Q1 2025 1-800-FLOWERS.COM Inc Earnings Call
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Speaker Change: and hello, this is the operator. Please continue to hold. We will begin today's webcast event shortly. Thank you.
Speaker Change: Good morning and welcome to the 1-800 Flowers.
Speaker Change: dot com, 2025 first quarter fiscal year earnings conference calls.
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Speaker Change: Please note that today's event is being recorded.
Speaker Change: I would now like to turn today's event over to Andy Milevoj, Senior Vice President of Investor Relations. Please go ahead.
Andy Milevoj: Good morning and welcome to our fiscal 2025 First Quarter earnings call
Andy Milevoj: Joining us today are Jim McCann, Chairman and CEO Tom Hartnett, President Bill Shea, CFO, and James Landrock, CAO, and then coming CFO upon Bill's Retirement in December.
Andy Milevoj: Before we begin, I'd like to remind you that some of the statements we make on today's call are covered by the safe harbor to squamer contained in our press release and public documents
Andy Milevoj: During this call, we will make forward-looking statements with predictions, projections, and other statements about future events
Andy Milevoj: These statements are based on current expectations and assumptions that are subject to risks and uncertainties.
Andy Milevoj: Including those contained in our press release and public filings with the Securities and Exchange Commission.
Andy Milevoj: The company disclaims any obligation to update any of the forward-looking statements that may be made or discussed during today's call.
Andy Milevoj: Additionally, we will discuss certain supplemental financial measures that were not prepared in accordance with Gap.
Andy Milevoj: Reconciliation of these non-gap financial measures to the most directly comparable gap measures can be found in the tables of our earnings release.
Speaker Change: and now I'll turn the call over to Jim.
Jim McCann: and Good Morning Everyone.
Jim McCann: This morning I'll share my perspective on the current environment and our recent performance and then I'll turn the call over to Bill and Tom who will provide the business and financial updates.
Jim McCann: As we announced this morning our first quarter performance generally came in line with our expectations.
Jim McCann: We began to see slight improvement in our e-commerce revenue trends, our gross profit margin continue to grow and throughout work, smarter initiatives to operate more efficiently, we reduced our operating expenses.
Jim McCann: We got into the complexion of our e-commerce revenue.
Jim McCann: and benefiting from our relationship, innovation, initiatives. What is the client's 6.5% as compared to 11.5% decrease in the fourth quarter of fiscal 24? And a 16.1% decrease from the prior year period.
Jim McCann: AOV declined 1.5% reflecting our plan to expand our offerings and broaden our price points.
Jim McCann: Additionally several wholesale gift guides get ordered shifted from Q1 into Q2. This was simply timing and we will ship and record those orders in Q2.
Jim McCann: We've always viewed and suggested that you view what this will hear as consistent of two halves.
Jim McCann: The first act consists of the inventory build and preparation for the holiday season that occurs during Q1 followed by the sales build leading up to the holiday during the second quarter.
Jim McCann: The second half of our fiscal year consists of the important holiday occasions, including Valentine's Day, which is in Q3 and Mother's Day in Q4. In just a moment, Tom will review our Q1 performance and share our view for the second quarter.
Jim McCann: As we turn to the holiday quarter, we expect our performance to improve, especially within our gourmet foods and gifts businesses, as consumers often see holiday getting is more than a essential activity rather than a discretionary one.
Jim McCann: Through the relationship, innovation and initiative, that we implemented over the last two years, we have expanded our offerings and brought in our price points, providing gift gifts with more choices at prices that span from budget friendly to premium.
Jim McCann: We look forward to helping our customers connect and express their sentiments with the important people in their lives.
Jim McCann: and our time that you'll go over the business update force.
Speaker Change: Thanks Kim, thank you for morning everyone.
Speaker Change: This morning, I'll review our results, highlight some of our strategic initiatives that we are executing against, and discuss some of the recent partnerships that we are excited about.
Speaker Change: As Jim highlighted, our first quarter performance generally came in line with our expectations.
Speaker Change: Our consolidate Q1 revenue declined 10%, essentially in line with our recent Q4 trends.
Speaker Change: More specifically, our e-commerce revenue declined 8% as we saw our relationship innovation efforts, which are focused on expanding our offerings and broadening our price points, drive more lower AOV transactions as anticipated.
Speaker Change: This resulted in a 6.5% decline in orders and a 1.5% decline in ALV
Speaker Change: Now let's take a moment to discuss our segments, beginning with our gourmet food and get baskets and business.
Speaker Change: Drone Q1, this segment's revenue declined 14.4% which was slightly higher than the 12.8% decline in Q4.
Speaker Change: If it's important to contextualize this performance, 3 million dollars of wholesale order shifted from Q1 to Q2, accounting for 3% of the revenue decline.
Speaker Change: These orders will be delivered and recorded during the second quarter.
Speaker Change: including this timing impact our rowed trends within this segment would have improved over two four.
Speaker Change: Turning our relationship innovation efforts, we continue to leverage our last mile delivery capabilities to expand our same day food related offerings for customers.
Speaker Change: is perfectly ill-strate how we infertile levers one of our primary differentiators and competitive advantages to offer more gifting options for same big delivery.
