1-800-FLOWERS.COM (FLWS) Q4 2014 earnings summary

Executive summary

• FY14 revenue grew for a fifth consecutive year, but severe winter weather, competitive pricing and weak discretionary demand pressured profitability.

• Harry & David joined the portfolio on September 30, 2014, expanding the gifting business and lifting expected FY15 annual revenue above $1.1 billion.

Financial highlights

• FY14 net revenue from continuing operations rose 2.8% to $756.3 million; growth was reported across all three segments.

• Gross profit increased 3.4% to $315.7 million; gross margin was 41.7%, up 20 bps YoY.

• Operating income was $23.7 million vs. $25.8 million; net income attributable to shareholders was $15.4 million vs. $12.3 million.

• Adjusted EBITDA, excluding stock-based compensation, declined 1.3% to $48.2 million; free cash flow rose 34% to $19.6 million.

Outlook and guidance

• FY15 guidance, including Harry & David contributions, called for revenue above $1.1 billion, Adjusted EBITDA of approximately $90 million and Adjusted EPS of $0.45–$0.50.

• Adjusted EBITDA guidance excluded acquisition transaction costs, purchase-accounting adjustments and stock-based compensation; Adjusted EPS excluded transaction costs and purchase-accounting adjustments but included stock-based compensation.

• FY15 Q2 was expected to generate 46%–50% of annual revenue, reflecting Harry & David’s holiday seasonality; guidance excluded its FY15 Q1 results.

• Prior standalone FY15 planning anticipated mid-single-digit consolidated revenue growth and EBITDA and EPS growth faster than revenue.