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

Quartr
Provided by Quartr
May 8, 2025

There are 9 speakers on the call.

Operator

Good afternoon, and welcome to the one-eighthundredFLOWERS.COM 20 20 5 Third Quarter Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Andy Milivoj.

Operator

Please go ahead.

Speaker 1

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

Speaker 1

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. And now I'll turn the call over to Jim.

Speaker 2

Thanks, Andy, and good afternoon, everyone. Just a short while ago, we made two major announcements that mark an exciting new chapter for

Speaker 3

our company.

Speaker 2

We introduced our transformative long term strategy Celebrations Wave and welcomed Aldopo Villagomez as our new CEO, who will spearhead this new strategy. Before we dive into Celebration's 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.

Speaker 2

Notably, decision to shut most of our retail operations during COVID and recent difficulties with our audit 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.

Speaker 2

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 Adafo's approach to leveraging data analytics and consumer insights, he has achieved remarkable success in his previous roles. His expertise will be instrumental and continue our legacy of innovation and connecting more deeply with our customers through cutting edge digital experiences.

Speaker 2

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 Adabo to introduce himself. We have also recently welcomed Henry Mori to our executive team as our Chief AI and Transformation Officer. With over seventeen 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.

Speaker 2

Beyond enhancing our leadership team, we've added expertise to our Board of Directors with the addition of Shelly Palmer. Shelly 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 ways, which include our retail stores, the launch of the national one-eight hundred Flowers number, the introduction of e commerce and the shift to mobile social commerce, which ultimately became conversational commerce.

Speaker 2

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 writing 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.

Speaker 2

It integrates our strategic initiatives and brand assets that utilize advanced technologies to create 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 in an ongoing consumer need 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.

Speaker 2

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.

Speaker 2

But 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?

Speaker 4

Thanks, Jim, and good afternoon, everyone. Today I'll review our Q3 performance, the significant factors that contributed to it and 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.

Speaker 4

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. More perspective, our sales and marketing spend as a percentage of revenue has averaged approximately 25% over the past five years.

Speaker 4

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 because occasions continue to face significant pressure. As a result, our third quarter revenue declined 12.6%. This was comprised of 11.4% decline in our Consumer Floral and Gifts segment, an 18.2% decline in our Gourmet Foods Baskets segment and a 4.5% increase in our BloomNet segment. Our third quarter adjusted gross profit margin declined three fifty basis points to 33.1%, which excludes $4,600,000 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.

Speaker 4

We expect to have any remaining issues with the order management system implementation resolved by the end of fiscal twenty twenty five. 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 Gifts segment and its personalization mall trade name. While this impairment impacted earnings for the period, it did not affect our cash flow.

Speaker 4

Adjusted for this charge and other items, operating expenses were $160,700,000 essentially flat compared with the prior year period. Based on these factors, our third quarter adjusted EBITDA loss was $34,900,000 as compared with a loss of $5,700,000 in the prior year period. Now turning to our balance sheet. Net debt was $75,000,000 compared with $9,000,000 a year ago. Our cash balance was $85,000,000 at the end of the third quarter.

Speaker 4

Inventory was $160,000,000 essentially flat with a year ago. In terms of our debt, we had $160,000,000 in term debt and no borrowings under our revolving credit facility as compared with 192,500,000 a year ago. At the end of the quarter, we amended our credit agreement as described in the Form eight ks 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.

Speaker 4

For perspective, we have approximately $1,000,000,000 of cost of goods sold, of which approximately $70,000,000 is imported and subject to tariffs. Approximately half of that $70,000,000 comes from China. Based on current policies and assuming they remain in place as is, we estimate our tariff exposure to be approximately $55,000,000 with the most significant impact on our personalization and wholesale businesses. Whereas China had been the least cost provider in the past, we are reexamining 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 on pricing.

Speaker 4

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 tactical approach to navigate these obstacles effectively.

Speaker 4

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. Celebration 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 $40,000,000 on an annualized basis, including $17,000,000 in reductions already executed.

Speaker 4

We anticipate that our efforts will lead to higher profitability and cash flows. And now I'll turn it over to Tom to share some more details on Celebrations Wave.

Speaker 5

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 above everyday and holiday occasions, optimize operations, lower cost and accelerate the pace of change leading to a higher EBITDA and cash flow over time.

