1-800-Flowers.com Inks $22 Million Pact With AOL

Online flower and gift shop 1-800-Flowers.com stands to save almost $5.5 million per year under a re-worked marketing pact with America Online.

The New York-based flower e-tailer today announced it had hammered out a new five-year deal with AOL valued at $22 million. The new deal replaces an existing $42 million agreement between the two firms which was signed last September and was set to expire in 2003.

The deal gives 1-800-Flowers.com exclusive rights to market its floral and gift offerings on AOL for the next five years at a vastly-reduced price.

“Pursuant to the terms of the new agreement, the Company will pay AOL $22.1 million over the new five-year term of the agreement, which reduces the Company’s annual amortization of the AOL agreement by approximately $5.5 million per year, 1-800-Flowers.com said in a filing with the SEC today.

1-800 Flowers.com, which vends its products via telephone and the Web, will pay $22.1 million over the next five years to continue as the exclusive marketer of fresh-cut flowers on AOL. It can be accessed via AOL Keyword: Flowers.

1-800-Flowers.com “will continue as the exclusive marketer of fresh-cut flowers across all six AOL properties including AOL, AOL.com, CompuServe, Netscape Netcenter, Digital City, and ICQ and will receive enhanced promotions across several AOL properties,” the company said in its 8-K filing.

As a result of the termination of the previous agreement, the Westbury-based firm said it would take a one-time, non-cash charge of approximately $7.3 million in its fiscal 2001
first quarter associated with monies previously paid under the old agreement.

This morning, investors were reacting favorably to the news of the reworked deal. Shares in 1-800-Flowers.com jumped 12.5 percent to a few pennies over $5.00. The stock closed last night at $4.50, which is almost 75 percent off the 52-week high of $17.50.

In a prepared statement, 1-800-Flowers.com CEO Jim McCann said the deal would allow maximum returns for his company’s market spending.

“Our company has had eight years of experience in the e-commerce arena, and we know which relationships result in the best return for our marketing spending. AOL is clearly one of the most effective partners we have, and we are extremely pleased to be able to cost effectively extend our relationship and enhance it with increased promotions that we believe will drive more traffic to our web site,” McCann said.

The company’s range of products includes flowers, gourmet foods, candies and gift baskets. It also has online business deals with the Microsoft Network, Snap.com, and Yahoo!, among others.

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