Q4 2025 1-800 Flowers.com Inc Earnings Call
Speaker #1: Good Good morning, and welcome to the 1 800 FLOWERS COM, fiscal 2025 fourth quarter earnings call. All participants will be in a listen-only mode.
Operator: Good morning and welcome to the 1-800-Flowers.com Fiscal 2025 Fourth Quarter Earnings Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Andy Milevoj, Senior Vice President, Investor Relations. Please go ahead.
Speaker #1: Should you need assistance, please signal a conference specialist by pressing the STAR key, followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker #1: To ask a question, you may press STAR, then 1 on your touchstone phone. To withdraw your question, please press STAR, then 2. Please note this event is being recorded.
Speaker #1: I would now like to turn the conference over to Andy Milevoj, Senior Vice President, Investor Relations. Please go ahead.
Speaker #2: Good morning, and welcome to our fiscal 2025 fourth quarter and year-end earnings call. Joining us on today's call are Rodolfo Villagomez, Chief Executive Officer, and James Langrock, Chief Financial Officer.
Andy Milevoj: Good morning and welcome to our Fiscal 2025 Fourth Quarter and Year-End Earnings Call. Joining us on today's call are Rodolfo Villagomez, Chief Executive Officer, and James Langrock, Chief Financial Officer. 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 Disclaimer contained in our press release and public documents. During this call, we will make forward-looking statements with predictions, projections, and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, including those contained in our press release and public filings with the Securities and Exchange Commission. The company disclaims any obligation to update any of the forward-looking statements that may be made or discussed during this call. Additionally, we will discuss certain supplemental financial measures that were not prepared in accordance with GAAP.
Speaker #2: 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 Disclaimer contained in our press release and public documents.
Speaker #2: During this call, we will make forward-looking statements with predictions projections and other statements about future events. These statements are based on current expectations and assumptions, that are subject to risks and uncertainties, including those contained in our press release and public filings with the Securities and Exchange Commission.
Speaker #2: The company disclaims any obligation to update any of the forward-looking statements that may be made or discussed during this call. Additionally, we will discuss certain supplemental financial measures that were not prepared in accordance with GAAP.
Speaker #2: Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables in our earnings release. Now, I'll turn the call over to Rodolfo.
Andy Milevoj: Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables in our earnings release. Now, I'll turn the call over to Rodolfo.
Speaker #3: Thanks, Andy. And good morning, everyone. I'm honored to step into the CEO role at such an important time for our company. And I am very optimistic about our future.
Rodolfo Villagomez: Thanks, Andy, and good morning, everyone. I'm honored to step into the CEO role at such an important time for our company, and I am very optimistic about our future. I want to start by thanking James for his support and the autonomy he has given me during this transition. Since joining in May, I have focused on gaining a deep understanding of our business by engaging with employees at every level and listening closely to customer feedback. These conversations have given me valuable insight into where we stand today, what's working, and what we need to change. They have helped us stabilize the business and identify both the immediate and long-term actions needed to set us on the right path. 1-800-Flowers.com is an iconic brand, and we have the privilege of being part of our customers' most meaningful moments.
Speaker #3: I want to start by thanking Jim for his support and the autonomy he has given me during this transition. Since joining in May, I have focused on gaining a deep understanding of our business.
Speaker #3: By engaging with employees at every level, and listening closely to customer feedback, these conversations have given me valuable insight into where we stand today, what's working, and what we need to change.
Speaker #3: They have helped us stabilize the business and identify both the immediate and long-term actions needed to set us on the right path. 1 800 FLOWERS COM is an iconic brand.
Speaker #3: And we have the privilege of being part of our customers' most meaningful moments. But customer expectations are evolving, technology is advancing quickly, and competition is intensifying.
Rodolfo Villagomez: Customer expectations are evolving, technology is advancing quickly, and competition is intensifying. We didn't fully keep pace with this environment, and as a result, we haven't reached our full potential. As we discussed on our last call, our celebration strategy is designed to change that. It represents a fundamental shift in how we engage with customers and run our business. By leaning into this approach, we intend to address the factors that matter most to our growth and financial performance and position the company for long-term success. Looking ahead, I see significant opportunities to improve our performance by becoming a leaner, more agile, customer-centric, and data-driven organization. To return to revenue growth, we are modernizing the customer experience, sharpening how we acquire and retain customers, and expanding our reach beyond our e-commerce sites. At the same time, we are building greater operational discipline, driving efficiency, and enhancing accountability.
Speaker #3: We didn't fully keep pace with this environment, and as a result, we haven't reached our full potential. As we discuss on our last call, our celebration strategy is designed to change that.
Speaker #3: It represents a fundamental shift in how we engage with customers and run our business. By leaning into this approach, we intend to address the factors that matter most to our growth and financial performance and position the company for long-term success.
Speaker #3: Looking ahead, I see significant opportunities to improve our performance by becoming a leaner, more agile, customer-centric, and data-driven organization. To return to revenue growth, we are modernizing the customer experience, sharpening how we acquire and retain customers, and expanding our reach beyond our e-commerce sites.
Speaker #3: At the same time, we are building greater operational discipline, driving efficiency, and enhancing accountability. I will share more of my thoughts in just a moment, but first, I would like to turn it over to James to review our fiscal 2025 fourth quarter and year-end financial results.
Rodolfo Villagomez: I will share more of my thoughts in just a moment, but first, I would like to turn it over to James to review our Fiscal 2025 Fourth Quarter and Year-End Financial Results. James.
Speaker #3: James?
Speaker #4: Thanks, Rodolfo, and good morning, everyone. This morning, I will review our fiscal 2025 fourth quarter and year-end performance. Please note that all comparisons are made to the prior year period, and represent adjusted results unless otherwise stated.
