Q4 2024 J.Jill Inc Earnings Call
Operator: Hello, and welcome to the J.Jill Inc. Q4 2023 earnings call. All lines have been placed on mute to prevent any background noise.
Hello, and welcome to the J Jill Inc. Q4, 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session and if you'd like to ask a question. During this time simply press star one on your telephone keypad I will now turn the conference over to Claire Spofford.
Operator: After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, simply press star 1 on your telephone keypad. I will now turn the conference over to Claire Spofford, Chief Executive Officer and President.
<unk> Chief Executive Officer, and President. Please go ahead.
Claire Spofford: Thank you, Operator. And hello, everyone. Thank you for joining us this morning. We are pleased with our strong end to 2023, capping off another year of great progress for J.Jill as a result of the disciplined execution of our operating model. For the fourth quarter, we delivered adjusted EBITDA above the prior year, supported by strong growth margin performance. As we discussed on our third quarter call, we started to see our customers become somewhat more discerning with their spend, and we had prepared for a slightly higher promotional holiday period, which did play out.
Thank you operator, and Hello, everyone. Thank you for joining us this morning.
We are pleased with our strong and into 2023 capping off another year of great progress for J Jill as a result of disciplined execution of our operating model.
For the fourth quarter, we delivered adjusted EBITDA above the prior year supported by strong gross margin performance.
As we discussed in our third quarter call. We started to see our customer becomes somewhat more discerning with their spend and we are prepared for a slightly higher promotional holiday period, which did play out.
Claire Spofford: However, through strong execution, solid customer reception for our winter assortment and spring preview in the latter half of the quarter, as well as tightly managed expenses, we delivered Q4 results above our expectations. Our performance throughout the year, including during the fourth quarter, is a testament to our team effectively leveraging our loyal customer base and to their ongoing focus on consistently delivering against our objectives amidst a volatile consumer environment. For the year, we delivered sales of $605 million and an adjusted EBITDA margin of 18.6% while generating $46 million in free cash flow, in line with our recent annual trend.
However, through strong execution solid customer reception for our winter assortment in spring preview in the latter half of the quarter as long as tightly managed expenses, we delivered Q4 results above our expectations.
Our performance throughout the year, including during the fourth quarter is a testament to our team effectively leveraging our loyal customer base and for their ongoing focus on consistently delivering against our objectives amidst a volatile consumer environment.
For the year, we delivered sales of $605 million and an adjusted EBITDA margin of 18, 6%, while generating $46 million in free cash flow in line with our recent annual trend.
Claire Spofford: During the year, we made great progress on strengthening our financial and operational foundation while planting the seeds for future growth. We successfully refinanced our debt, enhanced our omni-channel capabilities with the rollout of our POS system and refinements to our website, delivered our first net new store opening year in over three years, and continue to identify and test new concepts within our assortment with capsules, including pure gel elements and wherever it works. We also effectively managed our customer acquisition strategies and costs to support our customer files.
During the year, we made great progress on strengthening our financial and operational foundation, while planting the seeds for future growth.
We successfully refinanced our debt enhanced our omni channel capabilities with the rollout of our Pos system and refinements to our website delivered our first net new store opening here in over three years and continue to identify and test new concepts within our assortment with capsules, including pure Jill elements and wherever it works.
We also effectively managed our customer acquisition strategies and cost to support our customer file.
Claire Spofford: Our customer file remained healthy, and we saw nice growth from our best customer segment for the year, which partially offset the impact we had from our more cost-conscious cohort, given the dynamic macro environment she was navigating. Average customer spend increased versus the prior year, supported by growth in frequency and full price penetration. And we continue to benefit from our ongoing customer insight work. As a result, we've been able to not only strengthen our relationships with new and existing customers but also identify areas of opportunities for enhanced focus and growth, as seen with our inclusive sizing offering and capsule launches, including the Wherever Works collection. Through offering quality fabrications and an assortment that celebrates the totality of who she is, we are able to deliver the experience our customers expect from J.Jill.
Our customer file remain healthy and we saw nice growth from our best customer segment for the year, which partially offset the impact we had from our more cost conscious cohort given that dynamic macro environment. She was navigating.
Average customer spend increase versus the prior year supported by growth and frequency and full price penetration and we continued to benefit from our ongoing customer insight work.
As a result, we've been able to not only strengthen our relationships with new and existing customers, but also identify areas of opportunity for enhanced focus and growth as seen with our inclusive sizing operating and capital lunches, including the wherever work collection.
Through offering quality fabrications, and an assortment that celebrates the totality of who she is we were able to deliver the experience our customer expects from J Jill.
Claire Spofford: With this stronger foundation in place, we believe we are well-positioned to continue to deliver on our financial objectives while supporting our growth initiatives. While we are maintaining a cautious view on the macro backdrop as we move into 2024, we plan to continue to execute and leverage our proven disciplined operating model while further supporting our plans to drive mid and long-term profitable growth. In 2024, we plan to continue to invest in our Omnichannel Foundation. Building off of the completion of the POS rollout in 2023, we have launched our OMS project.
With this stronger foundation in place. We believe we are well positioned to continue to deliver on our financial objectives, while supporting our growth initiatives.
While we are maintaining a cautious view on the macro drop backdrop as we move into 2024, we plan to continue to execute and leverage our proven disciplined operating model, while further supporting our plans to drive mid and long term profitable growth.
In 2024, we plan to continue to invest in our Omni Channel Foundation building off of the completion of the POS rollout in 2023, we've launched our <unk> project.
Claire Spofford: Through the new POS and OMS systems, we will have greater Omni capabilities by 2025, which we believe will further enhance our customer shopping experience and enable us to benefit even further from our balanced operating model. In addition, we expect to open up to five net new stores in 2024. As we've discussed previously, with only 244 stores, we have a significant opportunity for further store growth. However, we plan to take a very measured and fiscally responsible approach to our openings in the near and medium term.
Through the new POS system, we will have greater omni capabilities ramping in 2025, which we believe will further enhance our customers' shopping experience and enable us to benefit even further from our balanced operating model.
In addition, we expect to open up to five net new stores in 2024.
As we've discussed previously with only 244 stores, we have significant opportunity for further store growth, but plan to take a very measured and fiscally responsible approach to our openings in the near and medium term.
Claire Spofford: Finally, we plan to continue to strengthen our customer file through new marketing strategies, including an upcoming summer campaign that we believe will help to increase brand awareness and drive new customer acquisition. As I have said before, we have a great loyal customer base with tremendous opportunity to increase our brand awareness and to welcome new customers to J.Jill through the strength of our brand equity, our assortment, and overall customer experience. Before I close, I also wanted to highlight our upcoming impact report that we will be publishing later this spring. We continue to build upon our history of empowering women, prioritizing responsible environmental stewardship, and contributing to the communities in which we operate. And we look forward to sharing this progress in our report. We are very proud of the work we have done to date with the Compassion Fund, which has donated over $24 million in grants and in-kind donations over the last 20 years and continues to focus on empowering and supporting underserved women and helping them establish a better life for themselves, their children, and their families.
