Q1 2022 1-800-Flowers.Com Inc Earnings Call
Earlier. This morning, the release can be accessed at the Investor Relations section of our corporate website at one 800 flowers, Inc. Dot com or.
Our call today will begin with brief formal remarks, and then we will open the call to your questions.
Renting 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 may be forward looking within the meaning of the private Securities Litigation Reform Act of 1095.
These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements.
For a detailed description of these risks and uncertainties. Please refer to our press release issued this morning, as well as our SEC filings, including the company's annual report on Form 10-K, and quarterly reports on Form 10-Q.
In addition, this morning, we will discuss certain supplemental financial measures that were not prepared in accordance with generally accepted accounting principles.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning.
The company expressly disclaims any intent or obligation to update any of the forward looking statements made in today's call any recordings of today's call. The press release issued earlier today or in any of its SEC filings, except as may be otherwise stated by the company.
I'll now turn the call over to Chris Mccann.
Okay. Thank you Joe and thank you to everyone for joining our call. This morning, we are very pleased to kick off our fiscal 'twenty two year with strong revenue growth in our first quarter as we mentioned back in our August call. The first quarter. This year represented one of our most challenging year over year comparisons this way.
Flex the year ago period surge in overall e-commerce demand combined with the steep drop in marketing rates as much of the country was still in locked down during the early stages of the pandemic.
It's important to note that our 9% revenue growth in the quarter was on top of the 51, 5% growth. We reported in last year's first quarter and represents more than growth of more than 65% compared with our fiscal 'twenty first quarter.
This illustrates the strong growth momentum that we have been building over the past several years as we have essentially doubled the size of our company transforming from a collection of specialty brands into unique ecommerce platform that inspires and enables our customers to express.
Connect and to celebrate.
As we had anticipated the first quarter. This year started out somewhat slowly in July and August as people across the country took advantage of the warm summer weather to act on their long pent up desire to get out and about.
As a result, we saw demand gradually ramp up as we headed towards back to school season, culminating in solid double digit revenue growth throughout the month of September.
This positive growth trend reflects the significantly increased recognition and relevance of our brands and our expanded product offerings for everyday gifting.
For example, in our Harry <unk>, David brand, we saw double digit revenue growth during the quarter and our sympathy. Thank you and our new encourage women's collections as well as continued strong growth for the award winning Harry <unk> David wines.
In our consumer floral and gift segments double digit revenue growth in the quarter was driven by the strong performance of personalization mall.
Along with continued growth in the one 800 flowers brand, including additional bundling of our best selling floral arrangements with sherry's berries products that are already proving to be customer favorites.
And the expansion of our floral subscription programs, including additional frequency and duration options along with a new self service portal that allows customers to self manage their subscriptions.
And personalization mall, we further expanded our already broad product offering, adding more than 2500, new items, including a new license personalized sports collection.
During the quarter personalization mall saw strong revenue growth for Halloween back to school travel gifts and weddings, reflecting a strong rebound in those collections after being down last year due to the pandemic.
We anticipate personalized gifts with traveling weddings to show strong growth throughout fiscal 'twenty two.
Yeah.
As we head toward the key holiday season, it's worth noting that personalization mall is in a uniquely strong position to meet growing demand from customers.
Upcoming holiday season.
We were able to stock up on our inventory items for personalization prior to the widely reported challenges that we see in the supply chain.
In addition, we further expanded personalization malls highly automated production and distribution facility to increase fulfillment.
Another area, where we've stepped up our efforts ahead of the holiday season is in corporate gifting.
Where we have further expanded our capabilities with the launch of our new hero platform powered by smart gift.
We continue to see strong growth across our brands and corporate gifting as companies across the country look for ways to stay connected with their employees and their clients and the new hybrid workplace.
The hero platform is now embedded in our existing corporate gifting portal, providing an engagement as a service offering that helps companies achieve their rewards and recognition goals and gives them the ability to track their campaigns to measure their success and provide recommendations for future efforts.
With the innovative hero platform and our expanded product offering we anticipate continued strong growth in our corporate gifting business for the holiday season.
