1-800-FLOWERS.COM, INC.
LETTER TO SHAREHOLDERS
Dear Fellow Shareholders,
Over the past few years, we, along with many other companies, faced a number of unprecedented
challenges that included how to operate our business safely during the height of the pandemic, which
coincided with a tremendous surge in customer demand and significant disruptions in the global supply
chain, followed by labor shortages, hyper-inflationary pressures, and then, a meaningful change in
consumer behavior. These forces significantly affected many aspects of our business, and in particular
our gross margin and profitability.
During Fiscal 2023, we experienced an improving macro environment on several fronts, which helped
offset a softer consumer environment. This includes ocean freight rates that have approached their pre-
pandemic levels and a decline in certain commodity prices. These macro forces, combined with our
internal efforts to increase efficiencies that include our investments in automation and logistics
optimization initiatives, led to the gross profit margin improvement that we began to experience this
past fiscal year.
When we take a step back to look at the bigger picture, we believe this is a story of a reversion to the
mean. And as the pendulum continues to swing back, we expect our gross profit margin to gradually
return to its 10-year historical average of 42%, which we experienced between fiscal years 2012 to 2021.
Entering into Fiscal 2023, we had anticipated that consumers would be challenged by ongoing
inflationary pressures, which was further exacerbated by rising interest rates and increasing fears of a
recession. As we moved from the holiday period, into the second half of our fiscal year, we saw
consumers pull their purse strings even tighter, especially outside of the holiday gifting periods. As a
result, our fiscal 2023 sales declined 8%, excluding the impact of the 53rd week a year ago.
We believe it’s important to place this in its proper context – while sales declined 8% for the fiscal year,
this was against the backdrop of an almost doubling of our sales since fiscal 2019. We retained most of
the revenues that we gained over the last few years, despite the challenging macro environment.
In fiscal 2023, we had revenues of $2.0 billion and over 11 million customers – who sent more than 25
million gifts. Simply put, we are a bigger, better, stronger company today than we were just a few years
ago.
As a consumer-facing company, growing our customer base will always be important, but we see
tremendous opportunities in increasing the lifetime value of our existing customer base by converting
them into multi-brand customers. Multi-brand customers currently represent approximately 13% of our
customer base, yet they account for approximately 28% of our revenue. Additionally, we have over 1.3
million Celebrations Passport members that we encourage to use their benefits across our family of
brands.
We are also highly encouraged by our customers’ response to our bundled offerings. Throughout the
fiscal year, we saw our customers gravitate toward our higher value, higher price-point cross-brand
bundles. This contributed to our average order value (AOV) increasing approximately 6% for the year.
We believe this provides a big opportunity for us and we will continue to expand our price points, both
lower and higher, to ensure we provide gifting options for all our customers.
Our Company made two acquisitions that increased our offerings and further enhanced our platform
over the past Fiscal year. The first was the acquisition of Things Remembered that expanded our
leadership position in the personalized gifts marketplace by adding thousands of personalized products
to our platform. And the second was the acquisition of SmartGift, a leading technology platform that
facilitates easy and thoughtful gifting and recognition experiences, allowing users to send, track, and
manage their gifting experience.
These are great examples of how we are investing in our platform to expand and innovate our gifting
capabilities. We are offering more ways to build and maintain meaningful relationships, celebrate
important milestones and create even more impact, all through the power of gifting.
For Fiscal 2023, we generated free cash flow of $71 million, which represents an improvement of over
$130 million from the prior year. This was primarily led by our effort to bring inventory more in-line
with operations, as we sold through the nonperishable inventory we purchased a year ago when we
faced supply chain constraints. Once again, further evidence pointing toward a reversion to the mean.
In addition to the substantial free cash flow we generated, we further fortified our strong balance sheet
during the past fiscal year by entering into a five-year $425 million credit agreement, comprised of a
$200 million term loan and a $225 million revolving credit facility. A critical accomplishment in these
complicated times.
As we look beyond the current horizon, we believe that the actions we have taken to enhance the
customer experience, improve margins and optimize expenses, combined with an improved consumer
environment, will enable us to achieve our historical sales growth, gross profit margin and adjusted
EBITDA margin rates – we believe it’s a question of when, not if.
Since founding this company our goal has been simple – helping people connect with and celebrate the
important people in their lives and helping them nourish more and better relationships. In doing so, we
developed stronger relationships with our customers. We’ve always embraced change and have a
history of innovation to increase our offerings and improve the customer experience to help them find
the perfect gift for their special occasion. We are strengthening our customer relationships and
interacting with them across a broad range of communication channels as we work to build a true
community and offer our customers the most robust online gifting experience.
For all these reasons, we remain very optimistic about our prospects and are confident that we are
positioned to perform well and grow our company while building shareholder value.
Sincerely,
Jim McCann
Chairman and Chief Executive Officer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 2, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-26841
1-800-FLOWERS.COM, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
Two Jericho Plaza, Suite 200, Jericho, NY 11753
(Address of principal executive offices) (Zip code)
11-3117311
(I.R.S. Employer Identification No.)
(516) 237-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A common stock
Trading symbol(s)
FLWS
Name of each exchange on which registered
The Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer
☐ Non-accelerated filer
☒ Accelerated filer
☐ Smaller reporting company
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last
business day of the registrant’s most recently completed second fiscal quarter, January 1, 2023, was approximately $247,769,000. The registrant
has no non-voting common stock.
37,733,189
(Number of shares of class A common stock outstanding as of September 8, 2023)
27,068,221
(Number of shares of class B common stock outstanding as of September 8, 2023)
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant’s Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders (the Definitive Proxy Statement) are
incorporated by reference into Part III of this Report.
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1-800-FLOWERS.COM, INC.
FORM 10-K
For the fiscal year ended July 2, 2023
TABLE OF CONTENTS
Part I.
Item 1. Business .......................................................................................................................................................
Item 1A. Risk Factors .................................................................................................................................................
1
9
Item 1B. Unresolved Staff Comments ........................................................................................................................ 18
Item 2. Properties ..................................................................................................................................................... 19
Item 3. Legal Proceedings ........................................................................................................................................ 19
Item 4. Mine Safety Disclosures .............................................................................................................................. 19
Part II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities ....................................................................................................................................... 20
Item 6. Reserved ...................................................................................................................................................... 22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ...................... 22
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ...................................................................... 39
Item 8. Financial Statements and Supplementary Data ............................................................................................ 39
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...................... 39
Item 9A. Controls and Procedures .............................................................................................................................. 39
Item 9B. Other Information ........................................................................................................................................ 42
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections ........................................................ 42
Part III.
Item 10. Directors, Executive Officers and Corporate Governance ........................................................................... 42
Item 11. Executive Compensation ............................................................................................................................. 42
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .... 42
Item 13. Certain Relationships and Related Transactions, and Director Independence ............................................. 42
Item 14. Principal Accounting Fees and Services ...................................................................................................... 42
Part IV.
Item 15. Exhibits, Financial Statement Schedules ..................................................................................................... 43
Item 16. Form 10-K Summary ................................................................................................................................... 44
Signatures ..................................................................................................................................................................... 45
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Item 1. BUSINESS
The Company
PART I
1-800-FLOWERS.COM, Inc. and its subsidiaries (collectively, the “Company”) is a leading provider of gifts designed to
help inspire customers to give more, connect more, and build more and better relationships. The Company’s e-commerce
business platform features our all-star family of brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s
Cookies®, Harry & David®, PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Things Remembered®, Moose
Munch®, The Popcorn Factory®, Wolferman’s Bakery®, Vital Choice®, and Simply Chocolate®. Through the Celebrations
Passport® loyalty program, which provides members with free standard shipping and no service charge across our portfolio
of brands, the Company strives to deepen relationships with customers. The Company also operates BloomNet®, an
international floral and gift industry service provider offering a broad range of products and services designed to help its
members grow their businesses profitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a
manufacturer of gift baskets and towers; and Alice’s Table®, a lifestyle business offering fully digital on demand floral,
culinary and other experiences to guests across the country.
Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS.
References in this Annual Report on Form 10-K to “1-800-FLOWERS.COM” and the “Company” refer to 1-800-
FLOWERS.COM, Inc. and its subsidiaries. The Company’s principal offices are located at Two Jericho Plaza, Suite
200, Jericho, NY 11753 and its telephone number at that location is (516) 237-6000.
Narrative Description of Business
The Origins of 1-800-FLOWERS.COM
The Company’s operations began in 1976 when James F. McCann, the Company’s founder and current Executive Chairman
of the Board of Directors and Chief Executive Officer, acquired a single retail florist in New York City, which he subsequently
expanded to a 14-store chain. Thereafter, the Company modified its business strategy to take advantage of the rapid
emergence of toll-free calling. The Company acquired the right to use the toll-free telephone number 1-800-FLOWERS,
adopted it as its corporate identity and began to aggressively build a national brand around it.
The Company’s Strategy
The Company’s objective is to be the leading authority on thoughtful gifting, to serve an expanding range of our customers’
celebratory needs, thereby helping our customers express themselves and connect with the important people in their lives.
The Company will continue to build on the trusted relationships with our customers by providing them with ease of access,
tasteful and appropriate gifts, and superior service. By engaging with our customers, we help to inspire more human
expression and connection – sentiments that are more important than ever in the current environment.
The Company has essentially doubled the size of its business over the past several years – generating more than $2 billion in
revenue, operating in a total addressable market of ~ $130 billion, with growing, market leading positions in Gourmet Food,
Floral and Personalized gifts.
The Company believes that 1-800-FLOWERS.COM is one of the most recognized brands in the floral and gift industries.
The strength of its brand has enabled the Company to extend its product offerings beyond the floral category into
complementary products, which include gourmet popcorn, cookies and related baked and snack food products, premium
chocolate and confections, wine gifts, gourmet gift baskets, fruit bouquet arrangements, and gift-quality fruit baskets, dipped
berries, steaks, chops and prepared meals, as well an extensive selection of personalized products. On August 3, 2020, the
Company completed its acquisition of PersonalizationMall.com LLC ("PersonalizationMall"), adding an extensive selection
of personalized products to our offerings, and on October 27, 2021, acquired Vital Choice Seafood LLC (“Vital Choice”), a
purveyor of wild-caught seafood and sustainably farmed shellfish, pastured proteins, and organic foods. On December 31,
2021, the Company acquired Alice’s Table® to supplement our product portfolio with lifestyle offerings, including fully
digital on demand floral, culinary and other experiences to guests across the country. On January 10, 2023, the Company
completed its acquisition of certain assets of the Things Remembered brand, a complete online gifting and personalization
destination renowned for its men’s and women’s jewelry, drinkware, home décor, business gifts and awards, and wedding
essentials, which was fully integrated into the Personalization Mall brand. This extended line of gift offerings helps our
customers with all of their celebratory occasions, and will enable the Company to increase the purchase frequency and average
1
order value for existing customers who have come to trust the 1-800-FLOWERS.COM brand, as well as continue to attract
new customers.
The Company’s consolidated customer database and multi-brand website is designed to dynamically engage our customers,
further enhancing the Company’s position as a leading, one-stop destination for all of our customers’ gifting and celebratory
needs. The Company is laser focused on deepening relationships with its customers through content and community and are
focused on inspiring our customers to give more and to build better and more meaningful relationships. We have a large
customer file, with increasing frequency from existing customers, including 1.3 million Celebrations Passport members who,
along with our multi-brand customers, represent our best customer cohorts in terms of frequency, retention and average spend,
and thus customer lifetime value. Celebrations Passport and multi-brand customers frequency is 2x to 3x other customers.
Multi-brand customers represent ~13% of customers but ~28% of revenue.
As part of the Company’s continuing effort to serve the thoughtful gifting needs of our customers, and leverage its business
platform, the Company continues to execute its vision to build a “Celebratory Ecosystem”, including a collection of premium
gifting brands, and an increasing suite of products and services designed to help our customers deliver smiles to the important
people in their lives.
The platform that the Company has built allows it to expand rapidly into new product categories using a “marketplace”
concept, providing its customers with a wider selection of solutions to help them express, connect and celebrate for all
occasions and recipients – including themselves.
As such, the Company has transformed from a floral-based specialty retailer with multiple-brand add-ons into an Ecommerce
platform built for growth. We have created a highly scalable platform that enables solid top and bottom-line growth over the
long term and expanding market-share positions. In addition, the Company has been successful in identifying, executing and
integrating highly accretive acquisitions supported by a strong balance sheet. PersonalizationMall, Shari’s Berries and Things
Remembered all benefited from being on our platform with accelerated revenue growth and enhanced profit contributions.
A summary of the Company’s significant brands and/or businesses follows:
CONSUMER FLORAL & GIFTS SEGMENT
Direct-to-consumer, multi-channel provider of fresh flowers,
plants, fruit and gift basket products, balloons, candles,
keepsake gifts, jewelry and plush stuffed animals.
Direct-to-consumer, multi-channel provider of artistically
carved fresh fruit arrangements.
Franchisor and operator of retail flower shops, acquired in
August 2011.
Direct-to-consumer provider of fresh flowers, plants, fruits and
gift baskets.
E-commerce provider of personalized gifts and keepsakes,
acquired in August 2020.
E-commerce provider of personalized gifts and keepsakes,
which
the
PersonalizationMall.com brand, acquired in January 2023.
fully digital
Provider of
livestreaming floral, culinary and other experiences to guests
across the country, acquired in December 2021.
lifestyle offerings,
operations
integrated
including
within
are
BLOOMNET SEGMENT
Provider of products and services to the professional florist.
Wholesale merchandiser and marketer of floral industry and
related products, acquired in July 2008.
2
GOURMET FOODS & GIFT BASKETS SEGMENT
Multi-channel specialty retailer and producer of premium gift
quality fruit, gourmet food products and other gifts marketed
under the Harry & David® and Cushman’s® brands, acquired in
September 2014.
Manufacturer and retailer of indulgent bakery gifts, including
super-thick English muffins, toppings, and desserts, acquired in
September 2014 in conjunction with the purchase of Harry &
David.
Multi-channel retailer and manufacturer of small batch gourmet
buttery caramel and chocolate covered popcorn, acquired in
September 2014 in conjunction with the purchase of Harry &
David.
E-commerce provider of wild-caught seafood and sustainably
farmed shellfish, pastured proteins, organic foods, and marine-
sourced nutritional supplements, acquired in October 2021.
Manufacturer of giftable premium popcorn and specialty treats,
acquired in May 2002.
E-commerce baker and retailer of premium cookies and related
including Mrs.
baked gifts, acquired
Beasley’s®, a baker of cakes, muffins and gourmet gift baskets,
acquired in March 2011.
E-commerce retailer of gift baskets and towers.
in March 2005,
Designer, assembler and distributor of wholesale gift baskets,
gourmet food towers and gift sets, acquired in April 2008.
E-commerce retailer of artisan chocolates and confections.
E-commerce retailer of dipped berries and other specialty treats,
acquired in August 2019.
Although the Company’s family of brands maintain their own sense of identity, the Company has taken a holistic approach
towards operating its brand portfolio. A key feature of this approach is that the Company proactively shares best practices
across its functional areas, through centralized operational centers of excellence focused on identifying initiatives designed
to enhance top and bottom-line growth opportunities.
3
The Company’s Products and Service Offerings
The Company offers a wide range of products including fresh-cut flowers, floral and fruit arrangements and plants, gifts,
personalized products, dipped berries, popcorn, gourmet foods and gift baskets, cookies, chocolates, candy, wine, and gift-
quality fruit. In order to maximize sales opportunities, products are not exclusive to certain brands, and may be sold across
business categories. The Company’s differentiated and value-added product offerings create the opportunity to have a
relationship with customers who purchase items not only for gift-giving occasions but also for everyday consumption. The
Company’s product development team works closely with its production team to select and design its floral, gourmet foods
and gift baskets, as well as other gift-related products that accommodate our customers’ needs to celebrate a special occasion
or convey a sentiment. As part of this continuing effort, the Company intends to continue to develop differentiated products
and signature collections that customers have embraced and come to expect.
The Company’s net revenues from international sources were not material during fiscal years 2023, 2022 and 2021.
Flowers and Plants. The Company’s flagship 1-800-Flowers.com brand offers fresh-cut flowers and floral and fruit
arrangements for all occasions and holidays, available for same-day delivery. The Company provides its customers with a
choice of florist designed products, including traditional floral and gift offerings, and the Company’s line of fruit
arrangements, under the Fruit Bouquets brand, and flowers delivered fresh from the farm. The Company also offers a wide
variety of popular plants to brighten the home and/or office, and accent gardens and landscapes. With the acquisition of
Alice’s Table, the Company now also provides lifestyle offerings, including fully digital on demand floral, culinary and other
experiences to guests across the country.
Personalized Gifts. Through its PersonalizationMall brand, the Company offers a wide assortment of products using
sublimation, embroidery, digital printing, engraving, and sandblasting to provide a unique, personalized experience to our
customers. The Company expanded its offering of personalized products with the recent acquisition of the Things
Remembered brand, a complete online gifting and personalization destination renowned for its men’s and women’s jewelry,
drinkware, home décor, business gifts and awards, and wedding essentials.
Gourmet Foods & Gift Baskets. Harry & David is a vertically integrated, multi-channel specialty retailer and producer of
branded premium gift-quality fruit, food products, land and sea-based proteins, and gifts marketed under the Harry & David,
Wolferman’s Bakery, Vital Choice, Cushman’s® and Moose Munch brands. The Company manufactures premium cookies
and baked gift items under the Cheryl’s Cookies and Mrs. Beasley’s® brands, which are delivered in beautiful and innovative
gift boxes and containers, providing customers with a variety of assortments from which to choose. The Popcorn Factory
brand pops premium popcorn and specialty snack products. The 1-800-BASKETS.COM brand features a collection of
gourmet gift baskets and related products confected by DesignPac, as well as through third parties. Simply Chocolate offers
artisan chocolates and confections. Many of the Company’s gourmet products are packaged in seasonal, occasion specific or
decorative tins, fitting the “giftable” requirement of individual customers, while also adding the capability to customize the
tins with corporate logos and other personalized features for the Company’s corporate customers’ gifting needs.
BloomNet®. The Company’s BloomNet business provides its members with products and services, including: (i) settlement
processing, consisting of the settlement of orders between referring florists (including the 1-800-Flowers.com brand) and
fulfilling florists, (ii) advertising, in the form of member directories, including the industry’s first on-line directory, (iii) access
services, by which BloomNet florists are able to refer and fulfill orders, using Bloomlink®, the Company’s proprietary
Internet-based system, (iv) other products and services, including web hosting, marketing, designer education and point of
sale systems, and (v) wholesale products, which consist of branded and non-branded floral supplies, enabling member florists
to reduce their costs through 1-800-Flowers.com purchasing leverage, while also ensuring that member florists will be able
to fulfill 1-800-Flowers.com brand orders based on recipe specifications. While maintaining industry-high quality standards
for its 1-800-Flowers.com brand customers, the Company offers florists a compelling value proposition, offering products
and services that its florists need to grow their business and to enhance profitability.
Marketing and Promotion
The Company’s marketing and promotional strategy is designed to strengthen the 1-800-FLOWERS.COM brands, engage
with its customers, increase customer acquisition, build customer loyalty, encourage repeat purchases and drive long-term
growth. The Company’s goal is to create a celebratory ecosystem that makes its brands synonymous with thoughtful gifting
and to help our customers “send smiles” every day. To do this, the Company intends to invest in its brands and acquire new
customers through the use of selective on and off-line media, direct marketing, public relations, social media and strategic
relationships, while cost-effectively capitalizing on the Company’s large and loyal customer base. The Company’s focus is
to create marketing messaging that is more relevant to the customer, to engage with our customers in a two-way dialog and
to focus on the experience of the connection. It plans to improve customer purchase frequency via product exposure through
4
its multi-brand portal, and Celebrations Passport® loyalty program, as well as continually investing and innovating how and
where it engages with its customers.
The Company’s strong appeal and brand recognition provide it with significant marketing opportunities. For example, the
Company was featured in an episode of the CBS TV hit reality show Undercover Boss, providing a great opportunity for its
brands to receive broad national exposure, while also being included in the Walk of Shame movie. Our “Summer of a Million
Smiles” charitable efforts deliver smiles to local charities, communities and service initiatives across the country. We also
sponsor our enterprise-wide “Gifts That Give Back” collection in support of our Smile Farms® philanthropic initiative, which
is focused on creating meaningful employment opportunities for individuals with developmental disabilities – a program that
we are proud to have founded. And, in what can be considered one of the best compliments a brand can receive, 1-800-
Flowers.com’s place in America’s cultural fabric was confirmed when the brand was featured in a great spoof on Mother’s
Day family relations during a Saturday Night Live skit.
Technology Infrastructure
The Company believes it has been and continues to be a leader in implementing new technologies to give its customers the
best possible shopping experience, whether online or over the telephone. Orders are transmitted directly from the Company’s
secure websites, or with the assistance of a gift advisor, into our internally developed transaction processing system, which
captures the required customer and recipient information. The system then routes the order to the appropriate distribution
center or, for florist fulfilled or drop-shipped items, selects a florist or vendor to fulfill the customer’s order and electronically
refers the necessary information using BloomLink, the Company’s proprietary Internet-based system. The Company’s gift
advisors have electronic access to this system, enabling them to assist in order fulfillment and subsequently track other
customer and/or order information.
Fulfillment and Manufacturing Operations
The Company’s customers primarily place their orders either online or over the telephone. The Company’s hybrid fulfillment
system, which enables the Company to offer same-day, next-day and any-day delivery, combines the use of BloomNet
(comprised of independent florists operating retail flower shops and franchise florist shops) with Company distribution
centers and vendors who ship directly to the Company’s customers. While providing a significant competitive advantage in
terms of delivery options, the Company’s fulfillment system also has the added benefit of reducing the Company’s capital
investments in inventory and infrastructure. The Company’s products are backed by a 100% smile guarantee, and the
Company’s business is not dependent on any single third-party supplier.
Fulfillment and manufacturing of products is as follows:
Flowers and Plants. A majority of the Company’s floral orders are fulfilled by one of the Company’s BloomNet members,
allowing the Company to deliver its floral and fruit bouquet products on a same-day or next-day basis to ensure freshness
and to meet its customers’ need for immediate gifting. In addition to these florist designed products, the Company also offers
fresh cut floral arrangements in a wide assortment of combinations, themes and designer bouquets and collections through
its direct ship program, fresh from the farm.
Personalized Gifts. Through PersonalizationMall, including the recently acquired Things Remembered brand, the Company
offers a broad selection of personalized gifts and keepsakes that are manufactured utilizing same-day/next-day capabilities,
and distributed from its Bolingbrook, IL facility.
Gourmet Foods & Gift Baskets. The Company offers a wide array of premium brand signature baked products, confections,
gift baskets, gourmet popcorn, dipped berries, giftable fruit towers and baskets, and related products through its Gourmet
Foods & Gift Baskets’ brands. The Company’s Cheryl’s cookies and baked gifts are manufactured primarily in its baking
facility in Westerville, Ohio, while The Popcorn Factory and Moose Munch premium snack products are popped in Medford,
Oregon and Lake Forest, Illinois. Harry & David products are grown and manufactured primarily from its facilities in
Medford, Oregon, supplemented by specialty products that are sourced across the U.S. and the world. Gift basket confection
and fulfillment for both wholesale and 1-800-Baskets.com is handled by DesignPac, located in Melrose Park, Illinois. Our
products are distributed from a combination of Company-owned and leased distribution facilities across the country, which
are shared by our brands in order to reduce both transit time to customer and overall logistics costs. Dipped berries and other
specialty treats for our Shari’s Berries brand are manufactured and fulfilled through our network of drop ship vendors.
5
Sources and Availability of Raw Materials
The Company’s raw materials consist of ingredients for manufactured products (including various commodities such as sugar,
flour, cacao, eggs, fruit and flowers), packaging supplies, and other supplies used in the manufacturing and transportation
processes (such as fuel, natural gas and derivative products). Except for certain crops which are grown in our Harry & David
orchards, raw materials used by the Company are purchased from third parties, some of whom are single-source suppliers.
The prices we pay, and the availability of these materials and other commodities are subject to fluctuation. When prices for
these items change, we may or may not pass the change to our customers. We utilize a global supply chain that includes both
U.S. and international suppliers. Our suppliers are subject to standards of conduct, including requirements that they comply
with local labor laws, local worker safety laws and other applicable laws. Our ability to acquire from our suppliers the
assortment and volume we need to meet customer demand, to receive those materials timely through our supply chain and to
produce, manufacture and distribute those products determines, in part, our ability to grow the business, and the appeal of
our merchandise assortment we offer to our customers.
Seasonality
The Company’s quarterly results may experience seasonal fluctuations. Due to the seasonal nature of the Company’s business,
and its continued expansion into non-floral products, the Thanksgiving through Christmas holiday season, which falls within
the Company’s second fiscal quarter, historically generated over 40% of the Company’s annual revenues, and all of its
earnings. Due to the number of major floral gifting occasions, including Mother’s Day, Valentine’s Day, Easter and
Administrative Professionals Week, revenues also rise during the Company’s fiscal third and fourth quarters in comparison
to its fiscal first quarter. During fiscal 2023, our fiscal second quarter revenues represented approximately 44% of annual
revenues, while our first, third and fourth quarters generated 15%, 21%, and 20% of annual revenues, respectively.
In preparation for the Company’s second quarter holiday season, the Company significantly increases its inventories. This
seasonal build has traditionally been financed by cash flows from operations, supplemented by a bank line of credit, which
peaks in November. The Company has historically repaid all revolving bank lines of credit with cash generated from
operations, prior to the end of the Company’s fiscal second quarter.
Competition
The popularity and convenience of e-commerce shopping has continued to give rise to established businesses on the Internet.
In addition to selling their products over the Internet, many of these retailers sell their products through a combination of
channels by maintaining a website, a toll-free phone number and physical locations. Additionally, several of these merchants
offer an expanding variety of products and some are attracting an increasing number of customers. Certain mass merchants
have expanded their offerings to include competing products and may continue to do so in the future. These businesses, as
well as other potential competitors, may be able to:
● undertake more extensive marketing campaigns for their brands and services;
● adopt more aggressive pricing policies; and
● make more attractive offers to potential employees, distributors and retailers.
In addition, the Company faces intense competition in each of its individual product categories. In the floral industry, there
are various providers of floral products, none of which is dominant in the industry. The Company’s competitors include:
● retail floral shops, some of which maintain toll-free telephone numbers and websites;
● online floral retailers, as well as retailers offering substitute gift products;
● catalog companies that offer floral products;
● floral telemarketers and wire services; and
● supermarkets, mass merchants and specialty retailers with floral departments.
Similarly, the plant, gift basket and gourmet foods categories are highly competitive. Each of these categories encompasses
a wide range of products, is highly fragmented and is served by a large number of companies, none of which is dominant.
Products in these categories may be purchased from a number of outlets, including mass merchants, telemarketers, retail
specialty shops, online retailers and mail-order catalogs.
6
The Company believes the strength of its brands, product selection, customer relationships, technology infrastructure and
fulfillment capabilities position it to compete effectively against its current and potential competitors in each of its product
categories. However, increased competition could result in:
● price reductions, decreased revenues and lower profit margins;
● loss of market share; and
● increased marketing expenditures.
These and other competitive factors may adversely impact the Company’s business and results of operations.
Government Regulation and Legal Uncertainties
The Internet continues to evolve and there are laws and regulations directly applicable to e-commerce. Legislatures are also
considering an increasing number of laws and regulations pertaining to the Internet, including laws and regulations
addressing:
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user privacy;
pricing;
content;
connectivity;
intellectual property;
distribution;
taxation and tariffs;
liabilities;
antitrust; and
characteristics and quality of products and services.
Further, the growth and development of the market for online services may prompt more stringent consumer protection laws
that may impose additional burdens on those companies conducting business online. The adoption of any additional laws or
regulations may impair the growth of the Internet or commercial online services. This could decrease the demand for the
Company’s services and increase its cost of doing business. Moreover, the applicability to the Internet of existing laws
regarding issues like property ownership, taxes, libel and personal privacy is uncertain. Any new legislation or regulation that
has an adverse impact on the Internet or the application of existing laws and regulations to the Internet could have a material
adverse effect on the Company’s business, financial condition and results of operations.
States or foreign countries might attempt to regulate the Company’s business or levy additional sales or other taxes relating
to its activities. Because the Company’s products and services are available over the Internet anywhere in the world, multiple
jurisdictions may claim that the Company is required to do business as a foreign corporation in one or more of those
jurisdictions. Failure to qualify as a foreign corporation in a jurisdiction where the Company is required to do so could subject
it to taxes and penalties. States or foreign governments may charge the Company with violations of local laws.
