Good morning and welcome to the 1-800-FLOWERS.COM’s fiscal 2022 Second 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, Senior Vice President, Investor Relations and Corporate Communications. Please go ahead.

Good morning and thank you for joining us today to discuss 1-800 flowers.com financial results for our fiscal 2022 second quarter. For those of you who 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 at www.1800flowersinc.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, and Bill Shea, CFO. Before we begin, I need to remind everyone that some of the statements we will make 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 this morning, as well as our sec filings, including the company's annual report on Form 10-K and 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, any recordings of today's call, the press release issued earlier today, or in any of its SEC filings, except as may be otherwise stated by the company. I will now turn the call over to Chris McCann.

Okay. Thank you to everyone for joining our call this morning. As we reported in this morning's press release, we achieved solid revenue growth of 7.5% for our fiscal second quarter. This was on top of the 45% growth we reported in last year's fiscal second quarter and represents growth of more than 55% compared with the fiscal 2020 second quarter. For the quarter, we achieved topline growth across our three business segments, highlighted by an increase of approximately 10% in our Gourmet Food and Gift Baskets segment, driven by double-digit growth in our Harry and David brand. As we noted in our press release and comments at the end of October, we saw solid double-digit growth in September that carried through October. This continued into mid-November driven by the success of our initiatives to drive everyday gifting, as well as early ordering by customers for the holiday season. Consumer demand slowed however, after the Thanksgiving holiday and did not pick up again until late in the quarter. As a result, our total revenue growth for the quarter was below the double-digit pace that we had anticipated heading into the period. Nonetheless, our solid revenue growth on top of last year's tremendous increase reflects our continued focus on engaging with our customers to deepen our relationships with them, to continue the expansion of our product offering, our ability to attract a significant number of new customers, the growth of our Celebrations Passport loyalty program, and our increasing ability to personalize our customers experience using AI and machine learning. And I'll come back to these topics in just a moment. But first turning to our bottom line results for the quarter, Bill will provide more detail in his remarks in a few minutes. But as an overview, the macro economy headwinds…

Thank you, Chris. Before I get into the details for the quarter, I think it is important to reiterate for Chris our revenue growth. Our 7.5% consolidated growth on top of the prior year's 44.8%, illustrates our ability to drive solid growth on top of the more than $2 billion revenue level that we reached last year. For the quarter, we were pleased to achieve solid growth across all 3 of our business segments. With our Gourmet Food and Gift Basket segment at nearly 10% of the key holiday season. We faced several challenges in the macro environment that impacted top line growth, including the reopening of some brick-and-mortar retail stores, the widely reported lack of seasonal labor, which impacted our ability to assemble certain labor-intensive product offerings. Marketing rates that escalated during the quarter and were significantly higher than planned, which impacted effectiveness in driving traffic to our sites, and the unprecedented disruptions to the global supply chain. On this last point, one example of the impact was late delivery of some important products and components that lead to canceled orders from several of our large wholesale customers, totaling upwards of $8 million. Another example was product shortages from some of our domestic suppliers due to their inability to find sufficient labor resulted in more than $4 million in sales left on the table. Our revenues could have been even stronger. The biggest challenge we faced in the quarter was clearly on the cost side and primarily within the components of gross margin. The reduction and consolidated gross margin percentage reflected several factors including Ocean Freight. As was widely reported, the spot market for Ocean Freight rates increased five to ten times historical levels. We were certainly not immune to this despite having contracted rates. As a result, our…

