Q3 2024 1-800-Flowers.Com Inc Earnings Call

Participants

Andy Milevoj; Senior Vice President - Investor Relations; 1-800-Flowers.Com Inc

James Mccann; Executive Chairman of the Board, Founder, Chief Executive Officer; 1-800-Flowers.Com Inc

Thomas Hartnett; President; 1-800-Flowers.Com Inc

William Shea; Chief Financial Officer, Senior Vice President, Treasurer; 1-800-Flowers.Com Inc

Michael Kupinski; Analyst; Noble Capital Markets, Inc.

Alex Fuhrman; Analyst; Craig-Hallum Capital Group LLC

Linda Bolton Weiser; Analyst; D.A. Davidson & Co. (Research)

Anthony Lebiedzinski; Analyst; Sidoti & Company, LLC

Doug Lane; Analyst; Water Tower Research LLC

Presentation

Operator

Good day and welcome to the Third Quarter Results Conference Call. All participants will be listen-only mode. Should you need assistance, please signal a conference specialist by pressing star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and one for your telephone keypad. To withdraw your question. Please press star and two. Please note that this event is being recorded. I would now like to turn the conference over to Andy Milevoj. Please go ahead.

Andy Milevoj

Good morning and welcome to our fiscal 2024 third quarter earnings call. Joining us today are Jim McCann, Chairman and CEO, Tom Hartnett, President, and Bill Shea, CFO.
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 of our earnings release.
And now I'll turn the call over to Jim.

James Mccann

Thank you, Andy, and good morning, everyone. Thank you for joining us this morning. I'll begin with a brief overview of our third quarter performance and then turn it over to Tom who will provide a business update. We will conclude with a financial review from Bill and then we'll open it up to your questions.
Over the last few quarters, we have been providing updates on our relationship innovation and work smarter initiatives that are centered on elevating the customer experience and driving efficiencies in all aspects of our business. Our organization continues to relentlessly execute on these initiatives, and you'll hear a number of updates today on how we are actively managing our product portfolio and our pricing elasticity.
As we look at our third quarter performance, we continue to see a very complex consumer environment. Consumers continue to be deliberate and discerning with their purchases and are making thoughtful decisions. And although there has been much discussion about the Brazilian economy, we continue to see a bifurcation of our lower versus middle and higher-income consumers. It's not surprising that the lower-income consumer continues to be most pressured by inflationary forces and higher interest rates, while at the same time credit card balances and the delinquency rates are on the rise. Our total third quarter revenue declined 9.1%, which includes lower wholesale and Blue net revenue. As Bill will highlight further, our e-commerce revenue trends continue to improve sequentially, helping offset our top line softness.
Fiscal 2024 remains the year of our gross margin recovery. As we updated everyone last quarter, the pace of our margin recovery is occurring at a faster rate than we had originally anticipated at the beginning of the fiscal year. Our gross margin is benefiting from a combination of our work, smarter initiatives that are largely centered on operating more efficiently and the reversion to the mean of certain commodity costs. As one of the aspects of work smarter, we took further action to optimize our workforce during the third quarter. While these decisions are difficult, these changes were made in response to the current environment and to appropriately allocate resources to the growth opportunities in our business. While I take this opportunity to express our gratitude to every team member who was affected for their personal contributions to our organization's success beyond our cost optimization efforts, we are executing on our strategic initiatives to offer more solutions for our customers' gift-giving needs. Since the founding of the Company, we have been in the forefront of innovation. We have expanded our gifting options and made it easier for our customers to stay connected and celebrate with all the important people in their lives. We have a portfolio of brands and all corporate gifting options for every occasion. Most recently, we further expanded our offerings with the acquisition of Carlyle, which enhances our print on-demand, personalized greeting card offerings and enables us to address a wider range of our customers' expressive needs. The addition of Carlisle gives our customers the ability to pair top quality, personalized greeting cards with our extensive variety of gifts across our family of brands or as a stand-alone greeting. We are excited for our expansion in the greeting card category that further enhances the gifting experience we can provide our customers. Tom will provide additional information on our strategic initiatives.
Before we move on to the business update, I did not want to take this opportunity to celebrate Harry & David's 90th anniversary. It's a truly remarkable milestone to celebrate 90 years of delivering gifts from the time of Harry & David first hand delivered boxes appears nearly a century ago. Sharing has been at the heart of what we do while much has changed since 1934. Harry & David has been here all along, delivering extraordinary gifts that bring people together for life meaningful moments.
And now I'll turn the call over to Tom for our business update.

