Q2 2021 1-800-Flowers.Com Inc Earnings Call
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Good morning, and welcome to the one 800 flowers Dot Com, Inc. <unk> 'twenty one conference call.
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I would now like to turn the conference over to Joe Caicedo. Please go ahead.
Thank you grant.
Good morning, and thank you all for joining us today to discuss one 800 flowers Dot Com, Inc. 's financial results for fiscal 2021 second quarter.
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 corporate website.
Www Dot one 800 flowers, Inc. Dot com.
Our call today will begin with brief formal remarks, and then we will open the call to your questions.
Today will be Chris Mccann, CEO and Bill Shea CFO.
Before we begin I need to remind everyone that some of the statements. We will make today maybe 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.
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 on today's call any recordings of today's call. The press release issued earlier today on any of its SEC filings, except as may be otherwise stated by the company.
I'll now turn the call over to Chris Mccann.
Chris we cannot hear your line.
Thank you. Thank you Joe.
So this morning, we are very pleased to report the highest quarterly revenue and profit in our company's history.
This reflects a continuation of the momentum that we've been building over the past several years, including accelerated revenue growth that began in our fiscal 'twenty.
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Ladies and gentlemen, pardon the interruption, but we do have our speakers back I would like to hand, the conference back over to Chris Mccann. Please go ahead.
Thanks, everyone apologize for the technical difficulties.
Good to have somewhat of a backup plan in place.
It's a heck of a way to kick off a celebration of a great quarter. So let's.
Jump back in.
So as I started to say this morning, we are very very pleased to report.
Highest quarterly revenue and profit in our company's history.
And this reflects the continuation of the momentum that we've been building over the past. Several years. This includes the accelerated revenue growth that we saw beginning in fiscal 18 continue through 19 and into fiscal 'twenty and accelerating further since the start of the Covid pandemic.
Our record results for the quarter were driven by strong double digit ecommerce growth across our gourmet food and gift basket brands and our market, leading one 800 flowers brand and in our newest market leading brand personalization mall.
Our strong E commerce growth combined with excellent operational execution.
Tabled us to drive record adjusted EBITDA and EPS results. Despite the significant headwinds that we faced in the year end holiday period.
Including what was all familiar with the increased labor and product shipping costs as well as operating inefficiencies related to the ongoing pandemic. This is really a testament to the incredible hard work and commitment of all of our associates across the company to help our customers connect and express themselves in a very cheap.
<unk> environment now.
Now to step back and put our results are strong results and our positive view of our future in perspective, its worth taking a look at the unique business platform that we've built.
Over the past several years, we've made investments in our brands.
Our technology stack or digital marketing and martech capabilities on <unk>.
Customer care platform, and our fast growing customer file.
And our brands, we continue to rollout initiatives designed to deepen customer engagement.
Such as our weekly celebrations pulse led us to our customers from me and my brother, Jim. These features thoughtful chips personal stories, all designed to help people stay connected and express themselves and it's creating a two way dialogue with our customers.
Also our virtual experiential workshops that we've launched in collaboration with a wonderful young business Alex is table.
Include immersive virtual events, such as floral design and the ever popular Charcuterie Board building workshops.
<unk> fund classes that net friends can do together, even while being socially distance.
That connection communities portal. This is a peer to peer support community that helps guide people through meaningful life events by connecting them with others, who have walked the same path.
It's these and other such programs that are evolving our relationship with our customers engaging with them beyond the transaction to really focus and build a community that force is deeply brand engagement and loyalty.
In terms of technology investments.
A culture of innovation.
And this enables us to stay at the forefront of new technologies that help our customers connect and express themselves.
We've built a new headless commerce platform for our brands and for all devices. This is a micro services driven platform that resides in the cloud, giving us significantly enhanced performance flexibility and scalability.
Among the latest enhancements that we've deployed on new site search capabilities across our multi brand website that enables us to show more cross brand results on product collections for specific occasions.
When our customers are using keyword search.
<unk> significantly enhancing our cross brand merchandising efforts.
And just in time for the holiday season, we launched a completely new enterprise <unk> Commerce platform. This brings a variety of new capabilities designed to help our corporate customers stay connected with their work from home employees and their clients.
One such features market, which enables corporate customers to send gifts even when they don't have the recipients home address all we need is an email address or we can utilize SMS.
We recently tested a fully automated AI bot on Apple business chat that allows customers to interact with the complete AI natural language bot.
Maintaining and scaling our high standards of customer service and we are now rolling it out across our website with excellent early results.
In digital marketing.
We've leaned into our effective programs in search display video and social channels.
Expanding our reach.
Building our brands all with analysis driven optimization for enhanced results.
We've continued to invest in our customer care platform with a laser focus on enhancing the customer experience moving.
Integrated and AI powered intelligent virtual assistant that seamlessly combines artificial intelligence and human understanding.
To provide exceptional free service with customers, calling us with questions.
And we've rolled out our online customer service hub that lets customers view real time updates on order status gives them the ability to modify their orders and offers a live chat feature.
We also continued to invest in new customer acquisition to accelerate the growth of our customer file.
And in addition to that.
