1-800-Flowers.Com Inc (FLWS) 2014 Q1 法說會逐字稿

Good day, everyone, and welcome to the 1-800-FLOWERS, Inc. fiscal 2014 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 Company's Vice President of Investor Relations, Joseph Pititto. Mr. Pititto, please go ahead, sir.

Thank you, Shannon. Good morning, everyone, and thank you for joining us today to discuss 1-800-FLOWERS.COM's financial results for our fiscal 2014 first quarter.

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 Altadonna at 516-237-6113, to receive a copy of the release by e-mail or fax.

In terms of structure, our call today will begin with brief formal remarks and then we will open the call to your questions. Presenting today will be Jim McCann, CEO, Chris McCann, President, and Bill Shea, CFO.

Before we begin, I need to remind everyone that a number of 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 your press release issued earlier this morning, as well as our SEC filings, including the Company's Annual Report on Form 10-K, and quarterly reports on Form 10-Q.

In addition, this morning we will discuss certain supplemental financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the Company's press release issued this morning. The Company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call or in recording of today's call, the press release issued earlier today, or in any of its SEC filings, except as may be otherwise stated by the Company.

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

Good morning, everyone. During this first quarter, seasonally our smallest, we achieved total revenue growth of approximately 3%, driven by solid performance in our Gourmet Food and Gift Baskets and BloomNet businesses, which more than offset slightly lower revenue in our Consumer Floral segment. Importantly, we anticipate both top and bottom line growth in our 1-800-FLOWERS brand during the current fiscal second quarter and for the full year, thereby further extending our leadership position in the floral category.

In our Gourmet Food and Gift Basket segment we saw strong revenue growth, driven by increased shipments of gift basket orders. This business, which returned to positive growth last year, is continuing to rebound nicely, with both increased order volumes from existing customers and an expanding list of new customers. Based on our book of orders in this business sales will also be up year-over-year for the current fiscal second quarter.

Also, within our Gourmet Food and Gift Basket segment we saw continued ecommerce growth during the first quarter in our Cheryl's, Fannie May, and Popcorn Factory brands, which we believe bodes well for the current fiscal second quarter, which includes the key holiday season.

Our BloomNet business also showed solid revenue growth during the quarter, driven by further market penetration for its expanded suite of products and services. BloomNet continues to grow its market position versus the older competing wire services, as florists across the country increasing embrace it as the growth and innovation leader in the industry. We saw this illustrated firsthand at our Annual Floral Convention this past month. The high energy event drew hundreds of professional florists and vendors from around the country, who gathered to celebrate the unique growth opportunities, educational programs, and the innovative technologies that BloomNet is bringing to the florist community.

As we head into the key holiday season we are cognizant of the challenges and distractions facing consumers, including the dysfunctional antics in our nation's Capitol and the continued uneven economic landscape. With that said, we believe we are well positioned to achieve our top and bottom line growth targets by merging the strength of the 1-800-FLOWERS brand and our great family of gift brands, our unique and still evolving multibrand website designed to be our customers go-to destination for all of their gifting needs, our truly original product offerings, which help differentiate us from the commodity focused competition, innovative marketing programs have engaged directly with our customers, such as our new [Hashtag Just Because Campaign], our industry leading initiatives in the fast growing mobile and social arenas, where we are making it even easier for our customers to connect and express themselves and deliver smiles.

I'll now turn the call over to Bill for a review of the financial and operating metrics for the quarter.

Thank you, Jim.

As we look at our first quarter results we see a number of positive trends in our business. During the quarter BloomNet returned to top line growth and continued with its strong margin expansion.

In our Gourmet Foods and Gift Basket segment we head into the key holiday season, as we head into the key holiday season, our Fannie May business, which stumbled last year, is performing well with solid ecommerce growth and improved execution across its operating platform. As a result, we believe Fannie May is poised to rebound nicely this quarter.

We're also seeing continued ecommerce growth in our Cheryl's and Popcorn Factory brands and, as Jim mentioned, our Gift Basket business had a strong first quarter and will be up again in the current fiscal second quarter.

Lastly, while sales in our Consumer Floral segment were below our targets for the first quarter, we are confident that the marketing and merchandising initiatives we have underway will help drive both top and bottom line growth for the current quarter and the year.

