1-800-FLOWERS.COM Sees Growth in Gourmet Foods and Gift Baskets, Expects Decline in Revenues for 2023
2023-07-30
1-800-FLOWERS.COM, a leading floral and gourmet foods retailer, held its Q1 2023 Earnings Call to discuss the company's financial performance, debt status, and guidance for the fiscal year. The meeting shed light on various strategies to mitigate the impact of the current macroeconomic environment and drive sales.
One of the key highlights of the meeting was the company's financial outlook for fiscal year 2023. While the consumer floral and gift business experienced some softness, the gourmet foods and gift baskets business saw significant growth. This shift in consumer preferences towards gourmet foods and gift baskets indicated a change in market trends.
To drive growth in the gourmet foods and gift baskets segment, the company focused on adding value and choice to its higher price point gift baskets. This strategic approach encouraged customers to trade up in assortments and effectively managed pricing. As a result, the company witnessed an increase in average order value in this segment.
The meeting also highlighted the rebound in the company's wholesale business. By proactively addressing supply chain challenges from the previous year, the company was able to increase its market share in the wholesale segment. This success was attributed to building and delivering gift assortments to wholesale customers earlier.
Customer acquisition was another area of achievement for the company, with over 775,000 new customers added during the quarter. Existing customers also played a significant role, accounting for 70% of total revenue. However, the company acknowledged that customers in the lower-income tier appeared to be less engaged.
Looking ahead, the company expects a decline in revenues for fiscal year 2023 due to lower consumer confidence and cautious spending behavior. Despite this, they have implemented strategic pricing programs, cost moderation, and investments in their business platform to mitigate the impact of the decline. They anticipate improving gross margins and bottom-line results in the latter half of the fiscal year. The company also expects adjusted EBITDA to be in the range of $75 million to $80 million and free cash flow to exceed $75 million.
The company's plans for product and service improvements include restoring 100% bonus payout in fiscal 2023 and engaging with customers through cross-category and cross-branded merchandise programs during the upcoming holiday season. They are focused on reducing costs, improving efficiency in facilities and logistics, and strategically building inventory to avoid supply chain disruptions.
While the exact evolution of the competitive landscape was not explicitly discussed, insights can be inferred. The presence of Amazon and its Black Friday events suggests active competition. The mention of UPS and other retailers adjusting their strategies closer to the holiday season indicates a response to changing consumer behavior. The company's focus on specific occasions like Valentine's Day, Mother's Day, and Halloween implies capitalizing on these events to drive sales. Additionally, the contrast between the current year and the previous year in terms of inventory availability suggests retailers addressing concerns about inventory not being on the shelves for Christmas.
During the meeting, the company emphasized the importance of key performance indicators (KPIs) such as gross margin and EBITDA margin. They aim to improve operating efficiencies to reach desired levels and return to historical margin levels over the longer term. Increasing gross margins is expected to positively impact EBITDA margins, crucial for assessing profitability and operational performance.
Despite the cautious market outlook, the company remains optimistic about engaging with customers and driving sales during the upcoming holiday season. They have made progress on strategic initiatives, implemented pricing programs, moderated costs, and made investments in their business platform. The company believes in growing their business, improving profitability, and building solid shareholder value over the long term.
The participants of the 1-800-FLOWERS.COM Q1 2023 Earnings Call included CEO Chris McCann, President Tom Hartnett, CFO Bill Shea, and Senior Vice President of Investor Relations Andy Milevoj. The meeting concluded with a summary of the key points discussed, including the company's slightly better-than-expected first-quarter results and the impact of inflationary pressures on consumer behavior. The company's commitment to transparency was evident through the provision of reconciliations of non-GAAP financial measures and the disclaimer regarding forward-looking statements.