The Company currently leases plants, warehouses, offices, store facilities, and equipment under various leases through fiscal 2036. Most lease agreements are of a long-term nature (over a year), although the Company does also enter into short-term leases, primarily for seasonal needs. Lease agreements may contain renewal options and rent escalation clauses and require the Company to pay real estate taxes, insurance, common area maintenance and operating expenses applicable to the leased properties. The Company accounts for its leases in accordance with ASC 842.
At contract inception, we determine whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time, by assessing whether we have the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset.
At the lease commencement date, we determine if a lease should be classified as an operating or a finance lease (we currently have no finance leases) and recognize a corresponding lease liability and a right-of-use asset on our Balance Sheet. The lease liability is initially and subsequently measured as the present value of the remaining fixed minimum rental payments (including base rent and fixed common area maintenance) using discount rates as of the commencement date. Variable payments (including most utilities, real estate taxes, insurance and variable common area maintenance) are expensed as incurred. Further, we elected a short-term lease exception policy, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. The right-of-use asset is initially and subsequently measured at the carrying amount of the lease liability adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use asset. Right-of-use assets are assessed for impairment using the long-lived assets impairment guidance. The discount rate used to determine the present value of lease payments is our estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as we generally cannot determine the interest rate implicit in the lease.
We recognize expense for our operating leases on a straight-line basis over the lease term. As these leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Renewal option periods are included in the measurement of lease liability, where the exercise is reasonably certain to occur. Key estimates and judgments in accounting for leases include how we determine: (1) lease payments, (2) lease term, and (3) the discount rate used in calculating the lease liability.
In addition, 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 final 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 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This “Management’s Discussion and Analysis of Financial Condition and Results of 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 Annual Report on Form 10-K, for the year ended June 27, 2021July 3, 2022. The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’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 Information and Factors That May Affect Future Results,” under Part I, Item 1A, of the Company’s Annual Report on Form 10-K, for the year ended June 27, 2021July 3, 2022 under the heading “Risk Factors” and Part II-Other Information, Item 1A in this Form 10-Q.
Business Overview
1-800-FLOWERS.COM, Inc. and its subsidiaries (collectively, the “Company”) is a leading provider of gifts designed to help inspire customers express,to give more, connect more, and celebrate.build more and better relationships. The Company’s e-commerce business platform features ouran 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®, Stock Yards® and Simply Chocolate®. Through the Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to deepen relationships with customers. The Company also operates BloomNet®, an international floral and gift industry service provider offering a broad-range of products and services designed to help members grow their businesses profitably; Napco℠, a resource for floral gifts and seasonal décor; and DesignPac Gifts, LLC, a manufacturer of gift baskets and towers; and Alice’s Table®, a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country.
For 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 June 27, 2021.
Acquisition of PersonalizationMall
On AugustJuly 3, 2020, the Company completed its acquisition of PersonalizationMall.com LLC ("PersonalizationMall"), a leading ecommerce provider of personalized products. The extensive offerings of PersonalizationMall include a wide variety of personalization processes such as sublimation, embroidery, digital printing, engraving and sandblasting, while providing an industry-leading customer experience based on a fully integrated business platform that includes a highly automated personalization process and rapid order fulfillment.
The Company used a combination of cash on its balance sheet and its existing credit facility to fund the $245.0 million purchase (subject to certain working capital and other adjustments), which included its newly renovated, leased 360,000 square foot state-of-the-art production and distribution facility, as well as customer database, tradenames and website. PersonalizationMall’s revenues were approximately $171.2 million during its fiscal year ended February 29, 2020 - see Note 4 – Acquisitions in Item 1.2022.
Acquisition of Vital Choice
On October 27, 2021, the Company completed its acquisition of Vital Choice Seafood LLC (“Vital Choice”), a provider of wild-caught seafood and sustainably farmed shellfish, pastured proteins, organic foods, and marine-sourced nutritional supplements. The Company utilized its existing credit facility to fund the $20.0 million purchase (subject to certain working capital and other adjustments), which included tradenames, customer lists, websites and operations. Vital Choice revenues were approximately $27.8 million during its most recent year ended December 31, 2020 - see Note 4 – Acquisitions–Acquisitions in Item 1.
Acquisition of Alice’s Table
On December 31, 2021, the Company completed its acquisition of Alice’s Table LLC (“Alice’s Table”), a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country. The Company utilized existing cash of $0.8 million, converted the existing accounts receivable from Alice’s Table of $0.3 million and its previous $0.3 million cost method investment in Alice’s Table, in order to acquire 100% ownership in Alice’s Table, which included tradenames, customer lists, websites and operations. Alice’s Table revenues were approximately $3.8 million during the twelve-month period ended September 30, 2021 - see Note 4 – Acquisitions–Acquisitions in Item 1.
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 will be 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 the intellectual property, customer list, certain inventory, and equipment. The acquisition did not include Things Remembered retail stores. Things Remembered’s annual revenues from its ecommerce operations, based on its most recently available unaudited financial information was $30.4 million for the twelve months ended November 30, 2022 - see Note 4 –Acquisitions in Item 1.
Amended Credit Agreement
Subsequent to, but in contemplation of the acquisition of PersonalizationMall, onOn August 20, 2020,29, 2022, the Company entered into a First Amendment to its 2019 Credit Agreement to: (i) increase the aggregate principal amount of the existing Revolver commitments from $200.0 million to $250.0 million, (ii) establish a new tranche of term A-1 loans in an aggregate principal amount of $100.0 million (the “New Term Loan”), (iii) increase the working capital sublimit with respect to the Revolver from $175.0 million to $200.0 million, and (iv) increase the seasonally-reduced Revolver commitments from $100.0 million to $125.0 million for the period from January 1 through August 1 for each fiscal year of the Company. The $100.0 million proceeds of the New Term Loan were used to repay the $95.0 million borrowing that had been drawn on its existing Revolver to finance the acquisition of PersonalizationMall, as well as financing fees of approximately $2.0 million.
On November 8, 2021, the Company, entered into a SecondThird Amendment to the Company’s existing credit agreement,Company's 2019 Credit Agreement. The Third Amendment amends the 2019 Credit Agreement to, among other modifications, decrease(A) alter the interest marginsfinancial maintenance covenants set forth therein by (1) increasing the required maximum consolidated leverage ratio, for the reference period ending October 2, 2022, from 3.25 to 1.00 to 4.25 to 1.00 and LIBOR floor applicable(2) decreasing the required minimum consolidated fixed charge coverage ratio, for the reference periods ending October 2, 2022, January 1, 2023, and April 2, 2023, from 1.50 to 1.00 to 1.00 to 1.00 and (B) increase the existing trancheamount of term A-1 loanscertain capital expenditures that may be disregarded for purposes of calculating the consolidated fixed charge coverage ratio from $25.0 million to $35.0 million (See Note 8 - Debt, in Item 1., for details).
COVID-19 and Other Macro-Economic Factors
The global COVID-19 pandemic,Overall, consumer behavior continues to reflect the significant geo-political, inflationary forces, interest rate hikes, and its related impacts, have affected,fears of a recession, that are affecting both their discretionary and nondiscretionary spending. Throughout the current fiscal year discretionary spending remained pressured and consumers continue to moderate their purchases for “Everyday” gifting occasions, and to a lesser extent, “Holiday” gifting occasions.
We expect consumers to remain cautious in the face of macroeconomic pressures, including high inflation, rising interest rates, and fear of recession. For the balance of the fiscal year, we expect that customers will continue to affect, our operations and financial results for the foreseeable future. In response to the pandemic, the Company has taken actions to promote employee safety and business continuity, informed by the guidelines set forth by local, state and federal government and health officials. These initiatives are governed by our “Pandemic Preparedness and Response Plan,” which established an internal “nerve center” to assist efforts surrounding: communication and coordination throughout the business, workforce protection and supply chain management, and support for the Company’s customers, vendors, franchisees, and our BloomNet member florists.
Our results for the fiscal third quarter were below our expectations. A solid Valentine’s Day holiday for our 1-800-Flowers brand was offset by overall slower consumer demand formoderate their spending on everyday gifting occasions, throughoutand while we also expect that our customers will continue to shop for the period. These results reflected a continuation, andimportant people in some areas an escalation,their lives during the major upcoming holidays, including Mother’s Day, the fourth quarter of the macro-economic cost headwinds that we saw in the prior quarter, including disruptions in the global supply chain, rising costs for inbound and outbound shipping, higher year-over-year labor costs, and growing consumer concerns with rapidly rising inflation and geopolitical unrest.our fiscal year is more heavily weighted towards everyday gifting occasions.
While total revenues forThe challenging macro-economic conditions that have affected our customers have also impacted our operating costs. During the second quarter ended March 27,of fiscal 2022, were down by 1%in-bound and out-bound shipping, commodity, labor and fuel costs began to surge, and escalated throughout the balance of the year into our first quarter of fiscal 2023. During our second quarter and third quarter of the current fiscal year, while certain commodity prices remain near historical highs, we began to see a more stable labor market, and significant year-over-year reductions in comparisonocean freight costs.
As a result of these trends, combined with our strategic pricing initiatives, and automation efforts, we expect to the prior year, the investments we have made in our brand have enabled uscontinue to maintain the significant revenue base generated by the accelerated shift to online shoppingsee margin improvement during the pandemic, as evidenced by the growth of 68.4%, and 60.7% when revenues are compared with the three and nine months ended March 29, 2020. While we expect that the easing of pandemic restrictions, along with the impact of new variants, and the aforementioned inflation and geopolitical concerns, will result in irregular buying patterns, as each of these issues are closely related to the overall financial health and outlookfourth quarter of our customers, we anticipate revenue growth for the fullfiscal year, as we continue to leveragecycle against the sharp inflationary period of a year ago. Further, as a management team, we are focusing our large customer file,efforts on the strong growth we continue to see inareas that are within our Celebrations Passport loyalty program,control, mitigating topline challenges through gross margin improvement and innovative product introductions and partnerships.expense management efforts.
From a cost perspective, in the near term, the Company anticipates facing continued labor and supply chain headwinds, which are expected to put further pressure on earnings. While supply chain issues associated with ocean container capacity and cost escalation are expected to moderate, in the short-to-mid-term, these costs are expected to continue to be well above pre-pandemic rates, and current COVID variants, which are causing renewed lockdowns in China, may negatively impact the modest supply chain recovery we have seen over recent months. In order to mitigate these headwinds, the Company intends to continue to invest in its operating platform to automate warehouse and distribution facilities, optimize its outbound shipping operations and build and bring in inventory early. Over the longer term, we anticipate these initiatives will enable us to improve gross margins and drive enhanced bottom-line performance.
Company Guidance
Based on its third quarter performance and outlook for the balance of the year, the Company is updating its fiscal 2023 guidance. This outlook includes a continuation of the challenging consumer environment, which is expected to be mitigated by the Company’s expense management efforts.
