What Management Said
Read the full Q1 2026 transcript ↗Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables of our earnings release. As I mentioned in our last call, we view fiscal 2026 as a year of stabilization for the company focused on building a foundation for long term sustainable growth. We began to make major changes in our customer acquisition and marketing strategy during the first quarter. In Q1, we made a fundamental shift to focus on marketing contribution margin, which allows us to better allocate resources and optimize spending, ensuring that our marketing dollars drive measurable returns.
In the short term, we could see additional pressure on the top line as we recalibrate our approach toward a positive marketing contribution margin on paid traffic. As we pivot toward a greater focus on contribution margin, we are placing a stronger emphasis on optimizing our marketing spend to drive profitable growth, not just higher sales. Efficiency ensures we are maximizing our marketing dollars, reducing waste, and aligning spend with our highest return channels. Together, these improvements directly impact our top and bottom lines by increasing awareness, accelerating customer acquisition, and improving retention.
At the end of the day, this strategy positions us for stronger and more sustainable growth and profitability. This approach is intended to improve productivity and maximize return on investment by increasing conversion and average order value as customers attach other categories merchandise on our primary platforms. I am thrilled to welcome Melanie Babcock to our company as Chief Marketing and Growth Officer. Her proven ability to scale brands, build high-performing businesses, and create customer-centric growth strategies make her the perfect partner for this new chapter of our journey.
What went well
- Made a fundamental shift to a marketing contribution margin focus during the quarter, which delivered a clear and immediate benefit with profitability improvements in both the first and second months of the quarter.
- After adjusting for timing-related items, the trend in adjusted EBITDA was slightly positive, representing the first year-over-year improvement in adjusted EBITDA trends over the past seven quarters.
- Began selling through third-party marketplaces including Amazon and Walmart.com, with early traction described as going quite well and growing nicely from a small base.
- Strengthened leadership by hiring Melanie Babcock as Chief Marketing and Growth Officer to lead a full-funnel marketing evolution, and made progress with external consultants identifying efficiency opportunities.
- Implemented $17 million in annualized cost reductions and identified an incremental $50 million in run-rate cost savings over the next two years.
What went wrong
- Consolidated revenue decreased 11.1%, with Consumer Floral & Gifts down 14.6% and Gourmet Foods & Gift Baskets down 8.6%, driven by the strategic marketing shift and wholesale order timing.
- Gross margin decreased 240 basis points to 35.7% from 38.1%, primarily due to deleveraging on the sales decline combined with the impact of higher tariffs.
- Adjusted EBITDA loss widened to $32.9 million from a loss of $27.9 million in the prior-year period.
- Net debt increased to $259.3 million from $224.1 million a year ago, with cash of only $7.7 million and $110 million drawn on the revolver, and a small tax expense was recorded as a valuation allowance was set up against deferred tax assets after three years of cumulative losses.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Top line | near term | could see additional pressure as the approach recalibrates toward positive marketing contribution margin on paid traffic |
| Cost savings (run-rate) | FY2026-FY2027 | incremental $50 million over the next two years on a run-rate basis, roughly half in FY2026 and half in FY2027, excluding one-time consultant and severance costs |
| Revolver borrowings | fiscal Q2 FY2026 | expected to be fully repaid during fiscal second quarter |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Consolidated revenue | -11.1% | Strategic shift emphasizing positive marketing contribution margin and, to a lesser extent, wholesale order timing shifting from Q1 prior year into Q2 of this fiscal year. |
| Consumer Floral & Gifts segment revenue | -14.6% | Strategic shift toward marketing contribution margin. |
| Gourmet Foods & Gift Baskets segment revenue | -8.6% | Marketing contribution margin shift and wholesale order timing shift into Q2. |
| BloomNet segment revenue | essentially flat | Relatively unaffected by the marketing shift. |
| Gross margin | -240 bps to 35.7% | Deleveraging on the sales decline combined with the impact of higher tariffs. |
| Operating expenses (adjusted) | -$10.9M to $124.9M | Lower marketing and labor costs. |
