1 800 FLOWERS COM INC

Notes to Condensed Consolidated Financial Statements

Note 1 –Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by 1-800-FLOWERS.COM, Inc. and Subsidiaries (the “Company”) in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended December 28, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending June 28, 2026. These financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 29, 2025.

The Company’s quarterly results may experience seasonal fluctuations. Due to the seasonal nature of the Company’s business, and its continued expansion into non-floral products, the Thanksgiving through Christmas holiday season, which falls within the Company’s second fiscal quarter, typically generates over 40% of the Company’s annual revenues, and all of its earnings. Due to the number of major floral gifting occasions, including Mother's Day, Valentine’s Day, Easter, and Administrative Professionals Week, revenues also have historically risen during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Net revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates for credits and returns (calculated based upon previous experience and management’s evaluation). Service and outbound shipping charged to customers are recognized at the time the related merchandise revenues are recognized and are included in net revenues. Inbound and outbound shipping and delivery costs are included in cost of revenues. Net revenues exclude sales and other similar taxes collected from customers.

A description of our principal revenue generating activities is as follows:

•E-commerce revenues - consumer products sold through our online and telephonic channels. Revenue is recognized when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is typically due prior to the date of shipment.

•Retail revenues - consumer products sold through our retail stores. Revenue is recognized when control of the goods is transferred to the customer at the point of sale, at which time payment is received.

•Wholesale revenues - products sold to our wholesale customers for subsequent resale. Revenue is recognized when control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement. Payment terms are typically 30 days from the date control over the product is transferred to the customer.

•BloomNet® services - membership fees as well as other service offerings to florists. Membership and other subscription-based fees are recognized monthly as earned. Services revenues related to orders sent through the floral network are variable, based on either the number of orders or the value of orders, and are recognized in the period in which the orders are delivered. The contracts within BloomNet services are typically month-to-month and, as a result, no consideration allocation is necessary across multiple reporting periods. Payment is typically due less than 30 days from the date the services were performed.

See Note 14 - Business Segments for additional information on disaggregated revenue.

Deferred Revenues

Deferred revenues are recorded when the Company has received consideration (i.e. advance payment) before satisfying its performance obligations. As such, customer orders are recorded as deferred revenue prior to shipment or rendering of product or services. Deferred revenues primarily relate to e-commerce orders placed, but not shipped, prior to the end of the fiscal period, as well as for subscription programs, including our various food, wine, and plant-of-the-month clubs, and our Celebrations Passport® program.

Our total deferred revenue as of June 29, 2025 was $23.7 million of which $7.9 million and $21.1 million was recognized as revenue during the three and six months ended December 28, 2025. The deferred revenue balance as of December 28, 2025 was $30.0 million and is included within the “Accrued expenses” line item in the consolidated balance sheets.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires enhanced disclosures about a business entity's expenses, includes enhanced interim disclosure requirements, and requires additional disclosure about specific types of expenses included in the expense captions presented on the face of the income statement, as well as disclosures about selling expenses. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 allows for either a prospective or retrospective approach on adoption. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires the disclosure of additional information with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes and requires greater detail about significant reconciling items in the reconciliation. Additionally, the amendment requires disaggregated information pertaining to taxes paid, net of refunds received, for federal, state, and foreign income taxes. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and allows for either a prospective or retrospective approach on adoption. The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures and plans to adopt this standard in the fourth quarter of fiscal 2026.

Note 2 –Net Income (Loss) Per Common Share

Basic net income per common share is computed by dividing the net income during the period by the weighted average number of common shares outstanding during the period. Diluted net income per common share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The following table sets forth the computation of basic and diluted net income per common share:

Note 3 –Acquisitions

Acquisition of Scharffen Berger®

On July 1, 2024, the Company completed its acquisition of certain assets of the Scharffen Berger® brand, a chocolate manufacturer, expanding the Company's product offerings in the Gourmet Foods & Gift Baskets segment. The Company used cash on hand to fund the purchase.

The total consideration of $3.3 million was primarily allocated to the identifiable assets acquired and liabilities assumed based on the estimates of their fair values on the acquisition date. During the quarter ended March 30, 2025, the Company finalized its purchase price allocation, and the consideration transferred was allocated to property, plant and equipment of $2.0 million, inventory of $1.3 million, and goodwill of $0.1 million (deductible for income tax purposes), partially offset by net liabilities of $0.1 million.

Scharffen Berger annual revenues and results of operations, based on its most recently available financial information, are deemed immaterial to the Company's consolidated financial statements and, as such, pro forma results of operations have not been presented.

Note 4 –Inventory

The Company’s inventory, valued at the lower of cost or net realizable value, includes purchased and manufactured finished goods for sale, packaging supplies, crops, raw material ingredients for manufactured products and associated manufacturing labor, and is classified as follows:

Note 5 –Property, plant and equipment, net

The Company’s property, plant and equipment, net consists of the following:

Note 6 –Goodwill, Trademarks with indefinite lives and other intangibles, net

The following table presents goodwill by segment:

The total carrying value of goodwill is reflected net of $252.4 million of accumulated impairment charges, of which $119.0 million is related to the Consumer Floral & Gifts reporting unit and $133.4 million is related to the Gourmet Foods & Gift Baskets reporting unit.