Now regarding specific financial results and key metrics from continuing operations for the first quarter, total revenues from continuing operations increased 2.9% to $123 million compared with $119.6 million in the prior year period. During the quarter our ecommerce orders totaled $1.265 million compared with $1.231 million in the year ago period. Average order size during the quarter was $63.70 compared with $65.87 in the prior year period.

During the quarter we added 375,000 new customers compared with 355,000 new customers in the prior year period. This was achieved while concurrently stimulating repeat orders from existing customers, who represented 62.6% of total revenues compared with 64.1% in the prior year period.

Gross margin for the quarter was 41.7%, up 40 basis points compared with 41.3% in the prior year period. This was driven by [20] and 340 basis point increases in our Consumer Floral and BloomNet segments, respectively, related to product mix and enhanced customer satisfaction. These increases more than offset a decline of 130 basis points in Gourmet Food and Gift Basket segments, which reflected product mix, specifically increased shipments of gift basket orders during the quarter.

Operating expense ratio, including depreciation and amortization, was 46.6% of total revenues compared with 45.7% in the prior year period, primarily reflecting increased marketing and other investments for the upcoming holiday season.

For the quarter depreciation and amortization was $4.7 million compared with $4.4 million in the prior year period.

As a result of these factors, EBITDA loss from continuing operations for the quarter, excluding stock based compensation, was a loss of $1.3 million compared with a loss of $800,000 in the prior year period. Including the impact of stock based compensation EBITDA loss for the quarter was $2.4 million compared with a loss of $1.8 million in the prior year period. And net loss from continuing operations and net loss were essentially unchanged at $4.6 million or $0.07 per share compared with the prior year.

In terms of category results, 1-800-FLOWERS, during the first quarter revenues in this category declined 1.7% to $71.6 million compared with $72.8 million in the prior year period. Gross margins for the quarter increased 20 basis points to 39.1% compared with 38.9% in the prior year period. In category contribution margin was $6.4 million, down 6.6% compared with $6.9 million in the prior year period. This primarily reflected the lower revenues, as well as higher spending in preparation for the upcoming holiday season. The Company defined category contribution margin as earnings before interest, taxes, depreciation and amortization and before allocation of Corporate overhead expenses.

In BloomNet revenues increased 2.9% to $20.3 million compared with $19.8 million in the prior year period. Gross margin increased 340 basis points to 53% compared with 49.6% in the prior year period. The strong increase primarily reflected revenue mix, which was skewed higher to services during the quarter. For the quarter category contribution margin increased 11.1% to $6.4 million compared with $5.8 million in the prior year period.

In our Gourmet Food and Gift Basket segment, revenues increased 15.1% to $31.2 million compared with $27.1 million in the prior year period. This reflected increased shipment of gift baskets, as well as solid ecommerce growth in our Cheryl's, Fannie May, and Popcorn Factory brands. As Jim noted earlier, we also expect to report an increase in gift basket orders for the current fiscal second quarter, as order volumes in this business have increased again this year from both existing and new customer accounts.

Gross margin for fiscal 2014 first quarter was 39.2% compared with 40.5% in the prior year period, reflecting the increase in gift basket shipments to mass market customers in this period. Category contribution margin improved to a loss of $2 million compared with a loss of $2.3 million, reflecting the increased revenue for the period.

In terms of Corporate expense, as stated earlier, our category contribution margin results exclude costs associated with the Company's enterprise shared services platform, which includes among other services IT, HR, Finance, Legal and Executive. These functions are operated under a centralized management platform, providing support services to the entire organization.

For the fiscal first quarter Corporate expense from continuing operations including stock based compensation was $13.2 million compared to $12 million in the prior year period, reflecting investment spending and preparation for the upcoming holiday period.

Now turning to our balance sheet, at the end of the fiscal first quarter our cash and investments position was approximately $3.6 million. Borrowings and working capital under our revolving credit facility were approximately $71 million, reflecting the seasonality of our Gourmet Food and Gift Basket business, specifically the increased investments in inventory for the upcoming holiday period.

The inventory of approximately $91.5 million was within Management's expectations and reflects the aforementioned increase in our basket business, as well as the build-up for the holiday season. We anticipate that we will finish the current fiscal second quarter with significantly reduced inventories, zero borrowings under our revolving credit line, and a strong cash position.

