Good morning, and welcome to the 1-800-FLOWERS.COM Fiscal 2023 Fourth Quarter and Year-End Earnings 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 Andy Milevoj, Senior Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to our fiscal 2023 fourth quarter and year-end 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.

Thanks, Andy, and good morning, everyone. It's great to be with you today. Many of you know me, and for some of you who I don't know, I look forward to getting to know you as well. Since our last earnings call, we announced that my brother Chris was stepping down as CEO for personal health reasons. I want to take this opportunity to thank Chris for all of his contributions to our company over the many years that he and I have worked together. Chris played an integral role in overseeing our rapid growth and enhancing our market-leading position of the company. He always looked beyond the shoreline to see what's next, where the consumer was going and ensured we always embraced the coming waves of technology. Whether it was expanding our business from a 1-800-Flowers phone number to the Internet, mobile commerce, social commerce, and now the AI technologies, Chris made sure we were ahead of the curve. We as a company have a rich history of innovation in embracing new technology and will continue to play a vital role in solving the relationship needs of millions of customers. We're grateful that Chris, who is currently taking a leave of absence, remains on our Board of Directors. And after his leave of absence ends, we expect him to return in a new capacity to help us navigate the coming waves of innovation. I want to take this opportunity to highlight the depth of our talent bench and the role that Tom Hartnett has played in our organization. Tom, who many of you know, has been with us for over 30 years and was promoted to President of the company just last year. Tom has played a critical role in overseeing the successful execution of our strategic initiatives and leads our talented management team as we collectively continue to execute our strategy to be a top destination for our customers' celebratory and gifting needs. In a moment, I'll turn the call over to Tom who will provide a business update. But before I do that, let's take a moment to look at where we've been, where we are, and where we're going. Over the past couple of years, we, along with many companies, faced numerous challenges, beginning with operating the business during the pandemic, then significant disruptions in the global supply chain, labor shortages, followed by inflationary pressures, and meaningful changes in consumer behavior. This significantly affected many aspects of our business, particularly our gross profit margin and profitability. Over the past fiscal year, we saw an improving macro environment on several fronts, including ocean freight rates that have approached their pre-pandemic levels and certain commodity costs that have come off their highs. These macro forces, combined with our own efforts to increase efficiencies, including our automation investments and logistics optimization efforts, led to the margin improvement we began to experience in fiscal '23. As the pendulum continues to swing back in fiscal '24, we expect to continue to benefit from the lower ocean freight costs, commodity costs that continue to revert closer to the mean, and our efforts to improve efficiencies. As we look a little further down the road, say, in the next year, two or three, we expect our gross margin to continue to benefit from these factors and return to its historical 10-year average of approximately 42%, which we experienced prior to fiscal '22. This is sort of a story of a reversion to the mean. While it is very difficult to predict precisely when we will see a more favorable environment for consumer discretionary spending, we believe that with regard to revenue growth and margin recovery, it's a question of when, not if. The actions we have taken to enhance the customer experience, improve margins and optimize expenses, combined with an improved consumer environment, will enable us to achieve our historical sales growth, gross profit margin, and EBITDA margin rates. For these reasons, we remain very optimistic about our prospects and are confident that we are positioned well to perform and grow our company while building shareholder value. I'll now turn the call over to Tom for an update on the business.

