Good morning and welcome to the 1-800 Flowers Fiscal Year 2018 Third Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Joseph Pititto, Senior Vice President of Investor Relations. Please go ahead..

Thank you, Kate. Good morning and thank you all for joining us today to discuss 1-800 Flowers.com’s financial results for our fiscal 2018 third quarter.

For those of you who have not yet received the copy of our press release issued earlier this morning, the release can be accessed at the Investor Relations section of our corporate website at 1800flowersinc.com. Our call today will begin with brief formal remarks and then we will open the call to your questions.

Presenting today will be Chris McCann, CEO; and Bill Shea, CFO. Before we begin, I need to remind everyone that some of the statements 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 supplementary 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, any recording of today’s call, the press release issued earlier today or any of its SEC filings, except as may be otherwise stated by the company. I’ll now turn the call over to Chris McCann..

Good morning everyone. Thank you all for joining us. As you saw in our press release this morning, we are pleased to report top and bottom line growth across all three of our business segments for the fiscal third quarter. In terms of growth, total comparable revenue was up more than 10% for the quarter. This was driven by several factors.

First, robust growth in the 1-800 Flowers brand, which was up nearly 9% for the quarter and more than 10% for the key Valentine holiday period.

This was driven by our focus on truly original product designs, as well as marketing programs that are designed to deepen the relationship we have with our customers as we help them deliver smiles to the important people in their lives. It also reflects our efforts to continually enhance the overall customer experience.

This was illustrated by the numerous awards received during the quarter for customer care, including a Silver Stevie Award for the Best Use of Technology in Customer Service, a gold customer engagement award from retail touch points, and another elite award from Stellar Service.

During the quarter, we also continued to invest in areas that we have described to you in our past calls, in our Celebrations Passport, Rewards and Reminder programs, as well as a variety of marketing and merchandising initiatives that are helping us to drive accelerated revenue growth and further extend our market leadership position in the flow of gifting space.

Second, strong growth in Gourmet Foods and Gift Baskets, which was up more than 15% on a comparable basis. This reflected the shift of the Easter Holiday into the quarter, as well as the continued growth in everyday gifting.

The merchants and marketing teams in our Gourmet Food brands have been creating specific product collections and targeted marketing campaigns that are helping to drive double-digit growth for such occasions as birthday, sympathy, new baby, and get well.

This was demonstrated most effectively by Harry & David, which continue the accelerated growth that we have seen since our third quarter of last year. For the quarter, Harry & David e-commerce revenue increased more than 15%, reflecting double-digit growth in new customers, as well as steady growth from its existing customer base.

During the quarter, we also continued our focus on product innovation. Our newest brand, Simply Chocolate, gained further traction with customers, particularly for the Valentine holiday. During the quarter, we launched an interactive content section on the site called Explore Chocolate.

This section highlights the stories behind our artisanal chocolatiers. It includes recipes, videos, and it gives the ability for our customers to share their passion of chocolate by posting pictures and commentary. As a result, customer engagement on the site continues to exceed our expectations.

And we see Simply Chocolate fast becoming a destination for chocolate lovers. During the quarter, we also launched – we launched our chocolate covered strawberries under the new Berrylicious brand. Chocolate-covered strawberries continue to be a hit with our customers.

Our new Berrylicious line offers unique same day delivery in many major markets around the country. We also further expanded Harry & David gourmet collection of food and cheese platters, wine, prepared meals, all that appeal to a younger demographic for both gifting and entertaining.

In this area, we leveraged our partnership of Southern living magazine to create southern inspired specialty food gift sets, as well as trending foodie content and recipes. We also entered into a new licensing agreement to launch the Royal Touch collection of baked goods.

The Royal Touch line features the exclusive recipes of Carolyn Robb, former executive chef to the British royal family and one of the hot new names in the culinary world. Lastly, in our BloomNet segment, we were pleased to return to top line growth during the quarter.

