1-800-Flowers.Com Inc (FLWS) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the 1-800-FLOWERS.COM fiscal 2014 third quarter results conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions). As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Joe Pititto, Vice President of Investor Relations. Sir, you may begin.

Thank you, [Sam]. Good morning and thank you all for joining us today to discuss1-800-FLOWERS.COM's financial results for our fiscal 2014 third 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 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 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 press release issued 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, and recordings of today's call, the press release issued earlier today or in any of the SEC filings, except as maybe otherwise stated by the Company . I'll now turn the call over to Jim McCann.

Good morning, everyone. As we indicated in our press release this morning, our fiscal 2014 third quarter results reflect several factors. Primary among these are, number one, the shift of the Easter holiday into our fourth quarter this year, compared to last year when the holiday fell on March 31st, the last day of the quarter. This is something that we have discussed in previous calls.

Just to quantify a bit for you, the Easter holiday typically represents in excess of $10 million in revenue for us, so the shift of the holiday out of the third quarter affected top and bottom line results across all three of our business segments. The good news is that with Easter having fallen on April 20th this year, we do recapture these revenues in this current fiscal fourth quarter.

Factor two was weather. The severity of the winter weather experienced throughout much of the country, particularly during January and February, clearly had an impact on the overall retail sector. Snow, ice, sub zero temperatures hampered consumer demand throughout the country as customers were focused on digging out from under snowdrifts or just distracted by the media attention given to all those storms.

For us, these weather conditions culminated in a snow and ice storm that hit our February 13th, significantly disrupting the Valentine holiday, a key period for us, no doubt, particularly since it was the only gift-giving holiday in this year's fiscal third quarter.

Despite these challenges, I must say how proud I was of the efforts from all of our Associate's across the Company that helped us deliver smiles for our customers during the Valentine holiday.

Our proactive planning for the severe weather, which was dubbed Operation Love Storm, enabled us to utilize our unique distribution platform, particularly our BloomNet network of local professional florist, to deliver millions of smiles to our customers throughout the country, including to many of the regions hardest hit by the snowstorms.

In addition, throughout the holiday period, our dedicated customer service associates, including our social channel communications teams, did an exemplary job of responding to our customers' inquiries. As a result, we were very pleased to read the post holiday accolades we received for sticking to our commitment to provide an open and transparent communications policy on Twitter and Facebook, which allows us to remain engaged and better service our customers.

We believe this focus, and positive comments we've been receiving from customers since this Valentine holiday period, positions us well to deliver solid year-over-year growth during our current fiscal fourth quarter, which features the Spring [gift-giving occasions], including Easter, Admin Professionals Week, Mother's Day, graduation and the wedding season and, of course, Father's Day.

Before I turn the call over to Bill for his recap of the results in metrics for the quarter, I'd like to highlight a few areas where we have made solid progress through this first three quarters of fiscal 2014. In 1-800-FLOWERS.COM, we continue to grow our top-line and extend our market leadership in a challenging and highly competitive marketplace.

We do this by offering our customers truly original product designs at an expanded range of price points, enabling them to connect and express themselves for any celebratory occasion, from Just Because to birthday, anniversaries, get well and much more.

On the product front, we are also increasingly excited by the opportunity we see in our new fruit bouquets products, where we are gradually expanding [their] availability across the country. Here we are working with our franchise and BloomNet florists towards what we believe can be a very significant business for us over time.

We continue to leverage the investments we've made over the past several years in our social and mobile efforts, which help us engage directly with our customers when and where they expect to find us.

In these areas our focus on being an early adopter has enabled us to stake out a strong leadership position well ahead of the competition, which we plan to build on as e-commerce rapidly involves into mobile and social commerce.

In our BloomNet business, we continue to increase our market penetration against the older, traditional wire services by providing florists with innovative products and tools designed to help them grow their businesses, such as our new cloud based store management system with its unique iPad application, another first for the florist industry.

