February 4, 2009, 12:00 AM

1-800-Flowers.com sales fell 16.1% in FY 2009 Q2 and cost pruning looms

E-commerce sales declined 16.1% in the second quarter of fiscal 2009 for 1-800-Flowers.com, from $274.2 million to $230.1 million. Continuing cost-management efforts include a 10% reduction in salaried, full-time employees since the beginning of January.

E-commerce sales in the second quarter of fiscal 2009 for flower and gift retailer 1-800-Flowers.com Inc. were $230.1 million, down by 16.1%, or $44.1 million, from $274.2 million year over year.

To offset declining sales, the company plans to continue cost-cutting initiatives that reduced operating expenses by $25 million from 2006 to 2008. Past cuts included consolidating its service and supply vendors and renegotiating contracts, optimizing its customer service platform by expanding its home-based agent network, and closing its Midwest service center, says CEO Jim McCann.

For the six months ended Dec. 28, 2008, web sales were $337.9 million, down by 13.1% from $388.7 million in the first half of fiscal 2008.

1-800-Flowers.com reported overall sales of $329.3 million for its fiscal 2009 second quarter, compared with revenue of $334.2 million in the prior year period. The revenue decline of 1.5% reflected weakness in the economy during the key holiday period, the company says. For the first half of fiscal 2009, total revenue was $487.4 million, up by 1.5% from $480 million in the prior year period.

Net loss for Q2 of fiscal 2009 was $5.1 million vs. net income of $19.3 million in the prior year quarter. Net loss for the first six months of fiscal 2009 was $10.4 million compared with net income of $13.5 million in the prior year period.

The company, No. 36 in the Internet Retailer Top 500 Guide, projects that overall sales for the full fiscal year will be down about 5% to 10% vs. the prior fiscal year.

Continuing cost-management efforts include a 10% reduction in salaried, full-time employees since the beginning of January, and reductions in variable labor in synch with lower order volumes, McCann says. The company also is downsizing its Home and Children’s Gifts business category including a reduction in catalog marketing and resizing of the business in light of the continued weakness in home decor retailing.

Other cutbacks include revamping the company’s information technology infrastructure, such as consolidating hosting sites and revisiting maintenance and support applications, to reduce costs while maintaining performance and availability. 1-800-Flowers also is trimming marketing spending companywide, McCann says, along with tapping more outsource service providers to reduce fixed facility and labor costs.

McCann says the latest initiatives, and others to be announced, will be implemented throughout the remainder of fiscal 2009. The company also is reducing capital expenditure plans for the remainder of fiscal 2009, with more to come in fiscal 2010.

During Q2 of fiscal 2009, 1-800-Flowers attracted approximately 1 million new customers, with 72%, or more than 715,000, coming in through online channels, the company says. Approximately 2.4 million customers placed orders during the quarter, of which 57% were repeat customers.

Kevin Ranford, director of web marketing at 1-800-Flowers.com, is speaking at the Internet Retailer Conference & Exhibition, June 15-18 in Boston, in an m-commerce workshop session titled 1-click checkout: The key to m-commerce success.

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