1-800-FLOWERS.COM, Inc. (FLWS) Q3 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the 1-800-FLOWERS.COM Fiscal 2014 Third Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Joe Pititto, Vice President of Investor Relations. Sir, you may begin.

Thank you, Sam. Good morning, and thank you all for joining us today to discuss 1-800-FLOWERS.COM's financial results for our fiscal 2014 third quarter. For those of you who have not received a copy of our press release issued earlier this morning, the release can be accessed at the Investor Relations section of our website, at 1800flowers.com, or you can call Patty Altadonna at (516) 237-6113 to receive a copy of the release by e-mail or fax. In terms of structure, our call today will begin with brief formal remarks, and then we'll open the call to your questions. Presenting today will be Jim McCann, CEO; Chris McCann, President; and Bill Shea, CFO. Before we begin, I need to remind everyone that a number of the statements that we will make today may be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. For a detailed description of these risks and uncertainties, please refer to our press release issued this morning, as well as our SEC filings, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. In addition, this morning, we will discuss certain supplemental financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning. The company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call, and recordings of today's call, the press release issued earlier today or in any of its SEC filings, except as may be otherwise stated by the company. I'll now turn the call over to Jim McCann.

Good morning, everyone. As we indicated in our press release this morning, our fiscal 2014 third quarter results reflect several factors, primarily among these are: Number one, the shift of the Easter holiday into our fourth quarter this year, compared to last year when the holiday fell on March 31, the last day of the quarter. This is something that we have discussed in previous calls. Just to quantify a bit to you, the Easter holiday typically represented an excess of $10 million in revenue for us, so the shift of the holidays out of the third quarter affected top and bottom line results, of course, all 3 of our business segments. The good news is that with Easter having fallen on April 20 this year, we do recapture these revenues in this current fiscal fourth quarter; factor two, is weather. The severity of the winter weather experienced throughout much of the country, particularly during January and February, clearly had an impact on the overall retail sector. Snow, ice, subzero temperatures hampered consumer demand throughout the country as customers were focused on digging out from under snow drifts, or just distracted by the media attention given to all those storms. For us, these weather conditions culminated in the snow and ice storm that hit on February 13, significantly disrupting the Valentine holiday. A key period for us no doubt, particularly since it was the only gift-giving holiday in this year's fiscal third quarter. Despite these challenges, I must say how proud I was of the efforts from all of our associates across the company that helped us deliver smiles for our customers during the Valentine holiday. Our proactive planning for the severe weather, which was dubbed Operation Love Storm, enabled us to utilize our unique distribution platform, particularly our BloomNet network of local professional florists, to deliver millions of smiles to our customers throughout the country, including to many of the regions hardest hit by the snow storms. In addition, throughout the holiday period, our dedicated customer service associates, including our social channel communications teams, did an exemplary job of responding to our customers' inquiries. As a result, we were very pleased to read the post-holiday accolades we received for sticking to our commitment to provide an open and transparent communications policy on Twitter and Facebook, which allows us to remain engaged and better service our customers. We believe this focus and positive comments we've been receiving from customers since the start of the Valentine holiday period, positions us well to deliver solid year-over-year growth during our current fiscal fourth quarter, which features the Spring gifting occasions including Easter, our Admin Professionals Week, Mother's Day, Graduation and the Wedding season and of course, Father's Day. Before I turn the call over to Bill for his recap of the results and metrics for the quarter, I'd like to highlight a few areas where we have made solid progress through these first 3 quarters of fiscal 2014. In 1-800-FLOWERS.COM; we continue to grow our top line and extend our market leadership in a challenging and highly competitive marketplace. We do this by offering our customers truly original product designs at an expanded range of price points, enabling them to connect and express themselves for any celebratory occasion, from just because, to birthday, anniversaries, get well and much more. On the product front, we are also increasingly excited by the opportunity we see in our new fruit bouquets products, where we are gradually expanding availability across the country. Here, we are working with our franchise at BloomNet florist, toward what we believe can be a very significant business for us over time. We continue to leverage the investments we've made over the past several years in our social and mobile efforts, which help us engage directly with our customers when and where they expect to find us. In these areas, our focus on being an early adopter has enabled us to stake out a strong leadership position, well ahead of the competition, which we plan to build on as e-commerce rapidly evolves into mobile and social commerce. In our BloomNet business, we continue to increase our market penetration against the older traditional wire services by providing florists with innovative products and tools designed to help them grow their businesses, such as our new cloud-based store management system with its unique iPad application, another first for the florist industry. In our Gourmet Food and Gift Basket segments, we have addressed the operational issues that impacted the results of our Fannie May Chocolates business last year, and I'm pleased to report Fannie May's operations ran significantly smoother during the recent peak holiday period. The brand is now poised to grow its top and bottom line going forward. As Cheryl's bakery gift business continues to hum along, growing its e-commerce business at a double-digit pace, while getting ready to take advantage of the capital investments we're making this year to more than double the capacity of its baking facility. Lastly, in terms of our financial strength, we are debt-free, we have positive cash position on our balance sheet, and we expect to build on that cash position during the current fiscal fourth quarter. And as we have ample and cost efficient access to capital through our credit facility, this provides us with significant flexibility to grow our business through internal investments, as well as potential strategic acquisitions that can help us increase engagement with our customers. It also enables us to be active with our stock buyback program, under which we have spent approximately $7.4 million to repurchase more than 1.4 million shares of our stock since the start of this fiscal year. We believe these initiatives, among others, position us well to grow our business and build value for all of our stakeholders. I'll now turn the call over to Bill for his review of the quarter.

