Q1 2022 Torrid Holdings Inc Earnings Call
Greetings and welcome to the Tort Holdings, Inc. First quarter fiscal 2022 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder.
This conference is being recorded I would now like to turn the conference over to your host Mr. Vince Adams S. V. P of S. P N E and Investor Relations. Please go ahead.
Good afternoon, everyone. Thank you for joining towards call today to discuss first quarter financial results for 2022, which we released this afternoon and can be found on our website at investors dot toward dot com.
With me today on the call are Lisa Harper Chief Executive Officer of Torrid, and Ted are Big Diamond interim Chief Financial Officer.
Before we get started I would like to remind you of the Companys Safe Harbor language, which I'm sure you're familiar with <unk>.
Management may make forward looking statements, including guidance and underlying assumptions.
Forward looking statements are based on expectations that involve risk and uncertainties that could cause actual results to differ materially.
Further discussion of risks related to our business see our filings with the SEC.
This call will contain non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin reconciliations to these non-GAAP measures to the most comparable GAAP measure are included in the earnings release furnished to the SEC and available on our website.
With that I will now turn the call over to Lisa.
Good afternoon, everyone and thanks for joining us for this.
Gushan of our first quarter results I'd like to start by saying that I'm very pleased to be hosting my first call today as the CEO of torrid.
I have a long history with the brand serving on the board of directors for the past 14 years. I also served as the CEO of toward and hot topic from 'twenty 11 to 2016.
I've been incredibly proud to see the growth and evolution of toward over the last decade, and I believe there is tremendous opportunity for us to continue that growth.
A large part of our success comes from the remarkable team behind the toward brand and I want to personally thank liv for serving as our CEO for the past four years.
Liz and I have worked together for more than a decade. She has an incredible passion for our product customer and our brand and has played an integral role in getting the business to where it is today I'm thrilled that lives is taking on the role of Chief Creative Officer, where she will continue to lead the vision for design product development merchandising and.
Creative marketing.
As for me I bring a strong background in business strategy and operational oversight and I'll lead the brand's overall vision and direction based on early observations I've determined where we need to strengthen our focus and my top priority is to provide direction to the team that will drive sustainable and profitable growth.
Before I share. This action plan I wanted to take a moment to briefly highlight our first quarter results.
Okay.
Net sales were 328 million exceeding our high guidance of 305 million, despite being up against stimulus from last year.
This was an increase of 1% compared to last year, and 30% compared to pre pandemic 2019.
Our results for the quarter were impacted by an estimated net five percentage point on a year over year basis due to shifts in events and shipment timing.
Adjusted EBITDA came in at 52 million exceeding our high guidance of 48 million with adjusted EBITA margin of 15, 8% of sales.
Our gross margin rate was slightly below our expectations, primarily due to higher promotional activity.
Looking ahead, we believe we can manage gross margin more proactively while executing a plan that will continue to drive long term profitable growth.
This brings me to my three main priorities for the business number one enhanced promotional and marketing strategies to better balance margin and sales growth.
Number two drive growth across multiple opportunities, including our curve concept and number three develop a more efficient and effective organization by realigning resources.
We have a significant opportunity to refine our promotional and marketing strategies to drive sales at higher margin rates by reducing our reliance on site wide promotions, focusing on product franchises and launches and better balancing retention reactivation and acquisition activities within our customer file.
We also plan to enhance our marketing strategy with better storytelling around our unparalleled depth and compelling assortment rather than the primary focus being the discount.
In the past our promotions have been largely broad based offers to all customer and across categories, which was anchored heavily on percentage discount.
Going forward, we plan to take a more surgical approach to promotions by closely aligning them with our merchandising and marketing strategies and our inventory investment.
We'll take time to refine these strategies and we will maintain site wide promotions in the near term, while we test and react into more targeted promotions.
I'll keep you updated on our progress in revising our promotional tactics as we learn more from these tests.
We will create a more balanced approach to our marketing investments to drive stronger conversion of lapsed customers and improve customer retention and frequency, while maintaining a focus on acquiring new customers. Once we get customers into the funnel. The foundation of our highly successful unified Commerce model is built on migrating single.
