Q1 2025 Designer Brands Inc Earnings Call

Operator: Good morning and welcome to the Designer Brands First Quarter 2024 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Dustin Honstein, Senior Vice President of Finance. Please go ahead.

Good morning, and welcome to the designer Brands' first quarter 'twenty 'twenty four results conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.

On your telephone keypad. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the comfort.

Over to Dustin Hornstein Senior Vice President of Finance. Please go ahead.

Dustin Hauenstein: Good morning. Earlier today, the company issued a press release comparing its results of operations for the 13-week period ended May 4, 2024, to the 13-week period ended April 29, 2023. Please note that the financial results that we will be referencing during the remainder of today's call exclude certain adjustments recorded under GAAP unless specified otherwise. For a complete reconciliation of GAAP to adjusted earnings, please refer to our press release. Additionally, please note that remarks made about future expectations, plans, and prospects of the company constitute forward-looking statements.

Dustin Hornstein: Good morning earlier today, the company issued a press release comparing results of operations for the 13 week period ended May four 2024 to the 13 week period ended April 29 2023.

Dustin Hornstein: Please note that the financial results that we will be referencing during the remainder of today's call excludes certain adjustments recorded under GAAP unless specified otherwise.

Dustin Hornstein: For a complete reconciliation of GAAP to adjusted earnings Please reference our press release.

Dustin Hornstein: Additionally, please note that remarks made about future expectations plans and prospects of the company constitute forward looking statements results may differ materially due to the various factors listed in today's press release and the company's public filings with the SEC. The company assumes no obligation to update any forward looking statements.

Dustin Hornstein: Yes.

Speaker Change: Joining us today are Doug Howe, Chief Executive Officer, Jared Poff, Chief Financial Officer, and Andrea O'donnell Brands' President.

Dustin Hauenstein: Results may differ materially due to the various factors listed in today's press release and the company's public filings with the SEC. The company assumes no obligation to update any forward-looking statements. Joining us today are Doug Howe, Chief Executive Officer; Jared Poff, Chief Financial Officer; and Andrea O'Donnell, Brands President. Now, let me turn the call over to Doug.

Speaker Change: Now, let me turn the call over to Doug.

Douglas M. Howe: Thank you for joining us this morning. This quarter, we were pleased to deliver results in line with our expectations as we gain traction on our path to returning designer brands to growth. As a result of meeting our targets on both the top and bottom lines, we are also reaffirming our 2024 fiscal year guidance. As noted last quarter, we are confident that we have the right people and processes in place and believe that 2024 will continue to be a time of transition for designer brands as our refreshed leadership team implements thoughtful, strategic, and operational improvements.

Douglas M. Howe: Thank you for joining us. This morning. This quarter, we were pleased to deliver results in line with our expectations as we gain traction on our path to returning designer brands to growth.

Douglas M. Howe: As a result of meeting our targets on both the top and bottom lines. We are also reaffirming our 2020 for fiscal year guidance.

Douglas M. Howe: As noted last quarter, we are confident that we have the right people and processes in place and believe that 2024 will continue to be a time of transition for designer brands as our refreshed leadership team implement thoughtful strategic and operational improvement.

Douglas M. Howe: We are seeing early signs that this refreshed focus is benefiting our organization. To that end, I would also like to thank our DBI associates for their ability to quickly adapt to new ways of working as we transform into a more efficient organization. Turning to this quarter's results, in the first quarter, sales were up almost 1% versus last year, and we saw a 2.5% decline in comparable sales. These results were in line with our expectations and demonstrated sequential improvement from the fourth quarter of fiscal 2023.

Douglas M. Howe: We are seeing early signs that this refresh focus is benefiting our organization to that end I would also like to thank our DVI associates for their ability to quickly adapt to new ways of working as we transform into a more efficient organization.

Douglas M. Howe: Turning to this quarter's results in our first quarter sales were up almost 1% versus last year and we saw two 5% decline in comparable sales.

Douglas M. Howe: These results were in line with our expectations and demonstrated sequential improvement from the fourth quarter of fiscal 2023.

Douglas M. Howe: We anticipate that comps will continue to improve throughout fiscal 2024 as our new strategic initiatives, which we will discuss on this call, are further implemented. Our strategic changes also enabled us to expand gross margins in the first quarter by 80 basis points to 32.8%. This improvement was driven by strong inventory management, a reduction in closeouts, and direct-to-consumer, or DTC, growth. During this turnaround year, we are continuing to look for ways to rationalize and size our cost base appropriately, streamline our operations, and improve our efficiency.

Douglas M. Howe: We anticipate that comps will continue to improve throughout fiscal 2024, as our new strategic initiatives, which we will discuss on this call are further implemented.

Douglas M. Howe: Our strategic changes also enabled us to expand gross margins in the first quarter by 80 basis points to 32, 8%.

Douglas M. Howe: This improvement was driven by strong inventory management reduction in Closeouts and direct to consumer or DTC growth. During this turnaround here and we are continuing to look for ways to rationalize and size our cost base appropriately streamline our operations and improve our efficiency.

Douglas M. Howe: Let's first talk about our retail businesses and how we're progressing on our strategic pillars to drive growth. In our US retail business, we performed in line with the overall industry as our improving assortment featuring trends, the right styles, and brands engaged existing customers and reached new audiences, despite seeing continued broad base weakness and seasonal footwear. As we continue to leverage Consumer Insights to evolve our assortment, we believe that the benefits of a strong athletic and casual assortment are evident. For example, our first quarter US retail sales were up 1.4% compared to last year with comps down 2.3%.

Douglas M. Howe: Let's first talk about our retail businesses and how we're progressing on our strategic pillars to drive growth.

Douglas M. Howe: In our U S retail business, we performed in line with the overall industry as our improving assortment featuring trend right styles and brands engage existing customers and reach new audiences. Despite seeing continued broad based weakness in seasonal footwear.

Douglas M. Howe: As we continue to leverage consumer insights to evolve our assortment and we believe that the benefits of a strong athletic and casual assortment are evident.

Douglas M. Howe: Our first quarter U S retail sales were up one 4% to last year with comps down two 3%.

Douglas M. Howe: We're pleased with the progress we've made on our strategic initiatives to fuel U.S. retail growth. Our efforts to reinvigorate the assortment, optimize our marketing investments, and enhance our omni-channel shopping experience are already beginning to contribute to our results. Let's begin with our first pillar and the progress we've made to reinvigorate the assortment at DSW. We were pleased with our performance in athletic and casual, which outperformed the balance of categories at DSW, with athletic in particular at 15%.

Douglas M. Howe: We're pleased with the progress we've made on our strategic initiatives to fuel U S retail growth.