Regarding guidance, we are reiterating our top and bottom line guidance for fiscal 2014, which calls for revenue growth amongst all three of our business segments, with consolidated revenue growth for the year expected to be in the mid single-digit range.

Also, based on our expectation of continued improvements in gross profit margin and operating leverage we anticipate achieving year-over-year increases in EBITDA and EPS at rates in excess of our revenue growth. We also anticipate generating free cash flow of approximately $20 million for the year.

I will now turn the call to our President, Chris McCann.

As Jim mentioned earlier, the fiscal first quarter is our smallest due to the lack of gifting holidays during the summer months, however, the period is anything but slow for the talented people working in our new product development and merchandising areas, our Marketing and PR Departments, and across a broad range of projects in IT and in our supply chain. Throughout the quarter they've been working to lay the foundations for our holiday season, marketing and merchandising programs, and we're very excited by the opportunities I see, plus to enhance our top and bottom line performance across all of our brands.

On the marketing front, we recently launched our new Hashtag Just Because Campaign, developed earlier this year, and featured as part of our appearance on the AMC Reality Show, the Pitch, which I hope everyone saw. Hashtag Just Because was designed from the start to be social by nature, less an ad campaign than a movement, and one that engages directly with our customers and encourages them to share their own just because content in the form of stories, experiences, memories, and all of their just because reasons for giving.

We're doing this across the social landscape, on Facebook, Twitter, Instagram, YouTube, Google Plus, Vine and others, as well as on our own social hub that we created, where we collect all of this content in one place and encourage our customers to share their stories. Hashtag Just Because was inspired by the conversations already taking place in the social arena about all of the just because reasons people have to make someone smile every day.

While it's still early in the campaign, we are already seeing excellent response from our customers in the form of increased engagement across all of our brands, including excellent response in our mobile channels. We'll be tweaking the campaign throughout the year, and we're confident it can help us drive both new customer acquisition and deepen the relationships we have with our millions of existing customers.

On the product development front, we continue to focus on working directly with our customers to develop truly original gifts that help them deliver smiles. At The Popcorn Factory we know that among our customers there are popcorn lovers and there are popcorn fanatics. With the help of these fanatics, appropriately named our Pop Stars, our Product Development Team has created the new VIP line, which stands for Very Indulgent Popcorn. VIP flavors include dark chocolate and sea salt, my personal favorite, toasted coconut, white chocolate peppermint candy cane, and a drizzled butter toffee almond pretzel mix, all destined to be big hits this holiday season.

At Fannie May we've created a new limited time only gift box of chocolate truffles in great holiday flavors, such as cinnamon, spice, eggnog, and pumpkin spice, and we've added the new mocha praline crunch to Fannie May's iconic collection of flavors, specifically targeting the growing demand for gourmet dark chocolate confections.

At Cheryl's we've expanded our successful cookie flower pots line with the unique selection of keepsakes ceramic pots, perfect for holiday gifting. We're also very excited about Cheryl's new collaboration with one of America's leading radio personalities, Delilah. Known as the most listened to woman on radio in the United States, Delilah was a nationally recognized author, mother and philanthropist known for her inspiring dialogue with listeners. Delilah has embraced Cheryl's hugely popular cookie cards as her very own, creating special customized messages designed to help her millions of listeners deliver smiles.

As you can tell, we're very excited by our great lineup of truly original gifts for the upcoming holiday season and by our new Hashtag Just Because customer engagement campaign. We believe these initiatives, among others, will help further set us apart from the competition.

I'll now turn the call back to Jim for a wrap-up.

To wrap-up our fiscal first quarter results, reflecting a number of positive trends that are particularly important as we head into the key holiday season, including solid ecommerce growth across our Gourmet Food segment and a continuing rebound in our Gift Baskets business, improved operating performance in our Fannie May business, reflecting the changes and investments we've made in that business during the second half of last year. As a result, we believe Fannie May is positioned to rebound nicely in the current quarter and for the full year.