This was driven primarily by an increase in wholesale products, as well as growth in digital and web marketing services for our local florist members. BloomNet is also seeing an increase in order volumes from both the 1-800-Flowers brand, as well as from florist shop-to-shop orders. We expect this positive trend to continue.

This will enable BloomNet to further enhance its market position. In terms of our overall bottom line results for the quarter, as I mentioned earlier, we're pleased to report contribution growth across all three of our segments. This growth could have been even stronger.

As we looked at the competitive landscape, particularly around the Valentine holiday, we saw the opportunity to accelerate our revenue growth and extend our market leadership position.

So, we made the decision to increase our investments in marketing and merchandising initiatives that enabled us to achieve the double-digit growth that we reported for the holiday.

Looking ahead, we are well-positioned to deliver solid results for the current fiscal fourth quarter and to further enhance our market leadership during the key Mother's Day holiday. I'd now like to turn the call over to Bill for some more detailed review of our results of the quarter.

Bill?.

Consolidated comparable revenues at the high end of our previously stated range of $1.13 billion to $1.15 billion; EPS of approximately $0.60 per diluted share; comparable adjusted EBITDA of approximately $80 million. We also expect free cash flow to remain in our previously stated range of $30 million to $40 million.

I’ll now turn the call back to Chris..

Thank you. So, to sum up, we're pleased with the accelerated revenue growth we achieved for the fiscal third quarter, specifically the strong performance of the 1-800-Flowers brand during the key Valentine holiday period.

Importantly, in addition to double-digit revenue growth, the 1-800-Flowers brand achieved solid growth in new customers and increased repeat rate from existing customers, all while further enhancing our already historically high customer satisfaction metrics.

We were also pleased by the traction we are getting in everyday gifting across our gourmet food brands, particularly the accelerated growth at Harry & David, which continues to benefit from our focus on digital marketing.

Also, during the quarter, in addition to the product innovations that I mentioned earlier, we further illustrated our commitment to being on the leading edge of new technology innovations that enhance the customer experience. Some of the initiatives in this area that we're most excited about include our launch of Google RBM, rich business messaging.

This enhances our status notifications and enables customers to view their order status, contact customer service and modify their orders, linked to our new self-service portal. We rolled out a new, responsive website design across our multi-brand platform for 1-800-Flowers, Harry & David, The Popcorn Factory, Wolferman's, and Simply Chocolate.

This new widescreen design and navigation features are getting great reviews from our customers. We also extended the capability of our new digital self-service portal, which we launched on the desktop channel back in the second quarter, now bringing this into our mobile platform.

We enhanced the shopping experience for our increasingly mobile customers, with the capability to do product add-ons during the order transaction process. We optimized keyword searches within Google Assistant. We launched one of the first SMS-based chatbots in the market with Samsung.

And most recently, we launched Apple Business Chat, giving Apple iPhone and iPad users the ability to chat one-on-one with one of our gift experts to service any and all of their gifting needs.

As you can see from our innovations in new products and new customer engagement technologies, we continue to invest and build the capabilities for future growth and the expansion of our Celebrations ecosystem.

I would like to thank our team, all of our associates across the company, for their continued passion and willingness to embrace change as we focus on our mission to deliver more and more smiles to our customers throughout the year.

With that, let me turn the call over to Kate so that we can handle and facilitate some of the questions that you may have. Thank you very much.

Kate?.

Thank you [Operator Instructions] The first question comes from Dan Kurnos of Benchmark Company. Please go ahead..

Great, thanks. Good morning. Chris, look, you clearly took a ton of share in the marketplace and invested to do so.

So, I think the obvious question on a go-forward basis here is, one, how sustainable do you think are your rev share gains? Two, given the disaster that has been your primary competitor, how aggressively do you think they come back in the marketplace to try to regain that share? And then, three, on a longer-term basis, if you can sustain that share, given the margin side of the equation here, especially as it relates to your guidance, sort of what do you think, is that just further investment to maintain and take share? Or what do you think is kind of a reasonable level to get back to from a margin perspective in order to either maintain that share or just compete in the marketplace on a go forward?.

