Q2 2025 Earnings Summary
- The company is actively resolving the temporary issues with the new Order Management System (OMS) that impacted revenue and customer experience in Q2; management expects these challenges to be largely resolved in Q3, leading to improved operations and customer satisfaction.
- The company is implementing cost-saving initiatives and automation ("Work Smarter" programs), which are expected to improve margins and operational efficiency, while also planning to reinvest savings into marketing and sales strategies to drive growth. ,
- The company is investing in technology and marketing, including leveraging AI and digitization, to enhance customer engagement, personalize content, and improve marketing efficiency, which should drive revenue growth in the coming quarters. ,
- Significant decline in corporate sales, with corporate revenue decreasing by almost $15 million or 17.5% year-over-year, indicating weakness in corporate demand.
- Operational challenges due to the implementation of a new Order Management System (OMS) led to approximately $20 million in estimated lost revenue and $6.3 million in additional costs in Q2, negatively impacting EBITDA and customer trust, which may affect future sales.
- Post-pandemic normalization leading to decreased consumer demand compared to pandemic levels, with the company stating that the 'COVID blip' has ended, indicating that prior demand was a temporary boost and may not sustain.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -6% | Persistent macro-economic headwinds (inflation, higher interest rates) continued to suppress discretionary spending, building on double-digit revenue declines in previous periods; this was further impacted by the company’s prudent reduction in promotions. |
Consumer Floral & Gifts | -8% | Weaker demand for everyday gifting, as seen in both Q1 2024 and Q1 2025, coupled with a 6.5% drop in online orders and 1.5% decline in average order value, continued to weigh on revenue in this segment. |
BloomNet | -16% | Reduced order flow due to a key partner’s merger with a competitor, which had already led to a 13.5% decline in Q1 2024; combined with deleveraging on lower revenue, this extended the segment’s downward trend and reduced contribution margin. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2025 | flat to a decline in the mid-single digits | decline in the mid-single digits | lowered |
Adjusted EBITDA | FY 2025 | $85 million to $95 million | $65 million to $75 million | lowered |
Free Cash Flow | FY 2025 | $45 million to $55 million | $25 million to $35 million | lowered |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Revenue | Q2 2025 | Expected to be in the range of flat to a decline in the mid-single digits | 775,492(down ~5.7% YoY from 822,054In Q2 2024) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Order Management System (OMS) | Q1 2025 described the new OMS for Harry & David as a system expected to optimize logistics and reduce fulfillment costs. Q4 and Q3 2024 had no OMS discussion [Document 2,3]. | Q2 2025 highlighted significant OMS challenges causing order backlogs, cancellations, and an estimated $20 million in lost e-commerce revenue, with fixes expected later in the year. | Shift from an implementation viewed with future benefits to a problematic rollout with immediate revenue and operational impacts. |
Cost-saving initiatives and automation efforts | Q1 2025 emphasized AI integration in customer care, logistics optimization and system consolidation aimed at cost reduction. Q3 2024 and Q4 2024 discussed “Work Smarter” initiatives, workforce reduction, and automation in distribution centers. | Q2 2025 reiterated focus on “Work Smarter” initiatives with automation in distribution centers and process streamlining, reinvesting savings into sales and marketing. | Consistent focus with continued positive sentiment for efficiency gains, even as other challenges emerge. |
Technology investments including AI and digitization | In Q1 2025 and Q4 2024, investments in AI for customer service and digital process improvements were highlighted, leading to efficiency gains. Q3 2024 had no specific discussion on this topic. | Q2 2025 expanded the discussion by emphasizing AI-driven personalization and digitization to improve marketing and operational efficiency. | Continuity with an evolved focus on personalization and deeper integration of digital tools. |
Revenue trends and wholesale business performance | Q1 2025 reported revenue declines partly due to the timing of wholesale orders; Q3 2024 and Q4 2024 provided detailed analysis of mixed trends between e-commerce declines and wholesale fluctuations. | Q2 2025 noted a consolidated revenue decline driven by lower consumer demand and OMS issues, while wholesale business showed strong growth in the teens, offsetting some weaknesses. | Mixed sentiment; revenue pressures from operational issues contrast with encouraging wholesale performance. |
Commodity and fuel cost pressures | Q1 2025 discussed locked-in cocoa prices and moderated egg and fuel costs, while Q3 2024 and Q4 2024 detailed high cocoa prices, elevated fuel costs, and volatility in freight rates. | Q2 2025 mentioned no anticipated savings on commodity costs, with moderated cocoa prices but rising egg costs due to bird flu, maintaining cost pressures. | Consistent cost pressures with specific emerging factors (e.g., egg costs) further marring margins. |
