1-800-FLOWERS.COM - Earnings Call - Q3 2025

Executive Summary

• Q3 FY25 materially missed consensus: revenue $331.5M vs $364.2M estimate and Primary EPS -$0.71 vs -$0.34 estimate, driven by weak “everyday” demand, a highly promotional environment, and order-management-system (OMS) remediation costs; GAAP EPS was -$2.80 due to a $138.2M non-cash impairment. Estimates from S&P Global: revenue $364.2M*, EPS -$0.34*, actuals - see tables below.
• Management withdrew near‑term guidance and unveiled “Celebrations Wave,” a multi‑year strategy to build a sentiment‑led ecosystem, alongside naming Adolfo Villagomez as CEO effective May 12, 2025; targeted annualized cost reductions of ~$40M, with ~$17M already executed.
• Segment mix: Consumer Floral & Gifts fell 11.4%, Gourmet Foods & Gift Baskets fell 18.2% (OMS issues/rebates/write‑offs), while BloomNet grew 4.5% with margin expansion; consolidated adjusted EBITDA was -$34.9M vs -$5.7M LY.
• Credit facilities were amended to increase flexibility and modestly adjust commitments; term debt stood at ~$160M, no revolver draw at Q3 end; cash ~$85M, net debt ~$75M, inventory ~$160M.

What Went Well and What Went Wrong

What Went Well

• BloomNet resilience: revenue +4.5% YoY to $28.6M and gross margin +150 bps to 46.9% on lower florist rebates; segment contribution rose to $8.5M.
• Strategic pivot and leadership: Launch of “Celebrations Wave” (sentiment-led app + site, loyalty revamp, AI personalisation) and appointment of an external CEO to accelerate execution.
• Clear cost agenda and targets: Annualized cost reductions of ~$40M targeted (with ~$17M already executed), aimed at restoring margins and improving cash flow over time.

What Went Wrong

• Demand softness and promos: Revenue -12.6% to $331.5M; adjusted gross margin down 350 bps to 33.1% ex-$4.6M OMS costs, reflecting a highly promotional environment and deleverage on lower sales.
• OMS implementation fallout: $4.6M of rebates/replacements/write‑offs in Q3; management called the OMS rollout a “colossal screw up,” with ~$20M top‑line hit in Q2 and ~$11M cumulative incremental costs across Q2–Q3.
• Large non‑cash impairment: $138.2M goodwill/trade name charge (Consumer Floral & Gifts, Personalization Mall), pushing GAAP EPS to -$2.80.

Transcript

Operator (participant)

Good afternoon, and welcome to the 1-800-FLOWERS.COM 2025 third quarter results 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 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. Please go ahead.

Andy Milevoj (SVP of Investor Relations)

Good afternoon, and welcome to our fiscal 2025 third quarter earnings call. Joining us today are Jim McCann, Chairman and current CEO; Adolfo Villagomez, incoming CEO; Tom Hartnett, President; and James Langrock, CFO. 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. 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 Jim.

James McCann (Chairman and Outgoing CEO)

Thanks, Andy. Good afternoon, everyone. Just a short while ago, we made two major announcements that mark an exciting new chapter for our company. We introduced our transformative long-term strategy, Celebrations Wave, and welcomed Adolfo Villagomez as our new CEO, who will spearhead this new strategy. Before we dive into Celebrations Wave, let's take a moment to consider the journey that led us to this point. In recent years, our company has faced several macro challenges, including the COVID bullwhip effect, inflation, bifurcated consumer markets, ocean freight disruptions, and rising customer acquisition costs, all during a time when shifting technology and evolving consumer engagement preferences have made our traditional marketing approach less effective. These are coupled with some newer issues, including a rapid decline in consumer confidence, tariff impacts, and discussions of possible recession.

These external factors are significant, but we also have encountered internal challenges, notably our decision to shutter most of our retail operations during COVID and recent difficulties with our order management system implementation. These are mistakes of our own making and all obstacles that we're confronting as a management team. Although we face certain challenges, as we've outlined in our press release this afternoon, we have developed a comprehensive plan to address them. This plan includes reorganizing our structure, reducing our costs, and ensuring we have the right leadership to lead us into the future, improving systems, marketing, and merchandising, optimizing our product assortment, pricing and partnerships, and testing new retail concepts, improving our loyalty program, and maximizing our last-mile capabilities. Let's begin with leadership and the new talent we brought on board to accelerate our changes. We're excited to welcome Adolfo to the team.