James Langrock: Thanks, Rodolfo, and good morning, everyone. This morning, I will review our Fiscal 2025 Fourth Quarter and Year-End Performance. Please note that all comparisons are made to the prior year period and represent adjusted results unless otherwise stated. Challenges we experienced throughout Fiscal 2025 persisted during the Fourth Quarter. Our top line remained pressured, and we continued to navigate an evolving customer acquisition landscape. Traditional SEO continued to decline, and our bottom-of-the-funnel marketing investments did not yield their expected results. As a result, our consolidated Fourth Quarter revenue declined 6.7%. This was comprised of an 8.8% decline in our consumer floral and gift segment, a 3.6% decline in our gourmet foods and gift baskets segment, and a 0.6% decline in our BloomNet segment. This was primarily due to a 5.6% decrease in transactions and, to a lesser extent, a 1.6% decrease in AOV.
Speaker #4: The challenges we experienced throughout fiscal 2025 persisted during the fourth quarter. Our top line remained pressured, and we continued to navigate an evolving customer acquisition landscape.
Speaker #4: Traditional SEO continued to decline, and our bottom-of-the-funnel marketing investments did not yield their expected results. As a result, our consolidated fourth quarter revenue declined 6.7 percent.
Speaker #4: This was comprised of an 8.8% decline in our Consumer Floral and Gift segment, a 3.6% decline in our Gourmet Foods and Gift Basket segment, and a 0.6% decline in our BloomNet segment.
Speaker #4: This was primarily due to a 5.6 percent decrease in transactions and, to a lesser extent, a 1.6 percent decrease in AOV. This was partly mitigated by the Easter shift from Q3 a year ago into Q4 this year.
James Langrock: This was partly mitigated by the Easter shift from Q3 a year ago into Q4 this year. For the fiscal year-end, our consolidated revenue declined 8%. This included an 8.2% decline in transactions and a 1.1% decline in AOV, which was partially offset by gains in our wholesale business. At the end of Fiscal 2025, we had 9.5 million customers, over 900,000 Passport members, and 74% of our revenue came from existing customers. As compared to the prior year, our customer count declined in line with our revenue decline, while our Passport membership declined at a greater rate. Multi-branded customers and Passport members continue to represent our best-performing customers. During Fiscal 2025, multi-branded customers represented 13% of our customers and 29% of our revenues, while Passport members represented 9% of our customer base and 19% of our revenues.
Speaker #4: For the fiscal year-end, our consolidated revenue declined 8 percent, this included an 8.2 percent decline in transactions, and a 1.1 percent decline in AOV.
Speaker #4: Which was partially offset by gains in our wholesale business. At the end of fiscal 2025, we had 9.5 million customers, over 900,000 Passport members, and 74 percent of our revenue came from existing customers.
Speaker #4: As compared to the prior year, our customer account declined in line with our revenue decline. While our passport membership declined at a greater rate.
Speaker #4: Multi-branded customers and passport members continued to represent our best-performing customers. During fiscal 25, multi-branded customers represented 13 percent of our customers and 29 percent of our revenues.
Speaker #4: While passport members represented 9% of our customer base and 19% of our revenues, we clearly recognize the affinity of these customers, as Rodolfo will touch on in just a few moments.
James Langrock: As Rodolfo will touch on in just a few moments, we clearly recognize the affinity of these customers. We are reviewing opportunities to improve our loyalty program, along with the overall shopping experience, to increase membership and promote multi-branded selling. Turning to gross margin, our Fourth Quarter gross margin declined 290 basis points to 35.5%, compared with 38.4% in the prior year period. This decline was primarily due to our highly promotional sales environment and deleveraging on the sales decline. On a full-year basis, excluding costs associated with the OMS system implementation challenges, our gross margin declined 100 basis points to 39.1%. Now let's review our Fourth Quarter operating margins. Excluding non-recurring charges and the impact of the company's non-qualified deferred compensation plan in both periods, operating expenses declined $3.7 million to $159.7 million. On a full-year basis, our adjusted operating expenses declined $10.9 million to $695.2 million.
Speaker #4: We are reviewing opportunities to improve our loyalty program, along with the overall shopping experience. To increase membership and promote multi-branded selling, returning to gross margin, our fourth quarter gross margin declined 290 basis points to 35.5 percent.
Speaker #4: Compared with 38.4 percent in the prior year period. This decline was primarily due to a highly promotional sales environment, and deleveraging on the sales decline.
Speaker #4: On a full-year basis, excluding costs associated with the OMS system implementation challenges, our gross margin declined 100 basis points to 39.1 percent. Now, let's review our fourth quarter operating margins.
Speaker #4: Excluding non-recurring charges and the impact of the company's non-qualified deferred compensation plan in both periods, operating expenses declined $3.7 million, to $159.7 million. On a full-year basis, our adjusted operating expenses declined $10.9 million, to $695.2 million.
Speaker #4: During fiscal 25, we invested in marketing that did not yield the top line results we were targeting. We began to optimize our marketing spend during the fourth quarter, and as Rodolfo will discuss in more detail, we see significant opportunities to become more efficient and effective with our marketing efforts going forward.
James Langrock: During Fiscal 2025, we invested in marketing that did not yield the top-line results we were targeting. We've begun to optimize our marketing spend during the Fourth Quarter, and as Rodolfo will discuss in more detail, we see significant opportunities to become more efficient and effective with our marketing efforts going forward. Based on these factors, our Fourth Quarter adjusted EBITDA loss was $24.2 million as compared with a loss of $8.8 million in the prior year period. On a full-year basis, adjusted EBITDA was $29.2 million compared with $93.1 million in the prior year period. On our last call, we reported the initiation of a cost reduction plan aimed at achieving approximately $40 million in annualized savings, which included $17 million in reductions that already have been implemented. As Rodolfo will expand on, we recently engaged an external consultant to assist in identifying and prioritizing additional efficiency opportunities.