Thomas Hartnett

Thanks, Jim, and good morning, everyone. I'll provide an update on our business performance as well as an update on our relationship innovation development, which encompasses new or enhanced product offerings, our merchandising efforts as well as user interface enhancements. Through these initiatives, we continuously evaluate our offerings, pricing and bundling opportunities to ensure we have appropriate price points for each of our customer segments and that we are actively managing the pricing elasticity of our product portfolio.
Turning to our performance during the third quarter, we generated an adjusted EBITDA loss of $5.7 million, essentially in line with prior year despite the 9.1% decline in revenue. Most notably, our e-commerce revenue trends continued to improve sequentially, declining 4.9% for the quarter.
As we look at what's driving these trends, we continue to see a bifurcation between our lower income customers reduce their purchases the most as compared to our middle and higher-income customers. Proof in point was our Valentine's Day selection of premium games that appeal to our luxury buyers and included our share is very select offering, which are priced 25% to 50% higher than our standard offering. And our 100 long stem roses that retails for $399 and sold out. This demonstrates our pricing power and ability to increase sales leads as a result of this ongoing trend.
Our AOV increased 1.4% as our upper income customers continued to represent a greater portion of our overall population, and they continue to gravitate towards our higher-priced bundled products that provide a great gift and value. We recognize that our higher income customers have not meaningfully changed their behavior and in many cases are trading up in price points. But our lower income customers who are more affected by the macro economic environment are being much more deliberate with their buying decisions. As a result, not only are we expanding our price points higher for luxury oriented customers. We also flexed lower for our lower income consumers to ensure that we have guests for every occasion at appropriate price points. Our focus on the customer journey, providing thoughtful gifting options and having the appropriate price points at each end of the spectrum from value to luxury has never been greater. During the quarter, we introduced new product offerings, utilize innovative technology to extend the life of our world-famous pairs, extending their selling season and increasing revenue. We amplified our marketing efforts to evoke greater motions with our brands, and we expanded our lineup of gift products available for same-day delivery.
Let me take a moment to touch on each of these. In January, we launched Cheryl's ice cream, which can also be paired with Charles cookies to make a great gift set. We continue to grow our Cheryl's assortment to layer on complementary categories as we did with the introduction of cupcakes a year ago. At Harry & David, we had our longest Royal Riviera selling season on record. We accomplished this by using technology that enabled us to extend the selling season of our pairs and offer them longer than we ever had into the spring. This enabled us to grow pair sales for the quarter as our customers responded to the extending offering period. This technology will yield an even greater benefit in fiscal 2025 as we were anticipating a strong pear crop due to the favorable weather conditions. Our orchards have experienced this past winter, and we continue to see our higher income customers gravitate towards our higher value, higher priced gift bundles that combine gets more family of brands into a bundled set for Valentine's Day, we reintroduced our Treos bundles that featured one 800 Flowers, Harry & David wine and Shari's Berries, which exceeded our expectations with great sell through and differentiate our offerings from that of our competitors were able to leverage our family of brands and the supply chain investments we've made to send these bundles as one extraordinary and elegant gift. This not only provides for a much better and more memorable gifting experience, but it also reduces shipping costs by sending all the products in a single delivery.
Turning to our marketing efforts, we are strategically incorporating storytelling to elevate our brands and make a meaningful impact on our customers. Factive storytelling, evokes emotions, create a stronger bond with our customers and ultimately generate action. A great example of this was within our health and wellness brand with the launch of the vital choices featured catch on our website, blog, social and external channels. Bidil choice provides customers with hundreds of healthy or better for you options and we saw an opportunity to foster a stronger relationship with our customers who are interested in food that is healthy, natural and convenient beyond providing customers with useful product information such as nutrition facts and serving suggestions, we dive deeper to share the story of the fishermen who are responsible for the cash, the differences between wild quarter fish and farm fish, their sustainability efforts and and how they help bring it from the ocean to our customers' play.
Same-day delivery for gifts has become increasingly important in today's fast-paced world, and customers have come to expect convenience and speed as a component of our strategic initiatives. Our management team has been focused on expanding the number of products available for same-day delivery by leveraging our BloomNet network. We have expanded the number of products available for same-day delivery to help customers celebrate special occasions, whether it's a last minute gift or a sudden celebration as part of this effort, we recently launched our Cheryl's same-day delivery program that features our best selling cookies any option for our cookie add-ons to select one 800 Flowers bouquets. We expect this to build over time. But most importantly, this is a great illustration of how we are differentiating ourselves in the marketplace by leveraging our e-commerce platform, our family of brands and our fulfillment capabilities to offer customers an expanded array of products, convenience and speed to be their gifting destination of choice.
And now I'll turn it over to Bill to provide the financial review Thanks, Tom, and good morning.

