Good morning and welcome to the 1-800-Flowers.com, Inc. Fiscal Year 2022 Third Quarter conference call. All participants will be in listen-only mode. . After today's presentation, there will be an opportunity to ask questions. . Please note this event is being recorded. I would now like to turn the conference over to Joseph Pititto, SVP Investor Relations. Please go ahead.

Good morning and thank you for joining us today to discuss 1-800-Flowers.com financial results for our fiscal 2022 on the call. For those of you have not received a copy of our press release issued earlier this morning. The release can be accessed at the Investor Relations section of our corporate website @ 1-800 Flowers, Inc. dot com. Our call today will begin with brief, formal remarks. And then we will open the call to your questions. Presenting today will be Chris McCann, CEO, Tom Hartnett President, and Bill Shea, CFO. Before we begin, I need to remind everyone to some of the statements that we've taken today, maybe forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. For a detailed description of these risks and uncertainties, please refer to our press release issued earlier this morning, as well as our SEC filings, including the company's annual report on Form 10-K, the quarterly reports on Form 10-Q. In addition, this morning we will discuss certain supplemental financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning. The company expressly disclaims any intent or obligation to update any of the forward-looking statements made in today's call, in recordings of today's call, the press release issued earlier today, or any of its SEC filings, except as may be otherwise stated by the company. Now I'll turn the call over to Chris McCann. Christopher G. McCann: Thank you, everyone, for joining our call this morning. Before we jump into the results for the third quarter, I'd like to take a moment to level set our view of the significant changes or stages that our company has seen over the past several years. Essentially, we see our business and the macro economy that we operate in in four stages: pre -COVID, during COVID, the current environment which I will optimistically call late COVID, and the fourth stage, our outlook for the future. Prior to COVID, our company had set a goal to accelerate revenue growth while continuing to grow EBITDA and free cash flow. For the second half of fiscal 2018 through the first three quarters of fiscal '20, we significantly accelerated our growth rate from low single-digits to high single-digits with our forward-looking guidance at the time calling for double-digit growth. We did this by leveraging the strength of our all-star family of brands and evolving our business platform into a highly scalable and leverageable e-commerce platform that is built for growth. The world has changed dramatically in the spring of 2020 with the advent of the COVID pandemic. And we all had to adapt to lockdowns, work-from-home, social distancing, mask, and so much more than we've all had to live through. From a business standpoint, we had to pivot quickly to address dramatically increasing demand from consumers stuck at home while being sure to protect our associates across the company. Once again, the resourcefulness and dedication of our team helped our customers stay connected with the important people in their lives, and we saw our revenues, our bottom-line results, and our customer file accelerate significantly. Today, as we are entering what we hope are the late, last stages of the pandemic, our world and the macro economy has changed dramatically once again. Disruptions in the global supply chain, geopolitical turmoil, and an unprecedented rapid rise in price inflation have combined to deliver a broad range of challenges to the macroeconomic environment from rising costs to slowing consumer demand. As we look ahead to the future, we know that we need to address the challenges we face in the near term while continuing to invest in our business in the long term. That has been our business philosophy from day one and it has enabled us, with the talented team and experienced team that we've assembled and the unique business platform that we've built, to weather the challenging periods in the past and emerge as a bigger, stronger, and better company that we are today. With that said, let's turn our attention to the most recent quarter's results, which, as we stated in this morning's press release, were below our expectations. During the quarter, we saw solid growth for the Valentine's Day holiday and our 1-800-FLOWERS brand. And based on the industry data that we've seen; we continue to extend our market-leading position in the floral category. However, the holiday period strength was offset during the quarter by the slower consumer demand across all categories for everyday gifting occasions, reflecting growing consumer concerns with rapidly rising inflation and geopolitical unrest. In terms of the bottom line, our results for the quarter reflected a continuation, and in some areas such as fuel prices an escalation of the inflationary pressures that we discussed back in January. While we expect these challenges to persist in the near-term, we're beginning to see early improvements in certain areas, including some softening in ocean freight rates, and port disruption, and improved outbound shipping efficiency, trends that we certainly hope will continue. More importantly, we're taking proactive steps to address these issues. And we are well positioned because of the scale of our business and the strength of our unique business platform to weather the current macroeconomic environment and as we emerge, as we have in the past, a bigger, stronger, and better company. To provide some perspective on our scale, our revenue in the third quarter, while essentially flat with the prior-year period, was up more than 68% compared with our fiscal 2020, third quarter. In fact over the past three years, we have essentially doubled the size of our company with revenues now exceeding $2 billion. While macro market conditions have slowed consumer demand in the near term, we anticipate driving growth on top of last year's more than 42% increase for our full fiscal '22 year. We'll continue to leverage the unique assets that we've assembled on our platform, including our all-star lineup of market-leading brands in floral, Gourmet Food and personalized gifts and we continue to expand our product offerings through accretive acquisitions that our customers are embracing such as Shari's Berries, Personalization Mall, and our most recent acquisition, Vital Choice. Our large customer base, which also has more than doubled in size over the past few years, and includes extensive and increasingly valuable first-party data. Here, we are combining behavioral and demographic data with machine learning technology to create highly personalized campaigns and experience for our customers on our sites and throughout our communications touch points. Our Celebrations Passport loyalty program, which continues to grow at a strong pace with membership up more than 40% year-over-year. Importantly, as we always point out, the behavior of our passport customer continues to be strong in terms of frequency retention, and