Q4 2022 Aritzia Inc Earnings Call
In the fourth quarter of fiscal 2022, we delivered net revenue of $444 million, an increase of 66% from last year and 61% from two years ago.
Our exceptional top line growth was only outpaced by our bottom line growth as we delivered adjusted EBITDA of $66 million or 15% of net revenue an increase of 88% from last year and 57% from two years ago.
We continued to make significant progress on our path to getting famous United States as our sales growth sustain its unprecedented pace net.
Net revenue grew to $217 million Canadian an increase of 109% from last year and 128% from two years ago.
The United States accounted for 49% of our net revenues.
Half of our total business in Q4 compared to 39% last year at 35% two years ago.
Our ecommerce business sustained its strong momentum as net revenue grew to $182 million, an increase of 21% from last year and 120%.
Two years ago.
E Commerce accounted for 41% of net revenues in the quarter.
Our retail business continued to surge as net revenue grew to $262 million, an increase of 123% from last year and 36% from two years ago with comparable sales growing 60% from last year.
13% from pre pandemic levels.
For the full year of fiscal 2022, we delivered net revenue of $1 5 billion, an increase of 74% from fiscal 2021 and 52% from fiscal 2020.
This manifested itself into extraordinary adjusted EBITDA improvement, which grew to $289 million or 19% of net revenue an increase of 277% from last year and 68% from two years ago.
Our United States business net revenue grew 600 to grew to $676 million Canadian rights of 132% from last year and 100% from two years ago.
The United States accounted for 45% of net revenues in fiscal 2022.
Our ecommerce business net revenues grew to $564 million, an increase of 33% from last year and 150% from two years ago.
E Commerce accounted for 38% of net revenues for the full fiscal 2022.
Our retail business net revenues grew to $930 million, an increase of 116% from last year and 23% from two years ago.
Driving this exceptional performance is our continued investment in our sales channels in Q4, we focused on sustaining our ecommerce growth by elevating our everyday luxury experience digitally.
We enhanced our Ritchie dot com with new and improved features and functionality across personalization and product discovery.
In retail our business continued to exceed our highest expectations across all geographies, particularly in the United States, where we opened seven new boutiques. This past year, most recently Tysons in Virginia, and Eastern Town Center in Columbus, Ohio.
Turning to product in Q4, we launched our spring collection to outstanding client response, despite experiencing continued production challenges and logistic delays, resulting in inventory pressures over the quarter, our use of strategic inventory management and expedited freight allowed us to somewhat mitigate the impact to our selection.
Additionally, we were able to offset both revenue and margin pressure without raising our prices as we continue to grow our full price selling business.
In marketing, we continue to reach new and loyal clients through our captivating communications. This quarter. We delivered brand feature in trend inspired campaigns are translated seamlessly across all our channels.
In short I am proud of what our entire team accomplished as we close yet another challenging yet successful quarter and year, while we deliver everyday luxury to significantly more clients than ever before.
I'll now turn the call over to Jennifer to give you an update on some of the key areas of our business.
Okay.
Thanks, Brian and good afternoon, everyone guessing Brian mentioned earlier in the call I am also incredibly proud of our team's unwavering dedication and ability to adapt and successfully deliver a result that continue to propel us forward at a phenomenal pace.
I would like to give a shout out to the Auryxia frontline team, who kept us fully operational during the holiday season. Despite the impact caused by the Omicron variant. There was one day during one of the busiest week of our entire year, where we had 1200 people unable to work due to illness or exposure.
Sure.
The teams responded immediately pivoted and maneuvered to ensure continuity in our operations preventing us from having to close a single store during our busiest period. Unlike many of our peers.
Kudos to the team for ensuring the last quarter was successful.
We continue to make considerable progress on our long term strategies today I will provide an update on the four areas of focus within operations. This quarter first our supply chain and distribution center.
And our infrastructure investments in data and analytics.
Third the integration of <unk> count.
And fourth our continued commitment to our communities.
Our product and supply chain teams did a phenomenal job to fuel the surging demand throughout the fiscal year and especially in this quarter.
