1-800-flowers.com Evaluating Home, Kids Business

May 01, 2007 2:10 AM  By

Despite a strong overall third-quarter performance for the gifts, toys, and home decor merchant, revenue in 1-800-Flowers.com’s home and children’s category fell 7.1% to $26.3 million for the quarter ended April 1. That’s down from $28.4 million for the same period in 2006.

According to officials, the results reflect a “planned reduction in marketing as the company focuses on improving profitability,” and 1-800-Flowers.com is doing everything it can to change the course of the struggling category. For the second quarter ended Dec. 31, the Carle Place, NY-based marketer’s sales in the home and children’s category had slipped 7.7% to $98.0 million, down from $106.2 million in the same period the year before.

CEO Jim McCann stated in a release: “During the quarter, we strengthened the management team, improved the creative look and feel of the catalogs, and revised the circulation plans for all titles to place more focus on the category’s existing customer base. As a result of these and other changes we are implementing, we have begun to see improvements in customer response rates and bottom-line performance. To augment these efforts and help in our analysis and planning, we have hired a consulting firm with specific expertise in the direct-to-consumer/catalog space. In addition, through their investment banking capabilities, they will assist us in evaluating all of our strategic options for this business.”

Exploring “strategic options” could lead to speculation of a possible sale of the division. But when reached for additional details, 1-800.Flowers.com spokesperson Joe Pititto had no further comment. He says the category consists of Plow & Hearth (purchased in 1998) and the children’s group titles: HearthSong and Magic Cabin (acquired in 2000), and Wind & Weather (purchased in 2005). Two additional titles, Problem Solvers, launched in 2003, and Madison Place, started in September 2006, were developed internally. MULTICHANNEL MERCHANT reported in March that Madison Place had not lived up to 1-800.Flowers.com’s expectations, and that the company would likely phase the catalog out in June.

During an April 26 conference call to discuss third-quarter fiscal results, McCann said that the merchant is taking “aggressive steps” to improve the home and children’s category. Although the category’s impact is still “negative,” McCann said company officials believe it will be a “strong contributor. We think we’re on the right path. Our attitude is to make this company as profitable as it can be.”

Total revenue for the third quarter grew 18.8% to $213.8 million, up from $180 million for the same period in 2006. Net income jumped 168%, to $1.1 million from a net loss of $1.5 million last year. The company attributed the double-digit revenue growth to solid results from the consumer floral, BloomNet Wire Service, and gourmet and gift baskets categories.