The Company’s trademarks with indefinite lives and other intangible assets, net consists of the following:

Future estimated amortization expense is as follows: remainder of fiscal 2026 - $0.6 million, fiscal 2027 - $0.6 million, fiscal 2028 - $0.3 million, fiscal 2029 - $0.2 million, fiscal 2030 - $0.1 million and thereafter - $0.1 million.

Additional Goodwill and Indefinite-Lived Intangible Asset Considerations

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of goodwill and indefinite-lived intangible assets requires the Company to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, long-term growth rates, royalty rates, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control change, such as discount rates, market capitalization, income tax rates, or inflation, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then goodwill or indefinite-lived intangible assets might become impaired in the future.

As discussed in the Annual Report on Form 10-K for the fiscal year ended June 29, 2025, goodwill for the Company’s Consumer Floral & Gifts reporting unit and the Company’s Personalization Mall tradename were impaired during the quarter ended March 30, 2025 and were written down to their respective fair values causing zero excess fair value over the carrying amount as of the impairment test date, resulting in a risk of future impairments if any assumptions (including changes in segments), estimates, or market factors change in the future.

Note 7 –Investments

Equity investments without a readily determinable fair value

Investments in non-marketable equity instruments of private companies, where the Company does not possess the ability to exercise significant influence, are accounted for at cost, less impairment (assessed qualitatively at each reporting period), adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. These investments are included within “Other assets” in the Company’s consolidated balance sheets. The aggregate carrying amount of the Company’s cost method investments was $0.4 million as of both December 28, 2025 and June 29, 2025.

Equity investments with a readily determinable fair value

The Company also holds certain trading securities associated with its Non-Qualified Deferred Compensation Plan (“NQDC Plan”). These investments are measured using quoted market prices at the reporting date and are included within the “Other assets” line item in the consolidated balance sheets (see Note 11 - Fair Value Measurements).

Note 8 –Leases

The Company currently leases plants, warehouses, offices, store facilities, and equipment under various leases through fiscal 2036. Most lease agreements are of a long-term nature (over a year), although the Company also enters into short-term leases, primarily for seasonal needs. Lease agreements may contain renewal options and rent escalation clauses and require the Company to pay real estate taxes, insurance, common area maintenance and operating expenses applicable to the leased properties. The Company accounts for its leases in accordance with Accounting Standards Codification ("ASC") 842.

At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time, by assessing whether the Company has the right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset.

At the lease commencement date, the Company determines if a lease should be classified as an operating or a finance lease (the Company currently has no finance leases) and recognizes a corresponding lease liability and a right-of-use asset on its consolidated balance sheet. The lease liability is initially and subsequently measured as the present value of the remaining fixed minimum rental payments (including base rent and fixed common area maintenance) using discount rates as of the commencement date. Variable payments (including most utilities, real estate taxes, insurance and variable common area maintenance) are expensed as incurred. Further, the Company elected a short-term lease exception policy, permitting it not to apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. The right-of-use asset is initially and subsequently measured at the carrying amount of the lease liability adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use asset. Right-of-use assets are assessed for impairment using the long-lived assets impairment guidance. The discount rate used to determine the present value of lease payments is the Company’s estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the Company generally cannot determine the interest rate implicit in the lease.

The Company recognizes expense for its operating leases on a straight-line basis over the lease term. As these leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Renewal option periods are included in the measurement of lease liability, where the exercise is reasonably certain to occur. Key estimates and judgments in accounting for leases include how the Company determines: (1) lease payments, (2) lease term, and (3) the discount rate used in calculating the lease liability.

Additional information related to the Company's leases is as follows:

Maturities of lease liabilities in accordance with ASC 842 as of December 28, 2025 and reconciliation to the consolidated balance sheet are as follows (in thousands):

Note 9 –Accrued expenses

Accrued expenses consists of the following:

Severance and Restructuring Charges

During the quarter ended December 28, 2025, the Company recorded severance and restructuring charges of $6.1 million primarily related to an enterprise reduction in workforce focused on reducing costs and streamlining the organization. These costs are included within the “General and administrative” line item in the consolidated statement of operations. The majority of these costs are expected to be paid during the remainder of fiscal 2026. At December 28, 2025, the Company had $5.3 million recorded related to these charges within the “Accrued expenses” line item in the consolidated balance sheet.

Note 10 –Long-term debt, net

The Company’s current and long-term debt, net consists of the following:

The Company, certain of its U.S. subsidiaries, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, are party to a Third Amended and Restated Credit Agreement (the “Third Restated Credit Agreement” and, as amended by that certain First Amendment (the “First Amendment”), dated as of January 28, 2025, and that certain Second Amendment (the “Second Amendment”), dated as of May 6, 2025, the “Existing Credit Agreement”).

