Q1 2024 Vince Holding Corp Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the Vince Basketball top 2020 bolt on its conference call. All lines have been placed on mute during the presentation portion of the call, but there's an opportunity for a question and answer the end if.

Unknown Attendee: Ladies and gentlemen, thank you for standing by.

Unknown Attendee: Welcome to the Vince 1st quarter of 2024 and in conference call. All lines have been placed on mute during a presentation portion of the call. With an opportunity for question and answer at the end. If you would like to ask a question, please press Start. That's my one on your telephone keypad.

Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.

Akiko Okuma: I would now like to hand the conference call over to our host, Akiko Okuma.

Operator: I would now like to hand the conference call over to our host, Akiko Okuma. Please go ahead. Thank you, and good morning everyone.

Marc: I would now like to hand, the conference call I bought two our highest akiko acute Marc. Please go ahead. Thank you and good morning, everyone. Welcome to Vince holding Corp, first quarter fiscal 2024 results conference call.

Unknown Attendee: Please go ahead.

David Stefko: Thank you and good morning, everyone. Welcome to Vince Holding Court 1st quarter of fiscal 2024 results conference call. Posting the call today is Dave Stefko, interim Chief Executive Officer, and John Szczepanski, Chief Financial Officer.

Unknown Executive: Welcome to Vince Holding Corp.'s first quarter fiscal 2024 results conference call. Hosting the call today are Dave Stefko, Interim Chief Executive Officer, and John Szczepanski, Chief Financial Officer. Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those that the company expects. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website.

John Szczepanski: The call today is based on interim Chief Executive Officer, and John's Iwanski, Chief Financial Officer before we begin let me remind you that certain statements made on this call may constitute forward looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that the.

David Stefko: Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that the company expects. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website. Investors should not assume that statements made during the call will remain operative at a later time, and the company undertakes no obligations to update any information discussed on the call.

John Szczepanski: Company expects those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website.

Unknown Executive: Investors should not assume that statements made during the call will remain operative at a later time, and the company undertakes no obligation to update any information discussed on the call. In addition, in today's discussion, the company is presenting its financial results in conformity with GAAP and on an adjusted date. The adjusted results that the company presents today are non-GAAP ledger. Discussions of these non-GAAP measures and information on reconciliations of them to their most comparable GAAP measures are included in today's press release and related schedules, which are available in the Investors section of the company's website at investors.biz.com. Now, I'll turn the call over to David.

Speaker Change: Busters should not assume that statements made during the call will remain operative at a later time and the company undertakes no obligation to update any information discussed on the call.

David Stefko: In addition, in today's discussion, the company is presenting its financial results and includes already with GAAP and on an adjusted basis. Adjusted results that the company presents today are non-GAAP measures. Discussions of these non-GAAP measures and information on reconciliation system to their most comparable GAAP measures are included in today's press release and related schedules, which are available in the investor section of the company's website at investors.

In addition in todays discussion the company is presenting its financial results includes already with GAAP and on an adjusted basis.

Speaker Change: The results that the company presents today are non-GAAP measures discussions of these non-GAAP measures and the information and reconciliations of them to their most comparable GAAP measures are included in today's press release and related schedules, which are available in the investors section of the company's website investors Bestbuy com.

Unknown Attendee: Vince.com.

David Stefko: Now I'll turn the call over to Dave. Thank you, Akiko, and thank you from our first quarter performance before you turn the call over to John to discuss our financial results and outlook in more detail. Our first quarter sales results were in line with the high end of our expectations when we delivered better than expected adjusted operating margin performance as we continued to drive gross margin expansion and maintain strong expense disciplines. Our results also reflect our strategic actions focused on driving improved full price performance as we continue to pull back in our off-priced business and our wholesale channel, as well as the reduced promotional activity in our direct to consumer channel.

Speaker Change: Now I'll turn the call over to Dave.

Dave: Thank you Keith so thank you everyone for joining us this morning.

David Stefko: Thank you, Kiko, and thank you, everyone, for joining us this morning. I will begin with a review of highlights from our first quarter performance before turning the call over to John to discuss our financial results and outlook in more detail. Our first quarter sales results were in line with the high end of our expectations, while we delivered better than expected adjusted operating margin performance as we continued to drive gross margin expansion and maintain strong expense discipline.

Dave: I'll begin with a review of highlights from our first quarter performance before turning the call over to John to discuss our financial results and outlook in more detail.

John: Our first quarter sales results were in line with the high end of our expectations, while we delivered better than expected adjusted operating margin performance as we continued to drive gross margin expansion and maintain strong expense disciplines.

David Stefko: Our results also reflect our strategic actions focused on driving improved full-price performance as we continue to pull back on our off-price business in our wholesale channel, as well as reduce promotional activity in our direct-to-consumer channel. In addition, we are continuing to see strong customer reception for our assortments, focused on luxurious contemporary wardrobe staples. Customers continue to gravitate toward our timeless casual pieces that can be styled up or down depending on the occasion.

John: Our results also reflect our strategic actions focused on driving improved full price performance as we continued to pull back in our off price business in our wholesale channel as well as to reduce promotional activity in our direct to consumer channel.

David Stefko: In addition to these actions, we are continuing to see strong customer reception to our sortments focused on luxurious contemporary wardrobe staples. Customers continue to gravitate for our timeless casual pieces that can be styled up or down depending on the occasion. During the quarter in women's, we saw strong customer reception in our midst and casual dresses, and in men's, he responded well to our linen fabrications in both tops and bottoms. Our direct to consumer channel, excluding the impact from store closures, slightly outperformed our wholesale channel. As mentioned, we continue to pull back our promotional activity across e-commerce and our stores, enabling a stronger full-price business and healthier customer file.

Speaker Change: In addition to these actions we are continuing to see strong customer reception to our assortments focused on luxurious contemporary wardrobe staples.

Speaker Change: Customers continue to gravitate toward our time was casual pieces that can be scaled up or down depending on the occasion.

Speaker Change: During the quarter in women's we saw strong customer reception and our niche and casual dresses.

Speaker Change: Any man he responded well to our London fabrications in both tops and bottoms.

David Stefko: During the quarter, in women's, we saw strong customer reception for our mitts and casual dresses, and in men's, he responded well to our linen fabrications in both tops and bottoms. Our direct-to-consumer channel, excluding the impact from store closures, slightly outperformed our wholesale. As mentioned, we continue to pull back our promotional activity across e-commerce and our stores, enabling a stronger full- In the quarter, we delivered a mid-single-digit increase in our full-price customer segment.

Speaker Change: Our direct to consumer channel, excluding the impact from store closures slightly outperformed our wholesale channel.

Speaker Change: As mentioned, we continue to pull back on promotional activity across e-commerce, and our stores, enabling a stronger full price business and healthier customer file in the quarter. We delivered a mid single digit increase in our full price customer segment and while this did not offset the impact of the lower promotional activity.

David Stefko: In the quarter, we delivered a mid single digit increase in our full price customer segment, and while this did not offset the impact of the lower promotional activity, it is yet another data point that has given us further confidence in our plans and expectations as we looked ahead. In wholesale, we have also continued to strengthen our partnerships. During the quarter, we continue to be a top brand for many of our key partners. In Nordstrom's latest earnings call, they noted that we were among their top contemporary brands in fiscal Q1. As we announced on our last earnings call, we are looking forward to expanding our men's presence across all Nordstrom stores in time for this year's Anniversary Sale.

David Stefko: And while this did not offset the impact of the lower promotional activity, it is yet another data point that has given us further confidence in our plans and expectations as we look ahead. In Wholesale, we have also continued to strengthen our partnership. During the quarter, we continue to be a top brand for many of our key partners; in Nordstrom's latest earnings call, they noted that we were among their top contemporary brands in fiscal Q1.

Speaker Change: It is yet another data point that has given us further confidence in our plans and expectations as we look ahead.

Speaker Change: In wholesale we have also continued to strengthen our partnerships.

Speaker Change: During the quarter, we continued to be a top brand for many of our key partners.

Speaker Change: In March <unk> latest earnings call. They noted that we were among their top contemporary brands in fiscal Q1.

Speaker Change: As we announced on our last earnings call. We are looking forward to expanding our men's presence across all Nordstrom stores in time for this year's anniversary sale.

David Stefko: As we announced on our last earnings call, we are looking forward to expanding our men's presence across all Nordstrom stores in time for this year's anniversary sale. This development is an important milestone as we continue to expand our men's business across our channels. We remain on track with expanding men's to 30% of total revenues over the next three years, while also growing our women's business. We are excited about the progress we're making on this growth initiative and look to build on the momentum we are driving, especially following the strong reception we saw in the 2025 pre-spring market this past month.