Finally, we plan to continue to strengthen our customer file through new marketing strategies, including an upcoming summer campaign that we believe will help to increase brand awareness and drive new customer acquisition.
As I have said before we have a great loyal customer with tremendous opportunity to increase our brand awareness and to welcome new customers to J Jill through the strength of our brand equity our assortment and overall customer experience.
Before I close I also wanted to highlight our upcoming impact report that we will be publishing later this spring.
We continue to build upon our history of empowering women prioritizing responsible environmental stewardship and contributing to the communities in which we operate and we look forward to sharing this progress in our report.
We are very proud of the work we've done to date with the compassion fund, which has donated over $24 million in grants and in kind donations over the last 20 years and continues to focus on empowering and supporting underserved women and helping them establish a better life for themselves their children and their families.
Claire Spofford: In summary, fiscal 2023 marked another year of great progress for J.Jill as we continue to strengthen our foundation and position the brand for long-term profitable growth. As we enter 2024, we plan to build on this progress by executing and leveraging our model while investing in enhanced Omnichannel capabilities, store growth, and marketing to drive further brand awareness and customer acquisition. I want to thank our teams and stakeholders for their support and dedication to J.Jill.
In summary fiscal 2023 and marked another year of great progress for <unk> as we continued to strengthen our foundation and position the brand for long term profitable growth.
As we enter 2024, we plan to build on this progress by executing and leveraging our model while investing in enhanced omni capabilities store growth and marketing to drive further brand awareness and customer acquisition.
I want to thank our teams and stakeholders for their support and dedication to J Jill.
Mark W. Webb: We believe we are just scratching the surface of the tremendous opportunity that lies ahead for our brand, and we look forward to driving even more value and delivering our objectives in both the near and long term. With that, I will now turn the call over to Mark to discuss our results and outlook in more detail. Thank you, Claire. And good morning, everyone.
We believe we are just scratching the surface of the tremendous opportunity that lies ahead for our brand and we look forward to driving even more value and delivering on our objectives in both the near and long term.
With that I'll now turn the call over to Mark to discuss our results and outlook in more detail.
Thank you Claire and good morning, everyone.
As Cliff discussed we were pleased to have delivered a strong end of the year, resulting in Q4 and full year. Adjusted EBITDA ahead of our expectations. Our disciplined approach to operating the business highlighted by tight inventory management supporting a strong gross margin profile and healthy free cash flow generation continued to deliver.
Mark W. Webb: As Claire discussed, we were pleased to have delivered a strong end to the year resulting in Q4 and full year adjusted EBITDA ahead of our expectations. Our disciplined approach to operating the business, highlighted by tight inventory management supporting a strong gross margin profile and healthy free cash flow generation, continued to deliver solid results. Before I review our results in detail, as a reminder, fourth quarter and full year 2023 included a 14th and 53rd week, respectively, which represented approximately $8 million in sales and $2 million in adjusted events. All results reported today are inclusive of this 53rd week impact, with the exception of our comp sales metric, which is reported on a like for like 13 and 52 week calendar. Now, more detail on results for the quarter. Total company comparable sales for the fourth quarter decreased 3.6%, driven by the retail channel.
Solid results.
Before I review our results in detail as a reminder, fourth quarter and full year 2023 included a 14th and 50, <unk> week, respectively, which represented approximately $8 million in sales and $2 million and adjusted EBITDA.
Our results reported today are inclusive of this 50 <unk> week impact with the exception of our comp sales metric, which is reported on a like for like 13, and 52 week calendar.
Now more detail on results for the quarter.
Total company comparable sales for the fourth quarter decreased three 6% driven by the retail channel.
While we saw a positive reception to our holiday promotions the slow start to the quarter impacted both channels and adverse weather in January disproportionately impacted traffic in stores at the end of the quarter contributing to the negative call.
Total company sales for the quarter were $149 million up 1% compared to Q4 2022.
Mark W. Webb: While we saw positive reception to our holiday promotions, the slow start to the quarter impacted both channels, and adverse weather in January disproportionately impacted traffic and stores at the end of the quarter, contributing to the negative. Total company sales for the quarter were $149 million, up 1% compared to Q4 2022. This performance was driven by a full price mix, improved markdown AUR in January, and the 53rd week actualizing as expected. However, store sales for Q4 were down 1.5% versus Q4 2022 as traffic was challenging, especially in January. Direct sales as a percentage of total sales were 51% in the quarter compared to the fourth quarter of fiscal 2022. Direct sales were up 4%, driven by the 53rd week. Return Levels improved in the 4th Quarter, returning to more normalized levels on a year-over-year basis.
This performance was driven by full price mix improved markdown AUR in January and the 50 <unk> week actualizing as expected.
Store sales for Q4 were down one 5% versus Q4 2022 as traffic was challenging especially in January.
Direct sales as a percentage of total sales were 51% in the quarter compared to the fourth quarter of fiscal 2022 direct sales were up 4% driven by the 50 <unk> week return levels improved in the fourth quarter, returning to more normalized levels on a year over year basis.
Q4 total company gross profit was $101 million up $6 million compared to Q4 2022 Q4 gross margin was 67, 3% up 290 basis points over Q4 of 2022, driven by a stronger mix of full price sales benefit from.
Great.
Mark down gross margin and first cost AUC benefit, partially offset by a higher promotional environment in the quarter.
Mark W. Webb: Q4 total company gross profit was $101 million, up $6 million compared to Q4 2022. Q4 gross margin was 67.3 percent, up 290 basis points over Q4 2022, driven by a stronger mix of full price sales, benefit from freight, a better markdown gross margin, and first cost AUC benefit, partially offset by a higher promotional environment in the quarter. SG&A expenses for the quarter were $90 million, compared to $87 million last year.
SG&A expenses for the quarter were $90 million compared to $87 million last year. The increase was driven primarily by variable expenses on sales in the 50, <unk> week as well as incremental expense associated with the Ams project.
Adjusted EBITDA was $18 million in the quarter compared to $15 million in Q4 2022.
For the full year, we delivered total net sales of $605 million down one 7% versus fiscal 2022, adjusted EBITDA was $112 2 million.
Compared to $109 4 million in fiscal full year 2022.
Excluding the impact of the 50 <unk> week, we were pleased to have delivered adjusted EBITDA above prior year for both Q4 and the full year, despite the challenging consumer environment that persisted throughout the year.
Mark W. Webb: The increase was driven primarily by variable expenses on sales in the 53rd week, as well as incremental expenses associated with the OMS project. Adjusted EBITDA was $18 million in the quarter compared to $15 million in Q4 2022. For the full year, we delivered total net sales of $605 million, down 1.7% versus fiscal 2022. Adjusted EBITDA was $112.2 million, compared to $109.4 million in fiscal full year 2020.
Please refer to today's press release for a reconciliation of adjusted EBITDA to net income the most comparable GAAP's financial measure.
Turning to cash flow for the quarter, we generated $7 million of cash from operations, resulting in ending cash of $62 million with zero borrowings against the ABL.
For fiscal 2023, we generated approximately $63 million of cash from operations and $46 million of free cash flow defined as cash from operations less capital expenditures.
As a reminder, we used cash on hand to reduce total outstanding debt by approximately $50 million in the first quarter of 2023.
