1-800 FLOWERS.COM Q3 Earnings Call Highlights

Key Points

• Management says Q3 reflected meaningful operational progress — a “significantly improved customer experience” at Valentine’s Day, AI-driven call‑center and site merchandising changes that are already lifting conversion and post‑purchase satisfaction.
• The company hit its target of $50 million in cost savings in under a year, reduced core headcount by about 20%, and is pursuing an additional $15–20 million of run‑rate savings while consultant costs are expected to roll off at the end of June.
• Consolidated revenue declined 11.6% in Q3 (Consumer Floral down 18.7%), adjusted EBITDA loss narrowed to $31.2 million, and management expects fiscal 2026 revenue to fall roughly 10–12% with adjusted EBITDA about break‑even (±$2M); a non‑cash impairment hit earnings but not cash flow.

1-800 FLOWERS.COM NASDAQ: FLWS executives said the company’s fiscal 2026 third quarter reflected continued progress in a multi-quarter effort to stabilize the business, improve execution, and rebuild capabilities that can support longer-term growth. Management highlighted a stronger customer experience around Valentine’s Day, accelerating cost savings, and a shift toward more balanced marketing investments beginning in the fourth quarter.

Valentine’s Day execution and customer experience improvements

Chief Executive Officer Adolfo Villagomez described Valentine’s Day as an “important indicator” of progress, saying the company delivered a “significantly improved customer experience with strong gains across our key service metrics.” While he did not provide specific metric values, Villagomez cited improvements in post-purchase satisfaction and customer service efficiency.

In response to an analyst question on what improved, Villagomez said the company’s “post-purchase experience has significantly improved,” adding that customer satisfaction increased and “our calls to the call center declined on a per order basis.” He also said the company is using AI in its call center to improve productivity “with a better customer experience.”

Villagomez cautioned that while lessons from Valentine’s Day are being applied to Mother’s Day, the short time between the holidays limits how much can change operationally due to advance flower purchasing needs. “Mother’s Day, it’s going to do better across those metrics, but don’t expect the full performance impact just yet,” he said.

Digital, assortment, and AI-driven changes

Management emphasized that changes to digital merchandising and product presentation are central to improving conversion and aligning the assortment with customer preferences. Villagomez said the company “fully implemented AI-powered sorting and ranking on 1-800-Flowers.com” during the quarter, shifting product placement to reflect customer-selected best sellers rather than merchant-driven decisions.

On the call, he said the change is already helping: “Number one, conversion is improving.” He added that the company is learning more about what customers want and what they are “willing to pay,” including preferences by flower type as well as delivery method and delivery fees.

Villagomez also discussed changes to how the floral business coordinates florist-fulfilled orders and direct-to-consumer shipments from distribution centers. He said the teams are now working together on assortment decisions, which management believes can simplify the shopping experience, improve conversion, and better align pricing for similar bouquets. He also noted the company has been “reducing choice in certain areas” to make it easier for customers to find the right gift.

Marketing strategy shifts and competitive dynamics

Chief Financial Officer James Langrock said third-quarter revenue came in line with expectations, reflecting the company’s “disciplined marketing approach” as well as continued pressure from “changes in search engine results and pressure on direct traffic.” He said Valentine’s Day performance was consistent with expectations, noting the holiday fell on a Saturday and during President’s Day weekend.

Villagomez said the company is moving away from an approach that relied heavily on bottom-of-the-funnel transaction marketing, arguing it did not build brand awareness or retention capabilities. He cited an example from the prior year of marketing inefficiency in floral: “We were buying transactions for $40 and making $20 margin on each transaction,” adding that the model only works if customers are retained.

Over the past nine months, management said it has built more capability to support retention and measurement, enabling more top- and mid-funnel testing. Villagomez said experiments with “podcasts, TikTok, Instagram” have seen “huge success” and will be expanded. Both Villagomez and Langrock said the company expects total marketing spend in the fourth quarter as a percentage of sales to be approximately flat year-over-year, even as mix shifts toward brand and demand generation efforts that may take time to translate into revenue.