average spending, all well above non-Passport customers. And Passport continues to feed our very best customer cohort those who purchase from multiple product categories or brands, and those that have our highest frequency, retention, and average spend. We've also been improving the user experience on the new Celebrations Passport app that we launched in January. Some of the new features we've added include the ability to search for any product across our family of brands on the app, including wine. And we've deployed new ways to connect with our customers directly through the app. We provided help finding gifts and advice on how to celebrate. We present custom app specific promotions and events, and we push tailored notifications based on past experiences. Along with the Passport app, we continue to view the overall Celebrations Passport loyalty program as a key element in our strategic focus on customer engagement and enhancing the total customer experience. Along that line, we also continue to expand our initiatives to create a true community through a broad range of non-transactional engagement experiences and content. Through the third quarter, we reached more than 80 million consumer engagements driven by our content and social campaigns and a growing number of influencer campaigns. We are now fast approaching our target of more than 120 million consumer engagements for the full fiscal 22 year. Now these engagements really help us to build relationships with our customers beyond the transaction and give us the opportunity to really deepen that relationship. We believe the combination of these unique assets and initiatives position us well to manage our business and drive long-term revenue growth. Terms of bottom-line results. While we anticipate facing continued cost headwinds in the near-term, our strong balance sheet enables us to invest in our operating platform to address these issues and build for the future. These investments include initiatives to automate our warehouse and distribution facilities, which reduces our exposure on the labor front, to utilize our strong balance sheet to build and bring in inventory early to get ahead of the ongoing global supply chain issues, and to optimize programs to enhance our outbound shipping operations and manage rising third-party shipping costs. Over the long term, we anticipate these initiatives will enable us to improve our gross margins and drive enhanced bottom line performance. Now, I'd like to turn the call over to Bill for his review of some of the key metrics from the third quarter. William E. Shea: Thank you, Chris. Our results for the fiscal third quarter, both top and bottom line, were below our expectations. Revenue in the quarter were down 1% compared with the prior-year period reflecting solid growth of bucketing 5% for the Valentine's Day holiday in our consumer floral business and contributions from Vital Choice, which we acquired back in October. These positives were offset by the shift of Easter to later in our fiscal fourth quarter this year, compared with last year when most of the holiday sales fell in our third quarter. But with deferred revenues coming into the quarter compared with the prior year when customers, particularly in our Harry and David brand, we're willing to accept delivery of holiday season gifts well into January. And slow e-commerce demand for everyday occasions throughout the quarter reflecting growing consumer concerns with rising inflation and geopolitical unrest. But as a reminder, Q3 revenues were up 68% over Q3 of fiscal 2020, the final quarter prices into the pandemic, and up 52% on an organic basis if we exclude P Mall and Vital Choice revenues. In terms of our bottom line results, gross margins in the quarter were impacted by several factors, including the continued disruptions in the global supply chain, the escalation of commodity costs, increased costs for inbound and outbound shipping, including an acceleration in fuel surcharges related to rising oil prices, increased year-over-year labor rates across the company, and the write-off of certain inventories of expired perishable products, reflecting softer than anticipated demand levels. In addition, during the quarter, we continued to see digital marketing rates up more than 30% compared with the prior-year period levels, which impacted effectiveness in driving traffic to our sites. As Chris noted, we do not expect these headwinds to go away in the near term. However, as we enter our fiscal fourth quarter, we do see some opportunities for improved performance, including the benefits of the Easter shift into the period, our strong inventory position, and the spring season's key holidays, including Mother's Day, Father's Day, graduations, and wedding season, where we anticipate stronger consumer demand as we saw in the past two quarters for key holiday occasions. In addition, we are continuing to work diligently to mitigate higher costs through the investments in our business platform that Chris described, as well as through our strategic pricing initiatives. Now breaking down some key metrics from our third quarter. As we have already noted, total consolidated revenues were $469.6 million, down 1%, compared with $474.2 million in the prior-year period. Validated gross profit margin for the period was 32.8%, a decline of 610 basis points compared with the prior-year period, reflecting the aforementioned cost headwinds. Operating expenses as a percent of total revenues improved 60 basis points to 38.4% of total sales compared with 39% in the prior-year period. Operating expenses excluding stock-based compensation, the cost associated with the one-time employee class-action legal settlement, and the appreciation and depreciation of investments in the company's non-qualified compensation plan improved 10 basis points to 38.1% of total sales compared with 38.2% in the prior-year period. Combination of these factors resulted in a net loss for the quarter of $23.4 million or $0.36 per share compared with net income of $1.4 million or $0.02 per diluted share in the prior-year period. Adjusted net loss for the quarter was $21 million or $0.32 per share compared with adjusted net income of $1.5 million or $0.02 per diluted share in the prior-year period. And adjusted EBITDA for the quarter was a loss of $12 million compared with adjusted EBITDA of $15.4 million in the prior-year period. Regarding our segment results, in our Gourmet Food and Gift Basket segment where revenues for the quarter were a 167.4 million down 4.5% compared with a 175.2 million in the prior-year period. This primarily reflected softer consumer demand throughout the quarter, combined with the shift of the Easter holiday and low deferred revenue entering the quarter compared with the prior-year period. This was partially offset by higher year-over-year wholesale revenues and revenues associated with Vital Choice. Gross profit margin was 25.3%, a decline of 1,410 basis points compared with 39.4% in the prior-year period. This primarily reflected increased cost of labor, inbound and outbound shipping, fuel, and charges associated with the write-off of expiring inventories. Segment contribution margin was a loss of 17.1 million compared with segment