In addition to the significant growth in new customers, we're seeing enhanced order frequency and retention in our best customer cohorts, specifically, our celebrations passport members and multi brand customers and both of these cohorts continue to grow at strong double digit rates.
Now in addition to our internal investments, we've continued to identify and execute strategic and highly accretive acquisitions.
Sure his berries.
On August 19, and personalization mall, just this past August.
With Sherry's berries, we bought the IP the brand <unk> and the customer list no facilities personnel and because of the flexibility of our platform, we were able to plug sherry's berries into our distribution networks as well as our marketing and merchandising programs literally from the data we closed the deal.
We have taken a brand that was declining and losing money before we acquired it to one that is now growing rapidly with strong bottom line contributions.
With Tmall, we added a leading provider of personalized gifts and home decor to our platform.
A whole new suite of products and capabilities that instantly makes us a leader in the fast growing category.
Most important by leveraging our business platform, particularly on digital marketing expertise, we've already been able to significantly accelerate <unk> revenue growth and enhance its profitability in just the first six months that it's been part of our platform.
So through the combination of our internal investments in our strategic acquisitions, we have successfully created a highly scalable and Leverages <unk> E Commerce platform, that's built for growth.
This platform will enable us to continue to drive growth, both near and longer term as consumers are increasingly shopping online to soften the connective and expressive needs.
And then I would like to turn the call to Bill to go over some specifics.
Thank you Chris.
As noted we achieved record top and bottom line results for our fiscal second quarter. Despite the significant headwinds that we told you about as we headed into the year end holiday period, including increased cost for seasonal labor volume.
I am constrained from third party shippers higher shipping costs related to the holiday season, Covid related expenses and operating inefficiencies related to the ongoing pandemic.
This was no small achievement and all our associates across the company ought to be commended for going above and beyond in a very challenging environment to help millions of our customers stay connected and express themselves to the important people in their lives.
Now breaking down some highlights from the quarter.
First in terms of revenue total consolidated revenues increased 44, 8% or $271 6 million to $877 3 million compared with $605 6 million in the prior year period.
The strong growth was driven by E commerce growth of 59, 7%, including revenue contributions from personalization mall Dot Com, which we acquired in August 2020.
Excluding <unk> total revenues increased 24, 7% in E Commerce revenues increased 34, 6% compared with the prior year period.
Gross profit margin for the quarter increased 100 basis points to 45, 4% compared with 44, 4% in the prior year period.
The gross margin improvement primarily reflects strong PMO on gross margins and our successful efforts to reduce promotions during what is typically a highly promotional environment.
These efforts more than offset higher costs associated with seasonal labor and third party shippers.
Operating expenses as a percentage of total revenues was 28, 6% compared with 28% in the prior year period, the slight deleverage in the quarter reflects several factors including.
Investments, we have made in enterprise marketing personnel and programs designed to help drive future strong growth.
The acquisition of <unk>, which has higher gross profit margin, but also higher operating costs compared with the overall company.
And the impact in the quarter of the higher investment income associated with our company's nonqualified deferred compensation plan with the offset being compensation expense.
Combination of these factors resulted in an increase of 48, 4% or $53 6 million and adjusted EBITDA to $164 3 million compared with adjusted EBITDA of $110 7 million in the prior year period.
Net income for the quarter increased 53, 3% or $39 five to $113 7 million or $1 71 per diluted share.
Compared with net income of $74 2 million or $1 12 per diluted share in the prior year period.
Adjusted net income for the quarter increased 54, 1% or $40 1 million to $114.
$2 million or $1 72.
Check.
In terms of our segment results in.
In our consumer floral and gift segment, which includes PMO. We grew revenues 163, 9% or $189 7 million to $305 4 million compared with $115 7 million in the prior year period.
Excluding the contribution of PMO total revenues in this segment increased 58, 3% compared with the prior year period as a 100 flowers brand continues to expand its market leading position.
Gross profit margin in this segment increased 550 basis points to 44% compared with 38, 5% in the prior year period, primarily reflecting contributions from PMO.
Excluding <unk> gross margins for the one 800 flowers brand increased 70 basis points.
Segment contribution margin increased 319, 3% or $34 8 million to $45 7 million compared with $10 9 million in the prior year period, including a strong contribution from BMO.
Excluding PMO segment contribution margin increased 69, 7% compared with the prior year period illustrating the leverage in our business model.
In terms of our Blue net business revenues growth.
32.
4% to $34 1 million compared with $25 7 million in the prior year period.
This reflected strong growth on wholesale products, including fresh flow and hard goods as well as significant order volumes growth significant order volumes from both the winning on the flowers brand as well as flowers flowers to orders.
As we noted after our first quarter. The decision we made to help all flowers back in the early days of the pandemic.
Including waving membership fees and providing various products and services at reduced prices continues to pay off as far as to buying more products and services from Bloom net in addition to fulfilling increased order volumes.
Further expanding bloom net market share.
Gross profit margin in this segment was 49, 4% a decrease of 180 basis points compared with 51, 2% in the prior year period, primarily reflecting product mix.
Segment contribution margin Inc.
<unk> 32, 9% to $12 1 million that was $9 1 million in the prior year period.