Mark W. Webb: Including the impacts of the 53rd week, we were pleased to have delivered adjusted EBITDA above prior year for both Q4 and the full year, despite the challenging consumer environment that persisted throughout the year. Please refer to today's press release for a reconciliation of adjusted EBITDA to net income, the most comparable GAAP financial measure. Turning to cash flow, for the quarter, we generated $7 million of cash from operations, resulting in ending cash of $62 million with zero borrowings against the ABL. For fiscal 2023, we generated approximately $63 million of cash from operations and $46 million of free cash flow, defined as cash from operations, less capital expenditure.
As required in the term loan agreement and based on our fiscal 2023 performance, we anticipate making a mandatory excess cash flow payment in the second quarter of 2024 of $26 6 million, which is now included in short term debt on the year end balance sheet.
Looking at inventory total inventories were up 5% at the end of the fourth quarter compared to the end of fourth quarter last year.
As messaged on our Q3 2023 earnings call. The 50 <unk> week. This year impacted reported inventory levels due to one additional week of goods shipping some vendors, which resulted in higher in transit levels compared to prior year. Excluding this impact from the 50 <unk> week total inventories were about flat to last year.
Mark W. Webb: As a reminder, we used cash on hand to reduce total outstanding debt by approximately $50 million in the first quarter of 2023. As required in the term loan agreement, and based on our fiscal 2023 performance, we anticipate making a mandatory excess cash flow payment in the second quarter of 2024 of $26.6 million, which is now included in short-term debt on the year-end balance sheet. Looking at inventory, total inventories were up 5% at the end of the fourth quarter compared to the end of the fourth quarter last year. As messaged on our Q3 2023 earnings call, the 53rd week this year impacted reported inventory levels due to one additional week of good shipping from vendors, which resulted in higher in transit levels compared to prior year, excluding this impact from the 53rd week. Total inventories were about flat compared to last year. Capital expenditures for the quarter were about $6 million. Total capital expenditures for the full year were about $17 million compared to about $15 million last year.
Capital expenditures for the quarter were about $6 million total capital expenditures for full year, we're about $17 million compared to about $15 million last year.
Full year 2023 capital spend was below prior guidance, primarily due to the timing of smaller store refresh capital projects that moved into early 2024.
Throughout the year, we made significant progress on our strategic technology roadmap completing the first step which was upgrading to our new modern Pos platform in the stores and kicking off the next step with the project to upgrade and replace our order management system.
With respect to store count we closed one store in the fourth quarter for full year 2023, we opened two new stores and closed one resulting in end of year store count of 244 stores.
Turning to our outlook for fiscal 2024.
As we have demonstrated over the past two years with our disciplined operating model, we are able to deliver a healthy margin profile and strong cash flow generation, while navigating a dynamic macro environment.
While there is some improvement in economic indicators the macro outlook for 2024 remains somewhat uncertain and we are planning the business. Accordingly, we expect to continue to build on the progress. We made in 2023, maintaining a disciplined approach to inventory management, while navigating ongoing inflationary pressures and beginning to.
Mark W. Webb: Full year 2023 capital spend was below prior guidance primarily due to the timing of smaller store refresh capital projects that moved into early 2024. Throughout the year, we made significant progress on our strategic technology roadmap, completing the first step, which was upgrading to a new, modern POS platform in the stores and kicking off the next step with the project to upgrade and replace our order management system. With respect to store count, we closed one store in the fourth quarter.
<unk> capital and SG&A to support profitable sales growth, including approximately $3 million in expenses related to our <unk> project.
For the 52 week fiscal 2024 year, we expect total revenue to be flat to up in the low single digits and adjusted EBITDA to be down in the mid single digits compared to the 53 week fiscal 2023.
Mark W. Webb: For full year 2023, we opened two new stores and closed one, resulting in an end-of-year store count of 244 stores. Now, turning to our outlook for fiscal 2024. As we have demonstrated over the past two years, with our disciplined operating model, we are able to deliver a healthy margin profile and strong cash flow generation while navigating a dynamic macro environment. While there is some improvement in economic indicators, the macro outlook for 2024 remains somewhat uncertain, and we are planning the business accordingly. We expect to continue to build on the progress we made in 2023, maintaining a disciplined approach to inventory management while navigating ongoing inflationary pressures and beginning to invest both capital and SG&A to support profitable sales growth, including approximately $3 million in expenses related to our OMS project. For the 52-week fiscal 2024 year, we expect total revenue to be flat to up in the low single digits and adjusted EBITDA to be down in the mid- This guidance reflects the negative impact of the loss of the 53rd week of about $8 million in sales and $2 million in adjusted events.
This guidance reflects the negative impact from the loss of the 50 <unk> week of about $8 million in sales and $2 million and adjusted EBITDA.
With respect to gross margin. We are currently experiencing some impact from the disruption in the Red Sea in the form of delayed deliveries higher ocean container cost and select use of air freight.
We expect this impact to be concentrated in the second quarter, but expect lower cotton prices to help minimize any impact to gross margin on a full year basis.
For full year 2024, we expect gross margin to be relatively flat to fiscal full year 2023.
Finally, we anticipate timing shifts associated with the 50 <unk> week to impact reported quarterly results specifically, we expect the calendar shift to benefit results in Q1, and Q3 and negatively impact results in Q2, and Q4 when compared to reported 2023 actuals.
The first and third quarters are expected to benefit as smaller weeks at the beginning of each quarter are replaced by relatively larger weeks pulled into the end of the quarter. This impact will be largest in Q1.
Conversely, Q2, and Q4 are expected to be negatively impacted as larger weeks at beginning of quarter are replaced with relatively smaller weeks at quarter end.
In addition to this impacts the fourth quarter comparisons to prior year will also be negatively impacted by the loss of the 50 <unk> week.
Mark W. Webb: With respect to gross margin, we are currently experiencing some impact from the disruption in the Red Sea in the form of delayed deliveries, higher ocean container costs, and select use of air freight. We expect this impact to be concentrated in the second quarter, but expect lower cotton prices to help minimize any impact on gross margin on a full year basis. For full year 2024, we expect gross margin to be relatively flat compared to fiscal full year 2023.
For the first quarter of fiscal 2024, we expect sales to be up in the low to mid single digits and adjusted EBITDA to be in the range of $29 million to $33 million.
Regarding store count, we expect to grow net store count by up to five stores by the end of fiscal 2024, we expect openings will be weighted to the back half of the year and we believe it is likely that we will close up to five stores in the first half of the year, leading to a decline in mid year store count.
Continue to believe in the opportunity to grow our retail channel by about 20% to 25 net new stores over the near to medium term.
Mark W. Webb: Finally, we anticipate timing shifts associated with the 53rd week to impact reported quarterly results. We expect the calendar shift to benefit results in Q1 and Q3, and negatively impact results in Q2 and Q4 when compared to reported 2023 action. The first and third quarters are expected to benefit as smaller weeks at the beginning of each quarter are replaced by relatively larger weeks pulled into the end of the quarter. This impact will be largest in Q1. Conversely, Q2 and Q4 are expected to be negatively impacted as larger weeks at the beginning of the quarter are replaced with relatively smaller weeks at quarter end. In addition to this impact, the four-quarter comparisons to the prior year will also be negatively impacted by the loss of the 53rd.
