Q4 2024 Zumiez Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen, and welcome to the Zumiez Inc. fourth quarter fiscal 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Yeah.

Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Zumiez, Inc. Fourth quarter fiscal 2023 earnings conference call. At this time all participants are in a listen only mode. We will conduct a question and answer session towards the end of this conference.

Operator: We will conduct the question and answer session towards the end of this conference call. Before we begin, I'd like to remind everyone of the company's Safe Harbor language. Today's conference call includes comments concerning Zumiez Inc., and the Business Outlook, and contains four forward-looking statements. These forward-looking statements and all other statements that may be made on this call that are not based on historical facts are subject to risks and uncertainties. Actual results may differ materially.

Speaker Change: Before we begin I'd like to remind everyone of the Companys Safe Harbor language.

Speaker Change: Today's conference call includes comments concerning Zumiez, Inc. Business outlook and contains forward looking statements.

Speaker Change: These forward looking statements and all other statements that may be made on this call that are not based on historical facts are subject to risks and uncertainties.

Speaker Change: Actual results may differ materially additional information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available in the new filings, but the S. E C.

Operator: Additional information concerning the number of factors that could cause actual results to differ materially from the information that will be discussed is available in Zumiez filings with the SEC. At this time, I will turn the call over to Rick Brooks, Chief Executive Officer. Mr. Brooks.

Speaker Change: At this time I will turn the call over to Rick Brooks, Chief Executive Officer, Mr. Brooks.

Richard M. Brooks: Hello, everyone, and thank you for joining us on today's call. With me today is Chris Work, our Chief Financial Officer. I'll begin with a few remarks about our fourth quarter and full year performance before discussing some of our strategic priorities for 2024. Chris will then take you through the financials and our outlook for the coming year. After that, we'll open the call to your questions.

Richard M. Brooks: Hello, everyone and thank you for joining us on today's call.

Richard M. Brooks: With me today is Chris work, our Chief Financial Officer.

Richard M. Brooks: I'll begin with a few remarks about our fourth quarter and full year performance before discussing some of our strategic priorities for 2020 for.

Christopher Codington Work: Chris will then take you through the financials and our outlook for the coming year.

Christopher Codington Work: After that we'll open the call to your questions.

Richard M. Brooks: The fourth quarter represented an encouraging finish to what was a challenging year. As was the case throughout fiscal 2023, we faced headwinds in the fourth quarter, including highly promotional activity across the soft lines retail sector and an increasingly selective consumer pressured by the multi-year inflationary impact on discretionary income. That said, our men's business turned positive in November, and growth accelerated in both December and January. Overall momentum built throughout the quarter with total sales trends improving month to month, culminating in January turning to positive and comparable sales, fueling fourth-quarter sales and adjusted EPS that were both above the high end of our guidance range. In many ways, the fourth quarter monthly sale trends were a microcosm of the trend we've seen throughout the year.

Christopher Codington Work: The fourth quarter represented an encouraging finish to what was a challenging year.

Christopher Codington Work: So that's what the case throughout fiscal 'twenty to 'twenty, three we faced headwinds in the fourth quarter, including highly promotional activity across the soft lines retail sector and an increasingly selective consumer pressured by the multi year inflationary impact on discretionary income.

Christopher Codington Work: That said our men's business turned positive in November and growth accelerated in both December and January.

Christopher Codington Work: Overall momentum built throughout the quarter with total sales trends are improving month to month comedy in January turning to positive comparable sales.

Christopher Codington Work: Fourth quarter sales and adjusted EPS that were both above the high end of our guidance ranges.

Christopher Codington Work: Many ways the fourth quarter it.

Christopher Codington Work: Must be sale trends were a microcosm of the trend we've seen throughout the year.

Richard M. Brooks: To recap our improving trend line, year-over-year total sales were down 70% in the first quarter, down 12% in the second quarter, down 9% in the third quarter, and down less than 4% in the fourth quarter, excluding the benefit of the 53rd week, which drove sales slightly positive for the quarter. As we enter 2024, we've continued to see some areas of strength in our business. While total sales trends for February were not yet positive, we did see sequential strength as we moved through the month and noted that the primary headwind was tied to seasonal snow sales in Europe that turned negative in February after being significantly positive in January due to the timing of promotions. For October through February, European snow sales were down low single digits, despite significant variability across periods that pushed our seasonal snow comparable sales positive in January and negative in February.

Christopher Codington Work: To recap our improving trend line year over year total sales were down 70% in first quarter down 12% in the second quarter down 9% in the third quarter and down less than 4% in the fourth quarter, excluding the benefit of the 50, <unk> week, which drove sales slightly positive for the quarter.

Christopher Codington Work: As we enter 2024, we've continued to see some areas of strength in our business.

Christopher Codington Work: While total sales transfer February we're not yet positive we did see sequential strength as we move through the month and noted that the primary headwind was tied to seasonal snow sales in Europe.

Christopher Codington Work: Negative in February after being significantly positive in January.

The timing of promotions.

Christopher Codington Work: For October through February Europe's snow sales were down both single digits, despite significant variability across periods that pushed our seasonal snow comparable sales positive in January and negative in February.

Richard M. Brooks: To be clear, 2023 was a disappointing year overall, and we're not satisfied with our results. With two years of meaningful, negative, comparable sales trends, the business is deleveraged significantly, and we experienced the first annual net loss in our history this last year. As we look to 2024, we expect the macroclimate to remain a headwind in the near term, as Chris will detail in our outlook.

Christopher Codington Work: To be clear 2023 was a disappointing year overall and we're not satisfied with our results with.

Christopher Codington Work: With two years of meaningful negative comparable sales trends the business of deleverage significantly.

Christopher Codington Work: And we experienced the first annual net loss in our history. This last year.

Christopher Codington Work: As we look to 2024, we expect the macro climate to remain a headwind in the near term as Chris will detail on our outlook. However, we are optimistic that the work we're doing will inflect our trend line positive.

Richard M. Brooks: However, we are optimistic that the work we're doing will inflect our trend line positively. Overall, we will focus on items within our control to grow sales and drive the business back to profitability. To that end, we plan to take specific actions to adjust portions of our strategy in the new year.

Christopher Codington Work: Overall, we will focus on the items within our control to grow sales and drive the business back to profitability to.

Christopher Codington Work: To that end, we plan to take specific actions to adjust portions of our strategy in the new year.

Richard M. Brooks: I'll quickly take you through the most significant changes, starting with a shift in focus for European business. The last few years have been particularly challenging for profitability in the European market. The business was close to achieving break-even in 2019 before the onset of the pandemic. However, the longer and stricter pandemic area closures in Europe, combined with the inflationary impact on the consumer and instability in the region in the years since, have resulted in earnings declines for our European business since 2020. To correct this negative trend, we're pivoting our focus away from store expansion to enhancing the productivity of the existing European business. The Solid Foundation, nearly 90 stores across 9 countries, and a pan-European web business. We believe we have adequate penetration today in the relevant European markets to unlock the potential for the concept and create value as we work through what has been a difficult cycle.

Christopher Codington Work: I'll quickly take you through the most significant changes starting with a shift in focus for the European business.

Christopher Codington Work: The last few years have been particularly challenging for profitability in the European market the.

The business is close to achieving breakeven in 2019 before the onset of the pandemic.

Christopher Codington Work: However, the longer and stricter pandemic area closures in Europe, combined with the inflationary impact of the consumer and instability in the region and they are since have resulted in earnings declines for our European business since 2020.

Christopher Codington Work: To correct. This negative trend, we're pivoting our focus away from store expansion.

Christopher Codington Work: The productivity of the existing European business.

Christopher Codington Work: The solid foundation barely 90 stores across nine countries and a pan European Web business. We believe we have adequate penetration today and the relevant European markets to unlock the potential for the concept and they create value, which we're working through what has been a difficult cycle.

Richard M. Brooks: By focusing on increasing the productivity of our current business in Europe, we'll improve our near-term profitability and cash flow, while also creating a profitable platform for long-term growth in the future. We have seen positive signs such as double-digit comparable sales growth in Germany, the Netherlands, Norway, and Sweden during the year, which gives us confidence that we can achieve profitability in Europe as we have done in other international markets like Canada and Australia. There's no doubt that trends emerge locally and grow globally.

Christopher Codington Work: By focusing on increasing the productivity of our current business in Europe will improve our near term profitability and cash flow. We're also creating a profitable platform for long term growth in the future.

Christopher Codington Work: We have seen positive signs such as double digit comparable sales growth in Germany, the Netherlands, Norway, and Sweden during the year, which gives us confidence that we can achieve profitability in Europe as we've done in other international markets like Canada and Australia.

Christopher Codington Work: There's no doubt that transit mercury locally and grow globally.

