1-800-Flowers.Com Inc Q3 2025 Earnings Call Transcript

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

Question: Anthony Lebiedzinski - Sidoti & Company - Analyst : Welcome on board, Adolfo, look forward to working with you. So first, I know, Jim, you touched on this a little bit, 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. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Outgoing Chief Executive Officer 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. The Easter shift, of course, does make a difference. That's why we always suggest that we be viewed as a 2-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 for 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. James? James Langrock - 1-800-Flowers.Com Inc - Chief Financial Officer So Anthony, with the Easter shift, revenue was down -- reported revenue was down 12.6%. But if you adjust for the Easter shift, it 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. 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. Okay. And then in terms of the system implementation issues, so I know you called out like around a $4.6 million 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? James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Outgoing Chief Executive Officer 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. So by the end of this fiscal year, the end of June, we'll be through that cleanup. But it was mishandled by us in every way imaginable. And yes, there's the raw data on that. But what I'm concerned about most is we disappointed a lot of customers on the Harry & 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. 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 for 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. 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? James Langrock - 1-800-Flowers.Com Inc - Chief Financial Officer 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 2025. 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. 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. And then you have the incremental cost in margin was about $4.6 million, Anthony. So the cost over the two quarters was close to $11 million of cost -- incremental cost on the implementation of OMS. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Outgoing Chief Executive Officer And then the inventory comes. James Langrock - 1-800-Flowers.Com Inc - Chief Financial Officer Yes, which included the inventory write-offs. 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 : Right. And my last question before I pass it on to others. So looking at the Celebrations Wave program, it is a multiyear initiative, as you called out. Maybe if you could just kind of talk about the time line. 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? What's kind of going to be more on the back burner, so to speak? James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Outgoing Chief Executive Officer 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 that we provide our customers. So that's on the internal facing, 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

Question: Michael Kupinski - NOBLE Capital Markets - Analyst : I welcome Adolfo as well. A couple of questions. So 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? Can you just kind of add some color to what we had seen prior to this particular quarter related to the customers themselves? Thomas Hartnett - 1-800-Flowers.Com Inc - President Michael, it's Tom. Yes, I think it continued the trend with the macroeconomic 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 and losing the buying right now is with those customers that are most challenged and struggling. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Outgoing Chief Executive Officer 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 has taken those lower price points out, which has artificially propped up our average order value.

Question: Michael Kupinski - NOBLE Capital Markets - Analyst : 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 kind of 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. James Langrock - 1-800-Flowers.Com Inc - Chief Financial Officer Yes. So when we said wholesale, Michael, that's including the Napco and BloomNet side of it. Napco is a big piece of it, the wholesale. So that was when we said wholesale, that did include the Napco, BloomNet wholesale business as well as the Food wholesale business. 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: Michael Kupinski - NOBLE Capital Markets - Analyst : 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. James Langrock - 1-800-Flowers.Com Inc - Chief Financial Officer 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 that's 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.

Question: Douglas Lane - Water Tower Research - Analyst : Jim, I think in your earlier comments, you mentioned that exiting retail during the pandemic was a mistake. Can you elaborate on that? What you've done differently with the Harry & David retail stores? And then while you're discussing retail, can you give us an early read on Long Island store? James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Outgoing Chief Executive Officer Sure. Happy to. My opinion is that when our hair was on fire at the beginning -- well, I should have make jokes. When things were 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'd close our stores, which sold a lot of perishable product, the decision was made to walk away from those. Now if I -- with the benefit of 2020 hindsight, that $50 million or so of revenue that we walked away from, I'd still like to have because I'm a believer in a multichannel kind of approach, we all are. And so mistake, I'll admit to it that we made that mistake. We also shut at other retail plans 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 still have the other experiments we had going on in retail, but now we're getting back to it. 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. We opened up the Harry & David store, which is a representation of several of our food group brands. We have a Scharffen Berger section in there. We have a big Cheryl's section in there. 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: Douglas Lane - Water Tower Research - Analyst : So this year, over the next, I don't know, 12, 18 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? James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Outgoing Chief Executive Officer Tom, what do you think? Thomas Hartnett - 1-800-Flowers.Com Inc - President 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 18 months more. And obviously, we're looking at high-traffic locations. And then yes, we will continue to be doubling down on the seasonal stores also. James Mccann - 1-800-Flowers.Com Inc - Executive Chairman of the Board, Founder, Outgoing Chief Executive Officer I'd point out that one of the good hires that we've made in the last few months was to run our real estate efforts for us 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 [unlocking] for us. He's become a real asset very quickly, but he is -- he knows retail inside out, and he's got us little jazzed about the opportunities. But don't tell them I said that (inaudible).