1-800-Flowers.Com Inc (FLWS) 2005 Q1 法說會逐字稿

Good day, everyone and welcome to the 1-800-Flowers.com Fiscal 2005 First Quarter Results Conference Call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Joe Pititto. Please go ahead, sir.

Thank you Belinda. Good morning and thank you for joining us today to discuss 1-800-Flowers.com's financial results for our fiscal 2005 first quarter. My name is Joe Pititto and I am Vice President of Investor Relations. For those of you who have not received a copy of our press release issued earlier this morning, the release can be accessed at the investor relations section of our website at 1-800-Flowers.com or you can call Patty Alfadona (phonetic) at 516-237-6113 to receive a copy of the release by email or fax.

In terms of structure, our call today will begin with brief formal remarks and then we'll open up the call for your questions. Presenting today will be Jim McCann, CEO; and Bill Shea, CFO. Also joining us today for the Q&A section of our call is Chris McCann, our President.

Before we begin, I need to remind everyone that a number of the statements that we will make today may be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. For a detailed description of these risks and uncertainties, please refer to our SEC filings, including the Company's annual report on Form 10-K and quarterly reports on Form 10-Q. The Company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call, any recordings of today's call, the press release issued earlier today or any of its SEC filings, except as may be otherwise stated by the Company.

I'll now turn the call over to Jim McCann.

Thanks, Joe, and good morning everyone. As we announced in this morning's press release our fiscal first quartet's revenues were $97.5 million, an increase of 2.5% from our period a year ago. This is traditionally our lowest revenue quarter due to the lack of any gifting holidays. While the revenue growth was below our expectations, the quarter saw a continuation of some very positive trends. Our online revenues grew a healthy 8.5% representing more than 54% of our combined online and telephonic revenues, and we further leveraged prior investments in our infrastructure and thereby reduced our operating expense ratio. In addition, we continue to deepen the relationships we have with our more than 15 million active customers as evidenced by the 60% repeat order rate achieved during the quarter.

From and operating perspective our fiscal first quarter is a very busy time as we prepare for the upcoming holiday season. During the quarter we enhanced our efforts in several key areas. We implemented and continue to implement changes in our marketing and merchandizing programs for our home and garden 0gift category. These changes are designed specifically to enhance its creative presentation and increase new product offerings. Based on preliminary responses from our customers, we are confident that we will see positive results from these changes during the current quarter. We made further investments in our business gifts services division expanding our sales team and increasing our customary comp base in preparation for what we anticipate will be an improved environment for corporate gifting in this year's holiday season. And we implemented enhancements to our website and marketing materials featuring our broad range of floral gift choices. Now these include professionally designed floral gifts created by our master florist available for same day delivery anywhere in the country.

Top quality and value floral gift shipped overnight is part of our fresh from our growers program, and our newest offering the unconventional floral artistry of Jane Carroll combining elements of art and sculpture with premium flowers for gift set can only be found at 1-800-flowers.com. We are proud of the fact that our customers have come to expect the very best from us in term of selection, quality, value and innovation. As we enter the holiday season, we are committed to building on these qualities to extend our leadership in the expressive gift category.

I will now turn the call over to Bill so that he can take you through the details of our financial results and the key metrics for the first quarter.

Thank you, Jim. While our fiscal first quarter is our lowest in terms of revenue, we continue to see positive trends in our business. During the period we achieved 8.5% online revenue growth, maintained a strong gross profit margin and further reduced our operating expense ratio. Importantly we are able to improve our operating expense ratio despite additional investments in our marketing and merchandizing departments to bolster our professional staff as well as increasing our media spend for brand marketing at the end of the quarter to position us top of mind as we head into the important holiday season. We believe these efforts help position us for a strong performance for the remainder of fiscal 2005.