Adolfo has significant experience in leading consumer businesses, digital transformations, and the shift in business models. He understands our challenges and has driven transformative changes throughout his career. Through Adolfo's approach to leveraging data analytics and consumer insights, he has achieved remarkable success in his previous roles. His expertise will be instrumental in continuing our legacy of innovation and connecting more deeply with our customers through cutting-edge digital experiences. The team and I look forward to working with him as he leads us through this next wave of our Celebrations journey. Before we conclude, I'll also ask Adolfo to introduce himself. We have also recently welcomed Henry Mori to our executive team as our Chief AI and Transformation Officer, with over 17 years of experience leading digital innovation and AI strategy at startups as well as global companies.

Henry has a proven track record in driving growth through AI-driven initiatives and will ensure we remain at the forefront of innovation and transformation. Beyond enhancing our leadership team, we've added expertise to our board of directors with the addition of Shelley Palmer. Shelley brings an extensive experience in technology, media, and marketing, which will be invaluable as we navigate our next wave of innovation. His strategic insight and industry knowledge will guide us in leveraging new opportunities and strengthen our market position. Our company has a rich history of innovation and has consistently embraced the need to adapt in response to structural changes in the operating environment. We have conceptualized these innovations in five distinct waves, which include our retail stores, the launch of the national 1-800-FLOWERS number, the introduction of e-commerce, and the shift to mobile social commerce, which ultimately became conversational commerce.

The commonality amongst these waves is a recalibration of our business model and practices to reflect ever-evolving technology and consumer buying preferences. We are now riding a new wave, one that we are embracing and whose momentum will carry us into the future. Celebrations Wave is our sixth wave of innovation, and we expect it to be the most transformative. Advancements in technology and shifting consumer buying preferences demand it. Celebrations Wave represents a significant evolution of our company. It integrates our strategic initiatives and brand assets that utilize advanced technologies to create a comprehensive celebrations ecosystem. Our company has always been focused on helping inspire consumers to give more, connect more, and build more and better relationships. We believe in the joy of giving and recognize that expressing sentiment and an ongoing consumer need is not limited to holiday periods. After all, relationships are an everyday business.

Now, new technologies align with our goal to create a comprehensive ecosystem that helps customers build and deepen their relationships. Celebrations Wave will further our mission by developing a new ecosystem that helps customers foster deeper, more meaningful connections. These changes will directly elevate the customer experience and address key pressures on our financial performance. This represents the most comprehensive strategic plan in our company's history, and we believe it will directly benefit our customer experience and drive significantly improved results. We've been preparing and positioning ourselves for this opportunity through our relationship management tools, sentiment-first approach, and recent sentiment expression-based acquisitions. Most importantly, we are evolving our business model to adapt to changes in technology and consumer behavior, ensuring our continued growth and future success. We look forward to sharing more of our plans with you on this call and when we interact in the future.

First, James will provide an update on the third quarter performance. To say we are disappointed with the results is an understatement. Following James, Tom will provide more details on the strategic actions we are taking with Celebrations Wave to address this underperformance. James?

James Langrock (SVP and CFO)

Thanks, Jim, and good afternoon, everyone. Today, I'll review our Q3 performance, the significant factors that contributed to it, and how our Celebrations Wave will help address a number of these issues. Please note that all comparisons are made to the prior year period and represent adjusted results unless otherwise stated. Our third quarter performance was challenging. We are observing consumers being affected by macroeconomic forces. More recently, consumer confidence and sentiment have declined in response to various uncertainties, including potential tariff impacts on inflation, a softening labor market, and shifting economic policies. We saw continued softening as the quarter progressed and consumer sentiment declined sharply. In addition to broader macroeconomic pressures, we are increasingly impacted by the decline of free and low-cost marketing channels as digital platforms shift toward paid placements, sponsored listings, and AI overview responses that limit organic visibility.

