Good day, everyone, and welcome to the 1-800-Flowers.com Incorporated fiscal 2009 third quarter results conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the company's Vice President of Investor Relations, Joseph Pititto. Mr. Pititto, please go ahead, sir.

Thanks [Lotha]. Good morning and thank you all for joining us today to discuss the 1-800-Flowers.com's financial results for our fiscal 2009 third quarter. My name is Joseph Pititto, and I'm Vice President of Investor Relations. Those of you who have not received the copy of our press release issued earlier this morning, the release can be accessed at the Investor Relations section of our website at 1800flowers.com or you can call Patty Altadonna at 516-237-6113 to receive a copy of the release by email or fax. In terms of the structure, our call today will begin with brief formal remarks and then we will open the call to your questions. Presenting today will be Jim McCann, CEO; and Bill Shea, CFO. Also joining us today for the Q&A section of our call is Chris McCann, our President. Before we begin I need to remind everyone that a number of the statements that we will make today maybe forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. For a detailed description of these risks and uncertainties, please refer to our press release issued this morning as well as our SEC filings, including the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. In addition, this morning we will discuss certain supplemental financial measures that are not prepared in accordance with Generally Accepted Accounting Principles. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning. The company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call, and the recording of today's call, the press release issued earlier today or any of the SEC filings except as maybe otherwise stated by the company. I will now turn the call over to Jim McCann.

Good morning, everyone. As we previously announced, the revenues for our fiscal third quarter declined 21%, primarily reflecting the continued weakness in the retail sector. Revenues were also affected by the shift of the Easter holiday into our fiscal fourth quarter this year and lower Valentine sales to the holiday falling on a Saturday, rather than a weekday, which is historically much better for our business. The factors, in fact accounted for approximately 25% of the total revenue declined during the period. With revenue growth clearly challenged by the severity of the current economy downturns, we have intensified our efforts to reduce operating expenses and allowing our cost structure commensurate with the reduced level of consumer demand. The demand we're seeing, we have a demonstrated ability in this area having taken more than $25 million of cost out of our operating platform between fiscal 2006 and 2008. We've targeted an additional $50 million in operating expense reductions under the accelerated cost reduction program that we announced back in January. I am pleased to report that we have made excellent progress towards this goal and we expect to fully realize these cost savings in fiscal 2010, which begins in July. Let me highlight a few of these cost saving initiatives which will begin in this third quarter. We reduced our labor cost by 10% across the company. We began the downsizing of our Home & Children's category significantly, including significant reductions in catalog marketing and prospectus. We reduced and reallocated our marketing spend across all of our brands, scaling it to lower customer demand and to achieve enhanced returns. We've put in place a plan to revamp our IT infrastructure, consolidating hosting sites and rationalizing maintenance and support applications to reduce costs. We announced that we will be closing a Midwest…

Thank you, Jim. During the fiscal third quarter, significant weakness in the consumer economy impacted both our revenues and gross margins. While, we reduced our operating expenses by nearly $10 million before one-time charges. Lower revenues impacted our operating leverage resulting in an EBITDA and EPS loss for the period. Additionally, during the quarter we wrote down $76.5 million of goodwill and intangibles related to our Gourmet Food and Gift Baskets business. It’s important to note that this segment is performing relatively well in the current economic environment and as a key component of our future growth. The non-cash impairment charge reflects the significant contraction in valuation multiples, our market capitalization and recent performance resulting from the economic downturn more on this later. Regarding specific financial results and key metrics for the third quarter, total net revenues were $173 million, down 21.2% compared with $219.6 million in the same period last year. During the quarter our e-commerce orders totaled $2.1 million compared with 2,740,000 orders in the year ago period. Average order size during the quarter was $62.96 compared with $64.79 in the prior year period. During the quarter we added 651,000 new customers. This was achieved while currently stimulating repeat orders from the existing customers who represented 61.2% of total revenues compared with 59.4% in the prior year period. Gross margin for the quarter was 40.2%, down 60 basis points reflecting a combination of product mix and increased promotional nature of the Valentine holiday. In dollar terms total operating expenses for the period were down nearly $10 million compared with the prior year period. This is before depreciation and amortization, goodwill and intangible impairment charges and severance cost of $1.5 million, but does includes operating expenses of approximately $2.9 million associated with our recent acquisitions. This reflects our ongoing…

