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Edited Transcript of FLWS earnings conference call or presentation 31-Oct-19 3:00pm GMT

Q1 2020 1-800-Flowers.Com Inc Earnings Call

CARLE PLACE Nov 5, 2019 (Thomson StreetEvents) -- Edited Transcript of 1-800-Flowers.Com Inc earnings conference call or presentation Thursday, October 31, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher G. McCann

1-800-FLOWERS.COM, Inc. - CEO, President & Director

* Joseph D. Pititto

1-800-FLOWERS.COM, Inc. - SVP of IR & Corporate Communications

* William E. Shea

1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO

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Conference Call Participants

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* Alex Joseph Fuhrman

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Anthony Chester Lebiedzinski

Sidoti & Company, LLC - Senior Equity Research Analyst

* Daniel Louis Kurnos

The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst

* Linda Ann Bolton-Weiser

D.A. Davidson & Co., Research Division - Senior Research Analyst

* Michael A. Kupinski

NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the 1-800-FLOWERS. COM, Inc. Fiscal 2020 First Quarter Results Conference Call. Today's conference is being recorded. (Operator Instructions) I would now like to turn this conference over to Joe Pititto, Senior Vice President, Investor Relations. Please go ahead, sir.

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Joseph D. Pititto, 1-800-FLOWERS.COM, Inc. - SVP of IR & Corporate Communications [2]

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Thank you, Shantel. Good morning, and thank you all for joining us today to discuss 1-800-FLOWERS. COM, Inc.'s financial results for our fiscal 2020 first quarter.

For 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 at www.1800flowersinc.com.

Our call today will begin with brief formal remarks, and then we will open the call to your questions. Presenting today will be Chris McCann, CEO; and Bill Shea, CFO. Before we begin, I need to remind everyone that some of the statements that we will make today may be 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. 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 any of its SEC filings, except as may be otherwise stated by the company.

I'll now turn the call over to Chris McCann.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [3]

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Good morning, everyone. We've had a strong start to fiscal 2020. As I stated in this morning's press release, our results for the first quarter represent a continuation of the momentum that we built throughout last year. Our revenue growth of more than 10% and EBITDA improvement of nearly 19% reflect the benefits we are getting from the investments that we made last year and continue to make this year in our key Harry & David and 1-800-Flowers brands as well as in our BloomNet business. Importantly, we achieved solid growth in revenues, contribution margin across all 3 of our business segments.

In Gourmet Food and Gift Baskets, we grew the revenue nearly 18%, driven by strong everyday gifting at Harry & David for such occasions as birthday, sympathy and thank you, along with its new get well collection, growing customer demand for the Harry & David gourmet line including prepared meals and wines for both gifting and entertaining that are attracting a younger shopper to the brand, continued growth in 1-800-Baskets for direct-to-consumer gifts for everyday gifting as well as increased wholesale shipments for the holiday season and contributions from our new Shari's Berries brand, which we acquired in mid-August. It's worth noting that we had the Shari's Berries brand up on our multi-brand platform and helping customers deliver smiles, literally within hours of having closed on the acquisition. This is a real testament to our culture of teamwork and our focus on execution.

The integration and development of this new business has been going well. We've been working with our fulfillment partners to prepare for the upcoming holiday season, making changes to packaging and improving product quality. And we've begun to rework Shari's Berries messaging and marketing mix and testing into different marketing channels. While this is still very early, we're encouraged by the customer interest and demand we are seeing.

In our floral businesses, 1-800-Flowers and BloomNet were able to effectively leverage the investments we've been making in innovative marketing and merchandising programs to achieve solid growth in revenue, gross margin and contribution margin during the quarter. As a result, 1-800-Flowers further extended its market leadership position and BloomNet continued to grow its market share. We expect these trends to continue throughout the fiscal year.

During the quarter, BloomNet's revenue growth was driven primarily by strong digital directory sales and increasing demand for our expanded line of wholesale products, along with continued growth in order volume.