Speaker Change: For example, during the quarter, Charles Cookies expanded its selection of available for same and next day delivery.
Speaker Change: This position is us to be more competitive in their market on an everyday basis.
Speaker Change: and his highly relevant going into Q2. As this will enable us to expand the shopping season, and to fill orders, place much closer to December 25th.
Speaker Change: We also expanded our 100 baskets same day delivery program to more locations offering more options
Speaker Change: This is a great solution for customers on a short timeframe and don't have the time to pre-plan a gift purchase
Speaker Change: Whether it's an unexpected sympathy gift, a gift to celebrate a new baby, or simply a last minute occasion, we can now help our customers express their sentiments and deliver more gifts on the same day.
Speaker Change: Gorg Q1, we successfully completed the integration of Schoffenberger, chocolate into Harry and David. Since we acquired Schoffenberger, customers have been gravitating towards their baking, chocolate, and bars.
Speaker Change: and as we head into Q2, we are excited to launch our new box tropical collection that we expect to be a hit for the holidays and beyond.
Speaker Change: Alright.
Speaker Change: Our Harry and David brand is synonymous with holidays. In this year we are thrilled to announce a new partnership with Macy's.
Speaker Change: We're opening six exclusive Harry David pop-ups, shops, and select Macy's stores this holiday season, including their Glendale Galleria and Harold Square locations to meet the grown demand for thoughtful or may-hallity gifts.
Speaker Change: These shops will run from a tober through early January and will provide customers another avenue to engage with the Harry and David Brand.
Speaker Change: and now let's move to our consumer floor and give segment.
Speaker Change: Our sequential trends have improved revenue declining 4.9% as compared with the clients of 6.7% during Q4 and 12.3% a year ago.
Speaker Change: As part of our relationship innovation initiatives, we are actively pursuing and have entered into exciting partnerships to expand our customer reach in our product offerings.
Speaker Change: Dorn the quarter, we entered into an exciting collaboration with Love Shock Fancy, to launch an exclusive collection of offerings that featured their explicit floral designs.
Speaker Change: Los Zach fancies known for their vintage inspired hand-painted floral prints.
Speaker Change: Customers' response to this partnership was tremendous and we quickly sold out of this floral offering. It also drove a higher percentage of new, young and higher income female customers to the brand.
Speaker Change: Seeing the strong customer response, we've extended the partnership to Cheryl's cookies, and are currently offering a limited time exclusive tin that is decorated in one of their magnificent Rose designs.
Speaker Change: Within our personalization businesses, we experienced good momentum in Q1 from our efforts to improve shopping experience and to elevate the product assortment that resulted in increased revenue, gross margin and profit.
Speaker Change: This performance was driven primarily by things remembered, which since acquisition has benefited from its addition to our platform and expanded products selection that appeals to a higher income customer.
Speaker Change: Turning to our BloomNet business, revenue declined 20.1% or $5.8 million dollars as compared to a year ago.
Speaker Change: This included an expected decline in orders by one of our business partners who merged with the competitor.
Speaker Change: We will fully lob this impact by the end of fiscal second quarter, expect to begin to grow bloom that revenues in the second half of this fiscal year.
Speaker Change: As we look ahead to the rest of the fiscal year, our strategic plan and priorities have been built a sharp and our customer experiences and industry positioning.
Speaker Change: While it's difficult to forecast when the consumer environment for discretionary spending will improve. We plan on leveraging our relationship innovation initiatives and increasing our marketing spend to improve our revenue trends during Q2.
Speaker Change: Additionally, as the orders have already been placed, we know that our wholesale revenues will increase by approximately $20 million for the prior year.
Speaker Change: We have improved the customer shopping experience, expanded our product range and brought in our price points to help consumers find the perfect gift for their important people in their lives.
Speaker Change: We're confident that our strategic initiatives have positioned us well to serve our customers as holiday season.
Speaker Change: Now I'll turn it over to Bill for the financial review.
Bill Shea: Thanks Tom and good morning everyone.
Bill Shea: During the first quarter, we experienced an improvement in the undercurrent of our e-commerce revenues, which included improving trends in order count and driving sales of our lower priced items that contributed to a lower ALV.
Bill Shea: Our discipline approach to managing the controls, combined with our focused execution of strategic initiatives over the past 18 months
Bill Shea: have enabled us to drive these trends and deliver Q1 results within our expectations.
Bill Shea: I'm highlighted, our relationship innovation and worksmot of initiatives have expanded and enhanced our offerings and positioned us to operate more efficiently.
Bill Shea: Today I want to highlight two important work streams within a work-smart of efforts to operate more efficiently.
Bill Shea: Organization has always been at the forefront of innovation, and AI is no different.
Bill Shea: Over the last few years, we implemented AI with an our customer service chat tool and we adopted it.
Bill Shea: On our e-commerce platform, the help customers better express their sentiments.
Bill Shea: when they are at a loss for words.
Bill Shea: We've now taken AI step further and implemented a new tool to power our customer care interactions
Bill Shea: A new customer care platform integrates AI to improve the customer experience, increase our efficiency and reduce overall labor costs.