Thanks, Bill. So to sum up, we achieved 7.5% revenue growth in our second quarter on top of the nearly 45% growth we had in the prior-year period, and up more than 55% compared with our fiscal 2020 second quarter prior to the pandemic. We drove adjusted EBITDA of $133 million despite unprecedented cost headwinds in the macro economy. We attracted more than 1.8 million new customers and added more than 350,000 new members to our Celebrations Passport loyalty program. We expanded our engagement initiatives creating millions of touch points that help us deepen our relationships and build a true community. And we continue to expand our product offering, organically and through acquisition, adding hundreds of truly original products designed to help our customers solve for all their connective and expressive needs. While we're clearly operating in a challenging macro environment, we are well positioned to address these challenges and over the longer term to build on the success that we have achieved over the past several years, during which we have doubled the size of our business and significantly transformed our company, becoming a unique e-commerce platform that inspires and enables our customers to express, connect, and celebrate. This is reflected in the unique platform that we've built, which includes our all-star family of brands, our advanced technology stack, our manufacturing, distribution, and logistics capabilities, our digital marketing expertise, and our expanded customer file. In closing, I'd like to note how very proud I am of all of our associates across the company, who work together as a team to address the challenges that we have seen and continue to see in the macro environment and drive sustainable revenue growth and solid bottom line performance. Now, I'd like to turn the call back to the operator so we can take your questions. Thank you.

We will now begin the question-and-answer session. At this time we will pause momentarily to assemble our roster. The first question comes from Dan Kurnos with The Benchmark Company. Please go ahead.

Good morning. And haven't gotten that one in a while. Top-line, 2 questions. First question, when did you guys start trying to pass through pricing? And how much do you think price in elasticity was an issue from the consumer demand perspective?

Sure Dan, thank you. Good morning. I think we started fairly early in the season looking at where we can get strategic price increases. Then again, if you just keep in mind that as we went through the holiday season and as we talked about in our October call, we were seeing strong demand in September, took into October, continued into November. And it was really right up until the Black Friday, Cyber Monday weekend where we were strong going into it, and then we saw some slowness come in after that. The dynamic pricing was at -- throughout that time period and we saw the ability to do dynamic pricing gives us the capability to turn it on and turn it off depending on what we're seeing on consumer demand. Bill, do you want --

Yeah, Dan, the overall --

--pricing

The overall growth during the quarter really was all driven by average order, comprised of really 2 components. One, the dynamic pricing in the price increases that we did put through, as well as really a kind of a shift in product mix. We were featuring more higher-priced items. Some of the labor challenges that had, we knew the number of packages we can process was going to be going to be limited. So we kind of suppressed some of the lower price point items and featured some of the higher-priced items. Some of this would have impacted our overall conversion and impacted our top-line.

The reason I asked the question is understanding that there are a lot of dynamics in the holiday quarter. But the quarter guidance is now for basically a blended average of 8% growth versus double-digit growth. And I think the obvious question that everyone's asking today is, you guys have been pretty confident in a long-term double-digit growth outlook. Now, I know that your costs are rather difficult. But this has been an issue with all the e-commerce companies, right? What kind of -- why are we looking at reduced revenue guide in the quarters? And what gives you guys confidence in your longer-term sustainable double-digit forecast?

So I think as we look at the guidance, I think we've taken into consideration what we saw during the holiday period. We saw that slowed down late in the quarter where the consumer pulled back a bit. We saw retail sales report come out recently down 2%. So recognizing that and looking forward, it's still the cost challenges that we've had, gives us the comfort level to provide the guidance of the 7 to 9% growth that we're seeing. Go ahead.

Dan, basically the first half of the year, we grew just around 8%, and our guidance implies that we're going to have a similar growth rate in the second half of the year. We do believe it's going to skew a little bit more towards Q4. We have the Easter shift, which favors Q4 versus Q3. And we had a decrease in our deferred revenue at the end of Q2, which is going to impact a little bit of the growth rate in January. But we do believe that with all the challenges that the macro environment and with the consumer, when the consumer comes back, we will rebound back to that double-digit growth. And we think overall that high single-digit growth in this environment is still pretty positive.