Douglas M. Howe: Our efforts to reinvigorate the assortment optimize our marketing investments and enhance our omnichannel shopping experience are already beginning to contribute to our results.

Douglas M. Howe: Let's begin with our first pillar and the progress we've made to reinvigorate the assortment of DSW.

Douglas M. Howe: We were pleased with our performance in athletic and casual which outperformed the balance of category that DSW with athletic in particular of 15%.

Douglas M. Howe: According to Sarkana, for Q1, DSW dollar sales in both of these categories, performance and leisure footwear, outpaced the balance of the footwear market. Kids significantly benefited from the heat in these categories as well, with sales dollars outpacing the balance of the footwear market in Q1, according to Circona.

Douglas M. Howe: According to <unk> for Q1, DSW dollar sales in both of these categories performance and leisure footwear outpaced the balance of the footwear market.

Douglas M. Howe: Kids significantly benefited from the heat in these categories as well with sales dollars outpacing the balance of the footwear market in Q1, according to sarcoma.

Douglas M. Howe: As such, athletic penetration of total DSW overall sales grew by over 460 basis points year-over-year to 30%. Furthermore, nearly all of the leading national athleisure brands that we carry are seeing impressive growth within DSW that often outpaces their own growth in the market, which has facilitated constructive dialogue with our top partners. Zooming out, we've seen exceptional growth from our top national brands. Specifically, in the first quarter, our eight hottest brands alone, which include a number of the most sought-after trending athletic brands in the market today, grew 27% year over year.

Douglas M. Howe: As such athletic penetration of total DSW overall sales grew by over 460 basis points year over year to 30%.

Douglas M. Howe: Furthermore, nearly all of the leading national Athleisure brands that we carry are seeing impressive growth within DSW that often outpaces their own growth in the market, which has facilitated constructive dialogue with our top partners.

Douglas M. Howe: Zooming out we've seen exceptional growth from our top national brands.

Douglas M. Howe: Specifically in the first quarter, our eighth hottest brands alone which include a number at the most sought after trending athletic brands in the market today grew 27% year over year.

Douglas M. Howe: We spoke last quarter about Laura's focus on strategically building stronger relationships with our brand partners. This will help to ensure we always have the right top brands on hand, based on consumer insights, regardless of category. Laura and her team have also been executing select strategic closeout buys in the affordable luxury market. These exciting finds carry a perceived value and product differentiation that extend well beyond the size of the buys themselves. Although relatively small compared to our other offerings, this affordable luxury category significantly outperformed the balance of our assortment. Additionally, we've gotten incredibly positive customer feedback.

Douglas M. Howe: We spoke last quarter about Lora focus on strategically building stronger relationships with our brand partners. This will help to ensure we always have the right top brands on hand based on consumer insights regardless of category.

Douglas M. Howe: Laurie and her team have also been executing select strategic closeout buys in the affordable luxury market.

Douglas M. Howe: These exciting find carry a perceived value and product differentiation that extend well beyond the size of the buys themselves.

Although relatively small compared to our other offerings. This affordable luxury category significantly outperformed the balance of our Assortments. Additionally.

Douglas M. Howe: Additionally, we've gotten incredibly positive customer feedback.

Douglas M. Howe: Many of our most ardent customers have been attracted to the excitement of the treasure hunt phenomenon at our physical locations, and we want to continue to be a destination of choice for shoppers eager to find exciting and unexpected selections. We believe that these buzzworthy offerings are paying off by enhancing assortment relevance and customer excitement, complementing our existing product offering and driving sales and ancillary categories. Amidst these category successes, we are equally aware of the categories that aren't responding as strongly with the customer and have enacted prudent inventory control. The seasonal category got off to a slower start as inconsistent weather impacted this category in the first quarter.

Douglas M. Howe: Any of our most ardent customers have been attracted to the excitement of the treasure Hunt phenomenon at our physical locations and we want to continue to be a destination of choice for shoppers eager to find exciting and unexpected selections.

Douglas M. Howe: We believe that these buzzworthy offerings are paying off by enhancing assortment relevance and customer excitement complementing our existing product and driving sales and ancillary categories.

Douglas M. Howe: Amidst these category successes, we are equally aware of the categories that arent resonating as strongly with our customer and have enacted prudent inventory controls.

Douglas M. Howe: The seasonal category got off to a slower start as inconsistent weather impacted this category in the first quarter.

Douglas M. Howe: The industry continues to see broad weakness in the seasonal footwear space. Likewise, dresses continued to experience softness in the quarter, posting a comp of negative 7% year over year. We will continue to closely monitor these trends and manage our inventory levels and assortment planning accordingly. Beyond these exciting developments in our assortment, in the first quarter, we advanced our second strategic pillar to optimize our marketing investment. I'm very excited to share that Sarah Crockett will be joining our leadership team as DSW's new Chief Marketing Officer.

Douglas M. Howe: The industry continues to see broad weakness in the seasonal footwear space.

Douglas M. Howe: Likewise dress continued to experience softness in the quarter, posting a comp of negative 7% year over year.

Douglas M. Howe: We will continue to closely monitor these trends and manage our inventory levels and assortment planning accordingly.

Douglas M. Howe: Beyond these exciting developments in our assortment in the first quarter, we advanced our second strategic pillar to optimize our marketing investments.

Douglas M. Howe: Sarah brings a wealth of experience in customer acquisition and retention, driving traffic and marketing budget efficiency to DSW, which strongly complements the work Laura is already championing around elevating our assortment and shopping experience. Sarah is bringing to DPI an extensive background in global full funnel marketing, including a comprehensive knowledge of brand strategy development. She also has considerable experience in multi-channel and consumer-centric marketing. She most recently served as Global Chief Marketing Officer at Nature Sunshine Products, Inc. And prior to that, he was Global Chief Marketing Officer for Dickies and Chief Marketing Officer at Backcountry and Burton Snowboards.

Douglas M. Howe: I am very excited to share that Sarah Crockett will be joining our leadership team as Dsw's, New Chief marketing officer.

Douglas M. Howe: Sarah brings a wealth of experience and customer acquisition and retention driving traffic and marketing budget efficiency to DSW, which strongly complements the work Laura is already championing around elevating our assortment and shopping experience.

Douglas M. Howe: There is bringing to DPI and extensive background in global full funnel marketing, including a comprehensive knowledge of brand strategy development.

Douglas M. Howe: She also has considerable experience in multichannel and consumer centric marketing.

Douglas M. Howe: She most recently served as global Chief Marketing Officer at Natures Sunshine products incorporated and prior to that with global Chief Marketing Officer for Dickies, and Chief marketing officer at back country and Burton Snowboards.

