Q1 2023 Allbirds Inc Earnings Call
[music].
Okay.
Good afternoon, ladies and gentlemen, and welcome to the Alberta first quarter 2023 conference call.
Participants have been placed in listen only mode.
After management's prepared remarks, there'll be a question and answer session at which time instructions will follow now.
Now I'd like to turn the call over to Katrina, Mercer Dockets, VP of Investor Relations and business development at all birds.
Good afternoon, everyone and thank you for joining US with me on the call today are Joe Leesville wondering Kim Brown authentic cofounder and any Mr. Albrecht Chief Financial Officer before we start I'd like to remind you that we will make certain statements today that are forward looking within the meaning of the federal securities laws, including statements about our financial outlook, including <unk>.
Cash flow and adjusted EBITDA expectation Q2 guidance target impact and duration of external headwinds.
Yes.
It's just your transformation plan.
This go to market strategy expected profitability cross savings target product plans expectation third party partnership strategy marketing strategy and other matters referenced in our earnings release issued today.
The results above our expectations as our teams are executing the plan and will continue to be a difficult backlog backdrop.
What we are industry saw a heavy promotional kittens in January followed by a slowdown in spending February which was exacerbated during the bank round in March.
The industry headwind and Alina <unk> Lodge calendar this quarter versus Q1 22 demand for all of our products exceeded our plan.
Particularly in March this top line performance, coupled with tight expense control enabled us to deliver bottom line results in cash flows that were better than expectation.
On the strategic transformation initiative announced on our last earnings call, we're making solid progress against their plan to drive growth with expanded margins.
As a reminder, or for initiatives include one reigniting our products and brands.
Optimizing U S distribution for wall profitability in our stores.
Three evaluating a transition of international direct go to market strategy toward a distributor models to reduce opex, an overall complexity and for improving overall gross margin and managing operating expenses.
Let's go through each of these now.
Starting with reigniting, our product and brand our teams are hard at work connecting inside to Ah Recalibrated product line and refine marketing approach, which we expect to begin to bear fruit in early 2024.
That said I'd like to highlight some recent product launches that speak to our dual pronged strategy focused on both surprising and delighting our core consumer while reinvigorating our core franchises to drive growth an assortment productivity.
During Q1, we announced moonshot.
Perfect Celeb project to create the world's first net zero carbon ship.
This net zero carbon footprint compares to our estimate of the industry average of 14 kilograms of carbon dioxide equivalent emissions for a typical sneaker and speaks to our core consumer who cares deeply for the environment as you the next generation of consumers.
This is an answer that was designed to drive brand awareness and was successful in garnering north of 2 billion media depression.
Social sentiment was extremely positive with video of use more than double our average organic social pose an engagement right up almost 200 per cent.
We also just launched an extension to our consumer favorites breeze or ballet flat with the new breed your point for women.
The freezer point is a great example of reinvigorating and extending one of our core franchises by adding an elevated aesthetic appropriate for the casual eyes work sick.
And as we mentioned last call our core consumer skews female relative to industry peers, and we believe we have an opportunity to improve conversion with women who are dedicated product offerings focused on meeting hurney.
We intend to continue our investment in similar extension.
Overall, we all birds brand remains strong.
Last quarter, we spoke about the results from a company sponsored B C. G study there are a few notable takeaways first Albert had the second highest net promoters Goin' our peer group.
Next our consumers have a strong level of brand loyalty and satisfaction with 96% of shoppers in the past year, stating they would consider purchasing from us again <unk>.
Quality comfort and design of the three main reasons why are consumers recommend that.
More recently in March 2023, Ellie Kay published it's 2023 U S. But we're in apparel brand heat index, which rank all birds as a top 10 casual footwear brand for both men and women.
To amplify our product focused on a core franchise innovation, we are emphasizing a social first influence or lead marketing approach, which we expect to drive improved organic traffic and relevance for our Recalibrated product line.
Extending upon our supernatural norstar, our message of supernatural exploration celebrate the fact that our consumers leading active lifestyle are adventurous and aspire to travel the world.
We have delivered strong in a line creative coupled with an integrated influence or activation to reinforce the amazing qualities of our core product for travel.
