Q3 2020 Earnings Call
[music].
Good day and welcome to the one 800 flowers dot com.
Pre 2020 results conference call.
All participants will be in listen only mode.
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After todays presentation there'll be an opportunity to ask question.
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I'd now like to Kinda conference over to use Joseph Pititto.
Your Vice President of Investor Relations. Please go ahead.
[laughter]. Good morning. Thank you for joining us today is it's just wondering as long as dot Coms Inc.'s financial results for fiscal 2023 core.
Those of you know when she's a copy of our press release issued earlier. This morning, the least can be accessed at the Investor Relations section of our corporate website and what are your flowers Inc. dot com.
Oh coal could they will begin with brief formal remarks, and then we'll open the call to your questions.
I think today will be Chris Mccann, CEO and Bill Shave CFO.
Before we begin I need to remind everyone that some of the statements that we will make today maybe forward looking within the meaning of the private Securities Litigation Reform Act I'd like you might get far.
These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements.
A detailed description of these risks and uncertainties. Please refer to our press release issued this morning, as well as Rusty see filings, including the company's valuable forward 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 of obligation to update any other forward looking statements made in today's call and recordings of today's call press release issued earlier today or any of the charts you see Farley, except as maybe otherwise stated by the company.
I'll now turn the call over to Chris Mccann.
Morning, everyone. Thank you all for joining us this morning.
I'd like to begin certainly by acknowledging the unprecedented in extremely challenging period, there all living in as a result, as it's called the 19 crisis.
Sure that many of us on today's call knows someone or even a family or friends, who softened during this pandemic harsco out to them, especially those who also.
I'd also like to recognize all those people working on the for a lot.
This crisis they are truly truly our heroes.
How do you view around him off today, we had a strong third quarter.
Oh, the challenges we face holding price it said in the patent last few weeks dispute I'm proud of the way our team is being used to respond to these challenges are moving rapidly hedging the health and safety. So she is managing our supply chain.
As we ended the physical well bore well we've seen it here are used for a long hours and especially I called <unk>.
The man acceleration has continued.
In April and you'll hear more about this later on the call. This what.
In terms of fiscal third quarter, how solid results for the period reflects a continuation of the momentum that we've seen throughout the year double digit consolidated revenue growth. We achieved was driven by increases across all three about business segments, you know gourmet food and gift baskets segment strong 27% growth.
Reflecting continuing positive trends in everyday gifting occasions, and increase self consumption as well as contributions from Sharis berries, which continues to perform ahead of expectations importantly, we saw a customer demand growth throughout the quarter and accelerate into our current fiscal fourth quarter Harry <unk> David.
It was cookies the popcorn factory, one 800 baskets, wolfermans basically stockyards and simply chocolate its customers have increasingly turn to our extensive been highly relevant product offerings, helping to stay connected and express that feelings during this difficult time.
Consumer floral segment, one 800 flowers brand continues to extend its market leadership, well double digit growth during the key Valentine's day period.
Revenue growth and contribution margin for the quarter. In this segment would have been even stronger where it's not for the softer consumer demand in the last few weeks of March what we saw the impact of the Covance 19 crisis. This first to perform and limitations on gathering specifically occasions, such as ways and fuels every strips.
She's on deliveries to hospitals, we get well occasions importantly, as we entered the current fiscal fourth quarter. We've seen this pattern reverse itself as customers are adapting to the new environment. That's sitting gifts for these occasions in many more to that recipients halls.
As a result, we are seeing customers increasingly turning to the trust one 800 flowers brand to help them express themselves and stay connected for holiday occasions, such as Passover unused to as well as for everyday occasions, we're seeing similar patterns. It up when that business, where we continue to grow market share position during Q3.
Solid top and bottom line results for the quarter that would've been even stronger well, it's not for the impact of the Colby. Thanks crisis.
Yeah, we're keenly focused on working closely with independent vocal forest across the country to support that businesses and help them, whether the current challenging environment.
Before I ask bill to shift some insights on a quarterly results are we affirmed guidance for the year I think it's important to note that as we navigate these trying and uncertain times, the health and safety about thousands of associates across the company I'll Bloomnet florist across the country, I suppliers and vendors and our cost.
<unk> is paramount to us.