Douglas M. Howe: She also has held leadership positions at other specialty retail brands, including Lucky Brands, Vans, and REI. Our renewed Top of Funnel programming continues to engage national audiences. Our current campaign, DSW Pairs with Everything, emphasizes the continued expansion of our offerings and styles. We are also focusing on recouping lapsed customers through tailored engagement, including special promotional campaigns. Using data on past purchasing behavior and time since the last purchase, we are analyzing new ways to reach out to both last and about to last customers.

Douglas M. Howe: She also has held leadership positions at other specialty retail brands, including Lucky brand vans and Rei.

Speaker Change: Our renewed top of funnel programming continues to engage national audiences. Our current campaign DSW pairs with everything emphasizes that continued expansion of our offerings and style.

Speaker Change: We are also focusing on recouping lapsed customers through tailored engagement, including special promotional campaigns.

Speaker Change: Zinc data on task purchasing behavior and time sense last purchase we are analyzing new ways to reach out to both lab and about to lapse customers.

Douglas M. Howe: While we are in the early stages of piloting this exciting initiative, we are quite pleased with the positive results we are seeing. Moving on to our final pillar, we have continued to find new avenues to enhance our omni-channel experiences.

Speaker Change: While we are in the early stages of piloting. This exciting initiative. We are quite pleased with the positive results we are seeing.

Speaker Change: Moving onto our final pillar, we have continued to find new avenues to enhance our omnichannel experiences.

Douglas M. Howe: This quarter, digital demand achieved strong mid-single-digit growth versus last year, and conversion continued to improve as we evolved our digital customer experience. At our physical locations, new layouts continue to be piloted, and we have seen a positive reception to the store refreshes we are doing, which include fresh paint, new lights, and updated flooring. Our customers love DSW because it provides a variety of brands and price points in convenient locations to try on items and receive exceptional customer support.

Speaker Change: This quarter digital demand achieved strong mid single digit growth versus last year and conversion continue to improve as we evolved our digital customer experience.

Speaker Change: At our physical locations, new layouts continued to be piloted and we have seen a positive reception to store refreshes. We are doing which include fresh paint new light and updated flooring, our customers love DSW because it provides a variety of brands and price points in convenient locations to try on items and receive exceptional.

Speaker Change: Customer support we are committed to enhancing the client experience both in store and online and we will continue to evaluate new opportunities that will strengthen our ability to drive omni channel growth.

Douglas M. Howe: We are committed to enhancing the client experience both in-store and online, and we'll continue to evaluate new opportunities that will strengthen our ability to drive omnichannel growth. Beyond our DSW banner, our Canadian operations are also representative of our efforts to improve the shopping experience for our customers. Our sales grew nearly 3% versus last year, while comps declined by 4.9%, a sequential improvement from the fourth quarter in line with our expectations. This was primarily driven by kids in athletic categories, which posted strong positive comps this quarter.

Speaker Change: Beyond our DSW banner, our Canadian operations are also representative of our effort to improve the shopping experience for our customers.

Speaker Change: Our sales grew nearly 3% versus last year, while comps declined by four 9% a sequential improvement from the fourth quarter in line with our expectations.

Speaker Change: This was primarily driven by kids and athletic categories, which posted strong positive comps this quarter.

Douglas M. Howe: As we noted last quarter, Mary Turner has begun fully rebranding the shoe company, both digitally and in new storefronts. This quarter, we opened five new Mary Turner stores, and we expect to add an additional four net new stores to our portfolio by the end of 2024. Additionally, as we continue to expand our reach and grow our market share, I'm pleased to announce that in the first quarter, we acquired Rubino, a profitable Canadian footwear retailer operating nearly 30 stores, specifically serving the province of Quebec, a province that represents nearly a quarter of Canada's population but in which we had no existing presence.

Speaker Change: As we noted last quarter Mary Turner has begun fully rebranding the shoe company, both digitally and in new store front. This quarter, we opened five new shoe company stores and we expect to add an additional four net new stores to our portfolio by the end of 2024.

Douglas M. Howe: Rubino currently operates stores that offer nearly identical atmospheres and assortments to that of our own shoe company stores. Rubino already makes sufficient use of its working capital and is expected to contribute to DBI's operating income at about the same rate as our overall Canadian retail segment, and we expect the acquisition to be immediately accreted. Rubino's customers are loyal to the brand, and we intend to continue operating these storefronts under the Rubino banner.

Speaker Change: Additionally, as we continue to expand our reach and grow our market share I am pleased to announce that in the first quarter, we acquired rubino, our profitable Canadian footwear retailer operating nearly 30 stores, specifically, serving the province of Quebec Province that represents nearly a quarter of candidates popular.

Speaker Change: Asian, but in which we had no existing presence.

Speaker Change: Rubino currently operate stores that offer nearly identical atmospheres and assortments to that of our own shoe company stores.

Speaker Change: <unk> already makes efficient use of its working capital and is expected to contribute to <unk> operating income at about the same rate as our overall Canadian retail segment, and we expect the acquisition to be immediately accretive.

Rubino as customers are loyal to the brand and we intend to continue operating NIE storefront under the <unk> banner.

We also believe there is an opportunity to add value by offering our own brands in their stores.

Douglas M. Howe: We also believe there's an opportunity to add value by offering our own brands in their stores. Moving on to the Brands Portfolio, I'd love to turn the call over to the new President of our Brands Portfolio and Footwear Industry Expert, Andrea O'Donnell, to discuss her priorities for the business now that she has had some time to access the portfolio and meet with our brand leaders. As a reminder, Andrea joined us in January after serving as the Chief Executive Officer at Everlane, Fashion Retailer, and before that, as President of Fashion Lifestyle and UGG Brands at Decker's. Andrea, thank you for joining us today.

Moving onto the brand's portfolio I'd love to turn the call over to the new President of our brands portfolio and footwear industry expert Andrea O'donnell to discuss our priorities for the business now that she has had some time to assess the portfolio and meet with our brand leaders as a reminder, Andrea joined US in January after surge.

Speaker Change: <unk> is the Chief Executive Officer, Ed ever Lane at fashion retailer and before that as president of fashion lifestyle and the brand's Ed Decker's Andrea Thank you for joining us today.

Andrea O'donnell: Thank you for having me, Doug. It's a pleasure to be here today. Designer Brands first attracted me because of its unique combination of retail and brands. Since I joined the team, I have become even more excited by the opportunity, not least of which is because of the progress we are already making this year. As a veteran in this industry, I understand footwear brands' competitive advantages very well. My job here is to build and execute a portfolio strategy that focuses our resources and efforts over the next few years toward the strongest brands and the biggest ideas. Our brand portfolio presents an incredible opportunity to increase the profitability of DBI. So what are we doing?