| Adjusted EBITDA | loss of $32.9M vs loss of $27.9M | Sales deleveraging and gross margin pressure, partially mitigated by marketing efficiency and cost actions; trend was slightly positive after adjusting for timing items. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Marketing strategy | Shift from gross margin to variable/contribution margin focus announced | Fundamental shift to marketing contribution margin implemented in Q1 with immediate profitability benefit; building toward a full-funnel approach under new CMO | — |
| Cost savings | $40 million plan with $17 million already implemented | Incremental $50 million run-rate target identified over two years (half FY2026, half FY2027), excluding consultant and severance costs | — |
| New channels | Plan to expand beyond e-commerce sites | Now selling on Amazon and Walmart.com with early positive traction; testing paid traffic consolidation by redirecting visitors from lower-traffic sites to main platforms | — |
| Organizational efficiency | Engaged external consultant to identify efficiencies | Implemented targeted changes including centralizing the marketing team and improving customer service/website development coordination | — |
| Physical retail | Celebration strategy to broaden reach | Opened holiday pop-up shops (nine locations) to test a scalable physical retail concept for potential nationwide rollout | — |
Q&A Summary
Are you still dealing with fuel surcharges on gas prices?
The fuel surcharge is always part of FedEx charges; they have moderated and have not gone away, but have not increased.
Have you made changes in products and price points alongside marketing changes?
Yes, the merchandising organization continuously reviews its assortment and pricing strategy to adjust costs accordingly.
What is the competitive environment in consumer floral?
More competitors are emerging, which is increasing the cost of buying clicks as players compete for the same search terms, raising marketing costs and reducing marketing productivity, rather than pressuring product pricing.
How did back-to-school and wholesale look heading into the holiday season?
Back-to-school is a smaller part of the business; the real peak is the Christmas holiday season and it is still early days. Wholesale saw a timing shift from Q1 into Q2, and the company is seeing really strong wholesale sales expected to be up year-over-year for the holiday season.
What is the revenue impact of the wholesale shift between Q1 and Q2?
Several million dollars, about $3 million to $4 million.
How should we think about the timing and net basis of the $50 million in gross savings?
On a run-rate basis, roughly half will be achieved in FY2026 and half in FY2027; some areas like supply chain and procurement take longer. The net cost to achieve is hard to quantify now, but more of the cost is expected this year than next.
Why was there a small tax expense this quarter instead of the usual benefit?
After three years of cumulative losses, the company set up a valuation allowance against deferred tax assets, an accounting matter; benefits can be used again as profitability returns.
What are you seeing in early sales from Amazon and Walmart.com?
It is early days but going quite well and growing nicely from small numbers; the company is learning best practices from those sites and seeing positive early traction and conversion from their existing traffic, before optimizing pricing and value proposition.
What was the impact of increased commodity costs?
Chocolate and eggs were up year-over-year while other major commodities were flat or down; commodities roughly netted out without significant Q1 impact, whereas tariffs had more of an impact.
How would potential stiff tariffs on Colombia impact the business?
Colombia represents about 60%-70% of fresh flowers entering the U.S., so steep tariffs would significantly impact the entire U.S. floral industry and raise prices; the company would try to offset with other sourcing (e.g., Ecuador), but everyone would do the same, so price pressure would be industry-wide.
What are you doing with pop-up shops this holiday season versus last?
Nine locations this season (eight Harry & David, one Things Remembered), about the same as last year. The main value is longer-term: identifying a profitable, scalable physical retail concept combining categories the company already manufactures, beyond just driving sales and brand awareness.
Given expansion onto Amazon and Walmart.com, is a rebranding needed beyond the 1-800-Flowers.com name?
Great question; the company hired an external marketing and brand consultant to help answer it and will take a customer-back approach, doing whatever resonates best with customers.
More on 1 800 Flowers Com Inc
Reported 2025-10-30 · figures from the 1 800 Flowers Com Inc Q1 2026 earnings call.
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