Q3 2024 Torrid Holdings Inc Earnings Call
Greetings and welcome to the tour at Holdings, Inc. Third quarter fiscal 2023 earnings conference call.
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A brief question and answer session will follow the formal presentation.
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It is now my pleasure to introduce your host Jim way I believe.
You may begin.
Good afternoon, everyone and thank you for joining towards call today to discuss our financial results for the third quarter of fiscal 2023, which we released this afternoon and can be found on our website at investors start toward Dot com with me today on the call are Lisa Harker, Chief Executive officer for it.
Mark Myfico, Chief commercial officer, and Paula Dempsey, our new Chief Financial Officer.
Before we get started I would like to remind you of the company's safe Harbor language, which I'm sure you're familiar with management may make forward looking statements, including guidance and underlying assumptions.
We're looking statements may include but are not limited to statements containing the words expect believe plan anticipate well may should estimate and other words in terms of similar meaning all forward looking statements are based on current expectations and assumptions as of today December.
2023.
These statements are subject to risks and uncertainties that could cause actual results to differ materially.
Further discussion of risks related to our business C O S filings with the SEC.
This call will contain non-GAAP financial measures such as adjusted EBITDA.
Reconciliations to these non-GAAP measure to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website with that I will turn the call over to Lisa.
<unk> Chen Wei good afternoon, and thank you for joining us to discuss our third quarter results before I dive into our financial performance I would like to take a moment to thank our more than 7000 employees across the U S and Canada, who are dedicated to the brand and to our customers.
Also like to thank our more than 4 million active customer base for continuing to love the brand while providing the most value added feedback.
This quarter, the torrid foundation with the support of our loyal customers and employees contributed over three quarters of a million dollars to the breast cancer awareness campaign. Thanks to you all.
I'm also thrilled to announce the appointment of college upstream Chief Financial Officer. This well deserved promotion reflects the outstanding leadership and invaluable contributions Paula has made in the last 10 months since joining our team and I believe she will continue to be instrumental in delivering our strategic growth plan.
Thank you and congratulations Paula.
I'm happy to report that our assortment journey over the past year has begun to deliver positive results.
We took a hard look at our assortment and understood the need to pivot towards the more casual and relevant style, ensuring a diverse range across our product lines.
It's encouraging to see the shift resonate.
From a store perspective, we have launched an initiative with our sitting room, Fridays, where our store teams personally try on our products.
This hands on approach is not only enhanced our teams' understanding and enthusiasm for our products, but also abused a new dynamic endorse or atmosphere.
Okay.
As a result, we are witnessing a positive response from a broad range of customers, who are attracted to our brands' renewed energy imbalance casual approach.
I will start by reviewing our performance in the third quarter detailing our achievements and future strategies.
Following that Mark Myfico will take over to elaborate on our merchandising and marketing strategies.
Paul will then review our financial aspects and offer insights into our projections for the rest of the year.
I'm pleased to report a strong third quarter sequential traffic improvement both in stores and on the web.
For the quarter, we generated net sales of $275 million and adjusted EBITDA of 19 million.
These results were higher than anticipated due to the strong demand experienced during the quarter.
We also ended the quarter with total inventory of 171 million down 14% compared to the same period last year.
We can attribute these results to a number of initiatives that started earlier in the year and that are now providing favorable results.
During the quarter, we focused on executing our key initiatives number one broadening our assortment and pricing strategy number two strengthening our marketing message and number three optimizing our cost structure and their inventory.
Starting with broadening our assortment and pricing strategy, which refers to the importance of a balanced across casual and dressy your options and a range of price points across the product portfolio.
Supported by expansion in key items and core programs.
Initial results of this more balanced strategic approach to assortment and pricing are promising with an appeal across a broad range of customers.
We will continue to scale. This initiative in the spring of next year.
Our second priority has been focused on strengthening our marketing efforts.
Highlights some of these strategies, while Mark will go into a deeper discussion later on the call.
Based on our recent strategic review, we proactively reallocated and increased our marketing investment enhancing our reporting infrastructure to align more closely with our core objective of optimizing EBITDA.
This week celebration of resources and focus has already begun to bear positive results. During our testing period in October we observed an uplift in both incremental revenue and EBITDA. This improved performance in digital marketing efficiency is not just driving top line growth, but also contributing to a healthy flow through to eat.
EBITDA.
During this period of testing, we also witnessed a steady increase in our traffic trends both on our website and in store signaling a strong resonance of our brand with customers.
