Q1 2025 J.Jill Inc Earnings Call

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Operator: Thank you for standing by. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the JJill First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Krista and I will be your conference operator today at this time I would like to welcome everyone to the J Jill first quarter 'twenty 'twenty four earnings conference 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 if you'd like to ask.

A question during that time.

I Star followed by the number one on your telephone keypad and if you'd like to withdraw that question I've got and press Star one.

I will now turn the conference over to Claire small field, Chief Executive Officer, and President Claire.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. I will now turn the conference over to Claire Spofford, Chief Executive Officer and President.

Claire Spofford: Thank you, Operator, and hello, everyone. Thank you for joining us this morning.

Claire Smallfield: Thank you operator, and Hello, everyone. Thank you for joining us this morning.

Claire Spofford: I'll begin with an overview of highlights from our first quarter and progress on our initiative, and we'll then turn the call over to Mark to discuss our financial results and outlook in more detail before we open the call for questions. Before we dive in, I want to emphasize where J.Jill is today and how far we've come in strengthening our foundation and positioning the brand for long-term success. As we have discussed before, J.Jill has incredible brand equity with a very loyal customer base that we delight with our product offerings that generate consistent demand and we serve them through our balanced omni-channel model.

I'll begin with an overview of highlights from our first quarter and progress on our initiatives and will then turn the call over to Mark to discuss our financial results and outlook in more detail before we open the call for questions.

Claire Smallfield: Before we dive in I want to emphasize we're J Jill is today and how far we've come and strengthening our foundation and positioning the brand for long term success.

Claire Smallfield: As we have discussed before J Jill has incredible brand equity with a very loyal customer base that we delight with our product offerings that generate consistent demand and we serve them through our balanced omni channel model.

Claire Spofford: Over the past three-plus years, through careful planning, disciplined inventory management, and a focus on full-price selling, we've not only driven strong financial results, but have enabled a stronger foundation to tell our brand and product story, while fostering our loyal customer base and welcoming new customers to the brand. We have refined our product assortment, leveraging a quality, fabric-first approach, and driven differentiation in our products and sub-brands, positioning them to meet a broad spectrum of end uses for our customers.

Claire Smallfield: Over the past three plus years through careful planning disciplined inventory management and a focus on full price selling is not only driven strong financial results, but have enabled a stronger foundation to tell our brand and product story of fostering our loyal customer base and welcoming new customers to the brand.

Claire Smallfield: We have refined our product assortment and leveraging our quality fabric first approach and driving differentiation in our products and sub brands positioning them to meet a broad spectrum of end uses for our customer.

Claire Spofford: Our relevant product and engaging customer experience have enabled strong full-price selling and driven best-in-class margins and profitability. In addition, we have modernized our brand and value propositions to be more relevant and inclusive, and optimized our marketing mix for efficiency and productivity, yielding strong customer acquisition economics that are scalable. The strength of our results to date gives us further confidence in the future of the J.Jill brand and business. We are now at a pivotal inflection point where we are leaning in and making strategic investments to realize the brand's full growth potential longer term. We are investing meaningfully in marketing to drive awareness and growth in our customer base. We are undertaking infrastructure projects that will unlock omni-channel capabilities to drive future growth.

Claire Smallfield: A relevant product and engaging customer experience have enabled strong full price selling and driven best in class margins and profitability.

Claire Smallfield: In addition, we've modernized our brand and value proposition to be more relevant and inclusive and optimized our marketing mix for efficiency and productivity, yielding strong customer acquisition economics that are scalable.

Claire Smallfield: The strength of our results to date gives us further confidence in the future of the J Jill brand and business. We are now at a pivotal inflection point, where we are leaning in and making strategic investments to realize the brand's full growth potential longer term.

Claire Smallfield: We are investing meaningfully in marketing to drive awareness and growth in our customer base. We are undertaking infrastructure projects that will unlock omnichannel capabilities to drive future growth and we are opening new stores that deliver strong economic and will be meaningful contributors to new customer acquisition over the coming years.

Claire Spofford: And we are opening new stores that deliver strong economics and will be meaningful contributors to new customer acquisition over the coming years. We continue to plan to open 20 to 25 new stores in the next three years and believe we have potential to grow further beyond that time horizon. In the next five years, we see the opportunity to open 50 new stores, inclusive of our medium-term goal. In addition to these investments, we also recently announced that we paid down approximately $60 million of debt and initiated an ordinary quarterly dividend program.

Claire Smallfield: We continue to plan to open 20 to 25, new stores in the next three years and believe we have potential to grow further beyond that time horizon.

Claire Smallfield: In the next five years, we see the opportunity to open 50, new stores inclusive of our medium term goal.

Claire Smallfield: In addition to these investments we also recently announced that we paid down approximately $60 million of debt and initiated an ordinary quarterly dividend program.

Claire Spofford: These investments and actions are in line with our capital priorities and reflect the strength of our results to date, our strong cash generation, and our confidence for the future. Now let me turn to review our first quarter highlights.

Claire Smallfield: These investments and actions are in line with our capital priorities and reflect the strength of our results to date are strong cash generation and our confidence for the future.

Claire Smallfield: Now, let me turn to review our first quarter highlights.

Claire Spofford: In the first quarter, we outperformed our expectations and delivered net sales growth of 7.5% and adjusted EBITDA of $35.6 million. For the quarter, comparable sales, which excludes the impact of the calendar shift, grew 3.1 percent, reflecting significant sequential improvement from the prior year trend. These results were driven by a strong end to the period as customers responded well to our early summer assortment, which was supported by an earlier floor set and marketing given the calendar shift and led up to the heart of our season and Mother's Day.

Speaker Change: In the first quarter, we outperformed our expectations and delivered net sales growth of seven 5% and adjusted EBITDA of $35 $6 million.

Speaker Change: For the quarter comparable sales, which excludes the impact of the calendar shift grew three 1%, reflecting significant sequential improvement from the prior year trends.

Speaker Change: These results.

Speaker Change: <unk> were driven by a strong end to the period as customers responded well to our early summer assortment, which was supported by an earlier floor set and marketing given the calendar shift and lead up to the heart of our season and mother's day.

Claire Spofford: This strong end to the period, which also saw strength in AOV and conversion, offset lower traffic earlier in the quarter, particularly in our retail channel, which was impacted by the cool and wet start to spring across the country. Given this dynamic, we saw our direct channel outperform our retail channel during the period, demonstrating the strength of our balanced omni-channel model that enabled customers the flexibility to shop at their convenience, anytime, anywhere they would like.

Speaker Change: The strong end to the period, which also saw strength in <unk> and conversion offset lower traffic earlier in the quarter, particularly in our retail channel, which was impacted by the cool and wet start to spring across the country.

Speaker Change: Given this dynamic we saw our direct channel outperformed our retail channel during the period, demonstrating the strength of our balanced omni channel model that enables customers the flexibility to shop at their convenience anytime anywhere they would like.

Claire Spofford: Our customer file remained healthy and supportive of the total sales growth we delivered for the period. Our loyal and best customer segment saw nice growth in the quarter and we saw improved strength in the file overall as we moved through the period consistent with the cadence of our top line results. In addition, we saw healthy spend across all segments of the file and delivered strong full-price selling and increased full-price penetration as evidenced by our gross margin performance.

Our customer file remained healthy and supportive of the total sales growth we delivered for the period.

Speaker Change: Our loyal and best customer segment saw a nice growth in the quarter and we saw improved strength in the file overall as we move through the period consistent with the cadence of our topline results.

