Q4 2021 Express Inc Earnings Call

Okay.

Good morning, My name is Chantal and I'll be your conference operator today at this time I'd like to welcome everyone to the Express Inc. Fourth quarter and full year 2021 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speakers remarks, there will be a question and answer session if you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you'd like to withdraw your question. Please press star one again thank you.

Now like to hand, the conference over to Greg Johnson, Vice President of Investor Relations. Please go ahead.

Thank you Phil Good morning, and welcome to our call I'd like to open by reminding you of the company's Safe Harbor provisions any statements made during this conference call, except those containing historical facts may be deemed to constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1994.

Actual future results may differ materially from those suggested in forward looking statements due to a number of risks and uncertainties all of which are described in the company's filings with the SEC, including today's press release.

Express assumes no obligation to update any forward looking statements or information, except as required by law.

Our comments today will supplement the detailed information provided in both the press release and the Investor presentation available on our Investor Relations website. In addition, you can locate a reconciliation of any adjusted results discussed in our comments to amounts reported under GAAP on our website or in our earnings release.

We will also be providing financial comparisons to prior fiscal periods and.

Our prepared remarks today refer to 2020, unless otherwise noted.

With me today are Tim Baxter, Chief Executive Officer, and Matt Moellering, President Chief operating Officer, and interim Chief Financial Officer.

And one additional item, Tim and Matt will be participating in a fireside chat at the UBS Global consumer and retail conference Tomorrow morning at eight a M. Eastern time. This event will be webcast on our Investor Relations website. So please join US I will now turn the call over to Tim.

Thank you, Greg and good morning, everyone and.

In 2020 , one we delivered three consecutive quarters of positive comparable sales versus 2019 and drove positive operating income for the full year.

We had a strong holiday season, and our momentum has continued.

In the fourth quarter grew 38% over 2020 and delivered a positive 4% comp compared to 2019.

We drove gross margin improvement of 220 basis points compared to 2019, including negative impact of $15 million of expense associated with ongoing supply chain challenges.

We generated positive operating income of $10 million and EPS of 11 cents.

We achieved EBITDA of $26 million in the fourth quarter and $65 million for the full year.

We achieved free cash flow of $55 million for the full year.

And the combined Q2, Q3, and Q4 period sales grew 53% over 2020.

Comparable sales accelerated each quarter and gross margin improved 420 basis points compared to 2019.

We generated positive operating income of $41 million EBITDA of $89 million and free cash flow of $60 million.

The expressway forward strategy is effectively galvanized our organization advanced our brand and accelerated our business and we are well on our way from being known as a store in the mall to a brand with a purpose powered by a styling community.

We are selling more elevated product to more loyal customers at stronger margins.

Our average unit retail for the year was up 13% compared to 2019, and we are exiting the year with the highest number of active loyalty members in our company's 40 year history.

Yes.

We continue to advance each one of the four foundational pillars of the expressway forward strategy.

<unk>.

Brand customer and execution.

I will take you through each with some of the results we've achieved and what is still to come starting with product.

We completely re imagined our product, bringing more style more versatility and more newness across our entire assortment.

Our occasion based categories that have historically been our strength and we are disproportionately impacted by the pandemic accelerated significantly as the year progressed dress.

Dresses and men's suits were down around 30% in the first quarter versus 2019, but delivered positive comps for the balance of the year.

Customer response to our denim has been incredible starting in the second quarter and continuing through the end of the year denim posted its best performance in recent history, delivering a plus 16% comp versus 2019.

Introduced this year the express essentials body contour collection generated nearly $60 million in sales and drove a 14% comp in women's knit tops compared to 2019.

And men Polo's in graphic Tees grew 40% in the full year versus 2019, delivering our best results in recent history.

Yeah.

Our second pillar is brand.

<unk> organic brand demand was up for the ninth consecutive month, increasing 14% on average between May in January compared to 2019.

Brand tracking measures social media engagement and positive customer feedback.

All important indicators of the health and vitality of our brand continued to increase.

