Q1 2022 Bath & Body Works Inc Earnings Call
Right.
Good morning, My name is Madison and I will be your conference operator today at this time I would like to welcome everyone to the Bath and body works first quarter 2022 earnings Conference call. Please be advised that today's conference is being recorded during the question and answer portion you may ask a question from the phone by pressing star.
One I would now like to turn the call over to MS. Wendy Ireland, Chief Financial Officer at Bath <unk> body works Wendy you may begin.
Thank you good morning, and welcome to Bath and body works first quarter earnings Conference call for the period ended April 30th 2022 as a matter of formality I need to remind you that any forward looking statements. We may make today are subject to our safe Harbor statement found in our SEC filings and in our press.
Joining me on the call today are executive chair of the board and interim CEO , Sarah Nash and brand President Julie Rosen All results. We discussed on the call today are adjusted results and exclude the significant items as described in our press release all results we discuss today represent the.
The operations of the Bath and body works business as the spun off Victoria's secret business has been classified as discontinued operation I'll now turn the call over to Sarah.
Wendy.
Thank you everyone for joining the call today.
I am delighted to be here speaking with all of you and serving as the company's interim CEO .
Bath <unk> body works is an incredible company with a customer first focus along with strong product innovation and development capabilities that include a mostly north American and highly agile supply chain.
Our business is very strong our execution is excellent and our strategy of delivering affordable luxury to our customers is more relevant than ever.
We have built on the past two years of extraordinary growth with strong momentum as we entered fiscal 2022.
We are pleased to have delivered better than expected sales and earnings results in the quarter.
Looking ahead in 2022, we are continuing to plan prudently and use our agility to chase winners.
We are accelerating investments in the business to drive our long term growth.
While at the same time, our team continues to successfully navigate the inflationary environment.
Long term, we continue to see exceptional opportunities to capitalize on Bath and body works existing strength and.
And extend the brand's global potential.
Since taking on the role of executive Chair and earlier this month stepping into the interim CEO role I have been spending time gaming, even deeper knowledge of our team and our capabilities.
This is a strong organization and one that operates with tremendous speed.
Making us nimble and allowing us to deliver products relevant for our customer.
We look forward to speaking with you today about initiatives, we have underway or are accelerating.
All designed to ensure we continue to advance our customer centric culture increased our data analytics across the business and with our 60 million customers and leverage our store and digital capabilities to transform Bath and body works to be a.
True Omnichannel business.
Our opportunities are great and we aim to capitalize on them.
Our vertically integrated and approximately 85% North America based supply chain has been a key differentiator for us.
It has enabled bath and body works to successfully navigate a dynamic environment.
Then full and abundant product assortments to our customers with speed and agility.
It gives us the flexibility to chase into the upside as well as manage any downside.
And you'll hear from Julie Rosen, our brand President.
An example of a successful chase to the upside with our butterfly launch from the first quarter.
On a broader level, our ability to leverage our relationship with.
With the worlds preeminent fragrance houses, our manufacturing partners and our raw material suppliers.
Along with our World class logistics enables us to achieve best in class innovation and manufacturing.
And this allows us to deliver to our customers what they want.
Fashion trends and newness.
In fragrance forms and packaging that bring them to the light.
Unacceptable price.
We remain highly focused on innovation.
And our product pipeline is full.
We have an ability to develop and launch products within 12 to 14 months.
Which is also best in class or an innovator and the stunted personal care sector.
With our pipeline, we are launching new fragrances and product.
Every four to six weeks and expect to maintain this pace going forward.
Importantly, we are also focused on new business opportunities and the acceleration of new product lines for personal care and home leveraging our stores and digital presence to test and launch these new lines.
In addition to Harris Phase men's is a big priority.
This business delivered close to $400 million in net sales in 2021, and we expect more than double its size over time.
We continue to lead the market in many of our categories with multiple number one product form.
The beauty personal care and home fragrance market.
<unk> to be strong and growing.
Our growth strategies will continue to leverage and expand on our fragrance first leadership and we also plan to explore expansion into other related categories as well as dive deeper into looking into new geographic markets in short and as I said at this.