<unk> been managing the situation exceptionally well and we have worked hard to maximize the availability of our product which is reflected in our sales results.
However, it has been difficult and will continue to affect timelines and will require us to continue using expedited freight.
We have been asked about the recent rolling Lockdowns in China, and I can confirm they have not materially impacted our production that said the local trucking services have.
And this has added more pressure to our freight timeline.
We have been building our inventory and are confident we're on track to be well positioned through the fall season.
Okay.
The distribution center the strength of our teams and the network itself has unequivocally bolstered our outstanding results. We continue to invest in this critical infrastructure to ensure we have the network to support our ongoing growth last month I had the opportunity to spend some time with the landlord developing our new facility.
<unk> I am pleased to report that our new Toronto area DC is on track for completion in the spring of 2023.
This is now our largest infrastructure investment to date and is a clear indicator of our continued success and growth.
The new 550000 square foot DC will replace our existing 150000 square foot facility.
The site also affords us the option to build out an additional 200000 square feet in the future.
The facility is designed to support several years of growth and will service retail and E Commerce for Eastern Canada.
And we will fulfill e-commerce orders for the eastern United States.
In the coming months, we will be hiring hundreds of positions to support the new DC, which will feature world class amenities, including a fitness facility and our fitness Youre Alk commissary.
Okay.
Our current growth trajectory, we also anticipate expanding our distribution footprint on the west coast over the next two years.
Data and analytics have always played a critical role in our decision, making and over the last year, we have significantly invested in our data and analytics infrastructure and more than doubled the size of our team.
This increased depth of talent has resulted in continued progress in several key areas of the business, including client sales and <unk>.
Our client dashboard provides us with timely insights into the drivers of our business performance as it relates to the client we have previously shared that our omni client spend and shop, approximately three times more than clients, who shop exclusively in one channel.
Insights like this informed the strategies used to maintain our accelerated client growth and increased client loyalty.
Our detailed sales analytics provides us with a 360 degree view of our clients and their shopping behaviors. For example, we are tracking when a client checks and items availability online and subsequently purchase the item and a boutique with this data we can adapt our strategies to enhance client.
Experience across all channels and increased client transaction frequency and conversion.
Okay.
We conducted an overhaul of our concierge reporting and create a dashboard that have increased the efficiency of our operations. The reporting allows us to optimize concierge staffing and scheduling to deliver our world class everyday luxury service.
In turn this deepens, our client loyalty, while maximizing client value.
We continue to move forward with our integration of reigning Champ, we are working with the reigning Champ team to formalize both the product and the marketing strategies to accelerate brand growth as we scale the business from.
From an operation standpoint, we are working diligently toward a seamless integration of our back office infrastructure.
We look forward to including further details about our men's product expansion through reigning Champ, when we share our long range strategic plan in the fall.
To deliver everyday luxury for today and tomorrow, we continue to strengthen our environmental and social efforts that amplify the positive impact we are making across our value chain.
Over the last several years, we have used the Hague facility environmental module to measure the environmental performance of finished goods facilities and strategic fabric suppliers we.
We have also increased the assortment of our products that respect the boundaries of our planet.
As of this season, 63% of our products are now made with more sustainable attributes and fabric up from 40% in 2021.
And last but not least we have developed a new program that expands our social impact audit and over the next year. We will include tier two fabric and treatment facilities into our supplier monitoring program.
Finally, we were incredibly proud to continue our support of women and girls through our international Women's day campaign this year.
We collaborated with artists Lia Colombo to create a limited edition collection.
All proceeds were donated to UN women to help women of Ukraine find peace and security during the ongoing humanitarian crises.
These remain incredibly difficult times for many and our thoughts are with everyone impacted.
It has been an absolutely exceptional year every earnings call I commend our team for their outstanding contribution to our business performance and this call is certainly no different it has been.
On a historic year for which you're in so many ways experiencing challenges and growth in ways, we have not experienced before.
