Q2 2022 Bath & Body Works Inc Earnings Call
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 second 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 will now turn the call over to MS. Wendy Island, Chief Financial Officer.
Thanks.
Wendy you may begin.
Good morning.
Welcome to the Bath <unk> body works second quarter earnings Conference call for the period ended July 32022.
As a matter of formality any forward looking statements. We may make today are subject to our safe Harbor statement found in our SEC filings and in our press releases 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 discuss today.
Represent the continuing operations of the Bath <unk> body works business. The results of the Victoria's secret business have been classified as discontinued operations I will now turn the call over to Sarah.
Thanks, Wendy and thank you everyone for joining the call today.
I am delighted to be here speaking with you in my role as the company's interim CEO .
More time I spend in the day to day operations of the business. The more I appreciate the talented and experienced management team who lead this business.
Also have been so impressed by the associates in our business and our customer first focus.
The time spent with our team has only reinforced for me how the company's innovation capabilities and predominantly North American supply chain provided b and agility that sets us apart.
And I would also like to appreciate all of our vendor partners.
Supportive and bringing our products to our customers.
First let's start with our second quarter results.
We are very pleased to share with you that the results for the second quarter exceeded our most recent expectations.
This was driven by improvements in both sales and expenses in the second half of July as we closed out the quarter, which enabled us to report earnings of 52 cents per share.
During the month of June and during our semiannual sale, we saw deceleration in traffic trends as compared to our first quarter.
Although our customers love our sale they love our newness more.
So as we entered July we listened to our customers and took actions to deliver the newness that they were looking for.
Fans were thrilled when we launched our covenant Halloween collection early.
Factories are a large part of this collection and customers are loving how they pair with our spooky sense for fun.
Our nimble vertical supply chain enabled us to quickly react to customer wants.
We also launched our new copy floor set in July which included our no notable fall.
Poppy was the most successful ever July single large fragrance across 22 forums.
Now for an update on loyalty.
We are truly excited that loyalty has finally arrived for Bath <unk> body works.
This week, we successfully launched the program to our associates with significant enthusiasm.
And we can't wait to launch across the country next week on August 22nd.
And to invite our base of approximately 60 million customers to participate.
Store associates are excited and ready to go.
We have numerous incentives and fund programs in place to encourage the buzz and enrollment and they are dressing up for the occasion.
In our test markets, we saw that our loyalty customers have higher spend and retention rates than our average customer.
Look forward to enrolling a significant number of our customers in the first year as well as attracting new customers capitalizing on enthusiasm for the brand and helping drive the growth of our customer base.
Now a little bit about our positioning of Bath <unk> body works for the future and some changes in our organizational structure.
As we look to the back half of the year.
Our investing in our customer experience.
Looking to chase winners and taking action to better position the business to drive future growth and improve profitability.
We are proactively working to combat inflationary pressures by challenging ourselves on expense management and working within our supply chain to decrease costs where possible.
All without compromising quality and our focus on the customer.
Something we will never do.
As part of our effort to more strongly position the business.
We've reviewed our operating structure and saw areas, where we could streamline and simplify along with enhancing our omnichannel approach.
Julie Rosen now has responsibility for the entire customer experience.
Including design merchandising marketing planning and the channels.
We are committed to becoming a truly omni and customer focused company.
As part of these efforts we.
Eliminating 130 roles from the organization.
Some of those are open head count, which we will not fail and some will be a reduction in force primarily of leadership positions.
Chris Cramer has decided to step down from his role as chief operating officer to pursue other opportunities.
We wish him all the best in his next chapter.
We do not plan to fill the chief operating officer role and Christmas responsibilities have been absorbed by Julie Rosen, Wendy Ireland and Tom Mr. Eric.
With these changes we are confident that the organization will be more effective and efficient going forward. In addition to delivering a true omni experience for our customers.
By shifting areas of responsibility and changing how our teams work together across the company, we will be operating like Z truly global omni brand that we are.