In our 1-800-Flowers business, we launched the plant shop building on the strong growth that we are seeing in plants for both gifting and self-consumption. The plant shop features a new collection of on-trend customer favorites of house plants and an expanded selection of succulents. We are quickly becoming the authority in this fast-growing category, a favorite of millennial customers. We also continue to differentiate and elevate our floral and gift offerings with now trending collections for the fall season, including Rustic Farmhouse and Pumpkin Spice, truly original and exclusive designs that are helping attract younger customers to the 1-800-Flowers brand.

In addition to the strong revenue growth during the quarter, we also continued double-digit growth in our customer file as well as solid growth in membership in our Passport program and in multi-brand customers. As we've noted in the past, these are our best-performing customers in terms of purchase frequency, retention and lifetime value. The strong growth in our customer file bodes well for us as we continue our momentum as we enter the key holiday shopping period. Before I turn the call over to Bill for the financial metrics for the quarter, I'd like to touch on a few of the initiatives we've taken ahead of the holiday season.

On the merchandising front, we launched our new Cards With Pop line from The Popcorn Factory, specially designed envelope shaped cards available with uniquely curated sentiments printed on the outside and gourmet popcorn on the inside. Cards With Pop are designed for customers who wish to express their thoughts with witty and relevant sentiments for everyday occasions, cultural moments and holidays, all for $9.99 shipping included. Also off to a great start is the repositioning of our Wolferman's brand as Wolferman's Bakery, featuring expansive assortment of exceptional baked goods for perfect for entertaining, self-consumption and gifting. The new positioning reflects how Wolferman's has evolved from a brand best known for its super-thick English muffins to a full online bakery, offering sweet and savory items baked from scratch daily. As a result of its repositioning, Wolferman's is already seeing some of the best customer demand that we have experienced in a while.

As we head into the season of sharing, we've also launched a special collection of holiday gifts designed to benefit Smile Farms, a nonprofit organization that is dedicated to creating meaningful jobs for individuals with developmental disabilities. Throughout the holiday season, 20% of all net proceeds from this collection's sales will be donated to Smile Farms.

In terms of innovation to enhance the customer experience, we recently completed the rollout of PWA technology across our brand, significantly increasing site speeds for our customers on their mobile devices. We launched our new Magic Link capability, enhancing our customers' sign-in experience by allowing them to log into the accounts with a single click, even if they don't remember their user name and password. And we deployed new 3D capabilities for a collection of top products on the 1-800-Flowers site, enabling customers to not only preview our products in 3 dimensions on both desktop and mobile, but also see what their gifts will look like on a table or in a room by augmented reality on their supported mobile devices.

Looking ahead, as we enter the key holiday period, we have strong momentum across all our business segments. We continue to grow our customer files at a strong pace and our customer metrics continue to be strong, and we have exciting new initiatives underway across the company designed to expand our product offerings and to continually enhance the customer experience. As a result, we are well positioned to deliver strong performance for the holiday period and for the full fiscal year.

I'll now turn the call over to Bill. Bill?

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [4]

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Thank you, Chris. As Chris noted, we have started fiscal 2020 off very well, and we are pleased with the strong top line growth and improved bottom line results in our first quarter. While we saw strong growth across all 3 of our business segments, our Gourmet Food and Gift Baskets segment achieved outsized growth in the quarter. This reflects the benefits from Shari's Berries as well as the timing of certain wholesale gift basket shipments, which in the past typically occurred in our second quarter. Adjusting for these, growth in this segment was in the high single digits for the quarter, driven by strong growth at Harry & David and 1-800-Baskets.com.

Now breaking down some highlights from our first quarter. First, in terms of revenues, total consolidated revenues increased 10.5% to $187.3 million compared with $169.5 million in the prior year period. This was driven by 17.7% growth in the Gourmet Food and Gift Baskets segment along with 6.7% and 6% growth, respectively, in the Consumer Floral and BloomNet segments.

