Q1 2025 Aritzia Inc Earnings Call

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Operator: Thank you for standing by. This is the conference operator. Welcome to Aritzia's first quarter 2025 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad.

Operator: Thank you for standing by.

Operator: This is the conference operator.

Operator: Welcome to Aritzia's first quarter 2025 earnings conference calls. As a reminder, all participants are in listen-only mode, and the conference is being recorded after the presentation. There will be an opportunity to ask questions.

Conference Operator: Thank you for standing by. This is the conference operator. Welcome to Aritzia's first quarter 2025 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad.

Operator: So join the question cue; you may press star, then one on your telephone keypad. To do the Houston during the conference call, you may signal an operator by pressing star, then zero.

Operator: Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Beth Reed, Vice President, Investor Relations. Please go ahead. Thanks for joining Aritzia's first quarter fiscal 2025 earnings call. On the call today, I'm joined by Jennifer Wong, our Chief Executive Officer, and Todd Ingledew, our Chief Financial Officer. As a reminder, please note that remarks on this call may include our expectations, future plans, and intentions, which may constitute forward-looking information.

Conference Operator: Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Beth Reed, Vice President, Investor Relations. Please go ahead.

Beth Reed: I would now like to turn the conference over to Beth Reed, Vice President, Investor Relations. Please go ahead.

Operator: Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions, as well as the competitive environment. However, actual results may differ materially from the conclusions, forecasts, or projections expressed by such forward-looking information.

Beth Reed: Thanks for joining Aritzia's first quarter, fiscal 2025 earnings call. On the call today, I'm joined by Jennifer Wong, our Chief Executive Officer, and Todd Ingledew, our Chief Financial Officer. As a reminder, please note that remarks on this call may include our expectations, future plans, and intentions that may constitute forward-looking information. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions, as well as the competitive environment. Actual results may differ materially from the conclusions, forecast, or projections expressed by the forward-looking information.

Beth Reed: We would refer you to our most recently filed management's discussion and analysis and our annual information form, which include a summary of the material assumptions, as well as risks and factors that could affect our future performance and our ability to deliver on the forward-looking information. Our earnings release, the related financial statements, and the MD&A are available on CDAR Plus, as well as in the investor relations section of our website. I'll now turn the call over to Jennifer. Good afternoon, everyone, and thank you for joining us today.

Jennifer Wong: For the first quarter of fiscal 2025, we delivered an 8% increase in net revenue to $499 million. Comparable sales grew 2% as all geographies and all channels performed positively. Throughout the quarter, we continued to optimize the composition of our inventory, and this drove a sequential acceleration in sales growth each month of the quarter. In addition to our improved inventory position, sales growth was also fueled by our new and repositioned boutiques and growing brand awareness in the United States, our primary growth market. U.S. net revenue increased 13% in Q1, while in Canada, net revenue grew 2%.

Beth Reed: Thanks for joining Aritzia's first quarter fiscal 2025 earnings call.

Beth Reed: On the call today, I'm joined by Jennifer Wong, our Chief Executive Officer, and Todd Ingledew, our Chief Financial Officer. As a reminder, please note that remarks on this call may include our expectations, future plans, and intentions that may constitute forward-looking information.

Beth Reed: Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions, as well as the competitive environment.

Beth Reed: Actual results may differ materially from the conclusions, forecasts, or projections expressed by the four looking information.

Beth Reed: We would refer you to our most recently filed management's discussion and analysis and our annual information form, which included summary of the material assumptions, as well as risks and factors that could affect our future performance and our ability to deliver on the forward-looking information.

Beth Reed: We would refer you to our most recently filed management's discussion and analysis and our annual information form, which include a summary of the material assumptions, as well as risks and factors that could affect our future performance and our ability to deliver on the forward-looking information.

Beth Reed: Our earnings release, the related financial statements, and the MDNA are available on Cedar Plus, as well as the Investor Relations section of our website.

Beth Reed: Our earnings relief, the related financial statements, and the MD&A are available on CDAR Plus, as well as the Investor Relations section of our website. I'll now turn the call over to Jennifer.

Jennifer Wong: I'll now turn the call over to Jennifer. Good afternoon, everyone, and thank you for joining us today. For the first quarter of fiscal 2025, we delivered an 8 percent increase in net revenue to $499 million. Comparable sales grew 2 percent as all geographies and all channels comped positively. Throughout the quarter, we continue to optimize the composition of our inventory. This drove us sequential acceleration and sales growth each month of the quarter. In addition to our improved inventory position, sales growth was also fueled by our new and repositioned boutiques and growing brand awareness in the United States, our primary growth market.

Jennifer Wong: In our retail channel, net revenue increased by 9% in the first quarter. This was driven by positive comparable sales growth in our boutiques and the progress we've made on our real estate expansion strategy. In Q1, we opened a newly repositioned location in Oak Brook, Illinois. Thus far in Q2, we've opened a new boutique in Boca Raton, Florida. Later in Q2, we plan to open three additional boutiques in Jacksonville, Florida; Plano, Texas; and San Diego, California.

Jennifer Wong: Good afternoon, everyone, and thank you for joining us today.

Jennifer Wong: For the first quarter of fiscal 2025, we delivered an 8% increase in net revenue to $499 million.

Jennifer Wong: Comparable sales grew 2% as all geographies and all channels comped positively. Throughout the quarter, we continued to optimize the composition of our inventory. This drove a sequential acceleration in sales growth each month of the quarter.

Jennifer Wong: In addition to our improved inventory position, sales growth was also fueled by our new and repositioned boutiques and growing brand awareness in the United States, our primary growth market.

Jennifer Wong: US net revenue increased 13 percent in Q1, while in Canada net revenue grew 2 percent. In our retail channel, net revenue increased by 9 percent in the first quarter. This was driven by positive comparable sales growth in our boutiques and the progress we've made on our real estate expansion strategy. In Q1, we opened a newly repositioned location in Oakbrook, Illinois. Thus far in Q2, we've opened a new boutique in Boca Raton, Florida. Later in Q2, we plan to open three additional boutiques in Jacksonville, Florida; Plano, Texas; and San Diego, California. Our boutique openings have a proven track record as our most consistent and most predictable driver of top-line growth.

Jennifer Wong: U.S. net revenue increased 13% in Q1, while in Canada net revenue grew 2%.

Jennifer Wong: In our retail channel, net revenue increased by 9% in the first quarter. This was driven by positive comparable sales growth in our boutiques and the progress we've made on our real estate expansion strategy.

Jennifer Wong: In Q1, we opened a newly repositioned location in Oakbrook, Illinois. Thus far in Q2, we've opened a new boutique in Boca Raton, Florida.

Jennifer Wong: Later in Q2, we plan to open three additional boutiques in Jacksonville, Florida, Plano, Texas, and San Diego, California.

Jennifer Wong: Our boutique openings have a proven track record as our most consistent and most predictable driver of top-line growth, and the performance of our new boutiques remains strong beyond our expectations. For example, the opening of our newest location in Boca Raton beat our internal sales projections by more than 35% and is tracking to pay itself back in just 10 months. This feeds our own projections of 12 to 18 months. In addition, more than 60% of our clients during opening week at Boca Raton were new to Aritzia.

Jennifer Wong: Our boutique openings have a proven track record as our most consistent and most predictable driver of top-line growth, and the performance of our new boutiques remains strong, beyond our expectations.

Jennifer Wong: And the performance of our new boutique remains strong. Beyond our expectations. The opening of our newest location in Boca Raton beat our internal sales projections by more than 35%, and it's tracking to pay back in just 10 months. This beats our own projections of 12 to 18 months. In addition, more than 60% of our clients during opening week at Boca Raton were new to Aritzia. This highlights the significance of our new boutiques as meaningful drivers of brand awareness and client acquisition in the U.S. In addition to the strong performance of our new boutiques, our boutique repositions also continue to deliver.

Jennifer Wong: The opening of our newest location in Boca Raton beat our internal sales projections by more than 35% and is tracking to pay back in just 10 months.

Jennifer Wong: This beats our own projections of 12 to 18 months. In addition, more than 60% of our clients during opening week at Boca Raton were new to Aritzia.

Jennifer Wong: This highlights the significance of our new boutiques as meaningful drivers of brand awareness and client acquisition in the U.S. In addition to the strong performance of our new boutiques, our boutique repositions also continue to deliver. The expanded square footage elevates the customer experience, allowing for enhancements such as a broader product assortment and more fitting rooms.

Jennifer Wong: This highlights the significance of our new boutique as meaningful drivers of brand awareness and client acquisition in the U.S.

Jennifer Wong: In addition to the strong performance of our new boutiques, our boutique repositions also continue to deliver. The expanded square footage elevates the customer experience, allowing for enhancements such as a broader product assortment and more fitting rooms.

Jennifer Wong: The expanded square footage elevates the customer experience, allowing for enhancements such as a broader product assortment and more fitting rooms. Repositions also drive top-line growth and profitability. Our repositions boutique in Shorehill, New Jersey, which happens to be celebrating the one-year anniversary of its reopening next week, is generating incremental sales growth at 75% and delivering a much higher contribution in terms of both margin and $1.

Jennifer Wong: Repositioning also drives top-line growth and profitability. For example, our Reposition Boutique in Shorehills, New Jersey, which happens to be celebrating the one-year anniversary of its reopening next week, is generating incremental sales growth of 75% and delivering a much higher contribution in terms of both margins and dollars. Turning to e-commerce, net revenue grew 4% in the quarter in spite of a lower volume of markdown sales compared to the first quarter last year.

Jennifer Wong: Repositions also drive top-line growth and profitability.

Jennifer Wong: Our Reposition Boutique in Shore Hills, New Jersey, which happens to be celebrating the one-year anniversary of its reopening next week, is generating incremental sales growth at 75% and delivering a much higher contribution in terms of both margins and dollars.

Jennifer Wong: Turn to e-commerce. Net revenue grew 4% in the quarter, in spite of a lower volume of markdown sales compared to the first quarter last year. But what is most encouraging is the momentum we're seeing. Sales accelerated throughout the quarter as we further optimized the composition of our inventory. We're also focusing on a number of initiatives intended to further enable growth in e-commerce and create a more cohesive digital journey for the customer. These strategic initiatives include an investment in digital marketing that will drive forward key benefits. It will protect our brand, amplify our product franchises, and grow awareness in the U.S.

Jennifer Wong: Turning to e-commerce, net revenue grew 4% in the quarter in spite of a lower volume of markdown sales compared to the first quarter last year. But what is most encouraging is the momentum we're seeing.

Jennifer Wong: But what is most encouraging is the momentum we're seeing. Sales accelerated throughout the quarter as we further optimized the composition of our inventory. We're also focusing on a number of initiatives intended to further enable growth in e-commerce and create a more cohesive digital journey for the customer. These strategic initiatives include an investment in digital marketing that will drive four key benefits. It will protect our brand, amplify our product franchises, grow awareness in the US, and fuel additional customer engagement. We also continue to make progress on enhancing the technology underpinning Aritzia.com. We expect the improved site to go live in the back half of this fiscal year.