While this presents near-term challenges, we see this as an opportunity to fundamentally change our customer acquisition and marketing approach. For perspective, our sales and marketing spend as a percentage of revenue has averaged approximately 25% over the past five years. Over the long term, we expect to reduce our marketing spend as a percentage of revenue by adopting methods that are more efficient and increasing engagement and frequency with existing customers through Celebrations Wave. As we have observed for some time, customers are more inclined to shop during holidays, which we experienced for Valentine's Day, while every day and just-to-because occasions continue to face significant pressure. As a result, our third quarter revenue declined 12.6%. This was comprised of an 11.4% decline in our consumer floral and gift segment, an 18.2% decline in our gourmet foods and gift basket segment, and a 4.5% increase in our BloomNet segment.

Our third quarter adjusted gross profit margin declined 350 basis points to 33.1%, which excludes $4.6 million in costs associated with the new system implementation as we work to resolve the issues identified during the holiday period and was driven by a highly promotional sales environment and deleveraging on the sales decline. We expect to have any remaining issues with the order management system implementation resolved by the end of fiscal 2025. Additionally, for reasons we discussed, our marketing expenditure did not yield the results we expected. Now let's turn to our third quarter operating margins. During this quarter, we recorded a non-cash goodwill and trade name impairment charge related to the company's consumer floral and gift segment and its Personalization Mall trade name. While this impairment impacted earnings for the period, it did not affect our cash flow.

Adjusted for this charge and other items, operating expenses were $160.7 million, essentially flat compared with the prior year period. Based on these factors, our third quarter adjusted EBITDA loss was $34.9 million as compared with a loss of $5.7 million in the prior year period. Now turning to our balance sheet, net debt was $75 million compared with $9 million a year ago. Our cash balance was $85 million at the end of the third quarter. Inventory was $160 million, essentially flat 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 $192.5 million a year ago. At the end of the quarter, we amended our credit agreement as described in the Form 8-K that we filed today.

Now I'd like to take a moment to discuss tariffs, our exposure, and the strategies we are implementing to address these issues. At present, there is an incremental 10% tariff on imported goods, with a far larger tariff affecting goods arriving from China. For perspective, we have approximately $1 billion of cost of goods sold, of which approximately $70 million is imported and subject to tariffs. Approximately half of that $70 million comes from China. Based on current policies and assuming they remain in place as is, we estimate our tariff exposure to be approximately $55 million, with the most significant impact on our personalization and wholesale businesses. Whereas China had been the least cost provider in the past, we are re-examining our opportunities based on the new calculus.

Additionally, to help mitigate the new tariff policies, our approach includes working with our vendors on concessions, changing componentry, modifying our assortment, and as a last measure, how much to pass through in pricing. Given the evolving macroeconomic landscape and the uncertainties that continue to shape the near-term outlook, we have made the decision to withdraw our guidance. This decision reflects not only the unpredictable external factors affecting the broader environment, but also our focus on executing a transformational strategy that positions our company for long-term success. As we embark on this next phase, while there may be some short-term variability, we remain confident in our ability to enhance operational efficiencies, drive sustainable growth, and create lasting value for our stakeholders. Looking ahead, we acknowledge the multifaceted challenges we face, both internal and external.

The fluidity and uncertainty of the current environment, including consumer sentiment and tariff policies, necessitated a tactical approach to navigate these obstacles effectively. While we are currently addressing these immediate challenges, we are also committed to our long-term vision of transforming how people celebrate and manage their relationships. Celebrations Wave aims to reduce costs and increase revenue by increasing frequency and restoring growth in everyday celebration opportunities, addressing affordability for all households while offering elegant products for higher-income consumers, enhancing engagement, and using tools like personalized reminders to significantly reduce customer acquisition costs. We expect our Celebrations Wave strategy to substantially improve our financial performance over the next few years. By leveraging advanced technologies, we plan to operate with greater efficiency and agility.

To support these investments, we are implementing cost reductions and plan to reduce costs by approximately $40 million on an annualized basis, including $17 million in reductions already executed. We anticipate that our efforts will lead to higher profitability and cash flows. I will now turn it over to Tom to share some more details on Celebrations Wave.