Douglas M. Howe: Thank you for having me Doug It is a pleasure to be here today.

Andrea O'donnell: Designer brands first attracted me because of its unique combination of retail and brand.

Andrea O'donnell: Since I joined the team I have become even more excited by the opportunity.

Not least of which is because of the progress we are already making this year.

Andrea O'donnell: As a veteran in this industry I understand footwear brands competitive advantage is very well.

Andrea O'donnell: My job here is to build and execute a portfolio strategy that focuses our resources and efforts over the next few years to build the strongest brands and the biggest ideas.

Andrea O'donnell: Our brand portfolio presents an incredible opportunity to increase the profitability of TPI.

Andrea O'donnell: So what are we doing.

Andrea O'donnell: In the immediate term, our focus is on reducing costs, right-sizing the organization, increasing margins, streamlining and simplifying the way we work, and defining the role, purpose, and potential of the brands in our portfolio. We already have in place key competencies in design, sourcing, and logistics. So once we have re-engineered the operating model and built the foundations for profitable growth, I believe we will be well-positioned to invest and scale fast. Across our brands, I see a great opportunity to evolve our product ideation process, which will, in turn, improve adoption rates amongst our collections. We know that not all brands are created equal, and I have charged my team to be discerning. Carefully consider resource trade-offs and think critically about maximizing the long-term potential of our enterprise.

Andrea O'donnell: In the immediate term after emphasis on reducing costs and right sizing the organization, increasing margins streamlining and simplifying the way, we work and defining the role purpose and potential as the brands in our portfolio.

Andrea O'donnell: We already have in place key competencies in design sourcing and logistics.

Andrea O'donnell: So once we have reengineered, the operating model and build the foundations for profitable Gray I believe we will be well positioned to invest in scale fast.

Andrea O'donnell: Across our brands I see great opportunity to evolve our product ideation process, which will in turn improve adoption rates amongst our collections.

Andrea O'donnell: We know that not all brands are created equal.

Andrea O'donnell: And I have charge my team to be discerning.

Andrea O'donnell: Carefully considered resource trade offs and think critically about maximizing the long term potential for enterprise.

Andrea O'donnell: Our goal is to build our foundation and refine our core competencies early, professionalizing our product strategy, so we can easily grow and integrate further in the future. Starting next year, we will be executing on a strategy that aims to deliver growth in a number of ways. DSW's exclusive brands already have strength in key women's categories, and we will leverage these trends to grow, scale sales, and become margin maximizers for the business. The DSW relationship gives us a unique opportunity to understand the family channel consumer well.

Andrea O'donnell: Our goal is to build our foundation and refine our core competencies and eight professionalizing our product strategy. So we can easily grow and integrate further in the future.

Andrea O'donnell: From next year, we will be executing on a strategy that aims to deliver growth in a number of ways.

Andrea O'donnell: DSW exclusive brands already have strength in key women's categories, and we will leverage these strengths to Greg Scott sales and become margin maximize instead of business.

Andrea O'donnell: The DSW relationship gives us a unique opportunity to understand the family channel can see them well and we are very confident in our ability to give these customers are targeted and focused offer a great style at unbelievable values.

Andrea O'donnell: And we are very confident in our ability to give these customers a targeted and focused offer of great style at unbelievable value. We are in the process of redefining the brand and product strategies for our licensed brands, with Jessica Simpson already demonstrating potential based on its current competitive positioning. In addition, we will be investing in accelerating growth for Keds and Topo Athletics. They are uniquely well positioned within the portfolio, have compelling heritages, and are situated in growing categories.

Andrea O'donnell: We are in the process of redefining the brand and product strategies for our licensed brands with Jessica Simpson already evident seeing potential based on its current competitive positioning.

Andrea O'donnell: In addition, we will be investing in accelerating growth and keds Intel's highlights, let's say.

Andrea O'donnell: They are uniquely well positioned within the portfolio have compelling heritage is and are situated in growing categories.

Andrea O'donnell: They already have access to great distribution and are achieving upper quartile gross margins. This year to date, brand strengths are emerging. In the first quarter, we saw solid performance from Keds, as well as overall D2C growth. Hush Puppies, which was added to our portfolio in the third quarter of last year, was incremental to sales, and Jessica Simpson posted a double-digit comp.

They already have access to great distribution and are achieving upper quartile gross margins.

Andrea O'donnell: This year to date brand strengths that are emerging in.

Andrea O'donnell: In the first quarter, we saw a solid performance from <unk> as well as overall DTC Gray.

Andrea O'donnell: Copies, which was added to our portfolio in the third quarter of last year with incremental to sales and Jessica Simpson posted a double digit comp.

Andrea O'donnell: Topo Athletic continues to be a brand with increasing momentum. This quarter, we saw strong consumer demand as we partnered with Premier Fitness and Outdoors channels, such as REI, to develop distribution nationwide. In conclusion, my team and I have developed a strategy and a three-year plan. Twenty-four is about reducing waste and driving efficiency. Twenty-five is leveraging our strengths to grow both gross margin and sales. And twenty-six is really about scaling, and scaling fast.

Andrea O'donnell: Telco athletic continues to be a brand with increasing momentum.

Andrea O'donnell: This quarter, we saw strong consumer demand as we partnered with premier fitness and outdoor channels, such as Rei to develop distribution nationwide.

In conclusion, my team and I have developed a strategy and a three year plan.

Andrea O'donnell: 24 is about reducing waste driving efficiency twenty-five is leveraging our strengths to drive growth gross margin and styles and 26 Israeli of that scaling scaling fast.

Douglas M. Howe: As you can tell, Andrea has many exciting perspectives that she has brought to our organization, and I am grateful to have her leadership and industry experience as we progress our own brand strategy, both within and outside of DSW. We believe we are on solid footing as we enter the summer months with an increasingly fresh assortment every day that is a mix of our core offerings and vibrant on-trend seasonal assortment. We're welcoming back lapsed customers, increasing engagement with existing customers, and targeting new customers with personalized promotions.

Speaker Change: As you can tell Andrea has many exciting perspective that she has brought to our organization and I am grateful to have her leadership and industry experience as we progress our own brand strategy, both within and outside of DSW.

Speaker Change: We believe we are on solid footing as we enter the summer months with an increasingly fresh assortment every day that is a mix of our core offerings and vibrant on trend seasonal assortment.

Speaker Change: We are welcoming back lapsed customers, increasing engagement with existing customers and targeting new customers with personalized promotions.

Speaker Change: We continue to see a clear pathway to reach new audiences as we further grow the relevance of our own brands and DSW offerings. We will continue to leverage our differentiated platform to remain nimble and meet customers, where they are with that I'll turn it over to Gerry.