Intellectual Property
The Company regards its service marks, trademarks, trade secrets, domain names and similar intellectual property as critical
to its success. The Company has applied for or received trademark and/or service mark registration for, among others, “1-
800-FLOWERS.COM”, “1-800-FLOWERS”, “1-800-Baskets.com”, “FruitBouquets.com”, “BloomNet”, “GreatFood.com”,
“The Popcorn Factory”, “Cheryl’s Cookies”, “Mrs. Beasley’s”, “Celebrations Passport”, “Flowerama”, “DesignPac”, “Harry
& David”, “Wolferman’s Bakery”, “Moose Munch”, Cushman’s”, “Simply Chocolate”, “Personalization Universe”,
“PersonalizationMall”, “Things Remembered”, “Shari’s Berries”, “SmartGift”, “Vital Choice” and “Alice’s Table”. The
Company also has rights to numerous domain names, including: www.1800flowers.com, www.800flowers.com,
www.personalizationmall.com,
www.1800baskets.com,
www.thingsremembered.com,
www.cheryls.com,
www.celebrations.com, www.flowerama.com, www.designpac.com, www.simplychocolate.com, www.mybloomnet.net,
www.napcoimports.com,
www.wolfermans.com,
www.vitalchoice.com, www.alicestable.com, www.berries.com, www.sharisberries.com and www.smartgift.com. In
addition, the Company owns a number of international trademarks and/or service marks. The Company has also developed
transaction processing and operating systems as well as marketing data, and customer and recipient information databases.
www.plants.com, www.florists.com, www.greatfoods.com,
www.personalizationuniverse.com,
www.thepopcornfactory.com,
www.harryanddavid.com,
www.flowers.com,
7
The Company relies on trademark, unfair competition and copyright law, trade secret protection and contracts such as
confidentiality and license agreements with its employees, customers, vendors and others to protect its proprietary rights.
Despite the Company’s precautions, it may be possible for competitors to obtain and/or use the Company’s proprietary
information without authorization or to develop technologies similar to the Company’s and independently create a similarly
functioning infrastructure. Furthermore, the protection of proprietary rights in Internet-related industries is uncertain and still
evolving. The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United
States. The Company’s means of protecting its proprietary rights in the United States or abroad may not be adequate.
Third parties have in the past infringed or misappropriated the Company’s intellectual property or similar proprietary rights.
The Company believes infringements and misappropriations will continue to occur in the future. The Company intends to
guard against infringement and misappropriation. However, the Company cannot guarantee it will be able to enforce its rights
and enjoin the alleged infringers from their use of confusingly similar trademarks, service marks, telephone numbers and
domain names.
In addition, third parties may assert infringement claims against the Company. The Company cannot be certain that its
technologies or its products and services do not infringe valid patents, trademarks, copyrights or other proprietary rights held
by third parties. The Company may be subject to legal proceedings and claims from time to time relating to its intellectual
property and the intellectual property of others in the ordinary course of its business. Intellectual property litigation is
expensive and time-consuming and could divert management resources away from running the Company’s business.
Human Capital
Employees. We focus on attracting, developing and retaining skilled, diverse talent, including recruiting from among the
universities across the markets in which we compete and are generally able to select top talent. We focus on developing our
employees by providing a variety of job experiences, training programs and skill development opportunities. As of July 2,
2023, the Company had approximately 4,200 full and part-time employees, all located in the United States. During peak
periods, the Company substantially increases the number of customer service, manufacturing, and fulfillment personnel. The
Company’s employees are not represented under collective bargaining agreements and the Company considers its relations
with its employees to be good. Our employees are a key source of our competitive advantage and their actions, guided by our
Code of Ethics, are critical to the long-term success of our business.
Workforce Diversity. As a company, we are committed to building an inclusive and equitable culture that embraces and
celebrates our associates’ diverse backgrounds and unique life experiences.
Compensation and Benefits. The Company aims to attract and retain a talented workforce by offering competitive
compensation and benefits, strong career development and a respectful and inclusive culture that provides equal opportunity
for all. We believe our base wages and salaries, which we review annually, are fair and competitive with the external labor
markets in which our associates work. We encourage and reward employees based upon the achievement of financial and
other key performance metrics, which strengthens the connection between pay and performance. We also grant equity
compensation awards that vest over time through our long-term incentive plan to eligible associates to align such associates’
incentives with the Company’s long-term strategic objectives and the interests of our stockholders. We also offer competitive
benefit programs, in line with local practices with flexibility to accommodate the needs of a diverse workforce, including
paid vacation and holidays, family leave, disability insurance, life insurance, healthcare, and a 401(k) plan with a company
match.
Health, Safety and Wellness. From a workplace safety standpoint, we focus on training, awareness, behavioral based work
observation practices, and culture in our continuous effort to reduce workplace injuries and accidents. We are continually
focused on the safety of our associates and have a strong emphasis on identifying and addressing the safety risks to and
concerns of our associates.
8
Item 1A. Risk Factors
Cautionary Statements Under the Private Securities Litigation Reform Act of 1995
Our disclosures and analysis in this Form 10-K contain some forward-looking statements that set forth anticipated results
based on management’s plans and assumptions. From time to time, we also provide forward-looking statements in other
statements we release to the public as well as oral forward-looking statements. Such statements give our current expectations
or forecasts of future events; they do not relate strictly to historical or current facts. We have tried, wherever possible, to
identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and
similar expressions in connection with any discussion of future operating or financial performance. In particular, these include
statements relating to future actions; the effectiveness of our marketing programs; the performance of our existing products
and services; our ability to attract and retain customers and expand our customer base; our ability to enter into or renew online
marketing agreements; our ability to respond to competitive pressures; expenses, including shipping costs and the costs of
marketing our current and future products and services; the outcome of contingencies, including legal proceedings in the
normal course of business; and our ability to integrate acquisitions.
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our
plans and assumptions. Achievement of future results is subject to risk, uncertainties and potentially inaccurate assumptions.
Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual
results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind
as you consider forward looking statements.
We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our 10-Q
and 8-K reports to the United States Securities and Exchange Commission (“SEC”). Also note we provide the following
cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business. These are factors
that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical
results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995.
Macroeconomic Conditions and Related Risk Factors
The financial and credit markets and consumer sentiment have and will experience significant volatility, which may have an
adverse effect on our customers’ spending patterns and in turn our business, financial condition and results of operations.
The Company’s business and operating results are subject to economic conditions and their impact on consumer discretionary
spending. Factors that may negatively impact consumer spending include high levels of unemployment, higher consumer
debt levels, reductions in net worth, reductions in disposable income levels, declines in asset values, and related market
uncertainty; home foreclosures and reductions in home values; fluctuating interest rates and credit availability; fluctuating
fuel and other energy costs; fluctuating commodity prices; and general uncertainty regarding the overall future political and
economic environment. Consumer spending patterns are difficult to predict and are sensitive to the general economic climate,
the consumer’s level of disposable income, consumer debt, and overall consumer confidence. In the recent past, such
factors have impacted and may continue to impact our business in a number of ways. Included among these current and
potential future negative impacts are reduced demand and lower prices for our products and services. Adverse economic
changes could reduce consumer confidence and could thereby affect our operating results. In challenging and uncertain
economic environments, including the aftermath of the COVID-19 pandemic, and the geopolitical climate, we cannot predict
when macroeconomic conditions uncertainty may arise and whether such circumstances could impact the Company.
The impact of the COVID-19 pandemic has created significant uncertainty for our business, financial condition and results
of operations and for the prices of our publicly traded securities. The extent of the continuing impact of the COVID-19
pandemic on our business and financial results will depend on numerous evolving factors that we are not able to accurately
predict and which will vary by market, including the duration and scope of the pandemic, global economic conditions during
and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic,
and changes in consumer behavior following the pandemic.
9
Although our business experienced positive growth in our revenues and customer file during much of the COVID-19
pandemic, when many consumers shifted to online shopping, most pandemic-era restrictions have since been lifted, and it is
difficult to predict what lasting effects the pandemic and resulting macroeconomic patterns will have on consumer spending
patterns and e-commerce generally. We may fail to achieve our previous rate of growth or be unsuccessful in maintaining
some or all of the new customers we acquired during the pandemic, which could reduce demand for our products. Any
reduced demand for our products or change in customers purchasing and consumption patterns, as well as continued economic
uncertainty, can adversely affect our customers’ and business partners’ financial condition, resulting in an inability to pay for
our products, reduced or canceled orders of our products, closing of florist or franchise locations, stores, or our business
partners’ inability to supply us with ingredients or other items necessary for us to make, manufacture, distribute or sell our
products. Such adverse changes in our customers’ or business partners’ financial condition may also result in our recording
charges for our inability to recover or collect any accounts receivable, owned or leased assets, or prepaid expenses.
Increased shipping costs and supply chain disruptions may adversely affect sales of the Company’s products. Many of the
Company's products are delivered to customers either directly from the manufacturer or from the Company’s fulfillment
centers. The Company has established relationships with Federal Express and other common carriers for the delivery of these
products. If these carriers were to further increase the prices they charge to ship the Company’s goods, and if the Company
is forced to pass these costs on to its customers, or if carrier capacity becomes constrained, due to strikes or otherwise, the
Company’s sales could be negatively impacted. In addition, ocean container availability and cost, as well as port disruptions
could impact the Company’s ability to deliver products on a timely basis to our customers and adversely affect its customer
relationships, revenues and earnings.
We are dependent on international vendors for our supply of flowers, as well as certain components and products, exposing
us to significant regulatory, global economic, taxation, political instability and other risks, which could adversely impact our
financial results.
The availability and price of flowers, as well as certain components and products that we rely on to manufacture and sell our
products could be adversely affected by a number of factors affecting international locations, including:
● import duties and quotas;
● agricultural limitations and restrictions to manage pests and disease;
● changes in trading status;
● economic uncertainties and currency fluctuations;
● severe weather;
● work stoppages;
● foreign government regulations and political unrest; and
● trade restrictions, including United States retaliation against foreign trade practices.
The U.S. administration has instituted or proposed changes in trade policies that include the negotiation or termination of
trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on individuals, corporations
or countries, and other government regulations affecting trade between the U.S. and other countries where we conduct
business. As a result, there may be greater restrictions and economic disincentives on international trade and such changes
have the potential to adversely impact the U.S. economy, our industry and the demand for our products. In addition, it may
be time-consuming and expensive for us to alter our business operations in order to adapt to or comply with any such changes,
and as a result, such changes could have a material adverse effect on our business, financial condition and results of
operations.
If the supply of flowers for sale becomes limited, the price of flowers could rise or flowers may be unavailable and the
Company’s revenues and gross margins could decline. A variety of factors affect the supply of flowers in the United States
and the price of the Company’s floral products. If the supply of flowers available for sale is limited due to weather conditions,
farm closures, economic conditions, political conditions in supplier locations, or other factors, prices for flowers could rise
and as a result customer demand for the Company’s floral products may be reduced, causing revenues and gross margins to
decline. Alternatively, the Company may not be able to obtain high quality flowers in an amount sufficient to meet customer
demand. Even if available, flowers from alternative sources may be of lesser quality and/or may be more expensive than
those currently offered by the Company.
Most of the flowers sold in the United States are grown by farmers located abroad, primarily in Colombia, Ecuador and
Holland, and the Company expects that this will continue in the future.
10
The Company's operating results may suffer due to economic, political and social unrest or disturbances. Like other
American businesses, the Company is unable to predict what long-term effect acts of terrorism, war, or similar unforeseen
events may have on its business. The Company’s results of operations and financial condition could be adversely impacted
if such events cause an economic slowdown in the United States, negatively impact the supply chain, increase the cost of key
components for our gifts, or have other negative effects that cannot now be anticipated.
Business and Operational Risk Factors
The Company’s operating results may fluctuate, and this fluctuation could cause financial results to be below expectations.
The Company’s operating results may fluctuate from period to period for a number of reasons. In budgeting the Company’s
operating expenses for the foreseeable future, the Company makes assumptions regarding revenue trends; however, some of
the Company’s operating expenses are fixed in the short term. Sales of the Company’s products are seasonal, concentrated
in the fourth calendar quarter, due to the Thanksgiving and Christmas-time holidays, and the second calendar quarter, due to
Mother’s Day and Administrative Professionals’ Week. In anticipation of increased sales activity during these periods, the
Company hires a significant number of temporary employees to supplement its permanent staff and the Company increases
its inventory levels. If revenues during these periods do not meet the Company’s expectations, it may not generate sufficient
revenue to offset these increased costs and its operating results may suffer.
The Company’s quarterly operating results may significantly fluctuate and you should not rely on them as an indication of
its future results. The Company’s future revenues and results of operations may significantly fluctuate due to a combination
of factors, many of which are outside of management’s control. The most important of these factors include:
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seasonality;
the retail economy;
the timing and effectiveness of marketing programs;
the timing of the introduction of new products and services;
the Company’s ability to find and maintain reliable sources for certain of its products;
the impact of severe weather or natural disasters on consumer demand;
the timing and effectiveness of capital expenditures;
the Company’s ability to enter into or renew online marketing agreements; and
competition.
The Company may be unable to reduce operating expenses quickly enough to offset any unexpected revenue shortfall. If the
Company has a shortfall in revenue without a corresponding reduction to its expenses, operating results may suffer. The
Company’s operating results for any particular quarter may not be indicative of future operating results. You should not rely
on quarter-to-quarter comparisons of results of operations as an indication of the Company’s future performance. It is possible
that results of operations may be below the expectations of public market analysts and investors, which could cause the
trading price of the Company’s Class A common stock to fall.
During peak periods, the Company utilizes temporary employees and outsourced staff, who may not be as well-trained or
committed to its customers as its permanent employees, and if they fail to provide the Company’s customers with high quality
customer service the customers may not return, which could have a material adverse effect on the Company’s business,
financial condition, results of operations and cash flows. The Company depends on its customer service department to
respond to its customers should they have questions or problems with their orders. During peak periods, the Company relies
on its permanent employees, as well as temporary employees and outsourced staff to respond to customer inquiries. These
temporary employees and outsourced staff may not have the same level of commitment to the Company’s customers or be as
well trained as its permanent employees. If the Company’s customers are dissatisfied with the quality of the customer service
they receive, they may not shop with the Company again, which could have a material adverse effect on its business, financial
condition, results of operations and cash flows.
If the Company fails to develop and maintain its brands, it may not increase or maintain its customer base or its revenues.
The Company must continue to develop and maintain the 1-800-FLOWERS.COM brands to expand its customer base and
its revenues. In addition, the Company has introduced and acquired other brands in the past, and may continue to do so in the
future. The Company believes that the importance of brand recognition will increase as it expands its product offerings. Many
of the Company’s customers may not be aware of the Company’s non-floral products. If the Company fails to advertise and
market its products effectively, it may not succeed in establishing its brands and may lose customers leading to a reduction
of revenues.
11
The Company’s success in promoting and enhancing the 1-800-FLOWERS.COM brands will also depend on its success in
providing its customers high-quality products and a high level of customer service. If the Company’s customers do not
perceive its products and services to be of high quality, the value of the 1-800-FLOWERS.COM brands would be diminished
and the Company may lose customers and its revenues may decline.
A failure to establish and maintain strategic online and social media relationships that generate a significant amount of
traffic could limit the growth of the Company’s business. Although the Company expects a significant portion of its online
customers will continue to come directly to its website and mobile applications, it will also rely on third party websites, search
engines and affiliates with which the Company has strategic relationships for traffic. If these third-parties do not attract a
significant number of visitors, the Company may not receive a significant number of online customers from these
relationships and its revenues from these relationships may decrease or remain flat. There continues to be strong competition
to establish or maintain relationships with leading Internet companies, and the Company may not successfully enter into
additional relationships, or renew existing ones beyond their current terms. The Company may also be required to pay
significant fees to maintain and expand existing relationships. The Company’s online revenues may suffer if it does not enter
into new relationships or maintain existing relationships or if these relationships do not result in traffic sufficient to justify
their costs.
If local florists and other third-party vendors do not fulfill orders to the Company’s customers’ satisfaction, customers may
not shop with the Company again. In many cases, floral orders placed by the Company’s customers are fulfilled by local
independent florists, a majority of which are members of BloomNet. The Company does not directly control any of these
florists. In addition, many of the non-floral products sold by the Company are manufactured and delivered to its customers
by independent third-party vendors. If customers are dissatisfied with the performance of the local florist or other third-party
vendors, they may not utilize the Company’s services when placing future orders and its revenues may decrease.
If a florist discontinues its relationship with the Company, the Company’s customers may experience delays in service or
declines in quality and may not shop with the Company again. Many of the Company’s arrangements with local florists for
order fulfillment may be terminated by either party with 10 days’ notice. If a florist discontinues its relationship with the
Company, the Company will be required to obtain a suitable replacement located in the same geographic area, which may
cause delays in delivery or a decline in quality, leading to customer dissatisfaction and loss of customers.
If a significant number of customers are not satisfied with their purchase, the Company will be required to incur substantial
costs to issue refunds, credits or replacement products. The Company offers its customers a 100% satisfaction guarantee on
its products. If customers are not satisfied with the products they receive, the Company will either replace the product for the
customer or issue the customer a refund or credit. The Company’s net income would decrease if a significant number of
customers request replacement products, refunds or credits and the Company is unable to pass such costs onto the supplier.
Competition in the floral, plant, gift basket, gourmet food, and specialty gift industries is intense and a failure to respond to
competitive pressure could result in lost revenues. There are many companies that offer products in these categories.
In the floral category, the Company’s competitors include:
● retail floral shops, some of which maintain toll-free telephone numbers and websites;
● online floral retailers;
● catalog companies that offer floral products;
● floral telemarketers and wire services; and
● supermarkets, mass merchants and specialty gift retailers with floral departments.
Similarly, the plant, gift basket, gourmet food, cookie, candy, fruit and specialty gift categories are each highly competitive.
Each of these categories encompasses a wide range of products and is highly fragmented. Products in these categories may
be purchased from a number of outlets, including mass merchants, retail shops, online retailers and mail-order catalogs.
Competition is intense and the Company expects it to increase. Increased competition could result in:
● price reductions, decreased revenue and lower profit margins;
● loss of market share; and
● increased marketing expenditures.
These and other competitive factors could materially and adversely affect the Company’s results of operations.
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If the Company does not accurately predict customer demand for its products, it may lose customers or experience increased
costs. If the Company overestimates customer demand for its products, excess inventory and outdated merchandise could
accumulate, tying up working capital and potentially resulting in reduced warehouse capacity and inventory losses due to
damage, theft and obsolescence. If the Company underestimates customer demand, it may disappoint customers who may
turn to its competitors. Moreover, the strength of the 1-800-FLOWERS.COM brands could be diminished due to
misjudgments in merchandise selection.
Extreme weather conditions and natural disasters, and other catastrophic events, may interrupt our business, or our
suppliers’ businesses. Some of our facilities and our suppliers’ facilities are located in areas that may be subject to extreme,
and occasionally prolonged, weather conditions, including hurricanes, tornadoes, and wildfires. Extreme weather conditions,
whether caused by global climate change or otherwise, may interrupt our operations in such areas, negatively impacting
various functions, such as production, distribution, and order fulfillment. Furthermore, extreme weather conditions may
interrupt our suppliers’ production or shipments, or increase our suppliers’ product costs, all of which could have an adverse
effect on our business, financial condition, and results of operations.
Various diseases, pests and certain weather conditions can affect fruit production. Various diseases, pests, fungi, viruses,
drought, frosts, hail, wildfires, floods and certain other weather conditions could affect the quality and quantity of our fruit
production in our Harry & David orchards, decreasing the supply of our products and negatively impacting profitability. Our
producing orchards also require adequate water supplies. A substantial reduction in water supplies could result in material
losses of crops, which could lead to a shortage of our product supply.
The ripening of our fruits is subject to seasonal fluctuations which could negatively impact profitability. The ripening of our
fruits in the Harry & David orchards can happen earlier than predicted due to warmer temperatures during the year. This
would result in an oversupply of fruits that we might not be able to sell on a timely basis and could result in significant
inventory write-offs. The ripening of the Company’s fruits can also happen later than predicted due to colder temperatures
during the year. This can cause a delay in product shipments and not being able to timely meet customer demand during the
critical holiday season. Both of these scenarios could adversely affect our business, financial condition and results of
operations.
If the Company is unable to hire and retain qualified employees, including key personnel, its business may suffer. The
Company’s success is dependent on its ability to hire, retain and motivate highly qualified personnel. Given the competitive
labor market, we cannot be assured that we can continue to hire, train and retain a sufficient number of qualified employees
at current wage rates. In particular, the Company’s success depends on the continued efforts of its Chief Executive Officer,
James F. McCann, as well as its senior management team which help manage its business. The loss of the services of any of
the Company’s executive management or key personnel or its inability to attract qualified additional personnel could cause
its business to suffer and force it to expend time and resources in locating and training additional personnel.
A failure to integrate our acquisitions may cause the results of the acquired company, as well as the results of the Company
to suffer. The Company has opportunistically acquired a number of companies over the past several years. Additionally, the
Company may look to acquire additional companies in the future. As part of the acquisition process, the Company embarks
upon a project management effort to integrate the acquisition onto our information technology systems and management
processes. Due diligence undertaken with any acquisition may not reveal all potential problems or inefficiencies involved in
integrating the acquired entity into the Company. If we are unsuccessful in integrating our acquisitions, the results of
our acquisitions may suffer, management may have to divert valuable resources to oversee and manage the acquisitions, the
Company may have to expend additional investments in the acquired company to upgrade personnel and/or information
technology systems and the results of the Company may suffer.
A failure to dispose of assets or businesses in a timely manner may cause the results of the Company to suffer. The Company
continues to evaluate the potential disposition of assets and businesses that may no longer help it meet its objectives. When
the Company decides to sell assets or a business, it may encounter difficulty in finding buyers or alternative exit strategies
on acceptable terms in a timely manner, which could delay the accomplishment of its strategic objectives. Alternatively, the
Company may dispose of a business at a price or on terms that are less than it had anticipated. After reaching an agreement
with a buyer or seller for the disposition of a business, the Company is subject to satisfaction of pre-closing conditions, which
may prevent the Company from completing the transaction. Dispositions may also involve continued financial involvement
in the divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations.
Under these arrangements, performance by the divested businesses or other conditions outside the Company’s control could
affect its future financial results.
13
Information Technology and Systems
Failure to protect our website, networks and computer systems against disruption and cyber security threats, or otherwise
protect our and our customers’ confidential information, could damage our relationships with our customers, harm our
reputation, expose us to litigation and adversely affect our business. We rely extensively on our computer systems for the
successful operation of our business, including corporate email communications to and from employees, customers and retail
operations, the design, manufacture and distribution of our finished goods, digital marketing efforts, collection and retention
of customer data, employee information, the processing of credit card transactions, online e-commerce activities and our
interaction with the public in the social media space. Our systems are subject to damage or interruption from computer viruses,
malicious attacks and other security breaches. The possibility of a cyber-attack on any one or all of these systems is always
a serious threat and consumer awareness and sensitivity to privacy breaches and cyber security threats is at an all-time high.
If a cybersecurity incident occurs, or there is a public perception that we have suffered a breach, our reputation and brand
could be damaged and we could be required to expend significant capital and other resources to alleviate problems.
As part of our business model, we collect, retain, and transmit confidential information over public networks. In addition to
our own databases, we use third party service providers to store, process and transmit this information on our behalf. Although
we contractually require these service providers to implement and use reasonable security measures, we cannot control third
parties and cannot guarantee that a security breach will not occur in the future either at their location or within their systems.
We have confidential security measures in place to protect both our physical facilities and digital systems from attacks.
Despite these efforts, we may be vulnerable to targeted or random security breaches, acts of vandalism, computer viruses,
misplaced or lost data, programming and/or human errors, or other similar events.
Given the robust nature of our e-commerce presence and digital strategy, it is imperative that we and our e-commerce partners
maintain uninterrupted operation of our: (i) computer hardware, (ii) software systems, (iii) customer marketing databases,
and (iv) ability to email our current and potential customers.
If our systems are damaged or fail to function properly or reliably, we may incur substantial repair or replacement costs,
experience data loss or theft and impediments to our ability to conduct our operations. Any material disruptions in our e-
commerce presence or information technology systems could have a material adverse effect on our business, financial
condition and results of operations.
An increase in the number of employees working remotely has amplified certain risks to the Company’s business and
increased demand on the Company’s information technology resources and systems. Following the COVID-19 pandemic,
the Company experienced an increase in the number of its employees working remotely, which has led to increased phishing
and other cybersecurity attacks as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic, and an
increase in the number of points of potential attack, such as laptops and mobile devices (both of which are now being used in
increased numbers), to be secured, and any failure to effectively manage these risks, including to timely identify and
appropriately respond to any cyberattacks, may adversely affect the Company’s business.
If the Company fails to continuously improve its website (on all relevant platforms, including mobile), including successful
deployment of new technology, it may not attract or retain customers and may otherwise experience harm to its business. If
potential or existing customers do not find the Company’s website (on all relevant platforms, including mobile) a convenient
place to shop, the Company may not attract or retain customers and its sales may suffer. To encourage the use of the
Company’s website, it must continuously improve its accessibility, content and ease of use. If the Company is unable to
maintain a compelling web presence, including by successfully responding to new technology trends (such as generative
artificial intelligence), competitors' websites may be perceived as easier to use or better able to satisfy customer needs. In
addition, our use of generative AI in certain features of our website may present risks and challenges that remain uncertain
due to the relative novelty of this technology, and could subject us to competitive harm, regulatory action, legal liability and
brand or reputational harm.
The Company’s business could be injured by significant credit card, debit card and gift card fraud. Customers typically pay
for their on-line or telephone orders with debit or credit cards as well as a portion of their orders using gift cards. The
Company’s revenues and gross margins could decrease if it experienced significant credit card, debit card and gift card fraud.
Failure to adequately detect and avoid fraudulent credit card, debit card and gift card transactions could cause the Company
to lose its ability to accept credit cards or debit cards as forms of payment and/or result in charge-backs of the fraudulently
charged amounts and/or significantly decrease revenues. Furthermore, widespread credit card, debit card and gift card fraud
may lessen the Company’s customers’ willingness to purchase products through the Company’s websites or toll-free
telephone numbers. For this reason, such failure could have a material adverse effect on the Company’s business, financial
condition, results of operations and cash flows.
14
Unexpected system interruptions caused by system failures may result in reduced revenues and harm to the Company’s brand.
In the past, particularly during peak holiday periods, the Company has experienced significant increases in traffic on its
website and in its toll-free customer service centers. The Company’s operations are dependent on its ability to maintain its
computer and telecommunications systems in effective working order and to protect its systems against damage from fire,
natural disaster, power loss, telecommunications failure, security breaches (including breaches of our transaction processing
or other systems that could result in the compromise of confidential customer data) or similar events. The Company’s systems
have in the past, and may in the future, experience:
● system interruptions;
● long response times; and
● degradation in service.
The Company’s business depends on customers making purchases on its systems. Its revenues may decrease and its reputation
could be harmed if it experiences frequent or long system delays or interruptions or if a disruption occurs during a peak
holiday season.
If the Company’s telecommunications providers do not adequately maintain the Company’s service, the Company may
experience system failures and its revenues may decrease. The Company is dependent on telecommunication providers to
provide telephone services to its customer service centers and connectivity with its data centers. Although the Company
maintains redundant telecommunications systems, if these providers experience system failures or fail to adequately maintain
the Company’s systems, the Company may experience interruptions and will be unable to generate revenue. The Company
depends upon these third-party relationships because it does not have the resources to maintain its service without these or
other third parties. Failure to maintain these relationships or replace them on financially attractive terms may disrupt the
Company’s operations or require it to incur significant unanticipated costs.
Failure to remediate a material weakness related to our controls over logical access and segregation of duties, at the
application control level, in certain information technology environments, could result in material misstatements in our
financial statements. Our management has identified a material weakness related to our controls over logical access and
segregation of duties, at the application control level, in certain information technology environments and has concluded that,
due to such material weakness, our disclosure controls and procedures were not effective as of July 3, 2022. While
remediation was completed during Fiscal 2023, our failure to establish and maintain effective disclosure controls and
procedures and internal control over financial reporting could result in material misstatements in our financial statements,
and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our
financial condition and the trading price of our common stock.
Legal, Regulatory, Tax and Other Risks
Unauthorized use of the Company’s intellectual property by third parties may damage its brands. Unauthorized use of the
Company’s intellectual property by third parties may damage its brands and its reputation and may likely result in a loss of
customers. It may be possible for third parties to obtain and use the Company’s intellectual property without authorization.
Third parties have in the past infringed or misappropriated the Company’s intellectual property or similar proprietary rights.
The Company believes infringements and misappropriations will continue to occur in the future. Furthermore, the validity,
enforceability and scope of protection of intellectual property in Internet-related industries is uncertain and still evolving. The
Company has been unable to register certain of its intellectual property in some foreign countries and furthermore, the laws
of some foreign countries are uncertain or do not protect intellectual property rights to the same extent as do the laws of the
United States.
The Company’s franchisees may damage its brands or increase its costs by failing to comply with its franchise agreements
or its operating standards. The Company’s franchise business is governed by its Uniform Franchise Disclosure Document,
franchise agreements and applicable franchise law. If the Company’s franchisees do not comply with its established operating
standards or the terms of the franchise agreements, the 1-800-FLOWERS.COM brands may be damaged. The Company may
incur significant additional costs, including time-consuming and expensive litigation, to enforce its rights under the franchise
agreements. Additionally, the Company is the primary tenant on certain leases, which the franchisees sublease from the
Company. If a franchisee fails to meet its obligations as subtenant, the Company could incur significant costs to avoid default
under the primary lease. Furthermore, as a franchisor, the Company has obligations to its franchisees. Franchisees may
challenge the performance of the Company’s obligations under the franchise agreements and subject it to costs in defending
these claims and, if the claims are successful, costs in connection with their compliance.
