FLWS Q3 Deep Dive: Turnaround Efforts Focused on Marketing Efficiency and Expanded Distribution

E-commerce florist and gift retailer 1-800-FLOWERS (NASDAQ:FLWS) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 11.1% year on year to $215.2 million. Its non-GAAP loss of $0.83 per share was 29.7% below analysts’ consensus estimates.

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StockStory’s Take

1-800-FLOWERS’ third quarter results missed Wall Street’s expectations, with revenue and adjusted earnings per share both falling short of analyst estimates. Management attributed the performance to a deliberate shift in marketing strategy, prioritizing marketing contribution margin over pure sales growth. CEO Adolfo Villagomez described the company as being early in a turnaround process, noting, “there is much more work to be done and inevitably, there will be some challenges.” The team pointed to ongoing operational efficiencies and cost-saving initiatives as partially offsetting softer sales, with early signs of improvement in underlying profitability when adjusting for timing-related items.

Looking forward, management is emphasizing disciplined marketing investment and operational efficiency as the foundation for future growth, while also navigating industry headwinds such as tariffs and transportation costs. The company aims to expand beyond its traditional e-commerce channels, increasing its presence on third-party marketplaces and testing new physical retail concepts. CEO Villagomez said, “This strategy positions us for stronger and more sustainable growth and profitability,” while CFO James Langrock highlighted a target of $50 million in incremental cost savings over the next two years, with half expected in the coming year.

Key Insights from Management’s Remarks

Management emphasized the initial benefits of its strategic shift towards marketing efficiency and a broader distribution approach, while acknowledging ongoing challenges from industry competition and cost pressures.

• Marketing strategy overhaul: The company moved away from focusing solely on revenue to prioritizing marketing contribution margin—gross profit minus credit card and marketing fees—which aims to ensure marketing spend drives profitable growth rather than just higher sales.
• Third-party marketplace entry: For the first time, 1-800-FLOWERS began selling through Amazon and walmart.com, expanding its reach beyond owned websites. Management noted early positive traction, with plans to optimize product offerings and apply best practices learned from these platforms.
• Physical retail testing: The company launched nine holiday pop-up shops as a test for a potential scalable physical retail concept, aiming to boost brand awareness and explore new revenue channels. Existing Cheryl’s Cookies stores are cited as a profitable model for future expansion.
• Leadership changes: Melanie Babcock was appointed Chief Marketing and Growth Officer, bringing experience in leveraging AI and customer-centric strategies from her tenure at The Home Depot. Her role is to drive a modernized, data-driven marketing approach.
• Cost efficiency initiatives: Ongoing collaboration with external consultants has already yielded $17 million in annualized cost reductions, with a further $50 million in targeted savings identified, though these efforts are being partially offset by higher tariffs and transportation expenses.

Drivers of Future Performance

1-800-FLOWERS’ outlook centers on disciplined marketing investment, cost reductions, and channel expansion, while managing industry-wide headwinds such as tariffs and heightened competition.

• Sustained marketing discipline: Management intends to further refine its marketing spend, focusing on channels that deliver higher returns and improving customer acquisition efficiency. This approach is expected to drive profitability even if near-term sales growth remains muted.
• Cost savings implementation: The company projects $50 million in incremental cost savings over two years, with half to be realized in the coming year. These savings are expected from operational streamlining, supply chain improvements, and centralized marketing operations, though some benefits may be delayed by upfront restructuring costs.
• Channel and product diversification: Management is investing in third-party marketplaces and exploring physical retail formats. These efforts are designed to capture new customers and reduce reliance on direct website traffic, but execution risks remain if consumer behaviors or competitive pressures shift.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the effectiveness of ongoing cost reduction efforts and whether identified savings materialize as planned, (2) progress in ramping up sales through third-party marketplaces and physical retail pilots, and (3) the impact of competitive pressures on digital marketing costs and customer acquisition. We will also watch closely for any industry-wide tariff developments that could further affect margins.

1-800-FLOWERS currently trades at $3.58, up from $3.50 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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