Richard M. Brooks: Remaining relevant in these markets is a significant advantage to Zumiez over the long term in serving both our customers and our brand partners. This heightened emphasis on profitability extends beyond Europe. In 2023, we closed 20 underperforming North American stores and expect to close an additional 20 to 25 locations in 2024 should results continue to be challenged. As a result, we have reduced field and corporate staffing levels to align with the reduced door count.

Christopher Codington Work: Maybe any relevant in these markets is a significant advantage to zumiez over the long term and serving both our customers and our brand partners.

Christopher Codington Work: This heightened emphasis on profitability extends beyond Europe in 2023, we closed 20 underperforming North American stores <unk>.

Christopher Codington Work: <unk> closed an additional $20 to 25 locations in 2024 showed results continued to be challenged.

Christopher Codington Work: As a result, we have reduced field at corporate staffing levels to align with reduced store count.

Richard M. Brooks: We're also further optimizing store labor through several initiatives, including adjustments to staffing models at lower volume stores. We have made structural changes to reduce shipping and logistics costs company-wide and continue to implement other cost savings opportunities in many areas throughout the organization. While we hone our focus on profitability company-wide, we're also making investments to ensure we continue to win with customers, including injecting our assortments with newness. In 2023, we launched nearly 200 new brands, almost double a typical year.

Christopher Codington Work: So further optimizing store labor through several initiatives, including adjustments to staffing models at lower volume stores.

Christopher Codington Work: We have made structural changes to reduce shipping and logistic costs companywide and continue to implement other cost savings opportunities in many areas throughout the organization.

Christopher Codington Work: While we heightened our focus on profitability company wide. We're also making investments to ensure we continue to win with customers, including injecting assortments with newness in 2023, we launched nearly 200, new brands almost double a typical year.

Richard M. Brooks: And we expect this newness with relevant and desired brands to continue to attract a broader customer set into 2024 and beyond. We're already seeing our new brands launched in the last couple of years represent a larger portion of our sales than we've historically seen, which we believe is an indication that they're responding with our customers. We're also growing our private label brand. Private label represented approximately 23% of sales in 2023, compared to 18% in 2022 and 13% in 2021, which is a testament to our teams in capturing both the trend and value of customers and provides another significant runway for growth. And we're maintaining our best-in-class service in stores and on the web.

Christopher Codington Work: We expect this newness with relevant and desired brands to continue to attract a broader customer set into 2024 and beyond.

We're already seeing our new brands launched in the last couple of years represent a larger portion of our sales than we've historically seen which we believe is the indication that they are resonating with our customers.

Christopher Codington Work: We're also growing our private label brands private label represented approximately 23, 23% of sales in 2023 compared to 18% in 2022 and 13% in 2021.

Christopher Codington Work: Which is a testament to our teams in capturing both the trend and value customer and provides another significant runway for growth.

Christopher Codington Work: And we are maintaining our best in class service in stores and on the web with continued investment in training and technology that combined are aimed at enhancing our relationship with customers and connecting with them in a more personalized and relevant way.

Richard M. Brooks: We'll continue to invest in training and technology that, combined, are aimed at enhancing our relationship with customers and connecting with them in a more personalized and relevant way. After two challenging years, we're ending 2024 with a strong balance sheet and over $170 million in cash that will allow us to weather the current environment. Before I close the call and turn the call over to Chris, I'd like to thank our teams and our brand partners for their efforts and partnerships in 2023.

Christopher Codington Work: After two challenging years, we're adding 2024 with a strong balance sheet and over $170 million in cash.

Christopher Codington Work: That will allow us to weather the current environment.

Speaker Change: Before I call before I close the call and turn the call over to Chris I'd like to thank our teams and our brand partners for their efforts and partnerships in 2023.

Christopher Codington Work: Our talented and dedicated people have been a bright spot as we've navigated recent challenges and will be the driving force behind the company's return to sustainable growth in the quarters and years ahead. I remain confident in our ability to serve our customers and drive back profitability and positive cash flow and look forward to updating you on our progress in the quarters ahead. With that, I'll turn the call over to Chris to discuss the finances. Thanks, Rick. Good afternoon, everyone.

Speaker Change: Our talented and dedicated people have been a bright spot and we navigated recent challenges and will be the driving force behind the company's return to sustainable growth in the quarters and years ahead.

Christopher Codington Work: I remain confident in our ability to serve our customers and drive back to profitability and positive cash flow.

Christopher Codington Work: We look forward to updating you on our progress in the quarters ahead.

Christopher Codington Work: With that I'll turn the call to Chris to discuss the financials.

Christopher Codington Work: I'm going to start with a review of the fourth quarter and full year 2023 results. I'll then provide an update on our first quarter's daily sales trends before providing some perspective on the full year. Net sales for the fourth quarter of 2023, which was a 14-week period, increased 0.6% to $281.8 million compared to $280.1 million in the fourth quarter of 2022, which was a 13-week period. Comparable sales were down 3.9%.

Christopher Codington Work: Thanks, Rick and good afternoon, everyone I'm going to start with a review of the fourth quarter and full year 2023 results. I'll then provide an update on our first quarter to date sales trends before providing some perspective on the full year.

Christopher Codington Work: Net sales for the fourth quarter of 2023, which was a 14 week period increased 0.6% to $281 8 million compared to $280 1 million in the fourth quarter of 2022, which was a 13 week period.

Christopher Codington Work: Comparable sales were down three 9% the decrease in comparable sales was driven by continued inflationary pressure on the consumer continued challenges and competition for the discretionary dollar and tougher trends in certain categories of our business from a regional perspective, comparing a 14 week period in the current year to the 13 week period in the prior year North America net sales were two.

Christopher Codington Work: The decrease in comparable sales was driven by continued inflationary pressure on the consumer, continued challenges and competition for the discretionary dollar, and tougher trends in certain categories of our business. From a regional perspective, comparing the 14-week period in the current year to the 13-week period in the prior year, North American net sales were $212.4 million, a decrease of 3.4% from 2022. Other international net sales, which consist of Europe and Australia, were $69.4 million, up 15.2% from last year.

Christopher Codington Work: $12 4 million a decrease of three 4% from 2022 other international net sales, which consists of Europe, and Australia were $69 4 million or 15, 2% from last year.

Christopher Codington Work: Excluding the impact of foreign currency translation, North American net sales decreased 3.4%, and other international net sales increased 12.3% compared with 2022. Comparable sales for North America were down 5.4%, and comparable sales for other international were up 0.9% for the 14 weeks ended February 3, 2024. From a category perspective, men's was the only category with positive comparable sales for the quarter, while all other categories were down from the prior year. Women's was our most negative category, followed by accessories, hard goods, and footwear.

Christopher Codington Work: Excluding the impact of foreign currency translation, North America net sales decreased three 4%.

Christopher Codington Work: International net sales increased 12, 3% compared with 2022.

Christopher Codington Work: Comparable sales for North America were down five 4% and comparable sales for either a national were up <unk>, 9% for the 14 weeks ended February three 2024.

Christopher Codington Work: From a category perspective men's was the only category with positive comparable sales for the quarter, while all other categories were down from the prior year.

Women's was our most negative category, followed by accessories hardgoods and footwear.

Christopher Codington Work: The decrease in comparable sales is driven by a decrease in transactions, partially offset by an increase in dollars per transaction. Dollars per transaction were up for the quarter, driven by an increase in units per transaction and an increase in average unit retail. Fourth quarter gross profit was $96.7 million, compared to $95.3 million in the fourth quarter of last year. Gross profit was 34.3% of sales for the quarter, compared with 34% in the fourth quarter of 2022. The 30 basis point increase in gross margin was primarily driven by 70 basis points of benefits in shipping costs related to better outbound shipping rates.

Christopher Codington Work: The decrease in comparable sales was driven by a decrease in transactions, partially offset by an increase in dollars per transaction.

Christopher Codington Work: Per transaction were up for the quarter driven by an increase in units per transaction and an increase in average unit retail.

Christopher Codington Work: Fourth quarter gross profit was $96 7 million compared to $95 3 million in the fourth quarter of last year gross profit was 34, 3% of sales for the quarter compared with 34% in the fourth quarter of 2022.

Christopher Codington Work: The 30 basis point increase in gross margin was primarily driven by 70 basis points of benefit and shipping costs related to better outbound shipping rates 60 basis points positive impact related to a mix shift away from service related shipping revenue in the prior year results, which carried a negative margin during the prior year quarter.

Christopher Codington Work: 60 basis points of positive impact related to a mixed shift away from service and related shipping revenue in the prior year results, which carried a negative margin during the prior year quarter. And 30 basis points of leverage and store occupancy costs related to a reduction in total expense year over year, combined with a modest increase in sales related to the 53rd week. These benefits were offset by a 110 basis point reduction in product margin due to discounted selling to manage age inventory, which was generally in line with our expectations, and a 20 basis point to deleverage and fix and other costs included in gross margin. SG&A expense for the fourth quarter of 2023 was $129.4 million, or 45.9% of net sales for fiscal 2023, compared with $80.1 million, or 28.6% of net sales in 2022

Christopher Codington Work: And 30 basis points of leverage in store occupancy costs related to a reduction in total expense year over year combined with the modest increase in sales related to the 50 <unk> week.