Great, Dan. Thank you for that question. Yes, we're very pleased with the ability that we've had to take market share in the last quarter or two now, maybe a little bit longer than that even.

And I think as we look more on a go-forward basis, the environment we're looking, the primary competitor that you spoke about, I think it's a good management team in place there. They're in a little bit of a turnaround situation there, but they will make smart decisions. So, we are confident in that.

I go back in history a little bit to when those two brands that we – primary brands we compete against, were in a more stable environment and we were still able to take market share even in that environment. So that bodes well for us as we look to the future.

I think as we look to the future and look at what kind of revenue share gains we can, it really comes down to first and foremost, how we are managing our brand, what kind of products we are bringing to the table and then staying with our obsession on constantly enhancing the customer experience.

Then from time to time, like we saw during the Valentine holiday period, I think there will be opportunities for us to become a little bit more aggressive and to step on the gas pedal a little, as we did. I'm not looking at that as a sustainable strategy.

So, now even as we look into the Mother's Day holiday period, we're comfortable and confident with the plan we have in place. With that said, if we see opportunities to grab some more market share, we will do so. But I think those are more short-term hits than a long-term sustainable strategy on our part..

Got it, okay. That's helpful.

Just – then just shifting over to the GFGB side of the equation, can you just give us ballpark, I think it's probably low single, something like that, but if you pull out Easter kind of, what the Harry & David growth was in the quarter?.

Sure. I think it was still mid-single digits.

Bill, do you want to cover that? You want Harry & David or GFGB?.

I think in both cases, we are talking similar numbers, Dan. We reported on a comparable basis, the GFGB segment grew 15.5%. Without Easter, it was 5.7%. You mentioned Harry & David. E-commerce growth was 15.9% during the quarter, but if you back out Easter, it's in that same 6% to 7% range..

Okay. Because I was just kind of trying to also triangulate, because you said Cheryl's and Baskets had a good quarter. As long as – just wanted to make sure that the rest of the non-Harry & David stuff was still performing up to your expectations.

Is there any way, because I – look, long term, and, Chris, I guess we can kind of leverage this with the first question I was asking. You guys have talked about getting this, the path towards long-term growth of organic 5%-plus.

And while obviously, this was an anomaly quarter where you were able to take a lot of share to the upside, all of these things, Harry & David needs to continue accelerating, which clearly kudos to you, it sounds like it is, understand that the rest of the GFGB is only about, call it, 10% or so maybe next year of your total revenue, but actually, even less.

But just your thoughts on getting kind of the – are you on a pace now to be able to achieve those long-term expectations that you guys have set out?.

Yes, Dan, I think we are. I think we're demonstrating that we're on that pace. It really goes back to last year, when we said that the main ingredient in that was getting the Harry & David e-commerce business on track, that would allow us to do so. And we are doing that.

So, I think we're clearly demonstrating that we're progressing towards that 5% growth, organic growth number. And a lot of that has to do, first and foremost, with the Flowers brand and the Harry & David brand bringing customers into the ecosystem. The other brands have to be able to take advantage of that and have their own performance as well.

When we get hurt by a mishap, like we had at Christmas at Cheryl's, that's going to pull us back a little bit.

But assume normal operating procedures, we'll all benefit from that customer – new customer acquisition coming into the pipe and then going into our cross-brand marketing and cross-brand merchandising programs, the Passport program, the Rewards program. And we're seeing all of those things now start to really generate this everyday business for us.

And we're very encouraged by it..

And again, Dan, overall, if you back out the impact of Easter, so the timing impact of Easter, our growth was over 6% in the quarter. And we have BloomNet getting back to growth. And we think there is opportunities, there's legs behind that and that we can really start showing sustainable growth within BloomNet as well..

