Good day and welcome everyone to the 1-800Flowers.com fiscal 2006, First Quarter Financial Results Conference Call. This call is being recorded. At this time for opening remarks and introduction I would like to turn the call over to vice president of investor relations, Mr. Joseph Pititto. Please go ahead sir.
Joseph Pititto, Vice President of Investor Relations
Good morning and thank you all for joining us today to discuss 1-800Flowers.com’s financial results for our fiscal 2006 first quarter. My name is Joseph Pititto and I am vice president of investor relations. 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 1-800Flowers.com or you can call Patty or Donna at 516-237-6113 to receive a copy of the release by email or fax. In terms of structure our call today will begin with brief formal remarks and then we will open the call to your question. Presenting today will be James McCann, CEO and Bill Shea, CFO. Also joining us today for the Q&A section of our call is Christopher McCann, our President.
Before we begin I need to remind everyone that in a number of 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 detailed description of these risks and uncertainties, please refer to our SEC filings including the company’s annual report on Form 10-K and quarterly reports on Form 10-Q. The company expresses to disclaim any intent or obligation to update any of the forward-looking statements made in today’s call and according to today’s call the press release issued earlier today or any other SEC filings except as may be other wise stated by the company and I will now turn the call over to Mr. James McCann.
Mr. James McCann Chairmen and Executive Officer
Good morning everyone. As we announced in this morning’s press release. Our fiscal first quarters revenues were $112.8 million an increase of almost 16% from the period a year ago. This is the continuation of the double-digit revenue growth that we achieved in the second half of the fiscal 2005. Importantly we achieve this growth in what is traditionally our lowest revenue quarter. Due to the lack of an existing college during this summer months. We also improved our gross margins by 20 basis points to 14.8% during the quarter, continuing the trend we saw in our fiscal 2005 fourth quarter. We anticipate the gross margin will continue to improve during our growing forward primarily as a result of our enhanced product re-sourcing our product mix and operational efficiencies.
On the customer front during the quarter we attracted more than 500,000 new customers with 66% of them coming to us online up from approximately 450,000 and 62% of first quarter last year. In addition we further deepen the relationship we’ve with our existing customers as evidenced by the 61.1% weekly quarter rate achieved during the quarter compared with 60.5% in the period a year ago. From an operating perspective our fiscal first quarter is a very busy time as we prepare for the upcoming holiday season. During the quarter we enhanced our outlets in several key areas.
First we continued the strong turn around began last year in our Home and Garden category marketed under the Plowandhearth brand where we achieved the sales growth of about 10%. With the significant increase in new product offerings and enhanced greater design in its catalogs in website we believe Plowandhearth is positioned to perform well in the current fiscal second quarter traditionally its largest.
Second we further developed our Bloomnet business, mailing our first directory to our Bloomnet florist members in September, this was followed by successful advertising sales effort for the second directory which is scheduled for mailing later this quarter. The directory represents the first in a range of new products and services for our florist members that we plan to introduce going forward.
And third during the quarter we made significant progress in the integration of our most recent acquisitions while the seasonality of the Winetasting Network and Cherly & Company impacted our operating results for the first quarter we anticipate that they will provide significant contributions during the current fiscal second quarter for both of our custom existing and our fast growing business gift service operations.
Combined with the popcorn factory and other offerings in Candy, Gourmet foods especially Gift Basket collection, we believed that we are well positioned to be a leading player in the food, wine and gift basket category this holiday season. I will now turn the call over to Bill so that he can take you to the details of our financial results and the key metrics for the first quarter, Bill.
Bill Shea, Chief Financial Officer
Thank you Jim. During the fiscal first quarter we saw the continuation of several positive trends in our business. In particular solid double digit revenue growth and an increasing gross profit margin. Importantly we expect these trends to continue during the current fiscal second quarter and throughout our fiscal 2006. Additionally the higher loss per share in the quarter compared with last year reflects, our stepped up marketing programs, which are helping us to drive accelerate revenue growth, our Bloomnet initiative which are progressing nicely.
And integration and seasonality of the acquisitions we made last year the Winetasting Network and Cheryl & Company, which generated the majority of the revenues and profitability during the current quarter. We believe these investment position as well for strong top line growth and significantly faster bottom line growth in the current quarter as well as full year fiscal 2006.
Regarding specific financial results and key metrics for the quarter. Total net revenues reached $112.8 million, an increase of 15.6% compared with $97.5 million in the same period last year.
Online revenues grew 17.3% to $62.3 million compared with $53.1 million in the first quarter last year. These online revenues equal 61.9% of combined online and telephonic revenues for the first quarter fiscal 2006 compared with 58.5% in the same period last year.
Telephonic revenues were $38.4 million up 2.1% compared with $37.6 million in the prior year period. Retail/fulfillment revenues were $12.1 million compared with $6.8 million in the year ago period. This increase primarily reflects revenues from Bloomnet and the contributions from the Winetasting Network and the retail stores of Cheryl & Company and Plowandhearth.
