1 800 FLOWERS COM INC Q2 FY2025 earnings call

• Revenue decline was due to softer consumer demand, corporate gifting order reductions, and challenges with the new Harry & David OMS implementation during peak holiday season.
• OMS issues at Harry & David escalated during holiday peak, impacting revenue and earnings, with estimated $20M loss in e-commerce revenue and $4.8M impact on EBITDA.
• Adjusted operating expenses declined by $2.9M to $239M, continuing Work Smarter initiatives. Gross margin was 43.3%, flat year-over-year, affected by promotions and OMS incremental costs.
• Focus on relationship innovation initiatives to transform into a celebratory ecosystem, moving from transactional to experiential and personalized, leveraging technology for customer engagement.

Consolidated second quarter revenue declined 5.7%. E-commerce revenue declined 8.3% for the quarter, with an estimated $20 million impact from OMS issues. However, the wholesale gift basket business increased. Adjusting for the $20 million lost revenue, Q2 e-commerce revenue would have declined 5.6% and total revenue 3.2%. Gross margin was 43.3%, flat with prior year, and excluding OMS related costs, gross margin would have been 43.5%.

• Updated fiscal 2025 outlook: full year revenue expected to decline in the mid-single digits.
• Adjusted EBITDA expected in the range of $65 million to $75 million.
• Free cash flow expected in the range of $25 million to $35 million.

• Softer than anticipated consumer demand and corporate gifting order reductions.
• Challenges with the new Harry & David OMS implementation impacting revenue and earnings.
• Macro environment impacts on paycheck customers' discretionary spending.
• Tariff exposure affecting cost of goods sold, particularly from China and Colombia.

Q: How did consumer engagement shifts accelerate during the quarter?

A: James McCann noted the end of the COVID blip, with consumer demand showing some response to lower price points but more needed. Tom Hartnett mentioned bifurcation in customer segments with lower-income customers watching budgets.

Q: When was the Harry & David OMS initially put in place?

A: Implemented end of August to September, with issues surfacing during peak holiday season. Most issues expected to be resolved in current or Q3 quarter.

Q: How does the marketing strategy change relate to channels and content?

A: Thomas Hartnett said some bottom-of-funnel channels saw lower returns, with focus on mid and upper funnel, refining content and leveraging AI for personalization. James McCann emphasized technology investments for efficiency and growth.

Q: What's the outlook for corporate gifting?

A: James McCann said corporate gifting declined year-over-year, with weakness more significant on the corporate side. Thomas Hartnett was bullish on the corporate business, planning to retool offerings and marketing approach.

Q: What about tariff exposure and Colombia?

A: James McCann and James Langrock discussed tariff impacts on cost of goods sold, with significant exposure to China and concern over Colombia's role in flower supply, which is crucial for the industry.