1-800-FLOWERS.COM's 2025 Q4: Contradictions Emerge on Marketing Efficiency, Retail Expansion, Competitive Strategies, and Tariff Impacts

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 04, 2025

Financials Results

• Revenue: Q4 down 6.7% YOY; FY down 8% YOY
• Gross Margin: Q4 35.5%, down 290 bps YOY (38.4% prior); FY ex-OMS 39.1%, down 100 bps

Guidance:

• Fiscal 2026 is a foundation-setting year focused on long-term growth.
• ~$40M annualized cost savings plan; $17M implemented; external consultant engaged.
• Shift marketing to full-funnel with variable contribution margin discipline.
• CapEx expected slightly down vs last year; includes retail pilots for Harry & David and Things Remembered.
• Expand beyond e-commerce: pop-ups (3 Macy’s, 5 H&D mall, 1 TR), marketplaces, and on-demand delivery.
• OMS issues resolved; customer care redundancies added for resilience.
• Commodities improving except cocoa; tariffs currently a ~$15M headwind under the present structure.

Business Commentary:

• Revenue Decline and Customer Acquisition Challenges:
• 1-800-FLOWERS.COM's consolidated revenue declined 6.7% in Q4 and 8% for the fiscal year-end.

• This was due to a 5.6% decrease in transactions and a 1.6% decrease in AOV, exacerbated by an evolving customer acquisition landscape and inefficiencies in marketing spend.

• Operational Efficiency and Cost Reduction:

• The company implemented a cost reduction plan to achieve $40 million in annualized savings, with $17 million already realized.

• This initiative aims to address fixed overhead costs, resolve OMS system issues, and optimize marketing spend to change the trajectory of the business.

• Marketing Strategy and Customer Engagement:

• A focus on variable contribution margin and shifting towards a full-funnel marketing approach was implemented to improve efficiency and effectiveness.

• The strategy aims to increase brand awareness, drive demand, and enhance customer retention, especially for multi-branded customers and Passport members who represent high-performing segments.

• Consumer Behavior and Channel Expansion:

• The company is expanding beyond e-commerce sites, focusing on self-consumption products, and exploring physical retail stores, digital marketplaces, and on-demand delivery platforms.

• This shift is driven by evolving consumer behaviors and the need to offer products where customers are already buying, with the goal of increasing sales and market share.

• Commodity Prices and Tariff Impacts:

• While cocoa prices remain elevated, other commodities have started to revert to their mean, improving the company's cost position.
• However, the company continues to face a $15 million tariff headwind, which has been reduced from the initial $55 million impact but remains a challenge.

Sentiment Analysis:

• Management said, “Our performance this quarter is disappointing.” Q4 revenue declined 6.7% YOY and the top line “remained pressured.” Gross margin fell 290 bps to 35.5% (vs 38.4% prior). Adjusted EBITDA loss widened to $24.2M from a $8.8M loss. Full-year revenue declined 8%.

Q&A:

• Question from Michael Kupinski (NOBLE Capital Markets, Inc.): Is ineffective marketing due to tech shifts like AI/voice search and declining Google search traffic?
  Response: They are pivoting from search-heavy, bottom-of-funnel spend to a full-funnel approach focused on variable contribution margin and broader channels beyond search.

• Question from Michael Kupinski (NOBLE Capital Markets, Inc.): What’s driving competition in Consumer Floral—any bad actors?
  Response: Competition is broad; they’re expanding distribution to where customers shop (delivery platforms, marketplaces, retail) and decoupling products, brands, and channels to increase agility.

• Question from Michael Kupinski (NOBLE Capital Markets, Inc.): Have commodity prices normalized, and outlook for cocoa?
  Response: Most commodities are reverting toward normal; cocoa remains elevated. Tariffs are a ~$15M headwind under the current structure (down from ~$55M previously).

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): Holiday sales (Easter/Mother’s Day) vs everyday gifting—any differences?
  Response: Mother’s Day was down YOY but in line with forecasts; they pulled back on unprofitable marketing to protect variable contribution margin.

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): Timing and low-hanging fruit for the new strategy?
  Response: FY26 is a transition year: near-term focus on costs, OMS fix, and marketing ROI; investing in assortment, retention “flywheel,” and AI-driven product discoverability.

• Question from Anthony Lebiedzinski (Sidoti & Company, LLC): How to think about CapEx and potential return to physical retail?
  Response: CapEx should be slightly down vs last year and includes funding for Harry & David and Things Remembered physical retail tests.

• Question from Douglas Lane (Water Tower Research LLC): What did you learn from the Long Island store and implications for store strategy?
  Response: The Huntington store is meeting expectations; learnings inform pop-ups (3 Macy’s, 5 H&D mall, 1 TR) this year, with potential permanent stores after testing.

• Question from Douglas Lane (Water Tower Research LLC): Which retail channels will you pursue beyond e-commerce?
  Response: All viable channels—department stores, mass, marketplaces, and on-demand—will be tested; capital will go to options with the best ROI and profitable growth.

• Question from Douglas Lane (Water Tower Research LLC): What share is self-consumption vs gifting?
  Response: Higher at Harry & David; lower in flowers/Things Remembered. They’re tailoring assortments (e.g., no-vase flowers, subscriptions) and selling across brands/channels to grow self-consumption.