William Shea

As Jim and Tom highlighted, we continue to operate in a complex consumer environment, which consumers continue to spend on certain categories while controlling their spend in others. We also continued to see the divergence in our customer file from which a higher income customers continue to spend and gravitate towards a higher price to offerings. As a result our third quarter revenue declined 9.1% as compared to a year ago. This includes lower wholesale volume with our retail partners for this past Easter as well as well as lower net revenue resuming a little closer look at our core consumer quarter over quarter, e-commerce revenue trends continued to improve, declining 4.9% in the third quarter as compared to 6.6% in the prior quarter. Improvement was partly due to the shift of Easter helping mitigate the revenue decline. Our gross margin is continuing its reversion to the mean improving 300 basis points to 36.6% improvement was led by lower freight costs, our inventory optimization efforts, labor efficiencies as well as a decline in certain commodity costs.
I want to take a moment to discuss a couple of external factors that have captured investors' attention over the past few months, including the Red Sea issues that impacted supply chains and the extraordinary rise in copper prices beginning with the supply chain, we are happy to report that our logistics team recently completed negotiations with our fiscal 2025 inbound freight costs and successfully negotiated lower rates for the fiscal year ahead. Despite the geopolitical issues in the Middle East as a cocoa prices, we were fortunate to have locked in our fiscal 2024 and fiscal 2025 cocoa purchases with moderate price increases prior to the recent and much more dramatic increase in pricing, we will look to offset these moderate price increases in other areas. As Jim mentioned, we made the decision to initiate a reduction of our full-time workforce in response to the current business environment and to appropriately allocate resources to the growth opportunities within our business. This action is expected to yield annual savings of more than $10 million. In conjunction with this action, the Company incurred a $2.4 million of severance and related charges. During the quarter quarter operating expenses were 43.9% of sales, which includes the severance-related charges as compared to 53.9% in the prior-year period, which includes a goodwill and intangible asset impairment charge.
Operating expenses. Excluding the impact of the severance-related charges, the appreciation or depreciation of investments in our company's nonqualified compensation plan and the impairment charge recorded in the prior year period were 42.4% of sales as compared with 38.8% in the prior year period.
Operating expenses, excluding the same items just noted, declined $1.2 million as compared to the prior-year period to $160.7 million net loss for the quarter was $16.9 million, or $0.26 per share, which includes severance and related charges of $2.4 million or $0.02 per share as well as a tax benefit of $0.04 per share related to the fiscal second quarter trademark impairment charge in the prior year, net loss was $71 million or $1.10 per share, which included an after-tax non-cash goodwill and intangible asset impairment charge of $53.1 million. The adjusted net loss was $18 million or $0.28 per share compared with an adjusted net loss of $17.8 million or $0.27 per share in the prior year period.
Our third quarter adjusted EBITDA loss was $5.7 million, essentially flat as compared with an adjusted EBITDA loss of $5.5 million a year ago. As the gross margin recovery and our effort efforts to operate more efficiently helped mitigate the top line decline.
Now let's review our segment results for gourmet foods and gift baskets. Segment revenues declined 11.4% to $131 million compared with $147.9 million in the prior-year period. A large contributor to this decline was our wholesale business, which declined approximately $10 million as several retailers have reduced their orders for Easter. In light of the consumer environment segment, e-commerce revenues declined 4.5%. Gross profit margin expanded 530 basis points to 29.9% compared with 24.6% in the prior-year period, benefiting from lower freight costs. The Company's inventory and labor optimization efforts as well as the decline in certain commodity costs. Excluding the impact of the severance charge in the current period and the impairment charge a year ago, the adjusted segment contribution margin loss improved $6.3 million to a loss of $7.6 million compared with an adjusted income segment contribution margin loss of $13.9 million in the prior year period.
In our consumer, floral and gift segments, revenue decreased 5.1% to $221.2 million compared with $233 million a year ago. Gross profit margin expanded 140 basis points to 39.3% compared with 37.9% in the prior year period, improving on lower fulfillment costs and our logistics optimization efforts.
Segment contribution margin was $22.8 million, excluding the severance charge compared with segment contribution margin of $26.1 million in the five-year period.
In our BloomNet segment, revenues for the quarter decreased 26.1% to $27.3 million MAUs were impacted by lower order volume processed by Bloom net, which included an expected decline in orders by one of our business partners following a merger with a competitor. Gross profit margin was 45.4% compared with 42.5% in the prior-year period, primarily reflecting higher margin product mix and lower freight costs. Segment contribution margin was $7.6 million, excluding the severance charge compared with $11 million in the prior year period.
Turning to our balance sheet, our cash and investment position was $184 million at the end of the third quarter. Inventory declined to $159.5 million compared with a inventory of $191.9 million at the end of last year's third quarter. In terms of debt, we had $192.5 million in term debt and no borrowings under our revolving credit facility. As a result, net debt was $8.5 million compared with $98.4 million at the end of last year's third quarter, we continued to execute on our stock buyback program and repurchased $9.2 million of our stock through the first three quarters of the fiscal year. This amounts to approximately 948,000 shares that we repurchased at an average cost of $9.68 per share.
Now let's turn to our fiscal 2024 guidance. We are reaffirming our guidance and continue to expect total revenues to decline in the 7% to 9% range as compared with the prior year. Our adjusted EBITDA to be in the range of $95 million to $100 million and our free cash flow to be in the range of $60 million to $65 million.
I will now turn the call back to Jim for his closing comments before we open it up for Q&A.