Speaker #4: Based on these factors, our fourth quarter adjusted EBITDA loss was $24.2 million, compared to a loss of $8.8 million in the prior year period.
Speaker #4: On a full-year basis, adjusted EBITDA was $29.2 million, compared with $93.1 million in the prior year period. On our last call, we reported the initiation of a cost reduction plan aimed at achieving approximately $40 million in annualized savings.
Speaker #4: Which included $17 million in reductions that have already been implemented. As Rodolfo will expand on, we recently engaged an external consultant to assist in identifying and prioritizing additional efficiency opportunities.
Speaker #4: Now turning to our balance sheet. At fiscal year-end, net debt was $114 million, compared with $31 million a year ago. Our cash balance was $47 million.
James Langrock: Now turning to our balance sheet. At fiscal year-end, net debt was $114 million, compared with $31 million a year ago. Our cash balance was $47 million. Inventory was $177 million, in line with a year ago. In terms of our debt, we had $160 million in term debt and no borrowings under our revolving credit facility, as compared with $190 million in term debt a year ago. Looking ahead to Fiscal 2026, we are approaching the year as a pivotal period of foundation setting. As we discussed on our last call, our celebration strategy is a multi-year strategy, and our strategic priorities are focused on positioning the company for long-term growth. These priorities include driving cost savings and organizational efficiencies, building a customer-centric and data-driven organization, broadening our reach beyond our e-commerce sites into new channels, and strengthening our team through enhanced talent and accountability.
Speaker #4: Inventory was $177 million, in line with a year ago. In terms of our debt, we had $160 million in term debt and no borrowings under our revolving credit facility.
Speaker #4: As compared with $190 million in term debt a year ago. Looking ahead to fiscal 2026, we are approaching the year as a pivotal period of foundation setting.
Speaker #4: As we discussed on our last call, our celebration strategy is a multi-year strategy. And our strategic priorities are focused on positioning the company for long-term growth.
Speaker #4: These priorities include driving cost savings and organizational efficiencies, building a customer-centric and data-driven organization, and broadening our reach beyond our e-commerce sites into new channels.
Speaker #4: And strengthening our team through enhanced talent and accountability. With a renewed commitment to agility and customer centricity, we believe these foundational steps will set the stage for sustainable revenue and profit growth in the years to come.
James Langrock: With a renewed commitment to agility and customer centricity, we believe these foundational steps will set the stage for sustainable revenue and profit growth in the years to come. Now I'll turn the call back to Rodolfo.
Speaker #4: Now I'll turn the call back to Rodolfo.
Speaker #3: Thank you, James. Our performance this quarter is disappointing, and it is clear that we need to fundamentally transform our strategy in order to return to sales and profit growth.
Rodolfo Villagomez: Thank you, James. Our performance this quarter is disappointing, and it is clear that we need to fundamentally transform our strategy in order to return to sales and profit growth. When I accepted this role, I did so with the belief that 1-800-Flowers.com is an iconic company with products customers love and with a unique place in their most meaningful celebrations. That belief has only grown stronger in my first few months as CEO. At the same time, I have identified several areas that require real change. Some issues can be addressed quickly, while others will take more time. This morning, I want to share my early observations and highlight the areas where the leadership team and I are focused. Over the past five years, our company experienced rapid revenue growth, followed by significant declines. While microeconomic headwinds played a role, internal challenges also contributed.
Speaker #3: When I accepted this role, I did so with the belief that 1 800 FLOWERS COM is an iconic company, with products customers love, and with a unique place in their most meaningful celebrations.
Speaker #3: That belief has only grown stronger in my first few months as CEO. At the same time, I have identified several areas that require real change.
Speaker #3: Some issues can be addressed quickly, while others will take more time. This morning, I want to share my early observations and highlight the areas where the leadership team and I are focused.
Speaker #3: Over the past five years, our company experienced rapid revenue growth, followed by significant declines. While microeconomic headwinds played a role, internal challenges also contributed.
Speaker #3: Our customer retention approach was ineffective, our marketing spend was inefficient, and expenses did not come down in line with revenues. So, where do we go from here?
Rodolfo Villagomez: Our customer retention approach was ineffective, our marketing spend was inefficient, and expenses did not come down in line with revenues. Where do we go from here? We are transforming 1-800-Flowers.com into a customer-centric, data-driven organization with clear priorities and ROI-driven decision-making. Our plan centers on four key areas: achieving cost savings and organizational efficiency, strengthening our customer focus, expanding our reach beyond e-commerce into new channels, and enhancing talent and accountability. On our cost structure, the company has not sufficiently adjusted expenses to reflect lower revenues. We have launched a comprehensive review of our structure, supply chain, procurement, and IT costs to simplify how we work, eliminate redundancy, and build greater agility. We have also engaged an external consultant to help us accelerate time to impact. Procurement is one clear example of improvement. Today, sourcing is fragmented across brands.
Speaker #3: We are transforming 1-800-Flowers.com into a customer-centric, data-driven organization with clear priorities and ROI-driven decision-making. Our plan centers on four key areas: achieving cost savings and organizational efficiency, strengthening our customer focus, expanding our reach beyond e-commerce into new channels, and enhancing talent and accountability.
Speaker #3: On our cost structure, the company has not sufficiently adjusted expenses to reflect lower revenues. We have launched a comprehensive review of our structure, supply chain, procurement, and IT costs to simplify how we work, eliminate redundancy, and build greater agility.
Speaker #3: We have also engaged an external consultant to help us accelerate our time to impact. Procurement is one clear example of improvement. Today, sourcing is fragmented across brands.
Speaker #3: By centralizing it, we can leverage scale, lower costs, and improve consistency. Similarly, we are reviewing level planning and our end-to-end supply chain to drive further efficiencies.