In our gourmet food and gift Basket segment, we grew revenues 15, 9% or $73 7 million to $538 3 million compared with $464 6 million in the prior year period.
The strong growth was driven by accelerated ecommerce growth of 27, 1%, which more than offset lower wholesale gift basket orders from the holiday season, and the loss of revenues associated with the closing of the Harry <unk>, David retail stores in fiscal 2020.
Gross profit margin increased 40 basis points to 45, 9% compared with 45, 5% in the prior year period.
And segment contribution margin as adjusted improved 19, 5% to 22 or $22 2 million to $135 5 million compared with $113 3 million in the prior year period is also demonstrates the leverage in this segment, which offset the aforementioned cost headwinds.
Now turning to our balance sheet.
Our cash and investment position was $370 6 million at the end of the quarter.
It should be noted that due to the proximity of the holiday season, our quarter end.
And our quarter end on accounts payable and accrued expenses were also at seasonal highs.
With that said our cash position is very strong, particularly considering the August acquisition of <unk>, which we funded with $145 million in cash and $100 million in bank debt.
Inventory was $89 4 million compared with $68 million at the end of last year's second quarter.
The increase reflects the acquisition of <unk> and the growth on our business.
In terms of debt.
We had $185 9 million in debt with zero borrowings under our revolving credit facility.
The strength of our balance sheet with a strong cash position and low debt combined with the untapped revolving line of credit gives us significant flexibility to continue investing to invest in our business platform and add accretive acquisitions like cherries berries and PMO.
Regarding guidance.
In keeping with our practice over the past several quarters due to the significant uncertainty in the overall economy related to the ongoing COVID-19 pandemic.
We are providing guidance on a quarter by quarter basis.
Regarding the current fiscal third quarter.
Based on the continued strong E commerce growth momentum that has carried into January we.
We anticipate achieving total consolidated revenue growth for the fiscal third quarter, including contributions from people in the range of 45% to 50% compared with the prior year period.
We anticipate that the strong revenue growth will help offset certain headwinds, including the Sunday day placement of the key Valentine's day holiday increased year over year labor and transportation costs and operating inefficiencies related to the Covid pandemic.
As a result, we anticipate achieving adjusted EBITDA of between $4 5 million for the fiscal third quarter compared with an adjusted EBITDA loss of $2 4 million in the prior year period.
In terms of EPS.
We anticipate improving to a loss of between nine and 11 for the quarter compared with a loss of <unk> 15.
In the prior year period.
I will now turn the call back to Chris.
Thank you Bill.
So to sum up.
Again, we achieved the highest quarterly revenue and profit in our company's history.
<unk> had a tremendous holiday season with strong customer demand truly incredible execution offsetting the headwinds that we told you about back in the fall.
It just can't say enough about how proud I am of how well our associates rose to the occasion during this very challenging environment.
During the quarter.
We saw a continuation of strong growth in new customers increased frequency from our existing customers more customers signing up for celebrations passport and more customers buying from multiple brands.
The strong growth and enhance behavior that we're seeing in our customer file gives us the confidence in our outlook for continued strong revenue growth going forward.
Importantly, the strong momentum that we've been building from the past several years now in our top and Bottomline results reflects the investments that we've made and continue to make in our technology stack.
Digital marketing and innovative merchandising programs are laser focused initiatives and customer experience and customer care.
And in strategic and highly accretive acquisitions.
As a result, we have built a highly scalable and Leverages <unk> E. Commerce platform that is designed and built for growth.
We are confident that our business platform positions us well to continue to drive growth, both near and longer term.
Now before I turn the call back to grant to provide instructions for the Q&A portion of the call I would like to again, thank all of our associates as well as our vendors and suppliers for their hard work and commitment to helping our customers solve the net connective and expressive needs sentiments that are more important than ever in today's environment.
With that I will turn the call back to you Chris Thank you.
We will now begin the question answer session to ask a question you May Press Star then one on your Touchtone phone.
On the speaker phone please pickup your handset before pressing on the keys.
Let's draw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question today will come from Dan Carlos with Benchmark Company. Please go ahead.
Thanks, Good morning.
Congratulations on the on the quarter on the revenue number was a misprint.
Just Chris I mean look the kind of a key alright. Thanks, maybe just talk about P model, a little bit I think it was some probably 50% higher $121 million in the quarter.
And where we.
Most people were expecting and I know there was a lot of stress underlying strength.
In E comm demand, but we were talking originally when you block is about non.
<unk> by the holiday period, I know you are really pushing hard for it.
Can you just give us some color around either cross sell.
Around any of the metrics or learnings you add how much more view you do here to get kind of full integration if you're not there yet on P. Volume just trying to get a sense of where the growth rates on the site and actually go.
Yeah, Dan. Thank you very much we really couldnt be more pleased with the acquisition of <unk> than we are right now.
And from an integration point of view.
We did focus on some assets early in the beginning making sure that we got it up in one form or fashion on our multi brand site integrated the customer database. So passport customers would have access to <unk> mall. So we did some of those things a lot of the integration is still yet to come there was limited <unk> limited capabilities that we could do before.
We really hit holiday time, when we would think the risk factor was too high to to mingle with.