Our marketing has evolved to reflect where and how content is being consumed and we are leveraging more tick tock Instagram reals and live streams, we had over 110 million video views across these platforms in Q4.

Our fourth quarter brand campaign launched with a segment on the Kelly Clarkson show and a spot on the Adele One night, only special which generated over 100 million impressions across all social platforms.

We introduced a very exciting new dimension to our brand when we kicked off our community Commerce program in Q3.

Our lead style editor fashion authority, Rachel Zoe joined US in Q4 and has already brought outsized awareness and engagement to the program.

Our first livestream shopping event highlighting her express outfit selections garnered nearly 450000 viewers unexpressed dotcom and Facebook live.

Youll be hearing a lot more about this program in the coming months.

Our third pillar is customer.

We are successfully engaging existing customers and acquiring new ones.

Our relaunched express insider loyalty program has brought in $2 7 million, new customers and reactivated $2 2 million lapsed customers.

And as I previously mentioned, we ended the year with the highest number of active loyalty members in the company's history.

We improved the quality of our customer file total customer spend increased by 13% in the fourth quarter and new customer spend grew 19% compared to 2019.

Our fourth pillar is execution.

We refined our go to market process advanced our multichannel capabilities and identified meaningful operational and financial efficiencies.

We have right sized our fleet.

Close of nearly 100 stores and begun to execute our fleet optimization strategy.

We effectively navigated supply chain challenges and applied strong financial discipline to both expenses and investments.

Outstanding execution helped accelerate sales across all channels.

I'll provide an update on our progress on each one starting with e-commerce .

We stated a goal to achieve $1 billion in e-commerce demand by 2024 and are on track to achieve this target.

With momentum that began last year and strengthen throughout 2021, we drove a 33% increase in demand for the year compared to 2020 and saw increases across all key metrics traffic conversion average order value and average unit retail.

We now have $2 3 million App users are most highly engaged customers, making five more visits and spending over $300 more each year than customers, who only shop through our web site or in one of our stores.

We added features and functionality to our mobile app that drove demand up 72% for the full year.

Traffic increased by 20% average order value increased by 27% and conversion was 45 basis points higher than 2020.

Our physical stores are one of the most important expressions of our brand and we saw real progress in the performance of our retail stores this year.

Comparable sales accelerated throughout the year and we drove a 20% increase in average unit retail for the year compared to 2019.

Our fleet optimization strategy includes a comprehensive look at the location.

<unk> design and customer experience in our stores as well as the opening of express edit stores.

We've renovated a select number of stores and see consistent comp sales increases.

We have refreshed many of our stores to meet customer expectations for a great fitting room, a comfortable place to sit and more clear sight lines and pathways for ease of shopping and.

And across both renovated and refresh stores, we are creating consistency of our visual brand identity.

Launched in 2020, our smaller format express edit stores are situated in high traffic locations and have product assortments tailored to the taste and character of each individual market and neighborhood.

They are acquiring new customers and reactivating lapsed customers at higher rates than the balance of our fleet and driving higher digital sales and the surrounding Zip codes.

Based on these results we will continue to open edit stores as a way to further diversify our brick and mortar portfolio.

Yeah.

Our outlet channel had a remarkable year driving record volume and a positive 4% comp in the last nine months of the year compared to 2019.

<unk> also performed well in the quarter capping off a great year, and achieving a sales increase of 41% compared to 2020.

Up West launched as a digital brand with a mission to provide comfort for people and planet and that has come to life through its assortment of casual relaxed apparel and home goods sustainable sourcing and manufacturing and a voluntary and giving program.

In 2022, we will expand the digital capabilities of up West with features such as single page checkout and enhanced customer segmentation.

Introduce an active product called go product line called go up West open additional stores and continue to grow.

As more consumers become more conscious about their buying choices, the up west product and ethos resonate even more strongly and we see up west as an incredible growth opportunity for our company.

Now, let me turn the call over to Matt who will provide details on our fourth quarter and full year results and share our view for 2022.