Speaker 5

To achieve this, we're 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 Way 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 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. And 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.

Speaker 5

North American card market is greater than $6,000,000,000 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.

Speaker 5

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 AgenTeq AI 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.

Speaker 5

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. And now I'll turn the call back to Jim.

Speaker 2

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

Speaker 3

Thanks, Jim, and good afternoon, everyone. I am truly honored to step into the role of Chief Executive Officer at one-eighthundredFLOWERS.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.

Speaker 3

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.

Speaker 2

Thanks, Hidalgo. 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 our 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 cost and improve efficiency through embracing new technologies positioning us to sustain and profitable growth.

Speaker 2

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

Thank you. We will now begin the question and answer session. And our first question will come from Anthony Lebiedzinski with Sidoti and Company. Please go ahead.

Speaker 6

Good afternoon, everyone, and thank you for taking the questions, and welcome aboard, Adolfo. Look forward to working with you.

Speaker 3

Thank you.

Speaker 6

So first, I know, Jim, you touched on this a little bit, and I think as far as how the quarter progressed. But 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 day placement. So maybe you could just speak to that and also whether the Easter shift had any meaningful impact on the quarterly sales?

Speaker 2

Hi, Anthony, Jim. Yes. I'll ask James to give you the color, but just an overview of the quarter. The quarter was book ended on each side of Valentine's Day. Yes, Friday is a good placement for Valentine's Day and 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.

Speaker 2

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. And then you have the Easter shift in the second half of the year, which always confuses the quarter. So the Easter shift did have an impact and James will quantify that to you at some point. And but the tale of the first calendar quarter, third fiscal quarter for us was soft every day, pretty good holiday business and overall just too expensive on the marketing side.

Speaker 4

James? So Anthony, with the Easter shift, revenue was down reported revenue was down 12.6%, but if you adjust for the Easter shift, we would have been down 8.9%. And as Jim mentioned, January and March were much weaker because that's the everyday business compared to February, which held up better in the quarter due to the Valentine's Day placement.

Speaker 6

Got you. Okay. And then in terms of the system implementation issues, so I know you called out like around the $4,600,000 hit to gross profit. But in terms of just overall thinking about the how much sales that you lost because of these issues, any way to put a number on that?

Speaker 2

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.

Speaker 2

So by the end of this fiscal year, the June, we'll be through that cleanup. But it was mishandled by us in every way imaginable. And yes, there's a raw data on that. But what I'm concerned about most is we disappointed a lot of customers on the Harry and 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.

Speaker 2

I think that's going reasonably well. I'm just sick that it happened in the first place. And it's had an overhang on us because it hurt us across our brands because we have an enterprise wide customer solution customer service solution and it got overwhelmed by the demand from the Harry David needs. And so it hurt all of our brands. So James will give you the numbers, but that doesn't tell half the story.

Speaker 2

Any good news is it's coming to an end. The system is nearly, nearly wrapping up on all its amendments. It will be a good system going forward, but it should never have happened, my mistake. James?

Speaker 4

Yes. 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. So we believe there's some cleanup still. We'll have that all taken care of by the end of our fiscal twenty twenty five. From top line, obviously Q2 is the significant holiday period for the Food Group and we believe that was about $20 plus million of top line at a minimum, that we could quantify.

Speaker 4

In Q3, there was probably some residual hangover, but we haven't measured that. And obviously, the Q3 is not a food holiday period. So there's a lot less out there, but there definitely was a residual hangover and you could see the top line was down in our expenses. Then you have the incremental cost in margin was up 4,600,000.0 Anthony. So the cost over the two quarters was close to $11,000,000 of cost incremental cost on the implementation of OMS.

Speaker 2

And the inventory cuts. Yes,

Speaker 4

which included the inventory write offs.

Speaker 6

Right. And my last question before I pass it on to others. So looking at the Celebrations Way program, it is a multiyear initiative as you called out. Maybe you could just kind of talk about the timeline, like 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?

Speaker 6

What's kind of going to be more on the back burner so to speak?

Speaker 2

So the primary focus of the Celebrations Wave is something you've heard Anthony you've heard us talk about for a while, the Celebrations capabilities. But now we have the ability and the tools. So when you think of what the impact of AI is on us, it's really twofold. One is how do we reengineer 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. So that's on the internal facing.