Douglas M. Howe: We continue to see a clear pathway to reach new audiences as we further grow the relevance of our own brands and DSW offerings. We will continue to leverage our differentiated platform to remain nimble and meet customers where they are. With that, I'll turn it over to Jared.

Speaker Change: Jared.

Jared A. Poff: Thank you, Doug. And good morning, everyone.

Jared A. Poff: Thank you, Doug and good morning, everyone.

Jared A. Poff: I am pleased with our first quarter financial results, which were in line with our expectations. Our disciplined execution delivered the improved results we had planned while we made headway on our strategic initiatives. I continue to be very pleased with the performance of our athletic and casual segments of the business as we flex our assortment to meet customer demand, something that will continue to anchor our strategy. Let me provide a bit more details on our financial results.

Jared A. Poff: I am pleased with our first quarter financial results, which were in line with our expectations. Our disciplined execution delivered the improved results. We had planned while we made headway on our strategic initiatives I continue to be very pleased with the performance of our athletic and casual segments of the business as we flex our assortment to meet customer demand.

Jared A. Poff: That will continue to anchor our strategy.

Jared A. Poff: Let me provide a bit more details on our financial results.

Jared A. Poff: For the first quarter of 2024, net sales of $746.6 million were up 0.6% versus the prior year as reported and were down 2.5% on a 13 week comparable basis. As discussed last quarter, the shift in our fiscal calendar following our 53rd week fiscal 2023 will cause some variability between year over year growth and comparable sales growth in any given quarter. Our first quarter results are shifted ahead by one week on the calendar, which resulted in the comparable prior-period year results dropping a softer week in early February and picking up a busier week in May.

Jared A. Poff: For the first quarter of 2024 net sales of $746 $6 million were up 0.6% versus the prior year as reported and were down two 5% on a 13 week comparable basis.

Jared A. Poff: As discussed last quarter the shift in our fiscal calendar. Following our 50 <unk> week fiscal 2023 will cause some variability between year over year growth in comparable sales growth in any given quarter.

Jared A. Poff: Our first quarter results are shifted ahead by one week on the calendar, which resulted in the comparable prior period year results dropping a softer week in early February and picking up a busier week in may.

Jared A. Poff: In our US retail segment, comps were down 2.3% in the first quarter, a significant sequential improvement over the fourth quarter of fiscal 2023. As Doug outlined, we are happy with the continued strength we saw from our top national brands, and more specifically, in our athletic and casual businesses. We performed relatively in line with the overall footwear market, and we're pleased to have ended the quarter stronger than we had started and to be continuing to see steady improvement in Q2, as expected.

Jared A. Poff: And our U S retail segment comps were down two 3% in the first quarter, a significant sequential improvement over the fourth quarter of fiscal 2023.

Jared A. Poff: As Doug outlined we are happy with the continued strength, we saw from our top national brands and more specifically in our athletic and casual businesses. We performed relatively in line with the overall footwear market and we're pleased to have ended the quarter stronger than we had started.

Jared A. Poff: And to be continuing to see steady improvement in Q2 as expected.

Jared A. Poff: With Athletic continuing to outperform, we think this also sets us up well as we move into the back to school season towards the end of Q2 and beginning of Q3. Our Canada retail segment comps were down 4.9% in the first quarter, driven by an overall reduction and Overall Consumer Discretionary Spending Levels.

Jared A. Poff: With athletic continuing to outperform we think Theres also sets us up well as we move into the back to school season towards the end of Q2 and beginning of Q3.

Jared A. Poff: Our Canada retail segment comps were down four 9% in the first quarter driven by an overall reduction.

Jared A. Poff: And overall consumer discretionary spending levels.

Jared A. Poff: Finally, in our Brands Portfolio Segment, sales were up 12% in the first quarter. As a reminder, starting this quarter, we have unified our approach to how we transact business between our Brands Portfolio Segment and our retail segments. This resulted in approximately $13 million of year-over-year sales growth for our Brands Segment. Vince Camuto dot com reported comps down 6.2% for the first quarter as it lapped a strong first quarter last year, which posted 11.3% comp. Meanwhile, Topo.com continued to gain traction with running enthusiasts as it posted a 26.4% comp gain.

Jared A. Poff: Finally in our brand portfolio segment sales were up 12% in the first quarter as a reminder, starting this quarter, we have harmonized our approach to how we transact business between our brands portfolio segment and our retail segments. This resulted in approximately $13 million of year over year sales growth for our brands segment.

Jared A. Poff: Then tomato dot com reported comps down six 2% for the first quarter as it lapped a strong first quarter last year, which posted 11, 3% comps.

Jared A. Poff: Meanwhile, Tokyo Dot Com continued to gain traction with running enthusiasts as it posted a 26, 4% comp gain.

Jared A. Poff: Consolidated gross margin of 32.8% in the first quarter, which expanded 80 basis points versus the prior year, was primarily driven by our brand segment, which benefited from much fresher inventory levels, resulting in reduced closeout sales attributed to cleaning up inventory in the channel last year upon acquisition, along with margin strength in wholesale. Our adjusted SG&A was 31.2% of sales compared to 28.9% in the prior year period. We have continued to experience modest deleveraging, largely due to declining sales combined with increases in underlying fixed expenses due to several acquisitions we completed in 2023. As mentioned last quarter, our full-year guidance assumes slight leverage in our SG&A rate. This guidance takes into consideration that we are returning to a normalized level of incentive-based compensation in 2024.

Jared A. Poff: Consolidated gross margin of 32, 8% in the first quarter, which expanded 80 basis points versus the prior year was primarily driven by our brand segment, which benefited from much fresher inventory levels, resulting in reduced closeout sales attributed to cleaning up inventory in the channel last year upon acquisition, along with margin strength in whole.

Jared A. Poff: Sale.

Jared A. Poff: Our adjusted SG&A was 31, 2% of sales compared to 28, 9% in the prior year period.

Jared A. Poff: We have continued to experience modest deleveraging largely due to declining sales combined with increases in underlying fixed expenses due to several acquisitions, we completed in 2023.

Jared A. Poff: As mentioned last quarter, our full year guidance assumes slight leverage in our SG&A rate.

Jared A. Poff: This guidance takes into consideration that we are returning to a normalized level of incentive based compensation in 2024.

Jared A. Poff: We are also acutely focused on finding efficiencies and leverage throughout our organization. As part of that work, we recently executed a cost reduction primarily driven by headcount reduction, which we believe will help drive efficiencies in many parts of the business, both financially and operationally. This cost reduction was anticipated in our annual guidance and reaffirms our prior commitment that we expect to generate slight SG&A rate leverage for the entire fiscal year. We are remaining focused on becoming more optimized with our expense structure as we move forward, both this year and over the long term.