In our gourmet foods and gift baskets segments, we've addressed the operational issues that impacted the results of our Fannie May chocolates business last year and I'm pleased to report Fannie May's operations ran significantly smoother during the recent peak holiday period. The brand is now poised to grow its top and bottom line going forward.

[Our] Cheryl's bakery gift business continues to hum along, growing the e-commerce business at a double-digit pace while getting ready to take advantage of the capital investments we're making this year to more than double the capacity of its baking facility.

Lastly, in terms of our financial strength, we are debt-free, we have positive cash position on our balance sheet and we expect to build on that cash position during the current fiscal fourth quarter. And as we have ample and cost efficient access to capital through our credit facility, this provides us with significant flexibility to grow our business through internal investments as well as potential strategic acquisitions that can help us increase engagement with our customers.

It also enables us to be active with our stock buy back program under which we have spent approximately $7.4 million to repurchase more than 1.4 million shares of our stock since the start of this fiscal year. We believe these initiatives, among others, position us well to grow our business and build value for all our stakeholders. I'll now turn the call over to Bill for his review of the quarter.

Thank you, Jim. Regarding specific financial results in key metrics from [continuing] operations for the third quarter, total net revenues were $179.6 million, down 6.3%, compared with $191.6 million in the prior year period. During the quarter our e-commerce orders (inaudible) 2,211,000, down 4.5%, compared with 2,315,000 orders in the year ago period.

Average order size during the quarter was $63.27, up [1.3%], compared with $62.45 in the prior year period. During the quarter we added 675,000 [true] customers, down 1.8% compared with the prior year period, and existing customers represented 58.4% of total customers in the period.

Gross margins for the quarter was 41%, down 100 basis points compared with 42% in the prior year period. And operating expenses as a [percent] of total revenues were 42.5%, an increase of 300 basis points compared with 39.5% in the prior period.

The increase in operating costs reflects are reduced leverage due to the lower revenues in the quarter related to the Easter shift, as well as increased marketing spend during the Valentine's Day holiday that did not drive sufficient sales due to the winter storm.

Total operating expenses were $76.4 million, up 1%, compared with $75.6 million in the prior year period. As a result of these factors, EBITDA for the period, excluding stock based compensation, was $3.3 million compared with $10.7 million in the prior year period.

Including stock based compensation, EBITDA was $2.1 million compared with $9.6 million in the prior year period. Net loss from continuing operations attributable to 1-800-FLOWERS.COM was $1.4 million with $0.02 per share compared -- compared with income of $3.1 million, or $0.05 per diluted share, in the prior year period.

And total net loss, including discontinued operations, was $1.4 million, or $0.02 per share, compared with income of $2.6 million, or $0.04 per fully diluted share, in the prior year period. In terms of category results, in our 1-800-FLOWERS.COM Consumer Floral business.

During the third quarter, revenues in this category increased 1% to $122.3 million compared with $121 million in the prior year period. Revenues in the segment included approximately $2.7 million resulting from the consolidation of the operating results of iFlorist, our UK floral gift provider, in which the Company increased its investment to a majority position during the second quarter of fiscal 2014.

As previously noted, the shift of the Easter holiday and the severe winter weather during the quarter, particularly the storm during the Valentine holiday, impacted sales in this segment. Gross margin for the quarter was 38.9%, down 110 basis points, [with] 40% in the prior year period, primarily reflecting higher customer credits related to the Valentine holiday weather and the impact of the lower margins associated with the aforementioned iFlorist business.

The [segment contribution margin] was $11.2 million, down 19.7%, with $13.9 million in the prior year period. This primarily reflected the lower revenues in the quarter related to the Easter shift, which reduced operating leverage, increased marketing spending during the quarter to drive Valentine sales, which was negated by the winter storm, and lower year-over-year gross margins also reflected the impact of the severe winter weather.

