Why Long Island Florists Should Read 1-800-Flowers' New Loan Terms

1-800-Flowers.com, the gifting company headquartered at Two Jericho Plaza, told investors on September 10 that it has amended its bank credit agreement for the third time, hired Guggenheim Securities to evaluate ways to raise capital, and is considering selling what it calls non-strategic assets. The filings behind that announcement are worth reading for anyone on Long Island who fills its orders, sells to it, or runs a business with a revenue line that is heading the same way.

What the numbers say

For the fiscal year that ended June 28, revenue fell 10.8 percent to $1.50 billion. The company lost $134.8 million, a figure that includes a $45.2 million non-cash write-down of goodwill and intangible assets. Adjusted EBITDA, the measure its lenders watch, came to $2.9 million for the entire year, down from $29.2 million the year before.

The balance sheet tightened along with it. Cash stood at $11.4 million at year end, against $46.5 million a year earlier, and working capital swung to negative $17.8 million. For the year now underway, management expects revenue to fall again by a mid-single-digit percentage, with adjusted EBITDA of $10 million to $15 million.

The decline is not spread evenly. The consumer floral and gifts segment, which carries the 1-800-Flowers brand most people know, saw revenue drop 17.7 percent for the year to $638.9 million. The gourmet foods and gift baskets segment, home of Harry & David and Cheryl's Cookies, fell 5.2 percent. The smallest segment, BloomNet, slipped 1.9 percent for the year to $96.8 million, and it was the only one of the three to grow in the fourth quarter, up 1.9 percent to $24.7 million.

Why BloomNet is the Long Island part of the story

BloomNet is the network through which the company sends floral orders to independent flower shops and franchise florists. It settles payment between the florist who takes an order and the one who delivers it, and it sells member shops wholesale supplies, directory listings and point of sale systems. According to the annual report the company filed on September 11, a majority of its own floral orders are fulfilled by BloomNet member shops rather than shipped from a warehouse.

That arrangement turns a national number into a local one. When the consumer floral brand loses nearly a fifth of its revenue, the orders it hands down to neighborhood shops shrink with it. The filings do not break out orders by region, so nobody outside the company can say how much of that loss landed in Nassau and Suffolk, but any shop here that counts on wire orders from the brand has absorbed some share of it.

What the lenders asked for

The amendment, signed September 9 with a bank group led by JPMorgan Chase as administrative agent, is where the mechanism shows. It replaces the usual ratio tests with a minimum liquidity requirement through the quarter ending in late September 2027, followed by a minimum EBITDA test. It widens the company's permission to sell assets but attaches conditions: after at least $15 million of sale proceeds goes to paying down the term loan, the company may keep up to $30 million for its turnaround. It also requires monthly calls with the lenders and adds prepayment obligations on the revolving credit line.

The term loan calls for $24 million in principal payments this fiscal year, with $97 million due at maturity in June 2028. The company also expects to borrow on its revolver again this fall to buy holiday inventory, as it does every year. Last year those borrowings peaked at $175 million in November before holiday sales paid them down in December.

The company has not said which assets it considers non-strategic, and it has said it will not comment further while the review runs. Nothing in the filings says BloomNet is for sale, and a reader should not infer that it is.

The Jericho footprint

The only Long Island property in the company's annual report is its headquarters, a 92,700 square foot leased office in Jericho. Its bakeries, orchards and distribution centers are in Ohio, Illinois, Oregon and other states, and it reports roughly 3,300 employees nationwide. Locally, that makes it an office tenant, a buyer of professional services and an employer competing for the same finance, marketing and technology staff that Melville and Route 110 firms recruit.

What it means for members

If you run a flower or gift shop that takes wire orders, work out what share of your revenue comes through any single network, and if the answer is large, build a plan to widen your order sources before the holiday season rather than during it. The fourth quarter of the calendar year is when a wire network's own cash is stretched furthest and when any change in its fees or terms would hurt a shop most.

If you sell goods or services to the Jericho headquarters, review your payment terms and invoice aging this quarter. A company operating under a liquidity covenant has every reason to manage its payables closely, and a vendor who knows where its receivables stand is in a better position than one who finds out later.

And if your own sales fell this year, read the amendment as a preview of your next bank meeting. When revenue slides, a lender does not simply waive a covenant. It swaps a ratio for a cash floor, asks for regular calls and claims the first dollars from any sale. Go to your banker with a plan before a quarter closes, not after a test has been missed.