And as our business continues to accelerate beyond our own high expectations I am deeply grateful for the support of our people. It is their dedication to excellence year over year, and particularly this year that enabled us to continue to grow at such a phenomenal pace.
I'll now turn the call over to Todd to discuss our financial results.
Thanks, Jennifer and good afternoon, everyone.
We delivered another quarter of exceptional results.
Even exceeding our own high expectations, we generated.
Net revenue of $444 million, an increase of 66% from last year and 61% from two years ago.
This outstanding growth was the result of several factors.
First.
We continue to see unprecedented growth in the United States with net revenue in USD $170 million in the quarter growing 109% versus last year and 136% versus two years ago.
Our business in the United States comprised 49% of net revenue up significantly from 39% in the fourth quarter last year.
The sustained momentum in our U S business is reflective of the significant acceleration in our U S client base, which has more than doubled in the last 12 months as more clients discover and become loyal to the Auryxia brand.
Second our ecommerce business remains robust and delivered another strong quarter with net revenue of $182 million.
An increase of 21% on top of 81%.
Last year.
Ecommerce penetration increased to 41% from 30% in the fourth quarter two years ago.
Third retail revenue in the fourth quarter was $262 million an increase of 123%.
This growth was the.
Growth was driven by comparable store sales and new boutiques in the United States as well as a recovery to pre pandemic levels in Canada. Despite restrictions from Ami from wave during our peak holiday selling period.
We delivered gross profit of $180 million up 74% from the fourth quarter last year.
Gross profit margin was 44% in the quarter, expanding 190 basis points from 38, 5% last year.
This improvement was achieved even with approximately 400 basis points of erosion from the use of expedited freight in the quarter.
When compared to fiscal 2020, our gross profit margin expanded 310 basis points.
This was the result of lower markdown leverage on occupancy costs and the strengthening of the Canadian dollar.
Also partially offset by the impact from the higher expedited freight.
Okay.
SG&A expenses in the quarter were $120 million.
Or 27, 1% of net revenue compared.
Compared to 27% last year.
This reflects ongoing investments in talent and technology to fuel our growth.
Overall adjusted EBITDA in the fourth quarter was $66 million, an increase of 88% from last year and 6% from two years ago.
The outstanding performance in the fourth quarter capped off a record year of both top and Bottomline results.
<unk> in our business reflects both growing brand awareness and affinity for its here in the United States.
And the strength in our E Commerce channel.
What makes the results for the year still remarkable is that they were accomplished in spite of ongoing impacts from pandemic related restrictions and closures as well as escalating global supply chain disruptions throughout the year.
For the full year net revenue was $1 5 billion in.
An increase of 74% from <unk>.
From last year, and 52% from two years ago.
This remarkable growth was led by an unprecedented 144% acceleration of sales in the United States with Canada, delivering 45% increase in sales compared to last year.
Our ecommerce business delivered revenue growth of 33% on top of an 88% increase last year.
And E. Commerce now comprises 38% of net revenue of 23 up from 23% in fiscal 2020 pre pandemic.
We delivered gross profit of $655 million up 110% from last year.
Gross profit margin was 43, 8% expanding 730 basis points from 36, 5% last year and 270 basis points from 41, 1% in fiscal 2020.
These improvements were in spite of approximately 250 basis points of erosion from the use of expedited freight in the year.
Okay.
SG&A expenses were $393 million or 26, 3% of net revenue compared to 29, 2% last year the.
290 basis point improvement was primarily driven by leverage from increased revenue.
Adjusted EBITDA was $289 million up 277% compared to $77 million last year and up.
68% compared to $173 million in fiscal 2020.
Adjusted EBITDA was 19, 4% of net revenue expanding from 9% last year and 17.
6% two years ago the expansion in adjusted EBITDA margin is a testament to the strength of the strength of our business and our ability to drive profitable growth in spite of significant macro headwinds.
At the end of the fiscal year inventory was $208 million.
Up 21% from last year.
Our team has done an incredible job of managing our inventory to deliver our revenue growth in light of the global supply chain disruptions.
As Jennifer noted we continue to build our inventory position and are confident we're on track to have the product to meet demand through the fall.