[In] BloomNet, revenues were $22.6 million, essentially flat, with $22.8 million in the prior year period, (inaudible) about the Easter shift as well as the severe winter weather during the quarter. Gross margin increased 330 basis points to 53.2% compared with 49.9% in the prior year period.

This reflected revenue mix, which included growth in sales of higher margin services such as our web marketing and [directory] advertising programs as well as pricing initiatives.

As a result of these factors, segment contribution margin was $7.1 million compared with $7 million in the prior period. In our gourmet food and gift basket segment, revenues for the fiscal third quarter were $35.3 million compared with $48.3 million in the prior year period.

The decline in revenues primarily reflected the aforementioned shift of the Easter holiday into the Company's fiscal fourth quarter combined with the impact of the severe winter weather during the period and lower wholesale orders for our (technical difficulty).

Gross margin was 38.7% compared with 42.4%, primarily reflecting the shift of Easter, which consisted largely of higher margin, e-commerce and retail revenues and reduced operating leverage associated with the impact on sales of the severe weather during the period.

Segment contribution margin was a loss of $3.2 million compared with income of $1.6 million in the prior year period.

As to corporate expense, for the fiscal third quarter corporate expense in continuing operations, including stock based compensation expense, was $13 million, up 1.6%, with $12.8 million in the prior year period.

Now turning to our balance sheet. For the first nine months of the year, we have used approximately $7.4 million to buy back our stock. Combined with free cash flow generated over the same third period, we finished the third quarter with a cash and investment position of approximately $1.3 million.

We have zero borrowing under our credit facility and anticipate finishing the fiscal year in June with no debt outstanding and a positive cash position on the balance sheet.

Inventory of $61.4 million was in line with management's expectations and reflects positioning for the spring holiday season, including Easter, Admin Professionals Week, Mother's Day and Father's Day.

Our regarding guidance. Our fourth quarter this year includes the Easter holiday as well as the aforementioned spring gifting occasions, particularly the key Mother's Day holiday. As a result, we anticipate achieving solid year-over-year growth, both top and bottom line, for the period.

Based on this outlook, combined with the results for the first three quarters of fiscal 2014, we anticipate achieving revenue growth across all three of our business segments, albeit with consolidated revenue growth for the year in the low to mid single digit range.

Regarding guidance for our bottom line, we anticipate EBITDA and EPS for the year will be flat to down slightly compared with the prior year, and we expect free cash flow for the year to be in the range of approximately $10 million to $15 million. I will now turn the call over to our President, Chris McCann.

Thanks, Bill. As Jim and Bill have both noted in their remarks, we faced some unique challenges during our fiscal third quarter, in particular the powerful winter weather storm that impacted the Valentine holiday.

I (inaudible) [for reiterating] Jim's accolades for all of our associates throughout the Company, particularly our customer service agents and dedicated social media teams who worked tirelessly throughout the holiday to help us deliver (inaudible) of smiles for our customers throughout the country.

I'd also like to add a big shout out to our BloomNet florists around the country, many of whom braved sub zero temperatures and ice-covered roads, to deliver smiles for our customers, even in some of the hardest hit regions of the country.

Importantly, it was BloomNet, with its focus on the very best local florists, that enabled us to pull forward thousands of orders for early delivery when we saw the storm coming, and it was those very same BloomNet local florists that enabled us to fulfill thousands more orders that would not have been delivered due to the -- due to the third party carriers whose operations were shut down by the snow and the ice.

BloomNet's unique business model and capabilities helped differentiate us from many of our competitors and we believe provide the significant growth opportunities we continue to increase our market penetration versus the old legacy [live] services. As we move into our fiscal fourth quarter we are already in full Mother's Day holiday mode throughout the Company.

Once again, we'll be leveraging our leadership position on the social front with our new hashtag My Mom campaign featuring sweepstakes with daily prizes. On Facebook we are encouraging our fans to tell us about their moms and all the reasons they are special as well as giving them the ability to post photos of themselves with their moms.

