36
1-800-FLOWERS.COM Inc. Investment Rating: 3
Symbol: FLWS
Address: 1600 Stewart Avenue
Westbury, NY 11590
Tel: (516) 237-6000
Shares Offered: 6,000,000 Class A
Outstanding Shares: Total
21,375,472 Class A
40,246,205 Class B
Competitors: NA
Officers: James F. McCann, Chairman/CEO
John W. Smolak, Sr. VP/Fin. & Admin.
Underwriters: Goldman, Sachs & Co.
CS First Boston
WIT Capital Corporation
Products: Internet florist
Offer Date: 8/2/99 Price: $21.00
Offer Range: $ 16.00 - 18.00
Employees: 1,464 FT & 227 PT
Business Environment
Not available
Company Strategy
The Company is an e-commerce provider of floral products and gifts.
Product/Services Portfolio
The Company offers more than 1,300 varieties of fresh-cut and seasonal
flowers and floral arrangements for all occasions and holidays. It also
offers more than 200 varieties of popular plants for the home and garden.
It offers more than 200 SKUs of gifts, including gift baskets, dolls, plush
toys, balloons, bath and spa items, wreaths and ornaments. In addition, it
offers more than 100 SKUs in the specialty food and gourmet categories,
including candies, chocolates, nuts, cookies and fruits. It offers more than
2,500 SKUs for the home, including candles and lighting, vases, kitchen
items and accents, casual lifestyle furniture and home accessories. It of-
fers more than 3,000 SKUs for the garden, including outdoor furniture,
tools and accessories, pottery, nature-related products, clothing and foot-
wear.
The Company offers floral, gift and home and garden products through its
Web site. Customers may come to its Web site directly or may be referred
to it by its strategic online partners. Its online partners include AOL.com,
Excite and Microsoft Network and more than 3,000 members of its online
affiliate program, which it initiated in February 1999. In addition, its cus-
tomers can shop at its AOL store. The Company also offers home and
garden products through the Plow & Hearth Web site. It intends to inte-
grate the Plow & Hearth Web site into its Web site to provide its custom-
ers the ability to purchase floral, gift and home and garden products con-
veniently in a single visit. As of December 27, 1998, approximately
400,000 customers had made a purchase through its Web site or its AOL
store in the previous twelve months.
The Company?s Web site allows customers to browse and purchase its
products, promotes brand loyalty and encourages repeat purchases by pro-
viding an inviting customer experience. Its Web site offers customers de-
tailed product information, complete with photographs, contests, home
decorating and how-to tips, information on floral trends, gift-giving sug-
gestions and information about special events and offers. The Company
has designed its Web site to be fast, secure and easy to use and to enable
customers to order products with minimal effort.
The Company offers customers a variety of delivery and shipping options,
including same-day or next-day delivery by the fulfilling local florist and a
number of delivery options through Federal Express, United Parcel Ser-
vice, the United States Postal Service and other common carriers.
Investment Analysis
Net revenues consist primarily of the selling price of merchandise and 37
1-800-FLOWERS.COM Inc.
service and shipping charges, net of returns and credits. Total net revenues in-
creased 39.3%, from $146.2 million for the nine months ended March 29, 1998 to
$203.7 million for the nine months ended March 28, 1999. Telephonic revenues
increased 36.5%, from $107.1 million for the nine months ended March 29, 1998
to $146.2 million for the nine months ended March 28, 1999 as a result of the Plow
& Hearth acquisition. Online revenues increased 85.3%, from $16.3 million for the
nine months ended March 29, 1998 to $30.2 million for the nine months ended
March 28, 1999. Retail fulfillment revenues increased 19.3%, from $22.8 million
for the nine months ended March 29, 1998 to $27.2 million for the nine months
ended March 28, 1999, primarily due to an increase in the number of owned retail
stores from 21 to 34.
Cost of revenues consists primarily of fees paid to clearinghouses, net of rebates,
and the cost of merchandise sold, including inbound freight and outbound ship-
ping. Additionally, cost of revenues includes labor and facility expenses related to
the Company?s wholesale operations and facility costs related to properties that it
sublet to its franchisees. Cost of revenues increased 34.7%, from $91.8 million for
the nine months ended March 29, 1998 to $123.7 million for the nine months ended
March 28, 1999. Cost of revenues increased in line with total net revenues. For the
same period, gross margin increased 2.0 percentage points to 39.2%. The improve-
ment in gross margin was primarily attributable to the Plow & Hearth acquisition,
whose product line carries a higher margin than its floral products.