Bill Shea: This implementation enabled us to consolidate multiple customer care systems into one, allowing more agents to assist customers across our brands as opposed to being brand specific.
Bill Shea: Most importantly.
Bill Shea: AI will empower our agents with...
Bill Shea: with the customers' order of information and history as the call comes in so that the agent is better prepared to help a customer.
Bill Shea: This will create a better customer experience and enable the agent to become more efficient driving lower labor costs
Bill Shea: Turning to all logistics optimization efforts.
Bill Shea: During Q1, we launched an enhanced back-end automatic system at Harry and David that enables us to further optimize logistics through optimal lease course routing.
Bill Shea: As we move beyond implementation phase, the new OMS system will enable us to lower fulfilment costs for Harry and David Orders.
Bill Shea: and now let's dive into the Q1 results.
Speaker Change: is Jim and Tom highlighted, our first quarter revenue declined 10% from the prior year period.
Speaker Change: This included the previous late discussed timing of certain wholesale orders that shifted into the second quarter.
Speaker Change: Ecommerce revenue declined 8% in Q1 with order count down 6.5% in AOV down 1.5% as anticipated.
Speaker Change: Well, perspective, this compares to year over year order counts declining 11.5% and 16.1% during the fourth quarter and first quarter of last year respectively.
Speaker Change: This was our set by slightly stronger growth margin rate of 38.1% and are disciplined approach to operate more efficiently
Speaker Change: That led to a 4.3 million dollar decline in operating expenses, when excluding non-recovering charges associated with the system implementations, as well as the impact of the company's non-qualified deferred compensation plan in both periods.
Speaker Change: All together, the adjusted EBITDA Awards was 27.9 million.
Speaker Change: Now let's review our segment results
Speaker Change: I'll call my food and get basket revenues to climb 14.4% from the prior period to 84 million.
Speaker Change: is the coin reflects the timing of approximately 3 million dollars of wholesale orders which shifted from the first quarter into the second quarter.
Speaker Change: Revenors were also impacted by the implementation of the new order management system.
Speaker Change: was proper margin increased 50 basis points to 32 percent, benefiting from the company's inventory optimization efforts and is a client in certain commodity costs.
Speaker Change: As a result, he adjusted the segment contribution margin loss with 11.3 million as compared to a loss of 11 million in the prior year period.
Speaker Change: In a consumer plow on GIF segment, rammed us to climb 4.9% from the prior year period to 135.2 million.
Speaker Change: was proper margin increased 30 basis points.
Speaker Change: 39.9%
Speaker Change: This quarter, we strategically invested in a range of marketing channels to test different aspects of the sales funnel in preparation for the holiday season.
Speaker Change: All together this resulted in segment contribution margin of 4.9 million compared with 8.8 million in the prior year period.
Speaker Change: In Oblu-Met segment, revenues decline 21% to 23.1 million.
Speaker Change: As Tom mentioned, this included an expected decline in orders by one of our business partners who merged with a competitor.
Speaker Change: We'll fully lap this impact at the end of the fiscal second quarter and expect the loon that revenue is to begin to grow in the second half of the fiscal year.
Speaker Change: The proper margin decreased 20-based points to 50% due to de-leveraging on the lowest sales volume
Speaker Change: As a result, 7 contribution margin was 6.8 million compared with 9.4 million in the prior year period.
Speaker Change: Turning to our balance sheet.
Speaker Change: Our cash and investment position was 8.4 million at the end of the first quarter, which is seasonally low as we prepare for the holiday period
Speaker Change: Aventory was 275.3 million compared with Aventory of 28.6 million at the end of the same time last year, benefiting from a component of the worst water initiative that is focused on operating more efficiently with lower Aventory
Speaker Change: I told that was 232.5 million essentially flat as compared with the prior year
Speaker Change: We had 187.5 million in term debt and ball rings of 45 million under our revolving credit facility in preparation for the upcoming holiday season
Speaker Change: We expect ballerings under the revaver to be fully repaid during the fiscal second quarter
Speaker Change: Regarding guidance of fiscal 2025
Speaker Change: Continue to respect total revenues on a percentage basis to be in a range of flat to a decline in the mid-single digits as compared to the prior year.
Speaker Change: Adjusted EBDA to be in a range of 85 to 95 millions and free cash flow to be in the range of 45 to 55 million
Speaker Change: Now I'll turn the call back to Jim for his closing comments before we open it up for Q&A.
Jim McCann: Thanks Bill, and summary our first quarter performance generally came in line with our expectations.
Jim McCann: In this still uncertain consumer environment, we are encouraged by the undercurrents in our e-commerce trends as we move closer to the holiday season. And the orders for all wholesale business are higher than they were a year ago, which will be booked during this second quarter.
Jim McCann: Customers generally view holiday gifts and more of a necessity and we have expanded our breath of products and our price points to offer them an even greater array of thoughtful gifts for everyone on the holiday list
Jim McCann: Before we move to the Q&A session, I want to take a moment to acknowledge and celebrate our incredible team members who is hardworking dedication and have been instrumental in earning us the recognition as one of America's most admired workplaces by Newsweek.
