It seems that nearly everything's coming up roses at 1-800-Flowers.com
Growing beyond flowers
Management kicked off the meeting by outlining the four components composing its overall business. In addition to its namesake goods, 1-800-Flowers.com offers gourmet food and gift baskets, as well as home and children's products.
Of course, the flower delivery segment provides nearly 50% of the company's revenue. Its floral business also includes the BloomNet wire service, which provides products and services to florists. The company developed this category in early 2005; it now contributes slightly more than 4% to overall revenue.
Meanwhile, management has aggressively grown its gourmet food and basket division, which now accounts for more than 24% of the company's revenue stream. This area has been its fastest-growing segment, displaying remarkable 96% year-over-year growth through the first nine months of 2007.
However, the home and children's area has been the company's lone disappointment. Though it provides nearly 22% of total revenue, it reported a 5% year-over-year decrease in the same nine-month period.
It's not all organic
Management outlined a three-pronged growth strategy, starting with its traditional focus on growth from within. 1-800-Flowers.com expects to continue its trend of roughly 7% to 10% organic growth per year.
More recently, the company has also sought to expand through acquisitions, particularly in gourmet food and gift baskets. It bought The Popcorn Factory in 2002, Cheryl & Co. in 2005, and Fanny May just more than a year ago.
Old-fashioned business development, through ventures such as its BloomNet service, has provided a third path to growth. 1-800-Flowers.com saw great potential in the wire service business, which enables retail florists to communicate with one another. According to management, this business historically hosted a duopoly of FTD
Management also discussed its strategies to grow profitability in three key areas. First, it's pursuing a superior mix of products to expand gross margins. Gourmet food and gift baskets are higher-margin items, spurring the company's efforts to expand this segment of the business.
Next, the company sought to expand its operating expense ratio, reducing the cost of conducting business via greater operating efficiencies. Finally, it invested the most in key business areas that provided the greatest growth: its consumer floral business, BloomNet wire services, and gourmet food and gift baskets.
It's the customer, stupid
Lastly, 1-800-Flowers.com executives discussed the importance of fostering long-lasting customer relationships. It found that shoppers often turned to 1-800-Flowers.com for long-distance floral deliveries, but chose local florists for closer recipients. In response, management made a concerted effort to improve relationships with customers, debuting a marketing campaign to present 1-800-Flowers.com as customers' local florist. According to management, most gift-giving occurs within a 15-mile radius, so convincing customers to use its services for those close-to-home occasions is crucial to the company's success. With that goal accomplished, the company has begun to focus on offering its loyal customers a broader spectrum of products.
The Foolish bottom line
Management at 1-800-Flowers.com has enjoyed a very successful business over the past year. Profits bloomed once more, and its stock price has climbed 79% in just a year. The company ambitiously expects to double profits in the next two years, believing that it's planted the seeds to achieve such growth. Before long, we'll know whether management is correct, or simply piling on the, well, fertilizer.
For more on the business of online gift givers, read:
- FTD Predicts Little Love for Mom
- 1-800-Flowers in Full Bloom
- A Profit at 1-800-Flowers.com: Fool by Numbers