Q4 2021 Levi Strauss & Co Earnings Call

[music].

Yeah.

Good day, ladies and gentlemen, and welcome to the Levi Strauss <unk> Company fourth quarter earnings conference call for the period ending November 20.

2021.

All parties will being a listen only mode until the question and answer session at which time instructions will follow this.

This conference is being recorded and may not be reproduced in whole or in part without written permission from the company.

A telephone replay will be available two hours. After the completion of this call through February 2022, one week after call for telephone replay.

Please use the conference I'd 467 6203.

This conference call also is being broadcast over the Internet and a replay of the webcast will be accessible for one quarter on the company's website Levi Strauss Dot com.

I would now like to turn the call over to Idaho orphan Vice President of Investor Relations.

Thank you for joining us on the call today to discuss the results for our fourth fiscal quarter of 2021, joining me on today's call are chip Bergh, President and CEO of Levi Strauss and Harmeet Zhang CFO , we have posted complete Q4 financial results in our earnings release section of our IR website investors that Levi Strauss Dot com the link to the webcast.

Today's conference call can also be found on our site.

We'd like to remind everyone that we will be making forward looking statements on this call, which involve risks and uncertainties actual results could differ materially from those contemplated by our forward looking statements. Please review our filings with the SEC in particular, the risk factors section of the annual report on Form 10-K that we filed today for the factors that could cause our results to differ also note that the.

Forward looking statements on this call are based on information available to us as of today and we assume no obligation to update any of these statements.

During this call we will discuss non-GAAP financial measures reconciliations to the most directly comparable GAAP financial measures are provided in today's earnings release on our IR website. These non-GAAP measures are not intended to be a substitute for our GAAP results.

Finally, this call in its entirety is being webcast on our IR website and a replay of this call will be available on the website. Shortly today's call is scheduled for one hour. So please limit yourself to one question at a time to give others the opportunity to have their questions addressed.

And now I'd like to turn over the call to chip.

Good afternoon, and thanks for joining us today at the beginning of the pandemic, we declared that we would emerge stronger from the crisis and I can confidently say that we are now indeed, a better stronger company than ever before.

After returning to pre Covid revenue levels in Q3 momentum accelerated through Q4, and today's results reflect robust financial performance across the board.

Q4 revenues were $1 7 billion up 22% to 2020 and 7% to 2019 led by continued strength in the Americas and Europe with Asia is seeing a strong recovery despite COVID-19 headwinds across the region.

Consumer demand remained very strong and outstrip supply by approximately $50 million in the quarter with 3% of revenue due to supply chain constraints.

The quarter punctuated a very strong fiscal 2021 performance delivering our highest revenue since 1998, and achieving a 12, 4% adjusted EBIT margin above our 12% plus target, while continuing to reinvest at a higher and accelerated level.

We have been able to deliver these results despite well known headwinds as our diversified and agile supply chain is a source of competitive strength, enabling us to mitigate risk and outperform.

Our performance demonstrates the strength and resilience of our brands and the increasing authentic connections we have with consumers on the foundation of trust and loyalty built over the past 170 years results. We delivered this year are proof points that our strategies are working and we have greater conviction than ever in our future.

With several multi year tailwind.

First the total addressable market for denim is large and growing and consumer preferences continue to shift towards casualization.

As the global dental market leader, we are well positioned to take advantage of and drive growth.

In the most recent quarter the U S jeans growth outpaced apparel with boat category, surpassing 2019 levels for the year U S. Jeans category was up 8% versus 2019, we.

We also continue to increase share in womens and the U S and we have achieved significant traction engaging gen Z consumers through programs like Levi's secondhand re commerce initiatives.

Our buy butter where longer campaign.

Second our strong brand equity is driving pricing power 2021 pricing actions are sticking best reflected by the companies, 7% AUR increase over 2019, which was primarily driven by our pricing initiatives. We have plans to take additional price increases in 2022, and God, helping us to offset inflation.

Sherri pressures, even as we take price our products provide exceptional value to consumers.

Third the direct engagement, we are building through our DTC business is bringing us closer to the consumer and allows us to showcase the fullest expression of our iconic brand and drive category expansion. In 2021, we continued the rollout of Nextgen doors around the world, including 16 in the U S. As we premium is this marketplace.

<unk>.

These stores are built with a digital backbone that supports our omnichannel platform delivering an elevated engaging and brand centric experience for our fans.

We're also using AI to enhance and differentiate our loyalty programs.

Both are seeing strong acquisition rates meaningful growth in performance and productivity of existing members.

And fourth the continued diversification of our business represents significant growth opportunities.

Performance. This year reflects the strength of our diversified portfolio, yet we remain underpenetrated in womens tops and international as well as product expansion further outside of denim.

Acquisition of beyond Yoga also provides an entry into the fast growing and high margin premium activewear category.

Let me now shift to some highlights from the fourth quarter.

Strength was broad based across channels brand category gender and markets.

The Levi's brand accelerated to 7% growth versus 2019, with even stronger growth in our top five markets men's bottoms were up 6% to 2019, reaching the highest revenue level since Q4 2015.

Women's bottoms continued to outperform up an exceptional 21% to 2019 as the trend towards high rise and looser fashion pitch drove significant growth in.

And demand remains robust for our iconic 501, which was up 23% for 2019, driven by strong gains with both men and women.

Overall looser Thats continued to increase in penetration representing roughly half of both our women's and men's bottoms assortments, including for the year.

Consumers can expect to see us iterate on this trend in future seasons.

We are diversifying our tops offering and we're pleased to see the Levi's tops business returned to growth versus 2019, driven by solid performance in men's woven and sweat shirts, while women's saw momentum across woven shirt dresses and outerwear.

Direct to consumer momentum accelerated across the globe and saw significant growth with the channel up 20% versus 2019 levels.

Global brick and mortar also grew well above pre pandemic levels up 14% to 2019, driven by both our mainline and outlet stores higher conversion and a mid single digit increase in AUR driven by the pricing power of the Levi's brand have offset lower store traffic.

We continue to rollout and enhance our in store and omnichannel capabilities globally. So that consumers can shop. These physical points seamlessly fueling the ease and convenience of our complete offering across all channels.

Our owned and operated E. Commerce saw continued strike despite the recovery in our stores and was up 22% year over year on top of 38% growth last year.

In order to drive growth in this marketplace, we have accelerated investments to evolve our distribution network with plans to open two new distribution centers.

As we shared earlier in the year, we successfully migrated the U S West coast ecommerce fulfillment to our owned and operated DC in Nevada, and now have plans to build a new DC for digital on the East coast.

We are also building a highly automated highly sustainable owned and operated army facility in Germany.

This multiyear project scheduled to open in 2024 will allow us to realize our strong long term opportunity in Europe consolidate the regions DC operations and deliver significant efficiencies.

The global wholesale business grew 1% versus 2019, and as importantly, a healthier business versus pre pandemic.

This reflects 2% growth in the U S for the quarter.

For the year U S wholesale was up 4% versus 2019 and is notably a more elevated digitally oriented and profitable market.

I will now provide highlights on signature dockers and beyond yoga.

Signature saw continued momentum with another quarter of above 30% growth versus 2019 led by women's brand saw strong gains in <unk> and continued success in digital wholesale.

Doctors had a good year and sales improved sequentially each quarter in 2021.

The brand has a healthier more diverse sales mix and its updated California casual aesthetic is winning new and younger consumers increasingly via DTC digital and international markets.

For the full year international comprise nearly 50% of Docker sales and grew at a higher rate than in the U S. Nearly 30% of Docker sales also now come from digital channels and what had been almost entirely wholesale business. Just a few years ago now has almost 30% of.

Its business in DTC growing.

And in the quarter beyond yoga launch tremendous pilot and based on the positive response, we will be expanding that collection in 2022.

Overall, we are entering fiscal 'twenty, two with great momentum around the world.

We're a stronger company than ever before with an agile supply chain, enabling us to outperform as revised strides increasingly more direct consumer engagement and denim category expansion, while making meaningful gains with women and Gen Z.

Longer term our entry into the activewear market represents another strong runway for growth. In addition to the category diversification opportunities in our existing portfolio.

Our company's potential has never been greater.

I credit all of our teams around the world for delivering an outstanding year for the company and positioning us for an even better 2022.

Now ill turn it over to Hanmi.

Thanks, Jeff Good afternoon, everyone.

Delivered another really strong quarter to end the year against a continuing challenging macro backdrop with several key metrics significantly exceeding 2019 level.

Revenue growth improved sequentially from the third quarter, driven by broad based consumer demand for the Levi's brand.

The strong top line growth together with the measures we took to substantially improve the structural economics of our business enable us to achieve an adjusted EBIT margin of 12% all while increasing our investments.

Looking ahead to 2022, we're excited about our momentum and expect our topline growth to exceed our pre pandemic growth algorithm and adjusted EBIT margin to expand beyond the 12, 4% we delivered portfolio 2021.

I'll share more details then I'll provide our outlook following our holiday update.

And I'll walk you through our fourth quarter results for which my comments will reference constant currency comparisons to 2019.

As I indicate otherwise.

Compared to quarter, four 2019 constant currency and reported revenues were both up 7%.

Largely driven by higher AUR.

The benefit of Black Friday, and the acquisition of beyond Yoga contributed approximately 3% to growth.

This was offset by supply chain constraints, which limited further revenue opportunity by approximately $50 million or 3%.

In the core, though our direct to consumer channel increased 18% versus 2019 due to higher AUR increase conversion and store expansion.

Our ecommerce business was up 64% delivering strong results across several key metrics, including AUR traffic and conversion and.

Profitability in our E Commerce business continues to improve.