David Stefko: This development is an important milestone as we continue to expand our men's business across our channels. We remain on track with expanding men's to 30% of total revenues over the next three years while also growing our women's business. We are excited about the progress we were making on this growth initiative and look to build on the momentum we are driving, especially following the strong reception we saw in the 2025 pre-spring market this past month. In addition to expanding our men's business, we are also continuing to enhance our customer acquisition efforts. Being in a cost management position over the last few years, we did not make investments in brand awareness or top-of-funnel marketing strategies.

Speaker Change: This development is an important milestone as we continue to expand our men's business across our channels.

Speaker Change: We remain on track with expanding mentioned of 30% of total revenues over the next three years, while also growing our windows business.

Speaker Change: We are excited about the progress we're making on this growth initiative and look to build on the momentum we are driving especially following the strong reception. We saw in the 2025 pre spring market. This past month.

Speaker Change: In addition to expanding our men's business. We're also continuing to enhance our customer acquisition efforts.

David Stefko: In addition to expanding our men's business, we're also continuing to enhance our customer acquisition efforts. Being in a cost management position over the last few years, we did not make investments in brand awareness or top of the funnel marketing strategies.

Speaker Change: Being in a cost management position over the last few years, we did not make investments in brand awareness or top of funnel marketing strategies.

David Stefko: While we are continuing to maintain strong expense disciplines, we are beginning to re-engage and driving brand awareness and enhancing our marketing efforts to track new customers and build increased loyalty with existing customers. During the spring, Culture Magazine, which targets a very affluent subscriber base, well-balanced between men and women with focused distribution and key markets for us, including New York, LA, and Miami, published an article featuring our Chief Creative Officer, Caroline Bowser. In celebration of this publication, we hosted a dinner at the end of May in LA with approximately 100 culture subscribers. By hosting this event, we introduced Vince to potential new customers in our organic fashion and expanded our brand awareness in an important market.

David Stefko: While we are continuing to maintain strong expense discipline, we are beginning to re-engage in driving brand awareness and enhancing our marketing efforts to attract new customers and build increased loyalty with existing customers. During the spring, Culture Magazine, which targets a very affluent subscriber base, well-balanced between men and women, with focused distribution in key markets for us, including New York, L.A., and Miami, published an article featuring our chief creative officer, Caroline Bowser.

Speaker Change: While we are continuing to maintain strong expense disciplines.

Speaker Change: Beginning to Reengage, and driving brand awareness and enhancing our marketing efforts to attract new customers and build increased loyalty with existing customers.

Speaker Change: During the spring culture magazine, which targets a very affluent subscriber base well balanced between men and women with focused distribution in key markets for us, including in New York, La and Miami published an article featuring our Chief Creative Officer.

David Stefko: In celebration of this publication, we hosted a dinner at the end of May in L.A. with approximately 100 cultured subscribers. By hosting this event, we introduced Vince to potential new customers in an organic fashion and expanded our brand awareness in an important way. In addition to these types of events, we're also looking to leverage our customer data platform to enhance customer engagement and drive further loyalty with top customers. Our store associates are continuing to leverage the database to engage with past customers and drive reactivation efforts for those customers that have not shopped with us in the past 12 months. Our top customers, who represent about 10% of our customer base and drive approximately 35% of demand across a full price direct consumer business, drive approximately

Speaker Change: Airline Belgium.

Speaker Change: In celebration of this publication, we hosted a dinner at the end of May in L. A with approximately 100 cultured subscribers.

Speaker Change: Hosting this event, we introduced Vince to potential new customers and are in an organic fashion and expanded our brand awareness.

Speaker Change: <unk> market.

David Stefko: In addition to these types of events, we are also looking to leverage our customer data platform to enhance customer engagement and drive further loyalty with top customers. Our store associates are continuing to leverage the database to engage with past customers and drive reactivation efforts for those customers that have not shopped with us in the past 12 months. For our top customers who represent about 10% of our customer base and drive approximately 35% of demand across a full-price direct consumer business, where evaluating strategies and identifying opportunities aimed at increasing customer lifetime value through driving higher average order value and purchase frequency.

Speaker Change: In addition to these types of events. We're also looking to leverage our customer data platform to enhance customer engagement and drive for their loyalty with top customers.

Speaker Change: Our store associates are continuing to leverage the database to engage with past customers and drive reactivation efforts for those customers that have not shopped with us in the past 12 months.

Speaker Change: For our top customers, who represent about 10% of our customer base and drive approximately 35% of demand across our full priced direct to consumer business, we are evaluating strategies and identifying opportunities aimed at increasing customer lifetime value.

David Stefko: We're evaluating strategies and identifying opportunities aimed at increasing customer lifetime value through driving higher average order values and purchase frequency. We look forward to sharing more on these plans later this year, along with our growth initiatives. We also plan to benefit from our partnership with Authentic Brands and our ownership stake in ABG Ventures. As a reminder, ABG Vince owns the Vince brand IP, and as it enters into new licensing agreements for the Vince IP, we, in turn, benefit from the growth of ABG Vince.

Speaker Change: Through driving higher average order value and purchase frequency.

David Stefko: We look forward to sharing more on these plans later this year. Along with our growth initiatives, we also plan to benefit from our partnership with authentic brands and our ownership stake in ABG Vince. As a reminder, ABG Vince owns the event brand IP, and as it enters into new licensing agreements for the Vince IP, we in turn benefit from the growth in ABG Vince. We are looking forward to the perilous launch of the Vince Taylor clothing line later this year, and we are excited for the recent announcement that Centric Brands will be producing a collection of handbags, belts, and small leather goods under the Vince label beginning in 2025.

Speaker Change: We look forward to sharing more on these plans later this year.

Speaker Change: Along with our growth initiatives.

Speaker Change: We also plan to benefit from our partnership with authentic brands and our ownership stake and AVG events.

Speaker Change: As a reminder, <unk> events owns the Vince brand IP and as it enters into new licensing agreements with Vince IP, we in turn benefit from the growth and AVG events.

Speaker Change: We're looking forward to Peerless is launch of da Vinci tailored clothing line later this year.

David Stefko: We're looking forward to Peerless's launch of the Vince Taylor clothing line later this year. And we're excited about the recent announcement that Centric Brands will be producing a collection of handbags, belts, and small leather goods under the Vince label beginning in 2025.

Speaker Change: We are excited for the recent announcement that centric brands will be producing a collection of handbags belts and small leather goods under the Vince label beginning in 2025.

David Stefko: We believe the earnings received from our ownership in the growing ABG Vince subsidiary, along with our transformation plan, will more than offset the royalty expenses we now incur. Our transformation plan, which is targeting over 30 million in savings over three years, remains on track. We are very pleased with the initial progress we are making, which is materializing our results thus far and reflected in our outlook as well. As we look ahead, we remain confident that the actions we have taken to date are positioning us well to deliver on our objectives. We are carefully investing to support the growth we see will maintain strong expense and inventory management disciplines.

We believe the earnings received from our ownership in the growing AVG and subsidiary along with our transformation plan will more than offset the royalty expenses, we now incur.

David Stefko: We believe the earnings received from our ownership in the growing ABG Vince subsidiary, along with our transformation plan, will more than offset the royalty expenses we now incur. Our transformation plan, which is targeting over $30 million in savings over three years, remains on track. We are very pleased with the initial progress we are making, which is reflected in our results thus far and reflected in our outlook as well. As we look ahead, we remain confident that the actions we have taken to date are positioning us well to deliver on our objectives.

Speaker Change: Our transformation plan, which is targeting over $30 million in savings over three years remains on track.

Speaker Change: We're very pleased with the initial progress we are making which is materializing in our results, thus far and reflected in our outlook as well.

Speaker Change: As we look ahead, we remain confident that the actions we have taken to date are positioning us well to deliver on our objectives.

David Stefko: We are carefully investing to support the growth we see while maintaining strong expense and inventory management discipline. We're focused on continuing to drive improved customer engagement and foster our relationships with our loyal top customers, which we believe will continue to yield results. And we have a strong wholesale order book in place for the remainder of the year. In closing, we're making significant progress in executing our objectives and remain focused on driving long-term profitable growth.

Speaker Change: We are carefully investing to support the growth, we see while maintaining strong expense and inventory management disciplines.

David Stefko: We are focused on continuing to drive improved customer engagement and foster our relationships with our loyal top customers, which we believe will continue to yield results. And we have a strong wholesale order book in place for the remainder of the year. In closing, we are making significant progress in executing our objectives and remain focused on driving long-term profitable growth. I want to thank all of our teams for their talent, hard work, and dedication as we continue to deliver on our goals.