Our strategic efforts to optimize our in store assortment, coupled with our refined marketing approach.
We used shaping the tone and content of our messaging across all channels.
This synergy between in store experience and digital engagement is creating a cohesive brand narrative further solidifying our market position enhancing the overall customer journey.
This outcome underscores the effectiveness of our agile and data driven approach to resource allocation affirming our commitment to driving sustainable and profitable growth.
Finally, our strategic of just on cost and inventory management yielded strong outcomes.
Our visit to our vendors in Asia. This summer played a key role, resulting in another 120 basis point increase in our product margin after accounting for cost benefits and discounts.
The more I am pleased to report that the pilot program consisting of three clearance stores, which was launched on September 10th has proven to be a success.
These developments will undoubtedly serve as the catalyst for the expansion of our overarching strategic initiatives.
These stores along with their theater stores have experienced a significant margin improvement relative to the rest of the fleet.
By utilizing clearance stores, we are moving through markdowns more profitably.
Militating greater regular price assortment exposure in the theater stores.
Across the portfolio, we identified opportunities to rebalance investments and departments and channel breadth focusing on the ratio of a web exclusive choices, including color extensions versus one off choices Tonight reminds regular price sell through and reduce markdown exposure.
These efforts combined with improving demand have led to a year over year inventory decrease of 14%.
We anticipate further improvement in our inventory levels over the next year.
Regarding SG&A our results aligned with our estimates we are committed to disciplined expense management without adversely affecting our future growth strategy.
Our focus remains on investing in our core strategies to ensure a positive return as.
As we reflect on this quarter, it's clear that our targeted strategies and merchandising.
Depth and breadth along with our smart marketing investments and rigorous attention to cost management are beginning to show real results yet we remain prudent in this current market.
Currently steering several initiatives that I believe will solidify our position moving into the fourth quarter and next year. Moreover, I'm confident that our focused approach will lead to expansion in our EBITDA margin in the next year.
And with that I will now pass the call over to our Chief Commercial Officer Martin is heiko.
Thanks Lisa.
I'd like to start today by briefly discussing some of the highlights for the third quarter and then providing some updates on a few of the initiatives that our teams have been working on.
Our merchandising and planning teams remain focused on generating products margin expansion through better product sell through and continued improvements in pricing and promotion.
In the third quarter, we began to see some broad improvement in these trends we generated improvement in our topline trend better year over year full price product turns and product merchandise margin expansion.
We are encouraged by our progress so far we know that we have much more work to do there are opportunities for us to enhance our channel and assortment planning and to improve our product ranking and by accuracy.
Our expectation is that we will continue to see improvement in these trends over the coming quarters as the changes, we're making continue to horizon stores in the fourth quarter and throughout 'twenty 'twenty four.
Okay.
In the third quarter, we saw improvements across most of our major categories. Our teams have been focused on driving the casual assortment and especially those pieces that have the versatility to be dressed all before dress down and we are starting to see positive trends both in our stores and on our website.
In apparel, we were pleased with the performance in our tops business driven by class graphics and sweaters.
And our bottoms business, we saw the customer react positively to a variety of leg shapes completing wide leg.
Players and Joggers, we also had a great response to our trio denim launch and I've seen a legging business just steady improvement over the course of the year.
And the current thinking that's business, we saw strong performance in push up bra is probably less than in the panty business.
Wound was also strong driven by cozy separates and wear now silhouettes and styles in our super soft fabrication.
In addition, we continued to see nice results in the outdoor segment of our active business.
Turning to marketing, we continue to make progress on several fronts and promotional events. We've learned a great deal about the timing and cadence of our events, how we communicate them to the customer and how we synchronize our selling channels as.
As a result of these refinements to our strategies are toward cash redemption in October was by most measures. The most successful of the entire year.
Our expectation is that we shouldn't continue to see improved customer response to our events calendar as we utilize the data from each of them to shape, our future promotional calendar.
We recently launched a new data platform with our digital marketing agency and.
October we began testing the amount and allocation of our digital marketing spend.
Preliminary results were positive and we are continuing these efforts in the current quarter with the goal of maximizing the profitability of our marketing spend with a focus on how these efforts are increasing the size and performance of our customer file.
In addition to these initiatives we've continued to elevate the creative content that our marketing team produces and have made great progress in improving the user experience of our websites and apps.
To summarize our team continues to make positive changes to our merchandising planning and marketing processes. We believe that many of the small successes that we're beginning to see in the business have opportunities to lead to greater margin expansion going forward and improve customer file growth.