Gross profit margin for the period increased 30 basis points to 40.7%, reflecting increases of 60 basis points and 130 basis points, respectively, in the Consumer Floral and BloomNet segments, more than offsetting a decline of 10 basis points in the Gourmet Food and Gift Baskets segment. The improved gross profit margin reflected a combination of strategic pricing initiatives and more efficient use of promotional marketing programs, which helped to offset higher costs associated with seasonal labor and tariffs.

Operating expenses improved 230 basis points to 51.7% of total revenues, primarily reflecting the strong revenue growth in the period. As a result of these factors, we improved our adjusted EBITDA by 18.6% or $2.6 million to a loss of $11.3 million for the quarter.

Our net loss for the period also improved nicely to $15.3 million or $0.24 per share compared with $17.3 million or $0.27 per share in the prior year period.

Turning to our balance sheet. Our cash and investment position was $34.2 million at the end of the first quarter. Inventory was $172.5 million compared with the inventory of $160.7 million at the end of last year's first quarter. The increase in inventory supports our growth and includes the decision to buy certain inventory early ahead of expected tariff increases as well as the strategic prebuilding of some inventory for the holiday season.

As we have noted on our past calls, this strategy allows us to use our core workforce during the slower summer months to somewhat mitigate the headwinds associated with a tight market for seasonal labor and rising hourly wages. In terms of debt, we have $95.8 million outstanding on our credit facility with 0 borrowings on our revolver.

Regarding guidance. We are reiterating our guidance we provided at the beginning of the current fiscal year. Our guidance also includes certain timing issues, in particular, the shipping of several million dollars in wholesale basket shipments into our first fiscal quarter, which will reduce the total wholesale shipments in our current fiscal second quarter. As a result, our guidance remains as follows.

Total consolidated revenue growth for the full fiscal year of 8% to 9%, consisting of 6% to 7% organic revenue growth, combined with the anticipated contributions from Shari's Berries, adjusted EPS growth for the year in the range of 8% to 10% and free cash flow for the year of approximately $45 million.

I'll now turn the call back to Chris.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [5]

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Thanks, Bill. So to sum up, we had a strong start to fiscal '20. Our results for the first quarter represent a continuation of the momentum that we've built throughout last year and beyond. We are seeing the benefits of the investments we've been making in marketing and merchandising programs in the form of strong revenue growth and increasing EBITDA and EPS, driven by all 3 of our business segments. We are continuing to invest in innovative technologies that help enhance customer experience, resulting in growing customer engagement and we are continuing to grow our customer file across the enterprise, along with increasing membership in our Passport program and in customers buying from multiple brands.

As a result, as we head into the important holiday season, we are well positioned to continue our momentum and deliver strong revenue growth and enhanced bottom line results. I'd like to take a minute to thank all the team members of our company who delivered these results for Q1 and for all the planning that has positioned us so well to continue this momentum into Q2.

With that, we'd now like to open the call for any of your questions. So Shantel, could you please repeat the instructions for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Dan Kurnos, The Benchmark Company, LLC.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst [2]

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You had a nice quarter guys. Chris, look, I think, not to too much alter your words, but it sounds like your share gains are good, you expect will continue after all the investments you've made, and yet in the quarter, you had pretty nice leverage, which I think was a little bit of a surprise. There's been a lot of rumors and expectations out there after Nexus took over FTD's stuff. They still don't have a CEO. So if you could just kind of talk to the competitive environment you're seeing now in this quarter and going into the holiday period, I'd appreciate it.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [3]

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Great, Daniel. Thank you for recognizing the share gains that we've achieved and showing some leverage. Yes, as we look at the competitive landscape across the categories that we're in, we really haven't seen any changes, whether on the gourmet food side or on the floral side of it. Q1, you wouldn't expect to see that, but we really haven't seen any change in the competitive landscape. And I think as we look at that, we continue to -- the share gains that we're getting continue to be because of our relentless focus on what we do well, our focus on building our brands and what our brand stands for, enhancing investing and enhancing the customer experience, bringing new product extensions to the table, like the plant shop, the on-trend floral bouquets that we talked about. So it's really a combination of all of this that's helping us to build out customer file and as we do that, it gives us great confidence that this momentum will continue no matter what the competitive environment is.