Taken together, we expect these organizational changes and additional cost control and margin improvement actions will generate savings of approximately $30 million in the second half of 2022.
We will be taking meaningful actions to address the merchandise margin and we are focused on pricing promotions and assortment.
We are also focused on strong expense discipline as well as providing customers the best possible omni experience.
Everyone, including those departing the business has worked very hard to position Bath <unk> body works for great things in the future.
I am incredibly grateful to everyone.
Over time, I see exceptional opportunities to capitalize on Bath <unk> body works existing strength, including our agility.
Speed, our innovation and our customers love of our brand.
We are excited to continue to extend the brand's global potential as we make the world a brighter and happier place through the power of fragrance.
With that I turn it back to Wendy thank.
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.
First for the second quarter as Sarah said, we exceeded our revised earnings guidance for the second quarter, We reported <unk> 52 per share as compared to our updated guidance of 40 to 42 per share the increase as compared to our most recent guidance was driven primarily by improved sales in the latter half of July .
As well as some expense favorability in U S and Canadian stores first quarter sales were one $1 6 billion a decrease of 6% compared to last year sales were up $278 million compared to 2019 or 31%.
Second quarter direct sales were $367 million, a decrease of 10% compared to last year.
Sales were up $189 million or 106% compared to 2019, our customers love and are continuing to take advantage of our omni focused option of buy online pickup in store. We ended the second quarter with focus availability in more than 1200 store.
<unk>, which is 500 more stores than we had just a quarter ago.
<unk> sales are recognized as a store sales our international business sales for the quarter were $90 million and increased 35% compared to last year, all franchise partners experienced growth in the quarter now.
Now to guidance for the remainder of the year for the third quarter of 2022, we expect sales to decrease between mid to high single digits compared to the prior year. We are forecasting third quarter earnings from continuing operations per diluted share between 10 and 20.
Which includes an estimated $6 million of expense for the previously announced and mentioned organizational changes.
For the full year, we are forecasting sales to be down mid to high single digits compared to 2021 in line with our most recent guidance.
We are forecasting full year earnings per share to be between $2 70 and $3.
Our full year guidance contemplates expected incremental inflationary cost totaling $230 million to $240 million and the estimated revenue deferral totaling approximately $40 million from the loyalty program rollout.
Turning to the balance sheet total inventories ended the quarter up 33% compared to last year in line with expectations finished goods units were up 13% compared to last year. The difference between dollar growth and unit growth is due primarily to inflationary pressures and products.
Approximately one third of the unit growth represents planned accelerated receipts to generate capacity during the third quarter peak periods, enabling our agility in the back half the balance of the unit increase relates to certain categories, including body care and soaps, where we were lean in the prior year.
And our strategic investment in gifting and accessories.
In summary, our guidance reflects a prudent outlook on the back half of the year as the environment remains dynamic and uncertain. We of course will be looking to chase sales upside maximize margin dollars and maintain a disciplined focus on expenses I will now turn the call over to Julie.
Thank you Wendy Im excited as we enter the second half of the year I am thrilled to be leading this customer focused organization with merchandising marketing planning and the channels all under my purview, we will be able to put the customer at the forefront of everything we do.
This will accelerate our journey and provide the best omni experience for our customer for.
For the second quarter, we were able to deliver newness innovation and trends that really resonated with our customer.
Our single fragrance launch coffee was a notable success, our best selling july's single fragrance launch ever the customer responded well to our packaging innovation and the collections happy bright fragrance.
On social media, we had high levels of engagement across all platforms, including <unk> and Instagram.
You might recall, we had another single fragrance launch success last quarter with butterfly. These two launches are terrific proof points of our strategy going forward, we know how to leverage our product.
Innovation capabilities in combination with our unique ability to introduce fragrance throughout the shop in every category body care home fragrance soap and Sanitizers and the customer we really told us They love our bold cross category offerings.
Increasingly we plan to leverage the fact that we own the entire shop and have the unmatched stability to bring fragrance to many facets of our customers' lives.
