Q1 2024 Bath & Body Works Inc Earnings Call

Donna: Good morning. My name is Donna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bath & Body Works first quarter 2024 earnings conference call. Please be advised that today's conference is being recorded. During the question and answer session, you may ask a question from the phone by pressing star 1. I will now turn the call over to Mike McGuire, Interim Head of Investor Relations. Mike, you may begin.

Good morning, My name is Donna and I'll be your conference operator today.

Speaker Change: At this time I would like to welcome everyone to the Bath and body works first quarter 2024 earnings conference call.

Please be advised that today's conference is being recorded.

Speaker Change: During the question and answer session. You May ask a question from the phone by pressing star one.

Speaker Change: I will now turn the call over to Mike Mcguire interim head of Investor Relations, Mike You may begin.

Mike Mcguire: Good morning, and welcome to Bath & Body Works' first quarter 2024 earnings conference call. Joining me on the call today are Gina Boswell, Chief Executive Officer; Julie Rosen, President and CEO; and Eva Boratto, Chief Financial Officer.

Good morning, and welcome to the Bath <unk> body works first quarter 2024 earnings conference call.

Joining me on the call today are gene of Boswell, Chief Executive Officer, Julie Rosen, President and reach out and even Berardo Chief Financial Officer.

Mike Mcguire: In addition to this call and this morning's press release, we have posted a slide presentation on our website that summarizes the information in these prepared remarks, in addition to providing some related facts and figures regarding our operating performance and guidance. This call may contain certain forward-looking statements related to future events and expectations. For factors that could cause actual results to differ materially from these forward-looking statements, please refer to this morning's press release, as well as the risk factors in Bath & Body Works' 2023 Form 10-K and our quarterly report on Form 10-Q, which will be filed at the end of today.

Speaker Change: In addition to this call in this morning's press release, we have posted a slide presentation on our website that summarizes the information in these prepared remarks. In addition to providing some related facts and figures regarding our operating performance and guidance.

Speaker Change: Today's call may contain certain forward looking statements related to future events and expectations for factors that could cause the actual results to differ materially from these forward looking statements. Please refer to this mornings press release as well as the risk factors in Bath <unk> body works 2023 Form 10-K, and our quarterly report on Form 10-Q, which will be filed.

Speaker Change: At the end of today.

Mike Mcguire: Today's call contains certain non-GAAP financial measures. Please refer to this morning's press release and supplemental materials for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. As you know, fiscal 2023 was a 53-week year to provide the best sense of the health of the business. All category sales results, market share data, loyalty metrics, and selling metrics discussed during the call are on a comparable calendar basis, which is the 13 weeks ended May 4th, 2024, versus the 13 weeks ended May 6th, 2023. All other results discussed are on a reported basis, which is the 13 weeks ended May 4, 2024, versus the 13 weeks ended April 29, 2023. With that, I'll now turn the call over to Gina.

Speaker Change: Today's call contains certain non-GAAP financial measures. Please refer to this morning's press release and supplemental materials for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure.

Speaker Change: As you know fiscal 2023 was a 53 week year to provide the best sense of the health of the business all categories sales results market share data loyalty metrics and selling metrics discussed during the call are on a comparable calendar basis, which is the 13 weeks ended may 4th 2024 versus the 13 weeks and.

Speaker Change: May six 2023.

Gina: All other results discussed are on a reported basis, which is the 13 weeks ended may four 2024 versus the 13 weeks ended April 29, 2023 with that I'll now turn the call over to Gina.

Gina R. Boswell: Thank you, Mike, and good morning, everyone. We appreciate you all joining us. Today, we are pleased to report better than expected Q1 sales and earnings performance. Through strong execution, we continued our progress against our strategic priorities, managed our profitability, and, at the same time, built toward our anticipated return to sales growth in the second half. Before I get into the details, let me first say that our Q1 outperformance would not be possible without the tireless dedication of our exceptional team, who consistently delivers tremendous service to our customers while remaining nimble in a dynamic environment to meet our goals.

Gina: Thank you Mike and good morning, everyone. We appreciate you all joining us today, we're pleased to report better than expected Q1 sales and earnings performance through.

Gina: Through strong execution, we continued our progress against our strategic priorities managing our profitability and at the same time building toward our anticipated return to sales growth in the second half.

Gina: Before I get into the details let me first say that our Q1 outperformance would not be possible without the tireless dedication of our exceptional team who consistently delivers tremendous service to our customers while remaining nimble in a dynamic environment to deliver our goals.

Gina R. Boswell: Jumping into results, we were pleased to deliver net sales of $1.4 billion in the first quarter, down 0.9% from the prior year, which was above the high end of our guidance. First quarter earnings per diluted share of $0.38 were up 15% from the prior year's adjusted EPS, which was also above our guidance. With our better-than-expected results in the first quarter, we've narrowed our full-year guidance ranges for both the top and bottom lines, raising the midpoint while maintaining the high end for each. Keeping in mind that it's still early in the year and we remain in a dynamic consumer spending environment, we are taking a prudent approach to our guidance. Eva will share more details later.

Gina: Jumping into results, we were pleased to deliver net sales of one $4 billion in the first quarter down 0.9% from the prior year, which was above the high end of our guidance.

Gina: First quarter earnings per diluted share up 38 cents was up 15% from the prior year's adjusted EPS, which was above our guidance.

Gina: With our better than expected results in the first quarter, we've narrowed our full year guidance ranges for both the top and bottom line raising the midpoint, while maintaining the high end for each.

Gina: Keeping in mind that it's still early in the year and we remain in a dynamic consumer spending environment. We are taking a prudent approach to our guidance even will share more details later.

Gina R. Boswell: Now shifting back to the quarter, let me provide some color on what drove our Q1 performance. Of course, it starts with the customer and their favorable response to the level of newness and innovation we brought to them with compelling product introductions and new marketing activities that build the brand. We continue to grow our newer adjacencies, such as men's, hair, lip, and laundry, and we are excited to see all of these contributing more to the business.

Gina: Now shifting back to the quarter, let me provide some color on what drove our Q1 performance.

Of course, it starts with the customer and their favorable response to the level of newness and innovation, we brought to them with compelling product introductions and new marketing activities that build the brand.

Gina: We continue to grow our newer adjacencies such as men her lips and laundry and we're excited to see all of these contributing more to the business.

Gina R. Boswell: We're continuing to roll out our lip fixtures to nearly all North American stores, and we're accelerating laundry to all U.S. stores in late fall. As part of our efforts to drive our core growth, we introduced a new brand collaboration with Netflix, starting with their hit series, Bridgerton.

Gina: We're continuing to roll out our lips fixtures to nearly all north American stores.

Gina: We're accelerating laundry into all U S stores in late fall.

Gina: As part of our efforts to drive our core growth, we introduced a new brand collaboration with Netflix starting with their hips theory Richardson.

Gina R. Boswell: We also launched a new everyday luxuries collection, which generated some viral buzz that Julie will touch on a bit later. Together, we were delighted with the abundance of brand love demonstrated by customers for these products. The Home Fragrance category performed in line with our expectations, with the year-over-year decline in candles consistent with the prior quarter's performance as macro-level normalization continued. Overall transactions were up for the quarter, driven by conversion, with dual-channel traffic flat. Consistent with external market data, we are continuing to see customers carefully manage their spending, which has pressured basket size. Average unit retail declined 1% versus our expectation of flat.

Gina: We also launched a new everyday luxury collection, which generated some viral bonds that Julie will touch on a bit later together, we were delighted with the abundance of brand love demonstrated by customers for these products.

Gina: The home fragrance category performed in line with our expectation with the year over year decline in candles consistent with the prior quarter's performance as macro level normalization continued.

Gina: Overall transactions were up for the quarter driven by conversion with dual channel traffic flat.

Gina: Consistent with external market data, we're continuing to see customers carefully manage their spending which has pressured basket size.

Gina: Average unit retails declined 1% versus our expectation of flat.

Gina R. Boswell: At the beginning of the quarter, we leveraged promotions to help drive traffic in light of a floor set that wasn't responding with our customers. As the quarter progressed and demand grew, we eased off promotions, which allowed us to achieve flat AURs in the back half of the quarter. From a market share perspective, we maintained our strong unit share overall. However, our international business was pressured given the war in the Middle East and related soft, Despite this near-term pressure, international markets remain an attractive pillar of our overall strategy, and we are committed to growing outside North America.

Gina: At the beginning of the quarter, we leveraged promotion to help drive traffic in light of a floor set that wasn't resonating with our customers as.

Gina: As the quarter progressed and demand grew we eased off promotions, which allowed us to achieve flat AUR in the back half of the quarter.

Gina: From a market share perspective, we maintained our strong unit share overall.

Gina: Our international business was pressured given the war in the middle East and related softness.

Gina: Fight this near term pressure international markets remain an attractive pillar of our overall strategy and we're committed to growing outside North America.

Gina R. Boswell: During the quarter, our partners opened stores in new markets, including our first stand-alone store in London. And just last week, together with our franchise partner, we opened our first store in South Korea. Our plan is to add at least 35 net new stores in international markets this year.

Gina: During the quarter, our partners opened stores in new markets, including our first Standalone store in London, and just last week together with our franchise partner, we opened our first store in South Korea.

Gina: Our plan is to add at least 35 net new stores in international markets. This year.

Gina R. Boswell: As you know, over the past year, our team's efforts have been centered on elevating the Bath & Body Works brand and product, extending our reach, engaging with our customers, enabling a seamless omni-channel experience, and enhancing operational excellence and efficiency. Building upon the strong foundations that Bath & Body Works had already established, our efforts are driving positive progress along our path to $10 billion in sales and operating margins of 20%. Last quarter, I highlighted several marketing and technology initiatives in which we're making important investments to fuel our growth.

As you know over the past year, our team's efforts have been centered on elevating the Bath <unk> body works brand and product extending our reach engaging with our customers.

Gina: Enabling a seamless omnichannel experience and enhancing operational excellence and efficiency.

Gina: Building upon the strong foundation that Bath and body works had already established our efforts are driving positive progress along our path to $10 billion in sales and operating margins at 20%.

Gina: Last quarter, I highlighted several marketing and technology initiatives in which we're making important investments to fuel our growth.

Gina R. Boswell: This quarter, I would like to focus on a key indicator of the success of this work, which we call customership. Customership essentially refers to the demand we generate among current and potential customers to drive sustained growth in the business. Simply put, our goal is to bring more customers to the brand more often and with more love for our amazing fragrance assortment and omni-channel experience. With the introduction of our full-funnel marketing approach, beginning in Q4 of last year, we have seen improving trends supported by greater top-of-mind brand awareness and engagement among existing, new, and reactivated customers alike. Early results from our more robust approach have been promising.