The Company is updating its guidance for fiscal year 2022, reflecting results for the first three quarters of the year, as well as its outlook for the remainder of the year. The updated guidance includes:
expects:
| | ● | Total revenue growth of 3.0 percentrevenues to 5.0 percent,decline approximately 8% as compared with the prior year; |
| | ● | Adjusted EBITDA to be in a range of $110.0$85.0 million to $115.0$90.0 million; and |
| | ● | EPS in a range of $0.55 to $0.60 per diluted share, and;
|
| ●
| The Company anticipates that Free Cash Flow for the year will be down significantly compared with the prior year based on its updated guidance and its plans to invest in inventory to support its growth plans and address the headwinds it sees in the macro economy.exceed $75.0 million.
|
The Company’s guidanceRefer to "Definitions of non-GAAP Financial Measures" for the year is based on several factors, including:reconciliation of non-GAAP results to applicable GAAP results.
| ●
| The continuing headwinds associated with the ongoing pandemic, increased costs for labor, inbound and outbound shipping and marketing, as well as consumer concerns regarding rising price inflation and geopolitical issues, somewhat offset by:
|
| ●
| the Company’s ability to continue to attract new customers and add new members to its Celebrations Passport® Loyalty program, which is helping drive increased frequency, retention, and cross-category/cross-brand purchases.
|
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 Operations sections below for reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures. We do not provide a reconciliation of adjusted EBITDA guidance to net income guidance or a reconciliation of free cash flow guidance to net cash provided by operating activities because doing so 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 imply a degree of precision that would be confusing or misleading to investors. These non-GAAP financial measures are referredFor the same reasons, the Company is unable to as “adjusted" or “on a comparable basis” below.address the probable significance of the unavailable information. The lack of such reconciling information should be considered when assessing the impact of such disclosures.
EBITDA and adjusted 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-based compensation, NQDC Plan investment appreciation/depreciation, and for certain items affecting period-to-period comparability. See Segment Information for details on how EBITDA and adjusted 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 adjusted EBITDA as factors 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 adjusted EBITDA to determine its interest rate and to measure compliance with covenants such as interest coverage and debt incurrence.certain covenants. EBITDA and adjusted EBITDA are also used by the Company to evaluate and price potential acquisition candidates.
EBITDA and adjusted 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 adjusted EBITDA do not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA and adjusted 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 should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.
Segment contribution 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 contribution margin adjusted for certain items affecting period-to-period comparability. See Segment Information for details on how segment contribution margin was calculated for each period presented.
When viewed together with our GAAP results, we believe segment contribution margin and adjusted segment contribution margin provide management and users of the financial statements meaningful information about the performance of our business segments.
Segment contribution margin and adjusted 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 segment contribution margin and adjusted segment contribution margin is that they are an incomplete measure of profitability as they do not include all operating expenses or non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such as operating income and net income.
Adjusted net income (loss) and adjusted or comparable net income (loss) per common share
We define adjusted net income (loss) and adjusted or comparable net income (loss) per common share as net income (loss) and net income (loss) per common share adjusted for certain items affecting period-to-period comparability. See Segment Information below for details on how adjusted net income (loss) and adjusted or comparable net income (loss) per common share were calculated for each period presented.
We believe that adjusted net income (loss) and adjusted or comparable net income (loss) per common share are meaningful measures because they increase the comparability of period-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.
Segment Information
The following table presents the net revenues, gross profit and segment contribution margin from each of the Company’s business segments, as well as consolidated EBITDA, and adjusted EBITDA.
| | | Three Months Ended | | | Three Months Ended | |
| | | March 27, 2022 | | Vital Choice and Alice's Table Transaction Costs | | Litigation Settlement | | As Adjusted (non-GAAP) March 27, 2022 | | March 28, 2021 | | % Change | | | April 2, 2023 | | Goodwill and
Intangible
Impairment | | Things Remembered Transaction Costs | | As Adjusted (non-GAAP) April 2, 2023 | | March 27, 2022 | | Vital Choice and Alice's Table Transaction Costs | | Litigation Settlement | | As Adjusted (non-GAAP) March 27, 2022 | | % Change | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 264,243 | | | $ | - | | | $ | - | | | $ | 264,243 | | | $ | 260,393 | | | 1.5 | % | | $ | 233,019 | | | $ | - | | | $ | - | | | $ | 233,019 | | | $ | 264,243 | | | $ | - | | | $ | - | | | $ | 264,243 | | | -11.8 | % |
BloomNet | | 38,448 | | | | | | | | 38,448 | | | 38,833 | | | -1.0 | % | | 36,968 | | | | | | | | 36,968 | | | 38,448 | | | | | | | | 38,448 | | | -3.8 | % |
Gourmet Foods & Gift Baskets | | 167,402 | | | | | | | | 167,402 | | | 175,245 | | | -4.5 | % | | 147,863 | | | | | | | | 147,863 | | | 167,402 | | | | | | | | 167,402 | | | -11.7 | % |
Corporate | | 43 | | | | | | | | 43 | | | 54 | | | -20.4 | % | | 36 | | | | | | | | 36 | | | 43 | | | | | | | | 43 | | | -16.3 | % |
Intercompany eliminations | | | (560 | ) | | | | | | | (560 | ) | | | (291 | ) | | -92.4 | % | | | (320 | ) | | | | | | | (320 | ) | | | (560 | ) | | | | | | | (560 | ) | | 42.9 | % |
Total net revenues | | $ | 469,576 | | | $ | - | | | $ | - | | | $ | 469,576 | | | $ | 474,234 | | | -1.0 | % | | $ | 417,566 | | | $ | - | | | $ | - | | | $ | 417,566 | | | $ | 469,576 | | | $ | - | | | $ | - | | | $ | 469,576 | | | -11.1 | % |
| | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 96,875 | | | $ | - | | | $ | - | | | $ | 96,875 | | | $ | 98,397 | | | -1.5 | % | | $ | 88,317 | | | | | | | | $ | 88,317 | | | $ | 96,875 | | | | | | | | $ | 96,875 | | | -8.8 | % |
| | | 36.7 | % | | | | | | | 36.7 | % | | 37.8 | % | | | | | 37.9 | % | | | | | | | 37.9 | % | | 36.7 | % | | | | | | | 36.7 | % | | | |
| | | | | | | | | | | | | | | | | | | | | |
BloomNet | | 14,895 | | | | | | | | 14,895 | | | 17,194 | | | -13.4 | % | | 15,720 | | | | | | | | 15,720 | | | 14,895 | | | | | | | | 14,895 | | | 5.5 | % |
| | | 38.7 | % | | | | | | | 38.7 | % | | 44.3 | % | | | | | 42.5 | % | | | | | | | 42.5 | % | | 38.7 | % | | | | | | | 38.7 | % | | | |
| | | | | | | | | | | | | | | | | | | | | |
Gourmet Foods & Gift Baskets | | 42,343 | | | | | | | | 42,343 | | | 69,091 | | | -38.7 | % | | 36,371 | | | | | | | | 36,371 | | | 42,343 | | | | | | | | 42,343 | | | -14.1 | % |
| | | 25.3 | % | | | | | | | 25.3 | % | | 39.4 | % | | | | | 24.6 | % | | | | | | | 24.6 | % | | 25.3 | % | | | | | | | 25.3 | % | | | |
| | | | | | | | | | | | | | | | | | | | | |
Corporate | | (22 | ) | | | | | | | (22 | ) | | 17 | | | -229.4 | % | | 32 | | | | | | | | 32 | | | (22 | ) | | | | | | | (22 | ) | | 245.5 | % |
| | | -51.2 | % | | | | | | | -51.2 | % | | 31.5 | % | | | | | 88.9 | % | | | | | | | 88.9 | % | | -51.2 | % | | | | | | | -51.2 | % | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 154,091 | | | $ | - | | | $ | - | | | $ | 154,091 | | | $ | 184,699 | | | -16.6 | % | | $ | 140,440 | | | $ | - | | | $ | - | | | $ | 140,440 | | | $ | 154,091 | | | $ | - | | | $ | - | | | $ | 154,091 | | | -8.9 | % |
| | | | 32.8 | % | | - | | | - | | | 32.8 | % | | | 38.9 | % | | | | | | 33.6 | % | | - | | | - | | | 33.6 | % | | | 32.8 | % | | - | | | - | | | 32.8 | % | | | |
| | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Segment Contribution Margin (non-GAAP) (a): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 20,523 | | | $ | - | | | $ | - | | | $ | 20,523 | | | $ | 22,537 | | | -8.9 | % | | $ | 26,136 | | | $ | - | | | | | | $ | 26,136 | | | $ | 20,523 | | | $ | - | | | $ | - | | | $ | 20,523 | | | 27.3 | % |
BloomNet | | 9,783 | | | | | | | | 9,783 | | | 12,042 | | | -18.8 | % | | 10,982 | | | | | | | | 10,982 | | | 9,783 | | | | | | | | 9,783 | | | 12.3 | % |
Gourmet Foods & Gift Baskets | | | (17,134 | ) | | | | | 2,900 | | | (14,234 | ) | | | 12,132 | | | -217.3 | % | | | (78,480 | ) | | 64,586 | | | | | | (13,894 | ) | | | (17,134 | ) | | | | | 2,900 | | | (14,234 | ) | | 2.4 | % |
Segment Contribution Margin Subtotal | | 13,172 | | | - | | | 2,900 | | | 16,072 | | | 46,711 | | | -65.6 | % | | (41,362 | ) | | 64,586 | | | - | | | 23,224 | | | 13,172 | | | - | | | 2,900 | | | 16,072 | | | 44.5 | % |
Corporate (b) | | | (26,735 | ) | | 25 | | | | | | (26,710 | ) | | | (35,128 | ) | | 24.0 | % | | | (30,015 | ) | | | | | 201 | | | (29,814 | ) | | | (26,735 | ) | | 25 | | | | | | (26,710 | ) | | -11.6 | % |
EBITDA (non-GAAP) | | (13,563 | ) | | 25 | | | 2,900 | | | (10,638 | ) | | 11,583 | | | -191.8 | % | | (71,377 | ) | | 64,586 | | | 201 | | | (6,590 | ) | | (13,563 | ) | | 25 | | | 2,900 | | | (10,638 | ) | | 38.1 | % |
Add: Stock-based compensation | | 1,507 | | | | | | | | 1,507 | | | 2,871 | | | -47.5 | % | | 2,487 | | | | | | | | 2,487 | | | 1,507 | | | | | | | | 1,507 | | | 65.0 | % |
Add: Compensation charge related to NQ Plan investment (depreciation) appreciation | | | (2,881 | ) | | | | | | | (2,881 | ) | | | 916 | | | -414.5 | % | |
Add: Compensation charge related to NQDC Plan Investment (Depreciation) Appreciation | | | | (1,446 | ) | | | | | | | (1,446 | ) | | | (2,881 | ) | | | | | | | (2,881 | ) | | 49.8 | % |