Channel customers become omni, where they spend over three times their single channel counterpart and deliver exceptional lifetime value.
<unk> continued to be the number one vehicle for acquiring customers. So we are expanding our efforts to drive traffic to our high conversion store environment.
We will continue to advance our growth strategies in both our core torrid business as well as curve, we remain committed to expanding curve with an emphasis on sustainable and high quality growth.
While we continue to believe in the ultimate growth potential we have seen growth in this business normalized and no longer expect to reach $500 million in sales by 2023.
We are reevaluating our approach to the business still believing that it will deliver substantial growth over the next three to five years.
Our previously discussed plans for curve. This year remains intact, and we will be opening up to 10 Standalone curve stores. This fall expanding the curb assortment and up to a third of the store fleet and launching the tablet experience on our website. We will keep you informed about the results of these initiatives and will plans the future expansions of her based on these learn.
<unk>.
We are also focused on a balanced approach that ensures the continued growth of our core business a renewed focus on innovative product launches and building franchises, such as our studio and lovesick Assortments in apparel, and our wire free and T shirt bra as incur will support compelling storytelling to the customer that's.
Specific products like broth and denim continue to drive the results for customer acquisition in the stores and we're seeing positive traffic trends in that channel.
My third priority will be to develop a more efficient and effective organizational structure by realigning resources to focus on the most critical tasks, we plan to put more rigor around our resource allocation to support long term scalable growth.
This will include thoughtful investments in technology to support the business not just the E. Com site enhancement will also increase capacity for our E. Comm order fulfillment in Q2, which will improve productivity and throughput to better support our growing business.
As part of realigning resources to focus on critical areas. We are also making organizational changes such as the recent promotion of Vivian Althorn to SVP Chief Digital officer.
Vivian has been with the business for almost a year and previously ran the E comm business at Banana Republic in pottery barn.
She brings strong leadership to our digital teams and will drive the initiatives and developing the customer file we are continuing to search for a permanent chief financial officer, and well. Meanwhile, leverage the expertise of our interim CFO tenor at Mcdiarmid and our strong finance team until a replacement is found.
Looking ahead I am confident in our ability to continue to drive sustainable and profitable growth toward has exceptionally strong brand equity and we are uniquely positioned to serve our existing and new customers. During this changing environment by focusing on what is most important to our customers unparalleled set.
I'm excited to be working with a talented passionate and innovative team that is energized by the opportunities that lie ahead for our brand.
And with that I'll now hand, the call over to Tanner to provide more detailed financials on the quarter and updated guidance.
Thank you Lisa and good afternoon, everyone.
I'm pleased to be here today as the interim CFO toward.
I've spent the majority of my career working with businesses to execute operational improvements increased productivity and to determine where to best invest cash to drive profitable growth, both as an adviser and an interim management roles.
I look forward to working with Lisa to help torrid strengthens its foundation in support of long term growth until a permanent CFO is named.
I will begin my discussion with a review of our financial results for the quarter followed by our outlook.
Yeah.
Starting with the first quarter results.
We exceeded our sales guidance is net sales grew 1% to 328 million compared to 326 million in the first quarter last year.
And they were up 30% versus pre pandemic 2019.
Comparable sales in the quarter declined 2% on a year over year basis.
Our sales in the quarter were impacted by an estimated five percentage points on a year over year basis due to shifts in event and shipment timing.
Adjusting for these shifts are net sales growth would have been up 6% for the quarter.
Comparable sales would've been up 3%.
As a reminder, we were up against a difficult 108% comp increase last year.
Government stimulus and pent up customer demand drove significant consumer spending.
We're pleased with the strong consumer demand throughout the first quarter and in toric hoard cash about which delivered above expectations.
Gross profit for the quarter was 125 million or 38, 1% of net sales.
This compares to $145 million or 44, 5% of net sales in the first quarter of last year.
Roughly half of the 640 basis point decline in gross margin was from higher discounts and promotions compared to last year.