Gina: This quarter I would like to focus on a key indicator of the success of this work, which we call customer ship.

Gina: Customer ship essentially refers to the demand we generate among current and potential customers to drive sustained growth in the business.

Gina: Simply put our goal is to bring more customers to the brand more often and with more love for our amazing fragrance assortment and Omnichannel experience.

Gina: With the introduction of our full funnel marketing approach beginning in Q4 of last year, we have seen improving trends supported by greater top of mind brand awareness and engagement among existing new and reactivated customers alike.

Early results from our more fulsome approach have been promising the trend on net customer count in the first quarter improved 10 percentage points when compared to the first quarter of 2023 fueled by better retention of existing customers and a trend improvement and attracting new customers to the brand.

Gina R. Boswell: The trend on net customer count in the first quarter improved 10 percentage points when compared to the first quarter of 2023, fueled by better retention of existing customers and a trend improvement in attracting new customers to the brand. We saw our most promising performance within our most valued customer segment, which we call Fragrance Fashionista. These customers consider fragrance to be an essential part of their identity and self-expression, and they're extremely invested in innovation, evidenced by their response to our newness in the quarter.

Gina: We saw our most promising performance within our most valued customer segment, which we call fragrance fashionista.

Gina: These customers consider fragrance to be an essential part of their identity and self expression and theyre extremely invested in innovation evidenced by their response to our newness in the quarter.

Gina R. Boswell: We were also encouraged to see our new efforts lead customers to shop with us more often, with approximately 40% of customers visiting us nearly seven times on average per year. And we're seeing brand love continue to build. Brand impressions generated in the quarter were up 43% versus the prior year.

Gina: We were also encouraged to see our new efforts lead customers to shop with us more often with approximately 40% of customers visiting us nearly seven times on average per year.

Gina: And we're seeing brand loves continued to build brand impressions generated in the quarter were up 43% versus the prior year and we saw key brand equities, such as likelihood to recommend Bath and body works on the rise.

Gina R. Boswell: And we saw key brand equities, such as the likelihood to recommend Bath & Body Works, on the rise. Hand in hand with our marketing efforts and driving customership is our focus on loyalty. As of the end of the first quarter, we had increased our active loyalty members by more than 18% year over year to approximately 37 million, and they drove about 80% of our U.S. sales. The program also boasted an outstanding 93% satisfaction rating among its membership.

Gina: And in hand, with our marketing efforts and driving customer ship is our focus on loyalty.

Gina: As of the end of the first quarter, we had increased our active loyalty members by more than 18% year over year to approximately 37 million and they drove about 80% of our U S sales.

Gina: The program also posted an outstanding 93% satisfaction rating within its membership.

Gina R. Boswell: While the scale and satisfaction of our loyalty programs are strong, of equal importance is the stickiness the program brings to the business. In Q1, our overall customer retention rate was the best since 2021, which was a high watermark for the brand. As we look to a future built on strong customership, we see additional potential to drive even more enrollment in our loyalty program, particularly among new customers, who made up 43% of enrollees in the first quarter.

Gina: While the scale and satisfaction of our loyalty program, our strong of equal importance is the stickiness the program brings to the business.

Gina: In Q1, our overall customer retention rate was the best posted since 2021.

Gina: Which was a high watermark for the brand.

Gina: As we look to a future built on strong customer ship, we see additional potential to drive even more enrollment in our loyalty program, particularly among new customers, who made up 43% of enrollees in the first quarter.

Gina R. Boswell: In order to drive a new level of engagement in the program in 2024, we will offer more loyalty exclusive and early access events, along with point accelerators. We introduced these in Q4 to foster reward redemption, as that is a critical factor in incentivizing customer purchase.

Gina: In order to drive a new level of engagement in the program in 2020 four we will offer more loyalty exclusive and early access events along with point accelerators. We introduced season Q4 to foster reward redemption and that is a critical factor in incentive customer purchase behavior.

Gina R. Boswell: As customership grows, it will enhance our potential to both drive short-term performance as well as sustain customer lifetime value. Turning briefly to our technology initiative, our tech roadmap is on track, and we've made progress toward our goal. As you know, in standing up Bath & Body Works as an independent company, there has been and continues to be significant work required to bring the company's technology systems to where we need them to be for a leading omni-channel retail business of our size.

Gina: As customer ship grows it will enhance our potential to both drive short term performance as well as sustained customer lifetime value.

Gina: Turning briefly to our technology initiatives, our tech roadmap is on track and we've made progress toward our goals.

Gina: As you know in standing up Bath and body works as an independent company. There has been and continues to be significant work required to bring the company's technology system.

Gina: Where we need them to be for a leading omni channel retail business of our size.

Gina R. Boswell: We remain focused on investing in the foundational tools and systems needed to support future growth and have been engaging with world-class partners to do so. We continue to evolve the digital experience for our customers, and we look forward to sharing big wins from these efforts later in the year. With that, I'll turn the call over to Julie to provide the merchandising overview.

Gina: We remain focused on investing in the foundational tools and systems needed to support future growth and have been engaging with world class partners to do so.

Gina: We continue to evolve the digital experience for our customers and we look forward to sharing big wins from these efforts later in the year.

Speaker Change: With that I'll turn the call over to Julie to provide the merchandising overview.

Julie B. Rosen: Thank you, Gina. I, too, want to thank our teams for their exceptional work and for continuing to deliver a special experience to our customers. We are pleased with our first quarter performance as a result of their efforts, and we're well positioned for a strong summer. As Gina touched on briefly, newness drove our success in the first quarter. In March, we announced a yearlong partnership with Netflix to bring storytelling to life through the power of fragrance.

Julie: Thank you Gina I too want to thank our teams for their exceptional work and for continuing to deliver a special experience to our customers. We are pleased with our first quarter performance as a result of their efforts and we're well positioned for a strong summer.

Julie: As Gina touched on briefly newness drove our success in the first quarter in March we announced a year long partnership with Netflix to bring storytelling to lives through the power of fragrance through the partnership we aim to transform the viewing experience for millions of Netflix spans.

Julie B. Rosen: Through the partnership, we aim to transform the viewing experience for millions of Netflix fans by allowing the power of fragrance to help transport them into their favorite stories and scenes. And we started with Bridgerton, one of the most popular programs on Netflix. The response was terrific.

By allowing the power of fragrance to help transport them into their favorite stories and themes and we started with Richardson one of the most popular programs on Netflix. The response was terrific. The collection resonated with our core customer and over the launch period Richardson products represented four.

Julie B. Rosen: The collection resonated with our core customer, and over the launch period, Bridgerton products represented 4% of the shop. This response exceeded our expectations, and our agile model allowed us to chase into strong-selling fragrances and forms. Turning to our category performance, body care sales grew low single digits in the quarter, outperforming the shop as we maintained unit share in the category. For example, Fine Fragrance Mist, Men's Travel & Lip,

Julie: Per cent of the shop.

Julie: This response exceeded our expectations and our agile model allowed us to chase into strong selling fragrances and forums turning to our category performance body care sales grew low single digits in the quarter outperforming the shop as we maintained unit share in the category.

Fine fragrance Smith men's travel unless we're particular highlights during the quarter, we had a limited launch of our everyday luxury collection of fine fragrance mist with success spurred on by the organic morality of the product as the sprays went viral on social media.

Julie B. Rosen: During the quarter, we had a limited launch of our Everyday Luxuries collection of fine fragrance mists. With success spurred on by the organic virality of the product, as the sprays went viral on social media, demand increased, with fine fragrance mists outperforming the shop during that period. Demand was driven by a slightly younger and more diverse set of customers. As I said, this was a limited test launch in about one-third of our U.S. stores. Given its success, you will see us relaunch this line across the full North American fleet in the fall.

Julie: Demand increased as fine fragrance mist outperforming the shop during that period.

Julie: The demand was driven by a slightly younger and more diverse set of customers. As I said. This was a limited test launch and about one third of our U S stores given the success you will see US relaunched this line across the full North American fleet in the fall.

Julie B. Rosen: The men's business continues to be one of our fastest-growing categories in body care, as we benefit from new forms introduced last year, including grooming and antiperspirant deodorant, as well as the newness we infused into the core collection in the first quarter. Notwithstanding the growth in men's we've seen to date, customer awareness for men's products remains relatively low, and we continue to invest in new media channels to drive awareness and growth. We believe we have a significant opportunity to drive increased visibility and expansion of this category. Travel, as I mentioned, outpaced the shop as we continue to take advantage of the trial and travel mindset.

Julie: The men's business continues to be one of our fastest growing categories and body care as we benefit from new forms introduced last year, including grooming and Antiperspirants deodorants as well as the newness, we infused into the core collection in the first quarter.

Julie: Notwithstanding the growth in men's we've seen to date customer awareness for men's remains relatively low and we continue to invest in new media channels to drive awareness and growth. We believe we have significant opportunity to drive increased visibility and expansion of this category.

Julie: Travel as I mentioned outpaced the shop as we continue to take advantage of the trial and travel mindset.

Julie B. Rosen: Home Fragrance Sales were down mid single digits compared to last year, yet we increased our unit market share slightly. Candle sales declined from last year as we not only continued to be impacted by candle normalization, but we also narrowed our assortment of single-wick candles. We saw a slight decline in unit market share in Campbell's in the quarter, while we maintained our market leadership. Are air fresheners or wallflowers growing in unit share in the quarter?

Julie: Home fragrance sales were down mid single digits to last year.

Speaker Change: Yeah, we increased our unit market share slightly handle sales declined from last year as we not only continued to be impacted by candle normalization, but we also narrowed our assortment of single wet candles, we saw a slight decline in unit market share in cameras in the quarter, while we maintained our market leadership.

Speaker Change: Our air Fresheners are Wallflowers grew unit share in the quarter.

Julie B. Rosen: Our Soaps & Sanitizers category decreased by low single digits compared to last year. However, despite slightly declining in unit market share, we maintained our strong market leadership. Within this, soaps increased, driven by refills. We've been pleased with the performance of our refills, which make up slightly less than 10% of the soap business. We've received positive customer feedback and have expanded the assortment since the launch. Meanwhile, sanitizers declined, driven by our decision to exit the full-size form due to continued normalization in the category.

Speaker Change: Our soaps and Sanitizers category decreased low single digits compared to last year, despite slightly declining in unit market share. We maintained our strong market leadership within mis soaps increased driven by refills, we've been pleased with the performance of our retail which make up slightly.

Speaker Change: Less than 10% of the soap business, we've received positive customer feedback and have expanded the assortments in full launch. Meanwhile, sanitizers declined driven by our decision to exit the both size form due to continued normalization in the category.