During the first quarter. We also continued to see strong growth in our customer file.
We added 900000, new customers, while continuing to see strong demand from existing customers, who represented more than 65% of our revenue during the quarter.
We also saw continued strong growth in our celebrations passport loyalty program.
This helps US you know to drive increased purchase frequency retention and lifetime value.
Along with solid growth in new members, we saw more than 50% year over year increase in customers, new and existing using the celebrations passport program during the quarter.
Celebrations passport also continues to be one of the key drivers of strong growth in our best performing customer cohort of multi category multi brand customers, which increased more than 15% year over year during the quarter.
Yeah.
In terms of customer engagement, we continue to see great engagement in our e-commerce channels, where we are doing more to allow our customers to watch and learn and not just shop during the quarter. We reached nearly 20 million engagements and increase of 75% over the prior year period.
And more than our entire fiscal 2020 would.
We're doing this by creating more helpful content, social videos and events recipes cooking demonstrations to name just a few examples.
We're also providing tips of how people can better express themselves when sending a gift. This is a valuable role that we play to enhance the gifting process and cement relationships.
Our opportunity as we go forward is to continue to take this great content and weave it into our experiences to better engage with our customers and you'll see us do more and more of this throughout the fiscal year.
During our current fiscal second quarter, which includes the upcoming holiday season, we are cognizant of several significant headwinds impacting the overall retail landscape I'll ask bill to cover these and our initiatives to address them in his remarks in just a moment.
With that said, we believe the combination of the positive trends in our business that I've just described.
Along with our unique business platform with our expanded product offering and the tremendous momentum that we've built over the past several years positions us well as our customers' destination for the solutions they need to connect the express and celebrate with the important people in their lives. We are confident that this will.
Enable us to drive strong growth in the current fiscal second quarter and achieve our guidance of double digit revenue growth for the full fiscal year.
On top of the tremendous growth that we saw in the prior year.
Now before I turn the call over to Bill I'd really like to take a moment to welcome the team from vital choice to the one 800 flowers family as we announced yesterday. We are excited to have acquired vital choice a trusted provider of exceptional quality premium wild caught seafood and hundreds of others.
Great better for you products.
This acquisition illustrates our focus on further expanding our offerings in the highly on trend better for you food and gifting category.
We look forward to integrating virus, which vital choice into a great family of brands and using the strength of our business platform to accelerate its growth going forward.
I'd now like to turn the call over to Bill.
Thank you Chris.
As Chris mentioned, we're very pleased with the start of our fiscal 2022.
It's worth repeating that the 9% revenue growth we achieved in the quarter was on top of 51, 5% growth that we achieved in the prior year period and represented 65, 2% growth compared with the first quarter of fiscal 2020.
Essentially the first quarter played out as we expected.
Soft demand in July and August, reflecting the increases in travel and other activities in the macro environment. This summer versus a year ago combined with the significantly higher marketing rates this year versus last year's record lows.
As we expected consumer demand improved significantly post labor day, and we are very pleased with the double digit organic growth we achieved in September.
When we provided our guidance for the full fiscal 2022 year back in August we said that.
First quarter revenue growth will be below the double digit growth rate that we anticipate for the full year and bottom line results for the quarter would be down year over year due to higher marketing rates and other cost increases.
Our results for the quarter, both top and bottom line well ahead of the guidance illustrating the strength of our brands and expanded product offerings, particularly for everyday occasions.
Looking ahead as we move into the important holiday season, we are encouraged by the significant increase in consumer demand. We saw in September which is carried over into October.
Anticipated higher revenue growth and improved bottom line performance going forward.
With that said, we are aware of several significant headwinds facing the overall retail landscape, including.
Immediate availability and increased cost of labor.
Rising commodity costs and higher rates of marketing.
And a vaccine combination of widespread transportation delays for components and finished products.
Along with significantly higher shipping costs.
We've implemented several initiatives designed to mitigate the impact of these issues and enable us to take advantage of the strong e-commerce demand, we anticipate during the key holiday season.
These include strategic price increases across our brands and product offering along with significant investments that we've made in our operating platform, including.