And if you keep in mind, in the past, we've been in a very competitive -- competitive environment, especially on the floral category, and we've continued to do well, increasing our margins along the way, growing market share. So even in an irrational spend market, we've done well. And if the market becomes a little bit more rational, we think that bodes even better for us.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst [4]

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Got it, great. And then I don't know if this is for you, Chris or for Bill, but just there is 1 less week, it happens whatever 6 years or 7 years, but there's 1 less week this holiday period, just how are you thinking about the impact, I know that's embedded in your guidance? If you could just help us think through how you guys are planning for logistics and how you expect order demand to be impacted by that, that would be helpful.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [5]

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Yes. So -- and as you point out, that is embedded in our guidance. And we certainly have gone back to years past when that's been the case to, to do our planning. It does affect how we go to market a little bit differently. It changes some of the timing of our marketing initiatives, trying to move things up a little bit, some early order incentives that we'll give our customers trying to get orders in a little bit earlier, get the holiday season going before Thanksgiving a little bit, so putting some emphasis there. Bill, you want to talk? You've been integrally involved in the planning on the logistics side of things.

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [6]

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Yes, we work very closely with FedEx, our major small package delivery partner. And we have a plan in place to fully deploy more inventory closer to consumer, it helps save on -- we get better and better at this each year. It helps save on small package delivery cost, but also gets the product closer to the consumer so we can ship later in the year. We've also worked with FedEx on the number of kind of direct truckloads that we put into their hubs. So again, we can just kind of react very quickly to the later demand that's happening this year. So to your point, Dan, the 6 less shopping days has an impact on both the front end, I think we've addressed that. We've built that into the guidance that we have. And operationally, we've been working with our partners to address that. We feel very comfortable on that end.

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Operator [7]

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Our next question will come from Michael Kupinski, NOBLE Capital Markets.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [8]

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And congratulations on your quarter, a very good start to the year. Can you talk a little bit about what might have changed in the last quarter in terms of the competitive landscape? I know that you indicated that there were some heightened cost for search words and things like that. I was just wondering if there is anything that may have changed in the last quarter, particularly.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [9]

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Yes. Thanks, Michael. I would say, no, there's been no real change. Again, Q1 is not a big quarter where we would expect to see much change. You referenced search terms going up. And that's just a kind of general market condition, not necessarily to our competitive set. So in Q1, we haven't seen any real change in the competitive landscape, whether it be on the floral side of our business, on the gourmet food side or in some of the general gifting products that we're moving into. And again, what we see is a continued engagement with our brand. People responding well to the new product offerings that we're bringing out.

That's why we've highlighted the plant shed. It's been doing great for us. That's why we highlighted the Harry & David gourmet line, which is doing fantastic for us, especially helping us to attract the younger demographic customer responding well in our digital marketing campaigns. So as we look at really kind of especially the short term, as we really look focused on Q2, as we're moving into it, we think we're really, really well positioned, but beyond that as well.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [10]

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Got you. And then the Consumer Floral business, can you talk a little bit about volume versus pricing maybe?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [11]

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So I'll ask Bill to cover that, but it's pretty straightforward.

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [12]

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Yes, it really is all volume. There really hasn't been much change in our AOVs. So the 6.7% growth that you saw in Consumer Floral is really driven by volume.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [13]

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Got you. And in BloomNet, can you talk a little bit about the number of florists in your network, has that been increasing? And just like maybe if you can provide that year-over-year, what that looks like?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [14]

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Yes. So -- I'll take that. As we've said for a long time now, BloomNet, we're not looking to really grow the membership. So that stays in that 5,000 to 6,000 range, and get some churn in there, you get new members coming in. We've seen some success in new members coming into the network coming from the FTD network into BloomNet. So we've seen that in the past 3 to 6 months, I would say. But really, the number stays fairly stable. And what's been important for us is really, as in the last year, as we moved order volume into BloomNet, that deepens the relationship we have with those BloomNet members.