Thank you Tim I'll take you through our fourth quarter and full year results review, our liquidity position and provide a high level outlook on the first quarter and full year of 2022.

My comments on comparisons will be to 2020 with additional color on our performance versus 2019.

We delivered positive operating income for the year and our fourth quarter comparable sales and gross margin results exceeded our outlook.

Fourth quarter net sales were $595 million, an increase of 38% and consolidated comparable sales were up 43% versus 2012.

Compared to 2019 Consol.

Consolidated comparable sales were positive, 4%, which was above our outlook.

Total retail comps increased 4% and outlet comps were up 1%.

These results were achieved despite a significant reduction in promotional activity in our retail channel.

As a result merchandise margin expanded by approximately 600 basis points compared to 2020.

Compared to 2019 merchandize.

Margin was down 40 basis points, however, excluding the negative impact of $15 million of expense associated with ongoing supply chain challenges, our merchandize margin would have been up approximately 200 basis points.

Buying and occupancy expenses leveraged 670 basis points in the fourth quarter compared to 2020.

This improvement was driven by increased sales compared to 2019 buying and occupancy expenses Levered 260 basis points driven by reductions in our expense structure.

During the fourth quarter, we had a gross profit of $174 million with a gross margin rate of 29, 2% an increase of approximately 13 100 basis points as compared to 2020.

Compared to 2019 gross margin increased by 220 basis points and exceeded our outlook.

SG&A expenses were $163 million, leveraging by 370 basis points compared to 2020, driven primarily by sales increases.

Compared to 2019, SG&A expenses were up $14 million, reflecting additional marketing investments and higher labor expenses.

We reinvested some of our markdown savings into marketing programs that drove higher traffic engagement and conversion.

Fourth quarter operating income was $10 million.

Fourth quarter diluted earnings per share was <unk> 11.

Compared to a loss of 82 and 2020.

EBITDA was $26 million for the quarter.

For the full year 2021, net sales of $1 9 billion increased 55% and comparable sales were up 37% compared to 2020.

Retail comps increased 41% and express factory outlet comps were a positive 27%.

Compared to 2019, our full year comparable sales were down 2%. However, comparable sales in the last three quarters were positive and improve sequentially throughout the year, culminating in a positive 4% comp in the fourth quarter.

Gross margin rate expanded by 260 basis points compared to 2019, we generated positive operating income and $65 million of EBITDA.

Turning to our balance sheet and cash flow, we ended the year with $41 million of cash and cash equivalents operating cash flow was $89 million for the full year and free cash flow was $55 million.

Compared to 2020, our inventory was up 36%, reflecting aggressive action, we took to mitigate supply chain challenges.

We have adjusted our go to market calendar to order product two to three weeks earlier than normal the additional and transit time will ensure the product arrives on time for product launches, while minimizing costly air shipments.

We also made investments in core categories with long lead times, such as denim in men's suits. These investments represent approximately $35 million of the increased inventory.

We also packed and held approximately $12 million of holiday product that arrived late.

This product is aligned with our outlet channel assortment strategy and we are confident it will sell through at regular prices and fall 2022.

We remain focused on ensuring that we are well positioned on both the newness and composition of our inventory and because we expect these supply chain challenges to continue our inventory levels will remain elevated in the first half of the year and move closer to parity with sales growth in the back half of the year.

Our balance sheet at the end of the year continues to reflect a $52 million cares Act receivable, which we expect to receive in the third quarter.

Our borrowings at the end of the year were $132 million of which $35 million was drawn against our existing ABL credit facility and the remaining $97 million was drawn on our term loans.

Turning to our outlook, we took a balanced approach as we developed our expectations.

We considered our strong performance in 2021, and the strength of our product brand and customer strategies against the ongoing supply chain constraints tight labor market and other inflationary pressures.

Our outlook includes expectations for the first quarter and the full year.

Let me start with Q1 <unk>.

Compared to the first quarter of 2021, we expect to deliver the following <unk>.

