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1-800-FLOWERS seeks to give 'choice of price point, product' for every budget, occasion: CEO

1-800-FLOWERS.COM CEO Chris McCann joins Yahoo Finance Live to discuss the company's Q3 earnings, consumer spending, and the launch of its AI bot.

Video transcript

RACHELLE AKUFFO: 1-800 Flowers is getting a boost today despite slowing gifting sales taking a bite out of the company's revenue, which fell over 11% year over year. Chris McCann, CEO joins us now. Good to have you on the show here, Chris. So talk us through some of this earnings data here, and what you think the markets are making of it.

CHRIS MCCANN: I think the markets are looking good. First off, Happy Mother's Day to everyone in the audience who's celebrating this weekend. It's a special day, for sure. I think what the markets are reacting to is how our management team is really responding to what we see in the macroeconomic environment.

The consumer is cautious, but what we've been able to do is softer revenue on the top line, we've been able to increase our gross margin and increase our EBITDA during the same time period. So the investment community sees that we're managing very well through this economic challenging times that we're dealing with.

RACHELLE AKUFFO: And it's interesting because a lot of discussions that we've had with providers has been, are we seeing customers trading down? But you're actually continuing to see customers trading upwards. What are some of the things that they're trading upwards on? And what sort of spend are you seeing?

CHRIS MCCANN: So we see a couple of things there, Rachelle. We see consumers in our product category will spend more money-- they want to buy especially a food gift during the recession. They might move off a floral and into a food gift, which carries a higher average order value.

We're seeing our higher end customers from a household demographic point of view, who maybe aren't as affected as some others are, still spending more money. And we're getting price increases up around the $100 price point. But the key for our company and the key for the platform that we've developed with all of these brands in all of these product categories is to give choice-- to make sure we're giving choice of price point and choice of product for every budget and every occasion.

RACHELLE AKUFFO: And I do want to ask you about the distinction between corporate gifts and some of these personal gifts as well, because you have that acquisition of SmartGift as well. You'd already been working with the company on some things with Universal in terms of gifting movies and things like that. Talk about the benefits of this acquisition and how that really adds to the portfolio here.

CHRIS MCCANN: Yes. We've been working with the founders of this company who are just great people-- a husband and wife team. And they've just developed this knack for gifting. And so there was a natural affinity between our two companies.

And we really see the opportunity to take this smart gift platform that we've been developing with the team into our corporate customers to really help give them a good ability to manage their client gifting, manage their employee gifting, be able to measure a return on that gift. So it's bringing capabilities to our corporate clients that really help them look at it from a science point of view and not simply a goodwill gesture.

RACHELLE AKUFFO: And even though, of course, the company, 1-800 Flowers, a number of brands come under that umbrella-- talk about some of the moves that you're making there and, really, the sort of build that you're seeing there, and some of the more successful parts of the business.

CHRIS MCCANN: M&A activity is part of our strategy going forward. So it's organic development, organic growth coupled with M&A activity. And we look for two things when we're looking at an acquisition. Can they leverage the platform that we've built-- the consumer facing platform, the operating platform? Or do they add to the platform?

So two examples-- a couple of years ago, we acquired Personalization Mall. There, we added significantly to our platform the whole personalized capability and moved into a new product category for us. Also a couple of years ago, we acquired a brand called Sherry's Berries from a bankrupt competitor of ours.

We took none of the assets. All we did was take the intellectual property and put it completely on our platform, leveraging the platform to take a business that was losing money and not growing to turn it around into a profitable growth business for us. So we look at those capabilities, smart gift is an example of that as the technology capability we acquired, things remembered is an acquisition that we did that leverages the personalization capabilities that we have. So we look to make sure that we have multiple ways of growth.

RACHELLE AKUFFO: Now, something that's interesting-- you mentioned technology. You have this AI chat bot, this Momverse bot. Tell us about that, because some people are on the fence as to whether or not they want AI writing their Mother's Day poems for them. Talk about why you decided to go that route, and where else we might see 1-800 Flowers incorporating AI into the business.

CHRIS MCCANN: Well, I can guarantee you there's plenty of customers out there that are looking for ChatGPT to write their Mother's Day card. I can guarantee you that. But we're a company that's been a culture of innovation that has begotten as a culture of reinvention.

And by embracing new technologies, we continue to transform our company from a brick and mortar retail business, to a telephonic commerce business, to an e-commerce business, to a mobile commerce, to now a conversational commerce company-- and embracing new technologies like AI and giving the customer a chance to play with it. We're all in the learning stage of what GPT and what this generative AI capability can bring.

So let's give our team something to play with and have fun with and the consumer as well. So generating a lot of these messages, we're seeing customers have lots of fun with this. Quite frankly, we're all having lots of fun with it internally in the company as well. It's just a great product and a good way to see how this-- everything that we're hearing about in the news-- artificial intelligence this, artificial intelligence that-- this gives us a good, applicable way to demonstrate the capabilities.

RACHELLE AKUFFO: I love that. And what a fine occasion to use it on. A big thank you there to Chris McCann, CEO, and a happy Mother's Day to everyone at the company to.