And then we start to really utilizing -- basically out of that relationship gets us more sales into our wholesale products and marketing services like the digital directory, some of the search marketing services, wholesale products I mentioned, and that's what we saw this quarter. So chronologically, that's what we expect. Bring the orders in, deepen the relationship, start to sell products and services into those relationships.

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [15]

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Yes. And ultimately, the BloomNet model and what we've outlined over the last couple of years is that we want to continue to drive, ultimately, contribution margin within that. It was going to initially come from the large increase in orders, that we started at the end of fiscal '18, kind of ran through fiscal '19 and now we're comping against those. So that was -- that drove the large top line growth, had some impact on our gross margins last year. Now the second stage of that is to monetize those orders. So as Chris referenced, you're seeing increases in kind of the digital directory that we're selling, seeing increases in wholesale. So now we have gross margins moderating, revenues coming down a little bit, but we still think we'll have very healthy top line growth in -- within BloomNet and still driving incremental margin dollars and incremental contribution margin dollars.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [16]

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And we're still seeing some order growth there as well. So we think we're in a good position.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [17]

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And in terms of the wage pressures that you were talking about, I know like last year, you indicated that you had heightened issues with seasonal help from Mexico given the political rhetoric that was going on, has that kind of stabilized? Or has that improved somewhat? Can you just kind of give me some idea as to what's happening there?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [18]

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So Bill, why don't you touch on the labor side? I mean we're in a good position right now. I'll talk about the seasonal labor. But, Bill, give a little more flavor on that?

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [19]

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Yes. I mean so overall, obviously, we hire a large number of seasonal workers. And labor, like most businesses, we're dealing with a tight labor market and rising labor costs. We certainly have had to increase our labor wages. We offer lots of programs, both in season and beyond to retain and attract that seasonal workforce. We offer product discounts, special sweepstakes, retention bonuses, bus passes, meal passes, et cetera, to kind of bring that -- as much of that seasonal labor force back year-after-year. We talked about strategies to lessen our dependency on that seasonal labor like prebuilding inventory. You see that at the end of Q1 with our inventory up in Q1 this year over where it was a year ago.

We continue to invest in automation initiatives, whether it be in our warehouses or manufacturing or distribution centers. What's really important to note here is there's really 2 aspects of labor; one, can you get the labor, and two, what's it costing you. Well, we were very successful in getting the labor. We have the labor that we need to execute against the holiday season. So that's critical. Two, it is costing us more dollars this year to get that labor. We've put that into the guidance that we provided.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [20]

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Got you. And then final question. Regarding the -- you indicated that you kind of tweaked and did some extra marketing, and I noticed that I'm getting a few more catalogs from some of your other brands that I had before. Is that part of the marketing strategy? I was just wondering if you can maybe talk a little bit about the movement there on the catalog side.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [21]

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Yes, I would say you're probably getting some catalogs maybe because you've been purchasing from some of our other brands.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [22]

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I do that often.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [23]

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Thank you. We haven't been increasing our spend on catalog marketing. If anything, we've been continually decreasing the spend on catalog marketing, especially on this prospecting side of things. And more of that money and spend is going into digital marketing. We've been talking about the success we've been having there and how we're moving more and more Harry & David into a digital marketing entity and that's working real well for us. So bottom line, we're not spending more money into catalog marketing. We're migrating more and more into digital marketing where we'll be able to see better returns and also better flexibility in short-term responsiveness as we see what the -- how the market develops in any given season.