Start Bath and body works has exceptional opportunities to leverage our existing strengths and extend the brand's global potential.
Before I turn the call over to Wendy and Julie to speak about our first quarter performance I'd also like to take this opportunity to touch briefly on our approach to environmental social and governance matters all of which are also core to the company and how we operate.
We have always been deeply committed to delivering high quality products.
The company has had a long standing commitment not to test on EM animals and this continues.
In addition, we have always included ingredients that are important to our customers.
Building on that strong foundation.
We are now re formulating several products to exclude ingredients such as Paraben sulfate and died.
This will be an ongoing focus for us and customers will see more and more mention of these changes on product labels and then our marketing as we continue to evolve.
We completed a restage and aromatherapy at the end of February with a new packaging and formulation made without parabens sulfates or artificial dyes.
Without compromising our fragrance authority.
The packaging is now and better for the Earth or a P. C are material.
We have also begun the process of re formulating fragrant body care.
Select fragrances and forums launched with new formulation in the first quarter and we will continue to expand in the second quarter.
By the end of 2022, we expect 35% of our assortment to be reformulated in this effort.
Beyond the products themselves. We are also continuing to migrate to PCR packaging for soaps, Sanitizers body care and aroma therapy with a target to expand to 45% of our assortment by year end.
As we migrate to P C. Our packaging our bottles will be made with 50% better for Earth materials with the goal to eventually get to 100%.
We will also continue to focus on diversity and inclusion.
Our D E N I efforts are broad and start at the top.
Earlier this year the board of directors amended the charter of the nominating and governance Committee to include a commitment to have at least 50% of the board be diverse.
Diverse and to provide that the initial pool of candidates for any board vacancy will consist of at least one woman and one version of color.
With the recent appointment of two new board members.
Four of our directors are women or.
One of our directors are people of color and one of our directors is a member of the L. G. B T Q I E plus community.
We're applying the same commitment and actions to our hiring throughout the organization.
And we are making sure that associates, particularly our Diversed associates feel welcome herd and invested in.
We now have eight inclusion resource groups that cultivate an inclusive environment provide professional development shape, the culture of our company and actively encourage community volunteer terrorism.
I want to thank our associates, who work so hard to create the best possible experience for our customers.
I have been consistently impressed by the terrific talent, we have within the company.
We have a fantastic balance of long tenured associates as well as new associates that bring fresh perspective to the business.
It is thanks to our dedicated and committed team. That's following on the last two years of extraordinary growth. The company started the year, continuing our momentum and achieving better than expected sales and earnings results.
Wendy.
Thank you Sarah I will be providing financial highlights, but I encourage you to review our slides posted remarks and press release, which each contain additional details we exceeded our sales and earnings guidance for the first quarter as Sarah noted in the quarter, we increased net sales by 2% excluding the estimated first quarter 2021 sales benefit.
A $50 million related to government stimulus payments the company's net sales in the first quarter of 'twenty. Two is on top of 53% net sales growth between fiscal 2019 in fiscal 2021, we are confident in our ability to maintain and grow sales and our customer file over time.
I'm.
In the United States and Canadian stores first quarter sales were one point O. Five 9 billion, an increase of 1% compared to last year first quarter direct net sales were $317 5 million a decrease of 9% compared to last year. The decline is partially due to last year's strong results as well as our.
<unk> utilizing our convenient omni focused option of buy online pickup in stores. We ended the first quarter with focus availability in over 700 stores, we plan to fully roll out focus availability during the course of the year with the goal to be an approximately 75% of our store fleet by four.
All we are excited about the role of focus as it drives customer engagement and traffic to our stores, our international business, which is a key opportunity for US continues to drive strong growth for our business. Looking ahead in 2022, we are accelerating investments in capabilities in the <unk>.
<unk> to support long term growth and there are also macro factors such as inflation that will impact our results these investments and macro pressures, which we outlined in detail in our commentary released yesterday could cause this year to vary from our three to five year growth algorithm. However, we remain.
Committed to that algorithm, including targeted sales growth and profitability.