Speaker Change: In addition, we saw healthy spend across all segments of the file and delivered strong full price selling and increased full price penetration as evidenced by our gross margin performance.

Claire Spofford: Underlying these results continues to be the strength of our product assortment. We have a deep connection with the customer and a keen understanding of her desire for quality, versatility, and novelty in her wardrobe. As we have discussed before, we stay very close to our customers through primary research and an ongoing dialogue. We solicit her input on satisfaction with the brand, her product purchase intent as she looks forward, as well as many other things.

Speaker Change: Underlying.

Speaker Change: These results continues to be the strength of our product assortment.

Speaker Change: We have a deep connection customer and a keen understanding of her desire for quality versatility and novelty and her wardrobe.

Speaker Change: As we have discussed before we stay very close to our customers through primary research and in ongoing dialogue.

Speaker Change: We solicit input on satisfaction with the brand or product purchase intent is she look forward as well as many other things.

Claire Spofford: Our latest customer insight work informed us that while she remains cautious, she is prioritizing her discretionary spend on items she loves. She also expressed especially strong satisfaction with our recent collection. The spring and early summer assortments are front and center in the heart of our season and we saw real strength in the bright color palettes and light versatile fabrications we offered, including our core linen and cotton gauze assortments. We also saw strength in our Pima and Supima knit franchises in seasonal colors and a great response to print and pattern. Novelty tops and embroidery sparked her interest in fresh options to update her spring and summer wardrobe.

Bob: Our latest customer insight work informed us that while she remains cautious she is prioritizing our discretionary spend on items you Bob.

Bob: She also express, especially strong satisfaction with our recent collection.

Bob: The spring and early summer Assortments are front and center in the heart of our season, and we saw real strength in the bright color pallets and like personal fabrications, we offered including our core linen and cotton God's assortment.

Bob: We also saw strength in our payment and <unk> franchises in seasonal colors, and a great response to print and pattern.

Bob: Novelty tops and embroidery sparked your interest in fresh options to update her spring and summer wardrobes.

Claire Spofford: As we look ahead, while we are maintaining our disciplined approach to inventory management, we are continuing to lean in more to investments in areas of the assortment that are driving results and gaining traction. We continue to be encouraged by the response to capsule collections such as Pure Jill Elements and Wherever Works that push the boundaries of our sub-brands to welcome new customers to the brand while also testing the upper bounds of our pricing architecture.

Bob: As we look ahead, while we are maintaining our disciplined approach to inventory management, we are continuing to lean in more to investments in areas of the assortment that are driving results and gaining traction.

Bob: We continue to be encouraged by the response to capsule collections, such as pure Jill elements and wherever work that push the boundaries of our sub brands to welcome new customers to the brand while also testing the upper bounds of our pricing architecture.

Bob: Hi.

Claire Spofford: In addition to supporting our assortment, we are also making significant investments in marketing to drive awareness and customer file growth. As you have heard us say before, we have an exceptionally loyal customer base, but we are a bit of a well-kept secret, which creates a significant opportunity to increase our brand awareness and drive growth. We are excited to launch the One Wardrobe, No Limits campaign at the end of the quarter, focused on enhancing our customer engagement and elevating the J.Jill brand. Campaign Leverage is an integrated marketing mix tailored to meet new and existing customers where they are, across social media, web, catalog, and in-store.

In addition to supporting our assortment. We are also making significant investments in marketing to drive awareness and customer file growth.

Bob: As you have heard us say before we have an exceptionally loyal customer base, but we are a bit of a well kept secret which creates a significant opportunity to increase our brand awareness and drive growth.

Bob: We were excited to launch the one wardrobe no limits campaign at the end of the quarter focused on enhancing our customer engagement and elevating the J Jill brand.

Speaker Change: Campaign Leverages, an integrated marketing next tailored to meet new and existing customers, where they are across social media web catalog and in store.

Claire Spofford: The campaign also features a series of nationwide activations and enhanced capabilities designed to encourage customers to discover pieces that demonstrate the versatility of our offerings and perfectly complement their multifaceted lives. In addition, we are working with a diverse group of social media influencers who are showcasing the versatility of our product and the ease with which it follows a woman through the various facets of her daily life. We're very excited to launch a nationwide customer activation this month that was inspired by our customers who told us that they are not only seeking versatile and high-quality items but also looking to give new life to their wardrobe.

Speaker Change: The campaign also features a series of nationwide activation and enhanced capabilities designed to encourage customers to discover pieces that demonstrate the versatility of our offerings and perfectly complement their multifaceted lives.

Speaker Change: In addition, we are working with a diverse group of social media Influencers, who are showcasing the versatility of our product and the ease with which it follows a woman through the various facets of her daily life.

Speaker Change: We're very excited to launch a nationwide customer activation. This month that was inspired by our customers who told us that they are not only seeking personal and high quality items, but also looking to give new life to their wardrobe.

Claire Spofford: Our upcoming activation will include a trade-in experience for consumers that will help breathe new life into their closets and show them the possibilities of refreshing their wardrobe with us. We believe this is another opportunity to engage our loyal customer base and introduce J.Jill to new customers in a very compelling way. Through all of these elements, our One Wardrobe, No Limits campaign is a step forward toward greater brand awareness and growth, and we are extremely excited to launch additional amplifying elements as we move into Q2.

Speaker Change: Our upcoming activation will include a trade in experience for consumers that will help breathe new life into their closets and show them the possibilities of refreshing their wardrobe with us.

Speaker Change: We believe this is another opportunity to engage our loyal customer base and introduce J Jill to new customers in a very compelling way.

Speaker Change: Through all of these elements are one wardrobe no limits campaign is a step forward toward greater brand awareness and growth and we are extremely excited to launch additional amplifying elements as we move into Q2.

Claire Spofford: This now leads me to our focus on strengthening our omni-channel model. The new POS system, which we rolled out last year, is delivering an enhanced customer experience in-store. And with our OMS project underway, we expect to enable even greater omni-channel capabilities that will drive increased productivity and efficiency across channels. Our store expansion plans for this year continue to include up to five net new store openings, balancing our measured approach with growth ambition.

Speaker Change: This now leads me to our focus on strengthening our Omnichannel model.

Speaker Change: The new Pos system, which we rolled out last year is delivering an enhanced customer experience in store and with our Oems project underway, we expect to enable even greater omnichannel capabilities that will drive increased productivity and efficiency across channel.

Speaker Change: Our store expansion plans for this year continue to include up to five net new store opening balancing our measured approach with growth ambitions.

Claire Spofford: Retail remains a very important channel for us as both a customer retention and acquisition strategy. About 60% of our new customers come in through our stores, and the high-touch customer service that our associates provide is part of the special thoughts that has driven our strong, loyal customer base. In addition to our retail channel, we are also benefiting from the work we did began last year to enhance our direct channel and create a more seamless experience, helping to drive nice improvements in conversion and return rates.

Speaker Change: Retail remains a very important channel for us.

Speaker Change: Both the customer retention and acquisition strategy.

Speaker Change: About 60% of our new customers come in through our stores and the high touch customer service that our associates provide as part of the special sauce that has driven our strong loyal customer base.

Speaker Change: In addition to our retail channel. We are also benefiting from the work. We did began last year to enhance our direct channel and create a more seamless experience helping to drive nice improvements in conversion and return rates.

Claire Spofford: Our ability to create a seamless experience is integral to creating loyalty, be it through online enhancements that give her greater confidence in her purchase or through positive interactions with J.Jill in-store associates. It's a holistic approach that not only satisfies but also delights our customer, reinforcing the backbone of our brand ethos. In summary, we are very pleased with the strong start to the year, and we are confident and excited in the growth potential for J-Jill.