Time, but.
The fact of how we've added that to our platform now Youll see few more products on the flower side for Valentine's day this year showing further integration.
It's really given us great capabilities that we're starting to integrate across the company across the brands.
Moves us into a whole new category for our customers. So we really couldnt be more pleased with it and the progress that we're making.
From an early point of view one of the early areas that we said we will go on to focus on from an integration was really on the marketing side of things on the digital marketing and there we're really happy with the early first holiday season results, helping to increase its growth rate when you give a little more color on that.
Hey, Dan as Chris mentioned, we're tremendously pleased with the results of <unk> Mall, you were able to do the math, we likely have a low Matthew guys to do within the <unk>.
Earnings call, but.
In the earnings release, but it's $122 million is a pretty accurate number that is what we achieved they were up 50% year on year over year, I think a lot of people had about $80 million in there.
In them and their models and a good contribution margin.
A $25 $26 million so significantly profitable.
Business. So we're extremely pleased with the with the results and it really really good team of people that Dan.
Integrating well with us meshing with our team.
And really it's a really strong operational team now are very very proud of.
That's super helpful. Thanks, guys and then just as we look into calendar Q1 fiscal Q3 here.
We know Valentine's day was on a Sunday.
Can you kind of pointed that out.
Sure you bet, but we have still obviously the lingering effects of Covid.
Get everybody at home.
Just kind of trying to gauge.
Look obviously the guidance you've given is well ahead of where people are too and so we're seeing that momentum, but just trying to gauge are you.
To be able to.
Probably not quite like mother's day, but is there some flexibility maybe earlier on the week around shipping dates on how Youre planning on.
On a working around that.
But as we looked at Valentines day.
Right.
Day placement shifts the bill will cover that in a minute, but we're looking on we're looking at is the ability to change things around looking at this holiday season.
Just the decrease that we normally would expect with such well positioned right now as a company much better than we were even a year ago with bigger was better we have a stronger customer file we have consumer demand we have broader product categories. So as we head into this quarter, even with that headwind gives us the confidence with the guidance and bill when you cover that.
A little more detail as well as we.
<unk>.
In our release and in the call. This morning, you will providing overall guidance for revenue growth of 45% to 50%.
With the contributions of <unk> mall, it still represents 35%.
Organic growth and that builds in the.
The impact of the floor.
The floral brand in the Sunday day placement typically.
When we.
We moved from a Friday, which is a great day placement Alpha Valentine's day, two after the weekend into a Sunday revenue is usually impacted and decrementals by about 20%.
This year is certainly atypical due to the pandemic. Most recipients are not going to be in the office. We do anticipate that we're going to be able to achieve double digit growth within within the flowers brand and that combined with the very strong everyday gifting.
We're seeing within the flowers brand within our food brands and within <unk> Mall.
Us too.
Overall topline topline growth.
But on top of that.
A lot of headwinds that work.
We continue to face from a from a cost perspective, and we're very pleased to be.
Providing guidance on.
<unk> adjusted EBITDA improvement of approximately $7 million, turning what is typically.
A.
Adjusted EBITDA loss quarter into a positive quarter.
And therefore, we will have all kind of four quarters positive for the for the year.
Got it really helpful last one if I could just.
Chris look I get not wanting to give guidance right given the tough comp coming up in sort of just the uncertainties, but I guess, maybe if I just ask from a high level.
You are now building what effectively is four straight quarters of challenging comps, but it seems like the business is just underlying accelerating should we just be thinking of this as kind of a new baseline from the business and we can kind of grow off of these levels.
Well I think what youre seeing here is that the.
The momentum we have going into the pandemic the acceleration that we've got from the pandemic decisions. We've made to jettison the retail at Harry <unk>, David and double down on focus on E Commerce.
The customer file that we've built we're just it's been a pivotal pivotal pivotal moment for us for our company to really seize the opportunities that have been presented so I think you're right, Dan I think that well.
We're in a much better position than we were a year ago, a bigger stronger better company better assets. The additional acquisitions that we've done put us in place and we're looking at a good good growth rates going forward.
Yes.
Perfect. Thanks, so much and congratulations again guys. Thank you.
Yeah.
Our next question comes from Anthony.
Since Keith with Sidoti and company. Please go ahead.
Hi, Yes. Good morning, Thank you for taking the question so.
In previous calls you guys talked about the fraud Smith.
Christmas being beneficial.
As you expect.
And.
And also just wondering as far as.
I guess based on the strength, although it doesn't seem like there was much of an issue, but as far as third party carriers, but if you could just touch.
As far as if you had any issues with Fedex.
Or any of the other.
Carriers that'd be great.
I think as we the Christmas day placement.
Beneficial for us It gave us two extra shopping days in the season.
Compared to last year.
So that ramped up so much of our volume really came in earlier than last week than it normally does.
And that also gave us the capability to push the numbers a little bit the 27% E commerce growth that we got in the gourmet food brands as an example, Anthony.
Was a little bit ahead of our expectations.
So we were able to achieve that on the shipping distribution front Bill why don't you cover that just going to reiterate with Chris I think there were so many stories about shipping challenges that the consumer is trained to buy a little earlier, which did kind of.