This is just a taste of what's to come in the next quarters.
Moving now to U S distribution.
As a reminder, we have slowed the pace of our new store openings to focus on driving for wall profitability. We are pleased with our real estate portfolio of 40 full price doors and three outlets in the U S.
And queue to reopen one new store in the U S with two more to follow later this year.
We continue to focus on driving traffic and conversions and I'm, making inroads as several store pilots under the leadership of our new head of stores.
Turning to third party partnerships, we continue to make steady progress with our Mark key partners Dick's Sporting goods, Nordstrom Rei and shields and initial feedback regarding a recalibrated 2024 product pipeline has been positive.
Great alignment of the inside today have pulled on their shoppers' perception of our brand.
After working through some slower moving inventory from Q4 22.
We believe this channel is clean from an inventory perspective for.
For now we are targeting our wholesale marketing investments towards in store communication and staff training to increase shelter and drive market.
We intend to invest alongside our retail partners to help ensure that our brand new product really stand out.
Moving now to our third initiative of evaluating a transition away from direct go to market strategy in certain international region.
We continue to explore alternatives with the goal of driving unit sales growth near term profitability.
And we have made meaningful progress in discussions with a number of strong potential distribution partners with embedded distribution. In addition to our current footprint in these international regions.
In summary, we are pleased about the level of interest we have generated and the pace of discussion and we'll update you on a regular regular quarterly call as we make additional have what.
Overall demand and brand help remained solid in our international business with revenue growth of $6 five per cent in local currency.
Similar to last quarter, we are seeing strong momentum and our Asia business with more than 50% organic revenue growth in Japan, which is a key trend market.
Butler.
We are seeing similarly, strong transit shine out of accelerating growth.
January .
Finally, our fourth initiatives on cost management is progressing very well.
We are on track to deliver on our $35 million to $45 million of annualized cost savings target as compared to our run right at the end of 2022.
Made up a cog savings of $20 million to $25 million and SG&A savings of $15 million to $20 million.
Starting with actions were taken advantage cause we are already seeing meaningful cost benefits from our manufacturing transition, though it is still early days, we're starting to see significant improvements and cost of products coming off the line for my New factory partner Vietnam. We.
We expect to see an acceleration in savings throughout the remainder of 2023 as we finalize the factory transition this year.
We expect savings from raw materials optimization to begin to hit production later in 23 with results expected to positively impact Cobb and 2024.
The early results Glen confidence that we will be able to achieve the $20 million to $25 million of annualized Cogs cost savings target on a volume neutral basis to 2022.
Moving to SG&A, we recently undertook a workforce reduction to reflect the reduced complexity created by the strategic initiatives.
These moments are difficult and we have taken steps to provide our departing colors with a smooth transition.
And for those who remain a strategy allows us to streamline operations, leaving a highly talented workforce well positioned to ignite growth for the brand.
We estimate that this recent action will deliver approximately $7 million, an annualized SG&A savings with full year impact to be reflected beginning in 2024 and lens confidence that we will be able to achieve our $15 million to $20 million of annualized SG&A cost savings target as compared to our run right at the end of 22.
And he will provide a little more detail on our cash management effort, but I'll share a couple of high level point.
We ended Q1 with $143 million, a cat, reflecting a significant improvement in cash usage and the first quarter versus Q1 of last year.
Tightened inventory by streamlined expenses and solid demand kasher, we expect a cash flow trends will continue to improve throughout the year and we remain focused on ensuring that we maintain an ample cash cushion to support investments needed to reignite growth and drive sustained profitability.
Now thrilled the hand, the call over to Annie Mitchell and he began her tenure as our CFO just a few weeks ago and she's already making a major impact and I couldn't be happier to have any rounding out our executive team with a great depth of industry expertise your brand.
Welcome any over to you.
Thank you for the warm welcome Kelly I'm very excited to join this loss of such a pivotal moment to this company and brands.
Much.
Let's get right to it with an overview of our financial results for the first quarter.
Q1 revenue at 54.4 million declined 13% year over year, which was better than we expected driven by improved performance into March.