And the remainder was due to increased product and transportation costs, which were partially offset by select price increases.
As Lisa mentioned, we were focused on actions to drive margin performance.
Selling general and administrative expenses in the quarter were 67 million compared to $110 million for the first quarter in the prior year.
As a percentage of sales SG&A was better than expected and decreased to 25%.
33, 7% compared to the first quarter of last year due to lower share based compensation and performance bonus expense.
This was slightly offset by an increase in store payroll and store expenses as we are operating with more normalized operating hours and wages and increase since last year.
Marketing expenses in the quarter were $18 million compared to 10 million in the first quarter of last year.
As a percentage of sales marketing increased approximately 250 basis points to five 5% compared to two 9% in the first quarter of last year.
The higher marketing costs as a percentage of sales was driven by further investment in digital marketing channels to drive action acquisition.
And the incremental marketing tests, we discussed last quarter.
Turning to profitability.
Net income for the quarter was $24 million or 23 per share versus net income of $13 million or 12 cents per share for the same period last year.
We had no adjustments to net income in the first quarter of 2022, but for comparison purposes. Adjusted net income last year was 45 million or 41 cents per share.
Yeah.
In addition to GAAP measures, we believe that adjusted EBITDA and adjusted net income are important measures that we use to evaluate and manage our business.
Adjusted EBITDA came in above the high end of our guidance at 52 million or 15, 8% of net sales compared to $76 million or 23, 2% of net sales in the first quarter of 2021.
Turning to the balance sheet.
Our cash and cash equivalents at the end of the quarter totaled 25 million.
Total liquidity at the end of the first quarter, including available credit was $145 million.
During the quarter, we repurchased 23 million of common shares outstanding and had $54 million remaining on our stock repurchase program at the end of the quarter.
Total debt at the end of the quarter was 357 million compared to $202 million in the first quarter of 2021.
Our net debt to adjusted EBITDA was one five times at quarter end.
Inventory at the end of the quarter was $179 million compared to $112 million in the prior year.
Excluding in transit inventory was up 51% to pre pandemic 2019.
No wait 30% sales growth and increased product costs over that period of time.
We ended the quarter with a comparatively elevated inventory balance, but with our current level of planned sales and receipts inventory levels should be better positioned going into the second half of the year.
We opened four toward stores in the first quarter and remain on track to open 35 for the year.
Clothing up to 10 curve stores.
Turning to the outlook for the second quarter.
While we were pleased with our first quarter results, we remain thoughtful on our outlook as we continue to face macro headwinds and lap significant stimulus from last year.
We expect net sales to be between $350 million and $360 million for the quarter and we expect adjusted EBITDA to be between 53 million to $58 million.
This outlook assumes our gross margin rate will be below Q1, as we clear through inventory heading into the back half of the year.
For the full year.
We are maintaining our full year sales guidance of between $1 3 billion and 1.365 billion.
As Lisa stated, we're focused on creating a better balance of sales and margin in the business that is expected to moderate sales growth in the back half while driving improvements in margin.
For adjusted EBITDA, we still expect to deliver between 195 million to $220 million for the year.
Capital expenditures are expected to be between $30 million to $35 million for fiscal 2022, reflecting infrastructure investments roughly 35, new store openings in 2022, including up to 10 curve only test stores.
We're also planning to close approximately five stores this year.
But as we move into the remainder of the year I'm looking forward to the opportunity to help strengthen the foundation for tour that will allow for sustainable long term growth.
Toward has an incredible brand equity and customer loyalty.
Cited to help build upon towards organization and operations.
With that I will now turn it over to the operator for questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment it may be necessary to.
Pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Yeah.
Your first question comes from Mark all trigger with Baird. Please proceed with your question.
Thanks for taking my questions I guess first off like you commented in the release that the brand and the toward customer has proven to be extremely resilient, but was hoping you could expand on that a bit how we should think about the durability of demand.
Should the economic backdrop soften a bit in the back half of the year and whether there's anything you're seeing within your customer data that would indicate sheetz she's pulling back at all.
Thanks Mark.
