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18

1 800 FLOWERS COM INC (FLWS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 revenue was $775.5 million (-5.7% YoY); diluted EPS was $1.00 as gross margin held at 43.3% amid a highly promotional environment and OMS implementation issues at Harry & David that resulted in ~$20 million lost revenue and ~$6.3 million incremental costs .
  • Adjusted EBITDA was $116.3 million (vs. $130.1 million prior year), with gross margin excluding OMS costs at 43.5% (+20 bps) and operating expenses down $19.9 million YoY .
  • Guidance cut: FY2025 revenue now seen down mid-single digits; Adjusted EBITDA $65–$75 million; FCF $25–$35 million (from prior flat to low-single-digit decline, $85–$95 million EBITDA, FCF $45–$55 million). The company amended its credit agreement to add flexibility around covenant definitions .
  • Key near-term catalysts: OMS remediation; favorable Valentine’s Day placement; wholesale gift baskets recovery; accelerated marketing/AI initiatives to improve efficiency and engagement .

What Went Well and What Went Wrong

What Went Well

  • Gross margin resilience: Q2 gross margin 43.3% flat YoY; excluding OMS costs, 43.5% (+20 bps). Gourmet Foods gross margin rose 30 bps to 43.5% on inventory/labor optimization .
  • Operating discipline: Operating expenses fell $19.9 million YoY to $244.5 million; adjusted operating expenses down $2.9 million to $239.1 million .
  • Strategic focus and technology: Management emphasized accelerating “Work Smarter” efficiencies to fund Relationship Innovation initiatives; AI will be leveraged to deepen personalization and marketing effectiveness (“AI can significantly help us here…deliver highly personalized marketing experiences”) .

What Went Wrong

  • OMS implementation issues: New Harry & David OMS escalated during peak, causing bottlenecks and cancellations; estimated ~$20 million e-commerce revenue loss, ~20 bps gross margin impact, ~$6.3 million P&L costs; lost EBITDA estimated at ~$8 million due to lost revenue mix .
  • Corporate gifting weakness: Corporate revenue ~$70 million vs. ~$84 million last year (-17.5%), lower AOV/items per order and fewer orders .
  • Promotional/macro headwinds: Softer-than-expected and highly promotional consumer environment hurt marketing efficiency; free and lower-cost channels underperformed (search rank changes reduced natural/branded search returns) .

Financial Results

Consolidated Results vs Prior Quarter and Year

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$360.9 $242.1 $775.5
Diluted EPS ($USD)($0.32) ($0.53) $1.00
Gross Profit Margin %38.4% 38.1% 43.3%
Operating Income ($USD Millions)($27.8) ($47.0) $91.1
Adjusted EBITDA ($USD Millions)($8.787) ($27.946) $116.278
Net Income ($USD Millions)($20.867) ($34.190) $64.348

Segment Breakdown

SegmentQ4 2024 Revenue ($MM)Q4 2024 Gross Margin %Q1 2025 Revenue ($MM)Q1 2025 Gross Margin %Q2 2025 Revenue ($MM)Q2 2025 Gross Margin %
Consumer Floral & Gifts$231.6 40.8% $135.2 39.9% $234.3 41.9%
BloomNet$24.4 49.7% $23.1 50.0% $22.8 50.9%
Gourmet Foods & Gift Baskets$105.2 30.0% $84.0 32.0% $518.5 43.5%

Selected KPIs

KPIQ4 2024Q1 2025Q2 2025
E-commerce Revenue ($USD Millions)$325.6 $193.2 $677.3
AOV Change YoY+2.9% -1.5% -1.2%
Orders Delivered (Holiday Season)n/an/a>7 million

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue YoY %FY2025Flat to low-single-digit decline Mid-single-digit decline Lowered
Adjusted EBITDA ($MM)FY2025$85–$95 $65–$75 Lowered
Free Cash Flow ($MM)FY2025$45–$55 $25–$35 Lowered