For full year 'twenty one.

Adjusted EBIT margin on a fully allocated basis expanded to mid single digits.

The low single digit margin shared a year ago.

We expect adjusted EBIT margin in this channel to expand and track in parity with the company average as the business that was inside in the coming years.

Not only as a company operated e-commerce profitability, improving but we also have a more highly penetrated total digital ecosystem.

Net revenue through all digital channels grew nearly 60% versus 2019, representing 22% of total company net revenues for full year 2021 compared to 14% in 2019.

Adjusted gross margin of 58, 1% expanded 380 basis points versus 2019, largely attributable to what we believe to be sustainably drivers such as higher mix of sales from DTC and women's businesses as well as price increases.

And lower promotion.

This was partially offset by a 60 basis point incremental freight impact.

Moving to SG&A.

<unk> continues to be managing expenses, while also continuing to strategically invest in our long term growth.

Adjusted SG&A expenses in the quarter were 776 million or 46% of net revenue compared to 45% of net revenue in quarter four of two in 2019.

The approximately $70 million increase relative to quarter. Four 2019 was primarily due to the investment spending in A&P as we amplified by better way longer campaign.

Higher DTC costs.

Rated to store expansion as well as the impact of currency and the addition of beyond yoga.

While we are investing significantly more in our brands, we still achieved an adjusted EBIT margin of 12% expanding 270 basis points versus 2019.

I'll now take you through key highlights by segment.

Be aware that given our recent reorganization and the acquisition of beyond Yoga, We provided historic segment restatements.

The regional segments include a Levi's brand Levis signature and denizen, while the other brands segment includes dockers and beyond yoga.

In the Americas revenues grew 12% in the fourth quarter, driven by a combination of increased price and higher unit volume, which has sequentially improved throughout the year.

All channels were up.

With continued strength in U S wholesale.

<unk> accelerated growth in our owned and operated stores and E Commerce businesses.

We saw growth across all markets, including the U S, which was up 9% and nearly 40% growth in Latin America.

Europe delivered strong results in the quarter up 3% versus 2019, despite sporadic wireless resurgence is rich in pes consumer mobility in some markets.

Excluding the impact of our footwear distributor, becoming a licensee Europe would have been up 6%.

DTC was up 14%, reflecting growth across our company operated mainline and outlet stores and E Commerce.

Top market, Germany, and the UK were up double digits.

Asia revenues decreased 2%, representing double digit sequential improvement versus Q3, driven by both DTC and wholesale even as Covid continues to impact many market.

<unk> remains a drag to results there were several bright spots that give us confidence that Asia should rebound in a more normalized 2022 environment.

Company operated mainline stores inflicted to growth and our E. Commerce remained robust up 49% in China growth in wholesale and company operated mainline stores was offset primarily by approximately 80 less doors as we rationalize our franchisee base.

Several markets, including ANZ, India, Korea, and Malaysia, all delivered growth in the corner.

Our other brand revenues grew 4% in the quarter reflective of the inclusion of the acquisition. Two did result, so beyond yoga.

So sales of approximately $15 million in the roughly two months period.

<unk> revenues continue to improve and while still being down versus 2019, each quarter in 2021 was sequentially better.

Despite lower sales and increased marketing investment dockers profits and margins were higher versus full year 2019.

Turning to balance sheet and cash flows inventories at the end of the quarter were 2% above Q4 2019.

<unk> coal inventory through the first half of the year to better meet consumer demand.

As a reminder, approximately two thirds of our inventory is comprised of coal non seasonal product.

Cash and liquidity remains strong with quarter end.

And net debt at $125 million and overall liquidity of $1 7 billion.

Our leverage ratio is now one two times the lowest it has been since the mid 19.

Adjusted free cash flow through the year was 230 million nearly double the $116 million of 2019.

Demonstrating how the emerging stronger from the pandemic with higher profitability and improved cash management and working capital with a shorter cash conversion cycle.

Our return on invested capital was 26% 10 year record and we continue to invest behind high ROI growth initiatives.

Full year Capex was $167 million, two thirds of which went to his technology spend to support our business growth and a third to accelerate DTC initiatives.

We have expanded our store footprint, primarily with a new digitally enabled nexgen storage Rio.

We opened 92 of those over the year, bringing our total company operated store count at year end $2083.

Touching next on our performance during the holidays, which we define as a combination of November and December .

The momentum in our business extend it through holiday.

Slide earlier holiday shopping and Covid related impact.

So our results above our expectations.

Overall total company revenue was up 28% versus 2020, reflecting both DTC and wholesale channels performing well.

Revenue growth was led by strong results by the Levi's brand in the U S up 20% versus 2020 and 9% versus 2019.

Gross margin also continued to see robust expansion due to similar drivers as the fourth quarter.

While we will provide updated long term financial targets at Investor Day. Later this year I will now turn to our fiscal 2022 outlook. As a reminder, we provide annual guidance and we'll update our annual guidance each quarter.

As we move through the year.

Overall, we are confident that we'll be able to deliver an even better year in fiscal 2022.

We expect net revenues between $6 4 billion and $6 5 billion, representing reported growth of 11% to 13% year over year, which reflects continued strength in the U S with growth exceeding pre pandemic algorithm.

Europe's growth accelerating as the region reopen and the strongest growth in Asia as the region recovers to more normalized levels.

For gross margin, we anticipate expansion of around 15 to 30 basis points against last year.

This is driven by the accelerated shift of our business towards DTC digital women's and international combined with the benefit of price increases and upgrading with LD inventory.

Our SG&A rate is expected to see leverage.

Approximately 10 basis points versus 2021.

The increase in incremental dollars is targeted in the areas.

Rating and supporting our growth, including advertising E Commerce, our store fleet and technology.

Overall, we expect adjusted EBIT margin expansion of around 20 to 40 basis points year over year, well exceeding the 12% plus target we laid out in 2021.

We anticipate a full year tax rate in the mid to high teens and adjusted diluted EPS in the range of $1 50 to a $1 56, which is higher than 2021, despite the increase in tax rates to more normalized levels.

We continue to invest behind high iron <unk> growth initiatives and uses of capital in 2022 include full year capex of around $270 million.

Capital spending in fiscal 2022 is focused on initiatives that will drive significant returns across our business.

The increase versus 2021 reflects increased investment in growth capex largely behind the digital initiatives, including the continued rollout of our ERP as well as new store openings and renovations in our fleet.

In addition to the two distribution centers chip spoke about.

In terms of DTC brick and motto, we anticipate opening more than 100 levis those globally in the U S. We plan to open around 30 put price Nexgen does in 2022, taking a mainline door count to approximately 50 by the end of the as we progress.

Press towards our goal of opening 100 full priced doors in the U S.

I'm also pleased to announce there'll be increasing our quarterly dividend payment to 10 cents per share exceeding pre pandemic levels based on our strong balance sheet and cash flow as well as our continued confidence in a structurally stronger business.

Before we go to Q&A I'd like to leave you with three key parts.

First we are pleased with what we accomplished in fiscal 2021, delivering our highest revenue and profitability in over two decades, despite the pandemic continuing to impact consumer mobility.

The disruption to the supply chain and inflationary headwinds.

Second our improved structural economics helped us generate in 2021.

Record gross margin and.

12 point for adjusted EBIT margin.

We continue to have sustainable margin drivers as we grow DTC digital and women, while also optimizing margins why AI and machine learning.

The strength of our brand supports our pricing initiatives, while continuing to provide great value to our consumers.

Third our free cash flows and balance sheet are strong, allowing us to increase capital deployment across our priorities, while also producing our lowest leverage ratio in decades.

Indeed in 2021, we successfully allocated capital across investments to grow the business organically.

<unk> cash to our shareholders and completed our first inorganic or acquisition, all while generating the highest rois fee in a decade.

In closing we are pleased with our momentum and the strong outlook. We provided for 2022 is underpinned by the strength of our brand discipline in allocating capital towards the right strategic priorities.

<unk> proven agility in managing through crises.

With that I will now open it up for questions.

Thank you the floor is now open for questions. If you have a question. Please press Star then the number one on your telephone keypad due to time constraints. The company requests that you only ask one question. If you have an additional question. Please queue up again, if at any point you.

Question has been answered you may remove yourself from the queue by pressing the pound sign.

Our first question comes from Matthew Boss.

P. Morgan your line is open.

Great Thanks, and congrats on another nice quarter guys.

Thanks, Matt Chip chip.

Chip can you speak to larger picture trends in the denim category your level of optimism into 'twenty, two maybe based on what Youre seeing today, and then Harmeet what gives you confidence in 11% to 13% revenue growth as the starting point for this year. If you could just help bridge this outlook relative to your mid single digit.

Brickell algorithm.

Alright, I'll start and Hermes you can take the second half of that question, but.

I think there's every reason to be optimistic about denim and denim category growth as we go forward.

Three.

Kind of big things that are happening that are driving it first is.

This continued acceleration of the casualization trend, which is not just a U S phenomenon, it's really happening around the world.

Number two is we're still in what I would call the early innings of the new denim cycle.

The looser bad year fits.

Really driving the category and keep in mind, but this is on both men's and women's the last big cycle was skinny jeans, which is a women's only thing and the new denim cycle drives apparel broadly it drives footwear drives comps as well so.

I'm optimistic for that reason and then the third thing that we've mentioned this in the past.

Here in the U S.

More than a third of Americans almost 40% have had.

Their waist size change during the pandemic and that's driving the need for a closet upgrade or a closet refresh.

We see it in the results denim bottoms were up 11% in Q4, and Levi's men's was up 6% women's was up 21%. The 501, which is our most iconic items was up 23% to 2019, all those or versus 2019, so really strong across both mens and womens.