Jared A. Poff: We are also acutely focused on finding efficiencies and leverage throughout our organization.

Jared A. Poff: As part of that work, we recently executed a cost reduction primarily driven by head count reduction, which we believe will help drive efficiencies in many parts of the business both financially and operationally.

Jared A. Poff: This cost reduction was anticipated in our annual guidance and reaffirms our prior commitment that we expect to generate slight SG&A rate leverage for the entire fiscal year.

Jared A. Poff: We are remaining focused on becoming more optimized with our expense structure as we move forward both this year and over the long term.

Jared A. Poff: During the quarter, we delivered adjusted operating income of $14.7 million compared to $25.8 million in the prior year. In the first quarter, we had $11.6 million of net interest expense compared to $6.6 million in the prior year period. Our higher interest is a direct result of the term loan we installed last year and higher interest rates on our AVL. Our effective tax rate for the first quarter on an adjusted basis was a negative 53.3% compared to 25.7% last year. This tax rate is primarily the result of tax planning in the quarter, which, when applied against a relatively small base of pre-tax income, resulted in an unusual tax rate.

During the quarter, we delivered adjusted operating income of $14 7 million compared to $25 $8 million in the prior year.

Jared A. Poff: In the first quarter, we had $11 6 million of net interest expense compared to $6 6 million in the prior year period.

Jared A. Poff: Our higher interest as a direct result of the term loan we installed last year and higher interest rates on our ABL.

Jared A. Poff: Our effective tax rate for the first quarter on an adjusted basis was a negative 53, 3% compared to 25, 7% last year.

Jared A. Poff: This tax rate is primarily the result of tax planning in the quarter, which when applied against a relatively small base of pre tax income resulted in an unusual tax rate.

Jared A. Poff: Our first quarter adjusted net income was $4.8 million, or $0.08 in diluted earnings per share. Now, on to our inventory. We ended the first quarter with inventory down 2.7% versus the prior year as we continue to execute against our initiatives to keep our assortment flexible. We are comfortable with our current inventory levels as our strong balance sheet enables us to continue to take advantage of opportunistic buys with our key partners and with select affordable luxury brands.

Jared A. Poff: Our first quarter adjusted net income was $4 $8 million or <unk>, <unk> and diluted earnings per share.

Jared A. Poff: Onto our inventory we ended the first quarter with inventories down two 7% versus the prior year as we continue to execute against our initiatives to keep our assortment flexible.

Jared A. Poff: We are comfortable with our current inventory levels as our strong balance sheet enables us to continue to take advantage of opportunistic buys with our key partners and with select affordable luxury brands.

Jared A. Poff: During the quarter, we once again reaffirmed our commitment to return cash to shareholders through a five cent dividend representing nearly $3 million in aggregate. Additionally, we spent $17.4 million in capitalized costs, including fixed assets and cloud computing arrangements as we invest in strategic growth and continue to modernize our businesses. We ended the quarter with $43.4 million in cash, and our total liquidity, which includes cash and availability under our revolver, was $231.2 million.

Jared A. Poff: During the quarter, we once again reaffirmed our commitment to return cash to shareholders through a five cent dividend representing nearly $3 million in aggregate.

Jared A. Poff: Additionally, we spent $17 $4 million in capitalized costs, including fixed assets and cloud computing arrangements as we invest for strategic growth and continue to modernize our businesses.

Jared A. Poff: We ended the quarter with $43 $4 million of cash and our total liquidity, which includes cash and availability under our revolver was $231 $2 million.

Jared A. Poff: Subsequent to the end of the quarter, we received the final $47 million of our CARES Act tax refund due to us from the IRS. In addition, we continue to be fully compliant with all covenants associated with our outstanding debt and have strong relationships with all credit providers. Total debt outstanding was $476.1 million as of the end of the first quarter.

Jared A. Poff: Subsequent to the end of the quarter, we received the final $47 million of our cares Act tax refund due to us from the IRS.

Jared A. Poff: In addition, we continue to be fully compliant with all covenants associated with our outstanding debt and have strong relationships with all credit providers total debt outstanding was $476 $1 million as of the end of the first quarter.

Jared A. Poff: Before I conclude, I want to take a minute to reaffirm our 2024 guidance. We continue to expect net sales growth in the low single digits versus last year, which factors in the headwind of sales recorded in the 53rd week of 2023. We also anticipate comparable sales to be up low single digits, improving sequentially as the year progresses. We are also reaffirming our sales outlook in our Brands Portfolio segment, reflecting growth in the mid-single digits, driven by double-digit DTC growth, as well as wholesale growth in key accounts, especially Topo and Hushpuppies.

Jared A. Poff: Before I conclude I want to take a minute to reaffirm our 2020 for guidance we continue.

Jared A. Poff: To expect net sales growth in the low single digits versus last year, which factors in the headwind of sales recorded in the 50 <unk> week of 2023.

Jared A. Poff: We also anticipate comparable sales to be up low single digits, improving sequentially as the year progresses.

Jared A. Poff: We are also reaffirming our sales outlook outlook in our brand portfolio segment.

Reflecting growth in the mid single digits, driven by a double digit DTC growth as well as how wholesale growth in key accounts, especially chapo and Hush puppies.

Jared A. Poff: In terms of the full year, we continue to expect comp sales in the fall to be materially stronger than in the spring, as our assortment evolution continues to take hold, with our top brand offerings taking share during back-to-school and holidays, while helping forge a recovery from last year's lackluster boot season. We continue to project our third quarter as our strongest sales growth period and our fourth quarter to be our weakest given the loss of the 53rd week. Given the impact of the 53rd week and our ongoing transformation efforts, we also wanted to provide more clarity on the second quarter.

In terms of the full year, we continue to expect comp sales in the fall to be materially stronger than in the spring as our assortment evolution continues to take hold with our top brand offerings, taking share during back to school and holidays, while helping forge a recovery from last year's lackluster boot season.

Jared A. Poff: We continue to project, our third quarter is our strongest sales growth period, and our fourth quarter to be our weakest given the loss of the 50 <unk> week.

Jared A. Poff: Given the impact of the 50 <unk> week in our ongoing transformation efforts. We also wanted to provide more clarity on the second quarter.

Jared A. Poff: We are pleased with the start of the second quarter, with May posting similar top-line performance to Q1. We do anticipate ending Q2 stronger than we had started, as we expect our performance to gradually improve as we reach an inflection point in Q3. Furthermore, we currently expect our Q2 gross margin to be in line with the levels of Q1. As I mentioned earlier, we continue to see an opportunity for slight expense leverage in our SG&A ratio for the full year as we cut costs while reinvesting in key areas such as marketing, personnel, and technology.

