1-800-Flowers.Com Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : Good morning everyone. Thank you for taking the question. So first, I guess, sort of a kind of a bigger picture type of question here. So obviously after the pandemic, we've seen changing patterns in consumer engagement. Do you feel like these shifts in the consumer engagement actually accelerated during the quarter? Or is it just kind of more of the same that you saw here in the December quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : Got you. And then as far as the issues with the order of management system, when was this initially put in place. And as far as getting this system to work as it should be, what's the time frame as to when you would expect to be, 100% fully functional as the system was designed to be. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer Hi Anthony, this is James. So we implemented the system at the end of August into September. We did all of the, necessary user acceptance testing. We did regression analysis simulation testing to simulate the peak of the busy season. So like with any system implementation, there's going to be some issues along the way. But what happened as we, got into the peak of the busy season after Thanksgiving, the surge of that and with some of the complex orders in the system, they were getting put on hold and it was creating a real backlog. So a lot of orders were being put on hold and you know, or cancelled because of that, we had manual workarounds on that. So it kind of showed itself in the peak in December the issue. We're working through that now it really.

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : So while we're doing the fixes on the OMS system for Harry and David and the food group, the, it doesn't cause the customer any difficulty because we have the bandwidth to deal with as we fix the last of the issues. So for the customers that cancel their orders because of these issues, do you plan to do a specific marketing outreach to them to make sure you don't lose those customers permanently? I was just wondering how you're thinking about that from a marketing perspective. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer Yeah, absolutely. We've reached out already to those customers. We plan and we have a win back program going on. We're extremely focused that will go on throughout the year. There'll be multiple touch points with those customers throughout the year. It is extremely important to us. In some cases, we did lose the trust of some of those customers that we fail. We take that very seriously and we're working to regain their trust.

Question: Alex Fuhrman - Craig-Hallum Capital Group LLC - Analyst : Hey, guys, thanks very much for taking my question. Looking out over the next couple of weeks, it looks like a little bit of a better placement for Valentine's Day relative to the Super Bowl this year. Can you talk about how you're going to go after Valentine's Day this year? I know it's been challenging. The last couple of years since the Super Bowl moved a week later, are there maybe opportunities to engage with customers before the Super Bowl or maybe be hyper engaged during that couple of days between the Super Bowl and Valentine's Day? Just curious what you've learned and how that's going to impact your strategy this year? James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer Thanks for your question. And in answer to your the day placement question, we're pleased that the day moves to a Friday this year. It's the best day placement from a sales point of view for us. And yes, thank you for using your influence to move the Super Bowl date. That's very helpful too because last year it was two days before Valentine's day. So that that was a crusher for us in terms of attention distraction. So yes, having five big selling days post Super Bowl is critical for us for the holiday. So we have a marketing scheme in place to reach out to customers. Well, before EMPS giving them a lot of incentives to place their orders early in the cycle. So we have a two week selling period and right in the middle of that is Super Bowl. So again, that's so much better than last year where it was just before Super Super Bowl was just before Valentine's day. So good day placement. I also point out that Easter is a better place than last year. Easter was at the very beginning of the fourth quarter last year. So a couple of selling days in the third quarter and when it's early, it retards the appeal and the sales of Easter because it comes up so early on people. So having it later in April in the in the April 20, I think it is a great selling time for us. So not the biggest of holidays, but an important holiday REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Alex Fuhrman - Craig-Hallum Capital Group LLC - Analyst : Okay, that's really helpful. Thanks. And then, if I could just ask quickly on corporate gifting, it sounds like the decline, there was a little bit self inflicted, a little bit demand. Can you just help to kind of, give us a little bit more historical context. How big is your corporate gifting business today compared to what it was before the pandemic? And what's your kind of outlook there for the next couple of years? Thomas Hartnett - 1-800-Flowers.Com Inc - President So just this year was around $70 million compared to last year of $84 million. So it was down almost $15 million or 17.5% on a year-over-year basis. And it was higher, obviously coming out of the pandemic. So it was obviously much bigger than the decline in e-commerce was the corporate sales. We did see the our corporate customers, reduce their, reduced their spend, so the AOV was down and they reduced the item per order that let you know, and also less orders. So we were obviously looking at that very closely, some of it was impacted by the RMS. We're trying get to the bottom but we definitely did see weakness in our corporate consumer more more than our, consumer on the corporate side was obviously, much more, significant as a percentage decline. Just to add Alex. We are bullish about the corporate business. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer We have some hotspots in the corporate business on lower price point items across the enterprise. Thomas Hartnett - 1-800-Flowers.Com Inc - President We have to retool some of our offerings but. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer And how we and how we go to market, how we, how we staff our teams on the marketing and stay engaged more year round because we have the breadth of product offerings now that certain year round. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Alex Fuhrman - Craig-Hallum Capital Group LLC - Analyst : Okay, guys, that's really helpful.