Our customer is incredibly resilient they have a household income of approximately.
Approximately 85000, we continue to see the shopping patterns more customers coming into the store, which is encouraging average unit retails, we're comfortable with so that we are seeing.
What we consider to be a sustained performance by the customer broadly.
So encouraging kids to that standpoint, because I think of that.
For lack of a pattern.
Additive opportunities our customers have you know.
Highly retentive as well as that higher household income, we think may have a combination to help.
Provides unmatched stability as we kind of continue to navigate.
That's very helpful. Thank you and just as a follow up with respect to the new marketing and promotional strategy.
Does there necessarily needs to be a sales reset in the near term or even into 2023 and as you walk away from some of the less profitable sales or is this transition going to be a little bit more subtle than that any further color there would be helpful. Thank you.
Sure I think reassessing, our promotional strategy and as I can.
Time period that we have a little bit more inventory than we would ideally like to have.
Is it we have to be very cautious about that in addition to the macro.
The conversations that are you know.
Perpetual play being shared at this point, we feel very strongly that we have an opportunity to test price elasticity models internally and with a more surgical approach to promotions.
Oh and also to enhance our product launch strategy. So building franchise businesses. So for instance, we have a big relaunch of the studio concepts and September of this year, which is one of our biggest launches ever. So we have good product.
Progression in innovation, but I also think is something that I'm excited about in the back half of the year, but broadly to the promotional mindset. We're not resetting sale. We've considered this as we've continued to reinforce our guidance moving forward.
I feel like we just have to take a more holistic 360 degree strategic approach to our promotional as well as our marketing strategies that allow us to really.
Give them the best advantage and really call all the advantages.
Of the product and our brand to the customer that's we're acquiring them and retaining them. So let me tell you.
All of that has been considered and two in our forecasting.
And well test and learn.
And second quarter, but going into the third quarter with these more surgical offerings that cause so that we can really model the price elasticity as we move forward and then again to reinforce its focusing on product launches and product benefits and features that I think are well well enhance our desirability.
As we move forward.
Our discount rate.
Okay. Thank you for all the detail jump back in the queue. Thank.
Thank you.
Your next question comes from Lorraine Hutchinson with Bank of America. Please proceed with your question. Thanks.
Thanks, Good afternoon.
Can you talk a little bit more about what happened in the quarter with curve.
That's causing you to step away from the longer term goals that was it.
Specific product line was it the attachment to other products, maybe just a little more insight into that and then the changes youre, making to try to improve on that business.
Sure I Wouldnt say that there was an abrupt shift in curve, there's some categories of business, particularly active on the athletic businesses that are waning I think.
Customer comes out of the pandemic and make different choices.
I also think that we have an opportunity to highlight our <unk>.
Five core frames and really build franchises office knows we are a little bit over bought in basics, which isn't a long term issue.
The work out of those that inventory really productively, but I just wanted to make sure that we have so many things that we're learning about curve the $50 50 story.
Towards the curve Standalone stores that are launching in the third quarter.
Tabbed experience that I wanted to make sure that we were moving forward in a really productive and profitable long term mindset versus really just rushing to make those things happen I am still incredibly bullish about this I think that well.
Seven.
This is like now I'm thinking if I'm getting in trouble seven of our top 10 items for customer acquisition are drive so it's absolutely a way that the customer enters the brand.
And it still is so we're seeing consistency in that and that's really a driver for customer acquisition and retention.
It's just an opportunity to be more prudent and step back a little bit take the real learnings from the all of these initiatives that we have undertaken and make sure that we put together a plan that is profitable and sustainable over a slightly longer timeframe.
Yes.
Thank you.
Your next question comes from Dylan Carden with William Blair. Please proceed with your question.
Yeah, I guess I guess mine is kind of a follow up from that I mean, if you're talking about sort of a more radical or not radical perhaps but it is definitely a shift in the promotional activity of their promotional stance and your customer historically has really been.
It's been a call to arms for them and curve has sort of a different outlook here. It sounds like is there something here where you're measuring.
Profit versus growth whereby the longer term sales outlook kind of as is muted in favor of gross margin.
