August 28, 2009, 12:00 AM

1-800-Flowers.com seeks a buyer for its home and children’s gifts business

Though 1-800-Flowers.com Inc. now lists its home and children’s gifts business as a discontinued operation, the company continues to actively seek a buyer. 1-800-Flowers.com has retained Paragon Capital Group LLC to help evaluate potential offers.

Though 1-800-Flowers.com Inc. now lists its home and children’s gifts business as a discontinued operation, the company continues to actively seek a buyer.

The e-commerce sites included with the business – PlowandHearth.com, WindandWeather.com, ProblemSolver.com and HearthSong.com – also are live and continue to process transactions. “We are actively engaged in the selling process and have received serious interest from a number of parties,” says a spokesman for 1-800-Flowers.com, No. 31 in the Internet Retailer Top 500 Guide to Retail Web Sites.

1-800-Flowers.com also has hired investment banking firm Paragon Capital Group LLC to help evaluate potential offers for its home and children’s gifts unit, which the company began building over a decade ago with the acquisition of Plow & Hearth in 1998 and Wind and Weather and Hearth Song in 2001.

1-800-Flowers.com began downsizing its home and children’s gifts business in the third quarter, and listed it as a discontinued operation last week when the company released its fiscal 2009 financial report. “We made a strategic decision to divest our home and children`s gift segment,” CEO Jim McCann told Wall Street analysts on the fourth quarter earnings call. “This allows us to focus all of our efforts and investments on our key business categories in floral and gourmet gifts. These businesses leverage our platform best and offer the greatest opportunity for top and bottom line growth in the years ahead.”

1-800-Flowers.com cites the tough economy and a sour financial performance as the main reasons it’s exiting the home and children’s gifts categories. For the fourth quarter of fiscal 2009, which ended June 30, sales for its home and children’s gifts business declined year over year 24.3% to $24.9 million from $32.9 million while revenue for the full year decreased 20.2% to $143.7 million from $180.2 million. In comparison, total revenue for 1-800-Flowers.com decreased 7.7% to $172.5 million from $186.9 million in Q4 of fiscal 2009 and 3.4% to $714.0 million from $739.2 million. “We began a sales process during the fourth quarter which we expect to complete during fiscal 2010,” 1-800-Flowers.com chief financial officer William Shea told analysts.

1-800-Flowers took a non-cash impairment charge of $14.8 million in the fourth quarter to reflect the decline in value of its home and children’s gifts business. But going forward, getting out from under a non-performing business and other cost-cutting measures will eventually save 1-800-Flowers.com about $50 million in operating expenses, McCann said. “As we saw the decline in the consumer economy unfolding during the year, we intensified our focus on three key strategic priorities that drive our business in good times and challenging times,” he told analysts. “This decision to close down home and children’s gifts was not made lightly and it is important to note that the segments` day-to-day business activities will remain unchanged while we work toward a possible sale.”

 

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