Speaker Change: Our ability to create a seamless experience is integral to creating loyalty be it through online enhancements to defer greater confidence in her purchase or through positive interactions with J, Jill and store associates.

Speaker Change: It's a holistic approach that not only satisfy but also delights our customers reinforcing the backbone of our brand ethos.

Speaker Change: In summary, we are very pleased with the strong start to the year and we are confident and excited and the growth potential for J Jill.

Claire Spofford: We're focused on continuing to deliver strong financial results with the ongoing execution of our operating model through careful planning, disciplined inventory management, and a focus on full price selling. In addition, we are leaning in and making strategic investments to realize the brand's full growth potential, and look forward to building on the momentum we are driving to deliver long-term profitable growth and value to our shareholders. I want to thank all of our teams for their ongoing hard work and dedication to delivering on our objective and to driving results. Let me now turn the call over to Mark to discuss our results and outlook in more detail.

Speaker Change: We're focused on continuing to deliver strong financial results with the ongoing execution of our operating model through careful planning disciplined inventory management and a focus on full price selling.

Speaker Change: In addition, we are leaning in and making strategic investments to realize the brand's full growth potential and look forward to building on the momentum we are driving to deliver long term profitable growth and value to our shareholders.

Speaker Change: I want to thank all of our teams for their ongoing hard work and dedication to delivering on our objectives and to driving results.

Let me now turn the call over to Mark to discuss our results and outlook in more detail.

Mark W. Webb: Thank you, Claire. And good morning, everyone.

Mark: Thank you Claire and good morning, everyone. As Claire discussed we were very pleased with our first quarter performance with total company comp sales up three 1% driven by a strong finish to the quarter leading into the important mother's day holiday period in early may.

Mark W. Webb: As Claire discussed, we were very pleased with our first quarter performance, with total company comp sales of 3.1%, driven by a strong finish to the quarter leading into the important Mother's Day holiday period in early May. Our disciplined business model delivered comp sales growth, healthy gross margins, growth in adjusted EBITDA, and solid free cash flow during the first quarter. As previously announced, early in the second quarter, we leveraged this strength and voluntarily paid down $58 million of debt, which, when combined with the scheduled amortization payment made in April, reduced principal outstanding by about $60 million. And we also announced the initiation of the first ordinary dividend program since the company's IPO in 2017.

Mark: Our disciplined business model delivered comp sales growth healthy gross margins growth in adjusted EBITDA and solid free cash flow during the first quarter as previously announced early in the second quarter, we leveraged the strength and voluntarily paid down $58 million of debt, which when combined with the scheduled amortization.

Mark: Payment made in April reduced principal outstanding by about $60 million and we also announced the initiation of the first ordinary dividend program since the Companys IPO in 2017.

Mark W. Webb: These actions are a direct result of our operating performance and demonstrate the confidence we have in our business model going forward, and our commitment to strengthening the balance sheet and driving total shareholder returns. Now, I'll provide details on results for the first quarter. As previously mentioned, total company comparable sales for the first quarter increased 3.1%, driven by the direct channel. As a reminder, the total company comp calculation shifts last year to align like-for-like weeks, in addition to adjusting for other non-comparable events between this year and last.

Mark: These actions are a direct result of our operating performance and demonstrate the confidence we have in our business model going forward and our commitment to strengthening the balance sheet and driving total shareholder returns.

Mark: Now I'll provide details on our results for the first quarter.

Mark: As previously mentioned total company comparable sales for the first quarter increased three 1% driven by the direct channel as a reminder, the total company comp calculation ships last year to align like for like weeks. In addition to adjusting for other non comparable events between this year and last.

Mark W. Webb: Total company sales for the quarter were about $162 million, up 7.5% compared to Q1 2023. This performance was driven by approximately $7 million of benefit due to the calendar shift compared to reported Q1 2023, as well as full price mix and higher average unit retails contributing to the positive comp. Store sales for Q1 were up about 4% compared to Q1 2023, driven primarily by the calendar shift and improved conversion rates during the quarter.

Mark: Total company sales for the quarter were about $162 million up seven 5% compared to Q1 2023. This performance was driven by approximately $7 million of benefit due to the calendar shift compared to reported Q1 2023, as well as full price mix and higher average unit retail.

Mark: Contributing to the positive comp.

Mark: Store sales for Q1 were up about 4% compared to Q1, 2023, driven primarily by the calendar shift and improved conversion rates during the quarter.

Mark W. Webb: Direct sales as a percentage of total sales were about 47% in the quarter, compared to the first quarter of fiscal 2023, direct sales were up about 12% driven in part by the calendar shift and also strong conversion and full price selling.

Mark: Direct sales as a percentage of total sales were about 47% in the quarter compared to the first quarter of fiscal 2023 direct sales were up about 12% driven in part by the calendar shift and also strong conversion and full price selling.

Mark W. Webb: Q1 total company gross profit was about $118 million, up about $9 million compared to Q1 2023. Q1 gross margin was 72.9%, up 80 basis points over Q1 2023, driven by a stronger mix of full-price sales, a better markdown gross margin, and first-cost AUC benefits. SG&A expenses for the quarter were about $89 million compared to approximately $83 million last year. The increase was driven primarily by marketing investments, as well as variable expenses on higher sales, wage inflation, and about $700,000 in incremental expense associated with the OMS project.

Mark: Q1 total company gross profit was about $118 million up about $9 million compared to Q1 2023.

Speaker Change: Q1 gross margin was 72, 9% up 80 basis points over Q1, 2023, driven by a stronger mix of full price sales are better markdown gross margin and first cost AUC benefit.

Speaker Change: SG&A expenses for the quarter were about $89 million compared to approximately $83 million last year. The increase was driven primarily by marketing investments as well as variable expenses on higher sales wage inflation and about $700000 in incremental expense associated with the Ams project.

Mark W. Webb: Adjusted EBITDA was $35.6 million in the quarter compared to $31.9 million in Q1 2023. Please refer to today's press release for a reconciliation of adjusted EBITDA to net income, the most comparable GAAP financial measure. Please also note that management's presentation of adjusted EBITDA has been updated to treat the amortization of SAS-related implementation costs for cloud-based software technology projects, including SG&A, as an adjustment and added back to adjusted EBITDA. Turning to cash flow.

Speaker Change: Adjusted EBITDA was $35 6 million in the quarter compared to $31 9 million in Q1 2023.

Speaker Change: Please refer to today's press release for a reconciliation of adjusted EBITDA to net income the most comparable GAAP's financial measure.

Speaker Change: Please also note that management's presentation of adjusted EBITDA has been updated to treat the amortization of SaaS related implementation costs for cloud based software technology projects included in SG&A as an adjustment and added back to adjusted EBITDA.

Speaker Change: Turning to cash flow.

Mark W. Webb: For the quarter, we generated about $21 million of cash from operations, resulting in ending cash of about $77 million with zero borrowings against the ABL. As a reminder, following the end of the first quarter, we used cash on hand to reduce total outstanding debt by approximately $58 million, which reduced the outstanding term loan balance to approximately $108 million and cash of about $28 million as of May 10, 2024.

Speaker Change: For the quarter, we generated about $21 million of cash from operations, resulting in an ending cash of about $77 million with zero borrowings against the ABL. As a reminder, following the end of the first quarter, we used cash on hand to reduce total outstanding debt by approximately $58 million, which reduced the outstanding.

Speaker Change: Standing term loan balance to approximately $108 million in cash of about $28 million as of May 10 2024.