Thank you, Jim. Regarding specific financial results and key metrics from continuing operations for the third quarter, total net revenues were $179.6 million, down 6.3%, compared with $191.6 million in the prior-year period. During the quarter, our e-commerce orders were 2,211,000, down 4.5% compared with 2,315,000 orders in the year-ago period. Average order size during the quarter was $63.27, up 1.3% compared with $62.45 in the prior-year period. During the quarter, we added 675,000 new customers, down 1.8% compared with the prior-year period. Existing customers represented 58.4% of total customers in the period. Gross margins for the quarter was 41%, down 100 basis points compared with 42% in the prior-year period. And operating expenses, as a percent of total revenues, were 42.5%, an increase of 300 basis points compared with 39.5% in the prior-year period. The increase in operating cost reflects reduced leverage due to the lower revenues in the quarter related to the Easter shift, as well as increased marketing spend during the Valentine Day holiday, that did not drive sufficient sales due to the winter storm. Total operating expenses were $76.4 million, up 1% compared with $75.6 million in the prior-year period. As a result of these factors, EBITDA for the period, excluding stock-based compensation, was $3.3 million compared with $10.7 million in the prior-year period. Including stock-based compensation, EBITDA was up $2.1 million, compared with $9.6 million in the prior year period. Net loss from continuing operations, attributable to 1-800-FLOWERS.COM was $1.4 million, with $0.02 per share compared with income of $3.1 million or $0.05 per fully diluted share in the prior-year period. And total net loss, including discontinued operations, was $1.4 million or $0.02 per share compared with income of $2.6 million or $0.04 per fully diluted share in the prior-year period. In terms of category results. In the 1-800-FLOWERS.COM Consumer Floral business, during the third quarter, revenues in this category increased 1% to $122.3 million, compared with $121 million in the prior-year period. Revenues in this segment included approximately $2.7 million, resulting from the consolidation of the operating results of iflorist, a U.K. floral gift provider, in which the company increased its investment to a majority position during the second quarter of fiscal 2014. As previously noted, the shift of the Easter holiday and the severe winter weather during the quarter, particularly the storm during the Valentine holiday, impacted sales in this segment. Gross margin for the quarter was 38.9%, down 110 basis points, with 40% in the prior-year period, primarily reflecting higher customer credits related to the Valentine holiday weather, and the impact of the lower margins associated with the aforementioned iflorist business. Segment contribution margin was $11.2 million, down 19.7%, with $13.9 million in prior-year period. This primarily reflected the lower revenues in the quarter related to the Easter shift, which reduced operating leverage, increased marketing spending during the quarter to drive Valentine sales, which was negated by the winter storm and lower year-over-year gross margins also reflecting the impact of the severe winter weather. In BloomNet, revenues were $22.6 million, essentially flat, with $22.8 million in the prior-year period, reflecting both the Easter shift, as well as the severe winter weather during the quarter. Gross margin increased 330 basis points to 53.2%, compared with 49.9% in the prior-year period. This reflected the revenue mix, which included growth in sales of higher margin services such as our web marketing and directory advertising programs, as well as pricing initiatives. As a result of these factors, segment contribution margin was $7.1 million, compared with $7 million in the prior-year period. In our Gourmet Food and Gift Basket segment. Revenues for the fiscal third quarter were $35.3 million, compared with $48.3 million in the prior-year period. The decline in revenues primarily reflected the aforementioned shift of the Easter holiday into the company's fiscal fourth quarter, combined with the impact of the severe winter weather during the period and lower wholesale orders for our chocolate brands. Gross margin was 38.7% compared with 42.4%, primarily reflecting the shift of Easter, which consisted largely of higher-margin e-commerce and retail revenues and reduced operating leverage associated with the impact on sales of the severe weather during the period. Segment contribution margin was a loss of $3.2 million, compared with income of $1.6 million in the prior-year period. In terms of corporate expense. For the fiscal third quarter, corporate expense from continuing operations including stock-based compensation expense, was $13 million, up 1.6% with $12 million -- $12.8 million in the prior-year period. Now turning to our balance sheet. For the first 9 months of the year, we have used approximately $7.4 million to buy back our stock. Combined with free cash flow generated over the same period, we finished the third quarter with cash and investment position of approximately $1.3 million. We have 0 borrowings under our credit facility, and anticipate finishing the fiscal year in June with no debt outstanding and a positive cash position on our balance sheet. Inventory of $61.4 million was in line with management's expectations, and reflects positioning for the spring holiday season, including Easter, Admin Professionals Week, Mother's Day and Father's Day. Now regarding guidance. Our fourth quarter this year includes the Easter holiday, as well as the aforementioned spring gifting occasions, particularly the key Mother's Day holiday. As a result, we anticipate achieving solid year-over-year growth, both top and bottom line for the period. Based on this outlook, combined with the results through the first 3 quarters of fiscal 2014, we anticipate achieving revenue growth across all 3 of our business segments, albeit with consolidated revenue growth for the year, in the low to mid single-digit range. Regarding guidance for our bottom line. We anticipate EBITDA and EPS for the year will be flat to down slightly compared with the prior year, and we expect free cash flow for the year to be in the range of approximately $10 million to $15 million. I will now turn the call over to our President, Chris McCann.