Marketing spend fluctuations and election-related media rate impacts | Q1 2025 focused on a flexible holiday marketing spend across funnel levels, while Q4 2024 discussed elevated media rates during the election and the plan to ramp up post-election. | Q2 2025 noted that post-election media rates became more reasonable, though some lower-funnel costs increased, overall leading to lower costs compared to pre-election levels. | Improvement in sentiment as election-related cost pressures abate compared to previous high-rate periods. |
Pricing strategies, margin improvements, and average order value changes | Q1 2025 and Q3 2024 emphasized strategies to broaden price points and reported margin improvements and modest AOV declines/increases; Q4 2024 detailed increases in AOV and notable margin improvements despite pricing challenges. | Q2 2025 observed flat gross margins affected by OMS-related incremental costs and a 1.2% AOV decline, reflecting a more promotional period with limited pricing gains. | A less positive outlook in Q2 2025 relative to previous periods, with promotional pressures dampening margins and AOV. |
Pear crop expansion and seasonal sales extension | Q1 2025 and Q3 2024 reported favorable and expanded pear crops with extended sales seasons, citing significant increases and longer availability. | Q2 2025 provided no mentions of pear crop expansion or seasonal sales extension. | Topic not mentioned in current period, suggesting a potential deprioritization or shift in focus. |
Post-pandemic demand normalization effects | Q3 2024 indirectly reflected normalization by discussing a return of margins and cost structures to historical means, but Q1 and Q4 2024 did not explicitly mention normalization effects. | Q2 2025 directly addressed the end of the “COVID blip” with explicit mention of post-pandemic demand normalization, linked with lower-income cautious spending and adjustments in pricing strategies. | Emerging as an explicit focus in Q2 2025, highlighting a strategic recalibration to normalized post-pandemic consumer behavior. |
-
Order Management System Resolution
Q: When will OMS issues be fully resolved?
A: The company implemented a new order management system in August-September, but significant issues emerged during the December peak season, causing order backlogs and cancellations. They expect to resolve the majority of these challenges within this quarter and achieve 100% functionality within the next two quarters. -
Post-Pandemic Consumer Demand
Q: Did shifts in consumer engagement accelerate this quarter?
A: The company saw the end of the "COVID blip," with eased demand compared to the pandemic peak. They are introducing lower price points and broader price ranges, seeing good uptake at the lower end, but acknowledge they need to do more to engage budget-conscious consumers. -
Margin Improvement Initiatives
Q: Where do you anticipate improved EBITDA margins?
A: The company doesn't anticipate savings from commodity costs but plans to improve margins through "Work Smarter" initiatives like streamlining processes and automation. Some savings will be reinvested into sales and marketing strategies. -
Corporate Gifting Decline
Q: How is the corporate gifting business performing?
A: Corporate gifting revenue declined to around $70 million from $84 million last year, a decrease of almost 17.5%. Corporate customers reduced their spend, average order value, and order volumes. The company is bullish on the corporate business and plans to retool offerings and marketing strategies. -
M&A Opportunities
Q: What is the outlook for M&A activity?
A: The company notes increased interest in potential partnerships among strained e-commerce companies. With a strong balance sheet, they see potential to be more active in M&A if opportunities are accretive and benefit customers. -
Tariff Exposure
Q: What is your exposure to tariffs?
A: The company was relieved when potential tariffs on Colombia, a key floral supplier, were resolved. With cost of goods sold at approximately $1 billion, about $40–$45 million comes from China purchases. Tariffs on China would have some impact but are modest relative to the total cost base. -
Marketing Strategy Adjustments
Q: What changes are anticipated in your marketing strategy?
A: The company saw declines in low-cost channels due to search engine changes. They plan to push more into mid and upper funnel channels and refine content for customer relevance. They are hopeful for increased efficiency through new digital tools and AI. -
Wholesale Business Strength
Q: Can you discuss the shift in wholesale vs. e-commerce performance?
A: Wholesale revenue increased significantly due to better in-store retail traffic, impacting e-commerce. They expect wholesale to remain strong due to new relationships and anticipate both wholesale and e-commerce to grow next year. -
Valentine’s Day Placement
Q: How will Valentine's Day placement affect sales this year?
A: With Valentine's Day on a Friday, it's the best day for sales, offering five big selling days post-Super Bowl. Last year's close proximity to the Super Bowl negatively impacted sales, so this year's placement is favorable. Easter's timing is also expected to benefit sales.