Mark W. Webb: Looking at inventory, total reported inventories were down about 1% at the end of the first quarter, compared to the end of the first quarter last year. Reported inventory levels this year will be impacted by both the calendar shift and the strategic decision we made to ship early to offset Red Sea disruptions. As a result, we expect end of Q2 reported inventories to be up meaningfully before normalizing later in the year. We continue to manage inventory prudently with overall levels planned about flat for the year, inclusive of small investments made to support growth initiatives, which we expect will grow over time as we read the results of these initiatives.

Speaker Change: Looking at inventory total reported inventories were down about 1% at the end of the first quarter compared to the end of the first quarter last year.

Speaker Change: Ported inventory levels. This year will be impacted by both the calendar shift and the strategic decision. We made to ship early to offset rent see disruptions. As a result, we expect end of Q2 reported inventories to be up meaningfully before normalizing later in the year, we continue to manage inventory prudently with <unk>.

Speaker Change: Overall levels planned about flat for the year inclusive of small investments made to support growth initiatives, which we expect will grow over time as we read the results of these initiatives.

Mark W. Webb: Importantly, as we enter the second quarter, we are comfortable with both the amount and complexion of our inventory. Capital expenditures for the quarter were $2.3 million compared to $2.9 million last year. Investments were focused on store and technology projects. With respect to store count, we neither closed nor opened any stores during the first quarter, resulting in end-of-quarter store count of 244 stores.

Speaker Change: Accordingly, as we enter the second quarter, we are comfortable with both the amount and complexion of our inventories.

Speaker Change: Capital expenditures for the quarter were $2 $3 million compared to $2 $9 million last year investments were focused on store and technology projects.

Speaker Change: With respect to store count, we neither closed nor open to any stores during the first quarter, resulting in end of quarter store count of 244 stores.

Mark W. Webb: Turning now to our Outlook. As we stated on our fourth quarter 2023 call, timing shifts associated with the prior year 53rd week will impact reported quarterly results in 2024. We expect the shift which benefited Q1 to negatively impact the second and fourth quarters of 2024, as relatively larger weeks at the beginning of each quarter are replaced by relatively smaller weeks at the end of each quarter, plus the impact of one fewer week in Q4 2024 compared to the 14 week quarter in Q4 2023.

Speaker Change: Turning now to our outlook.

Speaker Change: As we stated on our fourth quarter 2023 call timing shifts associated with the prior year, a 50 <unk> week will impact reported quarterly results in 2024.

Speaker Change: We expect the shift which benefited Q1 to negatively impact the second and fourth quarters of 2024 as relatively larger weeks at the beginning of each quarter are replaced by relatively smaller weeks at the end of each quarter plus the impact of one fewer week in Q4 2024 compared to the 14 week quarter in Q4.

Speaker Change: For 2023.

Mark W. Webb: Taking this into account, for the second quarter, we expect net sales to be flat to down 3% compared to $156.6 million in the prior year period. This outlook includes approximately $7 million of negative impact from the calendar shift.

Speaker Change: Taking this into account for the second quarter, we expect net sales to be flat to down 3% compared to $156 6 million in the prior year period. This outlook includes approximately $7 million of negative impacts from the calendar shift we expect adjusted EBITDA to be in the range of 27 30.

Mark W. Webb: We expect adjusted EBITDA to be in the range of $27 and $30 million. Second quarter guidance reflects expected gross margin pressure related to disruption from the issues in the Red Sea we communicated on our prior call. While these issues are ongoing, they have stabilized, and barring any worsening, the pressure to gross margin should largely be contained to the second quarter.

Speaker Change: Second quarter guidance reflects expected gross margin pressure related to disruption from the issues in the Red Sea, we communicated on our prior call. While these issues are ongoing they have stabilized and barring any worsening the pressure to gross margin should largely be contained to the second quarter. In addition, this guide.

Mark W. Webb: In addition, this guidance reflects approximately $500,000 in SG&A investments related to the OMS project, as well as ongoing investments in marketing to drive increased awareness. As for full year, we are increasing our outlook slightly. We now expect net sales to grow in the range of one to three percent. Gross margin to be about flat and adjusted EBITDA to decline in the range of one to three percent compared to the 53 week fiscal year 2023.

Speaker Change: This reflects approximately $500000 in SG&A investments related to the <unk> project as well as ongoing investments in marketing to drive increased awareness.

Speaker Change: As for full year, we are increasing our outlook slightly we now expect net sales to grow in the range of 1% to 3% gross margin to be about flat and adjusted EBITDA to decline in the range of 1% to 3% compared to the 53 week fiscal year 2023.

Mark W. Webb: This outlook is compared to prior year revenue of $608 million and adjusted EBITDA of $112.8 million and reflects the negative impact from the loss of the 53rd week compared to fiscal year 2023 of about $8 million in sales and $2 million in adjusted EBITDA, as well as our investments to support profitable sales growth, including approximately $3 million in operating expenses related to the OMS project. Excluding the impact of the 53rd week and the operating expense investment in the OMS project, we expect fiscal 2024 revenue to be up in the range of 2 to 4 percent and adjusted EBITDA to be up in the range of 1 to 3 percent compared to the prior year.

Speaker Change: This outlook as compared to prior year revenue of $608 million and adjusted.

Speaker Change: The EBITDA of $112 8 million.

And reflects the negative impact from the loss of the 50 <unk> week compared to fiscal year 2023 of about $8 million in sales and $2 million and adjusted EBITDA as well as our investments to support profitable sales growth, including approximately $3 million and operating expenses related to the <unk> project.

Speaker Change: Excluding the impact of the 50, <unk> week and the operating expense investment and the Oss project, we expect fiscal 2020 for revenue to be up in the range of 2% to 4% and adjusted EBITDA to be up in the range of 1% to 3% compared to the prior year.

Mark W. Webb: Regarding store count, we still expect to grow net store count by up to five stores by the end of fiscal 2024, with both openings and closings now weighted to the back half of the year. And with respect to total capital expenditures, we still expect to spend about $26 million in fiscal 2024 with investments focused on new stores and the OMS project. In closing, we are very pleased with the strong start to fiscal 2024.

Speaker Change: Regarding store count, we still expect to grow net store count by up to five stores by the end of fiscal 2024 with both openings and closings now weighted to the back half of the year.

Speaker Change: And with respect to total capital expenditures, we still expect to spend about $26 million in fiscal 2024 with investments focused on new stores and the RMS project <unk>.

Speaker Change: In closing we are very pleased with the strong start to fiscal 2024 to reiterate Claire's commentary, we remain confident in our ability to continue to execute our disciplined operating model, which continues to drive results and enable us to effectively navigate today's environment, while positioning us to deliver long term profitable growth.

Mark W. Webb: To reiterate Claire's commentary, we remain confident in our ability to continue to execute our disciplined operating model, which continues to drive results and enable us to effectively navigate today's environment while positioning us to deliver long-term profitable growth and total shareholder return. Thank you. I will now hand it back to the operator for questions.

Speaker Change: And total shareholder return.

I will now hand, it back to the operator for questions.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please go ahead.

Speaker Change: Yeah. Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one again.

Speaker Change: Your first question comes from the line of Ryan Meyers with Lake Street Capital markets. Please go ahead.

Ryan Robert Meyers: Hey, good morning, guys. Thank you for taking my questions. First one for me, just wondering if you can maybe talk a little bit about what you've seen traffic trends look like and maybe kind of how you expect that to trend throughout the rest of this year.

Ryan Robert Meyers: Hey, good morning, guys. Thank you for taking my questions.