We have made and continue to make necessary changes across our operations with facilities, including manufacturing warehousing and distribution to provide for the safety and well being about associates, while maintaining our business continuity.
Well well positioned to respond to the consumer demand for our products as evidenced by the growth. We saw an alcohol may fluid and gift basket segment during the third quarter.
We will continue to be agile and maintain our ability to leverage our labor and manufacturing capacity, while simultaneously managing our supply chain.
Overall, we are well positioned to meet the challenges of this environment by leveraging our operating platform that we've built over the years combined without diverse product line and deepening relationships with our customers.
Remain committed to our mission to engage with customers to help them expressing connect sentiments that are more important than ever in the current environment.
Now, let me turn the call over to build to share his insights and all that result, and discuss the drivers behind our outlook for continued growth Gulf.
Chris We're very pleased with our strong results for the fiscal third quarter and for the first three quarters, while fiscal year.
Well there was significant uncertainty in the overall consumer environment to cope with 19 crisis, we've seen very strong E commerce demand or make prudent gift baskets analog products holidays and everyday gifting occasions.
As Chris noted, we saw solid ecommerce flow throughout the third quarter, including a strong Valentine's day holiday.
As we ended occurring fiscal fourth quarter, we saw an acceleration of the man Easter holiday NPV and this continued throughout the month of April.
As we look forward, we expect ecommerce demand trends remain strong.
That said there was some headwinds that will affect us and the current quarter and the future.
These include cost associated with the closing of our retail stores and took place in March in accordance with state and local regulations.
Indicates what have you name it retail stores, we recently made it difficult decision not to we opened 38 39 locations.
As an aside hunky village store in Medford, Oregon remain open.
This will result in a onetime charge and all fourth quarter for employee costs. These obligations and all the store closing costs.
In addition, we've seen a reduction in a wholesale business. This will impact on a fourth quarter within our own that gourmet food and gift baskets segments.
Additionally, we anticipate reduced wholesale orders or the yearend holiday season as a large wholesale customers are taking a cautious approach to the uncertainty surrounding the impact of over 19 prices on the overall consumer economy.
We've also waves certain fees, while doing that members for the month April help them, whether over 19 crisis.
Lastly.
We are seeing some increased cost associated with the changes we have made and continuing to make toll manufacturing warehouse and distribution facilities to provide for the safety while being about associates.
These include quite social distancing enhanced facility cleaning <unk> sanitizing schedules and staggering production shifts among other changes that have an impact on our overall operating efficiencies.
With that said the strong E commerce demand that we are seeing across all brands is offsetting to produce revenues and these other channels as well as the incremental cost impacts.
As a result, we are reaffirming our guidance for fiscal 2020.
I will discuss in a moment and we continue to see opportunities to grow our business going forward.
Now breaking down some of the key metrics other third quarter.
Total consolidated revenues grew 12.2% 278.8 million have a 248.4 million in the prior year period.
This solid revenue growth across all three of our business segments.
The call me gift baskets up 27.1% consumable up 5.4% Bloomnet, calling 7.9%.
Importantly revenue growth in all three segments during the quarter affected the initial impact of the Kogan 19 crisis.
Go make wouldn't get baskets ecommerce demand was up strongly at the end of March as much of the increases related to the Easter holiday most of which ship and was recognized in April.
In consumable fall before dipping at the end of March revenues were up approximately 9% throughout most of the quarter, including strong Valentine holiday demand.
And then Bloomnet revenues were up more than 10% throughout most of the quarter before dip in the last two weeks disappeared.
Yes.
Consolidated gross profit for the quarter was 38.5% down 80 basis points compared with 39.3% in the prior year period, primarily looks like in product mix.
Operating expenses as a percent of total revenues improved 270 basis points to 42.4% compared with 45.1% in the prior year period.
It's primarily reflecting the strong revenue both in the theory combined with the benefit not backs on the company's nonqualified deferred compensation online game plan.
The combination of these factors resulted in improvement of 45.5% in adjusted EBITDA loss for the quarter to 2.4 million compared with 4.4 million in the prior year period.
Net loss for the quarter was 9.7 million or loss of 15 cents per share.
Excluding certain costs related to the company's planned acquisition a presentation mall adjusted net loss for the quarter was 9 million on adjusted loss at 14 cents per share compared with a net loss of 8.2 million or a loss of 13 cents per share in the prior year period.