Rodolfo Villagomez: By centralizing it, we can leverage scale, lower costs, and improve consistency. Similarly, we are reviewing level planning and our end-to-end supply chain to drive further efficiencies. On the customer side, our focus is to simplify and modernize the digital experience, enhance our data infrastructure, and transform marketing into a full-funnel engine that balances awareness, acquisition, and retention. Historically, our brands operated independently, but by aligning merchandising to categories and streamlining our brand architecture, we can capture synergies and present a more unified, intuitive experience. We will also use algorithm-driven merchandising to personalize the journey and respond to customer needs in real time. Improving marketing efficiency and retention is central to this effort. Our prior approach has spread dollars across too many brands, competed against ourselves in key channels, and it was primarily focused on bottom-of-funnel spend.
Speaker #3: On the customer side, our focus is to simplify and modernize the digital experience. Enhance our data infrastructure, and transform marketing into a full funnel engine that balances awareness, acquisition, and retention.
Speaker #3: Historically, our brands operated independently. However, by aligning merchandising to categories and streamlining our brand architecture, we can capture synergies and present a more unified, intuitive experience.
compete against ourselves in key channels and it was primarily focused on bottom of funnels spent
Rodolfo Villagomez: We are shifting toward smarter, more efficient marketing that builds brand awareness and demand, while creating a flywheel around acquisition, retention, and lifetime value. Our marketing framework will also shift from a focus on gross margin to emphasizing variable contribution margin and its direct impact on the bottom line. Enhancing our loyalty program is also a major opportunity. Today, it functions primarily as a free shipping program. By improving the value proposition, we can drive more frequent purchases and increase awareness of our broader product categories. We also see a significant opportunity in broadening our reach. While gifting will always remain at the heart of our business, many of our products also lend themselves to self-consumption. Expanding into locations where customers purchase for themselves opens the door to new growth.
We are shifting toward smarter more efficient marketing, that builds brand, awareness, and demand.
While creating a flywheel around acquisition retention and lifetime value.
Our marketing framework.
Will also shift from a focus on growth margin to emphasizing variable contribution margin and is direct impact on the bottom line.
Enhancing our loyalty program is also a major opportunity.
Today, it functions primarily as a free shipping program.
By improving the value. Proposition we can drive more frequent purchases and increase awareness of our broader product categories.
We also see a significant opportunity in broadening our reach.
While gifting will always remain at the heart of our business. Many of our products also lend themselves to self consumption.
Expanding into occasions where customers purchase for themselves opens the door to new growth.
Rodolfo Villagomez: Beyond our e-commerce sites, we will look to diversify our distribution, making our products more accessible in the places customers already shop and creating new entry points to experience our brands. Together, these initiatives will allow us to reach new audiences, deepen engagement, and drive incremental growth. Finally, talent and accountability are critical. We're aligning our team with the company's strategic goals and strengthening how we hire, develop, and retain talent. We are building a culture that values agility, accountability, and execution. This is essential to ensure that our strategy translates into results. As we said on our last call, our celebration strategy represents the next phase of our company's evolution. Many of the areas I have outlined today are central to that multi-year transformation.
Beyond our e-commerce sites, we will look to diversify our distribution, making our products, more accessible in the places customers already shop.
And creating new entry points to experience Our Brands.
Together, this initiative will allow us to reach new audiences, deepen engagement, and driving incremental growth.
Finally, talent and accountability are critical.
We're aligning our team with the company's strategic goals and strengthening how we hire, develop, and retain talent.
We are building a culture that values, agility, accountability, and execution.
This is essential to ensure that our strategy translates into results.
as we said, on our last call,
Our celebration strategy represents the next phase of our company's evolution.
They are Central to that multi-year transformation.
Rodolfo Villagomez: Expanding into other channels, improving frequency and conversion, broadening in price points, improving marketing efficiency, leveraging technology to create a better customer experience, and strengthening loyalty. These priorities will guide us as we work toward long-term success. Based on what I have seen and learned so far, I am energized and optimistic about our company's future. While the transformation will take time, I'm confident that the actions we're taking will return 1-800-Flowers.com to growth and create meaningful long-term value for our shareholders. I look forward to sharing more in the quarters ahead. With that, we'll now open the call for Q&A. Operator, please provide instructions.
Expanding into other channels, improving frequency and conversion.
Broadening price points.
Improving marketing, efficiency, leveraging technology to create a better customer experience and strengthening loyalty.
These priorities will guide us as we work toward long-term success.
Based on what I have seen and learned so far. I am energized and optimistic about our company's future.
While the transformation will take time, I am confident that the actions we're taking will return 1-800-Flowers.com to growth and create meaningful long-term value for our shareholders.
I look forward to sharing more in the quarters ahead.
With that, we'll now open the call for Q&A operator.
Please provide instructions.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Our first question will come from Michael Kufinski with Noble Capital Markets. Please go ahead.
Thank you. We will now begin the question and answer session to ask a question. You may press star then 1 on your touchtone phone,
If you're using a speakerphone, please pick up your handset before pressing the keys.
To withdraw your question. Please. Press star. Then 2
Our first question will come from Michael Chui with Noble Capital Markets. Please go ahead.
Analyst: Thank you. A couple of questions regarding your marketing. I know that you said that some of it has been ineffective, and I was just wondering, is it a change in the use of technology that's causing that? For instance, I know that there's been a decline in search traffic on the likes of Google and so forth, and I was just wondering if there was a dynamic shift in the use of the way that people use technology given AI-driven and voice-type search use, and I was just wondering if that's what you're referring to in terms of the ineffective marketing.
Thank you. Um, couple questions regarding your marketing. I know that you, uh, said that some of it has been ineffective and I was just wondering, is there, is it a change in like the use of Technology that's causing that, for instance? Um, you know, I know that there's been a decline in search traffic on the likes of Google and stuff, and so forth. And I was just wondering if, if there was a dynamic shift, in the use of the way, that people, use technology given, you know, AI driven and, and voice type search. Um, uh, use and I was just wondering if that's what you're referring to in terms of the ineffective marketing.