I think as we look beyond that, Dan, the things that continue to give us optimism, we took some challenges this quarter. We still delivered good growth as Bill just pointed out. And so many things are still going positive in the company that does not reduce our optimism going forward, whether we look at the Celebrations Passport customer cohort growth, we added 350,000 new members there, continuing to see the performance of those customers that purchase frequency of two to three times out of the average customer. We grew our multi-brand, multi-category customers, double-digit store in the quarter. We enhanced the person. We're enhancing our personalization capabilities. We just enhance the Celebrations Passport program, with the new tiered points-based membership quite system. The new app that we laid out. So all of these things really continue and give us the optimism going forward. What we see is some short-term challenges, as Bill pointed out with the consumer, the inflationary costs, etc., and our ability to manage through that and get back to where we were.

Yeah, then we also saw a little unexpected -- the sharp rise in digital marketing rates that happened as we got further and further into the quarter. If you recall, we've talked about marketing rates that -- we knew we had a challenge in the June quarter and the September quarter because a year ago, marketing rates were at historic lows because so many companies were not in the market. We saw them self-correct a year ago in October when the national campaigns came on around the presidential elections. And so we had a more normalized comp against our marketing rates this year. Yet what we ultimately saw as we got well into the holiday season in the month of December, digital marketing rates rising at 25% to 30%. That caught us a little bit by surprise and caused us to pull back on some of the marketing and some of the new customer acquisition targets that we had.

That's why our new customer acquisition of 1.8 million, a great number, was down compared to prior year. So some of the softness that we saw late in the quarter was on the new customer front. And then it just got -- the cost per acquisition just got beyond the point where we felt it was prudent to invest, especially considering the pressures we had on gross margin.

Got it. That's helpful additional color. Last one then just on margin. The guide at midpoint was 40 basis points year-over-year lower. Now it's 400 basis points year-over-year lower on EBITDA. I'm just trying to get a sense of how much of that is incremental investment on your part to future proof against these things, understanding that you can address things like digital marketing rates, but how much is incremental investment versus how much is just unexpected costs, just running out the December costs levels through the balance of the year?

Yeah, a lot of it is the continuation of the headwinds that we saw. We -- Ocean Freight. While I think the experts believe that over time, they are going to kind of moderate, probably never go back to where they were 2 years ago. But I think they're going to moderate over time. But the timing of that is still very much on known and we're still seeing the spot markets at very high rates. Labor and some of the challenges with access to labor and labor rates, I think we're at a new normal. So there's -- it's $18 an hour, that's up 25% over what we paid last year and probably up 30% to 40% over where we paid pre -pandemic. So there are some ongoing challenges that we have. We have initiatives in place to help offset these. We've talked about the automation of our Hopewell facility. We did 30% more volume on peak days out of that facility with 40% less labor on that facility. We're continuing to invest in our other facilities to continue to automate manufacturing and distribution. We're going to continue to use our strong balance sheet to bringing inventory early and we're going to use that. That you see some of the investments we've made in working capital, we're going to continue that as we were as we sell through that inventory, we're going to replenish inventory to have that to make sure we're ahead of the supply chain, we're going to pre -build inventory to use our core staff and be less reliant on the seasonal labor. And as Chris mentioned, we're going to continue to play with our dynamic pricing during the holiday period is a very competitive market as we get into everyday occasions. And maybe the back half of the year, some of the flaw holidays we're going to continue to test dynamic pricing within those categories to help offset some of those challenges. But we know in the short-term anyway, some of the margin pressures we're still going to continue to exist.

Okay. We've taken up enough of you guys time. I appreciate it. Chris just -- I'll leave you with just to be clear, there is no change in your long-term messaging here, but the short-term is really where most of the issues are. Is that fair?

Yes. That's fair, Dan. Our long-term optimism remains the same.

Great. Thanks, guys.

Thank you.

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

Thank you. I know Dan asked most of my questions, but I have a couple of questions on the marketing side. You mentioned that the marketing was less effective and I was just -- obviously you talked about the digital. I know that you have an omni -channel approach to marketing, but I did notice that it seems like maybe you, you stepped up a little bit of the television advertising with your everyday gifting. Could you just talk a little bit about the effectiveness of the channels that you're using in marketing and whether or not you feel that maybe the shift in marketing, was in effective and maybe if you could just give us a sense of how you plan to look at marketing going forward, whether it's content or whether it's different types of content, or maybe a shift in how you look at marketing?