Comparable sales increased 25% to 30%.

Gross margin rate to increase approximately 550 basis points, including approximately $7 million of expense related to mitigating supply chain challenges.

And SG&A expense as a percent of sales to lever approximately 250 basis points.

Compared to the full year of 2021, we expect the following for 2022 <unk>.

Comparable sales increased 7% to 9%.

Gross margin rate to increase approximately 100 basis points.

SG&A expenses as a percent of sales approximately flat, including incremental investments in technology higher labor expenses, and general inflationary pressures and capital expenditures of $50 million to $55 million.

To summarize our expressway forward strategy is working in 2021, we delivered positive comps in the second third and fourth quarters versus 2019 and positive operating income for the year.

We are carefully navigating and managing the supply chain challenges and are well positioned to achieve our expectations for continued growth and significantly improved operating income in 2022, I will now turn the call back to Tim.

Thanks, Matt.

We are well positioned to continue our momentum in 2022.

Our transformation has been driven by significant progress in each of the four foundational pillars of the expressway forward strategy.

Outstanding product.

A relevant and compelling brand purpose.

Our customer loyalty program, driving higher engagement and solid execution.

We are designing best in class modern product at incredible value and.

And gaining market share across some of the most significant volume driving categories.

We are reinvigorating, our brand and driving increases in brand tracking measures social media engagement and positive customer feedback.

We have the highest number of active loyalty program members in the Companys history.

More new customers more engaged and higher spending existing customers and more reactivated lapsed customers.

We have effectively navigated the pandemic rebuilt the foundation of our business and emerged as a stronger more focused organization.

We delivered profitable growth in the second third and fourth quarters.

Our comparable sales accelerated each quarter and we drove substantial gross margin expansion compared to 2019.

We delivered positive operating income and free cash flow for the year.

This performance is tangible evidence of the strength of our strategy and we are well on our way from being known as a store in the mall to a brand with a purpose powered by our styling community.

My confidence is reinforced by our results.

We expect to deliver another year of profitable growth in 2022 and are on track to achieve our stated goal of $1 billion in E Commerce demand.

Mid single digit operating margin and over $100 million and operating profit by 2024.

We will continue to restore the vitality of the express brand and business and also begin to explore other avenues of growth for our company.

From accelerating our up west business to considering wholesale and international possibilities, we see a number of compelling growth opportunities.

We are confident that the versatility of our product.

Power of our brand purpose.

The reach of our physical and digital stores, and our strong financial results and prospects and the incredible potential of our styling community will create long term shareholder value.

Thank you for joining us this morning and for your interest in our company and now we'll take your questions.

At this time I would like to remind everyone in order to ask a question Press Star then number one on your telephone keypad.

To allow time for everyone to ask a question. Please limit yourself to one question and one follow up we'll pause for just a moment to compile the Q&A roster.

Thank you.

Our first question comes from Steve Marotta with CL King Associates. Your line is open.

We can Matt and Greg Congratulations and capping off a terrific 2021.

Jim I know that 2021 was notably a low promotional year and I know that you will never of course be aggressive promoters again, but can you talk a little bit about how you view.

Any sort of deltas are variances in your promotional strategy as the year progresses also as you see potential for the industry to do the same.

Thanks, Steve.

But we.

We as you know have aggressively pulled back on deep storewide and site wide promotions.

And we have been very successful doing that because of the strength of our product and the value that we put into the product I've said, it before but our customer response to value.

What price and not necessarily promotion. So we are going to continue developing and delivering best in class product at incredible values. So I do not see.

Any significant change to our promotional strategy as we move through 2022, we will continue to use promotion very strategically.

And surgically versus those those big site wide in store wide promotions that we have done previously.

The competition I can't speak to I think we have seen varied.

Varied responses to business over the past six months and some of our competitors have continued to be very aggressive in promoting and others have like we have pulled back on that promotion.

So I think that will continue to see that environment.

I think that we will continue to win.