Question: Michael Kupinski - Noble Financial Capital Market - Analyst : Thanks for taking my questions and good morning. In terms of the marketing strategy you talked about, I was just wondering in some of the issues that you have with marketing. I was wondering it was more the content and message or related to maybe some of the channels you were using and just getting a lower return. I was just wondering as you kind of look forward in terms of the marketing strategy, what types of changes are you anticipating at this point? Thomas Hartnett - 1-800-Flowers.Com Inc - President I think there were some specific changes in some of our bottom of the funnel channels where our the search engine results page changes some of the ranking that really hit us in kind of natural search in branded search where those were a very low cost channels for us and and those those declined more than expected. As we go forward, we continue to to push more in the mid and upper funnel channels, etcetera. And we think we continue to obviously refine our content and we find our content to be more relevant to individual segments of our customers. So we think we continue to make strong strides there. And we're hopeful that, you hear the AI term used a lot, but we're hopeful that, we'll see in the increased efficiency with our ability to create content that that larger scale. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer Michael, what we're seeing with the technology deployments that we're and by the way, we don't fail to notice the irony of we had a technology fail in terms of an implementation, not the technology itself but the anticipation of how the demand would impact it yet. We're full speed ahead on other technology investments and that manifests itself in two different ways. One is on the cost side, we're able to operate more efficiently by digitizing so many more of the things that we do and it impacts us and we certainly anticipate that it will impact us on the marketing side too as we employ more tools and capabilities there. So we expect it to do two things, especially beginning this these next two quarters in front of us. And then throughout the rest of this calendar year, we see this calendar year is a big year for us in terms of changing things we do on the cost side and changing how we do things that will generate more revenue on the top line side. And these new digital tools are really, really intended to impact us in both ways on the growth side and on the cost side.

Question: Michael Kupinski - Noble Financial Capital Market - Analyst : Got you and typically you guys in periods like this, which has been challenged for some ecommerce type companies and things like that, you kind of stepped on the M&A activity and was just wondering if you can just kind of gauge what the M&A level might be at this point. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer I think those of so many of us who are in the consumer facing ecommerce, almost exclusive, but not 100% exclusive e-commerce have all felt similar drains. So that creates a strain for us. Yes, but because of the good balance sheet we have and the leverageable assets we have. I would tell you that the tenor of people interested in linking up is increased, whether or not we actually do anything there is to be determined. But I think the opportunities will be quite a bit better than they've been in the last couple of years. So if we find the right opportunity and we think it's accretive to what we do helps our customer in a better way, I think you'll see us have the potential to be more active in the quarters ahead.

Question: Linda Bolton - D. A. Davidson & Co - Analyst : So just a clarification if you would on the Valentine's Day placement, maybe I'm confused but I always thought that when Valentine's Day is in the middle of the week, it's better because then the guys will be placing orders they have delivered to, women's offices, etcetera. And I thought if it REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Linda Bolton - D. A. Davidson & Co - Analyst : Thanks for that explanation. And then just to be clear because I'm not kind of talked about still some fixit actions coming in the next few quarters for Valentine's day on the food side, will the issues be all fixed or not? I know the flower side is much bigger but will the issues be completely fixed on the food side for Valentine's Day or not really. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer On the food side, we are expecting the majority of those to be fixed. But as Jim had mentioned, if there are still remaining challenges, there won't be customer facing issues. We have the resources internally to make sure anything that does get, bogged down in the system. If you will, we can address it to manual intervention and you know that the and it will not have any impact on demand. Thomas Hartnett - 1-800-Flowers.Com Inc - President And Linda, obviously we're extremely disappointed with the challenges from the OMS system. But I just want to remind everyone that we shipped over, he delivered over $7 million orders in Q4. So while we did have some issues, we still got the lion's share of all the orders were delivered to our customers and KHO, right. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer We won't have that same kind of demand in the food group. So if there are any things that are unresolved but manageable with our existing processes, so to get to 100% with the new system is working the way we want, that's by the end of the fourth fiscal quarter of the spring quarter, but it won't be anything that's not resolved, will not be noticeable to the customers. And that's because what demand is good. It's not nearly as high as those couple of last couple of weeks of December in the food group. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Linda Bolton - D. A. Davidson & Co - Analyst : Okay, understood. And then finally, I was just curious about, you talked about your efficiency of your marketing costs then, but I was wondering in general about, about rates for digital spending, digital marketing cost rates. They were expected to go lower postelection. Is that what you found general in the more macro marketing environment? There was a pullback in rates after the election. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer I'd say certainly compared to before the election, compared to after there rates were more reasonable. Overall, if we compare it to kind of the prior year, we did see increased costs in the lower portion of the funnel that we advertised. So a lower portion.