Michael, thank you for that question. As we looked at the marketing spend during the quarter, one of the strategies we had going in was suspended more especially on the food brands, especially Harry and David spend more on top of funnel marketing. And we did spend an d allocate some more into television, both OTT and linear capabilities, linear TV there. We were pleased with the return there, but as we said, as we got deeper into the holiday season, marketing costs overall, even in those channels, increased. But it also as the consumer start to pull back and then as we saw, industry-wide during December, the consumer got softer following Black Friday weekend. So therefore, some of the effectiveness of that televisions weakened as well. I think, though you're hitting on the point, as we look going forward and our go-to-market strategy so much is about how we engage with our customers differently. It's how we really use content. And that's why in my formal remarks, I highlighted how we're measuring engagement and how we had two times, 55 million engagement contacts during the first half of this year, utilizing content, videos, classes, workshops, redefining how we go to market. This is a program that we had started, but as we've been pointing out for the past 2 years, accelerated our capabilities as we really moved into the pandemic, sending out the Celebrations Pulse newsletter that we send out on the weekend, which is not about selling. It's just about engaging with our customers. And how we build relationships with them. So going forward, while we really will have a multichannel, as you pointed out, an omni -channel approach to marketing. At the core at its basis is how do we deepen the engagement we have with our customers? Because as we deepen the engagement, they become those customer cohorts that we often speak about. The multi-product category purchases, they joined Celebrations Passport, and then we get their use of frequency and retention that we're looking for. So that all comes together and I think you hit the nail on the head. It's all -- we're a company that looks to inspire expression, connection, and celebration. How we do that is to more engaging ways with our customer and not simply just product and promotional pricing advertising.

Thank you. Dan asked most of my questions. So that's all I have. Thanks.

The next question comes from Linda Bolton Weiser with D.A. Davidson. Please go ahead.

Yes, hi. Good morning. So can we just go back to the pricing because I'm not sure I understood. You mentioned that you had highlighted higher price point items. That points to me that that was like intentional mix driver towards higher average price point. But did you actually raise price on a like for like item? So just in apples to apples item, did you raise price and can you give us some idea as if you did that, what the average percentage increase in price or what percentage of the skews or just give us some idea about what kind of pricing did take place. Thanks.

Yes, Linda. I think you're right on both accounts. We did position in merchandise higher-price orders, higher-price items to drive the AOV. As we knew, certain capacity constraints would be there. We wanted to make sure we optimize AOV, in addition, we did raise prices on certain. Bill, would you say it's color.

I would say it's pretty evenly split, that our 7.5% growth is always pretty evenly split between higher pricing and the repositioning of higher-priced items. What we saw is, and again, we can -- we can monitor this real-time with our dynamic pricing and we saw on some of the food brands and in particular Harry and David that some of that pricing stock. In other areas, we did have to pull back. As we saw the consumer and as the holiday went on as the consumer pull back, we did have to play with pricing and reduce pricing back to make sure we were getting the orders on the conversion right. So we saw it in -- particular big example was Personalization Mall. It was a very competitive marketplace out there, and very promotional marketplace out there. So while we try to increase pricing, we wind up having to pull back pricing in the month of December, because we weren't getting the conversion rates that we wanted.

Another example there on the flip side of that Linda, is in the Harry and David business, for example. One of the lessons learned coming out of the holiday for us is we clearly have an ability to expand our product offerings in the $149 to $500 price point items. What we -- merchandise there sold and sold very well. And it tells us we have the ability to scale that price point category up higher.

Okay. I just -- I'm just following that thread, I wonder, a lot of us consumer analysts are a little bit concerned about the consumer, less stimulus, etc., versus comparisons last year. How do you marry the higher idea of higher price points, more expensive items, hundreds of dollars, with this idea that the consumer is not getting the stimulus benefits that they did?