Jim McCann: This prestigious accolade reflects not only our commitment to fostering a supportive and innovative workplace, but also the incredible dedication of our team members.
Jim McCann: Being named among the top companies in this category is a testament to the culture we have built together. Thank you for being an essential part of our journey and helping us build up a smiles every day. And now for your Q&A. Operate please.
Speaker Change: Thank you, we will now begin the question and answer session.
Speaker Change: As a reminder to ask a question you may press star then one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If you would like to withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster.
Speaker Change: and today's first question comes from Alex Furman with Craig Hallam, please proceed.
Alex Furman: Hey guys, thanks very much for taking my question. You know, why to ask about same day delivery seems like this is something you guys have been investing quite a bit in ahead of this holiday season. Can you talk about how much of your business in the past are in peaks?
Alex Furman: have been same day delivery and what are you expecting this holiday season? I guess in terms of same day delivery utilization and what that could do to your margin.
Speaker Change: Thanks, Eric, thanks for your question. The answer is on a floral side, it's always been an important part of our business.
Speaker Change: and thank you.
Speaker Change: depending on the season or range.
Speaker Change: 30 to 40% of our business will be the same day on the flower side.
Speaker Change: on the non-favorite, almost none of our business historically has been same day. So what we're doing is leveraging the infrastructure that we've built over the years on the flower side of the business.
Speaker Change: to on a slow but sure pace to introduce more and more of the products we have. They're a great gifting product. For example, our Cheryl's cookie products.
Speaker Change: which are a great gift at the right price point and just put smiles on faces every day.
Speaker Change: We've introduced a limited collection of those products into a portion of our same day network. Tom, would you want to give a little bit more color on what the plan is in terms of the rolling of the products you mentioned in your remarks the same day having to give a gift back to the program.
Speaker Change: Yeah, so we're Alex looking, in morning, we're continuing to look at products within the food groups portfolio that we could leverage for same day delivery mentioned shelves, cookies and we're expanding the products there, we're introduced.
Speaker Change: Several of the Harry and David's gift baskets lines and we're rolling those out across the country as we have the capabilities in market. This will be something that will be after this is a program, something that will be after for the next couple years as we continue to build out.
Speaker Change: Arcade Bidolis on Refinishment and Expand, many of those products from our food brand. This, what we're saying is we've seen the success of this on our floor outside and we see this ample opportunity for the same day for the rest of our business.
Speaker Change: and it's a way to leverage to unique fulfillment we have, Alex with our retail floral partners. So giving them the opportunity to...
Speaker Change: to up the capabilities in terms of refrigeration capacity, freezer capacity. And so in select markets as we predict the demand would be strongest, we've been introduced in these projects and it's been really well received by our floral partners and across by our consumers.
Speaker Change: and it's already been successful with us on Chocolate College strawberries through Sherry's berries as well.
Speaker Change: and our publication.
Speaker Change: Okay, that's really helpful. Guys appreciate the thorough explanation and then if I could just ask one more, it sounds like you're expecting revenue trends to improve as you start to spend a little bit more on marketing going into the holidays. He's talked about where those dollars are going to go with a pretty similar to what you've done for past holiday marketing campaign.
Speaker Change: I'll start this time to give you some of the specifics there Alex, but in general two things. One is we kept some time to dry to make sure we had it available for this important holiday season number one. Number two, as Bill mentioned in his remarks, we think.
Speaker Change: The Spendedness Quarter, which is all around Thanksgiving and Christmas, is a little less discretionary than everyday business, because people feel like they have to and want to.
Speaker Change: by a gift, where is it? If they had a choice to buy something on a spur of the moment, non-analudate, they might have in this past couple of years passed on that. We think less discursionary when it's a specific calendar gift in occasion. Tom a little color on.
Speaker Change: with the Amir Edwards Fest, SLEEP COV.
Speaker Change: It will be similar to prior years, I mean, obviously we're sorry.
Speaker Change: The point dollars in pop mid and bottom of the funnel activities and
Speaker Change: You know, I think the most important thing we focus on is making sure those dollars are relatively flexible So that, you know, within a period we can redeploy and shift dollars pretty quickly So we're constantly looking at the returns on those efforts
Speaker Change: here and now it's an awesome just a few.
Speaker Change: and James Point of discretionary at holiday time versus every day. You know, sequentially, we always move better from Q1 and to Q2, like a year ago, or E-commerce.
Speaker Change: Numbers in Q1 with 12% in Q2, they were down 6% so just naturally improve as we get towards the holidays.
Speaker Change: Okay, that's really helpful, guys. Thank you very much. Thanks, Thomas.
Speaker Change: and the next question comes from Andy Lee Bidsinski with Siddote and Company Please proceed.
Speaker Change: Good morning and thank you for taking the questions.
Speaker Change: So, I just first, I just wanted to follow up on the same day, the live week.
Speaker Change: Markets, so I said, can you just maybe go over how many markets will work for percentage of your markets, your able to actually deliver non-floor?
Speaker Change: Gifts and kind of what's the expectation for the holiday season, whether that's going to change much from where it is right now. I don't have a couple of other questions if I could.