So I'm very confident that we will not go back and I'm very confident in the gross margin expansion that we have.

We've included in our outlook for 2022.

That's very helpful and just following up on that particularly on the gross margin side can you maybe.

<unk> talk about the inflationary pressures that youre seeing in the first half of this year and the second half of this year and do you feel that pretty.

Pretty much all of the offsets to those inflationary pressures will be pricing increases or is there another component that.

That we might want to think about thanks.

Yes, we are seeing some inflationary pressures as everybody is in the market, obviously, where our inflationary pressure show up more versus less as in the SG&A line width.

Labor expenses.

Et cetera, and we have that baked into our guidance that we provided both for Q1 and the full year as it relates to product we have gotten out in front of product.

Pretty aggressively as we talked about in our remarks.

And.

We have fabric platform a fair amount of fabric. So as we look at our costs that are coming in there a little bit higher what.

What we do know to Tim's point, when we get the fashion right, which we have now demonstrated in our ability to do on a regular basis. There is lot of very little price sensitivity to the product because the customer wants the right fashion that we're providing to them.

And.

I said to them.

Yes, and as I said, Steve on the call. We have consistently driven very very aggressive increases in our average unit retails and.

We'll be able to continue to do that as we move through 2022.

Very helpful. Thank you.

Thanks, Steve.

Our next question comes from Marni Shapiro with retail tracker. Your line is open.

Hey, guys. Congratulations on wrapping up a really nice year and congratulations on the floor sets for spring, which I would like to talk a little bit about you hit. This spring said it was pretty outstanding rivaling.

Zara considered the best fashion player out there in the space can you talk a little bit about how your customer is responding to this whether it's the bright colors are there more dressed lux and is it across men's and women's because you've made some bold moves on the men's side as well.

Yes, absolutely marni.

As I said, our momentum has continued into the first quarter and that was largely driven by the product launch in Florida.

You are speaking about which.

Did rivals.

I've said previously that we were we were striving to be the American version of Zara and I think we're finally hitting our stride on that.

Consumer response has been incredible to that product.

And incredible to the marketing campaign that supported the product.

And we are seeing extraordinary sell throughs on the fashion product and it is it's actually across all categories. So we continue to see incredible strength in denim and knits and we're seeing incredible strength in modern tailoring.

In both mens and womens so the colored head to so suits that you were referring to in the February product launch have been absolutely incredible many of the colors are actually sold out.

And that happened within a couple of weeks.

But the customers responding across the board.

As previously mentioned that our men's business has been outstanding and what we're seeing now is that men's has continued to.

To improve and has continued to drive incredible results and womens is beginning to keep pace with men's.

No.

I'm very very excited.

Excited about.

Where we are heading in the spring season, and the consumer response that we have seen thus far to the marketing and to the product.

The one thing I would add to that as well is that we talked about this prior but we have revamped our entire go to market process and we now have everybody working in concert with each other from design to merchandising to production and sourcing planning and allocation and marketing, we're getting behind the big ideas and making them.

Very powerful for the customer online and in stores. So when you go into the stores and see these powerful.

Powerful displays and product it is obviously intentional and we're getting behind the big ideas, which help drive our business going forward as well.

Yes. It makes it very easy to shop can you just talk also a little bit I think you then.

The last question about AUR are you seeing AUR or move up because you pulled back promotions or are you also raising some prices because your quality over the last couple of years has gotten significantly better and so I'm curious if AUC has gone up and so and prices on.

New products has gone up because theres better may can you just walk us through a little bit about your AUR breakdown.

Yes, absolutely Marnie and it's really.

Three components.

As you mentioned, it's a pull back on promotion. So we are promoting less which is driving higher average unit retails. It is higher.

Ticket prices.

That are based on higher average unit cost because we have put so much more quality.

Into the product and as I said, the customer is responding to that because they they recognize and see the value and the quality of our product and then the third thing is mix of business, which is also helping drive higher average unit retails as we continue to drive incredible.