Tom Hartnett (President)

Thanks, James. As we embark on our latest evolution with Celebrations Wave, we expect to transform how people connect and express themselves in meaningful ways. Our vision is to become the top destination for nourishing relationships through heartfelt expressions. The advantages of this transformative shift in our business model and customer engagement are intended to directly address the key factors influencing our growth and financial performance, positioning us for long-term success. This strategic plan seeks to increase revenue on both everyday and holiday occasions, optimize operations, lower costs, and accelerate the pace of change, leading to higher EBITDA and cash flow over time. To achieve this, we are developing a celebrations ecosystem that is sentiment-led to help our customers build stronger and more meaningful relationships.

This ecosystem is comprised of a newly launched Celebrations App, a content-rich approach that includes a new Celebrations website that will be launched in the coming weeks, and a reimagined Celebrations Passport loyalty program. Celebrations Wave will utilize a latter approach to drive sales growth and offer customers tailored experiences using personalized suggestions based on the nature of their relationships and their historical spending patterns. The customer journey begins with free and low-cost greeting card options, digital or printed, that are expected to increase overall engagement and frequency. Of course, customers can always start their experience by selecting a gift from our family of brands or marketplace offerings and attach a greeting card to the gift. The North American card market is greater than $6 billion, and our capabilities to fulfill gifts attached to those cards in many cases on a same-day or next-day basis is a significant differentiator.

By offering a wider range of products and price points that cater to various occasions and budgets, we expect to attract a broader audience and strengthen customer loyalty. The enhanced celebrations ecosystem will enable us to increase engagement and frequency amongst existing customers and attract a younger, more diverse customer base, allowing us to rely less on traditional bottom-of-the-funnel marketing to acquire new customers, which has increasingly become more costly and less effective. As James mentioned earlier, our sales and marketing costs represent approximately a quarter of our revenues. We anticipate that our new celebrations ecosystem will meaningfully reduce our customer acquisition costs and enhance customer lifetime value over time. Beyond our well-known brands, our customer lists, floral partners, and last-mile delivery capabilities are significant assets. These assets collectively form the foundation of our strategy to drive future growth and elevate our presence in the market.

As we build on our foundation, data is central to advancing our strategy and driving growth. These components are combined with new and emerging technologies such as agentic AI, which will provide a hyper-personalized, sentiment-first approach to helping our customers nourish their relationships. This personalization strengthens our latter strategy and positions us for continued relevance in a rapidly evolving consumer landscape. Celebrations Wave advances our vision of becoming the premier relationship destination for heartfelt expressions with a business model that aligns with future technological advancements and consumer purchasing preferences. We look forward to keeping you apprised with our progress. I will now turn the call back to Jim.

James McCann (Chairman and Outgoing CEO)

Thanks, Tom. Before I provide my closing thoughts, I'd like to take a moment to introduce Adolfo Villagomez to our investor community. Adolfo, would you like to say a couple of words?

Adolfo Villagomez (Incoming CEO)

Thanks, Jim. Good afternoon, everyone. I am truly honored to step into the role of Chief Executive Officer at 1-800-FLOWERS.COM during such a dynamic period for the company. I am excited to be here, and I am deeply optimistic about the future. With the company's exceptional portfolio of brands, innovative ecosystem, and forward-thinking relationship-building strategies, we are on the verge of a transformative digital revolution in relationship building.

I am eager to collaborate with Jim, Tom, James, and the entire leadership team to drive growth and help individuals forge deeper, more meaningful connections. Together, we will steer the future of e-commerce and establish our prominence as a leader in expressing sentiments and nurturing meaningful relationships. In the coming months and quarters, I look forward to meeting with many of you, sharing our vision, and discussing the impactful progress we are making. Your support is invaluable as we embark on this journey of transformation and growth.

James McCann (Chairman and Outgoing CEO)

Thanks, Adolfo. As we move forward with Celebrations Wave, our mission is clear: to improve people's relationships by enhancing the way they connect and share their sentiments. By leveraging innovative strategies, cutting-edge technologies, and a robust collection of assets, we are creating a celebrations ecosystem that anticipates and meets the evolving needs of our consumers. With Celebrations Wave, we expect to improve revenues by increasing engagement, frequency, and retention of our existing customers. At the same time, we plan to reduce costs and improve efficiency through embracing new technologies, positioning us for sustained and profitable growth. We thank you for your continued support, and we look forward to sharing more about our progress. I'll now ask the operator to open the call for your questions. Operator.