We like many other companies are continuing to experience increased cost in raw materials transportation and wage rates, we are forecasting incremental pressure versus our initial estimate and we now estimate that our full year inflation impact could range between $225 million and $250 million.
Or about $75 million higher than our initial estimate our speed and agility enables us to manage pricing and promotional activities to maximize margin dollars.
We continue to invest in the customer experience and have been piloting our customer loyalty program based on encouraging results. We have decided to accelerate the rollout of the program to August our loyalty members have higher spend and retention rates than our average customer. Thus, we expect that the loyalty program will drive sales and customer retention.
Deepening our relationships with our customers over the long term equally as important we believe that over time, our loyalty program will further increase data driven analytics and marketing, which will support personalized communications and offers as.
As we discussed last quarter, we are also investing to establish separate.
Capabilities for the Bath <unk> body works business, we recently decided to accelerate this work hiring accenture to assist us and we now expect that the separation component of the project to predominantly be completed by next year completing separation on this accelerated basis will in turn enable us to more.
Quickly build additional technology capabilities to support long term growth. We are excited to work with accenture to not only complete our it separation, but also to truly transform into a data driven organization, which will us will allow us to further strengthen our customer connection and capture new market.
<unk> for.
For the second quarter of 2022, we expect sales to be up in the low single digit range compared to the prior year consistent with our first quarter trends, excluding the stimulus benefit from last year. We are forecasting second quarter earnings from continuing operations to be between 60, and 65 per share compared to <unk> 77.
Last year for the full year, we are forecasting sales to be up low single digits compared to 2021. We're also forecasting full year earnings per share to be between $3 80.
And $4 50.
Compared to the $4 51.
The prior year the company is committed to managing and forecasting the business prudently. Thank you and now I will turn the call over to Julie.
Thank you Wendy I'd like to touch on a few merchandising highlights.
Our single fragrance launch in the quarter butterfly was a huge success highly.
Highly inspired by the women in our lives we wanted to celebrate international Women's day women's history month and mother's day.
This fragrance was created for women by a woman master perfume or honoring block is a highly regarded female and fragrance.
As with any new fragrance product launches our customer tested for initial smelling and where we leverage the result, and the customer verbatim to make the final fragrance decisions and are constantly listening to customers and applying feedback to our existing strategies for upcoming product launches.
Butterflies, we worked across our fragrance team concept and design and PNA and supply chain customer insights marketing MTR and field and customer to promote and build demand through impactful marketing, a social push and in store and online.
Preview.
Meeting, our customers' multiple mindset each season and putting them at the center of everything that we do is what sets us apart.
We not only test fragrance with customers, we also tested with packaging with both customers and associates.
For butterfly, we also launched this early in a small group of stores, which along with our nimble saliva supply chain allowed us to read feedback react and Reed order as soon as the products at all stores.
I'd also like to note again that our new product launch timeline of 12 to 14 months as best in class in the industry and butterfly is an excellent example of our capabilities.
It was our largest spring season cross category launch for cross body and home.
Butterfly was the number one fragrance for the total company in April and it was also the number one fragrance in all forms who we've got launched.
I'd also like to highlight the repackaging of our most beloved fragrance Japanese Cherry blossom in the first quarter.
Japanese carrier Cherry Blossom was recognized in March by women's wear daily as one of the top fragrances, all time, what a huge honor.
Japanese Cherry Blossom was launched in 2006 and this was the fifth time, we updated the packaging to make it more modern and aesthetically pleasing.
Current customers look forward to buying their favorite fragrances and updated packaging and the new modern designs entice new customers to buy as well. This has been a winning strategy for US is Japanese Cherry Blossom continues to be a top 10 fragrance for us.
Additionally, as we discussed last quarter, we've established a separate and dedicated team focused on innovating into new categories and businesses and we are pleased with the team's continued progress as part of their efforts, we continue to explore and test new and next product ideas.
We plan to test, a new personal care line, including face care and hair care in the back half of this year, which they are mentioned.
We have additional tests planned both in home and body in 2023, we're very excited to launch test and learn from these growth opportunities and our Omnichannel model positions us well to do that.
And finally I'd like to touch on the re formulations that Sarah mentioned earlier, we have been diligently working on taking parabens sulfate and is out of our formula and expect to be 35% complete by the end of the year.