We ended the year with a cash balance of $265 million or 78% increase compared to $149 million last year.
During the year, we repaid our $75 million term loan and funded the $33 million initial payment for the <unk> acquisition.
We continue to generate significant cash flow and have a strong balance sheet.
Since the implementation of our CIB on January 12, and through the end of the fourth quarter, we repurchased 164000 shares returning $9 million to shareholders with.
We plan to continue purchasing shares opportunistically throughout fiscal 2023 to offset the dilution of option exercises.
Turning to our outlook the.
The momentum in our business has continued into the first quarter of fiscal 2023.
As such we expect net revenue for the first quarter to be approximately $375 million, representing just over a 50% increase compared to last year.
This reflects continued strength in the United States in both retail and e-commerce as well as the strong recovery of our business in Canada.
Please note that 50% of our Canadian boutiques were closed for approximately two thirds of the first quarter last year.
For the full year, we expect net revenue to be approximately $1 8 billion.
Representing growth of approximately 20% from fiscal 2022.
We plan to open eight to 10 boutiques with all but one in the United States and to expand or reposition four to five boutiques.
We expect gross profit margins to decline by approximately 100 basis points compared to last year, reflecting ongoing impacts from global supply chain disruptions inflationary pressure and discontinued COVID-19 relief subsidies.
SG&A as a percent of net revenue is expected to increase approximately 50 to 100 basis points compared to last year, reflecting continued investments in talent and technology to fuel our future growth.
We expect capital expenditures in the range of 110 to 120 million comprised primarily of new and repositioned boutiques, our new distribution center in the Toronto area and the expansion of our support office.
In summary, our consistent growth reflects the strength of our business model and our proven ability to execute across the organization. We still have a long runway in front of us and we continue to leverage our strong balance sheet to make strategic investments that will support continued growth in our business we.
We are confident we are well positioned to maximize on the opportunities ahead and to drive profitable growth and deliver meaningful meaningful shareholder value.
With that I'll now turn the call back to Brian .
Thanks Todd.
We are incredibly pleased with our Q4 and Q and year end results, but even more excited for the road ahead. As we are now well into Q1 of fiscal 2023, we're seeing the strong momentum we generated in fiscal 2020 to continue across all geographies and all channels continued to continuing to be led by the United States.
Focus on sustaining our accelerated growth and as Todd mentioned, we are on track to deliver net revenue of $375 million in the first quarter, representing 50 at 50% increase from last year.
Okay.
We kicked off the 2023% fiscal year by continuing to deliver on our exciting new growth driving initiatives of particular note. We launched our first ever swim collection and deepen our presence in United States through new boutique openings in Las Vegas, and Miami, both so far surpassing our expectations.
We are continuing to capitalize on the extraordinary opportunities we see in the United States and I'm excited to announce that we recently signed our next global flagship on fifth Avenue in Manhattan.
Although we remain cautiously optimistic as we continue to monitor and navigate persistent global pressures, we could not be more excited for the future.
Today, we are better positioned than ever to capitalize on this extraordinary growth opportunities being presented to us as we continued to deliver everyday luxury experiences for our new and loyal clients.
Whenever we look to the future I'd like to reflect on what we started and how far we've come.
In my 38 years with the NCI have not only gained valuable perspective on our business, but more so an incredible appreciation for our people and the contributions each of them that had made to our tremendous success.
No one more so than Jennifer Wong without here, we would not be in the EMEA organization. We are in today.
Jennifer and I began our partnership 35 years ago, she knows our bids our business inside and out.
Over those 35 years, Jennifer has run most all departments within the organization. She has been instrumental to our accelerated growth and has delivered many of the milestones that we have shared with you on these calls over the years.
Jennifer is unparalleled leadership style and dedication to excellence exemplifies our values, which she had was integral in developing and deeply resonates inspires our people.
That is why I am thrilled to announce that Jennifer Wong will be taking over as our next CEO .
There is no better time and no one better to later its here with their long term lasting approach.