Adjusted EBITDA (non-GAAP) | | $ | (14,937 | ) | | $ | 25 | | | $ | 2,900 | | | $ | (12,012 | ) | | $ | 15,370 | | | -178.2 | % | | $ | (70,336 | ) | | $ | 64,586 | | | $ | 201 | | | $ | (5,549 | ) | | $ | (14,937 | ) | | $ | 25 | | | $ | 2,900 | | | $ | (12,012 | ) | | 53.8 | % |
| | | Nine Months Ended | |
| | | April 2, 2023 | | | Goodwill and Intangible Impairment | | | Things Remembered Transaction Costs | | | As Adjusted (non-GAAP) April 2, 2023 | | | March 27, 2022 | | | Vital Choice and Alice's Table Transaction Costs | | | Litigation Settlement | | | As Adjusted (non-GAAP) March 27, 2022 | | | % Change | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 672,248 | | | $ | - | | | $ | - | | | $ | 672,248 | | | $ | 760,555 | | | $ | - | | | $ | - | | | $ | 760,555 | | | | -11.6 | % |
BloomNet | | | 103,187 | | | | | | | | | | | | 103,187 | | | | 107,212 | | | | | | | | | | | | 107,212 | | | | -3.8 | % |
Gourmet Foods & Gift Baskets | | | 844,522 | | | | | | | | | | | | 844,522 | | | | 855,830 | | | | | | | | | | | | 855,830 | | | | -1.3 | % |
Corporate | | | 152 | | | | | | | | | | | | 152 | | | | 157 | | | | | | | | | | | | 157 | | | | -3.2 | % |
Intercompany eliminations | | | (1,062 | ) | | | | | | | | | | | (1,062 | ) | | | (1,761 | ) | | | | | | | | | | | (1,761 | ) | | | 39.7 | % |
Total net revenues | | $ | 1,619,047 | | | $ | - | | | $ | - | | | $ | 1,619,047 | | | $ | 1,721,993 | | | $ | - | | | $ | - | | | $ | 1,721,993 | | | | -6.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 262,510 | | | $ | - | | | $ | - | | | $ | 262,510 | | | $ | 302,903 | | | $ | - | | | $ | - | | | $ | 302,903 | | | | -13.3 | % |
| | | | 39.0 | % | | | | | | | | | | | 39.0 | % | | | 39.8 | % | | | | | | | | | | | 39.8 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BloomNet | | | 44,086 | | | | | | | | | | | | 44,086 | | | | 46,325 | | | | | | | | | | | | 46,325 | | | | -4.8 | % |
| | | | 42.7 | % | | | | | | | | | | | 42.7 | % | | | 43.2 | % | | | | | | | | | | | 43.2 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Foods & Gift Baskets | | | 302,902 | | | | | | | | | | | | 302,902 | | | | 308,745 | | | | | | | | | | | | 308,745 | | | | -1.9 | % |
| | | | 35.9 | % | | | | | | | | | | | 35.9 | % | | | 36.1 | % | | | | | | | | | | | 36.1 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate | | | 166 | | | | | | | | | | | | 166 | | | | 82 | | | | | | | | | | | | 82 | | | | 102.4 | % |
| | | | 109.2 | % | | | | | | | | | | | 109.2 | % | | | 52.2 | % | | | | | | | | | | | 52.2 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | | $ | 609,664 | | | $ | - | | | $ | - | | | $ | 609,664 | | | $ | 658,055 | | | $ | - | | | $ | - | | | $ | 658,055 | | | | -7.4 | % |
| | | | 37.7 | % | | | - | | | | - | | | | 37.7 | % | | | 38.2 | % | | | - | | | | - | | | | 38.2 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP) (a): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | | $ | 64,832 | | | $ | - | | | $ | - | | | $ | 64,832 | | | $ | 77,869 | | | $ | - | | | $ | - | | | $ | 77,869 | | | | -16.7 | % |
BloomNet | | | 29,847 | | | | | | | | | | | | 29,847 | | | | 32,530 | | | | | | | | | | | | 32,530 | | | | -8.2 | % |
Gourmet Foods & Gift Baskets | | | 26,313 | | | | 64,586 | | | | | | | | 90,899 | | | | 85,695 | | | | | | | | 2,900 | | | | 88,595 | | | | 2.6 | % |
Segment Contribution Margin Subtotal | | | 120,992 | | | | 64,586 | | | | - | | | | 185,578 | | | | 196,094 | | | | - | | | | 2,900 | | | | 198,994 | | | | -6.7 | % |
Corporate (b) | | | (91,595 | ) | | | | | | | 444 | | | | (91,151 | ) | | | (90,694 | ) | | | 540 | | | | | | | | (90,154 | ) | | | -1.1 | % |
EBITDA (non-GAAP) | | | 29,397 | | | | 64,586 | | | | 444 | | | | 94,427 | | | | 105,400 | | | | 540 | | | | 2,900 | | | | 108,840 | | | | -13.2 | % |
Add: Stock-based compensation | | | 5,941 | | | | | | | | | | | | 5,941 | | | | 6,803 | | | | | | | | | | | | 6,803 | | | | -12.7 | % |
Add: Compensation charge related to NQDC Plan Investment (Depreciation) Appreciation | | | (2,548 | ) | | | | | | | | | | | (2,548 | ) | | | 111 | | | | | | | | | | | | 111 | | | | -2,395.5 | % |
Adjusted EBITDA (non-GAAP) | | $ | 32,790 | | | $ | 64,586 | | | $ | 444 | | | $ | 97,820 | | | $ | 112,314 | | | $ | 540 | | | $ | 2,900 | | | $ | 115,754 | | | | -15.5 | % |
| | Nine Months Ended | |
| | March 27, 2022 | | Vital Choice and Alice's Table Transaction Costs | Litigation Settlement | As Adjusted (non-GAAP) March 27, 2022 | | March 28, 2021 | | Personalization Mall Litigation & Transaction Costs | Harry & David Store Closure Costs | | As Adjusted (non-GAAP) March 28, 2021 | | % Change | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | $ | 760,555 | | $ | - | $ | - | $ | 760,555 | | $ | 727,296 | | $ | - | $ | - | | $ | 727,296 | | | 4.6 | % |
BloomNet | | 107,212 | | | | | | | 107,212 | | | 105,622 | | | | | | | | 105,622 | | | 1.5 | % |
Gourmet Foods & Gift Baskets | | 855,830 | | | | | | | 855,830 | | | 803,439 | | | | | | | | 803,439 | | | 6.5 | % |
Corporate | | 157 | | | | | | | 157 | | | 295 | | | | | | | | 295 | | | -46.8 | % |
Intercompany eliminations | | (1,761 | ) | | | | | | (1,761 | ) | | (1,390 | ) | | | | | | | (1,390 | ) | | -26.7 | % |
Total net revenues | $ | 1,721,993 | | $ | - | $ | - | $ | 1,721,993 | | $ | 1,635,262 | | $ | - | $ | - | | $ | 1,635,262 | | | 5.3 | % |
Gross profit: | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | $ | 302,903 | | $ | - | $ | - | $ | 302,903 | | $ | 298,457 | | $ | - | $ | - | | $ | 298,457 | | | 1.5 | % |
| | | 39.8 | % | | | | | | 39.8 | % | | 41.0 | % | | | | | | | 41.0 | % | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
BloomNet | | 46,325 | | | | | | | 46,325 | | | 48,852 | | | | | | | | 48,852 | | | -5.2 | % |
| | | 43.2 | % | | | | | | 43.2 | % | | 46.3 | % | | | | | | | 46.3 | % | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Gourmet Foods & Gift Baskets | | 308,745 | | | | | | | 308,745 | | | 350,988 | | | | | | | | 350,988 | | | -12.0 | % |
| | | 36.1 | % | | | | | | 36.1 | % | | 43.7 | % | | | | | | | 43.7 | % | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate | | 82 | | | | | | | 82 | | | 128 | | | | | | | | 128 | | | -35.9 | % |
| | | 52.2 | % | | | | | | 52.2 | % | | 43.4 | % | | | | | | | 43.4 | % | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total gross profit | $ | 658,055 | | $ | - | $ | - | $ | 658,055 | | $ | 698,425 | | $ | - | $ | - | | $ | 698,425 | | | -5.8 | % |
| | | 38.2 | % | | - | | - | | 38.2 | % | | 42.7 | % | | - | | - | | | 42.7 | % | | | |
EBITDA (non-GAAP): | | | | | | | | | | | | | | | | | | | | | | | | |
Segment Contribution Margin (non-GAAP) (a) | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Floral & Gifts | $ | 77,869 | | $ | - | $ | - | $ | 77,869 | | $ | 87,430 | | $ | - | $ | - | | $ | 87,430 | | | -10.9 | % |
BloomNet | | 32,530 | | | | | | | 32,530 | | | 34,604 | | | | | | | | 34,604 | | | -6.0 | % |
Gourmet Foods & Gift Baskets | | 85,695 | | | | | 2,900 | | 88,595 | | | 145,172 | | | | | (483 | ) | | 144,689 | | | -38.8 | % |
Segment Contribution Margin Subtotal | | 196,094 | | | - | | 2,900 | | 198,994 | | | 267,206 | | | - | | (483 | ) | | 266,723 | | | -25.4 | % |
Corporate (b) | | (90,694 | ) | | 540 | | | | (90,154 | ) | | (101,582 | ) | | 5,403 | | | | | (96,179 | ) | | -6.3 | % |
EBITDA (non-GAAP) | | 105,400 | | | 540 | | 2,900 | | 108,840 | | | 165,624 | | | 5,403 | | (483 | ) | | 170,544 | | | -36.2 | % |
Add: Stock-based compensation | | 6,803 | | | | | | | 6,803 | | | 8,229 | | | | | | | | 8,229 | | | -17.3 | % |
Add: Compensation charge related to NQ Plan investment appreciation | | 111 | | | | | | | 111 | | | 4,123 | | | | | | | | 4,123 | | | -97.3 | % |
Adjusted EBITDA (non-GAAP) | $ | 112,314 | | $ | 540 | $ | 2,900 | $ | 115,754 | | $ | 177,976 | | $ | 5,403 | $ | (483 | ) | $ | 182,896 | | | -36.7 | % |
Reconciliation of net income (loss) to adjusted net income (loss) (non-GAAP): | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | |
| | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (70,993 | ) | | $ | (23,409 | ) | | $ | (22,155 | ) | | $ | 51,860 | |
Adjustments to reconcile net income (loss) to adjusted net income (loss) (non-GAAP) | | | | | | | | | | | | | | | | |
Add: Transaction costs | | | 201 | | | | 25 | | | | 444 | | | | 540 | |
Add: Litigation settlement | | | - | | | | 2,900 | | | | - | | | | 2,900 | |
Add: Goodwill and Intangibles Impairment | | | 64,586 | | | | - | | | | 64,586 | | | | - | |
Deduct: Income tax effect on adjustments | | | (11,546 | ) | | | (533 | ) | | | (11,609 | ) | | | (641 | ) |
Adjusted net income (loss) (non-GAAP) | | $ | (17,752 | ) | | $ | (21,017 | ) | | $ | 31,266 | | | $ | 54,659 | |
| | | | | | | | | | | | | | | | | |
Basic and diluted net income (loss) per common share | | | | | | | | | | | | | | | | |
Basic | | $ | (1.10 | ) | | $ | (0.36 | ) | | $ | (0.34 | ) | | $ | 0.80 | |
Diluted | | $ | (1.10 | ) | | $ | (0.36 | ) | | $ | (0.34 | ) | | $ | 0.79 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Basic and diluted adjusted net income (loss) per common share (non-GAAP) | | | | | | | | | | | | | | | | |
Basic | | $ | (0.27 | ) | | $ | (0.32 | ) | | $ | 0.48 | | | $ | 0.84 | |
Diluted | | $ | (0.27 | ) | | $ | (0.32 | ) | | $ | 0.48 | | | $ | 0.83 | |
| | | | | | | | | | | | | | | | | |
Weighted average shares used in the calculation of basic and diluted net income (loss) and adjusted net income (loss) per common share | | | | | | | | | | | | | | | | |
Basic | | | 64,767 | | | | 65,028 | | | | 64,660 | | | | 65,086 | |
Diluted | | | 64,767 | | | | 65,028 | | | | 64,660 | | | | 65,849 | |
Reconciliation of net income to adjusted net income (loss) (non-GAAP): | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | March 27, 2022 | | | March 28, 2021 | |
| | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (23,409 | ) | | $ | 1,427 | | | $ | 51,860 | | | $ | 105,342 | |
Adjustments to reconcile net income (loss) to adjusted net income (loss) (non-GAAP) | | | | | | | | | | | | | | | | |
Add: Transaction costs | | | 25 | | | | - | | | | 540 | | | | 5,403 | |
Add: Litigation settlement | | | 2,900 | | | | - | | | | 2,900 | | | | - | |
Deduct: Harry & David store closure cost adjustment | | | - | | | | - | | | | - | | | | (483 | ) |
Deduct: Income tax effect on adjustments | | | (533 | ) | | | 79 | | | | (641 | ) | | | (1,038 | ) |
Adjusted net income (loss) (non-GAAP) | | $ | (21,017 | ) | | $ | 1,506 | | | $ | 54,659 | | | $ | 109,224 | |
| | | | | | | | | | | | | | | | | |