With respect to total capital expenditures, we expect to spend about $26 million in fiscal 2024 with investments focused on new stores and the <unk> project plus the projects that carried over from the end of fiscal year 2023.
Our expectations for fiscal 2024 are in line with our financial model that we've delivered the past two years and we believe will enable another year of strong free cash flow generation, which continues to create optionality as we aim to drive further shareholder value.
I will now hand, it back to the operator for questions.
Thank you if you have a question. Please press star one on your telephone keypad. If you have queued up and want to withdraw your question simply press Star one again.
Your first question comes from the line of Ryan Meyers with Lake Street Capital markets. Your line is open.
Mark W. Webb: For the first quarter of fiscal 2024, we expect sales to be up in the low to mid-single digits and adjusted EBITDA to be in the range of $29 to $33 million. Regarding store count, we expect to grow the net store count by up to five stores by the end of fiscal 2024. We expect openings to be waited to the back half of the year, and we believe it is likely that we will close up to five stores in the first half of the year, leading to a decline in the mid-year store count. However, we continue to believe in the opportunity to grow our retail channel by about 20 to 25 net new stores over the near to medium term. With respect to total capital expenditures, we expect to spend about $26 million in fiscal 2024 on investments focused on new stores and the OMS project, plus the projects that carried over from the end of fiscal year 2023.
Hey, good morning, guys. Thank you for taking my questions.
First one for me, so obviously, you've guided to sales of flat to up low single digits, but EBITDA down mid single digits.
Just wondering if you can walk us through where that difference is there it sounds like youre going to be investing a little bit more.
SG&A. So I think that makes sense, but is there anything else to call out there is.
That kind of delta between the revenue and EBITDA guidance.
Ryan I'll take that.
Thanks for the question, Yes, we've tried just given there is so much.
Noise with the calendar shifts and everything else, we've tried to be a bit more I hope helpful. In the guidance that we've provided the sales guide margins about flat.
Do indicate that we are investing as we said in the remarks in SG&A and Capex and support.
Both sort of the rolling forward inflationary impacts that began.
Operator: Our expectations for fiscal 2024 are in line with the financial model that we've delivered the past two years and we believe will enable another year of strong free cash flow generation, which continues to create optionality as we aim to drive further shareholder value. Thank you. I will now hand it back to the operator for questions. Thank you. If you have a question, please press star one on your telephone keypad. If you have queued up and want to withdraw your question, simply press star one again.
This year to some extent rolling into next and then <unk>.
More proactively investing in strategic initiatives, particularly marketing to support.
To support our profitable sales growth as we go forward and then we have the <unk> project, which we are.
In the middle of and this is going to be a year.
Another significant step on our technology roadmap with the LMS project that does carry with a project related expense and we call it out, but that's $3 million worth of.
Ryan Robert Meyers: Your first question comes from the line of Ryan Meyers with Lake Street Capital Markets. Your line is open. Hey, good morning, guys. Thank you for taking my questions. First one for me.
On SG&A as well.
Got it that's helpful. And then you guys had commented that it sounded like traffic in January was a little soft can you maybe talk a little bit about what you've seen as far as traffic levels go.
Mark W. Webb: So obviously, you've guided sales flat up, you know, low single digits, but EBITDA down mid single digits. You know, just wondering if you could walk us through where that difference is there. Sounds like you're going to be investing a little bit more in SG&A, so I think that makes sense. But is there anything else to call out where there's that kind of delta between the revenue and EBITDA guide? Ryan, I'll take that.
<unk> progressed here through Q1.
Sure. Thanks Ryan.
I'll take that one we did see traffic impacted particularly in the retail channel in January.
And we continue to see some lumpiness coming into February but are hopeful that things sort of calmed down as we go further into the quarter and head into kind of the heart of our season.
In March and April.
Got it thank you for taking my questions. Thank.
Thank you.
Mark W. Webb: Thanks for the question. Yeah, we've tried just given that there's so much noise with the calendar shifts and everything else; we tried to be a bit more, I hope, helpful in the guidance that we provided. The sales guide, and the margins about flat do indicate that we are investing, as we said in the remarks in SG&A, in CapEx, in support of both the sort of the rolling forward inflationary impacts that began this year to some extent, rolling into next, and then more proactively investing in strategic initiatives, particularly marketing, to support our profitable sales growth as we go forward. And then we have the OMS project, which we are, you know, in the middle of, and this is going to be a year of another significant step on our technology roadmap with the OMS project that does carry with it project-related expenses, and we called out that that's $3 million worth of SG&A as well. Got it, that's helpful.
Your next question comes from the line of Jeff <unk> with B Riley financial your line is open.
Good morning, guys. Congrats on a great Q4.
So.
Elaborating on the Pos Oems as we enter 2024 I was curious if you could just maybe talk about.
What capabilities and how it manifests itself into the financial results.
You have going into this year that you didn't have last year and then one on the debt Mark I was just curious.
Could you pay off more than the 26 as we go through the year and if you don't really typically guide interest expense, but I'm guessing that interest will be down this year.
For 2023.
Hey, Geoff it's Mark I'll take both of those I'll start with the second one.
We outlined earlier this year, our sort of priorities for.
Sure.
For cash investing right in the primary was paying down the debt. So we have this mandatory excess cash flow payments.
Claire Spofford: And then you guys had commented that it sounded like traffic in January was a little soft, you know. Can you maybe talk a little bit about what you've seen as far as traffic levels go as we've progressed here through Q1? Thanks, Ryan. I'll take that one.
In the agreement with the term loan.
We then continue to have amortization to pay down the debt and as we've said previously the cash flow generation of the company.
Claire Spofford: We did see traffic impacted, particularly in the retail channel, in January, and we continue to see some bumpiness coming into February, but we are hopeful that things sort of calm down as we go further into the quarter and head into kind of the heart of our season in March and April.
Still provides additional cash to consider along those priority list. So nothing to announce at this point, but the answer is there could be.
There are other options as well that we continue to evaluate as a management team for deploying cash and driving shareholder value.
Jeffrey Francis Lick: Thank you for taking my question. Transcribed by https://otter.ai. Your next question comes from the line of Jeff Lick with B. Reilly Financial. Your line is open. Good morning, guys.
First question around Pos and LMS. These really are strategic foundational systems.
Really shore up the operational capabilities of the company and they do provide.
Mark W. Webb: Congratulations on a great Q4. So, just elaborating on the POS OMS as we enter 2024, I was curious if you could just maybe talk about the capabilities and how that manifests itself in the financial results. Do you have going into this year that you didn't have last year? And then one on the debt mark, I was just curious if you could pay off more than the 26... As we go through the year, and if you don't really typically guide interest expense, but I'm guessing that interest will be down this year from 2023. Hey Jeff, it's Mark. I'll take both of those. I'll start with the second one.
The platform to take advantage of current and future because the technology becomes more.
Less stuck in the past and you can adjust it and take new technologies with it in the future, but the benefits that we look at first of all with Pos as the first step and it's really about.
