Q3 2025 Aritzia Inc Earnings Call
Todd Ingledew: and for our products. Due to our improved inventory position, we had a lower mix of markdown sales compared to the third quarter last year, which helped drive continued growth margin improvement.
Due to our improved inventory position, we had a lower mix of markdown sales compared to the third quarter last year, which helped drive continued gross margin improvement.
To build excitement and drive momentum around the Auryxia brand, we amplified our flagship openings with our biggest ever marketing and PR campaign.
Jennifer Wong: To build excitement and drive momentum around the Aritzia brand, we amplified our flagship opening with our biggest-ever marketing and PR campaign. This included an exclusive VIP first-look opening party at our Soho flagship, which brought together top VIPs, media, influencers, and celebrities, driving brand awareness, fashion credibility, and cultural relevance. This event elevates brand prestige and reinforces Aritzia's status within the global fashion landscape. It garnered media coverage from the likes of InStyle, W Magazine, and L'Officiel. Press and social coverage surrounding the event and store opening reached a combined audience of more than 350 million.
This included an exclusive VIP first look opening party at our Soho flagship, which brought together top Vips media Influencers and celebrities driving brand awareness fashion credibility and cultural relevance.
This event elevates brand prestige and reinforces our riskiest status within the global fashion landscape. It garnered media coverage from the likes of Instyle W magazine and lots of C. L.
Pressing social coverage surrounding the event and store opening reached a combined audience of more than $350 million.
Other events and activation for our flagship openings included a subway takeover at Rockefeller Center exclusive clientele shopping opportunities opening weekend guests and a super Puff photo booth.
Jennifer Wong: Other events and activations for our flagship openings included a subway takeover at Rockefeller Center, exclusive clientele shopping opportunities, opening weekend gifts, and a super pop photo booth. All of our hard work on these iconic flagship locations culminated in a tremendous amount of buzz around the Aritzia brand, helping grow awareness and build brand affinity in the United States, and helping fuel our accelerated momentum in November and into the fourth quarter across all channels and all geographies.
All of our hard work on these iconic flagship locations culminated in a tremendous amount of buzz around the Auryxia brand, helping grow awareness and build brand affinity in the United States and helping fuel our accelerated momentum in November and into the fourth quarter across all channels and all geographies.
Todd: Now, let me turn the call over to Todd.
Todd Ingledew: Now let me turn the call over to Todd. Thanks, Jennifer, and good afternoon, everyone. Our performance in the third quarter of fiscal 2025 delivered strong results on both the top and bottom line. Trends accelerated sequentially each month of the quarter, and we again delivered meaningful gross margin expansion, resulting in a third consecutive quarter of substantial year-over-year improvement in our adjusted EBITDA margin. In order to provide clear visibility on underlying trends, during my prepared remarks, I will first reference our reported net revenue and comparable sales growth, followed by normalized growth where appropriate. which excludes the impact of the digital warehouse sale in the third quarter last year and the shift of the Vancouver warehouse sale into the second quarter this year from the third quarter last year.
Todd: Thanks, Jennifer and good afternoon, everyone.
Todd: Our performance in the third quarter of fiscal 2025 delivered strong results on both the top and bottom line trends accelerated sequentially each month of the quarter and we again delivered meaningful gross margin expansion, resulting in a third consecutive quarter of substantial year over year improvement in our <unk>.
Todd: The EBITDA margin.
Todd: In order to provide clear visibility on underlying trends during my prepared remarks, I will first reference our reported net revenue and comparable sales growth.
Todd: Followed by normalized growth where appropriate.
Which excludes the impact of the digital where wholesale in the third quarter last year and the shifts to the Vancouver warehouse sale into the second quarter. This year from the third quarter last year.
Todd: Turning to the details of our performance in the third quarter of fiscal 2025, we generated net revenue of $729 million, representing an increase of 12% from last year.
Todd Ingledew: Turning to the details of our performance, in the third quarter of fiscal 2025, we generated net revenue of $729 million, representing an increase of 12% from last year. Comparable sales grew 6.6%. Normalized net revenue in the third quarter increased 16% and normalized comparable sales grew 9.2%. We exited the quarter with double-digit comp growth, as trends accelerated meaningfully in November, concluding with a Black Friday event that broke all records. We remain particularly pleased with the strength we're seeing in the United States, where growth in both channels exceeded 20%. Net revenue in the United States increased 24% to $404 million in the third quarter.
Todd: Comparable sales grew six 6%.
Todd: Normalized net revenue in the third quarter increased 16% and normalized comparable sales grew nine 2%.
Todd: We exited the quarter with double digit comp growth as trends accelerated meaningfully in November including with our Black Friday event that broke all records.
Todd: We remain particularly pleased with the strength, we're seeing in the United States.
Todd: Our growth in both channels exceeded 20%.
Todd: Net revenue in the United States increased 24% to $404 million in the third quarter.
Todd Ingledew: Normalized net revenue growth was 27%. The foundation of this accelerated performance was an extremely positive response to our fall and winter product, fueled by our optimized inventory position. Our performance in e-commerce was further propelled by our investments in marketing, which drove meaningful traffic growth. Strength in our U.S. retail channel was driven by the contribution from 11 new and 3 repositioned boutiques in the last 12 months. In just the third quarter alone, we increased our total square footage in the United States by 25% as we opened our newly repositioned SoHo flagship, our new Chicago flagship, as well as four additional new boutiques.