Got it, okay. Just last quick one from me, Chris. High level, and I don't know, maybe this is a little bit too far into the future, but just thinking about the Simply Chocolate launch here, talking about recipes. I mean, it seems kind of ripe for the picking here with partnerships.

I mean, there are so many other guys out there, Allrecipes, other large content publishers that play in this space that could probably get you brand recognition. I don't know – it doesn't – you've done some partnerships in the past.

But is that kind of a thought process or an opportunity to continue to bring in sort of unique external or user-generated content to keep driving site traffic, site visits and time on site?.

Yes, I think that is very much a part of our strategy. We've always been strong believers in the intersection of content and commerce. It's been very difficult to figure that out over these years, but you're seeing us do more of that and I think you will continue to see that.

Even things like utilization of the partnership with Southern Living magazine, utilizing the things with Real Simple magazine that we've done. Now this new relationship with Carolyn Robb, the chef to the royal family, so bringing things like that into the mix. The artisanal chocolatiers within the Simply Chocolate line.

So, you're trying to see us bring more of a social and content element into our shopping experience..

Alright, got it. Great. Thanks very much for the color..

Thank you..

The next question is from Michael Kupinski of NOBLE Capital Markets. Please go ahead..

Thank you. Thanks for taking the questions. I'm just curious about Passport and was wondering, there's others out there like Amazon's planning on increasing shipment prices and so forth.

Can you just give us your thoughts about pricing for Passport and so forth?.

So, as we look at price – well, thank you, Michael. As we look at Passport, we're always working in where is the right optimal point. Our focus right now is growing Passport membership. So therefore, different price testing’s we do, whether it's a $29.99, which is our full price point item.

Sometimes we drop that down in a promotional activity to $19.99. We see an uptick in membership there. And when we see an uptick in membership, the good news is we are seeing similar behavior metrics. So, we're comfortable there. We're looking to see can we add – can we increase the price of Passport. I think down the road, we might be able to.

I still think it's pretty early. And also, it would be incumbent on us as to when we would do that, what other value we are adding to the program. So, if there's opportunity for us to do that, to work with some other companies perhaps, we would look at that to bring some other value add before we were to raise the price.

But Passport overall, we're very happy with the progress we're making there. The behavioral metrics that we've spoken about many times continue to see. And I think we're just seeing that overall in our customer file, we're very happy.

As we look at the revenue numbers we had across the business, what we really look at underneath that is the customer file and looking at our 12-month file growth across the company, driven by a combination, which is great, combination of new customers and kind of a resurgence of activity of existing customers, seeing their frequency and retention rates start to creep up.

And that's driven all by our focus on the experience, our multi-brand customer marketing and merchandising initiatives. And our focus on driving Passport, Rewards and Reminders program. So, all working well. I don't think we're in a position to raise the fee up to the same as Amazon Prime yet, but we will need to add a little more value to do that..

Got you.

In terms of the market share against FTD, can you just talk a little bit about the – whether or not the increased marketing spend was more seasonal? Do you plan to be backing off of that as you go into the – I guess, going back to Dan's question is whether or not this is going to be a sustainable spend? Or is it just going to be more seasonal, or like you said, more opportunistic?.

Our brand, our truly original products, and our commitment to service..

And on the lower margins in BloomNet, you mentioned it was due to product mix.

Can you explain the mix of product that contributed to the lower margin and the growth rate of those products in the quarter?.

I'll see if Bill can give you more specifics. But generally, when we sell in wholesale products are on the rise in BloomNet, gross margin will be on the decline, but ultimately reducing the contribution margin..

Yes, Mike, I think we've discussed in the past that the margin line can fluctuate within BloomNet, depending upon the product mix, because of membership fees and other services that BloomNet has, which are very high-margin items. And then you have the offset to that, some of the kind of wholesale items that we sell in at a low margin.

In this particular quarter, we did have some nice gains in wholesale, which helped to drive us back to top line growth, but it did impact margins.

We think we're in a position now where we have more sustainable growth on the wholesale side of the business, so it's driving incremental gross margin dollars, but it could impact the gross margin percent..

