakfast treats from Wolferman’s (1-800-999-1910 or www.wolfermans.com); artisanal and specialty chocolates from Simply ChocolateSM (www.simplychocolate.com), carved fresh fruit arrangements from FruitBouquets.com (www.fruitbouquets.com); top quality steaks and chops from Stock Yards® (www.stockyards.com), and personalized gifts from Personalization Universe�� (www.personalizationuniverse.com).experiences to guests across the country.
Service offerings suchFor additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our Annual Report on Form 10-K, for the year ended July 2, 2023.
Macro-economic Conditions
Overall, broader macro-economic conditions continue to impact our consumers as Celebrations Passport®, Celebrations Rewards®they continue to moderate their discretionary income. Consumers remain pressured by persistent inflation, higher interest rates, and Celebrations Reminders® are designedthe resumption of student loan repayments. Throughout the past several years, we have seen that customer spending on “Everyday” gifting occasions has slowed, whereas spending for the major holidays has held up better. However, customers did remain more conservative regarding their Christmas and Valentine's Day holiday spending than originally anticipated. In line with this, total consolidated revenues decreased 9.1% to deepen relationships$379.4 million and 9.2% to $1.47 billion during the three and nine months ended March 31, 2024, respectively, compared with customers across all brands. 1-800-FLOWERS.COM, Inc. was namedthe same periods of the prior year. As we look ahead to the Stores® 2017 Hot 100 Retailers List byend of fiscal 2024, we continue to expect our e-commerce sales trends to improve albeit at a slower pace than initially anticipated.
The challenging macro-economic conditions that have affected our customers have also impacted our operating costs. During the National Retail Federationsecond quarter of fiscal 2022, in-bound and receivedout-bound shipping, commodity, labor and fuel costs began to surge, and escalated throughout the Gold awardbalance of the year and into fiscal 2023. During our second quarter and third quarter of fiscal 2023, while certain commodity prices remained near historical highs, we began to see a more stable labor market, and significant year-over-year reductions in ocean freight costs. As a result of these trends, combined with our strategic pricing initiatives, automation efforts, and other internal management initiatives, we started to see year-over-year improvement in gross margin commencing in the “Best Artificial Intelligence” category atsecond quarter of fiscal 2023. These trends and initiatives continued into fiscal 2024 and we saw a significant improvement in year-over-year gross margin in the Data & Marketing Association’s 2017 International ECHO Awardsthird quarter and first nine months of fiscal 2024. This improvement and a reduction of expenses helped to offset the aforementioned year-over-year decline in sales.
Intangible Impairment
During the quarter ended December 31, 2023, as a result of a decline in the actual and projected revenue for the Company’s groundbreaking implementation of an artificial intelligence-powered online gift concierge, GWYN.
Shares in 1-800-FLOWERS.COM, Inc. are traded onPersonalizationMall tradename, as well as a higher discount rate resulting from the NASDAQ Global Select Market, ticker symbol: FLWS.
On May 30, 2017,higher interest rate environment, the Company completeddetermined that an impairment assessment was required for this tradename. This assessment resulted in the saleCompany recording a non-cash impairment charge of $19.8 million to reduce the recorded carrying value of the outstanding equity of Fannie May Confections Brands, Inc., including its subsidiaries, Fannie May Confections, Inc.PersonalizationMall tradename. See Note 5 – Goodwill and Harry London Candies, Inc. (“Fannie May”) to Ferrero International S.A., a Luxembourg corporation (“Ferrero”),Intangible Assets, Net for a total consideration of $115.0 million in cash, subject to adjustment for seasonal working capital. The working capital adjustment was finalized in August 2017, resulting in an $11.4 million reduction to the purchase price. The resulting gain on sale of $14.6 million, is included within “Other (income) expense, net” in the Company’s consolidated statements of income in the fourth quarter of fiscal year 2017.
The Company and Ferrero also entered into a transition services agreement whereby the Company will provide certain post-closing services to Ferrero and Fannie May for a period of approximately 18 months, related to the business of Fannie May, and a commercial agreement with respect to the distribution of certain Ferrero and Fannie May products.
Operating results of Fannie May are reflected in the Company’s consolidated financial statements through May 30, 2017, the date of its disposition, within its Gourmet Food & Gift Baskets segment. See Segment Information and Results of Operations below for a comparison of fiscal 2018 results to fiscal 2017, adjusted to exclude the operations of Fannie May.
further information.
Acquisition of Things Remembered
On January 10, 2023, the Company completed its acquisition of certain assets of the Things Remembered brand, a provider of personalized gifts, whose operations have been integrated within the PersonalizationMall.com brand, in the Consumer Floral & Gifts segment. The Company used cash on hand to fund the $5.0 million purchase, which included intellectual property, customer list, certain inventory, and equipment - see Note 3 –Acquisitions in Item 1.
Acquisition of Card Isle
On April 3, 2024, the Company completed its acquisition of Card Isle, an e-commerce greeting card company, expanding the Company’s presence in the greeting card category across all brands. The Company used cash on its balance sheet to fund the approximate $3.5 million purchase. – See Note 15 – Subsequent Events in Item 1.
Amended and Restated Credit Agreement
On June 27, 2023, the Company entered into a Third Amended and Restated Credit Agreement to, among other modifications, (i) increase the amount of the outstanding term loan from approximately $150 million to $200 million, (ii) decrease the amount of the commitments in respect of the revolving credit facility from $250 million to $225 million, subject to a seasonal reduction to an aggregate amount of $125 million for the period from January 1 to August 1, (iii) extend the maturity date of the outstanding term loan and the revolving credit facilities by approximately 48 months to June 27, 2028, and (iv) increase the applicable interest rate margins for SOFR and base rate loans by 25 basis points (See Note 7 - Debt, Net in Item 1, for details).
Company Guidance
For Fiscal 2024, the Company continues to expect revenue to remain pressured by a challenging consumer environment, but certain year-over-year trends continue to improve. The Company also expects continued improvement in gross margin.
As a result, the Company is reiterating its Fiscal 2024 guidance as follows:
| ● | total revenues on a percentage basis to decline in a range of 7% to 9%, as compared with the prior year; |
| ● | Adjusted EBITDA to be in a range of $95 million to $100 million; and |
| ● | Free Cash Flow to be in a range of $60 million to $65 million. |
Refer to "Definitions of non-GAAP Financial Measures" for reconciliation of non-GAAP results to applicable GAAP results.
Definitions of non-GAAP Financial Measures:
We sometimes use financial measures derived from consolidated financial information, but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these are considered "non-GAAP financial measures" under the U.S. Securities and Exchange Commission rules. See below for definitions and the reasons why we use these non-GAAP financial measures. Where applicable, see the Segment Information and Results of Operationssections below for reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are referred to as “adjusted"“non-GAAP” or “on a comparable basis”“adjusted” below, as these terms are used interchangeably. Reconciliations for forward-looking figures would require unreasonable efforts at this time because of the uncertainty and variability of the nature and amount of certain components of various necessary GAAP components, including, for example, those related to compensation, tax items, amortization or others that may arise during the year, and the Company's management believes such reconciliations would be confusing or misleading to investors. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The lack of such reconciling information should be considered when assessing the impact of such disclosures.
Adjusted revenues
Adjusted revenues measure GAAP revenues adjusted for the effects of acquisitions, dispositions, and other items affecting period to period comparability. See Segment Information for details on how adjusted revenues were calculated for each period presented.
We believe that this measure provides management and investors with a more complete understanding of underlying revenue trends of established, ongoing operations by excluding the effect of activities which are subject to volatility and can obscure underlying trends.
Management recognizes that the term "adjusted revenues" may be interpreted differently by other companies and under different circumstances. Although this may influence comparability of absolute percentage growth from company to company, we believe that these measures are useful in assessing trends of the Company and its segments, and may therefore be a useful tool in assessing period-to-period performance trends.
Adjusted gross profit and adjusted gross profit percentage
Adjusted gross profit measures GAAP revenues less cost of revenues, adjusted for the effects of acquisitions, dispositions, and other items affecting period to period comparability. Adjusted gross profit percentage measures adjusted gross profit divided by adjusted revenues. See Segment Information for details on how adjusted gross profit and adjusted gross profit percentage were calculated for each period presented.
We believe that this measure provides management and investors with a more complete understanding of underlying gross profit trends of established, ongoing operations by excluding the effect of activities which are subject to volatility and can obscure underlying trends.
Management recognizes that the term "adjusted gross profit" or “adjusted gross profit percentage” may be interpreted differently by other companies and under different circumstances. Although this interpretation may vary from company to company, we believe that these consistently applied measures are useful in assessing trends of the Company and its segments, and may therefore be a useful tool in assessing period-to-period performance trends.
EBITDA and adjustedAdjusted EBITDA
We define EBITDA as net income (loss) before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for the impact of stock basedstock-based compensation, Non-Qualified Deferred Compensation Plan (“NQDC Plan”) Investment appreciation/appreciation/depreciation, and certain items affecting period to periodperiod-to-period comparability. See Segment Information orfor details on how EBITDA and adjustedAdjusted EBITDA were calculated for each period presented.
The Company presents EBITDA and Adjusted EBITDA because it considers such information meaningful supplemental measures of its performance and believes such information is frequently used by the investment community in the evaluation of similarly situated companies. The Company uses EBITDA and adjustedAdjusted EBITDA as 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 and adjustedAdjusted EBITDA to determine its interest rate and to measure compliance with covenants such as interest coverage and debt incurrence.certain covenants. EBITDA and adjustedAdjusted EBITDA are also used by the Company to evaluate and price potential acquisition candidates.
EBITDA and adjustedAdjusted EBITDA 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 are: (a) EBITDA and adjustedAdjusted EBITDA do not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA and adjustedAdjusted EBITDA do 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 Adjusted EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.
Segment contribution margincontribution margin and adjusted segment contribution margin
We define segment contribution margin as earnings before interest, taxes, depreciation and amortization, before the allocation of corporate overhead expenses. Adjusted segment contribution margin is defined as segment contribution margin adjusted for certain items affecting period to periodperiod-to-period comparability. See Segment Information for details on how segment contribution margin and comparable segment contribution margin werewas calculated for each period presented.
When viewed together with our GAAPGAAP results, we believe segment contribution margin and comparableadjusted segment contribution margin provide management and users of the financial statements meaningful information about the performance of our business segments.
Segment contribution margin and comparableadjusted segment contribution margin are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material limitation associated with the use of the segment contribution margin and adjusted segment contribution margin is that it isthey are an incomplete measure of profitability as it doesthey do not include all operating expenses or non-operating income and expenses. Management compensates for these limitationsthis limitation when using this measure by looking at other GAAP measures, such as operating income and net income.
Adjusted net income (loss) and adjusted net income (loss) per common share
We define adjusted net income (loss) and adjusted net income (loss) per common share as net income (loss) and net income (loss) per common share adjusted for certain items affecting period to periodperiod-to-period comparability. See Segment Information below below for details on how adjusted net income (loss) and adjusted net income (loss) per common share were calculated for each period presented.
We believe that adjusted net income (loss) and adjusted net income (loss) per common share are meaningful measures because they increase the comparability of period to periodperiod-to-period results.
Since these are not measures of performance calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, GAAP net income (loss) and net income (loss) per common share, as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies.
Free Cash Flow
We define free cash flow as net cash provided by operating activities, less capital expenditures. The Company considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of fixed assets, which can then be used to, among other things, invest in the Company’s business, make strategic acquisitions, strengthen the balance sheet, and repurchase stock or retire debt. Free cash flow is a liquidity measure that is frequently used by the investment community in the evaluation of similarly situated companies.