Julie B. Rosen: Pocketbacks overall performed nicely in the quarter, growing versus the same period last year. We've been enhancing our current forms, such as adding a moisturizing pocketback. Finally, customers continue to look to us as an important gifting destination, which drove a 6% increase in gift sets in the quarter. As we look forward, continued innovation and newness that we have planned for the seasons ahead will continue to be key drivers across our products and merchandise.

Speaker Change: Pocket backs overall performed nicely in the quarter and versus the same period last year, we've been enhancing our current forms such as adding a moisturizing pocket back finally customers continue to look to us as an important gifting destination, which drove a 6% increase in gift sets in the quarter.

Speaker Change: As we look forward continued innovation and newness that we have planned for the seasons ahead, we'll continue to be key drivers across our products and merchandising for.

Julie B. Rosen: For our summer floor set, we delivered fresh and compelling new scents, such as our new Summer Glow Collection, and we expanded our SPF assortment and level of skin protection. Lit products outperform the shop as we continue to roll out our fixture and expanded assortment to almost all North American stores. Our new lip fixture is attracting new younger customers to our brand, which is encouraging customers to linger and play, doubling sales of lip products in the stores with the new lip fixture.

Speaker Change: For our summer floor set we delivered fresh and compelling new sense, such as our new summer glow collection, and we expanded our S. P F assortment and level of skin protection.

Speaker Change: Lip products outperformed the shop as we continue to rollout our fixture and expanded assortment to almost all north American stores.

Speaker Change: Our new led fixture is attracting new younger customers to our brand, which is encouraging customers to linger and play doubling sales of lift in the stores with the new led fixture.

Julie B. Rosen: We're on track to complete the rollout to nearly all of our North American stores by July. As we've continued to optimize our assortment and maintain supply to meet customer demand, we are accelerating the rollout of our laundry line and now expect it to be in all U.S. stores by late fall. With that, I'll turn it over to Eva.

Speaker Change: We're on track to complete the rollout to nearly all of our North American stores by July.

Speaker Change: As we've continued to optimize our assortment and maintain supply to meet customer demand. We are accelerating the rollout of our laundry line and now expect it to be in all U S stores by late fall with that I'll turn it over to Eva.

Eva C. Boratto: Thank you, Julie. Good morning, everyone.

Eva: Thank you Julie good morning, everyone.

Eva: Before I review, our first quarter fiscal results and fiscal 2024 guidance I will provide an update on capital allocation, our top priority remains driving sustainable long term profitable growth through investments in the business.

Eva C. Boratto: Before I review our first quarter fiscal results and fiscal 2020 for guidance, I will provide an update on capital allocation. Our top priority remains driving sustainable long-term profitable growth through investments in the business. To support this, we continue to plan for $300 million to $325 million in capital projects during the year, and our priorities remain investment in brick-and-mortar stores and technology. In the first quarter, our total capital investment was $46 million.

Eva: To support this we continue to plan for $300 million to $325 million in capital projects during the year and our priorities remain investing in brick and mortar stores and technology in the first quarter, our total capital investment was $46 million.

Eva C. Boratto: After investments in the business, our expectation for full-year free cash flow generation remains between $675 and $775 million, and we'll put that towards our priorities of dividends, share repurchases, and debt deleveraging. During the quarter, we paid out $45 million in dividends. Subsequently, a few weeks ago, we announced a quarterly dividend of $0.20 per share payable later this month.

Eva: After investments in the business our expectation for full year free cash flow generation remains between 675 and $775 million and we will put that towards our priorities of dividends share repurchases and debt deleveraging during the.

Eva: Quarter, we paid out $45 million in dividends and subsequently a few weeks ago, we announced a quarterly dividend of 20 cents per share payable later this month.

Eva C. Boratto: We expect to continue our annual dividend of $0.80 per share with the intention to increase the dividend over time with sustained earnings growth. During the quarter, we repurchased 2.2 million shares of common stock for $99 million at an average price of $45.61 per share. Our full-year guidance continues to include the expectation to repurchase approximately $300 million of shares opportunistically throughout fiscal 2024. We also remain committed to our goal of reducing our leverage ratio to approximately two-and-a-half times growth adjusted debt to EBITDAR. In the first quarter, we repurchased $109 million principal amount of senior notes, and our ratio held steady at 2.8 times on a four-quarter trailing basis.

Eva: We expect to continue our annual dividend of 80 cents per share with the intention to increase the dividend over time with sustained earnings growth.

Eva: During the quarter, we repurchased two 2 million shares of common stock for $99 million at an average price of $45.61 per share.

Eva: Our full year guidance continues to include the expectation to repurchase approximately $300 million of shares opportunistically throughout fiscal 'twenty 'twenty four.

Eva: We also remain committed to our goal of reducing our leverage ratio to approximately two and a half times gross.

Eva: Adjusted debt to EBITDAR in the first quarter, we repurchased $109 million principal amount of senior notes and our ratio held steady at 2.8 times on a four quarter trailing basis.

Eva C. Boratto: Now moving to the income statement, in the first quarter, we reported earnings per diluted share of $0.38, exceeding our guidance of $0.28 to $0.33 per diluted share. Our outperformance in the quarter was driven by better than expected net sales and, to a lesser extent, buying and occupancy costs. Net sales of $1.4 billion for the quarter declined a better than expected 0.9% compared to the prior year. The outperformance in net sales was driven by strong floor sets in March, reflecting the newness that Julie described.

Eva: Now moving to the income statement in the first quarter, we reported earnings per diluted share a 38 cents exceeding our guidance of 28 to 33 cents per diluted share.

Eva: Our outperformance in the quarter, which driven by better than expected net sales and to a lesser extent buying and occupancy cost.

Eva: Sales of $1 $4 billion for the quarter declined a better than expected, 0.9% compared to the prior year.

Speaker Change: Outperformance in net sales was driven by strong floor set in March reflecting the newness that Julie described.

Eva C. Boratto: As expected, the change in year-over-year net sales benefited by approximately 200 basis points from the shifted fiscal calendar resulting from the extra week in 2023. However, the benefit was offset by weaker than expected international ship sales and a decrease in average dollar sales as we continue to see the customer carefully manage their spending. As Gina previously discussed, AURs decreased 1% in the quarter versus our expectation of flat.

Speaker Change: As expected the change in year over year net sales benefited by approximately 200 basis points from the shift at the school calendar, resulting from the extra week in 2023.

Speaker Change: Benefit was offset by weaker than expected international ship sales and a decrease in average dollar sale as we continue to see the customer carefully manage their spending is.

Speaker Change: As gene previously discussed.

Speaker Change: Our <unk> decreased 1% in the quarter versus our expectation of flat.

Eva C. Boratto: Transactions were up for the quarter, driven by conversion. In US and Canadian stores, net sales totaled $1.1 billion, an increase of 3% versus the prior year. This is in line with our performance in Q4 of 2023 on a comparable calendar basis. Direct net sales were $261 million, a decline of 7% compared to last year.

Speaker Change: Transactions were up for the quarter driven by conversion.

Speaker Change: In U S seem to median stores net sales totaled $1.1 billion, an increase of 3% versus the prior year. This is in line with our performance in Q4 of 2023 on a comparable calendar basis.

Speaker Change: Net sales were $261 million, a decline of 7% compared to last year. Both this continue to grow as our customers appreciate the convenience it offers.

Eva C. Boratto: Focus continued to grow as our customers appreciated the convenience it offers. Keep in mind, BOPUS net sales are recognized as store net sales, and we delivered approximately 50% growth in demand year-over-year, and BOPUS now represents approximately 25% of direct demand. So, when adjusted for BOPUS, stores and direct growth are more comparable. Note, we lapped the BOPUS U.S. national rollout during the quarter. We generated $58 million in international net sales, a decline of 29% from last year's first quarter, which negatively impacted the year-over-year change in consolidated net sales by 170 basis points. The decline was driven by a decrease in wholesale revenue generated by product shipments to our franchise partners.

Speaker Change: Keep in mind. So this net sales are recognized as store net sales and we delivered approximately 50% growth in demand year over year and focus now represents approximately 25% of direct demand.

Speaker Change: So when adjusted for both the stores and direct growth are more comparable no. We laughed about this U S national rollout during the quarter.

Speaker Change: We generated $58 million of international net sales a decline of 29% from last year's first quarter, which negatively impacted the year over year change in consolidated net sales by 170 basis points.

Speaker Change: The decline was driven by the decrease in wholesale revenue generated by product shipments to our franchise partners due to the markets affected by the war in the Middle East as those partners continue to manage our inventory levels in the face of subdued forecast.

Eva C. Boratto: Due to the markets affected by the war in the Middle East, as those partners continue to manage their inventory levels in the face of subdued forecasts, total international system-wide retail sales from which we collect royalties were roughly flat to the prior year. Compared to the prior year period, sales were up mid-teens outside of the areas affected by the war in the Middle East, while sales improved sequentially in areas impacted by the war. We continue to believe in the international opportunity, and it is an important driver of long-term growth.

Speaker Change: Total international system wide retail sales for which we collect royalties were roughly flat to the prior year.

Speaker Change: Impaired to the prior year period sales were up mid teens outside of the areas affected by the war in the Middle East while sales improved sequentially in areas impacted by the war.

Speaker Change: We continue to believe in the international opportunity and it is an important driver of long term growth.

Eva C. Boratto: First quarter gross profit was 43.8%, an increase of 110 basis points compared to the prior year. Merchandise margin improved 110 basis points year over year, driven by a lower mix of international sales and lower transportation costs, partially offset by the modest AUR decline. Buying and occupancy expense as a percent of net sales was flat to last year. The outperformance was driven by strong execution in our fulfillment operation.

Speaker Change: First quarter gross profit rate was 43, 8% an increase of 110 basis points compared to prior year.

Speaker Change: Merchandise margin rate improved 110 basis points year over year, driven by a lower mix of international sales.

Speaker Change: And lower transportation cost, partially offset by the modest AUR decline.

Speaker Change: Buying and occupancy expense as a percent of net sales was flat to last year.

Speaker Change: The outperformance was driven by strong execution in our fulfillment operations.

Eva C. Boratto: Total first quarter SG&A deleveraged by 60 basis points versus last year, in line with expectations, which included the lapping of one-time discrete corporate expenses recognized in the first quarter of last year. The benefits of our cost optimization work span across both gross profit and SG&A. We continue to expect approximately $100 million in additional annual cost savings for fiscal year 2024, with benefits being realized earlier than expected. In the first quarter, we delivered approximately $40 million. First quarter total operating income increased by 3.6% to $187 million, or 13.5% of net sales.

Speaker Change: Total first quarter SG&A deleveraged by 60 basis points versus last year in line with expectations, which included the lapping of one time discrete corporate expenses recognized in the first quarter last year.

