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Harry & David drives profitable quarter for 1-800-Flowers

The acquisition of Harry & David by 1-800-Flowers.com has proven sweeter than the Long Island-based gourmet food and floral gifts company bargained for when it purchased Harry & David Holdings in early fall 2014.

A year ago, 1-800-Flowers said it anticipated $15 million in savings over a three-year period by integrating elements of the Medford gourmet food and gift firm into its system. The floral company said today that its cash savings over a three-year period is now anticipated to be $20 million. During a quarterly earnings conference call, 1-800-Flowers executives said the company had found ways to push this present fiscal year savings to $10 million.

CEO Jim McCann said 1-800-Flowers was able to carve out more than double its anticipated savings, combining vendor contracts for components such as information technology, health insurance, email providers, paper products and shipping. It did have some added costs, including egg price increases driven by McDonald's.

"We have additional contracts coming up," he said. "And there were redundant positions. We did have higher labor costs on our seasonal workforce. We had more people working, and that was great, but our commodities costs were up. It's great news that McDonald's is serving all-day breakfast, but it impacted our costs."

Overall, 1-800-Flowers' revenue didn't grow at targeted rates, but its bottom line grew 34.4 percent with a second-quarter profit of $61.5 million, or 92 cents per share, up from $45.8 million, or 68 cents a share, a year ago. Revenue over the past year at 1-800-Flowers grew 2.6 percent, or $14.1 million, to $548.4 million. The revenue increase was driven by the company's Gourmet Food and Gift Baskets group, dominated by Harry & David, which accounted for more than 75 percent of the sales during the period.

"The company (Harry & David) hadn't grown in years and had gone backwards," McCann said. "We closed stores last year and a couple more this year. We gave up $1.5 (million) to $2 million in top-line income when we shed those stores, but they didn't and weren't going to make money."

He said more stores may be closed when leases come up in the months ahead.

"We're examining the stores in our portfolio," McCann said. "There are a lot that are really good, some in the middle and some at the end. I think we have fixes for most of them so that we can turn them into nice producers. There are just two or three that there is no good fix, they aren't in the right location, and we will exit them early this year."

Senior Vice President Joe Pititto said Harry & David's revenue slid regularly from more than $600 million in 2007 toward Chapter 11 bankruptcy proceedings in 2011. He said the company produced roughly $390 million in revenue during fiscal 2015, but 1-800-Flowers doesn't break out quarterly revenue figures for its entities.

Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31.

Harry & David has saved even more money than expected for 1-800-Flowers. Mail Tribune file photo