Good morning, and welcome to the 1-800-FLOWERS.COM Fiscal 2024 Fourth Quarter and Year-End Earnings Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Andy Milevoj, Senior Vice President, Investor Relations. Please go ahead.

Good morning. and welcome to our fiscal 2024 fourth quarter and year-end earnings call. Joining us today are Jim McCann, Chairman and CEO; Tom Hartnett, President; Bill Shea, Chief Financial Officer; and James Langrock, Chief Administrative Officer. Before we begin, 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 Jim.

Thanks, Andy, and good morning, everyone. Thanks for joining us. Before we dive into our review, I wanted to begin with this morning's announcement that Bill Shea has confirmed his plans to retire this December. First and foremost, I'd like to congratulate Bill on his upcoming retirement and to thank him for his 3 decades of tireless commitment to our company. Bill has been a terrific partner to me and a tremendous asset to our company during a period of incredible growth and transformation. Bill was instrumental in overseeing our financial operations, fostering great relationships with our lending partners and maintaining a strong balance sheet. During Bill's tenure, our company grew from a multichannel floral retailer with approximately $150 million in revenue to a technology platform, the thoughtful gifting comprised of an all-star roster branch with over $1.8 billion in revenue. Bill, thank you for all that you've done for 1-800-FLOWERS.COM. We wish you all the best on your retirement and hope your retirement is filled with joyous time with your family and friends.

I also want to take this opportunity to introduce James Langrock, who joined our company as Chief Administrative Officer earlier this year and will become our CFO upon Bill's retirement. James came to us with tremendous industry and financial background having been CFO at other public companies involved both in the food and technology industries. We're glad to have James on board to help lead the next chapter of our company's growth. James will get to know many of you in the days ahead. And now let's turn to our performance. As we turn our sights on the fiscal year ahead, we think it's important to begin by reflecting on our performance and execution against our strategic initiatives over the past year and how it sets the stage for fiscal '25 and beyond. This includes a macro consumer environment that's been -- that we've been navigating, the resilience that we've demonstrated in our results and how we positioned ourselves for the future. Top line challenges for fiscal '24 certainly persisted longer than anticipated during this year. If we were to rewind the clock back 12 months, broader conversations we're focused on how many rate cuts we had to see throughout fiscal '24. Instead, we're still waiting for the first rate cut and we experienced a macro environment that remains challenging for many, especially lower-income households who were the most impacted by the higher interest rates and persistent inflation. While our revenues declined in the face of those macro conditions, our gross margin was a real story in fiscal '24, having rebounded significantly. This is a testament to our focus on cost management and operational efficiencies, combined with a reversion to the mean of certain commodity costs. Our ability to adapt quickly to changing [ market ] conditions has been crucial in this regard. As a result, our year-over-year EBITDA grew to $93 million. As we look to the future, we remain optimistic. Our gross margin recovery is well underway and our efforts to operate more efficiently are now evergreen. We've also been investing in our business. And this morning, you will hear how we plan to harvest these investments in fiscal 2025 to improve our top line trends. While acknowledging of consumer discretionary spending environment that remains challenging, we believe that our strategic investments in key areas differentiate us and will increase frequency and retention as customers come to us as their gifting destination of choice. We are committed to driving long-term growth, pursuing innovation and enhancing shareholder value. And now I'll turn the call over to Tom for a business update to discuss some of the opportunities that we're focused on to improve our revenue trends in fiscal '25 and drive our longer-term value creation.

Thanks, Jim, and good morning, everyone. Today, I'll provide an update on our business performance as well as an update on our relationship innovation development, which encompasses new or enhanced product offerings, our merchandising efforts as well as our user interface enhancements. Through these initiatives, we continuously evaluate our offerings, pricing and bundling opportunities to ensure we have appropriate price points for each of our customer segments. And that we are actively managing the pricing elasticity of our product portfolio.

Turning to our performance. Heading into fiscal 2024, we anticipated that the broader macro environment would improve as the year progressed, in turn, improving our top line trends. Additionally, we anticipated a sizable improvement in our gross margin. While our expectations for top line improvement has not occurred as quickly as we had anticipated. Our gross margin recovery on the other hand, occurred at a faster pace than initially expected. Our gross margin recovery benefited from our efforts to operate more efficiently, combined with the decline of certain commodity costs. As a result, we're able to grow adjusted EBITDA to $93.1 million despite the decline in revenues.