In terms of corporate expense.
The fiscal third quarter corporate expense, including stock based compensation improved to 21.4 million compared with 25.2 million in the prior year period.
The improvement is related to a 3.9 million dollar year over year impact associated with the company's nonqualified occurring on compensation plan.
Turning to our balance sheet and ended the third quarter, our cash and investment position was 232.1 million.
Turning that balance that as deferred financing cost was 93.6 million and we had zero borrowings outstanding under the working capital line within all evolving credit facility.
As a result total net cash at the ended the quarter was 138.5 million.
Inventory of approximately 74 million was in line with our expectations.
Regarding guidance for the full fiscal year.
As I stated earlier, we are reaffirming our guidance for the fiscal 2020 full year.
This affects this continued strong growth that we have achieved through the first three quarters of the year combined with the strong E. Commerce demand that we have seen to the first four weeks of the current fiscal fourth quarter.
These positive trends are more than offsetting the headwinds that I mentioned earlier.
As a result, our guidance for the year is as follows total consolidated revenue growth of 8% to 9% compared with the prior year, including approximately 6% to 7% organic growth combined with the contributions from the Sharis berries Brad.
EPS growth.
And the range of 15% to 17% adjusted EBITDA growth in a range of 13% to 15% and free cash flow for the year in the range of 45 to 50 million.
As we noted in our press release this morning, our guidance EPS and adjusted EBITDA for the year exclude certain onetime cost associated with the decision. We made this month not to reopen Irene David retail stores and certain costs associated with the planned acquisition personalization mall Dot com.
Now I'll turn the call back to Chris Textural, so to sum up we've seen strong growth momentum continuing through the first three quarters about fiscal year, we achieved solid revenue growth across all three of our segments during the quarter growth as Bill noted would've been even stronger for us not to the impact of the Cobiz 19 crisis.
Two weeks of the period.
Through the first four weeks of the current fiscal fourth quarter, we've seen strong E commerce demand across our brands as customers, both new and existing.
Turning to our expanded product offerings to help them express and connect.
As we look ahead the scale and overall economic impact of the crisis is still very difficult to assess was that said we are well positioned to continue to grow our business as a company with a focus on inspiring and enabling people to express and connect well well positioned for the current emerging consumer.
Sentiment.
This coupled with our platform our product diversification, our ability to engage our customers and a highly experienced management team give us confidence in our ability to manage our business is unprecedented and rapidly changing environment.
We remain focused on three key elements about business strategy, taking care of the health is previewed our associates Bloomnet florist and our customers.
Maintaining our financial strength and flexibility that continuing to invest in areas of our business that will help drive future growth.
Before I turn the call over the salad and begin today I'd like to thank all of our associates for their dedication and hard work during this incredibly challenging period.
And that is it is their commitment it's their innovative thinking that enables us as a company to engage with our customers to help them expressing themselves. They can that system is that or I'm increasingly important during this difficult time.
Eric Please repeat acuinova instructions.
Thank you will not begin the question answer session.
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At this time, we'll pause momentarily to assemble Iraq there.
My first question comes from L. experimented with Craig Hallum. Please go ahead.
Great. Thank you very much for taking my question and and certainly a you know wishing everyone. At one 800 flowers out down New York and around the country are all about the during these tough times I wanted to ask about the you know how how your business has progressed over the past dictate weeks it sounds like a business kind of got softer there.
Our in late March and is now come back in many regards is stronger than before can you kind of walk us through how that's impacting the different brands I mean, it with you would seem like you know gourmet food floral and certainly your foods brands kind of range from from suite. The prepared meal I'm. Just curious you know how each of those.
Brand has performed it again in March and then in April and then you know how how you're expecting them to perform in your fourth quarter.
Great Alex I'll take a started that and then bill could you know chime in as well as he sees fit.
No. If you look back when this really started to hit a thick first thing we noticed was Oh food brands and that's one of the things that we're really proud of is the product diversification that we have and how well positioned we offer different impacts to our society in our economy. So our food brands started performed well as soon as a crisis started the head and its just.
Really accelerated says that the floral brands are really did you know took a hit in the first couple weeks. So the crisis really those last two weeks or so much. So we were scrambling as we're trying to manage that Neil put out the fires that were happening across the company, a and again rapidly rapidly changing.