<unk> strategic growth Jennifer is perfect for leading us into the future.
This transition will be seamless as Jennifer has taken on more and more CEO responsibilities over the years today, we simply recognized her for all the incredible work. She is already done and know she will continue to do.
But jennifer stepping into the role of CEO I will become our executive chair.
I will continue to contribute to <unk> long term growth and maintain my full time leadership role in the areas, where I bring the most value product.
Marketing real estate development and business development.
I am just as dedicated to and passionate about our Ritchie as I was 38 years ago and I could not be more excited to continue to participate in driving our growth and supporting Jennifer and our team into the future.
Everyone. Please join me in congratulating Jennifer.
And our exciting future ahead.
You.
Okay.
Brian a heartfelt thank you.
I'm truly honored to lead Auryxia and our people into the future with you and our senior leadership team.
Im looking forward to building on the foundation of an extraordinary business, we have built over decades.
And I want everyone on the call to know that for 35 years I have had the privilege of working alongside Brian I have seen firsthand his commitment to auryxia values, our people clients and the communities we serve.
I would like to thank our dedicated team who have been pivotal to our success.
Our board, who have diligently laid the foundation for a seamless transition.
And of course, thank you to Brian for his ongoing Mentorship and trust.
I am excited to continue advancing our riskiest business and delivering on the incredible growth opportunities. We see ahead.
Thank you everyone for joining the call. This afternoon I will now turn the call over to the operator to take questions.
Thank you.
We'll now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
We will pause for a moment as callers join the queue.
The first question is from Lorraine Hutchinson from Bank of America. Please go ahead.
Hi, This is Alex on for Lorraine. Thanks for taking our question. Our first question is for Jennifer what aspects of the business are you. Most excited about for this upcoming fiscal 'twenty three and what challenges do you anticipate to navigate and secondly, a quick one on E. Commerce do you have a long term penetration target and how soon do you see.
Normalization to it and is there a difference in the ecommerce penetration in the U S versus in Canada.
Okay, Hi, there.
Alright, let me see if I can start at the top.
Well first of all.
Have a fantastic portfolio as it is in what we call business support our fantastic team there who have done an incredible job.
Executing on our operations as our results.
Can a caf II.
And certainly I'll, just echo what Brian said as well as Todd has said about the future and I'm. Most excited about ecommerce growth and in particular, our USA growth in both retail and e-commerce.
So I look forward to working with the team.
And continuing to.
Grow in those areas.
And I can't remember your last question, but I can't remember your last question.
I can take that.
Our integration, yes, we haven't provided a specific e-commerce penetration target.
But I think over time.
We expect that it will likely become over 50% of our business.
That's over multiple years, but we were 23% pre pandemic 50%.
Penetration during the pandemic and then this last year, we were at 38 and in an environment, where we had most of our stores open there we still had a period in Canada, where our stores were closed at the beginning of the year. So.
We likely expect there will be in that range again for this year in the high Thirty's.
But over time as we look at our our long range plan.
We expect to grow to e-commerce to grow to over 50% of our business.
Great. Thank you so much.
The next question is from Mark Petrie from CIBC. Please go ahead.
Yes. Thanks, good afternoon first congratulations Jennifer on being named CEO , clearly extraordinarily well deserved and wish you all the best.
I guess my first question is just with regards to the guidance on the revenue growth.
The implication for sort of Q2 to Q4 is kind of mid teens revenue growth and obviously not trying to minimize that as is an accomplishment, but clearly a deceleration from your your recent momentum and even what you were doing pre pandemic.
I know you take a conservative approach to guidance, but maybe can you give us some context about your assumptions to get to that to get to that number.
Yes, thanks Mark.
I mean first off obviously, we're extremely pleased with the momentum that we've seen in the first two months of the year.
And what we're expecting for Q1, but as I noted in my prepared remarks, and we did have 50% of our Canadian stores closed for two thirds of the quarter in Q1 of.
Of last year, So obviously, we're lapping that.
Currently and if you look back over last year.
The compare in Q2 Q3 and Q4.