Rodolfo Villagomez: Hi, Michael. This is Rodolfo. Let me put it like this. It's two things. Number one, in the short term, in the past, we would spend marketing to drive revenues, and we were not fully conscious of the variable contribution margin that that transaction would generate. The cost of acquiring customers, in some cases, was higher than the margin that that transaction was generating. That led to, instead of increasing bottom line, you actually were decreasing the more you spend marketing. In the short term, we are focusing on variable contribution margin at the expense of revenues to focus on bottom line increases. To your second question, as technology shifts, I think overall what you see these days is all about AI and LLMs. Really, I think you need to step back and think about where customers are buying products today.
Hi Michael. Uh, this is Adolfo. Um,
Let me put it like this.
It's um,
It's 2. Things number 1, and in the short term, uh, in the past, we would spend marketing to drive revenues and we were not fully conscious of the variable contribution margin that that transaction would generate.
So the cost of acquiring customers in some cases, was higher than the margin that that transaction was generating.
Um, that led to very, I mean, instead of increasing the bottom line, you actually were decreasing. The more you spend on marketing, so in the short term, we are focusing on variable contribution margin.
At the expense of revenues, uh, to focus on bottom line increases.
So your second question. Um, I mean
Technology shares. What I think, overall, what you see these days is all about AI and LLMs.
but,
Rodolfo Villagomez: Let's just say that not everybody goes into the search engines to look for products. Our strategy historically has been focused on bottom-of-funnel, and it has led us to spend a significant amount of our marketing spend on search engines. In a way, we didn't spend in other areas. We're also changing that. To summarize, it's the focus on variable contribution margin dollars for every transaction we have. As I mentioned in the call, expanding our marketing strategy from bottom-of-funnel into a full-funnel approach where we actually generate awareness and drive the market.
Really, I think you need to step back and think about with where customers are buying products today.
And let's just say that not everybody goes into the search engines to look for products.
Our strategy historically has been focused on the bottom of the funnel, and it has led us to spend a significant amount of our marketing budget on search engines. In a way, we didn't spend in other areas. We're also changing that.
So, to summarize, it's the focus on variable contribution margin dollars for every transaction we have. As I mentioned in the call, we're expanding our marketing strategy from a bottom-of-the-funnel into a full-funnel approach, where we actually generate awareness and drive demand.
Analyst: Gotcha. Thanks for that color. Can you talk a little bit about the competitive dynamic in consumer floral? Is there like a bad actor there, or is it just general competition? I'm just wondering if you could just kind of add some color there.
Gotcha. Thanks for that color. And can you talk a little bit about the competitive Dynamic and consumer floral? Is there like a bad actor there or is it? Uh, just general? Um, competition, I was just wondering if you could just kind of add some color there.
Rodolfo Villagomez: I wouldn't say there is a bad actor. I think I would go towards more general competition. We need to become more agile. As I mentioned in the call, I think today we are in an environment in which we manage products and we are trying to sell them on our website, on our e-commerce property. As I mentioned before, everything starts with the customer, and the customers are buying now in different channels. You need to have your products where the customers are. That is impacting our business in the short term because we were not agile to go into these other channels. As we speak, we're expanding into other channels to actually drive sales. We're in the process of expanding our products to other delivery platforms, to marketplaces, and other opportunity areas.
I wouldn't say there is a bad actor, I think I would go towards more General competition. We need to become more agile and
And, as I mentioned in the call, I think today we are in an environment in which.
We manage products and we are trying to sell them on our website or on our e-commerce property. And as I mentioned before, everything starts with the customer, and the customers are buying now in different channels. So you need to have your products where the customers are and, uh, that is impacting our business in the short term because we were not agile to go into this other channels. But as we speak, we're, we're expanding into into other channels to actually, uh, Drive sales where in in the process of expanding our products to other delivery platforms.
Rodolfo Villagomez: You're talking about fresh-cut flowers, but if I expand into Harry & David and some of our other brands, physical retail is also important, and we are moving there and other retailers. We are trying to drive the company to separate product brand from channels. It doesn't mean that they need to be the same, but you have products that can be sold using different brands and products that can be sold through different channels. We're looking at this end-to-end. As I said, I think the number one focus here is let's offer our products wherever the customers are already buying them.
Other uh, opportunity areas you're talking about flowers. But if I expand into
Her and David, and some of our other brands. Um,
uh, physical retail is also important and we are moving there and, um, and and other retailers we are. I'm trying,
To drive the company to separate.
Product brand from channels.
It doesn't mean that they need to be the same, but you have products that can be sold using different brands and products that can be sold through different channels. So we're looking at this end to end, and as I said, I think the number one focus here is let's offer our products wherever the customers are already buying them.
Analyst: Gotcha. My final question, Daniel, I'm going to let others ask questions. To what degree have commodity prices normalized? I know that in the past, we talked a little bit about where we are in that journey towards getting towards more normalized commodity prices. I know that cocoa prices have been exceptionally high. I was just wondering if you see the prospect for continued improvement, at least on the commodity price side.
Gotcha and my final question. I know I'm gonna let others ask questions to what degree have commodity prices normalized. I mean, I know that in the past we talked a little bit about, um,
Where we are in that Journey towards getting towards a more normalized commodity prices. And I know that Poco prices have been exceptionally high, it was just wondering if you see, uh, you know, the prospect for continued Improvement at least on the commodity price side.
James Langrock: Michael, this is James. Yes, as you mentioned, the cocoa remains elevated, but a lot of our other commodities have started to kind of revert closer to their mean. The one headwind that we're still dealing with is obviously a lot better. You know, when we spoke three months ago, the tariffs, right? We have a $15 million headwind with tariffs based on the current tariff structure that is out there. Now, that's down significantly from the $55 million when tariffs first came out back when we spoke in May. We have that headwind, but overall, the commodities are starting to revert to their mean.