Todd: Normalized net revenue growth was 27%.
Todd: The foundation of this accelerated performance was an extremely positive response to our fall and winter products fueled by our optimized inventory position.
Todd: Our performance in E. Commerce was further propelled by our investments in marketing, which drove meaningful profit growth.
Todd: Strength in our U S retail channel was driven by the contribution from 11, new and three repositioned boutiques in the last 12 months.
Todd: And just the third quarter alone we increased our total square footage in the United States by 25% as we opened our newly repositioned Soho flagship, our new Chicago flagship as well as for additional new boutiques.
Todd: Finally strong mid single digit comp growth in our existing boutiques also contributed to the outstanding performance in the United States.
Todd Ingledew: Finally, strong mid-single-digit comp growth in our existing boutiques also contributed to the outstanding performance in the United States. In Canada, net revenue in the quarter decreased 0.6% from last year to $325 million. Normalized net revenue growth in Canada was 5%. Importantly, in November, we started to see meaningful improvement in both our Canadian retail and e-commerce channels. Turning to our sales channels, net revenue in our retail channel was $487 million, an increase of 10% from the third quarter last year. Normalized retail net revenue growth was 13%. This was driven by the performance of our new and repositioned boutiques, as well as positive comp growth in our existing boutiques in both Canada and the United States.
Todd: In Canada net revenue in the quarter decreased 6% from last year to $325 million.
Todd: Normalized net revenue growth in Canada was 5% importantly in November we started to see meaningful improvement in both our Canadian retail and e-commerce channels.
Todd: Turning to our sales channels net revenue in our retail channel was $487 million, an increase of 10% from the third quarter last year.
Todd: Normalized retail net revenue growth was 13%.
This was driven by the performance of our new and repositioned boutiques as well as positive comp growth in our existing boutiques in both Canada and the United States.
Todd: And E Commerce net revenue was $242 million, an increase of 14% from the third quarter last year.
Todd Ingledew: In e-commerce, net revenue was $242 million, an increase of 14% from the third quarter last year. Normalized e-commerce growth was 22%. We're encouraged by a return to strength in this key growth pillar, where we continue to see opportunity to drive further momentum. We're extremely pleased with our continued progress as we saw e-commerce net revenue increase by more than 30% exiting the quarter. We delivered gross profit of $333 million, an increase of 23% compared to the third quarter last year. Gross profit margin was 45.8% compared to 41.5% last year, an increase of 430 basis points. This is despite an 80-basis point headwind from higher freight costs.
Todd: Normalized e-commerce growth was 22%.
Todd: We're encouraged by our return to strength in the key growth pillar, where we continue to see opportunity to drive further momentum.
We're extremely pleased with our continued progress as we thought e-commerce net revenue increased by more than 30% exiting the quarter.
Todd: We delivered gross profit of $333 million, an increase of 23% compared to the third quarter last year.
Todd: Gross profit margin was 45, 8% compared to 41, 5% last year, an increase of 430 basis points.
Todd: This is despite an 80 basis point headwind from higher freight costs.
Todd: The.
Todd Ingledew: The increase in gross profit margin was driven by IMU improvements, lower markdown rates, savings from our Smart Spending Initiative, and lower warehousing costs. SG&A expenses for the quarter were $216 million, up 15% from last year. This was primarily driven by variable selling costs associated with the increase in revenue, as well as strategic investments that are fueling our growth, including flagship launches, marketing, infrastructure projects, and technology initiatives. SG&A as a percent of net revenue increased 90 basis points to 29.6%, compared to 28.7% last year. Adjusted EBITDA in the third quarter was $136 million, an increase of 49% from last year.
Todd: Kris and gross profit margin was driven by IMU improvement lower markdown rate savings from our smart spending initiative and lower warehousing costs.
Todd: SG&A expenses for the quarter were $216 million.
Up 15% from last year.
Todd: This was primarily driven by variable selling costs associated with the increase in revenue as well as strategic investments that are fueling our growth.
Todd: <unk> flagship launches marketing infrastructure project and technology initiatives.
Todd: SG&A as a percentage of net revenue increased 90 basis points to 29, 6% compared to 28, 7% last year.
Todd: Adjusted EBITDA in the third quarter was $136 million, an increase of 49% from last year.
Todd Ingledew: Adjusted EBITDA as a percent of net revenue expanded 470 basis points to 18.7% compared to 14% last year. This demonstrates our ongoing efforts to deliver multi-year margin expansion and keeps us on track to achieve our fiscal 2027 adjusted EBITDA margin target of approximately 19 percent. Turning to the balance sheet, at the end of the third quarter, inventory was $462 million, up 16% from last year, closely aligned with normalized sales growth. We're pleased with the composition of our inventory, and we're well-positioned to capitalize on the strong demand for our product. We generated $104 million in free cash flow during the third quarter, ending Q3 with $207 million in cash and zero drawn on our $300 million revolving credit facility.
Todd: Adjusted EBITDA as a percent of net revenue expanded 470 basis points to 18, 7% compared to 14% last year.
Todd: This demonstrates our ongoing efforts to deliver multi year margin expansion and keeps us on track to achieve our fiscal 2027, adjusted EBITA margin target of approximately 19%.