In fiscal '24, we had over 10 million customers and approximately 1.1 million Celebrations Passport members. By focusing on the frequency and retention of our existing customer base, sales from existing customers represented 74% of our revenue in fiscal 2024. We continue to believe there is tremendous opportunity in increasing the lifetime value of our existing customer base by converting them into multi-brand customers. Multi-brand customers currently represent approximately 13% of our customer base, yet they account for approximately 28% of our revenue. As we discussed in some detail over the past year, we saw a sizable stratification between our lower and higher income consumers. With our lower income consumers being more affected by higher interest rates, higher credit card debt and persistent inflation. In response, we've been leaning into our pricing elasticity efforts to ensure we have gifts for customers throughout the income spectrum. For our customers who are more price sensitive, we're providing more value offerings. A great example of this is our bouquet of the month offering. This new offering features a bouquet of flowers at all in price of $50, which is inclusive of our shipping fees. This program enables us not only to provide great value for our customers, but also provides a new way for us to partner with our farmers and provide more value to them by further leveraging our supply chain.

On the other end of the income spectrum, we will continue to lean into higher value bundles in some of our higher end brands. Since acquiring Things Remembered, we successfully integrated the brand onto our platform and have been building out its product portfolio, which appeals to a more affluent customer. With that in place, we plan to accelerate the sales growth that we've experienced since acquisition. To further enhance our product portfolio in July, we acquired Scharffen Berger, a producer of high-end extraordinary chocolates. This is another great tuck-in acquisition for us. We plan to grow with Scharffen Berger by introducing their legendary brand, which is well known to chocolatiers to our customers by including their chocolate in our gift assortments from our family of brands. Additionally, as I mentioned on our last call, we continue to lean into one of our main differentiators last mile delivery. Beyond Flowers and Shari's Berries, we will continue to expand the availability of additional products from our family of brands, such as Cheryl's cookies in 1-800-Baskets to offer more gifting options for those last minute occasions. I look forward to keeping you apprised of these in our other initiatives throughout the fiscal year. Now I'll turn it over to Bill to provide the financial review.

Thanks, Tom, and good morning, everyone. Fiscal 2024 proved to be the year of our gross margin recovery. On a fiscal year basis, our gross margin increased 260 basis points, bringing us to 40.1% for fiscal '24. For the fourth quarter, our gross margin improved to 38.4%, increasing 130 basis points as we began to lap the improvement of a year ago. We've now recovered a meaningful portion of our gross margin that had been eroded over the last few years due to the supply chain challenges and higher ocean freight, commodity costs and labor costs. But the job is not done. Over the next few fiscal years, we expect to return to our historical gross margin rate in the low 40% range as certain commodity costs continue to revert to their mean and our evergreen Work Smarter Initiatives focused on operating more efficiently continue to yield future benefits. Our gross margin recovery helped mitigate the dynamic consumer environment that we have been navigating throughout fiscal 2024. Jim highlighted, we had expected the broader macro environment to become more supportive as fiscal 2024 progress, which did not occur and had a disproportionate impact on our lower income customers. As a result, our revenues declined 9.5% and 9.2% for the fourth quarter and fiscal year, respectively. As more price-sensitive consumers continue to pull back our higher income customers comprised a greater portion of our revenues and they gravitated towards our higher priced items that led to a 2.9% increase in our AOV for the quarter and 2.7% for the fiscal year. As a component of our Work Smarter Initiatives, our organization remains steadfast in managing expenses. And despite the inflationary environment, we are operating within, we reduced operating expenses by $22.2 million for the fiscal year, when excluding our impairment and other nonrecurring charges as well as the impact of our nonqualified deferred compensation plan in both periods. As a result of our gross margin recovery and expense optimization efforts, our fiscal '24 adjusted EBITDA improved $1.9 million to $93.1 million, offsetting the decline in revenue. For the fourth quarter, the adjusted EBITDA loss increased by $2.2 million to $8.8 million. Net loss was $20.9 million or $0.32 per share and $6.1 million or $0.09 per share for the fourth quarter and fiscal year, respectively. For the quarter, the adjusted net loss was $21.8 million or $0.34 per share. And the adjusted net income for the fiscal year was $11.6 million or $0.18 per share.

