1-800-FLOWERS.COM Earnings Call: Cost Cuts Amid Slump

1-800-FLOWERS.COM, Inc. ((FLWS)) has held its Q2 earnings call. Read on for the main highlights of the call.

1-800-FLOWERS.COM Balances Operational Progress With Steep Revenue Declines in Latest Earnings Call

The tone of 1-800-FLOWERS.COM’s latest earnings call was cautiously constructive: management emphasized that the business is becoming more efficient, more stable, and better organized, even as the near-term financial picture deteriorates. Executives highlighted repaired systems, a streamlined structure, fresh leadership, and meaningful cost savings as signs the company is building a stronger foundation. At the same time, they acknowledged sharp revenue declines, softer order volumes, margin pressure from commodities and tariffs, and a weak outlook for the coming year, underscoring that this turnaround will take time and discipline.

Operational Stability and Systems Fixes

A core theme was that the operational issues that plagued the company last year, especially around its order management system, have largely been resolved. Management reported that systems remained stable throughout the critical holiday season, avoiding the disruptions that previously hurt customer experience and financial performance. This stabilization removes a major overhang, allowing the company to focus on commercial execution rather than firefighting technical problems during peak demand periods.

Organizational Simplification and New Technology Leadership

The company has reorganized into a function-based operating structure aimed at reducing duplication and speeding decision-making. This restructuring included workforce reductions and leadership realignment, signaling a push toward a leaner, more accountable organization. A key hire was Alex Selikowski as Chief Information Officer, who will oversee technology, data, cybersecurity, and business intelligence. Management framed this as essential for improving digital capabilities, analytics, and long-term competitiveness in an increasingly tech-driven consumer environment.

Cost Savings Achieved and Larger Targets Ahead

Cost reduction is central to the turnaround story. In the latest quarter of fiscal 2026, 1-800-FLOWERS.COM achieved approximately $15 million in annualized run-rate cost savings. This is part of a broader plan to reach roughly $50 million in total run-rate savings across fiscal 2026 and 2027. While these savings are already helping to offset some margin pressure, management stressed that benefits will phase in over time and are intended not just to plug revenue gaps, but ultimately to support a more profitable, more flexible operating model.

Marketing Strategy: Less Spend, Higher Efficiency

The company has become more disciplined with its marketing budget, deliberately reducing advertising dollars while focusing on marketing contribution margin rather than pure top-line growth. The ad spend to sales ratio improved, indicating that each dollar of marketing is working harder. Management acknowledged that this strategic pullback in marketing did contribute to lower sales in the short term, but argued that tighter, more profitable marketing activity is critical for sustainable earnings over the long run.

Wholesale, B2B and Marketplace Channels Help Offset E‑Commerce Weakness

While core e-commerce trends were soft, management pointed to stronger performance in B2B and wholesale channels as a partial offset. The company is also leaning into third-party marketplaces such as Uber, DoorDash, Amazon, and Walmart.com, describing these offerings as growing rapidly and expanding the brand’s reach. This channel diversification is intended to reduce reliance on its own direct-traffic storefronts and build exposure to platforms where customers increasingly shop and order on-demand.

Solid Liquidity and Deleveraging Support Flexibility

Despite weaker earnings, the balance sheet remains a relative bright spot. The company ended the quarter with $193.3 million in cash and a net cash position of $42.3 million, after fully repaying borrowings under its revolver during the quarter. Inventory stood at $148.9 million. Management framed this liquidity and reduced leverage as giving the company room to invest in key initiatives and weather ongoing headwinds without resorting to highly dilutive or disruptive measures.

Conversion Gains and Higher Average Order Value

On the commercial side, the company did manage to extract more value from each order. Average order value (AOV) rose 5.2% year over year, supported by pricing, mix, and merchandising decisions. Management also cited testing efforts around product discoverability and online conversion that are showing early promise. These improvements provide some cushion against lower order volume and demonstrate that the company can still influence customer behavior on its platforms, even in a tougher demand environment.

Sharp Consolidated Revenue Decline

The downside of the more disciplined marketing approach and weaker customer traffic was clear in the top line. Consolidated revenue declined 9.5% year over year in the second quarter. Management noted that the strategic pullback in marketing, combined with a larger-than-expected drop in direct traffic, weighed heavily on results. The company’s challenge now is to regain revenue momentum without sacrificing the improved marketing economics it has worked to establish.