Speaker 2

How do we do what we do better and cheaper? And then 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 force. So last year we purchased a greeting card capability including a wonderful team of people that have as their DNA this whole sentiment first mentality. Tom, maybe you can touch on how many cards we're already selling and how we're just getting into that.

Speaker 2

But we as celebrations ecosystem is a mentality of how do we serve our customers with free inexpensive and high quality ways of expressing their sentiment and by the way when they want to attach a gift we have a beautiful assortment there. But then Tom maybe talk about how we'll introduce it primarily with our existing inventory of media or housing media as a first step.

Speaker 5

Yes. Hi, Anthony. It's Tom. Just a couple of things. As we start off and so first piece is our relationship management capabilities.

Speaker 5

We talked about our new app that's out there. We have enhanced capabilities with our address book and our logged in capabilities. And 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 in especially with ML and AI in personalizing all our experiences on our platforms.

Speaker 5

As Jim alluded to, it is now with the acquisitions of our Celebrations card business and some of the other attributes we have in the businesses we have, implementing our ladder strategy, having a low cost free environment where we can bring people, so it reduces the barrier to buy, the barrier to engage. So with free greeting cards and gift cards and things like we've talked about in the past like Muggables as well as premium gifts, right, that's all part of the journey here. And then as Jim mentioned, the use of AI, the use of AI in 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.

Speaker 6

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

Speaker 2

Thanks, Andrew. Thank you. Our

Operator

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

Speaker 7

Thank you and thanks for taking my questions. I welcome Adolfo as well. Couple of questions. You've been dealing with a bifurcated market for some time and I was wondering if the revenue weakness that you've seen in the last quarter was related to any of like maybe the higher end or the lower end customers? Was there a shift towards lower end pricing products?

Speaker 7

Can you just kind of add some color to what we had seen prior to this particular quarter related to the customers themselves?

Speaker 5

Hi, Michael, it's Tom. Yes, I think it continued to trend with the macro economic 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 or losing the buying right now is with those customers that are most challenged and struggling.

Speaker 7

Got you.

Speaker 2

We introduced a few higher price points in the $500 to $1,500 price range and frankly sold out of all the items we introduced. So the comfortable customer continues to spend and spend well. Our average ticket has 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 as taking those lower price points out, which is artificially propped up our average order value.

Speaker 7

Yes. And you mentioned that there is the competitive landscape in the floral business increased. Can you mention and you mentioned it was highly promotional. Do you believe you lost share in the floral business?

Speaker 5

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

Speaker 7

Okay. And you mentioned that personalization mall as well as your wholesale business are two of those that are most impacted by tariffs. I'm 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. And I was just wondering if you could just talk about the impact on BloomNet.

Speaker 4

Yes. So when we said wholesale, Michael, that's including the NAPCO and BloomNet side of it. NAPCO is a big piece of it in the wholesale. So that was when we said wholesale, that did include the NAPCO BloomNet wholesale business as well as the food wholesale business.

Speaker 2

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

Speaker 7

Got you. And then 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?

Speaker 4

So in April, we'll be obviously, we'll be up because of the Easter shift in April. So obviously the holiday buying was where we thought it would be. Still seeing the softness in the everyday business and for the quarter we believe that will be slightly better and part of the Easter shift and obviously we're getting close to Mother's Day. We got to see get through Mother's Day, but for the quarter we'll be slightly better than we were in Q3.

Speaker 7

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

Speaker 2

Thank you, Michael.

Operator

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

Speaker 8

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?

Speaker 8

What you've done differently with the Harry and David retail stores? And then while you're discussing retail, can you give us an early read on Long Island store?

Speaker 2

Sure. Happy to. My opinion is that when our hair was on fire at the beginning well, I shouldn't 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 could close our stores which sold a lot of perishable product. The decision was made to walk away from those.

Speaker 2

Now, if I with the benefit of 2020 hindsight that $50,000,000 or so of revenue that we walked away from, I'd still like to have because I'm a believer in a multi channel kind of approach. We all are. And so mistake, I'll admit to it that we made that mistake. We also shut it other retail plants 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, but now we're getting back to it.

Speaker 2

We'll do 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.