Regarding specific financial results and key metrics for the first quarter, total net revenues reached $97.5 million, an increase of 2.5% compared with $95.2 million in the same period last year. This was slightly below our expectations as sales were impacted by the shifting of a portion of our catalog circulation into the second quarter to improve its productivity and the unusually harsh hurricane season in Florida and the Southeast.

Online revenues grew 8.5% to $53.1 million compared with $48.9 million in the first quarter last year. These online revenues equaled 54.4% of combined online and telephonic revenues for the first quarter of fiscal 2005 compared with 51.4% in the same period last year. Telephonic revenues were $37.6 million, down 6.9% compared with $40.4 million in the prior year period. This reflects the continued migration of our customers to the internet and the lowest sales in our home and garden gift categories.

Retail fulfillment revenues were $6.8 million compared with $5.9 million in the year ago period. This increase reflects the growth in services and products we provide to our BloomNet network of florists as well as comparable store sales growth.

During the quarter, our combined online and telephonic orders totaled $1,407,000 compared with $1,381,000 orders in the year ago period. Average order size during the quarter was essentially unchanged at $64.46 compared with $64.69 in the prior year period. During the quarter we added 460,000 new customers with 287,000 or 62% coming to us online.

In terms of product mix, the split between floral and non-floral gifts was 62.6% floral and 37.4% non-floral compared with 61.8% and 38.2% in the prior year period. This primarily reflects management's decision to shift a portion of our catalog circulation home and garden gift categories out of the first quarter and into the second quarter to improve catalog productivity during the key holiday shopping period.

Gross profit margin for the fiscal first quarter was 40.6%, down slightly from 41.1% in the same period last year, primarily reflecting product mix. Operating expenses as a percent of revenue during the quarter were down 60 basis points to 45.6% compared with 46.2% in the prior year. Net loss for the first quarter including a tax benefit of $2 million was 2.7 million or 4 cents per share compared with 5.1 million or 8 cents per share in the prior year period. On a comparative basis, pre-tax loss for the fiscal first quarter was 4.7 million or 7 cents per share compared with a pre tax loss of 5.1 million or 8 cents per share in the prior year period.

Regarding our balance sheet, our cash and investments position at the end of the quarter was approximately 82 million. This was inline with management's expectation and reflects the investments we've made in preparation for the upcoming holiday season. We anticipate having a cash and investments position of approximately 130 million at the end of the current fiscal second quarter and to grow our cash position during the second half of the fiscal year. Inventory of 33.4 million was also inline with management's expectations and reflects the build up of the holiday shopping period.

During the first quarter we initiated our stock repurchase program, which has continued into the second quarter. To-date we have purchased approximately 1.9 million worth of stock on the open market under a $10 million stock repurchase authorization that we have from our Board.

Regarding guidance, as stated in our press release this morning, we have reconfirmed our guidance for fiscal 2005 which calls for full year revenue growth of between 8-10% and pre-tax income growth of approximately 40% compared with fiscal 2004. With regard to the current fiscal second quarter, we expect the quarter will represent approximately 34-37% of full year revenues.

In summary, we believe we are well positioned to execute against our plans to grow revenues cost effectively and improve our operating margins during fiscal 2005. I will now turn the call back to Jim.

To sum up, we are pleased that during the first quarter we were able to further improve our operating efficiencies and grow our online revenues by 8.5%. As I noted in the past, the continued customer migration online is important because we get the benefit of lower order processing costs, we get the opportunity to introduce them to our expanded range of gift services -- gifts and services and when they come to us online we can engage them in electronic dialogue via cost effective e-marketing programs where we can stimulate every day gifting as well as develop smaller gifting occasions. A case in point is Halloween, which is next weekend, by the way, and has become a growing holiday for our Popcorn Factory brand as well as for our lots of love line of plush stuffed animals and great assortment of Mama Moore's brand candy and bakery gifts, all found under the 1-800-flower.com brand.

