FLWS - Earnings call transcript Q4 2022

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Operator

Good morning and welcome to the 1-800-Flowers.com Fiscal 2022 Fourth Quarter and Full Year. All participants will be in listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Joseph Pititto, Senior Vice President, Investor Relations and Corporate Communications. sir. ahead go Please

Joseph Pititto

received thank be results joining XXXXflowersinc.com. fourth for Those section morning, corporate have full and release our our discuss earlier of at issued quarter today the X-XXX-Flowers.com’s year. this not who you financial our release of @ copy you morning of us press can for the to and a accessed Good website fiscal Relations XXXX Investor

open the call CEO; and will Our Bill will then today Presenting brief, begin Tom and McCann, to remarks, formal call will today with President; Shea, Chris questions. CFO. your we be Hartnett,

Litigation we statements Act statements These risks to that or Before forward-looking materially of remind and the make involve could the cause expressed those uncertainties will differ some implied Securities today, statements. to maybe of in of need actual applicable Reform I we from meaning results within XXXX. everyone begin, the that to Private the

refer and annual report For a as Form company's filings, the detailed XX-K, please as including morning, earlier our description press risks XX-Q. SEC well on of uncertainties, issued this release quarterly to on reports and these Form our

issued in financial its this Chris tables as of otherwise measures accordance earlier the will we today, addition, I'll certain call, that the today's morning. press issued disclaims any now any the the company's by most to of call, directly principles. McCann. of company any this over discuss the of release in statements in The any forward-looking can to or In recordings not SEC stated found were accompanying the may intent these measures made prepared today's call company. update except with supplemental obligation release turn be filings, be or accounting morning accepted to expressly financial generally measures Reconciliations non-GAAP GAAP press comparable the

Chris McCann

Thank and everyone you, good morning.

flat with year-over-year. fiscal we in the than to compared revenues in and economy. in change reaction of revenues This have noted consumer in on essentially pandemic. unprecedented quarter press prior reflects last we release, full December the behavior macro fourth more this in were morning's As growth which last represents compared to XX% top revenues XXXX, our that the finished inflation is in up our we more year XXXX since seen of saw revenue with we Nonetheless, fiscal year with XX%, year. was than our fiscal X%, prior growth This the

past gains the uncertainty behavior. fiscal change our to over achieved XXXX the years, growth we on Our illustrates two continued ability despite the in for and macroeconomic consumer retain build the and

file In and expanded size customer on combination fact, engaging of with have with a important our This over we reflects content highly the the we relevant have our several customers increasing that product seen the our of note doubled in to offerings and essentially past years. company experiences. growth that through our healthy our unique ever it's combined focus

to significant our As to half our revenue the the stages pandemic economy in marketing, the to first quarters David enabled gone our & the we over call, macro in having saw mentioned step-up our X-XXX-FLOWERS fiscal brands the from April, several investments three particularly just in through past fiscal prior decision business in our increase the to rate revenue went we low-single-digit Prior growth to flagship as of and during Harry double-digit through XXXX This stage, pandemic. back of when I made years. second accelerate growth. the us few conference pre-COVID growth XXXX from we to the or

respond business dramatically spring growth the of to platform initiatives in distancing the team investments Passport file along well that and with pandemic. lockdowns, our program. These loyalty XXXX COVID we work, also our helped our continued saw with the to important the the in stay social and period, the consumer when customer demand accelerated shift lives. of and surge that in During of Through connected positioned we the celebrations our world the in the customers their advent people with our resourcefulness of dedication changed to remote us

With the grow levels and we bottom saw line customer demand surge the results in file stage. our during record and pandemic top the

we the once in emerge celebrations, and macro consumer pandemic with activities. last behavior dramatic post-COVID changes other late or year, from to the began the again economy travel, out, As pent-up world and the stage group saw increased dining COVID,

saw the tight extremely also chain, geopolitical inflation, in turmoil, rapidly unprecedented disruptions labor market. an supply global We increasing and

As have from steep labor we have to gross and cost consumer a everything moderate, margins. commodities to while increases seen shipping result, impacted demand

While availability. highs in of beginning labor some peak the with inflationary including to see stabilization rates improvements freights, areas, higher certain have still pressures improvement early albeit pulled we in are that ocean prices year-over-year, softening fuel in and back in remain, significantly

hope get shipments. continue, these the While logistics to positive and facilities, and inventories trends investments we supply party global about building sheet labor address of spoken enhance and invest the prior automation and which include third our the early shipping utilizing implementing rates and our continuing balance proactive in our our to platform we've to buying operating to and front taken programs which These reduces ahead future. with manage we warehouse continue the steps rising of all outbound have to to issues will distribution operations that to our optimizing chain these issues exposure and build

programs of us across rising our gross we gradually with improve and the during the As brands, latter will costs manage we line margins continue results and bottom to strategic half year. these fiscal help combined ramp anticipate they our up current pricing initiatives,

our our offerings, to engagement We have continued as also initiatives. invest to expand as well product