I think what we did during the holiday season though, the other factor was some of the labor challenges we had with access -- without access to labor. So we knew we had the capacity is only funnel through x number of units. So we scaled back on more labor-intensive product offering. So some of the Create Your Own products that we have that are very popular, but they're labor-intensive. So we pulled back on those. And we pulled back on the lower price points because we're featuring the higher price points because we knew we only had capacity for X number of units. So we know some of the things we did would've held back on the overall demand that we're achieving. But we think we optimize. We tried to optimize what we can get from both a throughput perspective, which will drive the best top and bottom line results for us.

And our strategy we made, you're saying we want to make sure we have a broad enough offering and with broad enough price points to attract a large demographic of the customer base. There is always -- the old adage is always 10% of your customers, they don't care about price, but there's 90% of your customers who do and we're making sure that we have offerings for all of our customers.

And as we -- as we move away from the holiday season and have less constraints on that, we will have a board offering of price points for the consumer.

And then just another question kind of on the cost side. You were very well aware and you've been talking for many months about all these cost pressures, and you've been giving a quantification of the increase in labor, and you've even said the FedEx charges were known in something like September, October. So you could actually plan to try to offset. So when you think about what came in different than what you had in your plan, what was the one area that was most different? Was it the FedEx surcharges? Was it the labor? Was it the shipping like what was what -- because your gross margin is really very, very significantly different from what the street expected.

So clearly I wish I could point to one, but there are certainly several impacts. There are significant headwinds. And we're talking about Ocean Freight, out-balance shipping, labor, all of which we built in buffers into our plan on Ocean. We had contracted rates. We were choking on the increases that we had the contracted rates for and they were basically ignored and everything has to go to the spot market. Spot market ones are being 5 to 10 times, , and it escalated throughout the holiday season. So even in our October call, we have one set of course in mind and it exceeded that dramatically. Fuel kept going up. So yes, we have contracted rates with our third-party carriers that are relatively low single-digit increases year-over-year. But between, yes the holiday surcharges we knew about fuel surcharges, residential surcharges, all these surcharges added up so that we wanted to paying double-digit increase in cost per package and labor. An access to labor and the cost of labor just kept rising. We went from -- a few years ago; we were concerned about the federal minimum wage going up to $15 because we were well below that. Now, we're paying $18. And going into this -- and a year ago, we were paying well under $15. So those numbers just escalated significantly. And with some of the delays in the supply chain, we mentioned in our formal remarks that had an impact. We got inventory in after the due dates for some of the big box guys that we deliver wholesale products to. We had to write that inventory off. We had about a $6 million incremental write-off on inventory, because we've got the inventory and after the deadlines for the big box guys and they canceled orders on us. So both impacted both top line and margin. So we had built in a number of these buffers. We were very confident at the end of October with where the trend lines were from a top line perspective. And obviously, a greater top line would absorb some of these costs. But we had just come off of two consecutive months of double-digit growth, and we were feeling good where the holiday would end up on the top line perspective. And our cost levels were at certain levels, and it just escalated dramatically over the -- from November into December.

And as Bill mentioned, some of that also impacted the top-line of business. As we said, we saw a good, strong double-digit growth right up the Black Friday Cyber Monday, and then it tailed off after that. But during that time period because of some of the inventory challenges to labor challenges, we had to pull back on ramping as well. We had canceled orders. I mean, we probably left a significant demand on the table. I'm going to guess Bill probably at least 2% points. So that was that caused challenges on the top-line as well.

Okay. Just one more -- just kind of a housekeeping thing. Just on the Easter shifts, I actually thought it was fairly big. I don't know. So I am thinking revenue might even be down a bit sort of organic, at least in the third quarter and then double-digit or I don't know, pretty strong in the fourth quarter. Can you quantify the shift at all so we can get it right in our model?

Yeah. Easter holiday is an incremental $15 million or so of revenue. It doesn't fully go into from Q3 to Q4 because some of the food brands would still capture some of that revenue in Q3. But the bigger piece of the Easter shift goes into Q4. We do think it is the growth in the second half of the year. Again, as we -- the guidance implies similar to what we have in the first half of the year will be more heavily weighted towards Q4 than Q3. But we will grow in Q3 as well.