Christopher Codington Work: These benefits were offset by 110 basis point reduction in product margin due to discounted selling to manage aged inventory, which was generally in line with our expectations and 20 basis points of deleverage in fixed and other costs included in gross margin.

Christopher Codington Work: SG&A expense for the fourth quarter of 2023 was $129 4 million or 45, 9% of net sales for fiscal 2023, compared with $80 1 million or 28, 6% of net sales in 2022. This includes a $41 $1 million noncash.

Christopher Codington Work: This includes a $41.1 million non-cash goodwill impairment charge that resulted from our decision to slow growth in Europe and focus on profitability. This change in our modeling had a direct impact on the future cash flow projections of our Blue Tomato business, which have been tied to increased store growth and improved performance as we grow the business. The 1,730 basis point increase in SG&A expenses as a percent of net sales is driven by the following. 1,440 basis point increase driven by the impairment of goodwill in Europe. 140 basis points increase related to store wages deleveraging on the decrease in comparable sales as well as wage rate increases. 70 basis points increase in non-wage store operating costs. 50 basis point increase in other corporate costs and a 30 basis point increase in non-store wages.

Christopher Codington Work: Noncash goodwill impairment charge that resulted from our decision to slow growth in Europe and focus on profitability. This change in our modeling at a direct impact on the future cash flow projections of our blue tomato business that had been tied to increase store growth and improved performance as we grow the business.

Christopher Codington Work: The 1730 basis point increase in SG&A expenses as a percent of net sales was driven by the following 1440 basis point increase driven by the impairment of goodwill in Europe <unk>.

Christopher Codington Work: Third 40 basis point increase related to store wages deleveraging on the decrease in comparable sales as well as wage rate increases.

Christopher Codington Work: 70 basis point increase in non wage store operating costs.

Christopher Codington Work: 50 basis point increase in other corporate costs, and 30 basis point increase in non store wages.

Christopher Codington Work: Operating loss in the fourth quarter, inclusive of the $41.1 million goodwill impairment charge, was $32.8 million, or 11.6% of net sales, compared with operating profit of $15.2 million, or 5.4% of net sales last year. Net loss for the fourth quarter was $33.5 million, or $1.73 per share. This includes the goodwill impairment charge, which on an after-tax basis was $41.1 million, or $2.13 per share. For the year-ago period, we reported net income of $11.4 million, or $0.59 per diluted share. We had tax expense in the current quarter despite our pre-tax operating loss due to the distribution of pre-tax income across our different tax jurisdictions.

Christopher Codington Work: Operating loss in the fourth quarter inclusive of the $41 1 million goodwill impairment charge was $32 $8 million or 11, 6% of net sales compared with operating profit of $15 2 million or five 4% of net sales last year.

Christopher Codington Work: Net loss for the fourth quarter was $33 $5 million or $1 73 per share. This includes a goodwill impairment charge, which on an after tax basis was $41 1 million or $2 13 per share in the year ago period, We reported net income of $11 4 million or <unk> 59 per diluted share we.

Christopher Codington Work: We had tax expense in the current quarter, despite our pre tax operating loss due to the distribution of pretax income across our different tax jurisdictions. This compares to an effective tax rate of 29, 2% in the fourth quarter of last year.

Christopher Codington Work: This compares to an effective tax rate of 29.2% in the fourth quarter of last year. Looking at our full-year results, net sales for the 53 weeks of fiscal 2023 were $875.5 million, a decrease of 8.6% from $958.4 million in 2022. Comparable sales for the full year were down 10.6%. The decrease in comparable sales was related to continued inflationary pressures on the consumer, continued challenges and competition for the discretionary dollar, and tougher trends in certain categories of our business. From a regional perspective, North American net sales were $697.6 million, a decrease of 13.1% from 2022. Other international net sales were $177.9 million, up 14% from last year. Excluding the impact of foreign currency translation, North American net sales decreased 12.9 percent and other international net sales increased 11.8 percent compared with 2022. Comparable sales for North America were down 13.5%.

Christopher Codington Work: Looking at our full year results net sales for the 53 week fiscal 2023 were $875 $5 million a decrease of eight 6% from $958 $4 million in 2022.

Christopher Codington Work: Comparable sales for the full year were down 10, 6%. The decrease in comparable sales was related to continued inflationary pressures on the consumer continue to challenge the competition for the discretionary dollar and tougher trends in certain categories of our business.

Christopher Codington Work: From a regional perspective, North America net sales were $697 6 million a decrease of 13, 1% from 2022.

Christopher Codington Work: The international net sales were $177 $9 million up 14% from last year.

Christopher Codington Work: Excluding the impact of foreign currency translation, North America net sales decreased 12, 9% and other international net sales increased 11, 8% compared with 2022.

Comparable sales for North America were down 13, 5% and comparable sales for other international were up three 4% for the 53 week year ended February three 2024.

Christopher Codington Work: And comparable sales for other international were up 3.4% for the 53-week year ended February 3, 2024. From a category perspective, all categories were down from the prior year in comparable sales. Full wear was our most negative category, followed by women's, accessories, hard goods, and men's.

Christopher Codington Work: From a category perspective, all categories were down from the prior year and comparable sales footwear with our most negative category followed by women's accessories hard good demands. The decrease in net sales included a decrease in transactions, partially offset by an increase in dollars per transaction. The increase in dollars per transaction was driven by an increase in average unit retail partially.

Christopher Codington Work: The decrease in net sales included a decrease in transactions, partially offset by an increase in dollars per transaction. The increase in dollars per transaction was driven by an increase in average retail prices, partially offset by a decrease in units per transaction. In 2023, gross margin was 32.1% compared with 33.9% in 2022. The 180 basis point decrease was driven by a deleverage in our fixed costs, as well as rate increases in several areas. The key areas driving the decline were 130 basis points of deleverage in store occupancy costs and a 70 basis point decline in product margin. These decreases were partially offset by 20 basis points of efficiencies in distribution.

Christopher Codington Work: By a decrease in units per transaction two.

Christopher Codington Work: 2023 gross margin was 32, 1% compared with 33, 9% in 2020 to the 180 basis point decrease was driven by deleveraging of our fixed costs as well as rate increases in several areas.

Christopher Codington Work: Key areas driving the decline were 130 basis points of deleverage in store occupancy costs.

Christopher Codington Work: And a 70 basis point decline in product margin. These decreases were partially offset by a 20 basis points of efficiencies in distribution costs <unk>.

Christopher Codington Work: SG&A expense was $345.7 million, or 39.5% of net sales for fiscal 2023 compared with $293.6 million, or 30.7% of net sales in 2022. This includes the $41.1 million of goodwill impairment mentioned in our quarterly update. The 880 basis point increase as a percentage of net sales was driven by 470 basis points due to the non-cash goodwill impairment.

SG&A expense was $345 7 million or 39, 5% of net sales for fiscal 2023, compared with $293 6 million or 37% net sales in 2022.

Christopher Codington Work: This includes the $41 1 million of goodwill impairment mentioned in our quarterly update.

Christopher Codington Work: <unk> hundred 80 basis point increase as a percentage of net sales was driven by 470 basis points due to the noncash goodwill impairment.

Christopher Codington Work: 180 basis points increase related to store wages deleveraging on the decrease in comparable sales as well as wage rate increases. 110 basis points increase in non-wage related store operating costs, and 80 basis points in non-wage related corporate costs, and 60 basis points in non-store wage costs, which include the benefit in the prior year, 40 basis points related to a 3.6 million European government stimulus. These increases were partially offset by a 20 basis point decrease in training and events. Operating loss in 2023 was $64.8 million, or 7.4% of net sales, inclusive of the $41.1 million goodwill impairment charge, compared with operating income of $31.1 million, or 3.2% of net sales last year. Full-year net loss of $62.6 million, or $3.25 per share, including the non-cash goodwill impairment charge booked in the fourth quarter of 2023, worth $41.1 million, or $2.13 per share.

Christopher Codington Work: 180 basis points increase related to store wages deleveraging on the decrease in comparable sales as well as wage rate increases 110 basis point increase in non wage related store operating costs.

Christopher Codington Work: The 80 basis points and non wage related corporate costs.

Christopher Codington Work: 60 basis points and non store wage costs, which include the benefit in the prior year of 40 basis points related to a $3 6 million European government stimulus payment.

Christopher Codington Work: These increases were partially offset by a 20 basis point decrease in training and events.

Christopher Codington Work: Operating loss in 2023 was $64 8 million or seven 4% of net sales inclusive of the $41 1 million goodwill impairment charge compared with operating income of $31 1 million or three 2% of net sales last year.

Christopher Codington Work: Full year net loss of $62 6 million or $3 25 per share, including the noncash goodwill impairment charge booked in the fourth quarter of 2023, we're at $41 1 million or $2 13 per share. This is compared to net income of $21 million or $1 <unk> per diluted share in 2022.