While there is still much to improve upon we remain focused on building and maximizing our brands.
And with that I will now turn the call over to Paul.
Thank you Mark and good afternoon, everyone first I would like to say I'm thrilled to have been appointed the Chief Financial officer, having joined nearly a year ago I have seen many positive developments with the company I feel honored to be part of such a great brand alongside industry veterans.
My commitment to supporting the supervision and driving sustainable growth through Maverick strategy has not changed I have confidence in our leadership team and I'm delighted to be here.
I will now start with a detailed discussion of our third quarter performance, followed by an update on our outlook for the fourth quarter and full year.
Our third quarter results exceeded our expectations in both the top and bottom lines, we focused on driving traffic to our stores and online which a lot just a question on improvement in our comparable store sales trends, while we have continued to carefully manage expenses and inventory.
Let's start by discussing our topline performance.
During the third quarter net sales of 275 million compared to 300 million last year with comparable sales in the quarter down 8%.
We were encouraged to see that our latest collection available in stores and online was met with him plus customer traffic trends.
In addition, our towards cash events exceeded our expectations driving a sense of urgency as customers have to gone to adapt to the changes we have made sure that promotion.
This event continues to be our most effective promotion.
Gross profit margin declined 80 basis points to 33.2 compared to the third quarter of 34% last year.
So lots of promotional activity relative to a year ago and improved product costs drove a 120 basis point improvement in product margin.
This was offset by store occupancy, which deleveraged 80 basis points on lower net sale is 75 basis point decline in private label credit card revenue on Friday, com and through leverage of 45 basis points and merchandising payroll cost and distribution expense.
SG&A expenses in the quarter were 72 million or 26.1 notch sales compared to 69 million or 23.2% of net sales last year.
The primary increases in SG&A was driven by a one time 1.6 million expense reversal in the prior year related to the performance incentives and.
The 1 million in noncash sovereigns pay out some the reduction enforced in August of this year.
We maintained a strong focus on managing controllable expenses, while capitalizing on efficiencies within our distribution center improved technology capabilities and maximizing returns from product cost reduction as a result of increased supplier productivity.
Marketing expenses in the quarter were $12 7 million compared to $12 6 million in the third quarter of last year.
As a percentage of net sales marketing increased 40 basis points to four six compared to four point chip push that in the third quarter of last year as we continue to effectively invest in digital marketing across all channels leveraging traffic both in stores and on the web.
Turning to our bottom line performance, our net loss for the quarter was $2 7 million or a loss of three cents per share versus net income of $7 3 million or seven cents per share for the same period last year.
In addition to GAAP measures, we believe that adjusted EBITDA is an important measure that we use to evaluate and manage our business.
That EBITDA was 19 million or 7% of net sales compared to 32 million or 10, 7% of net sales in the quarter of 2022.
Turning to the balance sheet.
Our cash and cash equivalents stood at 16 million at the end of the quarter total liquidity at the end of the third quarter, including available borrowing capacity under our revolving credit agreement it was $153 1 million.
Total debt at the end of the quarter was 314 million compared to 327 million in the third quarter of 2022.
Our net debt to adjusted EBITDA was two eight times at quarter end.
Okay.
Inventory at the end of the quarter decreased 14% to 171 million compared to 200 million at the end of the third quarter of fiscal 'twenty two.
We are comfortable with our current inventory levels.
In Q3, we opened five towards stores and closed one store ending the quarter was 643 stores.
We recognize the value and impact our stores have on our customers and business results over the last 12 months, we have seen a greater shift to customers acquired through stores approaching 2019 levels.
The source hold an important value in our customer journey as it plays a pivotal role in converting single channel customers to omni customers within the first yeah. The spa.
Lending habits of these omni customers are key as they spend an average of more than three and a half times than their single channel counterparts.
With that in mind, we remain focused on an integrated omnichannel strategy seamlessly bridging our brick and mortar stores with all but business, creating a pleasant experience for our customers.
We're making progress improving store profitability through diligent inventory management seem like supply chain and strategic labor management processes.
In addition, we continue to review the process of evaluating our store fleet as well as taking a detailed approach to determine future location. This includes repositioning some of our stores to new shopping centers.
Targeted improvements are in line with our customer expectations on traffic trends reinforcing the importance, we place on our customers' views and experiences.
We are seeing that this comprehensive approach both operational efficiency and customer centric strategy will translate into increased traffic and customer acquisition.