<unk> continued to perform well during the second quarter and benefited from the exciting July launch of our cleansing formula gel.
Which is formulated without parabens sulfates or dies and in a PCR model, we will be testing aluminum soap dispensers and rebuild cartons this quarter as well.
Men's continues to outpace our shop as our fathers day collection of hero Sport and legend were all very successful.
Mentioned, it before but just to reiterate men's as a huge opportunity for us it's an $8 billion market. As a reminder, we delivered $400 million last year and we believe we can double that business we've.
We've had robust testing in stores right now on entered <unk> deodorant in about 600 stores and we're very excited to roll. This forum to all doors in spring of 'twenty. Three this is the number one form and men. So in order to gain share we have to win with this form.
Our prime collections performed well and was an opportunity for us to partner with nonprofits, including the it gets better projects to support the LGBTQ IAA plus community.
Halloween, which launched in mid July was incredibly well received and drove both traffic and stores in sell in stores and online.
Halloween is led by decor with our accessories and Wallflowers categories, where we saw success in our eyeball water globe and a distortion to our now famous with Japan.
These items are Prime example of our strategic investment in gifting and accessories were based on customer demand demand. We believe there is a greater opportunity.
As we look forward to the fall and a little teaser we're excited to be launching a new innovative brand and exciting new products more to come.
In closing we are navigating the current environment and taking aggressive actions to capture new opportunities and drive future growth as always we continue to focus on maximizing our performance by leveraging the strength of our brands maintaining close connection to our customers and delivering <unk>.
<unk> products and experiences at a great value.
Andy Thanks, Julie that concludes our prepared comments at this time, we'd be happy to take any questions. You may have we plan to go to about $9 45. This morning in the interest of time and consideration to others. Please limit yourself your questions to one question.
Madison, we are ready to go to Q&A.
Thank you so much our first question comes from Lorraine Hutchinson from Bank of America Lorraine. Your line is open.
Thank you good morning.
They're one of the outsized SG&A pressures this year seem to be particularly accelerating in the third quarter. As you look out to your longer term plan or algorithm can you talk about where you expect that SG&A rate to settle and then also from a near term perspective, just some of the larger drivers of that accelerated growth in <unk>.
Thank you.
Alright, thank you.
<unk>.
So SG&A coupled with a couple of comments on SG&A when you look at our SG&A.
Blent basket of costs about two thirds of our SG&A expenses, our store selling and related expenses.
So you know as you as you think about that we do obviously try and flex sore stores selling up and down with sales.
But we do plan on consistently increasing wages. So you would expect as you look out that we would see low to mid <unk> increases in that over time as we invest in our store associates in terms of the change between Q2, and Q3, which you are alluding to.
We are this fall the fall is a very important time for our stores and we are choosing to invest in our store associates by paying them a pic premium starting in Q3. So as you compare Q2 to Q3 this store selling change represents us making a very thoughtful.
<unk> and our store associates as we go into that key time period.
The other piece you know the second biggest piece of SG&A is home office and you know as we said in our remarks when you look at the home office expense in Q2 as compared to Q3.
There is a couple of things to note.
Number one as we called out in our remarks in Q2, LOI, we are lapping about $20 million of some corporate and legal related expenses that we incurred pre spin that we did not have this year. So that's a key difference when looking at the rate between Q2 and Q3, the other thing to note in beta.
The difference between Q2 and Q3 is due to business performance in the first half of the year. Our bonus expense was de Minimis in Q2 as of right now our models are assuming.
Our type payout for Q3, so there is a key piece and the home office, it's different between Q2 and Q3.
And then the last piece I think I would point out in terms of the difference between Q2 and Q3 is that in the technology expense that we talked about in our last call is a little bit back half weighted as we ramp up the separation work that we've talked about so you can think about that of the incremental spend that we talked about.
Last call roughly a third of that was front half of the year and about two thirds of back half. So those are the key walk between Q2 and Q3 you know the other thing I would point out on SG&A as you say as in terms of your question in terms of the future years. The last piece of our SG&A is marketing.