And I guess, the other thing I would say just to keep in mind and I've got a hammer this point home.

We are by far the global market leader in denim.

If you look at your monitor we're number one in mens.

One in women's the number one overall, obviously, but importantly, we're bigger.

For Pratt.

So for search.

Okay.

Alright.

We also.

You can monitor group.

In 'twenty, one versus 'twenty than any other major brand measured.

And then if you take a look at the U S, which is still the biggest market.

We have opportunities here, we're still only number two in women's here in the U S. But we were the only brand only major brand to grow women's share over the past 12 months, we added a full share point on our women's business in the U S.

And we added a full sharepoint.

Horton 18 to 30 demographics so.

We've got a great share story to tell on top of I think.

Pretty robust category story so.

It's a big part of the reason why.

We are optimistic about the year ahead.

And to your question, yes, and to your question Matt.

On the.

The 11% to 13 guidance a couple of things.

We have momentum as we step into the year you have seen our holiday sales.

Our business is that.

Underpenetrated womens has been growing very strongly.

Digital is a big component of our business and so is growing strongly.

As we.

<unk> talked to our customers our orders are reflecting growth.

But as people come to.

In Europe and other orders that was.

Tracking in the U S.

Direct to consumer home, which was.

The bulk of the growth in quarter four.

Coming back nicely.

Despite traffic still being down.

Beyond yoga adds about two points of growth dockers.

Turning around and that should also be.

Accretive.

Our business. So I think as we think about 11% to 13% guidance.

Our view is.

We've got tailwind as chip talked about from a category perspective, a lot of things we are doing a fairly strong if you think about the <unk>.

The growth algorithm regionally.

The strength of the consumer in the U S.

And we've looked at it.

Everywhere twice and then Thunder this economic forecast from bank.

Credit card data.

The consumer is pretty strong so we think.

Americas'.

<unk>.

<unk> growth high single digit growth in 2022, which is higher than our growth algorithm.

Asia.

Rebound I think you'd see.

In our high growth higher than our growth algorithm, I'd say Europe because of Omega omicron.

And what different countries.

Dealing with is a high single digit growth.

We were conservative in the pool is wrong.

The gross margins are fairly good and so.

Largely.

Direct to consumer business. So that really helps you would think about it.

By channel.

<unk> growth in wholesale globally.

And outside.

Outsize growth in direct to consumer which is good because it helps our gross margin and you would think about category stops in margin.

Hey, Barton slightly higher because of the casualization trends that you've seen in the past.

In tops, we continue to be an underpenetrated as a higher than what we've seen in the past we will lay out our longer term growth algorithm, Matt when we have an investor day, but clearly I think we seem to be headed towards a stronger growth algorithm.

Then we had pre pandemic.

That's great to hear great color Congrats again.

Thanks, Matt Thanks, Matt.

Thank you. Our next question comes from Lorem vascular SKU BNP Paribas Exane. Your line is open.

Good afternoon. Thank you very much for taking my question you talked about $50 million in supply chain constraints, how do we think about that for the first quarter and first half regarding these constraints.

Give us any finer points on that particularly with regards to <unk> performance year over year, how do we think about that in the context of the constraints, but also the European Lockdowns from last winter.

Yes sure so.

The good news is.

Demand for our product and brands outstripping supply, but we can confidently say that we did everybody who wanted a pair of.

Levi's to.

To place on the Christmas tree or chip likes to call. It got it.

Mind Outstretch supply we have had.

To book more shipping capacity, because we had pegged capacity at a certain point in a certain rate, but because we needed more.

We had to.

Our book at higher rates, but generally speaking.

I would say demand higher than supply, we probably see.

That's gone to new.

I would say definitely for the first half will be.

And that's where you've seen a range in our numbers, we're doing what we can our distribution teams are retail store associates.

Really working around the clock to make sure we are able to service.

Demand the other thing that we are going to be doing Lauren.

We will we plan to build a little bit more of the core inventory, especially in the U S.

It gives us two sales, especially in the first half.

Not a lot, but a little bit more because we do want to have inventory to service.

Consumer needs.

And.

No.

Full year basis, it's difficult to predict how long this continues I mean economists.

And folks are talking about supply chain constraints dissipating a reducing in the second half.

We're taking what we call more of a conservative view and.

And should that.

That really happened it definitely bodes well for our brands and our business.

We're going to do what we can and because coal is a large piece of our inventory I think the.

Building, a little bit of inventory will probably look to advantage and to our consumers needs over time.

Very helpful. Thank you very much for all the color.

Thanks, Laura.

Thank you. Our next question comes from Omar Saad of Evercore. Your question. Please.

Thanks for taking my question I'd like to ask actually about inflation as well as pricing power kind of how are you seeing inflation develop for 'twenty two cost inflation.

Maybe put into context, the gross margin guidance that you gave.

How much of that is kind of a proactive price increases.

Setting inflation as well as what's your expectation around the reduced promotional environment do you expect that to continue or expect that to rebound a little bit.

Versus the 2021 played out.

Sure Omar let me talk a little bit about.

How are we thinking about Cogs and then I'll talk to you about the puts and takes in the gross margin so on Cogs.

Last time, when we reported Q3, we said we are in the process of locking in the second half supply and negotiating prices.

We locked in Cogs slightly higher than the mid single digit.

Which we think is still better than the market.

But it is slightly higher.

We are effectively pricing for it.

Our view is because we have locked in the first half of it about a percentage increase relative to.

Great.

Relative to 2020.

The increase in Cogs for the year is about mid single digits. So that's how we're thinking about it we use about 15% to 20% of cotton.

Cotton continues to be high but because.

We are effectively price for it.

We think we'll be able to our gross margins will be able to offset that even as we think about 2023.

About <unk>.

Gross margin in how we're thinking about gross margin. We did signal that gross margin for 'twenty two would be about I think 15% to 30 basis points higher than the record gross margins in 2021.

The puts and takes on that is.

Pricing.

<unk> gross margin between 202 hundred 50 basis points, but we think that will offset inflation, which is largely cogs and higher dilution. We did reflect in the last few calls that the promotional and more.

Probably it doesn't continue and so we are kind of build that in.

And so that's one piece of it pricing offsetting inflation and higher dilution I think dilution probably stepping up.

Sometime call it two onwards, rather than quarter, one because inventories continued to be tight a structural improvements in our business does DDC womens beyond yoga.

Add 40 to 50 basis points, which is a growth algorithm.

And then.

We had a reasonable amount of air freight, but because ocean.

<unk> has stepped up we think.

The combination of Ohio Ocean freight and potentially a reduction in air freight is about 20 to 30 basis points of headwind and Thats, what makes up the gross margin.

Different puts and takes leading to a 15% to 30 basis points of gross margin accretion year over year, that's our thinking we think this probably.

It's kind of progresses evenly through the year, maybe gross margin slightly higher than the first half versus the second half, but that's how we're thinking about it.

Thanks for all the detail Harmeet best of luck.

Thank you.

Thank you. Our next question comes from Chris <unk>.

Bank of America. Your line is open.

Good afternoon guys.

It looks like you guys saw some nice recovery in Asia with revenues getting back to 19 levels during the quarter for full year EBIT margins in the region still.

Pretty well below pre pandemic levels can you discuss whether there are any structural differences today that would prevent you from returning to those pre pandemic levels. If you could just generally provide some comments around your strategy in Asia that would be great.

Yes.

I think.

The reason the operating margins in Asia.

We're down really combination of two things one was volumes being down.

Asia is about 15% to 16% of our business doesn't nearly leverage our operating costs.

As much as some of the other regions. The second is.

We were investing in China.

The good news is China in quarter four actually.

Made money it lost money in quarter three.

<unk>.

Earlier part of the year, so that was what.

Operating margins were.

We're impacted I think as you think about.

Asia longer term.

I would say Asia.

Coming back to pre pandemic levels will make us sizable difference.

Our gross margin.

Around the company, Ohio.

First around the company are lower so I think that impacts operating margins nicely over time.

But I think the way operating margin.

Prove sustainably in Asia, it's all going to be driven by volume.

As we reflected I reflected in my.

There were markets that actually.

Turning to growth in Asia and in that is that was pleasing as we ended the quarter.

Thank you.

Thank you. Our next question comes from Bob Turbo Guggenheim. Your question. Please hi.

Hi, good afternoon.

Just wondering chip.

You talk a little bit about the progress you've made on the wholesale business I think specifically in the U S piece of it just the profitability gains I don't know if you could share.

Percentage for the fiscal year in terms of where that business ended up and just curious on the game plan on inventories and orders that Youre seeing I think Herman you mentioned that if you could maybe just address a little bit.

Around the game plan and what you see on inventory levels and inventory orders from your wholesale partners.

Yes.

First of all happy to hear Bob.

We've put a lot of effort as you know into kind of re mapping our wholesale footprint.

To make a more premium and more digital over time, and that's really paid off our wholesale business today is much more profitable I'm not going to give you a number but it's a lot more profitable today than it once before and certainly the lower promotional environment has been good for us good for the brand in <unk>.

For our customers as well, but the pandemic definitely accelerated growth in the channel.

And we.

We had a good holiday as well here in the U S but.

I think our success in U S. Wholesale has largely it's marginally trace to the work that we did.

Premium is our business and really get our footprint right. So no real elevation with customers like Nordstrom and bloomingdale's.

The addition of target.

One of our customers here has been has been really big for us.

Three small tight assortment, but really premium elevation of our brand great in store execution.

So wholesale gross margin and profitability are the strongest they've been in a long long time.

Other than as I said lower promotional environment has helped that.