Thanks, Bill. As Jim and Bill have both noted in their remarks, we faced some unique challenges during our fiscal third quarter, in particular, the powerful winter weather storm that impacted the Valentine holiday. I think it's worth reiterating Jim's accolades for all of our associates throughout the company, particularly our customer service agents and dedicated social media teams who worked tirelessly throughout the holiday to help us deliver billions of smiles to our customers throughout the country. I'd also like to add a big shout out to our BloomNet florists around the country, many of whom braved subzero temperatures and ice covered roads to deliver smiles for our customers, even in some of the hardest hit regions of the country. Importantly, it was BloomNet, with its focus on the very best local florists, that enabled us to pull forward thousands of orders for early delivery when we saw the storm coming, and it was those very same BloomNet local florists that enabled us to fulfill thousands of more orders that would not have been delivered, due to the third-party carriers whose operations were shut down by the snow and the ice. BloomNet's unique business model and capabilities helped differentiate us from many of our competitors, and we believe provides a significant growth opportunity as we continue to increase our market penetration versus the older legacy wire services. As we move into our fiscal fourth quarter, we are already in full Mother's Day holiday mode throughout the company. Once again, we'll be leveraging our leadership position on the social front, with our new #MyMomCampaign, featuring a sweepstakes with daily prices. On Facebook, we're encouraging our fans to tell us about their moms and all the reasons they are special, as well as giving them to ability to post photos of themselves with their moms. On Twitter and Instagram, we're seeding questions all revolving around celebrating moms. We're even having a Twitter party with #AllAboutMom, during which we will be awarding prizes randomly for customer postings about their moms. On the product front, we're allowing our customers to curate our product offerings and create mom-approved gifts, such as our Cheryl's Mother's Day cookie flowers, delicious bouquets of 12 long stem buttercream frosted cutout cookies, delivered in a real flowers box. And our Fannie May chocolate dipped strawberries, dipped in real chocolate, unlike many of our competitors, and packaged in special Mother's Day gift wrapping. In our expanded offering of personalizable gifts, such as our new picture frames, decorative platters and mugs, as well as our unique personalized vase, which allows the customer to upload a photo from their desktop, Facebook or Instagram, and add that personal message and select a floral arrangement to create a truly personal gift for mom. Looking ahead, we're excited about the opportunity we're seeing across all of our great gift brands. We believe we are in well positioned to deepen our relationships with the customers, as their destination for truly original gifts. I'll now turn the call back to Jim.