Create on earlier demand than we normally have so it wasn't that kind of the late push.
Which we would have otherwise gotten a benefit for us with the with.
With the Friday day placement.
Certainly well continue to be challenges within.
The shipping environment.
We have to go into the quarter planning for volume volume constraints with it and we manage very well we have a great partnering and Fedex that does a lot of our a significant amount of our shipments and we work with them daily on.
On any of the challenges that the.
That we have.
But we did have increased costs and we had to absorb those within within that I think.
Increased shipping costs or the new normal.
Basically the third party carriers have instituted what essentially permanent surcharges they start off with <unk>.
First was Covid surcharges, then it became holiday surcharges in our past holiday. So we have a new set of surcharges. So.
Increased shipping cost of the new normal we all have to adjust for it I think we've done a very good job I think we've historically demonstrated our ability to absorb challenges that we have with regard to whether it be shipping costs or increased.
<unk> cost and build it into.
Our plans automate certain things to help offset these items.
Got it yes, thanks Bill.
And Chris So.
Is there any way you can quantify these higher labor and transportation costs higher.
Higher shipping costs or any sort of ballpark estimate on how much that impacted the quarter.
I mean, there are significant Anthony but bottom line I think the heat of stay so it's not like they're going to go away and all of a sudden we're going to have these positive comps in those areas going forward.
We're going to have a.
$15 minimum wage.
Of course, the contract amount we've operated in in that environment already in Oregon, as they've stepped up towards that $15 eight and other locations. We don't have that but we've been because of supply and demand on labor, we are already paying very close to.
To those rates.
So.
So these are here to stay increased labor costs increased shipping costs are kind of he is day, we have to continue to invest to automate what we can in the manufacturing and distribution.
So all of our business so that we're less reliant on that seasonal labor force, but these are the things we do net <unk>.
Faced with challenges, both short term and long term.
And we address them in.
And to continue to grow both top and bottom line and all of that Anthony is part of the reason why.
Really pleased to provide the guidance for Q3 of <unk>.
This improvement on the bottom line that was showing taking it from a loss from a positive in this quarter, even with those newly increased costs.
Got it thank you.
For me to just give us a sense as to.
The order volume versus <unk> quarter.
Bill go ahead.
Yes.
It was up a couple of points.
During the quarter it was really mainly driven.
E Commerce growth was mainly driven by volume.
Got it alright, well, thank you guys and best of luck.
Yes.
Yes.
Our next question will come from Michael Kaplinsky with noble capital markets.
Please go ahead.
The questions and congratulations some companies would have problems scaling to low level of revenue growth you've achieved over the last day past year on I think it is.
Testament to your on your team too.
Really handle that type of revenue growth you've got so congratulations.
Alright.
My question is going back to the seasonal labor the labor and the cost there.
Anthony as you mentioned you had some markets that are already implemented a $15 minimum wage I was just wondering in terms of how in those markets how competitive it's Ben.
Have you been able to get labor at $15, an hour or do you have to.
Rates your wages higher than that and in those markets, where you have not seen the minimum wage I know given the competitiveness of what you see for seasonal labor or are you just kind of trying to get a sense of how the minimum wage is impacted.
Your seasonal labor hiring and the costs were seasonal labor in the markets that you've already seen that.
Yes.
Ill give two examples Oregon is a minimum wage state, it's not a $15 yet, but it's a phased up towards towards 15 towards $15 on every year, we get.
We get a step up in what the minimum wages and we pay above we pay above that.
Another big.
State, where we have a lot of employees is not a minimum wage data has not been however, as you mentioned southern Ohio is kind of the distribution capitals of the world. So it really becomes more of a supply and demand issue, which which drives higher higher wages in that market on.
It is tough to get employees I mean, both the combination I think we always we've said this before that when the unemployment a year ago was at three 5% and then at the beginning of the pandemic it jumped up to double digits, we anticipated that labor would be.
Not as much of a challenge.
Going forward, but.
Unemployment came down.
But because of the Covid environment that we're operating in label was still tough to get so supply and demand still drives higher wage rates. Our answer to that is we need to attract that we need to bring that labor in need to pay what the market rates on that.
That drive that while we continue to invest in automation and.
And Thats, how and we have big projects some of them was stalled during the pandemic we've.
We've launched some big automation projects.
Going forward and Thats going to allow us to be less reliant on the seasonal labor force I think Michael to your cash.
Comment on your complement on the in the beginning of your question about the scalability of our business. In addition to focusing on the scalability that I referenced in my opening remarks regarding scalability of our it platforms. We're looking at the full platform, including our manufacturing and distribution platforms and making the appropriate investments there to scale.
Into the future to handle the demand that we see.
Thank you for that and then in terms of Tmall kind of going back to the.
A significant amount of.
Space and facilities that you acquired there can you talk a little bit about your plans now I know you havent been into <unk> that much but you still have such a large facility. There have you thought about the integration on the facility and what you how you might use the facility at this point.
We've begun some discussions on that Michael.
No no rock solid plans there yet on how we utilize that facility further than what it is currently being used on how we integrate some of the personalization capabilities into some of our other facilities as well again looking to move that product line closer to the customer around the country. So as we talk about investing into.