Since free cash flow is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company's cash balance for the period.
The following table reconciles net cash provided by operating activities, a GAAP measure, to free cash flow, a non-GAAP Measure.
| | | Nine Months Ended | |
| | | March 31, | | | April 2, | |
| | | 2024 | | | 2023 | |
| | | (in thousands) | |
Net cash provided by operating activities | | $ | 100,051 | | | $ | 73,064 | |
Capital expenditures | | | (26,482 | ) | | | (31,351 | ) |
Free Cash Flow | | $ | 73,569 | | | $ | 41,713 | |
SegmentInformation
The following table presents the net revenues,revenues, gross profit and segment contribution margin from each of the Company’s business segments, as well as consolidated EBITDA, and Adjusted EBITDA and adjusted net income.EBITDA.
| | | Three Months Ended |
| | | December 31, 2017 | | | January 1, 2017 | | | Exclude Operating Results of Fannie May | | | Severance Costs | | | Adjusted (non-GAAP) December 31, 2017 | | | Adjusted (non-GAAP) % Change | | |
| | | (dollars in thousands) | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 100,064 | | | $ | 97,808 | | | $ | - | | | $ | - | | | $ | 97,808 | | | | 2.3 | % | |
BloomNet Wire Service | | | 20,375 | | | | 20,502 | | | | | | | | | | | | 20,502 | | | | -0.6 | % | |
Gourmet Food & Gift Baskets | | | 405,964 | | | | 436,870 | | | | (41,199 | ) | | | - | | | | 395,671 | | | | 2.6 | % | |
Corporate | | | 317 | | | | 316 | | | | | | | | | | | | 316 | | | | 0.3 | % | |
Intercompany eliminations | | | (627 | ) | | | (943 | ) | | | 344 | | | | - | | | | (599 | ) | | | -4.7 | % | |
Total net revenues | | $ | 526,093 | | | $ | 554,553 | | | $ | (40,855 | ) | | $ | - | | | $ | 513,698 | | | | 2.4 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 38,844 | | | $ | 40,300 | | | | - | | | | - | | | $ | 40,300 | | | | -3.6 | % | |
| | | | 38.8 | % | | | 41.2 | % | | | | | | | | | | | 41.2 | % | | | | | |
| | | | | | | | | | | | - | | | | - | | | | | | | | | | |
BloomNet Wire Service | | | 11,693 | | | | 12,310 | | | | | | | | | | | | 12,310 | | | | -5.0 | % | |
| | | | 57.4 | % | | | 60.0 | % | | | - | | | | - | | | | 60.0 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Food & Gift Baskets | | | 184,468 | | | | 204,185 | | | | (15,939 | ) | | | - | | | | 188,246 | | | | -2.0 | % | |
| | | | 45.4 | % | | | 46.7 | % | | | | | | | | | | | 47.6 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate (a) | | | 254 | | | | 199 | | | | - | | | | - | | | | 199 | | | | 27.6 | % | |
| | | | 80.1 | % | | | 63.0 | % | | | | | | | | | | | 63.0 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 235,259 | | | $ | 256,994 | | | $ | (15,939 | ) | | $ | - | | | $ | 241,055 | | | | -2.4 | % | |
| | | | 44.7 | % | | | 46.3 | % | | | | | | | | | | | 46.9 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 10,791 | | | $ | 13,128 | | | $ | - | | | $ | - | | | $ | 13,128 | | | | -17.8 | % | |
BloomNet Wire Service | | | 7,692 | | | | 8,189 | | | | - | | | | - | | | | 8,189 | | | | -6.1 | % | |
Gourmet Food & Gift Baskets | | | 93,496 | | | | 104,624 | | | | (6,219 | ) | | | 79 | | | | 98,484 | | | | -5.1 | % | |
Segment Contribution Margin Subtotal | | | 111,979 | | | | 125,941 | | | | (6,219 | ) | | | 79 | | | | 119,801 | | | | -6.5 | % | |
Corporate (a) | | | (18,836 | ) | | | (20,223 | ) | | | 356 | | | | - | | | | (19,867 | ) | | | 5.2 | % | |
EBITDA (non-GAAP) | | | 93,143 | | | | 105,718 | | | | (5,863 | ) | | | 79 | | | | 99,934 | | | | -6.8 | % | |
Add: Stock-based compensation | | | 968 | | | | 1,724 | | | | - | | | | - | | | | 1,724 | | | | -43.9 | % | |
Add: Comp charge related to NQ Plan Investment Appreciation | | | 364 | | | | 20 | | | | - | | | | - | | | | 20 | | | | 1720.0 | % | |
Adjusted EBITDA (non-GAAP) | | $ | 94,475 | | | $ | 107,462 | | | $ | (5,863 | ) | | $ | 79 | | | $ | 101,678 | | | | -7.1 | % | |
| | | Three Months Ended | |
| | | | | | | | | | | | | | | | | | | | | | | Things | | | | | | | | | |
| | | | | | | | | | | As Adjusted | | | | | | | Goodwill and | | | Remembered | | | As Adjusted | | | | | |
| | | | | | | | Restructuring cost/ | | | | (non-GAAP) | | | | | | | | Intangible | | | | Transaction | | | | (non-GAAP) | | | % |
| | | March 31, 2024 | | | Severance | | | March 31, 2024 | | | April 2, 2023 | | | Impairment | | | Costs | | | April 2, 2023 | | | Change | |
| | | (dollars in thousands) | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 221,207 | | | $ | - | | | $ | 221,207 | | | $ | 233,019 | | | $ | - | | | $ | - | | | $ | 233,019 | | | | -5.1 | % |
BloomNet | | | 27,314 | | | | | | | | 27,314 | | | | 36,968 | | | | | | | | | | | | 36,968 | | | | -26.1 | % |
Gourmet Foods & Gift Baskets | | | 130,989 | | | | | | | | 130,989 | | | | 147,863 | | | | | | | | | | | | 147,863 | | | | -11.4 | % |
Corporate | | | 167 | | | | | | | | 167 | | | | 36 | | | | | | | | | | | | 36 | | | | 363.9 | % |
Intercompany eliminations | | | (272 | ) | | | | | | | (272 | ) | | | (320 | ) | | | | | | | | | | | (320 | ) | | | 15.0 | % |
Total net revenues | | $ | 379,405 | | | $ | - | | | $ | 379,405 | | | $ | 417,566 | | | $ | - | | | $ | - | | | $ | 417,566 | | | | -9.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 87,005 | | | $ | - | | | $ | 87,005 | | | $ | 88,317 | | | $ | - | | | $ | - | | | $ | 88,317 | | | | -1.5 | % |
| | | | 39.3 | % | | | | | | | 39.3 | % | | | 37.9 | % | | | | | | | | | | | 37.9 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BloomNet | | | 12,411 | | | | | | | | 12,411 | | | | 15,720 | | | | | | | | | | | | 15,720 | | | | -21.0 | % |
| | | | 45.4 | % | | | | | | | 45.4 | % | | | 42.5 | % | | | | | | | | | | | 42.5 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Foods & Gift Baskets | | | 39,169 | | | | | | | | 39,169 | | | | 36,371 | | | | | | | | | | | | 36,371 | | | | 7.7 | % |
| | | | 29.9 | % | | | | | | | 29.9 | % | | | 24.6 | % | | | | | | | | | | | 24.6 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate | | | 132 | | | | | | | | 132 | | | | 32 | | | | | | | | | | | | 32 | | | | 312.5 | % |
| | | | 79.0 | % | | | | | | | 79.0 | % | | | 88.9 | % | | | | | | | | | | | 88.9 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 138,717 | | | $ | - | | | $ | 138,717 | | | $ | 140,440 | | | $ | - | | | $ | - | | | $ | 140,440 | | | | -1.2 | % |
| | | | 36.6 | % | | | - | | | | 36.6 | % | | | 33.6 | % | | | - | | | | - | | | | 33.6 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP) (a): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 22,190 | | | $ | 630 | | | $ | 22,820 | | | $ | 26,136 | | | $ | - | | | $ | - | | | $ | 26,136 | | | | -12.7 | % |
BloomNet | | | 7,506 | | | | 69 | | | | 7,575 | | | | 10,982 | | | | | | | | | | | | 10,982 | | | | -31.0 | % |
Gourmet Foods & Gift Baskets | | | (8,172 | ) | | | 538 | | | | (7,634 | ) | | | (78,480 | ) | | | 64,586 | | | | | | | | (13,894 | ) | | | 45.1 | % |
Segment Contribution Margin Subtotal | | | 21,524 | | | | 1,237 | | | | 22,761 | | | | (41,362 | ) | | | 64,586 | | | | - | | | | 23,224 | | | | -2.0 | % |
Corporate (b) | | | (36,221 | ) | | | 1,180 | | | | (35,041 | ) | | | (30,015 | ) | | | | | | | 201 | | | | (29,814 | ) | | | -17.5 | % |
EBITDA (non-GAAP) | | | (14,697 | ) | | | 2,417 | | | | (12,280 | ) | | | (71,377 | ) | | | 64,586 | | | | 201 | | | | (6,590 | ) | | | -86.3 | % |
Add: Stock-based compensation | | | 3,046 | | | | | | | | 3,046 | | | | 2,487 | | | | | | | | | | | | 2,487 | | | | 22.5 | % |
Add: Compensation charge related to NQDC Plan Investment Appreciation (Depreciation) | | | 3,534 | | | | | | | | 3,534 | | | | (1,446 | ) | | | | | | | | | | | (1,446 | ) | | | 344.4 | % |
Adjusted EBITDA (non-GAAP) | | $ | (8,117 | ) | | $ | 2,417 | | | $ | (5,700 | ) | | $ | (70,336 | ) | | $ | 64,586 | | | $ | 201 | | | $ | (5,549 | ) | | | -2.7 | % |
| | | Six Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | Exclude Operating Results of Fannie May | | | Severance Costs | | | Adjusted (non-GAAP) December 31, 2017 | | | Adjusted (non-GAAP) % Change | |
| | | (dollars in thousands) |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 176,674 | | | $ | 173,023 | | | $ | - | | | $ | - | | | $ | 173,023 | | | | 2.1 | % |
BloomNet Wire Service | | | 40,139 | | | | 41,466 | | | | - | | | | - | | | | 41,466 | | | | -3.2 | % |
Gourmet Food & Gift Baskets | | | 466,950 | | | | 506,684 | | | | (52,573 | ) | | | - | | | | 454,111 | | | | 2.8 | % |
Corporate | | | 587 | | | | 579 | | | | - | | | | - | | | | 579 | | | | 1.4 | % |
Intercompany eliminations | | | (908 | ) | | | (1,370 | ) | | | 514 | | | | - | | | | (856 | ) | | | -6.0 | % |
Total net revenues | | $ | 683,442 | | | $ | 720,382 | | | $ | (52,059 | ) | | $ | - | | | $ | 668,323 | | | | 2.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 69,578 | | | $ | 70,799 | | | $ | - | | | $ | - | | | $ | 70,799 | | | | -1.7 | % |
| | | | 39.4 | % | | | 40.9 | % | | | | | | | | | | | 40.9 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BloomNet Wire Service | | | 22,751 | | | | 24,104 | | | | - | | | | - | | | | 24,104 | | | | -5.6 | % |
