1-800-Flowers.com Q2 2026 1-800 Flowers.com Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 1-800 Flowers.com Inc Earnings Call
Operator: Good day, and welcome to the 1-800-Flowers.com Fiscal 2026 Second Quarter Earnings Conference Call. All participants will be in 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 a touchtone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Andy Milevoj, Senior Vice President of Investor Relations. Please go ahead.
Operator: Good day, and welcome to the 1-800-Flowers.com Fiscal 2026 Second Quarter Earnings Conference Call. All participants will be in 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 a touchtone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Andy Milevoj, Senior Vice President of Investor Relations. Please go ahead.
Speaker #1: Good day, and welcome to the 1 800 FLOWERS COM fiscal 2026 second quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone.
Speaker #1: To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Andy Milevoj, Senior Vice President of Investor Relations.
Speaker #1: Please go ahead.
Speaker #2: Good morning. And welcome to our fiscal 2026 second quarter earnings call. Joining us on today's call are Adolfo Villagomez, Chief Executive Officer, and James Langrock, Chief Financial Officer.
Andrew Milevoj: Good morning, and welcome to our fiscal 2026 Q2 earnings call. Joining us on today's call are Adolfo 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.
Andrew Milevoj: Good morning, and welcome to our fiscal 2026 Q2 earnings call. Joining us on today's call are Adolfo 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 of our earnings release. And now, I'll turn the call over to
Andrew Milevoj: Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables of our earnings release. Now, I'll turn the call over to Adolfo.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables of our earnings release. Now, I'll turn the call over to Adolfo.
Speaker #2: Adolfo. Thanks, Andy.
Adolfo Villagomez: Thanks, Andy, and good morning, everyone. The holiday season was operationally strong, and most importantly, our operations ran smoothly throughout the period. We addressed the order management system issues that we experienced last year, and the stability of our systems this holiday season represents a clear and substantial improvement. Revenue came in slightly below our expectations, reflecting our continued focus on improving Marketing Contribution Margin and changes in Search Engine Results Page, including increased paid placements and AI-driven content, which negatively impacted organic visibility and direct traffic. While direct traffic declined more than we anticipated during the holiday period, this was partially offset by stronger performance in our B2B and wholesale businesses. At the same time, we continued to execute on our marketing strategy, which is focused on improving profitability and efficiency, as well as the quality and effectiveness of our paid and earned traffic over time....
Adolfo Villagomez: Thanks, Andy, and good morning, everyone. The holiday season was operationally strong, and most importantly, our operations ran smoothly throughout the period. We addressed the order management system issues that we experienced last year, and the stability of our systems this holiday season represents a clear and substantial improvement. Revenue came in slightly below our expectations, reflecting our continued focus on improving Marketing Contribution Margin and changes in Search Engine Results Page, including increased paid placements and AI-driven content, which negatively impacted organic visibility and direct traffic. While direct traffic declined more than we anticipated during the holiday period, this was partially offset by stronger performance in our B2B and wholesale businesses. At the same time, we continued to execute on our marketing strategy, which is focused on improving profitability and efficiency, as well as the quality and effectiveness of our paid and earned traffic over time....
Speaker #3: And good morning, everyone. The holiday season was operationally strong, and most importantly, our operations ran smoothly throughout the period. We addressed the order management system issues that we experienced last year.
Speaker #3: And the stability of our systems this holiday season represents a clear and substantial improvement. Revenue came in slightly below our expectations. Reflecting our continued focus on improving marketing contribution margin and changes in search engine results page.
Speaker #3: Including increased paid placements and AI-driven content, which negatively impacted organic visibility and direct traffic. While direct traffic declined more than we anticipated during the holiday period, this was partially offset by stronger performance in our B2B and wholesale businesses.
Speaker #3: At the same time, we continue to execute on our marketing strategy, which is focused on improving profitability and efficiency, as well as the quality and effectiveness of our paid and earned traffic over time.
Speaker #3: We believe this approach is important to building a more sustainable and disciplined demand generation model. During the second quarter, we continued to make steady progress on the key initiatives we outlined earlier this year to stabilize the business and support future growth.
Adolfo Villagomez: We believe this approach is important to building a more sustainable and disciplined demand generation model. During the second quarter, we continued to make steady progress on the key initiatives we outlined earlier this year to stabilize the business and support future growth. One of the most important changes this quarter was simplifying our organization and moving to a function-based operating structure. Previously, we were organized by individual brands, which created duplication, limited collaboration, and slow decision-making. The new structure is already driving greater efficiency, clearer ownership, and improved collaboration across the business. As part of this transformation, we reduced costs and streamlined the organization through workforce reductions and leadership realignments. While these were difficult decisions, they were necessary to improve accountability and better align resources with our strategic priorities. Additionally, we're also reducing layers, applying best practices more consistently, and enabling faster, more effective decision-making across functions.
We believe this approach is important to building a more sustainable and disciplined demand generation model. During the second quarter, we continued to make steady progress on the key initiatives we outlined earlier this year to stabilize the business and support future growth. One of the most important changes this quarter was simplifying our organization and moving to a function-based operating structure. Previously, we were organized by individual brands, which created duplication, limited collaboration, and slow decision-making. The new structure is already driving greater efficiency, clearer ownership, and improved collaboration across the business. As part of this transformation, we reduced costs and streamlined the organization through workforce reductions and leadership realignments. While these were difficult decisions, they were necessary to improve accountability and better align resources with our strategic priorities. Additionally, we're also reducing layers, applying best practices more consistently, and enabling faster, more effective decision-making across functions.
Speaker #3: One of the most important changes this quarter was simplifying our organization and moving to a function-based operating structure. Previously, we were organized by individual brands, which created duplication, limited collaboration, and slow decision-making.
Speaker #3: The new structure is already driving greater efficiency, clearer ownership, and improved collaboration across the business. As part of this transformation, we reduced costs and streamlined the organization through workforce reductions and leadership realignments.
Speaker #3: While these were difficult decisions, they were necessary to improve accountability and better align resources with our strategic priorities. Additionally, we're also reducing layers, applying best practices more consistently, and enabling faster and more effective decision-making across functions.
Speaker #3: With this structure and recent leadership additions in place, the team is now fully focused on execution. To support this next phase, I am pleased to share that Alex Helikovsky joins us as our Chief Information Officer.
Adolfo Villagomez: With this structure and recent leadership additions in place, the team is now fully focused on execution. To support this next phase, I am pleased to share that Alex Zelikovsky joined us as our Chief Information Officer. Alex brings more than 25 years of technology leadership experience and will lead our enterprise-wide technology strategy, including IT applications, data architecture, cybersecurity, and business intelligence, as we modernize our platforms and support our AI and optimization initiatives. We also continued to make progress in improving the efficiency of our marketing investments. During the quarter, we saw improvement in our ad spend to sales ratio as we reduced marketing spend on a dollar basis. Marketing contribution margin in Q2 was impacted by the scale of the holiday quarter and the decline in direct traffic.
With this structure and recent leadership additions in place, the team is now fully focused on execution. To support this next phase, I am pleased to share that Alex Zelikovsky joined us as our Chief Information Officer. Alex brings more than 25 years of technology leadership experience and will lead our enterprise-wide technology strategy, including IT applications, data architecture, cybersecurity, and business intelligence, as we modernize our platforms and support our AI and optimization initiatives. We also continued to make progress in improving the efficiency of our marketing investments. During the quarter, we saw improvement in our ad spend to sales ratio as we reduced marketing spend on a dollar basis. Marketing contribution margin in Q2 was impacted by the scale of the holiday quarter and the decline in direct traffic.
Speaker #3: Alex brings more than 25 years of technology leadership experience and will lead our enterprise-wide technology strategy. Including IT applications, data architecture, cybersecurity, and business intelligence.
Speaker #3: As we modernize our platforms and support our AI and optimization initiatives. We also continue to make progress in improving the efficiency of our marketing investments.
Speaker #3: During the quarter, we saw improvement in our ad spend to sales ratio as we reduced marketing spend on a dollar basis. Marketing contribution margin in Q2 was impacted by the scale of the holiday quarter and the decline in direct traffic.
Speaker #3: While this approach can create some pressure on the top line in the near term, we believe it is an important step toward building a more sustainable and profitable demand generation model.