Now let's review our segment results. For the fourth quarter, our Gourmet Food and Gift Baskets segment revenues declined 12.8% to $105.2 million. Gross profit margin increased 190 basis points to 30%, benefiting from lower freight costs, the Company's inventory and labor optimization efforts as well as a decline in certain commodity costs. As a result, the segment contribution margin loss was $14.4 million, compared with a loss of $13.4 million in the prior year period. For the full fiscal year, revenues declined 9.4% to $874.3 million. Gross profit margin increased 340 basis points to 38.3%, once again benefiting from lower freight costs, the Company's inventory and labor optimization efforts as well as a decline in certain commodity costs. Adjusted segment contribution margin increased to $85 million, compared with $77.5 million in the prior year.

For the fourth quarter, our Consumer Floral and Gifts segment revenues declined 6.7% to $231.6 million. Gross profit margin increased 20 basis points to 40.8%, improving on lower fulfillment costs and our logistics optimization efforts. As a result, segment contribution margin declined to $25.7 million, compared with $30.7 million in the prior year. For the fiscal year, revenues decreased 7.7% to $849.8 million, plus profit margin increased 130 basis points to 40.8%, benefiting from lower fulfillment costs and our logistic optimization efforts. As a result, segment contribution margin was $87.7 million, compared with $95.5 million in the prior year.

Turning to our BloomNet segment. Revenues for the quarter and fiscal year were impacted for the lower order volume processed by BloomNet, which included an expected decline in orders by one of our business partners following their merger with a competitor. For the fourth quarter, revenues declined 18.7% to $24.4 million. Profit margin increased 710 basis points to 49.7%, also benefiting from lower ocean freight costs as well as product mix. As a result, segment contribution margin was $7.8 million, compared with $7.4 million in the prior year period. For fiscal year, revenues decreased 19.1% to $107.8 million. Gross profit margin increased 550 basis points to 48.2%, primarily reflecting lower volume of lower-margin orders, lower ocean freight costs as well as product mix. Adjusted segment contribution margin was $33.8 million, compared with $37.2 million in the prior year.

Turning to our balance sheet at fiscal year-end. Our cash and investment position was $159.4 million compared with $126.8 million a year ago. Inventory declined to $176.6 million compared with inventory of $191.3 million at the end of last fiscal year. And in terms of debt, we had $190 million in term debt and no borrowings under our revolving credit facility. As a result, our net debt was $30.6 million compared with $73.2 million at the end of last year.

Now let's turn to our fiscal '25 guidance. Over the last few years, our company has made investments to significantly expand our offerings and improve the customer experience through organic growth and acquisitions. For fiscal '25, we expect our top line trends to benefit from these investments that have expanded and enhanced our platform. While it's difficult to predict when consumers will increase their discretionary spending, we plan to leverage our pricing elasticity to ensure we have gifts to serve each of our customer segments. Additionally, our wholesale business is expected to rebound as our partners have already placed and increase their gift basket holiday season orders as compared to fiscal 2024. Following a significant rebound in fiscal 2024, we expect our gross margin to continue to improve but at a slowing rate of improvement. We expect the improvement to be in the tens of basis points, which is on top of the 260 basis point improvement in fiscal 2024. This reflects the cross currents we are experiencing in the commodities markets. Certain commodity prices have reverted to their mean, while others remain relatively high, including cocoa prices, which have actually increased. Additionally, we plan to increase our marketing spend to further enhance our relationship innovation investments. Lastly, our guidance assumes increased incentive compensation expense in fiscal '25 as compared to a partial bonus payout in fiscal '24. Based on these assumptions, we expect total revenue on a percentage basis to be in the range of flat to a low single-digit decline as compared with the prior year. We expect our revenue trends to improve as the year progresses with some minor sequential improvement in Q1 of fiscal '25 that accelerates as the year progresses. Adjusted EBITDA is expected to be in the range of $85 million to $95 million, and free cash flow will continue to be strong in an expected range of $45 million to $55 million.

Before I turn the call back to Jim for his closing remarks and Q&A. And to follow up on Jim's comments earlier on this call, I'd like to take a moment to say thank you for everyone at 1-800-FLOWERS for so many great years and memories. I'd also like to thank many of you whom I have come to know quite well over the many years that we have worked together. It's been an absolute honor to work for such a great company whose mission is to bring people together and deliver smiles. I'd also like to take this moment to welcome James on board. James is a tremendous addition, who brings a wealth of experience to 1-800-FLOWERS leadership team. I'll be partnering with James over the next 4 months to ensure a seamless transition as he takes over the CFO role upon my retirement at the end of December. Now I'll turn the call back to Jim for his closing remarks before we open it up for Q&A.