We're focusing on the form that go directly on your body.
In closing, we continue to focus on maximizing our performance by leveraging the strength of our brands maintaining close connections to our customers and delivering compelling products and experiences at a great value.
Wendy Thanks, Julie that concludes our prepared comments at this time, we'd be happy to take any questions. You might have we plan on going to about $9 45. This morning in the interest of time and consideration to others. Please limit yourself to one question Madison I'll turn it over to you.
Thank you just as a reminder, if you would like to ask a question. Please dial star one our first question comes from.
Excuse me I can for a child from Wells Fargo. Your line is open.
Hey, good morning, everyone. Wendy just two quick ones for you on the expense line on the tech spend so $25 million higher than you're pulling forward a 100 million total.
What is the tech spend that you guys have just remind us as it's laid out for next year to kind of complete that transition and then on the other side of the cost of CEO transition costs and good retention I think is around 50 million if I'm doing the math right can you just explain what exactly that those dollars are basically allocated to just so we know like.
Right.
The rationale was behind that decline.
Sure. Thanks, Mike So.
So on the on the technology spend as you mentioned, we are pulling forward about 25 million into this year as we accelerate the work too.
To get separated and move onto transformation. So what what I would say is that $25 million acceleration will really benefit 2020 for as as we go forward since were pulling it out and we're making that projects go faster I would anticipate technology spend will normalize.
In the out years as a percentage of sales as we go into 2023 and 2024 in terms of the spend on the transition or or leadership and retention items I would tell you a breaks down you know the biggest piece of it is retention that we're investing in our associates to make sure that we've got a solid team as we go.
Fourth it you know through 2022 in 2023. The rest also relates to other other items, including share based compensation search fees et cetera.
Thanks, I think the next question please.
Oh go ahead sorry.
Just sorry quick follow ups on the tech spend for next year is it a $100 million again or is it less 100 I'm trying to see if there's a net benefit on the cost side from that next year. We think our tech spend next year will be roughly flat to what it is this year.
Okay, great. Thank you so much.
Thanks next question pardon me.
Our next question comes from Kimberly Greenberger from Morgan Stanley Kimberly Your line is open.
Great. Thanks for taking the question. This is Alex straighten on for Kimberly Greenberger I, just wanted to dig a little bit into where you guys are strategically raising prices across the assortment and the thought process on how you guys are stats if it makes sense as.
As well as kind of how you guys are thinking about promotional activity being down this quarter and then how it will evolve through the rest of the year. Thank you.
Sure I think I will take the question and then I'll turn it over to Julian maybe for some color commentary.
So in terms of pricing pricing is something that we are continuously testing in this business you know one of the advantages of our business because we have a very robust testing program a very consistent testing agenda every weekends were out in our stores testing different pricing and what that enables us to do it.
It enables us to see how our customer responds to certain pricing offers and our pricing really is a component of two things here. We have a ticket and then we also have our sharp price points are multiples deal that were running any given day. So we use that testing to look at both of those factors into at the end.
The day give our customer offers that they respond to but also maximize our margin dollars at the same time as we look forward to Q2 and promotional.
Approach, we are seeing the customer respond favorably right now two very sharp price points and so we've incorporated that into our second quarter guidance. We've got AUR is planned down slightly year over year in the second quarter, and we're really doing that too to resonate with our consumer when when the consumers feeling feeling.
A little pressure right now Julian anything else you'd want US yeah, I mean, I agree with Wendy we are constantly testing and reading and reacting to those test I think that anytime we invest in products. We're always looking at pricing. So as we're re formulating our formulas to be better for you we will be taking those.
<unk> forms up a dollar as they enter into our store I think a great example is wallflowers. So wallflowers had a really great quarter. They continued to have great momentum, we launched our new scent control theaters, which have high medium and low setting and.
They performed well above expectation our customers have been asking for this feature and we've really been working hard on delivering those in stores I think what this shows this product is a great example of our customer is smart and they understand the price value equation of our products.
And spending $12 50 for the sand control heater was didn't even.
Detour them at all from buying it so.