Is that kind of the way that we should be thinking about how this progresses from where kind of our models are currently said coming out of the IPO.
No I would still consider us to be a growth a growth company absolutely.
And I think it's prudent to make sure that we're growing.
Liam and profitably I think one of the things that we're really focusing on I'll give you. An example of how this applies there is.
An enormous focus placed on top of funnel acquisition marketing that while that is you know well acquisition is always important number one acquisition mode is through the stores are not our highest quality customer. It comes from the stores those customers all convert not all but a large percentage.
Convert to Hum, an omni customer all of those things still exist curve is still an enormous growth vehicle for the company, but we also have an enormous opportunity within the core business is to grow the studio launches.
Dressy pretty polished Lux she'll buy everything in her closet.
And I think we need to have a very broad based approach to growth.
And profit as we move forward. So it's not one or the other it's balancing and I think that we as we move forward, we want to make sure that our margin expectations.
Our expectations and how we're managing the business from a margin perspective ensures that we can have continue that long term profitable growth still at a at a high level of growth. So I'm.
I'm not I'm not changing that model at all I'm, just I'm trying to explain our approach which is more.
Prudent.
Uh huh.
Ensure that we before we accelerate something that where we're clear on what that acceleration means to do that.
Ultimate business and while we're opening the stores I still think curves the standalone internet.
Internet concept I still think that there's enormous growth there.
Enormous growth in the core.
Of the business the toy side of the business as well and we're committed to making sure that we continue the growth and we continue it profitably.
Understood and I guess more near term how should we think about sort of the cadence of gross margin.
Second quarter third quarter, it sounds like maybe more promotions in the near term and maybe some opportunities in the back half is that yeah. As Tanner said it is.
His comments, we would expect a.
More promotions in the short term and also some testing of some of these more surgical concepts.
In conjunction.
Function with that.
We can really kind of.
We can.
Determine.
This elasticity and the customers' appetite for the different types of promotions, which we have an opportunity to address and then on the back half we would expect it would be somewhat more moderated.
Very good and I guess, one quick one sorry.
Ideal leverage ratio here has that changed or you can prioritize debt paydown at this point.
Yeah.
Yeah.
We're comfortable with.
Great. Thank you very much.
Like any capital.
Thanks.
Yeah.
Your next question comes from Brooke Roach with Goldman Sachs. Please proceed with your question.
Good afternoon, and thank you so much for taking our question can you provide some additional color on your third priority of efficiency and resource allocation. How do you envision this playing out in terms of SG&A investment behind technology, and fulfillment versus potentially increasing the rate of marketing spend as you invest behind profitable.
At lower promotions. Thank you.
Sure.
So when we think about resource allocation, that's really about it.
Ensuring we're making investments in infrastructure.
But really help us meet customer customer demand streamline our processes and <unk>.
Support long term growth.
You know as of now we're sort of focused on.
Investing resources and distribution capacity and some technology upgrades, which is E com site enhancements.
Looking at our ERP systems.
And just as an example, we've implemented infrastructure and system enhancement of our D C.
It will significantly increase our daily fulfillment.
The changes are.
It really sort of focus on reconfiguration to increase throughput and productivity.
And should resolve some of the shipping delay issues that.
Youre seeing through customer sentiment online.
And from a marketing perspective, we're.
We're going to continue to invest in marketing at the same time, we're gonna be clear that the.
The goal of marketing is to build the ultimate customer file build retention and build frequency.
And and we're going to invest in all aspects of that from acquisition retention and reactivation frequency and to reduce.
Reduce attrition, so where we have a.
Again fundamentally the same goal, which is to build the customer file. We also want to make sure. We're building that customer file with very high quality omni customer.
And so the the investment smoking will continue not at the same rate at the first quarter.
But we still expect to be spending about this year about 5% on marketing.
Does that answer your question, but.
Yes, Thank you and if I could squeeze in one follow up would love to hear a little bit more about how youre thinking about it you see inflation into the back half what are you seeing in terms of rate of cost increases both in terms of raw materials and freight them in the back half of this year and into early 2023.