Our BloomNet business is once again growing its revenues, while driving strong increases in gross margin and contribution dollars, and our Consumer Floral business is poised to grow both its top and bottom line through a combination of merchandising programs focused on truly original product designs, such as our Signature a-DOG-able, Happy Hour, and Flower Birthday Cake collections, featuring exclusive designs for Halloween and the holiday season, as well as everyday gifting.

Marketing programs focused on real customer engagement, such as our new Hashtag Just Because initiative, with its customer generated messaging that emphasizes the power of delivering smiles every day, any day or for any reason, and our initiatives in the increasingly important social and mobile space, where once again 1-800-FLOWERS has staked out a leadership position.

That concludes our formal remarks, and I'll now open the call for questions. Shannon, can you please restate the instructions for the Q&A portion?

Thank you. (Operator Instructions)

Our first question is from Jeff Stein of Northcoast Research, you may begin.

Good morning, guys. A couple of questions. It looks like you were able to successfully avoid being dragged into kind of some of the promotional pricing that we saw across retail in the first quarter, particularly in your Consumer Floral Division. And I'm wondering as we approach the holiday season are you prepared to be -- maintain that discipline if the environment gets promotional or do you have kind of a backup plan in the event that it turns into a more challenging environment?

Well, Jeff, this is Chris. I think what we've seen for the past two years, two plus years really, is a good steady growth in the Consumer Floral business, while at the same time continuing to enhance our margin. We've done this really with a very, very disciplined approach towards growth, and we have the financial flexibility we always say to step on the gas pedal a bit when we see the consumer responding appropriately.

So in any kind of holiday season, especially as we move more and more so into the floral holidays, that's almost the Christmas holiday season, we see our competitors be extremely aggressive in discounting and promotional activities, but I think you'll see us continue to be able to take a very disciplined approach to managing both top line and gross margin.

Okay, very good. And a question for Bill, wondering if you can -- excluding the growth that you saw in your wholesale Gift Basket business, can you give us some indication in terms of what percentage growth increase we saw in the other gourmet food brands collectively? And maybe rank them in terms of which were the best and moving down to the weakest?

Yes, Jeff, so what we saw within Gourmet Food and Gift Basket we saw strong ecommerce growth really across the enterprise, so that really did include Shells, which is, you know, has been strong for a number of years, Popcorn Factory, which we saw very strong last year and that continued into this quarter, but importantly we saw it at Fannie May, as well, we saw nice ecommerce growth at Fannie May.

And to Chris' point with gross margins, talking about floral earlier, you know, if we backed out the gift baskets that we sold to the mass merchant customers, gross margins within the Gourmet Food and Gift Basket category would have been up in that category, as well.

So, Jeff, this is Jim. The ecommerce growth across the platform, I think that was probably the order of growth that Bill talked about. Cheryl's continued to grow and accelerate their growth. Costco now fully participating in that growth. Fannie May showing the signs of the steps we took throughout the spring and the summer months have really started to show some results, and we see that earliest in the ecommerce growth there.

So would you describe collectively, if we look at the Gourmet Food brands excluding the wholesale gift basket business, would it be fair to say was it kind of low single-digit, mid single-digit, how would you describe it? And the reason I'm asking is that that revenue stream is very dominant in the second quarter and historically has outstripped floral, so that what you have seen so far might be a good barometer of what we could expect to see for holiday.

I think that's how we view it, Jeff. The decision over the last several years to broaden our consumer product offerings and to do it in a way that we have good margins and we control the product and as we developed brands they were brands that we owned, I think is starting to really show the kinds of dividends. And I think you're right, especially in this quarter when the gifting of our food gift brands really comes to the fore, so the basket business, the chocolate business, the bakery gift business, and the popcorn business all have their strongest quarter in this fourth calendar or second fiscal quarter.

I'll turn to Bill for his comments on your specific questions about gross percentages.

Yes, I think overall without the Gift Basket sales and the mass merchant channel it would be kind of mid single-digit growth within the overall category, but ecommerce at that high single-digit growth.

Great, that's very helpful. And, one final question, wondering if you could talk a little bit about the fruit bouquet business and how that initiative is progressing, how many florists are now carrying the product and where you see yourselves going for the balance of the year?