Ryan Robert Meyers: First one for me just wondering if you can maybe talk a little bit about what <unk> seen traffic trends look like and maybe kind of how you expect that to trend throughout the rest of this year.

Claire Spofford: Thanks, Ryan. We, I think, I think I mentioned in my remarks that we saw traffic just absolutely strengthen over the course of the quarter. Traffic in the retail channel was challenged in the first part of the quarter due to just a, you know, wet late spring, but we saw nice recovery and traffic patterns improving over the course of the quarter and, you know, saw some strength coming into this quarter. We haven't commented on traffic expectations for the remainder of the year.

Speaker Change: Thanks Ryan.

Speaker Change: We I think I think I mentioned in my remarks that we saw traffic just absolutely strengthen over the course of the quarter traffic in the retail channel was.

Speaker Change: Our challenge in the first part of the quarter due to just.

Speaker Change: Wet late spring, but we saw a nice recovery and traffic patterns improving over the course of the quarter end.

Speaker Change: Some strength coming into this quarter, we haven't.

Speaker Change: Commented on traffic expectations for the remainder of the year.

Ryan Robert Meyers: Okay, got it. But you know, that being said, it seems like your core customer, you know, is more, I guess, aware of kind of the demand environment and seems like demand continues to be, let's just say, stronger now than you know, it was at the beginning of the year. Is that kind of a right way to think about it?

Speaker Change: Okay got it but that being said it seems like your core customer.

Speaker Change: Is it more I guess aware of kind of the demand environment and it seems like demand continues to be.

Speaker Change: Stronger now than it was at the beginning of the year is that kind of a right way to think about it.

Claire Spofford: Yeah, yeah. And, you know, we saw strength from our best customer segments throughout the quarter with really nice full price penetration, as you see in the margin performance and, you know, real strength in the heart of our season leading up to Mother's Day.

Speaker Change: Yeah Yeah.

Speaker Change: Saw strength from our best customer segments throughout the quarter.

With really nice full price penetration as you see in the margin performance and.

Speaker Change: Real strength in the heart of our season, leading up to mother's day.

Ryan Robert Meyers: Okay, got it. And then just one more for me, you know, as you guys have dialed into the marketing a little bit more, you know, have you seen this flow through in any new to brand customers? Or maybe, you know, comment on kind of how you guys have seen that?

Speaker Change: Okay got it and then just one more for me you guys have dialed into the marketing a little bit more have you seen this flow through in any new to brand customers and maybe comment on how you guys have seen that trend.

Claire Spofford: Yeah, you know, we're, as we talk about, we're really focused on bringing new customers into the brand. We, you know, we think relative to... Some of the other competitors in the marketplace, we have low awareness and we have an opportunity to really introduce the brand to new people and we've had some really nice traction. With particularly with things like our inclusive sizing initiative, our work, we're at it things like that, that are focused on bringing customers in who are at the lower end of our target demographic, which also just feeds the health of the file for the future.

Speaker Change: Yeah.

Speaker Change: As we as we talk about we're really focused on bringing new customers into the brand.

Ryan Robert Meyers: Got it. Thank you for taking my questions.

Speaker Change: Relative to.

Speaker Change: <unk>.

Speaker Change: Some of the other competitors in the marketplace, we have low awareness and we have an opportunity to really introduce the brand to new people and we've had some really nice traction.

Speaker Change: With particularly with things like our inclusive sizing initiative, our workwear at it things like that that are focused on bringing customers in who are at the lower end of our target demographic, which also just feeds the health of the file for the future.

Speaker Change: Okay got it thank you for taking my questions.

Ryan Robert Meyers: Thanks Ryan.

Dana Lauren Telsey: Your next question comes from the line of Dana Telsey with Telsey Group. Please go ahead.

Speaker Change: Your next question comes from the line of Dana Tesla with Kessler Group. Please go ahead.

Dana Lauren Telsey: Hi, good morning, everyone, and nice to see the progress. As you think about the store sales, which had a significant uptick in the first quarter from the fourth quarter, was it traffic? Was it all regions? Was it any specific categories?

Dana Lauren Telsey: Hi, good morning, everyone nice to see the progress.

Dana Lauren Telsey: Do you think about the store sales, which had a significant uptick in the first quarter from the fourth quarter was the traffic was it all regions with but any specific categories and then on the margins with the gross margin up certainly more than expected.

Claire Spofford: And then on the margins, with the gross margin up certainly more than expected, and Mark, you had mentioned that better margins even on some of the markdowns, any change in process of what you're doing there and driving that better margin even on markdown merchandise? And lastly, with the Red Sea impact on inventory levels, how much of an increase do you see inventory at the end of Q2? And is there any changes you're making going forward given the issues in the Red Sea? Thank you.

Speaker Change: Mark you had mentioned that better margins, even on some of the markdowns any change in process of what Youre doing there and driving that better much margin, even on markdown merchandise and lastly, with the Red sea impact on inventory levels.

Speaker Change: Much of an increase do you see inventory at the end of Q2 and is there any changes you're making going forward given the issues in the Red Sea. Thank you.

Mark W. Webb: Thanks, Dana. I'll take the first one and then let Mark comment on the other two. So the first quarter performance was definitely driven by AUR, full price penetration. You know, I think we just spoke to the traffic trends, but again, you know, really heartened to see the response to the product assortments at full price driving the margin performance, particularly in what we talk about all the time is sort of our holiday, which is Mother's Day, the big part of the season. And Dan, I would add, I'll come on to the next two.

Dana Lauren Telsey: Thanks, Dana I'll take the first one and then let mark comment on the on the other two so the first quarter performance was definitely driven by AUR full price penetration.

Speaker Change: I think we just spoke to the traffic trends, but again.

Speaker Change: Really heartened to see the response to the product Assortments at full price driving the margin performance.

Speaker Change: Particularly in what.

Mark: We talked about all the time at sort of our holiday, which is mother's day is a big part of the season.

Mark W. Webb: And Dana, I would add, I'll come on to the next two questions, but I would add that conversion was also strong in the stores in the first quarter, which is very encouraging and in part driven by some of the benefits we would expect to see from the POS, which is a much greater uptake of the online orders that are available to customers now in a much more seamless and efficient transaction. So really, really good to see that metric in the stores as well and gives us confidence again in the investments in POS and some of the benefits to come.

Dan: Dan I would add I'll come on to the next two questions, but I would add that conversion was also strong in the stores in the first quarter, which is very encouraging and in part driven by some of the benefits. We would expect to see from the POS which is much greater uptake of the online orders that are available to customers now in a much.

Dan: More seamless and efficient transaction, so really really good to see that metric in the stores as well.

Speaker Change: <unk> gives us confidence again and the investments in Pos and some of the benefits to come.

Mark W. Webb: The next question on the gross margin, yeah, look, it's still really great to be driving the results that we're seeing at full price. The fact that the markdown margin was one of the drivers to the margin is, I would call it a derivative benefit of our disciplined operating model, where the inventory buys, you know, bought deliberately with discipline, selling through well at full price. The markdowns present a natural opportunity to yield better as well. And you're seeing a result of that sort of flow through into the markdown margin in Q1. And that that will continue.

Speaker Change: The next question on the gross margin, yes look it's still really great to be driving the results that we're seeing at full price. The fact that the markdown margin was one of the drivers to the margin is I would call. It a derivative benefit of our disciplined operating model, where the inventory by.

Speaker Change: Yes.

Speaker Change: Bought deliberately with disciplined selling through well at full price the markdowns present, a natural opportunity to yield better as well and youre seeing results of that sort of flow through into the markdown margin in Q1 and that that will continue that's again, a derivative benefit of the full price.