Pre building inventory, which leverages, our expanded cold storage facilities.
And installation of automation in our warehouse and distribution facilities, which increases throughput and reduces our lines on seasonal labor.
As a result, we are well positioned to help our customers connect and express themselves with the important people in their lives will everyday occasions, and the key holiday season, and drive solid top and bottom line performance.
Now breaking down some of the highlights from our first quarter.
As we have noted total consolidated revenues increased 9% to $309 4 million compared with $283 8 million in the prior year period.
Excluding the non comparable five weeks of contribution from personalization mall, which we acquired on August 3rd last year total consolidated growth was four 3%.
This growth was driven by strong e-commerce demand, which increased 10, 3% for the quarter, including contributions from personalization mall.
<unk> gross profit margin for the period was 46% a decline of 10 basis points compared with the prior year period.
Operating expenses as a percent of total revenue increased 170 basis points to 47, 1% compared with 45, 4% in the prior year period.
This reflected the higher marketing rates compared with the prior year period.
As a result of these factors adjusted EBITDA loss for the quarter was $5 3 million compared with an adjusted EBITDA of $3 2 million in the prior year period.
Net loss for the quarter was $13 2 million or <unk> 20 per share and adjusted net loss was $12 9 million or <unk> 20 per share.
Compared with a net loss of $9 8 million or <unk> 15 per share and adjusted net loss of $6 5 million or <unk> 10 per share in the prior year period.
Regarding our segment results.
In our gourmet food and gift baskets segment revenues for the quarter increased eight 4% to $97 5 million compared with $89 9 million in the prior year period.
This strong growth was driven by increased demand for everyday occasions, illustrating the increased customer recognition of our brands such as Harry <unk>, David <unk> cookies, and cherries berries is highly relevant for everyday gifting occasions.
Gross profit margin in this segment was down 390 basis points at 35% compared with 38, 9% in the prior year period, reflecting increased costs for labor and transportation.
Importantly, we have already implemented a series of strategic pricing increase.
Increased initiatives as well as other strategies to help offset the increased labor and transportation cost going forward.
As a result of these factors as well as higher year over year marketing costs segment contribution margin for the quarter was a loss of $7 7 million compared with a loss of $2 6 million and an adjusted loss of $3 million in the prior year period.
Now consumer floral and gift segment total revenues increased 12, 2% to $181 2 million compared with $161 5 million in the prior year period.
Excluding the non comparable five weeks of contribution from personalization mall total revenues increased three 9%.
Gross profit margin increased 130 basis points to 41, 9% compared with 46% in the prior year period, primarily reflecting contributions from personalization mall.
As a result segment contribution margin was $19 2 million essentially unchanged compared with the prior year period.
This primarily reflected increased marketing costs offset by the incremental contributions from personalization mall.
And Blue net revenues for the quarter were $30 8 million a decline of five 8% compared with $32 7 million in the prior year period.
This reflected delays and hard goods shipments as well as the reduced order volume from third party online, Florida companies.
This profit margin increased 470 basis points to 50% compared with 45, 3% in the prior year period.
This reflected product mix with lower shipments of wholesale margin hard goods and fewer low margin orders from third party floral companies in the quarter.
As a result.
<unk> contribution margin increased four 2% to $10 9 million compared with $10 4 million in the prior year period.
Turning to our balance sheet.
Cash and investment position was $3 8 million at the end of the first quarter seasonally low as we prepare for the holiday period.
Inventory was $282 4 million with inventory of $192 6 million at the end of last year's first quarter.
The significant increase in inventory reflects a conscious effort on the part of our management team to invest early to pre build inventory to mitigate the supply chain and seasonal labor issues, we are seeing across the retail landscape.
In terms of debt.
$81 8 million in term debt and zero borrowings under our revolving credit facility.
Now regarding guidance.
We are reaffirming the guidance we provided in our August call for the full fiscal 2022 year, which includes.
Total revenue growth of 10% to 12% compared with the prior year.
Adjusted EBITDA growth of 5% to 8% compared with the prior year.
EPS in line with fiscal 2021 as improved EBITDA is offset by higher depreciation and a higher effective tax rate.