15
If third parties acquire rights to use similar domain names or phone numbers or if the Company loses the right to use its
phone numbers, its brands may be damaged and it may lose sales. The Company’s Internet domain names are an important
aspect of its brand recognition. The Company cannot practically acquire rights to all domain names similar to
www.1800flowers.com, or its other brands, whether under existing top level domains or those issued in the future. If third
parties obtain rights to similar domain names, these third parties may confuse the Company’s customers and cause its
customers to inadvertently place orders with these third parties, which could result in lost sales and could damage its brands.
Likewise, the phone number that spells 1-800-FLOWERS is important to the Company’s brand and its business. While the
Company has obtained the right to use the phone numbers 1-800-FLOWERS, 1-888-FLOWERS and 1-877-FLOWERS, as
well as common toll-free “FLOWERS” misdials, it may not be able to obtain rights to use the FLOWERS phone number as
new toll-free prefixes are issued, or the rights to all similar and potentially confusing numbers. If third parties obtain the
phone number that spells “FLOWERS" with a different prefix or a toll-free number similar to FLOWERS, these parties may
also confuse the Company’s customers and cause lost sales and potential damage to its brands. In addition, under applicable
FCC rules, ownership rights to phone numbers cannot be acquired. Accordingly, the FCC may rescind the Company’s right
to use any of its phone numbers, including 1-800-FLOWERS (1-800-356-9377).
Defending against intellectual property infringement claims could be expensive and, if the Company is not successful, could
disrupt its ability to conduct business. The Company has been unable to register certain of its intellectual properties in some
foreign countries, including, “1-800-Flowers.com”, “1-800-Flowers” and “800-Flowers”. The Company cannot be certain
that the products it sells, or services it offers, do not or will not infringe valid patents, trademarks, copyrights or other
intellectual property rights held by third parties. The Company may be a party to legal proceedings and claims relating to the
intellectual property of others from time to time in the ordinary course of its business. The Company may incur substantial
expense in defending against these third-party infringement claims, regardless of their merit. Successful infringement claims
against the Company may result in substantial monetary liability or may materially disrupt its ability to conduct business.
Product liability claims may subject the Company to increased costs. Several of the products the Company sells, including
perishable food and alcoholic beverage products may expose it to product liability claims in the event that the use or
consumption of these products results in personal injury or property damage. Although the Company has not experienced any
material losses due to product liability claims to date, it may be a party to product liability claims in the future and incur
significant costs in their defense. Product liability claims often create negative publicity, which could materially damage the
Company’s reputation and its brands. Although the Company maintains insurance against product liability claims, its
coverage may be inadequate to cover any liabilities it may incur.
Future litigation could have a material adverse effect on our business and results of operations. Lawsuits and other
administrative or legal proceedings that may arise in the course of our operations can involve substantial costs, including the
costs associated with investigation, litigation and possible settlement, judgment, penalty or fine. In addition, lawsuits and
other legal proceedings may be time consuming and may require a commitment of management and personnel resources that
will be diverted from our normal business operations. Although we generally maintain insurance to mitigate certain costs,
there can be no assurance that costs associated with lawsuits or other legal proceedings will not exceed the limits of insurance
policies. Moreover, we may be unable to continue to maintain our existing insurance at a reasonable cost, if at all, or to secure
additional coverage, which may result in costs associated with lawsuits and other legal proceedings being uninsured. Our
business, financial condition, and results of operations could be adversely affected if a judgment, penalty or fine is not fully
covered by insurance.
A privacy or data security breach could expose us to costly government enforcement actions and private litigation and
adversely affect our business. An important component of our business involves the receipt, processing, transmittal, and
storage of personal, confidential or sensitive information about our customers. We have programs in place to detect, contain
and respond to data security incidents. However, because the techniques used to obtain unauthorized access, disable or
degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be
unable to anticipate these techniques or implement adequate preventive measures. In addition, hardware, software, or
applications we develop or procure from third parties may contain defects in design or manufacture or other problems that
could unexpectedly compromise information security. Unauthorized parties may also attempt to gain access to our systems
or facilities, or those of third parties with whom we do business, through fraud, trickery, or other forms of deceiving our team
members, contractors, vendors, and temporary staff. In addition, security breaches can also occur as a result of intentional or
inadvertent breaches by our employees or by persons with whom we have commercial relationships. Any actual or suspected
security breach or other compromise of our security measures or those of our third party vendors whether as a result of
banking efforts, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering or
otherwise, could harm our reputation and business, damage our brand and make it harder to retain existing customers or
acquire new ones, require us to expend significant capital and other resources to address the breach, and result in a violation
16
of applicable laws regulations or other legal obligations. Moreover, any insurance coverage we may carry may be inadequate
to cover the expenses and other potential financial exposure we could face as a result of a privacy or data breach.
Our business is subject to government regulation in various areas, and the increasing costs of compliance efforts, as well as
any potential non-compliance, could adversely impact our business. We are subject to laws and regulations affecting our
operations in a number of areas, including consumer protection, labor and employment, data privacy, product safety, and
environmental. Compliance with these and similar laws and regulations may require significant effort and expense, and
variances and inconsistencies in requirements among jurisdictions may exacerbate this. The time and expense of compliance
with existing and future regulations could, in the aggregate, adversely affect our results of operations, limit our product and
service offerings in one or more regions, constrain our marketing efforts, or otherwise cause us to change or limit our business
practices.
We have implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there
can be no assurance that our customers, employees, contractors, vendors, franchisees, or agents will not violate such laws
and regulations or our policies and procedures. If we are held responsible for any such violations, we could incur substantial
aggregate expense from monetary penalties, resolution of customer claims, higher insurance premiums, and the time and
expense of addressing any such violation, which could be material to us. Additionally, we could experience reputational harm
as a result of any such violations.
Failure to comply with federal, state and international laws and regulations relating to privacy, data protection and consumer
protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection and
consumer protection, could adversely affect our business and our financial condition.
A variety of federal, state and international laws and regulations govern the collection, use, retention, sharing, export and
security of personal information. We also may choose to comply with, or may be required to comply with, self-regulatory
obligations or other industry standards. Laws and regulations relating to privacy, data protection and consumer protection are
evolving and subject to potentially differing interpretations, and laws providing for new privacy and security rights and
requirements may be enacted or come into effect in different jurisdictions. These requirements may be enacted, interpreted
or applied in a manner that is inconsistent from one jurisdiction to another or in a manner that conflicts with other rules or
our practices. As a result, our practices may not comply, or may not comply in the future with all such laws, regulations,
requirements and obligations. Any failure, or perceived failure, by us to comply with any federal, state or international privacy
or consumer protection- related laws, regulations, regulatory guidance, orders to which we may be subject or other legal
obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may
result in claims, proceedings or actions against us by governmental entities or others, including claims for statutory damages
asserted on behalf of purported classes of affected persons or other liabilities or require us to change our business practices,
including changing, limiting or ceasing altogether the collection, use, sharing, or transfer of data relating to customers, which
could materially adversely affect our business, financial condition and operating results.
Many governmental regulations may impact the Internet, which could affect the Company’s ability to conduct business. Any
new law or regulation, or the application or interpretation of existing laws, may adversely impact the growth in the use of the
Internet or the Company’s websites. The Company expects there will be an increasing number of laws and regulations
pertaining to the Internet in the United States and throughout the world. These laws or regulations may relate to liability for
information received from or transmitted over the Internet, online content regulation, user privacy, taxation and quality of
products and services sold over the Internet. Moreover, the applicability to the Internet of existing laws governing intellectual
property ownership and infringement, copyright, trademark, trade secret, obscenity, libel, employment, personal privacy and
other issues is uncertain and developing. This could decrease the demand for the Company’s products, increase its costs or
otherwise adversely affect its business.
17
Regulations imposed by the Federal Trade Commission may adversely affect the growth of the Company’s Internet business
or its marketing efforts. The Federal Trade Commission has proposed regulations regarding the collection and use of personal
identifying information obtained from individuals when accessing websites, with particular emphasis on access by minors.
These regulations may include requirements that the Company establish procedures to disclose and notify users of privacy
and security policies, obtain consent from users for collection and use of information and provide users with the ability to
access, correct and delete personal information stored by the Company. These regulations may also include enforcement and
redress provisions. Moreover, even in the absence of those regulations, the Federal Trade Commission has begun
investigations into the privacy practices of other companies that collect information on the Internet. One investigation resulted
in a consent decree under which an Internet company agreed to establish programs to implement the principles noted above.
The Company may become a party to a similar investigation, or the Federal Trade Commission’s regulatory and enforcement
efforts, or those of other governmental bodies, may adversely affect its ability to collect demographic and personal
information from users, which could adversely affect its marketing efforts.
Our business is subject to evolving corporate governance and public disclosure regulations and expectations. We are subject
to evolving rules and regulations promulgated by a number of federal, state, and local governmental and self-regulatory
organizations, including the United States Securities and Exchange Commission (“SEC”), the Nasdaq Stock Exchange and
the Financial Accounting Standards Board. These rules and regulations continue to increase in scope and complexity, making
compliance more difficult, expensive and uncertain. In addition, public companies are encountering increased scrutiny on
ESG matters and related disclosures. These changing rules, regulations and stakeholder expectations have resulted in, and are
likely to continue to result in, increased general and administrative expenses and increased management time and attention
spent complying with or meeting such regulations and expectations. For example, developing and acting on initiatives within
the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and
time consuming and is subject to evolving reporting standards. We could be criticized, fined or suffer other adverse
consequences based on the inaccuracy, inadequacy or incompleteness of our reporting. If our ESG-related data, processes
and reporting are incomplete or inaccurate, or if we otherwise fail to comply with ESG-related regulations, our reputation,
business, financial performance and growth could be adversely affected.
The price at which the Company’s Class A common stock will trade may be highly volatile and may fluctuate substantially.
The stock market has from time to time experienced price and volume fluctuations that have affected the market prices of
securities, particularly securities of companies with Internet operations. As a result, investors may experience a material
decline in the market price of the Company’s Class A common stock, regardless of the Company’s operating performance.
In the past, following periods of volatility in the market price of a particular company’s securities, securities class action
litigation has often been brought against that company. The Company may become involved in this type of litigation in the
future. Litigation of this type is often expensive and diverts management’s attention and resources and could have a material
adverse effect on the Company’s business and its results of operations.
Additional Information
The Company’s internet address is www.1800flowers.com. We make available, through the investor relations tab located on
our website at www.1800flowersinc.com, access to our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after they are electronically filed with or furnished to the
SEC. All such filings on our investor relations website are available free of charge. (The information posted on the Company’s
website is not incorporated into this Annual Report on Form 10-K.)
A copy of this Annual Report on Form 10-K is available without charge upon written request to: Investor Relations, 1-800-
FLOWERS.COM, Inc., Two Jericho Plaza, Suite 200, Jericho, NY 11753. In addition, the SEC maintains a website
(http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC.
Item 1B. Unresolved Staff Comments
We have received no written comments regarding our current or periodic reports from the staff of the SEC that were issued
180 days or more preceding the end of our fiscal year ended July 2, 2023 that remain unresolved.
18
Square Footage
1,112,000
Ownership
owned
361,176
leased
330,900
owned
324,500
301,176
272,821
255,070
250,000
180,000
148,000
116,000
109,722
92,700
88,000
70,000
70,000
41 (acres)
2,090 (acres)
1,123 (acres)
138 (acres)
41 (acres)
leased
leased
leased
leased
leased
owned
leased
leased
leased
leased
owned
leased
leased
leased
owned
owned
owned
owned
Item 2.
PROPERTIES
The table below lists the Company’s material properties at July 2, 2023:
Location
Medford, OR
Bolingbrook, IL
Hebron, OH
Medford, OR
Obetz, OH
Atlanta, GA
Groveport, OH
Melrose Park, IL
Jacksonville, FL
Lake Forest, IL
Hebron, OH
Burr Ridge, IL
Jericho, NY
Westerville, OH
Type
Principal Use
Office, plant and
warehouse
Office, plant and
warehouse
Office, plant and
warehouse
Manufacturing,
distribution and
administrative
Manufacturing,
distribution and
administrative
Manufacturing,
distribution and
administrative
Storage
Distribution
Manufacturing and
distribution
Warehouse
Distribution
Office and warehouse Distribution,
Warehouse
Warehouse
Warehouse
administrative and
customer service
Office and warehouse Distribution and
Office, plant and
warehouse
Warehouse
Office, plant and
warehouse
Office
Office, plant and
warehouse
Warehouse
Warehouse
Reno, NV
Memphis, TN
Jackson County, OR Orchards
Jackson County, OR Orchards
Jackson County, OR
Josephine County, OR Orchards
Josephine County, OR Land
Land
Item 3. LEGAL PROCEEDINGS
See Note 17. in Part IV, Item 15, for details.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
administrative
Manufacturing,
distribution and
administrative
Storage
Manufacturing,
distribution and
administrative
Headquarters
Manufacturing,
distribution and
administrative
Distribution
Distribution
Farming
Farming
Fallow land
Farming
Fallow land
19
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
1-800-FLOWERS.COM’s Class A common stock trades on The NASDAQ Global Select Market under the ticker symbol
“FLWS.” There is no established public trading market for the Company’s Class B common stock.
Rights of Common Stock
Holders of Class A common stock generally have the same rights as the holders of Class B common stock, except that holders
of Class A common stock have one vote per share and holders of Class B common stock have 10 votes per share on all matters
submitted to the vote of stockholders. Holders of Class A common stock and Class B common stock generally vote together
as a single class on all matters presented to the stockholders for their vote or approval, except as may be required by Delaware
law. Class B common stock may be converted into Class A common stock at any time on a one-for-one share basis. Each
share of Class B common stock will automatically convert into one share of Class A common stock upon its transfer, with
limited exceptions. During fiscal 2023, 2022, and 2021, 181,393, 904,000 and 389,209 shares of Class B common stock were
converted into shares of Class A common stock, respectively.
Holders
As of September 8, 2023, there were approximately 200 stockholders of record of the Company’s Class A common stock,
although the Company believes that there is a significantly larger number of beneficial owners. As of September 8, 2023,
there were 13 stockholders of record of the Company’s Class B common stock.
Purchases of Equity Securities by the Issuer
The Company has a stock repurchase plan through which purchases can be made from time to time in the open market and
through privately negotiated transactions, subject to general market conditions. The repurchase program is financed utilizing
available cash. On April 22, 2021, the Company’s Board of Directors authorized an increase to its stock repurchase plan of
up to $40.0 million. In addition, on February 3, 2022, the Company’s Board of Directors authorized an additional increase to
its stock repurchase plan of up to $40.0 million. The Company repurchased a total of $1.2 million (147,479 shares), $38.2
million (1,592,555 shares), and $22.4 million (862,290 shares) during the fiscal years ended July 2, 2023, July 3, 2022, and
June 27, 2021, respectively, under this program. As of July 2, 2023, $32.0 million remains authorized under the plan.
20
The following table sets forth, for the months indicated, the Company’s purchase of common stock during the fiscal year
2023, which includes the period July 4, 2022 through July 2, 2023:
Period
Total
Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Dollar
Value of
Shares
that May
Yet Be
Purchased
Under the
Plans or
Programs
Total
Number
of Shares
Purchased
Average
Price
Paid Per
Share
(1)
(in thousands, except shares and average price
paid per share)
07/04/22 – 07/31/22 .....................................................................
08/01/22 – 08/28/22 .....................................................................
08/29/22 – 10/02/22 .....................................................................
10/03/22 – 10/30/22 .....................................................................
10/31/22 – 11/27/22 .....................................................................
11/28/22 – 01/01/23 .....................................................................
01/02/23 – 01/29/23 .....................................................................
01/30/23 – 02/26/23 .....................................................................
02/27/23 – 04/02/23 .....................................................................
04/03/23 – 04/30/23 .....................................................................
05/01/23 – 05/28/23 .....................................................................
05/29/23 – 07/02/23 .....................................................................
Total .............................................................................................
- $
- $
- $
- $
140,248 $
- $
- $
1,757 $
- $
- $
5,474 $
- $
147,479 $
-
-
-
-
8.38
-
-
12.34
-
-
7.77
-
8.40
- $
- $
- $
- $
140,248 $
- $
- $
1,757 $
- $
- $
5,474 $
- $
147,479
33,203
33,203
33,203
33,203
32,029
32,029
32,029
32,007
32,007
32,007
31,965
31,965
(1) Average price per share excludes commissions and other transaction fees.
Dividends
We have never declared or paid cash dividends on our common stock. We currently do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our
board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital
requirements, general business conditions and other factors that our board of directors may deem relevant.
21
Item 6. RESERVED
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) is intended to
provide an understanding of our financial condition, change in financial condition, cash flow, liquidity and results of
operations. The following MD&A discussion should be read in conjunction with the consolidated financial statements and
notes to those statements that appear elsewhere in this Form 10-K. The following discussion contains forward-looking
statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or contribute to any differences include, but are
not limited to, those discussed under the caption “Forward-Looking Information” and under Item 1A — “Risk Factors.”
Business overview
The Company is a leading provider of gifts designed to help inspire customers to give more, connect more, and build more
and better relationships. See Item 1 in Part I for a detailed description of the Company’s business.
Business Segments
The Company operates in the following three business segments: Consumer Floral & Gifts, Gourmet Foods & Gift Baskets,
and BloomNet. The Consumer Floral & Gifts segment includes the operations of the Company’s flagship brand, 1-800-
Flowers.com, PersonalizationMall, Things Remembered, FruitBouquets.com, Flowerama and Alice’s Table, while the
Gourmet Foods & Gift Baskets segment includes the operations of Harry & David, Wolferman’s Bakery, Vital Choice, Moose
Munch, Cheryl’s Cookies, Mrs. Beasley’s, The Popcorn Factory, DesignPac, 1-800-Baskets.com, Simply Chocolate and
Shari’s Berries. The BloomNet segment includes the operations of BloomNet and Napco.
Fiscal 2023 Results
Fiscal 2023 was a challenging year from both a top and bottom-line perspective due to lower demand across all segments, as
consumers moderated their discretionary purchases in the face of significant macroeconomic pressures as core food and
energy inflation have reduced consumer discretionary income. The downward trend in “Everyday” and, to a lesser extent,
“Holiday” demand, which began in the latter half of Fiscal 2022, persisted throughout Fiscal 2023 due to the unprecedented,
rapid rise of inflation and interest rates, combined with significant geopolitical and recessionary concerns. A notable
exception to the slowing sales occurred during Fiscal 2023’s holiday season, when, as we anticipated, consumer spending
held up reasonably well during the December holidays, even though consumers reverted to their historical shopping patterns,
shopping much later in the holiday period. However, immediately following the December holiday selling season, revenue
growth resumed its downward trend.
Following three years of consecutive revenue and earnings growth, culminating in Fiscal 2021, the most successful year in
the Company’s history, during which time we eclipsed $2.1 billion in revenues and achieved $213.0 million in Adjusted
EBITDA, the Company has been facing a challenging post-COVID retail environment. Rising interest rates, inflation and
fears of a recession have led to lower customer discretionary spending, and accordingly our revenues, while high commodity
prices, labor, as well as inbound and outbound shipping costs, combined with some lagging supply chain issues, have
negatively impacted the Company’s margins.
During Fiscal 2023, net revenues declined by $190.0 million, or 8.6% (including the impact of the 53rd week in Fiscal 2022,
which contributed approximately 0.7% of the year-over-year decline), to $2,017.9 million, compared to Fiscal 2022, primarily
due to the aforementioned slowing demand for everyday gifting occasions as consumer confidence continued to suffer due
to prolonged inflation on staples such as food and energy, higher interest rates, higher credit card debt and higher housing
costs, which eroded disposable income for discretionary spending. In the face of a challenging retail environment, in Fiscal
2023, the Company made the strategic decision to prioritize earnings over sales goals, strategically increasing certain price
points, while decreasing advertising spending. While this decision contributed to the aforementioned revenue decline, it
resulted in improved gross profit margins and operating spend ratios.
Despite the recent revenue declines, for perspective, Fiscal 2023 revenues exceeded pre-pandemic Fiscal 2019 revenues by
61.6%. (This includes the impact of Personalization Mall, which was acquired on August 3, 2020, Things Remembered,
which was acquired on January 10, 2023, Alice’s Table, which was acquired on December 31, 2021, Vital Choice, which
22
was acquired on October 27, 2021, and Shari’s Berries, which was acquired in August 2019. Excluding revenues from these
acquisitions, pro-forma revenue growth vs. pre-pandemic Fiscal 2019 was 35.1%.)
These challenging macroeconomic conditions which impacted our revenues also began negatively impacting our gross
margins during Fiscal 2022, when inbound and outbound shipping, commodity, labor, and fuel costs began to surge,
continuing into Fiscal 2023. However, in the second quarter of Fiscal 2023, the labor market began to stabilize, and as retailers
worked to liquidate excess inventories, ocean shipping capacity dramatically improved, and ocean freight costs began to
decline significantly. By the third quarter of Fiscal 2023, while certain commodity prices were still near historical highs,
others such as eggs and butter, began to decline. While the inflationary environment, initially labelled as “transitory”, has
persisted for much longer than anticipated, these cost input improvements, combined with the aforementioned strategic
pricing initiatives, resulted in gross profit margin which improved by 30bps over the prior year, overcoming a 720bps decline
during the first quarter of Fiscal 2023, as the second quarter saw margins begin to steadily improve.
In addition to its efforts to improve gross margins, in order to counter the difficult retail environment, we sharply reduced
operating spend, with marketing (on significantly improved efficiency) and labor costs being the largest areas of savings.
As a result of ongoing efforts throughout the year to offset declining consumer demand, Adjusted EBITDA for Fiscal 2023
was $91.2 million, compared with $99.0 million in Fiscal 2022, reflecting the improvement in Adjusted EBITDA of $14.9
million in the second, third and fourth quarters collectively, after the $22.7 million decline in the first quarter. (See
Reconciliation of Net Income to Adjusted EBITDA below.)
Goodwill and Intangible Asset Impairment
During the quarter ended April 2, 2023, the Company evaluated whether events or circumstances had changed such that it
would indicate it was more likely than not that its goodwill, intangible and other long-lived assets of the Gourmet Foods &
Gift Baskets reporting units fair values were less than their carrying amounts. After considering the continuing pressures on
consumer discretionary spending, ongoing geopolitical events, the current inflationary macro-economic conditions, related
cost input headwinds that have negatively impacted the Company’s gross margins, and resulting downward revisions to its
forecast, the Company concluded that a triggering event had occurred for its Gourmet Foods & Gift Baskets reporting unit.
As such, the Company performed an impairment test of the reporting unit’s goodwill, intangibles and long-lived assets as of
April 2, 2023, and fully impaired the related goodwill ($62.3 million), and partially impaired certain tradenames ($2.3 million)
within the reporting unit. (See Note 6 – Goodwill and Intangible Assets in Item 15.)
Acquisition of PersonalizationMall
On August 3, 2020, the Company completed its acquisition of PersonalizationMall.com LLC ("PersonalizationMall"), a
leading ecommerce provider of personalized products. The extensive offerings of PersonalizationMall include a wide variety
of personalization processes such as sublimation, embroidery, digital printing, engraving and sandblasting, while providing
an industry-leading customer experience based on a fully integrated business platform that includes a highly automated
personalization process and rapid order fulfillment.
The Company used a combination of cash on its balance sheet and its existing credit facility to fund the $245.0 million
purchase (subject to certain working capital and other adjustments), which included its newly renovated, leased 360,000
square foot state-of-the-art production and distribution facility, as well as customer database, tradenames and website.
PersonalizationMall’s revenues were approximately $171.2 million during its fiscal year ended February 29, 2020 – see
Note 4 – Acquisitions in Item 15.
Acquisition of Vital Choice
On October 27, 2021, the Company completed its acquisition of Vital Choice Seafood LLC (“Vital Choice”), a provider of
wild-caught seafood and sustainably farmed shellfish, pastured proteins, organic foods, and marine-sourced nutritional
supplements. The Company utilized its credit facility to fund the $20.0 million purchase (subject to certain working capital
and other adjustments), which included tradenames, customer lists, websites and operations. Vital Choice revenues were
approximately $27.8 million during its most recent year ended December 31, 2020 – see Note 4 – Acquisitions in Item 15.
Acquisition of Alice’s Table
On December 31, 2021, the Company completed its acquisition of Alice's Table LLC (“Alice’s Table”), a lifestyle business
offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country. The
Company utilized existing cash of $0.8 million, converted the existing accounts receivable from Alice’s Table of $0.3 million
23
and its previous $0.3 million cost method investment in Alice’s Table, in order to acquire 100% ownership in Alice’s Table,
which included tradenames, customer lists, websites and operations. Alice’s Table revenues were approximately $3.8 million
during its fiscal twelve-month period ended September 30, 2021 – see Note 4 – Acquisitions in Item 15.
Acquisition of Things Remembered
On January 10, 2023, the Company completed its acquisition of certain assets of the Things Remembered brand, a provider
of personalized gifts, whose operations have been integrated within the PersonalizationMall.com brand, in the Consumer
Floral & Gifts segment. The Company used cash on hand to fund the $5.0 million purchase, which included the intellectual
property, customer list, certain inventory, and equipment. The acquisition did not include Things Remembered retail stores.
Things Remembered’s annual revenues from its ecommerce operations, based on its most recently available unaudited
financial information was $30.4 million for the twelve months ended November 30, 2022 – see Note 4 – Acquisitions in
Item 15.
Amended and Restated Credit Agreement
On November 8, 2021, the Company, entered into a Second Amendment to the Company’s existing credit agreement, to,
among other modifications, decrease the interest margins and LIBOR floor applicable to the outstanding term loan, and
subsequent to fiscal 2022 year-end, on August 29, 2022, the Company entered into a Third Amendment to, among other
modifications, (A) alter the financial maintenance covenants set forth therein by (1) increasing the required maximum
consolidated leverage ratio, for the reference period ending October 2, 2022, from 3.25 to 1.00 to 4.25 to 1.00 and (2)
decreasing the required minimum consolidated fixed charge coverage ratio, for the reference periods ending October 2, 2022,
January 1, 2023, and April 2, 2023, from 1.50 to 1.00 to 1.00 to 1.00 and (B) increase the amount of certain capital
expenditures that may be disregarded for purposes of calculating the consolidated fixed charge coverage ratio from $25.0
million to $35.0 million.
On June 27, 2023, the Company entered into a Third Amended and Restated Credit Agreement to, among other modifications,
(i) increase the amount of the outstanding term loan from approximately $150 million to $200 million, (ii) decrease the
amount of the commitments in respect of the revolving credit facility from $250 million to $225 million, (iii) extend the
maturity date of the outstanding term loan and the revolving credit facilities by approximately 48 months to June 27, 2028,
and (iv) increase the applicable interest rate margins for SOFR and base rate loans by 25 basis points (Note 9 – Debt, in Item
15.).
Fiscal 2024 Guidance
For Fiscal 2024, the Company expects revenues to remain pressured by a challenging consumer environment early in the
year, but then rebound during the holiday period and into the second half of the fiscal year. The Company also expects
continued improvement in gross margin. Additionally, the guidance assumes increased compensation expense, including the
restoration of 100 percent bonus payout, compared with a partial payout in fiscal 2023.
As a result, the Company expects Fiscal 2024:
• total revenues on a percentage basis to decline in the mid-single digits, as compared with the prior year;
• adjusted EBITDA to be in a range of $95 million to $100 million; and
• Free Cash Flow to be in a range of $60 million to $65 million.
Definitions of non-GAAP financial measures:
We sometimes use financial measures derived from consolidated financial information, but not presented in our financial
statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these are
considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission rules. See below for
definitions and the reasons why we use these non-GAAP financial measures. Where applicable, see the Segment
Information and Results of Operations sections below for reconciliations of these non-GAAP financial measures to their most
directly comparable GAAP financial measures. These non-GAAP financial measures are referred to as “non-GAAP”,
“adjusted” or “on a comparable basis” below, as these terms are used interchangeably. Reconciliations for forward-looking
figures would require unreasonable efforts at this time because of the uncertainty and variability of the nature and amount of
certain components of various necessary GAAP components, including, for example, those related to compensation, tax
items, amortization or others that may arise during the year, and the Company’s management believes such reconciliations
would imply a degree of precision that would be confusing or misleading to investors. For the same reasons, the Company is
unable to address the probable significance of the unavailable information. The lack of such reconciling information should
be considered when assessing the impact of such disclosures.
24
EBITDA and adjusted EBITDA
We define EBITDA as net income (loss) before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined
as EBITDA adjusted for the impact of stock-based compensation, Non-Qualified Plan Investment appreciation/depreciation,
and certain items affecting period-to-period comparability. See Segment Information for details on how EBITDA and
adjusted EBITDA were calculated for each period presented.
The Company presents EBITDA and adjusted EBITDA because it considers such information meaningful supplemental
measures of its performance and believes such information is frequently used by the investment community in the evaluation
of similarly situated companies. The Company uses EBITDA and adjusted EBITDA as factors used to determine the total
amount of incentive compensation available to be awarded to executive officers and other employees. The Company’s credit
agreement uses EBITDA and adjusted EBITDA to determine its interest rate and to measure compliance with certain
covenants. EBITDA and adjusted EBITDA are also used by the Company to evaluate and price potential acquisition
candidates.
EBITDA and adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute
for analysis of the Company’s results as reported under GAAP. Some of the limitations are: (a) EBITDA and adjusted
EBITDA do not reflect changes in, or cash requirements for, the Company’s working capital needs; (b) EBITDA and adjusted
EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal
payments, on the Company’s debts; and (c) although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized may have to be replaced in the future and EBITDA does not reflect any cash requirements for such
capital expenditures. EBITDA and Adjusted EBITDA should only be used on a supplemental basis combined with GAAP
results when evaluating the Company’s performance.