Creases in modern tailoring, and both mens and womens and categories like dresses Kantar.

Continue to rebound those are obviously higher average unit retails.

And the customers responding there as well.

Sneak in one more on the AUC as costs are going up across the board as we hear on the merchandise side is it less let's say less of an issue for you guys means can hit everybody, but you're you're already raising our AUC is because you were putting better quality and so is it not really an apples to apples for you guys. The same way it is for other people.

I would say that's definitely fair and it's a combination of that specifically marni as well as the work we've done in general improving our product and the brand and as we get the product and brand <unk>.

Stronger and stronger.

It helps with price stability as well and allows us to.

To ask for higher prices and get them.

Best of luck with the rest of the spring season guys.

Thanks Marni.

Your next question comes from the line of.

Roxanne Myers with <unk> partners. Your line is open.

Great. Thanks, Good morning, and congrats on your strength of your fourth quarter.

My follow up on AUR, I guess, I'm curious to know social occasion dressing.

Is doing exceptionally well for you and certainly others in the industry do you plan to drive ongoing AUR this year through.

And increasing tilt towards dresses and tailoring like are you consciously shifting the mix.

Increasingly in that direction and can you talk about maybe to what extent.

Yeah, absolutely yeah, our occasion base businesses as I mentioned have continued to accelerate continue to accelerate throughout 2021 and in 2022, It's worth mentioning that third party data tells us that two.

<unk> 2022 is the largest number of weddings in the United States since 1984.

And whether you are a guest of the wording.

<unk>.

Pride are a member of the wedding party, we have the right occasion based apparel to service all of those needs. So we will continue to drive outsized growth in modern tailoring categories like dresses, but as I've said, we're actually seeing strength across all of our category.

So denim also posting its best comp of 16% comp in the last three quarters of the year. The best comp we've had in denim in.

And a very long time so.

Yes occasion based categories are going to continue to grow yes, that's a great opportunity for us because those are the categories that have historically been our strength, but we are also going to continue to drive denim, we're going to continue to drive categories like body contour in womens and polo's in men's.

So the versatility of our assortment is how we are how we have been winning and how we are going to continue to win.

And those categories.

As you mentioned Roxanne are.

The occasion based categories are higher average unit retail so.

I said tomorrow, the third piece of that.

AUR growth is definitely coming from mix as those categories.

Regain momentum and become a larger percentage of our sales in 2022 that will be a part of what will drive our higher average unit retails.

Yeah.

Great. Thank you for all that color is super helpful and certainly an exciting talent for Ya.

My other question is is around new customer growth, which really has been a standout can you talk about.

What percent of new customers are coming from stores versus online.

Anything to call out in terms of the average age of your customer as your fashion has evolved.

And then as it relates to your loyalty program you know what percentage.

Have your customers our loyalty program members and how much more do they spend versus non loyalty.

A lot packed in there.

There is a lot I should've written that direction I hope I hope I can get it all.

Look we are really excited about the number of new customers coming into the brand the number of lapsed customers customers, who haven't shopped with us in years, who are reactivating and re engaging with the brand and obviously very excited that the customer our existing customers customers who are.

Stuck with us through thick and thin are spending a lot more with us at this point so very excited about all of those measures.

As I said the the loyalty program has been a big driver of all of that bringing in $2 7 million new customers in 2021 and two two.

Reactivated customers. So it's the loyalty program that.

Has been driving a great deal of the higher spend as our loyalty customers visit our stores more often.

And spend more money.

That being said we're also.

Bringing new customers in through our stores.

That was one of your questions I would say the vast majority without without sharing any numbers. The vast majority of our new customers come to us through our physical store locations.

That has always been true it continues to be true and express edit stores in particular are bringing a very disproportionately large number of new customers into the brand as we enter into locations where that we haven't.

Been in previously so we.

We also are bringing in.

New customers online so I don't want to.

I certainly don't want the takeaway to be that we're not bringing in a large number of new customers online because we are it's just that the vast majority of the new customers.

Come in through.