James Mccann

Thanks, Phil. Before we open it up to your questions, I want to tell you that I'm incredibly proud to share that 1-800 flowers.com has been recognized as one of America's most trustworthy companies by Newsweek. I want to take this opportunity to congratulate and thank everyone in our organization for the hard work that contributed to this recognition. It's an honor to have such a strong community of customers who trust us to help them get more collect more and build more and better relationships, trusting our company matters, and we look forward to continuing to build on this momentum.
Now, operator, if you would, let's open it up for any questions.

Question and Answer Session

Operator

We will now begin the question and answer session. To ask a question, you may press star and one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star and two.
Our first question comes from Michael Kupinski with NOBLE Capital Markets. Please go ahead.

Michael Kupinski

Thank you for taking the questions and congratulations on managing those costs. I was just wondering if you can talk a little bit about the commodity prices and obviously continued to weaken in the quarter. Can you give us a sense of those commodities that were weak that were impactful in the quarter, karate prices are looking like and trending, particularly not just the cocoa, which obviously you talked about, but maybe some of those commodities that might be a little stubborn and offer future prospects for lower prices and going forward.

James Mccann

Michael, thank you for your question. This is Jim. Your commodity prices have been all over the place and I would tell you just in the last week and the change in cocoa prices has been extraordinary. We are we plan for next year to have a cocoa prices up quite a bit and what the impact on us would be. As Bill mentioned, though, we're fortunate that we have locked in our our availability and our pricing on cocoa through next year. So we're a little bit protected from those wild swings, but still very conscious of it because it's going to impact the overall market and impact our pricing the future. But we're very pleased to see in the last couple of days, it's over 20% decline in cocoa prices for Bill. What other commodities? I know eggs and butter are two big components when your bakery and chocolate maker. You're very conscious of those prices and we've seen some wild swings a little color on where we are now and what impacts that might have on our overall cost going forward, you mentioned Asian, but are ones that have come down significantly of their of their highs and beginning to benefit some benefit this year on those commodities.
But other items like fuel, we were getting a benefit for most of this fiscal year and with client of crossover where fuel has risen and it's a combination of both on the fuel side, combination of both what's happening in the in the markets, the third party carriers continue to that's a surcharge that they continue to play with the with the mild winter that that's gone from a significant headwind tailwind this past year.
And right now, it's a slight it's a slight headwind as we head into fiscal 25 and sort of Michael's question overall, commodity prices, fuel being the biggest, it's still a negative headwind overall on commodity costs because fuel is such a disproportionate part of our commodity mix as we move forward I think fuel has been a benefit to us in fiscal in fiscal 24. But as we move forward, fuel will be a headwind against this.