Thanks, James. It's great to have you on board. As we go through this transition period, Bill and James will both be on our next earnings call towards the end of October, and then James will lead the following earnings call that we host toward the end of January. And with that, I'll open the call up for questions and invite the operator to please give instructions now.

[Operator Instructions] The first question today comes from Anthony Lebiedzinski with Sidoti.

Bill, congratulations on your pending retirement. I certainly enjoyed working with you for many years, and James I look forward to working with you as well. . So I guess, first, just looking at the quarter here, so GFGB revenue decline of 13% was most surprising to us. And Harry & David is the largest brand within that segment, which generally targets a higher-income consumer. But I just wanted to kind of like as you look at the different brands, maybe you could just talk more a little bit as far as where you're seeing the biggest kind of weakness? And then where are you seeing some signs of strength?

Thanks for your question. It's Jim. By the way, the best pronunciation of your last name we ever heard.

Great.

I'll ask Tom to start the answer and if Bill want to contribute to it.

Yes, I think part of it, Anthony, was just the shift in the Easter placement. So the Q3 was stronger with just the Easter placement. And with the...

Still remember that Easter was the last -- the Easter itself is the first day of the fourth quarter. So all of the sales that happened in GFGB for Easter happened in the third quarter. So that will skew it some. But Tom?

And I think the other part of it is as we were moving into the holiday, I mean, moving into the fourth quarter, we were seeing A lot of our advertising efforts not be formative and working as well as we like on the GFGB side. And so we chose to make certain adjustments in our marketing schedule in order to focus there on the bottom line there.

Anthony, I think if you take a bigger picture of where our revenue trends are pretty comfortable year-over-year down about 9% both years. But if you pull out wholesale -- with wholesale, we had a very good year in...

Disproportionately in GFGB.

Yes. Right. But wholesale was a strong year in '23, a down year in '24, and then we have a bouncing back in the upcoming '25 year. If you look at e-com pullout, wholesale and you look at kind of just the e-commerce trends, we were down 9.8% in '23. We were down 7.5% this past year. And if you break up, and we've talked about this a lot, you got to always look at us as two different halves of the year, the first half of the year and the second half of the year. Our e-commerce in the first half of the year was down 7.9%. E-commerce actually overall in the second half of the year was down 6.8%. So wholesale kind of distorts the numbers a little bit, but the e-commerce trend is actually improving in the second half of the year versus the first half of the year.

Got it. All right. That's very helpful. And just a follow-up on the wholesale side. So glad to hear that you expect that component of your revenue to be up in fiscal '25. As far as timing of that, I know that can fluctuate between 1Q and 2Q. What is your general sense as to when you'll see that pickup in revenue, whether it's going to be more 1Q or 2Q? Or is it too early to say for sure?

Definitely be Q2. There's always the timing at the end of Q1 into Q2. So we're still -- and that's sometimes dictated by the big box guys. But the growth will all be in Q2. A large majority of those revenues are in Q2 anyway.

So the good news is we know it's coming because we've already booked the business. It's just a question of shipping dates that they request, and that's right around the end of the first quarter. So as Bill said, you're going to see the improvement that we've budgeted for a planned and now have come in the second quarter.

Got you. Okay. And then just overall, in terms of the different initiatives that you've laid out, I mean, I guess how would you rank them as far as being the most impactful for you guys? As far as how revenue will improve as the year progresses maybe if you could just kind of walk us through and prior, like give us a sense as to like which of the initiatives will be the most impactful and so on.

Overall, I'd say that the things that -- the initiatives that we have the most promise and are getting behind the most are all around our relationship innovation efforts, the way that we interact with our customers, the way they interact with us, a lot of it on the direct marketing side, so as the engagement efforts we have, it's the tools we're introducing throughout this fiscal year to give them more and more sophisticated tools in terms of managing relationship and the lives. So I would say primarily the improvements that we see going forward will be relationship innovation side. Of course, we're always focused and Bill will touch more on some of the operating efficiency efforts we have our Work Smarter Initiatives. Work Smarter initiatives, as we described in the opening remarks, we now consider evergreen. And Bill will be focusing a lot of his time leading up to his retirement on really ramping up our Work Smarter initiatives. Bill, do you want to touch on some of those?

