• Revenue Decline: 5.7% decrease in consolidated second quarter revenue.
• E-commerce Revenue Decline: 8.3% decrease in e-commerce business for the quarter.
• Average Order Value (AOV): Declined 1.2% for the quarter.
• Gross Margin: 43.3%, flat compared to the prior year.
• Adjusted Operating Expenses: Decreased by $2.9 million to $239 million.
• Adjusted EBITDA: $116.3 million, down from $130.1 million in the prior year period.
• Net Cash: $87 million, compared to $117 million at the end of last year's second quarter.
• Cash Balance: $247 million at the end of the second quarter.
• Inventory: Declined to $157 million from $161 million at the end of last year's second quarter.
• Term Debt: $160 million, with no borrowings under the revolving credit facility.
• Fiscal Year Revenue Guidance: Expected to decline in the mid-single digits.
• Adjusted EBITDA Guidance: Expected to be in the range of $65 million to $75 million.
• Free Cash Flow Guidance: Expected to be in the range of $25 million to $35 million.

• Warning! GuruFocus has detected 6 Warning Signs with FLWS.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• 1-800-Flowers.com Inc (NASDAQ:FLWS) successfully delivered over 7 million orders during the holiday season, demonstrating operational capability despite challenges.
• The company has made progress in its relationship innovation initiatives, focusing on enhancing customer engagement and satisfaction.
• 1-800-Flowers.com Inc (NASDAQ:FLWS) is leveraging new technology to enhance customer engagement and build deeper relationships, aiming to transform into a comprehensive celebratory ecosystem.
• The company is focusing on expanding its customer base and sees significant opportunities to leverage AI for personalized marketing experiences.
• 1-800-Flowers.com Inc (NASDAQ:FLWS) has a strong balance sheet, allowing potential for strategic M&A activities to enhance growth.

Negative Points

• The company's second quarter revenue declined by 5.7%, impacted by softer consumer demand and reduced corporate gifting orders.
• Implementation challenges with the new Harry and David Order Management System (OMS) negatively affected revenue and earnings, causing order cancellations and additional expenses.
• Increased marketing spend did not yield anticipated results due to changes in the online marketing environment, impacting marketing efficiency.
• The Average Order Value (AOV) declined by 1.2% for the quarter, reflecting cautious spending by corporate business partners.
• The company's e-commerce business declined by 8.3% for the quarter, with OMS-related issues reducing Q2 e-commerce revenue by approximately $20 million.

Q & A Highlights

Q: How have consumer engagement patterns changed post-pandemic, and did these shifts accelerate during the quarter? A: Andy Milevoj, Senior Vice President of Investor Relations, noted that the company is seeing the end of the "COVID bullwhip," where demand surged during the pandemic. Consumer demand has eased, and the company is introducing lower price points to attract customers. Tom Hartnett, President, added that lower-income customers are watching their budgets closely, and the company has seen positive responses to new product introductions at lower prices.

Q: What were the issues with the new order management system, and when will it be fully functional? A: James McCann, CEO, explained that the system was implemented in late August but faced challenges during the holiday peak, causing order backlogs and cancellations. The company expects most issues to be resolved in the current quarter, with full functionality anticipated by the end of the fiscal year. Tom Hartnett added that while some challenges remain, they are manageable and not customer-facing.

Q: How is the company approaching Valentine's Day marketing, especially with the Super Bowl timing? A: James McCann highlighted that Valentine's Day falls on a Friday this year, which is favorable for sales. The company plans to engage customers early, offering incentives to place orders before the Super Bowl. Tom Hartnett mentioned that the extra days between the Super Bowl and Valentine's Day will help capture both early planners and last-minute shoppers.

Q: What is the outlook for the corporate gifting business, and how does it compare to pre-pandemic levels? A: Thomas Hartnett stated that corporate gifting was down 17.5% year-over-year, with reduced average order values and fewer orders. However, the company remains optimistic about the segment, planning to retool offerings and enhance year-round engagement with corporate clients.

Q: How is the company addressing marketing strategy changes, and what impact do you expect from AI? A: Thomas Hartnett noted changes in search engine rankings affected low-cost channels, prompting a shift to mid and upper funnel channels. The company is refining content to be more relevant and expects AI to improve content creation efficiency. James McCann emphasized that technology investments will enhance both cost efficiency and revenue generation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.