| | | | 56.7 | % | | | 58.1 | % | | | | | | | | | | | 58.1 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Food & Gift Baskets | | | 209,620 | | | | 232,936 | | | | (20,425 | ) | | | - | | | | 212,511 | | | | -1.4 | % |
| | | | 44.9 | % | | | 46.0 | % | | | | | | | | | | | 46.8 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate (a) | | | 588 | | | | 542 | | | | - | | | | - | | | | 542 | | | | 8.5 | % |
| | | | 100.2 | % | | | 93.6 | % | | | | | | | | | | | 93.6 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 302,537 | | | $ | 328,381 | | | $ | (20,425 | ) | | $ | - | | | $ | 307,956 | | | | -1.8 | % |
| | | | 44.3 | % | | | 45.6 | % | | | | | | | | | | | 46.1 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | |
1-800-Flowers.com Consumer Floral | | $ | 17,762 | | | $ | 21,309 | | | $ | - | | | $ | - | | | $ | 21,309 | | | | -16.6 | % |
BloomNet Wire Service | | | 14,393 | | | | 15,468 | | | | - | | | | - | | | | 15,468 | | | | -6.9 | % |
Gourmet Food & Gift Baskets | | | 88,509 | | | | 95,320 | | | | (3,018 | ) | | | 103 | | | | 92,405 | | | | -4.2 | % |
Segment Contribution Margin Subtotal | | | 120,664 | | | | 132,097 | | | | (3,018 | ) | | | 103 | | | | 129,182 | | | | -6.6 | % |
Corporate (a) | | | (39,040 | ) | | | (41,491 | ) | | | 763 | | | | - | | | | (40,728 | ) | | | 4.1 | % |
EBITDA (non-GAAP) | | | 81,624 | | | | 90,606 | | | | (2,255 | ) | | | 103 | | | | 88,454 | | | | -7.7 | % |
Add: Stock-based compensation | | | 2,069 | | | | 3,498 | | | | - | | | | - | | | | 3,498 | | | | -40.9 | % |
Add: Comp charge related to NQ Plan Investment Appreciation | | | 639 | | | | 282 | | | | - | | | | - | | | | 282 | | | | -126.6 | % |
Adjusted EBITDA (non-GAAP) | | $ | 84,332 | | | $ | 94,386 | | | $ | (2,255 | ) | | $ | 103 | | | $ | 92,234 | | | | -8.6 | % |
| | | Nine Months Ended | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Things | | | | | | | | | |
| | | | | | | | | | | | | | | As Adjusted | | | | | | | Goodwill and | | | Remembered | | | As Adjusted | | | | | |
| | | | | | | | Intangible | | | | Restructuring cost/ | | | | (non-GAAP) | | | | | | | | Intangible | | | | Transaction | | | | (non-GAAP) | | | % |
| | | March 31, 2024 | | | Impairment | | | Severance | | | March 31, 2024 | | | April 2, 2023 | | | Impairment | | | Costs | | | April 2, 2023 | | | Change | |
| | | (dollars in thousands) | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 618,236 | | | $ | - | | | $ | - | | | $ | 618,236 | | | $ | 672,248 | | | $ | - | | | $ | - | | | $ | 672,248 | | | | -8.0 | % |
BloomNet | | | 83,420 | | | | | | | | | | | | 83,420 | | | | 103,187 | | | | | | | | | | | | 103,187 | | | | -19.2 | % |
Gourmet Foods & Gift Baskets | | | 769,061 | | | | | | | | | | | | 769,061 | | | | 844,522 | | | | | | | | | | | | 844,522 | | | | -8.9 | % |
Corporate | | | 716 | | | | | | | | | | | | 716 | | | | 152 | | | | | | | | | | | | 152 | | | | 371.1 | % |
Intercompany eliminations | | | (924 | ) | | | | | | | | | | | (924 | ) | | | (1,062 | ) | | | | | | | | | | | (1,062 | ) | | | 13.0 | % |
Total net revenues | | $ | 1,470,509 | | | $ | - | | | $ | - | | | $ | 1,470,509 | | | $ | 1,619,047 | | | $ | - | | | $ | - | | | $ | 1,619,047 | | | | -9.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 252,503 | | | $ | - | | | $ | - | | | $ | 252,503 | | | $ | 262,510 | | | $ | - | | | $ | - | | | $ | 262,510 | | | | -3.8 | % |
| | | | 40.8 | % | | | | | | | | | | | 40.8 | % | | | 39.0 | % | | | | | | | | | | | 39.0 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BloomNet | | | 39,883 | | | | | | | | | | | | 39,883 | | | | 44,086 | | | | | | | | | | | | 44,086 | | | | -9.5 | % |
| | | | 47.8 | % | | | | | | | | | | | 47.8 | % | | | 42.7 | % | | | | | | | | | | | 42.7 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Foods & Gift Baskets | | | 303,276 | | | | | | | | | | | | 303,276 | | | | 302,902 | | | | | | | | | | | | 302,902 | | | | 0.1 | % |
| | | | 39.4 | % | | | | | | | | | | | 39.4 | % | | | 35.9 | % | | | | | | | | | | | 35.9 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate | | | 680 | | | | | | | | | | | | 680 | | | | 166 | | | | | | | | | | | | 166 | | | | 309.6 | % |
| | | | 95.0 | % | | | | | | | | | | | 95.0 | % | | | 109.2 | % | | | | | | | | | | | 109.2 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 596,342 | | | $ | - | | | $ | - | | | $ | 596,342 | | | $ | 609,664 | | | $ | - | | | $ | - | | | $ | 609,664 | | | | -2.2 | % |
| | | | 40.6 | % | | | - | | | | - | | | | 40.6 | % | | | 37.7 | % | | | - | | | | - | | | | 37.7 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP) (a): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 41,609 | | | $ | 19,762 | | | $ | 630 | | | $ | 62,001 | | | $ | 64,832 | | | $ | - | | | $ | - | | | $ | 64,832 | | | | -4.4 | % |
BloomNet | | | 25,981 | | | | | | | | 69 | | | | 26,050 | | | | 29,847 | | | | | | | | | | | | 29,847 | | | | -12.7 | % |
Gourmet Foods & Gift Baskets | | | 98,953 | | | | | | | | 538 | | | | 99,491 | | | | 26,313 | | | | 64,586 | | | | | | | | 90,899 | | | | 9.5 | % |
Segment Contribution Margin Subtotal | | | 166,543 | | | | 19,762 | | | | 1,237 | | | | 187,542 | | | | 120,992 | | | | 64,586 | | | | - | | | | 185,578 | | | | 1.1 | % |
Corporate (b) | | | (100,221 | ) | | | | | | | 1,180 | | | | (99,041 | ) | | | (91,595 | ) | | | | | | | 444 | | | | (91,151 | ) | | | -8.7 | % |
EBITDA (non-GAAP) | | | 66,322 | | | | 19,762 | | | | 2,417 | | | | 88,501 | | | | 29,397 | | | | 64,586 | | | | 444 | | | | 94,427 | | | | -6.3 | % |
Add: Stock-based compensation | | | 7,641 | | | | | | | | | | | | 7,641 | | | | 5,941 | | | | | | | | | | | | 5,941 | | | | 28.6 | % |
Add: Compensation charge related to NQDC Plan Investment Appreciation (Depreciation) | | | 5,712 | | | | | | | | | | | | 5,712 | | | | (2,548 | ) | | | | | | | | | | | (2,548 | ) | | | 324.2 | % |
Adjusted EBITDA (non-GAAP) | | $ | 79,675 | | | $ | 19,762 | | | $ | 2,417 | | | $ | 101,854 | | | $ | 32,790 | | | $ | 64,586 | | | $ | 444 | | | $ | 97,820 | | | | 4.1 | % |
Reconciliation of net income to adjusted net income (non-GAAP):
| | | Three Months Ended | | | Years Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | December 31, 2017 | | | January 1, 2017 | |
| | | (in thousands, except per share data) |
| | | | | | | | | | | | | | | | | |
Net income | | $ | 70,699 | | | $ | 62,929 | | | $ | 57,477 | | | $ | 47,158 | |
Adjustments to reconcile net income to adjusted net income (non-GAAP) | | | | | | | | | | | | | | | | |
Deduct: Fannie May operating results | | | - | | | | 5,047 | | | | - | | | | 629 | |
Deduct: U.S. tax reform impact on deferred taxes (b) | | | 12,158 | | | | - | | | | 12,158 | | | | - | |
Add back: Severance costs | | | - | | | | 79 | | | | - | | | | 103 | |
Add back: Income tax expense impact on Fannie May operating results and severance adjustments | | | - | | | | 1,656 | | | | - | | | | 171 | |
Adjusted net income (non-GAAP) | | $ | 58,541 | | | $ | 59,617 | | | $ | 45,319 | | | $ | 46,803 | |
| | | | | | | | | | | | | | | | | |
Basic and diluted net income per common share | | | | | | | | | | | | | | | | |
Basic | | $ | 1.09 | | | $ | 0.97 | | | $ | 0.89 | | | $ | 0.72 | |
Diluted | | $ | 1.06 | | | $ | 0.93 | | | $ | 0.86 | | | $ | 0.70 | |
| | | | | | | | | | | | | | | | | |
Basic and diluted adjusted net income per common share (non-GAAP) | | | | | | | | | | | | | | | | |
Basic | | $ | 0.91 | | | $ | 0.91 | | | $ | 0.70 | | | $ | 0.72 | |
Diluted | | $ | 0.88 | | | $ | 0.88 | | | $ | 0.68 | | | $ | 0.69 | |
| | | | | | | | | | | | | | | | | |
Weighted average shares used in the calculation of net income and adjusted net income (non-GAAP) per common share | | | | | | | | | | | | | | | | |
Basic | | | 64,601 | | | | 65,172 | | | | 64,778 | | | | 65,112 | |
Diluted | | | 66,782 | | | | 67,754 | | | | 67,037 | | | | 67,778 | |
Reconciliation of net income to adjusted EBITDA (non-GAAP) (c):
| | | Three Months Ended | | | Years Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | December 31, 2017 | | | January 1, 2017 | |
| | | (in thousands) |
| | | | | | | | | | | | | | | | | |
Net income | | $ | 70,699 | | | $ | 62,929 | | | $ | 57,477 | | | $ | 47,158 | |
Add: | | | | | | | | | | | | | | | | |
Interest expense, net | | | 1,140 | | | | 2,155 | | | | 1,911 | | | | 3,456 | |
Depreciation and amortization | | | 8,677 | | | | 9,167 | | | | 16,761 | | | | 17,164 | |
Income tax expense | | | 12,627 | | | | 31,467 | | | | 5,475 | | | | 22,828 | |
EBITDA (non-GAAP) | | | 93,143 | | | | 105,718 | | | | 81,624 | | | | 90,606 | |
Add: | | | | | | | | | | | | | | | | |
Severance costs | | | - | | | | 79 | | | | - | | | | 103 | |
Compensation charge related to NQ plan investment appreciation | | | 364 | | | | 20 | | | | 639 | | | | 282 | |
Stock-based compensation | | | 968 | | | | 1,724 | | | | 2,069 | | | | 3,498 | |
Less: | | | | | | | | | | | | | | | | |
Fannie May EBITDA | | | - | | | | 5,863 | | | | - | | | | 2,255 | |
Adjusted EBITDA (non-GAAP) | | $ | 94,475 | | | $ | 101,678 | | | $ | 84,332 | | | $ | 92,234 | |
| a)
| Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-Based Compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment.