Speaker Change: Sort of operating model that we've been working hard to instill in the business and are now very comprehensive.

Mark W. Webb: That's, again, a derivative benefit of the full price sort of operating model that we've been working hard to instill in the business and are now very competent in. With respect to the Red Sea, we did call it out because the issues in the Red Sea first cropped up sort of at the very beginning of the calendar year, and the reactions that that the global shipping companies took to figure out, you know, how to reroute any deliveries that would have been going through that region added time.

Speaker Change: With respect to the Red Sea, we did call it out because the issues in the Red Sea first cropped up sort of at the very beginning of the calendar year and the reactions that debt.

The global shipping companies took to figure out.

Speaker Change: How to reroute any deliveries that would have been going through that region.

Mark W. Webb: And we, in expectation of our big, important, you know, summer floor sets in the Mother's Day period, which we say a lot because it is very important, we took actions to air freight where we could expedite shipments in a lot of that product. Those actions were taken during the first quarter, but the cost shows up when you sell those goods through, and a lot of that will hit in the second quarter because it was those floor sets that we adjusted to.

Speaker Change: Added time and we.

Speaker Change: In expectation of our big important.

Speaker Change: Summer floor sets in the mother's day period, which we say a lot because it is very important.

Speaker Change: We took actions to air freight, where we could expedite shipments in a lot of that product. Those those actions were taken during the first quarter, but the cost shows up when you sell those goods through and a lot of that will hit in the second quarter. Because it was those floor sets that we adjusted too at the same time, we then went and looked.

Mark W. Webb: At the same time, we then went and looked at where the shipping timing delays from going around the Cape, where they were settling in and made the decision to strategically move forward where we could, the goods to consolidate or the shipment dates from points of origin. And so that adds a week or so to a lot of our fall floor set, so no more need to expedite as much as we were expediting with respect to air freight, which is very costly.

Speaker Change: At where the shipping timing delays from going around the Cape.

Speaker Change: Were they were settling in and made the decision to strategically move forward, where we could.

Speaker Change: Good to consolidate or the shipment dates from points of origin, and so that adds a week or so to a lot of our fall floor sets so no more need to.

Speaker Change: Expedite as much as we were expediting with respect to air freight, which is very costly and but it does add to your in transits and that plus the calendar shifts mean that you get just some walking results related to timing in inventory. So we wanted to flag that for Q2, but also make the statements that we do.

Mark W. Webb: And but it does add to your in transit and that plus the calendar shifts mean that you get just some wonky results related to timing in inventory. So we wanted to flag that for Q2, but also make the statements that we did around the remaining discipline, how we're prudently investing, we're investing about flat, we'll explain where the actuals are at the end of the quarter and and be forthright about the drivers of that at that point. But just wanted to flag that as we go forward.

Speaker Change: Did around.

Speaker Change: The remaining disciplined how we're prudently investing we're investing about flat will explain where the actuals are at the end of the quarter end and be forthright about the drivers of that at that point, but just wanted to flag that as we go forward.

Speaker Change: Thank you.

Dan: Thanks, Dan.

Dylan Douglas Carden: Your next question comes from the line of Dylan Carden with William Blair. Please go ahead.

Speaker Change: Your next question comes from the line of Dylan Carden with William Blair. Please go ahead.

Dylan Douglas Carden: Okay, thanks. Yeah, just kind of curious. I know it's small, but the new stores that you've kind of targeted, can you speak to how those might compare to your existing fleet regionally, sort of target demographic, and then more broadly, this idea that you're sort of the best kept secret? How do you penetrate deeper into your core customer and how, maybe even if you have a sense of it, how that's changed as far as sort of awareness of that group through time?

Speaker Change: Okay. Thanks.

Speaker Change: Kind of curious I know, it's small, but the new stores that you've kind of targeted so can you just speak to how those might.

Speaker Change: It might compare to your existing fleet.

Speaker Change: Regionally.

Speaker Change: Sort of target demographic and then more broadly this idea that you are sort of the best kept secret.

Speaker Change: How do you penetrate deeper into your core customer.

Speaker Change: And maybe even if you have a sense of how thats changed as far as sort of awareness of <unk>.

Speaker Change: That group through time.

Speaker Change: Yes.

Mark W. Webb: I'll start Dylan with the stores. The good news is with respect to the stores, in the last several years, we've closed from our peak about 40 stores. And a lot of those decisions were made during the pandemic. And they were in response to an uncertain environment and as well as economics underneath the deals, the markets where we were, from a customer perspective, we are still very confident in the customers that are in those markets and the opportunity with respect to revenues when we start to reenter some of these markets.

Speaker Change: I'll start dealing with the stores.

Speaker Change: The good news is with respect to the stores. The last several years, we've closed from our peak about 40 stores and a lot of those decisions were.

Speaker Change: Made during the pandemic than they were in response to <unk>.

Speaker Change: Uncertain environment, and as well as economics underneath the deals the markets, where we were from a customer perspective, we are still very confident in the customers that are in those markets and the opportunity with respect to revenues when we start to reenter some of these markets and <unk>.

Mark W. Webb: And a large number of our, you know, disclosed 20 to 25 net new store opening target that we've had out there for a while, a lot, a lot of those and Claire moved forward a little bit today. And in her remarks, a large percentage of those are reentry markets. And so of those 20 to 25 or up to 50 in like the five year mark, a lot of those are lower hanging fruit reentries.

Speaker Change: A large number of our.

Speaker Change: Disclosed 20% to 25.

Net new store opening target that we've had out there for a while a lot of those and Claire moved forward a little bit today in her remarks, a large percentage of those are reentry markets and so of those 20% to 25% or up to 50 and like the five year Mark a lot of those are lower hanging fruit reenter.

Mark W. Webb: And what we've seen when we reenter markets is that we do open right back very close to our peak sales in the stores that we had operating previously with a better operating model and economic model underneath it. So that's, that's kind of a big part of the confidence that we have in in looking at the sort of national distribution of our fleet and where we see some of the low-hanging fruit opportunities and how we get comfortable with those proformas that we would be looking at and we have some proof points with some of the stores that we've opened along the way that support that which is encouraging and with that I think I'll turn it to Claire.

Speaker Change: <unk> and what we've seen when we reenter markets.

Speaker Change: Is that we do open right back very close to our peak sales in the stores that we had operating previously with a better operating model an economic model underneath it. So that's that's kind of a big part of the confidence that we have in and looking at.

Speaker Change: That's sort of.

Speaker Change: National distribution of our fleet and where we see some of the low hanging fruit opportunities and how we get comfortable with those pro forma is that we will be looking at and we have some proof points with some of the stores that we've opened along the way that support that which is encouraging and with that I think I'll turn it to clear.

Mark W. Webb: Thanks, Mark. Thanks, Dylan.

Mark W. Webb: Thanks Mark.

Thanks, John So with regard to the brand and brand awareness. We know we have a big opportunity I think we feel.

Claire Spofford: So, with regard to the brand and brand awareness, you know, we know we have a big opportunity. I think we feel Great about where we are right now from a profitability standpoint, from a product standpoint the teams are doing just a terrific job of putting the right product assortments together and marketing them effectively. And so now we're really kind of shining the spotlight and leaning in on the marketing a little bit at a little bit different level than we have to date.

John: Great about where we are right now from a profitability standpoint from a from a product standpoint a team.

John: Are doing just a terrific job of putting the right product assortments together and marketing them effectively and so now we're really kind of.

John: Shining the spotlight and leaning in on the marketing a little bit a little bit different level than we have to date, you'll see that.