Through our stores.

In terms of age we havent shared anything on our age demographic.

I would say we are winning across all ages and both well I Shouldnt say all ages, we are winning.

We're winning from 18.

Plus in both genders.

So we have here.

Huge opportunity, we have historically been able to bring many new customers into the brand actually in high school.

We are many people's choice for their first homecoming dress or their first prom dress. We are many guys choice for their first homecoming suite of their first <unk>.

<unk> suite graduation suits and dresses were able to bring a large number of new customers in at that point and then obviously they have the longest lifetime value for us and because of the versatility and strength of our assortment and the breadth of our assortment, we can take them through each one of.

Their life stages.

And people ask me a lot what our target ages and we go back to when we launched the expressway forward strategy.

Aye.

We don't typically like to talk about that all I'll say is that obviously the younger they are when they when they come into the brand.

Longer we have them, obviously, the greater their lifetime value, but we call our customers the express generation.

<unk>.

We have we have incredible product and when youre driving incredible product at incredible value and there is incredible versatility you can appeal to a very very broad range in age of consumers.

Okay, great. Thank you for all that color is super helpful.

Thanks Roxanne.

Again, if you would like to ask a question Press Star then number one on your telephone keypad.

Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is open.

Good morning, everyone and congratulations on the nice progress.

Ken you're making great strides in improving the express business would love to hear anymore about the express edit store concept in outlet given the differentiation of product and how you're positioned going forward and then you mentioned some of the growth initiatives on up west any more clarity on what your.

That thing for that business and with wholesale is that a 2022.

Action or is that for 'twenty three and beyond thank you.

Thanks Dana.

So express edit I'll start there we are continuing to.

Explore locations for express edit we have not quantified the number of express edit stores that we will open in 2022, but we will be continuing to open express edit stores and.

Hi, traffic opinion maker locations and we believe that's a very powerful way for us to continue to reinvigorate the brand intra.

Introduce the brand to a large number of new customers for their consideration and so very excited about express edit and what we can do and accomplish and express at it will actually be opening up our first womens only express edit in St. Louis and about.

Months I believe don't quote me on that we're opening our first women's on the express edit soon.

Lewis at Plaza Frontenac, So youll continue to see us explore different concepts with express edit.

It's our intent to open up also try our mens only express edit so we're going to continue to evolve that it's going to continue to be a way for us to test. These new store concepts and continue to be a way for us to bring new consumers into the brand and drive e-commerce demand in the surrounding Zip codes.

Next will go to up West up West has been incredible and while we have not while we have not yet shared our longer range view of the potential volume of the brand.

We will likely do that at some point later this year or early in 2023 as we continue to map map this out but up west grew by 41%.

In 2021 over 2020, so incredible growth there we have opened seven up west stores.

And the stores are performing very well and we see the same exact thing with the up west stores that we see with express edit stores, where coming into these locations. We are gaining new customers through the physical store location and our digital business in those surrounding ZIP codes is.

Getting pretty significantly we.

We'll opened nine new up west stores in 2022, so more than double our store count in 2022 with up west.

And.

We're introducing go up west, which is an active component of the <unk> West brand. So a really exciting growth opportunity and look for us to get clearer on.

Where we see that opportunity at some point this year.

And then finally the last part of your question on wholesale we are in the very.

<unk>.

Early consideration in exploratory stages on wholesale I will say that we have begun our wholesale business in up west.

Up west will be a part of a national chains assortment gift assortment in the fourth quarter, which we're very excited about that's obviously going to drive incredible brand awareness for us to help west and we'll continue also to consider and explore opportunities for wholesale.

In the express business.

I think it's.

We're at an exciting point, where we are fielding calls on the subject as sort of an in demand brand among.

Multi brand retailers.

Thank you.

Okay.

Thanks Dana.

Your next question comes from Janet Kloppenburg.

Wildenberg with J&J Research Associates your line is open.

Hi, everybody can you hear me.

Hi, Janet.

Hi.