On Twitter and Instagram we're seeding questions all revolving around celebrating moms. We're even having a Twitter party, with hashtag All About Mom during which we will be awarding prizes randomly for customers posting about their moms.

On the product front, we're allowing our customers to curate our product offerings and create mom approved gifts, such as our Cheryl's Mother's Day cookie flowers, delicious bouquets of 12 long stemmed buttercream frosted cut-out cookies delivered in a real florist box.

Our Fannie May chocolate dipped strawberries, dipped in real chocolate unlike many of our competitors, and packaged in special Mother's Day gift wrapping.

And our expanded offering of [personalizable] gifts such as our new picture frames, decorative platters and mugs as well as our unique personalized vase, which allows a customer to upload a photo from their desktop, Facebook or Instagram and add their personal message and select a floral arrangement to create a truly personal gift for mom.

Looking ahead, we're excited about the opportunities we're seeing across all of our great gift brands. We believe we are well positioned to deepen our relationships with our customers as their destination for truly original gifts. I'll now turn the call back to Jim.

Thanks, Chris. Having completed three quarters of our fiscal year, we are pleased with the progress we've made in a number of key areas. We have successfully addressed the operational issues that we faced last year in Fannie May and that business is now poised to accelerate their growth.

Our gift baskets business, which rebounded nicely over the last two years, continued to do well. Based on early indications from our expanded list of customers, we anticipate [for] further growth in fiscal 2015. Our new [food] bouquets business is gaining ground as it expands its coverage across the country.

Importantly, customers are telling us that they really love the product and view it as a perfect complement to our expanded gift offerings. We continue to be excited by the opportunity to take market share in this business as well as participate in the growth of the overall category.

We have expanded our gift offerings across all of our brands to include increased personalization capabilities and a broader range of price points. These are the kinds of products and services that our customers are telling us they need to help them connect and express themselves more frequently and with more of the people in their lives.

These products (inaudible) featuring uploaded photos to personalized jewelry to customized plaques and mugs are also helping us attract a new and younger customer demographic to our brand [through] our social and mobile engagement programs.

As we look at what continues to be a challenging economic landscape, we believe we are well positioned to accelerate our top and bottom line growth in the years ahead and grow our market share in all three of these business segments. We do this by continuing to focus on those aspects of our business that we can control, including our merchandising programs, marketing messages, as well as our initiatives to enhance operating leverage across the platform.

We have the advantage of a strong financial position, with no debt and a good balance sheet, growing cash and a cost efficient access to capital.

This enables us to drive future growth through interim investments, such as the expansion of our Cheryl's baking facility, our category leading innovations in mobile and social and our unique technology solutions for our BloomNet florists.

It also positions us well to grow through M and A should opportunities that can expand our existing product offerings and deepen our relationships with our customers present themselves.

To wrap up, we remain cognizant of the uncertainties in the overall economy. With that said, we are heartened by the recent uptick in consumer confidence and we are confident that our strategic focus will enable us to build on the progress that we've made over the past several years to achieve accelerated top and bottom line growth in the years ahead.

Now that concludes our formal remarks. I'll ask Sam, our Operator, to regive the instructions on how to participate in the Q and A portion. Sam, would you do that now?

Thank you, sir. (Operator Instructions). Our first question comes from Jeff Stein of Northcoast Research. Your line is now opened.

Good morning, guys. First a question for Bill. Bill, I'm wondering if you could just talking about a little bit about your change in free cash flow guidance. It's a pretty big drop, it seems, to go from an estimate of $20 million to $10 million to $15 million, and that's just over a three month period. So maybe you could take a little bit about what changes you see on that front.

Yes. Jeff, you see from the -- from the release this morning our free cash flow for the first nine months was a little over $9 million. But we anticipate -- we are adjusting the guidance a little bit for the results of the third -- third quarter and the severe impact that -- the severe winter weather and the impact take had on us.

