August 7, 2002, 12:00 AM

Online sales and a broader product mix propel 1-800-Flowers’ FYQ4 profits

A $5.5 million net profit in the fourth quarter narrows 1-800-Flowers’ yearly net loss to $1.5 million. The company is gearing up for what it expects to be its biggest quarter ever with this year’s holiday season.

Driven largely by growth in its online channel, net income at rose to $5.5 million in its fourth fiscal quarter ended June 30, up from $226,000 in Q4 2001, on revenues that rose 6.1% to $140.3 million. For the year, the company posted a net loss of $1.5 million on revenues that rose 12.4% to $497.2 million. This represents a reduction of some $40 million from last year’s net loss of $41.3 million for the year on revenues of $442.2 million.

During the quarter, combined online and telephone revenue increased 6.4% to $132.2 million compared with $124.2 million in the year-ago quarter. Online revenues showed the biggest increase from the previous year, rising 9.3% to $68.5 million for the quarter. Telephone orders rose 3.4% to $63.7 million over fourth quarter last year.

For the year, online revenues increased 19.3% to $218.2 million. Online sales accounted for 49% of net revenues in the fourth quarter compared with 47.4% in the fourth quarter of 2001.

Across all channels, 1-800-Flowers gained approximately 800,000 new customers in the fourth quarter, including some 450,000 new online customers. More than half--51.8%--of the 1.6 million shoppers who placed orders in any channel were repeat customers, up from 47.4% who were repeat customers during last year’s fourth quarter. For the year, the company acquired 3 million new customers, up from 2.9 million last year, while reducing its average per-customer acquisition cost to $16.52 from $16.88 in fiscal 2001.

A broader product line has helped drive results for 1-800-Flowers. 40% of its combined telephone and online sales were from non-floral gifts, which the company began to focus on only in late 1999 by expanding what had been a small non-floral offering and featuring it more prominently on the web site. “Our customers told us that they have an average of 12 sendable gift-giving occasions during the year,” president Chris McCann tells Internet Retailer. “Flowers would satisfy about one of those occasions. So as we expand our product lines, we`re a solution for more of those sendable gift occasions for our customers, and that drives up repeat usage and frequency.”

In the past year, the company has added to its non-floral gifts Waterford crystal, Godiva chocolates, and enhanced an existing plush toy line, which aims at the so-called “expressive gifting” category. “That’s when you want someone to know you`re thinking about them, but you don`t necessarily want to spend $50 to $75," McCann says. The category and the less-expensive plush toys also helped bring in a younger demographic, he adds. It`s added monthly gift clubs for year-round giving, and will soon offer more flexibility in mixing monthly gifts from different product lines, as well as more choices in the frequency of gifts sent in club programs.

McCann adds that in part because of the expanded product offering, the company expects that this year for the first time, the year-end holidays will exceed the second quarter, traditionally the largest because of Mother’s Day and Easter, as its largest sales quarter for the year.

McCann credits the web with much of the company’s recent growth. “ The online channel has been important to our overall strategy for several years and that`s being demonstrated in the results of this past year,” he says. “It allows us to cost effectively educate our customer on the full line of gift products we have. If you call on the telephone, we really can’t communicate more than a handful of the products. We also use the catalog to communicate the broad range. But that’s a costly vehicle and one that to date, we only mail to existing customers. Even that can’t communicate the full breath of products we have. As we expand from the floral space into being a broad-line gift company, it would be difficult to do without the online channel.”

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