Including a $1.2 million in fact from FX revenue would have declined by 9%.
Gross margin was 41% down versus 51.9% in Q1, 22 and was impacted by several factors, including first.
Higher level of promotional activity due to both ongoing industry wide promotional environment and elevated mark counts as we work to clear an inventory of colors and styles that are being sucked at it.
Second.
Inventory write downs related to prior generation spot.
Third cost associated with our manufacturing transition.
And for a year over year shifting channel.
He continued to be thoughtful with our discount with an iron what's protecting our core franchise.
To that end for franchises such as that will runner three runner entry dasher continue to have 85% or higher full price field and a quarter.
Moving down the piano it is worth highlighting SG&A, excluding depreciation in stock compensation breaches three per cent on the corner.
This represents a meaningful improvement compared to Q1 2022.
Despite 20th if you want we can store it can reflect action to be taken to control costume it off the piano, including swelling you start growth and tiny discretionary expense.
And then the last quarter, we chose to pull back on overall marketing spend on a year over year basis, given the congressional environment.
We continue to look for ways to best manager cough and it made the choice to update our marketing strategy to prioritize our marketing spend two line within Recalibrated product line expected to come to market slightly later in the year.
And Q1 lean towards the $3.2 million in restructuring charges associated with our strategic transformation.
Taken together adjusted EBITDA came in at a 21.7 million dollar law.
Head of our guidance of negative 29th negative 26th.
Turning now to the balance sheet I'm pleased to report that inventory was down 8% compared to Q1 of 2022 and down 6% sequentially versus you right.
The decrease in the end of 2022 is attributable to laugh <unk> inventory as we continue to fight <unk> particular, headaches or non-core product.
A good example of this is a recent Roger lodge repetitive quickly to buy more tightly as.
As a result, this more cash than four product is turning ahead of our annual sales forecast, which room could potentially capture it just won't upside later in the year as we get more consumer feedback.
Overall, we continue to work towards the entering 2024 clean from an inventory suspected.
With regards to cats should we ended the quarter with approximately 143 million on our balance sheet.
Importantly, until you mentioned earlier <unk> usage with <unk> and have on a year over year basis from.
I'm 48 million in Q1, 2000 $22 million to $24 million in Q1 23.
As a reminder, Q1 is typically our highest cash usage quarter.
Similarly, thoughtless of last year's resolved was driven by the lower inventory that I just mentioned.
Sure Capex been primarily related to slowing the pace of new store openings.
A reduction in corporate account.
Kind of discretionary spend.
Significantly lower inbound shooting top which should prove a positive offset to gross margin pressure kind of quarters.
Looking ahead, we expect you to cash usage transfer to improve versus Q2 2022.
Lastly, I'm pleased to announce that we finalize the extension upsizing of our Undrawn revolver with J P. Morgan, which extend the maturity to 2026 and provides us with $50 million a committed liquidity, which is 10 million above our prior facility.
And $50 million of unlimited information liquidity 15 million about our private facility.
Regarding Q2 guidance, we expect Q2 revenue in a range at $64 million to $69 million, which represents a range of negative 18 to negative 12% year over year growth.
We expect adjusted EBITDA to be in the range of negative 20th negative $23 million.
You will not be providing annual guidance. This time, primarily due to the uncertainty surrounding the time any of our strategic transformation and most notably the international go to market transition 70 or evaluating.
I'm a directional perspective similar to what we said in queue for excluding the impact of any potential change in our international side of market, we're not anticipating any significant improvement demand trends.
Maintaining a cautious outlook for the rest of the year given the uncertainty macro backdrop.
And the nature of our transformation plan and.
Including the fact that many of our product and brain initiatives won't take hold until 2024.
As we work toward the clean inventory balance and next in 2024, we continue to expect gross margin to be pressured as we use markdowns at a more elevated level than is typical for our company.
Before hanging it up or I'd like to thank Kelly.
<unk> and the <unk> the opportunity to join a company finish watershed moment.
I'd also like to thank Mike for helping to ensure a smooth transition in the financing for their support.
As long admired and then a big fan of the opera is Brandon mission and I firmly believe that the strategic transformation plan. The team is put into motion is the best path forward for the company and to maximize shareholder value.