We remain focused on delivering exceptional value to our customers, while driving sustainable growth for our shareholders.
Moving to our outlook, while we're encouraged by the trends in our business and believe that we're well positioned for the holiday season, with our new marketing strategies and latest new collection, we remain mindful of the pressure at.
Art under today.
The current macro environment creates a heightened level of uncertainty what's it causes us to be prudent in our guidance.
We will remain focused on carefully managing expenses and expect our head count reduction initiatives will yield favorable results. Looking ahead, we expect to see a more significant impact from our initiatives in fiscal 'twenty 'twenty, four driven primarily by improved product cost and pricing architecture.
For fiscal 2023, given our stronger than expected third quarter results, we are raising our outlook for the year.
We now expect sales to be between 1.125 billion and 1.140 billion and adjusted EBITDA should be between 99 million to 109 3 million, which includes the impact of the 53rd week.
Dissipate net sale of the 50 <unk> week to be between 14 million to 18 million.
Capital expenditures to be between $25 million and 30 million for fiscal 'twenty to 'twenty three reflect some technology investments and between 34 to 36, new store openings for the year.
For the fourth quarter, we project net sales for range from 267 million to 283 million and adjusted EBITDA to be between 9 million and $13 million.
With that I will now I'll turn it over to the operator for questions.
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One moment, please while we poll for questions.
Thank you.
Our first question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.
Good afternoon, and thank you so much for taking our question I was hoping you could elaborate on the cadence of consumer trends that you've seen as you've moved through the third quarter and into holiday in terms of traffic ticket and conversion.
And as you make these changes to your marketing and merchandise strategy. How are you thinking about the opportunity to return to positive sales growth going forward. Thank you.
Yeah.
Hi, Brock this is Lisa we are seeing sequential improvement in both channels.
For the third quarter in terms of traffic.
Average unit retail is up or average transaction size is down slightly.
Think that can be attributed to lower inventory levels, so lower clearance inventory associated with that as well.
We're seeing more consistency in our ability to forecast in and rationalize the trend of the consumer.
Or would you still say that they're there they continue to be picky, and we think that the move towards casual and kind of a younger feeling on the overall assortment has been very very well received by the customer.
I would expect that on a year over year basis, we should start to see.
Hum.
The positive side I'm, assuming that's for sure and that would be accompanied with some margin expansion related to the things that we've talked about in terms of cost of goods and the margin initiatives that we have in place.
I think I might've missed the last part of your question.
I think I think you've covered it we talked about kind of big ticket conversion and the opportunity to return to sales growth I guess, just a follow up for Paula can you elaborate a bit more on what youre seeing in credit card income and how you're forecasting that going forward what impact could you see if there's a change in industry late fee structure.
Or other changes to consumer credit.
Yeah of course.
So what we did see is on a from a penetration standpoint, our private label credit card was slightly down from last year, but not overly concerning.
We are definitely seeing consumers being a little bit.
Slower on spending on their private label credit card just because of current interest rates I think as we move forward, we don't necessarily know what the decision there won't be a and what are the fees will be changing or not so at this point we are just.
Like everybody else into it in the industry just Washington, He is and it's actually I'm starting to prepare our plans just in case there there is a change but at this point, where you just have to I'm. Just just do the best we can in and listen to just see if there's any updates.
Yeah.
Thanks, So much I'll pass it on.
Thank you. Our next question comes from the line of Alex Stratton with Morgan Stanley. Please proceed with your question.
Hi, This is Katie delahunt on for Alex Straighten. Thank you so much for taking my question and congrats on the quarter I just was wondering.
I know you had spoke to a number of initiatives that you thought were contributing to kind of this better than expected print.
The wider price points to improve assortment marketing do justice to the cashier man is there any one in particular that you would point to as the main driver or is it really just kind of a compounding of all of these together.
I think the most important thing we've done the two most important things we've done our assortment oriented are moving toward a more casual younger assortment and inventory management because those are kind of the basis for every other.
Strategy that we employ I do think hum them.
Being in line with inventory allows us to focus on margin expansion and having the right product allows us to build margin am I think the marketing initiative is something that has a long tail to it that I think will improve customer acquisition retention and frequency over time, and I didn't and I think that what.
We're doing in terms of.
No.
Those are the main ones I think the clearance store strategy, where the feed or clearance.
Asian generates more margin than the rest of the fleet. That's that's really compelling. So what we're trying to do is make sure that we are very carefully focused on assortment and inventory levels and then layering in these margin initiatives and margin improvement initiatives on top of that and then the marketing.