Christopher Codington Work: This is compared to net income of $21 million, or $1.08 per diluted share, in 2022. Turning to the balance sheet, the business ended the year in a strong financial position. We had cash and current marketable securities of $171.6 million as of February 3, 2024, compared to $173.5 million as of January 28, 2023. The slight decrease in cash and current marketable securities over the last year was driven primarily by capital expenditures of $20.4 million, partially offset by cash flow from operations of $14.8 million. As of February 3rd, 2024, we have no debt on the balance sheet and continue to maintain our full unused credit facility.

Christopher Codington Work: Turning to the balance sheet. The business ended the year in a strong financial position, we had cash and current marketable securities of $171 6 million as of February three 2024, compared to $173 $5 million as of January 28, 2023, the slight decrease in cash and current marketable securities over the last year was driven primarily by capital.

Christopher Codington Work: Expenditures of $24 million, partially offset by cash flow from operations of $14 8 million.

Christopher Codington Work: As of February three 2024, we have no debt on the balance sheet and continue to maintain our full unused credit facility.

Christopher Codington Work: We ended the year with $128 $8 million in inventory down four 4% compared with $134 $8 million last year on.

Christopher Codington Work: On a constant currency basis, our inventory levels were down four 1% from the last year with decreases in both our North America and European businesses.

Christopher Codington Work: We ended the year with $128.8 million in inventory, down 4.4% compared with $134.8 million last year. On a constant currency basis, our inventory levels were down 4.1% from the last year, with decreases in both our North America and European businesses. Given the sales backdrop, we are happy with our ending inventory balance for 2023 and expect to continue to bring newness in as we move through 2024. Looking forward to 2024.

Christopher Codington Work: Given the sales backdrop, we are happy with our ending inventory balance for 2023, and I expect to continue to bring newness and as we move through 2024.

Christopher Codington Work: Looking forward to 2024. It is important to remind everyone that 2023 was a 53 week year, while 2024 is a 52 week year.

Christopher Codington Work: With the calendar shift, we expect sales and profit movement between quarters across 2020 for creating comparability challenges year over year in our commentary.

Christopher Codington Work: As such we will provide actual comparable sales to like periods as we move through the year, which will represent a better measure of current performance. Additionally, with the closures in 2023 and anticipated closures in 2024, we expect our store count will be down year over year on a quarter to quarter basis, which will negatively impact total sales growth.

Christopher Codington Work: It is important to remind everyone that 2023 was a 53-week year, while 2024 is a 52-week year. With the calendar shift, we expect sales and profit movement between quarters across 2024, creating comparability challenges year over year in our commentary. As such, we'll provide actual comparable sales to like periods as we move through the year, which will represent a better measure of current performance. Additionally, with the closures in 2023 and anticipated closures in 2024, we expect our store count will be down year-over-year on a quarter-to-quarter basis, which will negatively impact total sales growth, while having a more muted impact on earnings due to the performance of those closures. Now to our first quarter-to-date results. Total net sales for the four-week fiscal period ending March 2, 2024, decreased 3.1% compared to the four-week fiscal period ending February 25, 2023.

Christopher Codington Work: While having more muted impact on earnings due to the performance of those closures.

Christopher Codington Work: Now to our first quarter to date results.

Christopher Codington Work: Total net sales for the four week fiscal period ended March 2024 ended three decreased three 1% compared to the four week fiscal period ended February 25th 2023.

Our comparable sales decreased six 2% during the four week period ended March 2024 from the comparable weeks in the prior year.

Christopher Codington Work: From a regional perspective, North America net sales for the four week period ended March 2024 increased 2% over the four week period ended February 25 2023.

Christopher Codington Work: Other international business decreased 18, 6%, excluding the impact of foreign currency translation North America net sales increased two 1% and other international sales decreased 18, 5% compared with 2023 comparable sales for North America decreased two six for the four week period in March 2024 compared to the.

Christopher Codington Work: Our comparable sales decreased 6.2% during the four-week period and on March 2nd, 2024 from the comparable weeks in the prior year. From a regional perspective, North American net sales for the four-week period ended March 2nd, 2024 increased 2% over the four-week period ended February 25th, 2023, while other international business decreased 18.6%. Excluding the impact of foreign currency translation, North American net sales increased 2.1%, and other international sales decreased 18.5% compared to 2023. Comparable sales for North America decreased 2.6% for the four-week period ending March 2nd, 2024, compared to the same weeks in the prior year, while comparable sales for our other international business declined 17.8%. From a category perspective, the men's category was our largest positive comparable sales growth category, followed by footwear. The hard goods category was our largest decline in comparable sales, followed by accessories and women.

Christopher Codington Work: Same weeks in the prior year, while comparable sales for our other national business declined 17, 8%.

From a category perspective, the men's category was our largest positive comparable sales growth category, followed by footwear, the hard goods category with our largest decline in comparable sales followed by accessories and women's.

The comparable sales decrease was driven by a decrease in transactions, partially offset by an increase in dollars per transaction dollars per transaction increased for the four week period due to an increase in units per transaction, partially offset by a decrease in average unit retail.

With respect to our outlook for the first quarter of fiscal 2024, I want to remind everyone that formulating our guidance involves some inherent uncertainty.

Christopher Codington Work: And complexity in estimating sales product margin and earnings growth given the variety of internal and external factors that impact our performance.

Christopher Codington Work: With our sales results in early fiscal 2024, showing a small step back from our Q4 trends. We entered 2024 with some caution while we are optimistic that we could see continued improvement in the business as fiscal March to date sales have trended better with new spring receipts, we are planning more conservatively anticipating.

Christopher Codington Work: The comparable sales decrease was driven by a decrease in transactions, partially offset by an increase in dollars per transaction. Dollars per transaction increased for the four-week period due to an increase in units per transaction, partially offset by a decrease in average unit retail. With respect to our outlook for the first quarter of fiscal 2024, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity in estimating sales, product margin, and earnings growth, given the variety of internal and external factors that impact our performance. With our sales results in early fiscal 2024 showing a small step back from our Q4 trends, we entered fiscal 2024 with some caution. While we are optimistic that we could see continued improvement in the business as fiscal March-to-date sales have trended better with new spring receipts, we are planning more conservatively, anticipating total sales for the first quarter between $167 million and $172 million.

Christopher Codington Work: Total sales for the first quarter between $167 million and $172 million, we expect that our first quarter 2020 for product margins will be down year over year against the current backdrop, but an improvement from our Q4 run rate. We believe that the first quarter of 2024, we will see a continued negative impact on product margin related to.

A mix shift away from service and related shipping revenue in the prior year results.

Christopher Codington Work: While the product margin impact of this mix shift is negative the overall impact to gross profit is negligible.

We do not anticipate this mix shift will have a material impact beyond our first quarter of 2020 for consol.

Christopher Codington Work: Consolidated operating loss as a percentage of sales for the first quarter is expected to be between negative, 15% and negative 17% and we anticipate our loss per share will be between $1 nine and $1 19 compared to a loss of 96 in the prior year.

Christopher Codington Work: We expect that our first quarter 2024 product margins will be down year over year against the current backdrop, but an improvement from our Q4 run rate. We believe that the first quarter of 2024 will see a continued negative impact on product margin related to a mixed shift away from service and related shipping revenue in the prior year results. While the product margin impact of this mixed shift is negative, the overall impact on gross profit is negligible. We do not anticipate this makeshift will have a material impact beyond our first quarter of 2024. Consolidated operating losses as a percentage of sales for the first quarter are expected to be between negative 15% and negative 17%.

Christopher Codington Work: As we consider the outlook for the full year 2024, there remains uncertainty and volatility in the macro environment. Given this we will refrain refrained from giving specific annual financial guidance, but do you want to add some context around how we currently believe the business will trend throughout the year.

Speaker Change: We have experienced several negative sales trends over the past two years driven by the pandemic inflation competition for the discretionary dollar negative brand trends and general global instability, given the magnitude of the multi year decline. We believe that we are beginning to see the impact of those negative business trends moderate.

Christopher Codington Work: And we anticipate our loss per share will be between $1.09 and $1.19 compared to a loss of 96 cents in the prior year. As we consider the outlook for the full year 2024, there remains uncertainty and volatility in the macro environment. Given this, we will refrain from giving specific annual financial guidance but do want to add some context around how we currently believe the business will trend throughout the year. We have experienced several negative sales trends over the past two years driven by the Ebola pandemic, inflation, competition for the discretionary dollar, negative brand trends, and general global instability. Given the magnitude of the multi-year decline, we believe that we are beginning to see the impact of those negative business trends moderate, and our current results are showing that new trends are taking hold. This includes our men's category being positive across Q4 and into February.

Speaker Change: And our current results are showing a new trends are taking hold this includes our men's category being positive across Q4 and into February at this time, we believe we can build upon these trends throughout 2024 and see total sales growth for the full year.