Adolfo Villagomez: While this approach can create some pressure on the top line in the near term, we believe it is an important step toward building a more sustainable and profitable demand generation model. As part of this more disciplined approach, we've also evaluated our physical retail performance during the holiday season. Our pop-up stores were intentionally designed as short-term pilots during the holiday season and provided valuable insight into customer behavior, product preferences, and how customers engage with our brands in a physical retail environment. Based on the results of these tests, we concluded that the return on invested capital for the temporary pop-up stores was not attractive. As a result, we do not plan to pursue additional pop-up locations. Instead, as part of our testing culture, we are redesigning our retail approach to evaluate a full year store concept that is better suited for a permanent year-round location.
While this approach can create some pressure on the top line in the near term, we believe it is an important step toward building a more sustainable and profitable demand generation model. As part of this more disciplined approach, we've also evaluated our physical retail performance during the holiday season. Our pop-up stores were intentionally designed as short-term pilots during the holiday season and provided valuable insight into customer behavior, product preferences, and how customers engage with our brands in a physical retail environment. Based on the results of these tests, we concluded that the return on invested capital for the temporary pop-up stores was not attractive. As a result, we do not plan to pursue additional pop-up locations. Instead, as part of our testing culture, we are redesigning our retail approach to evaluate a full year store concept that is better suited for a permanent year-round location.
Speaker #3: As part of this more disciplined approach, we also evaluated our physical retail performance during the holiday season. Our pop-up stores were intentionally designed as short-term pilots during the holiday season and provided valuable insight into customer behavior, product preferences, and how customers engage with our brands in a physical retail environment.
Speaker #3: Based on the results of these tests, we concluded that the return on invested capital for the temporary pop-up stores was not attractive. As a result, we do not plan to pursue additional pop-up locations.
Speaker #3: Instead, as part of our testing culture, we are redesigning our retail approach to evaluate a full-year store concept that is better suited for a permanent year-round location.
Speaker #3: These will allow us to apply what we learned from the holiday tests while taking a more disciplined approach to capital deployment as we look to optimize and selectively grow our multi-channel strategy over time.
Adolfo Villagomez: This will allow us to apply what we learned from the holiday tests while taking a more disciplined approach to capital deployment as we look to optimize and selectively grow our multi-channel strategy over time. As we move into the Valentine's Day period, our teams are focused on applying this more disciplined marketing approach to a key gifting occasion, with an emphasis on execution, merchandising, and improving the customer experience. Looking ahead, we expect several key initiatives to drive improved performance. Our updated marketing approach is driving a better ad to sales ratio. Enhancements to product discoverability are improving conversion across our online experiences. The elimination of unprofitable initiatives is sharpening our focus on core businesses, and the continued expansion of our third-party marketplace offerings, including Uber, DoorDash, Amazon, and Walmart.com, is growing rapidly and expanding our reach to customers across the channels where they are shopping today.
This will allow us to apply what we learned from the holiday tests while taking a more disciplined approach to capital deployment as we look to optimize and selectively grow our multi-channel strategy over time. As we move into the Valentine's Day period, our teams are focused on applying this more disciplined marketing approach to a key gifting occasion, with an emphasis on execution, merchandising, and improving the customer experience. Looking ahead, we expect several key initiatives to drive improved performance. Our updated marketing approach is driving a better ad to sales ratio. Enhancements to product discoverability are improving conversion across our online experiences. The elimination of unprofitable initiatives is sharpening our focus on core businesses, and the continued expansion of our third-party marketplace offerings, including Uber, DoorDash, Amazon, and Walmart.com, is growing rapidly and expanding our reach to customers across the channels where they are shopping today.
Speaker #3: As we move into the Valentine's Day period, our teams are focused on applying this more disciplined marketing approach to a key gifting occasion, with an emphasis on execution, merchandising, and improving the customer experience.
Speaker #3: Looking ahead, we expect several key initiatives to drive improved performance. Our updated marketing approach is driving a better ad-to-sales ratio. Enhancements to product discoverability are improving conversion across our online experiences.
Speaker #3: The elimination of unprofitable initiatives is sharpening our focus on core businesses. And the continued expansion of our third-party marketplace offerings including Uber, DoorDash, Amazon, and Walmart.com is growing rapidly and expanding our reach to customers across the channels where they are shopping today.
Speaker #3: Together, these efforts are helping us build a more stable foundation for future growth over time. With our leadership team now fully in place, we are confident we have the right team executing against a clear and focused strategy that will continue to improve performance.
Adolfo Villagomez: Together, these efforts are helping us build a more stable foundation for future growth over time. With our leadership team now fully in place, we are confident we have the right team executing against a clear and focused strategy that will continue to improve performance. While there is still meaningful work ahead, the progress we are making gives us confidence that we are moving in the right direction. And now, I will turn the call over to James for the financial review.
Together, these efforts are helping us build a more stable foundation for future growth over time. With our leadership team now fully in place, we are confident we have the right team executing against a clear and focused strategy that will continue to improve performance. While there is still meaningful work ahead, the progress we are making gives us confidence that we are moving in the right direction. And now, I will turn the call over to James for the financial review.
Speaker #3: While there's still meaningful work ahead, the progress we are making gives us confidence that we are moving in the right direction. And now, I will turn the call over to James for the financial review.
Speaker #2: Thanks, Adolfo, and good morning, everyone. During the second quarter, revenue came in below our prior view, driven by our continued focus on improving marketing contribution margin and changes in search engine results pages that negatively impacted direct traffic.
James Langrock: Thanks, Adolfo, and good morning, everyone. During Q2, revenue came in below our prior view, driven by our continued focus on improving marketing contribution margin and changes in search engine results pages that negatively impacted direct traffic. As a result, our e-commerce revenue declined, which was partially mitigated by growth in our wholesale business. Our gross margin declined due to lower fixed cost absorption, higher commodity costs, and the impact of tariffs. At the same time, our ongoing cost reduction initiatives helped mitigate the impact on overall profitability. As Adolfo discussed, we continue to meaningfully improve the efficiency of our operating model. Our cost actions, including organizational simplification, workforce reductions, and tighter expense management, are beginning to benefit the business.
James Langrock: Thanks, Adolfo, and good morning, everyone. During Q2, revenue came in below our prior view, driven by our continued focus on improving marketing contribution margin and changes in search engine results pages that negatively impacted direct traffic. As a result, our e-commerce revenue declined, which was partially mitigated by growth in our wholesale business. Our gross margin declined due to lower fixed cost absorption, higher commodity costs, and the impact of tariffs. At the same time, our ongoing cost reduction initiatives helped mitigate the impact on overall profitability. As Adolfo discussed, we continue to meaningfully improve the efficiency of our operating model. Our cost actions, including organizational simplification, workforce reductions, and tighter expense management, are beginning to benefit the business.
Speaker #2: As a result, our e-commerce revenue declined, which was partially mitigated by growth in our wholesale business. Our gross margin declined due to lower fixed cost absorption, higher commodity costs, and the impact of tariffs.
Speaker #2: At the same time, our ongoing cost reduction initiatives help mitigate the impact on overall profitability. As Adolfo discussed, we continue to meaningfully improve the efficiency of our operating model.
Speaker #2: Our cost actions, including organizational simplification, workforce reductions, and tighter expense management, are beginning to benefit the business. While we are executing on our cost reduction actions, and realizing savings on a run-rate basis, the full benefit of those actions is not yet reflected in our P&L.
James Langrock: While we are executing on our cost reduction actions and realizing savings on a run-rate basis, the full benefit of those actions is not yet reflected in our P&L. In the near term, the savings are being partially offset by consulting fees incurred as part of the work to identify, implement, and operationalize these initiatives. These consulting costs are temporary and largely front-loaded. As implementation progresses, we expect a greater portion of the run-rate savings to be retained in the business and increasingly reflected in our P&L over time. To date, we have already achieved approximately $15 million in annualized run rate cost savings for fiscal 2026. As previously discussed, we continue to expect to achieve approximately $50 million of total cost savings on a run-rate basis across fiscal 2026 and fiscal 2027. Now let's review our performance.
While we are executing on our cost reduction actions and realizing savings on a run-rate basis, the full benefit of those actions is not yet reflected in our P&L. In the near term, the savings are being partially offset by consulting fees incurred as part of the work to identify, implement, and operationalize these initiatives. These consulting costs are temporary and largely front-loaded. As implementation progresses, we expect a greater portion of the run-rate savings to be retained in the business and increasingly reflected in our P&L over time. To date, we have already achieved approximately $15 million in annualized run rate cost savings for fiscal 2026. As previously discussed, we continue to expect to achieve approximately $50 million of total cost savings on a run-rate basis across fiscal 2026 and fiscal 2027. Now let's review our performance.
