1-800-FLOWERS.COM, Inc. Q2 FY2026 earnings call

• Holiday season operations were strong with improved systems after addressing last year's order management issues.
• Revenue was below expectations due to focus on marketing contribution margin and search engine changes impacting organic visibility and direct traffic.
• Simplified organization to a function-based structure to drive efficiency, reduce costs, and improve decision-making. Hired Alex Selikowski as Chief Information Officer.
• Improved marketing efficiency with better ad spend to sales ratio, though marketing contribution margin was impacted by holiday scale and direct traffic decline.
• Pop-up stores didn't meet return on invested capital expectations, so no additional pop-ups planned, but rethinking retail approach for a permanent store concept.
• Focus on Valentine's Day with disciplined marketing approach to execution, merchandising, and customer experience.

Consolidated revenue for the second quarter decreased by 9.5%. The Consumer Floral and Gift segment declined by 22.7%, and the BloomNet segment declined by 3.8%. Gross margin decreased 120 basis points to 42.1% compared with 43.3% in the prior year period. Operating expenses for the second quarter decreased $23.4 million to $221.1 million. Adjusted EBITDA for the second quarter was $98.1 million compared with $116.3 million in the prior year period. Cash balance was $193.3 million, inventory was $148.9 million, and borrowings under the revolver were fully repaid during the fiscal second quarter.

• Fiscal 2026 revenue expected to decline in the low double-digit range due to marketing focus and search engine impact on direct traffic.
• Adjusted EBITDA expected to decline slightly compared to prior year, but normalized basis expected to increase slightly excluding certain costs.
• Ongoing cost optimization and organizational streamlining efforts to offset top-line pressure.

• Impact of search engine result page changes on organic visibility and direct traffic.
• Volatility in marketing spend affecting revenue.
• Commodity cost pressures, including higher cocoa costs, impacting gross margin.
• Uncertain consumer behavior and economic conditions affecting sales.

Q: On the Consumer Floral and Gifts segment, was it mostly driven by PMOL?

A: James Langrock said PMOL was down more than floral, driven by inefficient marketing spend and pullback in marketing spend this quarter, improving ad spend ratio and contribution margin percentage.

Q: Any different behaviors from Passport members?

A: Adolfo Villagomez said passport members performed better than non-members, but loyalty program value proposition needs improvement.

Q: Thoughts on commodity price trends?

A: James Langrock said cocoa still elevated, but other commodities like eggs, butter, sugar starting to come down; improvement expected in back half if trends hold.

Q: Biggest swing factors for full-year performance?

A: James Langrock said cost savings initiatives and accelerating them, and Adolfo Villagomez mentioned best-in-class functional practices in merchandising and online improving conversion and growth in external marketplaces.

Q: Consumer behavior observation?

A: James Langrock said bifurcation in consumer spending with higher-end household income holding up better than lower-end.

Q: Capital allocation priorities?

A: James Langrock said priority on stabilizing performance, building capabilities, allocating capital to operational efficiencies, customer experience, and technology; disciplined approach with focus on turnaround.

Q: Consultant costs timeline?

A: James Langrock said consultant costs are front-loaded, expected to last through fiscal 2026 June and stop in fiscal 2027, totaling ~$11M this year in adjusted EBITDA.

Q: Valentine's Day impact and marketing strategy?

A: Adolfo Villagomez said merchandising and marketing strategy adjusted for Valentine's Day on Saturday, prepared to reverse trend.

Q: Order volumes and AOV?

A: James Langrock said AOV was up 5.2% and order volume was down about 16% for the quarter.

Q: Deterioration in floral vs food performance?

A: Adolfo Villagomez said impact of incremental marketing spend in 2025, food's B2B strength, and bifurcated consumer spending as factors.

Q: Learnings from pop-up stores?

A: Adolfo Villagomez said pop-up stores didn't meet return on invested capital, so not pursuing additional ones, but rethinking physical retail model for sustainable growth.