Speaker Change: After two years of difficult performance in product margin, we believe that with a more stable sales environment, we will grow product margin in 2024 with.

Speaker Change: With sales growth in 2024, we anticipate that will leverage SG&A costs year over year beyond the benefit we will receive of moving past the $41 $1 million goodwill impairment charge, we recorded in the fourth quarter of 2023.

Speaker Change: With the previously mentioned assumptions, we believe we will turn returned to positive operating margins for the full year.

Speaker Change: <unk> effective tax rates are likely to fluctuate significantly by quarter, we anticipate that our full year effective tax rate will be roughly 40% in fiscal 2024.

Speaker Change: We are planning to open 10, new stores during the year, including three in North America, three in Europe, and Florida stores in Australia. This is down from 19 stores in 2023, and 32 stores in 2022, as we focus on optimizing our current footprint.

Christopher Codington Work: At this time, we believe we can build upon these trends throughout 2024 and see total sales growth for the full year. After two years of difficult performance and product margin, we believe that with a more stable sales environment, we will grow product margin in 2024. With sales growth in 2024, we anticipate that we'll leverage SG&A costs year over year beyond the benefit we will receive of moving past the $41.1 million goodwill impairment charge we recorded in the fourth quarter of 2023. Based on the previously mentioned assumptions, we believe it will return to positive operating margins for the full year. While effective tax rates are likely to fluctuate significantly by quarter, we anticipate that our full-year effective tax rate will be roughly 40% in fiscal 2024.

Speaker Change: We expect our capital expenditures for 2024 to be between $14 million $16 million compared to $24 million in fiscal 2023, and $25 $6 million in fiscal 2022.

Speaker Change: The reduction is primarily due to fewer planned story openings store openings.

Speaker Change: We expect that depreciation and amortization, excluding noncash lease expense will be approximately $23 million and consistent with the prior year.

Speaker Change: We are currently projecting our diluted share count for the full year to be approximately $19 8 million shares.

Speaker Change: And with that operator wed like to open the call up for questions.

Speaker Change: Thank you at this time, we will conduct a question and answer session.

Speaker Change: Minder to ask a question you will need to press star one on your telephone and wait for your name to be announced <unk>. Your question. Please press star one again.

Christopher Codington Work: We are planning to open 10 new stores during the year, including three in North America, three in Europe, and four in Australia. This is down from 19 stores in 2023 and 32 stores in 2022, as we focus on optimizing our current footprint. We expect our capital expenditures for 2024 to be between $14 million and $16 million, compared to $20.4 million in fiscal 2023 and $25.6 million in fiscal 2022. The reduction is primarily due to fewer planned store reopenings or store openings. We expect that depreciation and amortization, excluding non-cash lease expense, will be approximately $23 million and consistent with the prior year.

Speaker Change: One moment for our first question.

Speaker Change: Yes.

Speaker Change: Our first question comes from Cory <unk> with Jefferies. Please proceed with your question.

Cory: Great. Thanks, good afternoon.

Cory: As it relates to Europe.

Cory: Where are you seeing green shoots and then.

Cory: Or are you seeing opportunities to improve as we look ahead and you assess the viability of certain regions or.

Speaker Change: The areas in which you are currently present as you think about.

Speaker Change: The go forward.

Speaker Change: Outlay for that region for your business.

Speaker Change: Alright, I'll start and then Chris can add on to add on.

His comments too.

Operator: We're currently projecting our diluted share count for the full year to be approximately 19.8 million shares. And with that, operator, we'd like to open the call up for questions. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker Change: I think they are really what's important in this conversation is the pivot in Europe away from store growth because obviously, we are growing sales in Europe.

Speaker Change: Over the last few years, but.

Speaker Change: Sales have been challenged relative to our expectations for the sales growth that we expect to see in Europe and opening new markets. It is an expensive proposition.

Speaker Change: So what you've really seen us do here is say, we need to we need to really refocus our teams efforts on going back and giving them the time and the bandwidth to go back and really focus on building out profitability in our existing markets and Thats our focus as we as we commented in the script we've seen some good results.

Corey Tarlowe: To withdraw your question, please press star 11 again. One moment for our first question. Our first question comes from Corey Tarlowe with Jeffries. Please proceed with your question. Great, thanks. Good afternoon.

Richard M. Brooks: As it relates to Europe, where are you seeing green shoots? And then where are you seeing opportunities to improve as we look ahead and you assess the viability of certain regions or areas in which you're currently present as you think about the future outlay for that region for your business? All right, I'll start, Corey, and then Chris can add his comments, too.

Speaker Change: And particularly in Germany last year, which is our I think our biggest market in terms of unit count in Europe.

Speaker Change: We got a double digit gain in the year, we made significant progress relative to profitability in that market, but we have more progress to make and Corey and I guess thats. What youre seeing is say here is where I put a pause on growth build a profitable base and then reconsider where we go from there. So this is more about basics, it's about the fundamentals and tactics, we have markets that are <unk>.

Richard M. Brooks: I think that really, what's important in this conversation is to pivot in Europe away from store growth, because obviously, we were growing sales in Europe over the last few years, but sales have been challenged relative to our expectations for the sales growth that we expect to see in Europe. And opening new markets is an expensive proposition. So what you're really seeing us do here is say, we need to really refocus our team's efforts on going back and giving them the time and the bandwidth to go back and really focus on building out profitability in our existing markets. And that's our focus. As we commented in the script, we've seen some good results, particularly in Germany last year, which is, I think, our biggest market in terms of unit count in Europe. We had a double-digit gain in the year.

Corey: Well in Europe to be clear.

Corey: But this is about getting all moving in the right direction and getting back to what our teams look like at every location driving better product margins across the business.

Corey: Controlling and managing expenses more effectively by not.

Corey: Reducing the cost of entering new markets as an example.

Corey: So we're back to basics and I would tell you much the same thing about here in our North American business too so.

Corey: I think it was more about perspective of we have opportunity there we have opportunity to grow the profitability on a four wall basis across those markets and even our rep business.

Corey: In Europe. So it is really about the pivot slowing growth focusing on building a profitable base doing and executing the basically I'm, putting all of our efforts into that.

Richard M. Brooks: We made significant progress relative to profitability in that market, but we have more progress to make. Corey, and I guess that's what you're seeing us say here is that we're gonna put a pause on growth, build a profitable base, and then reconsider where we go from there. So this is more about basics. It's about the fundamentals and tactics.

Speaker Change: Great. Thanks, and then I have two.

Two more if I can.

Speaker Change: North America the men's business.

Speaker Change: Seems to have made a turn how do you think about the prospects for that to potentially.

Richard M. Brooks: And we have markets that are profitable in Europe, to be clear, but this is about getting them all moving in the right direction, getting back to what our teams look like in every location, driving better product margins across the business, controlling and managing expenses more effectively by not, again, reducing the cost of entering new markets, as an example. And so we're back to basics. And I would tell you much the same thing about here in our North American business too. So I think it was more about the perspective of, we have an opportunity there. We have an opportunity to grow profitability on a four-wall basis across those markets and in our web business in Europe. So it's really about the pivot, slowing growth, focusing on building that profitable base, doing and executing the basics, and putting all of our efforts into that. Great, thanks. And then I have two more if I can.

Drive, maybe perhaps a more widespread momentum across the other categories of the biz.

Speaker Change: Now that you've seen the turn there and then just briefly on store count on the I believe it's 10 openings that you're anticipating.

Speaker Change: What would be the net number for the full year.

Speaker Change: Alright, great.

Speaker Change: The first part and again I'll, let Chris add on as you'd like.

Speaker Change: So the North American business. The good news. This is good news for you on North America is the improvement in our North American business is directly related to the comments we've made.

Speaker Change: In the script earlier, our private label business is.

Christopher Codington Work: Dead on and I think the trends were doing really fun creative things there multiple trends are working for us in private label and private label is growing in absolute dollars.

Christopher Codington Work: Despite the overall sales plan, we're not declining and private label on a relative basis, not a gain share but.

Richard M. Brooks: In North America, the men's business seems to have made a turn. How do you think about the prospects for that to potentially..., drive maybe perhaps a more widespread momentum across the other categories of the business now that you've seen the turn there? And then just briefly on store count on the I believe it's 10 openings that you're anticipating what would be the net number for the full year? All right, great. I'll take the first part.

Christopher Codington Work: On a relative basis again in absolute dollars in our business and private label. So we have a lot of momentum there and I think we're on the early edge I think we've been not just on those trends that we've been leading the trend cycles that we're seeing out there in the market. So that is a huge driver for private label. It also has I think a positive benefit of womens will see play out over time in terms of.

Christopher Codington Work: Of what we're doing on the women's side with our private label brands and again as both about the freshness, we can offer the consumer and beyond those trends building those trends for our customer.

