1-800-FLOWERS.COM (FLWS) Q4 2011 earnings summary

Executive summary

• FY2011 revenue rose 3.3% to $689.8M, returning to annual growth; gross margin and operating expense ratio improved, with all three continuing business categories growing.

• EBITDA increased to $34.1M from $24.8M, and EPS from continuing operations was $0.09 versus a $0.03 loss in FY2010.

• Results benefited from more efficient marketing, original product merchandising, higher average order value, improved operating efficiencies, and tighter cost leverage.

Financial highlights

• Net revenues were $689.8M, up 3.3%; e-commerce revenue was $485.4M, up 3.3%, and other revenue was $204.4M, up 3.4%.

• Gross profit rose 5.4% to $280.1M; gross margin was 40.6%, up from 39.8%.

• Operating income was $13.4M versus $3.4M; net income from continuing operations was $5.7M versus a $2.1M loss.

• EBITDA was $34.1M versus $24.8M; adjusted EBITDA was $34.1M versus $28.6M in FY2010, which included non-recurring adjustments.

• EPS from continuing operations was $0.09 versus a $0.03 loss; FY2011 had 53 weeks versus 52 weeks in FY2010.

Outlook and guidance

• FY2012 consolidated revenue growth forecast in the low-to-mid-single-digit range; EBITDA, EPS, and free cash flow expected to grow faster than revenue.

• FY2012 gross margin percentage expected to improve on FY2011 through lower promotional activity and better sourcing, supply chain, and manufacturing efficiencies.

• No significant improvement in discretionary consumer demand expected; priorities include cost leverage, original products, more efficient marketing, and investments in social/mobile commerce and franchising.

• Net debt expected to approach zero by FY2012 year-end after scheduled debt payments of about $16M and anticipated positive cash generation.