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Operator [24]

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Our next question will come from Linda Bolton-Weiser, D.A. Davidson.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [25]

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Congratulations on a good quarter. So I was wondering about the cadence of sales for Shari's Berries. It sounds like it was a couple of million in the quarter. Chris, this quarter would be maybe a little bigger, like $4 million, but then the biggest would be the March and June quarters, maybe $10 million each? Am I in the ballpark range on that? Can you comment at all on the cadence for Shari's Berries. And just confirm that it's being recorded in Consumer Floral. Is that correct?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [26]

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Sure. I'll ask Bill to kind of cover the cadence and where it's being recorded. But again, as I stated in my opening remarks, we're very pleased. Shari's Berries is off to a good start. As you point out, Linda, in Q1, it's going to be a slow -- low quarter anyway, but we only acquired it mid-August, and we're in the process of getting it up and running. It's a contributor really to the overall momentum that we have of the 10.5%, almost 11% growth for the quarter and what we're seeing in gourmet food category, what we're seeing across all 3 of our businesses. So what we do is really -- we have this celebratory ecosystem, this platform that we built, and we look for businesses like that and you'll continue to see us do this that we can tuck in nicely, leverage the platform and contribute to our overall growth rate moving us this quarter up above 10% growth. So strategically, that's what we're looking to do.

And Bill, any more color on the specifics there?

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [27]

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Yes. First, Linda, it is captured within the Gourmet Food and Gift Baskets segment, so it's not in Consumer Floral as you asked. That was a contributor to the overall almost 18% growth in Gourmet Food and Gift Baskets, but it's about half of what you indicated for the first quarter, more closer to about $2 million in the first quarter. Again, we've only owned it for about 6 weeks in the first quarter. The cadence will increase. Q3 and Q4 -- especially Q3, with Valentine's Day is the biggest quarter for Shari's and it's probably in the ballpark of what you have indicated at about $10 million or so for that quarter.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [28]

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And then can I ask you just this idea of the 1 fewer -- the 6 days fewer shopping days before Christmas. Is there actually some kind of a positive effect just in the sense that people might get caught short, they didn't get to the store for gifts and they would turn to online gifting and maybe some of your product categories as a last-minute fix because there are fewer days. Is there any kind of a bullish argument to be made for the calendar?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [29]

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Well, we'd love for you to make that argument more often. I'm not sure that we historically could say we see that as we look to bake into -- we look historically at our results to bake into our plans. I wouldn't say we see that. I would agree with the general overall theory there that people will turn to online shopping more. And certainly, our food brands will benefit from that, I think. So I'll hope along with you.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [30]

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Okay. And then can you just -- we had heard something a little bit out there about that Nexus actually kind of closed down the drop ship portion of ProFlowers and it's all being florist fulfilled. Can you confirm that or not? And then what does that mean for you? Does that create some kind of new opportunity maybe for share gain in the drop ship segment of the market? And would you pursue that aggressively? Just maybe comment on that whole situation.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [31]

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Sure, Linda. What I would say is that prior to the transaction in the bankruptcy court, the old management of FTD had really shut down the ProFlowers business completely and moved it all into FTD direct florist fulfilled product. Then what we saw coming out of the transaction a little bit was a moderation of that one. And I think, and I may not be completely up to speed here, that right now, if you went to the ProFlowers site, there's probably a mixture of some direct ship product as well as florist fulfilled product, and that seems to be the direction going forward. But again, what we've seen is no real change. So it's hard to understand. I don't know if there is a direction going forward yet that we've seen in the marketplace, but what we have seen is that the site is representing both direct ship and florist fulfilled items.

And as it -- it reflects to us, I mean, that's not going to impact what we do with our plants. I think we have a really good model in place of how we utilize both direct ship and florist fulfilled product, and our primary channel is and always has been to support our BloomNet florist and really use the same-day delivery capabilities that we have in the florist network to get a great quality, great designed product. So again, as we look at BloomNet, BloomNet is, yes, they provide us with great same-day fulfillment capabilities, but they provide us also with great design capabilities in the design councils that different BloomNet members belong to at different times. That's the real benefit to this category here. It's not just flowers in a box.