And what we're -- we're looking at is the potential for some inventory investments that we will make with respect to our gourmet food and gift basket division toward the end of this fiscal year to help spur growth next year as we secure some wholesale orders during the fourth quarter.

A little color on that last point, Jeff. We already see orders from some of our third party customers for our gift food products coming in, and requesting much earlier delivery dates into their system. So that's forcing us to plan to build inventory earlier than we would have, say, last year so that build in inventory is going to leak into the fourth quarter from the first quarter last year. So some of that change in cash is devoted toward the inventory to achieve that build to meet those orders for next year.

I see. Okay. That makes sense. As far as -- could you talking about a little bit about the Cheryl's plant expansion and where you stand on that and maybe some of the expected benefits you would expect to achieve in fiscal 2015.

Sure, Jeff, this is Jim. I'll ask Chris to follow up on this. But what you see is, we have a business that's been doing well for along time [there]. It's still a regional brand, increasingly growing its footprint of customers beyond the Ohio and Midwest area. The programs we've introduced there with the increased range of price points, the cookie clubs we've introduced, all of it doing really, really well.

So we're running up against capacity issues there. Anticipating that business will continue to grow, we've decided to make the investment to double its baking capacity, and that's well underway and we expect to have that come online this fall. Chris?

Yes. We're full swing in construction mode and just continuing to move forward there. Like Jim says, (inaudible) summer, early fall we've bringing that online and we'll be producing with the new capabilities. We think it really helps us to start to position [it]. It's just that it's not only doubled as a baking facility but we believe it enabled us to double the size of that business over the coming years.

Okay. And the doubling of capacity, if I recall, Chris, that's over several years, it's not just going to happen for the upcoming year, correct?

That's correct, Jeff. What we'll do is, we're kind of building the shell and then we'll be adding the equipment and capabilities in commensurate with growth.

That's right. But Jeff -- so Jeff we'd be adding, over time, three additional baking lines into that facility. One will happen this -- this summer into the fall and then the second and third will happen as the business grows.

But those two additions, those second and third lines of baking capacity, will have a much lower capital cost because the building is already there, all the infrastructure is there, it's just the specific equipment for those lines in the year or two ahead.

Okay. And final question I would have, guys. It relates to your multi-brand portal and if you could talk about where you're at on that? Have there been any delays? And do you expect to see any benefits in the upcoming fiscal year when you flip the switch?

I think what we've been last saying is basically that we look at most of the technology development work being completed this summer. Then that gives us the ability to start to layer in the marketing programs into that.

What we continue to see is the -- as we continued to move in this direction in different tests that we've been doing are showing benefits of where the increased traffic and or increased conversion to our food brands. We're seeing our best customers continue to not -- to continue to add the family of brands into their purchasing history, thus increasing the lifetime value of those customers across the Company.

So early signs are continuing to be very encouraging. The development work is continuing on schedule, to be completed this summer. And we would hope that we start to see the benefits of that as we move into fiscal 2015 as we start to really enable the marketing program behind that.

And, Jeff, this is Jim, I think every indication we could anticipate in terms of customer performance, their share of wallet, their -- [as they've been] pleased with the new products they're being introduced to. Every one of those tests has said -- screamed that this is a good thing to do.

I will tell you there's some frustration that it took us longer to get here than we would have liked and Chris had to make a lot of organizational changes in the last year or so to make sure that we got back on track. So, yes, we can see the light at the end of the tunnel and we're quite certain that it's not a train.

Okay. Thanks a lot.

Thank you. Our next question comes from Dan Kurnos of Benchmark Company. Your line is now opened.

Yes, great. Thanks. Good morning. Just maybe, again, a high level question here. Maybe this, I guess, could be for Bill. I don't know if you'd be willing to break out, specifically, what the Easter shift impact was just on the gourmet food business alone.

And then, sort of as a follow-up to that, just how you guys feel about if you had not had the weather impact, if you would have been able to achieve your initial guidance this year.