Okay. And just one last one I promise, is a profitable free, I didn't run my model through yet, but is it possible free cash flow for the year could be negative, slightly negative.

Bill.

The revised guidance we gave on free cash flow is that it's going to be down significantly year-over-year. It's obviously from a top line perspective -- from a bottom line perspective. And the revised guidance there will impact free cash flow. The big unknown is our investment in working capital. We want to use our strong balance sheet. We want to use our strong cash position to put us in the best possible position for next year. So where we see opportunities to get inventory early, we're going to take advantage of that. And obviously, to the extent that we're investing in working capital, that impacts free cash flow. So it really does depend on where the inventory ends up. But any sort of decrement as associated with that is really a positive for us because it puts us in a better position for next year.

Okay. Well, thanks a lot, guys.

Thanks Linda

The next question comes from Alex Fuhrman with Craig-Hallum Capital Group. Please go ahead.

Hey, guys. Thanks for taking my question. I wanted to talk about what you're seeing in terms of labor and supply chain pressure as you get -- start gearing up for the big Valentine's Day and Mother's day holidays obviously from a big picture, it sounds like these headwinds aren't really going away. But at least for Valentine's day and Mother's day, you're not necessarily competing against every other e-commerce company for seasonal workers and for shipping capacity. Just curious how you think about the major holiday season versus all of your other important holidays and then as you get more towards just kind of the everyday gifting component. Do those pressures ease up a little bit? Just kind of wondering how we think about those pressures that during the holiday season versus the rest of the year.

Well, Alex, the second half of the year is more floral centric than obviously the first half of the year. While is not immune to these -- to the cost pressures that we've discussed, the distribution model that we have for with the fulfilling a large part of the flow of product, they're not as susceptible. At least it doesn't impact us as much from that standpoint. So some of the challenges with Ocean Freight, higher labor, while it will continue into the second half of the year, our sales mix changes in the second half of the year. So the impacts on gross margin, consolidated gross margin will not be as great. I think from a standpoint of access to flow of supply, we feel based upon all size and the contacts that we've made over the many years in this industry that we're in a good position from a floral supply standpoint as we head into the significant floral holidays in the second half of the year.

Okay. That's great. Thanks, Bill.

The next question comes from Doug Lane with Lane Research. Please go ahead.

Yes. Hi. Good morning, everybody. Can you talk forward-looking on what specific price increases you have in the works? Maybe go through the businesses and give us a feel with some granularity on where you can and can't really take pricing in the March and June quarters.

I think Doug, thank you for your question. As we look at the pricing, I think really it is a dynamic environment that we move into. As Bill pointed out earlier, we were able to take some more -- we are able to be more successful with price increases on some of the higher-priced items. Harry and David for example, then we were price utilization while where you get into a lower price point. But really the dynamic point of view and where we see price elasticity, cock. opportunity for us as we move into the second half of the year, which is driven more by everyday business. It's a less competitive environment. But the way we manage it really is by constant AB testing and we have tests going throughout the day. And if we see a price increase decrementing conversion rate, and thus decrementing gross margin dollars, we'll pull that back. So it's kind of, it's a real-time effort that we're working with the customers on our pricing initiatives, as opposed to set it and forget it and see what happens to.

Well, that makes sense. And I'm sorry if I missed this, but I think you talked about your pricing actions of Personalization Mall, did I hear that you implemented pricing and then ended up pulling them back at the end of the quarter? Can you just go over that again for me?

Yes, we did. Just like we're doing throughout all of our business segments, we were playing with pricing and trying to optimize our pricing versus conversion to optimize revenue from that perspective. So in that category, it was a very competitive and promotional environment, especially in the month of December. So some pricing that we were playing with and putting in, we did have to pull back.

Okay. And then the other businesses you have where you have catalogs, doesn't that make it difficult to raise prices? And is there an opportunity there when you reprint catalogs to take some pricing?