<unk> depends on the time period, but we generally shoot to spend about 2% to 3% of sales on marketing expense.
Thanks, Laura next question please.
Our next question comes from Ike <unk> from Wells Fargo. Your line is open.
Hey, guys. This is Jesse Olson on for Ike.
We noticed that Q2 gross margins were under pressure, but remained above 2019 levels. While the second half gross margin guide implies a material decline versus 2019.
This is despite similar AUR mid single digit decline embedded in the plan and we're looking at slightly less inflation is this just conservatism or.
I guess could you guys just kind of help us with the pieces, there and understand the moving parts. Please.
Yep.
Thanks, Duffy so yes, so as you've seen in our models, we do have a deceleration in the gross profit when you compare Q3 to Q2.
And also as you point out our AUR assumption for Q3 and Q2, it's about the same so down down mid single digits in Q3. So in terms of what accounts for the drivers about about two thirds of the sequential change. What you are asking about is due to the merch margin.
<unk> lots of items in the merch margin rate, but the item that I would point out to be the most significant driver is the impact of the loyalty program, which we're super excited to launch next week.
As we've talked about when we when we launch it and our customers accumulate points we do.
Book, a revenue deferral related to the points accumulation and as we're rolling that nationwide next week, we will have an impact in <unk> that you didn't see in Q2 that I would say, though after the merch.
Merch margins about two thirds the balance.
<unk> expense deleverage.
Also a lot of things in the details there are couple of things I would call out is you've got a little bit of deleverage on the negative sales assumption you are third quarter right now is planned to be a little bit smaller than the second quarter and then the second thing is consistent with SG&A, our buying organization as is in gross <unk>.
And that line in the P&L and consistent with the SG&A part of the organization we had.
No bonus in Q2, and we are planning a par so to speak in Q3. So those are the key differences. Thanks for your question.
Next question.
Our next question comes from Simeon Siegel from BMO capital markets Simeon Your line is open.
Thanks, Good morning, everyone Hope you've had a nice summer.
So at this point I guess, what is the breakdown between price versus units in the 45% sales growth versus 19, and then youre referencing I mean, you guys have a really nice cross section of your escalation. So so how to Virgin are the results that you're seeing between high versus low income and then how are you thinking about approaching the balance between revenues with discounts versus Maine.
Painting, the higher margin and potentially giving up some discount driven volume. Thank you.
Yeah, why don't we go to Julian for that question and I can add some some color at the end.
Can you just say the first part of your question again.
Sure. So I think price price versus units versus pre pandemic. I think you said sales were up 45%. So just trying to think through the AUR that you've been able to get and retain and how youre thinking about that going forward yes.
Yes, maybe I'll take that Julie can add so from a from an AUR standpoint.
We have consistently and.
In Q2, as well, we consistently see a see AUR is that around the 20% higher than they were in 2019. So.
That is.
Still where we are seeing the price growth for the balance of the increase in units.
And then Julia I'll go to you for the high versus low.
The income question, yes, so we are seeing pressure Sim in and our lower income customers spending less that is where the pressure is which is why we are diligently working and doing aggressive testing to figure out what is the sweet spot.
What that means said it is very clear to us that our customer comes to us for fashion trend and newness and if they love it theyre going to buy it so.
There are a lot of pressures out there macroeconomically.
We're just trying to balance all of those things and figure out the sweet spot and ensure that we are delivering enough newness to capture their share of wallet.
Does that cover all your questions.
Okay Madison, we'll take the next question.
Our next question comes from Alex Street, <unk> from Morgan Stanley Alex Your line is open.
Great. Thanks for taking my question and congrats on a nice finish to the quarter.
If August month to date is trending in line with the down mid single digits to high single digits third quarter guidance does that mean, you've seen a step down from the second half of July performance I, just want to make sure I'm understanding that correctly and if I am kind of what are the drivers of that dynamic.