I'll ask Bill to give you the specifics on that but we quantified two things. Bill will cover the bottom line. Top line, we said was in excess of $10 million and that was a combination of Valentine's Day and the Easter shift. And the Easter shift is disproportional.

We won't break out the specific numbers but it's the -- the food [businesses] are disproportionately effected by the Easter shift. Anecdotally, and I'll hand it to Bill, January was a tough month. Weather wise it was just brutal. And then it started to get good right before Valentine's Day, the two weeks before Valentine's Day.

Business really looked like we were on pace to have a very good holiday, and then the 13th the whole east coast and part of the midwest got smacked by ice and snow storm. So, as Bill mentioned, as Chris mentioned, we did all this spending to have the business, the trend lines looked good and then we got smacked.

Now, I will tell you that after Valentine's Day -- Bill, I think we could say the trend lines returned to normal and have been good since then. Would that be fair?

Yes, that's right, Jim. So just getting back on a couple other points. Easter, as Jim mentioned, north of $10 million in revenue and, as Jim was referencing with the disproportionate, it's high margin, high gross margin, high contribution margin, business that shifts from Q3 to Q4 because it's all e-commerce or it's a brick and mortar retail, which has higher margins. So -- so that's why we (inaudible) the big shift in (inaudible) profitability as well.

Because of our [vertical integration] in those products.

Right. With respect to the impact of the winter weather on -- and Valentine's Day -- really the weather impacted, as Jim referenced, starting in January. So (inaudible) back in December. But, really, in this quarter -- really in the month of January as well as the much publicized Valentine's Day holiday.

The impact of that alone just kind of -- the weather issues we faced was the difference between us reporting positive EPS and the loss of $0.02 that we've reported. I think we did a pretty good job of mitigating some of the impact of -- without that savings elsewhere in the Company.

But the nature of the quarter, with only the one holiday in the quarter, with the shift of Easter into the fourth quarter resulted in that reduced revenues that you saw.

Got it. That's really helpful. And to that point, I think that the 1% growth in consumer floral was -- given the situation, probably better than most were expecting. So I guess the one thing I did want to follow up with you, Jim, on was you actually have had decent growth other than the -- sort of the [non] important quarter.

So -- but as we look to the margin side, you had nice peak margins last year. It's kind of come off. I'm just wondering if there have been -- are there any changes in the competitive landscape? Or is there's anything specific that you guys are doing to maintain or grow market share that could be impacting that line and when we might see sort of a return to the peak margins?

I think from a margin perspective, what Bill said was that we were on track for having a good margin quarter this quarter, and we've expected a return in this fourth quarter to our traditional margin levels. Bill, anything?

Yes, I do think -- first and foremost, we do believe that there is room to grow our gross -- our gross margins, and for the year our gross margins will be up in fiscal 2014 over fiscal 2013. As for the impact on the quarter, the lower gross margins that we saw in the consumer floral brand and in the gourmet food and gift basket segments were really primarily related to Easter, where I talked about before kind of the shift of the high margin products from Q3 to Q4, as well as, really, the impact of weather on the -- on the quarter, especially around the Valentine's Day holiday.

Got it. Great. And then just last one from me. It's something that's kind of been under the radar. It gets talked about a little bit. Maybe talk a little bit about your partnership with Amazon and their Fresh program and how that's developing, what you see it can contribute and sort of what your thought process is as you develop that relationship.

I think, first and foremost, we have a tremendous amount of respect for Amazon. So any time there's opportunities -- as we've been working with them as a merchant in their marketplace, we've been selling product on Amazon for a while. When given the opportunity to work with them on the Amazon Fresh program, we took it. It's a -- it's a small piece of the business but it gives us good partnering capabilities to see where that business might develop as they expand the Fresh program.

All right. Great. Thanks, guys.

You bet.

Thank you. Our next question comes from Eric Beder of Brean Capital. Your line is now opened.

Thanks.