Turning to the balance sheet at the end of the third quarter inventory was $462 million up 16% from last year closely align with normalized sales growth.
Todd: We're pleased with the composition of our inventory and we're well positioned to capitalize on the strong demand for our product.
Todd: We generated $104 million in free cash flow during the third quarter, ending Q3 with $207 million in cash and zero drawn on our $300 million revolving credit facility.
Todd: As our cash balance begins to build we expect to use our MTI be to purchase shares opportunistically and offset the dilution of option exercises.
Todd Ingledew: As our cash balance begins to build, we expect to use our NCIB to purchase shares opportunistically and offset the dilution of option exercises. In the third quarter, we began repurchasing shares, buying back 134,000 supporting and voting shares, returning $5.9 million to shareholders.
Todd: In the third quarter, we began repurchasing shares buying back 134000 subordinate voting shares returning $5 $9 million to shareholders.
Todd: Shifting to our outlook.
Todd Ingledew: Shifting to our outlook. The accelerated momentum we saw in the third quarter has carried into the fourth quarter. Given quarter-to-date trends, we expect net revenue in the fourth quarter to be in the range of $830 to $850 million, representing growth of 22% to 25%, or growth of 28% to 31%, excluding the 53rd week in the fourth quarter last year. Our net revenue outlook for the fourth quarter is based on the strength in the United States and our improved performance in Canada. Driven by accelerated e-commerce growth, our boutique openings, and comparable sales growth in our existing boutiques.
Todd: Celebrated momentum we saw in the third quarter has carried into the fourth quarter.
Todd: Given quarter to date trends, we expect net revenue in the fourth quarter to be in the range of $830 million to $850 million representing growth of 22% to 25% for a growth of 28% to 31%. Excluding the 50 <unk> week in the fourth quarter last year.
Our net revenue outlook for the fourth quarter is based on the strength in the United States and our improved performance in Canada.
Todd: Driven by accelerated e-commerce growth, our boutique openings and comparable sales growth in our existing boutiques.
Todd: We expect gross profit margin in the fourth quarter to increase approximately 400 basis points compared to the fourth quarter of fiscal 2024.
Todd Ingledew: We expect gross profit margin in the fourth quarter to increase approximately 400 basis points compared to the fourth quarter of fiscal 2024, despite absorbing meaningfully higher freight costs. We forecast SG&A leverage of approximately 100 to 200 basis points in the fourth quarter. This is primarily driven by cost leverage from the increased revenue growth and our ongoing spend management initiative. For the full year of fiscal 2025, we're raising our outlook for net revenue to a range of $2.67 to $2.69 billion. Representing growth of approximately 15% from fiscal 2024, or growth of 16 to 17%, excluding the 53rd week last year.
Todd: Despite absorbing meaningfully higher freight costs.
Todd: We forecast SG&A leverage of approximately 100 to 200 basis points in the fourth quarter.
Todd: This was primarily driven by cost leverage from the increased revenue growth and our ongoing spend management initiatives.
Todd: For the full year of fiscal 2025, we are raising our outlook for net revenue to a range of $2 67 to $2 six 9 billion.
Todd: Representing growth of approximately 15% from fiscal 2024 or growth of 16% to 17%, excluding the 50 <unk> week last year.
Todd: We continue to expect gross profit margin to increase approximately 450 basis points in fiscal 2025 and for SG&A as a percentage of net revenue to be approximately flat to up 50 basis points compared to last year.
Todd Ingledew: We continue to expect gross profit margin to increase approximately 450 basis points in fiscal 2025 and for SG&A as a percentage of net revenue to be approximately flat to up 50 basis points compared to last year. We expect adjusted EBITDA as a percent of net revenue in fiscal 2025 to increase 400 to 450 basis points, reflecting the leverage across the range of our net revenue outlook. Our results for the third quarter demonstrate the progress we've made across key areas of our business. Our performance continues to be driven by strength in the United States, and we're encouraged by the momentum we're seeing in Canada.
We expect adjusted EBITDA as a percent of net revenue in fiscal 2025 to increased 400 to 450 basis points, reflecting the leverage across the range of our net revenue outlook.
Todd: Our results for the third quarter demonstrate the progress we've made across key areas of our business.
Todd: Our performance continues to be driven by that.
Todd: Strength in the United States and we're encouraged by the momentum we're seeing in Canada.
Todd Ingledew: In addition, our e-commerce initiatives are generating substantial momentum in what is one of our key growth levers, while our retail channel continues to deliver outstanding results. As we finish fiscal 2025, the combination of our anticipated revenue growth and margin expansion will nearly double our earnings this year.
Todd: In addition, our e-commerce initiatives are generating substantial momentum in what is one of our key growth levers, while our retail channel continues to deliver outstanding results.
Todd: As we finished fiscal 2025, the combination of our anticipated revenue growth and margin expansion will nearly double our earnings this year.
Todd: Looking to fiscal 2026, we expect top line momentum to continue this will be supported by the record square footage growth. This year. Another strong pipeline of boutiques planned for next year and our ongoing e-commerce initiatives.