During the offering that been multi-brand we quarter, our customers to have fourth embracing. the bundles our of added

gifts a perfect brunch big continues hit For to be Wine Bakery Shari’s with with to and example, Cookies Cheryl's pairing the Harry combine & [ph] X-XXX-FLOWERS customs. create [confections] We bundles. David and Wolferman’s Berries bouquets

with plants, day saw offering We hot a well began also and we other double-digit October confections of also performed River] [ph] our pre-sale of breaking choice growth Copper with record [Wild-Caught our for of category, and last cakes birthdays Final the which year-over-year. where quarter. same we millennials, house demand acquired selection we celebrations particularly and expanded delivery fourth during

blogs the engagements, XXX including more Celebrations along to our front, and engagement for things for events Choice basis Vital interactive and non-transactional than the engagement consumer experiences well non-transactional connections our chat organic. enabled million we expanded including community on and to points emails, influencer Pulse, celebrations all basis of true our our a Cookies, series or weekly On further [ph] with through those broad our engagement create Chairman's range year. a new customers content, campaigns popular in X-XXX-FLOWERS, XXX the content past Table that Harry sympathy convert [found] arrangements that the points achieve everything We [indiscernible] and of interactive & [indiscernible] virtual Table Cheryl's Alice's talk and XXX talk know workshops floral us podcast, sustainably from than do engage higher to design to a with pedal blog boards David, goal from for from and [confection] topics collection a our of number Wild-caught [ph] who blogs, communities, growing These charcuterie not. of collaborative growing

existing our that build these the million more million during grew transactions, and enabled us customers than the X.X% product and and for more with attract for quarter X.X year true the in community. the Existing than to of X.X beyond million us our revenues XX% help engagements year. customers fourth X these total relationships new of customers year. Combination initiatives addition, creating expansion continued to In customers active the represented

In offerings our positions over Passport X.X give loyalty customers addition, long-term. significant and the million. rate Passport size inspire and well We with believe loyalty business better continue connect of robust our customer us our continued a and program our now year program more, to along file double-digit to exceeding our grow membership grow celebrations more the and celebrations growth to with during and our build product more, relationships at to the expanded

full to call the his metrics Bill review turn some the our me of the XXXX Bill? let from Now, and fiscal for key fourth quarter over of year.

Bill Shea

you, Thank Chris.

full fiscal touched in on the quarter Chris economy the remarks. the reflect his for that year in the XXXX macro fourth changes results and for Our fiscal

revenues, challenging year-over-year we despite upper the single Consumers behavior December to as terms last consumers year comparisons. as saw of global solid and growth In and digit with back unrest. inflation throughout year, of half the on rise spring in became began in This rise pull year, first inflation, beginning began in intensified the spending this concerned unprecedented change rapidly. the rapid growing to in their persisted

to which The the first to tough by were the our higher on steep morning's results. guidance cautious rates and we year's for impacted the the July inventory the trend bottom our current perishable with margins on are gross in an line and the In demand, have factors consumer than quarter, XXXX margins absorb with full fourth increases we addition chain, combined provided demand. from through due had surge seen we labor, our August. margins believe these chain the comparisons press supply in supply challenges year first in last shipping, global impact effect normal with These release to and slowing had below that Gross longer-term, and results we the also spending expectations. that to as reflects a for quarter be XXXX and fuel that and the in marketing global inflation, write-downs to caused we before commodities. have outbound With quarter along this significant year-over-year various higher fiscal our improve advertising impacts said, our over the to the fiscal fiscal factors gross unprecedented of in-bound and cost we was have well-positioned

and We commodities. we've of are high including relief freight, the headwinds category already facing, ocean certain fuel, been in some certain seeing that

availability are of our fourth key automate labor our the labor facilities warehouse down to costs initiatives control Breaking fiscal to and distribution metrics and mitigate some coming full and Additionally, for expanded online the quarter issues. help year.

were total revenues flat prior XXX net million, XXX.X the to quarter, essentially period. fourth million the in year compared For

quarter X.X%, the contributions organic million of the with XXX.X total compared year quarter was with period. included we perspective] Choice, made XXXX. of we revenues of revenues in fourth the quarter which for strong XXXX, XX.X%, growth acquired increased fiscal acquisitions the in from prior Vital strategic Excluding compared October XX%, for revenue down This pandemic. with of combined total [ph], during the [For the

an billion year, XX%, commodities, grew [ph], approximately growth compared XX.X%, business increased X% Gross of segments. with growth basis revenues of revenues [For across total organic three X.XX the strong XX.X% in year, the our XX.X% for included year the reflecting basis, perspective] X.XX billion, our margin this points, On quarter with Again, For acquisitions. X.X%. prior compared increased grew with combined down net period, and was net cost primarily prior labor, total XXXX. fiscal shipping, for in of to total net in the inventory XXX organic [reflecting] revenues [ph] the significantly perishable write-offs. with billion X.X profit year compared revenues

a and year higher period. This XX.X%, For prior operating the quarter, revenues compared with lower offset the advertising, of by higher as basis XXX an in and part non-qualified of , our period. incentive as primarily year percent compensation representing in compared compensation reflects was marketing of prior the with increase digital plan, XX.X% as total impact well depreciation expenses deferred the

the points, factors essentially basis prior year in total the offset For for a with higher the unchanged was XXX year, expenses the XX.X% the down profit the quarter. lower as compared Operating as with mentioned year, fourth same for were compared revenues in compensation. XX.X% XX.X% gross incentive marketing costs of percent margin by was I prior year, XX.X%, reflecting

significantly quarter, adjusted period, with million EBITDA share, with commodities, inventory year and EBITDA labor, digital year-over-year million in XX.X XX.X or million of shipping, write-offs. million XX.X million or $X.XX For million, Adjusted income prior reflecting period. cost per the or was $X.XX per diluted XX.X for perishable the XX.X along compared $X.XX higher adjusted diluted period. XX.X prior the Net of loss marketing prior compared loss with primarily was per in with year net the adjusted compared net income year loss net $X.XX share share or in of was per share

XX.X or the share XXX.X diluted adjusted period. per And $X.XX year, or was year. or share, $X.XX share, the compared in income year share in of compared year. the million, income million prior $X.XX million income $X.XX the per per diluted million million prior or XX.X diluted EBITDA net Net with was in million XXX.X compared For XX with net was diluted with prior per adjusted XXX.X

million, regarding million segment fourth quarter XXX.X prior Food the Gourmet XXX.X down compared for our results. in Baskets period. our Now, was revenue the year with Gift In X.X% and segment,

quarter Vital Excluding we Choice, of was revenue October XXX.X million. in XXXX, the acquired for which