contribution margin of 12.1 million in the prior-year period, reflecting the reduced revenues and gross margin, as well as the higher year-over-year digital marketing costs. Adjusted segment contribution margin for the quarter was a loss of 14.2 million, excluding one-time costs associated with the settlement of an employee class action compared with segment contribution margin of 12.1 million in the prior-year period. In Consumer Floral and Gifts, total revenues were $264.2 million, an increase of 1.5% compared with $260.4 million in the prior-year period primarily reflecting solid growth for the Valentine's Day holiday, partly offset by softer everyday gifting sales. Gross profit margin was 36.7% down 110 basis points compared with 37.8% in the prior-year period primarily reflecting increased shipping costs. And segment contribution margin was $20.5 million down 8.9% compared with $22.5 million in the prior-year period, primarily reflecting reduced gross margin and higher year-over-year digital marketing costs. In our BloomNet business revenues for the quarter were $38.4 million down 1% compared with $38.8 million in the prior-year period. Profit margin was 38.7% down 560 basis points compared with 44.3% in the prior-year period, primarily reflecting product mix and higher inbound shipping costs. As a result, segment contribution margin was $9.8 million down 18.8% compared with $12 million in the prior-year period. Turning to our balance sheet, our cash and investment position was $93 million at the end of the third quarter compared with $173.6 million at the end of fiscal 2021. Lower cash balance primarily reflects our investments in inventory to help offset the headwinds associated with supply chain and labor, combined with a higher capex spend, primarily related to automation efforts and our investments in our orchards, an increase in our stock repurchases amounting to $35 million year-to-date, and repayment of term debt. Inventory was $214.4 million, up $60 million compared with the end of fiscal 2021, primarily reflecting our decision to use our strong balance sheet to invest in inventory and help mitigate the continuing challenges in the supply chain. Terms of debt. We had a $167.2 million in term debt, and zero borrowings under our revolving credit facility. Regarding guidance. We're updating our guidance for fiscal 2022 full year based on the results we have reported for the first three quarters of the year as well as our outlook for our current fiscal fourth quarter. We anticipate achieving total revenue growth in a range of 3% to 5% compared with the prior-year. Adjusted EBITDA in the range of $110 million to $115 million and adjusted EPS in the range of $0.55 to $0.60 per diluted share. We anticipate that free cash flow for the year will be down significantly compared with the prior year based on our updated guidance and our efforts to use our strong balance sheet to invest in inventory, support our growth plans, and to address the continuing headwinds we see in the macro economy. I will now turn the call back to Chris. Christopher G. McCann: Thanks, Bill. To sum up, our results for the fiscal third quarter were below our expectations, despite the solid growth that we saw for the Valentine's Day holiday. We continue to see significant cost increases as well as softer consumer demand for everyday occasions, reflecting the macroeconomic conditions. We are proactively addressing these challenges by using our strong balance sheet to invest in initiatives that will help us mitigate rising costs and implementing innovative marketing and merchandising programs designed to engage and build deeper relationships with our customers to help drive improved growth. During the quarter, we attracted nearly 1.5 million new customers and added more than 225,000 new members to our Celebrations Passport loyalty program. And we continue to expand our cross category and cross-branded merchandise programs, fully integrating our new Vital Choice brand onto our platform. As we enter our fiscal fourth quarter, we have several innovative marketing and merchandising initiatives that we are very excited about, including our new partnership with global superstar Dolly Parton, which we kicked off to celebrate International Women's Day in April. Dolly collaborated with our team to curate several exclusive floral arrangements. And she dropped her newest album, Run Rose Run, along with a companion novel, that was available for our customers to buy digitally on the 1-800-FLOWERS site. She also promoted her collaboration with us on her social channels, reaching millions of her loyal fans. And we have a new partnership with famed Iron Chef Geoffrey Zakarian, who is now serving as our culinary ambassador for Harry & David. Zakarian worked with our team to create a special collection of Harry & David products, including items from our Wolferman’s Bakery and new Vital Choice brands. And just in time for Mother's Day, staying at the forefront of innovation, we've launched two exclusive collections of NFTs featuring unique artwork that celebrate moms. Looking ahead, the current macro economy is highly unpredictable. With that said, it's important to note that we have faced challenging macro market conditions in the past. And because of the strength of our unique business platform combined with our talent and experienced team, we have emerged a bigger, better, and stronger company. As a company, we are continuously evolving through compelling messaging and unique gift offerings for every emotion. We are dedicated to helping inspire our community of customers to give more, connect more, and build more and better relationships. We are confident that we will continue to grow our company and build shareholder value over the long term. In closing, as in my past calls, I'd like to give a shout out to all of our associates across the company. We have a tremendously talented team that continues to work diligently to address the challenges that we are seeing in the macro-environment, and drive long-term growth. I thank them for their hard work, their innovative thinking, and their laser-focus on our community of customers. Now, I'd like to introduce you to Tom Hartnett. Tom was promoted to President of the company earlier this week having previously served as Group President for our Consumer Floral and Gifts segment. Since joining our company in 1991, Tom has held number of positions of increasing responsibility and made many significant contributions to our business, not the least of which has been a tremendous growth and expanded market leadership in our 1-800-Flowers brand, which he has overseen. Tom has also been instrumental in building our company's digital marketing expertise, championing cross-brand, cross category product innovation to provide more gifting solutions for our customers and driving initiatives that further our commitment to customer service excellence. Tom and I have worked very closely over the years and I look forward to many, many more years of partnership as he takes on this new role. I am confident that his appointment will serve our stakeholders well as we further integrate our brands and our operating platforms. Jade, we can now open the call for questions, please. Thank you.