Better customer experience within the store less friction in some of the existing omni capabilities that we have with respect to that.
The concierge, which is the ability for a customer to order from the website from within the store.
Facilitation of a transaction that includes an online return in the store. So a lot less friction within the store, we would look at the benefits to that to come in the form of conversion first and transactions, which would be a support.
Mark W. Webb: You know, we outlined earlier this year our sort of priorities for cash investing, right? And the primary was paying down the debt. So, you know, we have this mandatory excess cash flow payment in the agreement with the term loan.
Unit growth within the stores and then <unk> is a complementary system, it's really the quarter.
Mark W. Webb: You know, we then continue to have amortization to pay down the debt. And as we've said previously, cash flow generation, the company still provides additional cash to consider on those priority lists. So nothing to announce at this point. But the answer is, there could be, and there are other options as well that we continue to evaluate as a management team for deploying cash and driving shareholder value. The first question around POS and OMS is, these really are strategic foundational systems to really shore up the operational capabilities of the company first. And they do provide the platform to take advantage of the current and future because the technology becomes more... Less stuck in the past, and you can adjust it and take new technologies with it in the future.
Quarter management quarter orchestration system for the E Commerce platform, but then really enterprise wide omni capabilities.
Then creates the opportunity for additional <unk>.
Inventory optimization additional sales fulfillment opportunities.
That really would Tom once that system is in and.
And hardened within the system within the within the business within the processes, that's likely a 2025.
Launch and so in 2024, our guidance that we provided has both the expense associated with the projects and we've implied some of the benefits coming from the Pos system.
Okay.
A clarification question and this might or might fall into that bucket.
Details you were elaborating for the calendar shifts, but given the low single digit.
Mark W. Webb: But the benefits that we look at, first of all, with POS as the first step, are really about a better customer experience within the store, less friction in some of the existing Omni capabilities that we have with respect to the concierge, which is the ability for a customer to order from the website from within the store, and the facilitation of a transaction that includes an online return in the store, so a lot less friction within the store. We would look at the benefits of that to come in the form of conversion first and transactions, which would be a support of unit growth within the stores. And then OMS is a complementary system.
Our sales guidance for Q1, so that is the implication that things actually might have picked up a little bit in the first quarter because it is a little bit of an acceleration from Q4 I was just curious if you could elaborate on that.
Hi, there.
What I would say Jeff in addition to what Claire just mentioned the <unk>.
First thing is we have a big second quarter and a large mothers day business, which we've talked about previously so the calendar shift for us pulling in essentially what would have been may week, one week into this quarter and losing.
February week, one week, which is typically.
End of season clearance and small versus mothers lead up to mother's day big at the end of the quarter does have an impact for us which is why we as explicit as we were and then I would say in addition to what player said she mentioned it was still a bit bumpy coming into February a little bit of improving trends.
Jeffrey Francis Lick: It's really the order management, order orchestration system for the e-commerce platform, but then really enterprise-wide Omni capabilities that then create the opportunity for additional inventory optimization, additional sales fulfillment opportunities that really would come once that system is in and hardened within the system, within the business, within the processes. That's likely a 2025 launch. And so in 2024, the guidance that we provided includes both the expense associated with the projects, and we've implied some of the benefits coming from the POS system. Okay, just a clarification question, and this might fall into that bucket of your details you were elaborating for the calendarships, but given the low single-digit sales guidance for Q1, you know, that has the implication that things actually might have picked up a little bit in the first quarter because it is a little bit of an acceleration from Q4. I was just curious if you could elaborate on that.
At the end of February but a lot of the big weeks are in front of us. It's a small month in their small weeks and so the bulk of the quarters in front of us.
Great. Thanks for the clarification best of luck.
Thank you.
Your next question comes from the line of Dylan Carden with William Blair. Your line is open.
Thanks, a lot.
This might be a tough question, but broad strokes kind.
Backing out the extra week.
Retail channel excluding weather performed more in line with the direct channel kind of down low single.
Hello.
Top.
So <unk>.
Generally speaking what I would say is and it's in that sort of results that youll see that direct business.
<unk> to improve and in fact, when we think about Q4 and the performance against our guidance that we reaffirmed earlier in the in the month of January.
The traffic in the stores was.
We mentioned it surprising the weather was widespread across the U S and impact of that channel.
Mark W. Webb: Kind of the innards there. What I would say, Jeff, in addition to what Claire just mentioned, the first thing is that we have a big second quarter and a large Mother's Day business, which we've talked about previously. So the calendar shift for us pulling in essentially what would have been May week, one week into this quarter and losing February week, one week, which is typically end of season clearance in small versus, you know, lead up to Mother's Day, big at the end of the quarter, does have an impact on us, which is why we were as explicit as we were. And then I would say, in addition to what Claire said, she mentioned it was still a bit It's a small month, and they're small weeks.
The benefit we were pleased to see direct offset and and then just the benefits of the operating model carrying less inventory overall less markdown inventory skews the sales into full price so even in a quarter, where we've mentioned it was more promotional quarter, we expected it to be back into Q3 report.
And it was.
That's still a better trade off at full price and markdown and then the markdown.
Margin benefits AUR benefits with so many fewer markdown units so that both benefits at those both benefit gross margin and that was the lion's share of our beat in Q4, but driven on the back of a fairly strong direct.
I appreciate that and that kind of dovetails into my next question, which is and I apologize if I missed this but.
For the guide this year.
To kind of get to the margin would you expect to be able it sounds like it's mostly positive SG&A investments and the new systems and what have you right. So gross margins relatively flat maybe some modest improvement is how should we think about that.
Jeffrey Francis Lick: And so the bulk of the quarter is in small. Great, thanks for the clarification. Best of luck. Your next question comes from the line of Dylan Cardin with William Blair.
We guided to relatively flat on the back.
Dylan Cardin: Your line is open. Thanks a lot. Just curious, this might be a tough question, but in broad strokes, kind of backing out the extra week, did the retail channel excluding weather perform more in line with the direct channel, kind of a down low single? [inaudible] I
Biometrics to get out there <unk> got a little bit of freight noise popping back up and then we have some benefits that we've talked about for a while but with raw materials, particularly cotton.
That we've said dose should be neutral across the year.
Mark W. Webb: So Dylan, generally speaking, what I would say is, and this is in the sort of results that you'll see, the direct business continues to improve. And in fact, when we think about Q4 and the performance against our guidance that we reaffirmed earlier in the month of January, the traffic in the stores was, you know, was, we mentioned it was surprising. The weather was widespread across the U.S. and impacted that channel.
And then it's really behind the guide is on the revenue side as unit supported by some of these initiatives.
That we talked about Pos conversion in the stores are continuing enhancements indirect et cetera.
Got it and then on the new stores that wanted to be clear about that so its five net new stores for the year, but five closures in the front half so 10 openings in the back half did I catch that right.
Mark W. Webb: The benefit, we were pleased to see direct offset and, and then just the benefits of the operating model carrying less inventory overall. Less markdown inventory skews the sales into full price. So, even in a quarter where we've mentioned, it was a more promotional quarter. We expected it to be back at the Q3 report, and it was. That's still a better trade-off at full price than a markdown.