Jennifer Wong: Sales accelerated throughout the quarter as we further optimized the composition of our inventory.

Jennifer Wong: We're also focusing on a number of initiatives intended to further enable growth in e-commerce and create a more cohesive digital journey for the customer.

Jennifer Wong: These strategic initiatives include an investment in digital marketing that will drive four key benefits.

Jennifer Wong: It will protect our brand, amplify our product franchises, grow awareness in the U.S., and fuel additional customer engagement.

Jennifer Wong: and fuel additional customer engagement. We also continue to make progress on enhancing the technology underpinningaricia.com. We expect to improve site to go live in the back half of this fiscal year. Other initiatives to drive digital include improving our online merchandising, optimizing our on-the-channel capabilities, enhancing our international e-commerce site, and developing a mobile app. Turning now to product, we entered Q1 well-positioned with our assortment in mind, with our historical balance of new styles and client favorites. Throughout the quarter, we focused on further improving the composition of our inventory. We were pleased to see that this improved inventory position resulted in an acceleration in sales trends as the quarter progressed.

Jennifer Wong: We also continue to make progress on enhancing the technology underpinning Aritzia.com. We expect the improved site to go live in the back half of this fiscal year.

Jennifer Wong: Other initiatives to drive digital include improving our online merchandising, optimizing our omni-channel capabilities, enhancing our international e-commerce site, and developing a mobile app. Turning now to products, we entered Q1 well-positioned with our assortment in mind, with our historical balance of new styles and client favorites. Throughout the quarter, we focused on further improving the composition of our inventory. We were pleased to see that this improved inventory position resulted in an acceleration in sales trends as the quarter progressed. Clients responded well to both our new styles and client favorites.

Jennifer Wong: Other initiatives to drive digital include improving our online merchandising, optimizing our omni-channel capabilities, enhancing our international e-commerce site, and developing a mobile app.

Jennifer Wong: Turning now to product, we entered Q1 well-positioned with our assortment in line with our historical balance of new styles and client favorites.

Jennifer Wong: Throughout the quarter, we focused on further improving the composition of our inventory.

Jennifer Wong: We were pleased to see that this improved inventory position resulted in an acceleration in sales trends as the quarter progressed.

Jennifer Wong: Clients responded well to both our new styles and client favorites. Our performance was consistently strong across product categories from our beloved sweat sleeves and effortless collections to brands such as denim form. In marketing, we continued to focus on amplifying our product and our much-loved everyday luxury experience. We're gaining momentum and recognition in the U.S. that only with customers but also in the industry. The Wall Street Journal featured an article on the rising popularity of our iconic effortless pants, underscoring its distinguishing features such as design, tailoring, and fabrication. Our network of celebrity fans also continued to expand.

Jennifer Wong: Our performance was consistently strong across product categories, from our beloved sweat fleece and effortless collections to brands such as denim form. In marketing, we continue to focus on amplifying our product and our much-loved everyday luxury experience. We're gaining momentum and recognition in the U.S., not only with customers but also in the industry. The Wall Street Journal featured an article on the rising popularity of our iconic effortless pant, underscoring its distinguishing features such as design, tailoring, and fabrication. Our network of celebrity fans has also continued to expand. Hayley Bieber has been spotted wearing our best hug, little ribbed T-shirts on numerous occasions and in multiple colors.

Jennifer Wong: Clients responded well to both our new styles and client favorites. Our performance was consistently strong across product categories, from our beloved sweat fleece and effortless collections to brands such as Denim Form.

Jennifer Wong: In marketing, we continue to focus on amplifying our product and our much-loved everyday luxury experience. We're gaining momentum and recognition in the U.S. not only with customers, but also in the industry.

Jennifer Wong: The Wall Street Journal featured an article on the rising popularity of our iconic effortless pant, underscoring its distinguishing features such as design, tailoring, and fabrication.

Jennifer Wong: Haley Bieber has been spotted in our best hug, little ribbed t-shirts on numerous occasions and in multiple colors. And Jessica Alba has been wearing the super-puff vest for cooler mornings in California. This growing media coverage and community of celebrity fans helps build industry relations, fashion credibility, and cultural relevance. All of this propels brand awareness and drives client acquisition in the U.S.

Jennifer Wong: Our network of celebrity fans also continued to expand. Hailey Bieber has been spotted in our Best Hug little ribbed t-shirts on numerous occasions and in multiple colors. And Jessica Alba has been wearing the Super Puff vest for cooler mornings in California.

Jennifer Wong: And Jessica Alba has been wearing the Super Puff vest for cooler mornings in California. This growing media coverage and community of celebrity fans helps build industry relations, fashion credibility, and cultural relevance. All of this propels brand awareness and drives client acquisition in the US. Now, I'll turn the call over to Todd. Thanks, Jennifer. And good afternoon, everyone.

Jennifer Wong: This growing media coverage and community of celebrity fans helps build industry relations, fashion credibility, and cultural relevance. All of this propels brand awareness and drives client acquisition in the U.S.

Todd Ingledew: Now, let me turn the call over to Todd.

Todd Ingledew: Thanks, Jennifer, and good afternoon, everyone. Net revenue for the first quarter was better than our outlook, and we delivered substantial adjusted EBITDA margin expansion that exceeded our expectations. Our momentum has continued into the second quarter during by the ongoing strength of our U.S. business.

Jennifer Wong: Now, let me turn the call over to Todd.

Todd Ingledew: Net revenue for the first quarter was better than our outlook, and we delivered substantial adjusted EBITDA margin expansion that exceeded our expectations. Our momentum has continued into the second quarter, driven by the ongoing strength of our U.S. business. Having optimized our inventory position, we remain optimistic about our growth plan and margin expansion opportunities, and we're reiterating our guidance for fiscal 2025. Turning to the details of our performance, in the first quarter of fiscal 2025, we generated net revenue of $499 million.

Todd Ingledew: Thanks, Jennifer.

Todd Ingledew: And good afternoon, everyone.

Todd Ingledew: Net revenue for the first quarter was better than our outlook, and we delivered substantial adjusted EBITDA margin expansion that exceeded our expectations.

Todd Ingledew: Our momentum has continued into the second quarter, driven by the ongoing strength of our U.S. business.

Todd Ingledew: Having optimized our inventory position, we remain optimistic about our growth plan and margin expansion opportunities, and we're reiterating our guidance for fiscal 2025. Turning to the details of our performance. In the first quarter of fiscal 2025, we generated net revenue of $4,999 million, representing an increase of 8% from last year. Comparable sales grew 2% as all geographies and all channels comped positively. Importantly, we saw sequential acceleration and revenue growth throughout the quarter as we continued to improve our inventory position. In the first quarter, net revenue in the United States increased 13% from last year to $285 million.

Todd Ingledew: Having optimized our inventory position, we remain optimistic about our growth plan and margin expansion opportunities, and we're reiterating our guidance for fiscal 2025.

Todd Ingledew: Turning to the details of our performance.

Todd Ingledew: In the first quarter of fiscal 2025, we generated net revenue of $499 million, representing an increase of 8% from last year.

Todd Ingledew: Representing an increase of 8% from last year, comparable sales grew 2% as all geographies and all channels pumped positive. Importantly, we saw a sequential acceleration in revenue growth throughout the quarter as we continue to improve our inventory. In the first quarter, net revenue in the United States increased 13% from last year to $285 million, primarily driven by the progress we've made on our real estate expansion strategy. This includes five new and four repositioned boutiques in the United States in the last 12 months. In Canada, net revenue increased 2% from last year to $214 million.

Todd Ingledew: Comparable sales grew 2% as all geographies and all channels pumped positively.

Todd Ingledew: Importantly, we saw a sequential acceleration in revenue growth throughout the quarter as we continue to improve our inventory position.

Todd Ingledew: In the first quarter, net revenue in the United States increased 13% from last year to $285 million.

Todd Ingledew: Primarily driven by the progress we've made on our real estate expansion strategy. This includes five new and four reposition boutiques in the United States in the last 12 months. In Canada, net revenue increased 2% from last year to $214 million. Comparable sales growth was similar on both sides of the quarter. Net revenue in our retail channel was $358 million, an increase of 9% from the first quarter last year. This was driven primarily by the performance of our new and repositioned boutiques, which continued to generate better-than-expected payback periods. We also delivered positive sales growth in our comparable boutiques.

Todd Ingledew: Primarily driven by the progress we've made on our real estate expansion strategy.

Todd Ingledew: This includes five new and four repositioned boutiques in the United States in the last 12 months.

Todd Ingledew: In Canada, net revenue increased 2% from last year to $214 million.

Todd Ingledew: Comparable sales growth with similar on both sides. Net revenue in our retail channel was $358 million, an increase of 9% from the first quarter last year. This was driven primarily by the performance of our new and repositioned boutiques, which continue to generate better than expected payback periods. We also delivered positive sales growth in our comparable stores. In e-commerce, net revenue for the quarter was $141 million.

Todd Ingledew: Comparable sales growth was similar on both sides of the border.

Todd Ingledew: Net revenue in our retail channel was $358 million.

Todd Ingledew: An increase of 9% from the first quarter last year.

Todd Ingledew: This was driven primarily by the performance of our new and repositioned boutiques, which continue to generate better-than-expected payback periods.

Todd Ingledew: We also delivered positive sales growth in our comparable boutiques.

Todd Ingledew: In e-commerce, net revenue for the quarter was $141 million, an increase of 4% from last year. E-commerce continued to be impacted by a lower volume of markdown sales as a result of our improved inventory position compared to the first quarter last year. Importantly, sales trends accelerated throughout the first quarter as we received reorders and further optimized our inventory. We delivered gross profit of $220 million, an increase of 22% compared to the first quarter last year. where profit margin came in better than our expectations, increasing 510 basis points to 44% from 38.9% last year. The expansion was primarily driven by lower markdowns, IMU improvements, lower warehousing costs, and savings from our smart spending initiatives.

Todd Ingledew: An increase of 4% from last year, e-commerce continued to be impacted by a lower volume of markdown sales as a result of our improved inventory position compared to the first quarter of last year. However, importantly, sales trends accelerated throughout the first quarter as we received reorders and further optimized our inventory. We delivered gross profit of $220 million, an increase of 22% compared to the first quarter last year, where profit margin came in better than our expectations, increasing 510 basis points to 44% from 38.9% last year.

Todd Ingledew: In e-commerce, net revenue for the quarter was $141 million, an increase of 4% from last year.

Todd Ingledew: E-commerce continued to be impacted by a lower volume of markdown sales.

Todd Ingledew: As a result of our improved inventory position compared to the first quarter last year.

Todd Ingledew: Importantly, sales trends accelerated throughout the first quarter as we received reorders and further optimized our inventory.