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Operator [32]

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(Operator Instructions) Our next question will come from Alex Furman, Craig-Hallum Capital Group.

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Alex Joseph Fuhrman, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [33]

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I wanted to ask about the Passport program, now that we're getting into the holiday season or getting close to it. Can you talk us -- to us a little bit about the typical lifestyle of a Passport customer? Curious what times of year, which holidays are really when you get those customers to sign up for Passport? And then similarly, curious when the Passport customers have really been transacting? And specifically, when have you seen those incremental transactions from the Passport customers? Is it more during your slow periods, when you get a nice lift from perhaps some self-consumption from those people? Or is that you see that perhaps they're coming back more often or with larger tickets during the key holidays?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [34]

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Great, Alex. Yes, Passport program is working very nicely for us, and we're glad you can see the continued growth of that program. From your first question about when do we see more sign-ups, naturally it's around the different holiday spikes that we have because just from the sheer volume of traffic of customers coming to our site and seeing the opportunity to sign up and join the Passport program. As far as when do we see the spend, I would say it's more of a year-round spend because what Passport does is increase the purchase frequency.

And we go from an average, let's say, maybe of a 2 times a year average customer to 4 or 5 times when they join Passport, they become multi-brand customers. So that was a big feeding into the everyday occasions and not just the key holiday seasons. So it really helps to round things out for us. And the more we grow that program, the more it not only drives that frequency of usage, but clearly with that frequency of usage comes retention, comes increased lifetime value.

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Alex Joseph Fuhrman, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [35]

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Great. That's really helpful. And then one other thing I wanted to ask about it. I'm not sure how long you've necessarily been offering this, but certainly seems that on your website, there's been a lot more marketing lately about same-day delivery if you order before 2:00 p.m., is that something that you're going to be able to offer throughout the key dates during the holiday season? And just curious if you can talk about what your expectation is there? Any color you can give us on how much same-day orders have impacted your recent results?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [36]

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Yes, I think it's just a focus or it's an extension of our focus on constantly enhancing the customer experience and that whole speed of delivery is a critical factor of that and with floral, our roots being in the floral business, we have really good expertise in same-day delivery, understanding the cost of that capability, moving that into delivery within certain time zones, within a 2-hour time zone and morning delivery and afternoon delivery, et cetera. So constantly pushing the needle with that, both with our florist network and then also working with other delivery services that we've worked with over the years like DoorDash and others. So we're constantly pushing the envelope on that. I would say -- I wouldn't say it has factored into really driving our results because we've been in the same-day delivery, it's a continuation of that. I think that would be a longer-term play really as we start to move other products into the next day, same-day delivery capability.

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Operator [37]

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Our next question will come from Anthony Lebiedzinski from Sidoti & Company.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [38]

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So, I may have missed this, but what was the impact of the gift basket shipments, that shift that you called out in GFGB between the quarters?

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [39]

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Yes, it was several million dollars, probably give or take $3 million of pull forward from Q2 into Q1. Just want to give it some context that, the 17.7% growth within GFGB. Even without that, it still would be a low-teen kind of growth rate in the quarter. And our 10.5% growth in the quarter, would still have been over 9% growth in the quarter, but about $3 million.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [40]

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Got it. Okay. And obviously, you had a very strong first fiscal quarter, a very good start to the year. You mentioned that you haven't really seen much in terms of changes in competitive landscape in the quarter. I know it's not a big quarter to begin with. But as you roll into the big second fiscal quarter for you guys, do you anticipate that the competitive landscape to change? And is that a reason why you did not change your guidance for the full year?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [41]

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No I don't think that specifically is the reason why we haven't changed guidance. It's just we wouldn't change guidance after Q1 with Q2 seeing such a big quarter for us really. But as we look at the competitive landscape, our expectation is what -- a continuation of what we've seen in the past. Christmas holiday will be a promotional holiday. It always is, and we're well positioned to work within that environment and continue to grow at the momentum that we are seeing right now. So nothing different from what we've seen in past holidays. And again, keeping in mind, this quarter, this holiday season is really driven by the food brands, which we're not seeing any change at all really on the competitive front.