Speaker Change: The benefits of our cost optimization work spans across both gross profit and SG&A. We continue to expect approximately $100 million in additional annual cost savings for fiscal year, 'twenty 'twenty four with benefits being realized earlier than expected.

Speaker Change: Got it in the first quarter, we delivered approximately $40 million.

Speaker Change: First quarter total operating income increased by three 6% to $187 million were 13, 5% of net sales.

Eva C. Boratto: Moving on to inventory, we ended the first quarter with total inventory dollars up 6% compared to last year, in line with our expectations. The increase in inventory is to support new product launches and additional stores. As we head into the second quarter, our inventory levels are appropriately positioned. Turning to real estate, our portfolio remains extremely healthy, with more than half our fleet in off-mall locations. In the first quarter, we continued to increase our North American off-mall penetration, opening 15 new off-mall stores and permanently closing 11 stores, primarily in malls. Internationally, our partners ended the quarter with 486 stores.

Speaker Change: Moving on to inventory we ended the first quarter with total inventory dollars up 6% compared to last year in line with our expectations. The increase in inventory is to support new product launches and additional stores as we head into the second quarter, our inventory levels are.

Speaker Change: Appropriately positioned.

Speaker Change: Turning to real estate, our portfolio remains extremely healthy with more than half our fleet in off mall locations in.

Speaker Change: In the first quarter, we continued to increase our north American all small penetration opening 15, new off mall stores and permanently closing 11 stores primarily in malls.

Speaker Change: Internationally, our partners ended the quarter with 486 stores.

Eva C. Boratto: Turning now to our Fiscal 2024 Financial Guidance. As a reminder, we are providing our guidance with comparisons to 2023 that include the 53rd week, which added about $81 million to net sales and $0.05 to diluted earnings per share. With that as a background, we are narrowing full-year guidance ranges for both the top and bottom lines, raising the midpoint while maintaining the high end for each.

Speaker Change: Turning now to our fiscal 'twenty 'twenty four financial guidance as a reminder, we are providing our guidance with comparisons to 'twenty 'twenty. Three that included the 53rd week, which added about 81 million Internet sales and five cents to diluted earnings per share.

Speaker Change: With that as background, we are narrowing full year guidance ranges for both the top and bottom lines raising the mid point, while maintaining the high end for each.

Eva C. Boratto: For the full year, we now expect net sales results to range between down two and a half percent to flat year over year. Adjusting for the 53rd week in 2023, we expect net sales results to range between down 1.5 to up 1% with the extra week representing a headwind of approximately 100 basis points to our 2024 growth. We continue to expect net sales growth at both the midpoint and the high end and to turn positive in the second half of the year on a comparable week basis as our marketing initiatives and our product launches in our adjacencies gain traction.

Speaker Change: For the full year, we now expect net sales result to range between down 2.5% to flat year over year.

Speaker Change: Adjusting for the 50 <unk> week in 2023, we expect net sales.

Speaker Change: Results to range between down 1.5 to a.

Speaker Change: 1% with the extra week, representing a headwind of approximately 100 basis points to our 'twenty 'twenty four growth.

Speaker Change: We continue to expect net sales growth at both the midpoint and the high end and turned positive in the second half of the year on a comparable week basis.

Speaker Change: As our marketing initiatives and our product launches in our Adjacencies our scale.

Eva C. Boratto: We now expect the gross profit rate to be approximately 43.7 percent and the SG&A rate to be approximately 26.7 percent. The benefits of our cost optimization work mentioned previously are now expected to be more weighted to gross profit than SG&A at a split of approximately 60 and 40 percent, respectively.

Speaker Change: We now expect gross profit rate to be approximately 43, 7% an SG&A rate to be approximately 26, 7%.

Speaker Change: <unk> of our cost optimization work mentioned previously are now expected to be more weighted to gross profit's been SG&A at a split of approximately 60 and 40% respectively.

Eva C. Boratto: Our guidance for net non-operating expenses remains unchanged from the guidance we provided on our last earnings call. Considering all of the inputs, our updated full-year guidance for earnings per diluted share is between $3.05 and $3.35. As Gina explained, we are taking a prudent approach to our guidance, keeping in mind it's still early in the year and we remain in a dynamic consumer spending environment.

Speaker Change: Our guidance for net non operating expenses remain unchanged from the guidance. We provided on our last earnings call considering all of the inputs our updated full year guidance for earnings per diluted share is between $3.05 to $3 and 35% SG&A.

Speaker Change: Explained we are taking a prudent approach to our guidance keeping in mind, it's still early in the year and we remain in a dynamic consumer spending environment.

Eva C. Boratto: Turning now to our second quarter 2024 guidance, we are forecasting a second quarter sales range of down 2% to flat versus the prior year, with the high end of the range reflecting a sequential improvement over the prior quarter. We expect second quarter gross profit rates to be approximately 40% in line with Q2 of 2023. In the second quarter, we will begin to lap merchandise margin rate expansion in the prior year. Our forecast reflects moderate improvement in year-over-year merch margin rates offset by deleverage in buying and occupancy expense as a percent of net sales driven by investments in store real estate.

Speaker Change: Turning now to our second quarter 2024 guidance, we are forecasting a second quarter sales range of down 2% to flat versus prior year with the high end of the range, reflecting a sequential improvement over the prior quarter.

Speaker Change: We expect second quarter gross profit rate to be approximately 40% in line with Q2 of 2023.

Speaker Change: In the second quarter, we will begin to lap merchandise margin rate expansion in the prior year, our forecast reflects moderate improvement in year over year merch margin rate offset by deleverage in buying and occupancy expense as a percent of net sales driven by investments in.

Speaker Change: In store real estate.

Eva C. Boratto: AURs in the second quarter are expected to be roughly flat. We expect our second quarter SG&A rate to be approximately 29% of net sales, with the rate increase versus the prior year driven largely by higher marketing investment and wage inflation, partially offset by our cost reduction initiative. We expect second-quarter net non-operating expense of approximately $65 million, a tax rate of approximately 27%, and weighted average diluted shares outstanding of approximately $224 million. Considering all of these inputs, we are forecasting second-quarter earnings per diluted share of between $0.31 and $0.36. And I'll now turn the call back to Gina for some closing remarks.

Speaker Change: A loss in the second quarter are expected to be roughly flat, we expect our second quarter SG&A rate to be approximately 29% of net sales.

Speaker Change: With the rate increase versus the prior year, driven largely by higher marketing investment and wage inflation, partially offset by our cost reduction initiatives.

Speaker Change: We expect second quarter net non operating expense of approximately $65 million a tax rate of approximately 27% with weighted average diluted shares outstanding of approximately 224 million.

Speaker Change: Considering all of these inputs, we are forecasting second quarter earnings per diluted share of between 31, and 36 set and I'll now turn the call back to Gena for some closing remarks.

Gina R. Boswell: In closing, I'd like to emphasize again how pleased we are with our better-than-expected start to the year, a convincing step toward our anticipated return to top-line growth in the second half of the year. We are effectively executing on our strategic initiatives and creating more efficiencies in our business, which is allowing us to further reduce our debt and continue to return cash to shareholders. We continue to be excited about the opportunities ahead. I'll now turn the call over to the operator for questions.

Gena: Thank you Eva in closing I'd like to emphasize again, how pleased we are with our better than expected start to the year, a convincing step toward our anticipated return to topline growth in the back half of the year.

Gena: We are effectively executing on our strategic initiatives and creating more efficiencies in our business, which is allowing us to further reduce our debt and continue to return cash to shareholders.

Gena: We continue to be excited about the opportunities ahead.

Speaker Change: I'll now turn the call over to the operator for questions.

Speaker Change: Thank you, ladies and gentlemen, we will now be conducting a question and answer session.

Donna: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key.

Donna: We do ask that you please limit yourself to one question in order to allow as many individuals as possible to ask questions today. Our first question is from Simeon Siegel of BMO Capital Markets. Please go ahead.

Speaker Change: You would like to ask a question. Please press star one on your telephone keypad at this time.

Speaker Change: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker Change: We do ask that you. Please limit yourself to one question in order to allow as many individuals as possible to ask questions today.

Speaker Change: Our first question is coming from Simeon Siegel of BMO capital markets. Please go ahead.

Simeon Avram Siegel: Hey, everyone. Good morning. Nice job. Unknown Speaker Now, reflect...

Simeon Avram Siegel: Thanks, Heather and good morning nice job.

Speaker Change: So what.

Unknown Speaker: So, reflecting on your marketing campaigns, the new product categories, the collaborations, how are you thinking about the benefits you're seeing from these initiatives? Are they incremental customers? Is it incremental visits? Is it better pricing? I mean, how are you thinking about what you're learning through these initiatives? And then, a little bit more nuanced, you held B&O on the sales decline, you're guiding for de-leverage going forward. Just what is the right way to think about the leverage point now? And I guess I understand you're making the investments in real estate, but I also wonder if you're lowering leverage points as you move off malls, so any color there would be helpful as well.

Speaker Change: Alright, guys. Thank you. So as you reflect on your marketing campaigns and new product categories and collaborations or just how are you thinking about the benefits you're seeing from these initiatives is it incremental customers as an incremental visits is it better pricing just how are you thinking about what you're learning through these these initiatives and then.

Speaker Change: A little bit more nuance to help you know on the sales decline you're guiding for deleverage going forward just what's the right way to think about the leverage point now and I guess I understand you're making the investments in real estate, but I also wonder if you're lowering leverage points as you move off mall. So any color there would be helpful. As well. Thank you.

Gina R. Boswell: Thank you, Simeon. It's nice to hear from you.

Speaker Change: Thank you Simeon and nice to hear from you I'll take the first part and ask to even speak to the B N O leverage or is the marketing and the new products and co labs, you know we've been investing in a full funnel approach and it's certainly driving top of brand awareness are you meant you heard Julie mentioned the 800.

Gina R. Boswell: I'll take the first part and ask that Eva speak to the B&O leverage. As far as marketing and the new products and co-labs are concerned, you know, we've been investing in a full-funnel approach, and it's certainly driving top-of-brand awareness. You heard Julie mention the 800 million impressions from Bridgerton and the everyday luxuries that had all those viral impressions. So, whether it's co-labs, whether it's the new media activities that we're engaging in, this is all inserting us into the cultural conversations that are most relevant for our customers today, and we're monitoring reach, as well as, you know, other key equity metrics.

Speaker Change: Million impressions from Bridger, Ken so and the everyday luxuries that had all those viral impression so whether it's co labs, whether its the new media activities that were engaging in and this is all inserting us into the cultural conversations that are most relevant for our customers today and we're monitoring reach as well as other key.