Richard M. Brooks: And again, Chris, add on as you'd like. So North American business, the good news, this is, you know, I have good news for you on North America. The improvement in our North American business is directly related to the comments we made in the script earlier. Our private label business is dead on, I think the trends. We're doing really fun, creative things there. Multiple trends are working for us in private label, and private label is growing in absolute dollars. Despite the overall sales decline, we're not declining in private label on a relative basis, not gaining share on a relative basis; it's a gain in absolute dollars in our business and private label. So we have a lot of momentum there. And I think we're on the early edge; I think we've been not just on those trends, but we've been leading the trend cycles that we're seeing out to the market. So that is a huge driver for private label.

Christopher Codington Work: As well as the value proposition, we have by the move the ability we have with private label to do bundling and things like that for customers provide more value for them beyond just cheap prices that's never been our strategy.

Christopher Codington Work: The second thing on men's that's really I think again directly correlated to the results, we're seeing and we comment.

Christopher Codington Work: Comment on this in the script too is that the emerging brands in 'twenty, two and 'twenty three and I will tell you, particularly in 'twenty three the brand's relaunched in 'twenty three and in some cases that <unk> launched in the back half of 2023.

Are gaining significant share in our business that have been doing so month over month quarter better deeper penetration in Q4 than Q3.

Richard M. Brooks: It also has, I think, a positive benefit for women that we'll see play out over time in terms of what we're doing on the women's side with our private label brands. And again, it's both about the freshness we can offer the consumer and being on those trends, building those trends for our customers, as well as the value proposition we have by the move, the ability we have with private label to do bundling and things like that for customers, providing more value for them beyond just cheap prices. That's never been our strategy.

Christopher Codington Work: So this is the newness when we talked about injecting newness into the business. This is what we're talking about and we're seeing it resonate and that these trends that we're seeing are the exact things that are driving our positive trend in the men's business. So as we think about that with new brands Corey Corey, but we'll look to do there in terms of broader amount of categories as well.

Christopher Codington Work: We'll look to do exactly that which is how can we take a screen or brand and get them into accessories and did different accessories categories.

Richard M. Brooks: The second thing on men's that's really, I think, again, directly correlated to the results we're seeing, and we comment on this in the script too, is that the emerging brands in 22 and 23, and I will tell you, particularly in 23, the brands we launched in 23, and in some cases, the brands we launched in the back half of 2023 are gaining significant share in our business and have been doing so month over month, better, deeper penetration in And so this is the newness; when we talk about injecting newness into the business, this is what we're talking about. And we're seeing it resonate.

Christopher Codington Work: How can we partner with with called out to do that with these brands to help drive more sales for them. How can we expand them to new categories of business. These are the things, we'll be working with again not all of them, but select brand partners to try to drive even more sales results and I. Just think these are again, we're new in a lot of these we're going to these are just these are brands.

Christopher Codington Work: Just continuing to gain share.

Christopher Codington Work: And again, we intend.

Christopher Codington Work: To launch.

Christopher Codington Work: A lot more new brands throughout 2024, Thats always our goal every year.

Richard M. Brooks: And that these trends that we're seeing are the exact things that are driving our positive trend in the men's business. So as we think about that with new brands, Corey, what we'll look to do there in terms of broadening the categories is we'll look to do exactly that, which is, how can we take a Screeno brand and get it into accessories and different accessory categories? How can we partner with collabs and things like that with these brands to help drive more sales for them?

Christopher Codington Work: I just want to be clear there is a direct correlation between what we're seeing an improving trend results in <unk>.

New brands and the efforts we put into private label. So there they are directly correlated and theyre driving the better results and I think we can expand it to other categories, absolutely and potentially will be able to lever some of that benefit for other departments within the business too.

Speaker Change: Yeah, and I'd, just add a couple of quantification points demands before.

I answer your question around store count that.

Richard M. Brooks: How can we expand them to new categories of business? These are the things we'll be working with, again, not all of them, but select brand partners to try to drive even more sales results. And I just think these are, again, we're new to a lot of these, we're gonna, these are just, these are brands that are just gonna continue to gain share. And again, we intend to launch a lot more new brands throughout 2024. That's always our goal every year. So I just want to be clear, there's a direct correlation between what we're seeing in the improving trend results and new brands and the efforts we put into private labels. So they're directly correlated, and they're driving better results.

Speaker Change: Men's men's as a percentage of our total sales grew from 43% to 47%, which I think is a strong metric for our business and it ties into some of the thoughts we gave annually as far as the belief that we think we can grow sales for the year.

Speaker Change: It's really good about the men's business is it turned positive in back to school.

Speaker Change: It wasn't positive for all of Q3. It was positive during that six week period, and then again turned positive in November and December during the peak and now has remained positive in January and February.

Christopher Codington Work: And I think we can expand it to other categories, absolutely, and potentially, we'll be able to leverage some of that benefit for other departments within the business too. Yeah, and I just had a couple of quantification points on men's before I answer your question about store account that, you know, men's wear is a percentage of our total sales grew from 43% to 47%, which I think is a strong metric for our business. And it ties into some of the thoughts we gave annually, as far as the belief that we think we can grow sales for the year. What I think is really good about the men's business is that it turned positive and back to school. While it wasn't positive for all of Q3, it was positive during that six week period. And then again, it turned positive in November and December during the peak, and it has remained positive in January and February.

Speaker Change: I bring that up because as we look back on the business and we look at other periods that have been a little more challenging from a financial perspective for us.

Speaker Change: And the last one being 15% and 16 men's really was and specifically men's T shirts was really was the.

Speaker Change: The driver for us coming out and growth of 17, 18, 19, So again I give our buying teams a lot of credit here. This is about finding newness and brands that will stick and men's really is the driving category. So I think it's a good callout from you to ask.

Speaker Change: From a store count perspective, I guess.

Speaker Change: Well, we plan to do right now and what we said in the script is that we.

Speaker Change: I opened 10 stores and closed $20 to 25 stores, but in answering that question I do want to.

Christopher Codington Work: I bring that up because as we look back on the business, and we look at other periods that have been a little more challenging from a financial perspective for us, the last one being 15 and 16, men's really was, and specifically men's t shirts were really the driver for us coming out and growth of 17, 18, 19. So again, I give our buying teams a lot of credit here; this is about finding newness and brands that will stick, and men's really is the driving category. So I think it's a good call from you to ask, from a store account perspective, I guess, what we plan to do right now. We said in the script is that we would buy open 10 stores and close 20 to 25 stores.

I step back because we also noted that we closed 21 stores in 2023 so.

Speaker Change: Think about that on a two year combined closure is a pretty significant closure cycle for us and really not a territory. We've been in before so I want to be careful in getting closure numbers because of the 2024 closures in 2024, I mean, this could increase or decrease as we move through the year depending on.

Speaker Change: On how our results go in and our ability to work both with our landlord partners as well as internally.

Christopher Codington Work: But in answering that question, I do want to step back, because we also noted that we closed 21 stores in 2023. So, you know, as you think about that on a two-year combined closure, it is a pretty significant closure cycle for us and really not a territory we've been in before. So I want to be careful in giving closure numbers because of the 2024 closures in 2024.

Speaker Change: Internally on some of the things that we.

Speaker Change: We control and when it comes to closures there is not a process, we really take lightly either I mean, we have a pretty detailed process to look at closures. We tried to factor in things, obviously, the sales and profitability levels of the specific location in question, but we also look at what does that sort of mean to its trade area and as we think about serving that customer.

Christopher Codington Work: I mean, this could increase or decrease as we move through the year, depending on, you know, how our results go and and our ability to work both with our landlord partners, as well as, you know, internally on some of the things that we control. And when it comes to closures, it's not a process we really take lightly either. I mean, we have a pretty detailed process to look at closures; we try to factor in things, obviously, the sales and profitability levels of the specific location in question, but we also look at what that store means to its trade area. And as we think about serving that customer, what other opportunities do we have around that store to impact that customer, we look at the condition of the center and, you know, how the landlord's plans for the center are playing into the location in regards to vacancies and the ability to bring newness to a location.

Speaker Change: What other opportunities do we have around that store impact that customer.

Speaker Change: We look at the condition of the center.

Speaker Change: And how the landlords plans for the center are playing into location in regards to vacancies and the ability to bring newness to our location and then we look at peak performance and working through if some of the declines we see in our business right now are permanent or temporary based on the current state of the market I think thats a really.

Speaker Change: Important thing.

Speaker Change: That we do and then.

Speaker Change: What else, we can do about the store economics. So we go through a pretty diligent process I think after factoring in all of those things if we make the determination at the store to close.

Christopher Codington Work: And then, you know, we look at peak performance and work through some of the declines we see in our business right now are permanent or temporary based on the current state of the market. I think that's a really important thing that we do. And then, you know, what else we can do about the store economics. So we go through a pretty diligent process, I think, after factoring in all of those things, if we make the determination that it's a store to close, it probably means that it's in a location or a mall that is, you know, one of the declining centers that we have in our country, and, and something that will close.