We will now begin the question-and-answer session. Our first question comes from Anthony Lebiedzinski of Sidoti. Please go ahead.

Yes. Good morning. And thank you for taking the questions. I guess, first, just a quick housekeeping item. Can you give us a sense as to pricing versus volume just for the quarter if you have that available? Christopher G. McCann: Sure, good morning, Anthony. Thanks for your question. Bill, you want to take that? William E. Shea: Sure. Anthony AOV was up ten plus percent offset by a decline in units. It's kind of combination of both the strategic pricing initiatives that were, that were put in place, but also product mix, as we're selling more and more bundled products and kind of featuring more higher-priced items on the site. Christopher G. McCann: I think it's important to know we always look, you think you're familiar Anthony, to make sure we have a broad range of products at all price points. So as Bill points out, when we see the higher price point items growing we push those a little bit more. But especially in this macro environment that we're working in, it's important to have a good selection of entry level price points as well.

Thanks for that. And then just in terms of the gross margin pressure that you guys saw in the quarter, quite a bit more than what we had expected, I think it's the first-time you guys called out specifically write-off of expiring inventories. What was the magnitude of that? William E. Shea: There was a number of factors that impacted gross margins. We mentioned them in our formal remarks, both inbound and outbound shipping being influenced by fuel surcharges, certainly labor, commodity cost increases with inflationary, as well as just availability of some supply such as wheat and eggs with the shortage of hens but additionally the write of some perishable inventory. The large majority of investments we've made in inventory is in nonperishable items. However, coming out of the holiday season, we did expect stronger consumer demand. We maintained some of the labor -- some of the seasonal labor that we had at the holiday time as once you let go of that labor, you don't get it back. And we built some inventory with some perishable products in there expecting higher demand. When that did not come we did have some write-offs, probably amounted to about $5 to $6 million during the quarter, which is probably 130 basis points of the 600 or so points that we're down in margin.

Got it. Okay. And then you guys talked about the Easter shift. Just wondering how significant that was and then as far as the lower deferred revenue, just wanted to get a sense of what the impact of that was. And I have one more question after that. Christopher G. McCann: Yeah. Bill will cover that and that's important to hit that lower deferred income point as well. William E. Shea: So we went into the quarter with about $10 million of lower deferred revenue. Again, from Harry & David a year ago, customers were willing to accept order in December, but accept in January when we were light on inventory. That's one of the reasons we've been making investments in inventory. So we went into the quarter about $10 million less in deferred revenue. The Easter shift on the other side, probably about $6 million or so, $6 million plus moving out of Q3 into Q4. Overall, the Easter holiday was up slightly. Year-over-year between March and April, the combination, about $6 million moved into the month of the fourth quarter.

Got you. And then just bigger picture. So Chris, you talked about some of the initiatives that you're working on to improve the cost issues, whether it's automation or other things. So what's the timing of that and when could we see some tangible improvements in terms of your cost? I know you don't have a crystal ball exactly, but it's just got a sense -- can you give us a sense as to when we could actually see some potential improvements from these initiatives to try to offset the cost headwinds that you guys are seeing? Christopher G. McCann: Sure, Anthony. Thank you. Again, as we look at it, the biggest challenge that we've been having, and we're getting our hands around, is the gross margin impact. With that said, we did show improvements in our OPEX ratio. As we look at some of the investments that we're making, automation of our warehouse and distribution centers is an example, and we talked about the benefit and the impact we're seeing from that early on. Again the example we gave from back in the Christmas holiday was, last year out of our largest DC in Ohio, we were able to ship 80,000 packages a peak day. This year, we were able to do several days -- I think like six days over a 100,000-peak day with 30% less staff. So we're seeing the benefits of that and that's continuing to roll through. And we're automating more of our facilities in Medford, automating our facilities in Atlanta, etc. Another more recent example of where we're seeing the benefits of that start to come in, is from Valentine's Day where, on our peak day, we were able to handle 30,000 customer interactions completely automated because of our AI engine powering our IVR and our chatbot capabilities. So it was 30,000 customer interactions completely automated. We would've needed a thousand more people just for that one day to handle that if we weren't investing in this automation capabilities. So you're starting to see that rolling and it's hard for me to put a timeline on it because it's an iterative process and it's happening every day. William E. Shea: I think, Anthony, if we break down the components of where the cost pressures are and where the margin pressures are, you have inbound Ocean Freight. That obviously is up dramatically over 12 months ago, 18 months ago. If you look, the experts do believe that that's going to over time self-correct. Probably not for this holiday season, but over the longer term will self-correct. Maybe not back to 18 months ago rates, but certainly significantly drop off of what current rates are. When you look at outbound freight, those rates are -- rates were going to continue to be high, but they're influenced by fuel and fuel has spiked during the quarter. So probably if our outbound rates were probably paying 15% more per package right now than we were a year ago, probably 40% of that is just tied to fuel. And ultimately fuel is cyclical and fuel will self-correct. The write-off of perishable products we got to readjust what -- that so that's an item that we can self-correct. Labor rates probably are going to remain high. We're not expecting relief from that standpoint, but as Chris mentioned, that's where a lot of the automation projects we have both on the warehouse distribution where a lot of our employees are, as well as the service center. On outbound rates, what our initiatives are is that while rates are higher, will working with FedEx and our internal logistics team. So just to kind of improve and our manufacturing, just to improve our operations so that we can get products out the door faster than -- than we can -- we can forward deployed product and inventory closer to the consumers. So we can Ultimately almost skip down a level of service with FedEx. So you can move overnight deliveries to ground deliveries, you can move grounded -- standard ground deliveries to ground economy delivery. So it's cheaper service from FedEx, yet still meeting customers’ expectations. So I think the two areas where that won't self-correct by themselves, labor and outbound shipping, we have initiatives in place to help offset those costs going forward. Christopher G. McCann: Bill on that last point that you just worked with FedEx as an example to optimize our capabilities. We've seen good results recently on time delivery rates with FedEx, which then improves the customer experience, cuts down on customer service contacts, etc. so it really improves the whole operating capability in our operating costs. William E. Shea: It's good point, Chris. What we used to see prior to the pandemic was 98% on-time delivery. Throughout the pandemic we were seeing deliveries that were in the mid-80s and some cases low 80s. We've seen a rebound back over 90% on-time deliveries and we continue to work with FedEx and Fresh FedEx to continue to get those on-time deliveries back up to historical levels. Christopher G. McCann: It's important factor.