Michael Kupinski

Yes. Thank you for that color. And can you give me a sense of the decrease in shipping costs that surprisingly negotiated lower rates going forward? I was just wondering if you can give us a sense of the shipping costs, including ocean freight costs it, Michael, we found that very surprising I would never have predicted that we lock in rates going forward that will lower who knew that we'd be talking and thinking about the Reg G and who sees it six months ago a year ago. It's certainly a surprise to me, but we'll have just finished a weaker, we're going to have to go those contract negotiations lower, call it aftermarket.

James Mccann

Yes. So several months ago, the spot market for ocean rates jumped dramatically probably doubled at the contractual rates that the that everybody had. The good news is that the carriers did honor the contractual rates. So we didn't feel the impact of those spot market on spikes as we had entered into negotiations several deals. And back in back in March, we were concerned where where rates would go for fiscal 25, but we were able to successfully negotiate a core store of the four carriers that we that we use a slight decrease in our ocean rates as we head into fiscal 25. So those actually rates went into effect Yes, yesterday May first, and they run through May May 31st of scale of next year.
On the FinTech side, on the outbound shipping side, we always have modest contractual rates we talked a little bit about about fuel. I know all of the surcharges that are outside of those rates, but we have been in between would fall under our model work smarter initiative with inventory optimization and logistics initiatives, we've been able to offset those rate increases this past year. So through the nine months ended, yes, on the end of the third quarter, our actual cost per package is on flat to slightly lower on a year-over-year basis. It has great than what we've done, Michael, to mitigate that those inbound freight costs. I'll ask Tom to comment on this a bit, where we purchase, where we manufacture.

Thomas Hartnett

Yeah, so as Michael asked, we over time and still feeling the sting from the pandemic we have shifted some of our volume to the states, et cetera, from a supply chain except com. And so, you know, just a raw number of containers we're bringing in is less than it was of even sands where we've been in sales.

Michael Kupinski

So. Got you. Thanks for that color. And just final question, if I may. You implemented cost cutting actions in your workforce in the quarter, how much of those actions could be viewed permanent?

James Mccann

Michael, this is Jim. Yes, we reduced our workforce on salaried workforce in this quarter. Painful thing to do but appropriate under our ongoing work, smarter initiatives where we'll continue to look to say how can we operate more efficiently, how can we be more productive? And that's going to result in us having a constant eye on our costs and part of our cost structure is obviously our talent. So they didn't have any impact on last quarter because in the same quarter. We also have the related severance costs that go along with that. So it didn't have any benefit in the last quarter on an ongoing basis, we're estimating about $10 million in reduced operating costs at the payroll level. And that is all permits.

Michael Kupinski

That's all I have. Thank you.

Operator

Our next question comes from Alex Fuhrman with Craig-Hallum Please go ahead, guys.

Alex Fuhrman

Thanks very much for taking my question. I wanted to ask about same-day delivery. It certainly seems like in many ways that's where the industry is heading out what are the economics on your orders look like compared to the rest of your business? And what do you think happens to your cost structure if it's become table stakes over time.

James Mccann

Thanks, Alex. I think the last thing you said is absolutely the case that is going to be table stakes. And we've been saying in these in these forums for a couple of years now. So it's something we're working toward and we're looking forward to more of that topline to give a little color on what the impact of the costs are for us. But the unique model that we've become it gives us a real leg up there. And in particular time, if you would talk about what we're doing now with other products across our portfolio and putting them in the same day program. What we're seeing, it's very early stages, but at the same day is, as you say, Alex increasingly table stakes and we think we're particularly well positioned to serve our customer better and benefit our community, particularly our last mile fulfillment, which is anchored by our BloomNet network. Tom?