Speaker Change: We're focused on continuing to drive improved customer engagement and foster our relationships with our loyal customers, which we believe will continue to yield results and we have a strong wholesale order book in place for the remainder of the year.

Speaker Change: In closing, we are making significant progress in executing our objectives and remain focused on driving long term profitable growth.

David Stefko: I want to thank all of our teams for their talent, hard work, and dedication as we continue to deliver on our goals. I'll now turn it over to John to discuss our financial results and outlook in more detail.

Speaker Change: I want to thank all of our teams for their talent hard work and dedication as we continue to deliver on our goals.

John Szczepanski: I will now turn it over to John to discuss our financial results and outlook in more detail.

Speaker Change: I'll now turn it over to John to discuss our financial results and outlook in more detail.

John Szczepanski: John? Thank you, Dave, and good morning, everyone. As Dave discussed, we are pleased to have delivered first quarter revenue in line with the high end of our guidance, along with better than expected adjusted operating margin. As we continue to execute and improve full price business, manage expenses with discipline, and deliver on our transformation plan objectives.

Speaker Change: John.

John: Thank you, Dave and good morning, everyone.

John Szczepanski: Thank you, Dave, and good morning, everyone. As Dave discussed, we are pleased to have delivered first quarter revenue in line with the high end of our guidance, along with better than expected adjusted operating margin as we continue to execute an improved full price business, manage expenses with discipline, and deliver on our transformation plan objectives. Turning now to our results in more detail, total company net sales for the first quarter decreased 7.6% to $59.2 million compared to $64.1 million in the first quarter of fiscal 2023, which included $0.1 million in Rebecca Taylor and Parker Segment sales, which have been wound down.

As Dave discussed we are pleased to have delivered first quarter revenue in line with the high end of our guidance along with better than expected adjusted operating margin as we continue to execute and improved full price business.

John: Manage expenses with discipline and deliver on our transformation plan objectives.

John Szczepanski: Turning now to our results in more detail. Total company net sales for the first quarter decreased 7.6% to $59.2 million compared to $64.1 million in the first quarter of fiscal 2023, which included $0.1 million in Rebecca Taylor and Parker segment sales, which has been wound down. The year-over-year decline in total company net sales was driven by the 7.5% decline in Vince Brand sales due to year-over-year declines in both our wholesale and direct to consumer segments as we continue to pull back in our off-priced business within our wholesale channel, as well as on promotions in the direct to consumer segment.

John: Turning now to our results in more detail.

John Szczepanski: The year-over-year decline in total company net sales was driven by the 7.5% decline in Vince brand sales due to year-over-year declines in both our wholesale and direct-to-consumer segments as we continued to pull back on our off-price business within our wholesale channel as well as on promotions in the direct-to-consumer segment. In addition, our direct-to-consumer segment was impacted by the closure of three full-price and two outlet stores, as well as the temporary closure of one of our full-price stores due to renovations.

Speaker Change: Total company net sales for the first quarter decreased seven 6% to $59 2 million compared to $64 1 million in the first quarter of fiscal 2023.

Speaker Change: Which included zero point $1 million, and Rebecca Taylor and Parker segment sales, which has been wound down.

Speaker Change: The year over year decline in total company net sales was driven by the seven 5% decline in Vince brand sales due to year over year declines in both our wholesale and direct to consumer segments. As we continue to pull back in our off price business within our wholesale channel as well.

As on promotions in the direct to consumer segment.

John Szczepanski: In addition, our direct to consumer segment was impacted by the closure of three full-price and two outlet stores, as well as the temporary closure of one of our full-price stores due to renovations. The impact from these closures resulted in approximately half of the decline we experienced in the direct-to-consumer channel.

Speaker Change: In addition, our direct to consumer segment was impacted by the closure of three full price and two outlet stores as well as the temporary closure of one of our full price stores due to renovations.

Speaker Change: The impact from these closures, resulting in approximately half of the decline we experienced in the direct to consumer channel.

John Szczepanski: The impact from these closures resulted in approximately half of the decline we experienced in the direct-to-consumer channel, excluding the impact from store closures. We continue to see stores outperform e-commerce and attribute some of this to a greater impact from the pullback in promotions on the online business compared to stores.

Speaker Change: Excluding the impact from store closures we.

John Szczepanski: Excluding the impact with store closures. We continue to see stores outperform e-commerce and attribute some of this to a greater impact from the pullback and promotions on the online business compared to stores. As Dave noted, we are pleased with the full price business we are driving, as reflected in our customer file as well as sales mix. In the quarter, full price sales penetration increased almost 500 basis points compared to the prior year. Gross profit in the first quarter was $29.9 million, or 50.6% of net sales. This compares to $29.6 million or 46.2% of net sales in the first quarter of last year.

Speaker Change: We continue to see stores outperformed e-commerce and attribute some of this to a greater impact from the pullback in promotions on the online business compared to stores.

Speaker Change: As Dave noted we are pleased with the full price business, we are driving as reflected in our customer file as well as sales mix.

John Szczepanski: As Dave noted, we are pleased with the full price business we are driving, as reflected in our customer file, as well as in the sales mix. In the quarter, full price sales penetration increased almost 500 basis points compared to the prior year. Gross profit in the first quarter was $29.9 million, or 50.6% of net sales. This compares to $29.6 million, or 46.2% of net sales, in the first quarter of last year. The increase in gross margin rate was driven by approximately 770 basis points related to lower promotional activity and lower discounting and approximately 240 basis points related to lower product costing and freight costs, driven in part by actions related to our transformation plan. These factors were partially offset by 460 basis points of royalty expenses associated with a licensing agreement with Authentic Brands Group.

Speaker Change: In the quarter full price sales penetration increased almost 500 basis points compared to the prior year.

Speaker Change: Gross profit in the first quarter was $29 9 million or 56% of net sales.

Speaker Change: This compares to $29 6 million or <unk> 46, 2% of net sales in the first quarter of last year.

John Szczepanski: The increase in gross margin rate was driven by approximately 770 basis points related to lower promotional activity and lower discounting, and approximately 240 basis points related to lower product costing and freight cost driven in part by actions related to our transformation plan. These factors were partially offset by 460 basis points of royalty expenses associated with the licensing agreement with Authentic Brands Group. Filling general and administrative expenses in the quarter were $31.9 million or 54% of net sales, as compared to $32.7 million or 51.1% of net sales in the first quarter of last year. The decrease in SG&A dollars was primarily driven by expense favorability compared to last year, given the transaction-related expenses associated with the Authentic transaction and was partially offset by an increase in rent and occupancy costs due to lease adjustments in the prior year, as well as increased short-term incentive compensation and benefits.

Speaker Change: The increase in gross margin rate was driven by approximately 770 basis points related to lower promotional activity and lower discounting and.

Speaker Change: And approximately 240 basis points related to lower product costing and freight costs driven in part by actions related to our transformation plan.

Speaker Change: These factors were partially offset by 460 basis points of royalty expenses associated with the licensing agreement with authentic brands group.

Speaker Change: Yeah.

John Szczepanski: Selling general and administrative expenses in the quarter were $31.9 million, or 54% of net sales, as compared to $32.7 million, or 51.1% of net sales, in the first quarter of last year. The decrease in SG&A dollars was primarily driven by expense favorableness compared to last year, given the transaction-related expenses associated with the authentic transaction, and was partially offset by an increase in rent and occupancy costs due to lease adjustments in the prior year, as well as increased short-term incentive, compensation, and benefits.

Selling general and administrative expenses in the quarter were $31 9 million or 54% of net sales.

Speaker Change: As compared to $32 7 million or 51, 1% of net sales in the first quarter of last year.

Speaker Change: The decrease in SG&A dollars was primarily driven by expense favorability compared to last year, given the transaction related expenses associated with the authentic transaction and was partially.

Speaker Change: Offset by an increase in rent and occupancy costs due to lease adjustments in the prior year as.

Speaker Change: As well as increased short term incentive compensation and benefits.

John Szczepanski: Operating income for the first quarter was $5.6 million compared to an operating loss of $2.4 million in the same period last year.

Speaker Change: Operating income for the first quarter was $5 $6 million compared to an operating loss of $2 4 million in the same period last year.

John Szczepanski: Operating income for the first quarter was $5.6 million, compared to an operating loss of $2.4 million in the same period last year. Following the completion of the winding down of the Rebecca Taylor business in fiscal 2023. In the first quarter, we completed a nominal sale of all outstanding shares of the Rebecca Taylor entity, which resulted in a one-time gain of $7.6 million realized from the release of liabilities on our balance sheet.