Earnings Call Themes & Trends

TopicQ4 2024 (Prior Year End)Q1 2025 (Prior Quarter)Q2 2025 (Current)Trend
AI/Technology initiativesGross margin recovery; automation in DCs; AI used in web and customer service, evergreen efficiency focus New AI-powered customer care platform; OMS rollout at Harry & David to optimize logistics AI to accelerate personalization and marketing; recommit to efficiency investment despite OMS challenges Expanding scope and emphasis
Supply chain/OMSNo OMS issues; optimization cited New OMS launched at Harry & David (implementation costs in Q1) OMS issues caused ~$20m revenue loss and cancellations; remediation underway Temporary negative impact, fix in progress
Macro/promotionsLower-income consumers pressured; promotional intensity Value expansion, broader price points; modest marketing rates post-election Highly promotional quarter; marketing efficiency deteriorated; improved post-election cost environment Continued pressure, adapting mix
Product performanceWholesale expected rebound in FY25; Scharffen Berger tuck-in Macy’s pop-ups for Harry & David; same-day expansion for cookies/baskets Gourmet margin +30 bps; BloomNet margin +330 bps; OMS hurt Harry & David Mixed: margin improvement vs OMS
Corporate giftingNeutral to cautious view Wholesale tailwind expected in Q2 Corporate revenue down 17.5% YoY; plan to retool offerings/staffing Weaker, retooling underway
Tariffs/regulatoryn/an/aColombia tariff scare; 10% of merchandise COGS from China ($40–$45m); industry exposed to Colombia Watchlist risk

Management Commentary

  • “We are disappointed that our Q2 performance did not meet our expectations…Some of the challenges were self-inflicted…we remain optimistic about our future performance…we are confident that the strategies and the foundational steps we have implemented will significantly improve our trends” — Jim McCann .
  • “AI can significantly help us here…accelerate our personalization efforts and present customers with content that is specific and appropriate…deliver highly personalized marketing experiences” — Jim McCann .
  • “Our e-commerce business declined 8.3%…OMS related issues reduced Q2 e-commerce revenue by approximately $20 million…gross profit impacted ~20 bps…incremental OMS-related costs ~$6.3 million” — James Langrock .
  • “We successfully delivered over 7 million orders this holiday season” — James Langrock .
  • “We must accelerate our Work Smarter initiatives to cut costs and in turn increase investment in our growth-oriented relationship innovation initiatives and marketing strategies” — Thomas Hartnett .

Q&A Highlights

  • Valentine’s Day placement: Friday placement and Super Bowl timing expected to benefit demand vs prior year; plan for early incentives and flexible marketing .
  • Corporate gifting: Down ~17.5% YoY to ~$70 million; retooling offerings and year-round engagement; lower price points saw “hotspots” .
  • Marketing efficiency: Election inflated rates; post-election moderation in some channels; bottom-funnel search rank changes hit natural/branded search .
  • Tariffs: Colombia tariff scare would be painful; China exposure ~$40–$45 million of COGS; industry depends on Colombia for 50–60% of U.S. fresh flowers .
  • Wholesale: Strong tailwind in Q2; shift of ~$3 million orders from Q1 to Q2; broader customer base should keep wholesale stronger .
  • OMS remediation: Majority of issues expected to be fixed by Q3; residual issues manageable given lower Food Group volumes outside December peak .

Estimates Context

  • Wall Street consensus (S&P Global) could not be retrieved due to access limits; numeric comparisons to estimates are unavailable. Given the guidance reduction (revenue mid-single-digit decline; Adjusted EBITDA $65–$75 million; FCF $25–$35 million), consensus estimates likely need downward revisions for FY2025 revenue, EBITDA, and FCF to reflect OMS disruption, corporate gifting softness, and promotional headwinds .

Key Takeaways for Investors

  • Q2 print: Solid gross margin and EPS despite OMS disruption; however, lost revenue and higher customer care/shipping costs weighed on Adjusted EBITDA, prompting a guidance cut .
  • Near-term setup: Favorable holiday placement and wholesale basket tailwind should support Q3 trajectories; monitor OMS remediation pace and marketing ROI post-election .
  • Execution focus: Accelerate “Work Smarter” savings to fund growth initiatives; AI personalization and same-day expansion across non-floral brands are strategic levers .
  • Risk watch: Promotional intensity, corporate gifting weakness, and tariff exposure (Colombia, China) remain headwinds; BloomNet revenue pressure laps mid-year .
  • Balance sheet/credit: Amendment adds flexibility to covenant definitions; net cash position improved by Q2 with $247 million cash; term debt at ~$160 million; revolver undrawn at Q2 end .
  • Medium-term thesis: If OMS issues are resolved and AI/marketing efficiency improve, margins can sustain low-40s while top-line recovers on price-point breadth and wholesale strength; tuck-ins (e.g., Scharffen Berger) augment assortment .
  • Trading implications: Watch for operational updates (OMS fix progress), Q3 Valentine’s execution, and any post-guidance analyst revisions; headline sensitivity around tariffs and corporate demand commentary is high .