Speaker Change: Thanks for entering into your discussion.
Speaker Change: It's a very small percentage of our non-floral.
Speaker Change: Package gifts business, Cheryl Terry and David Popcorn, chocolates.
Speaker Change: A very small percentage is available now for the same day. We're rolling it on markets, as Thomas said, our capabilities, our partners capabilities to do the last mile of fulfillment and anticipated demand. This is something we'll be doing as Bill said for the next few years rolling this out.
Speaker Change: But it's already beginning to make it impact because the Cheryl's business is doing better, because up until this past year they didn't have sympathy for the elderly
Speaker Change: But with all the different infrastructure options we've developed to do exactly at the last day, it's had a bigger impact so far on that brand. Irene Davis has been much newer, but with a large customer base of that brand and the terrific set of products I have, particularly around people wanting to express themselves on.
Speaker Change: Holiday Cations and on sympathy occasions, we'd expect that I'll have a big impact on Harry and David's business in the next year or two.
Speaker Change: That's probably helpful color Jim and then in terms of the AOV so you guys have talked a lot over the last few quarters about the more multi-brand bundles obviously this quarter the AOV came down because of the water price point but as far as the...
Speaker Change: The Bundos themselves are you still seeing a customer's gravitate towards those and what anything has changed from you're thinking about those.
Speaker Change: Now we haven't seen anything change at the New League.
Speaker Change: The excitement we have around, we create bundles and...
Speaker Change: and the product assortment, you know, we see the efficiency of those products, the conversion, those products and it is a big focus of the team.
Speaker Change: The Merchandising team to create more bundles and the logistics around that.
Speaker Change: gets delivered as one.
Speaker Change: Complete Gift Package.
Speaker Change: Yeah, sure, okay, and then I lastly for me, you know, in terms of the
Speaker Change: System Implementation Cost that you guys talked about impacting the quarter here. It was this isolated to the September quarter. Do you think some of this may be in may spill over to future quarters to just want to get a sense of that?
Speaker Change: Yeah, there were two kind of large implementations we've been working on, the new water management system, you know for Harry and David, that is behind us, those implementation course of behind us. On the service center, you know, platform, we've combined all the systems in the one. Ultimately, we're going to, you know, save money and we also need money on some licenses as we're moving as we're eliminating those, those you know.
Speaker Change: Other platforms, but we still have a double up for the first six months of the year. So this way I want to work part of a double up of license of you.
Speaker Change: with that said it's going to lead to more efficient, enable the agents to be more efficient, which is going to save dollars on labor going forward and ultimately provide a better customer experience.
Speaker Change: So a quarter of a quarter of this over next year is quarter several million dollars in licensed savings.
Speaker Change: We anticipate customer serving the customer to improve from good to even better
Speaker Change: and as Bill said, with the new technology in place and trust me cutting over systems that have been developed over decades.
Speaker Change: has been painful and fatiguing in terms of all the time that's been put into it. But the outcome we're already quite happy to see the benefit in terms of how we are able to serve our customers and to do it more efficiently.
Speaker Change: That all sounds good. Thank you very much and best of luck.
Speaker Change: Our next question is from Michael Kapinski with Noble Capital Markets, please proceed.
Michael Kapinski: Thank you and thanks for taking my questions. Just a couple here, as you kind of head into the holiday season and I noted that you made comments about your hiring customers in the past and it was wondering if your hiring customers continue to spend, are they?
Michael Kapinski: Still the key revenue driver versus the lowering customers and then with your...
Michael Kapinski: I guess your shift towards lower-end price points can you talk a little bit about.
Michael Kapinski: How to Lower in Customers, Are Influencing, Your Revenue, Going Forward. And in terms of your guidance, do you believe that the biggest risk to your fully-arevenate guidance would that be persistent inflation or what do you think is affecting the consumer buying behavior overall?
Speaker Change: So what do you want to try?
Speaker Change: Michael, I mean, we have talked about the affluent consumer and the upper end of our customer file continuing to perform well and as Tom was describing those bundled products and continued to offer a board a selection of higher priced items.
Speaker Change: that that African consumer is going to continue to, you know, once and we'll continue to buy what we saw in the first quarter and what we've been
Speaker Change: Efforting is also, you know, broadening the offerings at the lower price point items to stimulate the left half-worth consumer that has been sitting on the sidelines and we've seen some success, you know, some success there.
Speaker Change: and so that I think we should continue as we go towards the holiday season. Former inflation and everything, you know, perhaps today economy was not ready to do that.
Speaker Change: and a difficult back row and buying them in the several years now. The good news is the most recent.
Speaker Change: You know, data whether it's you.
Speaker Change: You know, whether it's the job, state, or inflation, you know, Asian data or consumer competence, you know, that's come out just this week. All positive are heading into the holiday season. So hopefully that end gas prices are, you know, or you know, two people are going to be over a year or a year or a year. So all those things are positive as we head towards that holiday season.
Speaker Change: Catch up.