Yes, I think fruit bouquets continues to be a future growth area of ours. It's continuing to ramp up nicely. As we said in the past quarter or two it's a steady ramp-up, it's nothing explosive there. What we are very encouraged by is what we continue to see, what we call same zip sales, so kind of looking at a same-store sales component of where we had the coverage last year, continue to see good growth there, and we continue to look to add the coverage necessary. But that's a good, steady growth that I think you'll just continue to see it steadily over the next couple of years.

And, Chris, roughly what percent of coverage do you have in the U.S. right now?

Yes, well, we haven't really broken that out, but again it's ramping up, and what you'll see as it ramps up you'll continue to see us market -- our marketing activity behind it start to increase, and that will be an indicator of where the growth percentage is.

Okay. Thank you.

Thank you. And our next question is from Dan Kurnos of The Benchmark Company, you may begin.

Yes, great. Good morning. Thanks for taking my questions. Jim, just on a high level basis here, just thinking about macro versus seasonality versus competition, maybe could you parse out for us which was the greatest contributor in the quarter to the Consumer Floral coming in maybe a little bit lighter than your expectations?

And then as a follow-on to that, on the advertising side we did see some deleverage in the Consumer Floral EBITDA margin, and I'm assuming that might have been forward spend, but I'd like to sort of get a sense from you guys how effective you think the radio campaigns are right now and, furthermore, you've talked about mobile and product launches, but any thoughts on your ad strategy once you're sort of 100% live and everybody is going to the same web page with the cross-branded platform? Thanks.

Well, that's a simple question, the answer is yes. Dan, I'll try and get to the pieces of the question. Everyone will chip in. But from a macro environment, clearly, it's not the best macro environment for us. I would love to see the category growing, you know, the categories we play in, the gift food category, the gift category, gift floral category, I'd love to see them growing in double digits, but, frankly, it just seems that they're not. The fact that we're growing 3% this quarter, planning on growing strongly in single digits for the year with outsized bottom line growth tells you that we feel confident that even if the environment doesn't improve, and we're not planning on it, that we continue to grow and that's going to be some taking share.

I'd rather be all the categories are growing, but I think we've demonstrated a discipline, which was evidenced in the first quarter in our floral sales, that we had a decent quarter, but we didn't reach, we were disciplined, we improved margins, and we kept our powder dry over the quarters when we can really move the needle.

And I think our product mix, that I just addressed in Jeff's question, where we've invested heavily in those pieces of our consumer business that really speak to the opportunities in this fiscal second calendar fourth quarter are serving us well. You heard that the growth, from Bill that the growth in those businesses organically was in the mid single-digit range. In fact, in this first quarter, that gives us a good indication of how we're set-up to perform in the second quarter. Overall the growth was 15%, that included some of our mass margin market business and our basket business. So all of those things seem to set up nicely.

So I think from a marketing perspective, I'll turn that to Chris, but we're certainly not going to tell you what our marketing plans are for the quarter in this forum, but we're confident, we'll be disciplined, and we have an array of options, depending on how the consumer responds and what the competitive landscape looks like.

Yes, a couple of things here, Dan. I think as we look at the Consumer Floral, first of all, it's Q1, and Q1 is really, there's no holiday stimulation in Q1, coupled with the fact that consumer confidence has certainly been a little bit draining the past couple of months, really puts an impact on the everyday gifting business segment.

But one of the things that we're really excited about is the launch of our Hashtag Just Because Campaign to go after that everyday gifting segment. And I think you're seeing that in some of our customer count increases early on and in our order transactional increases, as well. So we think we're well positioned to go after that and encouraged now as we start to move into the holiday season.

From the marketing mix point of view, again as Jim said, we're very disciplined. We will move dollars around throughout the media, whether it be through mobile, through radio, depending on the results we're seeing, and we're able to be very quick and very nimble in doing so.

As far as the contribution margin, Bill, spending?

Yes, I think we said in our formal remarks with the slight decline in top line revenue, and yet still in prepping the holiday season, and --

When you get a look at that you do have to compare that to all of our consumer businesses and we're entirely pleased with our 3% growth for the first quarter as it sets us up to reach our goals for the year quite nicely.

Right, I was just focused on Consumer Floral, and we're still seeding the market as we head into the holiday season and launching our everyday campaign with Just Because during the first quarter.

