Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables of our earnings release. We believe this approach is important to building a more sustainable and disciplined demand generation model. During the second quarter, we continued to make steady progress on the key initiatives we outlined earlier this year to stabilize the business and support future growth. Marketing contribution margin in Q2 was impacted by the scale of the holiday quarter and the decline in direct traffic.
While this approach can create some pressure on the top line in the near term, we believe it is an important step toward building a more sustainable and profitable demand generation model. Based on the results of these tests, we concluded that the return on invested capital for the temporary pop-up stores was not attractive. Instead, as part of our testing culture, we are redesigning our retail approach to evaluate a full-year store concept that is better suited for a permanent year-round location. Together, these efforts are helping us build a more stable foundation for future growth over time.
During the second quarter, revenue came in below our prior view, driven by a continued focus on improving marketing contribution margin and changes in search engine results pages that negatively impacted direct traffic. As a result, our e-commerce revenue declined, which was partially mitigated by growth in our wholesale business. Our gross margin declined due to lower fixed cost absorption, higher commodity costs, and the impact of tariffs. This included a 22.7% decline in Consumer Floral & Gifts segment, a 3.8% decline in the Gourmet Foods & Gift Baskets segment, and a 3.1% decline in the BloomNet segment.
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | second half FY2026 | expected to decline in the low double-digit range |
| Adjusted EBITDA | second half FY2026 | expected to decline slightly year-over-year; on a normalized basis expected to increase slightly year-over-year excluding approximately $12 million of incentive compensation and consultant costs |
| Total cost savings (run-rate) | across FY2026-FY2027 | reaffirmed approximately $50 million, with ~$15 million already achieved in FY2026 |
| Consultant costs | FY2026 | roughly $11 million this year, running through June then stopping in FY2027 (not added back to adjusted EBITDA) |
| Metric | YoY | Note |
|---|---|---|
| Consolidated revenue | -9.5% | Strategic shift toward more efficient marketing spend and a greater-than-expected decline in direct traffic from search engine results page changes. |
| Consumer Floral & Gifts segment revenue | -22.7% | Pullback of prior-year inefficient marketing spend, especially on Personalization Mall, plus the direct traffic decline. |
| Gourmet Foods & Gift Baskets segment revenue | -3.8% | More disciplined prior-year marketing and stronger B2B/wholesale exposure relative to floral. |
| BloomNet segment revenue | -3.1% | Broader strategic marketing shift and traffic pressure. |
| Gross margin | -120 bps to 42.1% | Deleveraging on the sales decline combined with higher tariff, commodity, and shipping costs. |
| Operating expenses (adjusted) | -$25.9M to $213.2M | Lower marketing and labor costs from cost reduction initiatives. |
| Adjusted EBITDA | $98.1M vs $116.3M | Revenue decline and gross margin pressure partially mitigated by cost actions. |
| Average order value (AOV) | +5.2% | Pricing and merchandising discipline; order volume was down about 16%. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Operating model | Began centralizing marketing and improving cross-function coordination | Fully moved to a function-based operating structure with workforce reductions and leadership realignments, replacing the prior brand-based organization | — |
| Cost savings program | Identified additional $50 million over two years | Approximately $15 million annualized run-rate achieved in FY2026; ~$50 million two-year target reaffirmed, with consultant costs ~$11 million front-loaded through June | — |
| Physical retail | Holiday pop-up shops opened to test a scalable physical retail concept | Concluded pop-up ROI was not attractive and will not pursue more; pivoting to evaluate a permanent full-year store concept with disciplined capital deployment | — |
| Marketing efficiency | Shift to marketing contribution margin focus | Continued discipline improving ad-to-sales ratio; contribution margin pressured in Q2 by holiday scale and direct traffic decline, but viewed as a step toward sustainable demand generation | — |
| Third-party marketplaces | Began selling on Amazon and Walmart.com | Expanding rapidly across Uber, DoorDash, Amazon, and Walmart.com to reach customers where they shop | — |