Operator (participant)

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 are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Anthony Lebiedzinski with Sidoti & Company. Please go ahead.

Anthony Lebiedzinski (Senior Equity Research Analyst)

Good afternoon, everyone. Thank you for taking the questions. Welcome aboard, Adolfo. Look forward to working with you.

Adolfo Villagomez (Incoming CEO)

Thank you.

Anthony Lebiedzinski (Senior Equity Research Analyst)

Yeah, first, I know, Jim, you touched on this a little bit, I think, as far as how the quarter progressed. Maybe if you could, guys, give us a little bit more details as far as January through March. I know you had Valentine's Day, which fell on a Friday, which I think was a favorable date placement. Maybe you could just speak to that and also whether the Easter shift had any meaningful impact on the quarterly sales.

James McCann (Chairman and Outgoing CEO)

Hi, it's Jim. Yes, I'll ask James to give you the color, but just an overview of the quarter. The quarter was bookended on each side of Valentine's Day. Yes, Friday is a good placement for Valentine's Day. The holiday wasn't bad, but the softness in January on the everyday business and then the softness again in March with the everyday business is what hurt the quarter. The Easter shift, of course, does make a difference. That's why we always suggest that we be viewed as a two-half company because you have the summer quarter, which is our first quarter, which is your big inventory build and your labor build for the holiday season, the Christmas holiday season, Thanksgiving, Christmas. You have the Easter shift in the second half of the year, which always confuses the quarter.

The Easter shift did have an impact, and James will quantify that for you at some point. The tale of the first calendar quarter, the third fiscal quarter for us, was soft every day, pretty good holiday business, and overall just too expensive on the marketing side. James?

James Langrock (SVP and CFO)

Anthony, with the Easter shift, revenue was down. Reported revenue was down 12.6%. If you adjust for the Easter shift, we would have been down 8.9%. As Jim mentioned, January and March were much weaker because that is the everyday business compared to February, which held up better in the quarter due to the Valentine's Day placement.

Anthony Lebiedzinski (Senior Equity Research Analyst)

Gotcha. Okay. In terms of the system implementation issues, I know you called out around the $4.6 million hit to gross profit. In terms of just overall thinking about how much sales that you lost because of these issues, any way to put a number on that?

James McCann (Chairman and Outgoing CEO)

James will give you the number. This is Jim, Anthony. The implementation of the order management system was a colossal screw-up on our part. The numbers are one thing, but I think it was even worse than that. We're coming to the end of that impact in the near term. By the end of this fiscal year, the end of June, we will be through that cleanup. It was mishandled by us in every way imaginable. Yes, there's the raw data on that. What I'm concerned about most is we disappointed a lot of customers on the Harry & David side, the food group side of things during that holiday period. We're doing our best to make it up to them now, calling them, seeing what we can do to remediate, apologizing, explaining what happened, and trying to win their consideration back.

I think that's going reasonably well. I'm just sick that it happened in the first place. It's had an overhang on us because it hurt us across our brands because we have an enterprise-wide customer service solution, and it got overwhelmed by the demand for the Harry & David needs. It hurt all of our brands. James will give you the numbers, but that doesn't tell half the story. If there's any good news, it's coming to an end. The system is nearly wrapping up on all its amendments. It'll be a good system going forward, but it should never have happened. My mistake. James?

James Langrock (SVP and CFO)

Yeah. So Anthony, as Jim mentioned, we've in the past few months been working through remediating most of the complex order issues, and we're through most of that. We believe there's some cleanup still. We'll have that all taken care of by the end of our fiscal 2025. From top line, obviously, Q2 is the significant holiday period for the food group. We believe that was about $20 million+ of top line at a minimum that we could quantify. In Q3, there was probably some residual hangover, but we haven't measured that. Obviously, Q3 is not a food holiday period, so there's a lot less out there. There definitely was a residual hangover. You could see that the top line was down in.