Todd Ingledew: Looking to fiscal 2026, we expect top-line momentum to continue. This will be supported by the record square footage growth this year, another strong pipeline of boutiques planned for next year, and our ongoing e-commerce initiative. Further, we expect to continue driving adjusted EBITDA margin improvement with ongoing gross profit margin expansion, as well as SG&A leverage. This keeps us firmly on track to achieving our top and bottom line fiscal 2027 target.
Todd: Further we expect to continue driving adjusted EBITDA margin improvement with ongoing gross profit margin expansion as well as SG&A leverage.
This keeps us firmly on track to achieving our top and bottom line fiscal 2027 targets.
Jennifer Wong: With that, I'll now turn the call back to Jennifer. Thanks, Todd. In closing, I am extremely proud of our team to have executed at a very high level across the board. 18 months of hard work across product, inventory management, brand marketing, performance marketing, and PR culminated in the third quarter to propel our increased momentum. And of course, our distribution center, concierge, and last but not least, our retail team. They all continue to perform at an exceptional level. From our assortment of high-quality, beautiful products and optimized inventory position to our new brand-propelling flagships and the acceleration we're driving in our digital channel, the progress we have made is tangible.
With that I'll now turn the call back to Jennifer.
Jennifer: Thanks Todd.
In closing I am extremely proud of our teams have executed at a very high level across the board 18 months of hard work across product inventory management brand marketing performance marketing and PR culminated in the third quarter to propel our increased momentum.
Jennifer: And of course, our distribution center concierge and last but not least our retail team. They all continue to perform at an exceptional level.
Jennifer: From our assortment of high quality beautiful products and optimized inventory position to our new brand propelling flagship and the acceleration we are driving in our digital channel. The progress we have made is tangible.
Jennifer: I'm pleased to report that our strong performance has continued into the fourth quarter with record breaking sales over the holiday period.
Jennifer Wong: I'm pleased to report that our strong performance has continued into the fourth quarter with record-breaking sales over the holiday period. Combined with our strong product position, our investment in opening and marketing the flagship generated tremendous momentum for our brand, starting with the opening of our SOHO flagship and continuing throughout the holidays.
Jennifer: Bind with our strong product position, our investment in opening and marketing the flagship generated tremendous momentum for our brand starting with the opening of our Soho flagship and continuing throughout the holidays.
Jennifer Wong: Looking to the future, we remain steadfast in advancing our three strategic growth initiatives. First, our geographic expansion strategy has continued to perform exceptionally well, and we have another exciting pipeline of boutiques planned for next fiscal year. Second, we drove a meaningful inflection in e-commerce growth this year and have several initiatives underway to support ongoing momentum in the years ahead. And third, our new boutiques and investment in marketing are multi-year levers to help grow brand awareness in the United States, where we continue to have a long runway for growth. We remain confident that our plans for the business will generate long-term profitable growth and attractive returns for all of our stakeholders.
Looking to the future we remain steadfast in advancing our three strategic growth initiatives first our geographic expansion strategy has continued to perform exceptionally well and we have another exciting pipeline of boutiques planned for next fiscal year.
Jennifer: Second we drove a meaningful inflection in ecommerce growth this year and have several initiatives underway to support ongoing momentum in the years ahead.
Jennifer: And third our new boutiques and investment in marketing, our multiyear leavers to help grow brand awareness in the United States, where we continue to have a long runway for growth.
Jennifer: We remain confident that our plans for the business will generate long term profitable growth and attractive returns for all of our stakeholders. Thank you.
Jennifer Wong: Thank you.
Jennifer: Well now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
Operator: We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request.
Operator: If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star and then.
Jennifer: If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star and then two please.
Operator: Please limit yourself to one question and one related follow-up before getting back into the queue.
Jennifer: Please limit yourself to one question and one related follow up before getting back into the queue. We will now pause for just a moment to assemble our roster.
Operator: We will now pause for just a moment to assemble our.
Speaker Change: And your first question today will come from Martin Landry with Stifel. Please go ahead.
Martin Landry: And your first question today will come from Martin Landry with Stiefel. Please go ahead. I get a few guys, and congrats on your strong result. Todd, the first question is regarding your guidance for Q4, you're guiding for a revenue growth of 28% to 31% when we normalize for an equal amount of weeks. So I was wondering if you could share with us a little bit, what's the comparable sales growth assumption that's behind that revenue growth? Yeah, absolutely. Thanks, Martin. Nice to hear from you.
Speaker Change: Hi, guys and congrats on your strong results.
Speaker Change: Todd.
Speaker Change: First question.
Speaker Change: As regard is regarding your guidance for Q4.
Speaker Change: You're guiding for a revenue growth of 28% to 31% when we normalize for an equal amount of weeks. So I was wondering if you could share with us a little bit what's the comparable sales growth assumption, that's that's behind that revenue growth.
Speaker Change: Yeah, absolutely. Thanks, Martin nice to hear from you our guidance in the fourth quarter reflects trends that were consistent with how we exited the third quarter in November and from a comp perspective that puts us in the high teens.
Todd Ingledew: Our guidance in the fourth quarter reflects trends that were consistent with how we exited the third quarter in November, and from a comp perspective, that puts us in the high teens. Trends in both Canada and the United States have actually accelerated quarter to date, and while we're optimistic about our momentum for spring and the inventory position we're in now and expect to be in at the beginning of February, we thought it was prudent to put our guidance closer to how we exited the third quarter as opposed to the current trends that we're seeing right now.