Got you.

Just share repurchases in the quarter?.

Yes, you see in the financial statement, you see the year-to-date numbers, which were $12.1 million, $11.1 million of that was done through the second quarter. So about $11 million was utilized during the quarter. We bought back about 100,000 shares; bought back about 1.2 million shares year-to-date..

Got you. Okay. That’s all I have. Thank you..

Thank you, Michael..

The next question is from Anthony Lebiedzinski of Sidoti & Company. Please go ahead..

Good morning and thank you for taking the questions. So first on the GFGB side, you guys have talked a lot about the, expanding the everyday gifting assortment. I was just wondering if just within that segment, if you could perhaps share with us how much of your growth is actually coming from the everyday gifting.

I mean, certainly, it tends to be less promotional, I would imagine, versus the holidays. So, if you could just give us a sense of the – how much of your revenue is now coming from everyday gifting occasions versus a year ago? That will be very helpful..

Anthony, this is Bill. So, we had kind of a wow number with 15.5% growth across the food brands during the quarter, but that included the shift in Easter. And Easter impacts the food brands and it does more to the food brands than it does 1-800-Flowers. When you back out the Easter impact, we grew about 5.7% – 5.7.

So, a lot of that is really the everyday gifting. The food brands don't participate at Valentine's Day that much. Their trend lines at Valentine's Day aren't much different than they would be on an everyday gifting occasion. So that 5% to 6% growth in everyday gifting is what it is..

And even last year, when we really started this momentum on everyday gifting in the food brands, the percentages sounded great, but they were pretty low numbers. This year the percentages have increased into the high double digits for some occasions, like a birthday occasion at Harry & David, and the numbers are starting to be meaningful.

So, it's really helping to drive that 5% to 6% growth number that Bill referenced..

Got it, okay. And you also talked about the new customer growth at Harry & David.

Do you guys have a sense as to the demographic of those new customers?.

Sure. In general, what we would be seeing on the new customer growth at Harry & David is that because of a stronger shift from especially our acquisition marketing into the digital channels, we're attracting a bit a younger customer, which is good. And then we've been tracking those customers.

So, we really first started to see that back in calendar Q2 – calendar Q4, fiscal Q2, the Christmas holiday season. And what we've been very pleased is to see that the activity from that cohort of customers in this next quarter to be slightly above what our normal cohort of activity would be.

So, they are showing they're a younger demographic, buying a different product line. That's where we're seeing them respond more and more to the Harry & David gourmet product line. Our fruits and cheese, our wine and prepared meals.

So, all of these things we're seeing to help generate younger demographic, that's coming in with either similar or same customer behavior metrics..

Got it, okay. And also, got a couple of kind of just housekeeping kind of items here. So, in the quarter, you guys talked about spending some money on the Cheryl's win-back promotion.

Just wondering if you could quantify that? And the transportation cost increase, how much was that versus a year ago?.

Sure. I mean, on the Cheryl's stuff, Bill will provide some numbers. But on the Cheryl's, I think there's a couple of things we looked at as we had mentioned going into the quarter, that we'd be doing some customer win-back programs to take care of the customers that we disappointed during the holiday season. So, we have a number of those.

In addition, then, because we didn't get a lot of the product shipped out, we had some inventory that we had to clean out during the quarter as well. So, those are a couple of factors.

But Bill, you want to put a little more specificity to that?.

Yes, I think first and foremost, we have Cheryl's operating effectively on its everyday; day-in and day-out business. But during the third quarter, we did incur some additional costs related to the second quarter operational issues that we had. We mentioned in our January call about initiating a win-back program.

So, we had some marketing programs and some cost behind the win-back program, where we basically reached out to customers that were affected back in the second quarter. We had some special offers for them, sold them some products at lower than our standard margins.

Additionally, as Chris mentioned, we had some excess holiday inventory that we wanted to move during the quarter, which we did. So, we had some special pricing on that and sold them below our standard margins.