Segment contribution margin and adjusted segment contribution margin
We define segment contribution margin as earnings before interest, taxes, depreciation and amortization, before the allocation
of corporate overhead expenses. Adjusted segment contribution margin is defined as contribution margin adjusted for certain
items affecting period-to-period comparability. See Segment Information for details on how segment contribution margin
was calculated for each period presented.
When viewed together with our GAAP results, we believe segment contribution margin and adjusted segment contribution
margin provide management and users of the financial statements meaningful information about the performance of our
business segments.
Segment contribution margin and adjusted segment contribution margin are used in addition to and in conjunction with results
presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material
limitation associated with the use of the segment contribution margin and adjusted segment contribution margin is that they
are an incomplete measure of profitability as they do not include all operating expenses or non-operating income and
expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such
as Operating Income and Net Income.
Adjusted net income (loss) and adjusted or comparable net income (loss) per common share
We define adjusted net income (loss) and adjusted or comparable net income (loss) per common share as net income (loss)
and net income (loss) per common share adjusted for certain items affecting period to period comparability. See Segment
Information below for details on how adjusted net income (loss) per common share and adjusted or comparable net income
(loss) per common share were calculated for each period presented.
We believe that adjusted net income (loss) and adjusted or comparable net income (loss) per common share are meaningful
measures because they increase the comparability of period-to-period results.
Since these are not measures of performance calculated in accordance with GAAP, they should not be considered in isolation
of, or as a substitute for, GAAP net income (loss) and net income (loss) per common share, as indicators of operating
performance and they may not be comparable to similarly titled measures employed by other companies.
Free Cash Flow
We define Free Cash Flow as net cash provided by operating activities, less capital expenditures. The Company considers
Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of
25
cash generated by the business after the purchases of fixed assets, which can then be used to, among other things, invest in
the Company’s business, make strategic acquisitions, strengthen the balance sheet and repurchase stock or retire debt. Free
Cash Flow is a liquidity measure that is frequently used by the investment community in the evaluation of similarly situated
companies. Since Free Cash Flow is not a measure of performance calculated in accordance with GAAP, it should not be
considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. A limitation of the
utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the
Company’s cash balance for the period.
Segment Information
The following table presents the net revenues, gross profit and segment contribution margin from each of the Company’s
business segments, as well as consolidated EBITDA, adjusted EBITDA and adjusted net income, for fiscal years ended July
2, 2023 and July 3, 2022. For segment information for the fiscal year ended June 27, 2021, please refer to our Annual Report
on Form 10-K for the fiscal year ended June 27, 2021.
Goodwill
and
Intangible
Impairment
Things
Remembered
Transaction
Costs
July 2,
2023
Years Ended
As
Adjusted
(non-
GAAP)
July 2,
2023
Vital
Choice and
Alice's
Table
Transaction
Costs
As
Adjusted
(non-
GAAP)
July 3,
2022
Litigation
Settlement
July 3,
2022
%
Change
(in thousands)
$
- $
- $ 920,510
133,183
$ 1,059,570
145,702
$
- $
- $ 1,059,570
145,702
-13.1 %
-8.6 %
Net revenues:
Consumer Floral & Gifts $ 920,510
BloomNet ........................ 133,183
Gourmet Foods & Gift
Baskets ......................... 965,191
375
Corporate.........................
Intercompany
eliminations ..................
Total net revenues ................ $ 2,017,853
(1,406 )
$
Gross profit:
Consumer Floral & Gifts $ 363,342
$
39.5 %
BloomNet ........................
56,879
42.7 %
Gourmet Foods & Gift
Baskets ......................... 336,764
Corporate.........................
34.9 %
541
144.3 %
- $
- $ 2,017,853
- $
- $ 363,342
965,191
375
1,004,272
201
1,004,272
201
(1,406 )
(1,860 )
$
$ 2,207,885
- $
- $ 2,207,885
(1,860 )
-3.9 %
86.6 %
24.4 %
-8.6 %
$ 416,591
$
39.3 %
39.5 %
56,879
61,562
42.7 %
42.3 %
- $
- $ 416,591
-12.8 %
39.3 %
61,562
-7.6 %
42.3 %
336,764
343,163
34.9 %
34.2 %
343,163
-1.9 %
34.2 %
541
144.3 %
422
210.0 %
422
210.0 %
28.2 %
Total gross profit .................. $ 757,526
$
37.5 %
- $
-
- $ 757,526
$ 821,738
$
-
37.5 %
37.2 %
- $
-
- $ 821,738
-7.8 %
-
37.2 %
EBITDA (non-GAAP):
Segment Contribution
Margin (non-GAAP) (a):
Consumer Floral & Gifts $
BloomNet ........................
Gourmet Foods & Gift
$
95,535
37,197
- $
- $
95,535
37,197
$ 104,319
42,515
$
- $
- $ 104,319
42,515
-8.4 %
-12.5 %
Baskets .........................
12,895
64,586
77,481
62,021
2,900
64,921
19.3 %
Segment Contribution Margin
Subtotal ................................ 145,627
64,586
- 210,213
208,855
444 (126,521 ) (117,676 )
444
83,692
91,179
-
540
540
2,900 211,755
(117,136 )
2,900
94,619
-0.7 %
-8.0 %
-11.5 %
Corporate (b) ................... (126,965 )
EBITDA (non-GAAP) ..........
18,662
64,586
Add: Stock-based
compensation ...............
8,334
8,334
7,947
7,947
4.9 %
Add: Compensation
charge related to
NQDC Plan Investment
(Depreciation)
Appreciation .................
Adjusted EBITDA (non-
(822 )
(822 )
(3,583 )
(3,583 )
77.1 %
GAAP) ................................. $
26,174
$
64,586 $
444 $
91,204
$
95,543
$
540 $
2,900 $
98,983
-7.9 %
26
Reconciliation of net income (loss) to adjusted net income (non-GAAP):
Years Ended
Net income (loss) ............................................................................................................ $
Adjustments to reconcile net income (loss) to adjusted net income (non-GAAP)
Add: Transaction costs ................................................................................................
Add: Litigation settlement ...........................................................................................
Add: Goodwill and intangibles impairment .................................................................
Deduct: Income tax effect on adjustments ......................................................................
Adjusted net income (non-GAAP) ............................................................................... $
Basic and diluted net income (loss) per common share
Basic ................................................................................................................................ $
Diluted ............................................................................................................................. $
444
-
64,586
(6,899)
13,429 $
(0.69) $
(0.69) $
July 2,
2023
July 3,
2022
(in thousands)
(44,702) $
29,610
540
2,900
-
(165 )
32,885
0.46
0.45
0.51
0.50
Basic and diluted adjusted net income per common share (non-GAAP)
Basic ................................................................................................................................ $
Diluted ............................................................................................................................. $
0.21 $
0.21 $
Weighted average shares used in the calculation of basic and diluted net income
(loss) and adjusted net income (loss) per common share
Basic ................................................................................................................................
Diluted .............................................................................................................................
64,688
64,688
64,977
65,617
27
Reconciliation of net income (loss) to adjusted EBITDA (non-GAAP):
Years Ended
July 2,
2023
July 3,
2022
(in thousands)
Net income (loss) ............................................................................................................ $
Add: Interest expense and other expense, net ..............................................................
Add: Depreciation and amortization ............................................................................
Add: Income tax expense (benefit) ..............................................................................
EBITDA ..........................................................................................................................
Add: Stock-based compensation ..................................................................................
Add: Compensation charge related to NQDC plan investment (depreciation)
appreciation ..............................................................................................................
Add: Goodwill and Intangible Impairment ..................................................................
Add: Transaction costs ................................................................................................
Add: Litigation settlement ...........................................................................................
Adjusted EBITDA ........................................................................................................... $
(44,702) $
11,751
53,673
(2,060)
18,662
8,334
(822)
64,586
444
-
91,204 $
29,610
10,999
49,078
1,492
91,179
7,947
(3,583 )
-
540
2,900
98,983
(a) Segment performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting
only the direct controllable revenue and operating expenses of the segments, both of which are non-GAAP
measurements. As such, management’s measure of profitability for these segments does not include the effect of
corporate overhead, described above, depreciation and amortization, other income (net), and other items that we do
not consider indicative of our core operating performance.
(b) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items,
Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service
Center functions, as well as stock-based compensation. In order to leverage the Company’s infrastructure, these
functions are operated under a centralized management platform, providing support services throughout the
organization. The costs of these functions, other than those of the Customer Service Center, which are allocated
directly to the above categories based upon usage, are included within corporate expenses as they are not directly
allocable to a specific segment.
Results of Operations
The Company’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to June 30. Fiscal years 2023 and 2021,
which ended on July 2, 2023 and June 27, 2021, respectively, each consisted of 52 weeks. Fiscal year 2022, which ended on
July 3, 2022, consisted of 53 weeks.
Net Revenues
July 2,
2023
% Change
% Change
Years Ended
July 3,
2022
(dollars in thousands)
June 27,
2021
Net revenues:
E-Commerce......................................................... $ 1,744,622
273,231
Other .....................................................................
$ 2,017,853
-9.8 % $ 1,934,648
273,237
-8.6 % $ 2,207,885
- %
12.6%
2.9% $ 1,879,550
242,695
4.0% $ 2,122,245
Net revenues consist primarily of the selling price of the merchandise, service or outbound shipping charges, less discounts,
returns and credits.
During the fiscal year ended July 2, 2023, net revenues decreased 8.6% in comparison to the prior year, which included a
53rd week. Excluding the impact of the 53rd week in the prior year period, revenues declined 7.9%, due to lower order
volume across all segments, reflecting a continuation of the trends that we have experienced throughout this fiscal year, as
discretionary income remains pressured and consumers continue to moderate their spending on purchases for “Everyday”
gifting occasions, and to a lesser extent, “Holiday” gifting occasions, combined with the prudent use of promotional offerings
and advertising campaigns that balance the long-term goals of the Company with strategies to improve gross margins and
operating spend ratios during this challenging economic environment.
28
Adjusted for the non-comparative impact of Alice’s Table, Vital Choice and Things Remembered, which were acquired on
December 31, 2021, October 27, 2021 and January 10, 2023, respectively, consolidated net revenues decreased 9.0%, in
comparison to the prior year period.
To provide perspective, our post-pandemic Fiscal 2023 revenues exceeded our pre-pandemic Fiscal 2019 revenues by 61.6%.
This revenue growth includes the impact of PersonalizationMall, which was acquired on August 3, 2020, as well as Things
Remembered, which was acquired on January 10, 2023, Vital Choice, which was acquired on October 27, 2021, Shari’s
Berries, which was acquired in August 2019, and Alice's Table, which was acquired on December 31, 2021. Excluding
revenues from these acquisitions, pro-forma revenue growth exceeded pre-pandemic Fiscal 2019 revenues by 35.1%.
During the year ended July 3, 2022, net revenues increased 4.0% in comparison to prior year due to higher volumes across
all three of our segments. Adjusted for the non-comparative impact of PersonalizationMall, Alice’s Table and Vital Choice,
which were acquired on August 3, 2020, December 31, 2021 and October 27, 2021, respectively, consolidated net revenues
increased 2.5%, in comparison to the prior year period. This revenue growth followed the 42.5% (26.6% excluding
PersonalizationMall) revenue growth we reported for fiscal 2021, which benefitted from the accelerated growth of e-
commerce shopping during the pandemic, continuing the strong growth momentum that we had generated over the past
several years, as a result of increased recognition and relevance for our family of brands for gifting and connective occasions.
Disaggregated revenue by channel follows:
Years Ended
Consumer Floral & Gifts
%
July 2,
2023
July 3,
2022
Change
BloomNet
July 3,
2022
July 2,
2023
%
Change
Gourmet Foods & Gift
Baskets
July 3,
2022
July 2,
2023
%
Change
Corporate and
Eliminations
Consolidated
July 2,
2023
July 3,
2022
July 2,
2023
July 3,
2022
%
Change
Net revenues
E-commerce ................ $911,302 $1,049,821
Other ............................ 9,208
9,749
Total net revenues ..... $920,510 $1,059,570
- $
-13.2% $
-
-5.5% 133,183 145,702
-13.1% $133,183 $145,702
(dollars in thousands)
- $ 833,320 $ 884,827
-8.6% 131,871 119,445
-8.6% $ 965,191 $1,004,272
- $
-5.8% $
- $1,744,622 $1,934,648
10.4% (1,031) (1,659) 273,231 273,237
-3.9% $ (1,031) $(1,659) $2,017,853 $2,207,885
-9.8%
-0.0%
-8.6%
Other revenues detail
Retail and other ........... 9,208
-
Wholesale ....................
-
BloomNet services ......
Corporate .....................
-
Eliminations ................
-
Total other revenues.. $ 9,208 $
9,749
-
-
-
-
9,749
-5.5%
-
-
- 50,075 53,957
- 83,108 91,745
-
-
-
-
-
-
-5.5% $133,183 $145,702
-
9,751
10,134
-7.2% 122,120 109,311
-
-
-9.4%
-
-
-
-
-
-
-8.6% $ 131,871 $ 119,445
18,959
-
19,883
-
-3.8%
- 172,195 163,268
-
11.7%
91,745
-
-
-
201
-
201
375
- (1,406) (1,860)
(1,860 )
10.4% $ (1,031) $(1,659) $ 273,231 $ 273,237
83,108
375
(1,406 )
-4.6%
5.5%
-9.4%
86.6%
24.4%
-0.0%
29
Revenue by sales channel:
● E-commerce revenues (combined online and telephonic) decreased 9.8% during fiscal 2023, primarily as a result
of a decline in demand for “Everyday” gifts across all our segments, attributable to the macro-economic conditions
noted above, which have negatively impacted consumer discretionary spending, combined with planned reductions
in advertising spend. Lower order volumes (20.9 million, -14.9% vs. prior year) were slightly offset by higher
average order value ($83.42, +5.9% vs prior year) as the Company prioritized earnings over sales goals, strategically
increasing price points where possible in a challenging economic environment, to help offset rising costs.
(Excluding the impact of the acquisitions of Vital Choice, Alice’s Table, and Things Remembered, and the 53rd
week in fiscal 2022, pro-forma e-commerce revenues declined 9.3% during fiscal 2023, compared to the prior year.
E-commerce revenues increased 2.9% during fiscal 2022, comprised of 2.4% growth within the Gourmet Foods &
Gift Baskets segment, which includes revenues of Vital Choice, acquired on October 27, 2021, and 3.4% growth
within the Consumer Floral & Gifts segment, which includes the revenues of PersonalizationMall and Alice’s Table
since their dates of acquisition on August 3, 2020 and December 31, 2021, respectively. These revenue increases
were attributable to pricing initiatives and product mix, which drove a higher average order value ($78.77, +9.0%),
partially offset by lower order volume (24.5 million, -5.6% as compared with fiscal 2021).
● Other revenues are comprised of the Company’s BloomNet segment, as well as the wholesale and retail channels
of its 1-800-Flowers.com Consumer Floral & Gifts and Gourmet Foods & Gift Baskets segments.
Other revenues were consistent with prior year as lower BloomNet revenues attributable to a decline in wholesale
product, transaction and directory sales, were offset by increased wholesale product demand within the Gourmet
Foods & Gift Baskets segment, as consumers returned to in person “brick-and-mortar” shopping.
Other revenues increased by 12.6% during fiscal 2022 due to increased wholesale product demand, partially offset
by a decrease in BloomNet services revenues.
Revenue by segment:
Consumer Floral & Gifts – this segment, which includes the operations of the 1-800-Flowers.com, as well as
PersonalizationMall, Alice’s Table, and Things Remembered brands subsequent to their acquisitions on August 3, 2020,
December 31, 2021, and January 10, 2023, respectively, derives revenue from the sale of consumer floral products and gifts
through its e-commerce sales channels (telephonic and online sales), retail stores, and royalties from its franchise operations.
Net revenues decreased 13.1% during fiscal 2023. Adjusting for the acquisitions of Things Remembered and Alice’s Table,
pro-forma segment revenue decreased 13.4%, due to the continued reduction of “Everyday” product demand, and weaker
than anticipated Valentine’s Day and Mother’s Day demand, as consumers’ available discretionary income continues to
shrink in the current inflationary environment, combined with planned reductions in advertising spend, as our brands focused
their efforts on improving gross margin and operating spend efficiency, in the face of softening demand. Despite these
challenges, the 1-800-Flowers and PersonalizationMall brands were able to maintain much of the sales gains achieved during
the pandemic and drive market share gains as a result of increased recognition and relevance for gifting and connective
occasions and continued emphasis on existing customers as our Celebrations Passport loyalty program has increased cross-
brand frequency, retention, and customer lifetime value. To provide some perspective, fiscal 2023 revenues increased by
84.9% vs fiscal 2019, +37.9% on a pro-forma basis, excluding the acquisition of Personalization Mall in August 2020, Alice’s
Table in December 2021, and Things Remembered in January 2023.
Net revenues increased 3.4% during fiscal 2022 (including the impact of PersonalizationMall acquired on August 3, 2020,
and Alice’s Table, which was acquired on December 31, 2021). Adjusting for the acquisitions of PersonalizationMall and
Alice’s Table, pro-forma segment revenue growth was 2.0%, reflecting the marketing and merchandising investments made
in our flagship brand, which are continuing to drive growth and market share gains, with more pronounced growth during the
Valentine’s Day and Mother’s Day holiday periods as “Everyday” volume has slowed during this inflationary post-pandemic
period.
BloomNet – revenues in this segment are derived from membership fees, as well as other product and service offerings to
florists.
Net revenues decreased 8.6% during fiscal 2023 due to soft wholesale product sales, as well as service revenues attributable
to reduced membership/transaction fee revenues associated with a decline in order volume processed through the network,
30
and lower directory services ad revenues. For point of reference, revenue increased 29.5% in fiscal 2023, compared with pre-
pandemic fiscal 2019 revenue.
Net revenues increased 1.9% during fiscal 2022 due to wholesale products growth, partially offset by lower services revenue
due to unfavorable membership/transaction fee revenues, resulting from unfavorable 1-800-Flowers and shop-to-shop order
volume, attributable to overall macro-economic conditions, and lower referral fees, partially offset by increased directory
services due to ad volume and fee amount increases.
Gourmet Foods & Gift Baskets – this segment includes the operations of Harry & David, Wolferman’s, Cheryl’s Cookies,
The Popcorn Factory, 1-800-Baskets/DesignPac, Shari’s Berries, and Vital Choice, subsequent to its October 27, 2021
acquisition date. Revenue is derived from the sale of gourmet fruits, cookies, baked gifts, premium chocolates and
confections, gourmet popcorn, gift baskets, dipped berries, prime steaks, chops, and fish, through the Company’s e-commerce
sales channels (telephonic and online sales) and company-owned and operated retail stores under the Harry & David and
Cheryl’s Cookies brand names, as well as wholesale operations.
Net revenues decreased 3.9% during fiscal 2023 due to lower e-commerce consumer demand, as a result of macro-economic
weakness, which has significantly reduced “Everyday” occasion volumes, combined with planned reductions in advertising
spend, as the brands focused their efforts on improving gross margins and operating spend efficiency in the face of softening
demand. The unfavorable revenue trend was attributable to lower order volume, partially offset by favorable average order
value as a result of strategic price increases and mix, although promotional activity was increased in order to reduce inventory
levels. This segment has seen the most dramatic reductions in “EveryDay” volumes, due to the disproportionate impact of
the macro-economic conditions noted above, combined with the fact that it also experienced the highest growth rates during
the Pandemic when food gifts/self-consumption peaked. Wholesale/Retail channel revenues were slightly favorable to prior
year as consumers returned to in person “brick-and-mortar” shopping. (Pro-forma segment revenues decreased 4.6% during
fiscal 2023, adjusting for the acquisition of Vital Choice.) For point of reference fiscal 2023 revenues were favorable by
48.9% vs. fiscal 2019, 33.9% excluding the impact of the acquisition of Shari’s Berries in August 2019, and Vital Choice in
October 2021.
Net revenues increased 5.1%, during fiscal 2022 as a result of favorable e-commerce sales, resulting from the acquisition of
Vital Choice, increased volume driven by Shari’s Berries and Harry & David, at holiday, as well as a higher average order
due to product mix and price increases, partially offset by lower demand across the remainder of the segment, combined with
favorable wholesale and retail revenue growth due to improving demand as COVID-19 restrictions were lifted and foot-traffic
in customer locations continued to return to more normalized levels.
Gross Profit
July 2,
2023
% Change
% Change
Years Ended
July 3,
2022
(dollars in thousands)
June
27, 2021
Gross profit ........................................................... $
Gross margin % ....................................................
757,526
37.5%
-7.8% $
821,738
37.2%
-8.3 % $
896,429
42.2%
Gross profit consists of net revenues less cost of revenues, which is comprised primarily of florist fulfillment costs (fees paid
directly to florists), the cost of floral and non-floral merchandise sold from inventory or through third parties, and associated
costs, including inbound and outbound shipping charges. Additionally, cost of revenues includes labor and facility costs
related to direct-to-consumer and wholesale production operations, as well as payments made to sending florists related to
order volume referred through the Company’s BloomNet network.
Gross profit decreased 7.8% during fiscal 2023 due to the lower revenues noted above, partially offset by a higher gross
margin percentage, driven by improvements across all three segments. Although the Company continued to face inflationary
pressures in the form of higher commodity costs (although certain commodities began declining during our third quarter),
fuel and related 3rd party shipping rates, in addition to the challenges required to work down inventory levels, rates on ocean
containers have come down significantly off of their Fiscal 2022 peak, and the Company has focused on improving the
variables within its control, implementing strategic initiatives designed to mitigate the impact of these factors, including
pricing initiatives across our product assortment, implementing logistics optimization programs to enhance our outbound
shipping operations and manage rising third-party shipping costs and deploying automation to increase throughput and
efficiency and address high cost of labor.
31
Gross profit decreased 8.3% during fiscal 2022 due to a significantly lower gross profit percentage, partially offset by the
higher revenues noted above. Adjusting for the impact of PersonalizationMall, Alice’s Table and Vital Choice, on a pro-
forma basis, gross margin percentage remained 37.2%. Gross profit percentage decreased during fiscal 2022 primarily due to
lower margins across all three segments, reflecting macro-economic headwinds including: continued disruptions in the global
supply chain, the escalation of increased commodity costs, increased year-over-year labor rates, as well as widespread delays
and increased costs for inbound and outbound shipping, including an acceleration in fuel surcharges related to rising oil
prices, and the write-off of certain inventories of expired perishable products, reflecting softer than anticipated demand levels.
Consumer Floral & Gifts segment – Gross profit in Fiscal 2023 decreased in comparison to prior year by 12.8%, due to the
unfavorable revenues noted above, partially offset by favorable gross profit percentage attributable to favorable product mix,
strategic pricing initiatives, reflected in the higher average order value, as well as favorable rates for ocean freight, partially
offset by higher outbound shipping costs and higher labor rates.
Gross profit in Fiscal 2022 (including the impact of PersonalizationMall, acquired on August 3, 2020, and Alice’s Table,
acquired on December 31, 2021) was unfavorable in comparison to fiscal 2021 by 1.0%, as a result of an unfavorable gross
profit percentage, partially offset by the higher revenues noted above. On a pro-forma basis, adjusting for the impact of
PersonalizationMall and Alice’s Table, gross profit percentage was 39.2% during fiscal 2022, a decrease of 190 basis points
compared to fiscal 2021. Gross profit percentage was negatively impacted by increased inbound and outbound shipping costs,
labor, and raw material component input costs, partially offset by pricing initiatives, reflected in the higher average order
value note above.
BloomNet segment – Gross profit in Fiscal 2023 from the BloomNet segment decreased in comparison to prior year by 7.6%,
due to the unfavorable revenues noted above, partially offset by an increase in gross margin percentage. Gross margin
percentage was higher than prior year due to improvements in wholesale margins, as a result of strategic pricing initiatives
and favorable ocean freight costs, partially offset by higher outbound shipping rates, and higher florist rebates due to higher
shop-to-shop volume from senders.
Gross profit in Fiscal 2022 was unfavorable in comparison to fiscal 2021 by 5.3%, due to lower margins, partially offset by
the increased revenues noted above. The lower margins were caused by the impact of sales mix (a greater proportion of
revenues were derived from lower margin wholesale volume), compounded by higher cost of merchandise due to increased
ocean freight costs and product costs, as well as supply chain issues, partially offset by lower rebates (due to lower shop-to-
shop volumes).
Gourmet Foods & Gift Baskets segment – Gross profit in Fiscal 2023 was unfavorable in comparison to prior year by 1.9%,
due to the unfavorable revenues noted above, partially offset by favorable gross profit percentage. The favorable gross profit
percentage was primarily attributable to lower inbound/ocean freight costs and production efficiencies resulting from
fulfillment automation projects, partially offset by continued inflationary pressures on certain commodity costs, and increased
markdowns to reduce inventory positions.
Gross profit in Fiscal 2022 was unfavorable in comparison to fiscal 2021 by 16.3%, due to a decrease in gross profit
percentage of 870 basis points, to 34.2%, partially offset by the aforementioned increase in revenues. The unfavorable gross
profit percentage was due to macro-economic headwinds including: continued disruptions in the global supply chain, the
escalation of increased commodity costs, increased year-over-year labor rates across the Company, as well as widespread
delays and increased costs for inbound and outbound shipping, including an acceleration in fuel surcharges related to rising
oil prices, and the write-off of certain inventories of expired perishable products, reflecting softer than anticipated demand
levels, as well as certain product mix shift into lower margins channels, partially offset by pricing initiatives and increased
average order value.
Marketing and Sales Expense
July 2,
2023
% Change
% Change
Years Ended
July 3,
2022
(dollars in thousands)
June
27, 2021
Marketing and sales .............................................. $
Percentage of sales ...............................................
500,840
24.8%
-12.4% $
571,661
25.9%
7.2 % $
533,268
25.1%
32
Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and
search costs, retail store and fulfillment operations (other than costs included in cost of revenues) and customer service center
expenses, as well as the operating expenses of the Company’s departments engaged in marketing, selling and merchandising
activities.
Marketing and sales expense decreased 12.4% during fiscal 2023 due to variable components associated with lower revenues,
combined with reduced, but more efficient advertising spend (as the brands focused their efforts on driving profitable volume
and servicing their most loyal customers during a period when discretionary purchases are still under heavy pressure), and
expense optimization efforts.
Marketing and sales expense increased 7.2% during fiscal 2022 due to the variable components associated with the higher
revenue noted above, combined with an increase in advertising spend due to efforts to drive revenue growth, combined with
advertising rates which have risen above historical rates, and the impact of the acquisitions of Vital Choice, and
PersonalizationMall, partially offset by a reduction in labor costs as a result of lower performance-related bonuses.
During fiscal 2023, the Company added approximately 4.8 million new e-commerce customers compared to 5.7 million
during fiscal 2022.
Technology and Development Expense
July 2,
2023
% Change
% Change
Years Ended
July 3,
2022
(dollars in thousands)
June 27,
2021
Technology and development .............................. $
Percentage of sales ...............................................
60,691
3.0%
7.3% $
56,561
2.6%
3.9 % $
54,428
2.6%
Technology and development expense consists primarily of payroll and operating expenses of the Company’s information
technology group, costs associated with its websites, including hosting, design, content development and maintenance and
support costs related to the Company’s order entry, customer service, fulfillment, and database systems.
Technology and development expenses increased by 7.3% during fiscal 2023, primarily due to higher maintenance and
support for the Company’s technology platform, as well as higher labor costs due to annual increases.
Technology and development expenses increased by 3.9% during fiscal 2022, primarily due to higher maintenance and
support incurred to support the Company’s technology platform enhancements, partially offset by lower labor costs, resulting
from reductions in performance related bonuses.
During the fiscal years 2023, 2022 and 2021, the Company expended $85.8 million, $83.2 million and $79.7 million,
respectively, on technology and development, of which $25.1 million, $26.6 million and $25.3 million, respectively, has been
capitalized.
General and Administrative Expense
July 2,
2023
% Change
% Change
Years Ended
July 3,
2022
(dollars in thousands)
June 27,
2021
General and administrative ................................... $
Percentage of sales ...............................................
112,747
5.6%
10.2% $
102,337
4.6%
-12.6 % $
117,136
5.5%
General and administrative expense consists of payroll and other expenses in support of the Company’s executive, finance
and accounting, legal, human resources and other administrative functions, as well as professional fees and other general
corporate expenses.
33
General and administrative expense increased 10.2% during fiscal 2023, primarily due to: (i) higher labor costs due to a
change in the value of the Company’s NQ deferred compensation investments - refer to equal offset in “Other
income/expense, net”, (ii) higher professional fees due to litigation costs, and (iii) higher bad debts expense primarily related
to reserves for certain big box retailers and florists.
General and administrative expense decreased 12.6% during fiscal 2022, primarily due to: (i) lower labor costs as a result of
lower performance-related bonuses, and a decrease in the value of the Company’s non-qualified deferred compensation plan
investments in the current year of $3.6 million compared to a $5.7 million increase in the prior year (refer to equal offset in
“Other income/expense, net”), partially offset by overall increased labor rates, and (ii) lower professional fees due to lower
litigation and transaction costs, partially offset by higher insurance costs due to increased health claims and business insurance
rates.