Look forward to meeting and working with you on the future.
With that I'll pass it over to check.
Thanks to any and welcome to the flock, we are through could I have you on the plane.
Is not covered in the last call I've been focused on four key areas as part of our strategic transformation plan.
One of <unk> bread to hoping to establish key strategic partnerships to grow our awareness.
Free working to define a future approach to sustainable innovation foot width, and lastly, continuing to work closely on an earpiece importance to both me and the business culture.
Uhm energized and excited by the square and the potential it has to support the growth of the business in the long term expansion of the brands Williams.
One example of the early fruits of this focus <unk> short project <unk>.
Joey mentioned this project to create the woods boost <unk> to market as of categories boost with the potential to become a longterm commercial franchise for the brand.
I will continue to work to champion the spirit of innovation that has been with us since I found it.
To support US focus Julian I'll have to give it with the board have made the decision to transition much huddled from Costanza and <unk>, the co founder and Chief Innovation Officer.
I'm looking forward to supporting Joey as he continues to lead the businesses F. C O on a day to day basis.
Walmart rolled has changed one thing hasn't and that's my long term focus and beliefs and the potential of this brand in business.
I know, both how far we've come and how much food that we can go.
From the original Quixotic campaign to the launch of Ubuntu and the world's most comfortable shoes and to the recent launch of innovations what the mood shop project we.
We have significant opportunities are here.
With a focus on design innovation and a clear vision to the role of brands will play in a new sustainable economy. We.
We have significant potential through the strategic transformation under way.
Finally, a note of thanks two o'clock.
Through the <unk> has been in existence.
Seeing you mean, you've reached <unk> with an unrelenting belief in the long term potential about work.
At each stage of evolution, we've been met with new challenges and new opportunities.
This moment is no different I know, we will work together as <unk> to continue executing on our plan to give it to the focus on innovation execution and staying true to what makes that company great. Thank.
Thank you.
Thank you.
And at this time, we will conduct a question and answer session.
As a reminder to ask a question [noise].
To ask a question.
You will need you'll do press star one one on your telephone and wait for your name to be announced.
Draw. Your question. Please press star one one again.
[noise]. Please stand by as we Q a request to roster.
First question comes from Marine Hutchinson with Bank of America.
Thanks, Good afternoon, I wanted to follow up on your comments around inventory how would you characterize the health of your inventory positioning exiting one Q and then what's the outlook on the promotional cadence from here.
Tim or is there.
Uhm.
Operator can you hear us.
Yes, now I can hear you.
Okay.
Not sure where I left off there.
I don't think we heard any of the anti matter. This is Lorraine I just asked the question and then it went silent Oh got it alright, I did a great job. So that's unfortunate here yeah, [laughter] I'll start over so I guess in terms of inventory all started off with with just kind of a shape at the inventory and then pass it over to Annie for a little bit more detail.
The shape I just describe the inventory, maybe maybe cutting it into two buckets first buck as being prior season obsolete styles that we plan to sunset and color ways that we also plan to sunset.
In that bucket, that's where you see the predominance of our of our Mark down and that's where we're working through inventory quite quickly and as we take price action. We're very encouraged by the movement of sales philosophy, we're seeing that.
Which gives a lot of confidence in our statement around making sure we get cleaned by 24.
The other the other bucket is in the core franchises and really.
Mostly a majority in the classic color ways that in in that bucket, we are maintaining a fairly high full price and yield and we're really working that from just managing down future received that we're buying from the factory and that you can see reflected in and really improved cash usage.
A year over year, I should say for the first quarter.
A couple of notes that add on top of that Uhm first is that we do feel like our inventory is also clean with our partners as well, which is an improvement compared to last year.
Uhm as with a former really focusing on the idea about tight eyes and so is Joey said, we've got good.
Good job a segment and need buckets and now it's really about the focus and execution overall, we feel good about our inventory we have our plan and this year is going to be about executing that plan.
And if you look at your domestic third party relationships are you happy with the number of relationships. You have right. Now are you looking for more or would you just like to get bigger within those existing third parties.
Yeah I think.