|
| b)
| The adjustment to deduct the impact of U.S. tax reform from Net Income includes the impact of the re-valuation of the Company’s deferred tax liability of $12.2 million, or $0.18 per diluted share, and does not include the ongoing impact of the lower federal corporate tax rate of $3.7 million, or $0.06 per diluted share.
|
| c)
| Segment performance is measured based on segment contribution margin or segment adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the segments, both of which are non-GAAP measurements. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), and other items that we do not consider indicative of our core operating performance.
|
Reconciliation of net income (loss) to adjusted net income (loss) (non-GAAP): | | Three Months Ended | | | Nine Months Ended | |
| | | March 31, | | | April 2, | | | March 31, | | | April 2, | |
| | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
| | | | (in thousands, except for share data) | |
Net income (loss) | | $ | (16,903 | ) | | $ | (70,993 | ) | | $ | 14,762 | | | $ | (22,155 | ) |
Adjustments to reconcile net income (loss) to adjusted net income (loss) (non-GAAP) | | | | | | | | | | | | | | | | |
Add: Transaction costs | | | - | | | | 201 | | | | - | | | | 444 | |
Add: Restructuring cost/Severance | | | 2,417 | | | | - | | | | 2,417 | | | | - | |
Add: Goodwill and intangible impairment | | | - | | | | 64,586 | | | | 19,762 | | | | 64,586 | |
Deduct: Income tax effect on adjustments | | | (3,538 | ) | | | (11,546 | ) | | | (3,538 | ) | | | (11,609 | ) |
Adjusted net income (loss) (non-GAAP) | | $ | (18,024 | ) | | $ | (17,752 | ) | | $ | 33,403 | | | $ | 31,266 | |
| | | | | | | | | | | | | | | | | |
Basic and diluted net income (loss) per common share | | | | | | | | | | | | | | | | |
Basic | | $ | (0.26 | ) | | $ | (1.10 | ) | | $ | 0.23 | | | $ | (0.34 | ) |
Diluted | | $ | (0.26 | ) | | $ | (1.10 | ) | | $ | 0.23 | | | $ | (0.34 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Basic and diluted adjusted net income (loss) per common share (non-GAAP) | | | | | | | | | | | | | | | | |
Basic | | $ | (0.28 | ) | | $ | (0.27 | ) | | $ | 0.52 | | | $ | 0.48 | |
Diluted | | $ | (0.28 | ) | | $ | (0.27 | ) | | $ | 0.51 | | | $ | 0.48 | |
| | | | | | | | | | | | | | | | | |
Weighted average shares used in the calculation of basic and diluted net income (loss) and adjusted net income (loss) per common share | | | | | | | | | | | | | | | | |
Basic | | | 64,489 | | | | 64,767 | | | | 64,703 | | | | 64,660 | |
Diluted | | | 64,489 | | | | 64,767 | | | | 65,057 | | | | 64,660 | |
Reconciliation of net income (loss) to Adjusted EBITDA (non-GAAP): | | Three Months Ended | | | Nine Months Ended | |
| | | March 31, | | | April 2, | | | March 31, | | | April 2, | |
| | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
| | | | (in thousands) | |
Net income (loss) | | $ | (16,903 | ) | | $ | (70,993 | ) | | $ | 14,762 | | | $ | (22,155 | ) |
Add: Interest expense and other, net | | | (2,693 | ) | | | 3,116 | | | | 3,138 | | | | 11,150 | |
Add: Depreciation and amortization | | | 13,232 | | | | 13,267 | | | | 40,578 | | | | 40,276 | |
Add: Income tax (benefit) expense | | | (8,333 | ) | | | (16,767 | ) | | | 7,844 | | | | 126 | |
EBITDA | | | (14,697 | ) | | | (71,377 | ) | | | 66,322 | | | | 29,397 | |
Add: Stock-based compensation | | | 3,046 | | | | 2,487 | | | | 7,641 | | | | 5,941 | |
Add: Compensation charge related to NQDC plan investment Appreciation (Depreciation) | | | 3,534 | | | | (1,446 | ) | | | 5,712 | | | | (2,548 | ) |
Add: Transaction costs | | | - | | | | 201 | | | | - | | | | 444 | |
Add: Restructuring cost/Severance | | | 2,417 | | | | - | | | | 2,417 | | | | - | |
Add: Goodwill and intangible impairment | | | - | | | | 64,586 | | | | 19,762 | | | | 64,586 | |
Adjusted EBITDA | | $ | (5,700 | ) | | $ | (5,549 | ) | | $ | 101,854 | | | $ | 97,820 | |
(a) Segment performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the segments, both of which are non-GAAP measurements. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), and other items that we do not consider indicative of our core operating performance.
(b) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-based compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment.
Results of Operations
Results of OperationsNet revenues
Net Revenues
| | | | Three Months Ended | | | Nine Months Ended | |
| | | Three Months Ended | | | Six Months Ended | | | March 31, | | April 2, | | % | | March 31, | | April 2, | | % | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | | | | | | | (dollars in thousands) | | | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | |
E-Commerce | | $ | 424,132 | | | $ | 420,594 | | | | 0.8 | % | | $ | 532,903 | | | $ | 527,678 | | | | 1.0 | % | | $ | 340,241 | | | $ | 357,801 | | | -4.9 | % | | $ | 1,288,558 | | | $ | 1,387,133 | | | -7.1 | % |
Other | | | 101,961 | | | | 133,959 | | | | -23.9 | % | | | 150,539 | | | | 192,704 | | | | -21.9 | % | | | 39,164 | | | | 59,765 | | | -34.5 | % | | | 181,951 | | | | 231,914 | | | -21.5 | % |
Total net revenues | | $ | 526,093 | | | $ | 554,553 | | | | -5.1 | % | | $ | 683,442 | | | $ | 720,382 | | | | -5.1 | % | | $ | 379,405 | | | $ | 417,566 | | | -9.1 | % | | $ | 1,470,509 | | | $ | 1,619,047 | | | -9.2 | % |
Net revenues consist primarily of the selling price of the merchandise, service or outbound shipping charges, less discounts, returns and credits.
Net revenues decreased 5.1%9.1% and 9.2% duringboth the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, compared to the same periods of the prior year, due to lower order volume across all segments, reflecting a continuation of the dispositiontrends that the Company had experienced throughout the prior fiscal year, as consumer discretionary income remains pressured, and consumers continue to moderate spending. Contributing to this decline was the prudent use of Fannie Maypromotional offerings and advertising campaigns, which balance the long-term goals of the Company with strategies to improve gross margins and tightly control operating expenses during this challenging economic environment.
The Company acquired Things Remembered on May 30, 2017. On a comparable basis, adjusting fiscal 2017 netJanuary 10, 2023 and launched the brand on its e-commerce platform in April 2023. Things Remembered revenues to exclude the revenues of Fannie May, net revenues increased 2.4% and 2.3%were not significant during the three and sixnine months ended DecemberMarch 31, 2017, respectively, compared to the same periods2024.
| | | Three Months Ended | |
| | | Consumer Floral & Gifts | | | BloomNet | | | Gourmet Foods & Gift Baskets | | | Corporate and Eliminations | | | Consolidated | |
| | | March 31, 2024 | | | April 2, 2023 | | | % Change | | | March 31, 2024 | | | April 2, 2023 | | | % Change | | | March 31, 2024 | | | April 2, 2023 | | | % Change | | | March 31, 2024 | | | April 2, 2023 | | | March 31, 2024 | | | April 2, 2023 | | | % Change | |
| | | (dollars in thousands) | |
Net revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E-commerce | | $ | 218,590 | | | $ | 230,403 | | | | -5.1 | % | | $ | - | | | $ | - | | | | - | % | | $ | 121,651 | | | $ | 127,398 | | | | -4.5 | % | | $ | - | | | $ | - | | | $ | 340,241 | | | $ | 357,801 | | | | -4.9 | % |
Other | | | 2,617 | | | | 2,616 | | | | 0.0 | % | | | 27,314 | | | | 36,968 | | | | -26.1 | % | | | 9,338 | | | | 20,465 | | | | -54.4 | % | | | (105 | ) | | | (284 | ) | | | 39,164 | | | | 59,765 | | | | -34.5 | % |
Total net revenues | | $ | 221,207 | | | $ | 233,019 | | | | -5.1 | % | | $ | 27,314 | | | $ | 36,968 | | | | -26.1 | % | | $ | 130,989 | | | $ | 147,863 | | | | -11.4 | % | | $ | (105 | ) | | $ | (284 | ) | | $ | 379,405 | | | $ | 417,566 | | | | -9.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other revenues detail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail and other | | | 2,617 | | | | 2,616 | | | | 0.0 | % | | | - | | | | - | | | | - | | | | 1,629 | | | | 1,686 | | | | -3.4 | % | | | - | | | | - | | | | 4,246 | | | | 4,302 | | | | -1.3 | % |
Wholesale | | | - | | | | - | | | | - | | | | 12,364 | | | | 14,695 | | | | -15.9 | % | | | 7,709 | | | | 18,779 | | | | -58.9 | % | | | - | | | | - | | | | 20,073 | | | | 33,474 | | | | -40.0 | % |
BloomNet services | | | - | | | | - | | | | - | | | | 14,950 | | | | 22,273 | | | | -32.9 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 14,950 | | | | 22,273 | | | | -32.9 | % |
Corporate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 167 | | | | 36 | | | | 167 | | | | 36 | | | | 363.9 | % |
Eliminations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (272 | ) | | | (320 | ) | | | (272 | ) | | | (320 | ) | | | 15.0 | % |
Total other revenues | | $ | 2,617 | | | $ | 2,616 | | | | 0.0 | % | | $ | 27,314 | | | $ | 36,968 | | | | -26.1 | % | | $ | 9,338 | | | $ | 20,465 | | | | -54.4 | % | | $ | (105 | ) | | $ | (284 | ) | | $ | 39,164 | | | $ | 59,765 | | | | -34.5 | % |
| | | Nine Months Ended | |
| | | Consumer Floral & Gifts | | | BloomNet | | | Gourmet Foods & Gift Baskets | | | Corporate and Eliminations | | | Consolidated | |
| | | March 31, 2024 | | | April 2, 2023 | | | % Change | | | March 31, 2024 | | | April 2, 2023 | | | % Change | | | March 31, 2024 | | | April 2, 2023 | | | % Change | | | March 31, 2024 | | | April 2, 2023 | | | March 31, 2024 | | | April 2, 2023 | | | % Change | |
| | | (dollars in thousands) | |
Net revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E-commerce | | $ | 611,770 | | | $ | 665,866 | | | | -8.1 | % | | $ | - | | | $ | - | | | | - | % | | $ | 676,788 | | | $ | 721,267 | | | | -6.2 | % | | $ | - | | | $ | - | | | $ | 1,288,558 | | | $ | 1,387,133 | | | | -7.1 | % |
Other | | | 6,466 | | | | 6,382 | | | | 1.3 | % | | | 83,420 | | | | 103,187 | | | | -19.2 | % | | | 92,273 | | | | 123,255 | | | | -25.1 | % | | | (208 | ) | | | (910 | ) | | | 181,951 | | | | 231,914 | | | | -21.5 | % |
Total net revenues | | $ | 618,236 | | | $ | 672,248 | | | | -8.0 | % | | $ | 83,420 | | | $ | 103,187 | | | | -19.2 | % | | $ | 769,061 | | | $ | 844,522 | | | | -8.9 | % | | $ | (208 | ) | | $ | (910 | ) | | $ | 1,470,509 | | | $ | 1,619,047 | | | | -9.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other revenues detail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail and other | | | 6,466 | | | | 6,382 | | | | 1.3 | % | | | - | | | | - | | | | - | | | | 7,859 | | | | 7,907 | | | | -0.6 | % | | | - | | | | - | | | | 14,325 | | | | 14,289 | | | | 0.3 | % |
Wholesale | | | - | | | | - | | | | - | | | | 32,867 | | | | 40,370 | | | | -18.6 | % | | | 84,414 | | | | 115,348 | | | | -26.8 | % | | | - | | | | - | | | | 117,281 | | | | 155,718 | | | | -24.7 | % |
BloomNet services | | | - | | | | - | | | | - | | | | 50,553 | | | | 62,817 | | | | -19.5 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 50,553 | | | | 62,817 | | | | -19.5 | % |
Corporate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 716 | | | | 152 | | | | 716 | | | | 152 | | | | 371.1 | % |
Eliminations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (924 | ) | | | (1,062 | ) | | | (924 | ) | | | (1,062 | ) | | | 13.0 | % |
Total other revenues | | $ | 6,466 | | | $ | 6,382 | | | | 1.3 | % | | $ | 83,420 | | | $ | 103,187 | | | | -19.2 | % | | $ | 92,273 | | | $ | 123,255 | | | | -25.1 | % | | $ | (208 | ) | | $ | (910 | ) | | $ | 181,951 | | | $ | 231,914 | | | | -21.5 | % |
Revenue by slightly lower revenues in the Company’s BloomNet segment. Comparable revenue growth was negatively impacted by a temporary disruption in operations at our Cheryl’s brand, related to the recent implementation of a new production and warehouse management system, which, in turn, led to the brand’s decision to stop taking orders eight days prior to the Christmas holiday. As a result, the Company estimates that it had to forego approximately $4.0 million in holiday revenues during the three and six months ended December 31, 2017. In addition, revenues during the six months ended December 31, 2017 were negatively impacted, by approximately $1.1 million, due to hurricanes Harvey and Irma.sales channel:
E-commerce revenues (combined online and telephonic) increased by 0.8% decreased 4.9% and 1.0%7.1% during the three and sixnine months ended DecemberMarch 31, 2017, 2024, respectively, compared to the same periods of the prior year, primarily due to the decline in demand across all our segments as a result of growth within the Consumer Floral and Gourmet Foods & Gift Baskets segments. On a comparable basis, adjusting fiscal 2017 e-commerce revenues to exclude the revenues of Fannie May, e-commerce revenues increased 3.1% and 2.9% duringmacro-economic conditions noted above. These external influences have negatively impacted consumer discretionary spending.