On the customer relationship front as I had noted earlier we continue to deepen the relationships we have with our customers as evidenced by the better than 60% repeat order rate achieved during eth quarter. With approximately 15 million active customers in our data base we believe our efforts in this area including such successful customer engagement programs as our recent iPod promotion which attracted approximately 400,000 customer entries, offer significant growth potential going forward. In terms of customer acquisition, our strong brands continue to cost effectively attract a significant number of new customers who are attracted to our convenience, quality and reliability as well as our unique same day delivery capabilities and our expanded gift offering.

On the corporate gifting front, we've continue to invest in this area adding resources and aggressively growing our account base. As business gift services team is highly focused on expanding their corporate clients' awareness of the uniquely broad range of gift choices that we offer, all designed to help them enhance their business relationships. We believe we have only begun to scratch the surface in corporate gifting, and we are well positioned to increase sales in this area as the business economy improves.

Looking ahead in to our current fiscal second quarter which includes the important year end holiday season, we believe we are well positioned to achieve double-digit revenue growth in our floral gift category as well as those areas that we have identified as having the highest growth potentials including gourmet gifts, gift baskets, plush and children's gifts. In addition we also expect to see improved performance in our home and garden gift category as a result of the changes that we have made and continue to make to enhance the marketing and merchandizing efforts in this area.

Throughout the second quarter, we will be stepping up our marketing and merchandizing efforts including a variety of direct mail campaigns, broadcast media programs and a broad range of online advertising initiatives -- all designed to attract a significant number of new customers to our great family of gift brands while simultaneously deepening the relationship we have with our existing customers. Combined with unique leverage that we have in our operating infrastructure, we expect to achieve strong growth in earnings and free cash flows compared to last year's fiscal second quarter.

Now that concludes our formal remarks. We will now open the call for your questions. Belinda please restate the instructions for the Q&A.

Thank you gentlemen. Today's question-and-answer session will be conducted electronically. If you would like to ask a question, please press "*" "1" on your touchtone telephone at this time. Again that's "*" "1" if you would like to ask a question or pose a comment. We will pause for just a moment to assemble the roster. And our first question will come from Heath Terry of CS First Boston.

Hey, I was wondering if you could just give us an idea, as you move in to this holiday season, I guess this is going to be your first one with a lot of -- with some of the acquisitions that you have made. Where do you stand now in terms of looking at strategic acquisitions, what areas are you still wanting to kind of fill in with more products? And then if you could, I guess maybe give us a little bit more color on what you are expecting out of Plough and Hearth this holiday season.

This is Jim, I will start with in terms of -- your first part of your question, we -- there is -- there aren't any acquisitions that would be new to us this holiday season. The last company -- the last brand that we integrated was Popcorn Factory and that was two years ago. So we have had a good -- the first cycle obviously not impacted much by our efforts, the second cycle that is the last holiday season was, so it's materially tough being integrated. So there is nothing new that would hit the playing field for this quarter.

Okay.

In terms of integration impacts. And secondly in terms of the kinds of products and service that we are looking to expand either through organically developed efforts or through acquisition efforts, I think that it would fair to say that you've seen the parameters of our primary playing field -- that is the products that we have identified having the best growth prospects for us -- the edible gifts, the popcorn, the candy, the fruit gifts, the gift baskets. So things that are in the gifting spectrum that are sampled to tried before or there is a particular appetite for [potney pun] there, from our customers are or the things they will look to deepen or expand, but not a great deal further than the parameters we have already identified.

And in terms of the acquisition front, we beefed up our efforts that were reported in the last phone call and continue to do that. In terms of our ability to look at the field of potential candidates for us in terms of the range of products associated that would be complementary to what we have and as we expressed by our customers and research, products and services that would help us to deepen our relationship with them. So we are increasing our efforts in that area and we would expect it will probably during this fiscal year have some specifics that we can talk to you about but nothing to report this moment.

