1-800-Flowers.com Finds Buyer for Gifts/Kid’s Unit

Dec 09, 2009 12:56 AM  By

It took more than two years, but multititle mailer 1-800-Flowers.com announced on Dec. 7 it is finally selling its home and children’s gifts business. PH International, an affiliate of Evergreen Enterprises, will buy the unit for $17 million. Richmond, VA-based Evergreen is a manufacturer and wholesaler of home decor and garden products.

The deal, which is expected to close by the end of January, has adjustments for seasonal working capital. Included in the sale are the Plow & Hearth, Problem Solvers, Wind and Weather, HearthSong and Magic Cabin brands, as well as the division’s offices and warehouse facility in Madison, VA, and a distribution center located in Vandalia, OH.

Currently a product vendor to Plow & Hearth, Evergreen Enterprises intends to “go vertical and capture retail sales,” says Lee Helman, managing director at investment firm Financo. It is not an experienced catalog operator, he notes, “but it obviously sees an opportunity to expand its wholesale sales to the catalog business and to grow the catalog business by launching new products that it sources exclusively.”

1-800-Flowers.com earlier this year classified its home and children’s gifts business segment as a discontinued operation. The marketer plans to focus on its floral business, BloomNet wire service, and its gourmet food and gifts baskets segment.

The company’s fiscal 2009 fourth-quarter revenue fell 7.8%, to $172.5 million, down from $186.9 million for the same period last year. It posted a net loss of $22.2 million, including discontinued operations, compared with net income of $4.3 million in the fourth quarter 2008.

For fiscal 2009, which ended June 28, sales declined 3.4%, to $714.0 million, down from $739.2 million in fiscal 2008. 1-800-Flowers.com’s net loss for the year was $98.4 million, compared with net income of $21.1 million for fiscal 2008.

Chris Kampe, managing director at investment firm Tully & Holland, says the deal with Evergreen marks “the divestiture of orphan catalogs that don’t fit 1-800-Flowers’ online gift and gourmet strategy.”

Not only does the sale make sense strategically for 1-800-Flowers.com, adds Financo’s Helman, the timing of the transaction’s close should enable the company to reap the benefits of converting the inventory into cash during the holiday selling season.