Sowing the Seeds of Profitability

Online retailer 1-800-FLOWERS.COM
negotiated a new five-year agreement with America Online Inc. that extends their
e-commerce partnership for two additional years, through August 2005.

The new agreement, effective Oct. 1, replaces an existing four-year contract
that was announced a year ago.

Financial terms of the new deal were not disclosed, but the flower and gift
retailer said the new agreement “provides significant cost savings over the
life of the contract,” thereby enhancing its ability “to attain its stated
goal of returning to positive EBITDA in the fourth quarter of fiscal 2001 and
for full-year fiscal 2002.”

The company’s stock closed yesterday at $4.50, well down from its 52-week
high of $19.75. The company reported a net loss applicable to common stock of
$66.8 million for its fiscal year ending July 2, 2000.

Under the terms of the new agreement, 1-800-FLOWERS.COM will continue as the
exclusive marketer of fresh-cut flowers across six AOL properties, including
the proprietary service, AOL.com, CompuServe, Netscape Netcenter, Digital
City and ICQ. Promotions will be increased across several AOL properties, and
AOL will receive
increased cross-promotion in 1-800-FLOWERS.COM marketing channels.

“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,” said Jim McCann, chief executive officer of the flower seller.

1-800-FLOWERS.COM sells gifts including flowers, gourmet foods, candies and
gift baskets.