Is obviously tougher one once all of our stores were opened and so therefore, we just decided it was prudent to take a conservative approach to our guidance and were.
We'd be extremely pleased to deliver $1 $8 billion of revenue on top of the 74% growth getting us to $1 5 billion last year.
Okay understood and then I guess, maybe just a higher level question with regards to store economics. I know this has been an evolving topic, but I'm wondering if you could just talk specifically about.
How the U S store economics have changed.
And what they're looking like kind of coming out of the pandemic, maybe some historical context would be helpful, but where does that sitting today in terms of cost what.
What youre seeing with regards to <unk> and then ramp up in payback.
I'll take that.
Sure.
So.
Yes.
What we're seeing is on.
On one side.
We're getting is costing more to build our stores in the United States and.
Think it's building as you know building costs have increased everywhere in every sector right across North America, and from what I understand more or less of the world. So.
We're not immune to that so its costing more money.
On the other hand, our sales are higher than they are meaningfully higher than they were when we were opening stores, two three or four or five years ago.
Our rent because of the.
Covid and then also with some sort of.
Adjustments happening with retail prior to Covid rents are less than they used to be.
And then the third thing with our performance and everything were getting and seeing a lot better locations.
And which is certainly helping and shapes and sizes and everything else, which is certainly helping our our real estate rollout. So the net of it all is as our paybacks have come back down significantly from where they were when we went public five years ago.
And so we're super thrilled and that's why we're continuing to open new stores and.
Continuing to quite frankly make them, even bigger and we announced the.
The store on fifth Avenue, which I believe is at 35000 square foot location, which will be our biggest.
For that for the time being.
And.
But at the end of the day, the rent is less than the existing stores out there right now so we're feeling pretty good about what's going on in the paybacks and the opportunities we have to drive our business and a more profitable manner from a retail perspective, particularly in the United States.
Okay, Thanks, and when does that flagship open Brian .
Or was that not opening for a few years, we've signed the deal.
It's not opening for a few years, it's a big locations can take is probably close to a year to build whereas our typical store it takes us more or less four months to build.
And New York has a lot of permitting and other other.
Processes, we have to work our way through we have an existing store on fifth Avenue, which we're not closing for another two or three years anyway. So we expect zero loss continuity from sales, but we see a big opportunity to increase our sales and not just sales, but our brand and our brand positioning and recognition.
We're so excited about this location there and I think we have more to come and that we will share with everybody on.
Coming calls hopefully.
Yes completely understand okay. Thank you very much.
Yes.
The next question is from Stephen Macleod from BMO capital markets. Please go ahead.
Thank you good evening, everyone and Jennifer and also wanted to extend.
Huge congrats for your new appointment.
My first set of questions was just around around the around Brian Youre CEO succession plan excuse me just curious like can you give a little color around your thought process on why now and then and then maybe secondly.
You did say that you would continue to have leadership both of those key areas, where you can add value product marketing real estate development business development.
Can you just talk is there potentially a plan to transition those areas as well or will you continue to be overseeing those for a number of years or so at least some period of time.
Thank you for that.
Well as we mentioned in the call Jennifer is already running a meaningful.
The amount of the company and.
Whether it be in key areas of the company and support divisions and everything that is that we build our whole company on so.
She is running all those or whether it be EHR and she can discuss with you what she wants.
He runs, but it HR finance everything she runs.
What she is what we're doing here is she is taking on the sales channels, which is E com and retail we're going to do it in a constructive manner over the next.
Period of time.
And I'm not truthfully planning on working any less at this point in time and I have no plans to give up real estate product or these other.
Marketing in these other areas in the imminent future I enjoyed doing it.
Where I think I add the most value is on all of the brand customer facing.
Departments.
Sure.
It's what I, what I enjoy the most and the way I looked at it was some of these other divisions I think Jennifer can do a better job than I am and running them and I can kind of selfishly do what I really like to do and what I think moves the needle for NCR.
Where I can move the needle for us here so.
I think this is a bit of a no brainer truthfully in.
And that's obviously continuing to put pressure.