Jared A. Poff: We are pleased with the start of the second quarter with May posting similar similar top line performance to Q1, we.

We do anticipate to end Q2 stronger than we had started as we expect our performance to gradually improve as we reached an inflection point in Q3.

Jared A. Poff: Furthermore, we currently expect our Q2 gross margin to be in line with the levels of Q1.

As I mentioned earlier, we continued to see an opportunity for slight expense leverage in our SG&A ratio for the full year as we cut costs, while reinvesting in key areas, such as marketing personnel and technology.

Jared A. Poff: We reaffirm our expectations for our annual adjusted earnings per share to be in the range of 70 cents to 80 cents, representing a roughly 10% increase at the midpoint versus our 2023 results. EPS will remain below last year for the spring, with growth over last year anticipated for the second half of fiscal 2024. We also continue to expect capital costs, including fixed assets and cloud computing arrangements, to be in the range of $65 to $75 million for the year.

Jared A. Poff: We reaffirm our expectations for our annual adjusted earnings per share to be in the range of 70 to 80 <unk>.

Jared A. Poff: Presenting a roughly 10% increase at the midpoint versus our 2023 results.

Jared A. Poff: EPS will remain below last year for the spring with growth over last year anticipated for the second half of fiscal 2024.

Jared A. Poff: We also continue to expect capital costs, including fixed assets and cloud computing arrangements to be in the range of $65 million to $75 million for the year.

Jared A. Poff: Throughout our evolution, we are as focused as ever on refreshing the DSW banner and our offering. Our team's passions and commitments to bringing trend-right styles to our customers are instrumental to the sustained success of our business. And I believe that by embracing these strategic initiatives firm-wide, we are already seeing the fruits of our labor. We will continue to focus on streamlining our operations, finding efficiencies, and improving our associates' productivity while our segment leaders execute the priorities that Doug has continued to reinforce. With that, we will open the call for questions.

Jared A. Poff: Throughout our evolution, we are as focused as ever on refreshing the DSW banner and our offerings.

Jared A. Poff: Our team's passion and commitment to bringing trend right styles to our customers is instrumental for the sustained success of our business.

Jared A. Poff: And I believe that by embracing the strategic initiatives firm wide, we are already seeing the fruits of our labor.

Jared A. Poff: We will continue to focus on streamlining our operations, finding efficiencies and improving our associates' productivity, while our segment leaders execute the priorities that Doug has continued to reinforce.

Jared A. Poff: With that we will open the call for questions.

Jared A. Poff: Operator.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star than two. Again, it is better to ask a question than to say nothing. At this time, we will pause momentarily to assemble our roster. The first question comes from Mauricio Sema with UBS; please go ahead.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker Change: If you were using a speakerphone please pick up your handset before.

Before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two again. It is star then one to ask a question.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question comes from Mauricio Cmos with UBS. Please go ahead.

Mauricio Serna Vega: Hi, good morning, and thanks for taking my questions. Maybe you could elaborate a little bit more on the comp sales trend throughout the quarter. It seems that things accelerated in April, so maybe if you could elaborate on that. And also, what does that imply about May, considering, as you say, it's roughly in line with the overall Q1? And then, second, maybe you could talk more about the impact of the Rubino acquisition in Canada.

Mauricio Serna Vega: Hi, good morning, and thanks for taking my questions.

Maybe if you could elaborate a little bit more on the comp sales trend throughout the quarter. It seems that things accelerated in April so maybe if you could elaborate on that so and also.

Mauricio Serna Vega: And what does that imply about may considering or would you say like it's roughly in line with the overall Q1, and then second maybe if you could talk more about the impact of the <unk>.

Speaker Change: Rubino acquisition in Canada.

Mauricio Serna Vega: I mean, I would assume that would impact, in a way, your top-line expectations, so maybe you could give us, like, a sense of... I mean, you mentioned the number of stores, but maybe, like, from a dollar perspective, like, you know, just for us to get a sense of, like, how much that is impacting Canada retail expectations. Thank you.

Speaker Change: I would assume that would.

Speaker Change: Impacting the way your you know your topline expectations. So maybe you could give us like a sense of I mean, you mentioned you know the right number of stores with maybe like from a dollar perspective.

Speaker Change: Just before us to get a sense of like how much that is impacting the Canada retail.

Expectations. Thank you.

Speaker Change: Yeah.

Douglas M. Howe: Yeah, Mauricio, this is Doug. Thanks for your question. I'll take the first one, and then I'll hand it over to Jared for the Rubino question.

Speaker Change: Yes. So this is.

Speaker Change: Thanks for your question I'll take the first one and then ill hand, it over to Jerry for the Rubino question, Yes, I mean, we exited Q1 stronger than we entered it as we said in the remarks and again, we're seeing that trend continue through may.

Douglas M. Howe: Yeah, I mean, we exited Q1 stronger than we entered it, as we said in the remarks, and again, we're seeing that trend continue through May. We feel really confident about all the work that Laura is doing, specifically to elevate the assortment and to really lean into the athletic category, which again had a 15% increase in Q1, and that penetration only gets stronger as we move into, obviously, back to school, which is, we think, a big opportunity for last year.

Speaker Change: I feel really confident about all the work that Laura is doing specifically.

Jerry Rubino: The elevate the assortment and to really lean into the athletic category, which again had a 15% increase in Q1 and that penetration only is.

Jerry Rubino: Stronger as we move into obviously back to school, which is we think a big opportunity as for last year. So.

Douglas M. Howe: So, you know, again, we're optimistic about that as we move through the quarter. But there was a sequential improvement in the fact that, you know, we exited the quarter at a stronger rate than we entered it, and dramatically, and obviously, better than our Q4 performance. So we're pleased with the progress.

Jerry Rubino: Again, we're optimistic about that as we move through the quarter, but there was a sequential improvement in the fact that we exited the quarter at a stronger rate than we entered it dramatically.

Jerry Rubino: Stronger than obviously, the Q4 performance. So we're pleased with the progress.

Jared A. Poff: Unknown Speaker Yeah, and on the Rubino acquisition. So last year, 2023, they generated $47 million, this is in Canadian dollars, $47 million in sales. And we bought them, and we'll be registering three quarters of the year of sales this year. So, you know, we are expecting, like we mentioned, a similar operating income contribution from Rubino to our entire Canadian segment. They look and feel, smell, and taste just like our shoe company stores, and they basically are the shoe company just rebadged as Rubino in Quebec.

Jerry Rubino: And then Jerry yes, and on the on the <unk> acquisition. So last year 2023, they generated $47 million and Canadian $47 million of sales.