Sure. So I would say that our overall business trends so far in the month of August is generally consistent with what we saw in July so.
We're generally seeing consistent trends keep in mind, though we're only two weeks in the month of August we have got a lot of quarter left and a lot of key weekends and events in front of us and we.
We think that we're well positioned but we also think that our guidance is prudent given given the quarter to come so more to come.
Thanks Madison next question please.
Next question comes from Kate Mcshane from Goldman Sachs. Your line is open.
Hi, This is Lee of Jordan on for Kate.
Our question is a brown the improvement opportunities for the merch margin.
What are you primarily focused on in the near term and how should we think about any timing impacts also the review that you're taking.
Taking it seems fairly comprehensive.
Should we anticipate more initiatives as the year goes on.
Great. So maybe I'll take it first and then I can hand, it to Julia for additional focus so right. Now we are definitely focused on winning in fall and winning at holiday. So that is our focus of course, we're trying to expand our merchandise margin.
But as we're doing this comprehensive review, we do see the potential for more improvement in 2023 and beyond.
As opposed to the short term.
As you said what are we looking at we're looking at everything as you can imagine we're looking at pricing promotion, we of course would like to see some deflation at our cost base, we're partnering with our vendors. They are great partners. We're looking at value engineering. So many initiatives our focus in the business.
Our ongoing focus on improving the merch margin rate and we do anticipate seeing many of those come to fruition in 2023, Julian maybe I can add some color there as well. So obviously, we are constantly evaluating our ticket prices as inflationary and macroeconomic costs.
Seeing pressures continue.
So we are taking a very targeted approach to both ticket pricing and our multiple unit pricing we have taken a good better best approach in many of our categories, which we haven't necessarily had in the past.
As opposed to a single price point for each form we have also increased prices and body care, where we have reformulated and better for you Formula and we have also gone back and taken up some of our multiple pricing. So for instance, and so we've gone from 5% or $25 25.
We've also raised our wall following multiple pricing for $5 25, and I know you all know, but we continue to have a robust testing agenda, where we're constantly testing alternate pricing ideas too.
Really where we can garner more gross margin dollars and we're looking at different ways to build the basket with pairings of different multiples. So it's a multi pronged approach, we test and learn imply.
Thank you Leah next question please.
Our next question comes from Olivia Tong from Raymond James Olivia Your line is open.
Great. Thanks, good morning.
To answer your question about the reduction in management.
Obviously based on the anticipated savings from the raw production it looks like barely senior positions. So could you discuss up there in specific functions or categories and whether it's suggest any change in terms of your strategic initiatives. Thank you.
Thanks, Olivia yes, as we mentioned and as you have pointed out our focus was primarily on leadership positions.
We first of all we've been a public company for a year or so over the last year, we've been settling in as a public company and thinking about how to run the organization and what makes sense.
And we saw some opportunities to really simplify and get synergies across the organization and.
In a way that really benefits us being focused as an omni retailer. So you heard in our opening remarks that we are really emphasizing that and we did a lot of combining teams in.
In particular under Julies leadership to really think about the customer as one customer and to think about us using one voice to the customer and thinking about managing inventory across all of our channels consistently so it's truly a reward to focus us to be nimble for the future and continue to grow as.
And omni focused organization.
Thank you next question please.
Our next question comes from Stephanie Wissink from Jefferies. Stephanie Your line is open.
Thank you good morning, everyone. Hopefully these will be two quick ones, but wanted to just hear a little bit about your customer file size of $60 million that you quoted how that's changed over the last couple of years.
And Wendy I think you mentioned that the 6 million dollar one time cost for the restructuring is included in your EPS guidance I just wanted to clarify that your EPS is GAAP and non-GAAP .
Would you like us to back that out or keep that in the EPS estimate for the third quarter. Thank you.
Stefan I will take the second part first and then I will go to Julian for the customer question.
The $6 million is included in our guidance.
We chose not to back it out just based really on materiality. So but it is included in the guide of 10 to 20 for Q3.