Basic and diluted net income (loss) per common share | | | | | | | | | | | | | | | | |
Basic | | $ | (0.36 | ) | | $ | 0.02 | | | $ | 0.80 | | | $ | 1.63 | |
Diluted | | $ | (0.36 | ) | | $ | 0.02 | | | $ | 0.79 | | | $ | 1.58 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Basic and diluted adjusted net income (loss) per common share (non-GAAP) | | | | | | | | | | | | | | | | |
Basic | | $ | (0.32 | ) | | $ | 0.02 | | | $ | 0.84 | | | $ | 1.69 | |
Diluted | | $ | (0.32 | ) | | $ | 0.02 | | | $ | 0.83 | | | $ | 1.64 | |
| | | | | | | | | | | | | | | | | |
Weighted average shares used in the calculation of net income (loss) and adjusted net income (loss) per common share | | | | | | | | | | | | | | | | |
Basic | | | 65,028 | | | | 64,885 | | | | 65,086 | | | | 64,644 | |
Diluted | | | 65,028 | | | | 66,474 | | | | 65,849 | | | | 66,564 | |
Reconciliation of net income (loss) to adjusted EBITDA (non-GAAP): | | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | March 27, 2022 | | | March 28, 2021 | | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | |
| | | |
Net income (loss) | | $ | (23,409 | ) | | $ | 1,427 | | | $ | 51,860 | | | $ | 105,342 | | | $ | (70,993 | ) | | $ | (23,409 | ) | | $ | (22,155 | ) | | $ | 51,860 | |
Add: Interest expense, net | | 5,233 | | | 608 | | | 5,431 | | | 319 | | |
Add: Interest expense and other, net | | | 3,116 | | | 5,233 | | | 11,150 | | | 5,431 | |
Add: Depreciation and amortization | | 12,693 | | | 11,892 | | | 36,251 | | | 31,792 | | | 13,267 | | | 12,693 | | | 40,276 | | | 36,251 | |
Add: Income tax expense (benefit) | | | (8,080 | ) | | | (2,344 | ) | | | 11,858 | | | | 28,171 | | | | (16,767 | ) | | | (8,080 | ) | | | 126 | | | | 11,858 | |
EBITDA | | (13,563 | ) | | 11,583 | | | 105,400 | | | 165,624 | | | (71,377 | ) | | (13,563 | ) | | 29,397 | | | 105,400 | |
Add: Stock-based compensation | | 1,507 | | | 2,871 | | | 6,803 | | | 8,229 | | | 2,487 | | | 1,507 | | | 5,941 | | | 6,803 | |
Add: Compensation charge related to NQ Plan investment (depreciation) appreciation | | (2,881 | ) | | 916 | | | 111 | | | 4,123 | | |
Add: Compensation charge related to NQDC plan investment (depreciation) appreciation | | | (1,446 | ) | | (2,881 | ) | | (2,548 | ) | | 111 | |
Add: Goodwill and Intangible Impairment | | | 64,586 | | | - | | | 64,586 | | | - | |
Add: Transaction costs | | 25 | | | - | | | 540 | | | 5,403 | | | 201 | | | 25 | | | 444 | | | 540 | |
Add: Litigation settlement | | | 2,900 | | | | - | | | | 2,900 | | | | (483 | ) | | | - | | | | 2,900 | | | | - | | | | 2,900 | |
Adjusted EBITDA | | $ | (12,012 | ) | | $ | 15,370 | | | $ | 115,754 | | | $ | 182,896 | | | $ | (5,549 | ) | | $ | (12,012 | ) | | $ | 97,820 | | | $ | 115,754 | |
(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
Net revenues
| | | Three Months Ended | |
| | | Consumer Floral & Gifts | | | BloomNet | | | Gourmet Foods & Gift Baskets | | | Corporate and Eliminations | | | Consolidated | |
| | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | March 27, 2022 | | | March 28, 2021 | | | %
Change | |
Net revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E-commerce | | $ | 261,707 | | | $ | 257,982 | | | | 1.4 | % | | $ | - | | | $ | - | | | | 0.0 | % | | $ | 148,070 | | | $ | 166,786 | | | | -11.2 | % | | $ | - | | | $ | - | | | $ | 409,777 | | | $ | 424,768 | | | | -3.5 | % |
Other | | | 2,536 | | | | 2,411 | | | | 5.2 | % | | $ | 38,448 | | | $ | 38,833 | | | | -1.0 | % | | | 19,332 | | | | 8,459 | | | | 128.5 | % | | | (517 | ) | | | (237 | ) | | | 59,799 | | | | 49,466 | | | | 20.9 | % |
Total net revenues | | $ | 264,243 | | | $ | 260,393 | | | | 1.5 | % | | $ | 38,448 | | | $ | 38,833 | | | | -1.0 | % | | $ | 167,402 | | | $ | 175,245 | | | | -4.5 | % | | $ | (517 | ) | | $ | (237 | ) | | $ | 469,576 | | | $ | 474,234 | | | | -1.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other revenues detail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail and other | | | 2,536 | | | | 2,411 | | | | 5.2 | % | | | - | | | | - | | | | | | | | 1,656 | | | | 1,660 | | | | -0.2 | % | | | | | | | | | | | 4,192 | | | | 4,071 | | | | 3.0 | % |
Wholesale | | | - | | | | - | | | | | | | | 15,322 | | | | 12,383 | | | | 23.7 | % | | | 17,676 | | | | 6,799 | | | | 160.0 | % | | | | | | | | | | | 32,998 | | | | 19,182 | | | | 72.0 | % |
BloomNet services | | | - | | | | - | | | | | | | | 23,126 | | | | 26,450 | | | | -12.6 | % | | | - | | | | - | | | | | | | | | | | | | | | | 23,126 | | | | 26,450 | | | | -12.6 | % |
Corporate | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | 43 | | | | 54 | | | | 43 | | | | 54 | | | | -20.4 | % |
Eliminations | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | (560 | ) | | | (291 | ) | | | (560 | ) | | | (291 | ) | | | 92.4 | % |
Total other revenues | | $ | 2,536 | | | | 2,411 | | | | 5.2 | % | | $ | 38,448 | | | $ | 38,833 | | | | -1.0 | % | | $ | 19,332 | | | $ | 8,459 | | | | 128.5 | % | | $ | (517 | ) | | $ | (237 | ) | | $ | 59,799 | | | | 49,466 | | | | 20.9 | % |
| | | Nine Months Ended | |
| | | Consumer Floral & Gifts | | | BloomNet | | | Gourmet Foods & Gift Baskets | | | Corporate and Eliminations | | | Consolidated | |
| | | March 27, 2022 | | | March 28, 2021 | | | %
Change | | | March 27, 2022 | | | March 28, 2021 | | | %
Change | | | March 27, 2022 | | | March 28, 2021 | | | %
Change | | | March 27, 2022 | | | March 28, 2021 | | | March 27, 2022 | | | March 28, 2021 | | | %
Change | |
Net revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E-commerce | | $ | 753,813 | | | $ | 721,049 | | | | 4.5 | % | | $ | - | | | $ | - | | | | 0.0 | % | | $ | 746,857 | | | $ | 720,392 | | | | 3.7 | % | | $ | - | | | $ | - | | | $ | 1,500,670 | | | $ | 1,441,441 | | | | 4.1 | % |
Other | | | 6,742 | | | | 6,247 | | | | 7.9 | % | | | 107,212 | | | | 105,622 | | | | 1.5 | % | | | 108,973 | | | | 83,047 | | | | 31.2 | % | | | (1,604 | ) | | | (1,095 | ) | | | 221,323 | | | | 193,821 | | | | 14.2 | % |
Total net revenues | | $ | 760,555 | | | $ | 727,296 | | | | 4.6 | % | | $ | 107,212 | | | $ | 105,622 | | | | 1.5 | % | | $ | 855,830 | | | $ | 803,439 | | | | 6.5 | % | | $ | (1,604 | ) | | $ | (1,095 | ) | | $ | 1,721,993 | | | $ | 1,635,262 | | | | 5.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other revenues detail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail and other | | | 6,742 | | | | 6,247 | | | | 7.9 | % | | | - | | | | - | | | | | | | | 8,084 | | | | 7,321 | | | | 10.4 | % | | | | | | | | | | | 14,826 | | | | 13,568 | | | | 9.3 | % |
Wholesale | | | - | | | | - | | | | | | | | 39,890 | | | | 32,826 | | | | 21.5 | % | | | 100,889 | | | | 75,726 | | | | 33.2 | % | | | | | | | | | | | 140,779 | | | | 108,552 | | | | 29.7 | % |
BloomNet services | | | - | | | | - | | | | | | | | 67,322 | | | | 72,796 | | | | -7.5 | % | | | - | | | | - | | | | | | | | | | | | | | | | 67,322 | | | | 72,796 | | | | -7.5 | % |
Corporate | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | 157 | | | | 295 | | | | 157 | | | | 295 | | | | -46.8 | % |
Eliminations | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | - | | | | - | | | | | | | | (1,761 | ) | | | (1,390 | ) | | | (1,761 | ) | | | (1,390 | ) | | | -26.7 | % |
Total other revenues | | $ | 6,742 | | | $ | 6,247 | | | | 7.9 | % | | $ | 107,212 | | | $ | 105,622 | | | | 1.5 | % | | $ | 108,973 | | | $ | 83,047 | | | | 31.2 | % | | $ | (1,604 | ) | | $ | (1,095 | ) | | $ | 221,323 | | | $ | 193,821 | | | | 14.2 | % |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2,
2023 | | | March 27,
2022 | | | % Change | | | April 2, 2023 | | | March 27,
2022 | | | % Change | |
| | | (dollars in thousands) | |
Net revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
E-Commerce | | $ | 357,801 | | | $ | 409,777 | | | | -12.7 | % | | $ | 1,387,133 | | | $ | 1,500,670 | | | | -7.6 | % |
Other | | | 59,765 | | | | 59,799 | | | | -0.1 | % | | | 231,914 | | | | 221,323 | | | | 4.8 | % |
Total net revenues | | $ | 417,566 | | | $ | 469,576 | | | | -11.1 | % | | $ | 1,619,047 | | | $ | 1,721,993 | | | | -6.0 | % |
Net revenues consist primarily of the selling price of the merchandise, service or outbound shipping charges, less discounts, returns and credits.
Net revenues decreased 1.0%11.1% and 6.0% during the three and nine months ended March 27, 2022,April 2, 2023, respectively, compared to the same periodperiods of the prior year, due to lower revenuesvolume across all segments, reflecting a continuation of the trends that we have experienced throughout this fiscal year, in which discretionary spending remains pressured and consumers continue to moderate their spending on purchases for “Everyday” gifting occasions, and to a lesser extent, “Holiday” gifting occasions, combined with the Gourmet Foods & Gift Basketsprudent use of promotional offerings and BloomNet segments, partially offset by slightly higher revenues inadvertising campaigns that balance the Consumer Floral & Gifts segment. long-term goals of the Company with strategies to improve gross margins and operating spend ratios during this challenging economic environment.
Adjusted for the non-comparative impact of Alice’s Table and Vital Choice, which were acquired on December 31, 2021 and October 27, 2021, respectively, consolidated revenues decreased 2.5%,6.4% during the nine months ended April 2, 2023, in comparison to the prior year period. The decreaseCompany acquired Things Remembered on January 10, 2023, and launched the brand on its e-commerce platform in April 2023. As such, Things Remembered revenues was due towere immaterial during the Easter shift (the Easter holiday was onthree and nine months ended April 17th, 2022, compared to April 4th in 2021, resulting in the shift of some Easter-related revenue and associated EBITDA, into the Company’s fiscal fourth quarter), lower deferred revenues coming into the quarter, compared with the prior year when customers – particularly in our Harry & David brand – were willing to accept delivery of holiday season gifts well into January, and slower ecommerce demand for everyday occasions, throughout the quarter, reflecting growing consumer concerns with rising inflation and geopolitical unrest. This was partially offset by solid growth of approximately 5% for the Valentine’s Day holiday in our consumer floral business, strong demand in our wholesale business and contributions from Vital Choice and Alice’s Table. Compared with the Company’s fiscal 2020 third quarter, prior to the pandemic, revenues increased 68.4%.2, 2023.
