In its fiscal 2025 fourth quarter and year-end results, 1-800-FLOWERS.COM reported continued top-line pressure as new CEO Adolfo Villagomez framed fiscal 2026 as a pivotal foundation-setting year. Q4 consolidated revenue declined 6.7% (full year -8%) on a 5.6% drop in transactions and a 1.6% decline in AOV, partly mitigated by an Easter shift into the quarter; Q4 gross margin fell 290 basis points to 35.5% amid a highly promotional environment and deleveraging, and the Q4 adjusted EBITDA loss widened to $24.2 million from $8.8 million while full-year adjusted EBITDA dropped to $29.2 million from $93.1 million. Management attributed the deterioration to volume decline against fixed overhead, the prior holiday OMS issue (now resolved), and unproductive bottom-of-funnel marketing, and laid out a four-pillar transformation (cost savings and efficiency, customer focus, channel expansion beyond e-commerce, and talent/accountability) anchored by a shift from gross margin to variable contribution margin, a ~$40 million annualized cost savings plan with $17 million already implemented, and an engaged external consultant. The company emphasized a customer lifetime value flywheel, improved loyalty program, marketplace and physical retail expansion (including pop-ups and the Long Island store), and a self-consumption opportunity, while net debt rose to $114 million from $31 million and a still-meaningful ~$15 million tariff headwind persisted.
Good morning and welcome to our Fiscal 2025 Q4 and Year-End Earnings Call. Joining us on today's call are Adolfo Villagomez, Chief Executive Officer, and James Langrock, Chief Financial 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 in our earnings release. And now, I'll turn the call over to Adolfo.
Thanks, Andy, and good morning, everyone. I'm honored to step into the CEO role at such an important time for our company, and I am very optimistic about our future. I want to start by thanking James for his support and the autonomy he has given me during this transition. Since joining in May, I have focused on gaining a deep understanding of our business by engaging with employees at every level and listening closely to customer feedback. These conversations have given me valuable insight into where we stand today, what's working, and what we need to change. They have helped us stabilize the business and identify both the immediate and long-term actions needed to set us on the right path. 1-800-FLOWERS.COM is an iconic brand, and we have the privilege of being part of our customers' most meaningful moments.
But customer expectations are evolving, technology is advancing quickly, and competition is intensifying. We didn't fully keep pace with this environment, and as a result, we haven't reached our full potential. As we discussed on our last call, our celebration strategy is designed to change that. It represents a fundamental shift in how we engage with customers and run our business. By leaning into this approach, we intend to address the factors that matter most to our growth and financial performance and position the company for long-term success. Looking ahead, I see significant opportunities to improve our performance by becoming a leaner, more agile, customer-centric, and data-driven organization. To return to revenue growth, we are modernizing the customer experience, sharpening how we acquire and retain customers, and expanding our reach beyond our e-commerce sites. At the same time, we are building greater operational discipline, driving efficiency, and enhancing accountability.
I will share more of my thoughts in just a moment, but first, I would like to turn it over to James to review our fiscal 2025 Q4 and year-end financial results. James.
Thanks, Adolfo, and good morning, everyone. This morning, I will review our fiscal 2025 Q4 and year-end performance. Please note that all comparisons are made to the prior year period and represent adjusted results unless otherwise stated. Challenges we experienced throughout fiscal 2025 persisted during the Q4. Our top line remained pressured, and we continued to navigate an evolving customer acquisition landscape. Traditional SEO continued to decline, and our bottom-of-the-funnel marketing investments did not yield their expected results. As a result, our consolidated Q4 revenue declined 6.7%. This was comprised of an 8.8% decline in our Consumer Floral & Gifts segment, a 3.6% decline in our Gourmet Foods & Gift Baskets segment, and a 0.6% decline in our BloomNet segment. This is primarily due to a 5.6% decrease in transactions and, to a lesser extent, a 1.6% decrease in AOV.
This was partly mitigated by the Easter shift from Q3 a year ago into Q4 this year. For the fiscal year-end, our consolidated revenue declined 8%. This included an 8.2% decline in transactions and a 1.1% decline in AOV, which was partially offset by gains in our wholesale business. At the end of fiscal 2025, we had 9.5 million customers, over 900,000 Passport members, and 74% of our revenue came from existing customers. As compared to the prior year, our customer count declined in line with our revenue decline, while our Passport membership declined at a greater rate. Multi-branded customers and Passport members continue to represent our best-performing customers. During fiscal 2025, multi-branded customers represented 13% of our customers and 29% of our revenues, while Passport members represented 9% of our customer base and 19% of our revenues.
As Adolfo will touch on in just a few moments, we clearly recognize the affinity of these customers. We are reviewing opportunities to improve our loyalty program along with the overall shopping experience to increase membership and promote multi-branded selling. Turning to gross margin, our Q4 gross margin declined 290 basis points to 35.5%, compared with 38.4% in the prior year period. This decline was primarily due to our highly promotional sales environment and deleveraging on the sales decline. On a full-year basis, excluding costs associated with the OMS system implementation challenges, our gross margin declined 100 basis points to 39.1%. Now let's review our Q4 operating margins. Excluding non-recurring charges and the impact of the company's non-qualified deferred compensation plan in both periods, operating expenses declined $3.7 million to $159.7 million. On a full-year basis, our adjusted operating expenses declined $10.9 million to $695.2 million.