You know not only where the controls leaders doing well, but our decorative heaters, which are also at times higher priced Peter So again as long as we have the right price value equation, they're very smart and they go along with us.
Thanks, Julien next question please.
Our next question comes from Lorraine Hutchinson from Bank of America Lorraine. Your line is open.
Thanks, Good morning.
You mentioned in the prepared comments that you've committed to the profitability algorithm can you talk about what are the best opportunities to get back to that low to mid Twenty's EBIT margin goal.
Sure Yeah, so as.
As you mentioned our profitability algorithm is low to mid Twenty's in terms of EBIT percentage. There's obviously lots of levers that we have the debt that enable us to push towards the higher ends. The first is obviously, we want to continue to grow sales and as we continue to grow sales, we should get leverage in the business.
And what <unk> experienced that over time as we've laid out in our sales growth algorithm, we see future growth in all components of our business. So we see growth in our stores channel through both organic comp growth and square footage growth, we see growth in the direct channel in the future and we also very.
It about growth opportunity in the international business in all three of those channels are all consistent with our overall EBIT percent target that I just mentioned so in other words, none of those channels.
Hurt us in terms of maintaining that overall profitability rate. The other thing that as you know an important lever for us to took pole is as Julia just mentioned and I mentioned, we're always continuously looking at pricing and we have discovered our customer is willing to pay higher prices when we deliver quality and we will continue.
To test and learn and see what what pricing is appropriate and try to increase pricing over time. So those are probably the biggest levers that we have to continue to emphasize our long term profitability growth algorithm.
Thank you next question please.
Our next question comes from Stephanie Wissink from Jefferies. Stephanie Your line is open.
Good morning, and thank you for the question. This is grace Wang calling for staff and wondering if you could highlight how youre using inventory levels to manage risk and opportunity and the best Nash. Thank you.
Great. Thank you for your question so as we've done our prepared remarks at the end of Q2, our forecasted inventory levels are higher than they would normally be in any given the second quarter and that was a strategic planned thoughtful decision and the biggest thing to go.
That went behind that is we wanted to pull some production into the second quarter to make sure that we mitigated any risk of disruption and also to make sure that by having some of our core production pull forward our supply chain will have.
More agility going into the holiday period for us to read react and chase into winter, so by making that planned decision, we've freed up flexibility and agility in the holiday period. So when we see what the customer wants we can chase into it and.
<unk> R and chase into more winners so that was that was our strategy behind our inventory, yeah, and just to add onto that Wendy.
You know this read and react is a competitive advantage for us is something that we can do that nobody else really can do so we were able in this last quarter to read and react in order of about 10% of our total production on the four to six week Chase timeline and that is this.
Strategy that we will continue to use throughout the end of the year I think a couple of things what that does for US is it ensures that we are in the product that the customer loves the mode that we're really going after the winners so butterfly as Dara and I. Both talked about was a great example of delivering URL.
Early reacting and getting back into many units across all categories. I think another area that we had great success, which we haven't really talked about was our profitable collection really hit on the mindset that was transported and our customer in March was ready to be transported and we had.
The outlier.
Brian on Pink Pineapple Sunrise that was a runaway hit and we immediately reacted and got into that so we are very adept at being flexible and fluid and getting in and out of what is and isn't working and that's the winning formula for us.
Thanks, Julien next question please.
Our next question comes from Simon <unk> from BMO capital markets. Simon Your line is open.
Thanks, Good morning, everyone.
One if I'm not misreading it might be it looks like inventory dollars may have come in lower than guidance, but the units were in line. So I'm. Just wondering is that a mix component or did inflation actually come in better than expected. This quarter and then just maybe for context any way to think about the 350 bps inflationary impact broken down into raw material cost versus higher transportation and then maybe the same question.
Go forward, just how you're thinking about the.
For the rest of the year with raw materials versus supply chain pressure from transportation. Thank you.
I think I got all that Simeon, but you're probably gonna have to repeat some of it. So so in terms of inventory there wasn't any major call out a lot of it was just it was components coming in a little bit favorable favorable than what we expected because you know some of that's in transit and at the end of the day it was.
