1-800-FLOWERS.COM, Inc.

Good morning and welcome to the 1-800-Flowers.com Inc. fiscal 2023 second quarter results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star then one on your telephone keypad. And please note that this event is being recorded. I would now like to turn the conference over to Andy Miliband, Senior Vice President of Investor Relations. Please go ahead.

Good morning and welcome to our fiscal 2023 second quarter earnings call. Joining us today are Chris McCann, CEO, Tom Hartnett, President, and Bill Shea, CFO. Before we begin the call, I'd like to remind you that some of the statements we make on today's call are covered by the Safe Harbor disclaimer contained in our press release and public documents. During this call, we will make forward looking statements with predictions, projections, and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, including those contained in our press release and public filings with the Securities and Exchange Commission. The company disclaims any obligation to update any of the forward looking statements that may be made or discussed during this call. Additionally, we will discuss certain supplemental financial measures that were not prepared in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables of our earnings release. And now, I'll turn the call over to Chris.

Thank you, everyone, and good morning. Our second quarter results reflect a successful holiday season and benefited from the strength of our food brands and improving gross margins. We did a good job projecting consumer demand for the quarter, particularly related to trends and sales curves. On a consolidated basis, revenue declined 4.8%. Our gourmet foods and gift baskets business had a solid quarter, with revenue being relatively flat, while revenue within our consumer floral and gift segment decreased 12%. This is in keeping with past trends in which consumers gravitate towards food gifting options from floral arrangements in challenging macroeconomic environments. Unlike a year ago when there was an unprecedented pull forward in holiday demand due to the global supply chain challenges, we had anticipated that customers would revert to their historical shopping patterns and shop much closer to the holidays. And that is what we experienced. Beginning in October, we witnessed a very promotional retail environment and those trends continued throughout the holiday period. Additionally, with some of our brands that offer a lower price point and appeal to a lower income customer, we noticed that customers appeared to be more price sensitive and were waiting for deals. We strategically utilized promotional pricing throughout the holiday period to entice customers while simultaneously reducing other offers, such as free shipping, that were not as impactful in the current economic environment. Moving forward to November, Black Friday and Cyber Monday were once again big days for us and represented the kickoff to the holiday shopping season. In fact, Personalization Mall had its biggest revenue day ever on Cyber Monday. From there, we continued to see demand build throughout the month of December with some of our greatest volume days coming during the two weeks before Christmas. Customers traded up to higher value, higher price point assortments within our food business. with the largest gains coming in at price points that were over $100. We also saw customers gravitate towards our prepared meal offerings that make their lives and entertaining easier. Our heat and serve meals, appetizers, and side dishes allow customers to spend less time in the kitchen and more time with family and friends. And our charcuterie and cheese assortments also saw a nice growth as more customers began to entertain for the holidays once again as compared to the past couple of years. All told, Harry & David set new records for this holiday season, including its biggest sale day ever in December, breaking a record that was set in the pandemic year of 2020, its first $3 million mobile day, as more customers shifted from desktop and tablet into mobile, and record sales of our award-winning wines, all resulting in a record sales quarter for the brand, sustaining the growth that we have seen over the past few years. Cheryl saw strong performance from the holiday assortment, which included the introduction of candy cane, maple syrup, and cinnamon swirl cookies, helping offset softer everyday sales earlier in the quarter. And Wolfram & Screw, its e-commerce business, in part benefiting buyers from a 6% increase in new customers. Turning to our floral business, We continue to leverage our strong assortment of products and brands to meet our customers' needs. We saw strong growth in holiday plants that grew 10% over the prior year period. And various floral and sweets pairings that include offerings from 1-800-Flowers and Sherry's Berries saw strong double-digit growth. However, as the floral business does not have the large spike at holiday, these successes were unable to offset the lower demand for everyday gifting throughout the quarter. Additionally, while our direct-to-consumer business across the enterprise remained fairly resilient to macroeconomic pressures this quarter, our B2B business was not immune. Our corporate gifting business saw demand soften as companies began looking for more opportunities to cut expenses. And as more employers shifted to hybrid work environments over the past year, companies began hosting holiday parties once again in lieu of corporate gifting. While corporate gifting remains under pressure today, It is a focus of ours, and we see growth opportunities and market share gains in the future. Our second quarter performance also benefited from our marketing efforts. We are transforming our company from being a purely transactional e-commerce company toward developing deeper relationships with customers through content and community. Our focus is on inspiring our customers to give more and to build better and more meaningful relationships in their lives. We built a company on knowing that people are naturally compelled to give, and it's no coincidence that we found our best customers to be the ones who enjoy giving the most. Our initiatives include our weekly celebrations pulse email newsletters, our experiential programs such as floral design classes, and expanded content development across multiple social channels. Through these initiatives, we are focused on nurturing our relationship with existing customers, growing our multi-category customer cohort to increase their purchase frequency, and defining our company as the preferred destination for all of our customers' gifting needs. As could be expected, net sales per customer are highest amongst our multi-category customers, followed by our 1.4 million celebrations passport members. Turning to our margins, during the second quarter, as we anticipated, our margins improved on lower inbound freight costs and strategic pricing initiatives. As Bill will discuss further, we expect this trend to continue in the second half of this year and into next year. As these costs continue to moderate, we anticipate that our margins will return to their historical levels over the next few years. As such, we expect to see a substantial recovery in EBITDA. In summary, we anticipate that certain macro trends would help us, and indeed they have. While they have not reverted to that pre-COVID levels, certain cost inputs continue to be favorable, which gives us confidence in our ability to improve margins in the future. Based on our second quarter performance, and in particular, our gross margin improvement and reduction in operating expenses, we are increasing our fiscal 23 adjusted EBITDA guidance to be in a range of 80 million to 85 million. As we look to the balance of the year, we are focused on executing for the upcoming holiday period. We expect the consumer to remain cautious in this environment and reduce their spend on everyday gifting occasions while continuing to spend for the major holidays. Even in an uncertain environment, we are confident that customers see value in our unique and one-of-a-kind gifts that make the perfect solution no matter who you are shopping for. As we look beyond Valentine's Day to the spring, we're focused on our Giving is the Gift campaign. From friends, family, teachers, and caregivers, this is a great time to remind those in your life that you appreciate all that they do for you and your family or business. Before I turn it over to Bill for the financial review, I wanted to take a moment to highlight the newest addition to our family of brands. We are excited to welcome things remembered to our all-star roster. This is a perfect example of a tuck-in acquisition That enables us to further expand our leadership position and product offerings in the personalization category. Things Remembered is very complimentary to Personalization Mall and significantly grows the number and variety of personalized products that we can offer to our customers to help celebrate every occasion with personalized masterpieces. We acquired a Things Remembered brand and related IP, including their customer list and certain assets for approximately $5 million. shortly after the second quarter ended. This edition perfectly illustrates how our e-commerce platform was built for rapid growth as we seamlessly incorporate complimentary brands onto our platform and grow them profitably. Now I'll turn the call over to Bill for his financial review.