Up to five.
Net openings in 2004.
Okay.
Kind of where where are the new stores, how should we think about kind of the ramp in productivity versus the fleet I know, it's going to be a drop in the bucket just from a scale standpoint, but anything to comment on there.
Yes, I would say in the in.
The full year and the guy at the stores or are at the back end of the year right. So theres very little assumed in our guidance aside from from from the store base aside from how we're planning on the closure activity against the openings.
Mark W. Webb: And then the markdown margin benefits, AUR benefits with so many fewer markdown units. So that both benefits; those both benefit gross margin. And that was the lion's share of our beat in Q4, but driven on the back of a fairly strong direct.
A lot of the stores and we've mentioned this before but on that 20% to 25 list a lot of those markets, our reentry markets for us and a lot of the first opportunity stores to reopen are likely to be and we open markets and the.
Mark W. Webb: I appreciate that, and that kind of dovetails into my next question, which is, and apologies if I missed this, but for the guide this year, To kind of get to the margin, would you expect to be able to, it sounds like it's mostly positive SG&A investments in the new systems and what have you, right? So gross margin is relatively flat, maybe some modest improvement is how should we think of it. We guide it to be relatively flat, Dylan, the macro out there, you know, you've got a little bit of freight noise popping back up, and then we have some benefits that we've talked about for a while, but with raw materials, particularly cotton, that we've said those should be neutral across the year. And then it's really behind the guide on the revenue side are units supported by some of these initiatives. P.O.S. conversion in the stores, continuing enhancements in direct, etc. I got it.
Good thing about our store fleet as we open and ramp pretty quickly once we're open at within the first year and have a pretty stable performance across new stores. Therefore, unlike some others, who open to low awareness and ramp up over several years.
We tend to again re entry markets have a customer we opened back up we've done it now with better.
More fair I would call them economics in sites that.
That are right for our brand and that tends to be that first year is a pretty good indicator of the stores revenue.
Got it and how are you feeling about your customer here I know kind of come into holiday.
There was some incremental softness there on your kind of core higher income consumer border.
How is she feeling how are you feeling about them kind of coming into this year.
Dylan Cardin: And on the new stores, I just want to be clear about that. So it's five net new stores for the year, but five closures in the front half, so ten openings in the back half. Did I catch that right? Yeah, up to five net openings in 24.
Yes coming into this year.
We feel this customer tracker primary research, we're pleased to see the outlet showing some signs of a positive shift.
Coming into our <unk>.
Your line.
Now we also saw.
Our high level of satisfaction with our early spring.
Mark W. Webb: Okay, and kind of where are the new stores? How should we think about their ramp and productivity versus the fleet? I know it's going to be a drop in the bucket just from a scale standpoint, but anything to comment on there? Yeah, I would say Dylan. In the full year and the guide, the stores are at the back end of the year, right?
Assortment.
At the core of who we are as a brand coming into spring loving our fabrics are colors.
So.
Positive energy there, but.
I think we talked about.
In the script that the file remains healthy, particularly with our best customer segments with some pressure.
Due somewhat to the macro environment at that.
Mark W. Webb: So there's very little in our guidance aside from from the store base aside from, you know, how we're planning on the closure activity against the opening. And a lot of the stores, and we've mentioned this before, but on that 20 to 25 list, a lot of those markets are re-entry markets for us, and a lot of the first opportunity stores to reopen are likely to be in reopened markets. And the good thing about our store fleet is we open and hit the ramp pretty quickly. Once we're open, and within the first year, and have a pretty stable performance across new stores, therefore, unlike some others who open to low awareness and ramp up over several years, we tend to, again, re-enter markets, have a customer, we open back up; we've done it now with better, more fair, I would call them economics in And that tends to be, you know, that first year is a pretty good indicator of the store's revenue. Got it.
Lower spend cohort, but.
All in all I think a good balance and some nice positive energy in her mind coming in.
Relative to where some of them.
Still a lot of uncertainty out there in the macro environment for sure.
Thank you very much guys.
Thanks, Tom Thanks, Kevin.
Your next question comes from the line of Oliver Chen with TD Cowen Your line is open.
Thank you for taking our questions and Chris Turner on for Oliver.
And higher full price selling and just curious higher.
And that as consumer where they live and we're more cautious about spending it and also just on marketing.
Our strategy around marketing this year instead of in your thoughts around driving higher ROE I understand thank you so much.
Sure. Thanks for the question and thanks for being with US I think from a full price selling standpoint, our inventory strategy.
It has been.
Support and keeping the focus on full price selling telling our brand storytelling, our product assortment story without competing with ourselves from a markdown standpoint.
And that has yielded nice full price penetration, which we saw play out in fiscal year 'twenty three.
And again, our customer we've said this repeatedly but if we offer her the product that she's looking for and it's unique and special she is willing to pay full price for it and so that focus on what makes sense special and different and.
Claire Spofford: And how are you feeling about your customer here? I know kind of coming into the holiday, you know, there was some incremental softness there in your kind of core higher-income consumer folder. How is she feeling?
And highlighting our key products has helped support that as we go into 'twenty four we are making an investment in marketing behind.
Claire Spofford: How are you feeling about them kind of coming into this year? Yeah, coming into this year, you know, again, we always field this customer tracker, primary research; we're pleased to see the outlook showing some signs of a positive shift. Coming into or going into one.
Our brand campaign, which you'll see rolling out in the next few months, which we're very excited about we think that theres a real opportunity to drive brand awareness. We know we have relatively low awareness compared to some of our competitors and some of that comes from having a smaller store fleet, but we're putting some investment behind that brand awareness.
Claire Spofford: And no, we also saw a high level of satisfaction with our early spring assortment. Right at the core of who we are as a brand, coming into spring, loving our fabrics, our colors. So, you know, some positive energy there, but, and I think we talked about that the file remains healthy, particularly with our best customer segments, with some pressure due somewhat to the macro environment at the lower spend cohort. But, all in all, I think a good balance and some nice positive energy in her mind coming in, but it's relative to where she's been; still a lot of uncertainty out there in the macro environment, for sure. Thank you very much, guys. Thanks, Dylan. Your next question comes from the line of Oliver Chen with TD Cowan. Your line is open.
And are excited about telling that story and so we will have more to say about that on the next quarterly call.
Thank you for what.
Your next question comes from the line of Marni Shapiro with the retail tracker. Your line is open.
Hey, guys congratulations the stores look great.
I Love this new set that just when it's beautiful.
Can you talk a little bit I think you said you grew your customer file very nicely could you talk a little bit about what actions you're doing on top of funnel and with all your technology updates could you talk a little bit forward.
Forward thinking about loyalty programs and things like that.
Yeah. Thanks Marni.
We agree we think there are certain looks great right now great color that she's responding to.
Operator: Thank you for taking our questions and turning it on for Oliver. You mentioned higher full price selling; just curious how you're managing that as consumers are a little bit more, Unknown Speaker, Claire Spofford, Jeffrey Lick, Michael Rahamim, Michael Eck, Shelley Milano, J.Jill Inc.