Question: Linda Bolton - D. A. Davidson & Co - Analyst : And then just one last one, just if you could review your tariff exposure, you've probably got some on the PMA side and also some of your baskets and stuff. Could you review what the plan is there? James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer It's an ever changing landscape, Linda, this is Jim. We had a little jolt to our cardiac systems earlier in the week. When Colombia was threatened with tariffs. Colombia is an important market for us. On the floral side of things, they grow a lot of product that we use here in the US. So we were very happy. A couple of days later to see that resolved, but we'll never get that sleeve back, but perhaps something much James, how do you give us some context again to Linda about how, how our sourcing materials where they come from and how they be exposed to. Thomas Hartnett - 1-800-Flowers.Com Inc - President So Linda, just a little way of context. If you look at our cost of goods sold approximately a billion dollars, on an annual basis, our cost of goods sold within that roughly 40% of that is comprised of the cost of merchant of merchandise. And within that, it's about 10% of that would be China. So we're talking about there's, 40 $45 million of purchases from China. So clearly, the tariff will have an impact but it's off of a base, of a billion dollars of cost of goods sold. So, we're looking at it, we're up cost of goods sold a billion dollars, $40 million & $45 million of exposure to Asia. And so that's what we'd be watching. So we don't want to see any increase in cost, but any increase in cost would be of that $40 million $45 million for China specifically.

Question: Doug Lane - Water Tower Research - Analyst : Hi, good morning, everybody. Just to follow up on Linda's question, what would you have done if terrorists had been enacted in Colombia? James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer We would have postponed this call to see what the impact would be. That would have been, that would have been painful because we rely on Columbia and other joining markets for a good supply of our product here. So the good news is we don't have to dust off that plan and it seems has been completely resolved, but it would have been damaging. So I don't, I don't have a hard answer for you. Doug, we're just glad we don't have to answer that.

Question: Doug Lane - Water Tower Research - Analyst : Is Colombia that important or could you shift of supplies to other countries in case it's just an isolated incident? James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer No, it's that important to us. It's a when I say us, it's the whole country, the whole industry is is dependent on Colombia probably for 50% to 60% of all the fresh flour product grown and grown and sold in this country. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Doug Lane - Water Tower Research - Analyst : Wow. So everybody would be in the same boat. That's helpful and just to be in the boat because we don't want to be in that boat. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer No, but that is not good for anybody. I get that just to shift gears on the wholesale business because you hit on the first quarter. Call that wholesale is going to be good. This year and frankly, it was a lot better than I thought it was going to be. So, it's a bit of a reversal from recent trends where ecommerce has been outperforming wholesale and now you have ecommerce down in the mid to high single digits depending upon your adjustments and the wholesale was up strongly in the 10s. So that's a big shift. I just wondered if you could talk a little bit more about that shift and whether you think that's something that's going to continue or will ecommerce revert back out before in wholesale. Thomas Hartnett - 1-800-Flowers.Com Inc - President Doug. What we think on that is it's counter counter indicative. In other words, wholesale is up because retail in store traffic was better. So that's where that product is sold. So that shows you that the customer felt comfortable going out and about and shopping in the retail store which took away from the shopping on e-commerce. So that's going to be a counterbalance to the e-commerce hit when however, going forward, we expect wholesale to stay stronger because we've cultivated new relationships in the wholesale channels this year. So we'll have a broader base of customers in the years ahead. So we expect that it won't be counter in indicative of the e-commerce pressure. We saw, we expect both to go up next year. We're anticipating and, and I hope we haven't built the plan yet. But on the wholesale side, we have a broader wholesale customer base. So we'd expect that will continue to look good because of the breadth of customers and a product products, frankly that we've introduced there, that was so successful in the retail stores this year.

Question: Doug Lane - Water Tower Research - Analyst : So like the mass merchants or the club stores in particular or I take it it's the large chains and not the mom and pops. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Chief Executive Officer That's right.