Thanks, Jim, and good morning, everyone. Our fourth quarter adjusted EBITDA improved over $10 million from the prior year as we continued to successfully navigate an ever-changing and complex consumer environment. As we entered fiscal 2023, we anticipated that consumers would be challenged by ongoing inflationary pressures, which were further exacerbated by rising interest rates and increasing fears of a recession. As we moved from the holiday period during our fiscal second quarter into the second half of our fiscal year, we saw consumers pull their purse strings even tighter, especially outside of the holiday gifting periods. As a result, our fourth quarter sales declined 14.8%, and on a full-year basis, they declined 7.9%, excluding the impact of the 53rd week a year ago. However, we believe it's important to place this in the proper context. While sales declined 8% for the fiscal year, this was against the backdrop of almost doubling our sales since fiscal 2019. Despite the challenging macro environment, we were able to retain the majority of the revenues that we gained over the last few years. In fiscal 2023, we had revenues of $2 billion and over 11 million customers spent more than 25 million gifts. Simply put, we are a bigger, better, stronger company today than we were just a few years ago. By focusing on the frequency and retention of our existing customer base, sales from existing customers represented 70% of our revenue in fiscal '23. While we were focused on marketing efficiency in a softer consumer environment, we nonetheless added 4.8 million new customers during fiscal '23. As a consumer-facing company, growing our customer base will always be important, but we see tremendous opportunity in increasing the lifetime value of our existing customer base by converting them into multi-brand customers. Multi-brand customers currently represent approximately 13% of our customer base, yet they account for approximately 28% of our revenue. Additionally, we have over 1.3 million Celebrations Passport members who are encouraged to use their benefits across our family of brands. We've already implemented several initiatives to increase these metrics. This includes highlighting our family of brands across our websites and enhancing our search function to provide relevant gifting ideas from our portfolio of brands on a single results page. And by leveraging our brand-agnostic warehouse facilities, we can offer unique bundles for customers to create a truly special one-of-a-kind gift. Throughout fiscal '23, we continued to see strong growth in our higher price point cross-brand bundles as customers continued to gravitate towards these higher-value offerings. As a result, our AOV increased approximately 6% for the year. We will continue to expand our price points, both lower and higher, to provide gifting options for all our customers. This includes providing free digital products to help our customers stay connected with the important people in their lives. Great examples of this include our free MomVerse and Dad Joke GPT offerings that encouraged customers to use our generative AI-powered tools to create a special poem for their mothers and a hysterical joke for their fathers. We are further integrating this generative AI technology into many facets of our customer engagements. For instance, at checkout, we will use this technology to help customers who may be lost for words express their sentiments and craft thoughtful messages for their gift recipient. In addition to these initiatives, we also expanded our offerings both organically and through acquisitions in fiscal '23. On the acquisition front, we acquired Things Remembered in January and launched a new website on our platform in April. A perfect example of a tuck-in acquisition that enables us to further expand our leadership position and product offerings in the personalization category and the B2B gifting space. This addition, much like Shari's Berries, demonstrates how our e-commerce platform was built for rapid growth as we seamlessly incorporate complementary brands into our platform by essentially just purchasing their intellectual property. Turning to our margins, as we had anticipated, we continue to see our gross margin improve during the fourth quarter, and our entire organization did a great job of managing operating expenses that helped to offset the revenue decline. As Bill will discuss in more detail, our fourth quarter gross margin improved significantly. We also continue to manage the business well in this environment. Our efforts to operate more efficiently, coupled with our decision to focus more on nurturing our existing customers, enabled us to reduce operating costs by $18.7 million during the fourth quarter and by $51.7 million for the fiscal year, excluding the impairment charge taken in the third quarter. As we turn to fiscal 2024, we will continue to leverage our tremendous portfolio of brands to encourage multi-brand shopping and focus our efforts to grow everyday gifting across our brands to support the top line. Simultaneously, we are focused on enhancing the customer experience, improving margins, and optimizing expenses. Now I'll turn it over to Bill to provide the financial review.