Free cash flow to exceed $100 million.
I'll now turn the call back to Chris.
Thanks, Bill and to sum up we are very pleased with the strong growth that we achieved in our first quarter against what was a challenging comparison.
This reflects the significant momentum that we've been building in our business for the past several years.
Stems from our laser focus on providing our customers with an expanded range of solutions designed to help them stay connected and express themselves.
Sentiments that are more important than ever today.
This is combined with our ability to leverage our unique ecommerce platform, which includes our all star family of brands, our advanced technology stack manufacturing distribution and logistics capabilities digital marketing expertise and of course, our growing customer file.
As I mentioned earlier and it bears repeating over the past several years, we have doubled the size of our business and significantly transformed our company, becoming a unique e-commerce platform that inspires and enables our customers to express connect and celebrate.
As such we are well positioned to continue to deliver strong growth going forward.
Our guidance for this year and our outlook for continued strong growth in the years ahead is based on several factors.
<unk> the significant increase in consumers shopping online the trend that we do not see going backwards.
The significant expansion of our product offering both organically and through strategic acquisitions like personalization mall cherries berries and now vital choice.
The significant growth of our customer file along with continued positive customer behavior trends and the continued strong growth in our celebrations passport loyalty program, which is helping to drive increased frequency retention and lifetime value.
In addition, I am extremely proud of our team all of our associates across the company, who have continued to overcome the challenges that we have seen and continue to see in the macro environment.
We've done this through a combination of hard work and innovative thinking that have become the core of our culture as a company.
Looking ahead, we are well positioned to deepen the relationship we have with our customers by engaging with them across a broad range of communication channels as we work to build a true community and offer our customers. The most robust online gifting assortment.
We are confident that we will continue to drive long term shareholder value as we continue to leverage the strengths of our platform.
Now I'd like to turn the call back over to the operator, so that we can take your questions. Thank you.
[laughter].
We will now begin the question and answer session to ask a question you May Press Star then one on it that Samsung.
He said he isn't a speaker phone please pick up your handset before pressing the keys.
If at any time your question has been addressed maybe the likelihood that.
Your question. Please press star two.
The first question is unlikely you would know the capital market. Please go ahead.
Thank you and congratulations on your quarter.
So just a couple of quick housekeeping things and then a couple of other questions.
The revenue guidance include vital choice.
Yes, Michael we didn't adjust our our guidance because of the size of it.
A vital choice buyer.
<unk> choices on an annual basis about a 25 million dollar revenue business, but we expect as we integrated to accelerate its growth and double digit growth going forward, but obviously, it's maybe a 0.2 annual to annual revenues at those numbers. So we didn't change our guide.
As a result.
Okay, and then can you just kind of give it to them.
And somehow.
Bridal choice performance of the quarter is it profitable each quarter.
You know just kind of give us a sense of how it performs.
Yeah about 30% of its revenue is normally in the holiday quarter where were.
Picking it up.
Secondly, one month into the quarter, so pretty minor impact on.
In this quarter.
Okay, and then the supply chain issues affect any one of your segments more so than the others.
There is a supply chain issue affects more of our wholesale business on our E Commerce business.
Primarily the.
You read a lot about the significant issues on ocean freight we're not as susceptible to.
The ocean freight issues and the imports from Asia that many companies are but a number of our wholesale products do come in from there. So it affects that piece of business. If you remember that's about.
Maybe a 5% component of our overall overall revenues was not a big piece of our business with that said, we are feeling some pain with regard to the supply chain issues.
So it's mostly in the wholesale channel more than in the e-commerce channels.
Gotcha, and then I'm hearing supply chain issues are starting to affect the economies of the larger markets in the U S.
Which in turn is affecting advertising are you seeing I know that advertising was up year over year marketing and so forth are you starting to see marketing rates begin to drop a little bit.
As you kind of head into this quarter.
We have not seen that yet Michael as you just pointed out marketing rates had returned to normal we don't face the same headwinds that we faced in the past quarters as we look at this year.
We're optimistic that we see marketing rates start to drop a little bit, but we have not seen that at this point.