NetTo provide perspective, our post-pandemic fiscal 2023 (three and nine months ended April 2, 2023) revenues increased 5.3% during theexceeded our pre-pandemic fiscal 2019 (three and nine months ended March 27, 2022 compared31, 2019) revenues by 68.1% and 63.7%, respectively. This revenue growth includes revenues attributable to the same period of the prior year, due to higher revenues across our three segments. Adjusted for the non-comparative impact ofShari’s Berries, which was acquired in August 2019, PersonalizationMall, Alice’s Table and Vital Choice, which werewas acquired on August 3, 2020, December 31, 2021 andVital Choice, which was acquired on October 27, 2021, respectively, consolidatedand Alice's Table, which was acquired on December 31, 2021. Excluding revenues increased 3.7%, in comparison tofrom these acquisitions, pro-forma, post-pandemic revenues for the prior year period. This revenue growth followed the 52.6% revenue growth we reported for thethree and nine months ended April 2, 2023, exceeded pre-pandemic (three and nine months ended March 28, 2021, which was accelerated31, 2019) revenues by the growth41.4% and 37.4%, respectively.
| | | Three Months Ended | |
| | | Consumer Floral & Gifts | | | BloomNet | | | Gourmet Foods & Gift Baskets | | | Corporate and Eliminations | | | Consolidated | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
Net revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E-commerce | | $ | 230,403 | | | $ | 261,707 | | | | -12.0 | % | | $ | - | | | $ | - | | | | - | % | | $ | 127,398 | | | $ | 148,070 | | | | -14.0 | % | | $ | - | | | $ | - | | | $ | 357,801 | | | $ | 409,777 | | | | -12.7 | % |
Other | | | 2,616 | | | | 2,536 | | | | 3.2 | % | | | 36,968 | | | | 38,448 | | | | -3.8 | % | | | 20,465 | | | | 19,332 | | | | 5.9 | % | | | (284 | ) | | | (517 | ) | | | 59,765 | | | | 59,799 | | | | -0.1 | % |
Total net revenues | | $ | 233,019 | | | $ | 264,243 | | | | -11.8 | % | | $ | 36,968 | | | $ | 38,448 | | | | -3.8 | % | | $ | 147,863 | | | $ | 167,402 | | | | -11.7 | % | | $ | (284 | ) | | $ | (517 | ) | | $ | 417,566 | | | $ | 469,576 | | | | -11.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other revenues detail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail and other | | | 2,616 | | | | 2,536 | | | | 3.2 | % | | | - | | | | - | | | | - | | | | 1,686 | | | | 1,656 | | | | 1.8 | % | | | - | | | | - | | | | 4,302 | | | | 4,192 | | | | 2.6 | % |
Wholesale | | | - | | | | - | | | | - | | | | 14,695 | | | | 15,322 | | | | -4.1 | % | | | 18,779 | | | | 17,676 | | | | 6.2 | % | | | - | | | | - | | | | 33,474 | | | | 32,998 | | | | 1.4 | % |
BloomNet services | | | - | | | | - | | | | - | | | | 22,273 | | | | 23,126 | | | | -3.7 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 22,273 | | | | 23,126 | | | | -3.7 | % |
Corporate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 36 | | | | 43 | | | | 36 | | | | 43 | | | | -16.3 | % |
Eliminations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (320 | ) | | | (560 | ) | | | (320 | ) | | | (560 | ) | | | 42.9 | % |
Total other revenues | | $ | 2,616 | | | | 2,536 | | | | 3.2 | % | | $ | 36,968 | | | $ | 38,448 | | | | -3.8 | % | | $ | 20,465 | | | $ | 19,332 | | | | 5.9 | % | | $ | (284 | ) | | $ | (517 | ) | | $ | 59,765 | | | | 59,799 | | | | -0.1 | % |
| | | Nine Months Ended | |
| | | Consumer Floral & Gifts | | | BloomNet | | | Gourmet Foods & Gift Baskets | | | Corporate and Eliminations | | | Consolidated | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| Net revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E-commerce | | $ | 665,866 | | | $ | 753,813 | | | | -11.7 | % | | $ | - | | | $ | - | | | | - | % | | $ | 721,267 | | | $ | 746,857 | | | | -3.4 | % | | $ | - | | | $ | - | | | $ | 1,387,133 | | | $ | 1,500,670 | | | | -7.6 | % |
Other | | | 6,382 | | | | 6,742 | | | | -5.3 | % | | | 103,187 | | | | 107,212 | | | | -3.8 | % | | | 123,255 | | | | 108,973 | | | | 13.1 | % | | | (910 | ) | | | (1,604 | ) | | | 231,914 | | | | 221,323 | | | | 4.8 | % |
Total net revenues | | $ | 672,248 | | | $ | 760,555 | | | | -11.6 | % | | $ | 103,187 | | | $ | 107,212 | | | | -3.8 | % | | $ | 844,522 | | | $ | 855,830 | | | | -1.3 | % | | $ | (910 | ) | | $ | (1,604 | ) | | $ | 1,619,047 | | | $ | 1,721,993 | | | | -6.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other revenues detail | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail and other | | | 6,382 | | | | 6,742 | | | | -5.3 | % | | | - | | | | - | | | | - | | | | 7,907 | | | | 8,084 | | | | -2.2 | % | | | - | | | | - | | | | 14,289 | | | | 14,826 | | | | -3.6 | % |
Wholesale | | | - | | | | - | | | | - | | | | 40,370 | | | | 39,890 | | | | 1.2 | % | | | 115,348 | | | | 100,889 | | | | 14.3 | % | | | - | | | | - | | | | 155,718 | | | | 140,779 | | | | 10.6 | % |
BloomNet services | | | - | | | | - | | | | - | | | | 62,817 | | | | 67,322 | | | | -6.7 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 62,817 | | | | 67,322 | | | | -6.7 | % |
Corporate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 152 | | | | 157 | | | | 152 | | | | 157 | | | | -3.2 | % |
Eliminations | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,062 | ) | | | (1,761 | ) | | | (1,062 | ) | | | (1,761 | ) | | | 39.7 | % |
Total other revenues | | $ | 6,382 | | | | 6,742 | | | | -5.3 | % | | $ | 103,187 | | | $ | 107,212 | | | | -3.8 | % | | $ | 123,255 | | | $ | 108,973 | | | | 13.1 | % | | $ | (910 | ) | | $ | (1,604 | ) | | $ | 231,914 | | | | 221,323 | | | | 4.8 | % |
Table of increased recognition and relevance for our family of brands for everyday gifting and connective occasions, which was complemented by an expanded product assortment, including PersonalizationMall and Vital Choice. We also continued to see growth in our customer file and Celebrations Passport loyalty program, which helps drive increased cross-brand purchasing, purchase frequency, retention, and customer life-time value. However, in the current year, the macro economy has changed dramatically once again and we were and will be faced with significant headwinds which have slowed consumer demand and increased our costs, including: limited availability of production and distribution labor, escalating global supply-chain disruptions that caused shortages of key components for some products, geopolitical turmoil, an unprecedented, rapid rise in price inflation, and increased digital marketing costs.Contents
Revenue by sales channel:
E-commerce revenues (combined online and telephonic) decreased 3.5%12.7% and 7.6% during the three and nine months ended March 27, 2022April 2, 2023, respectively, compared to the same periodperiods of the prior year, primarily as a result of lower sales of 11.2%a decline in demand for “Everyday” gifts within the Gourmet Foods & Gift Baskets segment, which includes revenues of Vital Choice, acquired on October 27, 2021, partially offset by growth of 1.4% within the Consumer Floral & Gifts segment.
E-commerce revenues increased 4.1% during the nine months ended March 27, 2022, comparedall our segments, attributable to the same period of the prior year as a result of growth within the Gourmet Foods & Gift Baskets segment of 3.7%,macro-economic conditions noted above, which includes revenues of Vital Choice since its date of acquisition, and the Consumer Floral & Gifts segment of 4.5%, which includes the revenues of PersonalizationMall and Alice’s Table since their dates of acquisition on August 3, 2020 and December 31, 2021, respectively.have negatively impacted consumer discretionary spending.
During the three and nine months ended March 27, 2022, respectively,April 2, 2023, the Company fulfilled approximately 5.44.6 million and 18.716.3 million orders through its e-commerce sales channelschannel (online and telephonic sales), a decrease of 14.6%15.8% and 5.6%12.7%, respectively, compared to the same periods of the prior year, whileyear. During the three and nine months ended April 2, 2023, average order value increased 12.7%3.8% and 10.2%5.9%, to $80.29$78.25 and $72.84, respectively. $85.01, respectively, as a result of strategic price increases, and product mix into higher price point items.
Excluding the impact of the acquisitions of Vital Choice and Alice’s Table, pro-forma e-commerce revenues declined 8.1% during the nine months ended April 2, 2023, compared to the same period of the prior year.
Other revenues are comprised of the Company’s BloomNet segment, as well as the wholesale and retail channels of its Consumer Floral & Gifts and Gourmet Foods & Gift Baskets segments.
Other revenues during the three months ended April 2, 2023, were consistent with the same period of the prior year, as higher wholesale volumes within the Gourmet Foods & Gift Baskets segment, as a result of increased spring and Easter volume, offset lower revenues within the BloomNet segment due to the overall macro-economic conditions.
Other revenues increased by 20.9% and 14.2%4.8% during the three and nine months ended March 27, 2022, respectively,April 2, 2023, compared to the same periodsperiod of the prior year, due to increased wholesale product demand within the Gourmet Foods & Gift Baskets segment, as consumers returned to in person “brick-and-mortar” shopping, as well as increased spring and BloomNet wholesaleEaster demand, partially offset by a decrease inlower revenues within the BloomNet services revenues.segment due to the overall macro-economic conditions.
Revenue by segment:
Consumer Floral & Gifts – this segment, which historically has consisted primarily ofincludes the operations of the 1-800-Flowers.com brand, but now includes revenues attributable toand PersonalizationMall andbrands, as well as Alice’s Table, subsequent to its acquisition on December 31, 2021, and the Things Remembered brand, subsequent 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 within this segment increased 1.5%decreased 11.8% and 4.6%11.6% during the three and nine months ended March 27, 2022,April 2, 2023, respectively, compared to the same periods of the prior year, reflecting the marketingdue to reduced “Everyday” product demand and merchandising investments made in our flagship brand, which are continuing to drive growth and market share gains, solid growth for theweaker than anticipated Valentine’s Day holiday, partly offset by softer everyday gifting salesdemand, as consumer discretionary spending continues to shrink in the third quarter. current inflationary environment, combined with planned reductions in advertising spend, as the brands focused their efforts on improving gross margin and operating spend efficiency in the face of softening demand.
Pro-forma segment revenue growth was 1.3% and 2.7%revenues decreased 11.7% during the three and nine months ended March 27, 2022,April 2, 2023, adjusting for the acquisitionsacquisition of PersonalizationMall and Alice’s Table.
BloomNet - revenues in this segment are derived from membership fees, as well as other product and service offerings to florists.offerings. Net revenues decreased 1.0%3.8% during both the three and nine months ended April 2, 2023, compared to the same periods of the prior year.