Move and increased investment in digital marketing and a careful of review and data analytics that determine how we're investing moving forward in the short term return on that as well as the mid and long term return of those investments.
Fundamental shift for us that's going to continue to pay off as we go into next year.
Is that helpful.
Yes very helpful. Thank you and maybe one more for me I Hope we were just wondering you know what is your fourth fourth quarter guide assuming in terms of demand.
Speak to you know any quarter to date trend strictly you know around around Black Friday that would be really helpful. Thank you.
Sure we were happy with the performance during November particularly around <unk>.
Black Friday, and cyber we were less promotional on a year over year basis. So it was really not much of a top line story as it was a margin.
Expansion story, and we're very happy with how all of that those results.
I think again.
As we rebalance assortments and inventories and we're being able.
Able to really focus on gross margin dollars and that's that was the tone of how we approached the black Friday and cyber events.
Great. Thank you.
Yeah.
Thank you. Our next question comes from the line of Cory Tarlow with Jefferies. Please proceed with your question.
Great. Thanks, Lisa I was wondering if you could just talk a little bit from a.
Trend perspective, what worked for you in the quarter and into holiday and how are you flexing into some of those trends as we head throughout the next couple of key weeks here of the fourth quarter.
Sure. So some of the things that are working well for us or anything in the cozy area. So sweatshirts and he cozy fabrications graphics are working for us get them in a lot of different leg shape. So didn't get them is down overall, but as we've gone into flare and wide leg and boot and.
A variety of life shapes that is really catching the attention of the customer and delivering them I think that we've done a good job with our holiday kind of sparkle assortment and that's been very very well received and moving through so what's interesting about it is that we have kind of a.
The high end of that.
Driven product that's working and then we have the cozy casual pieces that are working as well and so that is I think.
A precursor of how we're thinking about.
Shortener, then are our customers and us as we move forward.
The other pieces that are working in intimates bras panties.
Plus pushout plunged silhouette are all working really well sleep has worked really well anything Christmas specific has worked really well mm mm. So.
As we move forward, obviously, there's the Christmas pieces are less relevant, but I think the balance between casual cozy and you know are higher.
That's driven the end uses.
Better way to for us to manage our business actually as we progress.
Yeah.
Great.
Thanks, and Paul just on the gross margin as you think about the factors that have impacted the gross margin. So far this year and in the third quarter.
As you think holistically about some of the puts and takes of the margin.
The headwinds and tailwind.
What are some that you expect to stay for a little while and what are some that perhaps you're gonna come away and as perhaps sales get better and we start to see a much higher margin in the future.
Yeah. That's a great question. So as you as you noted for Q3, our gross margin was slightly down but as we mentioned our product margin was up so it was down really do true do you leverage them more to do so with volume just not fails.
As we move forward into Q4 from an expectation standpoint, we think it's gonna be aligned with where we wore last year more in sell in so hum.
Sales continue to improve we're definitely going to see that improvement in gross margin into the next year.
Hopefully in that regard.
Great. Thanks, so much best of luck.
Thank you. Our next question comes from the line of Mark All Altra water with Baird. Please proceed with your question.
Hi, This is Amy husky on for Mark. Thank you for taking our question you noticed some positive results from the testing of the clearance stores.
Were there any traffic trends here that were different than the balance of the chain and it's attracting a different type of customer and then bigger picture can you just help us size the opportunity here, how many stores could become clearer and stores. Thank you.
Yeah.
So so far.
For the clearance centers on the clearance theater stores I think the high line highlights of the performance.
Is the margin expansion that we saw in the theater stores in particular.
Which was was driven by a few things one there was a shift out of clearance selling into Iraq, because there was much less clearance on this on the floor of course.
And the second part is that we took some of the space and we put some more of our Reg price assortment in it. So there was a pretty nice expansion of margin dollars in the theater stores, we're still doing some work on trying to optimize the particular model of how many feet.
Your stores there are per clearance center, how to continue to drive even more margin dollars in the clearance centers themselves as.
As for as for the traffic and the customer trends. It was not meaningfully meaningfully different I don't have we didn't really dissect it yet to see if there are differences in demographics going in the traffic trends were very similar it was just more of a make up of what of what they were picking up.
That was driving it.
Okay. Thank you.
Yeah.
Thank you.
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Our next question comes from the line of Dylan Carden with William Blair. Please proceed with your question.
