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Bloom is off Gerald Stevens

Tuesday, April 24, 2001

By Teresa F. Lindeman, Post-Gazette Staff Writer

Gerald Stevens Inc., the Florida consolidator that plucked two of Pittsburgh's largest floral chains, has been forced by its own debt and the concerns of its vendors into Chapter 11 bankruptcy protection.

If the company can continue doing business with key suppliers while it works through the reorganization, customers shouldn't notice changes at the region's Johnston the Florist and Shackelford's & Maxwell's stores.

"It'll be business as usual," assured John G. Hall, president and chief executive officer of Gerald Stevens, in Ft. Lauderdale. The bankruptcy filing also isn't expected to force cuts in staff or pay.

On the other hand, the future is less certain.

"We are evaluating each of our markets for possible reconfiguration," said Hall. That might mean consolidating certain internal operations such as buying.

Officials also expect to sell some of the far-flung company's operations. "We're evaluating everything right now," said Hall, who declined to be more specific.

Gerald Stevens recently sold $15 million worth of assets, including a catalog business, Calyx & Corolla. A deal to sell its national wire service business, Florafax International, should close next week.

In February, the Boesen family of Des Moines, Iowa, bought back the retail floral business they sold to Gerald Stevens in October 1998.

It's quite a change for the company founded by former executives of Blockbuster video who decided to put together a national player in flowers. They went after their dream aggressively. Between October 1998 and August 2000 alone, the startup spent about $135 million acquiring 157 retail florist businesses.

The purchases included Wilkinsburg-based Shackelford's & Maxwell's 18 retail stores and wholesale operation in August 1999, followed by North Huntingdon-based Johnston the Florist's 24 stores and its wholesale operation a few months later. Some of those stores have since closed as the new owner moved to trim costs and consolidate.

Gerald Stevens now has more than 300 U.S. locations, an online store, a floral marketing company that places ads in Yellow Page directors and its own import and sourcing operation in Miami.

Sales in the quarter ended Nov. 30 rose 18 percent to $57.8 million, but net losses rose 21 percent to $5.2 million. "Unfortunately, we do have a balance sheet that has too much debt for the size and scope of our existing business," said Hall.

Management was restructured last fall, and officials have cut more than $18 million in annual overhead expenses. The most recent quarterly filing with the U.S. Securities and Exchange Commission indicated that the savings included reducing "retail headcount" -- industry-speak for closings -- and implementing a labor scheduling process in the stores that remain open to keep those costs in line.

Spring is an important season in the flower business, and the latest SEC filing indicated officials hoped an expected boost between Easter and Mother's Day this year would improve cash flow. Still in the midst of the holiday season, Hall would only say, "So far, we've been pleased."

But Gerald Stevens couldn't wait it out. Liquidity problems were exacerbated by the slumping U.S. economy as well as the decision this month by another conglomerate, U.S.A. Floral Products, to file for bankruptcy and sell most of its operations.

That triggered fear among the many vendors who work with both companies.

Gerald Stevens will ask the U.S. Bankruptcy Court in Miami for the right to give preferential treatment to suppliers essential to keeping the flowers moving. Hall said he expects to be able to pay all creditors in full.

The company's stock has taken a pounding. Already trading far off a 52-week high of $30, yesterday's announcement triggered a 15-cent drop. Shares closed at 9 cents.



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