Speaker Change: Trends in both Canada, and the United States have actually accelerated quarter to date and while we're optimistic about.
Speaker Change: Our momentum.
For spring and the inventory position, we're in now and expect to begin at the beginning of February we thought it was prudent to put our guidance closer to how we exited the third quarter as opposed to the current trends that we're seeing right now.
Jennifer Wong: Okay. And then I guess the follow-up to that question. You know, Jennifer, you've touched on a lot of success factors that are playing out right now. You know, it seems very broad-based, but I was wondering if you could just, you know, try to summarize for us why do you have so much success right now? What's different versus, let's say, six months ago, because it does seem like a very impressive turnaround. Thanks, Mark. We couldn't be more thrilled with the quarter. Obviously, you know, when things are going this well, it's usually many things are playing out very well.
Speaker Change: Okay.
Speaker Change: And then I guess the follow up to that question.
You know Jennifer you've touched on a lot of success factors and that are playing out right now and you know it seems its very broad based but I was wondering if you could just try to summarize for us what why do you have so much success right now what's different.
Speaker Change: Versus let's say six months ago, because it does seem like a very impressive turnaround.
Speaker Change: Thanks, Mark Turner I'm Gonna name Uh Huh.
Speaker Change: We couldn't be more thrilled with the quarter. Obviously, you know when things are going this well, it's usually many things are playing out very well and so if I just lay out a number of things that all came together in the quarter it starts with product.
Jennifer Wong: And so if I just lay out a number of things that all came together in the quarter, it starts with product. The product, first and foremost, is the center of everything that we do. Our product assortment resonated very well with the customer. We had a balanced assortment between client favorites and newness. And then on top of that, we had an optimized inventory, so we had the inventory and the right product to meet the demand. That, in combination with our store openings, record store openings, including the flagships that we opened. The flagships drove excitement and increased brand awareness, and then we capitalized on those flagships with amplified marketing and PR and media outreach, something that we have not necessarily done in the past.
Speaker Change: The product first and foremost at the center of everything that we do our product assortment resonated very well with the customer we had a balanced assortment between client favorites and newness and then on top of that we had an optimized inventory that we had the inventory in the right product for to meet the demand.
Speaker Change: That in combination with our store openings record store openings, including the flagships that we opened flagship drove excitement and increase brand awareness and then we capitalize on those flagship with amplified marketing and PR and media outreach.
Speaker Change: That's something that we have not necessarily done in the past and that in combination with our digital marketing, which feel traffic to our ecommerce site and quite frankly, it drove traffic to our stores as well and then certainly even the weather cooperated.
Jennifer Wong: And that, in combination with our digital marketing, which fueled traffic to our e-commerce site, and quite frankly, it drove traffic to our stores as well. And then, certainly, even the weather cooperated. The weather turned favorable for us, which helped with outerwear sales. And then, really, as I did mention in my prepared remarks, we had amazing execution in our operations across the board. Every single area of the business executed with excellence, and I often talk about the areas that are more visible to you or to the consumer, but really, there was a lot of support functions that fueled and enabled all of the things that we were able to accomplish.
Speaker Change: Cooperated the weather turn favorable for us, which helped with outerwear sales and then really as I did mentioned in my prepared remarks, we had amazing execution in our operations across the board every single area of the business executed with excellence and I often talk about the areas that are more visible to you or this or that.
Speaker Change: Sumer, but really there was a lot of support functions that are fuel that enabled all of the things that we were able to accomplish and then you bring it altogether and we're executing on this during the most important and busiest shopping period of the year are going into black Friday and going into holiday. So everything came.
Jennifer Wong: And then, you bring it all together, and we're executing on this during the most important and busiest shopping period of the year, going into Black Friday and going into holiday. So, everything came together really well, couldn't be more pleased. But really, I guess what I'm more pleased about is that it's continued into Q4. That's what's really great. Indeed.
Speaker Change: Together really well couldn't be more pleased but really I guess, what I'm more pleased about is that it's it's it's continued into Q4, that's what's really great.
Indeed, well done everyone.
Operator: Well done, everyone. Thank you.
Speaker Change: Thank you.
Speaker Change: Again, if you have a question. Please press star and then one.
Operator: Again, if you have a question, please press star and then 1.
Mark Petrie: And your next question today will come from Mark Petrie with CIBC, please go ahead. Yeah, good afternoon. I also wanted to ask about the Q4 guide. And I guess specifically, you know, given the stronger top line, what were the factors that held you back from adjusting the margin guidance? And what are you investing in in Q4, maybe above what you might have otherwise baked into the previous guide? Yeah, thanks, Mark. So, from a gross profit perspective, we are expecting 400 basis points of expansion, as we said, in the fourth quarter. That is up from our previous guide of 350 to 400, the implied range.
Speaker Change: And your next question today will come from Mark Petrie with CIBC. Please go ahead.
Mark Petrie: Yes, good afternoon.
Mark Petrie: I also wanted to ask about the about the Q4 guide and I guess specifically.
Mark Petrie: Given the stronger top line what were the factors that held you back from adjusting the margin guidance.
Mark Petrie: And what are you investing in in Q4, maybe above what you might have otherwise baked into the previous guidance.