Todd Ingledew: We delivered gross profit of $220 million, an increase of 22% compared to the first quarter last year.

Todd Ingledew: Our profit margin came in better than our expectations, increasing 510 basis points to 44% from 38.9% last year.

Todd Ingledew: The expansion was primarily driven by lower markdowns, IMU improvements, lower warehousing costs, and savings from our smart spending initiative. These improvements were partially offset by pre-opening lease amortization costs for our flagship beacons. SG&A expenses for the quarter were $176 million, up 15% from last year.

Todd Ingledew: The expansion was primarily driven by lower markdowns, IMU improvements, lower warehousing costs, and saving from our Smart Spending Initiative.

Todd Ingledew: These improvements were partially upset by pre-opening lease amortization costs for our pledge should be key. SGNA expenses for the quarter were $176 million, up 15% from last year. SG&A as percent of net revenue increased 220 basis points to 35.4%, compared to 33.2% last year. This was driven by investments in digital marketing to help protect and propel our brand, as well as infrastructure projects and technology initiatives to support our growth. Keeping a long-term focus, we continue to balance strategic investment in the future of the business with delivering significant margin improvement. Adjusted EBITDA in the first quarter was $54 million, an increase of 71% from last year.

Todd Ingledew: These improvements were partially offset by pre-opening lease amortization costs for our flagship boutique.

Todd Ingledew: SG&A expenses for the quarter were $176 million, up 15% from last year.

Todd Ingledew: SG&A, as a percent of net revenue, increased 220 basis points to 35.4%, compared to 33.2% last year. This was driven by investments in digital marketing to help protect and propel our brand, as well as infrastructure projects and technology initiatives to support our growth. Keeping a long-term focus, we continue to balance strategic investment in the future of the business with delivering significant margin improvement. Adjusted EBITDA in the first quarter was $54 million.

Todd Ingledew: SG&A as percent of net revenue increased 220 basis points to 35.4% compared to 33.2% last year.

Todd Ingledew: This was driven by investments in digital marketing to help protect and propel our brand, as well as infrastructure projects and technology initiatives to support our growth.

Todd Ingledew: Keeping a long-term focus, we continue to balance strategic investment in the future of the business with delivering significant margin improvement.

Todd Ingledew: An increase of 71% from last year. Just to leave it out, as a percent of net revenue inflected positively, expanding by 400 basic points to 10.8% compared to 6.8% last year. At the end of the first quarter, inventory was $397 million, down 18% from the end of the first quarter last year. Our teams have worked diligently to optimize the quantity and composition of our inventory, and we are pleased with our position. We had $101 million in cash at the end of the first quarter and zero drawn on our $300 million revolving credit facility.

Todd Ingledew: Adjusted EBITDA in the first quarter was $54 million, an increase of 71% from last year.

Todd Ingledew: Adjusted EBITDA as a percent of net revenue reflected positively, expanding 400 basis points to 10.8% compared to 6.8% last year. At the end of the first quarter, inventory was $397 million, down 18% from the end of the first quarter last year. Our teams have worked diligently to optimize the quantity and composition of inventory, and we're pleased with our position. We had $101 million in cash at the end of the first quarter, and zero drawn on our $300 million revolving credit facility.

Todd Ingledew: Adjusted EBITDA as a percent of net revenue inflected positively, expanding 400 basis points to 10.8% compared to 6.8% last year.

Todd Ingledew: At the end of the first quarter, inventory was $397 million, down 18% from the end of the first quarter last year.

Todd Ingledew: Our teams have worked diligently to optimize the quantity and composition of our inventory, and we are pleased with our position.

Todd Ingledew: We had $101 million in cash at the end of the first quarter and zero drawn on our $300 million revolving credit facility.

Todd Ingledew: We were made focused on maintaining a strong balance sheet and expected to see meaningful free capital generation starting in the back half of fiscal 2025, as our capital spend begins to normalize. Chifting to our outlook, based on quarter-day trends, net revenue in the second quarter of fiscal 2025 is expected to be in the range of $570 to $590 million. Representing an increase of 7 to 10%, compared to the second quarter last year. The acceleration of our store expansion strategy begins in Q2, with four new boutiques, including one that is already open in the quarter. We expect growth profit margin in the second quarter to increase by approximately 450 basis points, compared to the second quarter of fiscal 2024.

Todd Ingledew: We remain focused on maintaining a strong balance sheet and expect to see meaningful free cash flow generation starting in the back half of fiscal 2025 as our capital spend begins to normalize. Shifting to our outlook, based on quarterly date trends, net revenue in the second quarter of fiscal 2025 is expected to be in the range of 570 to $590 million, representing an increase of 7% to 10% compared to the second quarter last year.

Todd Ingledew: We remain focused on maintaining a strong balance sheet and expect to see meaningful free cash flow generation starting in the back half of fiscal 2025 as our capital spend begins to normalize.

Todd Ingledew: Shifting to our outlook, based on quarter date trends, net revenue in the second quarter of fiscal 2025 is expected to be in the range of $570 to $590 million, representing an increase of 7% to 10% compared to the second quarter last year.

Todd Ingledew: The acceleration of our store expansion strategy begins in Q2, with four new boutiques, including one that is already open in the quarter. We set growth profit margin in the second quarter to increase by approximately 450 basis points compared to the second quarter of fiscal 2024, driven by IMU improvements, lower warehousing costs, lower markdowns, and savings from our smart spending initiative.

Speaker Change: The acceleration of our store expansion strategy begins in Q2 with four new boutiques including one that is already opened in the quarter.

Speaker Change: We set gross profit margin in the second quarter to increase by approximately 450 basis points compared to the second quarter of fiscal 2024, driven by IMU improvement, lower warehousing costs, lower markdowns, and savings from our Smart Spending Initiative.

Todd Ingledew: Driven by IMU improvement, lower warehousing costs, lower markdown, and savings from our smart spending initiative. We forecast SG&A as a percent of net revenue to increase by approximately 100 to 150 basis points in the second quarter compared to the second quarter of fiscal 2024. Driven by investments in our digital business and technology initiatives. In addition to our further optimized inventory position, these investments are also contributing to an acceleration in e-commerce revenue. For the full year of fiscal 2025, we continue to expect net revenue in the range of $2.52, representative growth of 8-12% with fiscal 2024, or growth of 10-14% excluding the 53rd week last year.

Todd Ingledew: We forecast SG&A as a percent of net revenue to increase by approximately 100 to 150 basis points in the second quarter compared to the second quarter of fiscal 2024, driven by investments in our digital business and technology initiatives. In addition to our further optimized inventory position, these investments are also contributing to an acceleration in e-commerce revenue. For the full year of fiscal 2025, we continue to expect net revenue in the range of $2.52 to $2.62 billion.

Speaker Change: We forecast SG&A as a percent of net revenue to increase by approximately 100 to 150 basis points in the second quarter compared to the second quarter of fiscal 2024.

Speaker Change: Driven by investments in our digital business and technology initiatives.

Speaker Change: In addition to our further optimized inventory position, these investments are also contributing to an acceleration in e-commerce revenue.

Speaker Change: For the full year of fiscal 2025, we continue to expect net revenue in the range of $2.52 to $2.62 billion.

Todd Ingledew: Representing growth of 8 to 12 percent from fiscal 2024 or growth of 10 to 14 percent, excluding the 53rd week last year. Our net revenue acceleration in the back half reflects the anticipated pace of our boutique openings and increased momentum in our e-commerce business. We are on track to open 11 to 13 new boutiques and to reposition three to four boutiques this fiscal year. This includes our new Chicago flagship and two Manhattan flagship repositionings. We anticipate total square footage growth of 20 to 25%, including approximately 50% growth in the United States.

Speaker Change: Representing growth of 8 to 12% for the fiscal 2024 or growth of 10 to 14% excluding the 53rd week last year.

Todd Ingledew: Our net revenue acceleration in the back half reflects the anticipated cadence of our boutique openings and increased momentum in our e-commerce business. We are on track to open 11-13 new boutiques and to reposition 3-4 boutiques this fiscal year. This includes our new Chicago flagship and two Manhattan flagship repositions. We anticipate total square footage growth of 20-25%, including approximately 50% growth in the United States. In e-commerce, we're encouraged by the momentum we've already started to see, and we expect trends to continue to accelerate through the back half of the year with our inventory optimized. And as we open boutiques, launch our enhanced website, and refine our digital marketing strategy.

Speaker Change: Our net revenue acceleration in the back half reflects the anticipated cadence of our boutique openings and increased momentum in our e-commerce business.

Speaker Change: We are on track to open 11 to 13 new boutiques and to reposition 3 to 4 boutiques this fiscal year.

Speaker Change: This includes our new Chicago flagship and two Manhattan flagship repositions.

Speaker Change: We anticipate total square footage growth of 20-25%, including approximately 50% growth in the United States.

Todd Ingledew: In e-commerce, we're encouraged by the momentum we've already started to see, and we expect trends to continue to accelerate through the back half of the year, as we optimize our inventory, launch our enhanced website, and refine our digital marketing strategy. We continue to forecast meaningful gross profit margin expansion for the year of 400 to 450 basis points compared to fiscal 2024. And we also continue to expect SG&A as a percent of net revenue to be approximately flat to down 50 basis points compared to fiscal 2024.

Speaker Change: In e-commerce, we're encouraged by the momentum we've already started to see, and we expect trends to continue to accelerate through the back half of the year. With our inventory optimized, and as we open boutiques, launch our enhanced website, and refine our digital marketing strategy.

Todd Ingledew: We continue to forecast meaningful growth, profit margin expansion for the year of 400 to 450 basis points compared to fiscal 2024. And we also continue to expect SNA as a percent of net revenue to be approximately flat to down 50 basis points compared to fiscal 2024. Our outlook for adjusted EBITDA as a percentage of net revenue in fiscal 2025 remains 400 to 500 basis points of expansion, reflecting the leverage across the range of our net revenue outlook.

Speaker Change: We continue to forecast meaningful gross profit margin expansion for the year of 400 to 450 basis points compared to fiscal 2024.

Speaker Change: And we also continue to expect SG&A as a percent of net revenue to be approximately flat to down 50 basis points compared to fiscal 2024.

Todd Ingledew: Our outlook for adjusted EBITDA as a percent of net revenue in fiscal 2025 remains 400 to 500 basis points of expansion, reflecting the leverage across the range of our net revenue outlook. We expect capital expenditures for fiscal 2025 of approximately $230 million.

Speaker Change: Our outlook for adjusted EBITDA as a percent of net revenue in fiscal 2025 remains 400 to 500 basis points of expansion, reflecting the leverage across the range of our net revenue outlook.

Todd Ingledew: We expect capital expenditures with fiscal 2025 will approximately $230 million. This includes $190 million related to investments in new and reposition boutiques, fiscal 2025, and the start of construction for boutiques opening in relief fiscal 2026. This also includes $40 million primarily related to the expansion of our distribution center network in Vancouver.