Speaker #2: In the near term, the savings are being partially offset by consulting fees incurred as part of the work to identify, implement, and operationalize these initiatives.
Speaker #2: These consultant costs are temporary and largely front-loaded. As implementation progresses, we expect a greater portion of the run-rate savings to be retained in the business and increasingly reflected in our P&L over time.
Speaker #2: To date, we have already achieved approximately $15 million in annualized run-rate cost savings for fiscal 2026. As previously discussed, we continue to expect to achieve approximately $50 million of total cost savings on a run-rate basis across fiscal 2026 and fiscal 2027.
Speaker #2: Now, let's review our performance. Consolidated revenue for the second quarter decreased by 9.5%. This included a 22.7% decline in the Consumer Floral and Gifts segment, a 3.8% decline in the Gourmet Foods and Gift Basket segment, and a 3.1% decline in the BloomNet segment.
James Langrock: Consolidated revenue for Q2 decreased by 9.5%. This included a 22.7% decline in Consumer Floral and Gift segment, a 3.8% decline in the Gourmet Foods and Gift Baskets segment, and a 3.1% decline in the BloomNet segment. These results were primarily driven by a strategic shift towards more efficient marketing spending, as well as greater than expected decline in direct traffic. Turning to gross margin. Our Q2 gross margin decreased 120 basis points to 42.1%, compared with 43.3% in the prior year period. This was primarily due to deleveraging on the sales decline, combined with the impact of higher tariff, commodity, and shipping costs.
Consolidated revenue for Q2 decreased by 9.5%. This included a 22.7% decline in Consumer Floral and Gift segment, a 3.8% decline in the Gourmet Foods and Gift Baskets segment, and a 3.1% decline in the BloomNet segment. These results were primarily driven by a strategic shift towards more efficient marketing spending, as well as greater than expected decline in direct traffic. Turning to gross margin. Our Q2 gross margin decreased 120 basis points to 42.1%, compared with 43.3% in the prior year period. This was primarily due to deleveraging on the sales decline, combined with the impact of higher tariff, commodity, and shipping costs.
Speaker #2: These results were primarily driven by a strategic shift towards more efficient marketing spending, as well as a greater-than-expected decline in direct traffic. Turning to gross margin, our second quarter gross margin decreased 120 basis points to 42.1%, compared with 43.3% in the prior year period.
Speaker #2: This was primarily due to deleveraging on the sales decline combined with the impact of higher tariff, commodity, and shipping costs. Operating expenses for the second quarter decreased 23.4 million to 221.1 million, as compared with the prior year period, primarily due to lower marketing and labor costs.
James Langrock: Operating expenses for the second quarter decreased $23.4 million to $221.1 million, as compared with the prior year period, primarily due to lower marketing and labor costs. Excluding items affecting period-to-period compatibility and the impact of the company's non-qualified deferred compensation plan in both periods, operating expenses declined $25.9 million as compared with the prior year to $213.2 million. As a result of these factors, our second quarter Adjusted EBITDA was $98.1 million, compared with Adjusted EBITDA of $116.3 million in the prior year period. Now turning to our balance sheet. At quarter end, our net cash position was $42.3 million. Cash balance was $193.3 million, and inventory was $148.9 million.
Operating expenses for the second quarter decreased $23.4 million to $221.1 million, as compared with the prior year period, primarily due to lower marketing and labor costs. Excluding items affecting period-to-period compatibility and the impact of the company's non-qualified deferred compensation plan in both periods, operating expenses declined $25.9 million as compared with the prior year to $213.2 million. As a result of these factors, our second quarter Adjusted EBITDA was $98.1 million, compared with Adjusted EBITDA of $116.3 million in the prior year period. Now turning to our balance sheet. At quarter end, our net cash position was $42.3 million. Cash balance was $193.3 million, and inventory was $148.9 million.
Speaker #2: Excluding items affecting period-to-period comparability, and the impact of the company's non-qualified deferred compensation plan in both periods, operating expenses declined $25.9 million as compared with the prior year to $213.2 million.
Speaker #2: As a result of these factors, our second quarter adjusted EBITDA was 98.1 million, compared with adjusted EBITDA of 116.3 million in the prior year period.
Speaker #2: Now turning to our balance sheet. At quarter end, our net cash position was $42.3 million. Cash balance was $193.3 million, and inventory was $148.9 million.
Speaker #2: Borrowings under the revolver were fully repaid, during the fiscal second quarter. Looking ahead to the second half of the year, we do not expect progress to be linear.
James Langrock: Borrowings under the revolver were fully repaid during the fiscal Q2. Looking ahead to the second half of the year, we do not expect progress to be linear. However, we remain focused on executing our strategic initiatives and continuing to advance our cost reduction efforts. We believe this disciplined approach will allow us to further stabilize the business and position the company for improved performance over time. In addition, it is worth noting that Valentine's Day falls on a Saturday this year, which historically has been a more challenging day placement compared to midweek holidays. As we move forward, our focus remains on strengthening the foundation of the business. This includes improving efficiency, maintaining cost discipline, and ensuring we are positioned to capitalize on future growth opportunities as the turnaround progresses.
Borrowings under the revolver were fully repaid during the fiscal Q2. Looking ahead to the second half of the year, we do not expect progress to be linear. However, we remain focused on executing our strategic initiatives and continuing to advance our cost reduction efforts. We believe this disciplined approach will allow us to further stabilize the business and position the company for improved performance over time. In addition, it is worth noting that Valentine's Day falls on a Saturday this year, which historically has been a more challenging day placement compared to midweek holidays. As we move forward, our focus remains on strengthening the foundation of the business. This includes improving efficiency, maintaining cost discipline, and ensuring we are positioned to capitalize on future growth opportunities as the turnaround progresses.
Speaker #2: However, we remain focused on executing our strategic initiatives and continue to advance our cost-reduction efforts. We believe this disciplined approach will allow us to further stabilize the business and position the company for improved performance over time.
Speaker #2: In addition, it is worth noting that Valentine's Day falls on a Saturday this year, which historically has been a more challenging day placement compared to midweek holidays.
Speaker #2: As we move forward, our focus remains on strengthening the foundation of the business. This includes improving efficiency, maintaining cost discipline, and ensuring we are positioned to capitalize on future growth opportunities as the turnaround progresses.
Speaker #2: For the second half of fiscal 2026, we expect revenue to decline in the low double-digit range, reflecting a continued focus on improving marketing contribution margins, the impact of changes to search engine result pages on direct traffic, and tougher comparisons following higher levels of less efficient marketing spend in the prior year.
James Langrock: For the second half of fiscal 2026, we expect revenue to decline in the low double-digit range, reflecting a continued focus on improving Marketing Contribution Margin, the impact of changes to Search Engine Results Pages on direct traffic, and tougher comparisons following higher levels of less efficient marketing spend in the prior year. For the second half of fiscal year 2026, we expect Adjusted EBITDA to decline slightly compared to the prior year. On a normalized basis, for the second half of fiscal 2026, Adjusted EBITDA is expected to increase slightly year-over-year, excluding approximately $12 million of anticipated incentive compensation and consulting costs in the period. Ongoing cost optimization initiatives and organizational streamlining efforts are expected to offset top-line pressure. And now, we'll open the call for Q&A. Operator, please provide instructions for those interested in asking a question.
For the second half of fiscal 2026, we expect revenue to decline in the low double-digit range, reflecting a continued focus on improving Marketing Contribution Margin, the impact of changes to Search Engine Results Pages on direct traffic, and tougher comparisons following higher levels of less efficient marketing spend in the prior year. For the second half of fiscal year 2026, we expect Adjusted EBITDA to decline slightly compared to the prior year. On a normalized basis, for the second half of fiscal 2026, Adjusted EBITDA is expected to increase slightly year-over-year, excluding approximately $12 million of anticipated incentive compensation and consulting costs in the period. Ongoing cost optimization initiatives and organizational streamlining efforts are expected to offset top-line pressure. And now, we'll open the call for Q&A. Operator, please provide instructions for those interested in asking a question.
Speaker #2: For the second half of fiscal year 2026, we expect adjusted EBITDA to decline slightly compared to the prior year. On a normalized basis, for the second half of fiscal 2026, adjusted EBITDA is expected to increase slightly year over year, excluding approximately $12 million of anticipated incentive compensation and consultant costs in the period.
Speaker #2: Ongoing cost optimization initiatives and organizational streamlining efforts are expected to offset top-line pressure. And now, we'll open the call for Q&A. Operator, please provide instructions for those interested in asking a question.
Speaker #1: 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 are using a speakerphone, please pick up your handset before pressing the keys.
Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Anthony Lebiedzinski with Sidoti & Company. Please go ahead.
Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Anthony Lebiedzinski with Sidoti & Company. Please go ahead.
Speaker #1: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Speaker #1: The first question comes from Anthony Lebedinsky with Sedoti and Company. Please go
Speaker #1: ahead. Good
Anthony Lebiedzinski: Good morning, and thank you for taking the questions. So first on the Consumer Floral and Gift segment, it was down more than we expected. Was that mostly driven by PMALL, or can you provide any additional color on that?
Anthony Lebiedzinski: Good morning, and thank you for taking the questions. So first on the Consumer Floral and Gift segment, it was down more than we expected. Was that mostly driven by PMALL, or can you provide any additional color on that?
Speaker #2: morning and thank you for taking the questions. So first, on the consumer floral and gift segment, it was down more than we expected. Was that mostly driven by PMOL or can you provide any additional color on that?
Speaker #3: Yeah, so Anthony, PMOL was down more than Flowers during the quarter. A lot of it was driven, as we said in our prepared remarks, by the inefficient marketing spend.
James Langrock: ... Anthony, PMall was down more than flowers, you know, during the quarter. A lot of it was driven, as we said in our prepared remarks on the, you know, inefficient marketing spend. You know, we were spending, you know, heavily on PMall and pulled down quite a bit of the marketing spend this quarter and improved their ad spend ratio, as well as their overall contribution margin percentage. So a lot of that was known, Anthony, but they were impacted the most by the marketing spend, the inefficient marketing spend last year versus this year. So that was the main driver. But yes, PMall was a bigger component of the decline than the floral than the flowers business.
James Langrock: ... Anthony, PMall was down more than flowers, you know, during the quarter. A lot of it was driven, as we said in our prepared remarks on the, you know, inefficient marketing spend. You know, we were spending, you know, heavily on PMall and pulled down quite a bit of the marketing spend this quarter and improved their ad spend ratio, as well as their overall contribution margin percentage. So a lot of that was known, Anthony, but they were impacted the most by the marketing spend, the inefficient marketing spend last year versus this year. So that was the main driver. But yes, PMall was a bigger component of the decline than the floral than the flowers business.
Speaker #3: We were spending heavily on PMOL and pulled down quite a bit of the marketing spend this quarter, and improved their ad spend ratio as well as their overall contribution margin percentage.
Speaker #3: So a lot of that was known, Anthony, but they were impacted the most by the marketing spend, the inefficient marketing spend last year, versus this year.
Speaker #3: So that was a main driver. But yes, PMOL was a big component of the decline. Then the Flowers segment also contributed.
Speaker #3: business. That's very helpful color,
Anthony Lebiedzinski: That's very helpful color, James. So, just wondering also if you're seeing any different behaviors from your Passport members, whether you've seen still outperformance versus non-members. Can you comment on that and whether or not there's been any movement in terms of your Passport membership?
Anthony Lebiedzinski: That's very helpful color, James. So, just wondering also if you're seeing any different behaviors from your Passport members, whether you've seen still outperformance versus non-members. Can you comment on that and whether or not there's been any movement in terms of your Passport membership?
Speaker #2: James, so just wondering also if you're seeing any different behaviors from your Passport members, whether you've seen still outperformance versus non-members. Can you comment on that, and whether or not there's been any movement in terms of your Passport?
Speaker #2: membership?
Adolfo Villagomez: Hi, Anthony, it's Adolfo. At a high level-
Speaker #3: Hi,
Adolfo Villagomez: Hi, Anthony, it's Adolfo. At a high level-
Speaker #3: Anthony, it's Adolfo. At a high level, good morning. Our Passport members perform a lot better than non-Passport members. That has been the case. Having said that, we're getting feedback from our customers that the value proposition on our loyalty program needs to improve.
Anthony Lebiedzinski: Good morning.
Anthony Lebiedzinski: Good morning.
Adolfo Villagomez: Good morning. Our Passport members perform a lot better than non-Passport members. That has been the case. Having said that, we're getting feedback from our customers that the value proposition on our loyalty program needs to improve. And even though that the current loyalty program is doing okay, we believe we can do it a lot better. So the team is already made investments, and we're getting ready to significantly improve our loyalty program over the next few months. But those customers are still our most loyal customers.
Adolfo Villagomez: Good morning. Our Passport members perform a lot better than non-Passport members. That has been the case. Having said that, we're getting feedback from our customers that the value proposition on our loyalty program needs to improve. And even though that the current loyalty program is doing okay, we believe we can do it a lot better. So the team is already made investments, and we're getting ready to significantly improve our loyalty program over the next few months. But those customers are still our most loyal customers.
Speaker #3: And even though the current loyalty program is doing okay, we believe we can do it a lot better. So the team has already made investments, and we're getting ready to significantly improve our loyalty program over the next few months.
Speaker #3: But those customers are still our most loyal customers.
Anthony Lebiedzinski: Thanks, Adolfo. Okay, and then, you know, as we think about the revenue guidance for the back half of the year, which segments do you think will perform better than others? Or do you think it will be kind of consistent, more or less, across the brands and different segments?
Anthony Lebiedzinski: Thanks, Adolfo. Okay, and then, you know, as we think about the revenue guidance for the back half of the year, which segments do you think will perform better than others? Or do you think it will be kind of consistent, more or less, across the brands and different segments?
Speaker #2: Thanks, Adolfo. Okay. And then as we think about the revenue guidance for the back half of the year, which segments do you think will perform better than others, or do you think it will be kind of consistent more or less across the brands and different
Speaker #2: segments? So
Adolfo Villagomez: So let me take that, and then I'll pass it to James. The way to think about our business, it's... So James just shared that the performance of PMall was slightly behind flowers. And as you also see, food was way ahead of the other two businesses. To start with, the main driver was the exposure to incremental spend in fiscal year 2025, which is one of the reasons we wanted to move away from the president, the brand president role. They were not sharing our best practices. So in that order, PMall, flowers, and food, that's how much more marketing spend they used in 2025 to drive growth. So as you know, we implemented marketing contribution margin, and that is actually working quite well.
Adolfo Villagomez: So let me take that, and then I'll pass it to James. The way to think about our business, it's... So James just shared that the performance of PMall was slightly behind flowers. And as you also see, food was way ahead of the other two businesses. To start with, the main driver was the exposure to incremental spend in fiscal year 2025, which is one of the reasons we wanted to move away from the president, the brand president role. They were not sharing our best practices. So in that order, PMall, flowers, and food, that's how much more marketing spend they used in 2025 to drive growth. So as you know, we implemented marketing contribution margin, and that is actually working quite well.
Speaker #3: Let me take that, and then I'll pass it to James. The way to think about our business—so James just shared that the performance of PMOL was slightly behind Flowers.
Speaker #3: And as you also see food was way ahead of the other two businesses. To start with, the main driver was the exposure to incremental spend in 2020, in fiscal year 2025.
Speaker #3: Which is one of the reasons we wanted to move away from the precedent, the brand precedent role that we're not sharing of best practices.
Speaker #3: So in that order—PMOL, Flowers, and Food—that's how much more marketing spend they use in 2025 to drive growth. So, as you know, we implemented marketing contribution margin and that is actually working quite well.
Speaker #3: And this is why we are able to lower marketing spend while improving marketing contribution margin dollars. Now, over the second half, primarily what you are seeing is just a mixed shift.
Adolfo Villagomez: This is why we are able to lower marketing spend, while improving marketing contribution margin dollars. Now, over the second half, primarily what you are seeing is just a mix shift. During the first half, Harry & David, our food business, is significantly more important. The second half-
This is why we are able to lower marketing spend, while improving marketing contribution margin dollars. Now, over the second half, primarily what you are seeing is just a mix shift. During the first half, Harry & David, our food business, is significantly more important. The second half-
Speaker #3: During the first half, Harry and David, our food business, it's significantly more important. The second half, the flowers business is the one that is the most important and represents the majority of our revenues.
Anthony Lebiedzinski: Mm-hmm.
Anthony Lebiedzinski: Mm-hmm.
Adolfo Villagomez: The flowers business is the one that is the most important and represents the majority of our revenues. So the performance is consistent, if not slightly improving versus the first half. It's just a mix shift.
Adolfo Villagomez: The flowers business is the one that is the most important and represents the majority of our revenues. So the performance is consistent, if not slightly improving versus the first half. It's just a mix shift.
Speaker #3: So the performance is consistent if not slightly improving versus the first half, it's just a mixed
Anthony Lebiedzinski: That's very helpful.