And the company has historically been very good in terms of the price elasticity to raise prices during periods of inflation and things like that.
Just wondering do you think that this is a little different than the times that you've seen in the past how how receptive consumer.
Consumer has been to the price increases that you had on some of your select products and things like that can you just kind of give us a sense on how the consumers reacting.
So we've been taking as bill pointed out in his formal remarks, we've been taking price increases where we can where we can and doing so strategically as you pointed out that we've done very effectively in the past.
At this point I think we're seeing consumers respond appropriately or risk.
Respond.
Favorably to the price increases that we've taken and we're certainly looking at the opportunities going forward. I think we're also the market is being shaped by what we see in the general press.
The consumer is seeing that there are price increases coming that's also helping the consumer to step up and start to order early as well as we're seeing that as a general message in the macro community.
Yes, Michael we have the ability we have dynamic pricing. So we have the ability to adjust pricing up look at.
How thats impacting conversion and adjusted back.
If need be but as a kind of a macro comment we saw a softer consumer demand in July and August.
What we expected and what we guided to back in August August call. We expected and then we saw a nice uptick in the business post labor day as well.
Kids went back to school, everyone went back to back to work and we saw double digit growth in the month of in the month of September that's continued into October that's at the time that we really started to implement some strategic pricing and we didn't do it in July and August when consumer demand was a little softer and it didn't it did not impact.
Demand.
Gotcha. Thank you so much I appreciate all the questions. Thanks, Thank you Michael.
The next question is from Dan Kiernan the benchmark company. Please go ahead.
Great. Thanks, good morning.
Chris I guess, just as we think about some of.
Mike's comments on advertising and marketing obviously, the pressures have been abated if anything performance.
Nasty or given the supply issues.
Beating down funnel you.
<unk> been pretty flexible with.
Youre sort of go to market strategy and the interesting thing and even with elevated rates you guys are seeing.
Still strong growth so maybe kind of two part question, which is one.
Are you thinking about channel spend going into the holiday period and two obviously you spent a lot of money over the past couple of years sort of building your moat here and taking share.
You're seeing maybe the fruits of that labor now is there.
Are there any thoughts to kind of starting to let some of the.
The growth just flow through here.
Maybe since the inefficiencies are gone or.
Is it really just more of a reallocation to different channels.
Calling into 'twenty two here throughout the course of the year.
Thank you Dan.
As we look at things is to your first part of your question really well you know on how we look at the different channel spend.
First and foremost as you pointed out in your question were very good and we have good flexibility even as bill discussed on the dynamic pricing.
The point, we have the same capabilities really on our advertising spend for the most part so much of our advertising spend is in the digital channels and we can dial back in Dialup as we've seen the effectiveness move up and down.
I think we continue to look at especially our lead brands moving more upper funnel.
We're starting to do more.
Television, whether it be connected TV linear TV, we're seeing good opportunities in those markets right now so.
So that's broadening our capabilities and then as you get really into the closer to the holiday it becomes more of a kind of lower funnel and where we can really be flexible and take advantage of the efficiencies that we see in the market. So to your point on building the moat we.
See the opportunity to continue to grow the business so that I think.
As things become or even this holiday season, we expect it to be less promotional so that provides us some opportunity as well, but we're in a growth mode right. Now. So we're looking to see where we can expand that moat and how we can continue to grow our customer file as I pointed out in my remarks. This past quarter. When we grew our customer file by 900000.
People and at the same time, 65% of our revenue still came from existing customers with good metrics from a passport customers. Good metrics on our multi brand Cabot multi brand customers multi category customers. So we're continuing to lean into that.
Got it and maybe just to kind of follow up on that and at the risk of being wrong in my math here.
I still think in the September quarter, if you exclude T mall from both period, you still had some I don't know, 4% consumer floral growth off of I don't know 55, or so percent growth last year, something like that so you had tremendous kind of underlying momentum and bill feel free to tell me I get that wrong.
But I guess I'm just trying to understand.
How much of that is sort of marketing driven how much of that in passport how much of that is just kind of any.
Expansion of product lines here and just do you feel the need to continue marketing at the same level to maintain that growth.