We really our focus is on showing up fantastically for those consumers that are walking through those doors. So yeah. We have we have great partners and in different channels that reaches our core consumer in a really effective way. So we're quite happy there were in about 100 doors and there's a.
A lot of room to run within those four accounts before we start looking outside that.
And I also want to say that I think our focus is not in big growth in the wholesale channel in 2023, we really want to make sure that we come with the with the Recalibrated product line that will start to come in towards the end of this year, but really the most material I've got to that is in the first half of 24.
Beyond and when we do that that's when we really expect to be able to push the gas down and Unfortunately, we started to then we started that selling process with.
With some of these accounts and the feedback on the new private client is really warm so very encouraging but early signs sir.
Thank you.
One moment as we bring up our next question.
And our next question comes from Alex <unk> with Morgan Stanley .
Great. Thanks, so much for for taking my question here I just wanted to make sure I understand I understood. The commentary you gave on on the January to March cadence in terms of demand. It sounds like you guys actually saw an acceleration is that right or how would you talk about the cadence in terms of the top line throughout the corner.
Huh.
Yeah, we so I think.
<unk> I made a couple of comments about the industry overall and so I think what we saw was actually generally worsening trends in the industry overall sequentially, particularly from from January to the to the second two months of the quarter.
We outperformed that in terms of our own trends so relative to that we did see a continuation of Q for early on in a little bit of an uptick with good solid performance in <unk> in March.
So that was.
Got it.
Maybe maybe one other quick question for you I just wanted to understand the adjusted EBITDA guidance for the second quarter. It does look like you know dollars are most of the same but there was a slight improvement in margin I think thats seasonally kind of how your business typically runs I'm just trying to understand how you guys kind of thought about that guide and and what's.
Changing quarter over quarter on that map trick. Thank you.
Yeah, I'll I'll, just say largely a continuation of a trend and we're expecting for really.
Really the remainder of the year that the backdrop.
And we're really surgically working through working through inventory this year and we're gonna take the opportunities where we can to move through that efficiently. So that we set ourselves up to reignite growth in 24, while we're really effectively managing caches here and I can say that that is that is the laser focus of Howard.
In the business.
And if you want to add some specifics on for for the God.
Sir.
Yes, it's going to be relatively similar and Q2 compared to what we saw in Ky.
We are still seen again that consumer backdrop as week, it's a volatile Martin environment.
And so we really are maintaining our focus on executing our strategic plan, managing our inventory and our cash and and we do expect again in queue to to see significant cash improvement year over year, that's really going to be the highlight.
Well the P&L will stay roughly the same.
Alright, Thanks, and good luck.
Thank you have there.
One moment as we bring up our next question.
And our next question comes from Bob durable Guggenheim.
Hi, Good evening any welcome best of luck and I did have a couple of questions if I could.
The first one is Q U.
<unk> launches that you've done over the last few weeks a few months.
Given the golf shoe launched maybe today or yesterday, just you would love to hear any feedback that you've gotten on you know some of the newer launches that you've had your pricing perspective on where you.
<unk> and how you feel about the.
The pricing opportunity that you have and then I guess just pick it up higher level.
Can you talk a little bit more around where you feel the brand is today.
The brand equity the brand. He you know the brand recognition is if you're making progress there uhm thanks very much.
Mmm.
Thanks, Bob Uhm, so on the on the product launches specifically I can give you a couple of examples to kind of color it in.
All of them are really bought and I think we reflected this in the last quarter all of them are bought pretty tight. So when we're when we're looking at a situation where we have elevated inventory that we're trying to work through significantly we're not betting on any big homeruns or huge upticks in demand from new product launches.
The remainder of this year and when we have opportunities that really we can see we put into the market price in their resume really strongly we have ample time to chase and we have a fairly agile supply chain partner with our manufacturing grew up in Vietnam, So opportunity to chase when demand presents itself.
I think I'll highlight the golf to ask her what today and that's that's that's an example, where our customers have.
Just consistently since we started the company frankly, I said that they play golf and all birds and wear it around the clubhouse and that they would love to have won the dashes. The perfect franchise to do that it is a core franchise product for us and it just gave us an opportunity to delighted customer group Blue a consumer group, who really has been asking for it.