As to the last part of your question, with regard to what we expect from Plough and Hearth during this important holiday quarter, I'd ask Chris and Bill to comment.

Yeah, I think what we are seeing so far is courtesy with the changes that we made and have discussed previously regarding some of the creative changes that we implemented -- the page count expansion we implemented, the circulation plan changes. Early season so far, we are seeing the results of those pay off, so we are confident that we -- at this point it looks like we will have Plough and Hearth back on track as we have previously reported.

And the one final point is the introduction of new products, so that you know the merchandizing changes. So as we stepped up the increase in page counts, I think to our holiday books we were introducing a grater percentage of new products.

So as Chris said we tested those efforts during the spring and summer as best we could in terms of small counts which gave poised-- the good results from those gave poised to our management team in that area working with Chris and Bill to say -- the results look good, let's retard our distribution during the summer, and hold that distribution capability to the fourth quarter and we are obviously anticipating good results from those steps.

Great, thanks.

Thank you, sir. Moving on to Anthony Noto of Goldman Sachs.

By looking at your growth in the quarter overall was 2.5% -- I apologize I have a cold, but 2.5%, could you give us a sense of, how did your traffic grow year-over-year, what is the trend year-over-year in your conversion rate and then what was the trend in overall ASP? I am just trying to get to a lower level of detail in terms of the slower growth and whether it's a demand problem which would be retain traffic, a merchandizing problem which we would see in conversion rate and whether that merchandizing issue would be selection or price driven, and so that is why the three questions -- traffic, conversion and ASP, thanks.

Yeah, I think to answer -- first of all starting on the first one on ASP, I think as you start seeing the results, there really is no change -- no significant change. Also I am not looking at this as being a problem in any of the areas whether it be demand or whether it be traffic or whether it be conversion -- I think our conversion continues to grow nicely. Q1 is as quarter where we are not going to generate a lot of demand, and we made -- we took efforts specifically to move some of our demand generation away from Q1, specifically in our catalog marketing where we did shift probably in all of the catalog marketing branch. We weighted the circulation more into Q2. And on the flowers brand, the flowers brand is not one where we are going to generate demand. We did invest a little bit more marketing right at the end of Q1, really in brand marketing, we generated awareness to position for Q2, so I can't look at any of those categories and say there is an issue, it's a Q1 factor us. We fully expect to achieve the results that we have laid out for the rest of the year, so I am not looking at any concern.

So if you look at average selling price, consistent, if you look at as closed percentages growing and if you look at the type of marketing spend, you obviously saw a change in marketing spend from the direct response point of view from Q1 to Q2 [inaudible] increasingly as we've done over the last few years.

Okay, thank you very much.

Thank you, sir. Next we will hear from Peter Benedict of CIBC World Markets.

Thanks, hi guys. Could you talk a little bit about the trends in your direct from grower flower business versus the florist deliver business, I know that florist delivery obviously is a primary business, if you can just kind of talk about any different trend you are seeing there in terms of growth rates or where you are adding new customers? And then secondly Jim I was wondering -- if I heard you correctly are you expecting double digit growth in floral product sales in the second quarter, thanks.

Peter for the first part of your question there in terms of, -- our fresh from our grower program is a program that we have had now since early 1986, it's a program that is the way that we used -- is the program we use for entry to the market, it gave us an opportunity before we had the other very hard to accumulate assets like BloomNet, like the electronic communication network, like the field staff -- all the things are going to assuring the quality that we needed in the same-day delivery capability -- before we accumulated those, we had the fresh from our grower program. So it's a mature program for us. What we use it for today is to be competitive in a marketplace to allure the lower price point customer to our brand and to use it for promotional purposes with some of our corporate customers who like that branding and collateral exposure opportunities in our direct from the grower program. It's a program that grows and continues to grow for us part of the again pun there, its one of that involves both fresh-cut flowers direct from our farms in Latin and South America as well as some of our plant care product that comes from our network of greenhouse [30] to greenhouses in the United States that ship green and flowering plants direct to our customers through common carriers and through our LFC program, so its both components for us and it's a program that we expect will continue to grow but it will probably grow in step with the overall growth of our brand.