Todd Ingledew: This includes $190 million related to investments in new and repositioned boutiques in fiscal 2025 and the start of construction for boutiques opening in early fiscal 2026. This also includes $40 million primarily related to the expansion of our distribution center network in Vancouver. In closing, we're extremely pleased with the progress we're making across our business. We have optimized our inventory position, our newest boutiques continue to deliver strong revenue growth and attractive payback periods, and our planned store openings are on schedule.

Speaker Change: We expect capital expenditures for fiscal 2025 of approximately $230 million.

Speaker Change: This includes $190 million related to investments in new and repositioned boutiques in fiscal 2025 and the start of construction for boutiques opening in early fiscal 2026.

Speaker Change: This also includes $40 million primarily related to the expansion of our distribution center network in Vancouver.

Todd Ingledew: In closing, we're extremely pleased with the progress we're making across our business. We have optimized our inventory position. Our newest boutiques continue to deliver strong revenue growth and attractive payback periods. And our planned store openings are on schedule. We have multiple initiatives underway to continue to re-accelerate trends in our digital channel. And we have started to see meaningful margin improvement and are on track to deliver 400 to 500 basis points of adjusted EBITDA margin expansion this year. For the fiscal year, the combination of the anticipated revenue acceleration and margin expansion will nearly double our earnings.

Speaker Change: In closing, we're extremely pleased with the progress we're making across our business. We have optimized our inventory position, our newest boutiques continue to deliver strong revenue growth and attractive payback periods, and our planned store openings are on schedule.

Todd Ingledew: We have multiple initiatives underway to continue to reaccelerate trends in our digital channel, and we have started to see meaningful margin improvement and are on track to deliver 400 to 500 basis points of adjusted EBITDA margin expansion this year. For the fiscal year, the combination of the anticipated revenue acceleration and margin expansion will nearly double our earnings. We remain focused on executing across our growth pillars and investing in the infrastructure that will allow us to deliver consistent revenue and earnings growth over the long term. With that, I'll now turn the call back to Jennifer.

Speaker Change: We have multiple initiatives underway to continue to reaccelerate trends in our digital channel, and we have started to see meaningful margin improvement and are on track to deliver 400 to 500 basis points of adjusted EBITDA margin expansion this year.

Speaker Change: For the fiscal year, the combination of the anticipated revenue acceleration and margin expansion will nearly double our earnings.

Todd Ingledew: We remain focused on executing across our growth pillars and investing in the infrastructure that will allow us to deliver consistent revenue and earnings growth over the long term.

Speaker Change: We remain focused on executing across our growth pillars and investing in the infrastructure that will allow us to deliver consistent revenue and earnings growth over the long term.

Jennifer Wong: With that, I'll now turn the call back to Jennifer. Thanks, Todd. Our top line momentum has continued so far into Q2, and we're encouraged by the positive response to both our new styles and client favorites. We're pleased with the progress we've made to optimize our inventory position, allowing us to return to our proven operating model. I'm optimistic about the live ahead in fiscal 2025 as we work on advancing our primary growth levers: real estate expansion, e-commerce acceleration, and growing our brand awareness. First, the performance of our new boutiques continues to beat our own expectations, and our store productivity is among the best in the industry.

Jennifer Wong: Thanks, Todd. Our top line momentum has continued so far into Q2, and we're encouraged by the positive response to both our new styles and client favorites. We're pleased with the progress we've made to optimize our inventory position, allowing us to return to our proven operating model. I'm optimistic about what lies ahead in fiscal 2025 as we work on advancing our primary growth leverage.

Speaker Change: With that, I'll now turn the call back to Jennifer.

Jennifer Wong: Thanks, Todd.

Jennifer Wong: Our top-line momentum has continued so far into Q2, and we're encouraged by the positive response to both our new styles and client favorites. We're pleased with the progress we've made to optimize our inventory position, allowing us to return to our proven operating model.

Speaker Change: I'm optimistic about what lies ahead in fiscal 2025 as we work on advancing our primary growth levers, real estate expansion, e-commerce acceleration, and growing our brand awareness.

Jennifer Wong: Real Estate Expansion, E-commerce Acceleration, and Growing Our Brand Awareness. First, the performance of our new boutiques continues to beat our own expectations. And our store productivity is among the best in the industry. This is why we're particularly excited about the extraordinary pipeline of boutiques opening this year, representing total square footage growth in the United States of approximately 50 percent. Our teams have been working incredibly hard, and our openings are on track. This includes a total of 12 new and repositioned boutiques expected to open in just the next five months by the end of the third quarter.

Speaker Change: First, the performance of our new boutiques continues to beat our own expectations.

Jennifer Wong: This is why we're particularly excited about the extraordinary pipeline of boutiques opening this year, representing total square footage growth in the United States of approximately 50%. Our teams have been working incredibly hard, and our openings are on track. This includes a total of 12 new and reposition boutiques expected to open in just the next five months by the end of the third quarter. The increased pace of opening is expected to fuel retail sales growth and drive incremental e-commerce sales as we expand into new markets. In e-commerce, the optimization of our inventory has started to generate accelerated sales growth.

Speaker Change: And our store productivity is among the best in the industry.

Speaker Change: This is why we're particularly excited about the extraordinary pipeline of boutiques opening this year, representing total square footage growth in the United States of approximately 50 percent.

Speaker Change: Our teams have been working incredibly hard, and our openings are on track.

Speaker Change: This includes a total of 12 new and repositioned boutiques expected to open in just the next five months by the end of the third quarter.

Jennifer Wong: The increased pace of openings is expected to fuel retail sales growth and drive incremental e-commerce sales as we expand into new markets. For e-commerce, the optimization of our inventory has started to generate accelerated sales growth. Additionally, our strategic focus on digital marketing, technology, omni-channel, and international further supports growth in our digital business. As many of you know, after 40 years in business, we're very well-known and loved in Canada, and we're well on our way to replicating that love in the United States.

Speaker Change: The increased pace of openings is expected to fuel retail sales growth and drive incremental e-commerce sales as we expand into new markets.

Speaker Change: In e-commerce, the optimization of our inventory has started to generate accelerated sales growth. Additionally, our strategic focus on digital marketing, technology, omni-channel, and international further supports growth in our digital business.

Jennifer Wong: Additionally, our strategic focus on digital marketing, technology, omnichannel, and international further supports growth in our digital business. As many of you know, after 40 years in business, we're very well known and loved in Canada, and we're well on our way to replicating that love in the United States. We currently have just 52 boutiques in the US and believe the opportunity to grow our brand remains tremendous. We're confident in our ability to attract new clients to Erizia, while deepening our current client's affinity for the brand and are much loved every day luxury experience. In closing, we're confident that our real estate expansion strategy, digital initiatives, and growing brand awareness will enable us to deliver consistent, profitable growth and enhance shareholder value for years to come.

Speaker Change: As many of you know, after 40 years in business, we're very well-known and loved in Canada, and we're well on our way to replicating that love in the United States.

Jennifer Wong: We currently have just 52 boutiques in the U.S. and believe the opportunity to grow our brand remains tremendous. We're confident in our ability to attract new clients to Aritzia while deepening our current client's affinity for the brand and our much-loved everyday luxury experience. In closing, we're confident that our real estate expansion strategy, digital initiatives, and growing brand awareness will enable us to deliver consistent, profitable growth and enhance shareholder value for years to come.

Speaker Change: We currently have just 52 boutiques in the U.S. and believe the opportunity to grow our brand remains tremendous. We're confident in our ability to attract new clients to Aritzia while deepening our current clients' affinity for the brand and our much-loved everyday luxury experience.

Speaker Change: In closing, we're confident that our real estate expansion strategy, digital initiatives, and growing brand awareness will enable us to deliver consistent profitable growth and enhance shareholder value for years to come. Thank you.

Jennifer Wong: Thank you.

Operator: And with that operator, let's now open up the line for questions. Thank you. You join the question, Q. You may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speaker phone, please pick up your handslet before pressing any key. To withdraw your question, please press star, then two.

Jennifer Wong: Thank you. And with that, Operator, let's now open up the line for questions. [inaudible] To join the question queue, you may first press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys.

Speaker Change: And with that, Operator, let's now open up the line for questions.

Speaker Change: Thank you.

Speaker Change: To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2.

Operator: To withdraw your question, please press star, then two. Please limit yourself to one question and a related follow-up before getting back in the queue. The first question comes from Mark Petrie with CIBC. Please go ahead. Yeah, thanks. And good afternoon.

Operator: Please limit yourself to one question and a related follower to follow up before getting back in the queue.

Speaker Change: Please limit yourself to one question and a related follow-up before getting back in the queue.

Mark Petrie: First question comes from Mark Pichy, the CIBC. Where do you go ahead? Yeah, thanks. And good afternoon. I wanted to just ask about the performance of the new stores in Jennifer. I think you called out at the Boca Raton location that 60% of the customers were new to the Erizia brand. I just want to make sure I had that right.

Speaker Change: The first question comes from Mark Petrie with CIBC. Please go ahead.

Mark Robert Petrie: I wanted to just ask about the performance of the new stores. And Jennifer, I think you called out at the Boca Raton location that 60 percent of the customers were new to the Aritzia brand. I just want to make sure I got that right. And then also, if you could just comment, like, how does that compare to what you've seen from your other new stores in new markets over the last, you know, two or three years? You did hear me right.

Mark Robert Petrie: Thanks, and good afternoon. I wanted to just ask about the performance of the new stores, and Jennifer, I think you called out at the Boca Raton location that 60%

Jennifer Wong: And then also, if you could just comment like how does that compare to what you've seen from your other new stores in new markets over the last two or three years? You did hear me right. In that first week, our Boca Raton stores 60% of the clients coming through, being new clients to Erizia. We're seeing that this is consistent with our recent store opening. For instance, the last one that we opened in Sacramento at Galleria Roseville in roughly the first month was also 50% of the clients being new. I think since Boca Raton has opened, it's around the 50% market as well.

Mark Robert Petrie: of the customers were new to the Aritzia brand. I just wanna make sure I have that right. And then also, if you could just comment, like how does that compare to what you've seen from your other new stores in new markets over the last two or three years?

Jennifer Wong: In that first week, our Boca Raton store saw 60% of the clients coming through being new clients to Aritzia. We're seeing that this is consistent with our recent store openings. For instance, the last one that we opened in Sacramento at Galleria Roseville in roughly the first month, 50% of the clients were new. I think since Boca Raton opened, it's around the 50% mark as well. What we're thrilled about is that this is exciting for our growth in the U.S. as we continue to open stores in new markets. It's very encouraging that our stores continue to be our number one client acquisition vehicle. Okay, thanks for that.

Mark Robert Petrie: Thank you.

Mark Robert Petrie: You did hear me right. In that first week, our Boca Raton store saw 60% of the clients coming through being new clients to Aritzia.