Depreciation and Amortization
July 2,
2023
% Change
% Change
Years Ended
July 3,
2022
(dollars in thousands)
June 27,
2021
Depreciation and amortization ............................. $
Percentage of sales ...............................................
53,673
2.7%
9.4% $
49,078
2.2%
15.5 % $
42,510
2.0%
Depreciation and amortization expense increased 9.4% during fiscal 2023, due to recent increases in distribution facility
automation projects, and IT related E-commerce/platform enhancements, as well as
incremental depreciation
and amortization associated with recent acquisitions.
Depreciation and amortization expense increased 15.5% during fiscal 2022, primarily due to recent increases in distribution
facility automation projects and IT related e-commerce/platform enhancements, as well as an incremental amortization related
to the acquisition of Vital Choice, and the incremental depreciation and customer list amortization associated with
PersonalizationMall.
Goodwill and Intangible Impairment
Goodwill and intangible impairment .................... $
64,586
-% $
-
July 2,
2023
% Change
% Change
June 27,
2021
Years Ended
July 3,
2022
(dollars in thousands)
-% $
-
Based upon the continuing pressures on consumer discretionary spending, ongoing geopolitical events, the current
inflationary macro-economic conditions, related cost input headwinds that have negatively impacted the Company’s gross
margins, and resulting downward revisions to its forecast, the Company concluded that a triggering event had occurred for
its Gourmet Foods & Gift Baskets reporting unit during the quarter ended April 2, 2023. As such, the Company performed
an impairment test of the reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023, and fully impaired
the related goodwill, and partially impaired certain tradenames within the reporting unit. See Note 6 – Goodwill and
Intangible Assets, net, in Part IV, Item 15 for details.
Interest Expense, net
July 2,
2023
% Change
% Change
Years Ended
July 3,
2022
(dollars in thousands)
June 27,
2021
Interest expense, net ............................................. $
10,946
93.2 % $
5,667
-3.3% $
5,860
Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the
Company’s credit facility (See Note 9. in Part IV, Item 15 for details), net of income earned on the Company’s available cash
balances.
34
Interest expense, net increased 93.2% during fiscal 2023, due to higher interest rates and higher working capital borrowings
during the year, partially offset by favorable interest earned on available cash balances
Interest expense, net decreased 3.3% during fiscal 2022, due to lower interest rates attributable to the amendment of the
Company’s credit facility, partially offset by the annualization of the incremental debt that was used to partially finance the
acquisition of PersonalizationMall.
Other expense (income), net
July 2,
2023
% Change
% Change
Years Ended
July 3,
2022
(dollars in thousands)
June 27,
2021
Other expense (income), net ................................. $
805
-84.9 % $
5,332
-190.6% $
(5,888)
Other expense, net during fiscal 2023 consists primarily of a loss on the Company’s NQ deferred compensation investments
(for which the offsetting credit was recorded in the General and Administration expense line item).
Other expense, net during fiscal 2022 consists of a $3.6 million loss on the Company’s NQDC deferred compensation
investments (for which the offsetting expense was recorded in the General and Administration expense line item), compared
to a $5.7 million gain in the prior year, (ii) a $0.7 million impairment of the Company’s investment in Alice’s Table, prior to
completion of the acquisition during Q3, and (iii) a $1.2 million impairment of certain of the Company’s cost method
investments.
Income Taxes
During Fiscal 2023, the Company recorded an income tax benefit of $2.1 million, and during the fiscal years 2022 and 2021,
the Company recorded income tax expense of $1.5 million and $30.5 million, respectively, resulting in an effective tax rate
of 4.4%, 4.8% and 20.4%, respectively. The Company’s effective tax rate for fiscal 2023 differed from the U.S. federal
statutory rate of 21.0% primarily due to the impact of the non-deductible portion of the Company’s impairment charge, as
well as state income taxes and non-deductible expenses for executive compensation, tax shortfalls related to stock-based
compensation, partially offset by enhanced deductions and various tax credits. The Company’s effective tax rate for fiscal
2022 and fiscal 2021 differed from the U.S. federal statutory rate of 21.0% primarily due to excess tax benefits from stock-
based compensation and various tax credits, partially offset by state income taxes and nondeductible expenses for executive
compensation. Further impacting fiscal 2022, was a reduction in the Company’s valuation allowance, offset in part by the
expiration of capital loss carryforwards, as well as enhanced deductions.
At July 2, 2023, the Company’s federal enhanced deduction and carryforwards were $5.8 million and $3.7 million,
respectively, which if not utilized, will expire in 2027 and 2042, respectively. At July 2, 2023, the Company’s state and
foreign net operating loss carryforwards were $2.8 million and $1.3 million, respectively, which if not utilized, will begin to
expire in fiscal 2024 and fiscal 2034, respectively.
Liquidity and Capital Resources
Liquidity and borrowings
The Company’s principal sources of liquidity are cash on hand, cash flows generated from operations and borrowings
available under the Company’s credit agreement (see Note 9. in Part IV, Item 15 for details). At July 2, 2023, the Company
had working capital of $152.9 million, including cash and cash equivalents of $126.8 million, compared to working capital
of $82.5 million, including cash and cash equivalents of $31.5 million at July 3, 2022.
As of July 2, 2023, there were no borrowings outstanding under the Company’s Revolver.
Due to the seasonal nature of the Company’s business, and its continued expansion into non-floral products, the Thanksgiving
through Christmas holiday season, which falls within the Company’s second fiscal quarter, generates over 40% of the
Company’s annual revenues, and all of its earnings. Due to the number of major floral gifting occasions, including Mother’s
Day, Valentine’s Day, Easter and Administrative Professionals Week, revenues also have historically risen during the
Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.
35
During the first two quarters of fiscal 2023, the Company borrowed under its revolving credit agreement in order to fund pre-
holiday manufacturing and inventory procurement requirements, with borrowings peaking at $195.9 million in November
2022. Cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the
borrowings under the Revolver in December 2022.
On June 27, 2023, the Company, entered into a Third Amended and Restated Credit Agreement to, among other
modifications: (i) increase the amount of the outstanding term loan from approximately $150 million to $200 million, (ii)
decrease the amount of the commitments in respect of the revolving credit facility from $250 million to $225 million, (iii)
extend the maturity date of the outstanding term loan and the revolving credit facilities by approximately 48 months to June
27, 2028, and (iv) increase the applicable interest rate margins for SOFR and base rate loans by 25 basis points (See Note 9
– Long-Term Debt in Item 15 for details).
Based on our year-end cash balances, including the incremental term loan referenced above, combined with projected cash
flows, the Company expects to borrow against its Revolver to fund pre-holiday manufacturing and inventory purchases during
the first quarter of fiscal 2024. The Company expects to be able to repay all working capital borrowings prior to the end of
the second quarter of fiscal 2024.
While we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at least the
next twelve months, any projections of future cash needs and cash flows are subject to substantial uncertainty. We continually
evaluate, and will, from time to time, consider the acquisition of, or investment in, complementary businesses, products,
services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to require
additional financing.
Cash Flows
Net cash provided by operating activities of $115.4 million for fiscal 2023 was primarily attributable to the Company’s net
loss, adjusted by non-cash charges for goodwill and intangible asset impairment, depreciation and amortization, bad debt
expense and stock-based compensation, net of deferred income taxes, combined with net working capital generated from
decreases in inventories, and prepaid expenses, net of reductions in accounts payable and accrued expenses.
Net cash used in investing activities of $50.8 million was attributable to capital expenditures primarily related to the
Company's technology and automation initiatives, and the acquisition of Things Remembered noted above.
Net cash provided by financing activities of $30.8 million was primarily attributable to the term loan proceeds of $50.0
million associated with the Company’s Third Amended and Restated Credit Agreement, net of debt issuance costs and
repayments of bank borrowings under the Company’s previous credit facility.
Stock Repurchase Program
See Item 5 in Part II for details.
Contractual Obligations
At July 2, 2023, the Company’s contractual obligations consist of:
● Long-term debt obligations – payments due under the Company’s Credit Agreement (See Note 9 – Long-Term Debt in
Item 15 for details).
● Operating lease obligations – payments due under the Company’s long-term operating leases (See Note 16 – Leases in
Item 15 for details).
● Purchase commitments – consisting primarily of inventory and IT- related equipment purchase orders and license
agreements made in the ordinary course of business – see below for the contractual payments due by period.
Fiscal
2024
Fiscal
2025
Payments due by period
(in thousands)
Fiscal
2027
Fiscal
2028
Fiscal
2026
Purchase commitments ..................... $ 136,377 $
9,885 $
2,496 $
168 $
36
Thereafter Total
- $
- $ 148,926
Critical Accounting Estimates
The Company’s discussion and analysis of its financial position and results of operations are based upon the consolidated
financial statements of 1-800-FLOWERS.COM, Inc., which have been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these financial statements requires management to make estimates and assumptions
that affect the reported amount of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and
liabilities. Management evaluates its estimates on an ongoing basis and bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. We consider accounting estimates to be critical if both: (i)
the nature of the estimate or assumption is material due to the levels of subjectivity and judgment involved, and (ii) the impact
within a reasonable range of outcomes of the estimate and assumption is material to the Company’s financial condition. Our
critical accounting policies relate to goodwill, other intangible assets and income taxes. Management of the Company has
discussed the selection of critical accounting policies and the effect of estimates with the audit committee of the Company’s
board of directors.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in each business
combination, with the carrying value of the Company’s goodwill allocated to its reporting units, in accordance with the
acquisition method of accounting. Goodwill is not amortized, but it is subject to an annual assessment for impairment, which
the Company performs during the fourth quarter, or more frequently if events occur or circumstances change such that it is
more likely than not that an impairment may exist. The Company tests goodwill for impairment at the reporting unit level.
The Company identifies its reporting units by assessing whether the components of its operating segments constitute
businesses for which discrete financial information is available and management of each reporting unit regularly reviews the
operating results of those components.
In applying the goodwill impairment test, the Company has the option to perform a qualitative test (also known as “Step 0”)
or a quantitative test (“Step 1”). Under the Step 0 test, the Company first assesses qualitative factors to determine whether it
is more likely than not that the fair value of the reporting units is less than its carrying value. Qualitative factors may include,
but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance
of the reporting unit and other entity and reporting unit specific events. If after assessing these qualitative factors, the
Company determines it is “more-likely-than-not” that the fair value of the reporting unit is less than the carrying value, then
performing the Step 1 quantitative test is necessary.
Step 1 of the quantitative test requires comparison of the fair value of each of the reporting units to the respective carrying
value. If the carrying value of the reporting unit is less than the fair value, no impairment exists. Otherwise, the Company
would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value
up to the amount of goodwill allocated to that reporting unit.
The Company generally estimates the fair value of a reporting unit using an equal weighting of the income and market
approaches. The Company uses industry accepted valuation models and set criteria that are reviewed and approved by various
levels of management. Under the income approach, the Company uses a discounted cash flow methodology which requires
management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating
income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the
market approach, the Company uses the guideline public company method. Under this method, the Company utilizes
information from comparable publicly traded companies with similar operating and investment characteristics as the reporting
units, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order
to obtain their respective fair values. The Company also reconciles the aggregate fair values of its reporting units determined
in the first step (as described above) to its current market capitalization, allowing for a reasonable control premium.
During fiscal year 2021, the Company performed a Step 0 analysis and determined that it was not “more likely than not” that
the fair values of its reporting units were less than their carrying values. During fiscal year 2022, as a result of changes within
the macroeconomic environment, geopolitical pressures and the Company’s financial performance and market capitalization,
the Company performed a Step 1 analysis, which indicated that the fair values of the Consumer Floral & Gifts and Gourmet
Foods & Gift Baskets reporting units exceeded their respective carrying amounts.
During its quarterly assessment in the third quarter of fiscal year 2023, the Company concluded that a triggering event had
occurred for its Gourmet Foods & Gift Baskets reporting unit. As such, the Company performed a Step 1 analysis of the
reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023, and fully impaired the related goodwill, and
37
partially impaired certain tradenames within the reporting unit. The Company concluded that the definite-lived and other
long-lived assets of the reporting unit were not impaired.
As of its annual impairment testing date during the quarter ended July 2, 2023, only the Consumer Floral & Gifts reporting
unit carried goodwill, since the BloomNet unit carries no goodwill, and the goodwill of the Gourmet Foods & Gift Baskets
segment was written off during the quarter ended April 2, 2023. As such, during the quarter ended July 2, 2023, the Company
completed a step 0 analysis of its Consumer Floral & Gift reporting unit, as well as its indefinite lived intangibles, and
concluded that there was no impairment. See Note 6 – Goodwill and Intangible Assets, in Part IV, Item 15, for further
information.
Other Intangibles, net
Other intangibles consist of definite-lived intangible assets (such as investment in licenses, customer lists, and others) and
indefinite-lived intangible assets (such as acquired trade names and trademarks). The cost of definite-lived intangible assets
is amortized to reflect the pattern of economic benefits consumed, over the estimated periods benefited, ranging from 3 to 16
years, while indefinite-lived intangible assets are not amortized.
Definite-lived intangibles are reviewed for impairment whenever changes in circumstances or events may indicate that the
carrying amounts are not recoverable. When such events or changes in circumstances occur, a recoverability test is performed
comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying
value. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be recorded
for the excess of the carrying value over the fair value, which is determined by discounting future cash flows.
The Company tests indefinite-lived intangible assets for impairment at least annually, during the fourth quarter, or whenever
changes in circumstances or events may indicate that the carrying amounts are not recoverable. In applying the impairment
test, the Company has the option to perform a qualitative test (also known as “Step 0”) or a quantitative test. Under the Step
0 test, the Company assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived
intangible asset is impaired. Qualitative factors may include, but are not limited to economic conditions, industry and market
considerations, cost factors, financial performance, legal and other entity and asset specific events. If, after assessing these
qualitative factors, the Company determines it is “more-likely-than-not” that the indefinite-lived intangible asset is impaired,
then performing the quantitative test is necessary. The quantitative impairment test for indefinite-lived intangible assets
encompasses calculating a fair value of an indefinite-lived intangible asset and comparing the fair value to its carrying value.
If the carrying value exceeds the fair value, impairment is recognized for the difference. To determine fair value of other
indefinite-lived intangible assets, the Company uses an income approach, the relief-from-royalty method. This method
assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the
comparable asset. Other indefinite-lived intangible assets’ fair values require significant judgments in determining both the
assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair
value.
During fiscal year 2021, the Company performed a Step 0 analysis and determined that it was not “more likely than not” that
the fair value of its reporting units were less than their carrying amounts. During fiscal year 2022, the Company performed a
quantitative test, which determined that the estimated fair value of the Company's intangibles exceeded their respective
carrying value in all material respects.
As noted in the Goodwill section above, during the third quarter of fiscal year 2023, the Company concluded that a triggering
event had occurred within its Gourmet Foods & Gift Baskets reporting unit and, as such, performed an impairment test of the
indefinite lived intangibles, which resulted in a partial impairment of certain tradenames within the reporting unit.
During the fourth quarter of fiscal year 2023, the Company performed a Step 0 analysis and determined that it was not “more
likely than not” that the fair values of its indefinite-lived intangibles were less than their carrying amounts.
See Note 6 – Goodwill and Intangible Assets, in Part IV, Item 15, for further information.
Income Taxes
The Company uses the asset and liability method to account for income taxes. The Company has established deferred tax
assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of its assets
and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. The Company
recognizes as a deferred tax asset, the tax benefits associated with losses related to operations. Realization of these deferred
tax assets assumes that we will be able to generate sufficient future taxable income so that these assets will be realized. The
38
factors that the Company considers in assessing the likelihood of realization include the forecast of future taxable income and
available tax planning strategies that could be implemented to realize the deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits
recognized in the financial statements on a particular tax position are measured based on the largest benefit that has a greater
than a 50% likelihood of being realized upon settlement. The amount of unrecognized tax benefits (“UTBs”) is adjusted as
appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or
interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination.
We recognize both accrued interest and penalties, where appropriate, related to UTBs in income tax expense. Assumptions,
judgment, and the use of estimates are required in determining if the “more likely than not” standard has been met when
developing the provision for income taxes. For further discussion, see Note 11, in Part IV, Item 15.
Recently Issued Accounting Pronouncements
See Note 2. in Part IV, Item 15 for details regarding the impact of accounting standards that were recently issued on our
consolidated financial statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from the effect of interest rate changes and changes in the market values of its
investments.
Interest Rate Risk
The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment of
available cash balances and its long-term debt. The Company generally invests its cash and cash equivalents in investment
grade corporate and U.S. government securities. Borrowings under the Company’s credit facility bear interest at a variable
rate, plus an applicable margin, and therefore expose the Company to market risk for changes in interest rates. The effect of
a 50 basis point increase in current interest rates on the Company’s interest expense would have been approximately $1.1
million during the fiscal year ended July 2, 2023.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Annual Financial Statements: See Part IV, Item 15 of this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-
15(e) of the Securities Exchange Act of 1934, as of July 2, 2023. Based on that evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer have each concluded that the Company’s disclosure controls and procedures were
effective as of July 2, 2023.
Changes in Internal Control Over Financial Reporting
Other than execution of the material weakness remediation activities described below, there has been no change in our internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the three
39
months ended July 2, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Remediation of Previously Disclosed Material Weakness
We previously identified and disclosed in our 2022 Annual Report, as well as in our Quarterly Reports on Form 10-Q filed
for the quarters ended October 2, 2022, January 1, 2023 and April 2, 2023, a material weakness in our internal control over
financial reporting related to logical access and segregation of duties, at the application control level, in certain information
technology environments.
As of July 2, 2023, management has completed the implementation of our remediation efforts of the material weakness noted
above. Our remediation efforts included redesign and restriction of the logical access, segregating responsibilities and
increasing the frequency of user access reviews, and adding change control review functions, in addition to enhancing
our internal documentation and monitoring to ensure that all procedures designed to restrict access to applications and data
are operating in an optimal manner.
Management began to implement these remediation steps during the first quarter of fiscal 2023. In accordance with our
internal control compliance program, a material weakness is not considered remediated until the remediation processes have
been operational for a sufficient period of time and successfully tested. In light of this material weakness, management
performed additional procedures over our affected IT environment and personnel to determine if any unauthorized action had
been taken and found no such instances.
Limitations on Effectiveness of Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as
specified above. Our management recognizes that any control system, no matter how well designed and operated, is based
upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed
by, or under the supervision of, the Company’s principal executive and principal financial officers and effectuated by the
Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”), and includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made in accordance with
authorization of management and directors of the Company; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, including the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of
the Company’s internal control over financial reporting based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based
on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of
July 2, 2023.
The Company’s independent registered public accounting firm, BDO USA, P.C., audited the effectiveness of the Company’s
internal control over financial reporting as of July 2, 2023. BDO USA, P.C.’s report on the effectiveness of the Company’s
internal control over financial reporting as of July 2, 2023 is set forth below.
40
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
1-800-FLOWERS.COM, Inc.
Jericho, NY
Opinion on Internal Control over Financial Reporting
We have audited 1-800-FLOWERS.COM, Inc. (the “Company’s”) internal control over financial reporting as of July 2, 2023,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of July 2, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of July 2, 2023 and July 3, 2022, the related consolidated
statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years
in the period ended July 2, 2023, and the related notes and schedules and our report dated September 15, 2023 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A,
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, P.C.
Melville, New York
September 15, 2023
41
Item 9B. OTHER INFORMATION
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 of Part III with respect to directors, executive officers, audit committee and audit
committee financial experts of the Company and Section 16(a) beneficial ownership reporting compliance will be included
in our Proxy Statement relating to our 2023 annual meeting of stockholders and is incorporated herein by reference.
The Company maintains a Code of Business Conduct and Ethics, which is applicable to all directors, officers and employees
on the Investor Relations-Corporate Governance tab of the Company’s investor relations website (investor.1800flowers.com),
which is also accessible through a link at the bottom of the main Company page at www.1800flowers.com. Any amendment
or waiver to the Code of Business Conduct and Ethics that applies to our directors or executive officers will be posted on our
website or in a report filed with the SEC on Form 8-K to the extent required by applicable law or the regulations of any
exchange applicable to the Company. A copy of the Code of Business Conduct and Ethics is available without charge upon
written request to: Investor Relations, 1-800-FLOWERS.COM, Inc., Two Jericho Plaza, Suite 200, Jericho, New York 11753.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Part III will be included in our Proxy Statement relating to our 2023 annual meeting
of stockholders and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by Item 12 of Part III will be included in our Proxy Statement relating to our 2023 annual meeting
of stockholders and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 of Part III will be included in our Proxy Statement relating to our 2023 annual meeting
of stockholders and is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 of Part III will be included in our Proxy Statement relating to our 2023 annual meeting
of stockholders and is incorporated herein by reference.
42
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Index to Consolidated Financial Statements:
PART IV
Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; Melville, NY; PCAOB ID#243) .......... F-1
Consolidated Balance Sheets as of July 2, 2023 and July 3, 2022 .................................................................................. F-2
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended July 2, 2023, July 3,
2022 and June 27, 2021 ................................................................................................................................................... F-3
Consolidated Statements of Stockholders’ Equity for the years ended July 2, 2023, July 3, 2022 and June 27, 2021 ... F-4
Consolidated Statements of Cash Flows for the years ended July 2, 2023, July 3, 2022 and June 27, 2021 .................. F-5
Notes to Consolidated Financial Statements ................................................................................................................... F-6
Page
(a) (2) Index to Financial Statement Schedule:
Schedule II- Valuation and Qualifying Accounts ............................................................................................................ F-30
All other information and financial statement schedules are omitted because they are not applicable, or required, or
because the required information is included in the consolidated financial statements or notes thereto.
(a) (3) Index to Exhibits
Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the SEC,
as indicated by the reference in brackets. All other exhibits are filed herewith. Exhibits 10.1, 10.2, 10.3, 10.4. 10.5, 10.6, 10.7,
10.8, 10.9, 10.10, 10.11, 10.14 and 10.15 are management contracts or compensatory plans or arrangements.
Exhibit Description
*2.1
*3.1
*3.2
*3.3
*3.4
*4.1
*4.2
*10.1
*10.2
*10.3
Equity Purchase Agreement dated as of February 14, 2020, by an among 1-800-Flowers.com, Inc., 800-Flowers,
Inc. PersonalizationMall.com, LLC, and Bed Bath & Beyond Inc. (Current Report on Form 8-K filed on February
18, 2020, Exhibit 2.1)
Third Amended and Restated Certificate of Incorporation. (Quarterly Report on Form 10-Q filed on February 10,
2017, Exhibit 3.1)
Amendment No. 1 to Third Amended and Restated Certificate of Incorporation. (Registration Statement on Form
S-1/A (No. 333-78985) filed on July 22, 1999, Exhibit 3.2)
Amendment No. 2 to Third Amended and Restated Certificate of Incorporation. (Current Report on Form 8-K filed
on December 15, 2016, Exhibit 3.1)
Second Amended and Restated By-laws. (Current Report on Form 8-K filed on April 29, 2019, Exhibit 3.2)
Specimen Class A common stock certificate. (Registration Statement on Form S-1/A (No. 333-78985 filed on July
9, 1999, Exhibit 4.1)
Description of Securities. (Annual Report on Form 10-K filed on September 13, 2019, Exhibit 4.2)
Employment Agreement made October 4, 2016, effective as of July 4, 2016, between 1-800-Flowers.com, Inc. and
James F. McCann (Current report on form 8-K filed on October 6, 2016, Exhibit 10.1)
Employment Agreement made October 4, 2016, effective as of July 4, 2016, between 1-800-Flowers.com, Inc. and
Christopher G. McCann (Current report on form 8-K filed on October 6, 2016, Exhibit 10.2)
Section 16 Executive Officer’s Bonus Plan (as amended and restated as of September 14, 2016) (Quarterly Report
on Form 10-Q filed on February 10, 2017, Exhibit 10.2)
*10.4 Nonqualified Supplemental Deferred Compensation Plan dated December 21, 2010 (Quarterly Report on Form 10-
*10.5
*10.6
*10.7
*10.8
*10.9
Q filed on November 14, 2016, Exhibit 10.24)
2003 Long Term Incentive and Share Award Plan (as amended and restated as of October 15, 2020) (Proxy
Statement on Form 14(a) filed on December 9, 2020, Annex A).
Form of Restricted Share Agreement under 2003 Long Term Incentive and Share Award Plan. (Annual Report on
Form 10-K for the fiscal year ended June 29, 2008 filed on September 12, 2008, Exhibit 10.15)
Form of Incentive Stock Option Agreement under 2003 Long Term Incentive and Share Award Plan. (Annual
Report on Form 10-K for the fiscal year ended June 29, 2008 filed on September 12, 2008, Exhibit 10.16)
Form of Non-statutory Stock Option Agreement under 2003 Long Term Incentive and Share Award Plan. (Annual
Report on Form 10-K for the fiscal year ended June 29, 2008 filed on September 12, 2008, Exhibit 10.17)
Form of Restricted Share Agreement under 2003 Long Term Incentive and Share Award Plan (Quarterly Report on
Form 10-Q filed on February 10, 2012, Exhibit 10.20)
43
*10.10 Form of Performance Restricted Share Agreement under 2003 Long Term Incentive and Share Award Plan
(Quarterly Report on Form 10-Q filed on February 10, 2012, Exhibit 10.21)
*10.11 Form of Non-Statutory Stock Option Agreement under 2003 Long Term Incentive and Share Award Plan (Quarterly
Report on Form 10-Q filed on February 10, 2012, Exhibit 10.22)
*10.12 Amendment to Equity Purchase Agreement dated July 20, 2020 (Current Report on Form 8-K filed on July 22,
2020, Exhibit 10.1)
*10.13 Third Amended and Restated Credit Agreement, dated as of June 27, 2023, among 1-800-FLOWERS.COM, INC.,
the subsidiary borrowers party thereto, the subsidiary guarantors party thereto, the lenders party thereto, and
JPMorgan Chase Bank, N.A., as Administrative Agent (Current Report on Form 8-K filed on June 28, 2023, Exhibit
10.1)
10.14
James F. McCann Consent Letter, dated June 29, 2023
10.15 Christopher G. McCann Resignation Letter, dated June 29, 2023
21.1
23.1
31.1
31.2
32.1
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Document
101.PRE Inline XBRL Taxonomy Definition Presentation Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Item 16. FORM 10-K SUMMARY
Not applicable.
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 15, 2023
1-800-FLOWERS.COM, Inc.
By: /s/ James F. McCann
James F. McCann
Executive Chairman, Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated below:
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
Dated: September 15, 2023
By: /s/ James F. McCann
James F. McCann
Executive Chairman, Chief Executive Officer
(Principal Executive Officer)
By: /s/ William E. Shea
William E. Shea
Senior Vice President, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
By: /s/ Christopher G. McCann
Christopher G. McCann
Director
By: /s/ Celia R. Brown
Celia R. Brown
Director
By: /s/ James A. Cannavino
James A. Cannavino
Director
By: /s/ Dina M. Colombo
Dina Colombo
Director
By: /s/ Eugene F. DeMark
Eugene F. DeMark
Director
By: /s/ Leonard J. Elmore
Leonard J. Elmore
Director
By: /s/ Adam Hanft
Adam Hanft
Director
By: /s/ Stephanie Redish Hofmann
Stephanie Redish Hofmann
Director
By: /s/ Katherine Oliver
Katherine Oliver
Director
By: /s/ Larry Zarin
Larry Zarin
Director
45
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
1-800-FLOWERS.COM, Inc.
Jericho, NY
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of 1-800-FLOWERS.COM, Inc. (the “Company”) as of July 2, 2023 and July 3, 2022, the
related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period
ended July 2, 2023, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at July 2, 2023 and July 3, 2022, and the results of its
operations and its cash flows for each of the three years in the period ended July 2, 2023, in conformity with accounting principles generally accepted in the
United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's
internal control over financial reporting as of July 2, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated September 15, 2023 expressed an unqualified opinion
thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Goodwill related to the Gourmet Foods & Gift Baskets Reporting Unit
As described in Note 2 and Note 6 to the consolidated financial statements, the Company’s consolidated goodwill balance was $153.4 million as of July 2,
2023. The Company performs its annual assessment of goodwill impairment during its fiscal fourth quarter, or more frequently if events occur or
circumstances change such that it is more likely than not that an impairment may exist. Based on the quantitative impairment assessment performed for the
period ended April 2, 2023, the Company recorded a goodwill impairment charge against its Gourmet Foods & Gift Baskets reporting unit of $62.2 million.
Under the quantitative approach, the Company used certain estimates and assumptions to determine the estimated fair value of the reporting unit based on
an equal weighting of the income approach, specifically, the discounted cash flow method, and the market approach, specifically, the guideline public
company method.
We identified the forecasted revenues, gross profit margins and operating income margins included in the valuation of goodwill for the Gourmet Foods &
Gift Baskets reporting unit as a critical audit matter. The principal considerations for our determination included the subjectivity and judgment required to
determine forecasted revenues, gross profit margins and operating income margins. Auditing these elements involved especially challenging auditor
judgment due to the nature and extent of audit effort required to address these matters.
The primary procedures we performed to address this critical audit matter included:
•
•
Evaluating the reasonableness of forecasted revenue, gross profit margins and operating income margins by: (i) comparing to industry trends,
(ii) assessing the reasonableness of management’s forecasted profitability, and (iii) comparing the actual results for the historical years to the
forecasted revenues, gross profit margins and operating income margins that management used for its assessment.