Speaker Change: It probably means that location or a mall that.

Speaker Change: Is is one of the declining centers that we have in our country and and something that will close so for 2023. The majority of our closures were in North America. In 2024, we anticipate that will hold true, although we do expect some closures in Europe as well.

Speaker Change: This will be it does have an impact on overall sales, although again I mean, despite this which we estimate to be about $10 million.

Christopher Codington Work: So for 2023, the majority of our closures were in North America, and in 2024, we anticipate that will hold true, although we do expect some closures in Europe as well. You know, this will have an impact on overall sales. Although again, I mean, despite this, which we estimate to be about $10 million and the 53rd week, we still think we can grow sales in excess of that amount. Very helpful. Thank you so much and best of luck.

Speaker Change: And the 50 <unk> week, we still think we can grow sales in excess of those amounts.

Speaker Change: Very helpful. Thank you so much and best of luck.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Mitch <unk> with Seaport. Please proceed with your question.

Mitch: Yes, thanks for taking my questions.

Mitch: Maybe a few housekeeping and then maybe a couple a little bit more strategic.

Mitchel John Kummetz: Thank you. One moment for our next question. Our next question comes from Mitch Kummetz with Seaport. Please proceed with your question. Yes, thanks for taking my questions. I've got maybe a few housekeeping questions and then maybe a couple that are a little more strategic.

Chris I think you maybe partly answered my first question just on the 50 <unk> week, what was the sales and earnings impact in 'twenty, three with up to $10 million in sales that you just referenced sorry, maybe I didn't say that correctly.

Christopher Codington Work: Because I think you maybe partly answered my first question, just on the 53rd week, what was the sales and earnings impact of 23? Was that the 10 million in sales that you just referenced? Maybe I didn't hear that correctly.

Christopher Codington Work: No the $10 million in sales is referencing the closure is the amount that the <unk> 41 stores, we closed or where it's in.

Christopher Codington Work: No, the $10 million in sales is referencing the closures, the amount that the 21 stores we closed are worth in sales. The 53rd week is going to be worth about $12 million. And what about the earring?

Christopher Codington Work: In sales the 50, <unk> week is going to be where it's about $12 million.

Christopher Codington Work: And what about on the earnings.

Christopher Codington Work: It's about $1 $8 million of operating profit.

Christopher Codington Work: It's about 1.8 million dollars of operating profit. Okay, that's helpful. Thank you. And then on the OneQ guide, you gave us a sales range. Is there sort of a comp assumption that's embedded in that range?

Speaker Change: Okay. That's helpful. Thank you and then on the on the <unk>.

Speaker Change: You gave a sales range is.

Speaker Change: Is there a sort of a comp assumption that's embedded in that range.

Christopher Codington Work: Yeah, the comp assumption for this year will have a little bit of a negative spread, obviously, because of how the closures impact it, so it won't be that significantly different from the range we gave. Okay, um... And then on the full year, again, you expect sales growth. And I want to say that that's inclusive of the 53rd week in 23. So maybe just to confirm that, but also, given the net store closures that you're anticipating, I assume that you're expecting comp growth for the year. Can you just confirm that?

Speaker Change: Yes, the comp assumption in this year, we will have a little bit of a negative spread obviously.

Speaker Change: <unk>.

Speaker Change: Of how the closures impacted so.

Speaker Change: But it won't be that significantly different than the range we gave.

Speaker Change: Okay.

Speaker Change: And then on the full year.

Speaker Change: Again, you expect sales growth.

Speaker Change: And I wanted to say that that's inclusive of the 50 <unk> week.

Speaker Change: In 2003.

So maybe just to confirm that but then also.

Given given the net store closures that youre anticipating I assume that you are expecting comp growth.

Christopher Codington Work: Correct. Yeah, when we talked about the, you know, we didn't give specific guidance for the year or numbers, obviously, just given kind of the uncertainty and what's ahead. But we are planning the business with sales growth, factoring in both the 53rd week challenge that we'll have, as well as the $10 million in store closures. Is the, is the, so if there's comp growth in 24, do you anticipate some of that coming from just like, now that you've slowed the growth or shut down the growth of stores in Europe, is there an opportunity for comp growth in Europe, just kind of from the Yeah, I think I would look at this. I'm going to take your question a little bit higher, and then I'll come into Europe.

Speaker Change: For the year can you just confirm that.

Speaker Change: Correct, yes, when we talked about we didn't give specific guidance for the year of numbers obviously.

Speaker Change: Just given kind of the uncertainty and what's ahead.

Speaker Change: We are planning the business with sales growth.

Speaker Change: Factoring in both the 50 <unk> week challenge that we'll have as well is that $10 million and store closures.

Speaker Change: Is that is the comp growth in 'twenty four.

Speaker Change: Do you anticipate some of that coming from just like now that you have slowed the growth or shut down the growth of.

Speaker Change: Stores in Europe.

Speaker Change: Is there an opportunity for comp growth in Europe, just kind of from the standpoint of like a much ramp or you see that as an opportunity.

Yes, I think I would look at this I'm going to take your question a little bit higher level, and then I'll come into Europe I think.

Christopher Codington Work: I think when we're looking at this business, we think we have opportunity for comp growth really across the business, specifically because of, you know, what we know this business has been able to do and where we have landed here these last couple years, which is, you know, pretty disappointing to us, to be quite frank. But we're looking at many of these locations, knowing that we've got good locations. We've got, you know, buyers that are really honed in on finding the right product for what's next. We've got good sales teams that are out there to serve the customers. And so, as we tie this together and we think about 2024, we think we have a good opportunity.

Speaker Change: When we're looking at this business.

Speaker Change: We think we have opportunity for comp growth really across the business specifically because.

Speaker Change: What we know this business has been able to do and where we have landed here. These last couple of years, which is pretty disappointing to us to be quite Frank.

Speaker Change: But we're looking at many of these locations knowing that we've got good locations. We've got buyers that are really honed in on finding the right product for what's next we've got good sales teams that are out there to serve the customers and so as we as we tie this together and we think about 2024, and we think we have a good opportunity now earlier in this call we talked about.

Christopher Codington Work: Now, earlier in this call, we talked about men as being an opportunity, and I think that's a really good place for our business to start. I think each of our other categories, you know, have had some challenges as well. So, as we look at those, and we look at some of these new brands that Rick spoke about, and the fact that we've continued to bring a lot of newness into the business, we think we have opportunity in our other categories as well. Geographically, we know that North America has been challenged, and it has been just as much, if not more, than Europe.

Speaker Change: <unk>.

As being an opportunity and I think that's a really good place for our business to start I think each of our other categories have had some challenges as well so as we look at those when we look at some of these new brands that Rick spoke to and the fact that we've continued to bring a lot of newness into the business. We think we have opportunity in <unk>.

Speaker Change: Other categories as well geographically, we know that North America has been challenged and it has been just as much if not more than Europe. So.

Christopher Codington Work: So, we know that in the U.S., we've got opportunity. We believe we have opportunity in Canada. And as it comes to Europe, I think you're absolutely right.

Speaker Change: So we know that in the U S. We've got opportunity. We believe we have opportunity in Canada and as it comes to Europe, I think Youre absolutely right. We've got a lot of new units, we've been very focused on new markets and growth and as Rick said, we're sort of pausing that with the idea that we need to grow.

Christopher Codington Work: We've got a lot of new units. We've been very focused on new markets and growth. And as Rick said, we're sort of pausing that with the idea that we need to grow comp, and we need to focus on the customer and get back to basics to drive profitability and cash flow, right, within that region. And then I think once we get to that level, we have the opportunity to rethink growth, because there still is a lot of growth in Europe. I don't want to give the impression that growth's not there. We just have to be able to do it in a profitable way with cash flow. And as we think about Europe individually, I mean, despite the pullback we saw in overall sales, Europe did perform at a level that we needed it to, especially in light of what you've seen with wage inflation and some of the other costs that have gone up in Europe.

Speaker Change: And we need to focus on the customer and get back to basics to drive the profitability and cash flow right within that region and then I think once we get to that level, we have the opportunity to to rethink about growth because there still is a lot of growth in Europe, I don't want to give the impression that the gross not there we just have to be able to do it in a <unk>.

Speaker Change: Profitable way with cash flow and and as we think about Europe individually.

Speaker Change: Despite the pullback we saw an overall sales I mean, Europe did cop and 2023, it just did not comp to a level that we needed it to especially in light of what you've seen with wage inflation and some of the other costs that have gone up in Europe. So.

Christopher Codington Work: So I believe there's comp opportunity across the business, and I think that's why you're hearing us be pretty confident about the ability to grow sales, despite the fact that we've got the 53rd week and some closures that we've got to overcome. Okay, and then maybe the last two are a bit more strategic. One on the new brand. It sounds like the benefit that you're seeing there is mostly on the men's side. Is there also, I think Rick you mentioned the opportunity to do more in women's with the private label, but is there also an opportunity to add brands to help the women's business? That'd be my first question. And then secondly, one month doesn't make a trend, but footwear, it looks like, was positive in February. I'm just wondering whether that is really a function of it.