Good morning, Eric.

Good morning Eric.

Hi. Could you talk about a little bit about -- in the last conference call you talked about the $5 items. I know this quarter is not a huge kind of quarter (inaudible) but how does that [flow] into this quarter in terms of its broadening out the business here?

Well, you know, we view that lower price product opportunity to expand the range of our customers, attract more youthful customers, bring them to our franchise earlier, expose one set of customers to another brand, and we're doing that in each of our product categories.

Eric, it's more mature in our Cheryl's product because we started there probably two and a half years ago now -- two years ago, certainly.

But Chris has charged each of our brands with developing a line of introductory price points so that we can as -- especially as the multi brand platform comes online, we have more and more cross brand pollinization exposure opportunities. So it didn't have a particular impact on this quarter but we see it having an impact on our business every quarter in a very positive kind of way and we'll continue to deepen those efforts.

Yes. The key focus there on an ongoing basis is utilizing that kind of product for the Just Because reasons in everyday life, and it gives us the ability to deepen our relationship with the customers and just to increase their purchase frequency with us, in addition to, as Jim pointed out, attracting a different demographic, a younger audience as well.

I think one data point on that is that we mentioned we had 675,000 new customers, down about 1%, but despite the shift in Easter, despite the weather issues that we had, we still attracted a relatively good [crop] of new customers year-over-year and I think the lower price point items helped contribute to that.

Yes. Good point.

Actually, in talking about that, the website now has all the tabs and other pieces. How are you seeing customers take advantage of that and ordering from multiple brands and multiple locations and that? Is that something they're getting used to and starting to see more of here?

Yes. I do think it is something they're getting used to. My comments earlier, the real tech development work around that will complete that summer and that then enables us to really start putting more proactive marketing efforts behind inducing that type of behavior that we're looking for from our customers.

So, to this point, it's really just watching customer behavior on their own as they see the products, they're exposed to the different brands, et cetera. Again, what we're seeing is our best customers are not decreasing.

If you just take an example, the best customers of 1-800-FLOWERS brand, we're seeing them by no means decrease their floral purchases but just increasing their purchases of our other products and brands, and they're, ultimately, driving what we're after, is driving a higher lifetime value across the customer base.

Okay. And, finally, as you mentioned, all these holidays are coming up. What is your thoughts about advertising spend in terms of where you're going to put it? Are you going to do TV this year? How should we think about advertising rates going forward? Thank you.

I think as we look at it right now we're in the Mother's Day holiday, so Easter and Administrative Professionals Week is behind us. And we've continued to really have a strong focus on where we're putting our marketing dollars, constantly -- as we move into a very analytically driven marketing approach, constantly testing, iterating and deploying.

So you'll continue to see us do that. You'll continue to see us move the shift. Certainly radio has been a good program for us over the years, display advertise has been -- and actually just constantly working in search and SEO optimization.

On television, from time to time, you'll see us do a little bit of that at holidays. We are on air during this Mother's Day holiday. Constantly looking to see where we get the best return on the dollar.

And it's all about the message.

Okay. Great. Thanks and good luck.

Thank you, Eric.

Thank you. (Operator Instructions). Our next question comes from Anthony Lebiedzinski of Sidoti and Company. Your line is now opened.

Good morning. Just wondering, as far as the customer credits, I understand that it was a very difficult Valentine's Day period because of the weather. Is there any way that you can perhaps quantify the level of customer credits that you issued this year versus last year?

Anthony, I think -- I think, having been doing this for a long time, I think I can predict that every ten years we're going to get smacked like this. It seems to be the pattern. As Bill was just saying the other day he's been here for 17 years and that's -- and he's seen it, too, those Valentine [eruptions] occur.

So that's been the trend. The impact is two. One on the top line. You saw the overall impact on the quarter. And that we would attribute to the two things. The $10 million or so related to the Easter shift. The balance would be the Valentine impact.