So your management team meeting a couple of times, a day on regular basis and things change it by the hour or so some.
Crazy times, but not as we've seen business continue the floral business then started to pick up really as we moved into April and it's been really accelerating since then and again for all the different reasons that people are looking to express and connect as a society. When we go into this form of isolation, we really you heard for those.
Connections and we're making all of these efforts disconnect. So our product line, both floral and food brands are getting their consumer sensor perfectly.
And as you build your wasn't trying it from there.
Yeah, My only point, Alex on top of that I'll talk because his comments would be so we weren't package at the end of the third quarter often to Mclauchlin Bloomnet kinda indicated that in my formal remarks that we were trending no consumables was 9% growth and and Bloomnet double digit growth before the last the last two weeks of March.
As Chris mentioned, the food brands did get a benefit almost immediately but a lot of that was Easter demand. So that didnt really ship out until April so while we got some benefit in the third quarter. Most of the benefit that we saw immediately from the food brands is really going to be you'll see in the ultimately in the and you know in the fourth quarter and as Chris mentioned, there was a nice rebate.
Roundup consume a flaw almost at the they're trying to the calendar on April 1st that's you know on the Congress side and you know even if we look at haven't David.
All right you know with the stores being closed and as we moved into March no that that you know certainly put it on revenue, but with Harry <unk>, David we've been shifting so must be in ecommerce business anyway, and that's where we're leaning into the strength that we see all in all the on it and Harry <unk>, David business I would say really started showing strength earlier on then followed by.
Isn't that popcorn factory in one 800 baskets and they're all really the E. Commerce demand is is outpacing our ability to keep up with it at this point.
Great. That's really helpful. And then if I could just after the as a quick follow up all the strength you're seeing it and how are you gave in in the other gourmet foods branded has that been primarily your existing customers ordering more frequently and bigger you're getting a lot of new customers coming into those brands as well.
Sure I'll see if it's a combination of fault.
There's a new customer growth is really really strong, but so is existing customer activity passport customer activity has been fantastic. So.
So it was seen across the board no. If we look even a Q3, we have new customer growth in Q3 of 30%. That's accelerated since then so it was you know what we're seeing happening to our customer file really positions us well as we move forward.
Especially what we're seeing with passport multi brand customer behavior.
Really striking a customer file.
That's really helpful. Thank you very much huh.
Thank you.
Our next question comes from Dan Marino with the Benchmark company. Please go ahead.
Great. Thanks, Good morning right.
Chris maybe you can make maybe you can just go go a little bit deeper on your comment for in sort of the marketplace and I think people are looking at E. Com right. Now we had ebay out last night talking about sort of a tailing off of trail when a tailwind excuse me a and I'm just curious sort of what you guys are doing too.
To maintain the or maybe the influx of customers are the tail when that youre seeing so incremental incentives or what you're doing to make sure that you retain a it sort of the bump that you're seeing in the in the marketplace right now and then secondly.
Maybe what you're seeing from a competitive standpoint, our your competitor struggling more in this environment as its helping you build your lead build that mode that you've been doing for pretty much. The last 24 36 month.
So 30 day, they look at what's taking place in the marketplace I think first and foremost we'd look at a consumer sentiment and not necessarily consumer confidence. So we're going to go through some challenges, which you can tell MACOM sipping as the economy struggles with it but overall consumer sentiment.
There's a.
Good news really moved to a place that fits our business and fits our vision of inspiring people to connect in express we expect that to be a lasting change coming out of this crisis is you look at yields different crises that we've gone through.
This is one that's affected everybody a it was really so so being well positioned differently that consumer sentiment plus all the other capabilities of our company I think were good position to sustain that as we look at what were doing to do so you're feeling right now with emissive ramping up although a little affordable side, but also on the call me.
Food side of the mother's day holiday and then moving beyond that no, we're saying that we need to be less promotional than we have in the past.
And we've seen the ability to lead into our marketing efforts, because we've seen good efficiency and effectiveness or what else talked about the customer acquisition rates that we're seeing and then the repeat rates that we're seeing from our customers is really giving us the ability to read into that the you know both as we move into the mother's day holiday and then coming out of the mother's day.
Holiday, we see great growth opportunity. So we see this is this sustainable sentiment that is well positioned for our businesses and our ability to stay with that.