Claire Spofford: You'll see the, One Wardrobe No Limits campaign that we launched at the end of the quarter really ramped in Q2 and we think that that's just a great It's a great campaign that speaks to what our brand's all about, you know, the versatility of our product. And we think that that's going to help. Move the needle, we have tracking mechanics in place to understand where we are from a brand awareness standpoint and we will track that over time, but I feel like the time is now to, to get more energy into that brand awareness effort and so. You'll see it hopefully in a lot of places.

John: One more drove no limits campaign that we launched at the end of the quarter.

John: Really ramp in Q2, and we think that that's just a great.

John: It's a great campaign that speaks to what our brands all about the versatility of our product.

John: And we think that that's going to help.

Move the needle we have tracking mechanics in place to understand kind of where we are from a brand awareness standpoint, and we will track that over time, but feel like the time is now to.

To get more energy into that brand awareness effort and.

John: So.

John: You'll see it hopefully in a lot of places.

Dylan Douglas Carden: Thank you very much, guys.

Speaker Change: Yes, thank you very much.

Speaker Change: Thanks, Doug.

Jonna Kim: Your next question comes from the line of Jonna Kim with TD Cowan. Please go ahead.

Speaker Change: Your next question comes from the line of John Kim with TD Cowen. Please go ahead.

Jonna Kim: Thank you for taking my question. Could you just talk about some initiatives you are doing to drive higher full-price selling given the macro still remains volatile and your assumptions for the remainder of the year? And also, just on the customer acquisition front, you mentioned new customers being more at the younger end of your target age group. What are some initiatives you are doing to acquire more younger consumers to your base? Sure, Johnna, thank you.

John Kim: Thank you for taking my question could you just talk about some initiatives you're doing to drive higher full price selling given the macro still remains volatile and your assumptions for the remainder of the year.

So just on the customer acquisition front, you mentioned new customers being more at the younger end of your target age group what are some initiatives you're doing to acquire more younger consumers to your base. Thank you.

Claire Spofford: Sure, Donna, thank you. So full price selling, given the macro environment is continuing to manage the business the way we've been managing the business, which is, you know, being very disciplined with our inventory purchases, really, I think doing a great job of telling our full price story, product story, brand story, supporting that in both channels, and, and then promoting as little as we can. You know, we know, we live in the women's apparel space.

Jonathan: Sure Jonathan Thank you.

Speaker Change: So full priced selling given the macro environment is continuing to manage the business the way we've been managing the business which is.

Being very disciplined with our inventory purchases really I think doing a great job of telling our full price story product story brand story supporting that in both channel and and then promoting as little as we can.

Speaker Change: We know we live in the women's apparel space.

Speaker Change: And so some level of promotion is inevitable, but we really tried to be as narrow and shallow and short lived as possible with our promotions, which has yielded to date really strong best in class maintain margins for this category and and so.

Claire Spofford: And so some level of promotion is inevitable, but we really try to be as narrow and shallow and short lived as possible with our promotions, which has yielded to date, you know, really strong best in class maintained margins for this category. And, and so, you know, that's working for us, we're going to continue to do that. Obviously, it depends on continuing to deliver great product and delivering a great experience for our customer, both online and in store. And when we do, you know, she's willing to pay full price for that product. And she's very loyal to us. So we're going to keep operating the way we're operating.

Speaker Change: That's working for US we're going to continue to do that obviously it depends on.

Speaker Change: Continuing to deliver great product and delivering a great experience for our customer both online and in store and when we do.

Speaker Change: He is willing to pay full price for that product and she's very loyal to us. So we're going to keep operating the way we are operating and and then with regard to the new to brand, yes, we talk about our target being sort of 45% to 65.

Claire Spofford: And, and then with regard to the NUDA brand, yeah, you know, we talked about our target being sort of 45 to 65. Bringing people in at the younger end of that demo has to do a lot with the way we position our products, the way we segment our marketing efforts, the creative that we put forward, and then the marketing channels that we use, you know, with an emphasis on social channels, digital and performance marketing being really kind of focused and disciplined with that segmentation and targeting. But also, you know, a lot of this brand work we think is exciting and relevant to that younger end of the target demo. So lots of effort and energy behind all of that.

Speaker Change: <unk> people in at the younger end of that demo has to do a lot with the way we position our products the way we segment our marketing efforts.

The creative that we put forward and then the marketing channels that we use.

Speaker Change: With an emphasis on social channels digital and performance marketing being really kind of focused and disciplined with that segmentation and targeting but also a lot of this brand work. We think is exciting and relevant to that younger end of the target demo so lots of effort and energy behind all of that.

Speaker Change: Got it thank you very much.

Marni Shapiro: Your next question comes from the line of Marni Shapiro with Retail Tracker. Please go ahead.

Speaker Change: Your next question comes from the line of Marni Shapiro with retail tracker. Please go ahead.

Marni Shapiro: Thanks. Hey guys, congratulations. The stores have looked really beautiful. It sounds like the business is in a different place right now from listening to you guys that you're very comfortable with. It feels like the base of the business is very solid and this is what's fueling your ability to sort of invest in whether it's technology, marketing and everything. I'm curious internally, is the team feeling that? Did it suddenly all just gel?

Marni Shapiro: Thanks, Hey, guys. Congratulations the source of looked really beautiful.

Speaker Change: It sounds like the.

Marni Shapiro: The business is in a different place right now from listening to you guys that you're very comfortable with.

Speaker Change: Bringing customers in with the product with markdowns it feels like the base of the business is very solid and this is what's fueling your ability to sort of invest in whether it's technology marketing and everything.

Marni Shapiro: <unk>.

Speaker Change: I'm curious internally is the team feeling that suddenly all just jealous because it even in your stores is feels like the sales associates there is different.

Claire Spofford: Because even in your stores, it feels like the sales associates, there's just a different, Mark, you made a comment just about better online stores. I think you were talking about them in-store, and as you roll out new systems and new technologies, is there a greater opportunity there to use your sales associates as sort of like in-store influencers to help build and wardrobe for the people who are coming in-stores? You could just talk a little bit about that.

Speaker Change: For lack of a better word a different vibe in there.

Speaker Change: And then Mark you made a comment just about better online stores. I think you were talking about the in store and as you rollout new systems and new technologies is there a greater opportunity there to use your sales associates are sort of like in store influencers to help build and wardrobe for the people who are coming in stores.

Speaker Change: You could just talk a little bit about that.

Mark W. Webb: Sure, I'll take the first piece and then hand it over to Mark. Thanks, Marni. The business is in, you know, a place, as I just mentioned, where we feel like we're ready to step on the gas a little bit. And, you know, that's been trending over time, over the past few years. You know, we feel at this level of profitability, we can, we can make these investments that they are strategic investments with a nice expected ROI.

Speaker Change: Sure I'll take the first piece and then hand, it over to Mark Thanks Marni.

Mark: The business is in.

Mark: Our place as I, just mentioned, where we feel like we're ready to step on the gas a little bit.

That's been trending over time over the past few years.

Mark: We feel at this level of profitability we can.

Mark: We can make these investments that they are strategic investments with a nice expected ROI the vibe is great.

Mark W. Webb: The vibe is great. It's always great when you've got good business. And, you know, the teams, our teams are terrific. First of all, I can't say enough about the strength of our team and the way our teams work together. And that translates, you know, through the stores, through the D.C., through the, through the home office. And I think it is reflected in, you know, the energy that we're feeling. So, appreciate you saying that and recognizing that in, and, you know, when you're in the stores and you've got great product to sell and your customer's happy.

Mark: So it's great when you've had good business and.