Just a little bit better than forecast no no major call outs on the on the variance to our initial callout on core Q1 inventory.
In terms of inflation and transportation that subjects. We did mention that we are continuing to see pressure and inflation, we quantified approximately $75 million of incremental yeah.
As we look at that round roundly $250 million of inflation about just under half of it is raw materials and I know we talked about this in the last call, but we continue to see pressure on all of our raw material inputs.
And then about 40% of that is transportation. So we are seeing incremental pressure in transportation a lot of the increment in the first quarter is due to higher fuel.
And the impact that that's having on our transportation charges and then the balance of that $2 50, after raw materials and transportation.
Is wage rates in our fulfillment centers and our distribution centers.
Did that cover your question perfect. Yes. Thank you very much best of luck for the rest of the year.
Alright. Thank you next question. Please our next question comes from Jonna Kim from Cowen Joseph Your line is open.
Thank you for taking my question just curious if you can elaborate a little bit on the color of the consumer I know you said, they're reacting to sharp price points, but have you seen any sort of pullback in the units, they're purchasing and also internationally you're seeing some growth there, but any region that is notable in terms of any.
Shifting demand that'd be helpful. Thank you.
Okay first we're gonna go to Sarah and then Julie can add on Sarah. Thank you for the question you know, we make a daily use products in the affordable luxury category, our customer comes to us because she loves our newness she loves the fun and exciting.
Experience she gets in the store.
And as I've said earlier, the health of our customers is very strong.
We have held on to our 60 million customers that we have grown to over the last two years.
Our retention rates are strong at over 60%.
Our retention rates for our loyal customers and the loyalty program are north of 80%.
And that is just in the trial program.
So we are definitely delivering through our test read and react abilities, which are most impressive.
And the ability to bring our customer in at a much lower price point, but have them choose to fill up their basket with other item.
So we haven't seen in <unk>.
A strong you know or a large dimunition in the basket at all just a slight variance and you know our customers are across the income bracket. We like to say we are America's store for daily use affordable luxury and I think thats important to remember in all of them.
That is buttressed by our ability to have a supply chain that can read and react and three to four weeks that literally is across the street again, 65% is made in Columbus, 85% is made in North America. So as Julie will elaborate that's what enabled us to chase through millions of unit.
In a highly successful launch of butterfly across 25 categories. So our customer is loyal Chief Trust us and she's coming in repeatedly to see what's new in our stores Julie yes.
Yes, so just to give you a little bit context on unit sales unit sales were up low single digits and so just to give you a couple of.
Color areas, where we saw this.
So we're up against last year, and we were in a much stronger inventory position than we were last year and we believe the business is starting to stabilize and the customers coming to us.
As Sarah mentioned, we believe that we are a user of business. Our products are meant to be used daily and replenished frequently and what we're finding is they are coming back to replenish and when they come to our stores and they come to our site we are great with conversion.
We also have some great innovations and so then I think that they are responding to that as well. So we have a beautiful innovative tools bottle for our gel soaps and vibrant colors. She loves putting them on her counter their accounts are crowded helps or decorate for house.
As well as we are seeing strong acceptance to our foaming for restage, So and the other thing to mention I know, we talked about Wallflowers, but you know unit sales are up there as well. So we you know we have some outlier categories, where we're doing quite well.
Great. Thanks, Julien next question please.
Our next question comes from Matthew Boss from Jpmorgan, Matthew Your line is open.
Great. Thanks, So Wendy on the margin side two questions. What is your AUR forecast for the back half of the year relative to the front half and just any drivers supporting it and then on the expense front multiyear is there a base case way to think about SG&A dollar growth relative to revenue growth if we're thinking.
Beyond this year's investment Bill.
Sure so on AUR so.
We're thinking for the full year, we'll have AUR is about flat, which would imply a slight increase in the fall season, and you know as you know that's that's an area where we're extremely agile you know we are we constantly are watching pricing and watch.
<unk> promotions and what works and what doesn't work and we changed our plans weekly daily sometimes and so as we go into the fall season, we will be very very agile and flexible and approach that with with that attitude as we go into the important holiday season, but as of right now.