Anthony Lebiedzinski: That's very helpful.
Speaker #2: That's very helpful.
Speaker #3: And Anthony, as you mentioned, another thing to take into consideration is Valentine's Day falls on a Saturday this year, so that obviously has an impact on a year-over-year comparison as well.
James Langrock: And Anthony, as we mentioned, the other... another thing is to, you know, take into consideration is Valentine's Day falls on a Saturday this year.
James Langrock: And Anthony, as we mentioned, the other... another thing is to, you know, take into consideration is Valentine's Day falls on a Saturday this year.
Anthony Lebiedzinski: Mm-hmm.
Anthony Lebiedzinski: Mm-hmm.
James Langrock: So that obviously has an impact on a year-over-year comparison as well.
James Langrock: So that obviously has an impact on a year-over-year comparison as well.
Speaker #3: well. Gotcha.
Anthony Lebiedzinski: Gotcha.
Anthony Lebiedzinski: Gotcha.
Speaker #3: We're supposed to be an impact, okay. But we are preparing for it.
Adolfo Villagomez: We're hoping it's not going to be an impact, but we are preparing for it.
Adolfo Villagomez: We're hoping it's not going to be an impact, but we are preparing for it.
Speaker #2: Got it. Okay. So just to follow up quickly on the Valentine's Day placement, obviously, on a Saturday, which is the least favorable timeframe. Are you doing are you planning to do anything significantly different from a marketing perspective given the day placement?
Anthony Lebiedzinski: Got it. Okay, so, so just to follow up quickly on the Valentine's Day day placement, obviously, on a Saturday, which is the least favorable timeframe. Yeah, are you doing, are you planning to do anything significantly different from a marketing perspective, given the, the day placement? Just, just wondering if you could comment on that.
Anthony Lebiedzinski: Got it. Okay, so, so just to follow up quickly on the Valentine's Day day placement, obviously, on a Saturday, which is the least favorable timeframe. Yeah, are you doing, are you planning to do anything significantly different from a marketing perspective, given the, the day placement? Just, just wondering if you could comment on that.
Speaker #2: Just wondering if you could comment on
Speaker #2: that. Yes.
Adolfo Villagomez: Yes. The merchandising and marketing strategy adjusted for that. And again, we're preparing for it. We are not just assuming it's going to happen, so we are trying to reverse that trend. So we are absolutely prepared for that.
Adolfo Villagomez: Yes. The merchandising and marketing strategy adjusted for that. And again, we're preparing for it. We are not just assuming it's going to happen, so we are trying to reverse that trend. So we are absolutely prepared for that.
Speaker #3: The merchandising and marketing strategy adjusted for that. And again, we are preparing for it. We are not just assuming it's going to happen. So we are trying to reverse that trend.
Speaker #3: So, we are absolutely prepared for
Speaker #3: that. Gotcha.
Anthony Lebiedzinski: Gotcha. Okay, and the last question for me, just more or less kind of housekeeping. Can you just comment on your order volumes and AOV for the quarter?
Anthony Lebiedzinski: Gotcha. Okay, and the last question for me, just more or less kind of housekeeping. Can you just comment on your order volumes and AOV for the quarter?
Speaker #2: Okay. And last question for me, just more or less kind of housekeeping. Can you just comment on what are volumes and AOV for the quarter?
Speaker #3: Yeah, so Anthony, for the quarter our AOV was up 5.2%, and order volume was down about 16%.
James Langrock: Yeah. So, Anthony, for the quarter, our AOV was up 5.2%, and order-
James Langrock: Yeah. So, Anthony, for the quarter, our AOV was up 5.2%, and order-
Anthony Lebiedzinski: Mm-hmm
Anthony Lebiedzinski: Mm-hmm
James Langrock: ... volume was down about 16%.
James Langrock: ... volume was down about 16%.
Speaker #2: Got it. All right. Well, thank you very much. Best of luck.
Anthony Lebiedzinski: Got it. All right, well, thank you very much. Best of luck.
Anthony Lebiedzinski: Got it. All right, well, thank you very much. Best of luck.
Speaker #3: Thank
Speaker #3: you. The next
Adolfo Villagomez: Thank you.
Adolfo Villagomez: Thank you.
Operator: The next question comes from Michael Kupinski with Noble Capital Markets. Please go ahead.
Operator: The next question comes from Michael Kupinski with Noble Capital Markets. Please go ahead.
Speaker #4: question comes from Michael Kubinski with Noble Capital Markets. Please go ahead.
Speaker #5: Thank you. Thanks for taking my question. I just kind of want to circle back to the floral segment for a second. Given your shift in marketing initiatives, I was just wondering, outside of PMOL, can you talk a little bit about the decline you've seen in floral?
Michael Kupinski: Thank you. Thanks for taking my question. I just kind of want to circle back to the floral segment for a second. Given your shift in marketing initiatives, I was just wondering, outside of PMall, can you talk a little bit about the decline you've seen in floral? Do you feel that maybe you're... Are you still seeing gains in share in consumer floral? And then I was wondering: How do your initiatives change your competitive positioning, not just for floral, but maybe for your other channels as well?
Michael Kupinski: Thank you. Thanks for taking my question. I just kind of want to circle back to the floral segment for a second. Given your shift in marketing initiatives, I was just wondering, outside of PMall, can you talk a little bit about the decline you've seen in floral? Do you feel that maybe you're... Are you still seeing gains in share in consumer floral? And then I was wondering: How do your initiatives change your competitive positioning, not just for floral, but maybe for your other channels as well?
Speaker #5: Do you feel that maybe you are still seeing gains in share in consumer floral? And then I was wondering, how do your initiatives change your competitive positioning—not just for floral, but maybe for your other channels as well?
Adolfo Villagomez: So at this point, Michael, the focus is in the bottom line. We believe that with a better marketing approach and honestly, a better merchandising strategy. As we've said, this year is a transition year, so we are going to be better positioned for the future. As you know, our flowers business has two segments, one that depends on the florists and the other that is direct. We are proactively managing the business to minimize the impact on our florist network. Again, it's a transition year, and I believe it's going to make us stronger in the future. But we are. I think this transition to being focused on driving profitable traffic versus just driving traffic to drive revenue growth, you're seeing the impact in the short term on the top line.
Speaker #3: So at this point, Michael, the focus is on the bottom line. We believe that with a better marketing approach, and honestly, a better merchandising strategy—as we said, this year is the transition year.
Adolfo Villagomez: So at this point, Michael, the focus is in the bottom line. We believe that with a better marketing approach and honestly, a better merchandising strategy. As we've said, this year is a transition year, so we are going to be better positioned for the future. As you know, our flowers business has two segments, one that depends on the florists and the other that is direct. We are proactively managing the business to minimize the impact on our florist network. Again, it's a transition year, and I believe it's going to make us stronger in the future. But we are. I think this transition to being focused on driving profitable traffic versus just driving traffic to drive revenue growth, you're seeing the impact in the short term on the top line.
Speaker #3: So, we are going to be better positioned for the future. As you know, our flowers business has two segments: one that depends on the florists, and the other that is direct.
Speaker #3: We are proactively managing the business to minimize the impact on our florist network. So again, it's a transition year, and I believe it's going to make us stronger in the future.
Speaker #3: But we are, I think, in this transition to being focused on driving profitable traffic versus just driving traffic to drive revenue growth. You're seeing the impact in the short term on the top line.
Speaker #5: Gotcha. And I was hopeful there, I guess, we would start to see a little bit of improvement on the commodity prices. And you indicated that you're still seeing pressure there.
Michael Kupinski: Gotcha. I was hopeful that, I guess, we would start to begin to see a little bit improvement on the commodity prices, and you indicated that you're still seeing pressure there. I was just wondering if you can talk a little bit about commodity price trends, particularly, I, I know that we are still seeing pressure on chocolate and so forth, but can you just kind of give us your overall feel about the commodity trends going forward?
Michael Kupinski: Gotcha. I was hopeful that, I guess, we would start to begin to see a little bit improvement on the commodity prices, and you indicated that you're still seeing pressure there. I was just wondering if you can talk a little bit about commodity price trends, particularly, I, I know that we are still seeing pressure on chocolate and so forth, but can you just kind of give us your overall feel about the commodity trends going forward?
Speaker #5: I was just wondering if you can talk a little bit about commodity price trends. Particularly, I know that we are still seeing pressure on chocolate and so forth, but can you just kind of give us your overall feel about commodity trends going?