Julian will talk about customer a little bit yeah, I mean, as we all know we had explosive growth in our customer file during the pandemic. So in 2019, we had about 53 million customers and we've got upwards of $60 million during the pandemic and I'm thrilled to say that we have lost very few customers.
So we feel that while we.
We grew our customer base they are still coming back they still love us and with the addition of this loyalty program that we'll be launching next Monday lies I think that the opportunity to get the $60 million of roles in the program and incredibly loyal will only reap great benefits for us.
In the back half.
Thank you Stephanie next question please.
Our next question comes from Susan Anderson from B Riley Susan Your line is open.
Hi, good morning, Alex leg on for Susan.
Trends throughout the quarter can you talk about store traffic and online traffic and how that trended throughout the quarter. In addition to the conversion rate as you rolled out newness.
So yes price is coming down.
Sure.
For the second quarter was interesting and so we started out in may.
<unk>.
Performing consistent with our guidance at the beginning of the quarter and it was generally performing as we expected.
And then when we turn to the month of June starting in early to mid June we started to see a deceleration.
In traffic in particular in our stores.
And that continued through June into early July .
In response to that we were in semiannual sale semiannual sale as a key event for us to get our inventories clean and so we did promote in semiannual sale to move our backward facing old units.
And we successfully cleared those units through stop now when we flip the calendar calendar into July we knew that the customer was potentially getting tired of south and wanted newness, we know our customer loves newness and so as you heard us talk about that.
Earlier this morning.
We had a newness launch with a new gold fragrance launch with poppy and we accelerated our Halloween collection and those too.
Items of newness, along with the balance of shop showing new.
Resulted in an improvement of trends in July as compared to what we saw during semiannual sale. So that was the story of the quarter. Julia is there anything you'd like to yes, I think that what we really saw was that the customer got a little bit tired of the semiannual sale and while they are slightly price comps.
They still want fashion trend and newness and we deliver that for them. So we've taken a look at our flow calendar through the rest of the quarter and the year and we will be as usual delivering new themes single fragrance launches and ideas every four to six weeks, but you will see other drops basically.
Every week, just to get that excitement and to garner more traffic.
Thank you.
Please.
Our next question comes from Matthew Boss from J P. Morgan Matthew Your line is open.
So Julie could you just maybe elaborate on the demand that youre seeing across categories. In August maybe early customer response to your fall assortment and what do you see as the constraint to traffic that you're seeing versus the first quarter and then Wendy I guess, maybe just high level on AUR growth relative to 2019.
What do you believe is the fair number to hold onto over time relative to the 20% growth that we entered the year at.
Great. We'll go to Julie <unk>, yes, so I mean, I think that traps.
Traffic was a bit up and down in the quarter.
Think that where we saw traffic softening as we have said is during our semiannual sale.
I think that we have always been a semiannual sale that was anywhere from 28% to 35 days. This sale quite frankly was 30 days, so not longer than in the past, but the customer got tired of it. So what is happening is the mindset is shifting and there are sort of moving on to new ideas and new items.
Sooner the beauty of our agile.
Agile production capability is that we were able to move Halloween op.
And really move fall and give the customer what they wanted about a week early so we're finding that when we have the right deal the right product fashion trend and newness, we get the spikes in traffic, which is why as I just mentioned, we're going back and looking at how we are delivering all of our drops to ensure that we're garnering.
Most traffic possible.
As well as offering the right deals that hit the right mindset.
Great. Thanks, Julia and Matt to the second part of your question I would say, it's upper teens to 20 is generally consistent with what with what we've been saying in terms of what number you should you should you should look to for AUR growth.
Thank you next question please.
Our next question comes from Dana Telsey from the Telsey Advisory Group Dana Your line is open.
Hi, good morning, everyone.
You moved up the introduction of the Halloween collection. It seems to have gone into a lot of interest how are you thinking about the cadence of other collections moving forward in terms of timing and then as you think about promotions and the cadence of promotions and the depth of promotions.
Relative to last year, how you're planning it and how you're thinking about it.