For each borrowing under the Existing Credit Agreement, the Company may elect that such borrowing bear interest at an annual rate equal to either: (1) a base rate plus an applicable margin varying (other than during the Affected Period) based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus 0.5%, and (c) an adjusted SOFR rate for a one-month interest period plus 1.0%, or (2) an adjusted SOFR rate plus an applicable margin varying (other than during the Affected Period) based on the Company’s consolidated leverage ratio. The adjusted SOFR rate includes a credit spread adjustment of 0.1% for all interest periods. The effective interest rate as of December 28, 2025 related to the Company's outstanding borrowings was 7.6%.

The principal of the outstanding term loan under the Existing Credit Agreement (the "Term Loan") is subject to a quarterly payment of $3.0 million, which commenced on September 26, 2025, increasing to a quarterly payment of $6.0 million for the next 10 payments, with the remaining balance of $97.0 million due upon maturity on June 27, 2028. Future principal Term Loan payments are as follows: $12.0 million – remainder of fiscal 2026, $24.0 million – fiscal 2027, and $115.0 million – fiscal 2028.

The Existing Credit Agreement requires that, while any borrowings or commitments are outstanding, the Company comply with certain financial covenants and certain affirmative covenants and negative covenants that, subject to certain exceptions, limit the Company’s ability to, among other things, incur additional indebtedness, make certain investments, make certain restricted payments and, during the period (the “Affected Period”) from May 6, 2025 until the date the Company has (x) demonstrated compliance with the financial covenants as in effect under the Third Restated Credit Agreement as amended by the First Amendment and (y) if applicable, elected to terminate the Applicable Period during which various modifications set forth in the Second Amendment are in effect, hold cash deposits in accounts not maintained with lenders under the Existing Credit Agreement or their affiliates. The Company was in compliance with these covenants as of December 28, 2025. The Existing Credit Agreement is secured by substantially all of the assets of the Company.

Note 11 –Fair value measurements

Cash and cash equivalents, trade and other receivables, prepaids, accounts payable and accrued expenses are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. Although no trading market exists, the Company believes that the carrying amount of its debt approximates fair value due to its variable nature (these are level 2 investments). The Company’s investments in non-marketable equity instruments of private companies are carried at cost and are periodically assessed for other-than-temporary impairment when an event or circumstances indicate that an other-than-temporary decline in value may have occurred. The Company’s remaining financial assets and liabilities are measured and recorded at fair value (see table below). The Company’s non-financial assets, such as definite lived intangible assets and property, plant and equipment, are recorded at cost and are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. Goodwill and indefinite-lived intangibles are tested for impairment annually, or more frequently, if events occur or circumstances change such that it is more likely than not that an impairment may exist, as required under the accounting standards.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the guidance are described below:

The following table presents by level, within the fair value hierarchy, financial assets and liabilities measured at fair value on a recurring basis:

(1)The Company has established a NQDC Plan for certain members of senior management. Deferred compensation plan assets are invested in mutual funds held in a “rabbi trust,” which is restricted for payment to participants of the NQDC Plan. Trading securities held in a "rabbi trust" are measured using quoted market prices at the reporting date and are included in the “Other assets” line item, with the corresponding liability included in the “Other liabilities” line item in the consolidated balance sheets.

Note 12 –Income taxes

The Company computed the interim tax provision using an estimated annual effective rate, adjusted for discrete items. This estimate is used in providing for income taxes on a year-to-date basis and may change in subsequent interim periods. The Company’s effective tax rate for the three and six months ended December 28, 2025 were (0.6)% and 0.2% compared to 26.7% and 23.2% in the same periods of the prior year. The Company’s effective tax rate for the three and six months ended December 28, 2025 differed from the U.S. federal statutory rate of 21.0% primarily due to the change in valuation allowance, state income taxes and interest on uncertain tax positions. The Company’s effective tax rate for the three and six months ended December 29, 2024 differed from the U.S. federal statutory rate of 21.0% primarily due to state income taxes, tax deficiencies (shortfalls) from stock-based compensation and increases in valuation allowances, partially offset by tax credits.

For the year ended June 29, 2025, the Company had a total valuation allowance of approximately $40.6 million primarily related to net operating losses, charitable contributions, and deferred tax assets that are not more likely than not realizable. For the six months ended December 28, 2025, the Company decreased its valuation allowance by $5.8 million.

The Company completed its initial assessment of the One Big Beautiful Bill Act (“OBBBA”) corporate tax provisions enacted on July 4, 2025. OBBBA contained several U.S. corporate tax provisions. The EBITDA computation of the business interest expense limitation is not expected to have a significant impact on the Company’s current year tax expense. Additionally, it is not expected that any of the other provisions will impact the Company’s current year U.S. cash tax or effective tax rate.