Jim, I was just going to add in that which I think really and we have worked on the repositioning of this over the summer, so again no real trends coming out of Q1 but our position in communicating to our customers is the availability of choice, from the fresh from the grower which tends to be more value priced products to the flowers design to the high end floral artistry of our expert designers.

All with the goal of ensuring that we increasingly become not just a flower service to our customers but indeed as only we can their florist.

And just on the floral rust in the second quarter, you do expect double digit, am I correct to that?

I said that let me confirm with Bill.

I think Peter when we announced last year's number that we saw 10% growth in the floral category last year and kind of a reinvigorated growth in the flower category and we set for this year to achieve the same.

Okay, great thanks guys.

Thank you, sir. Moving on to Anthony Lebiedzinski of Sidoti & Company.

Good morning, a few questions here.

We only allow you one, Anthony. We're out of time.

Okay, great. With respect to the marketing plans for the second fiscal quarter, you know other then the catalog shift that you have just mentioned before, is there any other changes to their marketing plans?

I think the answer is yes. You are seeing us increase our spend -- number one. Number two I think where we spend it is changing, not only in the category or you reference that you highlighted, Anthony, which was in the catalog spend, where we have shifted from first quarter to second quarter but the landscape is changing for us all. That is three or four years ago, our online spend was almost exclusively done through portal partners. Beginning a couple of few years ago, we started to shift some of that spend towards the search engines and now you are seeing -- so you are seeing a less dependence on portals for us and increasing or embrace of research capabilities and now avenues, and there is not a single avenue but there are a number of things to do. Our affiliate program, for example, has now become the single largest source of new business for us. It's -- that pleases us because it has a slightly lower cost than some of the other online means of securing partnership as well as some of the promotional things we do both online and in the broadcast media world. So you see our shift like we did in this first quarter, at the very end of the quarter we did some brand advertising, it's an increase in spend and you will see an increase in spend in the second quarter as well. So you're seeing a shift in terms of timing on our catalog drops, you are seeing a shift in where we spend online and you are seeing a shift in not only where spend online but how we do it, what promotions we tie it to and our increasing emphasis on things that we find work in an ever changing environment and that specifically in the past couple of quarters has been an increase in our media spent.

And the only thing Jim I would add to that is again the value and the benefit that we get of such a large customer base and our direct marketing efforts targeted at our customer base, again which continue to be reflected in our repeat rate both on a quarterly basis as in this quarter but also on an annual basis.

And you would expect I think -- I think you could expect Anthony that with the point that Chris just made about the increasing emphasis on the 50 million customers we already have that if our direct marketing efforts are productive you will see over the course of the next two or three quarters that the yield from that marketing spend should actually go up as it has been for us over the last 2 years.

And with respect to the catalog circulation I think you mentioned that you've cut back on some of that?

No, what we said Bill would you --

Yes I think what we have are cut back circulation in Q1 so as an example the home and garden category we had like about 10-15% reduction in catalog circulation in Q1, that's shifting over to Q2. So we don't have deductions we have increases in circulation across all our brands in Q2 and beyond.

You talked about what you expect for revenue growth in the second fiscal quarter. As far as gross margin, any comments there, do you expect that to be where it was, sort of -- do you still expect it to be down or may be you could just comment on that please?

Okay for the first quarter we saw it down and we really have attributed that to product mix with the lower growth or negative counts on the home and garden category versus the other -- versus plough and some of the other categories. As we move back into Q2 and as we start seeing the improvements in the home and garden category, we think we'll get back to for slightly positive gross profit margin.

That’s compared to the year ago quarter.

That's compared to the year ago quarter.