Thomas Hartnett

Good morning, Alex, so on on this, obviously, same-day is something we've been at a long time, and we are very involved just in our floral with our floral partners in helping them manage delivery costs. So that's something we're right all the time for same day. So we're leveraging a lot of that learning as we move further and further into other gifting items that we can push into the local markets. And so we've seen success in our early success with Cheryl's cookies. We've had confection products with the Shari's Berries brand, where we've been able to bundle those products or our obviously our Shari's Berries products, our Fruit Bouquets products. And so we have a pretty wide swath of products. There will always be different economics based upon the speed in which a customer chooses to have to get delivery. Obviously, if somebody wants something in two weeks, we probably can be more economical in the way we provide that item to the customer and how we ship it then than that same day, we think of that as we continue to grow our volume and we learn into the better ways of for deploying product and really about those those rings of fulfillment, Com, et cetera, we can leverage our our of our network. We've networked at much greater.

Alex Fuhrman

Okay. Thank you so much, both of you. Really appreciate the thorough answer there.

Operator

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

Linda Bolton Weiser

Yes, hi. So I was wondering about you mentioned the on the wholesale side that some retailers you pulled back a little bit on ordering for Easter. I'm just curious if you're getting any early read about what retailers are thinking for Christmas. And going along with that, I know that the club programs are kind of an important part of things. Do you anticipate a decline in sort of your sales from those club programs this Christmas?

James Mccann

Thanks, Linda. Will you in answer to your question, the wholesale is a piece of our business that gives us an excuse and coverage for infrastructure. So it's not something we wanted to do well and do better, but it's not something we're going to be very reliant on other lender and help us offset the operating expenses that we have with or without it. So it's only important in that respect.
What we saw last year is it sell-throughs during the Christmas holiday in calendar 22 weren't as strong as the big boxes were hoping for. So they cut back dramatically on their on their buy for calendar 23 holiday period. So that was something we had as a headwind going into this that we knew about because as you indicated in your question, we have a good line of sight as to what that would look like several months out before the holiday season. And then Easter was a complication because we had a good Easter a year ago. And then this Easter, the big box guys, I think because Easter moved up and that always has a depressing impact on sales where Easter was earlier cycle tends to sneak up on people, they cut way back on the eStore. So we knew that coming in in answer to the most of the important underlying question about you asked, I'll ask Bill to talk about what line of sight that we have for this year and for the continuation and the ask our question to be a headwind for us.

William Shea

Yes. I mean, as we talked about at the end of the second quarter, we took about a $20 million reduction in those big box wholesale orders on backend into about $10 million hit this year because of the reduction in reduction in Easter. We do have some line of sight into holiday next year and orders will be up next year. So it will not be a headwind. It will be a tailwind on those orders have not been finalized yet so to the extent of the increase that we'll get next year, we don't have that locked in yet, but it will be a tailwind, not a headwind, but we don't anticipate getting back to it high of the pandemic time right now, we expect it to be up, but not to not recapture maybe the results fully recover from the high.

Linda Bolton Weiser

Yes. Okay. Thanks. And then and on the personalization side, I was wondering, given your commentary about the bifurcated consumer high versus low on, is there a big difference between P. mall and um, I think the other line, I think it's called Things Remembered or something like that. Is there has there been a big difference in the performance of those two lines? And can you kind of comment on how that area is doing in general things, good insights there, lender, of course, but I have time to give you color.

James Mccann

I think I think the answer is yes, but part of that is that is true, Linda.

Thomas Hartnett

As the personalization of small business that tends to have a consumer with a lower household income, we have seen a little bit more of the impact there on that personalization business, some but on, I'd say right now because Things Remembered is still so new. If you remember, we acquired that a year back and it was just the IP. And we're just starting to get our sea legs under us and we have. But we have seen growth in that we're very pleased with there and or was that that is appealing to on a different the different demographic. And we see a pretty big delta in average.

James Mccann

Our AOV for things remember so we're very, very pleased with how Things Remembered is getting started. It takes a couple of years to get your legs on this concept on that business. Could you have to select inventory manufactured imported, get it into stock. So it will take us through next holiday season to really get a feel how it's going. But we're really pleased with how it's doing coming out of the gate, Tom, what does that business? What is the big selling item we have is Things Remembered.

Thomas Hartnett

It's a pure along base that sells very well.

James Mccann

It's $180 nets and it's a beautiful item, but that's a strong, strong Celebros and continues to gain strength. And that's CAD180 a ticket. So I think that goes to the heart of your question, Michael.

Linda Bolton Weiser

And would the contribution margin for Things Remembered be higher than for PMO?