Mark Robert Petrie: We're seeing that this is consistent with our recent store openings. For instance, the last one that we opened in Sacramento at Galleria Roseville in roughly the first month was also 50% of the clients being new. I think since Boca Raton has opened, it's around the 50% mark as well. So what we're thrilled about is that this is exciting for our growth in the U.S. as we continue to open stores in new markets. It's very encouraging that our stores continue to be our number one client acquisition vehicle.

Mark Petrie: So what we're thrilled about is that this is exciting for our growth in the US as we continue to open stores in new markets. It's very encouraging that our stores continue to be our number one client acquisition vehicle. Okay. Thanks for that.

Mark Robert Petrie: And if I could just follow up on the sales momentum, I think the Q2 guidance is 7% to 10% growth. You've got some additional new stores coming into the network during the quarter. The Q1 growth was up 8%, and you were calling out how the trends accelerated through Q1. So I'm just hoping you could square that up, and is that just sort of pointing to the upper end of the range? Is the lower end just a sort of conservatism?

Todd Ingledew: And if I could just follow up on the sales momentum, I think the Q2 guidance is seven to ten percent growth. You've got some additional new stores coming into the network during the quarter. The Q1 growth was up eight percent, and you were calling out how the trends accelerated through Q1. So I'm just hoping you could square that up, and is that just sort of pointing to the upper end of the range? Is the lower end just sort of conservatism? Maybe Todd, you could just elaborate on the Q2 sales guidance. Thanks. Yeah. Thank you, Mark.

Speaker Change: Okay, thanks for that. And if I could just follow up on the sales momentum, I think the Q2 guidance...

Speaker Change: seven to ten percent growth.

Speaker Change: You've got some additional new stores coming into the network during the quarter. The Q1 growth was up 8% and you were calling out how the trends accelerated.

Speaker Change: through Q1. So I'm just hoping you could square that up and is that just sort of pointing to the upper end of the range? Is the lower end just sort of conservatism? Maybe Todd, you could just elaborate on the Q2 sales guidance. Thanks.

Todd Ingledew: Maybe, Todd, you could just elaborate on the Q2 sales guidance. Thanks. Yeah, thanks, Garth.

Todd Ingledew: So, as you said, the top end of our guidance range is close to the trend that we saw as we exited the first quarter in May. And given that there is a large portion of the quarter still in front of us, including launch and fall, we just felt it was prudent to have a range of scenarios within the guidance. And the stores that we're opening this quarter are predominantly centered around the end of July and the beginning of August.

Todd Ingledew: So, as you said, the top end of our guidance range is close to the trend that we saw as we exited the first quarter in May. And given that there is a large portion of the quarter still in front of us, including launch and fall. We just felt it was prudent to have a range of scenarios within the guidance, and the stores that were opening this quarter are predominantly centered around the end of July and the beginning of August. So we don't have a full quarter of those new stores. But, you know, we are extremely pleased with the acceleration that we saw throughout the first quarter and that the momentum has continued into the second quarter thus far.

Speaker Change: So, as you said, the top end of our guidance range is close to the trend that we saw as we exited the first quarter in May.

Speaker Change: [inaudible]

Speaker Change: And, you know, given the

Speaker Change: There is a large portion of the quarter still in front of us.

Speaker Change: including launch and fall. We just felt it was prudent to have a range of scenarios within the guidance.

Speaker Change: And the stores that we're opening this quarter...

Todd Ingledew: So, you know, we don't have a full quarter of those new stores, but, you know, we are extremely pleased with the acceleration that we saw throughout the first quarter and that that momentum has continued into the second quarter thus far. Okay, understood. Appreciate all the comments and all the best. The next question comes from Luke Hannan with CannaCode continuity.

Speaker Change: are predominantly centered around the end of July and the beginning of August . So, you know, we don't have a full quarter of those new stores.

Speaker Change: You know, we are extremely pleased with the acceleration that we saw throughout the first quarter and that that momentum has continued into the second quarter thus far.

Mark Petrie: Okay. Understood.

Mark Petrie: Appreciate all the comments, and all the best.

Speaker Change: Okay, understood. Appreciate all the comments and all the best.

Lou Cannon: The next question comes from Lou Cannon with Can a continuity. Please go ahead. Thanks. Good afternoon. I wanted to ask about digital marketing and specifically the campaigns that you've rolled out so far. Can you share with us any specifics on certain KPIs like return on ads, Ben? How is that unfolding relative to your expectations, maybe conversion as well, just to give us a sense of the progress there? Yeah, we just started our digital marketing at the pretty much at the beginning of this year. We experimented a little bit in the last quarter of last fiscal year, but we're really taking a meaningful approach this year.

Luke Hannan: Please go ahead. Thanks. Good afternoon.

Speaker Change: The next question comes from Luke Hannan with CannaCode Genuity. Please go ahead.

Luke Hannan: I wanted to ask about digital marketing and specifically the campaigns that you've rolled out so far. Can you share with us any specifics on certain KPIs like return on ad spend? How is that unfolding relative to your expectations, maybe conversion as well, just to give us a sense of the progress there?

Luke Hannan: Thanks. Good afternoon. I wanted to ask about digital marketing and specifically the campaigns that you've rolled out so far. Can you share with us any specifics on certain KPIs like return on ad spend? How is that unfolding relative to your expectations, maybe conversion as well, just to give us a sense of the progress there?

Jennifer Wong: Yeah, we just started our digital marketing pretty much at the beginning of this year. We experimented a little bit in the last quarter of last fiscal year, but we're really taking a meaningful approach this year. It's still overall, I want to remind you, it's still a low single-digit percentage spend of our overall revenue. What we're doing is we're paid influencer, paid search, paid social, and affiliate marketing, all of these in combination.

Luke Hannan: Yeah, we just started our digital marketing pretty much at the beginning of this year.

Luke Hannan: We experimented a little bit in the last quarter of last fiscal year, but we're really taking a meaningful approach this year.

Jennifer Wong: It's still overall, I want to remind you, is still overall a low single-digit percentage spend of our overall revenue. What we're doing is we're paid influencer, paid search, paid social, and affiliate marketing, all of these in combination. We're starting to see positive results to our business, certainly driven traffic in the last quarter quite meaningfully. We're seeing our conversion remaining consistent. And we're seeing our e-commerce accelerated throughout the quarter. In addition to the product optimization we did, we do believe the digital marketing was accreted to that. So certainly, our early indicators show that the ROAS is higher than industry.

Luke Hannan: It's still overall, I want to remind you, it's still overall a low single-digit percentage spend of our overall revenue. What we're doing is we're paid influencer, paid search, paid social, and affiliate marketing, all of these in combination. We're starting to see positive results.

Jennifer Wong: We're starting to see positive results for our business. Certainly, it's driven traffic in the last quarter quite meaningfully. We're seeing our conversion remain consistent, and we're seeing our e-commerce accelerate throughout the quarter. In addition to the product optimization we did, we do believe the digital marketing was accretive to that.

Luke Hannan: to our business. Certainly, it's driven traffic in the last quarter quite meaningfully. We're seeing our conversion remaining consistent.

Luke Hannan: So, and we're seeing our e-commerce accelerated throughout the quarter.

Luke Hannan: In addition to the product optimization we did, we do believe the digital marketing was accretive to that.

Jennifer Wong: Certainly, our early indicators show that the ROAS is higher than the industry average. We're pleased to see that on some of the basic metrics, we're performing better than our industry is showing. It's still early days, though.

Luke Hannan: So, certainly, our early indicators show that the ROAS is higher than industry, so we're pleased to see that on some of the basic metrics that we're performing better than our industry is showing. And it's still early days, but we're putting in place different metrics for us to monitor and calibrate our digital marketing. It'll probably take the better part of the year to get it exactly where we want it because it does take time for the calibration to take place.

Lou Cannon: So we're pleased to see that on some of the basic metrics, that we're performing better than our industry is showing. And it's still early days that we're putting in place different metrics for us to monitor and calibrate our digital marketing. It'll probably take the better part of the year to get it exactly where we wanted because it does take time for the calibration to take place. But we're very encouraged with what we're seeing so far. Thank you. Very helpful. Thanks.

Jennifer Wong: We're putting in place different metrics for us to monitor and calibrate our digital marketing. It'll probably take the better part of the year to get it exactly where we want it because it does take time for the calibration to take place. We're very encouraged with what we're seeing so far.

Luke Hannan: But we're very encouraged with what we're seeing so far.

Todd Ingledew: And then I wanted to follow up on the gross margin performance in the quarter. It was, Todd, slightly ahead of expectations. Curious to know if that's entirely driven by better than expected leverage on fixed costs because of the sales performance, or if there's anything else to call out there. Then maybe I'll just squeeze in if you can share your thoughts on freight as well, and if that's appropriately reflected in the margin guidance. Yeah, no problem.

Lou Cannon: And then I wanted to follow up on the gross margin performance in the quarter.

Speaker Change: Very helpful. Thanks. And then I wanted to follow up on the gross margin performance.

Todd Ingledew: It was Todd slightly ahead of expectations.

Todd Ingledew: Curious to know if that's entirely driven by better-than-expected leverage on fixed costs because of the sales performance, or if there's anything else to call out there. Then maybe I'll just squeeze in if you can share your thoughts on freight as well. And if that's appropriately reflected in the margin guidance for the year. Yeah, no problem. So there are two factors that related to the beat in the quarter from a gross profit perspective. So that 510 basis points of expansion, being higher than what we had expected by both 60 basis points. And it was, as you said, one from the leverage from the higher sales and expected in the month of May.

Speaker Change: In the quarter, it was, Todd, slightly ahead of expectations. Curious to know if that's entirely driven by better-than-expected leverage on fixed costs because of the sales performance, or if there's anything else to call out there. Then maybe I'll just squeeze in if you can share your thoughts on freight as well, and if that's appropriately reflected in the margin guidance for the year.

Todd Ingledew: So there are two factors that relate to the beat in the quarter from a gross profit perspective. So that's 510 basis points of expansion, which is higher than what we had expected by about 60 basis points. And it was, as you said, one from the leverage from higher sales than expected in the month of May. But it was also from a stronger than anticipated tailwind from lower markdowns. So this improved inventory position is not only driving sales but also supporting lower markdowns.

Speaker Change: Yeah, no problem. So there are two factors that related to the beat in the quarter from a gross profit perspective. So that's 510 basis points of expansion being higher than what we had expected by about 60 basis points. And it was, as you said, one, from the leverage from the higher sales than expected in the month of May. But it was also from stronger than anticipated tailwind from lower markdowns.

Todd Ingledew: But it was also from stronger-than-anticipated tailwind from lower markdowns. So that improved inventory position is not only driving sales, but also supporting lower markdowns. And so that strong full price selling that we saw, particularly in May, helped us incrementally as far as the beat goes in gross profit.