During the quarter, our combined online and telephonic orders totaled a 1,596,000 compared with a 1,407,000 orders in the year ago period. Average orders cited during the quarter was $63.8 down slightly compared with $64.46 in the prior year period. During the quarter we added 58,000 new customers with 337,000 or 66% of them coming to us online. Gross profit margins for the fiscal first quarter was 40.8% up 20 basis points compared with the same period last year primarily reflecting product mix and pricing initiatives.
Operating expenses as a percent of revenue increased to 50.7% compared with 45.6% in the prior year period. This increase could be attributed primarily to the investment areas that I mentioned earlier as well as the effective non-cash stock based compensation expense as calculated on the FAS 123R.
For the quarter, stock based compensation expense added 937,000 to operating expenses. To break this down further, the 500 basis points increase in our operating expense ratio can be attributed 50% to the combination of stock based compensation expense and the seasonality of the our recent acquisitions and 50% to investment in Bloomnet and stepped up marketing programs.
As a result of these factors, our proforma net loss for the quarter was $5.9 million or $0.09 per share compared with $2.7 million or $0.04 per share in the year ago period. We defined proforma earnings as GAAP net income or loss excluding stock based compensation, non of them related tax effect as calculated on FAS 123R. We provide proforma earnings but we believe it offers a more meaningful year-over-year comparison for reduced in corresponding per share amount, do not less than importance of comparable GAAP amounts. Including the after tax stock based compensation charge of 727,000 our GAAP net loss for the quarter was $6.6 million or $0.10 per share.
Regarding our balance sheet our cash and investments position at the end of the quarter was approximately $11 million. This was in line with Management expectations and reflects the investments we’ve made in preparation for the upcoming holiday season. We anticipate having a cash and investments position of roughly $70 millions at the end of the fiscal second quarter and to grow our cash position during the second half of the fiscal year. Inventory at $46 million was also in line with management expectations and reflects the build up for the holiday shopping period. Including the requirements we recently acquired companies.
Regarding guidance, as stated in our press release this morning we have reconfirmed our guidance for fiscal 2006, which calls for revenue growth of 14%-16% compared with the prior year. We expect an increase of gross profit margin by approximately 150 basis points while operating expense ratio will be inline with prior year. As a result of these factors, we expect to achieve proforma earnings per share growth of more than 75 % compared with fiscal 2005. In addition to the strong earnings growth and as a result of our relatively low working capital expenditure requirements, we anticipate cash from operations to be more than $40 million during fiscal 2006.
Regarding the current fiscal second quarter which includes the calendar year and holiday period, we expect this period will represent approximately 35%-37 % of full year revenues.
In summary, we believed we are well positioned to execute against our plan to grow revenues cost effectively and significantly enhance our bottom line results, in terms of getting greater EPS and cash flow growth. I will now turn the call back to Jim.
James McCann Chairmen and Executive Officer
Thanks Bill. What you see is that we are pleased that like during the first quarter we were able to grow revenues almost 16% continuing the double digit pace we achieved in the second half of last year. In addition during the quarter we cost efficiently attracted more than a half a million new customers while concurrently increasing our refill order rate from the existing customers to more that 61%. We believe these results reflect the effectiveness of our stepped up marketing efforts and the success our “your florist of choice” message which conveys our unique ability to provide our customers with choices including how florist design gifts, how freshen our grower offerings, our exclusive expert designer collections plus all the other great gifts that our customers expect to find in their favorite florist. Candy, Giftware, Bakery gifts and a broad range of gift baskets and gift sets, all available under our great family of brands.
In terms of operations during the quarter, our Plowandhearth business continued to do strongly down with 10% sales growth for the period compared with the prior year. We believe this works well for the current fiscal second quarter, which is traditionally the largest. During the quarter we continue to develop Bloomnet, expanding our florist membership and introducing our first member directory. Going forward, we plan to introduce a range of new products and services to help our Bloomnet members enhance their productivity and their profitability.
Also during the quarter we made significant progress of integrating the Winetasting Network and Cheryl & Company, which we acquired in the last fiscal year. These businesses are poised to deliver solid contributions during this upcoming holiday period, for both our consumer gifting channels and our business gift services group. Combined with our existing offerings in Candy, Gourmet goods and Gift baskets, we believe we are well positioned to be a significant player in the Food, Wine and Gift Basket category this holiday season.
Looking ahead while we remain cautious regarding the potential impact of higher energy cost on consumer spending as well as the impact of the severe weather we are seeing in major markets in the Gulf Coast, Texas and now Florida, we believe we have a effective marketing orders in place that leverage our large and growing customer base, the strength of the 1-800Flowers.com brand in our growing family of brands and the expanded range of choices we offer our customers in terms of products and services.
While we believe these factors will enable us to achieve our targeting guidance for the current fiscal second quarter and for the full fiscal 2006 year which calls for top line growth with 14%-16%. At the same time, we will be increasing our bottom line by 75% well above five times our top line growth rate. This illustrates the significant leverage in our business.
That concludes our formal remarks and we will now ask Glen, if she would turn the call over to queue for your questions. Glen would you please open the call to Q&A now.
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