Consumer Floral & Gift Segment Under Heavy Pressure

The core Consumer Floral & Gift segment suffered a steep 22.7% revenue decline year over year, making it the main drag on overall performance. This segment is closely tied to consumer discretionary spending and gift-giving occasions, and is particularly sensitive to traffic trends and search visibility. The depth of the decline underscores both the competitive pressure in online gifting and the risk of dialing back marketing too aggressively while organic traffic is under pressure.

BloomNet and E‑Commerce Headwinds From Search and AI

BloomNet, the company’s florist network business, saw revenue fall 3.8%, while overall e-commerce declined as well, though no single percentage was given. Management pointed to changes in search engine result pages, more paid placements, and rising AI-driven content as drivers of weaker direct traffic. These search-related shifts are forcing the company to rethink its digital acquisition strategy and weigh higher paid traffic costs against profitability goals.

Order Volume Declines Highlight Softer Demand

Order volume fell roughly 16% year over year, only partly offset by the 5.2% rise in AOV. This indicates fewer transactions overall, suggesting softer demand and possibly some negative impact from lower marketing visibility. While higher ticket sizes are encouraging, the decline in order count reflects the challenge of sustaining customer engagement in a market where search algorithms and advertising costs are moving against the company.

Margins and Adjusted EBITDA Move Lower

Profitability metrics weakened alongside revenue. Gross margin declined by 120 basis points to 42.1% from 43.3% a year earlier, with management citing cost pressures and deleveraging. Adjusted EBITDA dropped from $116.3 million to $98.1 million, a decline of roughly 15.7%. While operating expenses fell by $23.4 million to $221.1 million, that was not enough to fully offset the revenue and margin pressure, leaving overall earnings lower on a year-over-year basis.

Commodity, Tariff and Shipping Cost Pressures

Cost inflation remains a headwind, particularly in commodities. Cocoa prices were singled out as still significantly elevated versus last year, weighing on margins. Tariffs and shipping costs also hurt profitability, though management noted that some other commodities have begun to stabilize. The combination of softer revenue and persistent cost inflation makes the company’s cost-savings program and pricing discipline even more critical.

Front-Loaded Consulting and Temporary Costs Weigh on Results

Management highlighted that near-term results are being burdened by temporary expenses, particularly consulting and implementation costs tied to the restructuring and transformation efforts. Approximately $11 million in such costs are expected through the end of the fiscal year, and around $12 million of anticipated incentive and consultant costs were excluded from what management described as “normalized” adjusted EBITDA. These investments are front-loaded, meaning they hurt current earnings but are expected to support future efficiency and capability improvements.

Retail Pop-Up Test Disappoints, Capital Discipline Tightens

The company’s experiment with holiday pop-up stores was deemed unsuccessful. The locations underperformed and did not generate an attractive return on invested capital. As a result, management said it will not pursue additional pop-up stores and is rethinking its physical retail approach altogether. This candid admission underscores a more disciplined stance on capital allocation and a willingness to pull back quickly from initiatives that do not meet financial thresholds.

Guidance Signals Continued Top-Line Pressure but Gradual EBITDA Improvement

Looking ahead, management guided fiscal 2026 revenue to decline in the low double-digit range, signaling that they do not expect a quick rebound in sales. Adjusted EBITDA is projected to decline slightly year over year, but on a normalized basis—excluding roughly $12 million of incentive and consultant costs—it is expected to increase slightly. The company reaffirmed its target of about $50 million in total run-rate cost savings across fiscal 2026 and 2027, with $15 million already achieved. Management cautioned that progress will not be linear, citing timing factors such as the calendar shift of key holidays, and reiterated that ongoing headwinds include search-related traffic pressure, elevated commodity and tariff costs, and gross-margin deleveraging from weaker volumes.

In sum, 1-800-FLOWERS.COM’s earnings call painted a picture of a company taking the hard steps to fix its foundation—stabilizing systems, reshaping its organization, tightening marketing, and cutting costs—while confronting a demanding operating environment marked by falling revenue, lower order volume, and higher input costs. Investors will be watching whether the cost savings, channel diversification, and digital improvements can eventually translate into renewed growth and margin expansion, or whether structural industry pressures continue to weigh on the business longer than management expects.