James McCann (Chairman and Outgoing CEO)

Our expenses.

James Langrock (SVP and CFO)

Our expenses. Then you have the incremental cost in margin was about $4.6 million, Anthony. The cost over the two quarters was close to $11 million of incremental cost on the implementation of OMS.

James McCann (Chairman and Outgoing CEO)

The inventory customers.

James Langrock (SVP and CFO)

Yeah. Which included the inventory write-offs.

Anthony Lebiedzinski (Senior Equity Research Analyst)

My last question before I pass it on to others. Looking at the Celebrations Wave program, it is a multi-year initiative, as you called out. Maybe you could just kind of talk about the timeline. What's kind of the maybe easy or low-hanging fruit, so to speak? What can you achieve first in the first year of implementation of this new program? What's kind of going to be more on the back burner, so to speak?

James McCann (Chairman and Outgoing CEO)

The primary focus of the Celebrations Wave is something you've heard, Anthony, you've heard us talk about for a while, the celebration capabilities. Now we have the ability and the tools. When you think of what the impact of AI is on us, it's really twofold. One is how do we re-engineer ourselves now, which we're doing, to be much more efficient, to be much more lean, and to improve the level of service we provide our customers. That's on the internal facing. How do we do what we do better and cheaper? Externally facing, customer facing, AI gives us tools now to do things that a year ago, two years ago, we only dreamt of being able to do.

You factor that in with a couple of the acquisitions that the team has done in the last couple of years to position us to really go after the sentiment-first capability, the sentiment-first philosophy around the Celebrations Wave have really come to fore. Last year, we purchased a greeting card capability, including a wonderful team of people that have at their DNA this whole sentiment-first mentality. Tom, maybe you can touch on how many cards we are already selling and how we are just getting into that. But really, as Celebrations ecosystem is a mentality of how do we serve our customers with free, inexpensive, and high-quality ways of expressing their sentiment. Oh, by the way, when they want to attach a gift, we have a beautiful assortment there.

Tom, maybe talk about how we'll introduce it primarily with our existing inventory of media, our house media, as a first step.

Tom Hartnett (President)

Yeah. Hi, Anthony. It's Tom, just a couple of things. As we start off, first piece is our relationship management capabilities. We talked about our new app that's out there. We have enhanced capabilities with our address book and our logged-in capabilities. It's utilizing our first-party data now to define and look at the social graph around relationships and occasions. I think a big piece of this is also our occasion reminders that we've been doing fairly well, and we keep growing that data repository. Also, our personalized experiences on our platform. We continue to make good progress, especially with ML and AI in personalizing all our experiences on our platforms.

As Jim alluded to, it is now with the acquisitions of our Celebrations Card business and some of the other attributes we have and the businesses we have, implementing our ladder strategy, having a low-cost, free environment where we can bring people. It reduces the barrier to buy, the barrier to engage. With free and greeting cards and gift cards and things like we've talked about in the past, like Mugables, as well as premium gifts, right? That's all part of the journey here. As Jim mentioned, the use of AI, the use of AI and personalization in our content development and agentic shopping and how we're bringing to bear and utilizing it for advancements in our customer care.

I think that kind of rounds out what we're trying to achieve here and bring all that foundational elements, which a lot of them are already built in this forthcoming year.

Anthony Lebiedzinski (Senior Equity Research Analyst)

Got it. Thank you very much, and best of luck.

James McCann (Chairman and Outgoing CEO)

Thank you.

Tom Hartnett (President)

Thank you.

Operator (participant)

Our next question will come from Michael Kupinski with Noble Capital Markets. Please go ahead.

Michael Kupinski (Senior Equity Research Analyst)

Thank you, and thanks for taking my questions. I welcome Adolfo as well. A couple of questions. You have been dealing with a bifurcated market for some time, and I was wondering if the revenue weakness that you have seen in the last quarter was related to any of maybe the higher-end or the lower-end customers. Was there a shift towards lower-end pricing products? Can you just kind of add some color to what we had seen prior to this particular quarter related to the customers themselves?