To this distribution and manufacturing assembly capabilities of our business. Those are the things that are in consideration now, but no hard plans in place at this point.
My final question is about gross margins you said that it benefited from reduced marketing spend and of course this could be because of your scale and your broad platform, but also may just be due to the fact that youre just seeing ecommerce sales being very strong. So can you provide some color on your decrease in marketing spend in the quarter. What do you believe will be.
The sustainable gross margins going forward and just kind of give us an idea about whether or not you are.
Currently just benefiting from the platform.
Adding more onto your platform and not really seeing the type of incremental increases in marketing spend.
Michael I think as we look at the marketing spend here and as we look at last year last year, we had extremely low marketing cost.
As we went into the pandemic. So we're seeing those marketing cost returned to normal, but because we're seeing effectiveness. We continue to lean into the growth rate, we continue to lean into new customer acquisition with the marketing spend as long as we're getting the property profit return on ad spend.
We will continue to push that how that might impact gross margin bill yes. So let's just be clear on when we're talking on our marketing spend what affects gross margins is promotions and discounting.
The actual marketing advertising spend sits in operating expenses. So what we saw in the second quarter was on reduced level of promotions in what is normally a very promotional environment, we were able to pullback on on promotions in the quarter and that helped offset a bunch of the headwinds that we've talked.
With regard to the seasonal labor.
And transfer and transportation costs, and operating inefficiencies because of the pandemic, which allowed us to produce better gross margins year over year.
As we reported gross margins were up 100 basis points.
For the quarter.
<unk> was a nice contributor to that because they have high gross margins, but without a PMO we're still.
Flat with gross margins, but even that was a bit of a mix because we saw better margins on the one 800 flowers brand, we saw better margins within the food food brands, but because the the floral brand grew higher and traditionally has lower gross margins that mixed blended to the to the overall, 44% I think what we see going forward.
We're going to continue to we started to do this before the pandemic was being less promotional we want to get on messaging out about about our products on all brands and be less promotional. So I think we will continue to be less promotional going forward, which is going to help gross margins and help offset those those ongoing headwinds that we have on cost.
From a marketing side, we actually did as Chris mentioned, we actually leaned into it a little bit we're getting a good return on that we will spend some more dollars to help drive growth above revenue growth as well as customer file growth, because we think that that bodes well from the future.
Thanks for that added color I appreciate that that's all I have congratulations again, everyone. Thank you Michael.
Yeah.
Okay.
Okay.
Our next question will come from Linda Bolton Weiser with D. A Davidson. Please go ahead.
Hi, Thank you.
So not to rain on your parade here, because it's a great quarter, congratulations but your organic sales growth is decelerating from when the pandemic started.
Although you are guiding to a reacceleration next quarter, but can you kind of give us some color or some feel on why the growth rate would be decelerating is adjusted.
As the World Reopens, there is just simply less need for kind of remote gifting.
Or kind of what is the phenomenon that's going on I mean, why why would your business really slow at all.
Here from even though it was a very high growth rate, which can't be expected to continue but but the growth rate has slowed a bit can you give can you give a little bit of color.
And then thereafter, we.
Significantly.
<unk> outperformed the consensus revenue numbers is you have a bias.
Yes, I mean, the bottom line in the second quarter is different than the rest of the call I think we guided as we went into the quarter, saying, we have volume restrictions that the.
But the third party carriers have put on all E. Commerce companies, we have to live within that the tremendous growth in overall industry ecommerce has put a lot of pressure on the third party carriers. So they outlined starting back in the summer there's been tons of stories about.
About that about the constraints that and the pressure on the on time delivery of third party carriers with suffering so they put restrictions.
<unk> on on it we've talked about.
Some of the labor challenges that all companies are having in this <unk> in this environment. So the ability to produce all the inventory to ship out even if the warrant.
Volume constraints from.
From the third party carriers. So those was what impacted the second quarter with that said.
We had a tremendous second quarter.
When you look at that Bill first of all if you can't look at us as a quarter to quarter sequential business because of the seasonality of our business certainly Linda you understand that.
And as we look at the Gourmet food category. For example is where we've had most of the restrictions that Bill just mentioned we grew ecommerce there is 27%.
Certainly real strong result in the largest quarter led by the gourmet food category one of the other areas that we said in our last call one question, where could there be some upside in.
In the business for calendar fiscal Q2 calendar Q4, we said was we don't probably see a lot of upside on gourmet food, we did get some but where we saw upside was in consumer floral.
Continues to grow and certainly there's been no deceleration in consumer floral growth as we've gone forward here hitting 50 acres gave us on in the quarter, 58% in the quarter. So.
<unk> net hitting 33% growth so I'm not sure really what youre seeing in deceleration.
Great and can you can you.
Remind us.
When you come up against that comparison of 54% organic growth in the June quarter.
When the pandemic hit was the demand.
Sort of coming did it come late in the June quarter last year or was it right from the get go in April as soon as the pandemic hit you had strong growth.
Really throughout the quarter is there any way you can remind us about how that worked the last year.
And now we have a strong way from.
Really from day, one on actually what we saw is.