Speaker Change: Equity metrics. So it's really exciting to see that it's working it's working for us to gain more customers more often with more love we like to say so it's still early in the journey, but we like what we see and we've got more excitement in store for our customers as we enter the fall.

Gina R. Boswell: So, it's really exciting to see that it's working. It's working for us to gain more customers more often with more love, we like to say. So, it's still early in the journey, but we like what we see, and we've got more excitement in store for our customers as we enter the fall.

Eva C. Boratto: So thanks, Gina. Turning to the B&O, what I would say, Simeon, overall, we're really pleased with the progress we continue to make on driving overall growth margin improvements, and you saw that in Q1. And as you look at B&O, I would continue to say to leverage B&O, it's about 2% to 3% sales growth. Rents per square foot off the mall are slightly lower. In Q1, we were able to leverage flat B&O, and we had some really great execution there in our operations and our fulfillment center. So we'll continue to push ahead and drive improvements.

Gina: So thanks, Gina turning to the P&L, what I would say semi is overall, we're really pleased with the progress we continue to make on driving overall gross margin improvements and you saw that in Q1 and as you look at the you know I would continue to say to leverage being Oh, it's about 2% to 3%.

Gina: 8% sales growth rents per square foot, all small or are slightly are slightly lower Q1, we were able to leverage flat D&O and we had some really great execution there in our in our operations and our fulfillment center. So we will continue to to push ahead in <unk>.

Gina: <unk> improvements.

Donna: Thank you. Are you ready for our next question?

Speaker Change: Thank you ready for our next question. Thank.

Donna: Thank you. The next question is coming from Alex Straton of Morgan Stanley. Please go ahead.

Speaker Change: Thank you. The next question is coming from Alex Straightened up Morgan Stanley. Please go ahead.

Alexandra Ann Straton: Perfect. Thanks for taking my questions. There are just a couple here.

Speaker Change: Perfect. Thanks for taking my questions. Just a couple here first on the Middle East Dragon pressure can you talk to us about your assumptions on how that evolves in the second quarter as well as your ability to offset that at all at all and if you could provide how much that represents as a percentage of international that would also.

Unknown Speaker: First, on the Middle East-driven pressure, can you talk to us about your assumptions on how that evolves in the second quarter, as well as your ability to offset that at all? And if you could provide how much that represents as a percentage of international, that would also be helpful. And then maybe taking a look forward, looking at the first quarter outcome, the second quarter guidance, and the four-year guidance, seems like you're embedding that gross margin would fall in the back half compared to expansion in the front half. So can you just talk to us about the assumptions there?

Speaker Change: Would be helpful.

Speaker Change: And then maybe taking a look for ward looking at the first quarter our problem in the second quarter guidance full year guidance. It seems like you're embedding that gross margin would fall in the back half compared to expansion in the front half. So can you just talk to us about the assumptions there. Thanks a lot.

Unknown Speaker: Thanks a lot.

Speaker Change: Great. Thank you I will start and then I think.

Speaker Change: Even though it will chime in I just wanted to zoom out for a second on international as you pointed out. This is a directly affected by the war in the Middle East. If you remove the regions are affected by the war. It's a it's quite a healthy growing business with system wide retail sales in the teens in the first quarter. So we've got the near term pressure in the middle East, but all else is on track.

Gina R. Boswell: Great, thank you. I will start and then, I think, Eva will chime in.

Gina R. Boswell: I just want to zoom out for a second on international affairs. As you pointed out, this isn't directly affected by the war in the Middle East. If you remove the regions affected by the war, it's a, it's quite a healthy growing business with system-wide retail sales and the teams in the first quarter. So we've got the near-term pressure in the Middle East, but all else is on track. And so some of the offsets that we can speak to have to do with the opening of 35 net new stores in international.

Speaker Change: And so some of the offsets that we can speak to have to do with the opening of 35 net new stores in international we.

Speaker Change: You mentioned not only in the store the free firsthand standing store in London, but also South Korea and also in existing markets. Our partners are expanding for example in Mexico as well as other markets in Q2, so the big picture on International is that the middle East pressure has not changed are our long term international expansion plan.

Gina R. Boswell: We mentioned not only the store, the first freestanding store in London, but also South Korea and also existing markets. Our partners are expanding, for example, in Mexico, as well as other markets in Q2. So the, the big picture on international business is that the Middle East pressure has not changed our, our long-term international expansion plans. And then, beyond that, so I expect that that will be the ability to offset, and we are expecting, I think, as Eva mentioned in her remarks, that even in the markets affected, that that is moderating quarter by quarter. Yeah, thanks.

Speaker Change: <unk>.

Speaker Change: And then beyond that so I expect that that will be the ability to offset them and we are expecting I think as Eva mentioned in her remarks that even in the markets affected that that is moderating.

Eva C. Boratto: Yeah, thanks, Gina. And I'll add a few things, Alex.

Gena: By quarter, Yeah, Thanks, Gena and I'll I'll add a few things Alex there's many parts to your question here as you look at our guidance that we provided today that in Q1 International did underperform our expectations our guidance assumes a wide range of scenarios from the low to the high.

Eva C. Boratto: There are many parts to your question here. As you look at our guidance that we provided today, in Q1, international did underperform our expectations. Our guidance assumes a wide range of scenarios from the low to the high, and I would say at the mid and the high, we expect international business to improve. Beginning in Q2, and there are expectations in the guidance. In terms of gross margin for the year, we're expecting gross margin for the year comparable to 2023.

Gena: And I would say at the mid and the high you expect international to we expect international to improve beginning in beginning in Q2 and there are expectations in in the guidance.

In terms of gross margin for for the year, where we're expecting gross margin for the year comparable with 2023.

Eva C. Boratto: I would remind you we began driving Merge Margin improvements in Q2 of last year and will continue throughout 2024. So those improvements continue, but obviously, we're wrapping them as we get to the mid-year. Merge Margin improves by about 50 basis points for the year, and that's offset by B&OD leverage, given our investments in real estate.

Gena: Always remind you we began driving merch margin improvement of Q2 of last year and continues throughout 2024.

Gena: So that those improvements continue but obviously, we're wrapping them as we get to the to the mid year merch margin improved about 50 basis points for the year and that's offset by you know deleverage given our investments in in real estate.

Donna: Thank you. We're ready for our next question.

Speaker Change: Thank you were ready for our next question.

Donna: Thank you. The next question is coming from Paul Lejuez of Citi. Please go ahead.

Speaker Change: Thank you. The next question is coming from Paul Lajoie of Citi. Please go ahead.

Paul Lawrence Lejuez: Hi, thank you. This is Kelly. On behalf of Paul, I'm just curious about the AURs coming in at down one versus guidance. Given we, you know, when you reported the fourth quarter, we already sort of knew about some of the product misses early in the quarter. Just curious, you know, how AUR kind of played out relative to plan in the back half of the quarter. I know you said flat, but were you expecting kind of a pullback on promos as we got into March-April?

Kelly: I think he this is kelly on for Paul.

Speaker Change: Just curious on the AUR coming in at down one versus guidance.

Speaker Change: We you know when you reported.

Speaker Change: The fourth quarter, we already sort of knew about some of the product misses early in the quarter just curious.

Speaker Change: You know how you are kind of played out relative to plan.

Speaker Change: In the back half the quarter I know you said flat, but what are you expecting kind of more of a pull back on promos as we got into March April almost my first question and secondly, just curious how you're a pure product costs.

Paul Lawrence Lejuez: That's my first question. And secondly, just curious how your peer product cost trended, ex-transportation savings in one case. So just, you know, your raw materials, how they turned out on an absolute basis and relative to expectations and whether you saw a benefit to merge margins and just how we're thinking about product cost for the rest of the year. Thanks.

Speaker Change: It trended ex transportation savings and in one case. So just you know your raw materials, how they turned it on an absolute basis and relative to expectations and whether you saw a benefit to merch margins and just how we're thinking about product costs for the rest of the year.

Speaker Change: Thank you.

Unknown Speaker: So, as it relates to AUR, AUR was under pressure in the very first start of the quarter. It was something that we actually foreshadowed in our last earnings call.

Kelly: Thank you Kelly.

Speaker Change: So as it relates to AUR AUR was under pressure in the very first start with the quarter. It was something that we actually foreshadowed on our last earnings call. You recall, we had a a floor set in February that wasn't resonating. So that's when we quickly pivoted and we pulled on the strategic promotional ever to build traffic as we move through the quarter we had.

Unknown Speaker: If you recall, we had a floor set in February that wasn't responding, so that's when we quickly pivot, and we pulled on the strategic promotion letter to build traffic. As we moved through the quarter, we had strong floor sets with newness, and that enabled us to achieve flat AUR in the back part of the quarter, so we exited with flat AUR. So, other than the first part of Q1, we were no more promotional than we were last year, and we're back on plan to our AUR flat expectations. And then the reminder here is on the full year guide to expand AUR modestly for the full year. And then for product costs, I'll ask Eva to chime in. Yeah, thanks for the question.

Speaker Change: Strong floor sets with newness and not enable us to achieve flat or you are in the back part of the quarter. So we exited with flat AUR. So other than the first part of Q1, we were no more promotional than we were last year and were back on plan to our AUR flat expectations and then the reminder, here is on the full year guide is to expand AUR modestly.

Speaker Change: For the full year, and then for product cost I'll ask either too.

Eva C. Boratto: Yeah, thanks for the question. I'd say overall AECs were essentially flat in the quarter, as we expected.

Speaker Change: Yeah. Thanks for the question I would say overall auc's were essentially flat in the quarter as weak as we expected.

Donna: Thank you. Are you ready for our next question?

Speaker Change: Thank you ready for our next question.

Donna: Thank you. The next question is coming from Matthew Boss of J.P. Morgan. Please go ahead. Great, thanks. It's Amanda Douglas on for Matt. So Gina, could you elaborate on the drivers of 1Q's net sales outperformance?

Matthew Robert Boss: Thank you. The next question is coming from Matthew Boss of J.P. Morgan. Please go ahead.

Thank you. The next question is coming from Matthew Boss with J P. Morgan. Please go ahead.

Douglas: Great. Thanks, it's a matter of Douglas on for Matt.

Speaker Change: So gena could you elaborate on the drivers of <unk> net sales outperformance versus your initial plan, maybe as we think about by category and just any changes in traffic or consumer behavior as you've progressed into May and then Eva just could you elaborate on that cost savings that you've identified within cost of goods sold.

Speaker Change: To support your improved gross margin outlook on the year.

Unknown Speaker: Okay, that's a three-part question. We'll start with Julie on the category. Yeah.

