1-800-FLOWERS.COM(FLWS) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the second quarter decreased by 9.5% compared to the prior year, driven by a decline in e-commerce revenue and a strategic shift towards more efficient marketing spending [10][12] - Gross margin decreased by 120 basis points to 42.1%, primarily due to lower fixed cost absorption, higher commodity costs, and tariffs [12] - Adjusted EBITDA for the second quarter was $98.1 million, down from $116.3 million in the prior year [14] Business Line Data and Key Metrics Changes - Consumer Floral and Gifts segment saw a decline of 22.7%, Gourmet Foods and Gift Baskets segment declined by 3.8%, and BloomNet segment declined by 3.1% [12] - The decline in the Consumer Floral segment was attributed to inefficient marketing spend and a strategic focus on improving marketing contribution margin [18][36] Market Data and Key Metrics Changes - The company noted a decline in direct traffic during the holiday period, which was partially offset by stronger performance in B2B and wholesale businesses [4] - The food business, particularly Harry & David, performed better than the floral segment, benefiting from a more disciplined marketing approach and exposure to B2B [36][52] Company Strategy and Development Direction - The company is transitioning to a function-based operating structure to improve efficiency, accountability, and collaboration [5] - A focus on improving marketing contribution margin and reducing unprofitable initiatives is expected to build a more sustainable demand generation model [7][8] - The company plans to redesign its retail approach based on insights gained from pop-up store tests, moving towards a full-year store concept [7][8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the holiday season operations were strong, but revenue came in below expectations due to changes in search engine results and a decline in direct traffic [4] - The company expects revenue to decline in the low double-digit range for the second half of fiscal 2026, reflecting ongoing marketing strategy adjustments and tougher comparisons [15] - Management remains optimistic about future growth, citing improvements in marketing efficiency and product discoverability [9][41] Other Important Information - The company achieved approximately $15 million in annualized run-rate cost savings for fiscal 2026, with a target of $50 million in total cost savings across fiscal 2026 and 2027 [11] - The company is focused on stabilizing performance and building capabilities for sustainable growth, with capital allocation prioritized towards operational efficiencies and customer experience improvements [44] Q&A Session Summary Question: What drove the decline in the consumer floral and gift segment? - The decline was primarily driven by inefficient marketing spend, particularly in PMOL, which was impacted more than the flowers business [18] Question: How are Passport members performing compared to non-members? - Passport members continue to perform better than non-members, but feedback indicates the loyalty program's value proposition needs improvement [23] Question: Which segments are expected to perform better in the second half of the year? - The performance is expected to be consistent across segments, with a mixed shift towards the flowers business being more significant in the second half [25] Question: What are the trends in commodity prices? - Cocoa prices remain elevated, while other commodities like eggs, butter, and sugar are stabilizing and should not be a headwind in the back half of the year [37] Question: What are the biggest factors impacting full-year performance? - The focus is on cost savings initiatives and potential upside on the top line, with cost savings being a controllable factor [39] Question: How is the company approaching capital allocation? - The current priority is on stabilizing performance and building capabilities for sustainable growth, with a disciplined approach to capital allocation [44]