Speaker Change: So that improved inventory position is not only driving sales

Todd Ingledew: And so that strong full price selling that we saw, particularly in May, helped us incrementally as far as the beat goes in gross profit. And then from a freight perspective, our sea freight rates are fairly locked in. They don't have a large variance attached to them.

Speaker Change: Lower markdowns and and so that strong full price selling that we saw particularly in May helped us Incrementally as far as the beat goes in gross profit

Todd Ingledew: And then, from a freight perspective, our seed frame rates are fairly locked in. They don't have a large variance attached to them. It's really the air freight. And we are anticipating higher air freight this year, both from a price perspective or a cost perspective. And also from a volume, will be using more air freight this year. As you know, we're back to our normal standard operating model where you know air freight is used to get reorders in as quickly as possible. So we will see an elevation and air freight for the year, but it's all contemplated in our guidance.

Speaker Change: And then from a freight perspective.

Speaker Change: [inaudible]

Speaker Change: Our seafreight rates...

Todd Ingledew: It's really air freight, and we are anticipating higher air freight this year, both from a price perspective or a cost perspective and also from a volume perspective. We'll be using more air freight this year as we're back to our normal standard operating model where air freight is used to get reorders in as quickly as possible. So we will see an increase in air freight for the year, but it's all contemplated in our guidance. Very helpful, thank you very much.

Speaker Change: are fairly locked in. They don't have a large variant attached to them. It's really the air freight.

Speaker Change: We are anticipating higher air freight this year, both from a price perspective or a cost perspective, and also from a volume we'll be using more air freight this year as, you know, we're back to our normal standard operating model where, you know,

Speaker Change: Air freight is used to get reorders in as quickly as possible, so we will see an elevation in air freight for the year, but it's all contemplated in our guidance.

Lou Cannon: Very helpful.

Lou Cannon: Thank you very much.

Speaker Change: Very helpful. Thank you very much.

Irene Nattel: Next question comes from Irene Natel with RBC Capital Markets. Please go ahead. Thanks. First session, you know, we've been talking a lot about newness.

Irene Ora Nattel: The next question comes from Irene Nattel with RBC Capital Markets. Please go ahead. Thanks. First question: you know, we've been talking a lot about newness. It sounds as though you're really pleased with how that played out in the quarter, but I was wondering if you could provide just a little bit more color on the types of newness that you're seeing and what we should be expecting as we move through the summer into fall

Speaker Change: The next question comes from Irene Nattel with RBC Capital Markets. Please go ahead.

Jennifer Wong: It sounds as though you're really pleased with how that played out in the quarter, but wondering if you could provide just a little bit more color on the types of newness that you're seeing and what we should be expecting to move through the summer into fall. Yeah, we're absolutely back to our historical balance of newness versus client favorites. We're back to our proven operating model. As we do with every season, we introduce new items. I won't call out specifically the items because you'll see in our emails when we're introducing the new items. There's probably too many to mention.

Irene Ora Nattel: Thanks. First question, you know, we've been talking a lot about newness. It sounds as though you're really pleased with how that played out in the quarter, but wondering if you could provide just a little bit more color on the types of newness that you're seeing and what we should be expecting as we move through the summer into fall.

Irene Ora Nattel: Yeah, we're absolutely back to our historical balance of newness versus client favorites. We're back to our proven operating model. As we do with every season, we introduce new items. I won't call out the specific items because you'll see in our emails when we're introducing the new items. There are probably too many to mention, but you'll see in our emails when we announce the newness and the new items.

Irene Ora Nattel: Yeah, we're absolutely back to our historical balance of newness versus client favorites. We're back to our proven operating model.

Irene Ora Nattel: As we do with every season, we introduce new items.

Irene Ora Nattel: I won't call out specifically the items because you'll see in our emails when we're introducing the new items. There's probably too many to mention, but you'll see in our emails when we announce the newness.

Jennifer Wong: But you'll see in our emails when we announce the newness and the new items. You'll see when we get them back in stock and all of these efforts have put us back in a position where we are quite pleased with where we're sitting with our product and our inventory situation. As we receive reorders throughout the quarter, this further optimizes our inventory. And as we said, the continuing refinement of our inventory of expected sales positively has failed accelerated quarter. And so, you know, all in all, we're quite pleased with the quantity and the composition of our product and our inventory.

Jennifer Wong: You'll see when we get them back in stock. And all of these efforts have put us back in a position where we are quite pleased with where we are sitting with our product and our inventory situation. As we received reorders throughout the quarter, this further optimized our inventory. And as we said, the continued refinement of our inventory impacted sales positively as sales accelerated throughout the quarter. All in all, we're quite pleased with the quantity and the composition of our product and our inventory.

Irene Ora Nattel: And the new items, you'll see when we get them back in stock. And all of these efforts have put us back in a position where we are quite pleased with where we're sitting with our product and our inventory situation.

Irene Ora Nattel: As we received reorders throughout the quarter, this further optimized our inventory, and as we said, the continued refinement of our inventory expected sales positively as sales accelerated throughout the quarter.

Irene Ora Nattel: And so, you know, all in all, we're quite pleased with the quantity and the composition of our product and our inventory, and I would say that all of the conversation that we've had about product and inventory in the past year is behind us.

Jennifer Wong: I would say that all of the conversation that we've had about product and inventory in the past year is behind us. That's great to hear. Thank you. So, in light of the good momentum that we're seeing, I guess one of the questions is, why no upward nudging of the guidance for F-25 and what will it take to get there? Yeah, I'll take that one.

Irene Nattel: And I would say that all of the conversation that we've had about product and inventory in the past year is behind us. That's crazy, or thank you.

Todd Ingledew: So, in light of the good momentum that we're seeing, I guess one of the questions is why no upward nudging of the guidance for Act 25, and what will it take to get there? Yeah, I'll take that one. In terms of the guidance, Irene, we are pleased with the momentum that we're seeing and that we experience through the back part of Q1 and into the first part of this quarter. However, Q1 represents approximately 20% of our revenue, so we still have 80% of the year to go; so still a long way to go. And given the dynamic macro-environment, again, we just believe it's prudent to reaffirm our annual guidance.

Speaker Change: That's great to hear. Thank you. So, in light of the good momentum that we're seeing, I guess one of the questions is, why no upward nudging of the guidance for F-25, and what will it take to get there?

Todd Ingledew: In terms of the guidance, you know, Irene, we are pleased with the momentum that we were seeing and that we experienced through the back part of Q1 and into the first part of this quarter. However, Q1 represents approximately 20% of our revenue, so we still have 80% of the year to go, so we still have a long way to go. And given the dynamic macro environment, again, you know, we just believe it's prudent to reaffirm our annual guidance, and, you know, as we move through the quarters this year, we will revisit that. That's great.

Speaker Change: Yeah, I'll take that one. In terms of the guidance.

Speaker Change: You know, Irene, we are pleased with the momentum that we're seeing and that we experienced through the back part of Q1 and into the first part of this quarter. However, Q1 represents approximately 20% of our revenue, so we still have 80% of the year to go, so still a long way to go. And given the dynamic macro environment, again, we just believe it's prudent to reaffirm our annual guidance.

Irene Nattel: And as we move through the quarters this year, we will revisit that. That's great. Understood. Thank you.

Speaker Change: You know, as we move through the quarters this year, we will revisit that.

Speaker Change: That's great. Understood. Thank you.

Brian Morrison: The next question comes from Brian Morrison.

Irene Ora Nattel: Understood. Thank you. The next question comes from Brian Morrison, TD Cohen. Please go ahead.

Brian Morrison: It's T.D. Cohen. Please go ahead. Oh, thanks very much. I want to go back to the question that had Marquette on New Store Productivity because it's a big driver here. So just over the past year, I wonder if the new norm is a payback less than one year. Are the US stores in local currency? Are they tracking well ahead of the $1,000 of sales per square foot in Canadian dollars? And if so, by how much? And is your target this year that 60% of revenue growth is to come from new stores in Reynoldsville? So, yes, is the answer to the last question.

Speaker Change: The next question comes from Brian Morrison, T.D. Cohen. Please go ahead.

Brian Morrison: Thanks very much. I want to go back to the question that had Mark out on new store productivity, because it's a big driver here. So just over the past year, I wonder if the new norm is a payback less than one year. Are the U.S. stores, and local currency, are they tracking well ahead of the $1,000 of sales per square foot in Canadian dollars? And if so, by how much?

Speaker Change: Thanks very much.

Speaker Change: I want to go back to the question that had Mark had on new store productivity because it's a big driver here.

Brian Morrison: So, just over the past year, I wonder if the new norm is a payback less than one year. Are the U.S. stores and local currency, are they tracking well ahead of the $1,000 of sales per square foot in Canadian dollars, and if so, by how much? And is your target this year that 60% of revenue growth is to come from new stores and rentals still?

Todd Ingledew: And is your target this year still that 60% of revenue growth is to come from new stores and rentals? So yes is the answer to the last question. We still anticipate that 60% will come from the new stores and the expansions and repositioning. And the inline stores in the United States, so our standard store of 8 to 10,000 square feet, the new store, they are paying back in less than 12 months. And they are exceeding $1,000 a square foot, and that's why they're exceeding our payback expectations of 12 to 18 months.

Jennifer Wong: We still anticipate that 60% will come from the new stores and the expansions and repositioning. And the inline stores in the United States, so our standard store of 8 to 10,000 square feet, new store, they are paying back in less than 12 months. And they are exceeding the $1,000 of square foot. And that's why they're exceeding our payback expectations of 12 to 18 months.

Brian Morrison: So yes is the answer to the last question. We still anticipate that 60% will come from the new stores and the expansions and repositions. And the in-line stores.

Brian Morrison: In the United States, so our standard store of 8,000 to 10,000 square feet, new store, they are paying back in less than 12 months.

Brian Morrison: And they are exceeding the $1,000 a square foot, and that's why they're exceeding our payback expectations of 12 to 18 months. And then we don't provide specific detail around sales per square foot, so I'll leave it at that.

Brian Morrison: And then we don't provide through specific detail around sales per square foot, but I'll just leave it at that. Okay.

Todd Ingledew: And then we don't provide specific detail around sales per square foot, so I'll leave it at that. Okay, and then I guess, Todd, if I can have a follow-up here. If these encouraging trends continue throughout the second half, as you're saying, through the important holiday season, you're going to have some pretty significant net cash come year-end, and you're going to have declining capex next year. I'm wondering if an active NCIB is at the top of your capital priorities or how you're thinking about that. Yeah, 100%.

Todd Ingledew: And then I guess, Todd, if I can have a follow-up here, if these encouraging trends continue throughout the second half, as you're saying, through the important holiday season, you're going to have some pretty significant net cash come year-end. And you're going to have declining cap-back next year. I'm wondering if an NCIB is at the top of your capital priorities or how you're thinking about that? Yeah, 100%. After taking CapEx and investment in the business into consideration, our next priority, as we've shown in the past, is to buy back shares. And we have been inactive thus far on the NCIB this year, and that's clearly related to the exit cash position and the fact that we have all of these investments that we're making in the business that are delivering meaningful returns, and we want to focus on that.