Well to sum up, during the fiscal third quarter, total revenues were $173 million, down 21%. In dollar terms, we reduced our operating expenses by $10 million. We made significant progress for achieving our operational cost reduction target of $50 million as I described earlier. We expect to complete the implementation of these cost reduction programs by the end of the current fiscal fourth quarter and thereby realize the full $50 million savings in our fiscal 2010, which begins in July. And we revised our credit facility providing flexibility reducing our term debt by $20 million. Looking ahead, we believe that consumer volume [bond] remains very challenging. With that said, our company will be profitable for the full year and we are well positioned to weather the current economic headwinds, emerge as even stronger and more profitable business in the years ahead. To achieve this goal, we continue to be focused on three key strategic priorities that drive our business in good times and in challenging times. First, know when to take care of our customers, providing the right products and services to help our customers express themselves and connect to the important people in the lines. Here we think we're already best in category and yet we can be better. Second, maintain our financial strength and flexibility; aggressively reduce our operating cost, strengthen our balance sheet and add flexibility to our capital structure. And third, continue to innovate and invest for the future, investing in technology, investing in our brands, and investing in new growth areas that position us for enhanced future results. We believe that these strategic priorities are the keys to weathering the current economic environment and emerging a stronger business that implies are increasing profitability and thereby build long-term shareholder value. And that concludes our formal remarks and I’ll ask Erika to now open the call to your questions. Erika, please re-state the instructions for the Q&A.

Thank you. (Operator Instructions) And we’ll take our first question from Kristine Koerber with JMP Securities.

First, with the Easter shift, can we assume we’ll see a $7 million bump in the fourth quarter?

Yes, Kristine. Clearly the Easter shift will result in that. Obviously what we’ve been seeing is a trend down in overall top line. So you got to take that into consideration but there clearly will be a shift from the Easter season of $7 million from Q3 to Q4.

Okay. And then, second, you just comment on BloomNet and kind of the numbers. Have you seen any fallout as far as the numbers because of the economy? And then just another question, the $50 million to cost savings realized most of that in fiscal 2010, if things don’t improve, are there more opportunities to bring down the cost structure?

This is Jim. I’ll start with the latter part of your question there and then Chris will touch on BloomNet. Yes, I think that we’ve demonstrated the flexibility. We’re taking our best guess of what the environment will yield and we’re sizing our cost appropriate [today] giving us room to increase our profitability and continue to invest for the future. So, if it were worse than we’re anticipating it being and we’re certainly not planning on an uptick in this environment, then yes, I think we have more room to respond to that even greater challenge in the future. And with regard to BloomNet, Chris?

With regard to BloomNet, we’re seeing; membership has held up reasonably well I think because of our good value proposition. And what we're doing to make sure, I mean, the retail products clearly are feeling the pain of this economic downturn as well. We’re really focusing on making sure that we are aggressively promoting our product design product line through our good, better, best merchandizing strategy and that’s driving more and more audits into our FLOWERS network. We’re working very closely with them on local marketing, local marketing campaigns, such as working with them on radio and radio promotions network, opportunities testing, advertising, outdoor advertising with them, e-mail campaigns that we’re working on with them with the website hosting capability that we bring to the table. And also with our reviewed efforts behind BloomNet products, making sure that we're providing good low cost value products for them to help make their business more profitable, especially the recently launched value price (inaudible) the products we all receive by our products community.

So I would say in closing on the BloomNet question, Kristine, this is Jim, that we identified that there were probably a dozen investment areas that were, I think, we are pursuing at the beginning of this fiscal year. As we hit the later part of the second quarter, we realized that the environment had changed and we pulled back on probably seven or eight of those initiatives, and one of them that we frankly added to our investment portfolio is BloomNet, although it’s been around for four years now, clearly we see a lot of opportunity here to grow at even bigger than we thought and so it’s one of the areas we’re investing in. So BloomNet held up well, we continue to expect that it will do even better in the future and we are investing behind that to make sure that it continues to be a big driver of our future success.