Speaker Change: Following the completion of the wind down of the Rebecca Taylor business in fiscal 2023.

John Szczepanski: Following the completion of the wind down of the Rebecca Taylor business in fiscal 2023, in the first quarter we completed a nominal sale of all outstanding shares of Rebecca Taylor Entity, which resulted in a one-time gain of $7.6 million realized from the release of liabilities on our balance sheet. Excluding this one-time item, adjusted loss from operations in the first quarter of fiscal 2024 was $2 million compared to $0.3 million in the prior year, which excluded the impact from transaction-related expenses and the Parker IP tail gain. Adjusted operating margin declined approximately 300 basis points compared to the prior year, driven primarily by the wind down of the Rebecca Taylor business, which delivered income from operations of $1.2 million in the first quarter of fiscal 2023, as well as the lease adjustments in the prior year period.

Speaker Change: In the first quarter, we completed a nominal sale of all outstanding shares of Rebecca Taylor entity.

It resulted in a onetime gain of $7 $6 million.

Speaker Change: Realized from the release of liabilities on our balance sheet.

John Szczepanski: Excluding this one-time item, adjusted loss from operations in the first quarter of fiscal 2024 was $2 million compared to $0.3 million in the prior year, which excluded the impact of transaction-related expenses and the Parker IP sale gain. Adjusted operating margin declined approximately 300 basis points compared to the prior year, driven primarily by the wind-down of the Rebecca Taylor business, which delivered income from operations of $1.2 million in the first quarter of fiscal 2023, as well as lease adjustments in the prior year period.

Speaker Change: Excluding this onetime item.

Speaker Change: <unk> loss from operations in the first quarter of fiscal 2024 was $2 million compared to zero point $3 million in the prior year, which excluded the impact from transaction related expenses and the Parker IP sale gain.

Speaker Change: Adjusted operating margin declined approximately 300 basis points compared to the prior year.

Speaker Change: Driven primarily by the wind down of the Rebecca Taylor business, which delivered income from operations of $1 $2 million in the first quarter of fiscal 2023.

Speaker Change: As well as the lease adjustments in the prior year period.

John Szczepanski: This performance exceeded our expectations as we diligently managed expenses during the period.

Speaker Change: This performance exceeded our expectations as we diligently managed expenses during the period.

John Szczepanski: This performance exceeded our expectations as we diligently managed expenses during the period. Net interest expense for the first quarter decreased to $1.7 million compared to $3.3 million in the prior year. The decrease was driven by the year-over-year reduction in debt given the previously announced refinancing actions we took last year. Income tax expense for the first quarter was $0.9 million, primarily driven by $1.7 million of discreet tax benefit, primarily recognized from the reversal of a portion of the non-cash deferred tax liability related to the equity method investment.

John Szczepanski: Net interest expense for the first quarter decreased to 1.7 million dollars compared to 3.3 million dollars in the prior year. The decrease was driven by the year-over-year reduction in debt, given the previously announced refinancing actions we took last year. Income tax expense for the first quarter was 0.9 million dollars, primarily driven by 1.7 million dollars of discrete tax benefit, primarily recognized from the reversal of a portion of the non-cash-deferred tax liability related to the equity method investment. This was offset by tax expense of 0.8 million dollars due to the impact of applying the estimated effective tax rate for the fiscal year to the three-month pre-tax loss, excluding discrete items, which we detailed in today's press release.

Speaker Change: Net interest expense for the first quarter decreased to $1 7 million compared.

Speaker Change: Compared to $3 3 million in the prior year.

Speaker Change: The decrease was driven by the year over year reduction in debt given the previously announced refinancing actions we took last year.

Speaker Change: Income tax expense for the first quarter was <unk> $9 million primarily.

Speaker Change: Primarily driven by $1 $7 million of discreet tax benefit primarily recognized from the reversal of a portion of the noncash deferred tax liability related to the equity method investment.

Speaker Change: This was offset by tax expenses zero point $8 million due.

John Szczepanski: This was offset by tax expense of $0.8 million due to the impact of applying the estimated effective tax rate for the fiscal year to the three-month pre-tax loss excluding discreet items, which we detailed in today's press release. The tax expense in the first quarter of fiscal 2024 compares to an income tax expense of $5.3 million in the same period last year.

Speaker Change: Due to the impact of applying the estimated effective tax rate for the fiscal year to the three months pre tax loss, excluding discrete items, which we detailed in today's press release.

John Szczepanski: The tax expense in the first quarter of fiscal 2024 compares to an income tax expense of 5.3 million dollars in the same period last year. Net income for the first quarter was 4.4 million dollars or an earnings per share of 35 cents, compared to a net loss of 0.4 million dollars or a loss per share of 3 cents in the first quarter last year. Adjusted net loss, which excludes the one-time items previously reviewed, was 3.3 million dollars or 26 cents per share in the first quarter of fiscal 2024 compared to adjusted net loss of 4.4 million dollars or 36 cents per share.

Speaker Change: The tax expense in the first quarter of fiscal 2024 compares to an income tax expense of $5 3 million in the same period last year.

Speaker Change: Net income for the first quarter was $4 4 million.

John Szczepanski: Net income for the first quarter was $4.4 million, or an earnings per share of $0.35, compared to a net loss of $0.4 million, or a loss per share of $0.03, in the first quarter last year. Adjusted net loss, which excludes the one-time items previously reviewed, was $3.3 million, or $0.26 per share in the first quarter of fiscal 2024, compared to an adjusted net loss of $4.4 million, or $0.36 Moving to the balance sheet, net inventory was $56.7 million at the end of the first quarter, as compared to $80 million at the end of the first quarter last year.

Or an earnings per share of <unk> 35.

Speaker Change: Compared to a net loss of <unk> 4 million or a loss per share of <unk> in the first quarter last year.

Speaker Change: Adjusted net loss, which excludes the onetime items previously reviewed was $3 $3 million or <unk> 26 per share in the first quarter of fiscal 2024 compared to adjusted net loss of $4 4 million or <unk> 36 per share.

John Szczepanski: Moving to the balance sheet, net inventory was 56.7 million dollars at the end of the first quarter, as compared to 80 million dollars at the end of the first quarter last year. The year-over-year decrease in inventory was primarily driven by our disciplined approach as we invest back into inventory to help support the growth we see, especially in the back half of the year with our key selling season.

Speaker Change: Moving to the balance sheet.

Speaker Change: Net inventory was $56 $7 million at the end of the first quarter as compared to $80 million at the end of the first quarter last year.

John Szczepanski: The year-over-year decrease in inventory was primarily driven by our disciplined approach as we invest back into inventory to help support the growth we see, especially in the back half of the year, during our key selling seasons. We continue to expect inventory for fiscal 2024 to be relatively flat to fiscal 2023. Turning now to our Outlook. For Q2 fiscal 2024, we expect total net sales to be relatively flat to down low single digits compared to the prior year period, as we better match supply with demand in our wholesale business, with a more normalized penetration of off price following the pullback in that business over the past year.

Speaker Change: The year over year decrease in inventory was primarily driven by our disciplined approach as we invest back into inventory to help support the growth, we see especially in the back half of the year with our key selling season.

John Szczepanski: We continue to expect inventory for fiscal 2024 to be relatively flat to fiscal 2023.

Speaker Change: We continue to expect inventory for fiscal 2024 to be relatively flat to fiscal 2023.

Speaker Change: Okay.

John Szczepanski: Turning now to our outlook. For Q2 fiscal 2024, we expect total net sales to be relatively flat to down low single digits to the prior year period as we better match supply with demand in our wholesale business with a more normalized penetration of off-price following the pull back in that business over the past year. In addition, with respect to our DTC channel, we are seeing some deceleration across online and stores as we continue to pull back in our promotional activity. As we have said, while these actions have near-term impacts on top line, we believe they better support the full-price model we are executing.

John Szczepanski: In addition, with respect to our DTC channel, we are seeing some deceleration across online and stores as we continue to pull back on our promotional activity. As we have said, while these actions have near-term impacts on the top line. We believe they better support the full price model we are executing. With respect to the operating margin, we expect the operating margin for Q2 fiscal 2024 to decline approximately 500 basis points to 750 basis points compared to last year's adjusted operating margin of 4.1%. As a reminder, Q2 of fiscal 2023 was our strongest period from an operating margin perspective.

Speaker Change: Turning now to our outlook.