So Michael, this is James. So yes as as you mentioned, you know, the Coco remains elevated but a lot of our other Commodities have started to kind of revert.
Closer to their mean uh but the 1 had when that we're still dealing with, it's obviously a lot better.
You know, when we spoke, uh, 3 months ago, you know, the tariffs, right? We have a 15 million dollar headwind with tariffs based on the current, you know, tariff structure. That is out there now, that's down significantly.
From the 55 million, you know, when tariffs first came out, uh, back in when we spoke in, in in May, but again, we have that happen. But overall the Commodities are, you know, are starting to revert to their mean.
Analyst: Okay, great. That's all I have. Thank you.
Okay, great. That's all I have. Thank you.
Operator: Your next question will come from Anthony Lebaczynski with Sidoti and Company. Please go ahead.
And your next question will come from Anthony Lee zinsky with Saudi and Company. Please go ahead.
Analyst: Good morning, and thank you for taking the questions. First question, just in terms of the quarter here, can you comment on the sales for the major holidays like Easter and Mother's Day versus everyday gifting? Did you see the same kind of bifurcation between the two? Just wondering if you can comment on that.
Uh, good morning and thank you for taking the questions. Uh, so first the questions just, uh, in terms of the quarter here, um, can you comment on the sales for the major holidays, like, Easter and Mother's Day versus everyday? Gifting did you see the same kind of bifurcation be between the, the, the 2.
James Langrock: On the Mother's Day holiday, that came in line with what we were forecasting. It was obviously down on a year-over-year basis. One of the things that we did, if you recall back in Valentine's Day, Anthony, we were investing heavily in marketing to try to drive top line. From a Mother's Day perspective, we pulled back on getting back to what Rodolfo mentioned on the variable contribution margin. We're more focused on variable contribution margin and not driving non-profitable sales. Mother's Day was down year-over-year and came in line with our expectations.
Uh, just just wondering, uh, if you can comment on that.
No 1 of the things that we did. If you recall back, in Valentine's Day Anthony we were investing heavily in marketing to try to drive Topline. Uh so when mothers from Mother's Day perspective you know we pull back on you know getting back to what adopta mentioned on the variable contribution margin. We're more focused on variable contribution margin and not driving uh you know on profitable sales. So Mother's Day was down year over year and came in line with with our expectations
Analyst: Thank you, James. Okay. Thinking about the different strategies, Rodolfo, that you mentioned, can you give us maybe a sense as to the timing of some of these initiatives? Like, what's kind of like the low-hanging fruit, so to speak, and which of these strategies that you talked about will take more time to come to fruition?
Thank you James. Okay. And then um you know, thinking about the difference of strategies, adulthood that you you mentioned. Um, can you give us maybe a census as as to the timing of some of these initiatives? Uh like and you know what's kind of like the low-hanging fruit that so to speak and the which of these strategies that you talked about, will take more time to come to fruition?
Rodolfo Villagomez: Thank you, Anthony. As James said, we are seeing this year as a pivotal year to set the foundation for future growth. If you step back for a moment and just say, "Hey, what was driving the EBITDA decline on this company?" I can point you to three factors: volume decline combined with fixed overhead, the OMS issue we had back during the holidays, and then unproductive increases in marketing spend. In the short term, we're addressing those issues to change the trajectory of the business where we start planting seeds to drive future growth. The future growth will come from two sources: fixing the core business, and as we have been talking about it, everything starts with products. You need to make sure that you have the right value proposition.
Thank you, Anthony. Um,
As James said, we are seeing this year as a pivotal year to set the foundation for future growth.
If you step back for a moment and you say, hey what was driving, the ebw decline on this company.
I can point you to three factors.
Volume decline combined with fixed overhead.
The MS issue, we had back during the holidays.
And then on productive increases in marketing spend.
In the short term, we're addressing those issues to change the trajectory of the business where we start, planting seeds to drive future growth. And the future growth will come from 2 sources.
Rodolfo Villagomez: We were talking a lot about the customer, and I want to emphasize that the marketing strategy related to the customer, it is going to be less about the initial transaction and just capturing these customers at the bottom-of-funnel. It is more about how we are capturing these customers, what is the retention strategy to minimize the marketing fee as we acquire these customers and therefore increase the customer lifetime value over time. That's what we are calling the customer flywheel. The third component is related to, I call it the product discoverability, but it's helping the customer find our product. It's a combination of bringing AI to our websites, modernizing the navigation, search, product recommendations. The way to think about it is, in the short term, we're stabilizing the business, trying to change the trajectory.
Fixing the core business, and as we have been talking about, everything starts with products. So, you need to make sure that you have the right value proposition. We were talking a lot about the customer, and I want to emphasize that.
The marketing strategy related to the customer.
it is going to be less about the initial transaction and just capturing these customers at the bottom of the funnel funnel and it's more about
See, as we acquire these customers, and therefore increase the customer lifetime value.
Rodolfo Villagomez: Focus on the three things I mentioned is, okay, if your volume is declining, then your cost needs to change, and we're working on that. The OMS issue, I think we are, the way to think about it is, it's a combination of two things: the system's performance, then once the customers were not receiving the products, they would call customer care, and we were not ready for those calls. We're quite confident that we solved all of the system's performance issues that we know of. Actually, the system today is performing better than before we implemented versus the previous system. From a customer care perspective, we are building redundancies just in case something happens. We're very confident about that. Marketing, as I said, in the short term, is focusing on the variable contribution margin.
Uh um uh over time, that's what we are calling the customer flywheel. And the third component are is related to. I call it the the product discoverability but it's helping the customer find our products. It's a combination of bringing AI to to, uh, um, our websites modernizing, the navigation search Pro, um, uh product recommendations. So the way to think about it is in the short term, we're stabilizing the business uh, trying to change the trajectory focus on. The 3 things I mentioned is, okay, if your volume is declining,
Then you your calls needs to change and we're working on that the MS issue.