Tom Hartnett (President)

Hi, Michael. It's Tom. Yeah, I think continue the trends with the macroeconomic environment. We are seeing more challenges with our lower-income consumers where their discretionary spending has been reduced. We've seen good retention with our best and better customers. It's where we're losing the retention and losing the buying right now is with those customers that are most challenged and struggling.

Michael Kupinski (Senior Equity Research Analyst)

Gotcha.

James McCann (Chairman and Outgoing CEO)

We introduced a few higher price points in the $500-$1,500 price range and frankly sold out of all the items we introduced. The comfortable customer continues to spend and spend well. Our average ticket's been up over the last couple of years, and I think that's a function of, A, having a broader range of price points, and B, losing customers at the lower end of the income grade has taken those lower price points out, which has artificially propped up our average order value.

Michael Kupinski (Senior Equity Research Analyst)

Yeah. You mentioned that the competitive landscape in the floral business increased. You mentioned it was highly promotional. Do you believe you lost share in the floral business?

Tom Hartnett (President)

We don't believe so. We look at our market share annually. With our larger brands, we believe we've either maintained or gained share in the last year.

Michael Kupinski (Senior Equity Research Analyst)

Okay. You mentioned that Personalization Mall, as well as your wholesale business, are two of those that are most impacted by tariffs. I'm kind of surprised that you didn't mention BloomNet in there because it seems to me like some of your products there are also sourced maybe in Asia. I was just wondering if you could just talk about the impact on BloomNet.

Tom Hartnett (President)

Yeah. When we said wholesale, Michael, that is including the Napco and BloomNet side of it. Napco is a big piece of it in the wholesale. That was when we said wholesale, that did include the Napco, BloomNet wholesale business, as well as the food wholesale business.

James McCann (Chairman and Outgoing CEO)

On the BloomNet, as related to our fulfillment partners, the retail floral and gift fulfillment partners, less affected because their tariffs are going to be for South America, which are in the 10% range versus 145% on componentry we're importing from China.

Michael Kupinski (Senior Equity Research Analyst)

Gotcha. I was just wondering in terms of, since we're already through this fiscal fourth quarter, can you kind of give us a sense of how April's revenue trajectory? Did it worsen from where you were in March? I was just wondering if you can kind of give us just the general trends that you saw in April.

James Langrock (SVP and CFO)

In April, obviously, we'll be up because of the Easter shift in April. Obviously, the holiday buying was where we thought it would be, still seeing the softness in the everyday business. For the quarter, we believe that will be slightly better. Part of that's the Easter shift. Obviously, we're getting close to Mother's Day. We've got to get through Mother's Day. For the quarter, we'll be slightly better than we were in Q3.

Michael Kupinski (Senior Equity Research Analyst)

Thank you for that. That's all I have. Thank you.

James McCann (Chairman and Outgoing CEO)

Thank you, Michael.

Operator (participant)

Our next question will come from Doug Lane with Water Tower Research. Please go ahead.

Douglas Lane (Head of Consumer Products Equity Research)

Oh, yes. Hi. Good afternoon, everybody. Jim, I think in your earlier comments, you mentioned that exiting retail during the pandemic was a mistake. Can you elaborate on that? What would you have done differently with the Harry & David retail stores? While you're discussing retail, can you give us an early read on the Long Island store?

James McCann (Chairman and Outgoing CEO)

Sure, happy to. My opinion is that when our hair was on fire at the beginning—I should not make hair jokes—when things are going wild at the beginning of COVID, when we were growing 100% or thereabouts in our e-commerce business, and we had no idea how long we would close our stores, which sold a lot of perishable product, the decision was made to walk away from those. Now, with the benefit of 2020 hindsight, that $50 million or so of revenue that we walked away from, I would still like to have because I am a believer in a multi-channel kind of approach, we all are. Mistake, I will admit to it that we made that mistake. We also shut out the retail plans that we had in development because it was all hands on deck to keep up with the explosion of growth in the e-commerce side.

That being said, if I could wave a magic wand, I'd still have those stores. I'd still have the other experiments we had going on in retail. Now we're getting back to it. We did half a dozen holiday stores this past Christmas. We're really pleased with the results of that from a brand point of view and from a sales point of view, from an exposure of our different brands. That went well. We're going to be bigger. This team will have a bigger opportunity to do holiday stores this year. We opened up the Harry & David store, which is a representation of several of our food group brands. We have a Scharffen Berger section in there. We have a big Cheryl's Cookies section in there. It's a beautiful stage.