During the three and sixnine months ended DecemberMarch 31, 2017,2024, the Company fulfilled approximately 4.3 million and 14.8 million orders through its e-commerce sales channel (online and telephonic sales), a decrease of 6.2% and 9.5%, respectively, compared to the same periods of the prior year. During the three and nine months ended DecemberMarch 31, 2017, the Company fulfilled approximately 5.205,000 orders through its e-commerce sales channels (online and telephonic sales), compared to approximately 5,263,000 (5,020,000 adjusted to exclude Fannie May orders in fiscal 2017) during the same period of the prior year, while2024, average order value increased 1.4% and 2.7%, to $81.44 during$79.36 and $87.29, respectively, as a result of product mix trending into higher price point items, including bundles, and customer mix with more affluent consumers buying at a higher rate than less affluent. During the three monthsquarter ended DecemberMarch 31, 2017, from $79.92 ($81.92 adjusted2024, the Company has introduced a wider selection of more modestly priced items to exclude Fannie Mayattract broader segments of our customer base to purchase. This did have some negative impact on our average order value in fiscal 2017) during the same period of the prior year. During the six months ended December 31, 2017, the Company fulfilled approximately 6,725,000 orders through its e-commerce sales channels (online and telephonic sales), compared to approximately 6,780,000 (6,526,000 adjusted to exclude Fannie May orders in fiscal 2017) during the same period of the prior year, while average order value increased to $79.20 during the six months ended December 31, 2017, from $77.83 ($79.36 adjusted to exclude Fannie May average order value in fiscal 2017) during the same period of the prior year.value.
Other revenues are comprised of the Company’sCompany’s BloomNet Wire Service segment, as well as the wholesale and retail channels of its 1-800-Flowers.com Consumer Floral & Gifts and Gourmet Food andFoods & Gift Baskets segments.
Other revenues decreased by 23.9% and 21.9% during the three and sixnine months ended DecemberMarch 31, 2017, respectively,2024, decreased 34.5% and 21.5%, respectively. compared to the same periods of the prior year, due to lower volumes in both wholesale and BloomNet services. The decrease in wholesale revenue was primarily as a resultdue to certain retailers reducing their Easter orders in light of the Fannie May disposition during May 2017. On a comparable basis, adjusting fiscal 2017 otherconsumer environment. The lower service revenues were due to exclude the revenues of Fannie May, other revenues decreased 0.5% during the three months ended December 31, 2017, and increased 0.1% during the six months ended December 31, 2017, compared to the respective prior year periods.lower shop-to-shop volumes.
The 1-800-Flowers.com Revenue by segment:
Consumer Floral & Gifts – this segment, which includes the operations of the 1-800-Flowers.com, PersonalizationMall, and Alice’s Table brands, and the Things Remembered brand, whichsubsequent to its acquisition on January 10, 2023, derives revenue from the sale of consumer floral products and gifts through its e-commerce sales channels (telephonic and online sales), retail stores, and royalties from its franchise operations.
Net revenues increased 2.3%within this segment decreased 5.1% and 2.1%,8.0% during the three and sixnine months ended DecemberMarch 31, 2017, in comparison2024, respectively, compared to the same periods of the prior year, due to increased demand driven by merchandising and marketing efforts, as well asyear. The Consumer Floral & Gifts segment experienced an increase in promotional activityvolume trend driven by the Valentine's Day holiday, but due to continued economic pressure, the brands focused their efforts on improving gross margin and operating spend efficiency, in order to expand market share. Revenues during the sixface of softening demand.
During the three and nine months ended DecemberMarch 31, 2017 were negatively impacted,2024, Consumer Floral & Gifts orders through its e-commerce sales channel (online and telephonic sales) decreased 5.6% and 10.2%, respectively, compared to the same periods of the prior year. This was partially offset by approximately $0.8 million, duean increase in average order value of 0.5% and 2.3%, respectively, as a result of product mix into higher price point items, including bundles, and customer mix with more affluent consumers buying at a higher rate than less affluent. During the quarter ended March 31, 2024, the Company has introduced a wider selection of more modestly priced items to hurricanes Harvey and Irma.attract broader segments of our customer base to purchase. This did have some negative impact on our average order value in the quarter.
The BloomNet Wire Service- revenues in this segment includes revenuesare derived from membership fees, as well as other product and service offerings to florists. offerings.
Net revenues decreased 0.6%26.1% and 3.2%19.2% during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, compared to thethe same periods of the prior year, primarilyyear. The net revenue decline was due to soft wholesale product revenues, as well as, lower membership, transaction fees and ancillaryservices revenues, resulting fromattributable to a decline in network shop count, partially offset by higher wholesale product revenues. Duringorder volume processed through the six months ended December 31, 2017, these decreases were exacerbated by the impact of hurricanes Harvey and Irma, as BloomNet provided financial aid to florists in the affected areas, and waived approximately $0.2 million of membership fees.network.
The Gourmet FoodFoods & Gift Baskets – this segment includes the operations of Harry & David, Wolferman’s, Stockyards,Wolferman’s, Cheryl’s Fannie May (through the date of its disposition on May 30, 2017),Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, Shari’s Berries, and 1-800-Baskets/DesignPac.Vital Choice. Revenue is derived from the sale of gourmet fruits, cookies, baked gifts, premium chocolates and confections, gourmet popcorn, gift baskets, anddipped berries, prime steaks, chops, and chopsfish, through the Company’s e-commerce sales channels (telephonic and online sales) and company-owned and operated retail stores under the Harry & David Cheryl’s and Fannie May (through the date of its disposition)Cheryl’s brand names, as well as wholesale operations.
Net revenues within this segment decreased 7.1%11.4% and 7.8%8.9% during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, compared to the same periods of the prior year, as a result of lower e-commerce and wholesale revenues, primarily due to macro-economic weakness. As such, the dispositionbrands focused their efforts on improving gross margin and operating spend efficiency in the face of Fannie May on May 30, 2017. On a comparable basis, adjusting fiscal year 2017 revenues to exclude Fannie May, net revenues increased 2.6% and 2.8% duringsoftening demand.
During the three and sixnine months ended DecemberMarch 31, 2017,2024, Gourmet Foods & Gift Baskets orders through its e-commerce sales channel (online and telephonic sales) decreased 7.3% and 8.7%, respectively, compared to the same periods of the prior year due to growthyear. This was partially offset by the Harry & Davidan increase in average order value of 3.0% and 1-800-Baskets.com consumer and wholesale channel brands. Comparable segment growth was attributable to several initiatives implemented during the second half of fiscal 2017, including: (i) the Company’s successful efforts to grow the “everyday” volume of its Gourmet Foods & Gift Baskets brands through expanded birthday and sympathy merchandise, (ii) the modernization of the Harry & David brand, which focused on developing merchandising assortments and digital marketing programs that helped to broaden the demographic reach of the brand, and, (ii) the launch of the Simply Chocolates product line, which is managed by 1-800-Baskets. As noted above, Cheryl’s revenue decrease, in comparison to the prior year, was due to the Company’s decision to suspend order taking2.8%, respectively, as a result of operational issues experienced during the weeks leading up to the Christmas holiday. Asproduct mix trending into higher price point items, including bundles, and customer mix with more affluent consumers buying at a result, the Company estimates that it had to forego approximately $4.0 million in holiday revenues during the three and six months ended December 31, 2017. In addition, revenues during the six months ended December 31, 2017 were negatively impacted, by approximately $0.2 million, due to hurricanes Harvey and Irma. The operational issues at Cheryl’s have been addressed, and business has returned to its normal pace.
higher rate than less affluent.
Gross profit
Gross Profit
| | | | Three Months Ended | | | Nine Months Ended | |
| | | Three Months Ended | | | Six Months Ended | | | March 31, | | April 2, | | % | | March 31, | | April 2, | | % | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit | | $ | 235,259 | | | $ | 256,994 | | | | -8.5 | % | | $ | 302,537 | | | $ | 328,381 | | | | -7.9 | % | | $ | 138,717 | | | $ | 140,440 | | | -1.2 | % | | $ | 596,342 | | | $ | 609,664 | | | -2.2 | % |
Gross profit % | | | 44.7 | % | | | 46.3 | % | | | | | | | 44.3 | % | | | 45.6 | % | | | | | | 36.6 | % | | 33.6 | % | | | | | 40.6 | % | | 37.7 | % | | | |
Gross profit consists of net revenues less cost of revenues, which is comprised primarily of florist fulfillment costs (fees paid directly to florists), the cost of floral and non-floral merchandise sold from inventory or through third parties, and associated costs, including inbound and outbound shipping charges. Additionally, cost of revenues includeincludes labor and facility costs related to direct-to-consumer and wholesale production operations.operations, as well as payments made to sending florists related to order volume referred through the Company’s BloomNet network.