Thomas Hartnett

The contribution margin margin is about is about the same of the some the labor component of some of the items that we make on Things Remembered can be higher with a little bit less automation. So we're still working through those things, there's opportunity there in the future. But even though we have a higher ticket on the things remember product, it is less about the Things Remembered brand. It's more about the product and the personalization and vice versa on the Personalization Mall side.

Linda Bolton Weiser

Okay. And then on I'm just curious about ARM, your workforce reduction. I mean, I applaud you for taking action on that front. But I don't recall you taking a lot of workforce reductions just historically. So I'm just wondering how that's sitting like is that affecting morale within the company. Maybe maybe you could comment on there.

James Mccann

Linda, it's Jim. I'll stop there. Answer is it's always tough to do. And yes, you're right. We haven't done historically. We haven't done that open. I think it's only the second time in my memory that we've had to do a significant ramp. I think what you'll see from us going forward is that we have a new sense of talent management. And I think, frankly, it's not unique to us. I think you're seeing when a company like Google, we've really never had large layoffs or layoffs of any kind in their history and now telling their people that talent management is going to be a regular part of how they think about their cost and how they manage their company going forward. So to us that is you're going to have growth areas to the company. We're going to be stepping up. And even in the last couple of weeks, we've had a couple of really significant hires in our management ranks that we've just just initiated and to continue to step up the areas where there's growth, where there's opportunity and sometimes an area that's you're not emphasizing as much is you still require some boot Trimble or in some cases it removes some folks. So I think we have a different ongoing attitude about talent management. I don't anticipate that we'd have to do other risks of any size going forward, but we will always from a working model point of view, be managing our talent in a very proactive way to make sure we step in the growth opportunities and minimizing our exposure and our expenses on the areas that aren't growing or don't have the same problem going forward.

William Shea

And then Linda and work smarter, and we've talked about this for several years now is really a much broader than just labor management is all about operating more efficiently driving cost out of the business. We've talked a lot about technology and automation and how that's going. You have driven down our costs in our production area up in the production areas. We've talked about logistics and inventory management to drive down our cost per quarterly package, change in corporate expense negotiations, marketing efficiency, moving from some bottom of the funnel where the digital rates have continued to rise to more efficient marketing spend. So it is a much broader area of ultimately continuing to look at how we can operate this business more efficiently and drive cleaner business.

Linda Bolton Weiser

Okay. Well, thanks for everything and good luck.

James Mccann

Thank you, Linda.

Operator

Our next question comes from Anthony Lebiedzinski with Sidoti.

Anthony Lebiedzinski

How much was average order value in the quarter? And are you seeing success with doing more multi-branded bundles. It was a bit of a short question, but a couple of pieces to it will touch on what the average order was. I'll tell you the average order is increasing and we're not thrilled with that. It evidences and supports the theory that is that are better or higher-income customers weathering this period better than our lower income customers are number one number two. And I say we're not thrilled with the rise in average order value that causes a bill to have a heart palpitations. That's the reason I say we're not thrilled with that is because I'd rather see us have a broader range of price points, many more accessible price points. And you see you'll see and have seen our efforts to do that.
And then the third piece of your question, it's around bundles. So I ask Bill to start with the average order value. And then Tom to talk about the success we've seen with bundles, which goes back to a question that Alex asked earlier about it, what we're seeing with our last mile delivery capabilities, how that's benefiting our bundles, which is a collection of more than one of our brands yet.

William Shea

So the average ticket during the quarter was $79. It's up about 1.5% year over year to Jim's point, a lot of that is driven by by this deal by these bundles and ultimately the pricing elasticity that we've that we have. So we have been introducing more higher price items that you see that the affluent consumer that continuing to buy, part of that is the bundles that Tom will describe. And we've also introduced a number of lower price point items as well to generate interest and orders from our less affluent consumer, as you would guess a slight again on the part part of this is so I don't think we get to your specific question, it rose seven were AOV was $79 and rose or you didn't answer.

