1-800-FLOWERS.COM, Inc. — Form 10-Q Summary
Period clarification: The filing covers the quarter ended March 27, 2022, the third quarter of fiscal 2022, and the nine months then ended. This does not match the request metadata label “2021 Q3.” Unless otherwise noted, amounts below are in millions of dollars.
Business context and reporting period
The company sells floral, gift, gourmet food and related products through e-commerce, retail, wholesale and florist-network services. Its brands include 1-800-Flowers.com, Harry & David, PersonalizationMall and others. Fiscal Q3 is seasonally supported by occasions such as Valentine’s Day and Easter; Easter fell later in 2022, shifting some sales into fiscal Q4. The filing states that the holiday quarter typically generates over 40% of annual revenue.
During the period, the company included Vital Choice, acquired October 27, 2021, and Alice’s Table, acquired December 31, 2021. It also noted that comparisons include the prior acquisition of PersonalizationMall.
Key financial metrics
| Metric | Three months ended March 27, 2022 | Prior-year quarter | Nine months ended March 27, 2022 | Prior-year nine months |
|---|---|---|---|---|
| Revenue | $469.6 | $474.2 | $1,722.0 | $1,635.3 |
| Gross profit / gross margin | $154.1 / 32.8% | $184.7 / 38.9% | $658.1 / 38.2% | $698.4 / 42.7% |
| Operating income (loss) | $(26.3) | $(0.3) | $69.1 | $133.8 |
| Net income (loss) | $(23.4) | $1.4 | $51.9 | $105.3 |
| Diluted EPS | $(0.36) | $0.02 | $0.79 | $1.58 |
| Adjusted EBITDA (non-GAAP) | $(12.0) | $15.4 | $115.8 | $182.9 |
Quarterly revenue declined 1.0%; nine-month revenue grew 5.3%. The company reported nine-month revenue growth of 3.7% after adjusting for acquisition comparability. Quarterly gross margin contracted 610 basis points, and nine-month margin contracted 450 basis points.
For the nine months, operating cash flow was $38.7, versus $218.2 in the prior-year period. Capital expenditures were $47.9, implying free cash flow of approximately $(9.2), calculated as operating cash flow less capital expenditures. Investing cash outflow was $70.1, including $22.1 for acquisitions; financing cash outflow was $49.2, including $34.8 of share repurchases and $15.0 of net debt repayment.
At March 27, 2022, cash and cash equivalents were $93.0, current assets $381.9 and current liabilities $267.6; working capital was $114.3. Total debt, net of deferred financing costs, was $167.2, including $20.0 current debt. There were no revolver borrowings outstanding. Inventory was $214.4, up from $153.9 at June 27, 2021. Total assets were $1,128.7 and stockholders’ equity was $533.8.
Material changes versus comparable periods
- Quarterly revenue was pressured by weaker everyday gifting demand, lower Gourmet Foods & Gift Baskets and BloomNet sales, lower deferred revenue entering the quarter and the later Easter date. Valentine’s Day floral sales grew approximately 5%; revenue was 68.4% above fiscal 2020’s third quarter.
- Quarterly e-commerce orders fell 14.6% to approximately 5.4 million, while average order value rose 12.7% to $80.29. For nine months, orders fell 5.6% and average order value rose 10.2% to $72.84.
- Quarterly gross profit declined 16.6%; cost inflation, shipping and labor expense, supply-chain disruption, product mix and write-offs of expired perishable inventory reduced margins. Gourmet Foods & Gift Baskets’ quarterly revenue fell 4.5% and its segment contribution margin was a loss of $17.1, compared with positive $12.1 a year earlier.
- Nine-month gross profit fell 5.8% despite revenue growth. Adjusted EBITDA declined 36.7% to $115.8.
- Cash declined by $80.5 from fiscal year-end. Management attributed operating cash flow pressure in part to higher inventory and receivables; it planned to carry elevated inventory to mitigate supply constraints.
Outlook, risks and unusual items
Management updated fiscal 2022 guidance to revenue growth of 3%–5%, adjusted EBITDA of $110–$115 and diluted EPS of $0.55–$0.60. It expected full-year free cash flow to be significantly below the prior year, citing inventory investment and the macroeconomic environment. The company anticipated continued labor, shipping and supply-chain cost headwinds, while saying warehouse automation, shipping optimization, early inventory builds and pricing actions were intended to mitigate them over time.
Management said the quarter’s results were below expectations. It cited inflation, geopolitical uncertainty, consumer caution, increased marketing costs, labor availability and global supply-chain disruption as risks. COVID-19 effects and consumer demand patterns remained uncertain. The company said available cash and financing sources were expected to meet operating needs for at least the next twelve months, but noted forecasts are subject to substantial uncertainty.
- A call-center worker class-action settlement was reached in April 2022, subject to court approval. Payment is capped at $3.3; the final amount depends on claims and approved fees and costs. The filing does not state the final liability.
- The Alice’s Table acquisition followed a $0.7 impairment of the company’s prior investment, recorded in other expense. The acquisition consideration was approximately $1.3.
- The company repurchased 1.33 million shares for $34.8 during the nine months; $36.6 remained authorized under its repurchase plan at quarter-end.
- The credit agreement is secured by substantially all company assets and includes financial and other covenants; the company reported compliance at March 27, 2022. A 50-basis-point rate increase was estimated to add about $0.2 of interest expense for the quarter.
- Management reported effective disclosure controls and procedures and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the reporting-period mismatch: the filing is for fiscal Q3 2022, not 2021 Q3.
- Track whether gross-margin pressure from shipping, labor, commodities and perishable inventory write-offs moderates, particularly in Gourmet Foods & Gift Baskets.
- Assess whether the fiscal 2022 revenue, adjusted EBITDA and EPS guidance was achieved, and compare subsequent reported results with the stated free-cash-flow outlook.
- Monitor working-capital needs, inventory levels, operating cash flow, capital spending and seasonal revolver usage.
- Review the court-approved settlement amount and payment timing for the call-center claim, along with final purchase-price allocations for the recent acquisitions.
- Interpret adjusted EBITDA and other non-GAAP measures alongside GAAP results; the filing notes that its guidance reconciliations were not provided because they would require unreasonable effort.