So this quarter we are expecting the shift -- so for the second fiscal quarter this fourth calendar quarter that we're currently in, we are expecting that shift -- that product mix shift to come back to 60% plus, almost 65% being non floral gift products which carry a higher gross margins so Bill do you expect that we'd be comparable to last years gross margin to slightly improved.

That's right.

WITH respect to the inventory buildup in the first fiscal quarter what is that primarily for if you could just elaborate on that?

Again as Jim just mentioned with 65% of our business in the second quarter being non-floral, this is the time of the year that are building and investing for that -- for the second quarter so, if you look at the inventory at September this year of 33 million versus where it was a year ago at this time which is slightly below 30 million, that increase is really just a timing increase. We peak out in the mid 30's during this time of year and that remains the same. Overall inventory for the year on average will stay in the low to mid 20's and inventory turns would be extremely high.

Last question with respect to the tax rate I think on your last call, you mentioned that it should be 41%, it looks like it was a little bit higher the income tax benefit here -- just talk about that?

Yes now with that factor, it's really at 41%.

Okay alright thanks.

You are welcome.

Thank you sir, Eric Beder of JB Hanauer has a next question.

Good morning.

Good morning Eric.

Could you enlighten us once again on what you are doing with Plough and Hearth in terms of shifting the catalogs, in terms of new products and other things?

Well I did summarize that we have done this calendar year with Plough and Heart would be the following -- first is we did a pretty exhaustive internal and partially external, we brought in some different consulting firms that we've had from [ART] within the consultants over the years to work with us throughout the January, February, March, April timeframe to really diagnose what our challenges were there, what our strengths were, what our weaknesses were. As a result of that we determined that we become a little stale in terms of our creative look and a little too shy in our introduction of new products -- the percentage of new products that had fallen as a percentage of a whole. So, what we did during the course of the summer time, we changed the look an feel, did a lot of focused group testing, a lot of quantitative testing with our custom base, which resulted in a change in look and feel of our catalog not dramatic but significant nonetheless.

Second as we are charged our merchants with opening up their wish list, the things that they like to introduce into our catalogs and expanding their capabilities there, which put a challenge on our sourcing capability, our logistics and their merchandising skills -- all of which responded quite well. We then began to test the changes -- the creative changes, the merchandising, the new product feature in our summer catalogs and our fall catalogs where we could what I mean by that is you have a pretty long ramp time to get those things in place. But in about 3-5% of our books we were able to effectuate some of those changes. The results for those were quite positive for us. So what we did was, with those positive results instead of mailing in the same degree that we would have the spring and fall books of our Plough and Hearth brand with the old creative and with the old merchandising SKUs in them, we held some of our powder for this second fiscal quarter, the holiday quarter where we could effectuate on a greater degree the creative and merchandising changes.

In additional there are circulation changes that we have made how we market, how we deepen our relationship with our existing customers versus prospecting, so the accumulation of those efforts, a test results and early results in this quarter leave us void in our anticipation that we had a good solid quarter and maybe Bill if you could quantify what our expectations are for Eric in terms of that brand for this year.

I think what we've stated with that is that Plough and Hearth brand or the home and garden category is down 6% last year, and we stated that this year we'd be able to turn that around to low single digit growth for this year. And then move it beyond that, as Jim mentioned, from the merchandizing side we could make the changes to the look and feel but on the merchandizing side in the introduction of new product, that takes us probably a full 12 months to kind of burn that amble, so we will be seeing results of that in the second quarter and then more as we hit the spring summer catalog. And will take a full year to burn that amble, we think, we can turn that into a -- the negative comps into a positive.

And beyond that, Eric, I think we are comfortable that we become convinced that beyond the single digit increase in sales in that brand this year that we can return it to a double digit growth environment again within a next year, not this fiscal year but within another year.

Thanks. The LFCs, what are the LFCs doing for Christmas this year in terms of non-floral things?