Speaker Change: Yeah. Thanks Mark.
Mark Petrie: So from a gross profit perspective.
Mark Petrie: We are expecting a 400 basis points of expansion as we said in the fourth quarter that is up from from our previous guide of $3 50 to 400.
Mark Petrie: Wide range and.
Todd Ingledew: And from an SG&A perspective, we did leave it flat to up 50 basis points. And, you know, we are going to be a little closer to the bottom of that range than the top, but what we're really pleased about is that, from an SG&A perspective, we're flipping to 100 to 200 basis points of expansion in the fourth quarter. And we do expect to continue to see leverage in SG&A looking forward into fiscal 26, but we have made the strategic decision to continue reinvesting the leverage that we're seeing today in incremental marketing due to the success we're seeing and, frankly, the momentum that it's driving.
From an SG&A perspective, we didn't leave it flat.
Mark Petrie: Flat to up 50 basis points.
Mark Petrie: And you know we are going to be a little closer to the bottom of that range than the top but.
Mark Petrie: What we're really pleased about is that from an SG&A perspective, we're flipping to a 100 to 200 basis points of expansion in the fourth quarter and we do expect to continue to see leverage in SG&A looking forward into fiscal 'twenty.
Mark Petrie: Fiscal 'twenty six but we have made the strategic decision to continue reinvesting in the leverage that we're seeing today and the incremental marketing due to the success, we're seeing and frankly the momentum that is driving.
Speaker Change: Yeah understood, Okay, and I guess, that's sort of my my my follow up question was just around that sort of.
Todd Ingledew: Yeah, understood. Okay. And I guess that's sort of my follow-up question was just around that sort of pieces of spending for fiscal 26. I mean, you kind of answered it there. But is it the marketing piece that's really sort of still the area of investment? And then it's the other areas where you would expect to be getting leverage? Yes, exactly. That's 100% correct. It's primarily marketing that we've increased the investments in. Yeah, understood.
Speaker Change: Pieces of spending for fiscal 'twenty, six I mean, you've kind of answered. It there but is is is it the marketing piece. That's that's really sort of still the area of investment and then it's the other areas, where you would expect to be getting leverage.
Speaker Change: Yes exactly.
Speaker Change: Practice, primarily marketing.
Speaker Change: And then we increased the investments in.
Speaker Change: Yeah understood. Okay I'll pass the line congrats on a great quarter.
Operator: Okay, I'll pass the line. Congrats on a great.
Irene: And your next question today will come from Irene <unk> with RBC capital markets. Please go ahead.
Irene Nattel: And your next question today will come from Irene Nattel with RBC Capital Markets. Please go ahead. Thanks, and good afternoon, everyone. Happy New Year and congratulations on the quarter.
Thanks, and good afternoon, everyone happy new year and congratulations on the quarter.
Jennifer Wong: I was wondering if we could spend just a few minutes talking about the new store openings and particularly the flagships, the response to the flagships. And I know it's early days, but what has been kind of the biggest surprises and how they've been performing and how would you categorize the productivity in this larger square footage? Thanks, Irene. Great question. I've spent a lot of time in our flagships since they've opened. I attended every opening of the flagships this past couple of months, and obviously we're extremely pleased with the performance of the flagships. They've exceeded our expectations, our initial expectations.
Speaker Change: Just wondering if you could spend just a few minutes talking about the new store openings and particularly the flagships.
Sponsorship, our chipset and I know, it's early days, but what has been kind of the biggest surprises and how they've been performing and how would you how would you categorize the productivity in this larger square footage.
Speaker Change: Thanks, Irene Great question I've spent a lot of time in our flagship since they've opened I attended every opening of the flagship.
Speaker Change: This past couple of months and obviously, we're extremely pleased with the performance of the flagship they've exceeded our expectations our initial expectation.
Jennifer Wong: When we step back a bit and we look at it holistically, even beyond the financial performance of these stores, they're a brand-propelling marketing vehicle for us. They are a beacon for everyday luxury, and they have certainly put us on the map in the United States. But one of the things that was most apparent to me, particularly on Fifth Avenue, but in all three stores, quite frankly, is the international exposure. So it's really now putting us on the world stage, not just on the stage in the United States, but a lot of international visitors, particularly on Fifth.
Speaker Change: He stepped back a bit and we look at it holistically.
Speaker Change: Even beyond the financial performance of these stores there are brand propelling marketing vehicle for us they are a beacon for everyday luxury and they have certainly put us on the map in the United States, but one of the things that was most apparent to me, particularly on fifth Avenue, but in all three stores quite frankly is.
Speaker Change: The international exposure, so that was really now putting up on the world stage not just on the unit has stayed on the in the United States, but a lot of international visitors, particularly on fifth I visited that quite frankly, new our brand and then we're new to our brand and so I think that is a very encouraging obviously.
Jennifer Wong: Visitors, quite frankly, knew our brand and then were new to our brand, and so I think that is very encouraging.
Speaker Change: Ours are studying their beautiful they showcase the everyday luxury experience they offer the broadest product assortment of all of our stores just given the sheer a space available to them and I'm feeling really great about all the work that that went into that but it's it's really been rewarding to see the reaction of people when they walk into the stores I used to do it.