The net revenue decline during the three months ended March 27, 2022 compared to the same period of the prior year,April 2, 2023 was due to lowera decline in wholesale product revenues, as well as services revenues, attributable to reduced membership/transaction fee revenues asassociated with a result of reduced florist-to-florist and 1-800-Flowers.comdecline in order volume attributable to overall macro-economic conditions, partially offset by an increase inprocessed through the network, as well as lower directory services and growth in wholesale product volume. ad revenues.
Net revenues increased 1.5%declined during the nine months ended March 27, 2022, compared to the same period of the prior year,April 2, 2023 due to growthlower services revenues, attributable to reduced membership/transaction fee revenues associated with a decline in order volume processed through the network, as well as lower directory services and wholesale product volume,ad revenues, partially offset by lower membership/transaction fee revenues due to reduced florist-to-florist and 1-800-Flowers.com order volume attributable to overall macro-economic conditions.strong wholesale product demand in the first quarter of the fiscal year, driven by product availability, which had been constrained by supply chain issues in the prior year.
Gourmet Foods & Gift Baskets – this segment includes the operations of Harry & David, Wolferman’s, Stock Yards, Cheryl’s Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, Shari’s Berries, and Vital Choice, subsequent to its October 27, 2021 acquisition date. Revenue is derived from the sale of gourmet fruits, cookies, baked gifts, premium chocolates and confections, gourmet popcorn, gift baskets, dipped berries, prime steaks, chops, and fish, through the Company’s e-commerce sales channels (telephonic and online sales) and company-owned and operated retail stores under the Harry & David and Cheryl’s brand names, as well as wholesale operations.
Net revenues within this segment decreased 4.5% during the three months ended March 27, 2022 compared to the same period of the prior year, primarily reflecting softer consumer demand due to macro-economic issues, the shift of the Easter holiday later into the Company’s fiscal fourth quarter, as well as lower deferred revenue entering the quarter, compared with the prior year period, partly offset by higher year-over-year wholesale revenues11.7% and revenues associated with Vital Choice®, which the Company acquired in October, 2021. Net revenues increased 6.5% during the nine months ended March 27, 2022 compared to the same period of the prior year, due to: (i) favorable e-commerce revenues of 3.7%, resulting from increased penetration of both “everyday” and specific volume driven by Harry & David and Shari’s Berries initiatives, as well as (ii) wholesale and retail revenue growth of 31.2% due to improving demand as COVID-19 restrictions were lifted and foot-traffic in customer locations continued to return to more normalized levels. Pro-forma segment revenue decreased 8.2%, and increased 5.1%,1.3% during the three and nine months ended March 27, 2022, respectively,April 2, 2023 compared to the same periods of the prior year, as a result of lower e-commerce sales, primarily due to the macro-economic weakness, which has significantly reduced “Everyday” occasion volumes, combined with planned reductions in advertising spend, as the brands focused their efforts on improving gross margin and operating spend efficiency in the face of softening demand. Wholesale revenues were slightly favorable to prior year due to increased Spring and Easter volumes, and improved demand as consumers return to traditional “brick-and-mortar” shopping.
Pro-forma segment revenues decreased 2.1% during the nine months ended April 2, 2023, adjusting for the October 27, 2021 acquisition of Vital Choice.
Gross profit
| | | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | |
Gross profit | | $ | 154,091 | | | $ | 184,699 | | | -16.6 | % | | $ | 658,055 | | | $ | 698,425 | | | -5.8 | % | | $ | 140,440 | | | $ | 154,091 | | | -8.9 | % | | $ | 609,664 | | | $ | 658,055 | | | -7.4 | % |
Gross profit % | | 32.8 | % | | 38.9 | % | | | | | 38.2 | % | | 42.7 | % | | | | | 33.6 | % | | 32.8 | % | | | | | 37.7 | % | | 38.2 | % | | | |
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 includes labor and facility costs related to direct-to-consumer and wholesale production operations, as well as payments made to sending florists related to order volume referred through the Company’s BloomNet network.
Gross profit decreased 16.6%8.9% and 5.8%7.4% during the three and nine months ended March 27, 2022, respectively, compared to the same periods of the prior year. The decrease during the three months ended March 27, 2022 was attributable to the aforementioned decrease in revenues combined with a lower gross margin percentage, while the decrease during the nine months ended, March 27, 2022 was attributable entirely to a lower gross margin percentage, which was partially offset by the higher revenues noted above.
Gross profit percentage decreased 610 and 450 basis points, during the three and nine months ended March 27, 2022,April 2, 2023, respectively, compared to the same periods of the prior year, primarily due to lower margins across allrevenues noted above.
Gross profit percentage increased 80 basis points during the three months ended April 2, 2023, compared to the prior year, driven by improvements within the Consumer Floral & Gifts and BloomNet segments, as a result of strategic pricing initiatives and lower in-bound freight costs.
Gross profit percentage decreased by 50 basis points during the nine months ended April 2, 2023 compared to the prior year, reflecting the annualization of macro-economic headwinds including: continued disruptions in the global supply chain, the escalationfirst quarter of increasedfiscal 2023, attributable to higher commodity, costs, increased year-over-year labor, rates across the Company, as well as widespread delays and increased costs for inbound and outbound shipping costs, including an acceleration inthe impact of fuel surcharges, related to rising oil prices, andas well as the write-off of certain inventories of expireddated perishable products, reflecting softer than anticipated demand levels. product, partially offset by the improvements in the second and third quarter, as noted above.
The Company has and will continue to implement strategic initiativesstrategies designed to mitigate the impact of these issues,the various headwinds noted above, including pricing initiatives across our product assortment, as well as pre-building inventory to offset supply chain delays, implementingadvancements in our logistics optimizingoptimization programs to enhance our outbound shipping operations and managemitigate rising third-party shipping costs and deploying automation to increase throughput and efficiency and address labor shortages.
On a pro-forma basis, adjusting for the impacthigh cost of PersonalizationMall, Alice’s Tablelabor. Ocean freight costs have come down significantly from their highs of last year, and Vital Choice, gross margin percentage was 32.9% and 38.2% during the three and nine months ended March 27, 2022.over time, we expect commodity costs will revert to more historical norms.
Gross profit by segment follows:
Consumer Floral & Gifts segment - Gross profit decreased by 1.5%8.8% during the three months ended March 27, 2022,April 2, 2023 due to a reduction in gross margin percentagethe impact of 110 basis points to 36.7%,the lower revenues noted above, partially offset by favorable gross profit percentage attributable to strategic pricing initiatives and product mix, reflected in the increasehigher average order value, as well as lower inbound ocean freight rates.
Gross profit decreased by 13.3% during the nine months ending April 2, 2023, due to the impact of the lower revenues noted above, as well as a decrease in revenuegross profit percentage, driven by higher ocean freight (carried on earlier inventory buys), as well as higher outbound freight, and labor rates, partially offset by pricing initiatives which are reflected in the higher average order value noted above.
BloomNetsegment - Gross profit increased by 1.5%5.5% during the ninethree months ended March 27, 2022,April 2, 2023, compared to the same period of the prior year, due to an improved gross profit percentage, partially offset by the decrease in revenues noted above. Gross profit percentage increased in comparison to the prior year primarily due to improvements in wholesale margins, as a result of the revenue increase noted above, partially offset by decline in the gross margin percentage of 120 basis points to 39.8%. Gross margin percentage was negatively impacted for both the three and nine month periods ending March 27, 2022 as a result of significantly increased costs for inbound and outbound shipping and labor, and higher raw material component input costs, partially offset bystrategic pricing initiatives reflected in the higher average order value. On a pro-forma basis, adjusting for the impact of PersonalizationMall and Alice’s Table, gross margin percentage was 36.7% and 39.6%lower ocean freight
Gross profit decreased 4.8% during the three and nine months ended March 27, 2022.
BloomNetsegment - Gross profit decreased by 13.4% and 5.2% during the three and nine months ended March 27, 2022, respectively,April 2, 2023, compared to the same periodsperiod of the prior year, due to the lower revenues noted above, as well as the impact of a decrease inlower gross margin percentage, of 560 basis points to 38.7%, and 310 basis points, to 43.2% during the respective three and nine months ended March 27, 2022. The decrease in gross margin percentage was due to revenuesales mix, resultingwith a greater proportion of revenues derived from growth in lower margin wholesale revenues, combined with increased costs for inbound shipping,product sales, and higher raw material component input costs, partially offset by lower florist-to-florist volumes, which are monetized at lower margins.rebates.
Gourmet Foods & Gift Baskets segment - Gross profit decreased by 38.7% during the three months ended March 27, 2022, compared to the same period of the prior year, due to the decrease in revenues noted above, combined with a decrease in gross margin percentage of 1,410 basis points, to 25.3%. Gross profit decreased by 12.0% during the nine months ended March 27, 2022 due to a decline in gross margin percentage of 760 basis points, to 36.1%14.1% and 1.9%, partially offset by the aforementioned increase in revenues. The decline in gross margin percentage reflects the macro-economic headwinds including: continued disruptions in the global supply chain, the escalation of increased commodity costs, increased year-over-year labor rates across the Company, as well as widespread delays and increased costs for inbound and outbound shipping, including an acceleration in fuel surcharges related to rising oil prices, and the write-off of certain inventories of expired perishable products, reflecting softer than anticipated demand levels. On a pro-forma basis, adjusting for the impact of Vital Choice, gross margin percentage was 25.1% and 36.2%respectively, during the three and nine months ended March 27, 2022.April 2, 2023, compared to the same periods of the prior year, primarily due to the revenue decrease noted above, combined with a decline in gross profit percentage primarily attributable to increased promotions to incentivize customer demand and to work down long inventory positions, combined with continued inflationary pressures on component costs, partially offset by lower ocean freight, automation efficiencies, and pricing initiatives.
Marketing and sales expense
| | | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | |
Marketing and sales | | $ | 130,645 | | | $ | 127,923 | | | 2.1 | % | | $ | 432,795 | | | $ | 402,904 | | | 7.4 | % | | $ | 106,472 | | | $ | 130,645 | | | -18.5 | % | | $ | 390,077 | | | $ | 432,795 | | | -9.9 | % |
Percentage of net revenues | | 27.8 | % | | 27.0 | % | | | | | 25.1 | % | | 24.6 | % | | | | | 25.5 | % | | 27.8 | % | | | | | 24.1 | % | | 25.1 | % | | | |
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’s departments engaged in marketing, selling and merchandising activities.
Marketing and sales expense increased 2.1%decreased 18.5% and 7.4%9.9% during the three and nine months ended March 27, 2022,April 2, 2023, respectively, compared to the same periodsperiod of the prior year, due to: (i) higher advertising costs to support revenue generation and market share gains,variable components associated with lower revenues, combined with reduced, but more efficient advertising rates which have increased above historical averages, (ii) higher labor costs, primarily as a result of a class-action litigation settlement during the current quarter, labor ratesspend, and annual merit increases, all of which were almost entirely offset by lower performance related bonuses, and (iii) the impact of the acquisition of Vital Choice, and for the nine-month period, the annualization of the impact of the acquisition of PersonalizationMall, which carries both higher product gross margins, as well as higher advertising ratios.
During the three and nine months ended March 27, 2022, the Company added approximately 1.5 and 4.0 million new e-commerce customers, a decrease of 17.4% and 13.0% compared to the same periods of the prior year, while purchase activity from existing customers decreased 1.4% for the three months ended March 27, 2022 and increased 5.0% for the nine months ended March 27, 2022, in comparison to the same periods of the prior year.expense optimization efforts.