From a from a top of funnel standpoint.
Brand campaign that I, just talked about is definitely aimed at broadening awareness introducing new customers to the brand.
And that as I said it can be forthcoming in the next few months. In addition, we're very focused on new to brand acquisition through our performance marketing and other efforts and those did yield some nice benefits.
Unknown Speaker: Thank you. Thank you. Thank you. Thank you. Thank you. Sure, thanks for the question.
Claire Spofford: Thanks for being with us. I think from a full price selling standpoint, our inventory strategy has been supportive of keeping the focus on full price selling, telling our brand story, telling our product assortment story without competing with ourselves from a markdown standpoint. And that has yielded nice full price penetration, which we saw play out in fiscal year 23. And again, our customer, we've said this repeatedly, but if we offer her the product that she's looking for and it's unique and special, she is willing to pay full price for it.
Through much of 2003 focus on usage occasions like the work we're at it and our inclusive sizing initiative, both focused on introducing new customers to the brand and customers that are at the younger end of our target demographic and very valuable so.
Lots of efforts in terms of speeding the health of that file and also in making sure that we're communicating effectively with and nurturing our relationship with our best customers and our core customers, which we did see.
Nice growth from our best customer segment as I mentioned in 2023.
That's fantastic can I just ask you.
Claire Spofford: And so, you know, that focus on what makes us special and different and highlighting our key products has helped support that. As we go into 24, we are making an investment in marketing behind the scenes. A brand campaign, which you'll see rolling out in the next few months, which we're very excited about. We think that there is a real opportunity to drive brand awareness. We know we have relatively low awareness compared to some of our competitors, and some of that comes from having a smaller store fleet.
Quick question online I've been buying the fit assortment it looks nice it's highly edited.
I'm curious.
Are you thinking about bringing that into stores, a little bit more expanding it isn't a nice to have or do you feel like it's a need to have and you know these are your first steps into it if you could just expand on that.
Yeah. Thanks Marty.
It's a small part of the business and we haven't in select stores and we have an online.
Claire Spofford: But we're putting some investment behind that brand awareness and are excited about telling that story. And so we'll have more to say about that in the next quarterly. Thank you so much.
It's we think it's an important part of her life and the usage occasion that she cares about but.
It's not a major initiative growth initiative for us as we look forward.
Okay fantastic. Thanks, I'll take the rest offline.
Marnie Shapiro: Your next question comes from the line of Marnie Shapiro with the Retail Tracker. Your line is open. Hey guys, congratulations. The stores look great, and I love this new set that just went in. It's beautiful.
Your next question comes from the line of Dana Telsey with Telsey Group. Your line is open.
Hi, good morning, everyone and congratulations on the nice results.
Clarence do you think about the assortment going forward.
The changes and the enhancements that we should see what are you looking for this year is there any markers. Obviously you mentioned the marketing campaign that we should be mindful as we go through the year and then Mark you talked about the Red Sea issue impacting more of Q2 is there any bleed through to any other quarters that you foresee.
Marnie Shapiro: Can you talk a little bit? I think you said you grew your customer file very nicely. Could you talk a little bit about what actions you're doing on top of the funnel, and with all your technology updates, could you talk a little bit about, you know, forward thinking about loyalty programs and things like that? Yeah, thanks, Marnie.
Claire Spofford: We think the assortment looks great right now, and we have great colors that she's responding to. From a top of the funnel standpoint, the brand campaign that I just talked about is definitely aimed at broadening awareness and introducing new customers to the brand. And that, as I said, is going to be forthcoming in the next few months. In addition, you know, we're very focused on new-to-brand acquisition through our performance marketing and other efforts. And those did yield some nice benefits through much of 23, focused on, you know, usage occasions like the Workwear Edit and our inclusive sizing initiative, both focused on, you know, introducing new customers to the brand and customers that are at the younger end of our target demographic and very valuable. So, lots of efforts in terms of feeding the health of that file and also in making sure that we're communicating effectively with and nurturing our relationship with our best customers and our core customers That's fantastic. And could I just ask you a quick question? On the Internet, I've been buying the fit assortment. It looks nice. It's highly edited and produced.
And with the lower cotton costs.
That being projected throughout the year in the space of also the full price sales that youre generating how you're thinking about pricing of goods. This year as compared to last year. Thank you.
Sure I'll take the first part Dana and hand, it over to Mark.
I think <unk>.
Markers, we're heading into.
What is our big season, and obviously we.
We love the mother's day timeframe and moving through spring into summer.
You'll see our core franchises really.
Hit hard our linen programs, our net basics programs. We also have.
Some really exciting things happening with cotton guys and other <unk>.
Some are breezy fabrications that she really looks to us for us. So I think youll see a lot of that again as well as just wonderful color that she really responds to at this time of year. So.
We had real strength in 'twenty three with <unk>.
Growth in dresses woven tops and novelties.
A strong sweater business in the back half of the year, but we also had some opportunities and we think that those opportunities.
Hopefully we will be addressed in terms of.
Better performance and things like bottoms, and knit basic set where we saw some challenges last year. So overall some opportunities that we see in front of US and then some growth leading into where we have strength and momentum.
Claire Spofford: I'm curious, You know, are you thinking about bringing that into stores a little bit more, expanding it, is it a nice-to-have, or do you feel like it's a need-to-have and, you know, these are your first steps into it? If you could just expand on that. Thanks, Marty. It's a small part of the business, and we have it in select stores, and we have it online. We think it's an important part of her life and youth education that she cares about, but it's not a major initiative or growth initiative for us as we look forward.
And Dana I'll quickly hit the second part of your question.
Yes.
The great thing for us is that when the disruption started happening back in the <unk>.
<unk> timeframe, we created a task force inside the company that really came together and managed that uncertainty quite well and we've kept that process going even as things started to calm down post COVID-19 and through the last year.
Claire Spofford: Okay, fantastic. Thanks. I'll take the rest offline.
So the team is led by an incredible senior manager within the group and a great cross functional team, who reacts very quickly and meets weekly and so when the Red Sea issues started popping up they were poised and ready to react doesn't mean it doesn't have an impact which is why we called it out.
Dana Lauren Telsey: Your next question comes from the line of Dana Telsey with the Telsey Group. Your line is open. Hi, good morning, everyone, and congratulations on the nice results. Claire, as you think about the assortment going forward and the changes and the enhancements that we should see, what are you looking for this year? Are there any markers?
But but internally we were more prepared than ever just given the effort that we put against it.
Claire Spofford: Obviously, you mentioned the marketing campaign that we should be mindful of as we go through the year. And then, Mark, as you talked about the Red Sea issue impacting more of Q2, is there any bleed through to any other quarters that you foresee? And with the lower cotton costs, how is that being projected throughout the year in the space of also the full price sales that you're generating? How are you thinking about pricing the goods this year as compared to last year? Thank you. I'll take the first part, Dana, and then hand it over to Mark.
Delays that we're seeing are have calmed down to some extent the initial it's always an initial uncertainty that creates.
Longer delays the delays have settled down the teams are working on.
Every opportunity to offset them those include.