Thanks, Tom. As Tom highlighted in his discussion, our fourth quarter adjusted EBITDA came in better than our expectations. Many of the trends that we experienced throughout the fiscal year persisted into the fourth quarter. This included continued pressure on our top line, which was mitigated by our improvement of our gross margin that began in the second quarter and by our continued efforts to optimize expenses and operate more efficiently. Let's take a moment to review each of these. Throughout the fiscal year and continuing into the fourth quarter, our top line continues to be pressured by a complex consumer environment. As consumers were challenged by ongoing inflationary pressures, escalating interest rates, and higher credit card debt, they reduced their discretionary spending. As a result, our fourth quarter revenue declined 17.9% or 14.8%, excluding the impact of the 53rd week in the prior year. We experienced stronger performance during our holiday periods, principally Christmas, while we saw the pullback in consumer spending impact demand for everyday gifting. Now let's turn to our gross profit margin, which is a much more interesting story for us. As we had anticipated, we began to experience an improvement in our gross margins beginning in the second quarter. Gross margin benefited from our strategic pricing initiatives, lower ocean freight costs, and during the back half of the year, a decline in certain commodity costs and lower inventory write-offs. As a result, our gross margin improved 90 basis points during the second quarter, 80 basis points during the third quarter, and accelerated to 340 basis points during the fourth quarter. For the fiscal year, our gross margin improved 30 basis points to 37.5% as this annual number was weighed down by our first quarter results. It is important to highlight that as we look forward, we expect our gross margin to continue its return to historical levels in the low 40s percent range. In light of the top-line challenges, our team has been focused on controlling the variables we can control and has been steadfast in optimizing expenses. We reduced operating expenses by $18.7 million or 9.8% for the quarter as compared to the prior year and $51.7 million or 6.6% for the full year, excluding the impairment charge that was recorded during the third quarter. As a result, our fourth quarter adjusted EBITDA improved by $10.2 million to a loss of $6.6 million as compared to the prior year despite the top-line pressure. On a full year basis, our adjusted EBITDA was $91.2 million, representing a decline of $7.8 million, primarily due to the aforementioned revenue decline. However, it should be noted that since the first quarter, our year-over-year adjusted EBITDA has improved by nearly $15 million. Net loss for the quarter was $22.5 million or $0.35 per share, compared with a net loss of $22.3 million or $0.34 per share in the prior year period. Adjusted net loss was $17.8 million or $0.28 per share compared with an adjusted net loss of $21.8 million or $0.34 per share in the prior year period. For the fiscal year '23, the net loss was $44.7 million or $0.69 per share, which includes an after-tax non-cash goodwill and intangible asset impairment charge of $57.8 million or $0.89 per share compared with net income of $29.6 million or $0.45 per diluted share in the prior year period. Adjusted net income for the year was $13.4 million or $0.21 per diluted share compared with an adjusted net income of $32.9 million or $0.50 per diluted share in the prior year period. Now let's review our segment results. In our Gourmet Food and Gift Baskets segment, revenue for the quarter was $120.7 million, declining 18.7% compared with $148.4 million in the prior year period. Gross profit margin improved 490 basis points to 28.1% compared with 23.2% in the prior year period. The improvement was led by our strategic pricing initiatives, lower ocean freight costs, and improvement in certain commodity costs and lower inventory write-offs. Segment contribution margin loss was $13.4 million compared with a segment contribution margin loss of $23.7 million in the prior year period, reflecting the aforementioned improvement in gross margin as well as more efficient marketing spend. For the year, revenue in this segment decreased 3.9% to $965.2 million compared with $1 billion in the prior year. Profit margin for the year was 34.9% compared with 34.2% in the prior year. And adjusted segment contribution margin for the year without the third quarter impairment charge was $77.5 million compared to $64.9 million in the prior year, in large part due to the results of the fourth quarter. Our Consumer Floral & Gifts segment, revenue for the quarter was $248.3 million, declining 17% compared with $299 million in the prior year period. Profit margin improved 260 basis points to 40.6% compared with 38% in the prior year period. And segment contribution margin was $30.7 million compared with segment contribution margin of $26.5 million in the prior year period. For the year, revenues decreased 13.1% to $920 million compared with $1.06 billion in the prior year. Gross margin was 39.5% compared with 39.3% in the prior year. And segment contribution margin was $95.5 million compared with $104.3 million in the prior year. Now, the BloomNet segment. Revenue for the quarter decreased 22.1% to $30 million compared with $38.5 million in the prior year period. Gross profit margin was 42.6%, compared to 39.6% in the prior year, primarily reflecting ocean shipping costs as well as product mix. Segment contribution margin was $7.4 million compared with $10 million in the prior year period. For the year, revenue decreased 8.6% to $133.2 million compared with $145.7 million in the prior year. Gross profit margin was 42.7% compared with 42.3% in the prior year, and segment contribution margin for the year was $37.2 million compared with $42.5 million in the prior year. Regarding free cash flow, for the year, we generated free cash flow of $70.7 million, an improvement of over $130 million from the prior year. This primarily reflects our efforts to bring inventory more in line with operations as we sold through non-perishable inventory we purchased a year ago when we faced supply chain constraints. Before I turn to our balance sheet, I wanted to highlight that we amended and extended our credit agreement on June 27. We entered into a five-year $425 million credit agreement comprised of a $200 million term loan and a $225 million revolving credit facility, which further enhances our strong balance sheet. Turning to our balance sheet. At the end of fiscal '23, our cash and investment position was $126.8 million compared with $31.5 million at the end of fiscal '22. Inventory declined $56.3 million to $191.3 million. The increase in cash reflects the working capital benefit of selling through nonperishable inventory, the reduction in CapEx, and closing the new credit facility. As a reminder, in the prior two fiscal years, capital expenditures were elevated to support our investments in automation at our Hebron, Ohio and Atlanta facilities. In terms of debt, we had $196.4 million in term debt and no borrowings under our revolving credit facility. Our net debt position improved by $61 million to $70 million compared with $131 million a year ago. Regarding guidance for fiscal '24, as we turn to fiscal '24, there are several factors that contributed to our guidance. First, we expect consumers to continue to moderate their spending in the current environment, impacted by higher interest rates, higher credit card balances, and the resumption of student loan repayments. We expect revenues to remain pressured during the first half of the fiscal year and begin to rebound during the holiday period and into the second half. Second, we expect our gross margins to continue to improve as we benefit from ocean freight rates that are approaching pre-pandemic levels, certain commodity costs that continue to revert to their mean, and efficiencies from our automation investments. As a result, we expect our fiscal '24 margins to be just north of 39% compared with 37.5% in fiscal '23. Just as a reminder, there are seasonal variations on our quarterly gross margin due to sales mix. Third, our guidance assumes increased compensation expense, which includes a full bonus payout in fiscal '24 compared with a partial bonus payout in fiscal '23. This amounts to approximately $13 million increase. Based on these assumptions, we expect total revenues on a percentage basis to decline in the mid-single digits as compared to the prior year, adjusted EBITDA to be in the range of $95 million to $100 million, and free cash flow to be in the range of $60 million to $65 million.