Asked whether marketing pullbacks have opened the door to competitors, Villagomez said the category remains highly competitive, particularly around major gifting holidays. “Google makes it very easy for anybody just to buy other people’s brands,” he said, adding that focusing only on buying clicks can drive customer acquisition costs higher. He said the company is leaning into brand-building and improving the digital experience and retention capabilities as a differentiator.

Cost savings progress, reinvestment plans, and margins

Management said the company achieved its previously announced $50 million cost savings target—originally set across fiscal 2026 and fiscal 2027—in less than a year. Villagomez said the milestone strengthens the company’s ability to reinvest while continuing to improve efficiency. He also said that since January 2025, the company has reduced core headcount by approximately 20% as part of a transition to a function-driven operating model.

Langrock said the $50 million in savings is “probably split equally between cost of goods sold and SG&A.” He added that near-term benefits are partially offset by consultant costs, incentive compensation, tariffs, and commodity costs. The company said it expects consultant costs to roll off at the end of June, with Langrock stating, “we will not have that starting July 1st.”

Building on the initial savings, Langrock said the company is targeting an additional $15 million to $20 million in run-rate cost savings over the next fiscal year, bringing total identified savings opportunities to approximately $65 million to $70 million across cost of goods sold and operating expense reductions.

In a discussion of margin dynamics, Langrock said the company is seeing “much more pricing discipline” and “more targeted promotional activity,” including reduced discounting, which management believes is improving “overall margin quality.” He noted some commodity relief in areas such as “butter, flour, and eggs” year-over-year, while cocoa remains elevated. He also referenced fuel surcharges affecting outbound shipping as oil prices rose, while inbound transportation is protected by contracts “for the remainder of the year.”

Quarterly results, impairment charge, balance sheet, and outlook

Langrock reported consolidated revenue declined 11.6% in the fiscal third quarter. By segment:

• Gourmet Foods & Gift Baskets: essentially flat, benefiting from an approximate 5% revenue lift from Easter timing
• Consumer Floral & Gifts: down 18.7%
• BloomNet: down 5.9%

He also noted the company recorded a non-cash goodwill and trade name impairment charge related to the Consumer Floral & Gifts segment and the Personalization Mall trade name, which impacted earnings but “did not affect cash flow.”

Gross margin improved 10 basis points to 33.2%, excluding prior-year system-related issues, with benefits from cost reductions partially offset by tariffs, commodity costs, and fixed-cost absorption. Operating expenses declined $16.4 million year-over-year to $144.3 million, excluding items affecting comparability and the impact of the company’s non-qualified deferred compensation plan in both periods. Adjusted EBITDA loss was $31.2 million versus an adjusted EBITDA loss of $34.9 million in the prior-year period.

On the balance sheet, Langrock said net debt was $94.3 million at quarter end compared with $75.3 million a year ago. Cash was $51 million, inventory was $146 million versus $160 million a year ago, and term debt was $145 million with no borrowings under the revolving credit facility, compared with $160 million a year ago.

For fiscal 2026, management reiterated expectations for revenue to decline approximately 10% to 12% year-over-year and adjusted EBITDA to be approximately break-even within a range of ±$2 million. Langrock said the outlook includes approximately $22 million of anticipated incentive compensation and consultant costs during the fiscal year, including about $12 million to $13 million in consultant costs.

Looking further out, executives did not provide fiscal 2027 guidance, though Langrock said the company believes that “longer term” it can return to historical growth rates referenced by an analyst. Villagomez characterized the turnaround as a sequencing process, noting that when he joined the company, it was declining at “20%+” and that management is now seeing “positive days and those positive weeks in businesses.”

About 1-800 FLOWERS.COM NASDAQ: FLWS

1-800-FLOWERS.COM, Inc, founded in 1976 by Jim McCann and headquartered in Jericho, New York, is a leading floral and gift retailer in North America. Operating primarily through its online platform and call center, the company offers a wide selection of fresh-cut flowers, gourmet foods, gift baskets, plants and home décor items. With a network of affiliated florists and its own floral production farms, 1-800-FLOWERS.COM facilitates same-day delivery services across the United States, reaching more than 90% of U.S.

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