Testing the accuracy and completeness of the data used by management to develop its forecasted revenues, gross profit margins and operating
income margins.
We have served as the Company’s auditor since 2014.
/s/ BDO USA, P.C.
Melville, NY
September 15, 2023
F-1
1-800-FLOWERS.COM, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
July 2, 2023 July 3, 2022
Assets
Current assets:
Cash and cash equivalents ........................................................................................... $
Trade receivables, net ..................................................................................................
Inventories ...................................................................................................................
Prepaid and other .........................................................................................................
Total current assets ...................................................................................................
Property, plant and equipment, net ..................................................................................
Operating lease right-of-use assets ..................................................................................
Goodwill ..........................................................................................................................
Other intangibles, net ......................................................................................................
Other assets .....................................................................................................................
Total assets ..................................................................................................................... $
126,807 $
20,419
191,334
34,583
373,143
234,569
124,715
153,376
139,888
25,739
1,051,430 $
31,465
23,812
247,563
45,398
348,238
236,481
129,390
213,287
145,568
21,927
1,094,891
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ......................................................................................................... $
Accrued expenses ........................................................................................................
Current maturities of long-term debt ...........................................................................
Current portion of long-term operating lease liabilities ...............................................
Total current liabilities .............................................................................................
Long-term debt, net .........................................................................................................
Long-term operating lease liabilities ...............................................................................
Deferred tax liabilities, net ..............................................................................................
Other liabilities ................................................................................................................
Total liabilities ...............................................................................................................
52,588 $
141,914
10,000
15,759
220,261
186,391
117,330
31,134
24,471
579,587
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued ...................
Class A common stock, $.01 par value, 200,000,000 shares authorized, 58,273,747
-
and 57,706,389 shares issued in 2023 and 2022, respectively .....................................
583
Class B common stock, $.01 par value, 200,000,000 shares authorized, 32,348,221
and 32,529,614 shares issued in 2023 and 2022, respectively .....................................
Additional paid-in capital ................................................................................................
Retained earnings ............................................................................................................
Accumulated other comprehensive loss ..........................................................................
Treasury stock, at cost, 20,565,875 and 20,418,396 Class A shares in 2023 and 2022,
323
388,215
271,083
(170)
57,386
175,392
20,000
12,919
265,697
142,497
123,662
35,742
17,884
585,482
-
577
325
379,885
315,785
(211 )
respectively, and 5,280,000 Class B shares in 2023 and 2022 .....................................
Total stockholders’ equity ............................................................................................
Total liabilities and stockholders’ equity..................................................................... $
(188,191)
471,843
1,051,430 $
(186,952 )
509,409
1,094,891
See accompanying Notes to Consolidated Financial Statements.
F-2
1-800-FLOWERS.COM, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
Years ended
July 2, 2023 July 3, 2022 June 27, 2021
533,268
54,428
117,136
42,510
-
747,342
149,087
5,860
(5,888)
149,115
30,463
118,652
(75)
118,577
1.83
1.78
2,017,853 $
1,260,327
757,526
2,207,885 $
1,386,147
821,738
2,122,245
1,225,816
896,429
Net revenues ....................................................................................... $
Cost of revenues .................................................................................
Gross profit .........................................................................................
Operating expenses:
Marketing and sales ........................................................................
Technology and development .........................................................
General and administrative .............................................................
Depreciation and amortization ........................................................
Goodwill and intangible impairment ..............................................
Total operating expenses .............................................................
Operating income (loss) .....................................................................
Interest expense, net ...........................................................................
Other expense (income), net ...............................................................
Income (loss) before income taxes .....................................................
Income tax (benefit) expense..............................................................
Net income (loss) ...............................................................................
Other comprehensive income (loss) (currency translation) ................
Comprehensive income (loss) ............................................................ $
500,840
60,691
112,747
53,673
64,586
792,537
(35,011)
10,946
805
(46,762)
(2,060)
(44,702)
41
(44,661) $
571,661
56,561
102,337
49,078
-
779,637
42,101
5,667
5,332
31,102
1,492
29,610
107
29,717 $
Basic net income (loss) per common share ........................................ $
(0.69) $
0.46 $
Diluted net income (loss) per common share ..................................... $
(0.69) $
0.45 $
Weighted average shares used in the calculation of net income
(loss) per common share:
Basic ...................................................................................................
Diluted ................................................................................................
64,688
64,688
64,977
65,617
64,739
66,546
See accompanying Notes to Consolidated Financial Statements.
F-3
1-800-FLOWERS.COM, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years ended July 2, 2023, July 3, 2022 and June 27, 2021
(in thousands, except share data)
Common Stock
Class A
Class B
Additional Retained
Paid-in
Amount Capital
Earnings Comprehensive
(Deficit)
Loss
Treasury Stock
Shares
Amount
Total
Stockholders’
Equity
Accumulated
Other
Shares
Amount
Shares
Balance at
June 28, 2020 ... 53,704,477 $
537 33,822,823 $
338 $ 358,031 $ 167,523 $
(243 ) 23,243,551 $ (126,412 ) $
399,774
Net income ..........
Translation
adjustment .........
Stock-based
-
-
-
-
- 118,652
-
-
-
118,652
-
-
-
-
-
-
(75 )
-
-
(75 )
compensation ....
688,675
7
-
-
10,828
-
Exercise of stock
options ...............
893,300
9
-
-
2,244
-
-
-
-
-
10,835
-
-
2,253
Conversion of
Class B stock
into Class A
stock ..................
Acquisition of
Class A treasury
stock ..................
Balance at
389,209
4
(389,209 )
(4 )
-
-
-
-
-
-
-
-
-
-
-
-
-
862,290
(22,369 )
(22,369 )
June 27, 2021 ... 55,675,661 $
557 33,433,614 $
334 $ 371,103 $ 286,175 $
(318 ) 24,105,841 $ (148,781 ) $
509,070
Net income ..........
Translation
adjustment .........
Stock-based
-
-
-
-
- 29,610
-
-
-
29,610
-
-
-
-
-
-
107
-
-
107
compensation ....
805,028
8
-
-
7,939
-
Exercise of stock
options ...............
321,700
3
-
-
843
-
-
-
-
-
7,947
-
-
846
Conversion of
Class B stock
into Class A
stock ..................
Acquisition of
Class A treasury
stock ..................
Balance at
904,000
9
(904,000 )
(9 )
-
-
-
-
-
-
-
-
-
-
-
-
- 1,592,555
(38,171 )
(38,171 )
July 3, 2022 ...... 57,706,389 $
577 32,529,614 $
325 $ 379,885 $ 315,785 $
(211 ) 25,698,396 $ (186,952 ) $
509,409
Net loss ................
Translation
adjustment .........
Stock-based
-
-
-
-
- (44,702 )
-
-
-
(44,702 )
-
-
-
-
-
-
41
-
-
41
compensation ....
385,965
4
-
-
8,330
-
-
-
-
8,334
Conversion of
Class B stock
into Class A
stock ..................
Acquisition of
Class A treasury
stock ..................
Balance at
181,393
2
(181,393 )
(2 )
-
-
-
-
-
-
-
-
-
-
-
-
-
147,479
(1,239 )
(1,239 )
July 2, 2023 ...... 58,273,747 $
583 32,348,221 $
323 $ 388,215 $ 271,083 $
(170 ) 25,845,875 $ (188,191 ) $
471,843
See accompanying Notes to Consolidated Financial Statements.
F-4
1-800-FLOWERS.COM, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Years ended
July 2, 2023 July 3, 2022 June 27, 2021
(44,702) $
29,610 $
118,652
Operating activities:
Net income (loss) ............................................................................... $
Reconciliation of net income (loss) to net cash provided by
operating activities net of acquisitions:
Goodwill and intangible asset impairment .........................................
Depreciation and amortization ...........................................................
Amortization of deferred financing costs ...........................................
Deferred income taxes ........................................................................
Bad debt expense (recoveries) ............................................................
Stock-based compensation .................................................................
Other non-cash items ..........................................................................
Changes in operating items:
Trade receivables ............................................................................
Inventories ......................................................................................
Prepaid and other ............................................................................
Accounts payable and accrued expenses ........................................
Other assets and other liabilities .....................................................
Net cash provided by operating activities .......................................
Investing activities:
Acquisitions, net of cash acquired ......................................................
Capital expenditures, net of non-cash expenditures ...........................
Purchase of equity investments ..........................................................
Net cash used in investing activities ................................................
64,586
53,673
1,834
(4,608)
3,991
8,334
95
(597)
57,591
12,554
(38,623)
1,223
115,351
(6,151)
(44,646)
(32)
(50,829)
-
49,078
1,269
1,579
(411 )
7,947
3,194
(2,452 )
(85,047 )
6,731
(6,595 )
286
5,189
(21,280 )
(66,408 )
(2,000 )
(89,688 )
Financing activities:
Acquisition of treasury stock ..............................................................
Proceeds from exercise of employee stock options ............................
Proceeds from bank borrowings .........................................................
Repayment of notes payable and bank borrowings ............................
Debt issuance costs .............................................................................
Net cash provided by (used in) financing activities .......................
(1,239)
-
395,900
(360,900)
(2,941)
30,820
(38,171 )
846
125,000
(145,000 )
(284 )
(57,609 )
Net change in cash and cash equivalents ........................................
Cash and cash equivalents:
Beginning of year ...............................................................................
End of year ........................................................................................ $
95,342
(142,108 )
(66,933)
31,465
126,807 $
173,573
31,465 $
240,506
173,573
Supplemental Cash Flow Information:
-
-
Interest paid amounted to $12.8 million, $4.6 million, and $5.2 million for the years ended July 2, 2023, July 3,
2022, and June 27, 2021, respectively.
The Company received tax refunds of approximately $8.8 million, net of tax payments, for the year ended July 2,
2023, and paid income taxes of approximately $1.4 million, and $37.2 million, net of tax refunds received, for the
years ended July 3, 2022, and June 27, 2021, respectively.
- Acquisition of treasury stock includes treasury stock acquired to cover required employee withholding, upon
vesting of restricted stock awards.
See accompanying Notes to Consolidated Financial Statements.
F-5
-
42,510
1,143
5,530
964
10,835
645
(5,236)
(39,104)
(22,850)
57,397
2,804
173,290
(250,942)
(55,219)
(1,756)
(307,917)
(22,369)
2,253
265,000
(174,997)
(2,193)
67,694
1-800-FLOWERS.COM, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Description of Business
1-800-FLOWERS.COM, Inc. is a leading provider of gifts designed to help inspire customers to give more, connect more,
and build more and better relationships. The Company’s e-commerce business platform features our all-star family of brands,
including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, PersonalizationMall.com®,
Shari’s Berries®, FruitBouquets.com®, Things Remembered®, Moose Munch®, The Popcorn Factory®, Wolferman’s
Bakery®, Vital Choice® and Simply Chocolate®. Through the Celebrations Passport® loyalty program, which provides
members with free standard shipping and no service charge across our portfolio of brands, 1-800-FLOWERS.COM, Inc.
strives to deepen relationships with customers. The Company also operates BloomNet®, an international floral and gift
industry service provider offering a broad-range of products and services designed to help its members grow their businesses
profitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of gift baskets and
towers; and Alice’s Table®, a lifestyle business offering fully digital floral, culinary and other experiences to guests across
the country.
Note 2. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of 1-800-FLOWERS.COM, Inc. and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in consolidation. The Company’s net revenues from
international sources were not material during fiscal years 2023, 2022 and 2021.
Fiscal Year
The Company’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to June 30. Fiscal years 2023 and 2021,
which ended on July 2, 2023 and June 27, 2021, respectively, each consisted of 52 weeks. Fiscal year 2022, which ended on
July 3, 2022, consisted of 53 weeks.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits with banks, highly liquid money market funds, United States
government securities, overnight repurchase agreements and commercial paper with maturities of three months or less when
purchased.
Inventories
Inventories are valued at the lower of cost or net realizable value using the first-in, first-out method of accounting.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is
computed using the straight-line method over the assets’ estimated useful lives. Amortization of leasehold improvements and
capital leases is computed using the straight-line method over the shorter of the estimated useful lives and the initial lease
terms. The Company capitalizes certain internal and external costs incurred to acquire or develop internal-use software.
Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the software. Orchards in
production, consisting of direct labor and materials, supervision and other items, are capitalized as part of capital projects in
progress – orchards until the orchards produce fruit in commercial quantities, at which time they are reclassified to orchards
in production. Estimated useful lives are periodically reviewed, and where appropriate, changes are made prospectively.
F-6
The Company’s property, plant and equipment are depreciated using the following estimated lives:
Building and building improvements (years) ............................................................................................................ 10 - 40
Leasehold improvements (years) ............................................................................................................................... 3 - 10
Furniture, fixtures and production equipment (years) ............................................................................................... 3 - 20
Software (years) ........................................................................................................................................................ 3 - 7
Orchards in production and land improvements (years) ............................................................................................ 15 - 45
Property, plant and equipment are reviewed for impairment whenever changes in circumstances or events may indicate that
the carrying amounts are not recoverable.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in each business
combination, with the carrying value of the Company’s goodwill allocated to its reporting units, in accordance with the
acquisition method of accounting. Goodwill is not amortized, but it is subject to an annual assessment for impairment, which
the Company performs during the fourth quarter, or more frequently if events occur or circumstances change such that it is
more likely than not that an impairment may exist. The Company tests goodwill for impairment at the reporting unit level.
The Company identifies its reporting units by assessing whether the components of its operating segments constitute
businesses for which discrete financial information is available and management of each reporting unit regularly reviews the
operating results of those components.
In applying the goodwill impairment test, the Company has the option to perform a qualitative test (also known as “Step 0”)
or a quantitative test (“Step 1”). Under the Step 0 test, the Company first assesses qualitative factors to determine whether it
is more likely than not that the fair value of the reporting units is less than its carrying value. Qualitative factors may include,
but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance
of the reporting unit and other entity and reporting unit specific events. If after assessing these qualitative factors, the
Company determines it is “more-likely-than-not” that the fair value of the reporting unit is less than the carrying value, then
performing the Step 1 quantitative test is necessary.
Step 1 of the quantitative test requires comparison of the fair value of each of the reporting units to the respective carrying
value. If the carrying value of the reporting unit is less than the fair value, no impairment exists. Otherwise, the Company
would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value
up to the amount of goodwill allocated to that reporting unit.
The Company generally estimates the fair value of a reporting unit using an equal weighting of the income and market
approaches. The Company uses industry accepted valuation models and set criteria that are reviewed and approved by various
levels of management. Under the income approach, the Company uses a discounted cash flow methodology which requires
management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating
income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the
market approach, the Company uses the guideline public company method. Under this method, the Company utilizes
information from comparable publicly traded companies with similar operating and investment characteristics as the reporting
units, to create valuation multiples that are applied to the operating performance of the reporting unit being tested, in order
to obtain their respective fair values. The Company also reconciles the aggregate fair values of its reporting units determined
in the first step (as described above) to its current market capitalization, allowing for a reasonable control premium.
During Fiscal 2021, the Company performed a Step 0 analysis and determined that it was not “more likely than not” that the
fair values of its reporting units were less than their carrying values. During Fiscal 2022, as a result of changes within the
macroeconomic environment, geopolitical pressures and the Company’s financial performance and market capitalization, the
Company performed a Step 1 analysis, which indicated that the fair values of the Consumer Floral & Gifts and Gourmet
Foods & Gift Baskets reporting units exceeded their respective carrying amounts.
F-7
During its quarterly assessment in the third quarter of Fiscal 2023, the Company concluded that a triggering event had
occurred for its Gourmet Foods & Gift Baskets reporting unit. As such, the Company performed a Step 1 analysis of the
reporting unit’s goodwill, intangibles and long-lived assets as of April 2, 2023, and fully impaired the related goodwill, and
partially impaired certain tradenames within the reporting unit. The Company concluded that the definite-lived and other
long-lived assets of the reporting unit were not impaired.
As of its annual impairment testing date during the quarter ended July 2, 2023, only the Consumer Floral & Gifts reporting
unit carried goodwill, since the BloomNet unit carries no goodwill, and the goodwill of the Gourmet Foods & Gift Baskets
segment was written off during the quarter ended April 2, 2023. As such, during the quarter ended July 2, 2023, the Company
completed a step 0 analysis of its Consumer Floral & Gift reporting unit, as well as its indefinite lived intangibles, and
concluded that there was no impairment. See Note 6 – Goodwill and Intangible Assets for further information.
Other Intangibles, net
Other intangibles consist of definite-lived intangible assets (such as investment in licenses, customer lists, and others) and
indefinite-lived intangible assets (such as acquired trade names and trademarks). The cost of definite-lived intangible assets
is amortized to reflect the pattern of economic benefits consumed, over the estimated periods benefited, ranging from 3 to 16
years, while indefinite-lived intangible assets are not amortized.
Definite-lived intangibles are reviewed for impairment whenever changes in circumstances or events may indicate that the
carrying amounts are not recoverable. When such events or changes in circumstances occur, a recoverability test is performed
comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying
value. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be recorded
for the excess of the carrying value over the fair value, which is determined by discounting future cash flows.
The Company tests indefinite-lived intangible assets for impairment at least annually, during the fourth quarter, or whenever
changes in circumstances or events may indicate that the carrying amounts are not recoverable. In applying the impairment
test, the Company has the option to perform a qualitative test (also known as “Step 0”) or a quantitative test. Under the Step
0 test, the Company assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived
intangible asset is impaired. Qualitative factors may include, but are not limited to economic conditions, industry and market
considerations, cost factors, financial performance, legal and other entity and asset specific events. If, after assessing these
qualitative factors, the Company determines it is “more-likely-than-not” that the indefinite-lived intangible asset is impaired,
then performing the quantitative test is necessary. The quantitative impairment test for indefinite-lived intangible assets
encompasses calculating a fair value of an indefinite-lived intangible asset and comparing the fair value to its carrying value.
If the carrying value exceeds the fair value, impairment is recognized for the difference. To determine fair value of other
indefinite-lived intangible assets, the Company uses an income approach, the relief-from-royalty method. This method
assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the
comparable asset. Other indefinite-lived intangible assets’ fair values require significant judgments in determining both the
assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair
value.
During Fiscal 2021, the Company performed a Step 0 analysis and determined that it was not “more likely than not” that the
fair value of its reporting units were less than their carrying amounts. During Fiscal 2022, the Company performed a
quantitative test, which determined that the estimated fair value of the Company's intangibles exceeded their respective
carrying value in all material respects.
As noted in the Goodwill section above, during the third quarter of Fiscal 2023, the Company concluded that a triggering
event had occurred within its Gourmet Foods & Gift Baskets reporting unit and, as such, performed an impairment test of the
indefinite lived intangibles, which resulted in a partial impairment of certain tradenames within the reporting unit.
During the fourth quarter of Fiscal 2023, the Company performed a Step 0 analysis and determined that it was not “more
likely than not” that the fair values of its indefinite-lived intangibles were less than their carrying amounts.
See Note 6 – Goodwill and Intangible Assets for further information.
F-8
Business Combinations
The Company accounts for business combinations in accordance with ASC Topic 805, which requires, among other things,
the acquiring entity in a business combination to recognize the fair value of all the assets acquired and liabilities assumed;
the recognition of acquisition-related costs in the consolidated results of operations; the recognition of restructuring costs in
the consolidated results of operations for which the acquirer becomes obligated after the acquisition date; and contingent
purchase consideration to be recognized at their fair values on the acquisition date with subsequent adjustments recognized
in the consolidated results of operations. The fair values assigned to identifiable intangible assets acquired are determined
primarily by using an income approach, which is based on assumptions and estimates made by management. Significant
assumptions utilized in the income approach are based on company specific information and projections which are not
observable in the market and are therefore considered Level 3 measurements. The excess of the purchase price over the fair
value of the identified assets and liabilities is recorded as goodwill. Operating results of the acquired entity are reflected in
the Company’s consolidated financial statements from date of acquisition.
Deferred Catalog Costs
The Company capitalizes the costs of producing and distributing its catalogs and expenses them upon mailing. Included
within prepaid and other current assets were $2.4 million and $3.1 million at July 2, 2023 and July 3, 2022, respectively,
relating to prepaid catalog expenses.
Investments
Equity investments without a readily determinable fair value
Investments in non-marketable equity instruments of private companies, where the Company does not possess the ability to
exercise significant influence, are accounted for at cost, less impairment (assessed qualitatively at each reporting period),
adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. These
investments are included within “Other assets” in the Company’s consolidated balance sheets. The aggregate carrying amount
of the Company’s cost method investments was $2.6 million as of July 2, 2023 and $3.5 million as of July 3, 2022.
Equity investments with a readily determinable fair value
The Company also holds certain trading securities associated with its Non-Qualified Deferred Compensation Plan (“NQDC
Plan”). These investments are measured using quoted market prices at the reporting date and are included within the “Other
assets” line item in the consolidated balance sheets (see Note 10 - Fair Value Measurements).
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of
cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with high quality
financial institutions. Concentration of credit risk with respect to accounts receivable is limited due to the Company's large
number of customers and their dispersion throughout the United States, and the fact that a substantial portion of receivables
are related to balances owed by major credit card companies. Allowances relating to consumer, corporate and franchise
accounts receivable ($5.8 million at July 2, 2023 and $2.4 million at July 3, 2022) have been recorded based upon previous
experience and management’s evaluation.
Revenue Recognition
Net revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates
for credits and returns (calculated based upon previous experience and management’s evaluation). Service and outbound
shipping charged to customers are recognized at the time the related merchandise revenues are recognized and are included
in net revenues. Inbound and outbound shipping and delivery costs are included in cost of revenues. Net revenues exclude
sales and other similar taxes collected from customers.
F-9
A description of our principal revenue generating activities is as follows:
-
E-commerce revenues - consumer products sold through our online and telephonic channels. Revenue is recognized
when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is
typically due prior to the date of shipment.
- Retail revenues - consumer products sold through our retail stores. Revenue is recognized when control of the goods
is transferred to the customer at the point of sale, at which time payment is received.
- Wholesale revenues - products sold to our wholesale customers for subsequent resale. Revenue is recognized when
control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement.
Payment terms are typically 30 days from the date control over the product is transferred to the customer.
- BloomNet services - membership fees as well as other service offerings to florists. Membership and other
subscription-based fees are recognized monthly as earned. Services revenues related to orders sent through the floral
network are variable, based on either the number of orders or the value of orders, and are recognized in the period
in which the orders are delivered. The contracts within BloomNet services are typically month-to-month and as a
result no consideration allocation is necessary across multiple reporting periods. Payment is typically due less than
30 days from the date the services were performed.
Deferred Revenues
Deferred revenues are recorded when the Company has received consideration (i.e., advance payment) before satisfying its
performance obligations. As such, customer orders are recorded as deferred revenue prior to shipment or rendering of product
or services. Deferred revenues primarily relate to e-commerce orders placed, but not shipped, prior to the end of the fiscal
period, as well as for subscription programs, including our various food, wine, and plant-of-the-month clubs and our
Celebrations Passport® program.
Our total deferred revenue as of July 3, 2022 was $33.7 million (included in “Accrued expenses” on our consolidated balance
sheets), of which, $33.1 million was recognized as revenue during the year ended July 2, 2023. The deferred revenue balance
as of July 2, 2023 was $30.8 million.
Cost of Revenues
Cost of revenues consists primarily of florist fulfillment costs (fees paid directly to florists), the cost of floral and non-floral
merchandise sold from inventory or through third parties, and associated costs, including inbound and outbound shipping
charges. Additionally, cost of revenues includes labor and facility costs related to manufacturing and production operations.
Marketing and Sales
Marketing and sales expense consists primarily of advertising expenses, catalog costs, online portal and search expenses,
retail store and fulfillment operations (other than costs included in cost of revenues), and customer service center expenses,
as well as the operating expenses of the Company’s departments engaged in marketing, selling and merchandising activities.
The Company expenses all advertising costs, with the exception of catalog costs (see Deferred Catalog Costs above), at the
time the advertisement is first shown. Advertising expense was $291.9 million, $347.7 million and $307.9 million for the
years ended July 2, 2023, July 3, 2022, and June 27, 2021, respectively.
Technology and Development
Technology and development expense consists primarily of payroll and operating expenses of the Company’s information
technology group, costs associated with its websites, including hosting, content development and maintenance and support
costs related to the Company’s order entry, customer service, fulfillment and database systems. Costs associated with the
acquisition or development of software for internal use are capitalized if the software is expected to have a useful life beyond
one year and amortized over the software’s useful life, typically three to seven years. Costs associated with repair
maintenance, or the development of website content are expensed as incurred, as the useful lives of such software
modifications are less than one year.
F-10
Stock-Based Compensation
The Company records compensation expense associated with restricted stock awards and other forms of equity compensation
based upon the fair value of stock-based awards as measured at the grant date. The cost associated with share-based awards
that are subject solely to time-based vesting requirements is recognized over the awards’ service period for the entire award
on a straight-line basis. The cost associated with performance-based equity awards is recognized for each tranche over the
service period, based on an assessment of the likelihood that the applicable performance goals will be achieved.
Derivatives and Hedging
The Company does not enter into derivative transactions for trading purposes, but rather, on occasion, to manage its exposure
to interest rate fluctuations. When entering into these transactions, the Company has periodically managed its floating rate
debt using interest rate swaps in order to reduce its exposure to the impact of changing interest rates on its consolidated results
of operations and future cash outflows for interest. The Company did not have any open derivative positions at July 2, 2023
and July 3, 2022.
Income Taxes
The Company uses the asset and liability method to account for income taxes. The Company has established deferred tax
assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of its assets
and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. The Company
recognizes as a deferred tax asset, the tax benefits associated with losses related to operations. Realization of these deferred
tax assets assumes that we will be able to generate sufficient future taxable income so that these assets will be realized. The
factors that the Company considers in assessing the likelihood of realization include the forecast of future taxable income and
available tax planning strategies that could be implemented to realize the deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits
recognized in the financial statements on a particular tax position are measured based on the largest benefit that has a greater
than 50% likelihood of being realized upon settlement. The amount of unrecognized tax benefits (“UTBs”) is adjusted as
appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or
interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination.
We recognize both accrued interest and penalties, where appropriate, related to UTBs in income tax expense. Assumptions,
judgment and the use of estimates are required in determining if the “more likely than not” standard has been met when
developing the provision for income taxes.
Net Income (Loss) Per Share
Basic net income (loss) per common share is computed by dividing the net income during the period by the weighted average
number of common shares outstanding during the period. Diluted net income per common share is computed by dividing the
net income during the period by the sum of the weighted-average number of common shares outstanding during the period
and the potential dilutive common shares (consisting of employee stock options and unvested restricted stock awards). Diluted
net loss per common share is computed using the weighted-average number of common shares outstanding during the period
and excludes the dilutive potential common shares (consisting of unvested restricted stock awards), as their inclusion would
be antidilutive. As a result of the net loss for the year ended July 2, 2023, there is no dilutive impact to the net loss per share
calculation.
Recently Issued Accounting Pronouncements - Adopted
Financial Instruments – Measurement of Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, “Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 introduces
a new forward-looking “expected loss” approach, to estimate credit losses on most financial assets and certain other
instruments, including trade receivables. The estimate of expected credit losses requires entities to incorporate considerations
of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure
requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for
estimating expected credit losses. We adopted ASU 2016-13 for the Company’s Fiscal 2021 (quarter ending September 27,
2020), using the modified-retrospective approach. There was no material impact of adopting this guidance on our consolidated
financial statements.
F-11
Goodwill – Impairment Test. In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other
(Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step two from the goodwill impairment test.
Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a
reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. We adopted this guidance
for the Company’s Fiscal 2021 (quarter ending September 27, 2020), on a prospective basis. There was no material impact
of adopting this guidance on our consolidated financial statements.
Note 3 – Net Income (Loss) Per Common Share
The following table sets forth the computation of basic and diluted net income (loss):
Years Ended
July 2, 2023 July 3, 2022 June 27, 2021
(in thousands, except per share data)
Numerator:
Net income (loss) ............................................................................... $
(44,702) $
29,610 $
118,652
Denominator:
Weighted average shares outstanding ................................................
64,688
64,977
64,739
Effect of dilutive securities:
Employee stock options......................................................................
Employee restricted stock awards ......................................................
Total effect of dilutive securities ....................................................
-
-
-
45
595
640
727
1,080
1,807
Adjusted weighted-average shares and assumed conversions ............
64,688
65,617
66,546
Net income (loss) per common share:
Basic ................................................................................................... $
Diluted ................................................................................................ $
(0.69) $
(0.69) $
0.46 $
0.45 $
1.83
1.78
Note 4. Acquisitions
Acquisition of PersonalizationMall
On February 14, 2020, 1-800-Flowers.com, Inc., 800-Flowers, Inc., a wholly-owned subsidiary of 1-800-Flowers.com, Inc.
(the “Purchaser”), PersonalizationMall.com, LLC ("PersonalizationMall"), and Bed Bath & Beyond Inc. (“Seller”), entered
into an Equity Purchase Agreement (the “Purchase Agreement”) pursuant to which Seller agreed to sell to the Purchaser, and
the Purchaser agreed to purchase from Seller, all of the issued and outstanding membership interests of PersonalizationMall
for $252.0 million in cash (subject to certain working capital and other adjustments). On July 20, 2020, Purchaser,
PersonalizationMall, and Seller entered into an amendment (the “Amendment”) to the Purchase Agreement to, among other
things, amend the purchase price to $245.0 million (subject to certain working capital and other adjustments). On August 3,
2020, the Company completed its acquisition of PersonalizationMall, including its newly renovated, leased 360,000 square
foot, state-of-the-art production and distribution facility, as well as customer database, tradenames and website. After working
capital and related adjustments, total consideration paid was approximately $250.9 million.
