E-commerce florist and gift retailer 1-800-FLOWERS (NASDAQ: FLWS) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 12.6% year on year to $331.5 million. Its non-GAAP loss of $0.71 per share was significantly below analysts’ consensus estimates.
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1-800-FLOWERS (FLWS) Q1 CY2025 Highlights:
- Revenue: $331.5 million vs analyst estimates of $364.2 million (12.6% year-on-year decline, 9% miss)
- Adjusted EPS: -$0.71 vs analyst estimates of -$0.34 (significant miss)
- Operating Margin: -16.7%, down from -6.4% in the same quarter last year
- Market Capitalization: $327.4 million
StockStory’s Take
1-800-FLOWERS’ first quarter results were shaped by persistent macroeconomic headwinds and internal operational issues. Management openly acknowledged the impact of declining consumer sentiment, increased marketing costs, and the fallout from a problematic order management system rollout. Chairman Jim McCann described the implementation as a “colossal screw-up,” noting that it disrupted fulfillment and customer service, particularly in the company’s food group brands. The company also cited a highly promotional sales environment and the reduction of lower-income customer spending as factors that weighed on performance. These challenges combined to drive a double-digit decline in revenue and significantly weaker profitability.
Looking ahead, 1-800-FLOWERS is focused on its new Celebrations Wave strategy to address both external and internal pressures. Management emphasized plans to reduce marketing costs, improve operational efficiency through artificial intelligence, and revamp customer engagement with a new digital ecosystem. CFO James Langrock explained that, “We anticipate that our new celebrations ecosystem will meaningfully reduce our customer acquisition costs and enhance customer lifetime value over time.” The company withdrew near-term guidance due to external uncertainties, including tariffs and consumer spending trends, but expects the new strategy to eventually restore growth by targeting both everyday and holiday occasions with a broader product range and more personalized experiences.
Key Insights from Management’s Remarks
Management attributed the quarter’s underperformance to macroeconomic softness, shifting consumer behavior, and internal execution missteps, while highlighting new leadership and a transformative strategy to realign the business.
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Order management system setbacks: The company’s implementation of a new order management system led to operational disruptions, inventory write-offs, and customer dissatisfaction, particularly in the Harry & David food group. Management estimated the impact at over $20 million in lost holiday sales and more than $11 million in incremental costs across two quarters.
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Marketing cost pressures: Shifting digital platforms toward paid placements reduced the effectiveness of traditional marketing channels, raising customer acquisition costs. Management noted that sales and marketing spend has averaged 25% of revenue in recent years and expects new strategies to lower this over time.
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Everyday business softness: While holiday occasions like Valentine’s Day performed reasonably, everyday gifting occasions saw significant declines. The company attributed this to weakening consumer confidence and decreased discretionary spending among lower-income customers.
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Product mix and customer segmentation: Higher-income customers continued to spend, with new high-ticket offerings selling out, while lower-income segments reduced purchases. This mix shift elevated average order values but masked underlying volume declines.
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Retail strategy evolution: The exit from most physical retail during the pandemic was described as a mistake by management. The company is now selectively re-entering retail through pop-up stores and a new flagship Harry & David location, aiming to increase brand engagement and diversify sales channels.
Drivers of Future Performance
The company’s outlook hinges on the successful execution of its Celebrations Wave strategy, ongoing cost reductions, and adaptability to consumer demand volatility.
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Celebrations Wave rollout: Management is betting on the new Celebrations Wave initiative—combining a digital ecosystem, personalized engagement, and loyalty enhancements—to drive frequency, reduce acquisition costs, and broaden the customer base beyond holiday periods. Early investments include a new app, expanded greeting card options, and a revamped website.
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Cost reduction and operational efficiency: The company is targeting annualized cost reductions of $40 million, including $17 million already achieved. These savings are expected to support reinvestment in technology, marketing innovation, and margin stabilization, but near-term volatility remains possible as execution continues.
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Tariff and macroeconomic headwinds: Exposure to tariffs, especially on goods from China, and uncertain consumer sentiment remain key risks. The company is working with vendors on cost concessions, adjusting its product assortment, and evaluating pricing strategies to mitigate impacts, but visibility remains limited.
Catalysts in Upcoming Quarters
Over the next few quarters, the StockStory team will monitor (1) progress on resolving order management system issues and restoration of everyday business trends, (2) measurable reductions in marketing spend as the Celebrations Wave ecosystem expands, and (3) the revenue and engagement impact of new digital products and retail concepts. The ability to navigate tariff risks and maintain customer loyalty will also be key markers of execution.
1-800-FLOWERS currently trades at a forward P/E ratio of 17.5×. Should you double down or take your chips? The answer lies in our full research report (it’s free).
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