Bill, let me ask you to do something here. When we were prepping for this, you had an interesting summary of where we were last year as compared to this year. Maybe it would help if you ran through that again briefly.

Sure, Jim. As we began to prepare for today, it was really striking to me to reflect on where we were just a year ago and where we are today. The supply chain challenges and labor issues that we discussed a year ago have dissipated. We were able to manage our operations and reduce our inventory by $56 million. We generated positive free cash flow of $70.7 million this year as compared to a negative $61.2 million last year. Our gross margin trend inflected during the second quarter, and its improvement continued throughout fiscal '23, which will continue in fiscal '24 and beyond. We were able to efficiently operate our business and reduce operating costs by over $50 million, and we secured a new five-year credit facility that further enhances our already strong balance sheet, a critical accomplishment in these complicated times. While the consumer environment remains challenging, our company has never been better positioned to serve them when they are ready to shop. And we are well positioned to achieve our historical revenue growth, gross margin, and adjusted EBITDA margin rates over the longer term. With that, I'll turn the call back to you, Jim.

Thanks, Bill. I think that summary paints a picture. Sometimes you need to step back a little bit to see what you've been able to accomplish in the year. And the tonality last year was obviously very different. So I think you can get a picture from Bill’s summary there, from Tom's comments about why we have confidence that the year ahead, barring the unforeseen, and there is always the unforeseen, looks quite attractive for us because of the steps we've taken and because of the benefits of the macro environment reverting more to the mean. I think it's appropriate now that we open the call for questions. So I'll ask the operator if you could please restate the instructions for those interested in asking a question.

We will now begin the question-and-answer session. The first question comes from Michael Kupinski with Noble Capital Markets. Please go ahead.

Thank you and good morning, everyone. A couple of questions here. You talked a little bit about your labor, and I was just wondering if you can give us a little bit more color on maybe the pricing for labor? I know that there have been some significant increases in years prior. And then also the ability to fill the spots that you have, and given your improvement in production and distribution facilities, I was wondering if you can talk a little bit about how many people you needed this year versus years past. And I just have a couple of quick follow-ups.