Brian Morrison: Okay. And then I guess, Todd, if I can have a follow-up here.

Speaker Change: If these encouraging trends continue throughout the second half, as you're saying, through the important holiday season.

Speaker Change: You're going to have some pretty significant net cash come year-end.

Speaker Change: And you're going to have declining capex next year. I'm wondering if an active NCIB is at the top of your capital priorities or how you're thinking about that.

Todd Ingledew: I mean, after taking CapEx and investment in the business into consideration, our next priority, as we've shown in the past, is to buy back shares. And we have been inactive thus far on the NCAV this year, and that's purely related to the excess cash position and the fact that we have all of these investments that we're making in the business that are delivering meaningful returns, and we want to focus on that.

Speaker Change: Yeah, a hundred percent. I mean, after taking CapEx and investment in the business into consideration, our next priority, as we've

Speaker Change: And the last thing that we've shown in the past is to buy back shares. And we have been inactive thus far on the NCAB this year.

Speaker Change: purely related to the excess cash position and the fact that we have all of these investments that we're making in the business that are delivering meaningful returns. And we want to focus on that. But as you said, and as we work our way into the back half of the year, we do anticipate starting to build that cash position again. And at that point, we will look at using the NCIB in a more meaningful manner.

Todd Ingledew: But, as you said, and as we work our way into the back half of the year, we do anticipate starting to build that cash position again, and at that point, we will look at using the NCIB in a more meaningful manner.

Todd Ingledew: But as you have said, and as we work our way into the back half of the year, we do anticipate starting to build that cash position again, and at that point, we will look at using the NCAV in a more meaningful manner. I'll leave it there for now. Thanks very much. The next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead. Thank you. Good afternoon, everyone.

Brian Morrison: I'll leave it there for now. Thanks very much.

Speaker Change: I'll leave it there for now. Thanks very much.

Stephen Macleod: The next question comes from Stephen MacLeod, with BMO Capital Markets. Please go ahead. Thank you. Good afternoon, everyone. I just wanted to clarify with respect to the new stores, new boutiques for the bounds of the year. Jennifer, did I catch correctly that you have accelerated those new store openings, like you brought some forward? And if so, can you just give the breakdown of what you expect for the new boutiques by quarter through the bounds of the year? By accelerating, I've met compared to what we've done in the first quarter. We've opened two in the first quarter here, but the majority of it will be in the back half of the year.

Speaker Change: The next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead.

Speaker Change: Well, thank you. Good afternoon, everyone.

Speaker Change: I just wanted to clarify with respect to the new stores, new boutiques for the balance of the year. Jennifer, did I catch correctly that you have accelerated

Speaker Change: Those new store openings, you've brought some forward, and if so, can you just give the breakdown of what you expect in terms of new boutiques by quarter through the balance of the year?

Speaker Change: By accelerated I meant compared to what we've done in the first quarter. We've opened two in the first quarter here, but then the majority of it will be in the back half of the year. That's what I meant by accelerated. We haven't actually accelerated the dates of the opening. They're on track, as we've stated before. And are you asking for the cadence of the stores? We've opened two stores year-to-date, one repositioned in the first quarter and then one new store thus far in Q2.

Jennifer Wong: That's what I meant by accelerate. We haven't actually accelerated the date to be opening there on track as we've asked the cadence of the store. We've opened two stores year to date, one reposition in the first quarter, and then one new store thus far in Q2.

Stephen MacLeod: I just wanted to clarify with respect to the new stores, new boutiques for the balance of the year. Jennifer, did I catch correctly that you have accelerated those new store openings, like you've brought some forward? And if so, can you just give the breakdown of what you expect from the new boutiques by quarter through the balance of the year? By accelerated, I meant compared to what we did in the first quarter. We opened two in the first quarter here, but then the majority of them will be in the back half of the year. That's what I meant by accelerated.

Jennifer Wong: But the way is rolling out for the year is they will have, as of today, four new stores in the second quarter, eight new stores in the third quarter, and then one store in the fourth quarter, from a new store perspective. And then, from an expansion and reposition perspective, we had one in the first quarter. We're expecting to have two in the third quarter and then one additional in the fourth quarter. So that's our cadence today. A number of the stores in the third quarter are in November. So, you know, there is a chance that one of maybe one or two slides a week or two into the fourth quarter, but as we said, we're well on track and on schedule for delivering those stores as we expect.

Jennifer Wong: We haven't actually accelerated the dates for the openings. They're on track, as we've stated before. And are you asking for the cadence of the stores? Yeah, I can provide that. Yes, please.

Speaker Change: The way it is.

Speaker Change: Rolling out for the year is that we'll have

Speaker Change: As of today, four new stores in the second quarter, eight new stores in the third quarter, and then one store in the fourth quarter from a new store perspective. And then from an expansion and reposition perspective, we had one in the first quarter. We're expecting to have two in the third quarter and then one additional in the fourth quarter. So that's our cadence today. A number of the stores

Todd Ingledew: We've opened two stores year-to-date, one repositioned in the first quarter, and then one new store thus far in Q2. The way it is rolling out for the year is that we'll have, as of today, four new stores in the second quarter, eight new stores in the third quarter, and then one store in the fourth quarter from a new store perspective. And then from an expansion and repositioning perspective, we had one in the first quarter. We're expecting to have two in the third quarter and then one additional in the fourth quarter. So that's our cadence today. A number of the stores in the third quarter are in November.

Todd Ingledew: So, you know, there is a chance that one of them may be one or two slides a week or two into the fourth quarter. But, as we said, we're well on track and on schedule for delivering those stores as we expect. Right. Okay. That's great, Keller.

Speaker Change: In the third quarter are in November , so there is a chance that maybe one or two slides a week or two into the fourth quarter, but as we said, we're well on track and on schedule for delivering those stores as we expect.

Stephen MacLeod: Thank you. And then just coming back to the 2025 guidance, obviously, you have reiterated it here, which is great to see. Just when I'm thinking about SG&A for the balance of the year, you know, you're guiding to kind of flatten down 50 basis points. Overperforming on SG&A relative to your guidance, would that be largely just driven by the comps, or is there something else in there that you could do on SG&A to think about driving increased leverage compared to what your current guidance implies?

Todd Ingledew: That's very colorful, thank you. And then just coming back to the 2025 guidance, obviously reiterated it here, which is great to see. Just when I'm thinking about the S-GNA, for the balance of the year, you know, your guidance that kind of flat to down 50 basis points is overperforming on S-GNA, well, to your guidance. Would that be largely just driven by the cops, or is there something else in there that you could do on S-GNA, you know, to think about driving increased leverage compared to what your current guidance implies? Yeah, I mean, obviously, we're currently targeting what we've provided, which is flat to 50 basis points of leverage for the full year.

Speaker Change: Right, okay.

Speaker Change: That's great color, thank you.

Speaker Change: And then just coming back to the 2025 guidance, obviously reiterated it here, which is great to see. Just when I'm thinking about the SG&A as a sort of balance of the year, you know, you're guiding to kind of flatten down 50 basis points, is...

Speaker Change: Overperforming on SG&A relative to your guidance, would that be largely just driven by the comps or is there something else in there that you could do on SG&A, you know, to think about driving increased leverage compared to what your current guidance implies?

Todd Ingledew: Yeah, I mean, obviously, we're currently targeting what we've provided, which is flat to 50 basis points of leverage for the full year. We do expect sequential improvement throughout the year, with the back half of the year being leverage of approximately 150 basis points. So pressure continuing, as we've stated, in the first half of the year and then leverage in the back half with sequential improvement landing us at that flat to leverage of 50 basis points. So we haven't changed that. That's what we're expecting too.

Speaker Change: Yeah, I mean, obviously, we're currently targeting what we've provided, which is flat to 50 basis points of leverage for the full year. We do expect sequential improvement throughout the year with...

Todd Ingledew: We do expect sequential improvement throughout the year, with the back half of the year being leverage of approximately 150 basis points. So pressure continuing as we've stated in the first half of the year, and then leverage in the back half with sequential improvement, you know, landing us at that flat to leverage of 50 basis points. So we haven't changed that. That's what we're expecting. The beat in the first quarter was driven by predominantly leverage. That we experience from the higher revenue.

Speaker Change: The back half of the year being leverage of approximately 150 basis points, so pressure continuing as we've stated in the first half of the year, and then leverage in the back half with sequential improvement.

Speaker Change: you know, landing us at that, you know, flat to leverage of 50 basis points. So, we haven't changed that. That's what we're expecting. The beat in the first quarter was driven by predominantly leverage,

Todd Ingledew: The beat in the first quarter was driven predominantly by leverage that we experienced from the higher revenue. Okay, that's great. And then I just have just one more question, if I could. You talked a lot about optimized inventory, driving, you know, e-commerce sales, even retail sales. Do you have an inventory target?

Todd Ingledew: Okay, that's great. And then I just want more if I could. You talked a lot about optimized inventory, driving, you know, e-commerce sales, even retail sales. Do you have an inventory target? Like, how should we think about that evolving through the bounds of the years? It kind of in line with revenue growth? Yeah, for the end of the second quarter, we will still see a year-over-year decline. In the inventory as we're, you know, still lapping elevated levels from last year, but then as we start to work our way into the back half of the year.

Speaker Change: That we experience from the higher revenue.

Speaker Change: Okay, that's great. And then just one more if I could. You talked a lot about optimized inventory driving e-commerce sales, even retail sales. Do you have an inventory target? Like how should we think about that evolving through the balance of the years? Is it kind of in line with revenue growth?

Todd Ingledew: Like, how should we think about that evolving over the balance of the years? Is it kind of in line with revenue growth? Yeah, at the end of the second quarter, we will still see a year-over-year decline in inventory as we're still lapping elevated levels from last year. But then as we start to work our way into the back half of the year, and then from then forward, we would expect that our inventory will grow directly in line or very closely in line with our revenue growth, as it has historically for years prior to the pandemic. Great. Okay. Thanks, Todd.

Speaker Change: Yeah, for the end of the second quarter, we will still see a year-over-year decline in inventory as we're still lapping elevated levels from last year. But then as we start to work our way into the back half of the year, and then from then forward, we would expect

Todd Ingledew: And then, you know, from then forward, we would expect that our inventory will grow directly in line or very closely in line with our revenue growth, as it has historically for years prior to the pandemic.

Speaker Change: that our inventory will grow directly in line or very closely in line with our revenue growth as it has historically for years prior to the pandemic.

Todd Ingledew: Great. Okay. Thanks, Todd. Thank you, Jennifer.

Todd Ingledew: Appreciate it.

Speaker Change: Great. Okay. Thanks, Todd. Thanks, Jennifer. Appreciate it.