Thanks, Chris. Having completed 3 quarters of our fiscal year, we are pleased with the progress we've made in a number of key areas. We have successfully addressed the operational issues that we've faced last year in Fannie May, and that business is now poised to accelerate their growth. Our Gift Baskets business, which rebranded nicely over the last 2 years, continue to do well. Based on early indications from our expanded list of customers, we anticipate further growth in fiscal 2015. Our new Fruit Bouquets business is gaining ground, as it expands its coverage across the country. Importantly customers are telling us that they really love the product and view it as a perfect complement to our expanded gift offerings. We continue to be excited by the opportunity to take market share in this business, as well as participate in the growth of the overall category. We have expanded our gift offering across all of our brands to include increased personalization capabilities, and a broader range of price points. These are the kinds of products and services that our customers are telling us they need to help them connect and express themselves more frequently and with more of the people in their lives. These products from vases featuring uploaded photos, to personalized jewelry, to customized plaques and mugs, are also helping us attract a new and younger customer demographic to our brand through our social and mobile engagement programs. As we look at what continues to be a challenging economic landscape, we believe we are well positioned to accelerate our top and bottom line growth in the years ahead, and grow our market share in all 3 of these business segments. We do this by continuing to focus on those aspects of our business that we can control, including our merchandising programs, marketing messages, as well as our initiatives to enhance operating leverage across the platform. We have the advantage of a strong financial position, with no debt and a good balance sheet, growing cash and a cost-efficient access to capital. This enables us to drive future growth through internal investments, such as the expansion of our Cheryl's baking facility, our category-leading innovations in mobile and social, and our unique technology solutions for our BloomNet florists. It also positions us well to grow through M&A, should opportunities that can expand our existing product offerings and deepen our relationships with our customers present themselves. To wrap up, we remain cognizant of the uncertainties in the overall economy. With that said, we are heartened by the recent uptick in consumer confidence. And we are confident that our strategic focus will enable us to build on the progress that we've made over the past several years, to achieve accelerated top and bottom line growth in the years ahead. Now that concludes our formal remarks. I'll ask Sam, our operator, to re-give the instructions on how to participate in the Q&A portion. Sam, would you do that now?

[Operator Instructions] Our first question comes from Jeff Stein of Northcoast Research.

First, a question for Bill. Bill, I'm wondering if you could just talk a little bit about your change in free cash flow guidance. It's a pretty big drop, it seems, to go from an estimate of $20 million to $10 million to $15 million, and that's just over a 3-month period. So maybe you could talk a little bit about what changes you see on that front?