Technology and development expense
| | | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2022 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | |
Technology and development | | $ | 14,456 | | | $ | 14,281 | | | 1.2 | % | | $ | 41,369 | | | $ | 39,937 | | | 3.6 | % | | $ | 14,837 | | | $ | 14,456 | | | 2.6 | % | | $ | 44,529 | | | $ | 41,369 | | | 7.6 | % |
Percentage of net revenues | | 3.1 | % | | 3.0 | % | | | | | 2.4 | % | | 2.4 | % | | | | | 3.6 | % | | 3.1 | % | | | | | 2.8 | % | | 2.4 | % | | | |
Technology and development expense consists primarily of payroll and operating expenses of the Company’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 expense increased by 1.2%2.6% and 3.6%7.6% during the three and nine month periodsmonths ended March 27, 2022April 2, 2023, respectively, compared to the same periods of the prior year, primarily due to higher maintenance and support for the Company’s technology platform enhancements, which wasincluding higher labor and consulting costs, partially offset by lower labor costs resulting from reductions in performance related bonuses, and non-recurring costs related to PersonalizationMallperformance-based compensation in the prior periods.current year.
General and administrative expense
| | | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | |
General and administrative | | $ | 22,553 | | | $ | 30,912 | | | -27.0 | % | | $ | 78,491 | | | $ | 89,960 | | | -12.7 | % | | $ | 25,922 | | | $ | 22,553 | | | 14.9 | % | | $ | 81,075 | | | $ | 78,491 | | | 3.3 | % |
Percentage of net revenues | | 4.8 | % | | 6.5 | % | | | | | 4.6 | % | | 5.5 | % | | | | | 6.2 | % | | 4.8 | % | | | | | 5.0 | % | | 4.6 | % | | | |
General and administrative expense consists of payroll and other expenses in support of the Company’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 expenses decreased 27.0% and 12.7%increased 14.9%, during the three and nine months ended March 27, 2022, respectively,April 2, 2023, compared to the same periodsperiod of the prior year, due to: (i) lower laborto the impact of increases in health care claim costs, and related costs, primarily resulting from lower performance bonuses, and year-over-year decreaseschange in the value of non-qualified deferred compensation plan investment income (refer toinvestments (see equal offset in “other income/expense, net”), partially offset by lower performance-based compensation.
General and (ii)administrative expenses increased 3.3% during the nine months ended April 2, 2023, compared to the same period of the prior year, due to an increase in bad debt expense, legal fees, and health care costs, partially offset by lower transaction and litigationlabor costs resulting from a change in the value of non-qualified deferred compensation plan investments (see equal offset in “other income/expense, net”), and lower insurance costs.performance-based compensation.
Depreciation and amortization expense
| | | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | |
Depreciation and amortization | | $ | 12,693 | | | $ | 11,892 | | | 6.7 | % | | $ | 36,251 | | | $ | 31,792 | | | 14.0 | % | | $ | 13,267 | | | $ | 12,693 | | | 4.5 | % | | $ | 40,276 | | | $ | 36,251 | | | 11.1 | % |
Percentage of net revenues | | 2.7 | % | | 2.5 | % | | | | | 2.1 | % | | 1.9 | % | | | | | 3.2 | % | | 2.7 | % | | | | | 2.5 | % | | 2.1 | % | | | |
Depreciation and amortization expense increased 6.7%4.5% and 14.0%11.1% during the three and nine months ended March 27, 2022,April 2, 2023, respectively, compared to the same periods of the prior year, due to distribution facility automation projects and IT related ecommerce/platform enhancements, andas well as incremental depreciation associated with the Vital Choice acquisition, while depreciation and amortization expense for the nine months ended March 27, 2022 was also impacted by the incremental depreciation and customer list amortization associated with PersonalizationMall.recent acquisitions.
Goodwill and intangible impairment
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill and intangible impairment | | $ | 64,586 | | | $ | - | | | | - | % | | $ | 64,586 | | | $ | - | | | | - | % |
Based upon the continuing pressures on consumer discretionary spending, ongoing geopolitical events, the current inflationary macro-economic conditions, related cost input headwinds that have negatively impacted the Company’s gross margins, and resulting downward revisions to its forecast, the Company concluded that a triggering event had occurred for its Gourmet Foods & Gift Baskets reporting unit during the quarter ended April 2, 2023. As such, the Company performed an impairment test of the reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023, and fully impaired the related goodwill, and partially impaired certain tradenames within the reporting unit. See Note 6 – Goodwill and Intangibles, net, in Item I for details.
Interest expense, net
| | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | $ | 1,226 | | | $ | 1,553 | | | | -21.1 | % | | $ | 4,477 | | | $ | 4,520 | | | | -1.0 | % |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | $ | 1,712 | | | $ | 1,226 | | | | 39.6 | % | | $ | 8,676 | | | $ | 4,477 | | | | 93.8 | % |
Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’s credit facility (See Note 8 - Debt, in Item 1. for details), net of income earned on the Company’s available cash balances.
Interest expense, net decreased 21.1%increased 39.6% and 1.0%93.8% during the three and nine months ended March 27, 2022,April 2, 2023, respectively, compared to the same periods of the prior year, primarily due to lowerhigher interest rates, attributable toand higher working capital borrowings during the Second Amendment tonine month period, partially offset by favorable interest earned on available cash balances.
Other expense (income), net
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 2, 2023 | | | March 27, 2022 | | | % Change | | | April 2, 2023 | | | March 27, 2022 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other expense (income), net | | $ | 1,404 | | | $ | 4,007 | | | | -65.0 | % | | $ | 2,474 | | | $ | 954 | | | | 159.3 | % |
Other expense (income) consists primarily of investment losses/(gains) on the Company’s credit facility. Interest expense for the nine months ended March 27, 2022 was also impacted by the interest expense associated with the incremental debt that was used to partially finance the acquisition of PersonalizationMall.NQDC Plan assets.
Other (income) expense, net
| | | Three Months Ended | | | Nine Months Ended | |
| | | March 27, 2022 | | | March 28, 2021 | | | % Change | | | March 27, 2022 | | | March 28, 2021 | | | % Change | |
| | | (dollars in thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other (income) expense, net | | $ | 4,007 | | | $ | (945 | ) | | | -524.0 | % | | $ | 954 | | | $ | (4,201 | ) | | | -122.7 | % |
Other income, net for the three and nine months ended March 27, 2022, consists primarily of investment (gains)/losses on the Company’s NQDC Plan assets.
Income Taxes
The Company recorded 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, compared to an income tax benefit of $8.1 million and income tax expense of $11.9 million, during the three and nine months ended March 27, 2022, respectively, and income tax benefit of $2.3 million and income tax expense of $28.2 million, during the three and nine months ended March 28, 2021, respectively. The Company’s effective tax rate for the three and nine months ended March 27, 2022April 2, 2023 was 19.1% and -0.6% respectively, compared to 25.7% and 18.6%, respectively, compared to 255.6% and 21.1% in the same periods of the prior year. The Company’s effective tax rate for the three and nine months ended April 2, 2023 differed from the U.S. federal statutory rate of 21%21.0% primarily as a result of the non-deductible portions of the goodwill impairment charge as well as state income taxes, non-deductible executive compensation, and tax shortfalls related to stock-based compensation, partially offset by various tax credits. The effective tax rate for the three months ended March 27, 2022 differed from the U.S. federal statutory rate of 21% primarily due to state income taxes and nondeductible expenses for executive compensation, partially offset by various permanent differences and tax credits, andwhereas, the effective tax rate for the nine months ended March 27, 2022 differed from the U.S. federal statutory rate of 21.0% primarily due to excess tax benefits from stock based compensation, partially offset by state income taxes. The effective tax rate differed from the U.S. federal statutory rate of 21% for the three months ended March 28, 2021 primarily due to excess tax benefits from stock based compensation and state income taxes, and for the nine months ended March 28, 2021 primarily due to state income taxes and nondeductible expenses for executive compensation, which were partially offset by various permanent differences, tax credits, and excess tax benefits from stock-based compensation.
Liquidity and Capital Resources
Liquidity and borrowings
The Company's principal sources of liquidity are cash on hand, cash flows generated from operations and borrowings available under the 2021Company’s Credit Agreement (see Note 8 - Debt in Item 1 for details). At March 27, 2022,April 2, 2023, the Company had working capital of $114.3$114.4 million, including cash and cash equivalents of $93.0$51.6 million, compared to working capital of $134.1$82.5 million, including cash and cash equivalents of $173.6$31.5 million, at June 27, 2021.July 3, 2022.
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, generatesis expected to generate over 40% of the Company’s annual revenues. Since the onset of the pandemic of the novel strain of coronavirus (“COVID-19”), our customers have turned to our brands and our expanded product offerings to help them connect and express themselves. While the continuing impacts of COVID-19 are difficult to predict, the Company expects that its fiscal second quarter will continue to be its largest in terms of revenues, and the Company will likely generate all of its earnings within this quarter.earnings. Due to the number of major floral gifting occasions, including Mother's Day, Valentine’s Day, Easter, and Administrative Professionals Week, and Mother’s Day, revenues also have historically risen during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.
The Company utilized cash on hand to fund its operations throughDuring the first quartertwo quarters of fiscal 2022. In the beginning of the second quarter,2023, the Company borrowed under its Revolverrevolving credit agreement in order to fund short-term working capital needs,pre-holiday manufacturing and the acquisition of Vital Choice,inventory procurement requirements, with borrowings peaking at $125.0$195.9 million in November 2021.2022. Cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the borrowings under the Revolver in December 2021.2022. Based on current projected cash flows, the Company believes that available cash balances are expected towill be sufficient to provide for the Company’s operating needs through the remainder of Fiscal 2022, whenfiscal 2023, 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 amount under its Revolver as of March 27, 2022.April 2, 2023.
While we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at least the next twelve months, any projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate, and 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.
To date, we have not identified any material liquidity deficiencies as a resultThe Company is in the process of the COVID-19 pandemic. Based on the information currently available to us, we do not expect the impact of COVID-19 to have a negative impact on our liquidity. We will continue to monitor and assess the impact COVID-19 may have on our business and financial results. See Part II. Item 1A. “Risk Factors” and Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information.refinancing its Credit Agreement, which matures in May 2024.
Cash Flows
Net cash provided by operating activities of $38.7$73.1 million, for the nine months ended March 27, 2022,April 2, 2023, was primarily attributable to the Company’s net incomeloss during the period, adjusted by non-cash charges for goodwill and intangible asset impairment, depreciation and amortization, bad debt expense and stock-based compensation, combined with changes inpartially offset by uses of cash for working capital includingpurposes, comprised of decreases in accounts payable and increases in inventory and trade receivables. The Company intends to continue to carry higher than historical inventory balances to mitigate the expectation of continued supply chain constraints.receivables, offset by decreases in inventory.
Net cash used in investing activities of $70.1$36.4 million, for the nine months ended March 27, 2022,April 2, 2023, was primarily attributable to the acquisitions of Vital Choice and Alice’s Table for a combined $22.1 million, and capital expenditures of $48.0 millionprimarily related to the Company's technology and automation initiatives as well as manufacturing, production, and warehousing equipment.the acquisition of Things Remembered.
Net cash used in financing activities of $49.2$16.6 million, for the nine months ended March 27, 2022,April 2, 2023, related primarily to net repaymentrepayments of debt of $15.0 millionbank borrowings under the Company’s term loan, and the acquisition of $34.8 million of treasury stock.
Stock Repurchase Program
See Item 2 in Part II below for details.
