1-800-FLOWERS.COM (FLWS) Q4 2018 earnings summary

Executive summary

• Comparable FY18 revenue grew 3.7% to $1.15B, accelerating to 5.8% in H2 across all three segments; operational and cost headwinds weighed on earnings.

• Everyday gifting demand strengthened in Harry & David, while 1-800-Flowers.com and BloomNet benefited from marketing and merchandising investments.

Financial highlights

• Reported net revenue was $1,151.9M, down 3.5% YoY; excluding Fannie May’s disposition, comparable revenue rose 3.7%.

• GAAP net income was $40.8M and diluted EPS was $0.61; Adjusted net income was $29.3M and Adjusted diluted EPS was $0.44, excluding specified one-time items, including the $12.2M Tax Act benefit.

• Adjusted EBITDA was $78.9M versus $85.9M in FY17; reported operating income was $41.0M versus $46.4M.

• Gross profit was $489.0M and gross margin 42.5%, down 110 bps YoY; comparable gross profit increased 0.3% while comparable margin declined 140 bps.

Outlook and guidance

• FY19 revenue growth forecast at 5%–7%, EPS at $0.38–$0.42 using a normalized 26% effective tax rate, and Adjusted EBITDA at $77M–$80M.

• Double-digit EBITDA and EPS growth is anticipated by FY20; FY19 strategy includes targeted marketing, merchandising, digital marketing and broader everyday-gifting offerings.

• FY19 gross profit is expected to improve through sales growth, manufacturing productivity and automation, targeted price increases, and correction of FY18 operational issues, partly offset by higher labor and transport costs.