The total purchase price was allocated to the identifiable assets acquired and liabilities assumed based on our preliminary
estimates of their fair values on the acquisition date. The fair values assigned to PersonalizationMall’s tangible and intangible
assets and liabilities assumed were considered preliminary and were based on the information that was available as of the
date of the acquisition. As of June 27, 2021, the Company had finalized its allocation and this resulted in immaterial
adjustments to the carrying value of the respective recorded assets and the determination of the residual amount that was
allocated to goodwill.
F-12
The following table summarizes the allocation of the purchase price to the estimated fair values of assets acquired and
liabilities assumed:
PersonalizationMall’s
Preliminary
Purchase Price
Allocation
August 3, 2020
Measurement
Period
Adjustments
(1)
(in thousands)
PersonalizationMall’s
Final Purchase Price
Allocation
June 27, 2021
Assets Acquired:
Inventories ..................................................................... $
Other assets ....................................................................
Property, plant and equipment, net ................................
Operating lease right-of-use assets ................................
Goodwill ........................................................................
Other intangibles, net .....................................................
Total assets acquired ......................................................... $
Liabilities assumed:
Accounts payable and accrued expenses ....................... $
Operating lease liabilities ...............................................
Total liabilities assumed .................................................... $
16,998 $
5,216
30,792
21,438
133,337
76,000
283,781 $
11,400 $
21,438
32,838 $
- $
(1)
-
-
102
-
101 $
102 $
-
102 $
16,998
5,215
30,792
21,438
133,439
76,000
283,882
11,502
21,438
32,940
Net assets acquired ............................................................ $
250,943 $
(1) $
250,942
(1) The measurement period adjustments did not have a significant impact on the Company’s condensed consolidated
statements of operations for the year ended June 27, 2021.
The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated
lives of depreciable tangible and identifiable intangible assets) requires significant judgment. The estimates and assumptions
include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash
flows.
Acquired inventory, consisting of raw materials and supplies, was valued at book value, as there have not been any significant
price fluctuations or other events that would materially change the cost to replace the raw materials.
Property, plant and equipment was valued at book value (cost less accumulated depreciation and amortization), due to the
nature of
improvements
for PersonalizationMall's production facility, which became operational in September 2019.
included recently acquired production equipment and
the assets, which
leasehold
Based on the valuation as of August 3, 2020, of the acquired intangible assets, $11.0 million was assigned to customer lists
(4 year life), $65.0 million was assigned to tradenames (indefinite life), and the residual amount of $133.4 million was
allocated to goodwill (indefinite life and deductible for tax purposes). The goodwill recognized in conjunction with the
Purchaser’s acquisition of PersonalizationMall is primarily related to synergistic value created in terms of both operating
costs and revenue growth opportunities, enhanced financial and operational scale, and other strategic benefits. It also includes
certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.
The estimated fair value of the acquired trade names was determined using the relief from royalty method, which is a risk-
adjusted discounted cash flow approach. The relief from royalty method values an intangible asset by estimating the royalties
saved through ownership of the asset. The relief from royalty method requires identifying the future revenue that would be
generated by the trademark, multiplying it by a royalty rate deemed to be avoided through ownership of the asset and
discounting the projected royalty savings amounts back to the acquisition date. The royalty rate used in the valuation was
based on a consideration of market rates for similar categories of assets. The discount rate used in the valuation was based on
PersonalizationMall's weighted average cost of capital, the riskiness of the earnings stream associated with the trademarks
and the overall composition of the acquired assets.
F-13
The estimated fair value of the acquired customer lists was determined using the excess earnings method under the income
approach. This method requires identifying the future revenue that would be generated by existing customers at the time of
the acquisition, considering an appropriate attrition rate based on the historical experience of the Company. Appropriate
expenses are then deducted from the revenues and economic rents are charged for the return on contributory assets. The after-
tax cash flows attributable to the asset are discounted back to their net present value at an appropriate intangible asset rate of
return and summed to calculate the value of the customer lists.
As required by ASC 805, “Business Combinations,” the following unaudited pro forma financial information for the year
ended June 27, 2021, give effect to the PersonalizationMall acquisition as if it had been completed on July 1, 2019. The
unaudited pro forma financial information is prepared by management for informational purposes only in accordance with
ASC 805 and is not necessarily indicative of or intended to represent the results that would have been achieved had the
acquisition been consummated as of the dates presented, and should not be taken as representative of future consolidated
results of operations. The unaudited pro forma financial information does not reflect any operating efficiencies and/or cost
savings that the Company may achieve with respect to the combined companies. The pro forma information has been adjusted
to give effect to nonrecurring items that are directly attributable to the acquisition.
Net Revenues................................................................................................................................................. $
Net Income ....................................................................................................................................................
Year ended
June 27, 2021
(in thousands)
2,138,238
125,213
The unaudited pro forma amounts above include the following adjustments:
- A decrease of operating expenses by $5.4 million during the year ended June 27, 2021, to eliminate transaction and
litigation costs directly related to the transaction that do not have a continuing impact on operating results.
- An increase of operating expenses by $0.2 million during the year ended June 27, 2021, to reflect the additional
amortization expense related to the increase in definite lived intangible assets.
- An increase in interest expense of $0.6 million during the year ended June 27, 2021, which is comprised of
incremental interest and amortization of deferred financing costs associated with the 2020 Term Loan (as defined
below). The interest rate used for the purposes of these pro forma statements, of 3.5%, was the rate in effect at loan
inception.
- The combined pro forma results were tax effected using the Company's effective tax rate for the respective period.
Net revenue attributable to PersonalizationMall, included within the year ended June 27, 2021, was $236.0 million, and
corresponding operating income during the period, excluding litigation and transaction costs, was $34.7 million.
Acquisition of Vital Choice
On October 27, 2021, the Company completed its acquisition of all of the membership interests in Vital Choice Seafood LLC
(“Vital Choice”), a provider of wild-caught seafood and sustainably farmed shellfish, pastured proteins, organic foods, and
marine-sourced nutritional supplements. The Company utilized its existing credit facility to fund the $20.0 million purchase
(subject to certain working capital and other adjustments), which included tradenames, customer lists, websites and
operations. Vital Choice revenues were approximately $27.8 million during its most recent year ended December 31, 2020.
After working capital and related adjustments, total consideration was approximately $20.0 million, and was preliminarily
allocated to the identifiable assets acquired and liabilities assumed based on our preliminary estimates of their fair values, as
a result of information that was available as of the date of acquisition. During the quarter ended January 1, 2023, the Company
finalized its purchase price allocation, resulting in immaterial adjustments to the preliminary carrying value of the respective
recorded assets and the residual amount that was allocated to goodwill.
F-14
The following table summarizes the allocation of the purchase price to the fair values of assets acquired and liabilities
assumed:
Vital Choice
Preliminary
Purchase Price
Allocation
October 27,
2021
Measurement
Period
Interim
Adjustments
(in thousands)
- $
(474 )
(205 )
(600 )
634
(645 )
8,653 $
929
205
9,800
4,383
23,970
Vital Choice
Purchase Price
Allocation
January 1,
2023
8,653
455
-
9,200
5,017
23,325
3,365
19,960
Inventory ............................................................................................ $
Other current assets ............................................................................
Property, plant and equipment ............................................................
Intangible assets .................................................................................
Goodwill .............................................................................................
Total assets acquired ..........................................................................
Current liabilities ................................................................................
Net assets acquired ............................................................................. $
3,621
20,349 $
(256 )
(389 ) $
The estimated fair value of the acquired work in process and finished goods inventory was determined utilizing the income
approach. The income approach estimates the fair value of the inventory based on the net retail value of the inventory, less
operating expenses and a reasonable profit allowance. Raw materials inventory was valued at book value, as there have not
been any significant price fluctuations or other events that would materially change the cost to replace the raw materials.
Of the acquired intangible assets, $4.3 million was assigned to customer lists, which is being amortized over the estimated
remaining life of 5 years, $4.9 million was assigned to tradenames (indefinite life), and $5.0 million was assigned to goodwill
(indefinite life), which is expected to be deductible for tax purposes. The goodwill recognized is primarily related to
synergistic value created in terms of both operating costs and revenue growth opportunities, enhanced financial and
operational scale, and other strategic benefits.
The estimated fair value of the acquired tradenames was determined using the relief from royalty method, which is a risk-
adjusted discounted cash flow approach. The relief from royalty method values an intangible asset by estimating the royalties
saved through ownership of the asset. The relief from royalty method requires identifying the future revenue that would be
generated by the trademark, multiplying it by a royalty rate deemed to be avoided through ownership of the asset and
discounting the projected royalty savings amounts back to the acquisition date. The royalty rate used in the valuation was
based on a consideration of market rates for similar categories of assets. The discount rate used in the valuation was based on
the Company’s weighted average cost of capital, the riskiness of the earnings stream associated with the trademarks and the
overall composition of the acquired assets.
The estimated fair value of the acquired customer lists was determined using the excess earnings method under the income
approach. This method requires identifying the future revenue that would be generated by existing customers at the time of
the acquisition, considering an appropriate attrition rate based on the historical experience of the Company. Appropriate
expenses are then deducted from the revenues and economic rents are charged for the return on contributory assets. The after-
tax cash flows attributable to the asset are discounted back to their net present value at an appropriate intangible asset rate of
return and summed to calculate the value of the customer lists.
Operating results of the Vital Choice business are reflected in the Company’s consolidated financial statements from the date
of acquisition within the Gourmet Foods & Gift Baskets segment. Pro forma results of operations have not been presented,
as the impact on the Company’s consolidated financial results was not material.
F-15
Acquisition of Alice’s Table
On December 31, 2021, the Company completed its acquisition of Alice’s Table, Inc. (“Alice’s Table”), a lifestyle business
offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country. The
Company utilized existing cash of $0.8 million, contributed accounts receivable due from Alice’s Table of $0.3 million, and
converted its cost method investment in Alice’s Table of $0.3 million, in order to acquire 100% ownership in Alice’s Table,
which included tradenames, customer lists, websites and operations. Immediately prior to completing the acquisition, the
Company wrote down its previous cost method investment in Alice’s Table to its $0.3 million fair value, on the date of the
acquisition, resulting in an impairment of $0.7 million, which is recorded in the “Other expense (income), net” line item on
the Statement of Operations for the fiscal year ended July 3, 2022. Alice’s Table revenues were approximately $3.8 million
during its most recent fiscal year ended September 30, 2021.
The resulting total consideration of $1.3 million was preliminarily allocated to the identifiable assets acquired and liabilities
assumed based on our preliminary estimates of their fair values, as a result of information that was available as of the date of
acquisition. During the quarter ended January 1, 2023, the Company finalized its purchase price allocation, resulting in
immaterial adjustments to the preliminary carrying value of the respective recorded assets and the residual amount that was
allocated to goodwill. The consideration transferred was allocated to: goodwill of $0.8 million, trademarks of $0.5 million
(indefinite life), customer lists of $0.2 million (4-year life), and liabilities of $0.2 million.
Operating results of the Alice’s Table business are reflected in the Company’s consolidated financial statements from the
date of acquisition within the Consumer Floral & Gifts segment. Pro forma results of operations have not been presented, as
the impact on the Company’s consolidated financial results was not material.
Acquisition of Things Remembered
On January 10, 2023, the Company completed its acquisition of certain assets of the Things Remembered brand, a provider
of personalized gifts, whose operations will be integrated within the PersonalizationMall.com brand, in the Consumer Floral
& Gifts segment. The Company used cash on hand to fund the $5.0 million purchase, which included the intellectual property,
customer list, certain inventory, and equipment. The acquisition did not include Things Remembered retail stores. Things
Remembered’s annual revenues from its ecommerce operations, based on its most recently available unaudited financial
information was $30.4 million for the twelve months ended November 30, 2022.
The total consideration of $5.0 million was preliminarily allocated to the identifiable assets acquired and liabilities assumed
based on our preliminary estimates of their fair values on the acquisition date, including: goodwill of $1.7 million (deductible
for income tax purposes), trademarks of $0.8 million (indefinite life), customer lists of $0.8 million (3-year life), inventory
of $1.3 million, and equipment of $0.4 million. The Company is in the process of finalizing its allocation and this may result
in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain
additional intangible assets, revisions of useful lives of intangible assets, and the determination of any residual amount that
will be allocated to goodwill.
Operating results of the Things Remembered business are reflected in the Company’s consolidated financial statements from
the date of acquisition within the Consumer Floral & Gifts segment. Pro forma results of operations have not been presented,
as the impact on the Company’s consolidated financial results was not material.
Note 5. Inventory
The Company’s inventory, valued at the lower of cost or net realizable value, includes purchased and manufactured finished
goods for sale, packaging supplies, crops, raw material ingredients for manufactured products and associated manufacturing
labor and is classified as follows:
Finished goods................................................................................................................. $
Work-in-process ..............................................................................................................
Raw materials ..................................................................................................................
Total inventory ................................................................................................................ $
92,582 $
33,818
64,934
191,334 $
128,760
29,270
89,533
247,563
July 2, 2023 July 3, 2022
(in thousands)
F-16
Note 6. Goodwill and Intangible Assets
The following table presents goodwill by segment and the related change in the net carrying amount:
Consumer
Floral &
Gifts
BloomNet
Gourmet
Foods &
Gift
Baskets
(in thousands)
Total
Balance at June 27, 2021 .............................................................. $ 150,880 $
-
Acquisition of Vital Choice ..........................................................
Acquisition of Alice’s Table ........................................................
720
Balance at July 3, 2022................................................................. $ 151,600 $
-
Measurement period adjustment for Vital Choice Acquisition ....
112
Measurement period adjustment for Alice's Table Acquisition....
1,664
Acquisition of Things Remembered .............................................
Goodwill impairment ...................................................................
-
Balance at July 2, 2023................................................................. $ 153,376 $
- $
-
-
- $
-
-
-
-
- $
57,270 $
4,417
-
61,687 $
600
-
-
(62,287)
- $
208,150
4,417
720
213,287
600
112
1,664
(62,287)
153,376
The Company’s other intangible assets consist of the following:
July 2, 2023
July 3, 2022
Gross
Carrying
Amount
Accumulated
Amortization Net
Gross
Carrying
Amount
Accumulated
Amortization Net
(in thousands)
Amortization
Period (1)
(in years)
Intangible assets with
determinable lives
Investment in licenses .......... 14 - 16
3 - 10
Customer lists .......................
Other .....................................
5 - 14
Total intangible assets with
$
7,420 $
29,071
2,946
6,569 $
851 $
21,611 7,460
342
2,604
7,420 $
28,509
2,946
6,464 $
956
17,473 11,036
403
2,543
determinable lives .............
39,437
30,784 8,653
38,875
26,480 12,395
Trademarks with indefinite
lives ...................................
Total identifiable intangible
assets .................................
131,235
- 131,235 133,173
- 133,173
$ 170,672 $
30,784 $139,888 $ 172,048 $
26,480 $145,568
(1) The amortization of intangible assets for the years ended July 2, 2023, July 3, 2022 and June 27, 2021 was $4.2
million, $3.9 million and $3.3 million, respectively. Future estimated amortization expense is as follows: 2024 -
$4.5 million, 2025 - $1.9 million, 2026 - $1.3 million, 2027 - $0.5 million, 2028 - $0.2 million and thereafter - $0.3
million.
During the year ended July 3, 2022, the Company experienced a sustained decline in its share price and a resulting decrease
in its market capitalization, primarily due to the overall macroeconomic environment. Inflationary cost increases, which began
during the first half of the fiscal year, were exacerbated by geopolitical events, further pressuring the Company’s gross margin
and operating expenses. Due to this overall market decline and the Company’s operating performance, the Company
completed impairment assessments of the goodwill and intangible assets of its three reporting units. The quantitative
impairment tests as of July 3, 2022, did not indicate an impairment.
F-17
Although originally projected to be transitory, through the nine months ending April 2, 2023, the trend of adverse
macroeconomic conditions and geopolitical pressures continued, and there was a sustained decline in the Company’s market
capitalization. As the expected duration of these factors changed during the three months ended April 2, 2023, the Company
made downward projections to its business forecasts, and therefore determined a triggering event had occurred that required
an interim impairment assessment of the goodwill, intangibles and other long-lived assets of the Gourmet Foods & Gift
Baskets reporting unit as of April 2, 2023.
The Company performed its goodwill impairment test by comparing the fair value of its Gourmet Foods & Gift Baskets
reporting unit to its respective carrying value. The Company estimated the fair value of the Gourmet Foods & Gift Baskets
reporting unit using an equal weighting of the income and market approaches, and a discount rate of 13%. The Company
used industry accepted valuation models and set criteria that were reviewed and approved by various levels of management.
Under the income approach, the Company used a discounted cash flow methodology which required management to make
significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins,
working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, the
Company used the guideline public company method. Under this method, the Company utilized information from comparable
publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation
multiples that were applied to the operating performance of the reporting unit being tested, in order to obtain their respective
fair values. The Company also reconciled the aggregate fair values of its reporting units to its current market capitalization.
The Company’s impairment test for indefinite-lived intangible assets encompassed calculating a fair value of the indefinite-
lived intangible asset and comparing that result to its carrying value. To determine fair value of indefinite-lived intangible
assets, the Company used an income approach, the relief-from-royalty method. This method assumes that, in lieu of
ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Indefinite-
lived intangible assets’ fair values require significant judgments in determining both the assets’ estimated cash flows as well
as the appropriate discount and royalty rates applied to those cash flows to determine fair value.
The Company’s impairment test for definite-lived intangibles was performed through a recoverability test, comparing
projected undiscounted cash flows from the use and eventual disposition of the asset or asset group to its carrying value.
Based on the impairment assessment performed during the quarter ended April 2, 2023, the Company recorded a goodwill
and intangible impairment charge against its Gourmet Foods & Gift Baskets reporting unit of $64.6 million, comprised of
$62.3 million which was attributable to goodwill and $2.3 million which was attributable to certain tradenames within the
same reporting unit. The Company concluded that the definite-lived and other long-lived assets of the reporting unit were not
impaired.
Note 7. Property, Plant and Equipment
July 2, 2023 July 3, 2022
(in thousands)
Land................................................................................................................................. $
Orchards in production and land improvements ..............................................................
Building and building improvements ..............................................................................
Leasehold improvements .................................................................................................
Production equipment .....................................................................................................
Furniture and fixtures ......................................................................................................
Computer and telecommunication equipment .................................................................
Software ..........................................................................................................................
Capital projects in progress .............................................................................................
Property, plant and equipment, gross ..............................................................................
Accumulated depreciation and amortization ...................................................................
Property, plant and equipment, net .................................................................................. $
33,866 $
20,401
67,647
29,524
125,297
9,102
41,859
181,085
18,205
526,986
(292,417)
234,569 $
33,862
19,773
65,909
26,266
106,244
8,985
38,934
165,289
14,525
479,787
(243,306 )
236,481
Depreciation expense for the years ended July 2, 2023, July 3, 2022, and June 27, 2021 was $49.5 million, $45.2 million, and
$39.2 million, respectively.
F-18
Note 8. Accrued Expenses
Accrued expenses consisted of the following:
Payroll and employee benefits......................................................................................... $
Deferred revenue .............................................................................................................
Accrued marketing expenses ...........................................................................................
Accrued florist payout .....................................................................................................
Accrued purchases ...........................................................................................................
Other ................................................................................................................................
Accrued expenses ............................................................................................................ $
July 2, 2023 July 3, 2022
(in thousands)
33,927 $
30,811
13,679
13,437
18,351
31,709
141,914 $
37,617
33,746
19,506
18,938
32,141
33,444
175,392
Note 9. Long-Term Debt
The Company’s current and long-term debt consists of the following:
July 2, 2023 July 3, 2022
(in thousands)
Revolver (1) .................................................................................................................... $
Term Loan (1) .................................................................................................................
Deferred financing costs ..................................................................................................
Total debt ........................................................................................................................
Less: current maturities of long-term debt ......................................................................
Long-term debt ................................................................................................................ $
- $
200,000
(3,609)
196,391
10,000
186,391 $
-
165,000
(2,503 )
162,497
20,000
142,497
(1) On May 31, 2019, the Company and certain of its U.S. subsidiaries entered into a Second Amended and Restated Credit
Agreement (the “2019 Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, and a group of
lenders. The 2019 Credit Agreement amended and restated the Company’s existing amended and restated credit
agreement dated as of December 23, 2016 to, among other modifications: (i) increase the amount of the outstanding term
loan (“Term Loan”) from approximately $97 million to $100 million, (ii) extend the maturity date of the outstanding
Term Loan and the revolving credit facility (“Revolver”) by approximately 29 months to May 31, 2024, and (iii) decrease
the applicable interest rate margins for LIBOR and base rate loans by 25 basis points. The Term Loan was payable in 19
quarterly installments of principal and interest beginning on September 29, 2019, with escalating principal payments, at
the rate of 5.0% per annum for the first eight payments, and 10.0% per annum for the remaining 11 payments, with the
remaining balance of $62.5 million due upon maturity. The Revolver, in the aggregate amount of $200 million, subject
to seasonal reduction to an aggregate amount of $100 million for the period from January 1 through August 1, was able
to be used for working capital and general corporate purposes, subject to certain restrictions. For each borrowing under
the Existing Credit Agreement (as defined below), the Company was able to elect that such borrowing bear interest at
an annual rate equal to either: (1) a base rate plus an applicable margin varying based on the Company’s consolidated
leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus 0.5%, and (c)
a LIBOR rate plus 1%, or (2) an adjusted LIBOR rate plus an applicable margin varying based on the Company’s
consolidated leverage ratio.
On August 20, 2020, the Company, the Subsidiary Guarantors, JPMorgan Chase Bank, N.A. as administrative agent, and
a group of lenders entered into a First Amendment (the “First Amendment”) to the 2019 Credit Agreement. The First
Amendment amended the 2019 Credit Agreement to, among other modifications: (i) increase the aggregate principal
amount of the existing Revolver commitments from $200.0 million to $250.0 million, (ii) establish a new tranche of term
A-1 loans in an aggregate principal amount of $100.0 million (the “2020 Term Loan”), (iii) increase the working capital
sublimit with respect to the Revolver from $175.0 million to $200.0 million, and (iv) increase the seasonally-reduced
Revolver commitments from $100.0 million to $125.0 million for the period from January 1 through August 1 for each
fiscal year of the Company.
The 2020 Term Loan was payable in 15 quarterly installments of principal and interest beginning on September 27, 2020,
with escalating principal payments, at the rate of 5.0% per annum for the first four payments, and 10.0% per annum for
the remaining 11 payments, with the remaining balance of $67.5 million due upon maturity on May 31, 2024.
F-19
On November 8, 2021, the Company, certain of its U.S. subsidiaries, the lenders party thereto and JPMorgan Chase
Bank, N.A., as Administrative Agent, entered into a Second Amendment (the “Second Amendment”) to the 2019 Credit
Agreement. The Second Amendment amended the 2019 Credit Agreement to, among other modifications, decrease the
interest margins and LIBOR floor applicable to the 2020 Term Loan.
On August 29, 2022, the Company, certain of its U.S. subsidiaries, the lenders party thereto and JPMorgan Chase Bank,
N.A., as Administrative Agent, entered into a Third Amendment (the “Third Amendment”) to the 2019 Credit
Agreement. The Third Amendment amended the 2019 Credit Agreement (the 2019 Credit Agreement, as amended by
the First Amendment, the Second Amendment, and the Third Amendment, the “Existing Credit Agreement”) to modify
certain financial covenants.
On June 27, 2023, the Company, certain of its U.S. subsidiaries, the lenders party thereto and JPMorgan Chase Bank,
N.A., as Administrative Agent entered into a Third Amended and Restated Credit Agreement (the “Third Amended
Credit Agreement”) to, among other modifications: (i) increase the amount of the outstanding term loan from
approximately $150 million to $200 million, (ii) decrease the amount of the commitments in respect of the revolving
credit facility from $250 million to $225 million, (iii) extend the maturity date of the outstanding term loan and the
revolving credit facilities by approximately 48 months to June 27, 2028, and (iv) increase the applicable interest rate
margins for SOFR and base rate loans by 25 basis points.
For each borrowing under the Third Amended Credit Agreement, the Company may elect that such borrowing bear
interest at an annual rate equal to either: (1) a base rate plus an applicable margin varying based on the Company’s
consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus
0.5%, and (c) an adjusted SOFR rate plus an applicable margin varying based on the Company’s consolidated leverage
ratio. The adjusted SOFR rate includes a credit spread adjustment of 0.10% for all interest periods.
The Third Amended Credit Agreement requires that while any borrowings or commitments are outstanding the Company
comply with certain financial covenants and affirmative covenants as well as certain negative covenants that, subject to
certain exceptions, limit the Company’s ability to, among other things, incur additional indebtedness, make certain
investments and make certain restricted payments. The Company was in compliance with these covenants as of July 2,
2023. The Third Amended Credit Agreement is secured by substantially all of the assets of the Company.
Future principal term loan payments under the Third Amended Credit Agreement are as follows: $10.0 million – Fiscal
2024, $10.0 million – Fiscal 2025, $20.0 million – Fiscal 2026, $20.0 million – Fiscal 2027, and $140.0 million – Fiscal
2028.
Note 10. Fair Value Measurements
Cash and cash equivalents, trade and other receivables, prepaids, accounts payable and accrued expenses are reflected in the
consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments.
Although no trading market exists, the Company believes that the carrying amount of its debt approximates fair value due to
its variable nature (these are level 2 investments). The Company’s investments in non-marketable equity instruments of
private companies are carried at cost and are periodically assessed for other-than-temporary impairment, when an event or
circumstances indicate that an other-than-temporary decline in value may have occurred. The Company’s remaining financial
assets and liabilities are measured and recorded at fair value (see table below). The Company’s non-financial assets, such as
definite lived intangible assets and property, plant and equipment, are recorded at cost and are assessed for impairment when
an event or circumstance indicates that an other-than-temporary decline in value may have occurred. Goodwill and indefinite
lived intangibles are tested for impairment annually, or more frequently, if events occur or circumstances change such that it
is more likely than not that an impairment may exist, as required under the accounting standards.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most
advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date.
The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
The three levels of the fair value hierarchy under the guidance are described below:
Level 1
Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has
the ability to access.
F-20
Level 2
Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not
active, or other inputs that are observable or can be corroborated by observable data for substantially
the full term of the assets or liabilities.
Level 3
Valuations based on inputs that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
The following table presents by level, within the fair value hierarchy, financial assets and liabilities measured at fair value on
a recurring basis:
Carrying
Value
Fair Value Measurements
Assets (Liabilities)
Level 2
Level 3
Level 1
Assets (liabilities) as of July 2, 2023:
Trading securities held in a “rabbi trust” (1) ................................ $
$
22,617 $
22,617 $
22,617 $
22,617 $
(in thousands)
Assets (liabilities) as of July 3, 2022:
Trading securities held in a “rabbi trust” (1) ................................ $
$
17,760 $
17,760 $
17,760 $
17,760 $
- $
- $
- $
- $
-
-
-
-
(1) The Company has established a NQDC Plan for certain members of senior management. Deferred compensation
plan assets are invested in mutual funds held in a “rabbi trust,” which is restricted for payment to participants of the
NQDC Plan. Trading securities held in the “rabbi trust” are measured using quoted market prices at the reporting
date and are included in the “Other assets” line item, with the corresponding liability included in the “Other
liabilities” line item in the consolidated balance sheets.
Note 11. Income Taxes
Significant components of the income tax provision are as follows:
Years ended
July 2, 2023 July 3, 2022 June 27, 2021
(in thousands)
Current provision (benefit):
Federal ......................................................................................... $
State .............................................................................................
Current income tax expense (benefit) ..................................
Deferred provision (benefit):
Federal .........................................................................................
State .............................................................................................
Deferred income tax expense (benefit) ................................
976 $
1,572
2,548
(3,145)
(1,463)
(4,608)
(1,676 ) $
1,589
(87 )
2,679
(1,100 )
1,579
17,594
7,339
24,933
5,160
370
5,530
Income tax expense (benefit) ............................................................. $
(2,060) $
1,492 $
30,463
F-21
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate is as follows:
Years ended
July 2, 2023 July 3, 2022 June 27, 2021
Tax at U.S. statutory rates .................................................................
State income taxes, net of federal tax benefit ....................................
Capital loss expiration .......................................................................
Non-deductible impairment charge ...................................................
Valuation allowance change ..............................................................
Non-deductible compensation ...........................................................
Excess tax benefit/shortfalls from stock-based compensation ..........
Tax credits .........................................................................................
Enhanced deductions .........................................................................
Other, net ...........................................................................................
Effective tax rate ...............................................................................
21.0%
(0.2)
-
(16.8)
(0.2)
(2.1)
(1.7)
2.7
2.6
(0.9)
4.4%
21.0%
4.2
15.5
-
(19.8)
5.3
(16.1)
(3.9)
(2.1)
0.7
4.8%
21.0%
4.2
-
-
(0.3)
0.7
(4.1)
(0.9)
(0.2)
-
20.4%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the
Company's deferred income tax assets (liabilities) are as follows:
Years ended
July 2, 2023 July 3, 2022
(in thousands)
Deferred income tax assets:
Loss and carryforwards ............................................................................................ $
Accrued expenses and reserves ................................................................................