And then when we when we do have this analyst day that we keep talking about which is going to come.

Later this year in the spring.

Spring.

We will share our full growth algorithm about what we're expecting from wholesale over time I guess the last thing I would say is no.

Brick and mortar wholesale so just the brick and mortar component of it is only around 10% of our sales today.

We're just down hugely from 10 years ago, when I joined here I mean U S. Wholesale at the time was almost half of the company's total business today at brick and mortar U S. Wholesales about 10% of our total revenue.

Massive transformation for us over the last decade.

Got it and if I could just sneak in one more for you chip.

Do you think the miners are going to win this weekend and are you guys planning for.

Big Levis commercial in the Super Bowl at this point in time.

Well, here's what I will tell you what's Super Bowl 56 right.

What's 56 in <unk>.

Roman ladders Lv I. So the only thing that's missing is the latter.

So we'll see.

Good luck. Thank you thanks, a lot bye bye.

Yeah.

Thank you. Our next question comes from Dana Telsey Telsey Advisory Group. Please go ahead, good afternoon, everyone and happy new year.

As you think about the Capex budget for this year is $2 70, the new number or is the new distribution centers added adding to that how do you break it down and then just following up on digital what are you seeing on that digital Martin you mentioned the improvement where do you think that could go. Thank you.

Yeah.

Okay.

Dana happy new year to you too on Capex.

Capex is.

Over time.

We have stepped up capex as the company has generated a decent amount of cash.

And we've invested I would say wisely because our.

<unk> invested capital of the company is at a 10 year high by 26%.

So there is discipline in how we allocate capital Y capital are higher.

About 4% a little over 4% of revenue depending on where you think your revenue.

The increase was largely driven by a couple of things we did talk about.

The distribution centers in Europe , and in the East coast in the U S and that is to service higher demand and importantly.

Drive more efficiency in how we fulfill.

Because we can have visibility of inventory because direct to consumer and drive the channel that is really growing which is e-commerce .

Also during the pandemic.

We had scaled back on Remodels.

As I said, we have 1000 plus stores, we plan to scale that back.

Now that's good ROI.

And in another we haven't and Nextgen model working around the world. We have something we can retrofit to plus the $100.

New stores that we talked about.

We're also spending more.

More money on.

Digital as we trying to grow the e-commerce business, where there is scaling our loyalty program scaling our ads.

Scaling both this.

The basic things that today define whether good omnichannel retailers all about we're all.

Also scaling AI and machine learning and there is a wonderful ERP upgrade which is happening so I think a combination of factors.

But my view is two thirds of the capital is still growth oriented. So that's that's the first.

Answer to your question on capital I think.

Any question.

Second piece either sorry.

So my again can you help me.

Hi, David.

On the digital margin is a simple but the good news is it's mid single digits from low single digits at the end of last year from <unk>.

Numbers being in the Red.

The pandemic I think our view is if we can double our own e-commerce business, which will take a couple of years.

We think we can get to the 12% number.

So it's largely a volume game plus.

As we build efficiencies through digital distribution that also help so I think that's what we're trying to do I think.

The headwind is obviously distribution costs.

But we've got enough factors, including volume leverage that help offset that and just tip lastly, anything on beyond yoga and the early insights that you're gleaning there on what you're seeing.

Sure I guess, what I would say is a couple of things first of all.

We're pretty much complete with the integration and we are really really happy I mean, no big surprises, we kind of got what we thought we were going to get is one important headline that's great but beyond that.

Team is terrific.

We have already transplanted a couple of levi's folks onto the beyond yoga teams or personal marketing.

A person.

Who's going to help a lot with e-commerce .

And in that area, and we'll likely move a merchant down there as well so we're starting to populate some revised folks down there, but it's still really really early days, we talked on the prepared remarks about the men's pilot.

But they had right.

Right before the holidays that was really really good.

We will likely have a couple of stores before the end of this year so far.

Feeling really really positive and as I've said many times I think the future is really really bright for scrap that's amazing product.

Great team and we're very very optimistic right now.

Thank you.

Thank you. Our next question comes from Brook rows of Goldman Sachs. Please go ahead.

Good afternoon, and thank you so much for taking our question.

Pardon me AUR has been a strong contributor to Levi's growth versus 2019 levels. This year and it sounds like that has a lot of room to continue could you perhaps provide a bit of color on your outlook for sales volumes for the year and maybe the categories or channels, where you see the largest opportunity partly by share volume capture.

The increase in this next fiscal year. Thank you.

He broke up.

It's difficult to model with precision, but here's how we're thinking if we look at the 11% to 12% and about 2% of that.

Thanks to the wonderful work with beyond Yoga team is doing.

If you if you assume the rest is.

Levi's and maybe a point from dockers, but less utilized.

Our view is pricing is about half that.

And the other is largely being driven by what I call.

Higher DTC.

As well as.

Just.

Volumes.

So that's how we're thinking about it.

This point of time overall for the year I think chip referenced at <unk> were up 7% most of it pricing for the quarter.

We're up 10% to 70% of that was pricing. So that's how we're generally thinking about.

<unk>.

What they are and where they're headed over time.

Thank you so much and in terms of categories.

Immediately.

I think.

Being driven.

By our bottoms business.

And.

Tops as Underpenetrated as we tend to as we add more of our portfolio.

<unk>.

Our premium as we have premium talks to a portfolio that will help AUR overtime.

Great. Thank you.

Thank you. Our next question comes from Jay So of UBS. Your question. Please.

Great. Thank you so much chip my question is about the store rollout that you talked about earlier in the call with the next Gen stores, what are you seeing that.

It makes you it seems like that rollout is happening faster. It's increasing what are you seeing that makes you want to do that and then for Harmeet <unk>.

It could be an interesting year from a top line perspective, just because you're lapping fiscal stimulus in March and April the U S. And then Theres a lot of easy compares in parts of the World, where Covid was a big impact in 2021. So you can just give us an idea of the contours of the year from a quarterly perspective on where you expect the sales growth to be like maybe higher than average or lower than average. Thank you.

Yeah, I'll hit the store thing real quickly.

As we've been rolling out. These next Gen stores, we've been really pleased with their performance and literally kind of market by market.

We go in with the Nextgen store remember, they're smaller they tend to be smaller footprint more efficient tight assortment digitally enabled.

An easy store to shop.

And a little bit more consumer friendly larger fitting rooms better lighting.

Almost market by market they tend to outperform the old format stores.

Take a look at our ROIC for this past year, we're investing a lot of capital with.

And two into retail and it's returning and so.

I won't say every single one of these stores, how does meet our meet or beat our expectation, but we're really pleased with it and we know, especially here in the U S. We know we continue to have this opportunity to premium is the marketplace.

Just a couple of years ago, we only had 30 mainline doors I'm not even sure. If we cross 50 at this point and so there's still a lot of opportunity for productive mainline doors.

Here in the U S, but in other parts of the world as well and so we think we're going to add about another 100 doors or so on a gross basis this year and we're optimistic about it.

Time will be looking for real and real estate to in many markets.

And to your question about first half second half.

The quarterly puts and takes I'd say last year, our H one relative to <unk> 19 was still down because we are dealing with store closures in Europe and in <unk>.

Parts of Asia et cetera, So the way we think about it is.

Q1 is probably up in the mid.

To high teens, and obviously vary by quarter. The second second half is in the higher single digit.

That's how we're thinking about.

Revenue.

As generally strong through the year, but Europe and Asia.

Helping.

Drive the swings.

Got it okay. Thank you so much.

Thank you. Our next question comes from Ike <unk> of Wells Fargo. Your question. Please.

Hi, Thank you happy New year Chip took two questions for you just you know theres a lot of Investor Trepidation space clearly for a couple of different reasons, but one is just the idea of the demand is going to be moderating to a point, where maybe it becomes uncomfortable.

There anything you can say about Q1 or quarter to date, just from a demand perspective.

Whether it's your own DTC business of your talks with your wholesale partners are there would be helpful. For US and then just to that point on the wholesale side any difference in those competitions within the mass channel versus the department store channel would be helpful.

Yes, I won't get down to customer level detail, but.

Part of the reason, we sound optimistic as every signal we're looking at.

And I've got to say I'm, probably the one who gets most paranoid.

And Im always paranoid and I'm always looking for something that's going to send a sideways and every signal with that we look at right now.

Consumers still looks pretty bullish and.

Including credit card data that is fairly current.

And that's true on a global basis, we've got good visibility to the order book in Europe , where there's this concept of pre booking.

Signal coming from there is very strong we're still chasing here in the U S right now.

And as you heard we let demand on the table. If you will always love to three points of growth unfilled and we're still chasing so.

But I.

I think right about the same time, we started this call announcement interest rate hike in inflation is partially psychological and I've been there.

I was in business and back in the early eighties, I remember it and.

We're watching the consumer like a hawk, but but right now every signal that we're seeing is as positive and.

We know that we have been successful in getting pricing pass through over the last six months you see what's happened to our AUR. So.

But we'll keep an eye on it and if we see the signal is starting to change we'll we'll react.

Quickly, but right now and if you look at look at the economist reports even from your own bank. They are all very very optimistic right now about the consumers. So.

That's why we're feeling pretty good and everything we're seeing suggests that.

That's great. Thank you.

Thank you. Thank you at this time I would like to turn the floor back over to the company for any closing remarks.

Okay. I think we may have left one or two or a couple of questions on answered I'm, sorry about that I know that harmeet and either we'll be doing follow up calls with everybody.

We tried to be as quick as we could here but.

In the interest of time and respecting everybody's calendar, we'll call. It here, thanks very much for joining us.

And for being along for the ride and we'll speak to you at all.

The next earnings call in a couple of months.