X.X for revenue XX.X%, XXX.X%, our the compared including contribution The million, same perspective, of higher compared margin year margin perishable margin well million higher was prior growth write-offs. and and commodity compared For organic up fiscal the shipping, XXXX and with in period. segment was period fourth the period. with margin [ph], as year Profit quarter segment of Segment gross decline [loss] the inventory in in contribution rates contribution XX.X% as XX.X with primarily quarter, reflected labor, costs, year-over-year was marketing loss prior XX%.

year. increased segment to $X this with million billion, prior in XXX.X compared X.X% of the revenue year, the For

increased XX.X%, Gross organic with margin to million adjusted year. in XX.X% segment to for was the segment revenue lower the in the Gift the revenues fiscal XX.X%, year Floral prior increased year prior including in contribution for with year period. compared XX% XX.X with gross and growth. XXXX, margin the quarter revenue million, was million, for XXX X.X% segment, the Again, the and contribution Consumer year. XXX.X compared profit perspective, margin significant million And compared XXX.X In I've mentioned. prior For in already our compared headwinds reflected

for shipping margin was in quarter year XX.X% same XX.X This contribution revenue Gross period. XX% were primarily costs. prior million reflected million, compared and margin, higher the quarter Segment rates. XXXX gross year-over-year digital the prior XX.X For period, primarily margin XX.X%, year labor lower the profit perspective, to fiscal the compared with with company's reflecting compared increased up period the increased [ph] the XX%, with organically. was in in [primarily] and fourth marketing

billion revenues For in X.XX prior X.XX the increased year. compared to X.X% with year, the billion,

the increased XXXX contribution For compared Segment XXX.X up XX.X% with prior year. million million, compared the were was margin XXX.X XXX.X% Gross organically. and prior year XX.X%, margin with fiscal the perspective, in was revenue for our XX% year with compared year. in

for BloomNet period. prior Now in the XX.X with segment, million X.X% the revenue compared year XX.X to million quarter increased

was period profit company's year million product with for fiscal as costs, XX.X%, XX.X% higher prior Gross year Segment the the well in compared fourth perspective, up For revenue was shipping XX XX.X% the the was prior period, with in XXXX as contribution mix. compared margin same XX.X reflecting in period. the quarter compared with quarter. primarily margin million,

For million increased with the XXX.X year, X.X% to revenue compared million, XXX.X year. in the prior

increased with year. XX.X XXXX. margin was revenue our perspective, year the prior XX.X%, for XX.X%, was XX.X% profit compared the year XX.X margin prior compared with year million contribution and for the Gross the million, to year, compared For fiscal in in

million, deferred expense, of excluding of XX.X compared with terms including corporate the but the prior was In million company's quarter year XXXX compensation, for corporate stock-based fiscal XX.X the expense, fourth impact period. non-qualified compensation the in plan XXX(k)

but acquisition compensation, company's Vital compensation prior in the one-time deferred with of the costs the plan million and was including associated corporate impact year, compared expense, million XXX.X the XXX.X stock-based year. with For excluding the Choice the of

Regarding free cash flow.

XX.X cash capabilities. a and to For was the reflects have primarily logistics supply working free ahead potential year, automate distribution non-perishable investments This million. inventory in flow the CapEx challenges to and chain significant we of our stay however in capital, made negative

XXX.X At the build CapEx, Inventory acquisition reflects investments was proactive our XXXX global XXXX. end upcoming the buy prior reflecting year. fiscal XXX.X exposure well stock buybacks, and reduce for during our as plan our thereby inventory XX.X and million, debt to we of Vital decision the the reduction in sheet. of year, balance Turning at fiscal our with and with of ahead as end the was the down pay and million, in million investment as inventory up XX.X our our cash holiday of chain compared supply the Choice, position fiscal year to to new and season. aforementioned cash, of compared year The fiscal million,

credit. had deferred debt XXX.X was outstanding net our million costs, Our term line of zero revolving and of balance, under financing borrowings we

the debt at result, net million. the end a was total XXX As of year

of year provide a Regarding guidance include unpredictable trends current guidance our we have fiscal nature This on macro current on will time this XXXX, the to quarterly for of a date to quarter-by-quarter regular business based economy, at highly basis. decided results releases. the

us and we Looking improved and half ahead, our current achieve the we file morning have our have strategic during fiscal and latter line results customer of in in business incurred program, Celebrations with pricing enable discussed initiatives, that anticipate margins cost headwinds have Passport moderation year. combination the strong gross the in several of growth we platform investments gradually the we bottom this combined to the seen will

have the quarter, continued in our we remarks, inflation. spending noted cautious the As current impact months fiscal the price two of we first have consumer formal seen through reflecting behavior of

result, anticipate X%, As first period. to prior year a quarter, range the compared revenues the for will current with be the X% down of in we fiscal

terms cost commodities months and through fiscal labor, In two quarter. have digital our the year-over-year of inputs, first high of cost shipping, for remained marketing

As be a range of to anticipate current result, will loss the million. in our XX million XX period we that for EBITDA adjusted the

we year, with compared fiscal lower full the capital prior anticipate the as working for year. as capital needs, well reduced expenditures, Importantly,

cash result, a a will expect flow. turn we I generate As to Chris. substantial call to the in free now improvement year-over-year back

