What Management Said
Read the full Q3 2026 transcript ↗Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the table of our earnings release. As we move through fiscal 2026, we remain focused on stabilizing the business and building a stronger foundation for future growth. From a category perspective, our Gourmet Foods & Gift Baskets segment performed better than our Consumer Floral & Gifts segment. In addition, we are evolving how we operate our floral business, including how we balance florist-fulfilled orders with shipments fulfilled from our distribution centers.
We are now operating these areas in a more coordinated way, with our florist-fulfilled orders and direct shipment team working together on assortment decisions. Looking ahead, as our strategic initiatives take hold, we're beginning to shift toward a more balanced approach that includes targeted marketing investments to support future growth. While these efforts are expected to take time to translate into revenue, they are an important step in rebuilding demand in a more sustainable way. These investments will begin in the fourth quarter and continue into the next fiscal year as we strengthen the capabilities needed to support long-term growth.
More broadly, while cost discipline remains a priority, we believe these actions, combined with our structural improvements, are strengthening the foundation to stabilize the business and enable long-term growth. During the third quarter, revenue came in line with our expectations, reflecting continued execution against our disciplined marketing approach and the ongoing impact of changes in search engine results and pressure on direct traffic. From a category perspective, our Gourmet Foods & Gift Baskets segment performed meaningfully better than our Consumer Floral & Gifts segment during the quarter. Gourmet Foods & Gift Baskets segment benefited from an approximate 5% revenue lift from the timing of Easter.
What went well
- Valentine's Day delivered a significantly improved customer experience with strong gains across key service metrics, validating the structural and operational changes underway, even with the holiday falling on a Saturday during President's Day weekend.
- Achieved the previously announced $50 million two-year cost savings target in less than a year, reaching a full $50 million annualized run-rate ahead of plan, split roughly equally between cost of goods sold and SG&A.
- Gourmet Foods & Gift Baskets segment performed meaningfully better than Consumer Floral & Gifts, benefiting from an approximate 5% revenue lift from the timing of Easter and was essentially flat year-over-year.
- Gross margin (excluding prior-year system-related issues) improved 10 basis points to 33.2%, reflecting stronger pricing discipline, reduced discounting, and improved marketing efficiency, while contribution margin and the ad-to-sales ratio improved year-over-year.
- Adjusted EBITDA loss narrowed to $31.2 million from a $34.9 million loss in the prior-year period, and operating expenses declined $16.4 million to $144.3 million.
What went wrong
- Consolidated revenue decreased 11.6%, with the Consumer Floral & Gifts segment declining 18.7% and BloomNet declining 5.9%, reflecting disciplined marketing, prior-year inefficient marketing spend in floral, and changes in search engine results pressuring organic and direct traffic.
- Recorded a non-cash goodwill and trade name impairment charge related to the Consumer Floral & Gifts segment and the Personalization Mall trade name, which impacted earnings (though not cash flow).
- Net debt increased to $94.3 million from $75.3 million a year ago.
- Cost savings benefits were partially offset in the short term by consultant costs, incentive compensation, and tariffs, with commodity headwinds from elevated cocoa prices and emerging fuel surcharge pressure on outbound shipping from higher oil prices.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Consolidated revenue | FY2026 | decline of approximately 10%-12% versus prior year |
| Adjusted EBITDA | FY2026 | approximately break even within a range of plus/minus $2 million, including approximately $22 million of incentive compensation and consultant costs |
| Marketing spend as a percent of sales | Q4 FY2026 | approximately flat compared to the prior-year period |
| Incremental run-rate cost savings | next fiscal year (FY2027) | additional $15 million-$20 million, bringing total identified savings to approximately $65 million-$70 million |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Consolidated revenue | -11.6% | Disciplined marketing approach, prior-year inefficient marketing spend, and changes in search engine results pressuring organic and direct traffic. |
| Consumer Floral & Gifts segment revenue | -18.7% | Easter timing shift and heavier prior-year inefficient marketing spend, combined with focus on improving marketing contribution margin. |
| Gourmet Foods & Gift Baskets segment revenue | essentially flat | Approximate 5% revenue lift from the timing of Easter and more disciplined prior-year marketing relative to floral. |
| BloomNet segment revenue | -5.9% | Same factors discussed for the broader business including search engine result changes and direct traffic pressure. |