Yes. But even with back -- on the revenue side, just the pricing elasticity that we've been efforting both on the high end, but also on the value oriented Tom made some comments in his formal remarks about the $50 kind of all-in floral bundles. But we have a lot of more products to address kind of the value consumer that's out there, that has struggled the most. With respect to Work Smarter, we're continuing to implement initiatives, automation initiatives in our distribution centers are using AI on both the front end of the website to create a better customer journey and really on the back end with our customer service platform to reduce labor and be more efficient. But that's -- as Jim and Tom have indicated, those are kind of evergreen initiatives that will continue to generate savings for us going forward.

Got you. Okay. And then lastly for me before I pass it on to others. So you made a small acquisition of a high-end chocolate company. Can you comment as far as like how to think about the impact of that? And plus also what is your appetite for additional acquisitions?

Sure, Anthony. For appetite, I'll start with our appetite is kind of robust and the buffet is getting nicer. What I mean is because of the capital environment we're in, companies that have struggled to find a bottom line and don't have very close prospects are turning profitable, as you would well imagine, or struggling to find capital. That's made the inbound efforts to us a quite robust of late. So I think there'll be some opportunities, and certainly, there'll be some opportunities. We always have to manage our effort there to see if they really do pay off for us. There's always integration risk. There's obviously the capital side of things. But I think there's going to be a robust set of opportunities. What we've done in the last 1.5 years or so on the acquisition side is buy things that really do rev up our primary initiatives. Our Work Smarter Initiatives and our platform, they lever our platform.

So let me turn to the one you mentioned Scharffen Berger. This is a brand, frankly, I looked at 15 years ago because of its terrific brand position, its uniqueness, its high-quality product offerings. Another company, beat us to the punch there and bought back company. Fortunately, for us, it came back around. So it's very small. But everything about the story, everything about the brand, everything about its recipes, its unique product are still intact, has great people there. And coincidentally, it's only 10 minutes away from our facilities in Medford, Oregon where it was most recently located. So very easy for us to tuck in. And what do they need? They need the things that we have. our huge customer base, our e-commerce marketing capability or what we call house media, Anthony. So what I mean by that is inexpensive marketing opportunities that we have that are already a part of what we do including them in our e-mail communications, on our other websites, putting their products and our packaging, they're already working on where it's needed and necessary. So our gift baskets when they need a component of a high-end chocolate product, guess who it's going to be. So we have a number of ways of growing our brands. So we take a kernel that is a great brand, great recipes, great history we have. They have a good facility, but it can't handle much more volume than the couple of million dollars that they do now. We are going to have a 1 million square foot facility down the road with state-of-the-art, very highly automated equipment that can take their very unique recipes and do it in a high-scale volume with no additional capital cost to us. So we have the things that they need. And in terms of scale, that was the first part of your question. That will be a double or triple right out of the gate in terms of top line, but it's inconsequential when you think about our size. But in the 3 to 5 years from now, that will become a substantial business and be done capital efficiently with very little in marketing spend because we're able to lever the things we already do. That's a perfect example of the kind of things that are coming in more frequency to us now and makes us very excited because they are low risk, great extensions for our consumer because our existing customer base wants a product like that, and we have the wherewithal to make it grow very efficiently and grow it into a substantial business. If we don't see a path to get a business on our platform, to $50 million to $100 million business in a 5-year time frame, we probably wouldn't spend any time on it. But I think that brand has the opportunity to grow over time to be a substantial contributor.

Yes. So Anthony, this year, it's going to be introduced to a lot of our customers via inclusion in the gift baskets that we sell. So modest this year, but then growing, as Jim indicated, we believe, substantially over the future.

The next question comes from Michael Kupinski with NOBLE Capital Markets.

Bill, let me offer my congratulations on your retirement. I can tell you that it's been a tremendous pleasure working with you over the years. and I'm going to miss you. And I want to welcome James as well. I look forward to working with you more closely, James. A couple of questions. In terms of your guidance for 2025, consumer confidence has always been a metric that we've always looked at in terms of revenue growth. And if you look at the consumer confidence has most recently been improving. And at the same time, your revenue growth for at least your initial guidance was pretty positive and instructive on looking for rate decreases, and it now appears that we're going to have rate decreases a little bit more timely now. It looks like the timetable has been set -- relatively set. I was wondering in terms of what gives you pause in terms of your revenue outlook for 2025 given those metrics that we've more closely watched in the past?