Julie: Okay. That's a three part question, we'll start with Julie on the category, Yeah, Hi, there. So body care was up low single digits to the prior year and that was really driven by new and growing categories, such as men's and limp along with the performance in fine fragrance mist, including our ever.

Julie B. Rosen: Yeah, hi there. So, body care was up low single digits compared to the prior year, and that was really driven by new and growing categories, such as men's and lip, along with the performance in fine fragrance mist, including our everyday luxuries. Home fragrance was down mid-single digits while growing unit share, and this was really driven by continuing candle normalization. So, candles declined, and that was largely due to the narrowing of the assortment of single-wick candles, which continued to decline, but we did maintain our market leadership. Our decline in candles was consistent with Q4, and we did grow unit share in wallflower.

Julie: De luxury home fragrance was down mid single digits, while growing unit share and this was really driven by a continuing candle normalization. So candles declined and that was largely due to the narrowing of the assortment of the single Wick candle, which continued to decline, but we did maintain our market leadership.

Julie: Our decline in handles was consistent with Q4.

Julie: And we do grow unit share in wall flowers from a soap and sanitizer perspective, the business was down low single digits in line with shop, and soaps actually were slightly above shop and that was driven by the performance of our refills, which make up about less than 10% of our soap business.

Julie B. Rosen: From a soap and sanitizer perspective, the business was down low single digits in line with shop, and soaps actually were slightly above shop. And that was driven by the performance of our refills, which made up about less than 10% of our soap business. And we love our refills. It's a really great environmentally friendly way for our customers to partake in our soap business. And finally, sanitizers declined, and that was really driven by our decision to exit the full-sized form due to continued normalization in the category. Pocket backs really performed quite nicely in the quarter, growing versus the same period last year, and we really innovated here by introducing our moisturizing pocket backs.

Julie: And we love our refills, it's a really great environmentally friendly way for our customers partaken, our soap business and finally sanitizers declined and that was really driven by our decision to exit the full sized form due to continued normalization in the category pocket backs really performed quite nicely in la.

Julie: Quarter growing versus the same period last year, and we really innovated here by introducing our moist driving pocket back.

Unknown Speaker: Great. Thanks, Julie.

Speaker Change: Great. Thanks, Julie I I'll start with your cost savings question and come back to that and come back to the traffic. Overall, we are really pleased with how we're executing on our on the cost side of the equation.

Unknown Speaker: I'll start with your cost savings question and come back to the traffic. Overall, we are really pleased with how we're executing on the cost side of the equation. We've had a 2-year plan to deliver $250 million in annual cost savings, and we're tracking well with the incremental $100 million this year.

Speaker Change: We've had a two year plan to deliver 250 million in annual cost savings and where we're tracking well with the incremental 100 in this year. It is skewed a little more toward gross margin about 60% of the savings that's a little more skewed to gross margin and SG&A than last quarter and the.

Unknown Speaker: It is skewed a little more toward gross margin, about 60% of the savings. That's a little more skewed toward gross margin than SG&A than last quarter. And the key drivers are transportation, sourcing, and the exit of one of our fulfillment centers that's enabling us to be more efficient. The remaining 40% in SG&A is efficiencies in our store operation, home office, and indirect spend. So, again, we're really pleased with the progress that we're making there.

Speaker Change: Key drivers of transportation, So, we're saying exit of one of our fulfillment centers, that's enabling us to be more efficient the remaining 40% in SG&A, it's efficiencies in our store operation home office and indirect spend so again, we're really pleased with the progress that that.

Unknown Speaker: Now, coming back to traffic, overall, traffic was flat for the quarter. As I think we said previously, transactions were up, driven by conversion. While we target an overall Omni experience, I'll say our traffic was a little stronger in stores, and this was largely in the second half of the quarter. So overall, we continued to execute against the business. And as Julie said, the newness really delivered for us in the quarter.

Speaker Change: We're making they're now coming back to traffic overall traffic was flat for the quarter as I think we said previously transactions were up driven driven by conversion.

Speaker Change: While we target an overall omni experience I'll say, our traffic was a little stronger in stores and this was largely in the second half of <unk> of the quarter. So overall, where we continue to execute against the business and as Julie said, the newness really delivered for us in the quarter.

Donna: Thank you. Are you ready for our next question, please? The next question is coming from Lorraine Hutchinson of Bank of America. Please go ahead.

Donna: Thank you. Are you ready for our next question, please? The next question is coming from Lorraine Hutchinson of Bank of America. Please go ahead.

Speaker Change: Thank you ready for our next question. Please.

Speaker Change: The next question is coming from Lorraine Hutchinson of Bank of America. Please go ahead.

Lorraine Corrine Maikis Hutchinson: Thank you good morning, I wanted to dig into the moving pieces behind your outlook on AUR for the back half or are you raising ticket to ensure you're paid for some of the new formulation investments or.

Lorraine Corrine Maikis Hutchinson: Do you plan to give some of that value back to the customer through price or promotion.

Julie B. Rosen: Yeah, hi, Lorraine. I'll take that question. It's Julie.

Julie: Yeah, Hi, Lorraine I'll take that question. It's Julie you know, we really continue to balance the need to keep engagement and traffic strong with our desire to increase our pricing right. So we use our very agile operating model. It really allows us to increase or decrease promotional levels in a meaningful way and test for the you know.

Julie B. Rosen: You know, we really continue to balance the need to keep engagement and traffic strong with our desire to increase our prices, right? So, we use our very agile operating model. It really allows us to increase or decrease promotional levels in a meaningful way and test for the best outcomes. We did not take widespread ticket increases in Q1 of 24, but we are lapping some increases from 23. And we did take selective pricing actions in certain product launches like Bridgerton and Everyday Luxuries due to the elevated packaging and storytelling that came from these forms, where we know we can get the most out of them.

Speaker Change: <unk> outcomes, we did not take widespread chicken increases in Q1 of 'twenty four but we are lapping some increases from 'twenty three and we did take selective pricing actions in certain product launches like Bridger Tien and everyday luxury is due to the elevated packaging and storytelling that came from.

Speaker Change: These forums, where we know we can get paid.

Unknown Speaker: And I'll also add that this is still materially higher from the pre-pandemic period, so our AUR increases relative to 2019 are quite healthy.

Speaker Change: Thank you and I'll also add that this is still materially up from the pre pandemic. So our AUR increases relative to 2019 are quite healthy. So thank you for the question we're ready for our next.

Donna: The next question is coming from Kate McShane of Goldman Sachs. Please go ahead.

Donna: So thank you for the question. We're ready for our next. The next question is coming from Kate McShane of Goldman Sachs. Please go ahead. Hi, good morning. Thanks for taking our question. We wondered if you could comment at all about occasion buying versus impulse buying.

Speaker Change: The next question is coming from Kate Mcshane of Goldman Sachs. Please go ahead.

Katharine Amanda McShane: Hi, good morning, Thanks for taking our question I wondered if you could comment at all about occasion dying versus buying during a more shoulder period, which I think the second quarter is for you just with the events of Easter and mother's day and the like in Q1, they're not quite.

Katharine Amanda McShane: As many occasions in Q2, so could you maybe talk to us a little bit about again, how you view Q2, playing out given that dynamic.

Katharine Amanda McShane: And how we should think about it.

Katharine Amanda McShane: Yeah, hi, Kate. In Q2, actually, we had a great gifting business; our gift sets were up 6% in the quarter. And, you know, for Q2, we have three great gifting periods, right? We have Valentine's Day, we have Easter, and then we have the beginning of Mother's Day. The other big portion, as I think you all know, of Q2 for us is our semiannual sale. So those are the things that really drive our Q2. And we were very pleased with Valentine's Day, Easter, and the beginning of Mother's Day, as I said, with gift sets being up 6%.

Katharine Amanda McShane: Yeah, Hi, Kate you know Q2 actually we had a great gifting business, our gift sets were up 6% in the quarter.

Katharine Amanda McShane: And you know for Q2, we have three great gifting periods right. We have Valentine's day Easter and then we have the beginning of mother's day. The other big portion as I think you all know our Q2 for US is our semiannual sale. So those are the things that really drive our Q2 and we were very.

Katharine Amanda McShane: Pleased with Valentine's day, Easter and the beginning of mother's day as I've said with gifts, that's being up 6%.

Katharine Amanda McShane: Yeah.

Speaker Change: Next question please.

Donna: Next question, please. The next question is coming from Ike Boruchow of Wells Fargo. Please go ahead.

Speaker Change: The next question is coming from Ike Borough child of Wells Fargo. Please go ahead.

Irwin Bernard Boruchow: Hey, thanks, good morning. Eva, I have two for you.

Speaker Change: Okay.

Speaker Change: Thanks, Good morning.

Speaker Change: Two for you again.

Unknown Speaker: Again, I don't mean to beat a dead horse on the AUR, but my question is, which I think has been asked a couple different ways. When you guys gave guidance on the last call, I believe you guided AUR flat, and it came in a touch worse. I know you guys are saying that it improved at the end of the quarter, but it just seems like something wasn't to the degree that you'd hoped it was on the upside.

Speaker Change: Again, I don't mean to beat a dead horse I mean are you are but my question is which I think has been asked a couple of different ways. When you guys gave guidance on the last call I believe you had guided EUR floods.

Speaker Change: Came in a touch worse I know you guys are saying that it improved.

Speaker Change: Exited the quarter, but it just seems like something wasn't to the degree that you'd hoped it wasn't me up side. So just trying to understand if you could parse it out and then a quick follow up on the model Eva another like 200 basis points benefit from the calendar in the first quarter, because you kind of walk us through the next three quarters. So we feel like it's a little walkie, depending on the retailer in terms of like.

Unknown Speaker: So just trying to understand if you could parse that out. And then a quick follow up on the model, Eva. I know there's like 200 basis points benefit from the calendar in the first quarter. Could you kind of walk us through the next three quarters? I feel like it's a little wonky, depending on the retailer in terms of like what benefits to expect, I think, in 2Q and 3Q, and then how big is the headwind coming in the calendar in 4Q. Thanks.

Speaker Change: What benefits do you expect I think in two Q3, Q and how big of a headwind coming into calendar. Unfortunately.

Eva C. Boratto: Yeah, thanks for the question, Ike. I'll start with the second question first on the calendar shift. As we said, the first quarter benefited by 200 basis points. In Q2, there's a negligible calendar impact on us. In Q3, we would expect another positive calendar shift, comparable, I'd say, to the level in Q1. And in the fourth quarter, those benefits would obviously reverse. In terms of the AUR, at the risk of being redundant, right, as we said in our last quarter, we started out soft, and we leveraged AUR, I'll say in the first half of the quarter, to use our Agile Promotion Model to drive traffic and conversion, while also balancing our margin rate.