Gross profit decreased 8.5%1.2% and 7.9%2.2% during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, in comparisoncompared to the same periods of the prior year, whiledue to lower revenues as noted above, principally offset by a favorable gross profit percentage.
Gross profit percentage decreased 160increased 300 and 130290 basis points during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, in comparison to the same periods of the prior year. On a comparable basis, adjusting prior year gross profit to exclude Fannie May, which was disposed of on May 30, 2017, gross profit decreased 2.4% and 1.8% during the three and six months ended December 31, 2017, respectively, in comparisoncompared to the same periods of the prior year, while gross profit percentage decreased 220driven by lower florist fulfillment and 180 basis points, during the same periods. The lower comparable gross profit, and gross profit percentage, primarily reflects the impact of the operational issue at the Company’s Cheryl’s Cookies brand,rebate costs, as well as increased transportationlower freight costs, a decline in certain commodity costs, reduced labor costs in theour Gourmet Food andFoods & Gift Baskets segment, and increased promotional activity within the Consumer Floral segment in order to increase market share.better inventory management.
The 1-800-Flowers.com Gross profit by segment follows:
Consumer Floral & Gifts segment gross - Gross profit decreased by 3.6%1.5% and 1.7%3.8% during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, in comparisoncompared to the same periodperiods of the prior year, due to a decrease inthe impact of the lower revenues noted above, partially offset by favorable gross profit percentage of 240attributable to lower florist fulfillment costs and 150 basis points to 38.8%lower freight costs in both the three and 39.4%, respectively, partially offset bynine months ended March 31, 2024, and labor efficiencies for the aforementioned revenue growth. The lower gross profit percentages reflect an increase in promotional activity initiated to extend the market share of the 1-800-Flowers brand, as well as an increase in Passport free shipping participation, which has improved customer loyalty and purchase frequency.nine months ended March 31, 2024.
BloomNet Wire Service segment’s gross - Gross profit decreased by 5.0%21.0% and 5.6%9.5% during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, in comparisoncompared to the same periodperiods of the prior year, due to the decrease in revenues noted above, as well as decreases inpartially offset by improved gross profit percentage. Gross profit percentage of 260 and 140 basis points,increased in comparison to 57.4% and 56.7%, respectively, The lower gross profit percentages arethe prior year primarily due to sales mix, with a declineimprovements in higher margin membershipwholesale margins, lower freight costs and related services, offset by an increase in lower margin wholesale product sales.florist rebates due to lower volume.
The Gourmet FoodFoods & Gift Baskets segment gross – Gross profit decreasedincreased by 9.7%7.7% and 10.0%0.1% during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, in comparisoncompared to the same periods of the prior year whiledespite the revenue decrease noted above, as the brands delivered improved gross profit percentage. Gross profit percentage decreased 130increased 530 and 110350 basis points to 45.4% and 44.9%, over the same respective periods. On a comparable basis, adjusting prior year gross profit to exclude Fannie May, which was disposed of on May 30, 2017, gross profit decreased 2.0% and 1.4% during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, in comparisoncompared to the same periods of the prior year, whileyear. The increased gross profit percentage decreased 220was attributable to lower freight costs, a decline in certain commodity prices, labor efficiencies, and 190 basis points to 45.4% and 44.9%, over the same respective periods. The lower comparable gross profit and gross profit percentage primarily reflects the impact of the operational issue at the Company’s Cheryl’s Cookies brand, which negatively impacted gross profit by approximately $4.0 million as a result of increased labor, expedited shipping, expiring product and higher customer credits. In addition, although revenue growth provided for improved gross profit at Harry & David, higher transportation costs at Harry & David and our wholesale baskets brands negatively impacted gross profit percentage.better inventory management.
Marketing and Sales Expensesales expense
| | | | Three Months Ended | | | Nine Months Ended | |
| | | Three Months Ended | | | Six Months Ended | | | March 31, | | April 2, | | % | | March 31, | | April 2, | | % | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Marketing and sales | | $ | 113,771 | | | $ | 119,876 | | | | -5.1 | % | | $ | 163,493 | | | $ | 174,954 | | | | -6.6 | % | | $ | 105,828 | | | $ | 106,472 | | | -0.6 | % | | $ | 376,903 | | | $ | 390,077 | | | -3.4 | % |
Percentage of net revenues | | | 21.6 | % | | | 21.6 | % | | | | | | | 23.9 | % | | | 24.3 | % | | | | | | 27.9 | % | | 25.5 | % | | | | | 25.6 | % | | 24.1 | % | | | |
Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and search costs, retail store and fulfillment operations (other than costs included in cost of revenues) and customer service center expenses, as well as the operating expenses of the Company’sCompany’s departments engaged in marketing, selling and merchandising activities.
Marketing and sales expense decreased 5.1%0.6% and 6.6%3.4% during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, compared to the same periods of the prior year, due to the disposition of Fannie May on May 30, 2017. On a comparable basis, adjusting prior year marketing and sales expense to exclude Fannie May’s expenditures, marketing and sales expense increased 1.8% during both the three and six months ended December 31, 2017, in comparison to the same periods of the prior year, due to increased marketingvariable components associated with lower revenues, combined with planned reductions in advertising spend within the Consumer Floral and Gourmet Foods & Gift Baskets segments, commensurate with revenue growth, including the Company’s efforts to test digital marketing strategiesfocused on driving profitable volume during the holiday season for applications throughout the remainder of the fiscal year. These increases were partially offset by a reduction in performance based bonuses.period when consumer discretionary purchases are under pressure.
Technology and Development Expensedevelopment expense
| | | | Three Months Ended | | | Nine Months Ended | |
| | | Three Months Ended | | | Six Months Ended | | | March 31, | | April 2, | | % | | March 31, | | April 2, | | % | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | January 1, 2017 | | | January 1, 2017 | | | % Change | | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Technology and development | | $ | 9,175 | | | $ | 9,849 | | | | -6.8 | % | | $ | 18,845 | | | $ | 19,337 | | | | -2.5 | % | | $ | 15,291 | | | $ | 14,837 | | | 3.1 | % | | $ | 45,417 | | | $ | 44,529 | | | 2.0 | % |
Percentage of net revenues | | | 1.7 | % | | | 1.8 | % | | | | | | | 2.8 | % | | | 2.7 | % | | | | | | 4.0 | % | | 3.6 | % | | | | | 3.1 | % | | 2.8 | % | | | |
Technology and development expense consists primarily of payroll and operating expenses of the Company’sCompany’s information technology group, costs associated with its websites, including hosting, design, content development and maintenance and support costs related to the Company’s order entry, customer service, fulfillment, and database systems.
Technology and development expenses decreased 6.8%expense increased by 3.1% and 2.5%2.0% during the three and six monthsnine-month periods ended DecemberMarch 31, 2017,2024, compared to the same periodperiods of the prior year, primarily due to favorable hosting costshigher maintenance and labor expenses resulting from a reduction in performance based bonuses,support for the Company's technology platform enhancements, partially offset by increased licenselower web hosting costs in the quarter ended March 31, 2024, and maintenancereduced labor and consulting costs related to security and order processing platforms.for the nine months ended March 31, 2024.
General and Administrative Expenseadministrative expense
| | | | Three Months Ended | | | Nine Months Ended | |
| | | Three Months Ended | | | Six Months Ended | | | March 31, | | April 2, | | % | | March 31, | | April 2, | | % | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative | | $ | 19,170 | | | $ | 21,551 | | | | -11.0 | % | | $ | 38,575 | | | $ | 43,484 | | | | -11.3 | % | | $ | 32,295 | | | $ | 25,922 | | | 24.6 | % | | $ | 87,938 | | | $ | 81,075 | | | 8.5 | % |
Percentage of net revenues | | | 3.6 | % | | | 3.9 | % | | | | | | | 5.6 | % | | | 6.0 | % | | | | | | 8.5 | % | | 6.2 | % | | | | | 6.0 | % | | 5.0 | % | | | |
General and administrative expense consists of payroll and other expenses in support of the Company’sCompany’s executive, finance and accounting, legal, human resources and other administrative functions, as well as professional fees and other general corporate expenses.
General and administrative expense decreased 11.0%expenses increased 24.6% and 11.3%8.5% during the three and six monthsnine-month periods ended DecemberMarch 31, 2017,2024, respectively, compared to the same period of the prior year, primarily due to the disposition of Fannie May on May 30, 2017. On a comparable basis, adjusting prior year general and administrative expense to exclude Fannie May’s expenditures, general and administrative expense decreased 3.9% and 3.7% during the respective three and six months ended December 31, 2017,increases in comparison to the same periods of the prior year, due to reductions in travel, and labor resulting from a reduction in performance based bonuses, partially offsetcosts driven by an increasechanges in the value of Non-Qualified Deferred Compensation Planthe Company’s NQDC plan investments (increase(offset in Other Income below), as well as a severance charge taken during the quarter ended March 31, 2024, related to an enterprise reduction in workforce, partially offset in Other (income)by favorable bad debt expense net line item on the financials statement – see below),and higher healthlower insurance costs.and professional fees.
Depreciation and Amortization Expenseamortization expense
| | | | Three Months Ended | | | Nine Months Ended | |
| | | Three Months Ended | | | Six Months Ended | | | March 31, | | April 2, | | % | | March 31, | | April 2, | | % | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | $ | 8,677 | | | $ | 9,167 | | | | -5.3 | % | | $ | 16,761 | | | $ | 17,164 | | | | -2.3 | % | | $ | 13,232 | | | $ | 13,267 | | | -0.3 | % | | $ | 40,578 | | | $ | 40,276 | | | 0.7 | % |
Percentage of net revenues | | | 1.6 | % | | | 1.7 | % | | | | | | | 2.5 | % | | | 2.4 | % | | | | | | 3.5 | % | | 3.2 | % | | | | | 2.8 | % | | 2.5 | % | | | |
Depreciation and amortization expense fordecreased 0.3% during the three months ended DecemberMarch 31, 2017 decreased 5.3% and 2.3%2024 , in comparisoncompared to the same period of the prior year, due to the dispositiontiming of Fannie May. On a comparable basis, adjusting prior year depreciationcertain assets becoming fully depreciated, offset in part by distribution facility automation projects and amortization expense to exclude Fannie May, depreciationIT-related ecommerce/platform enhancements. Depreciation and amortization expense increased 3.9% and 7.9%0.7% during the respective three and sixnine months ended DecemberMarch 31, 2017, in comparison2024 compared to the same periodsperiod of the prior year, as a result of recent shorter-lived IT capital expenditures.due to distribution facility automation projects and IT-related ecommerce/platform enhancements.
Goodwill and Intangible impairment
| | | Three Months Ended | | | Nine Months Ended | |
| | | March 31, | | | April 2, | | | % | | | March 31, | | | April 2, | | | % | |
| | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill and Intangible impairment | | $ | - | | | $ | 64,586 | | | | -100.0 | % | | $ | 19,762 | | | $ | 64,586 | | | | -69.4 | % |
During the quarter ended December 31, 2023, the Company recorded a non-cash impairment charge of $19.8 million related to its PersonalizationMall trademark, due to a decline in the actual and projected revenue, combined with a higher discount rate resulting from the higher interest rate environment. See Note 5 - Goodwill and Intangible Assets, Net, in Item 1 for further information.
During the quarter ended April 2, 2023, the Company recorded a non-cash impairment charge of $64.6 million related to its Gourmet Foods & Gift Baskets reporting unit. The Company fully impaired the related goodwill and partially impaired certain tradenames within the reporting unit.