Good morning, Michael, it's Jim here. To tackle your questions. On the labor front, Bill will give you details, but just from a broader perspective, two factors. One is costs have gone up on labor. So let's focus first on entry-level logistics and warehouse kind of labor. Two years ago, our costs there were about $12 an hour, and now they are closer to $20 an hour. Last year, not only did we have the cost of labor, we had availability issues. When I say last year, a year ago. So this past Christmas, Christmas of 2022, we were able to fill all of our temporary holiday positions. The year before, we weren't able to. The benefit this year was, yes, we had higher labor costs, but by being able to fill every position, we didn't run the real high overtime costs when we had to ask people to work extra. Bill, Michael also asked about efficiencies, and you have an example there in terms of the automation and a number of packages we could ship out, particularly talking about our Ohio distribution facility.

Yeah, Michael, if you recall, we automated our Ohio facility two years ago, but it was late because of the supply chain challenges in getting steel. So we moved about 125,000 packages on a peak day this past Christmas out of that facility versus the year prior, we were in the range of about 80,000 to 85,000, and we did it with less labor.

And we were the first to achieve this. Previously, 100,000 packages in a single day was the peak. This year, we accomplished six consecutive days of exceeding 100,000 packages. Remarkably, we did this with a third less labor.

Not quite that, but we certainly did it with less labor. And now what we implemented last year, so we'll have this upcoming year as the third year of that facility. So we'll get more efficiency out of that facility. It will be the second year of our Atlanta facility that came on late, with the automation last year in November, again, because of supply chain challenges. So we have that as the second year. We also put some automation efforts into our Medley facility, which went live last year as well. We'll get the second year of that. Our efficiency will continue to improve in fiscal '24 because of just having more experience and having that facility operational for a full year.

And, Michael, it's Tom. Just to add on, I think your question touches on what we expect for the holiday season and our ramp. Currently, we observe a favorable environment. We believe we will be fine in securing the talent we need and engaging with our partners. While we don't anticipate rate declines, we also don't foresee any increases, so we feel confident about our position as of now.

So when we talk about a reversion to the mean, we have no illusion, Michael, about the fact that labor rates aren't going to return to pre-pandemic levels. Those are permanent. So we're very glad we made the investments over the last three, now four years, in the automation side of things where that brings the benefit of needing less people while being more productive with those you have.

Thanks for that color. And is there a way to determine how much of the revenue impact was due maybe to a shift to lower-priced products?

So we didn't see much of a shift to lower-priced products. As Tom pointed out in his comments, we actually had an increase in our average order size. So we think that the lower end of the funnel shopper just wasn't there on those everyday occasions like they might have been during the pandemic. So it was not a result of selling lower price items. In fact, Tom mentioned in his comments, too, that we both want to increase our average ticket in terms of the range of products that we offer. So we have plans to introduce some more lower-priced items. At the same time, we're beginning to think that we have the opportunity to increase some higher-priced items too. So you'll see our range expand.

I think customers with lower incomes were where we saw discretionary income decline, leading to a drop in some of the lower price point products.

Thank you, Bill. The company has been successful in making acquisitions during times of economic uncertainty, and some of the best acquisitions have occurred during those periods. I'm curious if there are any acquisitions planned in this environment. Can you discuss the current acquisition and M&A landscape?

On the M&A front, we’ve observed that tougher times often lead to more opportunities. We’re fortunate that Bill and his team secured financing through our long-term banking relationships. We finalized our deal at the end of June, and we’ve noticed some tightness in the syndication market, which isn’t favorable for companies that lack profitability, a solid history, or strong relationships like we have. This situation could indeed create opportunities for us. Recently, we completed two acquisitions, albeit they are minimal in nature. Things Remembered and SmartGift are our latest acquisitions, which primarily involve low-risk cash transactions centered around intellectual property and capabilities. We believe SmartGift will be a valuable addition, helping individuals and businesses with their gifting needs while allowing access to our product portfolio. This acquisition included a few skilled engineers we’ve collaborated with for years on a contractual basis, so we’re familiar with them. As for Things Remembered, it brought along valuable intellectual property, URLs, and a customer list of two million people. We are integrating that with our advanced personalization capabilities. Currently, we have three channels to access this capability: Personalization Mall, which we acquired; Personalization Universe, which we developed ourselves; and now Things Remembered, which we’re especially excited about. We recently conducted a brand review in Chicago with the team from Personalization Mall and Things Remembered, and we see great potential for growth in that area. We can appeal to a broader customer base, especially in the wedding, new baby, and holiday markets, leveraging the existing brand recognition of Things Remembered, which once operated 1,400 stores at its peak. We’ve acquired intellectual property that can enhance our existing infrastructure and foster growth in a strategic way.