So what we've done is with the catalog marketing specifically is we've been able to adjust the pricing mechanism so that we can't still have dynamic pricing on the web. But we have the ability to know if you're calling from a catalog or accessing us from a catalog and give us the catalog number, the published price will always be on it. No matter what would -- what we're testing on the web so to make sure that we're in compliance and being fair with our customers. So as we look forward, we'll take the learnings that we saw from the dynamic online pricing and apply that into our catalog pricing as we plan the next holiday season.

Okay, great. Thank you.

Thank you, Doug.

The next question comes from Tim Vierengel with Northcoast Research. Please go ahead.

Thank you for taking my question. Most have already been answered, but I was wondering if you could build specifically if you could spend just some of a bit more time explaining some of the supply chain pressures specifically coming from Ocean Freight. You called out some delays for the government through gift segment. I was wondering if anything specific also impacted the P Mall or the Consumer Floral segment. I think that was the biggest surprise in terms of revenue. So just wondering if there's any kind of unforeseen delays there that would call sort of fall in that segment. Thank you.

Yes. So from an Ocean Freight standpoint, two aspects of it. One, that tremendous increase in price that we had. Normally, when you contract for Ocean Freight, it's door-to-door. You get it from Asia right to your facilities. So those rates went up dramatically. The spot markets went up dramatically. But then as you still see today, and if you follow it, there's like a 140 tankers outside of the Port of L.A. So a lot of the delays that have been created because of the port congestion, we wind up having in a number of cases having to bring our own trucks in and grab the product at the dock and incur those incremental costs as well. And that's why we saw this unexpected significant increase in our costs where we're spending $28 million, $30 million more on that component of the business than we did in prior years. But delays did cause us problems. Because we got the product in late, that had an impact on our ability to assemble products. So with the labor challenges that we had and everything got pushed back to later in the year. So we had to pick and choose the types of products we wanted to -- we wanted to build on the consumer side. And on the wholesale side, we talked about and Chris mentioned in the formal remarks that we wind up having canceled orders on the wholesale side. That really was all within the food side of our business. On the fall and PMall side, we didn't really have -- we had delays in getting product in. But it didn't impact -- ultimately, impact the demand like it did on the food side of the business.

Okay. Yes. It's to clarify, I guess I was just looking at, is it through a clean demand falloff in the P Mall Consumer Floral segment as opposed to maybe some noise with capacity and fulfillment on the , correct?

Yeah. I think on PMall it was a very competitive environment. They have a tough comp that grew over 50% in the year-ago period. And they are comping and they grew just under 5% in this, holiday time in a very competitive promotional market for that product category, that kind of lower price point product category.

I think it's important to point out Bill, whether it be in the Personalization category, whether it'd be to floral, or quite frankly across all of our product categories from the data that we see in our best estimates is we gain share in our major categories. Even with the challenging environment that we operated in, the macro environment and the headwinds that we faced. It's our best view that we still gained shares in our key product categories, including personalization and remain very optimistic and very bullish on the future growth of PMall.

All right. Thank you. I guess lastly, do you see -- are there new competitors that maybe just haven't caught our eye yet that are driving that increased competition? Or is it just the really just the established players being more promotional? Thank you.

Certainly the latter. More of the established players being more promotional. I think most of --a lot retailers and e - tailers went into this holiday season expecting that we would not have to be as promotional as it turned out to be. Because I think we saw some pull forward early. Customers -- consumers purchasing early. So as we hit the key holiday season, it became a very competitive environment. And as Bill pointed out in the Personalization category for us especially.

All right. Thank you Chris and Bill.

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

Great. Well, thank you all for joining us this morning. We appreciate the opportunity. As you can see, we remain extremely optimistic on the future of the business, the accomplishments that we've had, the platform that we have to inspire people to express, connect, and celebrate, and the opportunity that gives us going forward. Right around the corner is Valentine's Day, so I urge you all to remember to please place your orders early for Valentine's. Thank you very much.

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