Alright.

Thank you. This concludes today's conference call. Please disconnect your lines at this time.

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Yes.

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Good day, ladies and gentlemen, and welcome to the Levi Strauss <unk> Company fourth quarter earnings Conference call for the period ending November 28 2021.

Parties will being a listen only mode until the question and answer session at which time instructions will follow.

This conference is being recorded and may not be reproduced in whole or in part without written permission from the company.

A telephone replay will be available two hours. After the completion of this call through February 2nd 2022 one week after call for telephone replay.

Please use the conference I'd 4676203.

This conference call also is being broadcast over the Internet and a replay of the webcast will be accessible for one quarter on the company's website Levi Strauss Dot com.

I would now like to turn the call over to Idaho orphan Vice President of Investor Relations.

Thank you for joining us on the call today to discuss the results for our fourth fiscal quarter of 2021, joining me on today's call are chip Bergh, President and CEO of Levi Strauss and Harmeet Zhang CFO , we have posted complete Q4 financial results in our earnings release section of our IR website investors that Levi Strauss Dot com the link to the webcast.

Today's conference call can also be found on our site.

I'd like to remind everyone that we will be making forward looking statements on this call, which involve risks and uncertainties actual results could differ materially from those contemplated by our forward looking statements. Please review our filings with the SEC in particular, the risk factors section of the annual report on Form 10-K that we filed today for the factors that could cause our results to differ also note that.

Forward looking statements on this call are based on information available to us as of today and we assume no obligation to update any of these statements during.

During this call we will discuss non-GAAP financial measures.

Reconciliations to the most directly comparable GAAP financial measures are provided in today's earnings release on our IR website. These non-GAAP measures are not intended to be a substitute for our GAAP results.

Finally, this call in its entirety is being webcast on our IR website and a replay of this call will be available on the website. Shortly today's call is scheduled for one hour. So please limit yourself to one question at a time to give others the opportunity to have their questions addressed.

And now I'd like to turn over the call to chip.

Good afternoon, and thanks for joining us today at the beginning of the pandemic, we declared that we would emerge stronger from the crisis and I can confidently say that we are now indeed, a better stronger company than ever before.

After returning to pre Covid revenue levels in Q3 momentum accelerated through Q4, and today's results reflect robust financial performance across the board.

Our Q4 revenues were $1 7 billion up 22% to 2020 and 7% to 2019 led by continued strength in the Americas and Europe with Asia is seeing a strong recovery despite COVID-19 headwinds across the region.

Tumor demand remained very strong and outstrip supply by approximately $50 million in the quarter were 3% of revenue due to supply chain constraints.

Quarter punctuated a very strong fiscal 2021 performance delivering our highest revenue since 1998, and achieving a 12, 4% adjusted EBIT margin above our 12% plus target, while continuing to reinvest at a higher and accelerated level.

We have been able to deliver these results despite well known headwinds as our diversified and agile supply chain is a source of competitive strength, enabling us to mitigate risk and outperform.

Our performance demonstrates the strength and resilience of our brands and the increasing authentic connections we have with consumers on the foundation of trust and loyalty built over the past 170 years.

We delivered this year are proof points that our strategies are working and we have greater conviction than ever in our future with several multi year tailwind.

First the total addressable market for denim is large and growing and consumer preferences continue to shift towards casualization.

As the global dental market leader, we are well positioned to take advantage of and drive growth.

And the most recent quarter the U S <unk> growth outpaced apparel with boat categories surpass in 2019 levels for the year U S jeans category was up 8% versus 2019.

We also continued to increase share in womens and the U S and we have achieved significant traction engaging gen Z consumers through programs like Levi's secondhand re commerce initiatives, and our buy butter where longer campaign.

Second our strong brand equity is driving pricing power 2021 pricing actions are sticking best reflected by the companies, 7% AUR increase over 2019, which was primarily driven by our pricing initiatives. We have plans to take additional price increases in 2022, and God, helping us to offset inflation.

Sherri pressures, even as we take price our products provide an exceptional value to consumers.

Third the direct engagement, we are building through our DTC business is bringing us closer to the consumer and allows us to showcase the bullish of expression of our iconic brand and drive category expansion. In 2021, we continued the rollout of next gen doors around the world, including 16 in the U S. As we have premium is this marketplace.

These stores are built with a digital backbone that supports our omnichannel platform delivering an elevated engaging and brand centric experience for our fans.

We're also using AI to enhance and differentiate our loyalty programs in the App and both are seeing strong acquisition rates meaningful growth in performance and productivity of existing members.

And fourth the continued diversification of our business represents significant growth opportunities. Our performance. This year reflects the strength of our diversified portfolio, yet we remain underpenetrated in womens tops and international as well as product expansion further outside of denim.

The acquisition of beyond Yoga also provides an entry into the fast growing and high margin premium activewear category.

Let me now shift to some highlights from the fourth quarter.

<unk> was broad based across channels brand category gender and markets.

The Levi's brand accelerated to 7% growth versus 2019, with even stronger growth in our top five markets men's bottoms were up 6% to 2019, reaching the highest revenue level since Q4 2015.

Women's bottoms continued outperform up an exceptional 21% to 2019 as the trend towards high rise in Lucerne fashion pitch drove significant growth in.

And demand remains robust for our iconic 501, which was up 23% to 2019, driven by strong gains with both men and women.

Overall looser fits continue to increase in penetration representing roughly half of both our women's and men's bottoms assortments, including for the year.

Consumers can expect to see us iterate on this trend in future seasons.

We are diversifying our tops offering and we're pleased to see the Levi's tops business returned to growth versus 2019, driven by solid performance in men's woven and sweatshirts, while women's saw momentum across woven dresses and outerwear.

Direct to consumer momentum accelerated across the globe and saw significant growth with the channel up 20% versus 2019 levels.

Global brick and mortar also grew well above pre pandemic levels up 14% to 2019, driven by both our mainline and outlet stores higher conversion and a mid single digit increase in AUR driven by pricing power. The Levi's brand have offset lower store traffic.

We continue to rollout and enhance our in store and omnichannel capabilities globally. So that consumers can shop. These physical points seamlessly feeling the ease and convenience of our complete offering across all channels.

Our owned and operated E. Commerce saw continued strike despite the recovery in our stores and was up 22% year over year on top of 38% growth last year.

In order to drive growth in this marketplace, we have accelerated investments to evolve our distribution network with plans to open two new distribution centers as we shared earlier in the year, we successfully migrated the U S West coast ecommerce fulfillment to our owned and operated DC in Nevada, and now have plans to build a new DC for digital.

On the East coast.

We are also building a highly automated highly sustainable owned and operated army facility in Germany.

This multiyear project scheduled to open in 2024 will allow us to realize our strong long term opportunity in Europe consolidate the regions DC operations and deliver significant efficiencies.

Global wholesale business grew 1% versus 2019, and as importantly, a healthier business versus pre pandemic.

This reflects 2% growth in the U S for the quarter.

For the year U S wholesale was up 4% versus 2019, and it was notably a more elevated digitally oriented and profitable market.

I will now provide highlights on signature dockers and beyond yoga.

Signature saw continued momentum with another quarter of above 30% growth versus 2019 led by women's brand saw strong gains in <unk> and continued success in digital wholesale.

Doctors had a good year and sales improved sequentially each quarter in 2021.

The brand has a healthier more diverse sales mix and its updated California casual aesthetic is winning new and younger consumers increasingly via DTC digital and international markets.

For the full year international comprise nearly 50% of Docker sales and grew at a higher rate than in the U S. Nearly 30% of Docker sales also now come from digital channels.

What had been an almost entirely wholesale business just a few years ago now has almost 30% of its business in DTC and growing.

And in the quarter beyond Yoga launched a men's pilot and based on the positive response, we will be expanding that collection in 2022.

Overall, we are entering fiscal 'twenty, two with great momentum around the world.

We are a stronger company than ever before with an agile supply chain, enabling us to outperform as revised strides increasingly more direct consumer engagement and denim category expansion, while making meaningful gains with women and Gen Z.

Longer term our entry into the activewear market represents another strong runway for growth. In addition to the category diversification opportunities in our existing portfolio.

Our company's potential has never been greater.

I credit all of our teams around the world for delivering an outstanding year for the company and positioning us for an even better 2022.

I'll turn it over to Hanmi.

Thanks, Jeff Good afternoon, everyone.

Delivered another really strong quarter to end the year against a continuing challenging macro backdrop with several key metrics significantly exceeding 2019 level.

Revenue growth improved sequentially from the third quarter, driven by broad based consumer demand for the Levi's brand.

The strong top line growth together with the measures we took to substantially improve the structural economics of our business enable us to achieve an adjusted EBIT margin of 12% all while increasing our investments.

Looking ahead to 2022, we're excited about our momentum and expect our topline growth to exceed our pre pandemic growth algorithm and adjusted EBIT margin to expand beyond the 12, 4% we delivered for full year 2021.

I'll share more details when I provide our outlook following our holiday update.

And I'll walk you through our fourth quarter results for which my comments will reference constant currency comparisons to 2019, unless I indicate otherwise.

Compared to quarter, four 2019 constant currency and reported revenues were both up 7%.

Largely driven by higher AUR the.

The benefit of Black Friday, and the acquisition of beyond Yoga contributed approximately 3% to growth.

This was offset by supply chain constraints, which limited further revenue opportunity by approximately $50 million or 3%.

In the core, though our direct to consumer channel increased 18% versus 2019 due to higher AUR increase conversion and store expansion.

Our ecommerce business was up 64% delivering strong results across several key metrics, including traffic and conversion and.

And profitability in our E Commerce business continues to improve.