Thanks, Michael. It's Jim. I think the main thing that gives us pause is we were feeling pretty good until the last 3 weeks when we heard everybody else be so cautious about the fourth calendar quarter, our second fiscal quarter. So just psychologically, it caused us to say, should we feel as good as we do. And -- but Bill, why don't you give Michael a little more color what went into the recipe for our guidance.

Yes. So our guidance is really based upon all the initiatives that we've been outlining and discussing over the last year or so that we think start coming to fruition this year. It's not based on an improvement in the macro economy. Certainly, when consumer confidence is high, companies like us that sell discretionary products do better. But we have not built that into our guidance. It really is based on our initiatives.

Yes. I layer on there, Michael, it's Tom. Again, I think our focus here in our -- what we put forth is based upon our relationship innovation efforts. It's those things that were within our control, our category expansion, our broadening price points or increase in same-day delivery of products or user experience. All those things are what is giving us confidence where we're portraying and putting forth our recommendation for this forthcoming year.

Got you. And then regarding margins, obviously, you're expecting some improvement even though not as much as what we've had more recently. But some of the commodity prices, as you mentioned, have been kind of stubbornly high, cocoa, milk, eggs and so forth. And I was just wondering in terms of commodity prices, specifically, what are your thoughts in terms of how that goes into 2025?

Yes. I mean certain commodity costs, as you mentioned, have reverted back to their mean, wheat, corn, actually eggs, even sugar has come down and reverted back to their mean. But you also mentioned coco. Coco is at all-time highs or was at all-time highs. We luckily did lock in some pricing. It's an increase year-over-year, but we've locked in pricing for the next two holiday seasons at more modest increases, but it is an increase. Fuel continues to be high. And inbound and outbound freight continue to be cost us more year-over-year. Inbound freight, again, we've locked in pricing that are competitive, but the spot market is very high now. So it's hard if you go outside your contractual volumes in any particular month not to have increases on the inbound volumes. So we factor all those items into the guidance for margin improvement, but much more modest than we saw last year. Again, last year, we increased 260 basis points well ahead of our original plan. So we already achieved over 40% gross margin.

So we said it wouldn't be a linear march to return to our historical gross margins. We had a big jump last year -- we'll have a small improvement in gross margin this year. And Bill gave you the factors on the commodity impacts. In addition, we're going to spend more money on marketing this year because we think the opportunity there is to improve our overall revenue trends. And that's going to be at the expense of more marketing spend.

Got you. And typically, you guys in periods like this, which has been challenged for some e-commerce type companies and things like that, you kind of stepped on the M&A activity. And I was just wondering if you can just kind of gauge what the M&A at that level might be at this point?

Well, I think those are -- so many of us who are in the consumer-facing e-commerce almost exclusive, but not 100% exclusive e-commerce have all felt similar drains. So that creates a strain for us, yes. But because of good balance sheet we have and the leverageable assets we have, I would tell you that the tenor of people interested in linking up has increased. Whether or not we actually do anything there is to be determined. But I think the opportunities will be quite a bit better than they've been in the last couple of years. So if we find the right opportunity and we think it's accretive to what we do helps our customer in a better way, I think you'll see us have the potential to be more active in the quarters ahead.

The next question comes from Linda Bolton-Weiser with D.A. Davidson.

So I was wondering just a little bit more on the cadence of revenue performance through the year, being that second quarter is your big seasonal quarter, I would expect that the year-over-year revenue would have to be at least in line with the guidance for the year of flat to down low single digit. Would that be a fair assumption then for second quarter on revenue?

Yes, Linda. We expect continuing improving trends from a revenue standpoint. So as I mentioned before, we're seeing some momentum in better trends on the e-commerce side of the business. You saw the transaction counts were down 6.5% in the first quarter.

Compared to last year.

Yes, that's an improvement of over 11.5% in the fourth quarter of last year and 16% in the first quarter last year. Generally speaking, sequentially, we improve as we get closer to the holiday. Again, e-commerce revenues last year went from 12% down in the first quarter and 6% down in the second quarter. Wholesale last year was a tailwind in the second quarter. We were down $20 million year-over-year in the second quarter last year. This year, we're going to be up $20 million, right? So that's going be a natural tailwind for us. So we feel comfortable that there'll be significant improvement in the revenue trends in the second quarter.

Okay. And then I was curious, too, about what you're seeing with media rates. I know you do mostly digital, but just in general, with the election situation, are you seeing elevated media rates in the December quarter?