Thomas Hartnett

I apologize. So our work, our bundles continued to two great we're exceeding our expectations we recently for the holiday season. We're continuing this would have launched a new bundle series between our Personalization Mall business and our Harry & David business and to give you a good example of our pressure cooker re board, where we have a personalized cutting board that is delivered to together as one as one discrete gift and the Board is personalized from the Board. I mean, him on his board is personalizing example. So just like we were talking about with the Cheryl's cookies, we have bundles some that are doing great with now and been bundling those with floral gifts. Some of the others we talked about is our is or as a wild guess that we're bundling with a whole assortment of different products throughout the different brands. We have this wonderful gift for Mother's Day, which is up Harry and David have prepared meals, which is prime rib, but we're also bundling with Shari's Berries and floral arrangement. We think that's going to be a great appeal to selling for $699 and think, well, that's going to have a great appeal for some of our affluent customers. So we continue to push heavily into the bundles model in a way our merchants have done a great job of being very creative in coming up with great ideas that our consumers are gravitating toward. So happy to see.

Anthony Lebiedzinski

Thank you for the color there.

Operator

As a reminder, if you wish to ask a question, you may press star and one. Our next question comes from Doug Lane with Water Tower Research.

Doug Lane

Yes, hi. Good morning, everybody. I just have a couple of things here. You know, I look at the third quarter EBITDA loss of $5.7 million, and that's not really too far from where that quarter was pre-COVID and through nine months, your gross margin is 40%, 41%, again, not too far from where you were pre-COVID. So I guess my question is how close are you with regards to reverting to the mean on your cost structure.

William Shea

So from a margin perspective, if you look at Doug, if you look at a kind of 10-year history from 2012 to 2021, you saw us in that that 42% range, give or take 50 basis points on. We had a low point of 37, two a few years ago, and we've been climbing back in this year. We've obviously made great progress on that. At the beginning of the year. We had guided that we'd be in the low 39% for the year, and we upped that after the second quarter and now anticipate that our margins will exceed 40% this year and being in being the low 40s 40%, 41%. So we're climbing back, but we're not we're not all the way there yet, and we do think there's still opportunity for us and that will go to kind of revert back to our historical mean of 42% over the next couple of years?

Doug Lane

Well, you did it pretty close anyway. I'm looking at the balance sheet here and I have to ask what's the what's the acquisition front look like? Are you still prioritizing acquisitions in your growth strategy and what's the environment like these days?

James Mccann

Well, I think Doug, this is Jim. The overall structure, the overall environment achieves that a lot of smaller companies, particularly early-stage companies, are really have a hard time finding capital if they don't have a profitability or a clear short-term path to profitability. So it's a target rich environment. We're being very judicious about what things and give real consideration to. So we announced an acquisition of Justin's talked about an acquisition just a few weeks ago there we don't really look at that as an acquisition. We see that as a talent acquisition, we see it as a capabilities acquisition. It comes with very little revenue, but very talented technology team that would fit in very nicely with our existing team. We're using that to improve our capabilities. Our spending a lot of effort in terms of portfolio of products that we have. So I don't think we need to do any acquisitions for us to achieve our near-term objectives. We will be opportunistic if we find something that really does fit our portfolio well, and we'll continue to do these tuck-in kind of talent acquisitions that really buttress our capabilities of providing a full experience for our consumers, helping them to have more and better relationships and provide them with the difference of a blended services. So I think it's a good environment, but we'll be very judicious about what kind of company do we want to be what capabilities do we need to really serve our customers. We already have an enormous database. How else can we serve those customers in that database was our primary objective, Bill or Tom, any color?

William Shea

Yes, I'll just say I mean, you've seen us do big acquisitions over the years with Harry & David in Personalization Mall, you've seen us do tuck-in acquisitions with Shari's Berries and Things Remembered type of items. And you've seen us almost like Aqua hires over the over the last year or so with the smart gift. And now I call it a while to kind of bring capabilities to the company that will help enhance the offerings that we have for for our customers and with Carlyle, it does give us an offering that cause the greeting cards that are the low price points that that our consumers can interact with us and we want our customers to come and visit us and interact with us more frequently.

Doug Lane

Great. That's very helpful. Thanks, guys.

Operator

Ladies and gentlemen, this was our last question.

James Mccann

Thank you all. Thanks for your interest and your good questions. Any other follow-up you have? We'll be happy to chat with you one on one of the happy to do that today tomorrow or anytime in the future. A reminder, we're at the beginning of the Mother's Day push here. So all the wonderful moms in your life where you have a vehicle selection that gives from all of our portfolio brands to help you express yourself in just the right way to the women in your life who amount. So I had a very bond-like influence on human people. So enjoy the upcoming Mother's Day holiday. Thanks for your interest and your time today.

Operator

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.