As a result of that thank you.
Great Dana we will go to Julian for your question on Halloween and the cadence throughout the back half on activity either Dana how are you. Good how are you.
I'm good it's nice to hear your voice.
So yes, we did we did move Halloween up a week. The thing to note is this year, we had planned to drops of Halloween. So we had the opportunity. After we pulled the first drop up to then follow through with the second drop. So that was that was very successful as I mentioned, we will be delivering ever.
A couple of weeks, a new idea, whether it's cross category single fragrance launch or whether we deliver our best in fall with our favorite false and an early Christmas preview. So we have a lot of ideas every couple of weeks to spark nunez.
Excitement. So we are not worried about that because as you know we're about to go into Q4, which is our largest quarter as Wendy likes to say the Super Bowl of our headquarters of our corridors and.
We will have our Christmas preview late in September and then in October really go out full on with Christmas. So we feel like we're covered with many not only great themes ideas and single fragrance launches, but the sense of Neil fact of spaces that are customer loves from us and expects to <unk>.
<unk>.
And then I would add on AUR. So for Q3, we are expecting our AUR to be down mid single digits, which is consistent with what we saw in Q2 and Q4 that will moderate a bit and the reason is is because in Q4.
Because there are so many huge days for us as an example, candle day is a huge event for us.
Those huge days or those huge weeks were.
And just given the nature of the quarter were not planning to go down Aur's and many of those promotions. So you get a little bit of a better impact in Q4, but we are expecting AUR to be down mid single digits in Q3.
Thanks, Dana next question please.
Our next question comes from Jonna, Kim from Cowen and co. Joseph Your line is open.
Thank you for taking my question just wanted to delve deeper into the promotional strategy do you think it's up versus 2019, and maybe if there are things that changed now versus 2019 will love to hear more color on your promo.
As you think about the back half thank you.
Yes, so maybe I'll start and then Julie can add comments. So we are even though we are planning to be more promotional compared to LOI or promotional levels in the back half will still be substantially less than they were in pre pandemic time peer.
So our strategy is still less than what we saw.
During that time period, Julien Yeah, I mean, I think from a from a promotional situation the thing to focus on is that.
Based on pre pandemic, our AUR is up but we are not more promotional than we were then we also have email exclusive that we do and those are down.
So we are winning on key event weekends, and that's really what we're focusing on how big can big B and how do we win even bigger.
Alright, Thanks, Madison I think we have time for one more question.
Our last question comes from Corrine wildfire from Piper Sandler Corrine. Your line is open.
Hi, good morning, and thanks for taking the question so I'd like to touch a bit on the boat best capabilities. I mean, you mentioned, that's taken about 10% out of the digital demand.
So I'm, putting that back and it does seem like maybe digital was a bit stronger than the numbers suggest.
One is that the correct way to be thinking about that and then going forward should we expect that kind of 10% to stay consistent or are you expecting that to kind of increase over time as you roll it out to more stores. Thank you.
Thanks for your question so in bulk as well first of all we are so excited to roll that capability right right now in the U S where basically in every store, where we want to be and we have had really positive feedback from our customers they like the capability.
And.
They.
Enjoy coming into the store and in many cases, our store associates are able to convert them to buy even more goods when they come into the store. So so we think that <unk> not only is it a great omni initiative for our customer. We think it's also great for us because we're able to get them to experience the store and our store associates are fantastic.
At converting them to buy even more stock so in terms of what was the.
The impact as you said is is clear we have seen some customers maybe who chose in the past two engagements that's online.
Our transferring to the store in terms of where that's going to settle out we'll see so it's hard to forecast, we just rolled 200 stores this quarter.
No its right for our customer and we know what's right for our brand and over time, we will see where that shakes out in terms of percentages.
Chris Thank you for your question.
That concludes our call. This morning. Thank you all for your continuing interest in Bath <unk> body works. Thanks.
Yes.
That concludes today's conference. Thank you for participating you may disconnect at this time.