Linda, it's Jim. Yes, media is more expensive. The election does have a big, big impact on what we pay for things, both digitally and in traditional media lines. Tom, anything you'd add?

No, as you would expect, Linda, we are seeing that in the environment. We've seen that for the last month. We are expecting that some of that will moderate as we get past the election.

With the second quarter, so much of the demand for the second quarter does come from that Thanksgiving through Christmas holiday. So there is some time to recover from the election time frame to the big demand days.

Right. Got you. And then finally, my question about the Harry & David pop-up at Macy's, just curious, are you flirting with the idea of getting back into brick-and-mortar retail from the company-owned perspective? Or is it just this purely this pop-up idea and it's not going to expand into anything else brick-and-mortar? Just curious about that.

Thanks, Linda. This is Jim. I spent some time at the holiday store we opened in Herald Square at Macy's yesterday. It looks fantastic. It had a good buzz about it. It's on the eighth floor, which sounds like it's off the beaten path, which, of course, it is, but that Macy's store is a model. And there was good traffic in the store yesterday, exciting customers. And then in a couple of weeks when they open up the Santa's workshop, you almost have to walk through our holiday store to get to Santa's workshop. It's great positioning. So it was good yesterday, it was busy. I love the way it looks. So I'm going to tell you that, in answer to the second part of your question, I'm a retailer. I've always liked retail. I think it plays a role in our mix. Whether we do that company-owned, whether we do with franchisees, this is a good first step to get back into the holiday store business, which used to be quite important to us. And these 6 stores that we've opened up now, 3 in California, 3 in New York, in partnership with Macy's, I'm very excited about. I'd expect that will continue to grow. We had some dialogue yesterday with other store managers who are in town, who asked could they get in the queue for us to open in their stores. I was all buzzed yesterday about how good the store looks, how the traffic was, how the interaction with customers was going. So the answer is we're not sure. It's always on the table for us. And yesterday got me excited about those prospects.

I mean, these are 6 great stores, right? And obviously, we've got to evaluate the results of that, but we're very encouraged.

I'm encouraged just on the marketing benefit of those stores, customers coming in, excited about seeing the brand. So you might hear that I got jazzed yesterday, how that influences things, how Bill beats the heck out of me in the next couple of weeks, it brings me back to reality, all to be determined.

And the next question comes from Doug Lane with Water Tower Research.

Bill, can we go back to that shift in wholesale orders from the September to December quarter? Can you reiterate what the dollar amount was and the reasoning behind that shift?

Yes, it's about $3 million on the food wholesale side of the business. And the reason is these are gift baskets for Costco and Sam's, they dictate when they want the orders. Sometimes it comes in at the end of September or starts at the end of September. Other times, it starts in the beginning of October. So clearly, just a shift. As we've talked about even in our August call, we have a strong book of business in kind of the food wholesale business this year. It's going to be a great tailwind for us. The large majority of it happens in the second quarter anyway, and it just happened to shift. Some of those dollars had shifted from Q1 to Q2.

And to add to that, Doug, the first quarter, the summertime, is when we're getting the majority of our inventory in for those presold items. We're assembling and packing those baskets, and then they're ready to ship. And then they'll notify us. It could be a 5- or 6- or 7-day swing, but that's right over the quarter's end. So all of that's now shipped.

Got it. That makes sense. And then to your point about looking at two halves of the year for 1-800-FLOWERS, you talked a little bit about the cost trends in cocoa, but can you just give us any update, has there been any significant shift in your cost trends anywhere else, energy, shipping, labor costs? Can you talk about your seasonal labor hiring this year versus prior years? Just try to touch base on the cost front a little bit, if you would.

Well, I'll start on the labor side. Bill and Tom will give you more color on the other components. But on the labor side of things, 2 years ago, it was very tough. We couldn't find people to work those seasonal jobs. Our logistics jobs, our shipping, warehouse jobs, we couldn't find enough people. So we were 2,000 positions short of where we would have liked to have been. The consequence of that was that we have paid a lot more overtime, which impacted us. Labor rates have been steady now, last year and this year. The fill rate has been very good. We have a program. We have distribution centers around the country to optimize our shipping costs, which Bill will give you some more color on. And 2 years ago, we've had real difficulty with our newest facility in the Atlanta area. Last year and this year, that's gone really well. We have a terrific labor partner in Atlanta, an agency called First Step Staffing, which is one an offer profit, which is a not-for-profit, which is staffing company that wraps a social services component around it. So that's really helped us. We have good quality labor for us there, and we feel really good about giving 350 or so people an opportunity to get back into the workforce. So it's helped us, and we're happy to be helping them. Bill, I know Doug, he asked about like fuel cost. We haven't seen the benefit yet of this decline in the fuel cost in terms of our shipping costs, have we, Bill?