<unk>.
Yes.
And we also have just.
But COVID-19 subsidies for example that are discontinued now that we benefited from 70 basis points last year.
Thats not continuing and there is a lot of puts and takes and obviously inflation is impacting our product our underlying product cost. So.
When we look at it given all of those pressures.
100 basis points, we feel like we're managing it very well.
I think if you look out longer term, which is important obviously we will.
Lower expedited freight at some point.
Next year, hopefully and we also as we grow our business in the United States, We have a natural improvement in gross profit.
But we're we're benefiting frankly from that today in our numbers.
And that will continue over time, so if you look out longer term we see.
Sort of sequential growth in our gross profit, but for this coming year. There is there's still pressures from external environment.
Okay.
That makes a lot of times that's helpful.
Thank you very much.
The next question is from Derek Daily from Canaccord. Please go ahead.
Yes, Hi, and again I also echo my congratulations Jennifer appointment very very well deserved.
When we think about inflation can you just comment on on areas.
Whether it's inflationary disruption, where youre sort of seeing the most impact we've been hearing from a few other companies that have reported that the distribution of trucking side. It's been a big bottleneck I think you mentioned that in your prepared remarks, but are there other areas, where youre seeing it really flow through.
There is some pressure on our product cost, but I would say from an inflation perspective.
I hate to keep going back to expedited freight, but it's really the expedited freight.
First choice of people and employees when they come and they want to get in the work for us and so we have to not only provide an incredible environment, but we have to make sure we're paying uber competitive wages the.
The supply chain, we are seeing inflation on raw materials, and things and as Todd mentioned expanded expedited freight.
It just doesn't end node for us I mean, the other day last week.
We had wide K K had a huge fire in one of their factories under their main factories.
It's completely taken off and so we're going to have zipper pulls not even though zippers zipper pools are going to affect over 1 million units of prop.
Product for us and timing of it so.
It never ceases, whether it be the rolling shutdowns of factories or mills, whether it would be the.
Freight costs and delays and things like that and then youre dealing with fires and stuff is just.
We are just scratching our head looking we could only last as what else could they throw at us now so.
We're just seeing it in all manifest manifests itself for delays and as Todd was saying than we have to expedited freight and it's expensive right now.
Yes.
I understand that.
But from an inventory perspective looking forward. It sounds like you guys are well thought out through the fall and maybe this is a bit too far in advance, but when do you start purchasing for the holiday sales period does that does that happen now or does that happen later in the year.
All of those orders are being placed.
Particularly they would've been placed already anyway, but.
Some of them had been in place for quite some time now do everything taking so much longer.
Right.
One thing that's going to happen with inventory is that we're going to see is we don't know when we're going to get inventory before we get a cut off at the end of September end of October and we kind of know look at their late theyre going to be a week late we've been getting sorry, it's going to be six weeks later, it's going to be eight weeks late and then if you.
Add in the freight and the shifting and everything else rather than taking three weeks by C is going to take 12 weeks by sea.
And so there's all of these things so we're having the one thing we are going to see is we're having to buy a little bit more inventory than we normally have bought obviously to fuel as these accelerating sales but also.
To ensure that we have inventory as well because if there's delays and cancellations and all sorts of things like that we need to make sure. We have enough inventory. So we're finding ourselves in a position where we're actually erring on the side of buying a little bit more inventory than we previously happened historically.
Right.
The plan there is.
Making sure you're fully stocked and if others. Arent then you don't have to put it on promo.
Maintain that extra margin.
Hopefully yes.
Okay. Thank you very much.
Thank you.
The next question is from Patricia Baker from Scotiabank. Please go ahead.
Yes. Good afternoon, everyone my questions have been asked.
And I'll answer it but I thought I'd jump on unlike also offer my congratulations to Jennifer.
Agreed.
Brian's comment there is no better person to be taken.
Congratulations.
Thank you Patricia.
The next question is from Megan Annette from TD Securities. Please go ahead.
Thank you good afternoon, and I'll Echo my congratulations to Jennifer on your Appointment's wish you continued success.