Speaker Change: For Q2 fiscal 2024, we expect total net sales to be relatively flat to down low single digits to the prior year period, as we better match supply with demand in our wholesale business with a more normalized penetration of off price following the pullback in that business over the past year.

Speaker Change: In addition, with respect to our DTC channel.

Speaker Change: We're seeing some deceleration across online and stores as we continue to pull back in our promotional activity.

Speaker Change: As we have said while these actions have near term impacts on topline we.

Speaker Change: We believe they better support the full price model we are executing.

John Szczepanski: With respect to the operating margin, we expect Q2 fiscal 2024 operating margin to decline approximately 500 basis points to 750 basis points compared to last year's adjusted operating margin of 4.1%.

With respect to the operating margin, we expect Q2 fiscal 2024 operating margin to decline approximately 500 basis points to 750 basis points compared to last year's adjusted operating margin of four 1%.

John Szczepanski: As a reminder, Q2 with fiscal 2023 was our strongest period from an operating margin perspective. Along with the difficult compare, we expect this contraction to be driven by SG&A leverage due to the reestablishment of our short-term incentive compensation plan as well as two other main factors. Similar to Q1, we will continue to lap expense favorability due to the wind down of the Rebecca Taylor business, creating an approximately 160 basis point headwind for Q2 fiscal 2024. and given recent actions we have taken to streamline our organization as part of our transformation plan, we expect to incur a headwind of approximately 130 basis points related to one-time severance expenses.

Speaker Change: As a reminder, Q2 with fiscal 2023 was our strongest period from an operating margin perspective, and along with the difficult compare we expect this contraction to be driven by SG&A deleverage due to the re establishment of our short term incentive compensation plan as well as two other main factors.

Operator: And along with the difficult compare, we expect this contraction to be driven by SG&AD leverage due to the reestablishment of our short-term incentive compensation plan, as well as two other main factors. Similar to Q1, we will continue to lap expense favorability due to the winding down of the Rebecca Taylor business, creating an approximately 160 basis point headwind for Q2 fiscal 2024. And given recent actions we have taken to streamlining our organization as part of our transformation plan, we expect to incur a headwind of approximately 130 basis points related to one-time severance expenses.

Speaker Change: Similar to Q1, we will continue to lap expense favorability due to the wind down of the Rebecca Taylor business, creating an approximately 160 basis point headwind for Q2 fiscal 2024.

Speaker Change: And given recent actions, we have taken and streamlining our organization as part of our transformation plan, we expect to incur a headwind of approximately 130 basis points related to one time severance expenses.

Speaker Change: Partially offsetting the SG&A deleverage is the expectation for gross margin expansion driven by improved full price penetration lower promotions and the impact of our transformation initiatives.

John Szczepanski: Partially offsetting the SG&AD leverage is the expectation for gross margin expansion driven by improved full-price penetration, lower promotions, and the impact of our transformation initiatives. That said, we do not expect the level of expansion we saw in Q1, given the expected headwind of 190 basis points from royalty expenses that were not incurred in the prior year period due to the expected mix shift from the increased penetration of wholesale as our off-priced business is normalized, and we continue to pull back on promotional activity in DTC compared to last year.

Operator: Partially offsetting the SG&AD leverage is the expectation for gross margin expansion driven by improved full price penetration, lower promotions, and the impact of our transformation initiative. That said, we do not expect the level of expansion we saw in Q1, given the expected headwind of 190 basis points from royalty expenses that were not incurred in the prior year period due to the expected mix shift due to the increased penetration of wholesale as our off-price business is normalized, and we continue to pull back on promotional activity in DTC compared to last year.

Speaker Change: That said, we do not expect the level of expansion. We saw in Q1, given the expected headwind of 190 basis points from royalty expenses that were not incurred in the prior year period due to the expected mix shift due to the increased penetration of wholesale as our off price business has normalized and we can.

Speaker Change: You need to pull back on promotional activity and DTC compared to last year.

John Szczepanski: With respect to our full year fiscal 2024 outlook, we continue to expect total net sales to grow in the low single digits compared to fiscal 2023. We expect trends to improve as we move through the year, as we normalize shipments to our wholesale partners, including the expansion of our business in Nordstrom, which Dave reviewed, and as we capitalize on our key fall and winter selling season. With more than 85% of our wholesale order book filled for the shipments for this fiscal year, we feel confident in our sales outlook for the remainder of the year. We continue to expect operating margin to be flat to up 25 basis points compared to fiscal 2023 adjusted operating margin.

Speaker Change: With respect to our full year fiscal 2024 outlook. We continue to expect total net sales to grow in the low single digits compared to fiscal 2023.

Operator: With respect to our full year fiscal 2024 outlook, we continue to expect total net sales to grow in the low single digits compared to fiscal 2023. We expect trends to improve as we move through the year, as we normalize shipments to our wholesale partners, including the expansion of our business in Nordstrom, which Dave reviewed, and as we capitalize on our key fall and winter selling seasons. With more than 85% of our wholesale order book filled for shipments for this fiscal year, we feel confident in our sales outlook for the remainder of the year.

Speaker Change: We expect trends to improve as we move through the year as we normalize shipments to our wholesale partners, including the expansion of our business and Nordstrom, which Dave reviewed and as we capitalize on our key fall and winter selling season.

Speaker Change: With more than 85% of our wholesale order book filled for the shipments for this fiscal year, we feel confident in our sales outlook for the remainder of the year.

Operator: We continue to expect operating operating margin to be flat to up 25 basis points compared to fiscal 2023 adjusted operating margin. This outlook continues to include a headwind of approximately 140 basis points associated with royalty fees through May 2024, which were not incurred in the comparable fiscal 2023 period, as well as the impact from the reestablishment of our short-term incentive compensation plan. As we look beyond this year, we continue to believe in the opportunity we see in front of us and are confident in our plans to deliver long-term profitable growth. This concludes our remarks, and I will now turn it over to the operator to open the call to questions.

Speaker Change: We continue to expect operating margin to be flat to up 25 basis points compared to fiscal 2023 adjusted operating margin.

John Szczepanski: This outlook continues to include a headwind of our approximately 140 basis points associated with royalty fees through May 2024, which were not incurred in the comparable fiscal 2023 period, as well as the impact from the reestablishment of our short term incentive compensation plan.

Speaker Change: This outlook continues to include a headwind of approximately 140 basis points associated with royalty fees through May 2024, which were not incurred in the comparable fiscal 2023 period as well as the impact from the re establishment of our short term incentive compensation plan.

John Szczepanski: As we look beyond this year, we continue to believe in the opportunity we see in front of us and are confident in our plans to deliver long term profitable growth.

Speaker Change: As we look beyond this year, we continue to believe in the opportunity we see in front of US and are confident in our plans to deliver long term profitable growth.

Unknown Attendee: This concludes our remarks, and I will now turn it over to the operator to open the call for questions.

This concludes our remarks and I will now turn it over to the operator to open the call for questions.

Unknown Attendee: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad.

Speaker Change: Thank Keith if you'd like to ask a question. Please press star followed by one on your telephone keypad.

Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad, remembering to ensure that your mic is local. If you'd like to withdraw your question at any time, you can do so by pressing start followed by 2. Our first question comes from the line of Eric Beddar of FTC Research. Your line is now open, please go ahead.

Unknown Attendee: Remembering to ensure your mic locally. If you'd like to enjoy your question at any time, you can do so by pressing star followed by two.

Brian: Brian to answer.

Speaker Change: Your mic Luckily.

If you'd like to withdraw your question at any time, you can do so by pressing star followed by Kate.

Eric Bedard: Our first question comes from the line of Eric Bedard of TSTC Research. You're lining so open, please go ahead. Good morning. Congratulations! Look forward to our upside.

Speaker Change: Last question comes from the line of Eric Better T. S. P. C. Richard Your line is now open. Please go ahead.

Speaker Change: Good morning, congratulations on the quarter upside.

David Stefko: Good morning. Congratulations on the quarter's upside. Thanks, Eric.

Speaker Change: Thanks, Eric.

David Stefko: Thanks, Eric. I have a few questions here. Let's start with what we are seeing in terms of international? I know that's primarily a wholesale business, as you talk about the wholesale focus in strong. What are you seeing internationally? What are the opportunities they are going forward? We're seeing similar performance internationally as we are in the U.S. And you know, we've talked in the past about growth opportunities, specifically in Asia. You know, those we have opened two stores in Asia that we have seen. Yes.

David Stefko: I have a few questions here. Let's start with, you know, what are you seeing in terms of international business? I know that's primarily a wholesale business, as you talk about the wholesale book being strong. What are you seeing internationally? What are the opportunities there going forward?