Inventory ..................................................................................................................
Stock-based compensation .......................................................................................
Deferred compensation ............................................................................................
Operating lease liability ...........................................................................................
Gross deferred income tax assets ....................................................................................
Less: Valuation allowance .......................................................................................
Deferred tax assets, net ....................................................................................................
Deferred income tax liabilities:
Other intangibles ......................................................................................................
Tax in excess of book depreciation ..........................................................................
Operating lease right-of-use asset ............................................................................
Deferred tax liabilities .....................................................................................................
Net deferred income tax liabilities .................................................................................. $
13,598 $
3,531
4,422
1,549
3,602
33,186
59,888
(3,182)
56,706
(14,916)
(41,826)
(31,098)
(87,840)
(31,134) $
7,590
7,550
5,897
1,330
3,723
33,847
59,937
(3,096 )
56,841
(21,764 )
(38,755 )
(32,064 )
(92,583 )
(35,742 )
A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets
will not be realized. At July 2, 2023, the Company has valuation allowances of approximately $3.2 million, primarily related
to certain state and foreign net operating losses. At July 2, 2023, the Company’s federal enhanced deduction and
carryforwards were $5.8 million and $3.7 million, respectively, which if not utilized, will expire in 2027 and 2042,
respectively. At July 2, 2023, the Company’s state and foreign net operating loss carryforwards were $2.8 million and $1.3
million, respectively, which if not utilized, will begin to expire in Fiscal 2024 and 2034, respectively.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign
countries. The Company’s last completed U.S. federal examination was for Fiscal 2018. Fiscal 2020, Fiscal 2021, and Fiscal
2022 remain subject to U.S. federal examination. Due to ongoing state examinations and nonconformity with the U.S. federal
statute of limitations for assessment, certain states remain open from Fiscal 2016. The Company's foreign income tax filings
from Fiscal 2017 forward are open for examination by its respective foreign tax authorities, mainly Canada and Brazil.
F-22
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of
income tax expense. At July 2, 2023, the Company has an unrecognized tax benefit, including accrued interest and penalties,
of approximately $1.7 million. The Company believes that $0.2 million of the unrecognized tax positions will be resolved
over the next twelve months.
Note 12. Capital Stock
Holders of Class A common stock generally have the same rights as the holders of Class B common stock, except that holders
of Class A common stock have one vote per share and holders of Class B common stock have 10 votes per share on all matters
submitted to the vote of stockholders. Holders of Class A common stock and Class B common stock generally vote together
as a single class on all matters presented to the stockholders for their vote or approval, except as may be required by Delaware
law. Class B common stock may be converted into Class A common stock at any time on a one-for-one share basis. Each
share of Class B common stock will automatically convert into one share of Class A common stock upon its transfer, with
limited exceptions. During Fiscal 2023, 2022 and 2021, 181,393, 904,000 and 389,209 shares of Class B common stock,
respectively, were converted into shares of Class A common stock.
The Company has a stock repurchase plan through which purchases can be made from time to time in the open market and
through privately negotiated transactions, subject to general market conditions. The repurchase program is financed utilizing
available cash. On April 22, 2021, the Company’s Board of Directors authorized an increase to its stock repurchase plan of
up to $40.0 million. On February 3, 2022, the Company’s Board of Directors authorized an additional increase to its stock
repurchase plan of up to $40.0 million. The Company repurchased a total of $1.2 million (147,479 shares), $38.2 million
(1,592,555 shares), and $22.4 million (862,290 shares) during the fiscal years ended July 2, 2023, July 3, 2022, and June 27,
2021, respectively, under this program. As of July 2, 2023, $32.0 million remains authorized under the plan.
The Company has stock options and restricted stock awards outstanding to participants under the 1-800-FLOWERS.COM
2003 Long Term Incentive and Share Award Plan (as amended and restated as of October 22, 2009, October 28, 2011,
September 14, 2016 and October 15, 2020, the “Plan”). The Plan is a broad-based, long-term incentive program that is
intended to provide incentives to attract, retain and motivate employees, consultants and directors in order to achieve the
Company’s long-term growth and profitability objectives. The Plan provides for the grant to eligible employees, consultants
and directors of stock options, share appreciation rights (“SARs”), restricted shares, restricted share units, performance shares,
performance units, dividend equivalents, and other share-based awards (collectively, “Awards”).
Note 13. Stock Based Compensation
The Plan is administered by the Compensation Committee or such other Board committee (or the entire Board) as may be
designated by the Board.
The amounts of stock-based compensation expense recognized within operating income (1) in the periods presented are as
follows:
Years Ended
July 2, 2023 July 3, 2022 June 27, 2021
(in thousands)
Stock options ...................................................................................... $
Restricted stock awards ......................................................................
Total ...................................................................................................
Deferred income tax benefit ...............................................................
Stock-based compensation expense, net ............................................. $
2,536 $
5,798
8,334
2,042
6,292 $
(41 ) $
7,988
7,947
1,943
6,004 $
36
10,799
10,835
2,673
8,162
(1) Stock-based compensation expense has not been allocated between business segments, but is reflected as part of
Corporate overhead. (See Note 15. for details).
F-23
Stock based compensation expense is recorded within the following line items of operating expenses:
July 2, 2023
Years Ended
July 3, 2022
(in thousands)
June 27, 2021
Marketing and sales ............................................................................ $
Technology and development ............................................................
General and administrative .................................................................
Total ................................................................................................... $
3,818 $
698
3,818
8,334 $
3,414 $
319
4,214
7,947 $
4,943
652
5,240
10,835
Stock Options
The weighted average fair value of stock options on the date of grant, and the assumptions used to estimate the fair value of
the stock options using the Black-Scholes option valuation model, were as follows:
July 2, 2023
Years ended
July 3, 2022
(1)
June 27, 2021
(1)
Weighted average fair value of options granted ................................. $
Expected volatility ..............................................................................
Expected life (in years) .......................................................................
Risk-free interest rate .........................................................................
Expected dividend yield .....................................................................
5.13
52%
7.5
4.3%
0/0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(1) No options were granted during the fiscal years ended July 3, 2022 and June 27, 2021.
The expected volatility of the option is determined using historical volatilities based on historical stock prices. The Company
estimated the expected life of options granted based upon the historical weighted average. The risk-free interest rate is
determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected
life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%.
The following table summarizes stock option activity during the year ended July 2, 2023:
Weighted
Average
Exercise
Price
Options
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in
thousands)
Outstanding beginning of period ..................................................
- $
Granted ......................................................................................... 2,346,416 $
Exercised ......................................................................................
- $
(60,808) $
Forfeited/Expired .........................................................................
Outstanding end of period ............................................................ 2,285,608 $
-
8.59
-
8.59
8.59
9.35 $
Exercisable at July 2, 2023 ...........................................................
- $
-
- $
-
-
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the
Company’s closing stock price on the last trading day of Fiscal 2023 and the exercise price, multiplied by the number of in-
the-money options) that would have been received by the option holders had all option holders exercised their options on
July 2, 2023. This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options
exercised during the years ended July 2, 2023, July 3, 2022, and June 27, 2021 were $0.0 million, $9.2 million, and $22.6
million, respectively.
F-24
The following table summarizes information about stock options outstanding at July 2, 2023:
Exercise Price
Options
Outstanding
Options Outstanding
Options Exercisable
Weighted-
Average
Remaining
Contractual
Life (years)
Weighted-
Average
Exercise
Price
Options
Exercisable
Weighted-
Average
Exercise
Price
$
8.59
2,285,608
2,285,608
9.4
9.4
$
$
8.59
8.59
- $
- $
-
-
As of July 2, 2023, the total future compensation cost related to non-vested options not yet recognized in the statement of
operations was $9.2 million and the weighted average period over which these awards are expected to be recognized was 2.4
years.
Restricted Stock
The Company grants shares of Common Stock to its employees that are subject to restrictions on transfer and risk of forfeiture
until fulfillment of applicable service conditions and, in certain cases, holding periods (Restricted Stock).
The following table summarizes the activity of non-vested restricted stock during the year ended July 2, 2023:
Weighted
Average
Grant Date
Fair Value
Shares
Non-vested – beginning of period ...................................................................................
Granted ............................................................................................................................
Vested ..............................................................................................................................
Forfeited ..........................................................................................................................
Non-vested - end of period ..............................................................................................
929,709 $
757,754 $
(385,965 ) $
(69,864 ) $
1,231,634 $
21.82
8.48
18.10
17.77
15.01
The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of July 2, 2023, there
was $10.7 million of total unrecognized compensation cost related to non-vested restricted stock-based compensation to be
recognized over a weighted-average period of 2.4 years.
Note 14. Employee Retirement Plans
The Company has a 401(k) Profit Sharing Plan covering substantially all of its eligible employees. All employees who have
attained the age of 21 are eligible to participate upon completion of one month of service. Participants may elect to make
voluntary contributions to the 401(k) plan in amounts not exceeding federal guidelines. On an annual basis, the Company, as
determined by its Board of Directors, may make certain discretionary contributions. Employees are vested in the Company's
contributions based upon years of service. The Company contributed $1.9 million, $1.9 million, and $1.6 million during
Fiscal 2023, 2022, and 2021, respectively.
The Company also has a nonqualified supplemental deferred compensation plan for certain executives pursuant to Section
409A of the Internal Revenue Code. Participants can defer from 1% up to a maximum of 100% of salary and performance
and non-performance based bonus. There were no Company contributions to the plan during Fiscal 2023, 2022 and 2021.
Distributions will be made to participants upon termination of employment or death in a lump sum, unless installments are
selected by the participant. As of July 2, 2023 and July 3, 2022, these plan liabilities, which are included in “Other liabilities”
within the Company’s consolidated balance sheets, totaled $22.6 million and $17.8 million, respectively. The associated plan
assets, which are subject to the claims of the creditors, are primarily invested in mutual funds and are included in “Other
assets” within the Company’s consolidated balance sheets. The gains (losses) on these investments, which were ($0.8
million), ($3.6 million), and $5.7 million, for the years ended July 2, 2023, July 3, 2022, and June 27, 2021, respectively, are
included in “Other (income) expense, net,” within the Company’s consolidated statements of operations.
F-25
Note 15. Business Segments
The Company’s management reviews the results of the Company’s operations by the following three business segments:
•
•
Consumer Floral & Gifts,
BloomNet, and
• Gourmet Foods & Gift Baskets
Segment performance is measured based on contribution margin, which includes only the direct controllable revenue and
operating expenses of the segments. As such, management’s measure of profitability for these segments does not include the
effect of corporate overhead (see (a) below), nor does it include depreciation and amortization, other (income) expense, net
and income taxes, or stock-based compensation, which are included within corporate overhead. Assets and liabilities are
reviewed at the consolidated level by management and not accounted for by segment.
Net revenues
Segment Net revenues:
July 2, 2023
Years ended
July 3, 2022
(in thousands)
June 27, 2021
Consumer Floral & Gifts ................................................................ $
BloomNet ........................................................................................
Gourmet Foods & Gift Baskets ......................................................
Corporate ........................................................................................
Intercompany eliminations .............................................................
Total net revenues .............................................................................. $
920,510 $
133,183
965,191
375
(1,406)
2,017,853 $
1,059,570 $
145,702
1,004,272
201
(1,860 )
2,207,885 $
1,025,015
142,919
955,607
341
(1,637)
2,122,245
Operating Income (Loss)
July 2, 2023
Years ended
July 3, 2022
(in thousands)
June 27, 2021
Segment Contribution Margin:
Consumer Floral & Gifts ................................................................ $
BloomNet ........................................................................................
Gourmet Foods & Gift Baskets ......................................................
Segment Contribution Margin Subtotal ..............................................
Corporate (a) ...................................................................................
Depreciation and amortization ........................................................
Operating income (loss) ..................................................................... $
95,535 $
37,197
12,895
145,627
(126,965)
(53,673)
(35,011) $
104,319 $
42,515
62,021
208,855
(117,676 )
(49,078 )
42,101 $
128,625
45,875
149,377
323,877
(132,280)
(42,510)
149,087
(a) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items,
Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service
Center functions, as well as stock-based compensation. In order to leverage the Company’s infrastructure, these
functions are operated under a centralized management platform, providing support services throughout the
organization. The costs of these functions, other than those of the Customer Service Center, which are allocated
directly to the above categories based upon usage, are included within corporate expenses as they are not directly
allocable to a specific segment.
F-26
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F-27
Note 16. Leases
The Company currently leases plants, warehouses, offices, store facilities, and equipment under various leases through Fiscal
2036. While most lease agreements are of a long-term nature (over a year), the Company also enters into short-term leases,
primarily for seasonal needs. Lease agreements may contain renewal options and rent escalation clauses and require the
Company to pay real estate taxes, insurance, common area maintenance and operating expenses applicable to the leased
properties. The Company accounts for its leases in accordance with ASC 842. At contract inception, the Company determines
whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset
for a period of time, by assessing whether the Company has the right to obtain substantially all of the economic benefits from
use of the identified asset, and the right to direct the use of the identified asset.
At the lease commencement date, the Company determines if a lease should be classified as an operating or a finance lease
(the Company currently has no finance leases) and recognizes a corresponding lease liability and a right-of-use asset on its
Balance Sheet. The lease liability is initially and subsequently measured as the present value of the remaining fixed minimum
rental payments (including base rent and fixed common area maintenance) using discount rates as of the commencement date.
Variable payments (including most utilities, real estate taxes, insurance and variable common area maintenance) are expensed
as incurred. Further, the Company elected a short-term lease exception policy, permitting it to not apply the recognition
requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to
account for lease and non-lease components as a single component for certain classes of assets. The right-of-use asset is
initially and subsequently measured at the carrying amount of the lease liability adjusted for any prepaid or accrued lease
payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to
the right-of-use asset. Right-of-use assets are assessed for impairment using the long-lived assets impairment guidance. The
discount rate used to determine the present value of lease payments is the Company’s estimated collateralized incremental
borrowing rate, based on the yield curve for the respective lease terms, as the Company generally cannot determine the
interest rate implicit in the lease.
The Company recognizes expense for its operating leases on a straight-line basis over the lease term. As these leases expire,
it can be expected that in the normal course of business they will be renewed or replaced. Renewal option periods are included
in the measurement of lease liability, where the exercise is reasonably certain to occur. Key estimates and judgments in
accounting for leases include how the Company determines: (1) lease payments, (2) lease term, and (3) the discount rate used
in calculating the lease liability.
Additional information related to our leases is as follows:
Years Ended
July 2, 2023
July 3, 2022
(in thousands)
Lease costs:
Operating lease costs ....................................................................................................... $
Variable lease costs .........................................................................................................
Short-term lease cost .......................................................................................................
Sublease income ..............................................................................................................
Total lease costs .............................................................................................................. $
22,208 $
24,582
5,307
(988)
51,109 $
19,402
21,823
5,224
(751 )
45,698
Years Ended
July 2, 2023
July 3, 2022
Cash paid for amounts included in measurement of operating lease liabilities ............... $
Right-of-use assets obtained in exchange for new operating lease liabilities .................. $
(in thousands)
21,020 $
12,040 $
16,486
57,494
Weighted-average remaining lease term - operating leases (in years) ............................
Weighted-discount rate - operating leases .......................................................................
July 2, 2023
July 3, 2022
(in thousands)
8.7
4.0 %
9.5
3.9%
F-28
Maturities of lease liabilities in accordance with ASC 842 as of July 2, 2023 and reconciliation to balance sheet are as follows
(in thousands):
2024 ............................................................................................................................................................... $
2025 ...............................................................................................................................................................
2026 ...............................................................................................................................................................
2027 ...............................................................................................................................................................
2028 ...............................................................................................................................................................
Thereafter ......................................................................................................................................................
Total Future Minimum Lease Payments .......................................................................................................
Less: Imputed Remaining Interest .................................................................................................................
Total Operating Lease Liabilities ..................................................................................................................
Less: Current portion of long-term operating lease liabilities .......................................................................
Long-term operating lease liabilities ............................................................................................................. $
20,759
20,339
18,409
16,784
15,862
67,096
159,249
26,160
133,089
15,759
117,330
Note 17. Commitments and Contingencies
Other Commitments
The Company’s purchase commitments consist primarily of inventory, equipment and technology (hardware and software)
purchase orders made in the ordinary course of business, most of which have terms less than one year. As of July 2, 2023,
the Company had fixed and determinable off-balance sheet purchase commitments with remaining terms in excess of one
year of approximately $12.5 million, primarily related to the Company’s technology infrastructure and inventory
commitments.
The Company had approximately $2.7 million and $2.3 million in unused stand-by letters of credit as of July 2, 2023 and
July 3, 2022, respectively.
Litigation
Call Center Worker Claim:
In March of 2018, a putative class action lawsuit was filed against a subsidiary of the Company (the “Subsidiary”) in the U.S.
District Court for the District of Oregon, Medford Division (the “Court”), alleging violations of the federal Fair Labor
Standards Act (“FLSA”) and Oregon state law. The complaint was brought on behalf of a putative class of call center workers
and alleged that certain Subsidiary policies and practices resulted in class members’ performance of unpaid work. The
plaintiff sought class certification, compensation for alleged unpaid and underpaid wages, civil penalties, prejudgment
interest, liquidated damages, litigation costs, and attorneys’ fees. Following mediation, the parties reached an agreement in
April 2022 to resolve all claims. In September 2022, the Court granted final approval of the settlement agreement, and in
November 2022, the Company remitted payment of approximately $2.9 million, which was previously accrued during the
quarter ended March 27, 2022, and was included in "Accrued expenses" in the consolidated balance sheets at July 3, 2022.
In entering into the settlement agreement, the Subsidiary made no admission of liability.
In addition, there are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the
operations of its businesses. It is the opinion of management, after consultation with counsel, that the final resolution of such
claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
F-29
1-800-FLOWERS.COM, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts-
Describe
Deductions-
Describe (a)
Balance at
End of
Period
Description
Reserves and allowances
deducted from asset
accounts:
Reserve for estimated doubtful
accounts-accounts/notes
receivable
Year Ended July 2, 2023 ......... $
Year Ended July 3, 2022 ......... $
Year Ended June 27, 2021 ....... $
2,396,000 $
4,032,000 $
5,665,000 $
3,991,000 $
(411,000) $
964,000 $
- $
- $
- $
(551,000 ) $
(1,225,000 ) $
(2,597,000 ) $
5,836,000
2,396,000
4,032,000
Valuation allowance for
deferred tax assets
Year Ended July 2, 2023 ......... $
Year Ended July 3, 2022 ......... $
Year Ended June 27, 2021 ....... $
3,096,000 $
9,258,000 $
9,681,000 $
86,000 $
58,000 $
174,000 $
- $
- $
- $
- $
(6,220,000 ) $
(597,000 ) $
3,182,000
3,096,000
9,258,000
Valuation allowance for
inventory
Year Ended July 2, 2023 ......... $
Year Ended July 3, 2022 ......... $
Year Ended June 27, 2021 ....... $
11,370,000 $
8,680,000 $
7,070,000 $
3,010,000 $
4,670,000 $
2,040,000 $
- $
- $
- $
(4,470,000 ) $
(1,980,000 ) $
(430,000 ) $
9,910,000
11,370,000
8,680,000
(a) Reduction in reserve due to amounts written off/recovered.
F-30
Exhibit 10.14
June 29, 2023
1-800-FLOWERS.COM, Inc.
Two Jericho Plaza
Suite 200
Jericho, NY 11753
Attention: General Counsel
Dear Sir:
This letter sets forth our agreement that, in connection with my appointment as Chief Executive Officer of 1-800-
FLOWERS.COM, Inc. (the “Company”), effective July 3, 2023, I will cease to accrue an annual deferred compensation
benefit as provided in Section 5(c) of my Employment Agreement with the Company, dated July 4, 2016 (the “Deferred
Compensation Arrangement”), and I will be eligible to earn an annual incentive bonus under the Company’s Sharing Success
Plan (or any successor annual cash bonus plan), with an annual target award equal to 100% of my annual base salary, as in
effect from time to time (the “Annual Bonus Arrangement”).
Unless otherwise agreed by me and the Company, the Annual Bonus Arrangement will continue for each fiscal year
of the Company in which I serve as Chief Executive Officer. In the event I cease to serve as Chief Executive Officer and
continue in the role of Executive Chairman of the Company, unless otherwise agreed by me and the Company, the Annual
Bonus Arrangement will be discontinued and the Deferred Compensation Arrangement will be resumed, commencing with
the first fiscal year of the Company following the fiscal year in which I have resigned or been removed from the position of
Chief Executive Officer of the Company.
Please acknowledge the Company’s agreement with the foregoing by signing this letter in the space provided below.
Very truly yours,
/s/ James F. McCann
1-800-FLOWERS.COM, Inc.
By: /s/ Michael R. Manley
Name: Michael R. Manley
Title: General Counsel
Exhibit 10.15
June 29, 2023
Board of Directors
1-800 FLOWERS.COM, Inc.
Two Jericho Plaza
Suite 200
Jericho, NY 11753
Dear Members of the Board of Directors:
By this letter (this “Resignation Letter”), I hereby resign as Chief Executive Officer of 1-800-FLOWERS.COM,
Inc. (the “Company”), effective as of July 3, 2023. Other than this change in my position, during the term of my paid leave
of absence (which will end no later than December 31, 2023), I will continue to be employed by the Company and to serve
as a Board member of the Company, and as an officer and board member of various subsidiaries of the Company on which I
currently serve, pursuant to the terms and conditions set forth in my employment agreement, dated July 4, 2016 (the
“Employment Agreement”). Upon return from my leave of absence, I will continue to be employed by the Company, continue
to serve as a Board member of the Company, and continue to serve on the board and as an officer of various subsidiaries of
the Company as I now serve, all of which pursuant to compensation and benefits to be determined by the Board; provided
that, my resignation as CEO shall not be deemed a voluntary resignation, nor shall my leave of absence be grounds for the
Company to claim a “Good Cause” termination, pursuant to my Employment Agreement. In addition, my rights after
returning from leave shall remain in effect with respect to (i) any potential severance payment pursuant to Section 11.(a)(i)(A)
of the Employment Agreement, and (ii) medical and health insurance pursuant to Section 11.(a)(ii) of the Employment
Agreement.
Please acknowledge the Company’s acceptance of my resignation by executing this Resignation Letter in the space
indicated below.
Very truly yours,
/s/ Christopher G. McCann
/s/ Celia R. Brown
Name: Celia Brown
Member of the Board
Subsidiaries of the Registrant
(as of July 2, 2023)
Exhibit 21.1
1-800-FLOWERS Retail Inc. (Delaware)
1-800-FLOWERS Service Support Center, Inc. (New York)
1-800-FLOWERS Team Services, Inc. (Delaware)
1-800-FLOWERS.COM Franchise Co., Inc. (Delaware)
1-800-Flowers.com DO Brasil Participacoes LTDA (Brazil)
1800Flowers.com Australia Pty LTD (Australia)
1873349 Ontario Inc. (Canada)
18F UK Holding Company Limited (United Kingdom)
18F Virginia, Inc. (Virginia)
800-Flowers, Inc. (New York)
Alice’s Table LLC (Delaware)
Bear Creek Orchards, Inc. (Delaware)
BloomNet, Inc. (Delaware)
Celebrations.com, LLC (Delaware)
Cheryl & Co. (Ohio)
Conroy’s Inc. (California)
DesignPac Co., Inc. (Delaware)
DesignPac Gifts LLC (Illinois)
Floranet Iberia S.L. (Spain)
Flowerama of America, Inc. (Iowa)
FOL UK Holding Company Limited (United Kingdom)
Fresh Gift Cards, Inc. (Florida)
Goodsey.com, LLC (Delaware)
Great Foods, LLC (Delaware)
Guarded Realty Holdings, LLC (Delaware)
Harry & David Holdings, Inc. (Delaware)
Harry and David, LLC (Oregon)
Harry & David Operations, Inc. (Delaware)
MyFlorist.net, LLC (Delaware)
Napco Marketing Corp. (Delaware)
Plants.com, LLC (Delaware)
PersonalizationMall.com, LLC (Delaware)
Personalization Universe, LLC (Delaware)
Shari's Berries.com, LLC (Delaware)
The Popcorn Factory, Inc. (Delaware)
TR Acquisition, LLC (Delaware)
Vital Choice Seafood LLC (Delaware)
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
1-800-FLOWERS.COM, Inc.
Jericho, New York
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-259759, 333-
54590, 333-119999, 333-164727, and 333-192304) of 1-800-FLOWERS.COM, Inc. and Subsidiaries of our reports dated
September 15, 2023, relating to the consolidated financial statements and schedule, and the effectiveness of 1-800-
FLOWERS.COM, Inc.’s internal control over financial reporting, which appear in this Annual Report on Form 10-K.
/s/ BDO USA, P.C.
Melville, New York
September 15, 2023
CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(RULE 13a-14 (a))
Exhibit 31.1
I, James F. McCann, certify that:
(1) I have reviewed this annual report on Form 10-K of 1-800-FLOWERS.COM, Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors
(or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: September 15, 2023
/s/ James F. McCann
James F. McCann
Executive Chairman and Chief Executive Officer
CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
(RULE 13a-14 (a))
Exhibit 31.2
I, William E. Shea, certify that:
(1) I have reviewed this annual report on Form 10-K of 1-800-FLOWERS.COM, Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors
(or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over the
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: September 15, 2023
/s/ William E. Shea
William E. Shea
Senior Vice President,
Treasurer and
Chief Financial Officer
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of
the undersigned officers of 1-800-FLOWERS.COM, Inc. (the “Company”) hereby certifies, to the best of such officer’s
knowledge, that:
(1) the Annual Report on Form 10-K of the Company for the year ended July 2, 2023, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), fully complies with the requirements of Section 13(a) or Section
15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Dated: September 15, 2023
Dated: September 15, 2023
/s/ James F. McCann
James F. McCann
Executive Chairman and Chief Executive Officer
/s/ William E. Shea
William E. Shea
Senior Vice President,
Treasurer and
Chief Financial Officer
These certifications are furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the
extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). Such certifications will not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically
incorporates them by reference.
CORPORATE
INFORMATION
• BOARD OF DIRECTORS •
James F. McCann
Founder, Chairman and Chief Executive Officer
1-800-FLOWERS.COM, Inc.
Christopher G. McCann
Former Chief Executive Officer
1-800-FLOWERS.COM, Inc.
Celia R. Brown
Former Executive Vice President, Group HR Director, Willis Group
James A. Cannavino
Senior Vice President, IBM Company, Retired
Dina M. Colombo
Chief Operating Officer and Chief Financial Officer,
GreyLion Capital LP
Eugene F. DeMark C.P.A.
Area Managing Partner KPMG, LLP, Retired,
Former Director, BankUnited and MSG Network
Leonard J. Elmore
Network Television Sports Analyst, Attorney at Law
Adam Hanft
Founder and Chief Executive Officer, Hanft Projects LLC
Stephanie Redish Hofmann
Managing Director, Google
Katherine Oliver
Principal, Bloomberg Associates
Larry Zarin
Senior Vice President, Chief Marketing Officer, Express Scripts, Inc.,
Retired
• LEADERSHIP TEAM •
James F. McCann
Founder, Chairman and Chief Executive Officer
Thomas G. Hartnett
President
William E. Shea
Senior Vice President, Treasurer and Chief Financial Officer
Michael R. Manley
Senior Vice President, General Counsel and Corporate Secretary
Arnold P. Leap
Chief Information Officer
Steve Roberts
Senior Vice President, Business Development
Jason John
Chief Marketing Officer
Joseph Rowland
Group President, Gourmet Foods & Gift Baskets
Faeth Bradley
Chief Human Resources Officer
Dinesh Popat
President, BloomNet
Andrew Deren
President, PersonalizationMall.com
Abhay Patel
Brand President, 1-800-Flowers.com
STOCKHOLDER
INFORMATION
• STOCK PERFORMANCE •
Comparison of 5 Year Cumulative Total Return*
Among 1-800-FLOWERS.COM, Inc., the Russell 2000 Index
and the S&P 500 Consumer Discretionary Index
The NASDAQ Non-Financial Index is no longer available and has been replaced with the S&P 500 Consumer
Discretionary Index as it contains S&P 500 companies classified as consumer discretionary companies based on GICS
codes. This year's performance graph includes both the NASDAQ Non-Financial Index for the available period and the
S&P 500 Consumer Discretionary Index to facilitate transition to the replacement index.
Corporate Headquarters
1-800-FLOWERS.COM, Inc.
Two Jericho Plaza, Suite 200
Jericho, NY 11753
(516) 237-6000
Stock Exchange Listing
NASDAQ Global Select Market
Symbol: FLWS
Transfer Agent & Registrar
Equiniti Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
(718) 921-8200
Independent Auditors
BDO USA, LLP
401 Broadhollow Road, Suite 201
Melville, NY 11747
(631) 501-9600
SEC Counsel
Cahill Gordon and Reindel LLP
32 Old Slip
New York, NY 10005
(212) 701-3000
Shareholder Inquiries
Copies of the Company’s reports on Forms 10-K and 10-Q as filed with
the Securities and Exchange Commission and additional information
about 1-800-FLOWERS.COM, Inc. may be obtained by visiting the
Investors section at www.1800flowersinc.com.