Have you seen any uptick in passport usage as a result of this are you trying to funneled people more into that program.
And then just maybe if you could also update us on where we stand on the people that would be helpful.
So on your first on this past fall, yes, we're seeing great uptick on volte people signing up to passport.
As well as to passport utilization from Youre purchasing from passport members.
As an increasing percentage rents overall active customer base. So that's growing very nicely just as we're seeing the overall customer file continue for us.
Again, with new customers coming in existing customers et cetera. So we're seeing really good participation. There as we look at a competitive said Oh, you know nothing anything special on the competitive market and again for us what we do especially being the leader that we are we focus on our brands, we focus on our customer experience on product.
And I think the product diversification is a key element from a competitive positioning point could you talk I suppose to building or the fact that when we move into if we move into a time period, where the economy will be softer our food businesses will perform better than a flow most likely which is very different from where we.
Back in the always Teledyne crisis in the financial crisis back then so you know again, we're very confident where we stand today in our abilities. The product line that we bring to the customers to the consumer sentiment that's out there in the world driving two in E Commerce World, which is again consistent with the decisions that we've been Nick.
Okay and Pmall, Chris are you say there yeah.
Well the update as you saw a statement that we filed back in April one on litigation was commenced on this transaction is unfortunately, all that we can say at this point there because it would be responsible others to comment beyond that statement that we put out due to the fact that were in current litigation.
Understood. Thank you.
Correct.
Our next question comes from Anthony Lebiedzinski, Let's see what ends up getting please go ahead.
Yes. Good morning, Thank you for taking the questions. So Chris you mentioned that the.
When you look at your business now versus the last recession of 2008 2009.
You have a very strong.
Oh, so I.
He is that what gives you confidence and conviction that you can maintain your guidance.
Just just again for those who may not be as familiar to you know business, but just looking at your business now versus the last recession.
Just wanted to get your.
Conviction level is to your ability to maintain guidance.
Yeah, I think it's a couple of things after it certainly is the broader product line that we have out the gives customers bought more and more opportunities for us right.
For us this holiday gifting needs I think it's a combination also these different this sentiment that exist in the marketplace. Today I think it's it's a combination of that way as we look into quarter, specifically and we look at you know some of the challenges that we had in the quarters go reference with you the retail stores being closed or a wholesale businesses no taking a bit of.
Hitting a quarter being completely offset by the strong E commerce demand that we see a sustainable Oh it gives us all the confidence to reaffirm archives fill any other color on the guidance.
[noise] definitely.
Now with respect to you know.
Fourth quarter and you know beyond is that the E. Commerce is strong and offsetting the abetted by far our biggest channel.
And Ah you know that's a that's very strong right now and that's offsetting the.
The downside in wholesale and retail with regard to you know the impact of the you know of though you know you know recession. The Atwood built up a very strong balance sheet that ensures kind of our financial.
Stability and flexibility and we have the management team that is really Matt and whether you know challenging economic environments for a and knows how to react and plan accordingly in the men and women and we've been doing that you know over the you know over the last you know over the last six weeks, we feel very comfortable that we're going to be able to weather.
Any sort of economic downturn.
<unk>.
And would you say the competitive landscape now versus the last recession is more.
In your favor.
Yeah.
A tough to say, but I've, probably said, yes, a a thing not just the competitive landscape, but that he position.
Yes, 35 million topline, but about a 2 million dollar.
You know EBITDA pickup.
As I look in a little we'd rather than having David stores as we look at that's always a difficult decision for something like that and especially as it affects the people that come with the company for a long period of time.
The challenge is it the Harry <unk>, David business since we've owned the business, we can migrating into really be in E. Commerce driven business. So as we look at the future and talk about leaning into growth opportunities the ability to exit out of the retail stores and put our focus on the E Commerce business, where we're seeing such strong growth in having David.
Yes.
Earlier throughout the first three quarters of the year, but certainly accelerating now in the fourth quarter just made all the rightsize from us from a business.
Got it well thank you so much and best of luck.
Our next question comes from Linda Bolton Weiser with D.A. Davidson. Please go ahead.
Hi.
I guess, one big difference in your business now versus in the last recession is that you own hereon. David now can you talk about how Harry <unk>, David performed in the last recession and it is pretty high end position in terms of the pricing and positioning are you thinking about modifying the product line or.