We need to air Freighting goods from the ports of origin to landed in the U S. That's a team of merchants and merchant planners, who pour over those decisions and make them based on the relative importance of the late style to the floor set or the marketing or some combination.
Mark W. Webb: You know, I think markers, we're heading into, you know, what is our big season, and obviously, you know, we love the Mother's Day timeframe and moving through spring into summer. You'll see our core franchises really hit hard, our linen programs, our knit basics programs. Some really exciting things happening with cotton gauze and other. [inaudible] growth in dresses, woven tops, and novelties, and a strong sweater business in the back half of the year. But we also had some opportunities.
<unk>.
Stan.
The other options are to work with our great vendor base, which we've talked at length about the great relationships, we have and see where we can move as shipment dates early to compensate for any delays and and then the last sort of element is if we do get a delayed shipment here, we will make the decision.
The other options are to work with our great vendor base, which we've talked at length about the great relationships, we have and see where we can move as shipment dates early to compensate for any delays and and then the last sort of element is if we do get a delayed shipment here, we will make the decision.
Mark W. Webb: And we think that those opportunities will hopefully be addressed in terms of, you know, [inaudible] And Dane, I'll quickly hit the second part of your question. The great thing for us is that when the disruptions started happening back in the COVID timeframe, we created a task force inside the company that really came together and managed that uncertainty quite well. And we've kept that process going even as things started to calm down post-COVID and through the last year or so. The team is led by an incredible senior manager within the group and a great cross-functional team who reacts very quickly and meets weekly. And so when the Red Sea issues started popping up, they were poised and ready to react.
Whether to expedite via airfreight to our west coast stores as needed.
The Q2 timeframe and why we called it out as that's our important quarter with.
With mother's day, and those Assortments are more likely warranting, the expedited airfreight option than others and we land those products in Q1, but we sell them through Q2, which is why we called out that that is the quarter that would feel.
The impact most we are assuming that the issues sort of stabilize and don't worsen through the rest of the year. So that's an assumption that we've made and the cotton costs. That's really started to come in late last year. We mentioned it in some of our earnings calls we expect that to help.
Mark W. Webb: It doesn't mean it doesn't have an impact, which is why we called it out, but internally, we were more prepared than ever just given the effort that we put against it. The delays that we're seeing have calmed down to some extent, you know, the initial it's always an initial uncertainty that creates, you know, longer delays, the delays have settled down, and the teams are working at every opportunity to offset them. Those include, if we need to air freight goods from the ports of origin to landed in the US, that's a team of merchants and merchandise planners who pour over those decisions and make them based on the relative importance of the late style to the floor set or the marketing or some combination.
Defray the costs and uncertainty from the Red sea through that second quarter timeframe.
And really with respect to the guidance that we provided for the year. The assumptions are will always and the merchant teams and planning teams do always look at strategic opportunities for.
For price opportunities.
Raising or decreasing based on market, our product et cetera that continues but really for the most part the guide that we provided implies that pricing is pretty stable and that units would be the driver of the sales range that we provided on the back of the initiatives that we're investing in the marketing effort.
Mark W. Webb: And then the other options are to work with our great vendor base, which we've talked at length about the great relationships we have and see where we can move shipment dates early to compensate for any delays. And and then the last sort of element is if we do get a delayed shipment here, we will make the decision whether to expedite the air freight to our West Coast stores as needed. The Q2 time frame and why we called it out is that's our important quarter with Mother's Day and those assortments are more likely warranting of the expedited air freight option than others and we land those products in Q1 but we sell them through Q2 which is why we called out that that is the quarter that would feel the impact most, that we've made, and the cotton costs that really started to come in late last year, we mentioned it in some of our earnings calls, we expect that to help defray the costs and uncertainty from the Red Sea through that second quarter time frame.
That we're taking and the benefits that will accrue from the technology as we've implemented it.
Got it. Thank you and one question on the store openings are you closing stores in malls and opening an open air anything in terms of the local regions locations in terms of what Youre doing in the store size at all changing cost to open versus what had been done in the past given you haven't been in any store opened.
A long time until now.
Yes.
Take the first part and hand, it over to Mark we prefer lifestyle centers, it's what our customer prefers but they're obviously miles that are very important and to the extent that we have exited locations that are high.
High potential.
Look at malls as well as lifestyle centers that certainly have a bias there.
Mark W. Webb: And really, with respect to the guidance that we provided for the year, the assumptions are that we'll always, and the merchant teams and planning teams do always look at strategic opportunities for price opportunities, raising or decreasing based on the market, our product, etc. That continues, but really, for the most part, the guide that we provided implies that pricing is pretty stable and that units would be the driver of the sales range that we provided on the back of the initiatives that we're investing in, the marketing efforts that we're, Thank you.
And as Mark said, the store openings will be weighted towards the back half of the year and the store closures will be weighted towards the front half of the year. So.
And then on the customer count if you want to address <unk>.
Generally speaking Dana the good news about our store model.
Great aspect of it I guess.
Stated differently.
Is that it's.
Sort of a known very right sized model and has been for some time and so there arent any major changes that were deploying aside from new Pos and what what opportunities that creates with respect to space requirements.
But generally speaking we're right sized we know the model and as we kick back off.
Dana Lauren Telsey: And one question on the store openings. Are you closing stores and malls and opening in the open air? Anything in terms of regions, locations, in terms of what you're doing?
Work, which we started in a little bit in 2022, and then we were a net store opening by one store in 2023.
Claire Spofford: And is the store size at all changing? The cost to open versus what had been done in the past, given it hadn't been a new store opener in a long time till now? Yeah, I'll take the first part and hand it over to Mark. You know, we prefer lifestyle centers. It's what our customer prefers, but there are obviously malls that are very important. And to the extent that we have existing locations that are high, high potential, we'll look at malls as well as lifestyle centers that certainly have a bias there. And, as Mark said, the store openings will be weighted toward the back half of the year, and the store closures will be weighted toward the front half of the year.
We're refining that model again, and nothing major to call out with respect.
So the cost side of it we are managing capital to vary.
We think managing it well and generating significant returns both at the project level and at the enterprise level.
Let you guys do the calculations, but that should show up in the results that we're producing.
Thank you.
Thanks.
This concludes the question and answer session I will turn the call to Claire Spofford for closing remarks.
Thank you everyone for your time and attention. This morning, we look forward to chatting again on our Q1 call in a few months.
Claire Spofford: So, and then on the cost market, I'm, Yeah, generally speaking, Dana, the good news about our store model, well, it's a great aspect of it, I guess. Unknown Executive, Claire Spofford, Jeffrey Lick, Michael Rahamim, Michael Eck, Jill Inc. Unknown Executive, Claire Spofford, Jeffrey Lick, Michael Rahamim, Michael Eck, Jill Inc.
This concludes today's conference call. We thank you for joining you may now disconnect your lines.
Yes.
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Unknown Executive: Thank you. This concludes the question and answer session. I'll turn the call over to Claire Spofford for closing remarks. Thank you, everyone, for your time and attention this morning. We look forward to chatting again on our Q1 call in a few months. This concludes today's conference call. We thank you for joining us. You may now disconnect your lines.
Okay.
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Yes.