And so.
Only six hours into the launch, but uhm, so far tracking really well and similarly with the Breeze, a point and the Super light versions of the tree runner and kind of an extension of that on the trainer those of all all perform to expectations and and show really good signs we learn a lot and then we can we can change that in the back part of the year.
And into 24, when it makes sense.
So so that that I'd say that that's sort of how I would that would calibrating you on on the product launches specifically.
Overall brand health I'd say the brand health.
The fundamentals are quite strong I would say that the awareness growth is is not picking up to the pace that we would have expected.
And so I think when you when you think about some of the points that gave ya around what the brand is showing up like for our customers, who do know about us incredibly high M. P. S lots of repeat purchase intent.
And good and good shelter at high yields on on our core franchises all that speaks to a really good experience.
The trick now is really we've just got to focus on growing brand awareness and saying all the hellos to our core consumer and.
And when I look at what we've outlined in terms of the way we expect to show up as a couple of elements I'd point, you to that I think should learn some some some good confidence into how we're headed here. The first is the.
The consumer who they are they are quite young digital first people pretty high household income with about two thirds of our of our customer base is is north of 100000 household income really geographically dispersed across the U S and skew quite significantly female relative to others in our industry.
So that's that's sort of the backdrop less than 15% of the U S population has yet to find out about the greatness of all birds. So that's now what we got to work on so were tightly integrating our creative and marketing approach around core franchises and we're showing up with this with this Ah social first an influencer letup.
Brooch, which is helping to amplify the message and keep that focus on the core franchise I gave the example around supernatural exploration, but that's one taste of it and we should ask you should expect a whole bunch more of that and.
We will give you updates on how that progressive in terms of increasing brand awareness as we go.
Alright, Thank you very much.
Make them up.
Mmm, one moment for our next question.
And our next question comes from Janine fixture with B T I G.
Hi, Thanks for taking my question without a little bit more.
Color on some of the strategies you remove you're using to move through the price that your son Saturday and I'm curious if you think you're getting a new customer through this promotional product and is ultimately at somebody who you can transition to full price. Thank you.
Yeah. Thanks for the question is name Yeah, we are seeing uhm.
Pretty good balance, where where we are getting a lot of new customer acquisition, let me do that when we do surgical markdowns and they're they're accessing the brand at a lower price point and frankly, they're performing.
As well or better as our full price entry customers and that's been pretty consistent for us over the last 12 18 months and that's really encouraging for us because they think promotion is really important.
Give access to new people, who may be on the fence and and as I mentioned earlier the sales velocity when we do move some of those products.
Products that we're gonna sunset in the future in terms of taking them out of the assortment.
The velocities get it in the pick up on that is good and when you. When you match that with a consistent longterm customer value of those people entering through that to that entry point uhm, it's an encouraging sign for us.
Okay, and then maybe just kind of on the flipside I you know I certainly you haven't been a very promotional brand. So as you can.
Cleared through some of this product how do you make sure that your existing customers, who thinks of you as a full price brand.
Doesn't become accustomed to the promotion.
Yeah great.
Great question, and we are trying to be very thoughtful about that first of all.
I'll I'll I'll tip my hat to our factory partner here, who has made tremendous efforts of making a lot of late additions for our spring summer line for for twenty-four so they're working <unk> truly around the clock to make sure we recalibrate that product line and I say that because the large majority of impact of.
When we when we really.
Get this to get the new assortment in front of consumers isn't until 24, so we want to pay this out.
As we work through the inventory and that allows us to be quite surgical there and N as when I say surgical what I mean is we want to really only focus to the extent we can on on products that we will sunset in the future and keep our classic colors in our core franchises really intact at full price. So that's sort of the.
Balance that we're trying to strike and <unk>.
Exceptions to that might be.
Select windows when we run.
<unk> why promotion or are targeted promotions around different items, and that's really just a tactic to get new consumers into the bread.
Great. Thanks for the color and best of luck.
Stand by Us.
Bring up our next question.
And our next question comes from Tim Duffy would stifle.