Speaker #5: forward? Yes,
James Langrock: Yes, Michael, as you mentioned, cocoa is still, you know, on a year-over-year basis, is up quite significantly. But we're seeing the other commodities, eggs, butter, and sugar starting to come down and stabilize. And, you know, at this point, we're seeing, you know, that those should no longer be a headwind, you know, in the back half of the year, you know, assuming they hold. But we are seeing improvement in the other commodities, but cocoa is still elevated.
James Langrock: Yes, Michael, as you mentioned, cocoa is still, you know, on a year-over-year basis, is up quite significantly. But we're seeing the other commodities, eggs, butter, and sugar starting to come down and stabilize. And, you know, at this point, we're seeing, you know, that those should no longer be a headwind, you know, in the back half of the year, you know, assuming they hold. But we are seeing improvement in the other commodities, but cocoa is still elevated.
Speaker #3: Michael. As you mentioned, cocoa is still on a year-over-year basis. It's up quite significantly. But we're seeing the other commodities: eggs, butter, and sugar starting to come down and stabilize.
Speaker #3: And at this point, we're seeing that should those should no longer be a headwind in the back half of the year. Assuming they hold, but we are seeing improvement in the other commodities.
Speaker #3: But cocoa is still elevated.
Speaker #5: And then I guess, what are the biggest swing factors that could positively or negatively impact the full-year performance at this
Michael Kupinski: And then, I guess, what are the biggest swing factors that could positively or negatively impact the full year performance at this point?
Michael Kupinski: And then, I guess, what are the biggest swing factors that could positively or negatively impact the full year performance at this point?
Speaker #5: point? The one of them
James Langrock: You know, one of them is obviously we're working on the cost savings initiatives. You know, we implemented $15 million of cost savings in Q2. You know, we are continuing to, you know, implement cost savings initiatives. So, you know, to the extent that we could accelerate some of those cost savings, that will help, you know, the bottom line. And then, you know, obviously, if we get some, you know, upside on the top line, that always helps as well, Michael. But right now, we're controlling what we can control. And the one, you know, the one lever would be, you know, on the cost savings, if, you know, we can accelerate some of those savings.
James Langrock: You know, one of them is obviously we're working on the cost savings initiatives. You know, we implemented $15 million of cost savings in Q2. You know, we are continuing to, you know, implement cost savings initiatives. So, you know, to the extent that we could accelerate some of those cost savings, that will help, you know, the bottom line. And then, you know, obviously, if we get some, you know, upside on the top line, that always helps as well, Michael. But right now, we're controlling what we can control. And the one, you know, the one lever would be, you know, on the cost savings, if, you know, we can accelerate some of those savings.
Speaker #3: Obviously, we're working on the cost savings initiatives. We implemented $15 million of cost savings in Q2. We are continuing to implement cost savings initiatives.
Speaker #3: So to the extent that we could accelerate some of those cost savings, that will help the bottom line and then obviously, if we get some upside on the top line, that always helps as well.
Speaker #3: Michael, but right now, we're controlling what we can control. And the one lever would be on the cost savings if we can accelerate some of those savings.
Speaker #3: So those are that's kind of the big one that we can control right
James Langrock: So those are the, you know, that's kind of the big one that we can control right now.
So those are the, you know, that's kind of the big one that we can control right now.
Speaker #3: Now, the other—yeah, building on that—the new functional structure that we have live since November, the whole intention of doing that is to bring best-in-class functional practices.
Adolfo Villagomez: Yeah. The other thing, building on that, the new functional structure that we have live since November, the whole intention of doing that is to bring best-in-class functional practices. I think the best example right now, or the hope that is going to give us a lot of top-line growth, is merchandising. We have a new merchandising leader, Nelson Tejada, who has commercial experience, and we completely changed the leadership of the flowers business to bring more pricing and assortment planning discipline to that business. As we start gathering facts and start gathering data, being more disciplined on our retail practices, comparing our pricing versus competitors, we are finding that we have lots of opportunities for improvement, that little by little are going to improve the business over time.
Adolfo Villagomez: Yeah. The other thing, building on that, the new functional structure that we have live since November, the whole intention of doing that is to bring best-in-class functional practices. I think the best example right now, or the hope that is going to give us a lot of top-line growth, is merchandising. We have a new merchandising leader, Nelson Tejada, who has commercial experience, and we completely changed the leadership of the flowers business to bring more pricing and assortment planning discipline to that business. As we start gathering facts and start gathering data, being more disciplined on our retail practices, comparing our pricing versus competitors, we are finding that we have lots of opportunities for improvement, that little by little are going to improve the business over time.
Speaker #3: I think the best example right now, or the hope that is going to give us a lot of top-line growth, is merchandising. We have a new merchandising leader—Nelson Tejada, who has commercial experience.
Speaker #3: And we completely changed the leadership of the flowers business to bring more pricing and assortment planning discipline to that business. As we start gathering facts and start gathering data, being more disciplined on our retail practices, comparing our pricing versus competitors, we are finding that we have lots of opportunities for improvement that little by little are going to improve the business over time.
Speaker #3: So we believe that what you are going to see is, as this functional leader starts taking action, I mentioned in the prepared remarks, also probably discoverability.
Adolfo Villagomez: So we believe that what you are going to see is as these functional leaders start taking action, I mentioned in the, in the prepared remarks, also product discoverability. We have tests going right now that significantly improve conversion as we improve our online experience. So those are going to be tailwinds to the business. So as, as we said, I mean, we're very optimistic that bringing best-in-class practices to the functional areas, merchandising, online, and even now, the growth in our external marketplaces, it's, I mean, it's from a small base, but it's growing significantly. We believe that all of those will be positive factors on the performance of the business going forward.
So we believe that what you are going to see is as these functional leaders start taking action, I mentioned in the, in the prepared remarks, also product discoverability. We have tests going right now that significantly improve conversion as we improve our online experience. So those are going to be tailwinds to the business. So as, as we said, I mean, we're very optimistic that bringing best-in-class practices to the functional areas, merchandising, online, and even now, the growth in our external marketplaces, it's, I mean, it's from a small base, but it's growing significantly. We believe that all of those will be positive factors on the performance of the business going forward.
Speaker #3: We have tests going right now that significantly improve conversion as we improve our online experience. So those are going to be tailwinds to the business.
Speaker #3: And so, as we said, I mean, we're very optimistic that bringing best-in-class practices to the functional areas—merchandising, online, and even now, the growth in our external marketplaces—I mean, it's from a small base, but it's growing significantly.
Speaker #3: We believe that all of those will be positive factors on the performance of the business going forward.
Speaker #5: Gotcha. Just a couple of quick ones here. Interestingly, GDP numbers were pretty strong in the third quarter. Interest rates are coming down, albeit modestly.
Michael Kupinski: Gotcha. Just a couple quick ones here. Interestingly, you know, GDP numbers were pretty strong in Q3. Interest rates are coming down, albeit, you know, modestly. Though consumer confidence is super weak, and, you know, traditionally, your business followed consumer confidence. And I was just wondering, what are you seeing in terms of the consumer at this point? And kind of give us your thoughts of what you're seeing out there.
Michael Kupinski: Gotcha. Just a couple quick ones here. Interestingly, you know, GDP numbers were pretty strong in Q3. Interest rates are coming down, albeit, you know, modestly. Though consumer confidence is super weak, and, you know, traditionally, your business followed consumer confidence. And I was just wondering, what are you seeing in terms of the consumer at this point? And kind of give us your thoughts of what you're seeing out there.
Speaker #5: So, consumer confidence is super weak, and traditionally, your business followed consumer confidence. I was just wondering, what are you seeing in terms of the consumer at this point?
Speaker #5: And kind of give us your thoughts of what you're seeing out
Speaker #5: there. So on the consumer front, we are
James Langrock: So on the consumer front, where we are still seeing the bifurcation, you know, we still feel that, you know, the higher end, you know, household income is holding up better, Michael, and we're, you know, still seeing, you know, some softness on the lower end, you know, household income spectrum. So we're kind of still seeing that trend.
James Langrock: So on the consumer front, where we are still seeing the bifurcation, you know, we still feel that, you know, the higher end, you know, household income is holding up better, Michael, and we're, you know, still seeing, you know, some softness on the lower end, you know, household income spectrum. So we're kind of still seeing that trend.
Speaker #3: We're still seeing the bifurcation. We still feel that higher-end household income is holding up better, Michael, and we're still seeing some softness on the lower-end household income spectrum.
Speaker #3: So we're kind of still seeing that trend.