Yes, Jeff, you see, from the release this morning, our free cash flow for the first 9 months was a little over $9 million. What we anticipate, we are adjusting the guidance a little bit for the results of the third quarter and the severe impact that was the severe winter weather and the impact that had on it, and what we're looking at is the potential for some inventory investments that we will make, with respect to our Gourmet Food and Gift Basket division towards the end of this fiscal year to help spur growth next year as we secure some wholesale orders during the fourth quarter.

A little color on that last point, Jeff. We already see orders from some of our third-party customers for our gift food products coming in, requesting much earlier delivery dates into their systems. So that's forcing us to plan, to build inventory earlier than we would have, say, last year so that build and inventory is going to leak into the fourth quarter from the first quarter last year. So some of that change in cash is devoted toward the inventory to achieve that build, to meet those orders for next year.

I see. Okay, that makes sense. As far as -- could you talk a little bit about the Cheryl's plant expansion, and where you stand on that? And maybe some of the expected benefits you would expect to achieve in fiscal 2015.

Sure, Jeff. This is Jim. I'll ask Chris to follow up on this. But what you see is we have a business that's been doing well for a long time there. It's still a regional brand, increasingly growing its footprint of customers beyond the Ohio and Midwest area. The programs we've introduced there, with the increased range of price points, the Cookie Clubs we've introduced. All have been doing really, really well. So we're running up against capacity issues there, anticipating that business will continue to grow, we decided to make the investment to double its baking capacity, and that's well underway. And we'd expect to have that come online this fall. Chris?

Yes, I think, we have a full swing in construction mode, and just continuing to move forward there. Like Jim says, come late summer, early fall, we'll be bringing that online and be producing with the new capabilities. We think it really helps us to start to position, as Jim said, not only double the baking facility, but we believe it enables us to double the size of that business over the coming years.

Okay. And the doubling of capacity, if I recall, Chris, that's over several years. It's not just going to happen for the upcoming year, correct?

That's correct, Jeff. What we're doing is we're kind of building the shell, and then we'll be adding the equipment and capabilities in commensurate with growth.

That's right. So Jeff, we'll be adding over time 3 additional baking lines into that facility. One will happen this summer, into the fall and then the second and third will happen as the business grows.

But those other 2 additions, of second and third line baking capacity will have a much lower capital cost because the building is already there, all the infrastructure is there, it's just the specific equipment for those lines in the year or 2 ahead.

Okay. And final question I would have guys, it relates to your multi brand portal, and if you could talk about where you're at on that, have there been any delays, and do you expect to see any benefits in the upcoming fiscal year, when you flip the switch?

I think that [indiscernible] stands, and I think we'll -- what we've been last saying, is basically, that will -- we look at most of the technology development where it's being completed this summer. Then that lot, it gives us the ability to start to layer in the marketing programs into that. What we continue to see is the -- as we continue to move in this direction, and different tests that we've been doing, are showing benefits of whether increased traffic and/or increased conversion to our food brands. We're seeing our best customers continue to add the family of brands into their purchasing history, thus increasing the lifetime value of those customers across the company. So early signs are continuing to be very encouraging. The development work is continuing on schedule, to be completed this summer, and we would hope that we start to see the benefits of that, as we move into fiscal '15, as we start to really enable the marketing program behind that.

And Jeff, this is Jim. I think every indication we could anticipate, in terms of customer performance, their share of wallet, their being pleased with the new products they're being introduced to, every one of those tests have said -- screamed that this is a good thing to do. I will tell you, there is some frustration, that it took us longer to get here than we would've liked, and Chris had to make a lot of organizational changes in the last year or so, to make sure that we got back on track. So yes, we can see the light at the end of the tunnel, and we're quite certain that it's not a train.

Our next question comes from Dan Kurnos of Benchmark Company.

Just, maybe, again, a high-level question here, maybe this, I guess, could be for Bill. I don't if you'd be willing to break out specifically what the Easter shift impact was, just on the Gourmet Food business alone. And then, sort of as a follow-up to that, just how you guys feel about, if you had not had the weather impact, if you would've been able to achieve your initial guidance this year.