Got it. Thank you. That's definitely very helpful color and thanks a lot. And best of luck going forward. Christopher G. McCann: Thanks, Anthony.

The next question is from Alex Fuhrman of Craig-Hallum. Please go ahead.

Great. Thanks very much for taking my question here. It sounds like Valentine's Day was pretty strong whereas everyday gifting is really where the company struggled in the quarter. Can you unpack that a little bit more for us? Can we interpret that as January, early February were a little bit stronger before some of these macroeconomic headwinds really started to weigh on consumer demand, or is it really more the story of consumers is continuing to spend around key events like Valentine’s Day and Mother's Day and really just pulling back on self-consumption in every day occasions? Christopher G. McCann: Thank you, Alex. I think, first off, if we just step back and look at the quarter, to your point, and what we've seen during the quarter is rising inflation, the geopolitical unrest, and all of that, certainly the price of gas going up impacting the consumer. With all of that said and the points that you made; we continue to see us growing market share in the environment. Tom, why don't you speak a little bit too as what we saw for Valentine's Day and what that portends for us as we go forward into the spring holiday season of Mother's Day, etc.?

Yes. Hi, Alex. Yes. As mentioned in our formal remarks, we grew Valentine's by 5% and we are continuing to think and see from our data that we're taking market share in the category. As we've said, it does look like the everyday occasions are getting a little softer for us, but we have seen, as Bill mentioned, good response for Easter and we're expecting a solid Mother's Day. Christopher G. McCann: Yeah. And I think also as we look at everyday motions, Alex, keep in mind last year when we were comping against those everyday occasions last year, we're seeing significant growth. And that's why it's important, as Bill pointed out, that during the quarter which grew 68% over two years ago, the Flowers brand grew over 50% to two years ago. And Harry & David grew at about 75% to two years ago. And most of that growth that we've seen last year was really the majority of the accelerated growth was in those everyday occasions. So we're seeing that come back to more pre -COVID levels, I would say. William E. Shea: I think Harry & David was a proxy for the entire food group. It was also up around 75% over two years ago.

Okay. That's really helpful. Thanks. And then it sounds like the Passport program continues to show nice growth year-to-date. The slowdown you've seen in demand over the past couple of weeks and months, has that been seen more or less equally amongst your Passport members and your multi-brand customers, as well as your maybe just kind of once and twice a year type customer? Christopher G. McCann: Go ahead, Tom. Why don't you cover some of that?

We're still -- we remain very pleased with our Passport results and how we've grown. We said we've grown membership for the quarter, 40% plus. We've added 225,000 Passport members in the quarter. And so we continue to see a good resonance there. And we also continue to make strides in our checkout flow and how we market to customers in order to make our existing customers or our new customers more aware. We're also seeing good growth in converting new customers to the Passport program. So we have continued to see good results there. And, obviously, that portends well for us on -- these customers are great for multi-brand customer buying, which is our strongest cohort. Christopher G. McCann: Alex, as we look at our customer file, as Tom points out, we're continuing to see strength in our multi-brand, multi-category customers out past book customers. The softness year-over-year -- and I want to point out it's not exactly soft year-over-year, it is more of a new customer acquisition than it is in what we're seeing from our existing file. So with that said, even with digital advertising rates increasing about 30% as we said, in the markets increasing, we still acquired 1.5 million new customers during the quarter, so that shouldn't be understated. So we're looking at that opportunity in the end one of the things we've talked about in the past, I double checked this recently just to make sure this data is holding up. The new customers that we've been acquiring since the pandemic are actually still performing better than the new customers acquired pre -pandemic, we're seeing slightly still higher retention rates during that. So that's the thing one of the components that really gives us confidence as we move, look forward to say we're getting will get back to normal growth rates . This is the size of our customer file, which again has doubled over the last couple of years. As we've doubled the size of our business over the last three years or so, the brands the platform we built. So the core that you're getting to all those customer metrics. And that's what really drives our confidence going forward.

Great. Thank you very much.

The next question is from Linda Bolton Weiser of D.A. Davidson. Please go ahead.

Hi. Thank you. So I was just curious about -- looking ahead, I know you don't want to get into giving guidance yet for the next fiscal year, but I guess initially, maybe analysts would have thought you would have some cost comparison relief a little bit in the upcoming December 2022 quarter because you had such a hard time with costs this past year. But now I'm thinking that even if costs and fuel and labor just stay where they are, that you may have unfavorable comparisons coming up on the cost side, on surcharges and things like that this holiday. Can you just generally comment on whether that's a correct assumption? Thanks. William E. Shea: Linda, our policy is not to give guidance on fiscal 23. We'll do that in the August call. I think what we'll see by generally speaking with this holiday season, we have efforts to help offset some of these costs. We're going to continue to invest behind those efforts to help offset some of these costs. As I mentioned in my earlier comments, some of these cost pressures that we have will ultimately will self-correct by themselves the timing of which is tough to predict and hard to -- some of these will not go away by the holiday time. But I think we have certain initiatives in place that we're going to continue to effort to try and offset these costs to mitigate some of these cost increases. And we continue to test strategic pricing initiatives to help offset some of these costs as well. Christopher G. McCann: I think that's an important factor, Bill. So I think that assumption isn't exactly accurate, Linda, because I would assume that we're not getting any benefits from the efforts that we're putting in. And I think we're getting tremendous benefits from the efforts we're putting in to make sure that we get our hands around the cost. So if the external pressures remain the same, I think our internal mitigation efforts will give us improvements. And I think as we look forward overall, what we're seeing is, again, the benefits that we'll get as we come out to some better comps as we'll see going forward, the growth rates that we're seeing from the customer file -- again, seeing that earned growth from our customer file is giving us extreme confidence. You couple that with what we've done with the platform that we continue to expand on. The M&A capabilities we've done with businesses like Shari's Berries, like Personalization Mall, our newest acquisition, Vital Choice, putting -- which we just integrated on to our platform. All of this has been successful for us and will continue to be successful as we get our hands around the cost structure.