Contractual Obligations
At March 27, 2022,April 2, 2023, the Company’s contractual obligations consist of:
● | Long-term debt obligations - payments due under the Company's 2021 Credit Agreement (see Note 8 - Debt in Item 1 for details and payments due by period). |
● | Operating lease obligations – payments due under the Company’s operating leases (see Note 13 - 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 2022 | | | Fiscal 2023 | | | Fiscal 2024 | | | Fiscal 2025 | | | Fiscal 2026 | | | Thereafter | | | Total | |
Purchase commitments | | $ | 111,626 | | | $ | 53,983 | | | $ | 10,388 | | | $ | 6,206 | | | $ | 2,524 | | | $ | 148 | | | $ | 184,875 | |
| | | Payments due by period | |
| | | (in thousands) | |
| | | Remaining Fiscal 2023 | | | Fiscal 2024 | | | Fiscal 2025 | | | Fiscal 2026 | | | Fiscal 2027 | | | Thereafter | | | Total | |
Purchase commitments | | $ | 60,888 | | | $ | 34,967 | | | $ | 10,279 | | | $ | 2,124 | | | $ | 168 | | | $ | - | | | $ | 108,426 | |
Critical Accounting Policies and Estimates
As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2021,July 3, 2022, the discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements, 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 goodwill, other intangible assets and income taxes. There have been no significant changes to the assumptions and estimates related to the Company’s critical accounting policies since June 27, 2021.July 3, 2022, except as noted below:
Goodwill & Intangible Assets Assessment and Impairment
Interim Impairment Evaluation
During the quarter ended April 2, 2023, the Company evaluated whether events or circumstances had changed such that it would indicate it was more likely than not that its goodwill, intangible and other long-lived assets of the Gourmet Foods & Gift Baskets reporting units fair values were less than their carrying amounts. After considering the continuing pressures on consumer discretionary spending, ongoing geopolitical events, the current inflationary macro-economic conditions, related cost input headwinds that have negatively impacted the Company’s gross margins, and resulting downward revisions to its forecast, the Company concluded that a triggering event had occurred for its Gourmet Foods & Gift Baskets reporting unit. As such, the Company performed an impairment test of the reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023.
Impairment Assessments – Goodwill and Intangibles
The Company performed its goodwill impairment test by comparing the fair value of its Gourmet Foods & Gift Baskets reporting unit to its respective carrying value. The Company estimated the fair value of the Gourmet Foods & Gift Baskets reporting unit using an equal weighting of the income and market approaches, and a discount rate of 13%. The Company used industry accepted valuation models and set criteria that were reviewed and approved by various levels of management. Under the income approach, the Company used a discounted cash flow methodology which required management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, the Company used the guideline public company method. Under this method the Company utilized information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that were applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. The Company also reconciled the aggregate fair values of its reporting units to its current market capitalization.
The Company’s impairment test for indefinite-lived intangible assets encompassed calculating a fair value of the indefinite-lived intangible asset and comparing that result to its carrying value. To determine fair value of indefinite-lived intangible assets, the Company used an income approach, the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Indefinite-lived intangible assets’ fair values require significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value.
The Company’s impairment test for definite-lived intangibles was performed through a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of the asset or asset group to its carrying value.
Based on the impairment assessment performed for the period ending April 2, 2023, the Company recorded a goodwill and intangible impairment charge against its Gourmet Foods & Gift Baskets reporting unit of $64.6 million, comprised of $62.3 million which was attributable to goodwill and $2.3 million which was attributable to certain tradenames within the same reporting unit. The Company concluded that the definite-lived and other long-lived assets of the reporting unit were not impaired.
Recently Issued Accounting Pronouncements
See Note 1 - Accounting Policies in Item 1 for details regarding the impact of accounting standards that were recently issued 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’s current expectations or beliefs concerning future events and can generally be identified by the use of statements that include words such as “estimate,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “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:
| | o | to achieve revenue and profitability; |
| | o | to leverage its operating platform and reduce operating expenses; |
| | o | to manage the seasonality of its business; |
| | o | to cost effectively acquire and retain customers; |
| | o | to successfully integrate acquired businesses and 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 effectively 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 and the costs of shipping and labor; and |
●
| the impact of the COVID-19 pandemic on our business and financial statements. labor.
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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 for the fiscal year ended June 27, 2021July 3, 2022, 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. 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’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 2021 Credit Agreementcredit 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 million and $0.8$0.9 million during the three and nine months ended March 27, 2022, respectively.April 2, 2023.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’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 March 27, 2022.April 2, 2023. 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 not effective as of March 27,April 2, 2023, due to a material weakness in internal control over financial reporting related to logical access and segregation of duties, at the application control level, in certain information technology environments. The material weakness was first identified and reported in Management's Report on Internal Control over Financial Reporting in our Annual Report on Form 10-K for the period ending July 3, 2022.
Management has taken steps to remediate these deficiencies, including redesigning the logical access and placing enhanced segregation of duties, enhancing its internal documentation and monitoring approach to ensure that all procedures designed to restrict access to applications and data are operating in an optimal manner in order to provide management with comfort that access is properly limited to the appropriate internal personnel. Management began to implement these remedial steps during the first quarter of fiscal 2023. In accordance with our internal control compliance program, a material weakness is not considered remediated until the remediation processes have been operational for a sufficient period of time and successfully tested. In light of this material weakness, management performed additional procedures over our IT environment and personnel affected to determine if any unauthorized action had been taken and found no such instances.
Notwithstanding the material weakness described in Management's Report on logical access and segregation of duties in certain technology environments, our management has concluded that our consolidated financial statements for the periods covered by this form 10-Q are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and fairly present, in all material respects, our financial position, results of operations and cash flows for each of the periods presented herein.
Changes in Internal Control over Financial Reporting
ThereExcept for the remedial actions described above, there were no changes in our internal control over financial reporting identified in connection with the Company’s evaluation required by Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the quarter ended March 27, 2022,April 2, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. To the extent our normal procedures and controls related to our financial close or other reporting processes were adversely impacted by the COVID-19 outbreak, we took appropriate actions and safeguards to reasonably ensure the fair presentation of the financial statements in accordance with GAAP.
PART II. – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litigation
Bed Bath & Beyond:
On April 1, 2020, the Seller commenced an action against the Company in the Court of Chancery for the State of Delaware, which is captioned Bed Bath & Beyond Inc. v. 1-800-Flowers.com, et ano., C.A. (the “Complaint”), alleging a breach of the Equity Purchase Agreement (the “Purchase Agreement”), dated February 14, 2020, between Seller, PersonalizationMall, the Company and the Purchaser, pursuant to which the Seller agreed to sell to Purchaser, and the Purchaser agreed to purchase from Seller, all of the issued and outstanding membership interests of PersonalizationMall. The action was initiated after the Company requested a reasonable delay in the closing under the Purchase Agreement due to the unprecedented circumstances created by COVID-19. The Complaint requested an order of specific performance to consummate the transaction under the Purchase Agreement plus attorney’s fees and costs in connection with the action. The Company filed its answer to the Complaint on April 17, 2020 and an order governing expedited proceedings was approved on April 9, 2020 that set a trial date for late September 2020. On July 21, 2020, the Company and Seller entered into a settlement agreement, pursuant to which the Company agreed to move forward with its purchase of PersonalizationMall for $245.0 million, subject to certain working capital and other adjustments. The transaction closed on August 3, 2020. In connection with the settlement agreement, the parties executed a Stipulation and Proposed Order of Dismissal, resulting in the voluntary dismissal with prejudice of the litigation relating to the transaction.
Call Center Worker Claim:
In March of 2018, a putative class action lawsuit was filed against a subsidiary of the Company (the “Subsidiary”) in the U.S. District Court for the District of Oregon, Medford Division (the “Court”), alleging violations of the federal Fair Labor Standards Act (FLSA) and Oregon state law. The complaint was brought on behalf of a putative class of call center workers and alleged that certain Subsidiary policies and practices resulted in class members’ performance of unpaid work. The plaintiff sought class certification, compensation for alleged unpaid and underpaid wages, civil penalties, prejudgment interest, liquidated damages, litigation costs, and attorneys’ fees.Following mediation, the parties reached an agreement in April of 2022 to resolve all claims. The settlement agreement remains subject to certain judicial approvals. The Subsidiary’s payment liability underIn September 2022, the Court granted final approval of the settlement agreement, is capped at a maximum amount of $3.3 million,and in November 2022, the amount payable will depend on the number of claims filed by class members and the amounts of attorneys’ fees and litigation costs that are approved by the Court. We anticipate that final Court approval, and determination andCompany remitted payment of the final settlement amount, may occurapproximately $2.9 million, which was previously accrued during the third quarter of fiscal 2023.ended March 27, 2022, and was included in "Accrued expenses" in the consolidated balance sheets at July 3, 2022. In entering into the settlement agreement, the Subsidiary is makingmade no admission of liability.
In addition, 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 final 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. RISK FACTORS.
There were no material changes to the Company’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 June 27, 2021July 3, 2022.
ITEM 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 April 22, 2021, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $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 March 27, 2022, $36.6April 2, 2023, $32.0 million remained authorized under the plan.
The following table sets forth, for the months indicated, the Company’s purchase of common stock during the first nine months of fiscal 2022,2023, which includes the period June 28, 2021July 4, 2022 through March 27, 2022:April 2, 2023:
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) | | | | | |
| | | | | | | | | | | | | | | | | |
06/28/21 - 07/25/21 | | | 34,835 | | | $ | 30.03 | | | | 34,835 | | | $ | 31,409 | |
07/26/21 - 08/22/21 | | | 99,602 | | | $ | 31.07 | | | | 99,602 | | | $ | 28,312 | |
08/23/21 - 09/26/21 | | | 153,589 | | | $ | 32.01 | | | | 153,589 | | | $ | 23,393 | |
09/27/21 - 10/24/21 | | | 100,000 | | | $ | 30.60 | | | | 100,000 | | | $ | 20,330 | |
10/25/21 - 11/21/21 | | | 284,281 | | | $ | 34.11 | | | | 284,281 | | | $ | 10,633 | |
11/22/21 - 12/26/21 | | | 155,000 | | | $ | 23.83 | | | | 155,000 | | | $ | 6,935 | |
12/27/21 - 01/23/22 | | | 185,000 | | | $ | 23.83 | | | | 185,000 | | | $ | 2,522 | |
01/24/22 - 02/20/22 | | | 77,783 | | | $ | 18.34 | | | | 77,783 | | | $ | 39,876 | |
02/21/22 - 03/27/22 | | | 240,000 | | | $ | 14.24 | | | | 240,000 | | | $ | 36,576 | |
Total | | | 1,330,090 | | | $ | 26.13 | | | | 1,330,090 | | | | | |
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) | | | | | |
| | | | | | | | | | | | | | | | | |
07/04/22 - 07/31/22 | | | - | | | $ | - | | | | - | | | $ | 33,203 | |
08/01/22 - 08/28/22 | | | - | | | $ | - | | | | - | | | $ | 33,203 | |
08/29/22 - 10/02/22 | | | - | | | $ | - | | | | - | | | $ | 33,203 | |
10/03/22 - 10/30/22 | | | - | | | $ | - | | | | - | | | $ | 33,203 | |
10/31/22 - 11/27/22 | | | 140,248 | | | $ | 8.38 | | | | 140,248 | | | $ | 32,029 | |
11/28/22 - 01/01/23 | | | - | | | $ | - | | | | - | | | $ | 32,029 | |
01/02/23 - 01/29/23 | | | - | | | $ | - | | | | - | | | $ | 32,029 | |
01/30/23 - 02/26/23 | | | 1,757 | | | $ | 12.34 | | | | 1,757 | | | $ | 32,007 | |
02/27/23 - 04/02/23 | | | - | | | $ | - | | | | - | | | $ | 32,007 | |
Total | | | 142,005 | | | $ | 8.42 | | | | 142,005 | | | | | |
(1) | Average price per share excludes commissions and other transaction fees. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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)
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Date: May 6, 202212, 2023 | /s/ Christopher G. McCann Christopher G. McCann
Chief Executive Officer and
Director
(Principal Executive Officer) |
| | |
Date: May 6, 202212, 2023 | /s/ William E. Shea
William E. Shea
Senior Vice President, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer) |