Now we are planning the full year.
Roughly flat.
In terms of SG&A growth.
We tend to obviously are our biggest about two thirds of our SG&A is store selling.
And so that will flex with sales and so you know I think the easiest way to model our store SG&A expenses is really to look at it as a person.
And as we as we grow sales, we will try and leverage that over time.
Great. Thank you good luck.
Question. Please.
Thanks Matthew.
Our next question comes from Janet Kloppenburg from J J K Research Associates Janet Your line is open.
Good morning, everyone and thank you for all the detail today.
I was wondering I heard what you said about Clayton and rising gas prices.
I'm just wondering as we look into the back half if you look for the increases to moderate if that's assumed in the guidance, we're getting mixed we'd some.
Reporting companies are saying they are looking for freight to moderate in the back half and.
And others are saying that it is not window moderate at all in fact, it might be worse, so I would like to understand what's embedded there for guidance.
I'd also like to understand where we are in price increases in terms of what anymore and given the fact that raw material costs continue to rise and heightened Julie and Julia you could talk a little bit about the fragrance category you have tough compares but the category globally is good.
Growing rapidly and I'm wondering if you see an opportunity for the growth there to continue to be outsized.
Since the other categories. Thank you.
Okay Janet to be clear your first question was on freight.
Yes.
In transportation.
That outlook as we go through the year do you expect it to continue to be at the level. It was in the first quarter would you expect that to moderate as we go through particularly the back half.
Okay, Great Alright, so I'll take the first two parts of your question and then we'll turn it over to Julie on the fragrance market.
So in terms of freight we have forecasted freight rates based on what we know today.
And as I mentioned, you know of our.
Our roughly $250 million of pressure that we've quantified roughly 4% sorry, 40% of that is transportation and the increases were feeling or in particular in surcharges in our parcel network.
It's based on what we know today.
We'll see what happens if rates change over the course of the year then those costs will either go up or down but that is our current estimate is assuming the facts that exist today.
In terms of what inning, we are in pricing I would describe that our pricing conversations is a baseball game that never ends. So I wouldnt say were ever in a certain any you know that's something that you know over time, we will continue to test.
Test and expand pricing as appropriate I mean, one data point is that as if you compare our overall pricing now to pre pandemic, our <unk> are up over well approximately 20% over that time period. So this is something that we're continually looking at and.
That will be part of this businesses agenda.
Forever as we've continued to do business, so I'll turn it over to Julian for the overall fragrance.
Yeah, Hi, Janet its nice to hear your voice again. So can you just repeat the question because you sort of went out and I want to make sure I am answering it correctly.
Well I follow a lot of a lot of companies in the beauty industry and our fragrance category.
Had very strong growth during COVID-19 and has has been sustaining that closed here in the post COVID-19 environment. So I'm just wondering if you could talk a little bit about those trends as it pertains to V. VW do you see that opportunity for fragrance to grow as a percentage of the mix and maybe if you can talk about its margin profile versus company.
Average that would help as well thanks.
Yeah, we absolutely.
Are seeing great, new learnings and new all passive spaces, which is very exciting. So when we have things like JCB, which we repackaged.
<unk> has been with us since 2006, it continues to be a top 10 fragrance.
The great thing is we can have something like butterfly, which is a new all back that space for us which was a rudy laurel.
Also be in the top 10, the other thing to say is we launched a line of gender neutral White barn candle. This particular quarter and saw a huge success from an old facts of space and Amber and <unk>. So we are in the process as always we test everything we have a major.
<unk> tests going on right now just to understand how much we can go into that ethanol affective space, we make sure that we're balancing by season and.
We're also doing a big tested men. So there is a man how high is high test, where we're testing 16 fragrances. So theres a lot going on in fragrance, we know at different times of the year, we need to.
Leanne certain ways Gourmand pumpkins in fall, but we're also opening up new spaces, which is very exciting and it's very exciting that our customers coming along with us.
Thanks, Kimberly we are out of time. So this concludes our call. This morning. Thank you everyone for your continuing interest in Bath <unk> body works.
That concludes today's conference. Thank you for participating you may disconnect at this time.