All right. Thank you.

We will take our next question from Eric Beder of Brean Murray.

Good morning. Could you talk a little bit about, Martha, I know you rolled out the cookies and some other things for holiday season, how does Martha continue to going out. [You almost thought] I guess about a year of doing it?

Well, Martha overall has been a good learning experience for us. I would tell you that performance to-date has been below our expectations, and I think the headwind we ran into there as we introduced the higher price product point into environment that demanded value pricing. We work closely with the team at the MSO to redo our recipes to provide better value for our customers by taking some of the best of the products out and focusing on some real winners there. Martha is a strong brand with the loyal customer base and it teaches innovative product design and strong brand affinity. So we need to take better advantage of that. This is a multi-year deal. We think we are taking the right steps to make it a better deal for both Martha Stewart, (Omni Living) and for us and we are very positive about the future, but year-to-date it's not been what we expected but we think we have taken aggressive steps to make sure it is for the years going ahead.

Okay. In terms of DesignPac, how was the integration going with DesignPac for your other units in terms of gifting and what do you think in terms of Christmas orders and orders for the holiday season towards buyback?

Eric (inaudible) DesignPac continues to do well. We disclosed the seasonal loss that we have and that was obviously expected. Year-over-year revenues and profits are up. We continue to work on integration plans with a lot of businesses.

The integration is doing well, I think we are integrating it nicely into our product development processes across the full category to do more and more for the flowers category as well and we are looking forward to, as we mentioned early on, that really being a product development engine behind 1-800 baskets.

So, the first year, integration is on page prior to ahead of (these), but it grew nicely on the top line and the bottom line during this year and the integration in terms of projecting its merchandizing capability across the other brand. So all in all I'd it's an A on our report card.

Okay. What do you – I know I might have missed this and I apologize. What are you doing in terms of falling (inaudible) I know you’ve been trying to stabilize the business. What's the profile just going forward in this type of economy?

In terms of well, what we call our management brands which includes (inaudible), I would say today we have made significant progress in implementing our plans of (downsizing), reducing headcounts, cutting back on circulation, redeploying marketing spends in areas that we think will provide better returns. I think you saw that it's in improved results this third quarter. As we said in the past, Eric, we are proactively showing all of our actions for this category and we are working with the appropriate internal and external resources in that process.

Okay. Thank You.

(Operator Instructions) And we’ll take our next question from Anthony Lebiedzinski with Sidoti & Company.

Good morning. I had a couple of questions here. Could you guys maybe try to quantify the impact of the downsize [day] shifting to a Saturday, how much of a headwind was that in the quarter?

Bill, I think you said maybe you have more color here. What you said in response to Antony’s question here is that the combined Easter shift and the Saturday day pricing was about 25% of the change.

That’s correct. We think it’s about 10% or $5 million of the impact related to the Valentine’s placement on a Saturday.

Got you and also back in January you had lowered your guidance for revenue, you’re keeping the revenue guidance here unchanged, however in January you expect to be profitable in the second half of fiscal ’09 looks like that’s no longer the case here, what are the reasons for that?

I think the major impact is on that is really gross margins. It continues to be a very promotional environment that we’re operating in and as you saw in the consumer flow, new business margins were down 260 basis points do specifically to that. As we’re moving into fourth quarter of this year into Mother’s Day, we continue with a number of value priced products to help with them consumer demand, but we do feel that there is still be pressure on gross margin for next several quarters.

And really that’s an outlook of our strategy that Jim mentioned earlier of lowering and taking care of our customers, making sure we are giving them the right value price point that they need in this economic environment. On a go forward basis, I think you’ll see this as we move through into next year, you will see gross margins start to come back.

Okay. And as for as the cost cutting initiatives, it sounds like you couldn’t very well do more than the $50 million in cost reductions, is that fair to assume?