Retail for me, if you can do retail and make a couple of bucks at it, it's free marketing because customers see your brand. They engage with you. You remember we acquired a very small company a couple of years ago called Alice's Table right before COVID—not good timing—to buy a live events company. We have repurposed those assets and those relationships under the Celebrations Experiences brand. You will see at the Huntington store of Harry & David and 1-800-Flowers.com, you will see Scharffen Berger chocolates. You will see Moose Munch, Vital Choice, Harry & David brands, our new nut line from Beaver Creek under the Harry & David umbrella. All of them represented there. We did a big grand opening party and a board dinner there a couple of weeks ago. It was fantastic. Had about 100 people in the store, great experiences.

We have a section in front of the store right up front where you can see in the window. This is one of the most highly trafficked intersections on Long Island. All these cars driving by, seeing all of these people taking classes in there day and night. We're building a whole program there of all the different classes. People come in, they interact, they have a great experience. We can make a couple of bucks at that. They all get a little gift bag that they can walk around the store and fill it with all different kinds of items. Cheryl's Cookies product is our best-selling item in that store right now. We are and have been retailers for most of our 50 years. Made the mistake of shuttering those.

We're coming back in a deliberate and tested fashion with holiday stores with different kinds of concepts. I believe that if we are deliberate about that, it'll play an important and meaningful role in our marketing scheme/sales going forward. Most especially, we get to interact one-on-one with our customers, and they have a different sense of our brand when that happens.

Douglas Lane (Head of Consumer Products Equity Research)

This year, over the next, I don't know, 12-18 months, are we looking at just expanding the holiday stores, or do you think you'll take your learnings from the Long Island store and start to expand that concept?

James McCann (Chairman and Outgoing CEO)

Tom, what do you think?

Tom Hartnett (President)

Yeah. Our plans are to have a handful of full year-round stores as we test into those, maybe a little bit more, certainly over 18 months more. Obviously, we're looking at high-traffic locations. Yes, we will continue to be doubling down on the seasonal stores also.

James McCann (Chairman and Outgoing CEO)

I'd point out that one of the good hires that we've made in the last few months was a fellow running our real estate efforts for us that has a real deep retail knowledge and great contacts. Frankly, I was just chatting with him this morning about some of the opportunities he's unearthing for us. He's become a real asset very quickly. He knows retail inside out, and he's got us all jazzed about the opportunities. Don't tell him I said that. He'll ask for a raise.

Douglas Lane (Head of Consumer Products Equity Research)

All right. That's our secret. Thank you, guys.

James McCann (Chairman and Outgoing CEO)

Thank you.

Operator (participant)

With no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Jim McCann for any closing remarks.

James McCann (Chairman and Outgoing CEO)

It has been a pleasure to interact with you. I look forward to continuing to do that. I really look forward to Adolfo being in our e-commerce store because I am excited about him being here. I am excited about the new additions to the team that we have made lately. I am getting out of Tom's way and bringing someone in that has a lot more to offer than I do. That is exciting for me. I think you can tell that we are disappointed in our performance of late. Some of it is macro, yes, but some of it is of our own doing. We have to own up to that. Indeed, we do. I could not be more excited about what our future looks like with our Celebrations Wave initiative. This is the sixth wave for us.

Five decades with six waves: starting with stores, then raising the 800 number, then online, then social, then mobile, then conversational commerce. This one now is the most exciting for me because it comes closest to enabling us to be able to fulfill the dream we've had for a long time of playing a more important role in our customers' lives by helping them to have more and better relationships. That starts with our engagement with them and the tools we can help them to be genuine about their investment in more, better, and deeper relationships. Adolfo, I welcome you as well and congratulate you. I couldn't tell you how excited I am to have you at the helm of what I think is not a ship but a rocket ship. Thank you.

Adolfo Villagomez (Incoming CEO)

I agree with you, Jim. I'm super excited to be here. Looking forward to working with you guys. Thank you.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.