Terrific. Thanks for taking my questions.

Thanks for your interest, Michael.

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

Hey, guys. Thanks very much for taking my question. First of all, I just want to say, Chris, it's been such a pleasure getting to know you over the years, and I really hope you are back at 1-800-Flowers soon. I wanted to ask you guys about revenue growth. Obviously, it has been challenging here. What gives you confidence that it is a matter of when and not if you get to revenue growth? Are there any kind of new product launches or marketing campaigns? I know you mentioned a big uptick in multi-branded gifting, but I would love to just get a sense of where that confidence comes from that revenue growth will resume at some point in the future?

We didn't mean to come across as overly confident, just joking. Internally, we recognize that the challenge lies in our everyday business, and I'll ask Tom to provide more insight on that. We believe that the everyday business is not entirely discretionary, especially during key holiday milestones like Thanksgiving and Christmas at the end of our second fiscal quarter. While there is some discretionary aspect, the people you want to buy gifts for will always be there. With our diverse product range and the behavior of our Passport customers, who have become a significant part of our mix, alongside historical patterns, we have reasons for optimism. As Bill noted in his summary, looking back to the pre-pandemic era, we had a compounded annual growth rate of 12% over a decade. This was driven by both organic growth and some small acquisitions we made. During that period, we also maintained a gross margin of approximately 42%, fluctuating within 50 basis points year-to-year, without a perfectly linear increase. These are the key metrics we aim to return to, and from a sales perspective, they will be crucial. Tom, could you share your thoughts on how we've set our future forecast and the reasons behind our confidence?

As we enter 2024, we anticipate our sales will start to recover during the holiday season, as we typically perform better during this time compared to regular periods. We believe the investments we've made in user experience, the growing visibility of our brand portfolio, and our expanded range of products, including marketplace and organic offerings, will contribute to this rebound. We are fostering stronger relationships with our current customers and are seeing positive results from this focus, indicating there is still significant opportunity ahead. In the latter half of the year, we intend to increase our marketing expenditures to stimulate demand thoughtfully and responsibly. We've all experienced economic downturns over the years, and we find valuable lessons from history. While we cannot precisely predict when consumers will return to spending, we observe several signs indicating that consumer behavior is approaching pre-pandemic levels, which, along with other factors, reassures us that consumer spending will rebound.

Okay. That’s really helpful. Thank you, guys, very much.

Thank you, Alex.

The next question comes from Anthony Lebiedzinski with Sidoti & Company. Please go ahead.

Good morning, and thank you for taking the questions. And, welcome back, Jim, and best wishes to Chris for a speedy recovery.

Thank you, Anthony.

I just wanted to follow up on the earlier question. The everyday gifting business has clearly faced some challenges. Regarding the main demand strategies you're planning to implement to improve that business, you mentioned some multi-branded bundles. Also, about your comment on increasing marketing spending in the latter half of the year, is there a specific reason for waiting until then? I understand the balance you're trying to maintain, but if increased spending could lead to higher revenue, why not act on it sooner?

I believe Bill will address that. As we evaluate marketing efficiencies, Tom and his team are constantly working on it. We see opportunities emerging. During this time, it's important to be cautious and manage our costs effectively. However, one area where we can increase our investment is in marketing. Developing those plans takes time, along with the necessary materials, and we anticipate that certain capabilities will become more available as we approach the end of the calendar year. The key is timing; knowing when to make our moves to seize the best opportunities. We’ve observed some competitors overspending and it seems to be detrimental to their business, which we find reassuring.

Anthony, did you want to…

Bill, you want to add something to that?