Speaker #5: Gotcha. I can't think of a period where you've gone through such a big corporate reorganization in the past. During periods like this, you've kind of looked and were able to pick up some pretty interesting companies and made some acquisitions.
Michael Kupinski: Gotcha. I can't think of a period where you've gone through such a big corporate reorganization. In the past, you would, during periods like this, you've, you kind of looked and were able to pick up some pretty interesting companies and, made some acquisitions. And how are you thinking about capital allocation priorities right now in terms of, just the reinvestment, you know, shareholder returns and things like that?
Michael Kupinski: Gotcha. I can't think of a period where you've gone through such a big corporate reorganization. In the past, you would, during periods like this, you've, you kind of looked and were able to pick up some pretty interesting companies and, made some acquisitions. And how are you thinking about capital allocation priorities right now in terms of, just the reinvestment, you know, shareholder returns and things like that?
Speaker #5: And how are you thinking about capital allocation priorities right now in terms of just the reinvestment, shareholder returns, and things like that?
Speaker #3: I mean, as Adolfo mentioned—and we've been mentioning—Michael, we're looking at fiscal 2026 as a foundational year for us. So the priority right now is really on stabilizing the performance and building the capabilities.
James Langrock: I mean, you know, as Adolfo mentioned, and we've been mentioning, Michael, we're looking at fiscal 2026 as like a foundational year for us. So the priority right now is really on stabilizing the performance and building the capabilities, as Adolfo mentioned, within the organization for sustainable, profitable growth. So clearly, you know, we're taking a disciplined approach, and, you know, we'll allocate, you know, capital, you know, toward, you know, towards, you know, operational efficiencies, customer experience improvements, and adding technology capabilities. But clearly, if there, you know, if there's something out there that makes sense, we would, we would look at it. But right now, we're really focused on, you know, the turnaround and the foundation setting, from a capital allocation standpoint.
James Langrock: I mean, you know, as Adolfo mentioned, and we've been mentioning, Michael, we're looking at fiscal 2026 as like a foundational year for us. So the priority right now is really on stabilizing the performance and building the capabilities, as Adolfo mentioned, within the organization for sustainable, profitable growth. So clearly, you know, we're taking a disciplined approach, and, you know, we'll allocate, you know, capital, you know, toward, you know, towards, you know, operational efficiencies, customer experience improvements, and adding technology capabilities. But clearly, if there, you know, if there's something out there that makes sense, we would, we would look at it. But right now, we're really focused on, you know, the turnaround and the foundation setting, from a capital allocation standpoint.
Speaker #3: As Adolfo mentioned, within the organization for sustainable, profitable growth. So clearly, we're taking a disciplined approach. And we'll allocate capital towards operational efficiencies, customer experience improvements, and adding technology capabilities.
Speaker #3: But clearly, if there's something out there that makes sense, we would look at it. But right now, we're really focused on the turnaround and the foundation-setting from a capital allocation standpoint.
Speaker #5: Would there be anything that you would
Michael Kupinski: Would there be anything that you would sell?
Michael Kupinski: Would there be anything that you would sell?
Speaker #5: sell? I mean, at this
Adolfo Villagomez: I mean, at this point, the more we strengthen the core, the better we are going to be. So everything is on the table.
Adolfo Villagomez: I mean, at this point, the more we strengthen the core, the better we are going to be. So everything is on the table.
Speaker #3: Point is, the more we strengthen the core, the better we are going to be. So, everything is on the table.
Speaker #5: Gotcha. All right. That's all I have. Thank you.
Michael Kupinski: Gotcha. All right. That's all I have. Thank you.
Michael Kupinski: Gotcha. All right. That's all I have. Thank you.
Speaker #5: you. The next question comes
Operator: The next question comes from Doug Lane with Water Tower Research. Please go ahead.
Operator: The next question comes from Doug Lane with Water Tower Research. Please go ahead.
Speaker #6: from Doug Lane with Water Tower Research. Please go ahead.
Speaker #5: Yeah. Hi. Good morning, everybody. James, remind me, you do not take consultant calls out of your adjusted profit numbers, right? They're included in there at this point.
Doug Lane: Yeah, hi, good morning, everybody. James, remind me, you, you do not take consultant costs out of your adjusted profit numbers, right? They're included in there at this point, is that right?
Doug Lane: Yeah, hi, good morning, everybody. James, remind me, you, you do not take consultant costs out of your adjusted profit numbers, right? They're included in there at this point, is that right?
Speaker #5: Is that
Speaker #5: right? Correct.
James Langrock: Correct. Yes, they are in there.
James Langrock: Correct. Yes, they are in there.
Speaker #3: Yes. They are in there.
Speaker #5: So at some point, they'll roll off. So I don't know if you've talked about how long you expect the consultants to be working for you.
Doug Lane: So at some point, they'll roll off. So I don't know if you've talked about how long you expect the consultants to be working for you. Is this gonna be a couple of quarters, a couple of years? Just any kind of, you know, characterization there.
Doug Lane: So at some point, they'll roll off. So I don't know if you've talked about how long you expect the consultants to be working for you. Is this gonna be a couple of quarters, a couple of years? Just any kind of, you know, characterization there.
Speaker #5: Is this going to be a couple of quarters, a couple of years—just any kind of characterization there?
Speaker #3: Yeah, so what we know, Doug, what we said is the consultant costs are front-loaded. So we believe right now that the costs will kind of last through this fiscal year, through June, and then they'll stop going into fiscal 2027.
James Langrock: Yeah. So, what we know, Doug, what we said is, you know, the consultant costs are front-loaded. So, you know, we believe right now that, you know, the costs will kind of last through the, you know, this fiscal year through June. And then they, you know, they'll stop going into fiscal 2027. That doesn't mean, you know, if we see an opportunity, you know, where we think we may need some help with, you know, some initiative that we're working on, that they may not come back. But right now, the consultant costs will, you know, go through the end of the year. And, you know, that's gonna total roughly about $11 million of consultant costs this year. That will be in our, you know... But we're not adding back to the Adjusted EBITDA.
James Langrock: Yeah. So, what we know, Doug, what we said is, you know, the consultant costs are front-loaded. So, you know, we believe right now that, you know, the costs will kind of last through the, you know, this fiscal year through June. And then they, you know, they'll stop going into fiscal 2027. That doesn't mean, you know, if we see an opportunity, you know, where we think we may need some help with, you know, some initiative that we're working on, that they may not come back. But right now, the consultant costs will, you know, go through the end of the year. And, you know, that's gonna total roughly about $11 million of consultant costs this year. That will be in our, you know... But we're not adding back to the Adjusted EBITDA.
Speaker #3: That doesn't mean, if we see an opportunity where we think we may need some help with some initiative that we're working on, that they may not come back.
Speaker #3: But right now, the consultant costs will go through the end of the year. And that's going to total roughly about $11 million of consultant costs this year that will be in our that we're not adding back to the adjusted
Speaker #3: EBITDA. Got
Doug Lane: Mm-hmm. Got it. Just switching gears here, you talked about Valentine's Day being on a Saturday. Isn't Easter a little earlier this year? Is that gonna impact the timing between Q3 and Q4?
Doug Lane: Mm-hmm. Got it. Just switching gears here, you talked about Valentine's Day being on a Saturday. Isn't Easter a little earlier this year? Is that gonna impact the timing between Q3 and Q4?
Speaker #5: it. And just switching gears here, you talked about Valentine's Day being on a Saturday. Isn't Easter a little earlier this year? Is that going to impact the timing between the third quarter and the fourth
Speaker #5: quarter? Yes.
James Langrock: Yes, Easter falls, I think, April 4. So that actually, you know, a lot of the orders will come in in, you know, the end of March, so that will be a shift in the quarter. And actually, with Easter falling a little further away from Mother's Day, it does help us as well. So that, you know, that day placement is helpful. So there will be a shift into Q3, but also, typically, that day placement's a little better. The closer Easter is to Mother's Day, you know, that's not as strong for us, so the day placement we like in early April.
James Langrock: Yes, Easter falls, I think, April 4. So that actually, you know, a lot of the orders will come in in, you know, the end of March, so that will be a shift in the quarter. And actually, with Easter falling a little further away from Mother's Day, it does help us as well. So that, you know, that day placement is helpful. So there will be a shift into Q3, but also, typically, that day placement's a little better. The closer Easter is to Mother's Day, you know, that's not as strong for us, so the day placement we like in early April.
Speaker #3: Easter falls, I think April 4th. So that actually a lot of the orders will come in in the end of March. So that will be a shift in the quarter.