During fiscal 2025, we invested in marketing that did not yield the top line results we were targeting. We've begun to optimize our marketing spend during the Q4, and as Adolfo will discuss in more detail, we see significant opportunities to become more efficient and effective with our marketing efforts going forward. Based on these factors, our Q4 adjusted EBITDA loss was $24.2 million as compared with a loss of $8.8 million in the prior year period. On a full-year basis, adjusted EBITDA was $29.2 million, compared with $93.1 million in the prior year period. On our last call, we reported the initiation of a cost reduction plan aimed at achieving approximately $40 million in annualized savings, which included $17 million in reductions that already have been implemented. As Adolfo will expand on, we recently engaged an external consultant to assist in identifying and prioritizing additional efficiency opportunities.
Now turning to our balance sheet. At fiscal year-end, net debt was $114 million, compared with $31 million a year ago. Our cash balance was $47 million. Inventory was $177 million, in line with a year ago. In terms of our debt, we had $160 million in term debt and no borrowings under our revolving credit facility, as compared with $190 million in term debt a year ago. Looking ahead to fiscal 2026, we are approaching the year as a pivotal period of foundation setting. As we discussed on our last call, our celebration strategy is a multi-year strategy, and our strategic priorities are focused on positioning the company for long-term growth. These priorities include driving cost savings and organizational efficiencies, building a customer-centric and data-driven organization, broadening our reach beyond our e-commerce sites into new channels, and strengthening our team through enhanced talent and accountability.
With a renewed commitment to agility and customer-centricity, we believe these foundational steps will set the stage for sustainable revenue and profit growth in the years to come. Now I'll turn the call back to Adolfo.
Thank you, James. Our performance this quarter is disappointing, and it is clear that we need to fundamentally transform our strategy in order to return to sales and profit growth. When I accepted this role, I did so with the belief that 1-800-FLOWERS.COM is an iconic company with products customers love and with a unique place in their most meaningful celebrations. That belief has only grown stronger in my first few months as CEO. At the same time, I have identified several areas that require real change. Some issues can be addressed quickly, while others will take more time. This morning, I want to share my early observations and highlight the areas where the leadership team and I are focused. Over the past five years, our company experienced rapid revenue growth followed by significant declines. While microeconomic headwinds played a role, internal challenges also contributed.
Our customer retention approach was ineffective, our marketing spend was inefficient, and expenses did not come down in line with revenues. So, where do we go from here? We are transforming 1-800-FLOWERS.COM into a customer-centric, data-driven organization with clear priorities and ROI-driven decision-making. Our plan centers on four key areas: achieving cost savings and organizational efficiency, strengthening our customer focus, expanding our reach beyond e-commerce into new channels, and enhancing talent and accountability. On our cost structure, the company has not sufficiently adjusted expenses to reflect lower revenues. We have launched a comprehensive review of our structure, supply chain, procurement, and IT costs to simplify how we work, eliminate redundancy, and build greater agility. We have also engaged an external consultant to help us accelerate time to impact. Procurement is one clear example of improvement. Today, sourcing is fragmented across brands.
By centralizing it, we can leverage scale, lower costs, and improve consistency. Similarly, we are reviewing level planning and our end-to-end supply chain to drive further efficiencies. On the customer side, our focus is to simplify and modernize the digital experience, enhance our data infrastructure, and transform marketing into a full-funnel engine that balances awareness, acquisition, and retention. Historically, our brands operated independently, but by aligning merchandising to categories and streamlining our brand architecture, we can capture synergies and present a more unified, intuitive experience. We will also use algorithm-driven merchandising to personalize the journey and respond to customer needs in real time. Improving marketing efficiency and retention is central to this effort. Our prior approach spread dollars across too many brands, competed against ourselves in key channels, and it was primarily focused on bottom-of-funnel spend.
We are shifting toward smarter, more efficient marketing that builds brand awareness and demand while creating a flywheel around acquisition, retention, and lifetime value. Our marketing framework will also shift from a focus on gross margin to emphasizing variable contribution margin and its direct impact on the bottom line. Enhancing our loyalty program is also a major opportunity. Today, it functions primarily as a free shipping program. By improving the value proposition, we can drive more frequent purchases and increase awareness of our broader product categories. We also see a significant opportunity in broadening our reach. While gifting will always remain at the heart of our business, many of our products also lend themselves to self-consumption. Expanding into occasions where customers purchase for themselves opens the door to new growth.
Beyond our e-commerce sites, we will look to diversify our distribution, making our products more accessible in the places customers already shop, and creating new entry points to experience our brands. Together, these initiatives will allow us to reach new audiences, deepen engagement, and drive incremental growth. Finally, talent and accountability are critical. We're aligning our team with the company's strategic goals and strengthening how we hire, develop, and retain talent. We are building a culture that values agility, accountability, and execution. This is essential to ensure that our strategy translates into results. As we said on our last call, our celebration strategy represents the next phase of our company's evolution. Many of the areas I have outlined today are central to that multi-year transformation: expanding into other channels, improving frequency and conversion, broadening price points, improving marketing efficiency, leveraging technology to create a better customer experience, and strengthening loyalty.
These priorities will guide us as we work toward long-term success. Based on what I have seen and learned so far, I am energized and optimistic about our company's future. While the transformation will take time, I'm confident that the actions we're taking will return 1-800-FLOWERS.COM to growth and create meaningful long-term value for our shareholders. I look forward to sharing more in the quarters ahead. With that, we'll now open the call for Q&A. Operator, please provide instructions.