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    1-800-Flowers.Com Inc (FLWS)

    Q3 2024 Earnings Summary

    Reported on Feb 18, 2025 (Before Market Open)
    Pre-Earnings Price$9.06Last close (May 1, 2024)
    Post-Earnings Price$8.91Open (May 2, 2024)
    Price Change
    $-0.15(-1.66%)
    • The company has implemented permanent cost reductions, resulting in estimated annual savings of $10 million at the payroll level. This action is expected to improve profitability.
    • Gross margins are improving and are expected to exceed 40% this year, with plans to return to the historical mean of 42% over the next couple of years. This indicates a reversion to pre-COVID profitability levels.
    • Average order value increased to $79, up about 1.5% year-over-year, driven by successful multi-branded bundles that are exceeding expectations. This suggests pricing power and the ability to increase AOV.
    • Rising fuel and commodity costs are expected to become headwinds, which could pressure the company's margins moving forward.
    • Declining spending from lower-income customers due to economic pressures may negatively impact revenue growth.
    • The wholesale business is facing challenges, with lower orders from retailers that are not expected to return to prior high levels, indicating persistent weakness in this segment.
    1. Workforce Reduction
      Q: How permanent are recent workforce reductions?
      A: The company reduced its salaried workforce in the quarter, resulting in about $10 million in permanent cost savings. These reductions are part of ongoing efforts to operate more efficiently under the Work Smarter initiative.

    2. Commodity Price Impact
      Q: How are commodity prices affecting costs?
      A: Volatile commodity prices, especially fuel, are a negative headwind overall. Cocoa prices have been extraordinarily volatile, but the company is protected through next year due to locked-in pricing. Eggs and butter prices have come down significantly, providing some benefit.

    3. Shipping Costs and Ocean Freight
      Q: What's happening with shipping and ocean freight costs?
      A: Despite initial concerns, the company successfully negotiated slightly lower ocean freight rates for fiscal '25, effective May 1. This positive outcome helps mitigate some cost pressures.

    4. Wholesale Orders and Retailer Demand
      Q: What are retailers planning for holiday orders?
      A: After a decrease in wholesale orders from big-box retailers for Easter and the previous Christmas, orders for the upcoming holiday season are expected to increase, providing a tailwind rather than a headwind. However, orders may not return to previous highs.

    5. Same-Day Delivery Economics
      Q: How will same-day delivery impact costs if it becomes standard?
      A: Same-day delivery is becoming table stakes in the industry. The company is well-positioned due to its unique model and expects to manage costs by leveraging its network, though same-day delivery may have different economics compared to standard delivery.

    6. Average Order Value Increase
      Q: What was the average order value, and is bundling successful?
      A: The average order value increased to $79, up about 1.5% year-over-year. Bundling, especially multi-brand bundles, is performing well and exceeding expectations, contributing to higher average order values.

    7. Margin Recovery
      Q: How close is the cost structure to pre-COVID levels?
      A: Gross margins have improved to around 40% and are expected to reach historical levels of 42% over the next couple of years. Progress is being made, but margins have not fully reverted to pre-COVID levels yet.

    8. Acquisition Strategy
      Q: Are acquisitions still a growth priority?
      A: While being judicious, the company remains open to opportunistic acquisitions that fit its portfolio. Recent acquisitions have focused on talent and capabilities rather than revenue, such as enhancing technology teams.

    9. Personalization Business Performance
      Q: How are Personalization Mall and Things Remembered performing?
      A: Personalization Mall has seen more impact from lower-income consumers, while Things Remembered, targeting a different demographic with higher average order values (e.g., $180 items), is growing and meeting expectations.

    10. Workforce Reduction Morale Impact
      Q: How are workforce reductions affecting morale?
      A: Workforce reductions are challenging but considered necessary. The company emphasizes ongoing talent management and continues to invest in growth areas, making significant hires even after reductions.