Initially a little hold on the on the floral side of the business, but the food took off right away, but certainly.
With Easter being April 10th or 11th even flow bounce right back on we had very strong growth in the month of April and that continued throughout the quarter and I think it's important to note that.
As we look forward and as we come up to some of those next quarter's call.
It's going to be difficult sure theyre going to be difficult everybody recognizes that and understands that I think the fact that you have to look at our business as I mentioned earlier. This has been a pivotal pivotal moment for our business going through this pandemic. The way we responded to with the way we reacted to it the momentum we had going into it so when we look forward.
We see ourselves as a much bigger much stronger better positioned company and we look at the trends that we're seeing there has been a seismic shift of offline to online sales that we are just so well positioned for.
It is the shift of consumer sentiment out there that we've all learned the need to express and connect and our business. Obviously is well positioned from that and then the third big trend that we see as the trend of nesting and that's not going away either and I think we were well positioned for that trend to begin with but now with the addition of <unk> even better.
So and again, our focus is as an E Commerce company keep in mind in Q2, we also lost a lot of revenue from the decision we made on the retail stores.
We didn't have this year on Q2, so we got to factor that into our growth rates, but that just keeps us laser focused on what we're doing what we're how we're building our customer file so will we grow in the future yes.
Okay. Thank you very much.
Okay.
Our next question will come from Doug Lane with Lane Research. Please go ahead.
Yes, hi, good morning, everybody.
On that note at the retail stores here, Chris and Bill I had in my model that was about $20 million on revenue to you guys that is not there. This year that was there last year is that about right that's about right.
On the down as well as we.
Guided people to going into the going into the quarter.
Okay fair enough.
And getting back on the floral.
P Mall, obviously blow away my numbers, but also the organic growth in Florida was pretty astounding to your point, Chris I wanted if you could give us a step back and give us some color on the retail landscape and floral I know Bob on flower shops around your clothes I don't see them coming back is there just a permanent dislocation going on at floral or how do you how do you view the whole retail.
Market a year from now or so when we come out of the Covid thing.
I think what we're seeing annuities health net was sitting in Luna and Bill really referenced.
Doug what we saw in <unk>.
The benefits that we're seeing in Brooklyn from.
Aid that we gave and narrowly pandemic. So I think as we look at the retail florist industry. It is on.
It was a different number of closings and certainly many shops have been hit hardest by the pandemic than others.
Again, we're fortunate that as a industry.
Been well positioned during this pandemic and even while orders have shifted from offline to online. It still is benefiting the bloom that partners for us from a fulfillment perspective. So what we expected last summer was a little bit more of a challenge of shops closing up it hasnt been what we expected.
There are those situations those unfortunate situations in every town, but I would say we have not really seen that acceleration there on the on the retail store side and as we look at our distribution capabilities. We continue to see the benefits of our franchise shops outflow net shops, as well as our direct ship capabilities and having that flexibility.
On the network works very well for us, especially as we manage the high volume holidays like Valentine's day coming up.
Okay. That's helpful and just one more thing.
You talked about your balance sheet, it's getting a lot better you're getting all this cash unit from the December quarter.
Obviously the acquisition strategy is on point cherries, berries, personalization mall and Matthew to your guys do but acquisitions as you know are difficult to time. So what else can you do with the financial strength here as far as stock buyback as far as.
Reinvestment in the business Capex additional marketing just what's sort of the backup plan pending the next acquisition.
Yes, Thank you Doug.
First and foremost I think we've always been proven to be very good stewards of our balance sheet.
And we utilize our balance sheet to drive investments in our existing business.
We talked about some of the investments Bill highlighted a moment ago, certainly around scaling up the operational capabilities of the company implementing automation et cetera investments in technology that we look to make and as you pointed out I think we've proven very capable on adept at acquiring companies and integrating them Youre right.
You can't predict timing on that unfortunately.
And also I think we've been very diligent in on.
Our approach and we will continue to be very diligent in our approach on the M&A aspect.
So I think that's that's how we're looking to utilize our cash in general Bill when you speak to buybacks et cetera, Yes, we still are kind of our stated strategy is that we're going to buybacks.
Shares on a level designed to offset any sort of share creep. We did in the first half of the year spend about $12 $5 million and bought back about 550000.
Shares actually on a price of $22, I guess, where we're pretty good stock pickers.
Okay.
And if you look at that the denominators.
Our EPS calculations, you'll see that our share count is slightly down year over year. So we are we.
We are implementing we are effectively utilize implementing that strategy.
Okay. That's helpful.
Our goal at the end of the day is to put our under leveraged balance sheet to work for our shareholders primarily through acquisitions that help us accelerate our growth.
Fair enough thanks, everybody.
Thank you.
Again, Jeff a question. It is star then one.
Our next question will come from Tim.
Dan Nagel.
With Northcoast research. Please go ahead.
Thank you just one question for you guys.
From my notes I think you guys cited like a free.
40.
The 50% growth from that kind of customer profile of our portfolio.
During that that pandemic shut down quarter back.
In June last year.
And if you look at the E commerce growth rate that sits above that number. So clearly you guys are getting.
Some leverage on on the multi brand customer from can you guys speak more specifically.