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [42]

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Yes. I think just a couple of more comments on the overall guidance. Obviously, we're very pleased with where we are, what we achieved in the first quarter and the momentum we're carrying into the second quarter. But as Chris referenced, Q1 is our smallest quarter, and Q2 is by far our largest quarter. I think we've said this on a number of occasions that it's really best to look at the company in 2 halves. Look at the first half of the year because Q1 really is kind of the feeder into Q2. So looking at the first half of the year in total.

And then looking at the second half of the year, which becomes more floral because of the shift in Easter, looking at those on a combined basis. So as a result, we're not adjusting guidance at this point in time. As we did last year, when we get through the first half of the year, we'll reassess where we are and how our performance was, and we'll adjust the guidance in our next call based upon the results.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [43]

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Got it. And just wondering if you could provide a comment as far as the overall impact from the flower gatherers like FromYouFlowers, for example, how does that -- what are your thoughts on them? Or just impact on your overall business?

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [44]

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So as we look at the landscape, in the floral landscape specifically that you talk about and other competitors, other florists like a FromYou or an Avas, they're good customers of BloomNet. We have very good relationships with those players. We provide them great support. And again, they're good supporters of BloomNet. So we will thank them for their business. We also compete with them on the consumer side of things. It's an interesting relationship that we have, but one that works very well. So we're very happy to work with partners like that in helping to grow our overall business.

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Anthony Chester Lebiedzinski, Sidoti & Company, LLC - Senior Equity Research Analyst [45]

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Got it. And lastly, as far as the tariff impact, is it still about $5 million for fiscal '20?

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William E. Shea, 1-800-FLOWERS.COM, Inc. - Senior VP of Finance & Administration, Treasurer and CFO [46]

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Yes, Anthony. I mean I think we kind of threw that number out back on our August call that the impact -- the biggest piece of the impact is last year's tariffs, we were able to mitigate a lot of last year's tariffs last year by pulling inventory in early. Obviously, as those roll into fiscal '20, we have to buy the inventory. Then we have the September tariffs, the October tariffs that have -- that in some degree have been deferred. And then we have the December tariffs that who knows where that's going to be. I think if you add it all up, the impact on our costs of all that would be $5-plus million. We have done some things this year to help minimize some of the current year tariffs.

Again, you saw the higher balance, the higher inventory balance at the end of September this year versus a year ago. Two plays there. One, we did bring in some inventory early to avoid the tariff cycle that were contemplated for September and October. And we are producing more inventory to address the seasonal labor. So bottom line is probably in excess of $5 million overall based upon the tariffs that are currently out there and expected to be implemented in December. We've been able to mitigate a lot of that through some price increases on both the wholesale side of our business as well as in the direct-to-consumer side of the business, especially last year's tariffs.

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Operator [47]

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Thank you very much. This now concludes our question-and-answer session. I would like to turn the conference back over to Chris McCann for any closing remarks.

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Christopher G. McCann, 1-800-FLOWERS.COM, Inc. - CEO, President & Director [48]

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Well thank you again for joining us. As you can see, we have good momentum coming into the next quarter for us and we're looking -- we're sitting in a good position. We've got a good response, growing customer files, and we thank you for your interest and your attention and for joining us on the call today.

Clearly, we'd like to wish everyone a happy Halloween. And we encourage you to visit our all-star family of brands early and often for the upcoming holiday season. Thank you.

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Operator [49]

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Thank you very much. Ladies and gentlemen, this now concludes today's conference. You may disconnect your phone lines, and have a great rest of the week.