Just your comment about using the strength of your balance sheet to continue to build inventory, to me that seems odd because at the same time you're making a statement about consumers being pinched more because of price inflation. So I'm just wondering, like are you building inventory in the team all pipe items which you need to have ready for the holiday or what is it specifically that you feel like you need to build more inventory in? William E. Shea: Well, a lot of it is addressing the supply chain issues to make sure we have the inventory. What we what we faced holiday plus ago was a lack of inventory. What we faced this past year was the timing of inventory with all the supply chain challenges that we had. So we didn't have the inventory in play when we needed it. So inventory delays were happening. We had labor that we hired. We couldn't produce on time, so it was very disruptive to the operations. So having the inventory in play so that we can build and plan our operations is clearly a benefit in the upcoming year versus the past. Christopher G. McCann: Bill, plan the operations and manage the inventory and the labor appropriately.

Okay. And then finally, I was just curious in terms of Tom Hartnett's experience within the company, has he spent all of his years pretty much on the Floral side or has ever had a stint kind of working or managing within the GFGB business? Christopher G. McCann: Tom has been involved in just about every area of the business in the 30 years that has been with the company. So he has been involved in the food businesses to Shari's Berries business most recently, he quarter-backed that acquisition. And obviously the Shari's Berries business, the fruit bouquet business deal, he overseas Personalization Mall as he moved to the non-food category. This is a guy who started sitting here looking at time, giving him his praises here, started in finance for us is it's basically had every role you could conceive in the company over time. And what this change does really for us, it's really brings all the operating business units under one leader. It really helps us drive the enterprise growth in the cross-brand capabilities that we've been looking at moving forward on, allow some of more dynamic PNL management being able to quickly adjust on the fly, where we're putting investments, where we're seeing opportunities. For me it allows me more time Linda to spend more focused on it as I have throughout my career on innovation, on customer centricity, our strategy work, our M&A a development capabilities and overall growth focus with the company. So Tom has extremely well deserving this position. I couldn't think of anybody more better suited for it.

Sounds good. Thank you very much. Christopher G. McCann: Excellent.

The next question is from Michael Kupinski of Noble Capital Markets. Please go ahead. Hello, Michael. Your line is open. We'll move on to Dan Kurnos of The Benchmark Company. Please go ahead.

Thanks. Good morning. Two short-term questions. Chris, can we go back to your comments around marketing? We know that performance marketing, and digital channels and social in particular are, A. Converting less, B. The rates are extremely high right now. Yes, you added a lot of new customers. You did talk about a little bit more challenge coming from those new customers rather than from your existing base. So how do we think about, is there any contemplation in the near term on either a pullback in spend or how are you thinking in terms of LTV given this environment? I know you're trying to think several years out, but just maybe help us think through the way that you're assessing your marketing or customer acquisition strategy right now. Christopher G. McCann: Great. Thank you, Dan. It's a great question. As we look at the environment and as we look at it really from an LTV perspective and looking at the long term as you pointed out, that really helps guide our decisions day-to-day. We pointed out in our last quarter how once we hit the more challenging consumer period of the month of December, and the advertising costs going up, we intentionally pulled back on some of our customer acquisition efforts as it was just getting too expensive. Even in this quarter, when I talk about the softness -- again the 1.5 million new customers is a great number. It's less than we acquired last year where we saw more opportunity. So we turned our dial back where we saw the customer acquisition costs being effective for us from the long-term LTV. I can tell you; we know our competitors are not able to compete in this market at these -- at this CAC level that we're working at. So again, a big part of that is because of the platform and the brands that we have and the ability to drive LTV as we drive this Passport capability and the multi-brand capability. So we're really looking at what's the CAC we're willing to spend on the long-term scenario for us as we continue to see the development of the file and the cohorts. William E. Shea: Yeah, Dan, the only other thing I'd add is, as you mentioned, we continue to see performance marketing costs rise. We're aware of that. It's forced us just to be better marketers around better targeting opportunities. So we're doing better in targeting those new customers that we believe have the right LTV or CLV for the future and that allows us to spend our dollars more effectively.

Got it. That's helpful. I'll get back to the tangential question to that in a second and just ask the side one here on P Mall. Obviously this is not really a great environment for P Mall. I know you guys have been looking to potentially beef up your personalization vertical. Perhaps this market, if it continues to be messy, will offer some more opportunities out there for multiple compression in your competitors. But just curious: A. How that process is going, and B. How you're evaluating P Mall under the current environment or landscape? Christopher G. McCann: I'll ask Tom. He has been closer to P Mall certainly, but I look at -- we're still extremely pleased with how P Mall has fit into the platform and how it's performing in its future. Tom, specific comments on what we're seeing the P Mall now, especially for the upcoming season that we see.

Again, it's similar to what we're seeing for the rest of the organization. We are seeing a little softness on the everyday occasions, good performance on the major holidays. We are focused on the P Mall customer. It's a little bit lower household income, generally speaking, so we're taking a lot of steps to attract a higher household demographic in that and add to our product assortment there as well as look at other potential targets in the marketplace. Christopher G. McCann: Since P Mall's, keep in mind as I mentioned, upcoming holidays, wedding season, Father's Day, June is P Mall's strongest month. So we see a good opportunity there as we look forward. To your point on potential M&A targets, whether in the Personalization category. Dan, actually we look at it as across the board in any of our categories or adjacencies. We do think we're in a strong position as a company right now to watch what happens during the market, what happens to valuations. We do think that the M&A market could present opportunities for us as we go through the sloppiness that we're seeing in the market today.