Yes.
Oh go ahead sorry.
We see a continuing through the remainder of the year than it's been.
Included in our guidance for the year.
On a year over year basis.
No.
We believe that the prop.
Cost inflation to be.
Somewhere close to 10% on a year over year basis.
And we are able to bridge that gap with increased.
Initial retail.
And so we'll we will continue to thoughtfully and carefully can reconsider retail asset.
Prior to closing that gap gap on a higher cost.
Thank you so much I'll pass it on.
Okay.
Your next question comes from Kimberly Greenberger with Morgan Stanley . Please proceed with your question.
Okay, great. Thanks, so much Lisa I wanted to dig a little bit more into marketing if we could.
If I'm reading between the lines of what you're saying.
It sounds like you're.
You're you've been most successful acquiring and retaining customers, meaning minimizing the churn rate for those customers acquired in store, whereas there.
There has been maybe success at acquiring customers online, but you have maybe a very high churn rate I am I am I reading you correctly on those are those the correct assumptions are that im walking away with.
And do you think that.
Some of the the shipping issues are.
At play here in terms of the churn in and our digital customer acquisition, because I would think that there is such a vast market out there for this product that and so many women. So many of those women don't necessarily shop at the mall. So there has to be other way.
Other ways of I've talking to those women, whether it's through and sort of you know more developed influencer network or some other form of social commerce, but I I'm. Just wondering I don't know if you've had time to sort of rethink. If you in did in for example, together have had time to sort of rethink.
Our marketing strategies, and where you take this going forward. Thank you sure. Thanks, Kimberly broadly on the marketing strategy I think there.
If you walk away with nothing else, what I would ask do you walk away with it we have many different ways of filling the customer file and the.
The efforts that where the company was focused on was very very high top of funnel consideration mindset and that was the big investment that went into first quarter that were not going to continue that you know focus level of high funnel.
That's been in marketing, what I'm asking the team to do and I've met directly face to face with the digital agency that we use is really to focus on a 360 approach to acquisition retention and reactivation and frequency.
And because we can fill that customer file we have many different touch points that we can use to do to maintain and build that customer file and I wonder if we have a real opportunity to do that in a more comprehensive integrated strategic way.
My Ultimate goal is to build the customer file with high quality highly retentive.
High frequency customers. So that is fundamentally the marketing goal. That's the brief and we have many different tactics.
Part of that also is who acknowledged the store's role in customer acquisition the quality of the customer that comes there and that there should be there will be an <unk>.
A shift in some small way to drive customers to the store because of that quality of acquisition has the highest conversion into omni customers long term I do agree with you are our net promoter score and storage for the store experience is exorbitant Lehigh it's in it.
I don't know if I can give it to you, but it's in the it's in the nineties. It's in the mid Ninety's for the experience in the store environment isn't echoed as effectively in our digital experience and one of our goals and some of the things that <unk> been talking about in terms of investment will even out that score.
I think I got all that.
So highlight our very low return rate of return rate is still 9% and so that idea that it's still cut product that they very much like and that fits them well and so that as you know.
A huge accomplishment, but I think we are making the investments and we'll start to see some improvements in this quarter in terms of being able to ship to the customer very very quickly and that will I think resolve a lot of the issues that we have on and the differentiation in line as we bring up that experience online and make it equivalent to the spear.
Against that she has and the stores are more equivalent to the experience that she hasnt in the stores I think that expansion of acquisition and retention.
On the digital side will continue to improve.
I don't I see it as an opportunity and we're investing in systems and processes and capabilities and capacity to be able to improve the speed of shipping product to that customer. So that we can also build frequency and retention.
Does that right that's very helpful.
It does thank you. Thank you.
Yeah.
Your next question comes from Oliver Chen with Cowen and company. Please proceed with your question.
I. Thank you for taking our question. This is John on for Oliver could you just talk about which categories performed well during the quarter and if you think you have the ability to chase into some of the trends in categories that are working better in the second half and maybe also touch on your the opportunistic.