So, in summary, we're comfortable with our product mix. We think the decisions we've made over the last few years bode well, especially for this quarter. We're confident, we're comfortable and confident in the momentum that we're seeing in the gift food categories in the first quarter and how that bodes for the second quarter and particularly in the baskets business.

And overall we think we have the right assets, pattern, and plan, as Chris mentioned that the Hashtag Just Because Campaign was introduced to address the everyday business, where it's been a little bit tougher to grow over the last several years, but we still delivered on our growth for the year by emphasizing the holiday periods where we fish where the fish are, and that campaign just started, but we expect it'll have a positive impact throughout the year.

Okay, thanks for all the colors, guys. I really appreciate it. Let me just ask a quick follow-up, and I promise it will be quick. On terms of the multibranded or the cross-branded website, just anything that you're seeing there in terms of improvements and conversion rates? And a follow-up to the other on the Gourmet Food side, any improvement in Fannie May Berries, and how that might contribute to the holiday period? Thanks.

I'll cover the Fannie May Berries. This is Jim. Fannie May Berries, we just introduced at the beginning of this calendar year. We just started to introduce it I guess for the fourth quarter last year was the first you saw it and really introduced it for Valentine's Day. So we would expect, like the fruit bouquet business, Fannie May Berries will be a good long-term big contributor to our overall business and growth. And we've not yet aniversaried that business, but the experiments have been good, the rollouts have been good, so we think that becomes quite a big part of our Fannie May business and overall gift mix, just like we expect fruit bouquets to contribute mightily over the next couple of years.

Yes, and as far as our go-to-market strategy from our website perspective, we are continuing to see good results there. It's not necessarily an impact on conversion so much, but it's more of an impact on long-term customer value and gaining a greater share of wallet out of the customers as they get introduced to our additional brands, our additional product lines, and they'll wind-up coming back to use those products and those brands for additional gifting purchases throughout their year. So it's more of a lifetime value and share of wallet play than it is a shorter term conversion play there, and you'll continue to see us do things in the web perspective, our CRM marketing efforts, and mobile efforts to continue to introduce our customers to family and friends.

Got it, great. Thanks so much for the color, guys.

You bet.

Thank you. Our next question is from Michael Kupinski of Noble Financial, you may begin.

Hi, good morning. This is actually [Warren Beharn] in for Michael Kupinski, and thank you for taking my questions. Just to follow-up on fruit bouquets, just wanted to get a sense on when you guys think you can reach the 50% coverage mark? I believe this is when you guys start spending marketing dollars at a national level, do you guys have a timeframe?

We do, and we would expect that, as Chris said, we're doing a good, steady introduction. We think that this is the right model for us to introduce this business. It leverages assets we already have, it leverages relationships we already have in terms of our franchisees in the floral community, it leverages other assets as we bring them online. So, yes, we have a definite plan. I won't be sharing that with you now, but there comes a tipping point and I don't know that it's 50% but it's probably north of 50% before we can start spending any marketing dollars behind it.

The good news is, the two things that Chris mentioned. One is all we have to do is show its availability and the business is there. Our customers have been asking us for this product for years now, and when we can deliver it for them they love it, it increases our share of wallet with that customer, it gets good word-of-mouth, and we're seeing zip code increases, that is year-over-year zip code increases that are quite encouraging for us, with no marketing support behind it.

So, yes, you'll see us as we get -- as soon as you see us turn on the marketing spigot here against this brand we'll be able to talk to you more specifically about what kind of coverage we have, but until then you can assume that we're not quite at the tipping point yet.

Okay. Thank you. And thank you for the color on the Just Because Campaign. I just wanted to get a sense of I know the cookie cards were really successful last year. Are you guys seeing the same type of demand this year?

Yes, I think what we're seeing, and again you see it somewhat in the results, I mean the numbers are small, but you see increased transactions, increased customer counts, AOV down a little bit I think. I mean just showing that the cookie cards and similar products like that are showing an attractiveness and an appeal to our customer base.

That's it for me.

Thank you.

Thank you. Our next question is from Danielle McCoy of Brean Capital, you may begin.

Hi, everyone. Thanks for taking my questions. Many have been asked, but I guess just looking at the floral space versus last year is there anything distinct that you see different on a year-over-year basis?