[noise]. Thank you dreamed of Stifel.
So what <unk>.
Mmk.
International business model transition complex process. You said this was something that could influence your annual numbers does that suggest you expect some changes could be increased before year round or are we looking at a much longer process.
Now we would expect we would expect at least one if not more to be done this year.
Hope to update you on that.
Okay, Great movie.
Answers My my next question.
Do you expect announcements on a piecemeal.
Country by country basis, or is there a certain regions, where you'd expect to bundle.
Relationships.
How do you foresee that pulling out.
I think what we would like to do is just kind of collect them and when they happen will announce them on these are on these on these quarterly calls him.
Okay. That's helpful. Thank you.
One moment for our next question.
And our next question comes from Dana Telsey with the Telsey Advisory group.
Hi, good afternoon, everyone on the differentiation between the performance in stores in the performance online what is the biggest difference you're saying whether it's in terms of traffic price point, how are you managing eat and if you think about optimizing the stores, where you're seeing the most successful lately with it.
Regent box size or open air enclosed malls how're you thinking about it and then in terms of the product side with promotions with promotion.
Is there a channel where you're using promotions more than another and with the core franchise that will be expanded by early 2024, what percent you want that to be at the assortment. Thank you.
Alright, I'll try to work through those the I'd say.
Store versus digital on a direct channel.
We see generally a consistent customer it does in our store business excused, a little younger of a consumer and they tend to be less price sensitive and.
And we drive.
One year one year later questions. There, we drive a higher full price sell through inside of a brick and mortar.
That is really the best expression for the brand we have the highest NPS in our four walls.
And we do drive hire full price out there and then that translates to a great kind of omni experience, where those customers crossover.
Dual channel customers tend to spend quite a bit more.
And then just single channel customers, even if they're repeat customers.
So that's the those are kind of the biggest differences and and then in terms of how we're going about improving productivity in the stores.
That's really what we're here to sell shoes in the stores and.
Focusing on what we can control on the floor wall is probably the most important so our <unk> our new store leadership team has put a new regional structure in place really driving good incentive management. Good labor productivity and then of course focused on making sure everyone walks out with a pair of shoes.
Or more.
And so those initiatives have been focused on merchandising you can store visuals.
And also just the general kind of brass tacks Incentivising, our store fleet of upgrade ambassadors in the store. So I'd say those are those are largely and then last I guess I'll I'll close out with your your question on promos.
Generally we do that cross channel, albeit.
In terms of managing margin inside of those stores, which does tend to have a higher gross margin in terms of relative relative shape of business, we do like to minimize sandbox.
We offer.
Local deals to people, who are within our community and make sure. They get the best experience, there and get access to things that might be a little unique for versus versus.
Other consumers.
Thank you.
One moment for our next question.
And our next question comes from Tom.
<unk> Securities.
Thanks for taking my question.
<unk> declined you're quite a bit year over year, and I'm, assuming back up a function of.
Yeah, not not having.
Product at the moment I'm not trying to point the email marketing dollars.
Exactly have.
Your product, where you want it to be should rethink that.
Marketing continues to decline on a year over year basis kind of you know.
Yeah.
24, when you have.
The new product lines that you are excited about them.
Reinvestment marketing too.
My throat.
Yes that is exactly how you should look at about marketing.
Absolutely plan to align and prioritize our marketing and spend this year with the recalibrate.
Launch that we expect to come at the end of the year, we do expect that our marketing spend will be planned down year over year, both in absolute and as a percentage of sales.
We really want to make sure that we are matching our investments with the product.
And we will we as a result of the why we've made the decision to hold further spend until we have the product recalibration to justify that higher investment and everything we've seen so far confirms for us that will be the case in 2024.
Great. Thanks very much.
One moment for our next question.
And our next question comes from Edward Room with Piper Sandler.
Hi, I'm Abby on for AD. So just in terms of the product Recalibration. He talks about the golf shoe launch, but can you talk about your thoughts on a <unk> physician uhm within the performance category. After some of the the missteps on running and what your plan is for the performance product going forward.
Yeah. Thanks.
That's the way to characterize it as we saw some I would say, perhaps more noise than a signal.