Or do you have kind of substantial momentum worthy investment and product expansion in things like Battle choice becomes maybe more of a better lever to continue driving the.
Elevated growth rates you're seeing.
I don't think bill is going to correct you I think your math is fairly accurate.
But I think to your question. It really is overall and it really is the momentum that we've been building up as we've been speaking about.
Just in the consumer floral about the momentum we've been building for several years in our businesses.
And really leveraging the platform. So when you look at different product expansions, we talked about the sherri's berries product expansion and how that really.
Leverage that platform is helping to drive some of this momentum or any growth that you referenced.
Vital choice will be similar will bring that product line on a tower platform work to accelerate its growth capabilities.
Bring that product catalog and with the Harry <unk> David.
My line, which is such a nice complementary fit so it's the customer base that we've had that we've built up over time, it's the the product expansion.
Passport numbers everything kind of working together to give us that momentum.
Yes, just with your fair enough.
With your numbers ballpark consumer floral and overall.
We highlighted it in the.
In our formal remarks, but overall, 9% growth on top of.
Last years over 50% growth, which got us a 65% growth over two years ago very similar numbers in the <unk>.
Consumer floral category, yeah over 4% organic growth consumer and consumer floor on the wanting them to flowers brand over last year as well over 50%, bringing a 60% growth over two years ago.
Yes.
It's an unusual story line in this market to the upside.
You guys should be commended for that thanks for all the color I appreciate it. Thank you then.
The next question is from Linda Bolton Weiser with D. A Davidson. Please go ahead.
Okay.
Yeah. Thank you hi.
So.
Can you just comment.
And is there any issues at all in terms of supply chain with availability or pricing of flour supply are you seeing anything unusual there.
I wouldn't say a very unusual Linda there have been challenges as was reported last spring just didn't really mostly in the <unk>.
In the freight side of the flower availability. So there is some small challenges just like we're seeing in every sector, but we've got that under control. We've mitigated that we were in good inventory position as we go forward into this coming holiday season.
Okay, Great and then.
Maybe I missed it but did you actually give the increase in the number of passport members year over year increase in the quarter.
No we did not break that out on a quarterly basis, but I would say that we're continuing to grow passport at double digit rates and what's really important.
Pointed out in my remarks is if you look at Q1, we saw a 50% 51% increase in customers, both new and existing utilizing the passport program. So that's a good metrics is really shows the traction that passport is gaining in our everyday sales.
Okay.
And then in terms of a vital choice.
Integrated where you'll be able to get it in time for the holiday season and is that going to be.
You know completely integrated multi brand platform like how much progress can you make on that by the holidays.
At this point in time, Linda Thanks for that question on it and as you've seen us do in the past. The first thing we do when we look at an acquisition and on the integration plan is don't mess with the existing business.
We move into the holiday season, we won't rush things there so what youll see us do is merchandize their top selling products within the Harry <unk>, David Gourmet line and that's about the extent that Youll see in addition to starting to do some.
The customer database exposure et cetera, but from an integration point of view very limited pre holiday and really focus from a merchandising on our platform point of view.
Okay.
And then.
I had a question just about the longer term.
Okay. Yeah, you had a target of a 10% EBITA margin for several years and you've hit it you've been successful in that.
So going forward over the next few years are you seeing that you're more of a top line growth with more of a flattish EBITDA margin or do you think there can be some EBITDA margin expansion beyond the 10% level.
Yes.
Yes, Linda I think over the longer term, we do see that there is.
The ability to improve our EBITDA margin.
Whether it be on the gross margin line or even on the Opex line over time as passport.
<unk> becomes a bigger component as multiyear.
Category purchases become a bigger component of our revenue more revenue will come from our existing customer base. Thus there will be some leveraging on the marketing side of the of.
The business. So we do think over time.
There will be an expansion.
As we get benefits from the overall platform that we've built as Bill said, both on the marketing side, the customer database side as well as the operations capabilities. The automation, we're building into the platform et cetera. So the more we invest and build a platform the better youll see returns in the future.
Okay, Great and then.
Just finally.
And then with your guidance for double digit growth revenue growth for the year I think if you look at street estimate.