Chris McCann

you, Bill. Thank

increased context, to to pandemic. stage, during growth single-digits of So our to pre-COVID prior revenue the and we low in invested from our in put the things double-digits brands rate key start the

help to lives. them and important we from their in to tremendous as to down people in will the who demand able respond with stay were stage, consumers pandemic the us the surge During turn benefit lock connected

than $X size of of more Celebrations business and file to our than our Passport doubled loyalty more our we also to the addition customer program. the billion, In size doubling

Now, labor cost move we're of from shipping the as that number including stage, in challenges, [indiscernible] to into commodities unprecedented gross or rise a have we post-COVID margins. our facing inputs rapid impacted

the we consumers have inflationary X% strong become that high highly XXXX acquisitions stay environment. Mall during on cautious made we addition, expand achieved in to that This more as the to from fiscal revenue us product XXXX these more customers in purchasing our connected. and In million X customers internal to strategic Choice organic than we prior Along products, ways growth have our new on and help as XXXX, behavior growth, new helped customers nearly significantly acquisitions XX% our have since the truly includes and focus Fiscal original Vital growth more the With increasingly XXXX. said, than also that of we reaction attracted our Personalization their creating attracted pandemic. fiscal contributions since fiscal pandemic. with offering accretive year we well XX the top million achieved of our provide in

We frequency. Celebrations to double the have Passport also over seen in and loyalty past more than drive two conversion, size our enhanced retention, program helping years,

that front, investments remains gradually and self-correct us macroeconomy macro costs rising laser able use positively focused margins our that make are facility results as in current the position on of mitigate investments to These the is and those high, have over cost helped and time. we gross structure costs aspects our we and to us improve inventory automation to we've environment line bottom experienced. the managing unpredictable control. know within sheet our On been inflation balance our We've cost

several the to environment. an what our navigate during and the ability continues be volatile past pre-COVID economic Our performance and unpredictable been post-COVID through and pandemic years, over has to demonstrates

business better, our experienced market consistently faced in mentioned in and our team, I've we platform, stronger combined past with the of the emerged because and as bigger, of strength talented have a company. company, a and have we past As unique calls, challenging conditions

engagement highly we connected helping we our emotion gift of a and unique are with more. are company, to continuously to an building As every content, offerings inspire relevant broadening and evolving stay dedicated customers digital a increasing for of the give volume community to community of range initiatives,

and well in the to my our that building I'd positioned long-term. As are In to our we as value perform over forward, look company we closing, past grow thank like are while of confident we all shareholder associates. calls,

to challenges and We Our talented team see day we importance focus at every addressing call our dedication of they our better more macro team's environment. hard and and creative customers thinking help if formal questions, work concludes community been throughout in the operator appreciate our the the for to more, as give company please. relationships. on with connect them that of the has more, the now will engaging build the remarks. This And open

Operator

[Operator first come Group. Please Dan Instructions] with go the And from will Kurnos you. question The Benchmark Thank ahead.

Dan Kurnos

of there's you're, re-opening be point, Great. just you the vantage do kind Thanks. some, whereas big to the pandemic maybe the sort revenue the your this, concern strong Good there pullback up KPIs on going new Chris, of out from picture. theme big the even talking you levels the here pandemic about revenue around that of peak, is guys highlighting And macro. think I obviously pick is How morning. cohort that ads. versus to outlook, pretty think outlook, sort is from, had retracement and of much

revenue point us kind base XX think, the just your next on you actually XX, what of XX, can over from here? conversation is So, of view frame the the you months help

Chris McCann

bottom-line, able to were we single-digit membership, were we came our top-line, that great in a respond produce to from strength rate thank really investments pandemic. results put Passport grow demand to what context before low able in was the company I morning surge for the able etcetera. make what the growth the been pre-pandemic of Good been do And to of to double-digit Dan. as because and stage, us Sure, we in record that we company, in through through to And move you just our may the of the in rates did that's couple to the the to we've business start pandemic. past metrics, of right we question. the for And custom years. And saw Celebrations is trying

two going through pace really. now, is look his trend continues. to in what some year hit to hopefully, last have pointed that, So, things and as And out we're that seeing pressures really came moderate, that starting in through forward, being moderation, as cost Bill remarks, get anniversary early unprecedented with we're on The we we that. right hopefully and

we to at at the our the as consumer, addition, it consumer effect in get started look as back end as the saw In of call early we December January.

I was gold whether somebody think it mine, in look pullback or well, someone, you we the saying, consumer seeing [indiscernible] was before others.

So, we had cars here now. this is that come starting improve. dropped. consumer and the to play as confidence reports We're fact consumer at and We're starting our maybe see starting to that recover signs have right out see week to fuel starting

with back company. when So, are. better, We've content much lost, not just stronger in We're the little a And size content a where term we pre-pandemic. who comment of we more remarks bigger, often and use we about we double the becoming that are, to those step people I more made at not. and we we engage were And my look of be clearly bps do XXX many and XXX We're converting added to that that capabilities. [indiscernible] bps when company. what engagement they're produced,

next out our that XX, to cross is shows that and through that's shows we're is, better, about we it at do shows we're working. the environment working. passport manage a need initiatives, What again as brand So, we our of so we're that months, company. It that difficult this know in are this position as excited we in extremely now, stronger that our as bigger, working. a XX It the look bundles membership we'll XX, company come

Dan Kurnos

in and cost maybe the if higher, level here. XXXX, a that from step you take cost – look – especially due so Bill is labor. to the we at let's can So, Obviously, chime further substantially base

around yet. and ease, clearly You that we're Yeah, seen not carrier a I've but freight commodities $X. charging may third-party inputs some have

going $X. Now, we're charge to you

think the to do things, [gross pulls impact And given other the level short-term, consumer making of a like [ph] with we this? that come of in and So, the in investments margin when mind how that what's underlying maybe relative the dollar about you automation, revenue the incremental and on? out back in margin] you're