Speaker Change: Michael just to add to Tom, you know when we're as we're expanding our price points of, I don't know what's saying, this is a perfect execution here, but we are very much targeting different customer segments with different price points, so it isn't just like we're expanding everything across the board, it is a targeted approach.
Speaker Change: and on the commodity side, any updates on the Cocoa cost outlook and are there any particular other commodity costs that are little stubborn right now that you believe could weigh and you to provide some lift to your gross margins.
Speaker Change: You know, as we've mentioned in the past, Coco, we've kind of locked in pricing for, but not only for this holiday season, but also through, actually, next holiday season
Speaker Change: and prices that are above what we historically pay for but well below where the overall market has been coming down in the Colkland market but it's still.
Speaker Change: High of historical norms.
Speaker Change: and keeping mind Michael the big usage of those commodities are in the first half of the year because they are so heavily used in a holiday gift assignment at Harron David, Charles, eggs, for example, have been something that moderated son but still higher than traditionally. So we think that the trend is open and all of those categories are not already and the benefits won't be seen until next fiscal year because we've already done a big spend. But it's still said, we feel comfortable that we're locked in on the Coco's side of things.
Speaker Change: through the next holiday season, but we hope in that time that the overall price situation moderate so that when we're renewing, it's going to attract a third.
Michael Kapinski: Thanks for that color and just my final question is I'm blue-medead. I know in the past you managed the number of full of shops in your network.
Speaker Change: can kind of provide some color in the trends of that. I know you've been affected by a merger with your competitor, but I'm just generally how we should look for the number of...
Speaker Change: of whether or not shop serve will be increasing especially as you lap that.
Speaker Change: that I'm urgent with the competitor.
Speaker Change: The number of shops that Thomas give you more color on this but the number of shops that stayed steady for us, the depth of relationship is improving that is as we offer more opportunities for more involvement across the breadth of gift product offerings.
Speaker Change: We always leave with let's give the opportunity to our retail floor of partners first. I think that's it.
Speaker Change: Recognized and appreciated.
Speaker Change: and now I have especially with us adding the Harry David product, the Sherry's very product keep mind when we board the Sherry's very intellectual property a few years ago, none of that business would have fulfilled my floors. When we boarded we converted it to our model.
Speaker Change: and all of that businesses is fulfilled in market, not by our own company own facilities. So that boosted our relationship with our retail floor partners and our gourmet network partners.
Speaker Change: So, the numbers state study, the relationship is available on anything else. No, I think you know, just to lay around that it is the number is stable, you know, week.
Speaker Change: Continue to think just like our car now for which it's been a U-chit with our local fore, so they can print, you know, gifting cards locally now and obviously those are attached to our orders, but also for the benefit of their shops.
Speaker Change: So we just continue to add value to those relationships which keeps that number steady and we do expect as we laugh a year we probably will see a little bit of a bump up.
Speaker Change: as we move forward in membership. You just a reminder Michael, Oh, goal isn't to grow in that work, it's always the best thing in the quality of our partners.
Speaker Change: Just as a reminder, Michael, we do lack that lost value from a competitor at the end of the second quarter. So, you know, third and fourth quarter of this year will be on kind of a steady stream. And we do expect a blend that to grow the second half a year.
Speaker Change: Webbing.
Speaker Change: Great, that's all I have, thank you.
Speaker Change: Thank you Michael.
Speaker Change: The next question comes from Linda Boltonwiser with DA David.
Linda Boltonwiser: Good morning, Wendy. Yes, hi, good morning. Hi, I'm...
Linda Boltonwiser: So I was wondering, just a little bit more on the cadence of revenue performance through the year. Being that second quarter is your big seasonal quarter. I would expect that the year of your revenue.
Linda Boltonwiser: would have to be at least in line with the guidance for the year of plant to download single digit. Would that be a fair assumption then for a second quarter on revenue?
Speaker Change: Yes, Linda, we expect continuing improving trends from a revenue standpoint. As I mentioned before, we're seeing some momentum embedded trends on the e-commerce side of the business. You saw the transaction counts with down 6.5% in the first quarter. That's an improvement that you left through. That's an improvement over 11.5% in the fourth quarter, last year and 16%.
Speaker Change: in the...
Speaker Change: First Quadal last year.
Speaker Change: Generally speaking sequentially we improve as we get closer to the holiday that again, E. Congress revenue is last year when from 12% down in the first quarter to 6% down in the second quarter. Holcel last year was a tailwind in the second quarter. We were down $20 million a year in the second quarter. Last year this year we're going to be up $20 million, right? So that's going to be a natural tailwind.
Speaker Change: for us. So we feel comfortable that there'll be significant improvement in the revenue trends in the second quarter.
Speaker Change: Okay, and then I was curious to about what you're seeing with Media Rape. I know you do mostly digital, but just in general with a election situation, are you seeing elevated Media Rape in the December quarter?
Speaker Change: Linda's trip, yes, it's meteor is more expensive, the election does have a big, big impact on what we pay for things both digitally
Speaker Change: and the traditional media lines. Thomas, you know, as you would expect Linda, we are seeing that in the environment seen that for the last month, we are expecting that some of that will moderate, that we get past the election.