| Gross margin (ex prior-year system issues) | +10 bps to 33.2% | Benefits from cost reduction initiatives partially offset by tariffs, commodity costs, and fixed cost absorption. |
| Adjusted EBITDA | loss of $31.2M vs loss of $34.9M | Modest year-over-year improvement from cost actions and improved marketing efficiency. |
| Operating expenses (adjusted) | -$16.4M to $144.3M | Cost reduction initiatives and lower marketing/labor costs. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Cost savings program | $50 million two-year run-rate target across FY2026-FY2027 | Full $50 million achieved ahead of plan in under a year; new incremental $15M-$20M target raising total to $65M-$70M | — |
| Marketing strategy | Primary focus on marketing contribution margin and reducing bottom-of-funnel spend | Transition to a more balanced approach with targeted top- and mid-funnel investments beginning in Q4 to rebuild the brand and reach younger customers via Instagram, TikTok, and podcasts | — |
| Third-party marketplaces | Selling on Amazon, Walmart, DoorDash, Uber Eats | Launched Instacart partnership ahead of Valentine's Day supported by local florists; expects out-of-own-site sales to reach double digits of company revenue within three years | — |
| AI and digital experience | Early product discoverability and conversion testing | Fully implemented AI-powered sorting and ranking on 1-800-Flowers.com prioritizing customer best-sellers; deploying AI in the call center; martech stack investments beginning in Q4 | — |
| Headcount and operating model | Transition to function-driven operating structure | Reduced core headcount by approximately 20% since January 2025, driving synergies and more efficient decision-making | — |
Q&A Summary
What customer experience metrics improved during Valentine's Day and what learnings will be applied to Mother's Day?
There were many learnings across merchandising, digital, marketing, and post-purchase experience. AI-driven sorting and ranking improved conversion (65% of sales come above the fold) and revealed customer preferences. Marketing experiments going top- and mid-funnel via podcasts, TikTok, and Instagram succeeded and will be expanded. Mother's Day will improve on key metrics but won't show the full impact yet given limited time to change between holidays.
How should we think about cost savings on a net basis, OpEx versus cost of goods?
The $50 million is split roughly equally between cost of goods sold and SG&A. Not all savings flow through this year due to near-term consulting costs, tariffs, and commodity headwinds. Consulting costs end in FY2027, allowing more savings to flow through, but deployment will be deliberate and not a dollar-for-dollar EBITDA flow-through as savings are reinvested.
How much are the consultant costs for this fiscal year?
Total incentive compensation and consultant costs are about $22 million in this year's P&L, of which consultant costs are about $12 million-$13 million.
Have changes in marketing opened the door to competitors, including low-cost providers?
Yes, flowers is very competitive especially during events and Google makes it easy to buy others' brands, which raises customer acquisition costs. The company is leveraging 1-800-Flowers.com brand awareness and natural/direct traffic, building the brand through mid- and top-funnel marketing, and improving digital experience and retention to differentiate.
What is the true baseline growth rate coming out of the inflection point (historically 3%-5% revenue, 8% EBITDA growth)?
No FY2027 guidance yet, but longer term and further out the company believes it would get back to those growth rates. It is a sequencing process from declining at 20%+ a year ago toward positive days and weeks; the company is ahead of where it expected to be but with work remaining.
Where are the two or three key areas driving the improved EBITDA margin outlook despite $10 million more incentive comp and consulting costs?
Cost benefits are flowing through gross margin, plus pricing discipline, more targeted promotional activity, better coordination between florist-fulfilled and direct shipment, reduced discounts, and improved AOV. This is partially offset by higher tariff, commodity, and shipping costs; gross margin was up about 10 basis points year-over-year.
Are commodity inputs down and when do consultants and tariffs roll off?
Cocoa remains elevated year-over-year but butter, flour, and eggs are down. Fuel surcharges on outbound shipping are rising with oil prices; inbound is unaffected due to contracts. Consultant costs roll off at the end of June (none from July 1st), and tariff impacts begin to recede in early FY2027 as the company anniversaries implementation and gets lower rates.
Will improved marketing efficiency lower marketing spend as a percent of sales going forward?
Potentially not in the short term, as savings will be redeployed into marketing and strategic top-/mid-funnel investments to rebuild the brand. Longer term, marketing spend should become more efficient. Every investment is tested and measured against a control group, with spend continued only where there is a demonstrated lift.
More on 1 800 Flowers Com Inc
Reported 2026-05-07 · figures from the 1 800 Flowers Com Inc Q3 2026 earnings call.
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