Well the offerings, some lower and lower price.
Hi.
Hi, I'm no one of the areas that we moved into in the last year or two which is really benefiting as well today is the whole hereon, David gourmet prepared meals and and meets and different things like that I think if you look at not just the Harry <unk>, David product line, but if you.
Look at how we evolved as a company overall really from the platform that we've built well across our brands. We have ways for you to express and connect some things at a free like an E car, which we promote different activities to a $5 cookie card from shows to a 999.
I was with pop from the popcorn factory tens will pop out sentiment expressions that was saying that's one of the green things that we're seeing now.
A lot of any item that we have with the sentiment on it and especially in those lower price points are giving people the opportunity to connect with people in a much more frequent manner.
So I think your question regarding the Harry <unk>, David product line really extends across our platform in our family of brands and once again, we've been building that so you can utilize our brands to express yourself for free.
Right off to having a self prepared and meal from hereon David.
[noise]. My next question comes from Doug Line with Lane, Sir. Please go ahead.
Yeah, Hi, good morning, everybody I'm just a couple of things first is in a the food and gift baskets, how much of that 27% growth was the acquisition of shares berries.
It's probably about half so we.
Oh, you know we saw generate about you're probably about 30% of the 27 cents sharis berries and about half of it is organic growth trying to model. Yeah. So that shows that our organic growth was growing double digits on a quarter and as we said we seem to accelerate.
Question on E commerce side of that sense that.
No. That's a that's a pretty good strong organic growth rate that's faster going forward there.
And then sort of stepping back here, you know lots and lots changed in the last four to six weeks and you know we're not too far away from you having to plan for the December quarter, which of course into your big quarter from a profitability standpoint can you walk us through maybe early thinking on how you're going to approach the fourth quarter. This year, perhaps differently than you might have in the past.
Sure I think at this point in time, well the visibility that we have going into the fourth quarter and are planning is looking first at first and foremost, saying, okay. How's the supply chain lots out capacity of manufacturing once our capacity of distribution, how do we expand or how do we lean into the demand that we expect to be there as we move into holiday season.
So really that's that's how we're approaching the holiday from the did we expected demand will be there how much of it can we capture how how agile can be would have different manufacturing capabilities. The local partners that we utilize a little flowers, we utilized the vendors we utilize on food side of the business and just expanding out our marketplace.
So I think it's just a shift in our business, it's a again going to be.
Going to be more dominant didn't on E. Commerce side of the business. We continue to grow and then see very strong demand that we expect that to continue wholesale will be down because of the you know the caution cautious nature of some of the retailers that are out there and retail with the with the yeah with the closing of having baby stores will be down, but everybody comments, we expect them.
Michelle.
Any incremental spending.
You are thinking maybe capex or technology or marketing that may not have been there a month or so ago.
No not really I wouldn't say so.
The plans you off the Capex plans were in place prior to that and that really no hasn't necessarily change at this point in time and.
And our technology spend again those plans have been in place we haven't seen any need to change those plans at this point so no real change in that approach now yeah. I mean, the world is you know the world can you know continues to change almost you don't know almost daily So we're at war and the planning process for you know the holiday.
Hey season in fiscal <unk> 21, you know no right now and we continue to take more data points. Each you know each day, and Ah and and modify our plans as as at least you focus.
Okay. That's helpful. Thank you.
Thanks.
[noise] [noise] again, if you'd like to ask a question.
And then one my next question comes from Michael.
In ski with global or mobile or capital markets. Please go ahead.
Thank you I'm, sorry that I got dropped from the called their briefly there was like problem and so I apologize. If these questions were answered, but first of all before getting to my question I want to congratulate you on some impressive numbers and outlook given the Saar crisis, I mean, I follow companies that are not fairing, so well and.
So it's up quite remarkable that you're doing so well.
First of all.
I just wondering if you could talk about the cost impact that you may have had some kogan in the first in the last quarter I'm, particularly you talked a little bit about the revenue.
Potential impact, but were there any extra cost in the quarter.
Sure I think as we've seen has a rapidly respond to changes on a on a continuous basis, although the impact of social distancing things like that that bill one and give a little more color on the cost effective forgetful. Thank you Mike Yeah, we sorry, yeah, we saw little impact in the Oh excuse me. This has happened obviously towards the end of Q3 and.