Pricing I know you mentioned you have some room, but how do you think about that across your portfolio and how much room. There is going forward. Thank you.
Thank you some of our best categories for the quarter were dresses.
That was occasion based was great on accessories is OXXO area, particularly shoes that we see expansion in and anything that that as I said that was more occasion and occasion based Flynn is doing well, we're happy with that.
So I think that we did.
Did not shift quite enough and too.
More polished or occasion based categories and we have as we move into the back half of the year.
I'm really happy with how they've bought the back half of the year and the types of product categories are reflected base.
Based on the selling that we're seeing in the end in this half of the year, where the word dressy those types of thing.
So I feel.
That we're well positioned in the back half to capitalize on the trends that we're seeing in the front half.
Got it and just on.
Pricing how much room do you think you have to take pricing.
I think we have we have some room in particular categories I think we have room.
And yeah, I won't I won't go category by category I've seen where we have raised prices that we've actually had good results. So I'm I'm. We're focused on the team we look at the value of the product and make sure that the value.
Equation remains the same or we think that it holds the high value for the customer where we're repricing guide. So that's under constant evaluation, but I do think we have room to take some price it up in the back half.
Got it thank you.
Thank you.
Your next question comes from Dana Telsey with Telsey advisor. Please proceed with your question.
Hi, good afternoon, Lisa the framework the holistic framework that you set out regarding the adjustments to the business that you're making whether it's the surgical promotions to marketing the efficiencies and the team as you think of the markers as we go through the balance of this year, what should we be looking for to say check the box checked the box.
And how do you embed this with the macro environment that you're navigating with supply chain and inventory levels. Thank you.
Thank you Dana.
I think that I'm going to take the end of your question first we've been the business has been managing in a very nimble way for two and a half years now and that continues so I think we've all develop the skill set to be able to be nimble at that are you know.
Different macro pressures coming but we've certainly had a lot of shipping in cost of goods.
Challenges for a while now so unless I'm less concerned about that broadly what I, what I would say is in terms of marker.
I would now.
I would expect to see more lunch messaging I would expect to see more product franchise messaging that we would expect to see more storytelling and I would expect to see influencers that are guided towards store events I would expect to see.
I can't give you a timeline on kind of margin.
Shifts until I can read that.
What we've learned in the second quarter in the third quarter, but.
But I would you guys.
You guys are all very good about watching our marketing.
Our promotional cadence and and it should be more focus on storytelling as we move into the third and fourth quarter.
That being said, we always have the opportunity if the macro pressures are there to be slightly more promotional in order to.
Based on the competitive scenario that we might face in the broader marketplace. So we won't be nimble in those terms, but our goal as we have world class that we have product that she wants that she feels her closet Swift and we wanted to make sure that we have the opportunity to tell.
Tell her that story and sell the product on its own merits.
And and make sure that we focus on the opposite side on the customer file developments and that will kind of offset our need for high levels of promotion ality to continue to build that file.
Yeah.
Got it and then on the inventory levels, Lisa and Tanner, what should we be thinking about inventory growth as you move through the year.
Hum.
So.
We are.
Comfortable with the position of the inventories with the remainder here, we are going to have to be more promotional in Q2.
So that one of them.
I'm feeling cleaner on our inventory heading into the.
Post summer timeframe.
But we.
We feel like we've planned receipts some.
In the back half of the year.
Such that we're going to be comfortable with our inventory position.
Q3 Q4 timeframe.
Yeah, everything sort of in the back half are below last year.
And where am I.
I am happy with the categories that we've invested in and so that we should.
We should be I think we can turn faster obviously.
Even.
In the back half of this year on a year over year basis, and our goal will be to make sure that we are investing appropriately in inventory to also drive.
The highest level of productivity and the overall business.
Thank you.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Lisa Harper CEO for closing remarks.
Thank you everyone for joining us today I really appreciate your focus on tour. It in our time together, we will look forward to our next call with you at the end of the summer have a great have a great season, everybody. Thanks.
This concludes today's conference you may disconnect your lines at this time. Thank you all for your participation.
Yeah.
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Yeah.
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