Speaker Change: Yeah. Thanks for the question I I'll I'll start with your second question first on the calendar shift as as we said first quarter benefited by 200 basis points Q2, there's a negligible calendar impact to us.

Speaker Change: Q3, we would expect another positive calendar shift comparable I say to the level and in Q1 and in the fourth quarter those benefits, obviously what would reverse.

Speaker Change: In terms of in terms of the AUR at the risk of being redundant right. As we said on our last quarter, we started out soft.

Speaker Change: And we leveraged a you are I'll say in the first half of the quarter to use our agile promotion model to drive traffic and conversion, while also balancing our our margin rate.

Eva C. Boratto: And as we progressed through the quarter and our March floor set was strong, we were able to pull back. And that was Gina's comment about exiting the quarter at Flattish. So, again, the AUR, you're right, it is pressured from our guidance. But as we look at the overall quality of our quarter, at the results that we drove, we believe we made the right decisions to drive the business to drive the business forward.

genus: And as we progressed through the quarter and our March floor set was strong we were able to pull back and that was genus comment around exiting the quarter at at flattish. So again, the AUR youre right. It is pressured for from our guidance, but as we look at the overall <unk>.

Speaker Change: <unk> of our corridor at the results that we drove we believe we made the right decisions to drive the business to drive the business forward and I. If I may add we're always doing that up or down and to meet the customer where they're at so I have you know being relatively still new to this model of agility were you.

Unknown Speaker: This is Fallers. And if I may add, we're always doing that up or down to meet the customer where they are. So I have, you know, been relatively still new to this model of agility where you can actually, you know, almost measure the elasticity within weeks.

Speaker Change: You can actually you know almost measure elasticity is within weeks, if we if we guide to flat and we feel the need to use it a promotion as a strategic lever to get that so long as the quality of everything else are intact, including by the way our gross margin we can optimize the topline so I just.

Unknown Speaker: If we guide to flat, and we feel the need to use promotion as a strategic lever to get that, so long as the quality of everything else is intact, including, by the way, our gross margin, we can optimize the top line. So I just want to make sure that we're clear that when we guide to flat, we can sometimes be up, as we were in the fourth quarter, and we can sometimes be down. But the important point is that we're trying to get a good quality view and meet the most customers where they're at. Thank you for the question. We're ready for them.

Speaker Change: To make sure that we're clear that when we guide to flat, we can sometimes be up as we were in the fourth quarter and we can sometimes be down but the important point is that we're trying to get a good quality Ah you know view and meeting the most customers where they're at.

Speaker Change: Thank you for the question, we're ready for our next.

Speaker Change: Yeah.

Donna: Thank you. The next question is coming from Olivia Tong of Raymond James. Please go ahead.

Speaker Change: Thank you. The next question is coming from Olivia Tong of Raymond James. Please go ahead.

Unknown Attendee: Great. Thank you I wanted to better understand a few things one of them being your view on the retail competition and how that might be impacting you. You know, we've obviously heard a lot of comments from Alta some some more in terms of being active.

Olivia Tong Cheang: You know, we've obviously heard a lot of comments from Ulta, some more in terms of the activity in Amazon and off-price within these categories. I know they're not direct competitors, but just thinking through how that may be impacting your business. And then, apologies for another question on AUR, but if you could potentially give us a little bit of color on what you saw in May and then just talk about the second half initiatives that could drive the improvement that you're expecting. Thank you.

Unknown Attendee: Activity at Amazon in off price within these categories I know theyre not direct competitors, but just thinking through how that maybe impacting your business and then I apologize for another question on AUR, but if you could potentially give us a little bit of color on what you saw in may.

Unknown Attendee: And then just talking about the second half initiatives that could drive the improvement that you are expecting thank you.

Julie B. Rosen: Hi there, it's Julie. I'll take the competition question. So, we participate in very attractive market segments, right? Competition is always top of mind for us. We think that they're always right at our doorstep.

Julie: Hi, there, it's Julie I'll take the competition question. So we participate in very attractive market segments right. The competition is always top of mind for US we think that they're always right on our doorstep. It's why we're really focused on offering innovative products that perform.

Julie B. Rosen: It's why we're really focused on offering innovative products that perform well against the high standards of our customers. Innovation is literally our lifeblood. It sets us apart from the competition. We know that they don't stand still, and we work really hard as a team to stay ahead. I would say that two competitive advantages really help us do this. One is our vertically integrated model.

Julie: Well against the highest standards of our customers. So innovation is literally our lifeblood it sets us apart from the competition.

Julie: We know that they don't stand still and we work really hard as a team to stay ahead I would say that two competitive advantages really help us do this one is our vertically integrated model. It really enables us to act with speed, we were able to out react to Bridget into breath best sense best fragrance.

Julie B. Rosen: It really enables us to act with speed. We were able to react to Bridgerton, to the best scents, and the best fragrances, and get back into them. We can do this more quickly than anybody else out there. And a second competitive advantage is our unique immersive selling environment. You know, that can be found in our best in class stores. We are really able to tell compelling stories, which is a competitive advantage for us that you don't see at the Targets or the Altas of the world.

Julie: <unk> got back into them, we can do this more quickly than anybody else out there and the second competitive advantage is our unique immersive selling environment. You know that is found in our best in class stores. We are really able to tell transported stories, which is a competitive advantage for us that you don't see it.

Julie B. Rosen: And as a fragrance-first company, the quality of our fragrances and our work with the top fragrance houses in the world really help us deliver products that our customers need across many different forms, whether it's body wash, a candle, a wallflower, or a lip product. So we have a constant eye on the competition.

Julie: Targets are the authors of the world and as a fragrance first company the quality of our fragrances and our work with the top fragrance houses in the world to really help us to deliver products that our customer needs across many different forms whether it's body wash a candle a wallflower or lip product.

Julie: So we have a constant eye on the competition.

Unknown Speaker: Great, and I'll pick up on your question regarding what we've seen so far in May. The trends that we've seen so far are contemplated in our guidance outlook that we provided today, both sales and AUR. Thank you.

Speaker Change: And I'll pick up on your question regarding what we've seen so far in may the.

Speaker Change: The trends that we've seen so far are contemplated in in our guidance outlook that we provided today, both sales and N E R.

Speaker Change: Thank you really for our next question.

Donna: Thank you. The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead.

Speaker Change: Thank you. The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead.

Dana Lauren Telsey: Good morning. Just one more thing on AUR. As you think about the different categories in merchandise and as we go through the year, are you expecting any differences in how the categories' AURs are as we go from 1Q to 2Q to 3Q to 4Q and what you're seeing? And then on the direct business versus the retail stores business, any difference in pricing that we should be aware of? And then Julie, just in terms of the new categories out there, what are you most excited about as we go through the balance of the year? Given the increased laundry, anything we should be watching for in terms of the new numbers?

Dana Lauren Telsey: Good morning.

Dana Lauren Telsey: Just one more thing on AUR as you think about the different categories of merchandise and as we go through the year.

Dana Lauren Telsey: Are you expecting any differences to how the categories that you are Saar as we go from one two to two two to three two to four two and what you're saying and then on the direct business versus the retail stores business any difference in pricing that we should be aware of and then Julie just in terms of the new categories out there what do you mean.

Speaker Change: Excited about as we go through the balance of the year given the increased laundry anything we should be watching for in terms of the newness. Thank you.

Unknown Speaker: So, I'll start with the AUR category differences, and we will look at it in total. As you know, we do different ticket increases, and then we have promotions throughout the year. So, there are no noticeable or planned differences as we move through the year. There'll be more, you know, surprise and delights, and those would be opportunities for us to, you know, move AUR up in those instances. But in general, we're trying to build really compelling baskets as well with cross-category opportunities.

Speaker Change: So I'll start with the AUR category differences, we we look at it in total as you as you know we do different you know ticket increases and then we have promotions throughout the year. So no noticeable or planned differences as we move through the year there'll be more you know surprise and delights them and those who.

Speaker Change: Would be opportunities for us to you know move move AUR up in those instances, but in general what we're trying to build really compelling baskets as well with cross category opportunities in terms of direct versus stores, we try very hard to be an omnichannel player, meaning no a specific advantage too.

Unknown Speaker: In terms of direct versus stores, we try very hard to be an omni-channel player, meaning no specific advantage to direct or stores, because what we really want to encourage is dual shopping, because those are the most valuable customers that we have. And in terms of excitement about newness, Julie, if you want to comment on that, there's lots to be excited about. Hi Dana, it's nice to hear your voice.

Julie: Direct or stores, because what we really want to Incent is dual shopping because those are the most valuable customers that we have and in terms of excitement about newness I'm Julie if you want to comment on the lots to be excited about.

Julie B. Rosen: There's a lot to be excited about, and me and my team are very pleased with our new adjacencies. So as we look to return to growth, we have four key elements, and they're all important to our strategy. As you heard Gina say, new adjacencies is one of them.

Julie: Hi, Dana it's nice to hear your voice there was a lot to be excited about and me and my team are very pleased with our new Adjacencies are so as we look to return to growth. We have four key elements and they're all important to our strategy you heard Gina say new Adjacencies is wanted.

Julie B. Rosen: So we continue to be excited about men's. It's our fastest growing category in body care. We're really benefiting from the forms we introduced last year in APDO and grooming, as well as newness in the core collection, which is really driving a lot of that growth. And we are seeing a slightly younger customer in men's.

Julie:

Julie: We continue to be excited about men's it's our fastest growing category in body care, we're really benefiting from forms we introduced last year in a P D O and grooming as well as newness in the core collection, which is really driving a lot of that growth and we are seeing a slightly younger customer in mens.

Julie B. Rosen: From a lip perspective, lip sales in stores that have our new lip fixture doubled, and we are on track to really complete that rollout to nearly all North American stores by July. We have a great routine that we're introducing customers to through this fixture. It's a routine of scrub, mask, and tint, and it is responding with customers. And we're seeing a younger customer sort of linger at the fixture and play, and then go and purchase. From a hair perspective, another exciting category; we rolled hair into the full fleet earlier this year, and we're continuing to learn.

Julie: Our lip perspective, so lip sales in stores that have our new led fixture doubled and we are on track to really complete that rollout to nearly all north American stores by July we have a great routine that we're introducing customers to through this fixture it's a routine of.

Julie: Scrub mask and 10th and it is resonating with customers and we're seeing a younger customer.

Julie: Linger out the fixture and play and then go and purchase.

Speaker Change: From her perspective, another exciting category, we rolled her to the full fleet earlier this year.

Speaker Change: And we're continuing to learn we are learning that our core best selling fragrances that we're famous for are really resonating with our customer we continue to test fragrances and will continue to optimize our assortment. We've also seen that 14% of those customers are new to brand and we're very excited because we just.