For full year 'twenty one.

Adjusted EBIT margin on a fully allocated basis expanded to mid single digits.

The low single digit margin shared a year ago.

We expect adjusted EBIT margin in this channel to expand and track in parity with the company average as the business that was in size in the coming years.

Not only as a company operated e-commerce profitability, improving but we also have a more highly penetrated total digital ecosystem.

Net revenue through all digital channels grew nearly 60% versus 2019, representing 22% of total company net revenues for full year 2021 compared to 14% in 2019.

Adjusted gross margin of 58, 1% expanded 380 basis points versus 2019, largely attributable to what we believe to be sustainably drivers such as higher mix of sales from DTC and women businesses as well as price increases.

And lower promotion.

This was partially offset by a 60 basis point incremental impact.

Moving to SG&A.

<unk> continues to be managing expenses, while also continuing to strategically invest in our long term growth.

Adjusted SG&A expenses in the quarter were $776 million or 46% of net revenue compared to 45% of net revenue in quarter four of two in 2019.

The approximately $70 million increase relative to quarter. Four 2019 was primarily due to the investment spending in A&P as we amplified by better way longer campaign higher DTC cause.

Weighted to store expansion as well as the impact of currency and the addition of beyond yoga.

While we are investing significantly more in our brands, we still achieved an adjusted EBIT margin of 12% expanding 270 basis points versus 2019.

I'll now take you through key highlights by segment.

Be aware that given our recent reorganization and the acquisition of beyond Yoga, We provided historic segment restatements.

The regional segments include a Levi's brand Levis signature and denizen, while the other brands segment includes dockers and beyond yoga.

In the Americas revenues grew 12% in the fourth quarter, driven by a combination of increased price and higher unit volume, which has sequentially improved throughout the year.

All channels were up.

With continued strength in U S wholesale and accelerated growth in our AUM.

Owned and operated stores.

And e-commerce businesses.

We saw growth across all markets, including the U S, which was up 9% and nearly 40% growth in Latin America.

Europe delivered strong results in the quarter up 3% versus 2019, despite sporadic wireless resurgence is rich and paste consumer mobility in some markets.

Excluding the impact of our footwear distributor, becoming a licensee Europe would have been up 6%.

DTC was up 14%, reflecting growth across our company operated mainline and outlet stores and E Commerce.

Market, Germany, and the UK were up double digits.

Asia revenues decreased 2%, representing double digit sequential improvement versus Q3, driven by both DTC and wholesale even as Covid continues to impact many market. While golar remains a drag to results. There were several bright spots that give us confidence that Asia.

The rebound in a more normalized 2022 environment.

Company operated mainline stores inflicted to growth in our E. Commerce remained robust up 49% in China growth in wholesale and company operated mainline stores was offset primarily by approximately 80 less does as we rationalize our franchisee base.

Several markets, including ANZ, India, Korea, and Malaysia, all delivered growth in the corner.

Our other brand revenues grew 4% in the quarter reflective of the inclusion of the acquisition to date results of beyond yoga, which saw sales of approximately $15 million in the roughly two months period.

<unk> revenues continue to improve and while still being down versus 2019, each quarter in 2021 was sequentially better.

Despite lower sales and increased marketing investment dockers profits and margins were higher versus full year 2019.

Turning to balance sheet and cash flows inventories at the end of the quarter were 2% above Q4 2019.

We plan to build inventory through the first half of the year to better meet consumer demand.

As a reminder, approximately two thirds of our inventory is comprised of coal non seasonal product.

Cash and liquidity remains strong with quarter end net debt at $125 million and overall liquidity of $1 7 billion.

Our leverage ratio is now one two times the lowest it has been since the mid nineties.

Adjusted free cash flow through the year was 230 million nearly double the $116 million of 2019 again, demonstrating how the emerging stronger from the pandemic with higher profitability and improved cash management and working capital with a shorter <unk>.

Cash conversion cycle.

Our return on invested capital was 26% 10 year record and we continue to invest behind high ROI growth initiatives.

Full year Capex was $167 million, two thirds of which went to his technology spend to support our business growth and a third to accelerate DTC initiatives.

We have expanded our store footprint, primarily with a new digitally enabled nexgen storage.

We opened 92 of those over the year, bringing our total company operated store count at year end $2083.

Touching next on our performance during the holiday, which we defined as the combination of November and December .

The momentum in our business extend it through holiday despite earlier holiday shopping and Covid related impact both months saw a result above our expectation.

Overall total company revenue was up 28% versus 2020, reflecting both DTC and wholesale channels performing well.

Revenue growth was led by strong results by the Levi's brand in the U S up 20% versus 2020 and 9% versus 2019.

Gross margin also continued to see robust expansion due to similar drivers as the fourth quarter.

While we will provide updated long term financial target as an Investor day. Later this year I will now turn to our fiscal 2022 outlook. As a reminder, we provide annual guidance and we'll update our annual guidance each quarter as necessary as we move through the year.

Overall, we are confident that we'll be able to deliver an even better year in fiscal 2022.

We expect net revenues between $6 4 billion and $6 5 billion, representing reported growth of 11% to 13% year over year, which reflects continued strength in the U S with growth exceeding its pre pandemic algorithm.

Europe's growth accelerating as the region reopen and the strongest growth in Asia as well.

The region recovers to more normalized levels.

For gross margin, we anticipate expansion of around 15 to 30 basis points against last year.

This is driven by the accelerated shift of our business towards DTC digital women's and international combined with the benefit of price increases and upgrading with LD inventory.

Our SG&A rate is expected to see leverage.

Of approximately 10 basis points versus 2021.

The increase in incremental dollars is targeted in the areas accelerating and supporting our growth, including advertising E Commerce store fleet and technology.

Overall, we expect adjusted EBIT margin expansion of around 20 to 40 basis points year over year, well exceeding the 12% plus target we laid out in 2021.

We anticipate a full year tax rate in the mid to high teens and adjusted diluted EPS in the range of $1 50 to a $1 56, which is higher than 2021, despite the increase in tax rates to more normalized levels.

We continue to invest behind high ROI growth initiative and uses of cash flow in 2022 include full year Capex.

Around $270 million.

Capital spending in fiscal 2022 is focused on initiatives that will drive significant returns across our business.

The increase versus 2021 reflects increased investment in growth capex largely behind the digital initiatives, including the continued rollout of our ERP as well as new store openings and renovations in our fleet. In addition to the two distribution centers chip.

<unk> about.

In terms of DTC brick and module, we anticipate opening more than 100 levis those globally in the U S. We plan to open around 30 full priced nextgen those in 2022, taking a mainline gokhan to approximately 50 by the end of the as we.

Progress towards our goal of opening 100 full priced doors in the U S.

I'm also pleased to announce there will be increasing our quarterly dividend payment to 10 cents per share exceeding pre pandemic levels based on our strong balance sheet and cash flow as well as our continued confidence in a structurally stronger business.

Before we go to Q&A I'd like to leave you with three key parts.

First we are pleased with what we accomplished in fiscal 2021, delivering our highest revenue and profitability in over two decades. Despite the pandemic continuing to impact consumer mobility, the disruption to the supply chain and inflationary headwinds.

Second our improve structural economics helped us generate in 2021, a record gross margin and 12 points for adjusted EBIT margin.

We continue to have sustainable margin drivers as we grow DTC digital and women, while also optimizing margins why AI and machine learning.

The strength of our brand supports our pricing initiatives, while continuing to provide great value to our consumers.

Third our free cash flows and balance sheet are strong, allowing us to increase capital deployment across our priorities, while also producing our lowest leverage ratio in decades.

Indeed in 2021, we successfully allocated capital across investments to grow the business organically return cash to our shareholders and completed our first inorganic.

Position, all while generating the highest rois fee in a decade.

In closing we are pleased with our momentum and the strong outlook. We provided for 2022 is underpinned by the strength of our brand discipline in allocating capital towards the right strategic priorities.

And proven agility in managing through crises.

With that I will now open it up for questions.

Thank you the floor is now open for questions. If you have a question. Please press Star then the number one on your telephone keypad due to time constraints. The company requests that you only ask one question.

You have an additional question. Please queue up again, if at any point. Your question has been answered you may remove yourself from the queue by pressing the pound sign.

Our first question comes from Matthew Boss of Jpmorgan. Your line is open.

Great Thanks, and congrats on another nice quarter guys.

Thanks, Matt Chip.

Chip can you speak to larger picture trends in the denim category your level of optimism into 'twenty, two maybe based on what Youre seeing today, and then Harmeet what gives you confidence in 11% to 13% revenue growth as the starting point for this year. If you could just help bridge this outlook relative to your mid single digit.

Oracle algorithm.

Alright, I'll start and Hermes you can take the second half of my question, but I.

I think there's every reason to be optimistic about denim and denim category growth as we go forward there are three.

Kind of big things that are happening that are driving it first is.

This continued acceleration of the casualization trend, which is not just a U S phenomenon, it's really happening around the world.

Number two is we're still in what I would call the early innings of the new denim cycle.

New looser bad year fits.

We're really driving the category.

And keep in mind, but this is on both mens and womens.

Last big cycle will skinny jeans, which is a women's only thing and the new denim cycle drives apparel <unk> footwear drives comps as well so.

I'm optimistic for that reason and then the third thing and we've mentioned this in the past is.

Here in the U S.

More than a third of Americans almost 40% have had.

Their waist size change during the pandemic and that's driving the need for a closet upgrade or a closet refresh.

And we see it in the results denim bottoms were up 11% in Q4 and the revised guidance is up 6% women's was up 21%. The 501, which is our most iconic item was up 23% to 2019 all of those are versus 2019, so really strong across both men's and women's.