Speaker Change: Perfect.

Speaker Change: I have a few questions here lets start with what are you seeing in terms of international.

Speaker Change: No that's primarily a wholesale business that you're talking about the wholesale book has been strong what are you seeing internationally and what are the opportunities there going.

Speaker Change: Going forward.

Speaker Change: Yes.

Speaker Change: We're seeing we're seeing similar performance internationally as we are in the U S.

David Stefko: We're seeing similar performance internationally as we are in the U.S. And, you know, we've talked in the past about growth opportunities specifically in Asia. We have opened two stores in Asia that we have seen, you know, I would say, inconsistent performance to date amongst those two floors and are looking at, similar to here in the U.S., in some investments that we should be making from a marketing perspective. But right now, Eric, we're focused long-term on trying to understand the Asian market.

Speaker Change: We've talked in the past.

Speaker Change: About growth opportunities specifically.

Speaker Change: In Asia.

Those we have opened two stores in Asia, we have seen.

Speaker Change: Yes.

David Stefko: I would say inconsistent performance today amongst those two tours and looking at, you know, similar to here in the U.S. in some investments that we should be making from a marketing perspective. But right now, Eric, we're focused, you know, long-term on trying to understand the Asia market. Ok, we mentioned that, you know, store closures were part of the reason why the year we were sales were down. I know that you've kind of, I don't expect you're going to be doing stores this year.

Speaker Change: I would say inconsistent performance to date.

Speaker Change: Amongst those two floors and you're looking at.

Similar to here in the U S.

Speaker Change: Some investments that we should be making from a marketing perspective.

Speaker Change: But right now Eric.

Eric: Focused long term I'm trying to understand the Asia market.

Eric: Okay.

Mike: You mentioned that store closures are part of the hi, Mike just part of the reason why the year over year sales were down I know that you've kind of I don't expect it's going to be doing stores. This year, so how do stores fit in.

David Stefko: OK. You mentioned that, you know, store closures were part of the... Part of the reason why the year over year sales are down. I know that you've kind of...

David Stefko: I don't expect you're gonna be doing stores this year, but how do stores fit in as a longer-term growth opportunity here as you refocus even more on the full price customer and provide that higher level of service and drive them into the stores? Where do stores fit in terms of potential expansion going forward?

David Stefko: But how do stores fit in as a longer-term growth opportunity here as you refocus even more on the full-price customer and providing that higher level of service and driving a mention of the stores? Where does stores fit in terms of potential expansion going forward? You know, it's certainly part of the longer-term growth strategy. Again, if you go back, you know, 2023 for us, there's more of a, as a transformative year, you know, as we proved, and proved the help through the business, you know, in late 2023 and mid-2024, we've been discussing this kind of been a focus on the core business of resetting the promotional cadence and, you know, wholesale off price and focusing on our transformation program and looking at, you know, the customer data platform, you know, how do we, how do we utilize that enough to drive growth?

Mike: The longer term growth opportunity here as you refocus.

Mike: You've been more on the full price customer and providing a higher level of service.

Mike: And driving that mix in the stores, where the stores, but in terms of potential expansion going forward.

David Stefko: You know, it's certainly part of the longer-term growth strategy. Again, if you go back, 2023 for us was more of a transformative year, as we improved the health of the business. In late 2023 and mid 2024, we've been discussing a focus on the core business of resetting the promotional cadence and wholesale off price and focusing on our transformation program and looking at, you know, our customer data platform, you know, how do we, how do we utilize that to drive growth.

It's certainly.

Mike: Part of this longer term growth strategy again, if you go back to.

Speaker Change: 2023 for US was more of a as a transformative year as we prove improve the health of the business.

Speaker Change: In late 2023, and the 2020 forward we've been discussing has kind of been a focus on the core business of resetting the promotional cadence in <unk>.

Speaker Change: Wholesale off price and focusing on our transformation program and looking at.

Speaker Change: Our customer data platform, how do we how do we utilize that to drive growth. So from a customer data platform. We have we get a lot of inflammation.

David Stefko: So from a customer data platform, we have, we get a lot of information. We are doing a market study, you know, as we've talked about, if you look at Concentration of our over 60 stores, you know, we have a lot of stores in the New York, LA area, but when you look at markets like, you know, Chicago, we have one or two stores, you know, in Dallas, you know, we have one store in Houston, we have two stores, you know, there's just so many markets that we have opportunities in.

David Stefko: So, from a customer data platform, we have, we get a lot of information. You know, we are doing a market study, you know, as we've talked about. If you look at concentration of our over 60 stores, you know, we have a lot of stores in New York, LA area, but when you look at markets like, you know, Chicago, we have one or two stores. You know, in Dallas, you know, we have one store; in Houston, we have two stores. You know, there's just so many markets that we have opportunities in. And we certainly are looking at that, and as we look into late, you know, 2024 and 2025, you know, we will look at new and existing store opportunities, you know, in the US and international also.

Speaker Change: Yes.

Speaker Change: Our fueling a market study as we have.

Speaker Change: <unk> talked about as you look at.

Speaker Change: Concentration of our over 60 stores, we have lot of stores in the New York L. A area, but when you look at markets like Chicago, We had one or two stores in Dallas.

Speaker Change: One store in Houston, we had two stores.

Speaker Change: Just so many markets that we have opportunities and so we certainly are looking at that and as we look into late.

David Stefko: So we certainly are looking at that. And as we look into late 2024 and 2025, you know, we will look at new and existing store opportunities, you know, in the US and international also, but the focus right now for 2024 is on the core business and making sure we achieve our goals for this year.

Speaker Change: 2024 and 2025.

Speaker Change: Look at new and existing store opportunities.

Speaker Change: The U S and international also but our focus right now for 2024 is on is on the core business and making sure that we.

David Stefko: But the focus right now for 2024 is on the core business and making sure that we achieve our goals for this year. And kind of speaking about the core, you talked before about how, you know, lowering the drive to lower prices has been kind of pushed to the exact opposite. And you're clearing out the outlet channel. You know, when do you expect that to be done? And when do you expect the pricing to be kind of where you want it to be in terms of the mix of outlet, non outlet in terms of the pricing also in terms of full price and non full price?

Speaker Change: Achieve our goals for this year.

David Stefko: And speaking about the Corps, you've talked before about how the drive to lower prices has been kind of pushed to the exact opposite, and you're clearing out the outlet channel. When do you expect that to be done, and when do you expect the pricing to be kind of where you want it to be in terms of the mix of outlet and non-outlet, in terms of the pricing also, in terms of full price and non-full price? When do you think that process is going to happen? Viewing the ad.

Speaker Change: And kind of thinking about the core you've talked before about how.

Speaker Change: The lower R&D.

Speaker Change: Rai for lower prices, that's been kind of pushed to the exact opposite.

Speaker Change: And you are clearing out the outlet channel when do you expect that to be done.

Speaker Change: When do you expect the pricing to be kind of where you want it to be in terms of the mix of outlet.

Speaker Change: Outlet in terms of the pricing also in terms of full price and non full price when do you think that processes.

John Szczepanski: When do you think that process is viewing the end? Eric, it's, it's John; I'll take that. I think when we look at how we completed Q1, that's really the end of that reset period. We're now going into starting in our fiscal Q2, certainly recapitalizing into the demand that we see in the wholesale channel. And having an appropriate balance between wholesale full price and off price certainly from here on, from here on out, from an outlet perspective, from a BTC outlet perspective. We're also looking at the fleet and then looking at our pricing strategies with regards to, you know, a more healthier access liquidation, if you will, going forward.

Speaker Change: Yes.

John: Yeah, Eric It's John I'll take that I think when we look at how we completed Q1, that's really the end of that reset period, we're now going into starting in our fiscal Q2.

John Szczepanski: Eric, it's John. I'll take that.

John Szczepanski: I think when we look at how we completed Q1, that's really the end of that reset period. We're now going into starting fiscal Q2, certainly recapitalizing on the demand that we see in the wholesale channel and having an appropriate balance between wholesale full price and off price, certainly from here on out. From an outlet perspective, from a DTC outlet perspective, we're also looking at the fleet and then looking at our pricing strategies with regard to a more healthy excess liquidation, if you will, going forward.

Speaker Change: Certainly.

Speaker Change: Recapitalizing into the demand that we see in the wholesale channel.

Speaker Change: Inbound and having an appropriate balance between wholesale full price and off price.

Speaker Change: Certainly from here on from here on out.

Speaker Change: From from an outlet perspective from a DTC outlet perspective, we're also looking at the fleet and then looking at our pricing strategies with regards to.