Speaker Change: Okay, we're going to the second quarter, you know, so much of the demand, you know, for the second quarter does come from that Thanksgiving through.
Speaker Change: Chris Miss Howard, so there is some time to recover from the election time frame to the big demand days.
Linda Boltonwiser: Right, Gacha.
Speaker Change: and then finally my question.
Speaker Change: about the hearing's even pop up.
Speaker Change: and Macy's. This curious are you flirting with the idea of getting back into brick and mortar retail from the company own perspective or is just this purely this pop up idea and it's not going to expand into anything else brick and mortar just curious about that. Thanks.
Speaker Change: Thanks for the wisdom. I spent some time at the Howard H. Storley Opened Harold Square of Measys yesterday. It looks fantastic.
Speaker Change: and having good buzz about it, it's only eighth floor which sounds like it's what the being best, which of course it is. But that makes you stories as a model.
Speaker Change: and it was good traffic in the story out today, excited customers.
Speaker Change: and then in a couple of weeks when they open up the Santers Workshop, you almost have to walk through holiday store to get to Santers Workshop. It's great positioning.
Speaker Change: Thomas, it was good yesterday was busy, I loved the way it looks
Speaker Change: So I'm going to tell you that in answer to the second part of your question
Speaker Change: I'm a retailer. I've always liked retail. I think I think it did.
Speaker Change: plays a role in our mix, whether we do that company on, whether we do it franchises. This is a good first step to get back into the holiday store business.
Speaker Change: which used to be quite important to us.
Speaker Change: and these six doors that we've opened up now three California three in New York, in partnership with Macy's.
Speaker Change: I'm very excited about it. I'd expect that would continue to grow. We had some dialogue yesterday with other store managers who were in town who asked if they could get in the queue for us to open in their stores. It was I was all buzzed yesterday about how good the store looks, how the traffic was.
Speaker Change: and how the interaction with customers was going. So the answer is, in our sewer, it's always on the table for us, and guess that it got me excited about those price effects.
Speaker Change: I think there are three or these are six great stuff and obviously we gotta evaluate the results of that but we're very encouraged I'm encouraged just from the marketing benefit of those stories, customers coming in excited about seeing the brand so you can hear You might hear that I got jazz just that I have that influences things, how a billpiece that heck that have been in the next couple of weeks And brings me back to reality all the reason I'm here
Speaker Change: Okay, sounds good, thank you.
Speaker Change: And the next question comes from Doug Lane with Water Tower Research, please proceed.
Doug Lane: Yeah, hi, thank you. Good morning, everybody. Bill, can we go back to that shift and wholesale orders from the September to December quarter? Can you reiterate what the dollar amount was and the reading behind that shift?
Bill Shea: Yeah, it's about $3 million on the food wholesale side of the business and the reason is we are, you know, these are gift baskets for Costco and Sam's, they dictate when they want the orders.
Bill Shea: Sometimes it comes in at the end of September or it starts at the end of September, other times it starts at the beginning of October. So clearly just a shift. As we've talked about, even in our August.
Bill Shea: Call, we have a strong book of business in kind of the food wholesale business this year. It's going to be a great, you know, tailwind for us. It's all just, the large majority of it happens in the second quarter anyway. And it just happened to ship some of those dollars to ship them from Q1 to Q2.
Speaker Change: and Andrea Dresdov.
Speaker Change: The first quarter, the first fiscal quarter, of some time, is when we're getting the majority of our inventory in for those.
Speaker Change: Presold items were assembling, infecting those baskets and then their ready to ship and then where the notify us it could be a five or six or seven day swing, but that's right over the court is end. So all of that's now shipped.
Speaker Change: Got it, that makes sense and then to your point about looking at two halves of the year for 800 flowers. You talked a little bit about the cost trends in Cocoal but can you just give us any update as if in any significant shift in your cost trends anywhere else energy shipping?
Speaker Change: Labor Costs, can you talk about your seasonal labor hiring this year versus prior years, just try to touch base on the cost for a little bit of people. I'll start on the Labor side, Bill and Tom will give you more color on the other components, but on the Labor side of things.
Speaker Change: Two years ago, it was very tough. We couldn't find people to work those seasonal jobs, logistics, jobs, shipping, warehouse, jobs, going to find people. So we were two thousand positions short of where we would have liked to have been. The consequence of that was that we had to pay a lot more overtime, which impacted us.
Speaker Change: Labor rates have been steady now last year and this, the fill rate has been very good. We have a program, we have distribution centers around the country to optimize.
Speaker Change: Out shipping course which bill.
Speaker Change: and you have some more color on. But two years ago, we had real difficulty with on newest facility in the Atlanta area. Last year in this year, that's gone really well. We have a terrific labor partner in Atlanta and an agency called First Step Stepping.
Speaker Change: which is a company that wraps social services component around it. So that's really helped us, we have a good quality labor force there and we feel really good about giving.
Speaker Change: 350 is so big ball
Speaker Change: and opportunities to get back into the workforce.
Speaker Change: It's helped us and we're happy to be helping them
Speaker Change: Bill, I know we have many cogears to about like fuel course. We haven't seen the benefit yet of this.