And I guess, the other thing I would say just to keep in mind and I've got a hammer. This point home we are by far the global market leader in denim.

If you look at Europe monitor we're number one in men's we're number one in women's the number one overall, obviously, but importantly, we're bigger.

Yes.

The affordable Care Act.

So percentage.

Okay.

<unk>.

Alright.

We also.

You have to monitor group.

In 'twenty, one versus 'twenty than any other major brand measured.

And then if you take a look at the U S, which is still the biggest market.

We have opportunities here, we're still only number two in women's here in the U S. But we were the only brand only major brand to grow women's share over the past 12 months, we added a full share point on our women's business in the U S.

And we added a full sharepoint and important 18 to 30 demographics. So we've got a great share story to tell on top of I think.

A pretty robust category story, so and it's a big part of the reason why.

We are optimistic about the year ahead.

And.

To your question, yes, and to your question Matt.

On.

The 11% to 13 guidance a couple of things.

We have momentum as we step into the year you have seen our holiday sales.

Our business is that.

Underpenetrated womens has been growing really strongly.

Digital is a big component of our business and so is growing strongly.

As we.

<unk> talked to our customers our orders are reflecting.

Growth.

We see but as people come to.

In Europe and other orders that was.

Tracking in the U S.

Consumer which was.

The bulk of the growth.

In quarter four.

Coming back nicely.

Despite traffic still being down.

Beyond yoga adds about two points of growth dockers.

Turning around and that should also be.

Accretive.

Our business. So I think as we think about 11% to 13% guidance.

Our view is.

We've got tailwind as chip talked about from a category perspective, a lot of things we are doing a fairly strong. If you think about the the growth algorithm regionally I think the strength of the consumer in the U S.

And we've looked at it.

Twice in a standardized economic forecasts from bank.

<unk> got data.

The consumer is pretty strong so we think.

<unk>.

Drive.

In our higher growth high single digit growth in 2022, which is higher than our growth algorithm.

Asia as things rebound I think you'd see.

In our high growth higher than our growth algorithm, I'd say Europe because of Omega omicron.

Different countries out.

Dealing with is a high single digit growth.

Hopefully we're conservative in the pool was wrong by.

The gross margins are fairly good and so and largely.

Direct to consumer business. So that really helps you would think about it.

By channel, our stronger growth in wholesale globally and I.

Outsize growth in direct to consumer which is good because it helps our gross margin and if you think about categories tops and bottoms.

Hey, Barton slightly higher because of the casualization trend that we've seen in the past.

And so we continue to be an underpenetrated as a higher than what we've seen in the past we will lay out our longer term growth algorithm, Matt when we have an investor day, but clearly I think we seem to be headed towards a stronger growth algorithm.

Then we had pre pandemic.

That's great to hear great color Congrats again.

Thanks, Matt Thanks, Matt.

Thank you. Our next question comes from a neuron vascular SKU BNP Paribas Exane. Your line is open.

Good afternoon, and thank you very much for taking my question for me you talked about $50 million in supply chain constraints, how do we think about that for the first quarter and first half regarding these constraints.

Is there any finer points on that particularly with regards to one two performance year over year, how do we think about that in the context of the constraints, but also the European Lockdowns from last winter.

Yes sure so.

The good news is.

Demand for our product and brands outstripping supply, but we can confidently say that we did everybody who wanted a pair of.

Levi's to.

To place on the Christmas tree as chip likes to call it guidance, but demand outstrips supply we have had to book more shipping capacity, because we had pegged capacity at a certain point in a certain rate, but because we needed more.

We had to.

Book at higher rates, but generally speaking.

I would say demand higher than supply, we probably see.

That's gone to new.

I would say definitely for the first half will be.

And that's where you've seen a range in our numbers, we're doing what we can distribution team the retail store associate.

Really working around the clock to make sure we are able to service.

Demand the other thing that we are going to be doing.

<unk>.

As we will we plan to build a little bit more of the core inventory, especially in the U S.

And then it gives us two sales, especially in the first half.

Not a lot, but a little bit more because we do want to have inventory to service.

Consumer needs.

And.

On a full year basis, it's difficult to predict how long. This continues I mean economists.

And folks are talking about supply chain constraints dissipating, reducing in the second half.

We're taking what we call more of a conservative view and.

And should.

That really happened it definitely bodes well for our brands and our business but.

We're going to do what we can and because coal is a large piece of our inventory I think.

Building, a little bit of inventory will probably work to our advantage and to our consumers needs over time.

Very helpful. Thank you very much for all the color.

Thanks, Laura.

Thank you. Our next question comes from Omar Saad of Evercore. Your question. Please.

Thanks for taking my question I'd like to ask actually about inflation as well as pricing power or kind of how are you seeing inflation develop for 'twenty two cost inflation.

Maybe put into context, the gross margin guidance that you gave.

How much of that is kind of a proactive price increases.

Setting inflation as well as what's your expectation around the reduced promotional environment do you expect that to continue or expect that to rebound a little bit.

Versus the 2021 played out.

Sure Omar let me talk a little bit about.

How are we thinking about Cogs and then I'll talk to you about the puts and takes in the gross margin so on Cogs.

Last time, when we reported Q3, we said we are in the process of locking in the second half supply and negotiating prices.

We locked in Cogs slightly higher than the mid single digit.

Which we think is still better than the market.

But it is slightly higher.

We are effectively pricing for it.

Our view is because we are locked in the first half of it about a percentage increase relative to.

Great.

Relative to 2020.

The increase in Cogs for the year is about mid single digits. So that's how we're thinking about it it really was about 15% to 20% of cotton.

<unk> continues to be high but because.

We are effectively price for it.

We think we'll be able do gross margins will be able to offset that even as we think about <unk> 2023.

About <unk>.

Gross margin how are we thinking about gross margin. We did signal that gross margin for 'twenty two would be about I think 15% to 30 basis points higher than the record gross margins in 2021.

The puts and takes on that is.

Pricing.

<unk> gross margin between 202 hundred 50 basis points, but we think that will offset inflation, which is largely cogs and higher dilution. We did reflect in the last few calls that the promotional environment, probably doesn't continue and so we are kind of build that in.

And so thats, one piece of it pricing offsetting inflation and higher dilution I think dilution probably stepping up.

Sometime quarter, two onwards, rather than quarter, one because inventories continued to be tight our structural improvements in our business does DDC womens beyond yoga.

AG 40 to 50 basis points, which is a growth algorithm.

Then.

We had a reasonable amount of air freight because ocean.

<unk> has stepped up rethink.

The combination of Ohio Ocean freight and potentially a reduction in air freight is about 20 to 30 basis points of headwind and Thats, what makes up the gross margin.

Different puts and takes leading to a 15 to 30 basis points of gross margin accretion year over year, that's our thinking we think this probably.

Kind of progresses evenly through the year, maybe gross margin slightly higher than the first half versus second half, but that's how we're thinking about it.

Thanks for all the detail best of luck.

Thank you.

Thank you. Our next question comes from Chris <unk> of Bank of America. Your line is open.

Good afternoon guys.

It looks like you guys saw some nice recovery in Asia with revenues getting back to 19 levels during the quarter, but full year EBIT margins in the region still.

Pretty well below pre pandemic levels can you discuss whether there are any structural differences today that would prevent you from returning to those pre pandemic level. If you could just generally provide some comments around your strategy in Asia that would be great.

Yes.

I think.

The reason the operating margins in Asia.

We're down really combination of two things one was volumes being down.

Asia is about 15%, 16% of our business doesn't nearly leverage our operating costs.

As much as some of the other regions. The second is.

We were investing in China.

The good news is China in quarter four actually.

Made money it has lost money in quarter three.

Earlier part of the year, so that was in operating margin.

We're impacted I think as you think about.

Asia longer term.

Hey, Asia.

Coming back to pre pandemic levels will make us sizable difference.

Our gross margin.

Around the company a higher costs around the company are lower so I think that impacts operating margins nicely over time, but.

But I think.

The way operating margin.

To improve sustainably in Asia, it's all going to be driven by volume.

And as we reflected I reflected in my in my script, there were markets that actually turn.

Turning to growth in Asia.

And that is that was pleasing as we ended the quarter.

Thank you.

Thank you. Our next question comes from Bob Turbo Guggenheim. Your question. Please hi.

Good afternoon.

Just wondering chip could you talk a little bit about the progress you've made on the wholesale business I think specifically in the U S piece of it just the profitability gains I don't know if you could share.

The percentage for the fiscal year in terms of where that business ended up and just curious on like the game plan on inventories and orders that Youre seeing I think Herman you mentioned that if you could maybe just address a little bit.

Around the game plan and what you see on inventory levels and inventory orders from your wholesale partners. Thanks.

Yeah.

First of all happy to hear Bob too.

We've put a lot of effort as you know into kind of re mapping our wholesale footprint.

To make a more premium and more digital over time, and that's really paid off our wholesale business today is much more profitable I'm not going to give you a number but it's a lot more profitable today than it once before and certainly.

Our promotional environment has been good for us good for the brand and good for our customers as well, but the pandemic definitely accelerated growth in the channel.

And we.

We had a good holiday as well here in the U S but.

I think our success in U S. Wholesale has largely is largely trace to the work that we did.

Premium is our business and really get our footprint right. So real elevation with customers like Nordstrom and bloomingdale's.

The addition of target.

One of our customers here has been has been really big for us.

Three small tight assortment, but really premium elevation of our brand great in store execution.

So wholesale gross margin and profitability are the strongest they've been in a long long time.

And again as I said lower promotional environment has helped that.

And then when we when we do have this analyst day that we keep talking about which is going to come.