Bill Shea

So maybe basis down quarter. for basis points can down were in I the respect With we points you. the gross to down Dan, margins, for year, XXX break XXX fourth

and about that a it's it outbound write-off. components was freight. our some is it labor, is us. formal talked both for or lot freight, the in You It is right of but in-bound was remarks. inventory It release It of commodity in and is inventory it commodity,

than and level we quarter it get maybe We it in our normalized to probably inventory write-offs kind be a back break be was. consumer and points to the down, you we know basis to So, of need fourth was get We the to XXX inventory demand more of stronger of margin. to anticipated back plan write-offs. had the consumer

made up a We'll to write off. perishable of ended And that And so, get normalized inventory. commitments some more level on to on certain that. having we I've back

but from this throughout improvements double it's past XXX already two reductions of year seeing that outbound. Last basis We freight that were probably points the had of our our the come down side free, ocean about the of lot where side, in-bound, we We're obviously significantly well but ocean it. they or cost. rates. a Significant years high. were. what is ago, a talked they down. there's quintupling is both a probably They've On They’re year, lot is as of as in in margin

are drop. points pressures are lot basis but because these of because height commodity that factors, inflationary markets We're it basis – cycle to of we're geopolitical was the the Now, supply spiked things XXX the bought of points cost seeing cost moderation during maybe we're XXX and some lot probably costs us spot on have seeing somewhat year. some in The demand. sitting we're we quarter, dropped of that on fourth of through some inventory the Commodity factors, there. seeing dramatically. have but a dramatically those these A cost costs, moderation

self-correct. and Labor not past rates, in So, probably probably there about do are we've certain moderate. don't high items the that they are talked

one the facilities why that's in automating investments the that's reasons the one benefits our So, offset of that. – to making help is – of of we're

with to are We that. have are the down. With to that access back do more less, [indiscernible] to making right, automation not going to outbound you're go labor rates labor investments we're and rates, respect freight, addressing

their in, party – to off continues there's is spot, component to to fuel. to to carriers into We're are logistics going the does rates, right inventory kind March, had Hopefully, fluctuate third back challenging that the exists. to the in April what's happening that doing continues the timeframe. of not is government And to that out – highs reduce on those big but continuing with have transit that The closer the moderate. there. a times, The inventory fuel fuel things of we're that future, the move consumer, moderate but projections

can expectations service? use customers’ we on a that. there, So, needs To it still it cheaper get

through. increases nature we margin. So, about things takes of have the time of to in the these that's are there we these just we are year, latter costs, some initiatives believe why macro that And in to should in part and gross see offset sizable help but flush play talking some of we're

Chris McCann

Yes.

inventory early to initiatives Bill logistics that away about but bigger shipping that factor what there, many cost key a [Dan producing labor initiatives talked inventory automation, saying optimizing was things of bringing make like the help other there. there's just gets] routes and sure take just and of with to our [ph] to to Bill, our The structure. with are help We referenced. So, Bill early front, some

see work So, there's initiatives cost we that smarter going the forward. a address we of structure to have new program whole

Tom Hartnett

is this Dan, Tom. And

now Just had Like Bill some in position this initiatives on year mean, in the have certainly labor appropriate that, side last the were costs. offset than we're to part the shrink we if are we disruption, year. we perishable for prior we than think of of in strategic other because was looking products. of these And pricing we're the going much better a the said, do less I supply to

get one component locations around fulfillment in part. So, we're because have can't people expecting not standing our we to

So…

Dan Kurnos

don't two this are at time? Got with your release, I things. on says your does Bill, double-digit the points point significant of want said in positive, improvement, I go – still to it. you're just press those change And some flow to free over just that clarification, outlook want guide, targeting very word margins two cash on it you different the EBITDA and this.

So, which is it?

Bill Shea

Probably million free you in you investment it's cash capital. our cash made statement a we've look comments significant but on of a if flows, see XX we year, on both. This negative in working the had flow,

year-over-year. Our up is $XX inventory million

we that against free flow. investment to goes what were the big a that companies year. challenges supply inventory supply and the all was Tom it needed referencing, to global cash not in. looking People made that's when was kind chain the address – last That you many chain, So, the did where the broken that to be, with of had, address got labor having not was you

likely high not same that of down a ultimately So, disruptions level title existed We're come seeing that inventory. a We're but improving. that ago. chain the demand, but at going Most supply we to made the one-time at inventory is investment, to now also the year, this is ports a investment. that's year

So, will and normalized will chain to supply get we levels. get normalized back to improves, inventory as back more more companies

free investment tailwind capital flow or in headwind that becomes working next So a on cash year.

investing and behind Southern the our both two years, in we're Atlanta our facility facilities, last of the automation Ohio most part our for CapEx Those are us. facility. Additionally,

be XX million free will – That that – million. XX we're So, million what two is, cash flow. ago, past CapEx last this million directly was XX year what expecting probably down $XX affects we have around so the years

made over is flow $XXX of The an we've and over will that reduced and million investments the free year the be CapEx next So, this working us of improvement this positive combination as capital working cash a capital. year. year past have

Dan Kurnos

margin And the question?

Bill Shea

to we right I perspective margin believe, we do a get bigger, That sustainable growth from Chris than a are before. company Dan, Yes. self-correct? strong pressures back and we're better the of as long-term, over were the lot going mean, a we now, mentioned, to line top ultimately

Chris McCann

our long-term change outlook. doesn't It

Dan Kurnos

enough. it. you That's with me I Okay. bearing Thank fair guys. for appreciate

Chris McCann

you, Thank Dan.