I'll ask Bill to give you the specifics on that, but we quantify 2 things. Bill will cover the bottom line. Top line, we said was in excess of $10 million, and that was a combination of Valentine's Day and the Easter shift. And the Easter shift is disproportional. We won't break out the specific numbers, but it's -- the Food business is disproportionately affected by the Easter shift. But anecdotally, and I'll hand it to Bill, anecdotally, January was a tough month, weather-wise, it was just brutal, and then it started to get good right before Valentine's Day, the 2 weeks before Valentine's Day, business really looked like we were on pace to have a very good holiday. And then the 13th, the whole East Coast and part of the Midwest got smacked by ice and snow storms. So as Bill mentioned, as Chris mentioned, we did all the spending to have the business. The trend lines looked good, and then we got smacked. Now I will tell you that after Valentine's Day, Bill, I think, he -- we could say that, the trend lines returned to normal, and had been good since that. Would that be fair?

Yes, that's correct, Jim. So just getting back on a couple points. So Easter, as Jim mentioned, north of $10 million in revenue, and as Jim was referencing with the disproportionate, it's high-margin, high gross margin, high contribution margin business that shifts Q3 to Q4, because it's all e-commerce or it's brick-and-mortar retail, which has higher margin. So that's why, they kind of the big shift in profitability, as well.

Because of our vertical integration in those products.

Right. With respect to the impact of the winter weather on -- and Valentine's Day, really, the weather impacted, as Jim referenced, starting in January. So we go right back -- back in December, but really in this quarter, it's really the month of January, as well as the month -- public side, Valentine's Day holiday. The impact of that alone, of just kind of the weather issues we face was a difference between us reporting positive EPS and the loss of $0.02 that we reported. I think we did a pretty good job of mitigating so many impacts of, with OpEx savings elsewhere in the company, but the nature of the quarter, with only the 1 holiday in the quarter with the shift of Easter into the fourth quarter, resulted in that reduced leverage that you saw.

Got it. That's really helpful. And then to that point, I think that the 1% growth in Consumer Floral was, given the situation in a probably better than most we're expecting. So I guess that one thing I did want to follow up with you, Jim, on was you actually had decent growth, other than the sort of nonimportant quarters. So -- but as we look to the margin side, you had nice peak margins last year, it's kind of come off, I'm just wondering if there have been -- is there any changes in the competitive landscape, or if there's anything specific that you guys are doing to maintain or grow market share that could be impacting that line, and when we might see sort of return of the peak margins?

Well, I think, from a margin perspective, what Bill said was that, that we were on track for -- have a good margin quarter this quarter, and we expected a return in this fourth quarter to our traditional margin levels. Bill?

Yes, and I do think, first and foremost, we do believe that there is room to grow our gross margins and for the year, our gross margins will be up in fiscal '14 over fiscal '13. As for the impact on the quarter, the lower gross margins that we saw in the Consumer Floral brand and in the Gourmet Food and Gift Basket segments were really primarily related to Easter, what I talked about before, kind of the shift at the high-margin products from Q3 to Q4, as well as really the impact of weather on the quarter, especially around the Valentine's Day holiday.

Got it, great. And then just last one for me, some thing that's, I guess, kind of been on the radar, gets talked about a little bit. Make talk a little bit about your partnership with Amazon and their Fresh program, and how that's developing what you can see can contribute and sort of what your thought process is, as you develop that relationship?

Yes, I think, first and foremost, we have a tremendous amount of respect for Amazon, so any time there's opportunities as we've been working as a merchant in their marketplace has been selling product in Amazon for a while. When given the opportunity to work with them on the AmazonFresh program, we took it -- it's a small piece of the business, but it gives us good partnering capabilities to see where that business might develop, as they expand the Fresh program.

Our next question comes from Eric Beder of Brean Capital.

Could you talk a little bit about, in your last conference call, you talked about the $5 items. I know this quarter's on a huge kind of quarter of an effort. How does that flow into this quarter, in terms of its broadening out the business here?