Got it. That's helpful. And then just lastly, for me, we've seen this before, you guys have been through this before. Always difficult to predict how the economy is going to react. You've seen lots of wide-ranging recession calls, what have you, even though we're at record low on appointment and there's still two years’ worth of savings out there. But regardless, not to ask about specifically '23, but just in general, you guys are going to post the more modest, albeit still really strong two-year stack growth, so you'll have technically easier comps as you go into next year. I'm just wondering if you have any altered views on the longer-term sustainable growth outlook for the business based on what you're seeing now? William E. Shea: I think in a long-term outlook it stays consistent. We're extremely proud of what we've built with the capabilities we have. We have high confidence in our abilities to return to the growth rates that we want as we move forward here. We have the right products, we have the right brands, we have an expanded customer file. We have a great experienced team in place. As you pointed out, we've done this before. We've been in business for 46 years now. We've been through some ups and downs. One of the key things about our category, it never really participates in the high highs of a robust economy, but nor do we participate in the very lows of a recessionary economy either. And then as we've expanded our product categories, food generally tends to do better in a tougher economy as people -- consumers put more value on something you can need. But with all the things that we look at, the platform, the customer file, the brands that we have, the improvements in CX that we've made, our outlook, our confidence in the future has not diminished at all. Dan, just go back to two years ago or even four years ago. We started to initiate a higher growth rate from the second half of fiscal 18 through the start of the pandemic. We were increasing our organic growth rate. We had gotten it up to high single-digits. We had guided prior to the pandemic to double-digit growth in the third quarter of our fiscal 20, and for the second half of fiscal 20. For the fourth quarter we achieved that in the March quarter of fiscal 20, where we posted 12% growth rate. And we're got again guided for the fourth quarter to be a double-digit. We are a bigger, better, stronger company today, based on a lot of the initiatives that Chris has outlined. So we view this as the consumer certainly has pulled back due to the geopolitical unrest and some of the macro economy issues that have happened. But, we're there to take advantage of the opportunities going forward. Christopher G. McCann: And in this current year, over we're still growing over the last year, which was a 42% growth rate.

I tend to agree with all of that, especially what you said Bill thing that's missing now is Chris go over pusher brother for a name change? Thanks, everyone. Appreciate the . Christopher G. McCann: Thank you, Dan.

The next question comes from Michael Kupinski of Noble Capital Markets. Please go ahead.

Thank you. And I got dropped right when you introduced me. Sorry about that. Just a couple of clarifications. One is, did you say that you shifted accounted for roughly $6 million revenue in the quarter? I just wanted to clarify that. Christopher G. McCann: The question was, did you say $6 million shifted quarter to quarter? William E. Shea: Yeah. For the Easter impact. Yes. From Q3 to Q4.

Yes. And is there any way to quantify for us the amount of savings that you might be able to get from the heightened CapEx that you planned through automation and reduced cost and so forth. Is there any way to quantify that? Christopher G. McCann: Michael, it's a -- this is a long-term investment that we have. We've automated the Hopewell facility. I think we've described this in the past that we did 30 plus percent more volume out of that facility on peak days with 30 to 40% less labor. That's clearly being offset by labor rates at this point. So it's hard to put just a straight dollar amount. We're investing in our Atlanta facility to do many of the similar things to automate that facility and to significantly increase the amount of capacity that we have with less labor, and then a number of the initiatives that we have on -- with our service center platforms. It's hard to quantify that at the current time, but I think all these initiatives are there to basically help offset the higher labor rates that we're seeing -- significantly higher labor rates, which we don't believe the hourly labor rates are going to go down much.

I guess, obviously, you had seasonal -- you had these seasonal things going on every quarter. But were there any standouts in terms of performance among your brands popcorn, anything in particular that stood out to you that performed better than what you thought? Christopher G. McCann: I think most importantly, because of the quarter and because of the holiday, the Valentine's Day Flowers brand was really the standout brand during the quarter. Again, because it's stimulated by the Valentine's holiday. And that's why, again, it really has us very optimistic as we now move in -- as we are in the middle of Mother's Day currently and the spring holiday season and then moving into the Father's Day capabilities that we have of Personalization Mall, the wedding season, etc. So for this quarter it was really the floral business, Valentine's Day, it really encouraged us, as well as now, as we look going forward, some of the other product lines coming into play. William E. Shea: Yeah. The only one I would add to that would be Shari's Berries. That aligned itself with the floral holidays as well. The chocolate-covered strawberries are a good product for Valentine's Day and Mother’s Day. In both the last year and this year, the date placement of Valentine's was not exactly great. Being on a Monday doesn't help things and we're looking forward to Just date placement help in the next four to five years.