Operator

Please next from ahead. with Lebiedzinski will go Sidoti The question Company. & Anthony

Anthony Lebiedzinski

and Yes, questions. for taking you the thank good morning

last, curious, you this little write-downs just any and this of or risks surface, bit, from the So, inventories to but Bill touched know how I up of to are and markdowns additional a were there inflation on due XX% high, inventory? much on is

Bill Shea

because ahead really chain as to did step-up supply our big get on burned, all got was and inventory we in potential effort part conscious we or well. the The we burned the companies Again, a supply many chain of of last the did chain supply year challenges. got

the than Choice Maybe historically? were or So, we is inventory our value big XX effort. is because up a million of so higher conscious Yes, a rest costs it up. effort. the was it that to due at million. but Vital was acquisition, made Inventory of Is a XX

So, the costs to is that this of double-digit across were but go us non-perishable inventory in holiday It's up, know the board as is a most execute it the up towards XX% percent value much, we as you up puts of our position our holiday. units. plus, it inventory costs and head good that

Chris McCann

So, we're last of year. write-down the not expecting

Bill Shea

Yes.

We next the the [indiscernible] write-downs over year. Yes. expect

Anthony Lebiedzinski

Okay, for you that. Thank got it.

So, consumer, forward just in just more given price maybe you strategy opening your looking do about to points, on pressures merchandising maybe the broaden of going you that having the here? perhaps think are how terms maybe

Chris McCann

take Anthony, I'll Yes, one. that Tom to ask

Tom Hartnett

Yes, Anthony, Tom, it’s morning. good

much to shippers as budget by of initiative pricing to you more going part each product are our on And points needs. markets been that's drop initiative going It's we continue our activities, we that just on. and want sellers that's with product do strategy. going has and but push where M&A consumer's development, utilize price So, our a an meet We very been to been growing that certainly broad have initiative internal we we've also place well. expanding assortment have market

we're needs. So, and the of a in and product for to occasions assortment right the we're their big widely to us. focus personalization trying customization products our customer that's And get expanding their front around meet again, and

Chris McCann

key Anthony. a factor That's

the at as the] well marketplace, that of future. us key look Tom for file we out, passport As [ph] really [expanding] have, and [ph] acquisition, through through the tenants what enhanced development, membership product offerings plus [also three have, customer we we the position the through that enhanced pointed

Anthony Lebiedzinski

can Thanks business. wholesale guidance of XQ. shipments to for timing it. in that. know and your retailers XQ for Got embedded then quarter? vary What your the in terms between What's And that of sometimes first are terms in of I you expecting?

Bill Shea

the and Anthony, in a year QX we wholesale should combined, right, wholesale ago QX be slightly expect year-over-year. QX up over have believe season. we you're those play. that be do do we in [Indiscernible] up for to orders

We those in years] big [over [ph]. orders guys have up the ordered play, have year know five box you this

Anthony Lebiedzinski

it. Got

as far Thanks. then as should share repurchases, just think Okay. forward? curious, we about going for how appetite your And that

Chris McCann

past, think in I gone increased and worked seen an the authorization we've we've under as year we've through last that.

at we've investing place As usage, invest been cash we we business the already in automation, through where best we think as is to in use activities. look M&A talked the about have cash where we

concerned. So, point, as changing see is don't allocation far our we at really cash strategy this as

Anthony Lebiedzinski

efforts, the of you are far automation in then that you terms are Got in as I as lastly, guess the inning And terms, tail it, in, of automation end okay. initiatives? baseball or what the mean, I initiative at

Bill Shea

just the help we at we're and The will equipment can of Ohio the the we Atlanta various the facilities, tailwind, Yes. two we as initiatives, the we're be as buy the facilities, always facility aspects are business, facility, in There speak. that automate wrapping much very up but yes. big late innings incremental Southern Atlanta the big to

Anthony Lebiedzinski

and Got much you it. of very luck. best Thank

Chris McCann

you, Thank Anthony.

Operator

question ahead. next Markets. Capital will Please come with Michael go The from Kupinski NOBLE

Michael Kupinski

I rising we're interest appreciate rate in still. Thank you. Obviously, Thanks for a environment my taking that. questions.

we, of increases. improvement through these of bit some kind of be a rate cycle so, And might a the consumer little confidence just head as fake

kind I your cycles was past been product of how the in past? you've or you past in that so wondering, something spend differently it playbook through of past, Just your marketing in similar And expanding thoughts are how of kind we've seen of you've strategy in the the some cycles is that positioning against of just us forth, you've you're to and terms in your so some the what forth and yourself? terms so, on offerings, give economic Is been in increasing past the and than done cycles you've been doing that. weigh

Chris McCann

past, from think Thank on we've we're we've building you. and and the good learned you. always hear Michael, what it's what done I well on to

we that took money pre-pandemic stage, And the David step on in that the costs & that invested we I the acquisition ability stage, into our very off was saw we more based acquisition. we and behind going think behind and market. customer strategies saw and Harry specifically nicely. accelerate up pre-COVID we to we the on Flowers we effectiveness pandemic, the if Once the advantage again and again, gas moved opportunity the as because look pedal paying of at really costing, saw forward, step customer to the reference the of and I therefore, to marketing

still we XXXX. we I [ph] things top think [required] even this still customers X customers tighten, [required] the XX since of – year, when we million we on – in [ph] new million

to but customer always see color a we a want opportunity as of opportunity. to play is there. here, where we're game market, you now the Right our in we'll always if play So, to new nimble Tom, any not new customer we'll nimble seeing add strategy. game And growth part current but accelerate this growth, the