Later this year in the spring late spring.

Our full growth algorithm about what we're expecting from wholesale over time I guess, the last thing I would say is.

Brick and mortar wholesale so just the brick and mortar component of it is only around 10% of our sales today.

Which is down hugely from 10 years ago, when I joined here I mean U S. Wholesale at the time was almost half of the company's total business today at brick and mortar U S. Wholesales about 10% of our total revenue.

A massive transformation for us over the last decade.

Got it and if I could just sneak in one more for you chip.

Are you do you think the miners are going to win this weekend on are you guys planning for a big Levis commercial in the Super Bowl at this point in time.

Well, here's what I will tell you what's Super Bowl 56 right.

What's 56.

Enrollment ladders.

So the only thing that's missing is the letter.

So we'll see.

Good luck. Thank you thanks, a lot bye bye.

Thank you. Our next question comes from Dana Telsey Telsey Advisory Group. Please go ahead, good afternoon, everyone and happy new year.

As you think about the Capex budget for this year is $2 70, the new number or is the new distribution centers added adding to that how do you break it down and then just following up on digital what are you seeing on that digital margin you mentioned the improvement where do you think that could go. Thank you.

Yeah.

Okay.

Dan Happy New year to you too on Capex.

Capex is.

Over time.

We have stepped up capex as the company has generated a decent amount of cash.

And we've invested I would say wisely because our.

Invested capital of the company is at a 10 year high of about 26%.

So there is discipline.

And how we allocate capital Y is capital higher.

Five 4% a little over 4% of revenue depending on where you think your revenue beat.

The increase was largely driven by a couple of things we did talk about.

The distribution centers in Europe , and in the East coast in the U S and that is to service higher demand and importantly.

Drive more efficiency in how we fulfill.

Because we can have visibility of inventory across our direct to consumer and drive the channel that is really growing which is weak almost.

Also during the pandemic.

Had scaled back on Remodels.

As I said, we have 1000 plus stores, we plan to scale that back.

That's good ROI.

And in another we Havent Nextgen model working around the world we have.

Something we can retrofit to plus the $100.

New stores that we talked about.

We're also spending more.

More money on.

Digital as we trying to grow the e-commerce business, where they're scaling our loyalty programs scaling our ads.

Scaling <unk>.

The basic things that today define whether good omnichannel retailers are all about.

Also scaling AI and machine learning and the wonderful ERP upgrade which is happening so I think a combination of factors.

But my view is two thirds of the capital is still growth oriented. So that's that's the first.

Answer to your question on capital I think.

Any question.

Second piece <unk>.

So Mike can you help me.

Hi, David.

On the digital margin is a simple but the good news is it's mid single digits from low single digits at the end of last year from <unk>.

Numbers being in the Red.

Pandemic I think our view is if we can double our own e-commerce business, which will take a couple of years.

We think we can get to the 12% number.

So it's largely a volume game plus.

As we build efficiencies through digital distribution that also help so I think that's what we're trying to do I think the.

The headwind is obviously distribution costs.

But we've got enough factors, including volume leverage that help offset that and just tip lastly, anything on beyond yoga. The early insights that you're gleaning there on what you're seeing.

Sure I guess, what I would say is a couple of things first of all.

We're pretty much complete with the integration and we are really really happy I mean, no big surprises, we kind of got what we thought we were going to get is one important headline that's great but beyond that.

Team is terrific.

We have already transplanted at a couple of Levi's folks onto the beyond yoga teams or personal marketing.

A person.

Who is going to help a lot with e-commerce .

And in that area, and we'll likely move our merchant down there as well so we're starting to populate some revised folks down there, but it's still really really early days, we talked on the prepared remarks about the mens pilot.

But they had right.

Right before the holidays that was really really good.

We will likely have a couple of stores before the end of this year. So we're feeling really really positive and as I've said many times I think the future is really really bright for the scrap that's amazing product.

Great team and we're very very optimistic right now.

Thank you.

Thank you. Our next question comes from Brook rows of Goldman Sachs. Please go ahead.

Good afternoon, and thank you so much for taking our question.

Pardon me.

There has been a strong contributor to revive growth versus 2019 levels. This year and it sounds like that has a lot of room to continue could you perhaps provide a bit of color on your outlook for sales volumes for the year and maybe the categories or channels, where you see the largest opportunities by share volume capture to increase.

And this next fiscal year. Thank you.

Hey Brook.

It's difficult to model with precision, but here's how we're thinking if we look at the 11% to 12% about 2% of that is.

Thanks to the wonderful.

The beyond yoga team is doing.

If you if you assume the rest is.

Levi's and maybe a point from dockers.

Our view is pricing is about half that.

And the other is largely being driven by what I call.

Higher DTC.

As well as.

Just.

Volumes.

That's how we're thinking about it at.

At this point of time.

Overall for the year I think chip referenced at <unk> were up 7% most of it pricing for the quarter.

<unk> were up 10%, 70% of that was pricing. So that's how we're generally thinking about.

<unk>.

What they are and where they're headed over time.

Thank you so much.

And in terms of categories.

Primarily.

I think.

Being driven.

By our bottoms business.

And.

Tops as Underpenetrated as we tend to as we add more of our portfolio.

Premium as we have premium talks to our portfolio that would help AUR overtime.

Great. Thank you.

Thank you. Our next question comes from Jay So of UBS. Your question. Please.

Great. Thank you so much.

My question is about the store rollout that you talked about earlier in the call with the next Gen stores, what are you seeing that.

Makes you it seems like that rollout is happening faster, it's increasing what are you seeing that makes you want to do that and then for Harmeet.

Should be an interesting year from a top line perspective, just because you're lapping fiscal stimulus in March and April in the U S. And then Theres a lot of easy compares in parts of the World, where Covid was a big impact in 2021. So you can just give us an idea of the contours of the year from a quarterly perspective on where you expect the sales growth to be like maybe higher than average or lower than average. Thank you.

Yeah, I'll hit the store thing real quickly.

As we've been rolling out. These next Gen stores, we've been really pleased with their performance and literally kind of market by market.

When we go in with a Nextgen store remember, they're smaller they tend to be smaller footprint more efficient tight assortment digitally enabled.

And easy store to shop.

And a little bit more consumer friendly larger fitting rooms better lighting.

Almost market by market they tend to outperform the old format stores.

Take a look at our ROIC for this past year, we're investing a lot of capital with.

And two into retail and it's returning and so.

I won't say every single one of these stores have meet our meet or beat our expectation, but we're really pleased with it and we know, especially here in the U S. We know we continue to have this opportunity to premium is the marketplace. So just a couple of years ago. We only had 30 mainline doors I'm not even sure if we cross 50 at this point.

There's still a lot of opportunity for productive mainline doors.

Here in the U S, but in other parts of the world as well and so we think we're going to add about another 100 doors or so on a gross basis this year and.

We're optimistic about it.

It's a good time to be looking for real estate two in many markets.

And your question about first half second half of the quarterly puts and takes I'd say.

Last year, our H one.

Relative to <unk> 19 was still down because we are dealing with store closures in Europe and in parts of Asia et cetera. So the way we think about it is.

Q1 is probably up in the mid.

To high teens, and obviously vary by quarter. The second second half is in the higher single digit.

That's how we're thinking about.

Revenue.

As generally strong through the year, but Europe and Asia.

Helping.

The swings.

Got it okay. Thank you so much.

Thank you. Our next question comes from Ike <unk> of Wells Fargo. Your question. Please.

Hi, Thank you happy new year Chip chip two questions for you just you know theres a lot of Investor Trepidation space clearly for a couple of different reasons, but one is just the idea of the demand is going to be moderating to a point, where maybe it becomes uncomfortable I mean is there anything you can say about Q1 or quarter to date, just from a demand perspective.

Whether it's your own DTC business of your talks with your wholesale partners are that would be helpful. For us and then just to that point on the wholesale side any difference in those competitions within the mass channel versus the department store channel would be helpful.

Yeah, I won't get down to customer level detail, but.

Part of the reason, we sound optimistic as every signal we're looking at.

And I've got to say I'm, probably the one who gets most paranoid and I'm always paranoid and I'm always looking for something thats going to send our sideways and every signal that we look at right now.

Consumers still looks pretty bullish and.

Including credit card data that is fairly current.

And that's true on a global basis, we've got good visibility to the order book in Europe , where there is this concept of pre booking the demand signal coming from there is very strong we're still chasing here in the U S right now.

And as you heard we less demand on the table. If you were always loved to three points of growth unfilled and we're still chasing so.

But the fed I.

I think right about the same time, we started this call announcement interest rate hike and inflation is partially psychological and I've been there.

I was in business and back in the early eighties, I remember it and.

We're watching the consumer like a hawk.

But right now every signal that we're seeing is as positive and.

We know that we've been successful in getting pricing pass through over the last six months you see what's happened to our AUR. So.

But we'll keep an eye on it and if we see the signal is starting to change will will react.

Quickly, but right now and if you look at look at the economist reports even from your own bank, they're all very very optimistic right now about the consumer so.

That's why we're feeling pretty good and everything we're seeing suggests that.

That's great. Thank you.

Thank you. Thank you at this time I would like to turn the floor back over to the company for any closing remarks.

Okay. I think we may have left one or two or a couple of questions on answered I'm, sorry about that I know that harmeet and either we'll be doing follow up calls with everybody.

We tried to be as quick as we could here but.

In the interest.

Time, and respecting everybody's calendar, we'll call. It here, thanks very much for joining us.

For being along for the ride and we'll speak to you at.

The next earnings call in a couple of months.

Bye bye.

Thank you. This concludes today's conference call. Please disconnect your lines at this time.