Um, um, um, I think we are, uh, the way to think about it is, it's a combination of 2 things, the systems performance with, uh, then once once the customers were not receiving the products, they would call customer, uh, care. And we were not ready for those calls.
We are quite confident that we solve uh, all of the systems performance issues that we know of actually the system today is performing a better than than um um before we implement the versus the previous system and from a customer care perspective we are building redundancies just in case something happens. So we are very confident about that.
Rodolfo Villagomez: Parallel to that, we are planting seeds and making targeted investments on the future growth, which, as I mentioned, is the product assortment's value proposition, the customer flywheel, and the product discoverability on our platforms. It is a transition year coupled with investments to drive future growth, Anthony.
And then marketing, as I said, in the short term is focusing on the variable contribution margin. Parallel to that, we are planting seeds and making targeted investments in future growth, which, as I mentioned, is the product assortment, value proposition, the customer flywheel, and the product discoverability on our platforms. So it's a transition year followed by a couple of investments to drive future growth. Anthony.
Analyst: Gotcha. Thanks for that. I guess my last question before I pass it on to others. As you look to execute your strategy, how do we think about CapEx spending for this year? It does sound like you are also looking to perhaps bring back some physical retail stores. I know a few years ago, you guys closed pretty much all of your Harry & David stores. I don't know if you would be looking to reconsider that decision. Just maybe help us understand how do you guys think about CapEx spending as you look to execute this strategy here?
James Langrock: Anthony, this is James. From a CapEx perspective, we had the big implementation of the OMS system last year. Right now, we're not giving guidance, but we believe CapEx will be slightly down this year from last year. Included in that is our investment in some of the physical retail locations. That's already included in that. We do have CapEx set aside for the expansion into some Harry & David and Things Remembered embedded locations.
Gotcha, thanks for that. And so I guess, you know, my last question before I pass it on to others. So as you look to execute your strategy, uh, how do we think about capex spending for this year? Um it's it does sound like you're also looking to perhaps bring back some physical retail stores. I know a few years ago, you guys closed pretty much all of your Harry and David stores. I don't know if you would be looking to reconsider that decision and uh, you know, but just just just, you know, maybe help us understand how do you guys think about, you know, you know, uh, capex spending, as you look to execute this strategy here.
so, uh, and
James. So if I'm a capex perspective, uh, we had the big implementation of Ms last year. So we're right now. Uh, we're not, you know, we're not giving guidance but we believe capex will be slightly down this year, uh, from last year, but in, in included in that is our investment in some of the physical, uh, retail locations. So that's already, you know, included.
We do have capex set aside for the expansion into some Harry and David and Things Remembered locations.
Analyst: Got it. Thank you very much and best of luck.
James Langrock: Thank you.
Got it. Well, thank you very much and best of luck. Thank you. Thank you.
Operator: Again, if you have a question, please press star, then one. Your next question will come from Doug Lane with Water Tower Research. Please go ahead.
Again, if you have a question please press star. Then 1 your next question will come from Doug Lane with water tower research. Please go ahead.
Analyst: Yes. Hi. Good morning, everybody. I'm staying on the retail stores. You did open that Long Island store earlier this year. Can you give us an update on what you've learned there and how that's going to impact your strategy going forward and maybe opening additional retail stores?
Yes. Hi, good morning, everybody. I'm staying with retail stores. You did open that Long Island store earlier this year. Can you give us an update on what you've learned there and how that's going to impact your strategy going forward, and maybe opening additional retail stores?
Rodolfo Villagomez: Let me separate the question from two perspectives. Number one, as I mentioned, I think in the midterm, we believe that expanding our channels is fundamental to our strategy, and that includes physical retail. This year, as you probably saw in the announcement, we're going to have three pop-up stores at Macy's, five in malls for Harry & David, and one for Things Remembered. The way to think about those is we are experimenting and trying to find out what is the right assortment for those stores. The Huntington store combines, I would say, the best assortment we have within our brands. Harry & David goes beyond baskets into a lot of products that are of everyday consumption. If you were to walk that store, you find those products there. Those products actually drive conversion when you get the traffic and drive transactions.
so, um,
Let me separate the question from uh, a 2 perspectives. Like
number 1.
As I mentioned, I think in the midterm we believe that expanding a uh, our channels is, it's fundamental to our strategy and that includes includes physical uh, retail.
Uh, this year, as you probably saw the announcement, we are going to have um, uh, 3 pop up stores at Macy's, uh, 5, uh, in um, um, uh, malls, and for car and David, and 1 for Things Remembered, the way to think about those is we are experimenting and trying to find out what is the right assortment, um, uh for those stores.
Product transactions.
Rodolfo Villagomez: That store, given our expectations, is doing quite well. Keep in mind, it's a lower traffic store. It's not located in a shopping mall. In general, you want to locate where traffic is located. We are learning a lot from that store, and we are leveraging those learnings for our pop-up stores. If things go well, our intention is to continue expanding, not only exploring pop-up stores but actually permanent physical stores. As I said, next year is all about experimentation. We are learning and preparing for growth.
Uh, that store, um, given our expectations is doing quite well. Um, now keep in mind, it's a lower traffic store, is it's not located in a shopping mall.
In general, you want to you want to locate where traffic is located?
But we are learning a lot from that store, and we are leveraging those learnings for our popup stores.
Uh, if things go well, uh, Our intention is to continue expanding and not only exploring pop-up stores, but actually permanent uh, physical stores. But, um, as as I said, next year is all about experimentation. We're learning and preparing for growth.