Tom Hartnett

get a that I we as right more trying Also, portfolio the we think to just continue good couple customers we I'd products catchment inventory, because more obviously, and things to company, mean, them. bit of products, put think again continue opportunities in mature of customer to about have Michael, in a better for have etcetera. to there. Yes. We of be such we as develop a our say, morning. I our just focused expanded and A front we we're talked relevant. inventory,

big going point, around LTV So, four over say, just putting we I a we're I'd still are that's three and making to years versus where realize to Chris' investments ago. echo disciplined I sure CAC advantage, we compared mean, think on those that time. and return and watching that a we were forth probably and

equation here. the piece important an of So, that's

Chris McCann

you critical. importantly, which And just on point, hit Tom, is a

I on focus would existing base. customer our people understand think our

customers size the saw before. more with in The comes We think increased in I said reflected remarks see even that customers, down the growth million product XX% in that of year, our Celebrations our last of came the we buying thing while acquired buying the still Passport. rate. one And release as that which Again, which was etcetera. existing increased was and our existing year products, from customers improvements retention new continue X.X to our highlighted and same revenue where than from frequency, from as we in we bundled we doubling category, customers.

a at. that's us to better continue even get and really for mine jewel to So,

Michael Kupinski

the and Got a of Anything And that little mix? a the just related then change talking company Was a little in about television spend? spend marketing marketing your bit, the quarter? spending in bit did quarter you. notice was your that was – there change to I did marketing on in you the

Bill Shea

with in etcetera. the creative right units off matching progress those right and and activities. ad the more Yes. move We're just around content mid-funnel very we certainly and more funnel Michael, continue as of to we started the call and focused pieces top

able order yes, move in – share, we're up looking we're food to in will reach, so, if effectively And the more on a things so. to you do pretty again, constantly been And market gain [indiscernible] chain, more those to activities. we've

Michael Kupinski

at how product products. and product that downturn back just about recessions an changes then the know prospect are while priced past And how's I economic company's in does strategy expanding – of your your to some the offerings past lower of that to the what I the point, offerings cycles? you. going compare in before, into asked kind to Got going looking of

we looking SKUs? of What terms inflationary What in higher into? SKU prospects I you number number was impact, the of I think products. And of like the in look economic of environment? the go but of be brought SKUs, I at having as that, think even down expect terms are as you've, wondering we expansion in just number kind the and wondering of I I numbers the can a was because the past, just think we could more similar things challenging at of of kind

Chris McCann

Thanks Michael.

a customers with move bring to what we'll conversation potentially can recessions of products in continue the to will them, customers and because as we saw higher range continuing in don't be more quarter, broad Tom of from price reducing pointed household continue guide forward, out the number to for we will give that you little are this the working that constantly a the we choice as earlier, we anything, point find A us. up I Even us. is tick AOV that income good our to products. for as think buy I SKUs. to table on was bit. think add If well, price we part SKUs higher

at care So, we're as higher even need while we're customers end make price making the we to level points, sure well. we of entry sure taking the have the

we a I Whether way well as development, key well. over organic platform, SKUs at as for third – think marketplace mentioned our that then see from as it's coming see and we well Tom as as the now So, expansion growth factor earlier, continue M&A that go the we do do that? product how is we we activity will party XX,XXX opportunity right vendors if look on

Michael Kupinski

against that we were more final seeing forth. that And we cycling some my significant know still pressures? Are then is, rate question cycling we wage last against are I year, and wage so now increases or

Bill Shea

from in prior than ago. a to we last think years year that. labor We were a two this saw the the year in rates about on labor time step versus a calls prior talked I the year that better and a various up we big lot standpoint we're shape

still With of availability that stabilization of So, of some the ahead rates for it the of our hiring that labor market to and stabilization the more seems hiring be seems to a labor. even degree, us. big season and be is a of said,

a but year So, were than that hit we in we're a sitting we better certainly yet, today ago. position haven't

Michael Kupinski

had. I Got you. That's all you. Thanks. Thank

Chris McCann

Mike. you, Thank

Operator

Capital go The Fuhrman come will next Please Alex ahead. with Craig-Hallum question Group. from

Alex Fuhrman

customer pull special again? taking tell you if holidays sense Are purchasing their everyday trying major events And could still back a Day to was buying have come own much events suggest like more? in maybe of little one anniversaries lives has of areas on or very in occasion? like get of where a are terms just about or of spending to kind might guys. Curious people kind for key if Hey, might Thanks my self-consumption Valentine's and they just maybe hoping impacted starting for us of still question. back been for that those gifting bit they I Chris, birthdays. those been

Chris McCann

a you. it's weakness really, on but not [indiscernible] that's beginning fairly really everyday strong Alex. The that And seen [ph] where we've occasions say continuing seen we've prior that etcetera. occasions year, Valentine's had We've it's post-December, whether strong notifications] proves anniversary had just those long the everyday on exactly years, for a has well, moving, Yes, but we're because business. is past the the since and beginning season, That's [growth last business to occasions. Thank been softness. Mother's is food just December been been strong why been we softness we've season, the more saw good holiday Day, birthday, we especially those this in which the is the post-holiday us, was quarter, on

stepping season is gives little holiday this optimism gifts. we good what a those seen some customers forward go that for that's So, upcoming but into us holiday must have are still we've also really up shift, as

Bill Shea

I our reminder, are, in remarks, food even side, reminder years up three over everyday in those XXX% ago fourth in versus think on Alex, group, quarter a XXXX. occasions, even our we was said we of pre-pandemics formal but where Yes. just a the the over

of is those lot occasions. everyday So, that a

So, consumer such pre-pandemic. during years the large pandemic growth We while three the size was had of where pullback the doubling still over stage ago. we're the were that now seeing year-over-year we

Chris McCann

point. good very Yes,

Alex Fuhrman

Thank much. Yes, that's you very helpful. guys

Operator

will question ahead. Weiser with Bolton Linda next go come D.A. The from Davidson. Please