Well, we view that lower price product opportunity to expand the range of our customers, attract more youthful customers, bring them to our franchise earlier, expose 1 set of customers to another brand, and we're doing that in each of our product categories. Eric, it's more mature, and our Cheryl's product, as we started it there, probably 2.5 years ago now, 2 years ago, certainly. But Chris has charged each of our brands with developing a line of introductory price points so that we can, especially as the multi-brand platform comes online, we have more and more cross-brand pollinization exposure opportunities. So it didn't have a particular impact on this quarter, but we see it having an impact on our business every quarter, in a very positive kind of way, and we'll continue to deepen those efforts.

Yes, the key focus on an ongoing basis, is utilizing that kind of product for the just because reasons in everyday life. That gives us the ability to deepen our relationship with the customers, and just increase their purchase frequency with us in addition to, as Jim pointed out, a tracking of different demographic, younger audience, as well.

Yes, and I think, 1 data point on that is, we mentioned, we had 675,000 new customers, down about 1%, but despite the shift in Easter, despite the weather issues that we had, we still attracted a relatively good comp of new customers year-over-year, and I think the lower price point items help attribute to that.

Yes. Good point.

I'm actually, I'm talking about that. You, the website now has all the jabs and other pieces. How are you seeing customers take advantage of that, and ordering from multiple brands and more locations in that? Is that something they're getting to used to and starting to see more of there?

Yes, I do think it is something they're getting used to. My comments earlier, the real tech development work around that will complete this summer, and that then enabled us really start putting more proactive marketing efforts behind, inducing that type of behavior that we're looking from our customers. So to this point, that's really just watching customer behavior on their own, as they see the products are exposed to the different brands, et cetera. As you know, again, what we're seeing is our best customers are not decreasing, if you just take an example of best customers, the 1-800-FLOWERS brand, we're seeing them, by no means, decrease their floral purchase, but just increasing their purchases of our other products and brands and ultimately, driving what we're after is driving a higher lifetime value across the customer base.

Okay. And finally, as you've mentioned, all these holidays are coming up. What is your thoughts about your advertising spend, in terms of where you're going to put it, into TV this year? How should we think about how the advertising rates are going forward?

Yes, so I think, as we look at here, right now, we're in the Mother's Day holiday, and so Easter and Administrative Professionals Week is behind us. And we've continued to really have a strong focus on where we're putting our marketing dollars, constantly, as we moved into a very analytically driven marketing approach, constantly testing, iterating and deploying. So you'll continue to see us do that. You'll continue to see us move the shift. Certainly radio has been a good program for us over the years. Display advertising, they naturally just constantly working in search and SEO optimization. Television, from time to time, you'll see us do a little bit of that at holidays, we are on add during this Mother's Day holiday, constantly looking to see where we get the best return on the dollar.

And it's all about the mix.

[Operator Instructions] Our next question comes from Anthony Lebiedzinksi of Sidoti & Company.

Just wondering, as far as the customer credits, I understand that was a very difficult Valentine's Day period because of the weather. Is there any way that you can perhaps quantify the level of customer credits that you issued this year versus last year?

Impact on gross margin. Anthony, I think, having been doing this for a long time, think I can predict that every 10 years, we're going to get smacked like this. It seems to be the pattern. As Bill was just saying the other day, he's been here for 17 years, and that's -- and he's seen 2 of those Valentine eruptions occur. So that's been a trend. The impact is 2: One on the top line, you saw the overall impact on the quarter and that we would attribute to the 2 things, the $10 million or so related to the Easter shift, the balance would be the Valentine impact. As we said, we spent all our marketing dollars, we spent all our efforts on product and preparations, and then when you lose your revenues for that '13 to '14, and that's going to cause you a credit issue, too. Good news is we took care of our customers in a way that was transparent. I think we're uniquely -- unique in that position in our category, and in the way that our customers have been giving us good credit for. Bill, any color you want to give the answer Anthony's specific question?

Yes, I would say about half of the margin decrement was due to the credits and the weather-related issues that we had. The rest was really kind of the shift of the Easter and the higher margin items that we had.