Speaker Change: Again, you know spending the time in the stores and overhearing conversations from our customers they walk in and they're explainable to their friend that there was like Oh, My God, what a beautiful store there I'm thrilled with the customer service that our staff are providing and you know and then when you bring it back to the financial performance of the cell.
Speaker Change: On the fifth Repositions are essentially paying back I'm tracking close to our standard reposition payback of approximately two years are the Chicago, one is taking a little bit longer we ran into some more complex construction issues as we were building in it. It was 100 with a 100 year holds.
Speaker Change: Building, so again couldn't be more thrilled overall with all of the things that these flagships are contributing to our business on a very balanced kind of scorecard matter.
Jennifer Wong: So, again, couldn't be more thrilled overall with all of the things that these flagships are contributing to our business on a very balanced kind of scorecard measure. That's outstanding, thank you.
Speaker Change: Oh, that's outstanding Thank you.
Jennifer Wong: And a follow-up to that, as we look ahead to next year, how should we be thinking about the numbers, new store openings, and I guess maybe taking a slightly longer-term horizon, you've stepped up the number of openings, but also with the flagships and the success, has it reframed a little bit how you're The types of locations you're now going for, and again, how should we be thinking about all of this? But we have one more flagship on deck, again in Manhattan, our third one. That will be the one that we're building out in the Flatiron neighborhood.
I'll follow up to that as we look ahead to next year, how should we be thinking about the numbers of new store openings and I guess, maybe taking a slightly longer term horizon.
Speaker Change: You've stepped up and everything things, but also with the flagships.
Speaker Change: And the success has it reframed a little bit how you're.
Speaker Change: The types of locations, you're now going for and again, how should we be thinking that all of us.
Speaker Change: Well, we have one more flagship Oh, that's again in Manhattan, our third one that will be the one that we're building out in the flat iron neighborhood that one is expected to open within the first half of the next fiscal year. So we're excited about that one.
Jennifer Wong: That one is expected to open within the first half of the next fiscal year, so we're excited about that one. And beyond that, right now, we obviously are always open and looking for really interesting opportunities. And when we come across those, we will make sure that we share those with you. As it stands right now, we have at least a minimum of 10 to 12 new stores on deck in the pipeline for next year and four to five repositions stated. Thank you.
Speaker Change: And then beyond that right now, we obviously are always open and looking for really interesting opportunities and.
When we come across those we will make sure that we share those with you as it stands right now we have at least a minimum of 10 to 12, new stores on gas in the pipeline for next year and four to five Repositions stated.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And your next question today will come from Brian Morrison with TD Cowen. Please go ahead.
Brian Morrison: And your next question today will come from Brian Morrison with TD Cowen. Please go ahead. Good evening. Happy New Year. And lots of positives within these results, for sure. I want to drill down on the digital initiatives to start with, because that was really impressive. What's driving that, Jen? Is it the products resonating? Is it the halo impact? Is it your digital marketing? And then just to follow on to that, what is the percentage of digital marketing as a percentage of sales? And is 45% as a percent of revenue still the target for you?
Brian Morrison: Good evening, and happy new year, and lots of positives that give me Israel results for sure I wanted to drill down on the digital initiatives to start with because that was a really impressive what's driving that churn was it the products resonating is it a halo impact that your digital marketing and then just a follow on to that what is the percentage of digital marketing.
Speaker Change: Im just sales and it's 45% as a percent of revenue still the target for you.
Speaker Change: A great question, we've really focused on digital acceleration this year.
Jennifer Wong: Great question. We've really focused on digital acceleration this year, and it's been about a one-year anniversary since we hired our chief digital officer. And so the normalized sales growth of 22% in this quarter is really fantastic to see. Essentially, if I just sum it up, it was a traffic story. Traffic drove our growth, but certainly all of the things that we're doing contributed to it, contributed to the success of digital. So the store openings help with that because it creates a halo effect on our e-commerce when we open a new store and a new market.
Speaker Change: It's been about one year anniversary since we hired our chief Digital officer, and so the normalized sales growth of 22% in this quarter is really fantastic to see essentially that just sum it up it was a traffic story traffic drove our growth.
Speaker Change: But certainly all of the things that we're doing contributed to it contributed to the success of digital so the store opening a help with that because it creates a halo effect on our E. Commerce. When we opened a new store in a new market and certainly the flagships and all of the buzz around the flagship openings in the marketing around that does draw.
Jennifer Wong: And certainly the flagships and all of the buzz around the flagship openings and the marketing around that does drive traffic to the e-commerce site. That said, even with the introduction of performance marketing, paid performance marketing this year, which we've talked a lot about, remember we started from pretty much zero paid performance marketing just a little over a year ago. So when you add it all up, it's a very, very, very low single-digit percentage of sales. And 45% still the target for fiscal 2027. Well, you know, that we set those targets when we were kind of coming out of the pandemic and in the pandemic, when digital was the primary driver of our revenue, when stores were closed, and then coming out of the pandemic, as you know, there's been a resurgence and re-energization in retail, and certainly our retail is showing that.
Speaker Change: <unk> traffic to the E Commerce site.
Speaker Change: That said, even with the introduction of performance marketing paid performance marketing this year, which we've talked a lot about you know remember we started from pretty much zero paid performance marketing are just a little over a year ago. So when you add it all up it's a very very very low single.
Did it percentage of sales.