Speaker Change: A more healthier.

Speaker Change: Excess liquidation if you will going forward so between between.

John Szczepanski: So between normalizing wholesale off price and the fact that we're managing inventory so much better now and expected into the future, we expect that equation to be optimized as we go through the balance of this year, setting us up for a good position going forward.

John Szczepanski: So between normalizing wholesale off price and the fact that we're managing inventory so much better now and expected into the future. We expect that equation to be optimized as we go to the balance of this year and then setting us up for, you know, good position going forward.

Speaker Change: Normalizing wholesale off price and the fact that we're managing inventories so much better now and expected into the future. We expect that equation to be optimized as we go through the balance of this year and then setting us up for <unk>.

Speaker Change: Good position going forward.

Speaker Change: Okay.

John Szczepanski: That actually is a great; that actually is the next follow-up. How do you think about normalizing an SGNA? I know you have multiple flows here in terms of project transformation, terms of short-term incentive call. How should we be thinking about how the SGNA flows and when does that kind of, what we should consider, kind of normalize levels, I guess, for comparison is going forward? Yeah, Eric, great question. So when you think about where the company has been last year, there was no short-term incentive plan established because of the challenging situation, financial situation of the company.

John Szczepanski: That actually is a great question. How do you think about normalizing SG&A? I know you have multiple flows here in terms of project transformation. In terms of short-term incentive calls, how should we be thinking about how the SG&A flows and when does that kind of hit what we should consider kind of normalized levels, I guess, for comparison purposes going forward?

Speaker Change: Actually it's a great Alex Who's the next fall.

How do you think about normalizing on SG&A I know you have multiple flows here in terms of the project transformation or is it in short term incentive comp. So how should we be thinking about how the SG&A flows and when does that kind of what we should consider kind of normalized levels I guess for comparison purposes going forward.

Eric: Yes, Eric Great question. So when you when you think about where the company has been last year.

John Szczepanski: Yeah, Eric, great question. So when you think about where the company was last year, there was no short-term incentive plan established because of the challenging situation and the financial situation of the company. As we reset into this year, as we set goals for our teams, it was appropriate to reset and reestablish a short-term incentive comp program. And as you saw in the quarter, that impact was the primary driver for the SG&AD leverage that we saw year over year.

Speaker Change: There was no short term incentive plan.

Speaker Change: Establish because of the challenging situation financial situation of the company as we reset into this year as we set.

John Szczepanski: As we reset into this year, as we set goals for our teams, it was appropriate to reset and reestablish a short-term incentive program. And as you saw in the quarter, that impact was the primary driver for the SG&A delivers that we saw year over year. Certainly, Q1 is our lightest quarter in terms of revenue footprint. So the impact of that should mitigate as we go through the balance of the year, as our sales build, especially in the back half of the year, into our key selling season. So our outlook includes the incorporation of a program, again, not to the same order of magnitude as what we've seen in Q1.

Eric Great: <unk> for our teams it was appropriate to reset and re establish US short term incentive comp program and as you saw in the quarter.

Eric Great: That impact was the primary driver for the SG&A deleverage that we saw.

John Szczepanski: Certainly, Q1 is our lightest quarter in terms of revenue footprint, so the impact of that should mitigate as we go through the balance of the year as our sales build, especially in the back half of the year, into our key selling season. So our outlook includes the incorporation of a program, again, not to the same order of magnitude as what we've seen in Q1.

Eric Great: Year over year, certainly Q1 is our lightest quarter.

Eric Great: Quarter in terms of revenue footprint.

Eric Great: So the impact of that should mitigate as we go through the balance of the year as our as our sales build especially in the back half of the year into our key selling season.

Eric Great: So our outlook includes the incorporation of a program.

Eric Great: Again, not to the same order of magnitude as what we've seen in Q1.

Eric Bedard: Great, well, congrats. And look forward to seeing what's happening the rest of the year.

Speaker Change: Great well, congrats and look forward to seeing what's happening in the rest of the year it should be fine. Thank you.

David Stefko: Great. Well, congrats, and look forward to seeing what's happening the rest of the year. It should be fun. Thank you.

Speaker Change: Thanks, Eric Thanks, Sarah.

Speaker Change: Okay.

Michael Kapinski: The next question comes from Michael Kapinski of Novo Capital Market. Your line is now open. Please go ahead. Thank you. And let me offer my congratulations as well.

Operator: The next question comes from Michael Kopinski of Noble Capital Markets. Your line is now open. Please go ahead.

Speaker Change: Next question comes from Michael <unk>.

Speaker Change: Often April capital market. Your line is now open. Please go ahead.

Operator: Thank you. And let me offer my congratulations as well.

Michael: Thank you and let me offer my congratulations as well first of all given the improvement in margins I was just wondering if you can identify for us how much of the cost initiatives.

John Szczepanski: First of all, given the improvement in margins, I was just wondering if you can identify for us how much the cost initiatives, I know you're targeting 10 million for the year, how much of that was reflected in the quarter. And I know that you mentioned 240 basis points, which I would assume would be like maybe 1.2 million if my math is correct. And I was just wondering if that was the number that you realized towards that 10 million goal. And then if you can just talk a little bit about what will be the cadence of those cost initiatives throughout the year.

John Szczepanski: First of all, given the improvement in margins, I was just wondering if you could identify for us how much of the cost initiatives, I mean, you're targeting $10 million for the year. How much of that was reflected in the quarter? And I know that you mentioned 240 basis points, which would be like maybe 1.2 million, if my math is correct. And I was just wondering if that was the number that you realized towards that $10 million goal. And then, if you can just talk a little bit about what will be the cadence of those cost-cutting initiatives throughout the year.

Speaker Change: Targeting $10 million for the year, how much of that was reflected in the quarter and I know that you've mentioned and 240 basis points, which I would assume would be like maybe one 2 million. If my math is correct.

Speaker Change: And I was just wondering if that was the number that you realized towards that $10 million goal and then if you can just talk a little bit about what will be the cadence of those cost cut initiatives throughout the year.

John Szczepanski: Great question, Mike. So, as you think about our margin improvement, the year is just starting. Our cadence for transformation, since it's more COGS-related, we'll definitely follow the penetration of sales by quarter throughout the year. So again, with Q1 being our lightest quarter, we should see a build as it relates to the COGS portion going through the course of the year. We're happy with where we ended transformation in Q1, where we feel we're ahead of schedule in terms of what we were expecting. What we are monitoring right now is really the impacts of DTC deceleration as we come off of that promotional cadence, as well as the return rates that are amplified, given especially an e-com, given the fact that we're definitely moving away from higher discounts.

Speaker Change: Great great.

John Szczepanski: Great question, Mike. So as you think about our margin improvement, the year is just starting. Our cadence, especially in e-comm, given the fact that we're definitely moving away from higher discounts. And last year, the promotions were tied to end-of-sale activities with no returns. So that piece is becoming more magnified, and we're monitoring that as potential offsets to the real upside that we're seeing in Transformation.

Speaker Change: Mike.

Speaker Change: So as you think about our margin improvement.

Speaker Change: Year is just just starting.

Speaker Change: Our cadence for transformation since its more Cogs related will definitely follow.

Speaker Change: The penetration of sales by quarter throughout the year, So again with Q1 being our lightest quarter.

Speaker Change: We should see a build as it relates to the Cogs portion going through going through the course of the year, we're happy with where we ended transformation in Q1.

Speaker Change: Where we feel we're headed ahead of schedule in terms of what we were expecting what we are monitoring right. Now is really are the impacts of DTC deceleration as we come off of that promotional cadence.

Speaker Change: As well as the return rates that are are amplified given especially in E. Com given the fact that we.

Speaker Change: We're definitely moving away from higher discounts in and last year, we had.

John Szczepanski: And last year we had really the promotions were tied to end of sale activities with no returns. So that piece is becoming more magnified. And we're monitoring that as potential offsets to the real upside that we're seeing in transformation. Gotcha. And so if you were to look at the margin prospect, I suppose, if assuming that the 10 million is fully realized, would that largely fall into the third quarter then? I mean, proportionally, I would say it would be more proportional with our level of COGS and sales as we progress. So, not completely back half of the year waited, but certainly more weighted to the back half of the year given that penetration of business flow.

Speaker Change: Really the promotions were tied to end of end of sale activities with no returns. So that piece is becoming more magnified and we're monitoring that as as potential offsets to that.

Speaker Change: The real upside that we're seeing in transformation.

Speaker Change: Got you and so if.

John Szczepanski: Gotcha. And so if you were to look at the margin prospect, I suppose, assuming that the 10 million is fully realized, would that largely fall into the third quarter then? I mean, proportionally, I would, I would.