Jerry Rubino: And we bought them.

Jerry Rubino: And we will be registering three quarters of the year of sales in this year. So.

Jerry Rubino: We are expecting like we mentioned similar operating income contribution from from Rubino as our entire.

Jerry Rubino: Canadian segment, and they look and look feel smell taste, just like our shoe company stores and they basically are the shoe company just <unk>.

Jerry Rubino: <unk> survey in Quebec.

Jared A. Poff: Got it. It's super helpful. And then just a quick follow-up on SG&A, you know, maybe you could provide a little bit more detail on, you know, why the acceleration, I mean, high single-digit increase, trying to understand like if there's anything in particular, maybe it's related to timing or with the calendar shift? But yeah, anything more, any additional detail on SG&A acceleration would be very helpful as we model the next few quarters.

Speaker Change: Not a super helpful. And then just a quick follow up on the SG&A.

Speaker Change: Just maybe could you provide a little more details on why the acceleration I mean high single digit increase.

Speaker Change: I'm just trying to understand like if theres anything in particular, maybe.

Speaker Change: Maybe you could related to timing or with their own calendar shifts.

Speaker Change: But yeah, I don't think any additional detail on azure and exploration would be very helpful.

As we model the next few quarters. Thank you.

Jared A. Poff: Sure, yeah, so we did mention in the comments that we did return to our normalized incentive comp posture this year. Last year, given the performance of the business, that was completely removed. That, in round numbers, is just a little over $30 million. Our incentive comp goes to all employees in the company, and so that is a net headwind that is pretty evenly dispersed across all four quarters. We did just execute a reorganization, as we shared.

Speaker Change: Sure sure Yeah. So we did mentioned in the comments.

Speaker Change: We did return to our normalized incentive comp posture this year.

Speaker Change: Last year, given the performance of the business that was completely removed.

Speaker Change: That in round numbers is just a little over $30 million or incentive comp goes to all employees in the company.

Speaker Change: And so that that is a net headwind.

Speaker Change: That debt.

That is pretty evenly dispersed across all four quarters, we did just execute.

Speaker Change: Reorganization as we shared that's resulting in this year of around $12 million of savings.

Jared A. Poff: That's resulting in around $12 million of savings this year. When you kind of look at year-over-year dollars as far as being more than last year, right now, these two quarters, we are living with more dollars being spent this year than last year, primarily in that incentive comp land, and a little bit in some marketing. When we get into next year, or into the fall, that year-over-year dollar deleverage minimizes, primarily because marketing and selling expenses were higher last year in the fall than they were in the spring. That's why we're expecting overall SG&A rates to leverage slightly, especially as sales build into the fall, but those are the big drivers.

Speaker Change: When you kind of look at year over year.

Dollars as far as being more than last year right. Now. These two quarters, we are living with more dollars being spent this year than last year, primarily in that incentive comp land and a little bit in some marketing when we get into next year and into the fall that that year over year dollar deleverage.

Speaker Change: Minimises.

Primarily because marketing and selling expenses were higher last year in the fall than they were.

Speaker Change: Spring. So that's why we're expecting overall the overall overall SG&A rate to leverage slightly, especially as sales built into the fall.

Speaker Change: Those are the big drivers.

Jared A. Poff: Honestly, very helpful. Thank you so much. Once again, if

Speaker Change: Understood very helpful. Thank you so much.

Operator: Once again, if you have a question, please press star then 1 on a touch-tone phone.

Speaker Change: Once again, if you have a question.

Please press Star then one on a touchtone phone.

Operator: This concludes our question and answer session. I would like just one moment. I see that we have a follow-up from Mauricio Sena from UBS. Please go ahead.

Speaker Change: This concludes our question and answer session.

Speaker Change: I would just one moment I see that we have a follow up from Mauricio Serna from UBS.

Speaker Change: Please go ahead.

Mauricio Serna Vega: Great, thanks. If I could just squeeze one in, if you could talk about maybe what you're seeing in the promotional environment for the US retail business. I know you called out primarily the growth margin expansion was coming from Brands Portfolio. But maybe if you could talk about what you're seeing in U.S. retail, that would be very helpful.

Speaker Change: Great. Thanks.

Mauricio Serna: Just a quick one in.

Mauricio Serna: If you could talk about maybe what you're seeing on the promotional environment on the U S.

Speaker Change: Retail bank.

Speaker Change: Called out.

Speaker Change: Primarily the gross margin expansion coming from that portfolio, but maybe you could just talk about what youre seeing in the U S retail it would be very helpful. Thank you.

Douglas M. Howe: Yeah, this is Doug. I'll take that. We definitely, you know, invested fewer markdowns than we did in Q4. And I would say, you know, we have some very early pilots in phase now where we're trying to be more targeted with those offers. But I think at this point, we feel like it's pretty steady as she goes with regard to the promotional activity, acknowledging, you know, we're in a discretionary category; there's still a fair amount of uncertainty out there in the economy. So we want to be prudent about how we're managing that. But we definitely saw some favorability with regard to how promotional we were versus Q4, and that, you know, was incorporated into our guide.

Douglas M. Howe: Yes. This is Doug I'll take that.

Douglas M. Howe: Definitely.

Douglas M. Howe: We invest with fewer markdowns than we did in Q4.

Speaker Change: And I would say we have some very early pilot phase now where we're trying to be more targeted with those offers that I think at this point, we feel like it's pretty steady as she goes with regard to the promotional activity acknowledging we are in a discretionary category, there's still a fair amount of uncertainty out there in the economy. So we want to be prudent about how we are.

Speaker Change: How we're managing that but we definitely saw some favorability with regards to how promotional we were versus Q4.

And Thats incorporated into our guidance.

Mauricio Serna Vega: Thank you so much.

Speaker Change: Got it thank you so much.

Douglas M. Howe: This concludes our question and answer session. I would like to turn the conference back over to Doug Howe for any closing remarks.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Doug Howe for any closing remarks.

Douglas M. Howe: Well, thank you all for joining us today, and I just would like to reiterate one more time how much myself and this entire leadership team appreciate all of our DBI associates for their ability to adapt their new ways of working as we transform the business. So again, thanks for your time; we look forward to updating you on our progress as we move throughout the balance of the year. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Douglas M. Howe: Well. Thank you all for joining us today and I just would like to reiterate one more time, how much myself and the entire leadership team I appreciate all of our DVI associates for their ability to adapt.

Operator: ??

Douglas M. Howe: <unk> new ways of working as we transform the business so.

Douglas M. Howe: Again, thanks for your time, we look forward to updating you on our progress as we move throughout the balance of the year.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].