We are continue to increase -- I don't know how I can quantify that number for you, Eric, but we're continuing to increase it -- the products that we have, if the same day delivery of the non-floral gives --

There will be more [waterfoot], we are also using the LFC network as we discussed during the past to do some fully deployment of product which has enabled us to really improve the productivity of our shipping and get more consistent quality to our older product lines.

And sooner than that, next week there are about a half a dozen of our Halloween gift SKUs, which are non-floral which will be our LFC's holiday weekend, including our flower shop, balloons, and our candy products.

Okay. And just one housekeeping question, between the transactions, how much of that was online, and how much that was telephonic?

I'm sorry.

What are your transactions split between telephonic and online in terms of number of transactions?

Hey giving like number of orders.

Yeah.

Yes, the total numbers of orders we mentioned was a million, little over $1.4 million with online orders been just under $900,000 -- $880,000, the rest being telephonic.

Alright thank you.

Is there anything further Mr. Beder.

No that's it.

Thank you moving on to Bill Gilchrist of CC Growth Investments.

Hi my question has been answered. Thanks.

You are welcome Gilchrist.

Thank you Mr. Gilchrist. Rob Labick of CJS Securities. Mr. Labick your line is open, please go ahead.

Good morning I just dropped off the line, so I apologize if this has been asked. If I could speak, I know you spoke about marketing plans this year and enhancing them, you spent roughly $91 million in advertising and promotions last year, 52% of your total marketing. Where should we expect that number to be going this year?

Yeah we haven't given specifics on that other then that we are going to have increase in marketing overall, that increase would be in step would probably with revenue growth.

Okay, great. And then in terms of there cooperate gifting and again I apologize if you covered this, but do you sound excited about the opportunity this year, could you just remind us what percent of sales it is in the second quarter and what kind of growth you expect year-over-year for corporate gifting?

The cooperate gifting has an impact on overall sales in a couple of different ways -- one is specifically related to companies that are the billing entity here, that is we sell directly to the companies and that's a number that's less then 5% of our sales. Secondly the benefit of our corporate partner and relationships are promotional and that promotional benefit might take a couple of different forms one of which often times offered to their employees as a no cost benefit to the Company, the opportunity to those employees to purchase some through an internet or through their online buying services that they offered across their platform and that's a significant benefit too. that would not be counted in the corporate sales number, that would be counted and come to our regular retail sales channel, but it is no lesser benefit as a result of the sales efforts of the business gift services business.

Got it. Okay. And then in terms of just of the 5% or so is that standard through the year or is --?

That's it, that's an annual number; it's a larger number during this quarter.

Okay. That's what I would expect, and you expect it to grow during this quarter?

We do.

Okay. Great. Thank you very much.

Mr. Pititto at this time there are no further questions, we'll turn the conference back over to you for any additional closing remarks.

It's Jim. And thank you for all your questions and your interest. If you have any additional questions please contact us.

In closing I'd like to give a remainder or two -- first, Halloween weekend is fast approaching and you'd need to look any further than 1-800-flowers.com find a perfect trick or treat, with an emphasis on treats of course. And from our Scaredy Cat Halloween Goodie Pail, complete wit loads of candy and a plush white cat to our pocket and poses of the [inaudible] in a keepsake ceramic pumpkin path, we have everything you need to help make Halloween a good time for all your friends and loved ones.

Second, it's never too early stop planning for your holiday season business gifting needs. Our business give services team that is ready to help you find the perfect gifts to enhance your professional relationships, including everything from delicious gift baskets and cookies and cakes from our exclusive Mama Moore's bake shop to decorative tins in Popcorn and -- tins of Popcorn and braising with your corporate logo. You can reach the BGS business gift services team at 1-88-755-74-74. So this holiday season call or come in to one of our stores to see all of the great ways in which we can help you connect and celebrate with the important people in your lives. Thank you for your time today.

That does conclude today's conference. We do thank you for your participation.