No, we've seen some. Our year-over-year surcharge is lower now than it's been and we've been able to negotiate with FedEx caps on certain of the fuel surcharges. So overall, Doug, if you recall, 2024 was kind of the year of the gross margin recovery. We're up 260 basis points last year and climbed back over 40%. And this year, our guidance for the year is to be up modestly this year as we always have various offsetting [ files ], but we're continuing to move margins forward. The 20 basis points we improved in the first quarter was actually slightly above where we expected. We knew, later in the year, the margins would improve even more. From a commodity standpoint, there's always puts and calls. We talked a little bit about cocoa, and Jim mentioned eggs. We've got pluses and minuses. Fuel is a positive for us and should be through the holiday season for us. And the OMS implementation that we have, we're able to automate some of our least cost routing. That is ultimately our ability to optimize the shipping methods that we use. We always have cost increases from the third-party carriers, right? And that's a significant cost to us. So we have been doing a good job, and we continue to do a good job of coming up with ways to offset those actual cost increases that we have, and that should be a slight benefit to us this year as well.

Okay. That's very helpful. And just lastly, I've heard you talk about a favorable pear crop this year. Can you elaborate on that and how that impacts your business plans this year?

We all learned in the last decade of owning Harry & David that we have more reasons to lose sleep than we did even prior to that acquisition. We grow our own food product there in Southwest Oregon, in the Rogue Valley and Medford, Oregon. And we've suffered through some real tough natural weather patterns in the last several years, which caused us to really have struggles on the quality and the quantity of our product. This year, weather was more favorable. The snowpack was good. Our ag team here has done a terrific job. The crop is, frankly, terrific this year, not the biggest we've ever had but more than double last year's crop size. So we have inventory enough to fill what we anticipate will be demand and then a little bit more.

So to give you a little dimension, probably increase to 20%, 25% more crop there.

And a higher quality.

Higher quality. And as you can imagine, the infrastructure we have, whether the crop is extra white is really the same cost. So when we have a better crop of those products, we don't have to go out and purchase third-party products. We utilize our pears, which is our marquee product anyway. We want to use that product. So we're pretty excited about the quality of the product this year and the abundance.

And it wasn't just the pears. Pears are a key crop, as Tom mentioned. But our peach, obviously, this year was fantastic; apples, all of our products were good. The pears are what Harry & David is most known for. And we've been eating them around here for the last couple of weeks. So we can attest to the fact that they're as good as they've ever been.

And we've continued to work on extending the life of the pears. And so we have the pears now. Historically, it took us through a holiday and into maybe the January time frame. Last year, we were able to extend that into the March, April time frame. We think this year, we're going to actually be able to extend that even further, maybe even get to Mother's Day with our pears. Again, as Tom was referencing, by having the ability to do that, we don't have to source third-party pears during that time of the year, and it saves us money.

So two things here. Good crop this year, quantity, and especially quality. And the second thing is the capital expenditures we've made on our storage facilities to optimize our ripening capabilities gives us a little bit of extension in the season, as Bill mentioned.

This concludes our question-and-answer session. I would now like to turn the conference back over to Jim McCann for any closing remarks.

Well, Happy Halloween, everyone. I hope those of you who can get away with some little ones enjoy it today, whether it's your children or your grandkids or just fun in the office place. As we mentioned in our Q&A session, if you are near one of the 6 Macy's stores that we have holiday shops in, 3 here in the New York area, Roosevelt Field, Queens Center Mall and, of course, the Herald Square marquee flagship store for Macy's and 3 great locations in California, stop by and take a look. You'll see the breadth of our product offerings. And even though it's very intimate and proximate to us, when you see it all beautifully merchandised like it is, you get a sense of how we really do help people celebrate the holiday. We have a great assortment of product there. So go take a look. Hopefully, we all get out and vote in the next few days, and we know by this time next week who the next president is, and we can get on to making people happy and satisfying their gifting and celebratory needs for this exciting upcoming holiday season. So thank you for your time, your interest, your questions, and we stand by to further answer any questions and engage with you as we go after the next couple of days.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.