Speaker #3: And actually, with Easter falling, a little further away from Mother's Day, it does help us as well. So that day placement is helpful. So there will be a shift into Q3, but also typically, that day placement's a little better.
Speaker #3: The closer Easter is to Mother's Day, that's not as strong for us. So the day placement we like in early
Speaker #3: April.
Speaker #5: Got it. That makes
Doug Lane: Got it. That makes sense. And also looking at the sales number here, you know, the total number was literally within $1 million of our forecast, but floral missed by $30 million and food beat by $30 million. So there's a big divergence between floral and food here. And you've touched on it, but what do you think is the real source of the deterioration in the floral and gifts business, and the better than expected performance in the food and gift baskets business?
Doug Lane: Got it. That makes sense. And also looking at the sales number here, you know, the total number was literally within $1 million of our forecast, but floral missed by $30 million and food beat by $30 million. So there's a big divergence between floral and food here. And you've touched on it, but what do you think is the real source of the deterioration in the floral and gifts business, and the better than expected performance in the food and gift baskets business?
Speaker #5: Makes sense. And also, looking at the sales numbers here, the total number was literally within a million dollars of our forecast, but Floral missed by $30 million, and Food beat by $30 million.
Speaker #5: So there's a big divergence between floral and food here. And you've touched on it, but what is the real what do you think is the real source of the deterioration in the floral and gifts business and the better-than-expected performance in the food and gift baskets business?
Speaker #3: So I mean, again, I mentioned the impact in 2025 of incremental marketing spend. I think it was significant in flowers the food business was a lot more disciplined.
Adolfo Villagomez: So, I mean, again, I mentioned the impact of, in 2025, of incremental marketing spend. I think it was significant in flowers. The food business was a lot more disciplined, although they also overspent a little. The second factor that is important is, food is a lot more exposed to B2B, and that business has been very solid for us. So those are the factors, and, there's some other competitive things, but, those two are primarily the difference between one and the other.
Adolfo Villagomez: So, I mean, again, I mentioned the impact of, in 2025, of incremental marketing spend. I think it was significant in flowers. The food business was a lot more disciplined, although they also overspent a little. The second factor that is important is, food is a lot more exposed to B2B, and that business has been very solid for us. So those are the factors, and, there's some other competitive things, but, those two are primarily the difference between one and the other.
Speaker #3: Although they also overspent a little. The second factor that is important is food. It's a lot more exposed to B2B. And that business has been very solid for us.
Speaker #3: So those are the factors. And there's some other competitive things, but those two are primarily the difference between one and the other.
Speaker #3: other. Is this also where we see
Doug Lane: Is this also where we see that bifurcated consumer, since PMall's in the floral side and, you know, Harry & David's on the food side, and they're clearly, you know, opposite ends of the economic spectrum?
Doug Lane: Is this also where we see that bifurcated consumer, since PMall's in the floral side and, you know, Harry & David's on the food side, and they're clearly, you know, opposite ends of the economic spectrum?
Speaker #5: That bifurcated consumer, since PMALS is on the floral side and Harry & David is on the food side, and they're clearly at opposite ends of the economic spectrum?
Speaker #3: Probably, yes.
Adolfo Villagomez: Probably, yes.
Adolfo Villagomez: Probably, yes.
Speaker #5: Okay. Oh, okay. Fair enough. Lastly, can you talk a little bit about what your learnings were in the quarter from your pop-up
Doug Lane: Okay. Uh-
Doug Lane: Okay. Uh-
Adolfo Villagomez: Yeah. Go ahead.
Adolfo Villagomez: Yeah. Go ahead.
Doug Lane: Oh, okay. Fair enough. Lastly, could you talk a little bit about what your learnings were in the quarter from your pop-up stores?
Doug Lane: Oh, okay. Fair enough. Lastly, could you talk a little bit about what your learnings were in the quarter from your pop-up stores?
Speaker #5: stores? So I
Adolfo Villagomez: So, I mean, again, as I said in the prepared remarks, we have a strategic belief that we eventually should become an omni-channel player. Today, we have physical retail stores that are EBITDA positive and have a very attractive return on invested capital. There was a belief on the pop-up stores that, "Hey, we're going to open them. They will not only drive sales, but they will also drive brand awareness in the locations where they are, and probably the sales will increase online." There was a little of that, but one of the things we're trying to implement, James and I, going forward, is capital discipline. If the return on invested capital is not attractive, we are simply not going to do it.
Adolfo Villagomez: So, I mean, again, as I said in the prepared remarks, we have a strategic belief that we eventually should become an omni-channel player. Today, we have physical retail stores that are EBITDA positive and have a very attractive return on invested capital. There was a belief on the pop-up stores that, "Hey, we're going to open them. They will not only drive sales, but they will also drive brand awareness in the locations where they are, and probably the sales will increase online." There was a little of that, but one of the things we're trying to implement, James and I, going forward, is capital discipline. If the return on invested capital is not attractive, we are simply not going to do it.
Speaker #3: mean, again, as I said in the prepared remarks, we have a strategic belief that we eventually should become an omnichannel player. Today, we have physical retail stores that are EBITDA positive and have a very attractive return on invested capital.
Speaker #3: There was a belief on the pop-up stores that, "Hey, we're going to open them they will no longer drive sales, but they will also drive brand awareness in the locations where they are and probably the sales would increase online." There was a little of that, but if one of the things we're trying to implement, James and I going forward, is capital discipline.
Speaker #3: If the return on invested capital is not attractive, we are simply not going to do it. And I think it's twice that we tested the pop-ups.
Adolfo Villagomez: And, I think it's twice that we tested the pop-ups and twice that were below expectations, so enough is enough. Having said that, as I said, we're still looking for that physical retail model, so you will see us testing things. But again, these tests are with the idea of find a way to significantly grow the physical retail segment of our business, but definitely it's not going to be through pop-up stores.
And, I think it's twice that we tested the pop-ups and twice that were below expectations, so enough is enough. Having said that, as I said, we're still looking for that physical retail model, so you will see us testing things. But again, these tests are with the idea of find a way to significantly grow the physical retail segment of our business, but definitely it's not going to be through pop-up stores.
Speaker #3: And twice that we're below expectations. So an off is an off. Having said that, as I said, we're still looking for that physical retail model.
Speaker #3: So you will see us testing things. But again, these tests are with the idea of finding a way to significantly grow the physical retail segment of our business.
Speaker #3: But definitely, it's not going to be through pop-up.
Speaker #3: stores. Oh, that makes
Doug Lane: Well, that makes sense. Okay, thank you.
Doug Lane: Well, that makes sense. Okay, thank you.
Speaker #5: sense. Okay. Thank you.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Adolfo Villagomez for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Adolfo Villagomez for any closing remarks.
Speaker #6: This concludes our question and answer session. I would like to turn the conference back over to Adolfo Villagomez for any closing remarks.
Adolfo Villagomez: Thank you once again for joining us today and for your continued support. Fiscal 2026 continues to be a year of stabilization for the company. During Q2, we continued to make progress on the initiatives that matter most, including simplifying the organization, improving cost efficiency, and strengthening our leadership team and broadening our customer reach. While we recognize that progress will not be linear, we remain focused on executing our strategy with discipline and consistency. The actions we are taking today are intended to stabilize the business and build a strong and durable foundation to support future growth over time. We appreciate your continued interest in and support of the company, and we look forward to keeping you updated on our progress.
Adolfo Villagomez: Thank you once again for joining us today and for your continued support. Fiscal 2026 continues to be a year of stabilization for the company. During Q2, we continued to make progress on the initiatives that matter most, including simplifying the organization, improving cost efficiency, and strengthening our leadership team and broadening our customer reach. While we recognize that progress will not be linear, we remain focused on executing our strategy with discipline and consistency. The actions we are taking today are intended to stabilize the business and build a strong and durable foundation to support future growth over time. We appreciate your continued interest in and support of the company, and we look forward to keeping you updated on our progress.
Speaker #3: Thank you once again for joining us today and for your continued support. Fiscal 2026 continues to be a year of stabilization for the company.
Speaker #3: During the second quarter, we continue to make progress on the initiatives that matter most, including simplifying the organization, improving cost efficiency, and strengthening our leadership team and broadening our customer reach.
Speaker #3: While we recognize that progress will not be linear, we remain focused on executing our strategy with discipline and consistency. The actions we are taking today are intended to stabilize the business and build a strong and durable foundation to support future growth over time.
Speaker #3: We appreciate your continued interest in and support of the company. And we look forward to keeping you updated on our progress.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