Linda Bolton Weiser

morning. Yes, hello. Good

Bill, saying that FY positive, to just XXXX, the number, clarify, correct? be cash is you're will So, free positive flow for it a

Bill Shea

but the that to we know have. cash were free of we for working because have quarter, last where for it I'm the to and in addition year; give a we investments CapEx Yes. the higher we made million we've years $XXX flow, capital guidance not the plus going giving

are So, cash that positive. will free saying be yes, we flow

Linda Bolton Weiser

FY reference a lot And made Okay. then just of – XXXX. you've I'm to

and going then, then, than but and back And your also the is so, higher. much looking cost structure company on I'm revenue financial bigger back is was your scale at it a

EBITDA I'm and is million out, XX So, of to XX% a you figure margin. trying year you Well, had gross today. that lower like, a know, gross your margin lot

you like to with is out. help million think XX So, the structure. XXXX I'm able I to higher just today FY would cost profit way level? mean, it I versus Am any that and us differences not thinking there today trying of now I to mean, correctly? about kind figure a earn seems be of the

Bill Shea

side. the on I as gross having we've the Linda, margin fiscal each what the obviously mean quarters this Well, of reported about is talking we're year been we've challenges throughout

have of we XX,XXX China. dropped from self-correct market that went we yes, in a up. a over issues container ocean again, years gross macro at The ultimately $XX,XXX container XXXX, a be were to spot the We went in $X,XXX the XX%, our So, will gave below believe a Those freight few up for back is We dramatically. have of – the bring but from like ago, of a now not permanent. over lot to inputs example I cost are were things caused a container. ago. time. to a year paying lot those Those margins

were there inputs impacted cost our – that things So, significant margins.

as coupled Some they improving Tom referenced we the as of exist in today, pricing, improvements time play, we'll them over start them improve. are what again. some still of have initiatives margin that That we in will and think seeing with well in

Chris McCann

Right.

improve, that. So, will to recognizing not factor cost place initiatives the restructure away, says we go Automation structure. – but in I'm of why we're example while being some to our going an that's to costs, the is, redo have key of Bill internally

Linda Bolton Weiser

you Okay. gross did up something in [FY I said FY FY or or year-over-year, XXXX] about margin [ph] did XXXX for know mean you mean you full-year XXXX? being And

Tom Hartnett

This is Tom.

meant say I just mean Bill when [indiscernible]. think gross was were I margins describing in to down down XXXX. he he missed those

Bill Shea

margins were If down. we're gross XXXX, talking about

and – see year. second I think expect part the this referencing gross we margins our the latter what said to half margins I we're year-over-year of in what latter in improvements part our of is of year, the in fiscal

Chris McCann

Yes.

Linda Bolton Weiser

key Okay. mean, quarter was the second But that the I quarter.

Is So, margin that in I mean, up quarter. sound doesn't gross it be can correct? like that

Bill Shea

Yeah. a Linda, we're here, giving quarter-by-quarter guidance right. basis on

of longer-term margins year gave to against believe The for are quarter. the QX to peaked guidance certainly started the So, comp high first the QX. and starting to the improve second year We improve. incur started We and obviously we were and going [ph] where margins points half we as the costs [believe] we of over the higher we're will in QX last improvements. see costs in

So, we're providing the we're far. guidance providing that so

Linda Bolton Weiser

the about I'm just curious And Okay. pricing.

It's mean, [indiscernible]. a I know, margins sense business hard that You the in

not a lot a are profitable. You those online but of of lot have do competitors,

cost of they're facing same the So, types pressures.

a can't versus different your couple of for Is be years pricing ago? some about So, of I'm competitive higher more curious you? the pressures why today that there things are and offset

Chris McCann

much. really, it's I competitive issue. not No, so it think mainly a is marketplace issue It's a not

as perception in a far product. on playing, product the has value As that categories what consumer the the we're

moves then the demand, and back know pricing. where the a push the too pushing is drop the to So, constantly if to time every pricing testing point we're conversion pricing. in drop far a we we And we consumer rate, see our that's see in on

household pricing give we So, on price we're helping price as we're but that higher how need, at low that customers customers we to about also, say points initiatives. seeing ALV. merchandising look they income points to more pointed sure And strategic that's very drive have customers the up higher spend we're out make wage why I the importantly,

point So, across we don't – but the the that we you play as have as board, think. might much it elasticity I cuts price in, one price think at just

Tom Hartnett

a over the that we brands because we here brands that the for largest this dynamic that May whole The and in had we've we've is of of particularly for been [Technical increases that the the growth market that time. Difficulty] have. to in have continue market points seen think, larger we've are I our to QX the gain Flowers brand do verticals scale, on competitive at that larger we using significant vertical December, Tom. share changes don't and And – opportunities is for other our to and and hopefully look and on for in we're February, going year year, share competitors

Linda Bolton Weiser

giving Have off you for share thought profitability, to share about have trading some profitability? up market market better

Bill Shea

the on on the having the customer as it and right in front take them an and item far important value. appropriate as most around customer is, making thing pricing lifetime and a product sure when where of customer the that the send value focused Again, created opportunity we of we're We'll that and there's on it.

Linda Bolton Weiser

luck good everything. Well, and Okay. guys thanks very with much

Bill Shea

you. Thank

Operator

remarks. sir. over session. closing Chris McCann conference concludes This for our like ahead, would Please to the turn go to back any question-and-answer I

Chris McCann

for to good here us and joining follow-up appreciate any And have you. I'd season. just for you I everyone everybody end thank we’re if of summer the like wish [indiscernible] Certainly, a today. to time questions

Operator

for The presentation. now today's concluded. conference attending is Thank you

now You disconnect. may

1-800-FLOWERS.COM (FLWS) 1 Sep 222022 Q4 Earnings call transcript