Mark: The teams our teams are terrific first of all I can't say enough about.

Mark: The strength of our team and the way our teams work together and that translates through the stores through the DC through the through the home office.

Mark: And I think it is reflected in the energy that we're feeling so I appreciate you, saying that and recognizing that.

Mark: And.

Mark: When you are in the stores and you've got great product to sell and your customers happy youre going to be happy.

Claire Spofford: Marni, I would just tack on to that that it's been a lot of deliberate, very hard work on behalf of the teams to get here. So that does show up, I think, when it starts to really show reliable results. In addition to the investments that you mentioned, I think it's maybe a testament to where we are in this performance that we haven't had a question on the capital structure or anything today, which is, I think, a good thing.

Marty: Marty I would just tack onto that that the it's been a lot of deliberate very hard work on behalf of the teams to get here. So that does show up I think when when it starts to really show.

Speaker Change: Reliable results right. In addition to the investments that you mentioned it also I think maybe a testament to where we are in this performance that we haven't had a question on the capital structure or anything today, which is I think a good thing, but I have to mention right and also we mentioned it a couple of times in our remarks and it also fuels our ability to strengthen.

Claire Spofford: But I have to mention, we mentioned it a couple of times in our remarks, that it also fuels our ability to strengthen the financial foundation of the company, which we demonstrated earlier this month, well, actually last month in May, with the pay down of the debt and leaving us with $108 million of principal outstanding as of that date, the May 10th date, and $28 million still of cash on the books. So call it $80 million of net debt.

The financial foundation of that.

Speaker Change: Company, which we demonstrated earlier.

Speaker Change: This month it will actually last month in may with the pay down of the.

Speaker Change: That and leaving us with $108 million of.

Speaker Change: Principal outstanding as of that date May 10 states and $28 million still have cash on the books. So call it $80 million of net debt and I think it's now even more feasible for us to start at an objective to get to net cash in the not too distant future and not putting a timeline on that right.

Mark W. Webb: And I think it's now even more feasible for us to start at an objective to get to net cash in the not-too-distant future. Not putting a timeline on that right now, but I feel like that's just going to continue to de-lever the business, which is an important, and we think, strong signal for an apparel retailer to continue to push into. That is sort of, and then the dividend, of course, that we initiated is another sign of our confidence and don't want to give that any short change, because that was a really important step for us to take and we think is hopefully a demonstration of our commitment to driving total shareholder returns.

Speaker Change: Now, but feel like that's just going to continue.

Speaker Change: To Delever the business, which is an important.

Speaker Change: And we think strong signal for an apparel retailer to continue to push into that.

Speaker Change: That is sort of and then the dividend of course that we initiated as another sign of our confidence and don't want to give that any short change because that was a really important step for us to take in and we think as hopefully a demonstration of our commitment to driving total shareholder returns.

Speaker Change: And we will continue as a company to think about that and those are our priorities.

Mark W. Webb: And we'll continue as a company to think about that and those are our priorities. You mentioned it is exciting, this sort of omni capabilities that we're just now, we've had omni capabilities in our stores, and we've been a direct to consumer retailer from our onset. So it's in our DNA. But having the systems now catch up to create what has been in many cases, a challenging, full of friction, to be to be blunt, sort of transaction in the stores with very So this is the first element of that with POS going in and then the OMS project and why we're so excited about it is it lights up the rest of the enterprise inventory, and allows us to provide that same level of, you know, lower friction, better service across the enterprise. So very excited to see those early results in the store.

You mentioned and it is exciting.

Speaker Change: Just sort of omni capabilities that we're just now we've had omni capabilities in our stores and we've been a direct to.

Speaker Change: Consumer retailer from our onset so it's in our DNA, but having the systems now catch up to create what has been in many cases a challenging.

Speaker Change: Full of friction.

Speaker Change: To be to be blunt sort of transaction in the stores with very patient and great customers that have taken advantage of it but now to offer that in a much more seamless capability and to provide our store associates have always been very good at selling this service to our customers but to offer them tools.

Speaker Change: <unk> that they can sell throughout the store instead of at a terminal somewhere and it's part of the same transaction and really offer that in a seamless it's less about the transaction and more about the sale and the service. So this is the first element of that with Pos going in and then the <unk> project and why we're so excited about it is.

Speaker Change: It lights up the rest of the enterprise inventory and allows us to provide that same level of.

Speaker Change: Lower friction better service across the enterprise so very excited to see those early results in the store.

Marni Shapiro: That's great. And can I ask you guys to follow up also just about some of the younger consumers that you're bringing into the store? You know, I know there are other brands that her first kind of step into the brand is through accessories. You guys dabble in accessories a little bit more online than in-store. It's usually like on a front table or someplace, but there's never, it's not a big story. Even online, it's not a big story, but there's a good assortment in certain sub-segments, especially. Have you thought about, you know, I'm curious what your customer, the younger customer, comes into by first, and have you thought about magnifying some of the accessories as that kind of entry point into the brand?

Speaker Change: Great.

Speaker Change: Can I ask you guys a follow up also just about some of the younger consumers that you are bringing into the store.

Speaker Change: I know there are other brands that her first kind of step into the brands through accessories, you guys dabble in accessories, a little bit more online than in store.

Speaker Change: It's usually like auto front table or someplace, but theres never it's not a big story.

Speaker Change: Even online is not a big story, but theres a good assortment in certain sub segments, especially have you thought about I'm curious what your customer the younger customer comes in to buy first and.

Speaker Change: Have you thought about magnifying some of the accessories is that kind of entry point into the brand.

Claire Spofford: Thanks, Marni. It's a great question. You know, accessories are important to the business in the sense that they help complete the outfit. Our customers love being outfitted with our teams and, you know, we try to make that happen, obviously, online as well as in-store by suggesting the selling and the accessories and things. And we do have a broader assortment of accessories online. We have a broader assortment in general online, but, you know, footwear is not available in the stores, things like that.

Speaker Change: Thanks, Marni, it's a great question.

Speaker Change: Accessories are important to the business in the sense that they help complete the outfit our customers love being outfitted.

Speaker Change: With our teams and we try to make that <unk>.

Speaker Change: Happen, obviously online as well as in store by suggesting that selling in the accessories and the bank and we do have a broader assortment of accessories online we have a broader assortment in general online but.

Claire Spofford: Accessories aren't an especially important acquisition. Marni Shapiro, Dana Telsey, Dylan Carden, Mark Webb, Ryan Meyers, Michael Rahamim, Michael Eck, Kathleen Stevens, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill Inc, J.Jill, relevant and, you know, appealing to that younger end of the target demographic as well. That's great.

Speaker Change: Footwear is not available in stores things like that.

Speaker Change: Accessories, arent, an especially important acquisition.

Marni Shapiro: That's great. Thanks, guys. I'll take the rest offline.

Category for us the way it may be for other brands. Our acquisition categories are the things that we're really known for and I think recently some of our novelties and are more fashion forward elements, but also some of our core franchises. So the linen shirt and yes.

The carton guys twin.

Speaker Change: Set dressing that we've got now definitely is it spans kind of full demographic and.

Speaker Change: Is is <unk>.

Speaker Change: Relevant and.

Speaker Change: Appealing to that younger end of the target target demographic as well.

That's great. Thanks, guys I'll take the rest offline.

Speaker Change: Thanks Marni.

Speaker Change: Okay.

Operator: That concludes our question and answer session. And with that, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Speaker Change: That concludes our question and answer session and with that that does conclude today's conference call. Thank you for your participation and you may now disconnect.

Operator: We'll see you next time.

Speaker Change: Yes.

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