1 800 FLOWERS COM INC annual report, FY2021

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1-800-FLOWERS.COM, Inc. — FY2021 Form 10-K

Reporting period: Fiscal year ended June 27, 2021 (52 weeks), compared with fiscal 2020 ended June 28, 2020. Although the request metadata says “2020 Q4,” this filing reports the full fiscal year ended in 2021; it is not a standalone Q4 report.

Business context and results

The company sells flowers, personalized gifts, gourmet foods and gift baskets through e-commerce, retail, wholesale and florist-service channels. Its three segments are Consumer Floral & Gifts, Gourmet Foods & Gift Baskets, and BloomNet. Management attributed the year’s growth to increased e-commerce gifting, prior investments and acquisitions, including PersonalizationMall, acquired August 3, 2020.

Key financial metrics

  • Revenue: $2.122 billion, up 42.5% from $1.490 billion. Excluding PersonalizationMall, revenue grew 26.6%.
  • Gross profit and margin: $896.4 million and 42.2%, versus $622.2 million and 41.8% in FY2020.
  • Operating income and margin: $149.1 million and approximately 7.0%, versus $80.4 million and approximately 5.4%.
  • Net income and diluted EPS: $118.7 million and $1.78, versus $59.0 million and $0.89. Adjusted EBITDA, a non-GAAP measure, was $213.1 million versus $129.5 million.
  • Cash flow: Operating cash flow was $173.3 million; capital expenditures were $55.2 million, implying free cash flow of approximately $118.1 million under the company’s definition.
  • Liquidity: Cash was $173.6 million and working capital was $134.1 million at year-end, compared with $240.5 million and $198.3 million, respectively, a year earlier.
  • Debt: $185.0 million of term loans before deferred financing costs; no revolver borrowings at year-end. The company reported $181.5 million of total debt net of financing costs. The term loans mature May 31, 2024; $20 million of principal was scheduled for FY2022.
  • Segments: Revenue grew 72.8% in Consumer Floral & Gifts, 21.6% in Gourmet Foods & Gift Baskets, and 27.9% in BloomNet. Consumer Floral growth included PersonalizationMall.

Material changes versus FY2020

  • E-commerce revenue rose 52.8% to $1.880 billion; the company fulfilled approximately 26.0 million e-commerce orders, up 54.9%, while average order value fell 1.4% to $72.22.
  • Growth moderated as pandemic-driven demand began to annualize: reported revenue growth was 16.5% in FY2021’s fourth quarter, or 3.8% excluding PersonalizationMall, according to management.
  • PersonalizationMall contributed $236.0 million of FY2021 revenue and $34.7 million of operating income excluding litigation and transaction costs. The $250.9 million acquisition was funded using cash and credit facilities.
  • Interest expense increased to $5.9 million from $2.4 million, primarily reflecting acquisition-related borrowing. Cash declined by $66.9 million, including acquisition spending, capital investment and share repurchases.

Outlook, risks and unusual items

  • FY2022 guidance: Revenue growth of 10%–12%; adjusted EBITDA growth of 5%–8%; EPS in line with FY2021; and free cash flow above $100 million. Management said higher depreciation and a higher effective tax rate would offset improved EBITDA in EPS.
  • Management cited customer growth, online shopping, broader product offerings and the Celebrations Passport loyalty program as supports for growth. It identified labor availability and wage increases, higher inbound and outbound shipping rates, and higher commodity costs as headwinds.
  • COVID-19 created uncertainty around demand normalization, labor, shipping capacity, supply chains and operating costs. The company closed 38 of 39 Harry & David retail stores in FY2020; those locations had generated approximately $33 million in annual revenue. Wholesale demand was also affected.
  • FY2021 included $5.4 million of PersonalizationMall transaction and litigation costs, a $5.7 million gain on nonqualified deferred compensation plan assets, and a favorable $0.5 million settlement of store-closure costs. The corresponding adjusted measures exclude specified items and are non-GAAP.
  • The Bed Bath & Beyond dispute over the PersonalizationMall sale was settled, the acquisition closed, and the litigation was dismissed with prejudice. Management said other pending claims were not expected to materially affect the company.
  • Management and the auditor concluded internal control over financial reporting was effective, but PersonalizationMall’s controls were excluded from the assessment. The acquired business represented 11% of FY2021 revenue and 7% of year-end assets.

Important facts for investors to verify

  • Whether revenue, customer retention and margins remain resilient as pandemic-related demand normalizes, including growth excluding acquisitions.
  • Whether the company achieves FY2022 guidance and free cash flow above $100 million amid wage, shipping and commodity-cost pressure.
  • Debt repayment, seasonal revolver needs, covenant compliance and the effect of variable interest rates.
  • PersonalizationMall integration, acquisition-related amortization and the effectiveness of its financial controls.
  • Inventory levels and working-capital needs, particularly ahead of the holiday season; FY2021 inventory increased to $153.9 million from $97.8 million.