Specifically about what you're seeing from both passport.
And the percentage of people on your portfolio Youre buying from multiple brands.
Tim Thank you very much.
As we look at the.
Customer file overall, you referenced some earlier numbers from the earlier there is it a pandemic, but even I think we see that growth in our customer file continue as we mentioned, we'll continue to invest into new customer acquisition. When we win on where we see the opportunities. This past quarter I think we grew new customers north of 50%.
Over last year, so not including non income included an PMO alright, just kind of from an organic perspective, so I think that continues.
Addition to that as you point out from our remarks.
We're seeing good increases in retention and frequency, especially from our top cohorts, whether it be on top decile customers passport members customers buying from more than one brand and one.
It's very encouraging is during this time period, we are seeing.
New customers convert into passport at a higher rate than average on a higher rate than previous new customers become multi brand customers at a higher rate than average and a higher rate than we had been previously experiencing so we continue to grow that file we have said previously that multi brand customers.
<unk> for about 10% of our 12 month active file.
We're not forecasting that but that is growing and that is increasing as time goes on very nicely. So so when we look at our customer file we look at those behavior metrics, we look at what's happening to the new customers that have come on during the past year and see their behavior slightly than the average we see.
That is very very encouraging.
No I appreciate that color and I was wondering.
Looking deeper into their customer profile, if you guys could.
Give us an indication whether those new customers or are skewing younger or older or maybe it's all the people will get more accustomed to buying E. Commerce wise I know theres been some talk about younger consumers shying away from using a service like you guys. So just some color there would be great as well, yes, we're seeing good.
Good customer traction across the demographics, each one of our brands may vary a little bit.
Slightly from one to the other.
But if we look at Doug if we look at the flowers brand on the flowers brand really follows the population more than anything else from a demographic breakdown.
And without prowess in digital marketing, we continue to try to attract younger customers some of our new product lines like the adjacent woo Wild beauty line.
Our plants category is attracting new new and younger customers as well and then if we shift over to the gourmet food side, we've been saying from a while the fastest growing product category that we have in Harry <unk>, David is our gourmet food line and that's driven by also coupled with our digital marketing efforts so that naturally.
Invites a younger gen younger audience to the mix there as well so.
But I would also say that the reports coming out right now with the shift from offline to online the biggest category, that's shifting offline to online as baby boomers.
And with that.
Thats been the core of our business from a long time, so that benefits as well as we look to the future.
Alright, thanks, guys.
Yes.
Okay.
Our next question will come from Alex Fuhrman, Craig Hallum. Please go ahead.
Alright, thanks, very much for taking my question guys and congratulations on a terrific quarter on a terrific calendar year.
Wanted to ask about I guess sort of the pace of revenue growth as well I mean, I would imagine it sounds like a lot of the reason that your growth rate in percentage terms, probably came back a little bit in the holiday quarter as is the law of large numbers given how big your base of business and as we're kind of looking into the March quarter.
<unk>.
We're obviously your guidance on revenue growth re accelerating that to a very strong rate crosses my mind that it looks like I think last year in the March quarter, what I believe a record quarter for you guys in terms of consumer floral and obviously valentines day I imagine drove a lot of that can you kind of give us it's Dan.
How much room is there to continue to grow on the floral platform given that that become.
Really your workforce brand for the Ballantyne day on mother's day.
Can you give us a sense.
How much growth potential there is you know in the years to come on during those peak holiday that the demand is there.
Okay.
While we built into <unk>.
Alex Thanks for the question, we built into our guidance for the third.
Third quarter.
What we can do at Valentines day.
For the 100 cloud ran again on normally under normal conditions.
Valentine's day would take.
Moving from Friday to Sunday.
20, plus percent decrement in revenues and we do think under the current circumstances, we're going be able to grow that.
Double digits, but that's all built into.
Into our plan, we do have a very strong third quarter a year ago.
We had 10% growth at Valentine's day, a year ago.
I think we're tracking at around 10% from most of the quarter and then what I mentioned before the.
On the outset of the pandemic consumer floral dropped a little bit at the end of the margin picked right back up in <unk>.
April.
Very strongly but we're continuing to build out our infrastructure. So that we can handle the growth not only every day.
Where we have on.
Kind of unlimited capabilities to grow but also at the peak times, so that at holiday time in December and at the peak flow holidays of Ballantyne day, and mother's day that we're going to be able to continue to handle the increased demand that we anticipate.
That's terrific. Thank you very much bill.
Yeah.
There being no further questions. This will conclude our question and answer session I would like to turn the conference back over to Chris Mccann for any closing remarks.
So again, thank you everyone for joining us today.
And as we celebrated a record a record quarter for us in terms of revenue and profit suffering from very very proud of.
Very proud of the team on how we've managed through this process.
On this very challenging time.
Thank you you have any further questions don't hesitate to call us.
Glad to handle those questions.
Of course, as we've talked on the call don't forget Valentine's day is right around the corner.
Have some great opportunities, we have some multi gifting capabilities multi day gifting capabilities for you to make sure you're saying I Love you on numerous day is not just one day.
Get your orders early and remember this year there are no limits on love.
Thank you.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.