I think the net impact of these things cost the Cheryl's contribution, the end price contribution, probably about $1 million during the quarter. But I think it's – what's important to point out is historically, we've talked about Cheryl's a lot in the past, right? Cheryl's has historically been one of our best brands.

It's high gross margins, it's got the highest contribution margin of any of our brands, and it has like the highest customer loyalty of any of our brands. So, we are confident that Cheryl's is back on the path to returning to kind of those levels and those metrics..

And we've seen some good results to those win-back programs that we've been running, so we're very pleased with that..

With respect to transportation cost, we talked more about this back in the January call, in the second quarter, because it impacts us more during the high period of the gourmet food. But that continues to linger for us, probably close to about $0.5 million during the quarter..

Alright, thanks very much..

The next question is from Linda Bolton-Weiser of D.A. Davidson. Please go ahead..

Hi. So, just kind of thinking about your business in a very long-term kind of perspective. I'm thinking about like your gross margin, because there's been some degradation. And it seems like it is because one of your competitors has come back to life, so to speak.

So, I'm just trying to figure out like going forward, I mean, your gross margin peaked out at over 44% a couple of years ago, but one could argue that was because of a main competitor not being as aggressive. So, prior to that, your gross margin was more like 41%, 42%.

So, going forward, are we headed from where we are now down to 41%, 42% gross margin? Or are we headed back up to 44%? So that's what I'm trying to figure out, like just in a very long-term perspective, can you increase that gross margin, given that a key competitor has kind of more come to life?.

So, Linda, I'll take a stab at that. And certainly, Bill will have some color. Thanks for that question. Certainly, I like the fact that you take a long-term view at it. Certainly, that's how we take it, as a long-term view of our business as well.

And that's why I referenced earlier, that whether it be Valentine's Day or if we have an opportunity at Mother's Day, to make some short-term decisions on gaining some market share and sacrificing some margin, we will.

Other than that, I think really, what we've seen so far is some of the cost pressures that Bill had mentioned earlier on the gross margin and those are areas where we have opportunities to mitigate. So, it's less from the competitive point of view, unless we see an opportunity, and we will make that short-term decision.

But from a long-term point of view, there's been price competitors in the market all along, and I think there will always be some level of a price competitor for us to compete with. We don't compete with price competitors head on.

We focus on our brand, we focus on our truly original products and our service that allows us to offer a higher-value product that does comes with a higher gross margin as well. So, we’re confident in our ability to do that..

Yes, I think, Linda, longer term, I think the Passport program, which Chris talks about is something, and we've mentioned in the past, that's going to have some impact on our gross margin. It's going to drive more gross margin dollars. It's going to help us drive more top line growth.

But it will have an impact, because obviously, we're giving up some shipping revenue as that program gets larger and larger. So that – so you might see some gross margin degradation as a result of that. But that's a good thing.

With respect to this past quarter, Chris mentioned with regard to FTD, there was some reaction to a competitor out there that impacted this quarter. But that's more episodic in nature and not longer-term.

We have initiatives in place on the food side of our businesses, where we have some headwinds with respect to seasonal labor, where we had transportation costs, and we have some initiatives in place to help address that.

We do believe over time, other than the impact of Passport, which, again, is going to drive incremental gross margin dollars on that, that we'll be able to correct for the other cost headwinds that we have and get margins back moving in the right direction..

Thank you for that. And then just kind of – we haven't heard an update in quite a while on Fruit Bouquets, I think that's what it's called. How is that doing? And how is that segment of the market? Is it still growing? I know one of the competitors there is quite big.

But is that something you are still expanding? Or can you give us an update on that?.

Fruit Bouquets has been still expanding, still growing for us.

And one of the things we're excited about with Fruit Bouquets is the Berrylicious product that I talked about during my formal remarks, because as we expand Fruit Bouquets, you run into this challenge as we expand the fulfillment network, is there enough volume right away to give to that fulfiller to keep them in – to keep the muscle memory going on in the product distribution.