Speaker 2

We opened up the Harry and Davies store, which is a representation of several of our food group brands. We have a Schaffenberger section there. We have a big Cheryl section in there. It's a beautiful stage and retail permission. You can do retail and make a couple of bucks at it.

Speaker 2

It's free marketing because customers see your brand, they engage with you. And we if you remember, we acquired a very small company a couple of years ago called Alice's Table right before COVID, not good timing, didn't buy a live events company, but we've repurposed those assets and those relationships and under the Celebrations Experiences brand and you'll see at the Huntington store of Harry and David and one-eight hundred Flowers, you'll see Schaffenburger chocolates, you'll see Moose Munch, Vital Choice, our Harry and David brands, our new nut line from Beaver Creek under the Harry and David umbrella. All of them represented there and 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 and we have a section in front of store right upfront where you can see in the window and this is one of the most highly trafficked intersections on Long Island and all these cars driving by seeing all of these people taking classes in there day and night, we're building out a whole program there, all the different classes.

Speaker 2

So people come in, they interact, they have a great experience. We can make a couple of bucks with that and then they all get a little gift bag that they can walk around the store and fill it with all different kinds of items. Our Cheryl's Cooking product is our best selling item in that store right now. So we are and have been retailers for most of our fifty 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.

Speaker 2

And I believe that if we are deliberate about that it will play an important and meaningful role in our marketing schemesales going forward. But most especially, we get to interact one on one with our customers and they have a different sense of our brand when that happens.

Speaker 8

So this year, over the next, I don't know, eighteen 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?

Speaker 2

Tom, what do you think?

Speaker 5

Yes. We our plans are to have a handful of full year round stores as we test into those, maybe a little bit more, certainly over eighteen months more. Obviously, we're looking at high traffic locations. And then yes, we will continue to be doubling down on the seasonal stores also. I'd point out that one of the

Speaker 2

good hires that we've made in the last few months was fellow run our real estate efforts where it has a real deep retail knowledge and great contacts. And frankly, I was just chatting with him this morning about some of the opportunities he's under before. He's become a real asset very quickly, but he is he knows retail inside out and he's got us all jazzed about the opportunities. But don't tell him I said that in the last four weeks.

Speaker 8

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

Speaker 2

Thank you.

Operator

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.

Speaker 2

Well, it's been a pleasure to interact with you. I look forward to continue to do that, but I really look forward to Adafo being in

Speaker 3

the high school

Speaker 2

forward, because I'm excited about them being here. I'm excited about the new additions to the team that we've made lately. I'm getting out of Tom's way and bringing someone in that has a lot more to offer than I do. That's exciting for me. I think you can tell that we're disappointed in our performance of late.

Speaker 2

Some of it's macro, yes, but some of it's of our own doing. We have gone up to that and indeed we do. But I couldn't be more excited about what our future looks like with our Celebrations Wave initiative. This is the sixth wave for us. So five decades with six waves, starting with stores, then raising 800 number, then online, then social, mobile, conversational commerce.

Speaker 2

This one now is the most exciting for me because it comes closest to enabling us to be able to fill 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 and 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. So Adaho, I welcome you as well and congratulate you. I couldn't tell you how excited I am to have you in the helm of what I think is not a ship, but a rocket ship. Thank you.

Speaker 3

I agree with you Jim. And I'm super excited to be here. So looking forward to working with you guys. Thank you.

Operator

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

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Key Takeaways

  • The company announced its sixth wave of innovation, Celebrations Wave, and welcomed Adolfo Villagomez as CEO to spearhead a transformative long-term strategy.
  • Third quarter revenue declined 12.6% with an adjusted EBITDA loss of $34.9 million, as promotional pricing and $4.6 million in order-management system costs pressured margins.
  • Macro headwinds—falling consumer confidence, inflation and an estimated $55 million in tariff exposure—and internal missteps like COVID-era retail shutdowns and audit/system rollout issues hurt performance.
  • Celebrations Wave will build a sentiment-led ecosystem with a new app, content-rich website, revamped loyalty program and free/low-cost greeting cards to boost engagement, frequency and reduce customer acquisition costs.
  • Management targets about $40 million in annualized cost savings and plans to leverage AI-driven personalization and improved systems to drive efficiency and restore profitable growth.
A.I. generated. May contain errors.
Earnings Conference Call
1-800-FLOWERS.COM Q3 2025
00:00 / 00:00