Analyst: The way I understand it, then there could be two paths here as you expand beyond e-commerce. One is Harry & David and Things Remembered branded stores, whether they're standalone like in Long Island or whether they're in the mall. Would you also pursue on a parallel track permanent placement in Macy's and other department stores? Would you go to mass merchants? Just a little bit more granularity on where in retail you think the brand can go.
So I the way I understand it, then there could be two paths here as you expand beyond e-commerce. 1 is...
Harry and David and Things Remembered branded stores, whether they're Standalone like in Long Island or whether they're in the mall, or would you also pursue on a parallel track? Permanent placement in Macy's and other department stores. Would you go to mass Merchants just a little bit more granularity on on where in retail you think the brand can go
Rodolfo Villagomez: I would say all of the above, and that's what we are experimenting. I would go beyond physical retail into also digital, including marketplaces and on-demand delivery. The way we're thinking about it is wherever the customer is, we have products for them. As I mentioned, it's, I think, beyond gifting, we're also focusing on self-consumption. We have a lot of products for self-consumption. We're experimenting our way to grow. All of the things you mentioned, Doug, are options. We are fact-based. We are data-driven. Whatever delivers the best performance, that's where we are going to invest our capital. I think number one priority for me and for the team is let's make sure that we drive profitable growth and the return on invested capital we provide to our shareholders is above their expectations.
Also digital including, um, marketplaces, uh, and um, on demand delivery.
Uh, the way we're thinking about it is whatever the customer is, we have products for them. We as a, as I mentioned, it's
I think Beyond gifting, we're also focusing on self consumption and we have a lot of products for self consumption. So we're experimenting our way uh to grow.
So, all of the things you mentioned, dog, are options. We are fat-based; we are data-driven. So, whatever delivers the best performance, that's what we are going to invest our capital in. I think the number one priority for me and for the team is to make sure that we drive profitable growth and the return on invested capital we provide to our shareholders. It's about their expectations.
Analyst: Your comment about self-consumption makes a lot of sense to me. I know that you're positioned as a gifting platform, but certainly a lot of that product would be right for self-consumption. Do you have any data yet on what you think your current % of sales are that go to self-consumption versus gifting?
Your comment about self consumption makes a lot of sense to me. Um, I know that you your position as a gifting platform but certainly a lot of that product would be right for self consumption. Do you have any data yet on what you think your current percentage of sales are that go to self consumption versus gifting?
Um,
Rodolfo Villagomez: I would say it varies by brand. It's a lot higher on Harry & David, lower in flowers, and lower in PersonalizationMall.com. Honestly, Doug, part of this is self-inflicted. One of the things the merchants are working on on 1-800-Flowers.com is to tailor the assortment for self-consumption, e.g., something as simple as selling flowers without the vase. If you're buying flowers for your house, you are not buying vases. You just want the flowers. Launching a subscription model, we're experimenting with all of these things. Today, naturally, the products and the brands that we have acquired over the years and that are sitting under the umbrella of Harry & David are tailored for self-consumption. We have cookies. We have coffee. We have chocolate. We're about to launch olive oil and vinegar. I mean, we have a lot of things that you can find in your average retail store.
uh, lower in flowers and lower in lower in people. Honestly, the part of this is self-inflicted. Um, 1 of the things the merchants are working on. On 1 of the flowers is to tailor the assortment for self self consumption. EG something as simple as selling flowers without the vase. If you're buying flowers for your house, you
Rodolfo Villagomez: As I said, also, we're planning to have our own stores. That's what we're unlocking here. I think in the past, we had this approach of, "Oh, it's our brand and it needs to be sold on our website." We're basically saying, "No, separate the brand from the product on our website." I'll give you an example. Cookies. I can sell cookies on the Cheryl's Cookies brand. I can sell cookies on Harry & David. I can sell private label cookies. I can sell all of those on the Harry & David website. I can sell all of that on the 1-800-Flowers.com website. I can sell that on marketplaces. I can sell that in physical retail. The sky is the limit. We're testing our way to find out what drives the most profitable growth for the company in the short term.
Journal design basis. You just want the flowers, uh, launching a subscription model. We're experimenting with all of these things, but today, naturally, the products and the brands that we have acquired over the years and that are sitting sitting under the umbrella of Harry. And David are, are Taylor for self consumption. We have cookies, we have coffee, we have chocolate. Um, um, uh, we're about to launch olive oil and vinegar. I mean, we have a lot of things that you can find on your average retail store and as I said, also we're planning to have our own stores. So that's what we are unlocking here. I think in the past we had this this um, um,
approach of oh, it's our brand and its needs to be sold on our website where basically saying no
Separate the brand from the product, and our website. I'll give you an example: cookies.
I can sell cookies on the the Cheryl's brand I can sell cookies on the Harry and David I can sell private label cookies. I can sell all of those on the Harry. And David website, I can sell all of that, on the 1, on the flowers website, I can sell that on marketplaces, I can sell that on on physical retail. The the sky is the limit and we are experimenting. We're testing our way to find out what drives the most profitable growth for the company in the short term.
Analyst: That's a good color. Thanks, Rodolfo.
James Langrock: Thank you.
That's a good caller. Thanks to dolfi. Thank you.
Operator: With no further questions, this will conclude our question and answer session. I would like to turn the conference back over to you, Rodolfo Villagomez, for any closing remarks.
With no further questions, this will conclude our question and answer session. I would like to turn the conference back over to also available Gomez for any closing remarks.
Rodolfo Villagomez: Thank you all once again for taking the time to join us on today's call and for your continued support of 1-800-Flowers.com. I am very excited to lead this company during such a transformational period in its history. I look forward to keeping you updated on our progress in the quarters ahead.
James Langrock: Thank you.
Thank you all once again for taking the time to join us on today's call and for your continued support of 100 flowers.com. I am very excited to lead this company during such a transformational period in its history and I look forward to keeping you updated on our progress in the course ahead. Thank you.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Conference is now concluded. Thank you for attending today's presentation. You may now disconnect