Well, what we said was that we’re confident that we will achieve that $50 million target. And in response to a question of Kristine asked earlier, I said that if the environment would turn worse then forecast of our [internally] that yes, we still think we have the flexibility to do it. But rest assured, as we finish this process, if we find other opportunities to lower our cost basis even with the forecast that we’re assuming for the next fiscal year, we’ll take every opportunity to do that.

And then where specifically do you think you would be able to cut cost further?

Assuming pretty much investor relations. Our cost cutting initiatives they have really come across four key areas in equal weighting and just about, it’s a headcount reduction that we announced earlier, it’s marketing spend and the reallocation of that marketing spend appropriately, cutting back on catalog prospectus and which is again we return right now, especially in our Home and Children's category we’re intentionally cutting back on customer acquisition efforts to downsizing that category overall. And then the other areas really, it’s a reengineering of the operations throughout the company, including the virtualization of our customer service platform as we announced, closing this year of two brick and mortar call center facilities, revamping of our IT infrastructure and continuing to improve it there, and then just our overall what we call performance enhancement program which drives operation efficiency improvements throughout every single process of the company.

For example, on the service center platform, we anticipated this year closing one of those facilities. We did that and it went so well, it gave the team confidence so we could go to another service center and [eliminate] all that brick and mortar expense related debt because we saw in each of those cases that the best majority in (inaudible) from a percentage point of view of our really highly skilled qualified and 10 year service people stayed with us, because they opted to work in a home based environment for our home agent network. So, that gave us the confidence, that wasn’t as part of the original plan but we’re able to take that second [turn] out. So there’s lots of things from a headcount performance basis and we are also exploring other growth areas that these cuts have highlighted growth as opportunities, particularly within BloomNet as we go forward that we can really have other growth initiatives that we can initiate in next fiscal year.

Okay. Thank you.

(Operator Instructions). We will take our next question from Jennifer Watson of Goldman Sachs.

Hi, it’s (inaudible) for Jennifer Watson. Can you please just talk a little bit about the pricing trends in ROI changes you've seen across media namely digital and how this is impacting your marketing allocation going forward?.

Well, Chris can provide much more color on this than I will.

I think that the indications you see that sort of parameters of what’s going on in the e-marketing environment is that the category has suffered. When you see key word search traffic, overall I'd say that the category suffered from a traffic point of view, and then what we do is we allocate our marketing resources to keep it within the percentages that we’ve allocated for acquisition of customers through those vehicles. So that’s why you see we’ve able to reduce marketing and still maintain our market share.

It’s strange in challenging dynamic, right, the media marketplace right now, whether it will be in the digital marketplace or in the offline whereas we can get more impressions for our dollar today than we could a year ago. And that’s good news, but at the same time consumer confidence and consumer demand being down you’re getting less return on those prices. So, with half a balance pulled on each side project.

Great, thank you and then just a follow-up. Could you talk a little bit about your decision to partner with various supermarket chains, what are the benefits and do you plan to partner with other e-commerce sites in the future?

Well, if you look at the supermarket chains where there happened is really within the BloomNet network. And our decision there and our focus there is working nicely. Just to make sure that these supermarkets are gathering orders to be delivering it to the flower community, we want to make sure our BloomNet process are getting their fair share of orders. So we play in that supermarket area with BloomNet to the benefit of these kind of flowers.

Great. Thank you.

It appears there are no further questions at this time. Mr. McCann, I would like to turn the conference back over to you for any additional or closing remarks.

Thank you, Erica. And thank you for all your questions and your interest today. If you have any additional questions please contact us. And in closing I’d like to offer reminder. The Mothers Day holiday is just around the corner and there are millions of moms out there that deserve your recognition and appreciation. To help out with this, 1-800-Flowers.com has launched the SPOT A MOM movement including our Spotlight A Mom Sweepstakes, numerous blogs as well as Facebook and (inaudible) help ensure that no mom gets left behind. I encourage you to visit spotamom.com and spotlightamom.com to show your appreciation to all the moms in your life. Thank you.

That concludes today’s conference. We thank you for your participation.