Thank you I'm, just trying to feel out.
What if any conservatism here kind of baked into guidance given.
Given the performance you just put up.
Looking at pre pandemic sales levels it would suggest something other.
Deceleration I just want to sort of make sure I understand kind of how you're thinking about the world here.
I would just say.
Sure.
Right.
That we are.
Watching the customer from week to week, there's a lot of business to be done right. Now we don't peak the same way that other retailers peak in the fourth quarter, we have a big event with toward cash and in January and then again as you know something that's always back loaded in our in our performance.
As I mentioned earlier, we weren't happy with margin performance, particularly which was our strategy over black Friday, and cyber and we're very happy with our inventory levels. So we don't have a lot of product to clear we don't have a lot of you know.
[noise] areas of inventory that are in backlog in us at all so it is a clean her scenario, but we are watching the consumer week by week, and becoming more and more comfortable with that performance. So I can you know I can't tell you what scale of conservatism that we're.
And here, we're trying to be as pragmatic and prudent as possible as we as we move forward and the and.
Whereas with executing some of our strategies and refining them.
Makes sense. Thank you.
Thank you.
On pricing and sort of.
Lower clearance levels cleaner inventories any way to scale, maybe in essentially sort of product margin terms sort of a structural level that you're targeting as far as sort of what that opportunity the E.
The magnitude I would think it'd be pretty big I'm, just kind of given some of the history here.
Do you think there's over the next.
Year, or so substantive Samsung and margin in the product.
I can't say, we're going to go back to our high level from a historical basis, but we certainly feel that with all of us out with what the costing the improved assortment and inventory management and all the other strategies that we've talked about which are we have strategies in place that we did not have optimized and and kind of.
The prior experience of the brand that we think that there is I would say substantive margin expansion opportunity in the business.
The high watermark for them.
Probably its origin.
What would the high watermark not be feasible.
Given input inflation or why wouldn't you expect to go to get back to that is to your point you sort of implement them.
Have you looked at a turtle next because we're so heavily we shifted from 19 to through the pandemic. So much higher penetration online, where we were more like 50 50 in 19, but we're higher than that now that there's you know the fundamental economics of the the web channel.
Doug.
Doug will allow us to get back I don't think at this point to the topline historical merch margins that we've been able to.
To fit in the past.
But it's still a.
A substantial improvement over all right.
And then finally just on the marketing.
Testing that Youre doing.
And apologies if I missed this.
When are you kind of looking to do a fuller rollout and as part of the thought here that maybe you would wait for.
I didn't know better macro or are a more meaningful quarter before you kind of start leaning into that more seriously.
Oh, well, we we.
The results we saw didn't didn't give us any indication that we will have reasons to pull back. So the extra level of investment that we started in October we've continued through November and into this quarter and you know it's still very early every every metric.
We look at it makes us feel like the level that we have is right. We're not ready to make a call on whether that gets increased to another level, yet, but we we monitor all the metrics and analyze the daily data on a weekly basis and so we're constantly having.
Actions about how to reallocate where to increase and what the overall level should be so we'll we'll certainly continue to monitor that.
Hopefully.
Future conversations about it about the direction that we're taking.
Well when you have a very important.
Eric It's a very important area to invest in and as we are as we mentioned in the I think in the comments today that are our customer acquisition numbers and as a percentage are up in stores to 2019 levels, but we think that we can do a better job in trends in terms of customer acquisition and retention through the digital.
Channel to augment that more effectively and I think the team has done a great job and using the data on a daily weekly basis to make really smart calls in those investments.
Got it.
You say, it's sort of EBITDA accretive.
Or what are the primary drivers of that is that just throughput.
Leveraging.
The primary drivers are where the the returns on the levels of what we're spending or are such that the.
The price per customer session or traffic or store visitor.
And the conversion rates that we're getting R. R.
Are flowing through to EBITDA in other words, we're getting more than enough sales margin dollars considering all of the additional variable cost, but there are.
To cover the investment.
And have EBITDA flow through after all of that.
Oh, okay.
Did I answer your question yes.
Thank you.
Thank you there are no further questions at this time I'd like to turn the floor back over to CEO, Lisa Harper for closing comments.
Thank you all for joining US today, we appreciate your attention on on our brand and business I Hope all of you guys have a wonderful holiday season, and we look forward to connecting with you guys in the new year with the fourth quarter and full year results. Thank you so much.
This concludes today's teleconference. You may disconnect your lines at this time.
You for your participation.
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