Got you. And it sounded like Dan may have asked a portion of this question and I apologize if I am asking you the same question. But the company has been opportunistic in making acquisitions and typically during periods where you had to be a lot of looking forward, obviously. And so is it too early at this point for you to be making acquisitions given that maybe some of the sellers aren't inclined to sell currently just because they haven't received enough pain, so to speak, of pressure and headwinds like you might be seeing, or do you think that you would still look at acquisitions even in this environment, given that you're maybe more focused on managing the business and offsetting some of the headwinds you're seeing yourself? Christopher G. McCann: Thank you, Michael. I think we were always looking in the market when is the right opportunity from an M&A point of view. I think we've proven over time to be very diligent and very deliberate in our decision-making there. I do think we're starting to see the beginnings of people really kind of realize they're not going to sell their business off the COVID bump and evaluations are maybe starting to come into play a little bit. We might need a little bit more time, but I think we're seeing the beginning of that. And I think it's important to step back and look again at what we've done from an M&A point of view. Again, if you look at what we've done with Shari's Berries, we took a business that was failing there, kind of resized that business when we integrated it into our platform which -- complete integration. All we took was the URL and the customer file were really the only assets we took there and completely put it on our operating platform and have grown that business significantly. I think you could expect we're looking to do the same thing with the small acquisition we did this past year with Vital Choice, where we just now -- just recently integrated that onto our platform, and now we'll begin the capabilities to grow that business similar to how we've grown Shari’s Berries. And then in between those two, we acquired Personalization Mall, which was an appendage to the platform giving us all the capabilities in the Personalization space that we didn't have and, as Dan pointed out, we've mentioned in the past, that's an area we think is a separate part of our platform that we can look to grow, again, through organic business development to capabilities or through M&A. So I think we're a strong company and we will continue to come at it as stronger and better than we have, just like we have in the past. And M&A will be part of that equation for sure.

Your timing on acquisitions has been great, going back to even Harry & David. So that's all I have. Thank you. Christopher G. McCann: Thanks, Michael.

The next question is from Doug Lane of Lane Research. Please go ahead. Douglas M. Lane: Hi. Good morning, everybody. I think we've talked about a lot here, so I'd just like to focus on the gross margin in the Gourmet Food and Gift Baskets segment. The 25% gross margin is well below anything I've seen quarterly going back at least five years. So there's something going on there. So I want to try drill down on is this reset of the gross margin in Gourmet Food and Gift Baskets permanent, or are they're cross-currents going on here that will go away in the next quarter or two? William E. Shea: Yeah, Doug, this is clearly the lowest margin. We've seen in most of the items that we talked about with regard to the overall gross margins. All of those impact the food brands far greater than it does on the floor side of the business. So again, inbound shipping is high and it's not going to go away. And then in the next quarter or two, but I think eventually it will self-correct to some degree it's not going to go back to $3 thousand of container, but it's not going to be a $25 thousand a container. We're seeing a little bit of relief on that right now in the off season. And we hope that that continues. It's hard to predict what the spot market will be and whether the carriers will honor contractual rates, but right now we are seeing a little softness on over where we spent and what we incurred last year. Outbound shipping rates are up and there's a lot of surcharges associated. The biggest surcharge right now is fuel. So as I mentioned, probably 40% of our increase in outbound shipping rates is related to fuel. Eventually that will self -- that that will correct. Fuel is not going to always be at $5 a gallon, so that will self-correct, but the timing of which is tough. Labor. We are seeing higher labor. We've talked about that last quarter and this quarter that our labor rates are significantly up year-over-year. They probably are not going to go down significantly. We have seen a little bit of relief in one of our markets in the Chicago market. But where we have a bulk of our hourly labor in Ohio and in Oregon, we have not seen much relief there. So our efforts are focused there on automation and basically doing more with less. We need to utilize less labor in our manufacturing and distribution. Christopher G. McCann: We're reconfiguring how we do some of our product development, etc. so all of these capability is focused on how do we mitigate the labor. William E. Shea: Right. Commodity cost increases are cyclical. We're seeing it right now. We're seeing double-digits, mid-teen increases in lot of the commodities. We know there's a wheat shortage. Part of that is the geopolitical issues that we have. We know there's an egg shortage because of a shortage of hens. We see other commodities that are up. But those will, over time, self-correct. Again, not necessarily in the next quarter or two, timing is hard to predict. But those will self-correct. And again, back to even the outbound shipping. And I mentioned this earlier. While rates will be higher on a same level of service, we are working with FedEx, we are working internally on our operations so that we can utilize less expensive services from FedEx to still meet customer expectations, but lower our rate, so there are correctable actions. Clearly our focus is on the ones that with outbound rates and with labor rates that we don't think will self-correct so that we need initiatives in play to mitigate those costs. Other ones will self-correct. It's just a matter of the timing. Douglas M. Lane: Okay. That's very helpful. Thank you. And lastly, on inventories, they're up 75% year-over-year and your sales are down 1%. So where are you building inventories and what is the risk of future inventory write-offs because you have such a big perishable component of your business? William E. Shea: Yeah. So most of the inventory that we're investing, we're about 60 million over where our year-end number was. We're about 150 something million at June last year. We're about 214 right now in inventory. So most of the investments are really in hard goods, non-perishable items. Think the write-off that we took on inventory on the perishable items was coming out of the holiday thinking demand is going to be stronger than it was, and maintaining some of the seasonal labor because we were concerned that we lost the labor, we would not get it back. So we built some products using some of the perishable products that we -- the inventory that we had and the demand wasn't there on that. So I think that is correctable from our standpoint, but we're thinking investment in inventory really is to address -- there are going to continue to be supply chain challenges and disruptions in the market. We all felt -- many companies felt it, we felt it last year. We want to have the inventory in play so we can manage our operations and manage our labor better. Christopher G. McCann: Our inventory strategy, along with many others, has moved from a just-in-time inventory to kind of a just-in-case inventory. Douglas M. Lane: Okay, that's helpful. Thank you, guys. Christopher G. McCann: Thanks, Doug. William E. Shea: Okay, Doug.

This concludes our question-and-answer session. I would like to turn the conference back over to Christopher G. McCann for closing remarks. Christopher G. McCann: Thank you, Jane and thank you everyone for joining us today. As you can see, we have a lot of opportunity and a lot of optimism in the future of our business. Right now, our focus is on the Mother's Day holiday, as all of our focus should be, moms rule the world. And I urge you to place your Mother's Day orders early. Thank you.

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