As we said, we spent all our marketing dollars. We spent all our efforts on product and preparations. And then when you lose your revenues for that 13th and 14th -- and that's going to cause you a credit issue, too. Good news is we took is care of our customers in a way that it was transparent.

I think we're uniquely -- unique in that position in our category, and the way that our customers have been giving us good credit for. Bill, any color you want to give to answer Anthony's question --

Yes. I would say about half of the margin (inaudible) was due to the credits and the weather-related issues that we had. The rest was really kind of the shift of Easter and the higher margin items that we had.

That's very helpful. And also, looking at the iFlorist business, is there an opportunity to improve margins in fiscal 2015 for that segment?

Anthony, there is. It's a very small business. This is Jim. It's a very small business but one that we think has great promise and opportunity. So we just put our arms around them in December when we moved to majority position in our Company. So we think two things.

They have very small, very light margins now so the reason we felt comfortable stepping up there is we see a path to quite a good business there, with margin improvement, with top line growth, with product diversification. So the reason why we felt comfortable doing that is we think all of those things can and should come through in the near term.

Alright. Got you. And then can you give us just more details about the pricing initiatives within BloomNet?

You can see Bill's really interested in doing that.

BloomNet has a [mix] of products. We've talked about it in the past. There's some high margin products with regard to membership fees, advertising, web hosing, et cetera. And then we have some of the -- some of the more boring, wholesale and everything else, the every day products that -- that we have.

So the low margin things we need to do because it's good for our (inaudible). It provides the customers with the right product mixing there. But I think what you're referring to there, Bill, is introducing this new software management system. We put the development work into that. But we're really selling the software as a service there to our customers.

It has higher margin because you have all of these development costs on the front end. And then when the -- your flower shop operators, your BloomNet members can operate their business on a wireless platform, on a cloud based system using an iPad as both the point of sale device, as a selling tool, as an access to our other products, it really does open up a whole world of opportunities for our BloomNet members. And that's a higher margin business. I think -- Bill, is that what you [getting] to?

Yes. That's right.

Okay. That's helpful. And lastly, I just wanted to clarify the lower wholesale orders that you had in your GSGB segment. Is that entirely because of the Easter shift?

No. I would say that what happened was, with our operational issues last year, Anthony, particularly in Fannie May, the good news is, we fixed them and it worked well this holiday season. And that, frankly, there's more we can do but we got back to a good operating platform.

We have a team that has plans in place to make it even better as we go forward. But it returned to a very good operating platform that worked well this holiday. But we disappointed some third party customers last year who, this year, said we're going to wait and see and make sure you fix that business. So I think that would be the difference. So we fully expect that business to return in 2015 because we've proven ourselves this year.

Got it. Thank you very much.

Thank you. Our next question comes from [Michael Kupinski] of [Noble Financial]. Your line is now opened.

Hi, how are you. This is actually (inaudible). And thanks for taking the questions. Most of them have been asked but just in terms of (inaudible). I know you discussed it a little bit but can you maybe update us on the coverage there? Are you close to that 50% mark? I know that above 50% you start to advertise on a national level. Can you just give us a quick update on the coverage?

We have worked -- in terms of coverage, we will -- I think our next call would be the more appropriate time to do that, consistent with what we did last year. We're continuing to make steady, slow and steady progress on our coverage.

We're looking forward to getting to the point when we think we can begin to advertise that product because we have sufficient coverage. But I'll give you an update on our next call on where, specifically, our -- last summer we told you we were nearing the one third mark and we'd be over it by the time we did that call, and we'll update that in our next quarterly call.

Again, we continue to be [encouraged]. Our customers in the markets where fruit bouquets are available have been overwhelming positive in their response to the product. And we continue to believe that there's a significant opportunity for incremental sales growth in this category.

Okay. Great. Thank you. That's it for me.

Thank you.

Thank you. And at this time I'm showing no further questions. I'd like to turn the call back to management for any closing comments.

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.