Congratulations on a great quarter anchored outlook.

I wanted to talk about our first quarter guidance.

<unk>.

And it sounds like given the guidance it sounds like businesses.

Maybe you could talk to us a little bit about.

What's your outlook is for March as we mid March entity come up again.

Comparisons from last year.

And secondly.

I was wondering if you could talk about the assortment content right now it looks really it looks really good to me.

I wondered if you owned enough.

Our best selling spring items or any supply chain constraints there.

Also wondering about.

Year end liquidation because through holiday haven't seen a lot of what might have been late receipts from from the fourth quarter and I just wonder.

If you were clean and if youre planning cycles for lower year over year.

And just lastly on your freight expense I was wondering if you what you have embedded into your guidance I think you said.

Sizing up a 100 basis points, what does that assume for Frank as we move through the year. Thanks, So much.

Yes, Janet I'll start off.

To your question about the comparable sales we did mentioned that the business has gotten off to a strong start in Q1, we are cognizant of the fact that there were stimulus payments made beginning in mid March we have embedded all of that and we did if you go back to our Q1 <unk>.

Earnings call last year, we did talk about seeing an inflection point start in the business.

In mid March for Q1, and then we saw it again after Easter we've embedded all of that into our outlook and projections. So we feel good about the overall quarter there.

And that's why you also see.

A more conservative comparable sales as you get into Q3, and four lapping those higher numbers as well.

Sure.

Second T cell picked up ill, let Jim talk about the product in general, but from an inventory standpoint, we.

And our freight standpoint, the 100 basis points.

Gross margin improvement on the year.

What we have built in is.

The only thing we've talked about to date is the $7 million in incremental freight for Q1, we as we've talked about we have taken aggressive action to change our go to market calendar to take into account delays in shipments from different ports and therefore that should help minimize.

Air cost, which is the primary driver of the incremental cost in Q3, and Q4 of this past year it should minimize that going forward.

Tim you want to talk about it sure Hi, Janet Thank you Matt.

Hi, Tim.

Hi, Janet so.

The product and the consumer response to the product in the first quarter has been incredible and there have certainly been items that.

We have.

That we have sold through at a very very fast rate, but that is part of the strategy.

Our assortment is is is built very strategically in the components of the assortment we're building very strategically so.

You heard Matt in the call I'll talk about the fact that we have positioned ourselves and I mentioned it we have positioned ourselves in core categories like denim like men's dress shirts men's suits.

Our body contour all of those big key item volume driving categories, we are very very well positioned to meet.

Consumer demand.

The fashion.

We're going to expect to sell through at faster rates going forward.

Is going to be the scarcity of our fashion.

That continues to drive those higher average unit retails that we've been talking about so.

<unk>.

While we sold through.

Our February product launch very very quickly.

March is now being set and we're very confident in the results of March and that'll be followed directly with with a new idea for new ideas for April so the fashion component of the business, we are going to turn faster.

Very strategically while being really really well positioned in the core drivers of the business.

Yes.

Okay and on clearance levels and carryover from holiday.

Yes, we feel good about our composition of our inventory right now as we mentioned.

We did take a look at product that was delivered late so.

An example, if we had if.

If we had something coming in that had a 12 week selling window came in eight weeks late so we only had really a four week selling window. We have full size runs et cetera, we did pack and hold about $12 million worth of inventory.

So in our outlet channel next fall, we made sure it was great products that fit within the <unk>.

Product strategy for the fall season next year pack and hold that which helps.

<unk>.

Make sure our composition of inventory overall was good.

And so clients levels on lower here I'll begin on that.

There are other about flat year over year at this point, but we feel good about where we are.

Good thing is the product is also better this year than it was last year, which makes it more attractive to the customer to buy as well.

Thanks, so much.

Thank you.

Thanks Janet.

There are no further questions at this time, Mr. Baxter I will turn the call back over to you for closing remarks.

Thanks for joining us everyone.

Okay.

This concludes today's conference call you may now disconnect.

Okay.

[music].