FLWS

1-800 FLOWERS.COM, Inc. (FLWS)

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1-800-FLOWERS.COM, Inc. (FLWS)

F1Q2010 Earnings Call

October 21, 2010 11:00 am ET

Executives

Joseph Pititto - VP, IR & Corporate Communications

Jim McCann - Chairman & CEO

Bill Shea - SVP, Finance & Administration, Treasurer & CFO

Chris McCann - President, Director

Analysts

Ingrid Chung - Goldman Sachs

Eric Beder - Brean Murray

David Cannon - First Midwest Securities

Presentation

Operator

Good day everyone and welcome to the 1-800-Flowers.Com Inc. fiscal 2011 first quarter results conference call. This call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to the company’s Vice President of Investor Relations and Corporate Communications Mr. Joseph Pititto. Mr. Pititto, please go ahead sir.

Joseph Pititto

Thank you, Melina. Good morning and thank you everyone for joining us today to discuss 1-800-FLOWERS.COM’s financial results for our fiscal 2011 first quarter. For those of you who have not yet received a copy of our press release issued earlier this morning, the release can be accessed at the Investor Relation section of our website at 1800flowers.com or you can call Patty Altadonna at 516-237-6113 to receive a copy of the release by email or fax.

In terms of the structure, our call today will begin with brief formal remarks and then we'll open the call to your questions. Presenting today will be Jim McCann, CEO, Chris McCann, President and Bill Shea, CFO.

Before we begin, I need to remind everyone that a number of the statements that we'll make today maybe forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. For a detailed description of these risks and uncertainties, please refer to our press release issued this morning, as well as our SEC filings including the company's annual report on Form 10-K and quarterly reports on form 10-Q.

In addition, this morning, we will discuss certain supplemental financial measures that were not prepared in accordance with the Generally Accepted Accounting Principles. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release this morning.

The company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call, or any recordings of today's call, the press release issued earlier today or any of it’s SEC filings except as maybe otherwise stated by the company.

I'll now turn the call over to Jim McCann.

Jim McCann

Good morning everyone. Our first quarter’s results were in line with our expectations and with the trends that we have seen in our business segments. During the quarter which is typically our lowest in terms of revenues, we saw continued soft demand in our consumer floral business. This was somewhat offset by stronger sales in our BloomNet wire service business and solid e-commerce growth in our Gourmet Food and Gift Basket segments.

A little later in the call, Chris will highlight some of the initiatives we are implementing to help stimulate demand in our consumer floral business including new product development efforts and a re-tooling of our marketing programs. In terms of gross profit margin, we’ve told you that we are keenly focused on driving stronger margins across the enterprise and particularly in our consumer floral business. During quarter, we increased gross margin in the consumer floral by 120 basis points and consolidated gross margin grew a 130 basis points compared with the prior year period.

This was achieved through a combination of initiatives including among others more efficient use of promotion strategy we discussed in our last conference call. Combined with strong gross margins we are seeing our Gourmet Food and Gift Basket businesses that we have seen in those basket businesses. We expect to see continued improvement in consolidated gross margins throughout the fiscal year.

In terms of operating expenses, this is another key focus area for us where we have been successfully leveraging our business platform to reduce costs. Through the first quarter, we were able to keep operating expenses flat compared with the prior year period. We achieved this while continuing to innovate and invest for the future across a number of initiatives that we believe will help us drive growth in the years ahead.

Among these initiatives, our efforts in franchising, our technology investments in mobile and social commerce where we are recognized leader in this space. Our program is to enhance the floral industry supply chain and in Celebrations.com, our party planning, content and customer engagement sight where we are currently attracting more than 1 million unique business a month. Now we are the number one search result for the Keyboard Halloween parties.

We believe these efforts and others like them that we have underway, position us well for growth opportunities in the future. Regarding our investments as we head into our key yearend holiday season, we continue to see the benefits of the investments we have made and continue to make in our Gourmet Food and Gift Basket businesses, we have seen solid e-commerce growth in this category particularly in our Cheryl’s and [1-800-Baskets springs]. This growth is largely offsetting the softer demand we have seen in wholesale baskets.

Importantly gross margins and contributions margins in our Gourmet Food and Gift Baskets category continue and increased to a combination of sales growth, product mix, manufacturing efficiencies and reduced shipping costs. We expect these positive trends to continue throughout the fiscal year. I think it’s important to note that our newest brand in this category, 1-800-BASKETS.COM is still very much in infancy with significant growth opportunities in the years ahead.

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