There is an expectation for double digit revenue growth and the big holiday quarter in the second quarter. So are you, saying that that's possible with the trends you're seeing now.
Is that the ballpark range of what you're kind of expecting for the holiday quarter.
Yes, Linda.
By reiterating our guidance of 10% to 12% growth for the year with where we were below that in Q1, the remainder of the year, we certainly have to be at the double digit level with Q2 being our largest quarter by by a significant margin.
We do expect to achieve double digit growth in the second quarter.
Okay, great. Thank you so much and good luck with everything.
Thank you thank you Linda.
The next question is from Alex Fuhrman, Craig Allen. Please go ahead.
Great. Thank you very much for taking my question. Yeah, obviously, it sounds like you guys had a really good handle on the supply chain given that you're reiterating your guidance for the full year, but you know as you look at the headwinds that you are facing in the optical ahead with the supply chain what are the areas that you're most.
Concerned about or are there any overseas inputs that are critical to the construction of your gift basket and towers are there any concerns about perhaps outbound shipping delay risking some of your fresh pop products whaling in transit and I guess just from a big picture are there any concerns about being able to fulfill.
<unk> orders and weak demand for holiday or is it really just a matter of having to pay a little bit more for things like labor and shipping.
Alex that's a mouthful.
In supply chain is as all over the news.
These days.
Certainly the ocean freight side of it gets a lot of news.
Luckily, we're less susceptible to ocean freight than than.
Many other companies is we don't import a significant amount of items from.
From Asia with that said, we are susceptible to it and it does impact the wholesale part of our business more than he comments. It really doesn't have much impact on e-commerce, but when you talk about supply chain as you know there's a lot of factors there right. There is there is the <unk>.
Ocean freight is trucking trucking availability.
And as outbound freight so it's a wide.
It's a wide category. This is why we've been investing food.
For a number of years in automation.
We wanted to.
Lessen our reliance on AC seasonal labor, but also be able to get ahead of some of the some of the challenges you saw on our balance sheet that our inventory is up $90 million over a year ago, right and that's a comp to comp right, we already own personalization mall.
A year ago that was a conscious effort on management's part to bring inventory in early to put us in a better position than we were a year ago and to address some of the issues with.
With supply chain so.
There are certainly headwinds out there that that will keep Chris and I are up it.
Up at night, but we think we are in.
A pretty good position as we head into the important.
Two months ahead of us and why we are accompanying and reiterated our guidance.
That's terrific. Thanks Bill.
The next question is found that Doug Lane with Lane Research. Please go ahead.
Oh, Yes, hi, good morning, everybody.
Just on talking about the December quarter, the holiday quarter.
Number right there were capacity constraint in year ago quarter, So where are we on those capacity issues what are we going to alleviate them.
<unk>.
<unk>.
Some demand.
Question this quarter that maybe werent fulfilled last quarter.
Sure Doug there's a couple of things there Bill asked you to chime in as well, but if we look last year some of the capacity constraints.
Yeah, we were dealing with are more on the inventory side than pure capacity.
Capabilities, so as bill pointed out we've addressed and looking to mitigate that with the increased inventory position that we're in in addition to that we've built in automation into some of our distribution facilities to increase throughput I mentioned some of the new equipment. We added into for example that personalization mall to increase fulfillment capabilities there.
In addition, as Bill pointed out just a minute ago. The additional inventory that we brought in at personalization mall. The new items drove a 2500 new items that were either that we've introduced there personalization mall.
Most of the things that we've done to really address those issues Bill anything else you think of yeah.
Obviously from an operational standpoint. This is this is very fluid.
It's a tough environment, both on the supply chain and from.
From a labor availability, but thats again why we.
You did a lot of the things that Chris just spoke about from an inventory standpoint from an automation from an automation.
Standpoint to put us in the best position, we could we could be and take advantage of what we believe is going to be.
Good strong consumer consumer demand as we head into Q2.
We'll also get the benefit a little bit of a benefit of a shift from Q1 into Q2 on some wholesale orders we spoke about it with.
With Bloom net.