Speaker Change: I believe there is comp opportunity across the business and I think that's why you're hearing us be pretty confident about the ability to grow sales.

Speaker Change: Despite the fact that we've got the 50 <unk> week and some closures that we've got to overcome.

Speaker Change: Okay, and then maybe two last ones are a bit more strategic one on the new brands at.

Speaker Change: It sounds like the benefit that Youre seeing there is mostly on the mens side is there also I think Rick you mentioned the opportunity to do more.

Speaker Change: Women's with private label, but there is also an opportunity.

Speaker Change: You add brands to help the women's business that would be my first question and then secondly.

Speaker Change: One month doesn't make a trend, but where it looks like it was positive.

Speaker Change: February I'm, just wondering to what is that really a function of it youre just starting to lap easier compares or have you also kind of worked on sort of pivoting footwear assortment to try to drive better results there.

Richard M. Brooks: Are you just starting to lap easier competitors, or have you also kind of worked on sort of pivoting the footwear assortment to try to drive better results there? All right. Thanks for the question, Mitch. First, I guess just for clarification purposes around new brands, we have some brands that are new brands we've launched that are working well for women. So I'll be clear about that. And where it's really made a difference in the business, just not enough to tip it to the positive at this stage of the game.

Speaker Change: Alright, thanks for the question Mitch.

Speaker Change: First I guess I'd just for.

Speaker Change: Clarity purposes around new brands, we have some brands that are new brands. We've launched that are working well aware of it so would be clear about that and.

Where it's really made a difference in the business just not enough to tip. It to the positive at this stage of the game in their private label you have a lot of good stuff there too so where and then other brands that we're launching that are predominantly benefit demands also.

Richard M. Brooks: And our private label, we have a lot of good stuff there too. And then other brands that we're launching that are predominantly having a benefit for men's. We know there's also a unisex aspect to how our customers buy products, so it becomes a little harder for me to quantify that for you as to how it's impacting women.

Speaker Change: Unisex aspect to how our customer buys products. So it becomes a little harder for me to quantify that for you to how it how it's impacting women, but that's that we see that throughout our business with it with with women by boys shoes. As an example would be another example, where we know it's happening based upon the size mix, we see playing out there where we see it in tea.

Richard M. Brooks: But we see that throughout our business. Women buying boys' shoes, for example, would be another example where we know it's happening based upon the size mix we see playing out there. Or we see it in t-shirts where we're selling the small size of the men's shirts disproportionately to our typical business. So it's a little bit hard to answer that question.

Speaker Change: <unk>, where we're selling.

Speaker Change: The small size of the men's disproportionately to our typical business. So.

Richard M. Brooks: It's just because we know there's this unisex aspect to our business, particularly with women in the business. But yes, we do have some brands that are specifically new in the women's business. And we're seeing some success, just not enough to tip it to the positive at this point. So we're always looking for brands across wide ranges that we think will really be relevant for all of our customers. That, I guess, would be the message I'd have for you there. On footwear in February, yes, it was positive, but it was a promotionally driven positive number.

Speaker Change: So it's a little bit hard to answer that question Mitch just because we know this is unisex aspect to our business.

Speaker Change: Particularly with women.

Speaker Change: In the business, but yes, we do have some brands that are specifically new in the women's business and were seeing.

Speaker Change: Some success just not enough to pivot to the positive at this point.

Speaker Change: So we're always looking for brands across wide ranges that we think really be relevant for all of our customers I would guess it would be the message did halfway there.

Speaker Change: On footwear in February yes.

Speaker Change: It was positive.

Speaker Change: And but it was a promotional driven positive number.

Richard M. Brooks: So, what I'll tell you about footwear, Mitch, is we have just been clearing footwear aggressively. And we've had a lot of footwear. We've had some good help from our brand partners here in doing this. But it's, as you know, it's been an issue in a challenged department for a while now.

Speaker Change: So.

What I will tell you about footwear niches as well.

Speaker Change: We have just been clearing footwear aggressively and we've had a lot of footwear. We've had some good help from our brand partners here and doing this.

Speaker Change: But as you know it's been an issue and a challenge department for a while now.

Richard M. Brooks: And so what you're seeing us do is get inventory in place so they can really go after newness in footwear. So, I think, Chris, inventory in footwear was down 30% at the end of the year. Mitch, to give you a sense of where we're at on the footwear inventory, we have aggressively been aggressive about clearing it out. And, again, great support from our brand partners in helping us do that, and we've done it also through liquidation. So, what you've really seen over the last month is aggressive liquidation in the footwear market. Now, as we look forward, we definitely have some trends that are working, and I'm sure you're identifying them on our footwear wall. And so now it's about the right levels of inventory; it's about we're going to ride the trends that we know are working that really actually go together with the trends that are in our private label business, particularly in long bottoms. They're going to drive, I think, some that will drive improved business in footwear. And then what our teams have done is we have a basic view.

Speaker Change: And so what you're seeing US do is get inventory in position. So that can really go after newness in footwear.

Speaker Change: So I think Chris inventory in footwear was down 30%, 30% at the end of the year Mitch to give you a sense of where we're at.

Speaker Change: Inventory, we have aggressively been aggressive about clearing it out and again, great support for our brand partners and helping us do that and we've done. It also through liquidation so what you're really seeing over the last month as aggressive liquidation in the footwear market now.

Speaker Change: Now as we look forward, we definitely have some trends that are working and I am sure youre identify them on our footwear wall.

Speaker Change: And so now it's about the right levels of inventory, it's about we're going to ride the trends that we know are working that really actually go together with the trends that are in our private label business, particularly in long bottoms theyre going to drive I think summit.

Speaker Change: That will drive improved business of footwear.

Richard M. Brooks: If you were to see our plan for footwear throughout 2024, I think we have a really solid plan for injecting newness throughout the year on a regular basis, period by period. We're going to see us launch newness and build as we move, really try to build and adjust as we move towards back to school and holiday with what works in the assortment and how we reposition our footwear wall to really hit those peak periods as best we can. So I think the key takeaway on footwear is yes, it was, but it was promotionally driven and in liquidation mode, I would say. But as we look forward, we now have inventory in a position where we can really go out and make investments, really try. As you know, footwear is tough because of the size and sizing. You do have to make larger investments in each style of footwear you try.

Speaker Change: And then what our teams have done is we have a basic as you. If you were to see our plan for footwear throughout 2024, I think we have a really solid plan for injecting newness throughout the year on a regular pretty pretty regular basis period by period, we're going to see us launch newness and build as we move really try to build an adjusted had moved towards back to school and holiday.

With what works in the assortment and how we reposition our footwear wall for the to really hit those peak periods as best we can.

Speaker Change: I think the key takeaway on footwear is yes, it was but it was promotional driven.

Speaker Change: Liquidation mode I would say.

Speaker Change: But as we look forward, we're now of inventory in a position, where we can really go out and make investments really try as you know.

Speaker Change: It's tough because of the size. The sizing you do have to make larger investments in each style of footwear you try. So we're going to do now is just go out there and pass some fund we're going to play our brand partners again are being incredibly supportive here and we have a lot of newness coming in every period and footwear.

Mitchel John Kummetz: So what we're gonna do now is just go out there and have some fun. We're going to play. Our brand partners are again being incredibly supportive here. And we have a lot of newness coming in every category in footwear. All right, thanks. I look forward to seeing some size 14s in your stores.

Speaker Change: Alright, Thanks, I look forward to seeing some size fourteens in your stores.

Richard M. Brooks: I appreciate you taking all my questions. Well, not that much news, Mitch. As a reminder, if you'd like to ask a question, please press star 11 on your telephone and wait for your name to be announced. That concludes the question and answer session. At this time, I would like to turn the call back to Rick Brooks for his closing remarks. All right, thank you, everyone. Again, we always greatly appreciate your support of Zumiez. And again, to our employees and all of our brand partners, we really, again, as I said in the commentary earlier, we really appreciate the challenge we've all worked through. And we're looking forward to, hopefully, a better and improved 2024. So, thank you, everyone. And we'll look forward to talking to you after the first quarter results. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. [inaudible] Thanks for watching!

Speaker Change: I appreciate you taking all my questions.

Speaker Change: Not that much.

Okay.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: That concludes the question and answer session. At this time I would like to turn the call back to Rick Brooks for closing remarks.

Richard M. Brooks: Alright. Thank you everyone again, we always appreciate your support assuming it's greatly and again to our employees in all of our brand partners. We really again as I said in the commentary earlier, we really appreciate the challenge here. We've all worked through and we're looking forward to hopefully a better and improved 2024. So thank you everyone and we'll look forward to talking to you.

Richard M. Brooks: First quarter results.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].