1-800 FLOWERS.COM Q2 Earnings Call Highlights

1-800 FLOWERS.COM (NASDAQ:FLWS) executives said the company delivered an “operationally strong” holiday season in its fiscal 2026 second quarter, highlighting improved system stability after addressing order management issues experienced last year. However, management said revenue came in slightly below expectations amid a continued shift toward more disciplined marketing and changes to search engine results pages that reduced organic visibility and direct traffic.

Holiday execution improved, but direct traffic weighed on revenue

Chief Executive Officer Adolfo Villagomez said operations “ran smoothly throughout the period,” pointing to the stability of the company’s systems as a “clear and substantial improvement” versus last year. Even with that operational progress, Villagomez said results reflected the company’s effort to improve marketing contribution margin and the impact of search engine changes, including “increased paid placements and AI-driven content,” which he said negatively affected organic visibility and direct traffic.

While direct traffic declined more than expected during the holiday period, Villagomez said stronger performance in the company’s B2B and wholesale businesses partially offset the impact.

Organizational overhaul and leadership changes

Villagomez said the company made “steady progress” on initiatives aimed at stabilizing the business and supporting future growth, with a key move being a shift to a function-based operating structure from a brand-based structure. He said the prior approach created duplication, limited collaboration, and slowed decision-making, while the new structure is intended to improve efficiency, clarify ownership, and increase cross-business collaboration.

As part of the transformation, the company implemented workforce reductions and leadership realignments. Villagomez characterized the decisions as difficult but necessary to improve accountability and align resources with strategic priorities.

He also announced that Alex Zelikovsky joined the company as Chief Information Officer. Villagomez said Zelikovsky brings more than 25 years of technology leadership experience and will lead enterprise-wide technology strategy, including IT applications, data architecture, cybersecurity, and business intelligence, as the company modernizes platforms and supports AI and optimization initiatives.

Marketing discipline, retail testing, and channel expansion

Management repeatedly emphasized a more disciplined marketing strategy focused on profitability and efficiency. Villagomez said the company reduced marketing spend in the quarter and saw improvement in its ad spend-to-sales ratio, though marketing contribution margin was pressured by the scale of the holiday quarter and the decline in direct traffic.

During the Q&A, executives provided additional color on segment performance. Chief Financial Officer James Langrock said PersonalizationMall (PMall) declined more than the flowers business during the quarter. He attributed the decline primarily to reduced marketing, noting the company had previously spent heavily on PMall and pulled back significantly this quarter to improve the ad-to-sales ratio and contribution margin.

The company also discussed its holiday pop-up store tests. Villagomez said the pop-ups were designed as short-term pilots to gather insight into customer behavior and product preferences, but the company concluded the return on invested capital was not attractive. As a result, 1-800 FLOWERS.COM does not plan to pursue additional pop-up locations. Villagomez said the company is redesigning its retail approach and intends to test a full-year store concept that would be more suitable for permanent, year-round locations, while maintaining capital discipline.

Villagomez also pointed to continued expansion on third-party marketplaces—including Uber, DoorDash, Amazon, and Walmart.com—which he said is “growing rapidly” from a small base and helping broaden reach.

Quarterly financial results: revenue down, costs reduced, margins pressured

Langrock said second-quarter revenue fell below the company’s prior view due to the marketing shift and search-engine-driven declines in direct traffic, which drove a decrease in e-commerce revenue. Growth in the wholesale business partially mitigated the decline.

Key financial metrics shared on the call included:

• Consolidated revenue decreased 9.5% year over year.
• Segment revenue changes: Consumer Floral & Gifts down 22.7%, Gourmet Foods & Gift Baskets down 3.8%, and BloomNet down 3.1%.
• Gross margin decreased 120 basis points to 42.1% from 43.3%, driven by deleveraging on the sales decline and higher tariff, commodity, and shipping costs.
• Operating expenses declined $23.4 million to $221.1 million, primarily due to lower marketing and labor costs. Excluding certain comparability items and deferred compensation plan impacts, operating expenses declined $25.9 million to $213.2 million.
• Adjusted EBITDA was $98.1 million, down from $116.3 million in the prior-year period.

Langrock said the company’s cost actions—including organizational simplification, workforce reductions, and tighter expense management—are beginning to benefit the business, though the full benefit is not yet reflected in the P&L. He said savings are being partially offset in the near term by temporary consulting fees used to identify and implement initiatives.

To date, the company has achieved approximately $15 million in annualized run-rate cost savings for fiscal 2026, and management reiterated expectations to reach approximately $50 million of total run-rate cost savings across fiscal 2026 and fiscal 2027.

Balance sheet and outlook: Valentine’s Day timing cited as headwind

At quarter end, Langrock said the company had a net cash position of $42.3 million, including $193.3 million in cash and $148.9 million in inventory. He said borrowings under the revolver were fully repaid during the fiscal second quarter.

Looking to the second half of fiscal 2026, management said results may not improve in a straight line. Langrock also noted Valentine’s Day falls on a Saturday this year, which he said has historically been a more challenging day placement compared to midweek holidays. Executives said the company has adjusted merchandising and marketing strategies to prepare for the shift.

For the second half of fiscal 2026, management expects:

• Revenue to decline in the low double-digit range, reflecting the focus on improving marketing contribution margin, continued search engine result page impacts on direct traffic, and tougher comparisons versus higher marketing spend in the prior year.
• Adjusted EBITDA to decline slightly year over year. On a “normalized” basis, management expects Adjusted EBITDA to increase slightly year over year excluding approximately $12 million of anticipated incentive compensation and consultant costs.

During Q&A, Langrock said consultant costs are included in Adjusted EBITDA and are expected to be “front-loaded,” lasting through the end of fiscal 2026 (through June) before rolling off into fiscal 2027. He also said commodity costs remain a factor, noting cocoa is still significantly higher year over year, while eggs, butter, and sugar have started to come down and stabilize. He said the company expects those other commodities to no longer be a headwind in the back half of the year, assuming trends hold.

On consumer behavior, Langrock said the company continues to see a bifurcation: higher-income households are holding up better, while lower-income consumers remain softer.

Villagomez closed by describing fiscal 2026 as a “year of stabilization,” with continued focus on simplifying the organization, improving cost efficiency, strengthening leadership, and expanding customer reach.

About 1-800 FLOWERS.COM (NASDAQ:FLWS)

1-800-FLOWERS.COM, Inc, founded in 1976 by Jim McCann and headquartered in Jericho, New York, is a leading floral and gift retailer in North America. Operating primarily through its online platform and call center, the company offers a wide selection of fresh-cut flowers, gourmet foods, gift baskets, plants and home décor items. With a network of affiliated florists and its own floral production farms, 1-800-FLOWERS.COM facilitates same-day delivery services across the United States, reaching more than 90% of U.S.