So, it's always a little bit of that Catch-22, as you expand a little bit, maybe you retreat a little bit. So, Fruit Bouquets is growing.

The addition of the Berrylicious product line and utilizing the Fruit Bouquets delivery network to have same-day delivery, just puts more volume into the distribution network, which now allows us to do more marketing and start to begin to grow the distribution network again. So, Fruit Bouquets is growing.

For a while there, certainly, it's been growing a little bit slower than we would have liked as far as the distribution is concerned. You get to a certain point where it's a little more difficult to grow that. But we're taking, you're seeing strategic initiatives like the Berrylicious program that will help us reaccelerate that growth..

Okay. Thanks very much..

Thank you..

[Operator Instructions] The next question is from Alex Fuhrman of Craig-Hallum Capital Group. Please go ahead..

Great. Thank you very much for taking my question. Wanted to ask about the chocolate marketplace that you've been talking about for the last couple of quarters. It sounds like that has been going pretty well. And as you think about the business longer term, obviously, you guys have a good balance sheet, generate a lot of cash.

So, it's logical that there could be perhaps some more acquisitions to put onto your multi-branded platform.

Does the experience of Simply Chocolate make you think that perhaps there could be some other sort of one-off categories where rather than vertically integrating with your own brands, perhaps there are more opportunities to aggregate a fragmented category on your website? And as you think about that, are there any meaningful margin differences between the Simply Chocolate business and your own brands? And do you feel that if Simply Chocolate were to grow as a larger share of perhaps your Passport users, are you able to support free shipping as that business presumably scales up over time?.

Couple of good questions there, Alex. I think first and foremost, you're kind of hitting the nail on the head on how we're looking at the expansion of our Celebrations ecosystem. It is certainly working with the family of brands we have today that are mostly vertically integrated, at least on the food side, flowers side is not.

The experimentation into the marketplace with Simply Chocolate is giving us different learning and showing us different capabilities and a different way to expand. So, as we start to look at the marketplace for future growth, I think we are looking at both opportunities.

Is there a product category or categories where we could play more of an aggregator role? We'll look to do that and experiment into that. We're doing that to some degree with Personalization Universe as well, where we're bringing other products into that mix.

So, a couple of early efforts to gain more learning of that, and I think you will see us do some more testing and learning into that strategy.

At the same time, we have a wonderful set of assets in our core businesses, especially in the food group, and if we find acquisitions there that we can leverage and leverage the operating capabilities and the platforms that we have there, that will continue to makes sense for us.

So, I think it gives us a couple of different opportunities to look for growth.

As far as the gross margin is concerned, I think we've been fine so far, but Bill?.

Yes, they are slightly below what we generate from products that we manufacture, but they are still very strong margins, and we've been happy with the margins within Simply Chocolate, in the low 40s..

And then the key there for us is making sure, let's take Simply Chocolate as an example, really, all we've done is introduce our product line in front of our existing customer base. We haven't really put a lot of marketing effort behind it.

Now what we're watching and trying to analyze is, is that cannibalization or is that additional sales? As we've seen, and we don't – I would say we probably don't have enough data there to be 100% in our conviction.

But just as we've seen with our multi-brand customer strategy early on, each brand manager would be afraid that if they left one brand and went to another, it was cannibalization. But what we see over time is they don't simply go to one other brand. They wind up going to two or three other brands. And you wind up with an increased lifetime value.

So that's what we're really chasing there..

Okay, that’s really helpful. Thank you very much..

There are no other questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Chris McCann for closing remarks..

Thank you all for joining us today and for your questions. We appreciate the dialogue and the input we receive from you. If there's any other questions, please don't hesitate to contact us. But as you know, Mother's Day is just around the corner, and we have everything you need to make it special.

You know that your mother, she will never ask, so make it special. And mom does it all, so don't disappoint. Come to 1-800-Flowers, take care of all the moms in your life. Thank you very much..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..