Michael Glen: The next question comes from Michael Glen with Raymond James. Please go ahead. Hi, just on gross margin. So you're talking about this improving continually improving inventory composition. And then lower markdowns as the positive influence on gross margin. But like, is there, I'm just trying to assess, like you do expect a relatively sizable step down in gross margin in Q2 relative to Q1. So I know there's some normal seasonality, but is there anything else in there that we should be thinking about? Yeah, our improvement in growth profit margin on a year-over-year basis is consistent Q1 to Q2.

Jennifer Wong: Thanks, Jennifer. I appreciate it. The next question comes from Michael Glen with Raymond James. Please go ahead.

Speaker Change: The next question comes from Michael Glen with Raymond James. Please go ahead.

Michael W. Glen: Hi. Just on gross margins, you're talking about continually improving inventory composition and then lower markdowns as a positive influence on gross margin, but is there, I'm just trying to assess, like you do expect a relatively sizable step down in gross margin in Q2 relative to Q1, so I know there's some normal seasonality, but is there anything else in there that we should be thinking about?

Speaker Change: Hi, just on gross margins, so you're talking about this improving, continually improving inventory composition, and then lower markdowns as the positive influence on gross margin, but like,

Michael W. Glen: I'm just trying to assess, like you do expect a relatively sizable step down in gross margin in Q2 relative to Q1, so I know there's some normal seasonality, but is there anything else in there that we should be thinking about?

Todd Ingledew: Yeah, our improvement in growth profit margin on a year-over-year basis is consistent from Q1 to Q2, that's the 450 basis points. However, the second quarter, like on a historic basis, if you look back, that's our sale period, one of our sale periods of the year, June and even into June and July. And so the second quarter and the fourth quarter of the year being the quarters where we have our sales periods, those are always historically lower growth profits than the first and third quarter.

Michael W. Glen: Yeah, our improvement in growth profit margin on a year-over-year basis is consistent Q1 to Q2. That's the 450 basis points. However, the second quarter, like on a historic basis, if you look back, that's our sale.

Todd Ingledew: That's the 450 basis points. However, the second quarter, like on a historic basis, if you look back, that's our sale period, one of our sale periods of the year, June, and even in June and July. And so the second quarter and the fourth quarter of the year, being the quarters where we have our sale periods, those are always historically a lower gross profit than the first and third quarter. Okay, but you're still seeing, so would you expect then, are you expecting for this Q2 relative to prior years to have a similar level of market sale activity in Q2? Like I'm just trying to gauge it versus history.

Michael W. Glen: period, one of our sale periods of the year, June , and even into June and July , and so the second quarter and the fourth quarter of the year being the quarters where we have our sale period, those are always historically lower growth profit than the first and third quarter.

Michael W. Glen: Okay, but you're still seeing, so would you expect then, are you expecting this Q2 relative to prior years to have a similar level of sale activity in Q2, like I'm just trying to gauge it versus history. Markdowns will be a tailwind in the second quarter as they were in the first compared to last year, and the markdowns in Q2 will also be lower than pre-pandemic levels. So on both measures, they would be a tail end.

Michael W. Glen: Okay, but you're still, you're still seeing, so would you expect then, are you expecting for this Q2 relative to...

Speaker Change: prior years to have a similar level of mark sale activity in Q2 like I'm just trying to gauge it versus history. Markdowns will be a tailwind in the second quarter as they were in the first compared to last year and the markdowns in Q2 will also be lower than pre-pandemic levels.

Todd Ingledew: Yeah, so markdowns will be a tailwind in the second quarter as they were in the first compared to last year, and the markdown in Q2 will also be lower than pre-pandemic levels. So we're on both measures; they would be a tailwind.

Todd Ingledew: And maybe just, okay, I'll just take the opportunity for a second just because the 450 basis points for the year is driven by IMU improvements of 150 basis points, lower warehousing costs of 125 basis points, the lower expected markdowns of 100 basis points, and then savings from our start spending initiative of 75. So it's just to give you the building logs; those are the four key drivers of that 400 to 450 basis points of improvement for the year.

Todd Ingledew: Okay, I'll just take the opportunity for a second because the 450 basis points for the year are driven by IMU improvements of 150 basis points, lower warehousing costs of 125 basis points, lower expected markdowns of 100 basis points, and then savings from our smart spending initiative of 75. So just to give you the building blocks, those are the four key drivers of that 400 to 450 basis points of improvement for the year.

Speaker Change: So we're on both measures, they would be a tail end.

Speaker Change: And maybe just, okay, I'll just take the opportunity for a second just because.

Speaker Change: The 450 basis points for the year is driven by IMU improvements of 150 basis points.

Speaker Change: Lower warehousing costs of 125 basis points.

Speaker Change: The lower expected markdowns of 100 basis points and then savings from our Smart Spending Initiative of 75. So, just to give you the building blocks, those are the four key drivers of that 400 to 450 basis points of improvement for the year.

Todd Ingledew: Okay, and then just on the store openings, like as we think about next year, fiscal 26, like what's the, are you seeing a potential for higher, higher number store openings next year versus what we might be modeling? So our multi-year guidance for 8 to 10 new stores; we do have a strong pipeline already under development for next year, but it's too early to confirm the exact number. Okay, thank you.

Todd Ingledew: Okay, and then just on the store openings, like as we think about next year, fiscal 26, like what's the potential for a higher number of store openings next year versus what we might be modeling? So our multi-year guidance for 8 to 10 new stores, we do have a strong pipeline already under development for next year, but it's too early to confirm the exact number.

Speaker Change: And then just on the store openings, as we think about next year, fiscal 26, are you seeing a potential for a higher number of store openings next year versus what we might be modeling?

Speaker Change: So our multi-year guidance for 8 to 10 new stores, we do have a strong pipeline already under development for next year, but it's too early to confirm the exact number.

Operator: Once again, if you have a question, please press star, then one.

Speaker Change: Okay, thank you.

Michael W. Glen: Okay, thank you. Once again, if you have a question, please press star, then one. The next question comes from Mauricio Serna with UBS. Please go ahead.

Marie Fyodorna: The next question comes from Marie Fyodorna with UBS. Please go ahead. Great, good afternoon, and thanks for taking my questions. I just wanted to confirm the comment that you guys all positive comp sales across both geographies and both channels, and then maybe you could talk a little bit more about the exit rate that you had at the end of the quarter, maybe from a total sales and comp sales perspective; that would be super helpful. Thank you. Yeah, so just to confirm that we had positive, comparable sales in the first quarter in all channels and all geographies.

Speaker Change: Once again, if you have a question, please press star, then 1. The next question comes from Mauricio Serna with UBS. Please go ahead.

Mauricio Serna Vega: Great. Good afternoon, and thanks for taking my questions. I just wanted to confirm the comment that you guys saw positive comp sales across both geographies and both channels. And then maybe if you could talk a little bit more about the exit rate that you had at the end of the quarter, maybe from a total sales and comp sales perspective, that would be super helpful. Yeah, so just to confirm that we had positive comparable sales in the first quarter in all channels and all geographies, so Canada e-com and retail and US e-com and retail.

Mauricio Serna Vega: Great. Good afternoon, and thanks for taking my questions. I just wanted to confirm the comment that you guys saw positive comment sales across...

Mauricio Serna Vega: Both geographies and both channels. And then maybe if you could talk a little bit more about the exit rate that you had at the end of the quarter, maybe from a total sales and comp sales perspective, that would be super helpful. Thank you.

Mauricio Serna Vega: Yeah, so just to confirm that we had positive comparable sales in the first quarter in all channels and all geographies, so Canada Ecom and Retail and US Ecom and Retail.

Jennifer Wong: So Canada, ecom and retail and US ecom and retail. The guidance for Q2 of 7 to 10 percent, the top of that range is close to the exit rate for total revenue that we acted as the first quarter and the cost that would have been mid-single digits. Got it. Super helpful.

Mauricio Serna Vega: The guidance for Q2 of seven to 10%, the top of that range is close to the exit rate for total revenue that we exited in the first quarter, and the cost would have been in the mid single digits.

Mauricio Serna Vega: The guidance for Q2 of 7 to 10%, the top of that range is close to the exit rate for total revenue that we exited the first quarter, and the comp would have been in mid-single digits.

Todd Ingledew: And then just lastly, if I may follow up on the growth margin puts in take, one of the headwinds still is like the pre-opening, flagship amortization. Could you give us a sense, like how much of that was of an impact you had in Q1 and the expectation for the rest of the year? You have an idea. Thank you. Yeah, we expect that headwind to continue for the year. As once we open the new flagship stores, we will still have, for the rest of the year, we'll still be paying for the rent in the existing locations.

Todd Ingledew: Got it. It's super helpful. And then just lastly, if I may follow up, on gross margin puts and takes, one of the headwinds still is the pre-opening flagship amortization. Could you give us a sense of how much of that was of an impact you had in Q1 and the expectation for the rest of the year, if you have an idea? Thank you. Yeah, we expect that headwind to continue for the year as once we open the new flagship stores, we will still have for the rest of the year; we'll still be paying for the rent in the existing locations, and either the cost or the benefit that's going to come off is reasonably meaningful in the 50 to 100 basis point range.

Mauricio Serna Vega: Got it. Super helpful. And then just lastly, if I may follow up, on the gross margin puts and takes, one of the headwinds still is the pre-opening.

Speaker Change: Could you give us a sense of how much of an impact you had in Q1 and the expectation for the rest of the year, if you have an idea?

Speaker Change: Yeah.

Speaker Change: We expect that, Hedwin, to continue.

Speaker Change: for the year.

Speaker Change: Once we open the new flagship stores, we will still have, for the rest of the year, we'll still be paying for the rent in the existing locations.

Marie Fyodorna: And either the cost or the benefit that's going to come off is reasonably meaningful in the 50 to 100 basis point range. Got it. Very helpful. And congrats on the results.

Speaker Change: Either the cost or, you know, the benefit that's going to come off is reasonably meaningful in the 50 to 100 basis point range.

Todd Ingledew: They are very helpful, and congratulations on the results. This concludes the question and answer session. I will now turn the call back over to Beth Reed for any closing remarks. Thanks again, everyone, for joining us this afternoon. We're available after the call to answer further questions, and we look forward to providing another update next quarter. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Speaker Change: Very helpful and congrats on the results.

Beth Reed: This concludes the question and answer session.

Beth Reed: I will now turn the call back over to Best Read for any closing remarks. Thanks again, everyone, for joining us this afternoon. We're available after the call to answer further questions, and we look forward to providing another update next quarter.

Speaker Change: This concludes the question and answer session. I will now turn the call back over to Beth Reed for any closing remarks.

Beth Reed: Thanks again to everyone for joining us this afternoon. We're available after the call to answer further questions and we look forward to providing another update next quarter.

Operator: This concludes today's conference call.

Operator: You may disconnect your thank you for participating, and have a pleasant day.

Speaker Change: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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