First question is related to the guidance can you just talk about how you are approaching price increases in fiscal 'twenty three and if there is anything factored in that's meaningful related to price our growth in average unit selling prices and also maybe how youre thinking about markdown rates relative to last year.
Yeah.
Since I'm still running product I'll take that.
So we are seeing cost inflation because of our mix into the U S. So and how our pricing works, we're getting automatic built in price.
Increases be as our product mix becomes more and more than USD versus Canadian dollars.
We have built the recent acceleration from sort of 25% of our business couple of years ago to almost 50% of our business now we've found that those those price.
The currency mix could offset any price increases we are seeing we are now seeing though.
As our business continues to grow we are seeing.
Different.
Did that to that acceleration in the U S. The mixture itself isn't having quite the same effect.
Is it when it would doubled so we are seeing a bit of pressure, we're seeing pressure on costs, obviously over and above.
The expedited freight and so.
We've been looking at some of the new items and new programs, but we are still being able to and we will continue to try to maintain all our pricing on our core carryover items. So we're going to continue to do that and hopefully not.
And not have to pass on any price increases to our consumers and we're not planning on doing so yet but that may change in the future, but as of now we're maintaining our pricing.
Yes.
And then on the product side could you talk about the customer response to the swimwear and watch seems to have been quite positive.
And also provide a bit of context around the size of that initial launch and any plans for that category for upcoming seasons.
Yes, so we had our swimwear launch.
Launch very well, but in the scheme of the size of our business is not moving the needle on wont will not move the needle for us in the short term.
So we launched about Baton collection.
We're in the midst of launching a TNA collection, we're going to be launching a wilford collections from collection.
We were the first orders and launches were tests or testing, making sure. We have the right silhouettes. The right size is the right fit right colors. So.
We everything we do at <unk> do it slowly and methodically and we're going to continue to I wouldn't say slowly, but we certainly do it methodically. So swim is no is no.
Different so.
Our objective is to have slimmed, the meaningful part of our business three to five years from now and we're not going to force it to try to make it move the needle for us in the next six to 12 months.
As you can see from our sales growing from 850 to $1 5 billion, which we did without swim that was plenty of growth for us to try and manage and.
And so we're just going to continue driving whats actually moving the needle for us.
Great. Thank you for taking the questions.
The next question is from Mark Petrie from CIBC. Please go ahead.
Yes, I wanted to ask about the asks about the website I know, there's a ton of effort and investment placed on the functionality of the <unk> website and Im hoping you could just talk a little bit about sort of the payoff of that work I know you don't give specifics, but maybe some context on some of the performance metrics would be would be helpful.
Thanks.
So I'll take this for the last time and Jim is going to be running answering these questions Mark so.
<unk>.
I can't really get into the performance metrics too much other than the fact that they haven't really changed our conversion hasnt changed.
Our average purchase Hasnt changed none of these things have changed that much what has changed is our traffic our traffic has changed meaningfully and so we're getting a lot more traffic as we were coming more and more famous and so that has changed.
Jennifer has a whole strategy.
<unk> been working on and she hasn't sort of launched yet, but a whole strategy.
Around E Commerce, and what we're planning on doing and a roadmap for the next three years or so.
She is going to be sharing that with us over the coming months and we're looking forward to seeing our website and all of the different features evolve.
But.
Our website and our retail our E Commerce business continues to grow and we're super excited about it and we will continue to grow for the coming years and so we're just going to keep on investing in high returning channel for us, particularly in the U S and so we're going to continue to to drive investments into our E Commerce site.
Okay. Thanks, Brian don't worry, Brian we'll find we'll find other topics to pester yoga.
Thanks, a lot.
Thank you. Thank you.
Yeah.
This concludes the question and answer session I would like to turn the call back over to Charlie Bishop for closing comments.
Thank you Saatchi and thanks again to everyone for joining us this afternoon.
Available after the call to answer any questions you may have.
We look forward to speaking with you again soon.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Yes.
Okay.
Yes.
Yeah.