August 13, 2008, 12:00 AM

1800Flowers.com sales and profit wilt in the fourth quarter

Acquisition costs, changes in financial reporting and a tougher economic climate caused web sales for 1800Flowers.com to drop 5.2% in the fourth quarter and finish flat for the company’s 2008 fiscal year.

Acquisition costs, changes in financial reporting and a tougher economic climate caused web sales for 1800Flowers.com Inc. to drop in the fourth quarter and finish flat for the company’s 2008 fiscal year.

In the fourth quarter ended June 29 net income and total sales for 1800Flowers.com also declined by 34.9% and 5.2%, respectively. 1800Flowers.com notes that about 90% of its revenue is generated online. As a result, 1800Flowers.com, No. 36 in the Internet Retailer Top 500 Guide, posted Q4 web sales of about $197.8 million, a drop of 5.2% from web sales of approximately $208.6 million in the prior year.

For the fourth quarter, 1800Flowers.com recorded net income of $4.3 million on sales of $219.8 million vs. net income of $6.6 million on sales of $231.8 million in FY 2007. The company says a shift of the Easter holiday into the third quarter reporting period, ongoing costs related to the acquisition of DesignPac Gifts, and the inclusion in the prior year period of revenues and profits associated with the BloomNet wire service were among the reasons for the downturn in sales and profits. “Adjusting for these factors, the company believes its results for the fiscal 2008 fourth quarter would have been essentially unchanged compared with the prior year period,” says 1800Flowers.com.

For the full year, web sales for 1800Flowers.com grew by 0.75% to about $827.5 million from $821.3 million in fiscal 2007. The company also posted net income of $21 million on revenue of $919.4 million in fiscal 2008, compared with net income of $17.1 million on sales of $912.6 million in fiscal 2007. “Despite slower sales growth we continued to drive double-digit bottom-line growth and generated free cash flow of $38 million for the year,” says CEO Jim McCann. “These results were achieved by leveraging our business platform to reduce costs while targeting our marketing and merchandising initiatives to achieve profitable growth.”

Repeat business is a clear reason e-commerce sales for the year held steady, the company says, noting that 6.8 million e-commerce customers placed orders during fiscal 2008, of which approximately 50% were repeat customers. During fiscal 2008, 1800Flowers.com also attracted more than 3.4 million new customers. For the fiscal fourth quarter, more than two million e-commerce customers placed orders, with repeat customers representing 61% of the total, the company says. In Q4 1800Flowers.com also attracted approximately 800,000 new e-commerce customers. “We believe these customer metrics illustrate our ability to leverage the strength of our brand to attract millions of new customers while deepening our relationships with our existing customers by helping them to connect and express themselves to the important people in their lives,” McCann says.

Vibhav Prasad, senior director of web merchandising at 1800Flowers.com, was a speaker at the Internet Retailer Conference & Exhibition in June. His audio-visual presentation at IRCE 2008 is available on CD-ROM.

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