Interest Expense,expense, net
| | | Three Months Ended | | | Six Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | $ | 1,226 | | | $ | 2,154 | | | | -43.1 | % | | $ | 2,257 | | | $ | 3,605 | | | | -37.4 | % |
| | | Three Months Ended | | | Nine Months Ended | |
| | | March 31, | | | April 2, | | | % | | | March 31, | | | April 2, | | | % | |
| | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | $ | 881 | | | $ | 1,712 | | | | -48.5 | % | | $ | 8,974 | | | $ | 8,676 | | | | 3.4 | % |
Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’sCompany’s credit facility (See Note 87 - Debt,, Net in Item 1.1 for details regarding the 2016 Amended Credit Facility)details), net of income earned on the Company’s available cash balances.
Interest expense, net decreased 43.1% and 37.4%48.5% during the three and six months ended DecemberMarch 31, 2017 in comparison2024 compared to the same periodsperiod of the prior year, as a result primarily due to interest earned on available cash balances, partially offset by higher interest rates on the Company's credit facility. Interest expense, net increased 3.4% during the nine months ended March 31, 2024, compared to the same period of scheduled repaymentthe prior year, due to higher interest rates on the Company's credit facility, partially offset by favorable interest earned on available cash balances.
Other expense (income), net
| | | Three Months Ended | | | Nine Months Ended | |
| | | March 31, | | | April 2, | | | % | | | March 31, | | | April 2, | | | % | |
| | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other (income) expense, net | | $ | (3,574 | ) | | $ | 1,404 | | | | 354.6 | % | | $ | (5,836 | ) | | $ | 2,474 | | | | 335.9 | % |
Other (income) expense consists primarily of term loan borrowings and funding fiscal 2018 working capital requirements primarily throughinvestment losses (gains) on the use of cash on hand from the sale of Fannie May, in comparison to fiscal 2017, when the Company funded working capital requirements through its revolving credit facility.Company’s NQDC Plan investments.
Other (income) expense, net
| | | Three Months Ended | | | Six Months Ended | |
| | | December 31, 2017 | | | January 1, 2017 | | | % Change | | | December 31, 2017 | | | January 1, 2017 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other (income) expense, net | | $ | (86 | ) | | $ | 1 | | | | 8,700 | % | | $ | (346 | ) | | $ | (149 | ) | | | 132.2 | % |
Other income, net for the three and six months ended December 31, 2017 consists primarily of investment earnings of the Company’s Non-Qualified Deferred Compensation Plan assets, partially offset by a $0.2 million impairment related to the Company’s equity method investment in Flores Online (see Note 7 - Investmentsabove).
Other (income) expense, net for the three and six months ended January 1, 2017 primarily consists of investment earnings of the Company’s Non-Qualified Deferred Compensation Plan assets for both the three and six months ended January 1, 2017, partially offset by a decrease in the Company’s equity interest in Flores Online of $0.1 million for both the three and six months ended January 1, 2017.
Income Taxes
The Company recorded an income tax expensebenefit of $12.6$8.3 million and $5.5 million, respectively, during the three and six months ended December 31, 2017 and income tax expense of $31.5$7.8 million and $22.8 million, respectively, during the three and sixnine months ended January 1, 2017.March 31, 2024, respectively, compared to an income tax benefit of $16.8 million and income tax expense of $0.1 million, during the three and nine months ended April 2, 2023, respectively. The Company’s effective tax rate for the three and sixnine months ended DecemberMarch 31, 20172024, was 15.2%33.0% and 8.7%34.7%, respectively, compared to 33.3%19.1% and 32.6%-0.6% in the same periods of the prior year. The Company’s effective ratestax rate for fiscal 2018 were impacted by changes associated with the Tax Act (see Note 1 -Accounting Policies in Item 1. above). During the quarter ended December 31, 2017, the Company recognized a benefit of $15.9 million, or $0.24 per diluted share related to the impact of the Tax Act, consisting of a discrete tax benefit of $12.2 million, or $0.18 per diluted share, reflecting a revaluation of deferred tax liabilities at the lower U.S. federal statutory rate of 21%,2024 and a benefit of $3.7 million, or $0.06 per diluted share, reflecting the Company’s lower transitional federal tax rate in fiscal 2018 of 28.0 percent. In addition, fiscal 2018 effective rates were impacted by state income taxes, which were partially offset by various permanent differences and tax credits. The effective rates for fiscal 20172023 differed from the U.S. federal statutory rate of 21.0% primarily due to impairment charges within the respective periods, thus reducing the amount of income reflected in the Company’s estimated annual effective tax rate. Further impacting the effective tax rate for fiscal 2024 and fiscal 2023 were tax deficiencies (shortfalls) from stock-based compensation, state income taxes which were more thanand non-deductible executive compensation, partially offset by various permanent differences and tax credits, including excess tax benefits on stock based compensation as a result of the Company’s adoption of ASU 2016-09. At December 31, 2017, the Company has an unrecognized tax benefit, including an immaterial amount of accrued interest and penalties, of approximately $0.4 million. The Company believes that no significant unrecognized tax positions will be resolved over the next twelve months.credits.
Liquidity and Capital Resources
Liquidity and borrowings
The Company's principal sources of liquidity are cash on hand, cash flows generated from operations, and the borrowings available under the 2016 Credit FacilityCompany’s credit agreement (see Note 87 - Debt, Net in Item 1 for details). At DecemberMarch 31, 2017,2024, the Company had working capital of $172.2$186.4 million, including cash and cash equivalents of $232.6$184.0 million, compared to working capital of $132.2$152.9 million, including cash and cash equivalents of $149.7$126.8 million, at July 2, 2017. Borrowings under the Revolver (working capital needs), which were significantly lower than prior year as a result of cash generated from the sale of Fannie May, peaked in November, when cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the Revolver prior to the end of December 2017. 2023.
Due to the seasonal nature of the Company’s business, and its continued expansion into non-floral products, the Thanksgiving through Christmas holiday season, which falls within the Company’s second fiscal quarter, is expected to generate nearly 50%over 40% of the Company’s annual revenues, and all of its earnings. As a result,Due to the number of major floral gifting occasions, including Mother’s Day, Valentine’s Day, Easter, and Administrative Professionals Week, revenues also have historically risen during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.
During the first two quarters of fiscal 2024, the Company borrowed under its revolving credit agreement to fund pre-holiday manufacturing and inventory procurement requirements, with borrowings peaking at $82.0 million in November 2023. Cash generated significant cash from operations during its second quarter, which, after re-paying allthe Christmas holiday shopping season enabled the Company to repay the borrowings outstanding under itsthe Revolver is expected toin December 2023. Based on current projected cash flows, the Company believes that available cash balances will be sufficient to provide for the Company’s operating needs untilthrough the second quarterremainder of fiscal 2019, when2024, at which time the Company expectswould again expect to borrow against its Revolver to fund pre-holiday manufacturing and inventory purchases. The Company had no amounts outstanding under its Revolver as of March 31, 2024.
WeWhile we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at leastleast the next 12 months. However,twelve months, any projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate, opportunities to repurchase common stock and we will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to require additional financing.
Cash Flows
Net cash provided by operating activities of $114.2$100.1 million, for the sixnine months ended DecemberMarch 31, 2017,2024, was primarily attributable to the Company’s net income during the period, adjusted by non-cash charges for depreciation/related to the intangible impairment, depreciation and amortization, stock-based compensation and changes in deferred income taxes, (including the impact of the Tax Act – see Note 1 -Accounting Policies and Note 11 – Income taxes in Item 1 above) and stock based compensation, as well ascombined with seasonal changes in net working capital, including holiday related increasesdriven by a decrease in accounts payable and accrued expenses, and reductions in inventory, partially offset by increases in receivables related to holiday season sales.inventories.
Net cash used in investing activities of $17.4$26.5 million, for the sixnine months ended DecemberMarch 31, 2017,2024, was primarily attributable to the working capital adjustment related to the sale of Fannie May, of which $8.5 million was still due to Ferrero at July 2, 2017 and to capital expenditures primarily related to the Company's technology initiatives and Gourmet Foods & Gift Basket segment manufacturing production and orchard planting equipment.automation initiatives.
Net cash used in financing activities of $13.9$16.4 million, for the sixnine months ended DecemberMarch 31, 2017 was2024, related primarily due to Term Loan repaymentsnet repayment of $2.9 million and the acquisition of $11.1 million of treasury stock. Allbank borrowings under the Company's revolvingCompany’s working capital line of credit facility were repaid byand the endrepurchase of the fiscal second quarter. common stock.
Stock Repurchase ProgramFree Cash Flow
The Company has a stock repurchase plan through which purchases can be made from time to time inFree cash flow was $73.6 million for the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program is financed utilizing available cash. On August 30, 2017,nine months ended March 31, 2024, compared with free cash flow of $41.7 million for the Company’s Board of Directors authorizednine months ended April 2, 2023, an increase of $31.9 million primarily driven by an increase in cash flows from operations. Refer to its stock repurchase plan"Definitions of upnon-GAAP Financial Measures" for reconciliation of non-GAAP results to $30.0 million. As of December 31, 2017, $21.1 million remained authorized under the plan.applicable GAAP results.
Contractual Obligations
There have been no material changes outside the ordinary course of business related to the Company’s contractual obligations as discussed in the Annual Report on Form 10-K for the year ended July 2, 2017.
Stock Repurchase Program
See Item 2 in Part II below for details.
Contractual Obligations
At March 31, 2024, the Company’s contractual obligations consist of:
● | Long-term debt obligations - payments due under the Company's credit agreement (see Note 7 - Debt, Net in Item 1 for details and payments due by period). |
● | Operating lease obligations – payments due under the Company’s operating leases (see Note 12 - Leases in Item 1 for details and payments due by period for the long-term operating leases). |
● | Purchase commitments - consisting primarily of inventory and IT-related equipment purchase orders and license agreements made in the ordinary course of business – see below for the contractual payments due by period. |
| | | Payments due by period | |
| | | (in thousands) | |
| | | Remaining | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal | | | Fiscal | | | Fiscal | | | Fiscal | | | Fiscal | | | | | | | | | |
| | | 2024 | | | 2025 | | | 2026 | | | 2027 | | | 2028 | | | Thereafter | | | Total | |
Purchase commitments | | $ | 54,971 | | | $ | 42,956 | | | $ | 5,039 | | | $ | 805 | | | $ | - | | | $ | - | | | $ | 103,771 | |
Critical Accounting Policies and Estimates
As disclosed in the Company’s Company’s Annual Report on Form 10-K, for the fiscal year ended July 2, 2017,2023, the discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements, of 1-800-FLOWERS.COM, Inc., which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances, and management evaluates its estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. The Company’s most critical accounting policies relate to revenue recognition, accounts receivable, inventory, goodwill, other intangible assets and long-lived assets and income taxes. There have been no significant changes to the assumptions and estimates related to the Company’s critical accounting policies since July 2, 2017, except for the enactment of the Tax Act (see2023.
Recently Issued Accounting Pronouncements
See Note 1 -Accounting Policies and Note 11 – Income taxes in Item 1 above for details).