Because the supply chain challenges on that wholesale product. We have some orders that are typically would've gone out in Q1 that are going to come into Q2.
Okay. That's helpful. Thank you.
We're on.
<unk> mall, we anniversary the acquisitions that we're going to lose visibility numbers more bulk.
As far as I can tell the growth there has been more than doubled.
30%. So I don't know if you want to confirm that number and what kind of growth rates you're seeing.
On the top.
Okay.
So personalization mall, Doug as you pointed out continues to perform very well.
Continue to increase the capabilities, there new product introductions, the inventory position, where there. So we're very comfortable with its continued growth rate.
As you mentioned.
Okay.
Is it fully integrated.
Italy and England.
Where do we stand there.
There's still integration to be done there.
Some of the technology platforms, etcetera, but one of the big things that we did this past quarter or recently anyway was really integrating their product catalog. So everything is it the whole product catalog is integrated with our product information management system. So what we're seeing now is much more cross merchandising being done across.
Our other brands of the personalization mall products. So that's one of the most recent and significant achievements in the integration plan.
Okay.
Your next question.
With Northcoast research. Please go ahead.
Thank you and good morning.
Only one question after Alex and Doug.
<unk> got some good color from theirs.
And it is on vital choice yeah. It was a small tuck in acquisition I know you guys have.
Stockyards already on your Prada.
Product offering I was wondering if this kind of better for you.
Category is kind of a new target vertical for you. If you guys could maybe size that vertical I don't know I'm not very familiar with what that kind of market. It looks like I was just wondering if you could provide some more.
Color on why you're targeting the better for you category or what you like about it and and if you could maybe size it a little bit better for us. Thanks.
Sure. Thanks for the question, Tim because we look at the better for you category, we've been in that category already with some of the product line from Harry <unk>, David whether it be some organic food organic capabilities organic vegetables that we've had we've had some shareholders gluten free cookies sugar free cookies et cetera, and it's a category that is.
Been on trend for a while now and continues to be a hot trend, especially after a younger and younger demographic.
So when we saw the opportunity with vinyl choice, it's more than just a product expansion for us which again the product is just fantastic and it's just a.
Great product and well positioned but it really positions and it's a brand that we think we can grow into the better for you category I don't have the numbers off the top of my head, but it's a very large category for us to grow into.
And for us to continue to expand.
<unk> printing our position in there so we're pretty excited about that and if you take a look at the vital choice side, if you've had a chance to see how they really promote the whole better for you the healthier.
I'm conscious aspect of a wildcard sea food and sustainably farmed shellfish, that's it so that flavor of branding and positioning as well you'll see US do is as we expand the vital choice brand over the over the over the coming years.
No I appreciate that color and something maybe you can expand on.
Later, one other kind of quick question no supply chain issues of last year, you know a wholly different I think than this year I think last year it was more fulfillment.
All the e-commerce demand.
From my notes I have a I think a number you guys gave us last year, which was I think you were able to fill 96% of your orders I was wondering you know what a normal metric is for fulfillment.
Now the orders you get and if you feel comfortable that you're going to get back to you know, 100% or whatever that normal fulfillment rate as you.
This holiday.
[laughter].
Yeah, Tim I mean, we we did discuss last year that in December we re left demand on that on the table.
The combination of the availability of inventory as well as Fedex capacity issues. We have worked very hard with Fedex you know throughout the year and we feel we do feel confident that that Fedex will be able to.
Fulfill the demand.
Now that we have now you've heard us talk about.
Some of the supply chain and labor.
Issues with the strategies we've.
Implemented.
Offset that we think we're in good.
Good shape, but.
This is a this is a top of operational environment to.
And so we're going to do our best to do.
Phil.
Order that we can get.
Alright, Thanks, Scott and good luck thanks, Tim.
This concludes our question and answer session I would like to turn the conference back over to Chris Mccann for any closing a lot.
I'd just like to thank everyone for joining this morning and appreciate your comments and your questions. If you have any additional follow up questions. Please don't hesitate to reach out we'd be glad to engage.
And I urge all of you to try a new product line for vital choice guarantee you'll love it.
You very much.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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