I just think the consumer is going to tell us a little bit more, too, as we get through the holiday period. This is our slow season to begin with, with a lot of messages in the marketplace, the consumer is still struggling at this point in time. We always do better at the holiday, and we believe coming off the success that we'll have this holiday, that will be the time for us to invest. We'll continue to monitor and operate this business efficiently based on what the macro trends are.

We are always in market and iterating based upon where we see customer acquisition costs, segments, etc. So if there are veins, as Jim said, we will be taking advantage of those opportunities.

Anthony, I think you've reported on and we've seen ourselves that for consumer-facing businesses, particularly those in the e-commerce arena, but not just there, the CAC, the customer acquisition cost, has gone through the roof for most companies. So we're able to pull in our horns on an advertising basis when that is very expensive or make it more expensive for others and rely on our existing customer base, our Passport customers, and our ability to stimulate the existing base with offers beyond our primary brand of introduction. So that's why we've seen our costs come down significantly. We're sort of continuing that until the opportunities are better, and that's when people are more in the market for gifting occasions as Halloween, Thanksgiving, and Christmas approach.

All right. That makes a lot of sense. Okay.

Anthony, did you want to…

So as far as Passport members, are you still seeing them spend two to three times more than non-members? Has that trend continued?

It has continued, Anthony. We have seen that stable and, in fact, multi-brand customers, Passport customers, we're seeing the average order value tick up a little bit with those customers for the year.

Got you. Okay. And then you also talked about seeing lower costs for certain commodities. So where have you seen the most relief and where are you seeing the most pressure points? Well, Bill is our expert on commodities. He spends a lot of time on the farm with the chickens. We bake and make a lot of products, including Cheryl's, Harry & David, and Wolferman's, and there, we use lots of eggs and lots of butter. Those have been stubborn, but we are starting to see the trends improve there. They tripled in cost within four or five, six months due to a chicken shortage from a flu that went through, cocoa costs for all our chocolates, all of those commodities were high, Bill. Did they peak at almost triple and where are we trending now?

Yes. So all the way back and exiting back to their kind of historic mean as butter and all types of nuts, cashews, almonds, that we use a lot of. The ones that haven't reverted are wheat, due to some of the macro and geopolitical issues; corn continues to be high; and sugar and cocoa continue to be extremely high. So we have a mix of commodities where some have already reverted back to their historical means from a cost perspective. Others are still at very high levels.

On the other side of the cost account, we had last year, we pointed out that ocean freight costs were the real shocker. Now we use ocean freight, both in BloomNet and in our food brands, particularly with bringing in packing materials, container shipping materials and non-perishable stuff. Bill, what were our increased unbudgeted costs there last year?

We historically spent around $10 million, but at peak, that rose to about $50 million. We're back down to those historical levels now, around that $10 million.

We informed you, Anthony, that we don't believe labor costs will decrease. While the inflation of labor seems to be stabilizing, we certainly won't be reducing our labor rates, which is beneficial for our workforce and reflects our ability to adapt. Ocean freight prices have now returned to nearly pre-pandemic levels, dropping from a peak of approximately $25,000 per container to about $5,000. We're very close to those pre-pandemic figures. However, on the labor front, we don't anticipate significant inflation, nor do we expect costs to decrease. This is why automation has been essential, enabling us to fill positions without incurring substantial overtime expenses as we gear up for the holiday season.

Understood. And my last question, I guess, for Bill. What's the CapEx outlook for fiscal '24?

Yeah. We think CapEx will be at or below last year's level. We brought it back down to about $45 million in fiscal '23. For fiscal '24, we expect to be in that $40 million range.

But it was good prudent spending, obviously, because CapEx on automation really helped the throughput and helped us on where labor was really challenged.

Okay. Well, thank you very much and best of luck.

Thank you, Anthony.

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

Thank you, and thank you for your interest and your time today. I appreciate all the good questions. We're getting ready for a holiday weekend at the end of this summer, so I hope it's a good and fun one for you and your families. If you have any other questions, please don't hesitate to reach out to us, and Bill, Andy, and Tom are available to handle any questions you have. So we look forward to addressing those in the days ahead and certainly after the holiday weekend. So best of the weekend to you.

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