Marketing and sales expenses consist primarily of advertising and promotional
expenditures, catalog costs, fees paid to strategic online partners, costs associated
with retail store, customer service center and fulfillment center operations and the
operating expenses of the Company?s departments engaged in marketing, selling
and merchandising activities. Marketing and sales expenses increased 76.4%, from
$38.1 million, or 26.0% of total net revenues, for the nine months ended March 29,
1998, to $67.2 million, or 33.0% of total net revenues, for the nine months ended
March 28, 1999. The increase was primarily attributable to catalog printing and
circulation expenditures resulting from the Plow & Hearth acquisition, expansion
of its online and traditional media advertising campaigns, increased inbound freight
and outbound shipping, telephone expenses and payroll and related expenses in
support of increased order fulfillment and customer service activities.
Technology and development expenses increased from $1.1 million for the nine
months ended March 29, 1998 to $5.2 million for the nine months ended March 28,
1999. The increase was primarily attributable to staff additions to the technology
team, costs incurred to enhance the content and functionality of its Web site, fur-
ther enhancements of the Company?s transaction processing system and increased
investment in other areas of its systems infrastructure.
38
1-800-FLOWERS.COM Inc.
Income Data (Thousands $) * Nine Months ended March 31, 1999
Year Ended
Jun30 Revs Costs Oper Inc Taxes Net Inc EPS
1994 91,663 53,468 831 62 638 0.01
1995 116,807 64,657 1,561 300 837 0.02
1996 153,128 92,820 2,702 1,255 268 0.01
1997 186,430 115,078 6,852 3,135 2,925 0.06
1998 220,592 136,966 6,415 3,181 3,466 0.07
1999 203,668 123,738 (9,052) (2,926) (8,682) (0.20)
Balance Sheet Data (Thousands $) * As of March 31, 1999
Year Ended
Jun30 Cash
Acct
Rec Invent
Total Cur
Assets
Total Cur
Liability PPE
Total
Assets LTDebt
S/holder
Equity
1994 1,344 NA NA NA NA NA 13,669 7,251 (4,222)
1995 10,775 NA NA NA NA NA 35,483 14,959 (3,316)
1996 6,639 NA NA NA NA NA 36,884 17,804 (5,615)
1997 11,443 6,520 786 23,235 21,260 8,486 44,130 9,456 (2,670)
1998 8,873 8,432 4,971 29,973 28,023 19,379 81,746 35,359 672
1999 2,632 10,966 8,060 27,368 36,858 24,832 86,559 38,640 (7,919)
CashFlowSummary (Thousands $) Avg. Price Per Share
Year 1993 1994 1995 1996 1997 1998 1999
Net Csh-Ops NA NA NA 5,819 10,664 9,500 (9,702) Existing Stockholder $ 2.18
Net Csh-Inv NA NA NA (4,014) (4,190) (25,463) (1,704) NewInvestors $ 21.00
Net Csh-Fin NA NA NA (5,941) (1,670) 13,393 5,165
Net Change NA NA NA (4,136) 4,804 (2,570) (6,241)
*Nine Months ended March 31, 1999
QuarterlyPerformance (Thousands $)
Ended Mar-95 Jun-95 Sep-95 Dec-95 Mar-96 Jun-96 Sep-96 Dec-96 Mar-97 Jun-97
Revs *** Not Available ***
Net Income
EPS
Ended Sep-97 Dec-97 Mar-98 Jun-98 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99
Revs 37,515 53,589 55,113 74,375 47,574 88,804 67,290
Net Income 830 433 1,133 2,678 (1,570) (2,755) (3,029)
EPS
Major Stockholders (Shares Owned)
Prior toOffering After Offering
ClassA ClassB ClassA ClassB
James F. McCann 0 36,605,105 0 36,605,105
Benchmark Capital Partners 7,399,080 0 7,399,080 0
Chase Venture Capital Associates 4,065,022 0 4,065,022 0
39
1-800-FLOWERS.COM Inc.
Business Model
1996 1997 1998 1998 1999
Net Revenues:
Telephonic 83.5% 78.0% 73.4% 73.2% 71.8%
Online 6.5 8.6 12.1 11.2 14.9
Retail fulfillment 10.0 13.4 14.5 15.6 13.3
Total net revenues 100.0 100.0 100.0 100.0 100.0
Cost of revenues 60.6 61.7 62.1 62.8 60.8
Gross profit 39.4 38.3 37.9 37.2 39.2
Operating expenses:
Marketing and sales 28.0 25.4 25.1 26.0 33.0
Technology and development 0.6 0.8 0.8 0.8 2.6
General and administrative 7.5 6.6 7.2 7.1 5.1
Depreciation and amortization 1.5 1.8 1.9 1.9 3.0
Total operating expenses 37.6 34.6 35.0 35.8 43.7
Operating income (loss) 1.8 3.7 2.9 1.4 (4.5)
Other income (expense), net (0.2) 0.4 0.8 1.2 (0.5)
Income taxes (benefit) 0.8 1.7 1.4 1.0 (1.4)
Net income (loss) 0.8% 2.4% 2.3% 1.6% (3.6)%
Years ended
June 30,
Nine Months ended
March 30, |