On a year-over-year basis, no, I think you're seeing a couple of things. One is our average ticket in the categories remained essentially flat. Our gross margins have improved. Our expense disciplines have been good. Our marketing campaigns have shown the yield that they want to. That positions us quite well and is on target for us to deliver what we said for the year.

This is a quarter, the first quarter, where you're not going to see a big pop. You could see a mistake, you could see a stumble and, of course, we didn't have that. What you saw is a quarter that sets us up for this important quarter, and then the two quarter to follow. So we're in a good spot from a discipline, marketing, merchandising, and margin point of view.

All right, great. Thank you guys so much. Good luck.

Thank you, Danielle.

Thank you. (Operator Instructions)

Our next question is from Anthony Lebiedzinski of Sidoti, you may begin.

Good morning. A couple of questions. First, looking at the wholesale Gift Basket segment, could you just comment as far as what you're seeing now in terms of revenue and number of customers versus what you saw before the recession?

Sure. This is Jim, Anthony. The part of the basket business that where we resell product to mass merchants, I would say that we're well on our way to recapturing the best of our years before the recession. We're not quite there yet, but we've seen now two good years in a row there, so we're so happy not to be talking about that being a drag on us.

It's a lower margin business, but it helps all the rest of our businesses go, and so the good news is that we've seen both an increase in share from our existing customer base and in new customers come to us for our very creative and unique products, which are oftentimes the exact same products that we bring, very similar to the products that we bring to our customers under the 1-800 baskets brand and the basket business we do now increasingly with our BloomNet florists.

So it's a great kernel of opportunity and knowledge for us and that we see our top line sales growth, we see increased depth with the existing customers and new customers all gives us hope that we will not only catch where we were at the peak in the near term, but exceed it.

And, also, looking at the average order value, it was down slightly in the first fiscal quarter. What are your expectations for the second fiscal quarter and for the year for AOV?

Well, what we said is two things, Anthony. Our average order value in the largest segment, our flower segment, was the same as last year. And the good news is our average order value overall was down and, as Chris just mentioned, that was due primarily to the success of our low price point products that we've introduced across our Gift Food and Gift Basket brands to give them the opportunity to mimic the success that we've had with our cookie card campaign and find lower price points.

So I would hope that that would continue, that is that our flowers price points would remain in the same range as we increase order counts and customer counts, so that's the trend we expect there. And I hope we see our average order value continue to decrease as a result of extremely higher, a lot higher volumes because of the introduction of these lower price points that we've had success with in the gifting categories.

Okay, got it. And then for BloomNet are there additional opportunities to expand their product offerings?

Yes, there are, and I think you've seen some evidence this quarter, and I'm glad you pointed that out because there was some concern at the end of last year where the trend was for BloomNet. And we said we'd expect it to improve and sure enough this first quarter it improved nicely. It's a good growing business. We're increasing the depth of our relationship with our existing florists. Margins are quite good in that business.

And we've just announced a partnership with [You To Me], which is a hot Silicon Valley based company that's in the online education arena. They have the largest, most comprehensive web-based education platform, and we've partnered with them to introduce Fresh University, which really is a wonderful tool for our BloomNet florists to continue their education, to socially connect, to correspond and to advance the skills not only of themselves, but of their employees, both in the floral category and beyond. So there's a rich offering there.

And I think you can expect it will help create and build the community that we are in BloomNet, it will give us enhanced revenue opportunities, and most importantly help our BloomNet florists to develop their skills and improve their effectiveness and thereby grow their businesses and improve their margins. So we're very excited about Fresh University and the Floriology Institute as part of that, which we just announced in the last week or two.

Okay, and lastly how much as of now do you have left on your share repurchase program?

Bill, we had a $20 million authorization back in the spring?

As we go into the spring, so we still have --

The majority of it.

Yes, the majority of it is still left.

Okay. Thank you.

Thank you.

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Jim McCann for closing remarks.

Thank you, Shannon. And thank you, all, for your questions and your interest today. If you have any additional questions please don't hesitate to contact us.

As a reminder, we encourage you to join us in the conversations at Hashtag Just Because, where you can tell us all the reasons you like to deliver smiles to those important people in your lives. Thanks, again.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day.