In the midst of the pandemic, we saw our dash our franchise come out and just be an absolute blockbuster for us resonate really well and we read some of those signals as as permission from the consumer to get a little bit more technical in terms of performance running.
And so we back that up with some of the products that you saw at the end of last year things like the fire.
Really emphasized the technical running credibility and and as I think we've been pretty open and candid about that that just didn't land as well with the consumer so we really want to pull that back to this active lifestyle. This blend of of where consumers became famous vacated became fell in love with us and we became famous for.
With them around.
Around this blend of lifestyle on active.
An activity kind of in that athleisure space, if we focus on that as the way we show up the way we message and the products that we breathe then we know that that resonates much more strongly with our core consumer in and we see the same thing from feedback in our in our third parties. So you'll see a lot less in terms of kind of the hardcore technical run.
<unk> or technical sport and I think even if you if you look at the way we've message the Gulf Dasher to that.
You can see it's just as good on the 18th hole as it is in the 19th hole and so that kind of language, where we really talk about that versatility.
Style element that layers into to something that still delivers on on good comfort and good performance, that's the sweet spot for us.
Got it that makes sense and then just one more on when you enter 24 and a clean inventory position do you have like a dollar amount that you can give us that you consider healthy healthy position there.
Yeah, we won't we won't give specific guidance on that just kind of a line with the overall change in terms of what's going on with the strategic transformation.
And I can also tell you that that as we noted the international changeovers are.
Or a big element of that so it's difficult to to put it.
To put a 10.
That's gonna land, but we will give you updates and as we do as we do finalize our decision to move in one of those regions to a distributor model I think we can give you a blueprint and really color that in in more detail.
Great. Thank you.
The next question.
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And our next question comes from Mark All Swiger with bird.
Good afternoon. Thank you for taking my question so.
24 is really going to be the bigger flow of new products, but uhm mentioned.
Mentioned, a few times on this call them, but there has been quite a bit of a nudist in the last few months here with the Super light.
Three runners in the golfing.
I guess <unk>.
Roderick products that are really aimed right at their core customer.
So.
What kind of marketing muscle or are you putting behind that over the spring summer or anything you're doing differently from a merchandising perspective in the stores I guess, ma'am I know you're an early innings of with the transformation here, but I'm curious you were looking at some of these recent launches as a way to get an early read on the strategy to refocus on the core.
It's really just going to be more amount of 24 product full story.
Thanks.
Yeah, Mark Thanks for the question. It's a great. One you know these are these are these are really good examples of extensions off of core franchises.
Reality is that we bought him quite tight so we don't want to back up the track with marketing dollars. When we don't have the inventory so.
Most of these cases.
I should say in some of these cases will see 100 per cent sell through relatively quickly on some of these examples.
And then you'll see things like the breeze or point and it's original kind of the the tree Breeze or franchise. We will continue to run the integrated marketing campaign and slow that through and we are seeing solid progress of that so these are these are kind of like good tip of the iceberg examples of where we're headed and how we integrate them.
Marketing against these.
The signs are positive there.
As we move through the inventory, we want to make sure that we don't overextend on marketing and make sure that as we used mark down, particularly on some of these.
Some of these.
Slower moving products from prior seasons that we let that do with some of the heavy lifting for us instead of spending marketing dollars outside these walls.
Makes sense makes for the color.
And at this time I would like to turn it back over to jewelry for closing remarks.
Great well, thanks, everyone I just want to close a couple of things.
I Wanna say first that I'm really incredibly proud of our teams unwavering dedication to successfully executing the strategic transformation with a really unified set of goals around driving growth, particularly in 24 with expanded margins and also focusing on the day to day business with a laser focus on cash.
I think we all know these big changes don't happen overnight, but as we progress through the plan the strategy is already demonstrating real tangible value.
And value creation for all birds, and our stakeholders and to all of our stakeholders here.
<unk> for your continued to support your continued support and our commitment to growing into a global and vital generational brand remains steadfast and I could not be happier with the team of people I'm surrounded by to achieve these ambitions.
Thanks, very much and we will look forward to sharing more with you in the next quarter.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Mmm.
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