Okay. That's very helpful. And also, looking at the iflorist business. Is there an opportunity to improve margins in fiscal '15 for that segment?

Technically, there is. It's a very small business. It's Jim. It's a very small business, but one that we think has great promise and opportunity, so we just put our arms around them in December, when he moved to a majority position in our company. So we think 2 things, to have very small, very light margins now. So we -- the reason we felt comfortable stepping up there is, we see a path to a, quite a good business there, with margin improvement, with top line growth, with product diversification, so the reason why we felt comfortable doing that is, we think all of those things can and should come through in the near term.

All right. Got you. And can you give us just more details about the pricing initiatives within BloomNet?

You can see Bill's really interested in doing that.

I mean, BloomNet has a mix of products. We talked about in the past, we have some high-margin products with regard to membership fees, advertising, web hosting, et cetera, and then we have some of the, kind of the more boring kind of wholesale and everything else, the everyday kind of products that we have.

And so the low margin things, we need to do because it's good for our florists, it provides the customers with the right product mix we have, but when, I think, what you're referring to there Bill is, introducing this new software management system. We put the development work into that. What you're really selling is the software as a service there to our customers, and that's higher-margin because you have all your development cost on the front end, and then when the -- your flower shop operators, your BloomNet members can operate their business on a wireless platform, on a cloud-based system, using an iPad as both the point of sale device, as a selling tool, as an access to other products, it really does open up a whole world of opportunities for our BloomNet members, and that's a higher-margin business. I think -- Bill is that what you were referring to?

Yes, that's right.

Okay, that's helpful. And lastly, just wanted to clarify the whole lower wholesale orders that you had in your GF, GB segment. Is that entirely because of the Easter shift?

No, I would say that what happened was, with our operational issues last year, and Anthony, particularly in Fannie May, the good news is we've fixed them, and it worked well this holiday season, and in fact, there's more we can do, but we got back to a good operating platform. We have a team that has plans in place to make it even better as we go forward. But it returned to a very good operating platform that worked well this holiday. But we disappointed some third-party customers last year, who this year said, we're going to wait and see and make sure you fix that business. So I think that would be the difference. So we'd fully expect that business to return in '15, because we've proven ourselves this year.

Our next question comes from Michael Kupinski of Noble Financial.

This is actually Juan Bejarano for Michael Kupinski. Most of them have been asked, but just in terms of Fruit Bouquets, I know you discussed it a little bit, but can you maybe update us on the coverage there? Are you close to that 50% mark? I know that above 50%, you start to advertise on a national level, can you just give us a quick update on the coverage?

We have worked -- in terms of coverage, we will -- I think our next call would be the more appropriate time to do that, consistent with what we did last year. We're continuing to make steady, slow and steady progress on our coverage. We're looking forward to getting to the point when we think we can begin to advertise that product, because we have sufficient coverage. But I'll give you an update on our next call, on where specifically our -- last year -- last summer, we told you we were nearing the 1/3 mark, and we'd be over it by the time we did that call, and we'll update that on our next quarterly call.

Yes, I did, again, we continue to be encouraged. Our customers in the markets where our Fruit Bouquets are available have been overwhelmingly positive in their response to the product. And we continue to believe that there's a significant opportunity for incremental sales growth in this category.

And at this time, I'm showing no further questions. I'd like to turn the call back to management for any closing comments.

Well, thank you and thank you, all, for your questions and your interest. If you have additional questions, please don't hesitate to contact us and just a reminder that Mother's Day is fast approaching. It's a week from Sunday, so these are our 2 busy Mother's Day weeks. And that the moms, so that we know, deserve the very best and that's why we encourage you to visit us at Facebook, on Twitter, on Instagram to tell us something about the wonderful mom and moms in your life. You'll find similar sentiments from thousands of others, who are sharing their mom stories, as well as the perfect mom curated and approved gifts for all the moms in your life. Thank you, and I hope all the moms in your life have a wonderful Mother's Day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.