Let me get just spend a little bit extra dollars at the end of Q3, a little bit Isle. They you know the margin impact that you saw at the end of Q3 is a little bit was product mix, because we didn't have the Hawaii.
Retail gross margins, even though it does its money this time of year, but but high retail gross margins, but we had some incremental operating costs and we will have some operating wasn't when we'll have some cost incremental cost for the bought to our they impact gross margin going forward. We have raised you know the wages or some of our hourly employee.
<unk> we have.
Because the so.
Good point well yeah were.
Managing out on discretionary spend we're looking at all those type items and you know and holding back on that so you saw some leverage in the third quarter on actual continue to see leverage in the fourth quarter on our operating expense line.
And you haven't identified what are the dollar amount was in the last quarter.
We did not know.
Okay, and then I was wondering if you could talk little bit on regarding the last question about the marketing efforts I'm it seems.
Like across the board media has cost to come down significantly can you talk little bit about your marketing efforts have you made any specific changes in your mark.
Any budget.
I would assume your customer acquisition costs are coming down even search word costs are down as much as 50 per site can you just talk a little bit about maybe the efficiencies of your marketing efforts and maybe some of your changes in marketing.
Sure Michael.
Okay. Thanks to the question I think as we look at a marketing efforts, we've been leaning into the marketing it was around different brands and this time period, because we're seeing such good efficiencies in those.
You are seeing significant ramps up ramp ups in customer acquisitions, a new mentioned earlier that we put in Q3, we had a 30% growth in new customers and.
And that's accelerated through the first four weeks or so now Q4. So we're getting really good returns on our marketing efforts and now and as we manage the marketing. It's just a matter of marrying the marketing, which is generating the demand what's with the distribution in supply capabilities the inventory capabilities that we have.
So we're chasing that demand and it's working well for us.
And while we deal with a key focus for us so in our marketing efforts is customer acquisition, and we get them into the family and get them into the family of brands.
Markets. It hasn't passport program, which has seen really good growth rates get them to introduce introduced a christmas across half <unk> believe that Brent getting them to buy from more than one brand or you know to best developing that customer lifetime value that we're looking for so when we look.
You know marketing efforts, it's the okay. What's the initial spend once the initial ROI, but in most importantly, what do we think the C.L.D. opportunities with those customers.
Gotcha, and then can you talk a little bit about doubling that wire service a little bit it.
What has happened in terms of the number of affiliated shops, and if you could just talk of what about the trends there.
So I think you lose lunar businesses, you know as we look at Bloomnet up our purpose built bloomnet first and foremost isn't helping our local golf Bloomnet florist to compete successfully in their local markets need to small businesses generally family owned businesses local businesses that are so important fabric of American society.
So it's an important aspect for us we put together to mix to help them, whether this townhouse huh florist support program has some financial benefits for the the florist marketing benefits supply benefits that we could bring to them et cetera.
So with.
Okay.
Operates very much like a restaurant business will be would be able to operate where maybe the front doors in old when you're doing it deliveries out of the backdoor now again they'll have challenges because the social distancing, but the good news is that most of them have really those that were closed wholesale was it was supposed to reopen so things are moving better in the flow side.
Business, you might as well as pointed to the large majority applause, yes.
Gotcha, and then can you talk a little bit about the inventory potential disruption supply. So we'll try to I know, it's a you know a topical question, but as you head into your strong season here was just wondering about your sourcing.
The products. What are you are you still getting favorable pricing or is it coming from try now you're looking at other suppliers, just kinda give us a flavor what's happening there.
Yeah, Michael first of all three years tariff issues of.
No way back when I guess now you know kind of pad, it's a little bit or you know you know for what's coming you know, what's coming and whats been coming now and Italy on there was some you know it wasn't little difficulty getting things out of China with all the issues.
And the shutdown in fact, we somebody that China is back is back open and the supply chain is really has opened up, albeit maybe a little slower than we have so.
We're not seeing an issue from that standpoint, you know as Christian mentioned I know several times ecommerce demand and social which you know what chasing inventory a little bit we've been able to.
Continuing to secure product manufacturing the product and get the product and it's part of ethanol.
Gotcha, well congratulations on your quarter again, thank you.
Thank you Mike.
This concludes our question native fashion I would like to test that's back over to Chris Mccann CEO for any closing remarks.
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