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This amended guidance will enhance the comparability of revenue recognition practices and will be applied to all contracts with customers. Expanded disclosures related to the nature, amount, timing, and uncertainty of revenue that is recognized are requirements under the amended guidance. As we continue to evaluatedetails regarding the impact of this ASU, we have determinedaccounting standards that the new standard will impact the following areas: the costs of producing and distributing the Company’s catalogs will be expensed upon shipment, instead of being capitalized and amortized in direct proportion to the actual sales; gift card breakage will be estimated based on the historical pattern of gift card redemption, rather than when redemption is considered remote; the Company will defer revenue at the time the Celebrations Reward loyalty points are earned using a relative fair value approach, rather than accruing a liability equal to the incremental cost of fulfilling its obligations. We have further identified the timing of revenue recognition for e-commerce orders (shipping point versus destination) as a potential issue in our analysis, which is not expected to change the total amount of revenue recognized, but could accelerate the timing of when revenue is recognized. We plan to adopt this guidance beginning with the first quarter in the fiscal year ending June 30, 2019 on a retrospective basis with a cumulative adjustment to retained earnings. We are continuing to evaluate the impact that this ASU, and related amendments and interpretive guidance, will have on our consolidated financial statements, including the related disclosures.
In July 2015, the FASBwere recently issued ASU No. 2015-11, “Inventory (Topic 330).” The pronouncement was issued to simplify the measurement of inventory and changes the measurement from lower of cost or market to lower of cost and net realizable value. The Company adopted this standard effective July 3, 2017. The adoption of ASU 2015-11 did not have a significant impact on the Company’s consolidated financial position or results of operations.
In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities." The pronouncement requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. This guidance will become effective for the Company's fiscal year ending June 30, 2019. The adoption is not expected to have a significant impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for the Company’s fiscal year ending June 28, 2020. We are currently evaluating the impact and expect the ASU will have a material impact on our consolidated financial statements, primarily to the consolidated balance sheets and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” ASU No. 2016-09 affects all entities that issue share-based payment awards to their employees. ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company elected to early adopt the amendments in ASU 2016-09, in fiscal 2017. As a result, stock-based compensation excess tax benefits are reflected in the Consolidated Statements of Income as a component of the provision for income taxes, whereas they were previously recognized in equity. This change resulted in the recognition of excess tax benefits against income tax expenses, rather than additional paid-in capital, of $1.0 million for the year ended July 2, 2017. There was no impact on earnings per share since approximately 700,000 tax benefit shares for the year ended July 2, 2017, previously associated with the APIC pool calculation, are no longer considered in the diluted share computation. Additionally, our Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity. This change has been applied prospectively in accordance with the ASU and prior periods have not been adjusted. Further, the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The cumulative effect of this change, which was recorded as compensation expense in fiscal 2017, was not material to the financial statements. In addition, this ASU allows entities to withhold an amount up to an employees’ maximum individual statutory tax rate in the relevant jurisdiction, up from the minimum statutory requirement, without resulting in liability classification of the award. We adopted this change on a modified retrospective basis, with no impact to our consolidated financial statements. Finally, this ASU clarified that the cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity. This change does not have an impact on the Company’s consolidated financials as it conforms with its current practice.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 introduces a new forward-looking “expected loss” approach, to estimate credit losses on most financial assets and certain other instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. ASU 2016-13 is effective for the Company’s fiscal year ending July 4, 2021, and the guidance is to be applied using the modified-retrospective approach. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
In June 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), a consensus of the FASB’s Emerging Issues Task Force.” ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU is effective for the Company’s fiscal year ending June 30, 2019, and interim periods within those fiscal years. Early adoption is permitted, including interim periods within those fiscal years. An entity that elects early adoption must adopt all of the amendments in the same period. The guidance requires application using a retrospective transition method. The adoption is not expected to have a significant impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01)," which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is effective for the Company's fiscal year ending June 30, 2019, with early adoption permitted, and should be applied prospectively. We do not expect the standard to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. This guidance is effective for the Company’s fiscal year ending July 4, 2021, with early adoption permitted, and should be applied prospectively. We do not expect the standard to have a material impact on our consolidated financial statements.
In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets.” This update clarifies the scope of accounting for the derecognition or partial sale of nonfinancial assets to exclude all businesses and nonprofit activities. ASU 2017-05 also provides a definition for in-substance nonfinancial assets and additional guidance on partial sales of nonfinancial assets. This guidance will be effective for the Company’s fiscal year ending June 30, 2019 and may be applied retrospectively. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
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In May 2017, the FASB issued ASU No 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. An entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for the Company's fiscal year ending June 30, 2019, with early adoption permitted, and should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
Forward Looking Information and Factors that May Affect Future Results
Our disclosure and analysis in this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’sCompany’s current expectations or beliefs concerning future events and can generally be identified by the use of statements that include words such as “estimate,” “expects,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “forecast,” “likely,” “will,” “goal,” “target” or similar words or phrases. 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:
| ● | the Company’sCompany’s ability: |
| o | to achieve revenue and profitability; |
| o | to leverage its operating platform and reduce operating expenses; |
| o | to manage the increased seasonality of its business; |
| o | to cost effectively acquire and retain customers; |
| o | to effectivelysuccessfully integrate acquired businesses and grow acquired companies;assets; |
| o | to reduce working capital requirements and capital expenditures; |
| o | to mitigate the impact of supply chain cost and capacity constraints; | | o | to compete against existing and new competitors; |
| o | to manage expenses associated with sales and marketing and necessary general and administrative and technology investments; and |
| o | to cost efficiently manage inventories;address the effects of changes in accounting policies, practices, or assumptions, including changes that could potentially require future impairment charges; |
| ● | the outcome of contingencies, including legal proceedings in the normal course of business; and |
| ● | general consumer sentiment and economic conditions that may affect, among other things, the levels of discretionary customer purchases of the Company’s products.Company’s products and the costs of shipping and labor. |
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties, and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated, or projected. Investors should bear this in mind as they consider forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our Annual Report on Form 10-K filing for the fiscal year ended July 2, 20172023 listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Cautionary Statements Under the Private Securities Litigation Reform Act of 1995”. We incorporate that section of that Form 10-K in this filing and investors should refer to it. In addition, please refer to any additional risk factors in Part II, Item 1A in this Form 10-Q. ITEM 3.3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from the effect of interest rate changes. Interest Rate Risk
The Company’sCompany’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment of available cash balances and its long-term debt. The Company generally invests its cash and cash equivalents in investment grade corporate and U.S. government securities. Due to the currently low rates of return the Company is receiving on its cash equivalents, the potential for a significant decrease in short-term interest rates is low and, therefore, a further decrease would not have a material impact on the Company’s interest income. Borrowings under the Company’s credit facility bear interest at a variable rate, plus an applicable margin, and therefore expose the Company to market risk for changes in interest rates. The effect of a 50 basis point increase in current interest rates on the Company’s interest expense would be approximately $0.2 and $0.3$0.8 million during the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively. ITEM 4.4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company’sCompany’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of DecemberMarch 31, 2017.2024. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have each concluded that the Company’s disclosure controls and procedures were effective as of DecemberMarch 31, 2017.2024. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the Company’sCompany’s evaluation required by Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the quarter ended DecemberMarch 31, 2017,2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. PART II. II. – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Litigation There are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the ultimatefinal resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity. ITEM 1A.1A.RISK FACTORS.FACTORS There were no material changes to the Company’sCompany’s risk factors as discussed in Part 1, Item 1A-Risk Factors in the Company’s Annual Report on Form 10-K for the year ended July 2, 2017. 2023. ITEM 2.2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The Company has a stock repurchase plan through which purchases can be made from time to time in the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program is financed utilizing available cash. On August 30, 2017,April 22, 2021, the Company’sCompany’s Board of Directors authorized an increase to its stock repurchase plan of up to $30.0$40.0 million. In addition, on February 3, 2022, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $40.0 million. As of DecemberMarch 31, 2017, $21.12024, $22.8 million remained authorized under the plan. The following table sets forth, for the months indicated, the Company’sCompany’s purchase of common stock during the first sixnine months of fiscal 2018,2024, which includes the period July 3, 20172023 through DecemberMarch 31, 2017:2024: Period | | Total Number of Shares Purchased | | | Average Price Paid Per Share (1) | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | | | | (in thousands, except average price paid per share) | | | | | | | | | | | | | | | | | | | | | | | | 07/03/17 - 07/30/17 | | | 89.3 | | | $ | 9.66 | | | | 89.3 | | | $ | 16,363 | | 07/31/16 - 08/27/17 | | | 99.6 | | | $ | 9.08 | | | | 99.6 | | | $ | 15,456 | | 08/28/17 - 10/01/17 | | | 268.7 | | | $ | 9.43 | | | | 268.7 | | | $ | 27,859 | | 10/02/17 - 10/29/17 | | | 233.5 | | | $ | 9.62 | | | | 233.5 | | | $ | 25,606 | | 10/30/17 - 12/03/17 | | | 414.3 | | | $ | 9.36 | | | | 414.3 | | | $ | 21,719 | | 12/04/17 - 12/31/17 | | | 61.9 | | | $ | 10.16 | | | | 61.9 | | | $ | 21,089 | | | | | | | | | | | | | | | | | | | | Total | | | 1,167.3 | | | $ | 9.47 | | | | 1,167.3 | | | | | |
| | | | | | | | | | | Total | | | Dollar | | | | | | | | | | | | | Number of | | | Value of | | | | | | | | | | | | | Shares | | | Shares | | | | | | | | | | | | | Purchased | | | that May | | | | | | | | | | | | | as Part of | | | Yet Be | | | | | Total | | | Average | | | Publicly | | | Purchased | | | | | Number of | | | Price | | | Announced | | | Under the | | | | | Shares | | | Paid Per | | | Plans or | | | Plans or | | Period | | Purchased | | | Share (1) | | | Programs | | | Programs | | | | | (in thousands, except average price paid per share) | | | | | | | | | | | | | | | | | | | | | | | | 07/03/23 – 07/30/23 | | | - | | | $ | - | | | | - | | | $ | 31,965 | | 07/31/23 – 08/27/23 | | | - | | | $ | - | | | | - | | | $ | 31,965 | | 08/28/23 – 10/01/23 | | | 10,483 | | | $ | 7.08 | | | | 10,483 | | | $ | 31,890 | | 10/02/23 – 10/29/23 | | | - | | | $ | - | | | | - | | | $ | 31,890 | | 10/30/23 – 11/26/23 | | | 272,978 | | | $ | 8.56 | | | | 272,978 | | | $ | 29,549 | | 11/27/23 – 12/31/23 | | | 240,000 | | | $ | 9.85 | | | | 240,000 | | | $ | 27,178 | | 01/01/24 – 01/28/24 | | | 180,000 | | | $ | 10.38 | | | | 180,000 | | | $ | 25,305 | | 01/29/24 – 02/25/24 | | | 124,823 | | | $ | 10.10 | | | | 124,823 | | | $ | 24,040 | | 02/26/24 – 03/31/24 | | | 120,000 | | | $ | 10.42 | | | | 120,000 | | | $ | 22,787 | | Total | | | 948,284 | | | $ | 9.65 | | | | 948,284 | | | | | |
(1) | (1) Average price per share excludes commissions and other transaction fees.
|
ITEM 3.3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5.5. OTHER INFORMATION None.
None. 3337
ITEM 6. EXHIBITS * Filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | 1-800-FLOWERS.COM, Inc. (Registrant)
| Date: February 9, 2017 May 8, 2024 | /s/ Christopher G.James F. McCann Christopher G.James F. McCann
Executive Chairman and Chief Executive Officer
Director and President
(Principal Executive Officer)
| | | Date: February 9, 2017 May 8, 2024 | /s/ William E. Shea
William E. Shea
Senior Vice President, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer) |
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