Speaker Change: You were to look at the margin prospect I suppose.

Speaker Change: Assuming that the $10 million fully realized would that largely fall into the third quarter then.

Speaker Change: I mean proportionately.

John Szczepanski: I would say it would be more proportional with our level of COGS and sales as we progress. Not completely back half of the year weighted, but certainly more weighted to the back half of the year given that penetration of business flow.

Speaker Change: I would say it would be more proportional with with our level of Cogs and sales as we progress so.

Speaker Change: Not completely back half of the year weighted but certainly more weighted to the back half of the year given that given that penetration of business flow.

John Szczepanski: Gotcha.

Speaker Change: Gotcha and then on the revenue side can you talk a little bit about the variables that are baked into your favorable revenue guide for the year because certainly based on your <unk> Guide you would look for a much stronger performance in the second half and I was just wondering if you can just talk a little bit about maybe some of the.

John Szczepanski: Gotcha. And then on the revenue side, can you talk a little bit about the variables that are baked into your favorable revenue guide for the year? Because certainly, based on your 2Q guide, you would look for a much stronger performance in the second half. And I was just wondering if you could just talk a little bit about maybe some of the, you know, while you obviously have identified some positive outlook, I was just wondering what would be the possible challenges in terms of achieving your revenue targets for the fiscal full year as you see it.

John Szczepanski: And then on the revenue side, can you talk a little bit about the variables that are baked into your favorable revenue guide for the year? Because certainly, based on your 2Q guide, you would look for a much stronger performance in the second half. And I was just wondering if you can just talk a little bit about maybe some of the while while you obviously identified a positive outlook, I was just wondering what would be the possible challenges in terms of achieving your revenue targets for the fiscal pull year as you see it? Yeah, we are monitoring our DTC trends as we called out.

Speaker Change: While while you.

Speaker Change: Obviously, you identified it as a positive outlook.

Speaker Change: I was just wondering what would be the possible challenges in terms of achieved achieving your revenue targets for the fiscal full year as you see it.

John Szczepanski: Yeah, we're monitoring our DTC trends, as we called out. We're monitoring some of that sales deceleration from the promotional activity, the return rates in our e-com channel. But we're really, as we approach our key selling season in fall and holiday, that's where our product performs best. So we expect, we expect a really good trend reversal as we get into Q3, Q4, the back half of the

Speaker Change: Yes.

Speaker Change: We are.

Speaker Change: Monitoring our DTC trends as we called out we're monitoring some of that sales dissenter deceleration from the promotional activity the return rates and our E Com channel.

John Szczepanski: We're monitoring some of that sales deceleration from the promotional activity, the return rates in our ecom channel. But we're really, we're really as we approach our key selling season in fall and holiday. That's where our product performs best. So, we expect, we expect really a good trend reversal as we get into Q3, Q4, the back half of the year. And we're also, we've talked a lot, and Davis mentioned this too about the work we've done around the customer database. We expect a lot of those efforts to start getting traction as we as we enter those those key selling selling seasons.

Speaker Change: But we're really we're really as we approach the.

Speaker Change: Our key selling season in fall and holiday, that's where our product performs best So we expect we expect really a good trend reversal as we get into Q Q3, Q4 in the back half of the year.

John Szczepanski: And we're also, we've talked a lot, and David mentioned this too, about the work we've done around the customer database. We expect a lot of those efforts to start getting traction as we enter those key selling seasons. The other driver in our back half of the year weight in terms of revenue is our wholesale business. You know, we talked about the fact that because of the financial constraints we had last year, we really couldn't match supply with the demand we saw in the wholesale channel.

Speaker Change: And we're also.

David: We've talked a lot and David mentioned this too about the work we've done around the the customer database, we expect a lot of those efforts to start getting traction as we as we enter those those key selling selling seasons.

John Szczepanski: So, the other driver in our back half of the year weight in terms of revenue is our wholesale business. You know, we talked to the fact that because of the financial constraints we had last year, we really couldn't match supply with the demand we saw in the wholesale channel. This is really our moment to to the level set that for fall holiday for our Q3, Q4 selling cycle in the wholesale channel. And we're looking to capitalize on that demand. You know, right now where we stand, we've completed all of the major markets that relate to the shipping cycle this fiscal year.

David: The other driver in our back half of the year weighed in terms of revenue is our wholesale business, we talked to the fact that because of the financial constraints. We had last year, we really couldnt match supply with the demand we saw in the wholesale channel. This is really our moment to level.

John Szczepanski: This is really our moment to level set for the fall holiday season, for our Q3, Q4 selling cycle in the wholesale channel, and we're looking to capitalize on that demand. You know, right now, where we stand, we've completed all of the major markets that relate to the shipping cycle this fiscal year, and we can say that we've got more than 85 percent of our order book filled for those those shipping windows through the balance of the year. So that also gives us some good confidence about the back half of the year guide.

David: Set that for fall holiday for our Q3 Q4 selling cycle in the wholesale channel.

David: And we're looking to capitalize on that demand.

David: Now where we stand.

David: Completing all of the major markets.

David: That relate to the shipping cycle.

David: Fiscal year.

John Szczepanski: And we can say that we've got more than 85% of our order book filled for those shipping windows through the balance of the year. So that also gives us some good confidence about the back half of the year guide. Gotcha.

David: And we can say that we've got more than 85% of our order book filled.

David: For for those.

David: Shipping windows through the balance of the year. So that also gives us some good confidence about the back half of the year guide.

David: Gotcha.

David Stefko: Gotcha. In terms of just the product itself, you mentioned men's as being a really key category for you, and you mentioned Lennon's, but I was just wondering, in terms of categories that you might find that are growth opportunities in the men's category, if you could just kind of identify for us, what are some of the bets that you're making in terms of the back half in terms of that particular category?

David Stefko: And in terms of just the product itself, you mentioned men's being a really key category for you. Are there. And you mentioned Lenin's, but I was just wondering, in terms of categories that you might find, that our growth opportunities in the men's category, if you could just kind of identify for us what are some of the bets that you're making in terms of the back cap in terms of that particular category. Yeah, the biggest category we're focused on from a growth perspective is a new pant program that we're working on. And so we hope that we see some value for that.

Speaker Change #100: Just the product itself you mentioned men's.

Speaker Change #101: Every key category for you are there.

Speaker Change #102: And you mentioned <unk>, but I was just wondering in terms of.

Speaker Change #103: Categories that you might find that our growth opportunities in the men's category. If you could just kind of identify for us what are some of the bets that you're making in terms of the back half in terms of that that particular category.

Speaker Change #103: Yes, the biggest biggest category we're focused on.

David Stefko: Yeah, the biggest category we'll focus on from a growth perspective is a new pant program that we're working on. And so we hope that we see some value from that after the year.

Speaker Change #104: Gross perspective, as a new Pant program that we're working on.

Speaker Change #104: And so we hope that we see some value from that.

Speaker Change #104: For the year.

Speaker Change #105: Gotcha, Okay. That's all I had thank you.

Operator: Gotcha. Okay, that's all I have. Thank you.

Michael Kapinski: Okay, that's all I have. Thank you. Great.

Speaker Change #106: Great. Thank you.

Unknown Attendee: Thank you.

David Stefko: As there are no additional questions waiting at this time, I'd like to hand the conference back over to David Stefko for closing remarks. Okay, thanks. Thank you all for joining us today.

David Stefko: As there are no additional questions waiting at this time, I'd like to hand the conference back over to David Stefko for closing remarks.

Speaker Change #108: As there are no additional questions at this time I would like to hand the conference.

Speaker Change #107: The closing remarks.

Speaker Change #107: Okay. Thanks.

Operator: Okay, thanks. Thank you all for joining us today. We will speak to you again on our second quarter earnings call, which will be in September. And with that, have a great day. Thank you.

Speaker Change #109: Thank you all for joining US today, we will speak to you again.

Unknown Attendee: We will speak to you again on our second quarter earnings call, which will be in September. And with that, have a great day. Thank you.

Speaker Change #109: Our second quarter earnings call, which will be in September.

Speaker Change #109: Have a great day. Thank you.

Unknown Attendee: Ladies and gentlemen, this concludes today's call. Have a great rest of your day. You may now disconnect your line.

Operator: Ladies and gentlemen, this concludes today's call. Have a great rest of your day. You may now disconnect your line.

Speaker Change #110: Ladies and gentlemen. This concludes today's call have a great rest of your day you may now disconnect your line.

Speaker Change #110: Yeah.

Speaker Change #110: [music].