Bill Shea: The client of fuel course in terms of our shipping course, have we built it? Now we're seeing some. Are you over here for search odds? Is lower now than it's been and we've been able to negotiate with FedEx caps on certain of the fuel certain, you know, good.
Bill Shea: He'll search out his...
Bill Shea: Um...
Speaker Change: So, all you know, Doug, if you were called, 2024 was kind of the year of the Ghost Margin Recovery. We're up to 160 basis points, you know, last year.
Speaker Change: Lineback over 40%
Speaker Change: and this year our guidance for the year is to be up to middle, you know, modestly.
Speaker Change: The year as we always have various war setting files where we're continuing to move.
Speaker Change: Modions forward. You know, the 20-based points we improved in the first quarter was, you know, actually slightly above where we expected. We knew later in the year, you know, the modions would improve even more. You know, from a commodity standpoint, there's always puts in calls, you know, we talked a little bit about Coco and, you know, Jim mentioned eggs and, you know, we got what is in minuses.
Speaker Change: Fuel is a positive force and should they do the holiday season for us.
Speaker Change: The OMS implementation that we have were able to automate some of our lease costs routing. That is, ultimately, our ability to optimize the shipping methods that we use. We always have cost increases from the third party carriers, and that's a significant cost to us. So we have been doing a good job and we continue to do a good job of coming up with ways to offset those actual cost increases that we have. And that's going to be, you know, should be a slight benefit to us this year as well.
Speaker Change: Okay, that's very helpful and just lastly, I've heard you talk about a favorable paracrop this year. Can you elaborate on that and how that impact your business plans this year?
Speaker Change: A New Reader
Speaker Change: We all learned in the last decade of owning hiring David that we have more reasons to lose sleep than we did even prior to that acquisition. We grow our own food product there in Southwest Oregon and the Rogue Valley and meant for Oregon.
Speaker Change: and we've suffered through some real tough natural weather patterns in the last several years which of course, us that really have struggles on the quality and the quantity of our product.
Speaker Change: and then we had a big fire two years ago which really disrupted this set. This year, whether it was more favorable, the snow pack was good, our acting there was done to ripping jobs, the crop is frankly terrific this year.
Speaker Change: Not the biggest we ever had but more than double last year's crop size so we have inventory enough to fill what we anticipate will be demand.
Speaker Change: and then a little bit more. So give you a little dimension, probably increase the 20-25% more crop there and I'll have quality quality and as you can imagine.
Speaker Change: The infrastructure we have, whether the crop is extra-wise, is really the same cost. So when we have a better crop, those products, we don't have to go out and purchase third-party products.
Speaker Change: Utilizer, repairs which is our mark key product anyway we...
Speaker Change: want to use that product so we're pretty excited about the quality of the product this year and the abundance.
Speaker Change: and it wasn't just a pair, it's a pair of key copies, Tom mentioned, but a peach harvest issue is fantastic, apples, all about products.
Speaker Change: Good, the pairs are what Harry and David are most known for and we've been eating them around here for the last couple of weeks so we can attest them in fact that there is good or same ever been.
Speaker Change: and we've continued to work on extending their life for the pairs and so we have the pairs now that historically took us through holiday and into the January timeframe. Last year we were able to extend that into the March April timeframe. We think that we're going to actually be able to extend that even further and maybe you can get to the mother's day with our pairs. Again, as Tom was referencing, by having the ability to do that, we don't have to source your third party pairs during that time of the year and it saves us money.
Speaker Change: So two things, yeah, good crop this year, quantity and especially quality and a second thing is the capital expenditures we've made on our storage facilities to optimize our ripening capabilities, gives us a little bit of extension and season as Bill mentioned.
Speaker Change: Great, that's good color, thank you. Thank you, though.
Speaker Change: This concludes our question and answer session. I would now like to turn the Comprehensible Retude Jim McKin for any closing remarks.
Jim McCann: Well, happy Halloween everyone. I hope I hope those of you who get away with some little ones enjoy it today, whether you're children or your grandkids or just on in the office place.
Jim McCann: As we mentioned in our Q&A session, if you're a near one of our, one of the six Mays East Boys, we have holiday shops in three here in the New York area, Rosso Field, Queen Centam Wall, and of course the Heralds Grill, Marky Flavship Store for Maysies.
Jim McCann: and three great locations in California. Stop it and take a look. You'll see the breath of our product offering. Just you can know.
Jim McCann: It's very intimate and approximate to us when you see a little beautifully merchandise like it is, you get a sense of how we really do help people celebrate the holiday. We have a greatest song in a product there. So go take a look.
Jim McCann: of the, uh, we all get out of vote.
Jim McCann: in the next few days and we know bye.
Jim McCann: This time next week, we'll be next to the next president and we can get on to making people happy and
Jim McCann: satisfying the gifting and celebratory needs for this set.
Jim McCann: Exciting upcoming holiday season.
Jim McCann: So thank you for your time, your interest, your questions and we stand by to further answer any questions and engage with you as we go out through the next couple of days.
Speaker Change: The conference has now concluded, thank you for attending today's presentation and you may now disconnect.
Speaker Change: The End