Julie B. Rosen: We are learning that our core bestselling fragrances that we're famous for are really responding with our customers. We continue to test fragrances, and we'll continue to optimize our assortment. We've also seen that 14% of those customers are new to the brand. And we're very excited because we just launched our travel-size shampoo and conditioner this month. And customers were asking for that because it's a great way for them to gain entry into a new category. And, of course, laundry, which I know is everybody's favorite.

Speaker Change: Launched our travel size shampoo and conditioner this month and customers were asking for that because it's a great way for them to gain trial into a new category and of course laundry, which I know is everybody's favorite we ended Q1 with laundry and about 300 stores and we are thrilled to announce that we will be rolling.

Julie B. Rosen: We ended Q1 with laundry in about 300 stores, and we are thrilled to announce that we will be rolling it out to all US stores by late fall. We've been testing and tinkering with different assortments in different stores to ensure that we continue to optimize and the right size. But just quickly, above and beyond, you know, we have other things that we are delivering that are innovative and new and exciting, besides just the adjacencies.

Speaker Change: It to all U S stores by late fall, we've been testing and tinkering with different assortments in different stores to ensure that we continue to optimize and rightsize.

Speaker Change: But just quickly above and beyond you know we have other things that we are delivering that are innovative and new and exciting. Besides just the adjacencies I'm just for summer you know this last month, we delivered fresh and compelling new sense, we have our new summer low collection were also delivered our <unk>.

Julie B. Rosen: Just for summer, you know, this last month, we delivered fresh and compelling new scents. We have our new summer glow collection. We also delivered our expanded SPF assortment with a higher level of protection, which our customers were asking for, and we're very excited about that. And then we haven't spent a lot of time talking about Bridgerton, but that was very exciting for us as our first partnership with Netflix, and you should expect to see more partnerships as the year progresses.

Speaker Change: S. P S assortment with a higher level of protection, which our customers were asking for and we're very excited about that and then we haven't spent a lot of time talking about Bridger 10, but that was very exciting for us as our first partnership with Netflix.

Julie: And you should expect to see more partnerships as the year progressed, and if I could just add and I know that was quite a bit you can hear the passion and Julie's voice I think what we try to think about and the newness category is it's core and more and we speak about growing the core which these partnerships and collaborations do just that.

Julie B. Rosen: And if I could just add, and I know that was described, but you can hear the passion in Julie's voice. I think what we try to think about in the newness category is its core and more, and we speak about growing the core, which these partnerships and collaborations do just that, and then more on the adjacencies is also critical. Both of these are two of the four levers that we will rely on to inflect the back half of the growth. And so that's why we're so excited about it, because it is truly driving the inflection point at the mid and high points of our growth.

Julie: And then the more on the Adjacencies are is also critical both of these these are two of the four levers, which we will rely on to inflect in the back half of the growth and so we're that's why we're so excited about it because it is truly driving the inflection point at the mid and high point of our guidance.

Donna: Thank you. Next question. Our next question is coming from Joanna Kim of TD Cowan. Please go ahead. Thanks for taking my question. I just wanted to get more color on your expectations.

Speaker Change: Thank you next question.

Donna: Our next question is coming from Joanna Kim of TD Cowan. Please go ahead.

Speaker Change: Our next question is coming from Joanna Kim of TD Cowen. Please go ahead.

Joanna Kim: Thanks for taking my question just wanted to get more color on your expectations for it for home fragrance category and your business in the back half if anything has changed since last quarter. There and also you're increasing marketing spend then talked about full funnel marketing, but how are you measuring ROI.

Joanna Kim: How are you allocating spend across the franchise in the back half. Thank you so much.

Unknown Speaker: Yeah, thanks for the question. I'll start in terms of our overall expectations for the second half of the year. As you look at the guidance that we provided today, our assumptions behind the inflection point and returning to growth in the back half of the year remain consistent; the four elements that we outlined, and you know, they're moderating the normalization of candles and sanitizers, they don't need to return to growth. Growth from our core categories supported by newness and seasonal storytelling, which I think Julie just hit on quite a bit.

Speaker Change: Yeah. Thanks for the question I'll I'll I'll start in terms of our overall expectations for the back half of the year.

Speaker Change: As you look at the guidance that we provided today, our assumptions behind the inflection point in returning to growth in the back half of the year remain consistent the four elements that we outlined and you know, they're moderating normalization of candles and sanitizers, they don't need to rich.

Speaker Change: Turn to growth.

Julie: Growth from our core categories supported by newness and seasonal storytelling, which I think Julie just hit on quite a bit reaching more of our consumers with our adjacencies men's hair lift and laundry and finally driving more loyal and engaged costa.

Unknown Speaker: Reaching more of our consumers with our adjacencies, men's hair, lip, and laundry. And finally, driving more loyal and engaged customers through the marketing investments that we're making and the capabilities, both what we're doing on loyalty as well as personalization and digital experience.

Julie: First through the marketing investments that we're making and the capabilities both what we're doing on loyalty as well as personalization and digital experience.

Unknown Speaker: Yes, and then on the question about marketing spend, which we commented on earlier, and how that is driving customership increases, as well as the, you know, exciting engagement and the deepening of engagement. We are measuring ROI through a number of tools that people often use, which is the marketing mix model, where we can actually attribute a dollar of spend and what that drives to the top line. But we're also using technology as well to, you know, do some targeting and tools.

Speaker Change: Yes, and then on the question about marketing spend which we commented earlier and how that is driving the customer ship increases as well as the you know the exciting engagement and the deepening of engagement. We are measuring ROI through a number of them you know tools that people often use which is the marketing mix model where are we.

Speaker Change: Can actually attribute a dollar spend and what that drives to the top line, but we're also using the technology as well to you know do some targeting tools like for example, we we have a targeted model now that uses machine learning algorithm and it can predict when a one trip customer can make their second part.

Unknown Speaker: For example, we have a targeting model now that uses machine learning algorithms, and it can predict when a one-trip customer can make their second purchase based on purchase behavior, social engagement, and segmentation. And then these customers are then targeted with personalized offers. So there are early innings here and really promising results. So I think of marketing hand-in-glove with technology so that we can actually optimize and get the highest bang for our buck with respect to those investments. So you should expect more of that in the back half. I think we have time for one more question, please.

Speaker Change: Just based on purchase behavior, and the social engagement and the segmentation and then these customers are then targeted with personalized offers so there's early innings here and what really promising results. So I think of marketing hand in glove with technology. So that we can actually optimize and get the highest bang for a buck with respect to those investments.

Speaker Change: So you should expect more of that.

Speaker Change: In the back half I think we have time for one more question. Please.

Donna: Thank you. Our final question today is coming from Corinne Wolfmeyer of Piper Sandler. Please go ahead.

Speaker Change: Thank you. Our final question today is coming from Corinne will fire of Piper Sandler. Please go ahead.

Corinne Wolfmeyer: Hey, good morning, thanks for taking the question. First, could you just clarify the commentary on returning to growth in the back half? I assume that's assuming the high end of your guidance range and how are you thinking about returning to growth from like Q3 and Q4 and kind of like the cadence there? And then separately, on some of the new product launches, could you talk a little bit about now that you have some of the more like loyalty membership data, how much of that new product uptake and sales is coming from customers maybe newer to those products versus customers who are now starting Thanks.

Speaker Change: Hey, good morning, Thanks for taking the question.

Speaker Change: First can you just clarify the commentary on returning to growth in the back half I assume that's assuming the high end of your guidance range and how are you thinking about returning to growth from like Q3, and Q4 and kind of like the cadence there and then separately on some of the new product launches.

Speaker Change: Could you talk a little bit about now that you have some of the more like loyalty member.

Speaker Change: Membership of data how much of that new product uptake in sales is coming from.

Speaker Change: Customers, maybe newer to those products versus customers, who are now starting to replenish those products. Thanks.

Eva C. Boratto: Thanks, this is Eva. Corinne, I'll take the first part, your first question first. Our return to growth is at the mid and the high point and the high end of our guidance on a 52 comparable week basis. And as you look at the cadence Q3, Q4, we would expect to return to growth in Q3.

Eva C. Boratto: Thanks. This is Eva trend I'll take the first part of your first question first or return to growth is at the mid and the high point and at the high end of our guidance on a on a 52 comparable week basis and as you look at the cadence Q3, Q4, we would expect to return to growth in Q in Q3.

Unknown Speaker: Yeah, and as far as customers are concerned with the new categories, you know, from a lip perspective, we're seeing a younger, more diverse customer. And as I mentioned, from a hair perspective, 14% of those customers are new to the brand, as well as men. We're seeing some new customers and slightly younger ones coming to us for men. That being said, as I said in my script, we still think we have a huge opportunity to attract more men to the brand.

Speaker Change: Yeah, and as far as customers are concerned with the new categories. You know from a lift perspective, we're seeing a younger more diverse customer and as I mentioned from a hair perspective are 14% of those customers are new to brand as well as men's we're seeing some.

Speaker Change: New customers and slightly younger coming to us for them and that being said as I said in my script. We still think we have huge opportunity to attract more men to the brands and you see us investing in more marketing and in more media to attract them.

Unknown Speaker: And you see us investing in more marketing and more media to attract them. And I'll also add that in the first quarter, you know, 43% of loyalty enrollees were new customers. And so getting them in the program, getting them the kind of offers to really take up the entire portfolio. There's so much data capture where we can use clickstream data to really recommend products and things like that. So we expect new customers, existing customers, and reactivated customers alike to really benefit from the loyalty program.

Speaker Change: I'll also add that in the first quarter you know the the 43% of loyalty enrollees were new customers and so getting them in the program getting them the kind of offers to really.

Speaker Change: Take the entire portfolio there. There's so much data capture where we can use clickstream data to to really recommend products and things like that so we expect new customers, our existing customers and reactivated customers like to really benefit from the loyalty program.

Speaker Change: Thank you.

Mike Mcguire: Thank you. At this time, I would like to turn the floor back over to Mr. McGuire for closing comments.

Speaker Change: Thank you at this time I would like to turn the floor back over to Mr. Maguire for closing comments.

Donna: Thank you, Dana. A replay of this call will be available for 90 days on our website. Thank you for joining us today, and, of course, thank you for your interest in Bath & Body Works. Have a good day.

Donna: Thank you Donna.

Unknown Attendee: This call will be available for 90 days on our website. Thank you for joining today and of course. Thank you for your interest in Bath <unk> body works. So have a good day. Thank you.

Donna: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Speaker Change: Ladies and gentlemen. This concludes today's event you may disconnect your lines and block off the webcast at this time and enjoy the rest of your day.

Speaker Change: Mhm.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Mhm.

Speaker Change: Mhm mhm.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Mhm.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Mhm.