Speaker Change: And 45% still the target for fiscal 2027.
Speaker Change: Well you know that we set those targets when we were kind of coming out of the pandemic and in the pandemic. When digital was the primary driver of our revenue when the stores were closed and then coming out of the pandemic as you know there's been a resurgence and re energize and reenter dilation in retail.
Speaker Change: And certainly our retail is showing that so you know I think we've said that I'd like to see that that digital becomes an increasing larger proportion of our total business I do see a growing to be allergic totaled.
Jennifer Wong: So, you know, I think we've said that. I'd like to see that digital becomes an increasing larger proportion of our total business. I do see it growing to be a larger total, you know, proportion of our total business. That said, our stores are on fire as well. So, quite frankly, we're agnostic to where the growth comes from, as long as we're maximizing growth in both channels.
Speaker Change: A portion of our total business that said our stores are on fire as well so quite frankly, we're agnostic to whether to where the growth comes from as long as we're maximizing growth in both channels.
Operator: All right. And then my follow-up question, thank you for that.
Alright, and then my follow up question. Thank you for that my follow up question is I don't think it would be.
Jennifer Wong: My follow-up question is, I don't think it would be a call without discussing tariffs. Can you just talk about how you're preparing for the potential impact of tariffs, the undertakings to address? Where is the risk? Is it on imports to the U.S.? Is it the minimum threshold? And what is your current percentage of manufacturing in China? I know you've been moving manufacturing to Vietnam. Yeah, good question. It is a necessary question. Something, obviously, that we are very closely monitoring. We check in with the trade team almost regularly, you know, almost harassing them for what the latest news is.
Call with a discussion on tariffs.
Speaker Change: Can you just talked about all year.
Speaker Change: Preparing for the potential impact of tariffs the undertakings to address whereas the risk on imports to the U S is it de Minimis threshold and what is your current percentage of manufacturing in China, I know you've been moving manufacturing to Vietnam.
Speaker Change: Yeah. Good question. It is a necessary question something obviously that we are very closely monitoring we check in with the trade team almost [laughter] regulus.
Speaker Change: Almost harassing them or what the latest news as you know the fact of the matter is as you know the news is changing all the time, there's a new announcement of the new article in the media, there's a new announcement.
You know, the fact of the matter is, as you know, the news is changing all the time. There's a new announcement, there's a new article in the media, there's a new announcement almost every day. That said, for years now, we have been systematically diversifying our manufacturing. For years, like I think since the IPO we talked about as a strategy to diversify our manufacturing. What I can say right now is that the great majority of our product is manufactured outside of China. And the other point I'd probably make here is that product quality is paramount. So what is most important to us, even with all of this discussion around tariffs, is that we will focus and ensure and protect the quality of our product.
Speaker Change: Almost every day that said for years now we have been systematically diversifying our manufacturing for years I think since the IPO, we talked about as a strategy to diversify our manufacturing, but I can say right now that the great majority of our product is manufactured outside of.
Speaker Change: China.
Speaker Change: And the other point I'd, probably make here is that product quality is paramount. So what is most important to us even with all of this discussion around tariffs is that we will focus and ensure and protects the quality of our products and that means you know we partnered and have had long standing party.
Speaker Change: Our ships with manufactures in am and partners that we know and can count on that produce the quality that we're after so we're not going to make any knee jerk sort of changes here that said just to give you. Some you know some color. If there was a 10% increase on goods from China.
Speaker Change: That would be approximately even less and less of that but a lesson or approximately a 30 basis point impact to us and that is before any further mitigating actions and so given that we have a diversified sourcing strategy I think we have good things in place that allow us to hedge against disruptions, whether it be a tariff or whether it be.
Speaker Change: Some other like keeping natural disaster risk that these types of things, but de Minimis is a different issue that sort of that section three of one the de Minimis is a different issue what I'm. What I'm hearing is that that is not a priority. Although that's something we still talk about too what I suppose I'm hearing is that.
Speaker Change: The de Minimis.
Speaker Change: There will be changes for de Minimis, maybe not immediately but the changes but de minimis, depending on what the changes are may or may not affect us again, the de Minimis right now is $800 and our average value of the transaction is around 200, So oh, yeah 200.
Speaker Change: It's from there.
Speaker Change: Alright, Thank you very much congratulations to you and your team.
Speaker Change: Your next question today will come from Luke Hannan with Canaccord Genuity. Please go ahead.
Luke Hannan: Thanks, Good afternoon, everyone and congratulations on the results I wanted to ask about the Canadian business. If we were to go back a quarter ago, I think things were a little bit less sanguine, maybe than they were right. Now. So was there anything specific that you did in order to bring in Canadian consumer a little bit more often to hear boutiques or.
Luke Hannan: It's something you know a broader element that makes the Canadian tumor, although it seems a little bit healthier than they were a couple of months ago.
Luke Hannan: Thanks, Luke Yes, we did report coming out of Q2 that the macro challenges in Canada, where our parents. We did enter Q3, a similar answer how we were in Q2, obviously trends improved as.
Luke Hannan: As the quarter progressed, and we saw sequential improvement with each month of the quarter.
Luke Hannan: What I would say is that the everything I'm reading everything that we're hearing about it is theres still these challenges in the macro environment that said, what we were really pleased to see was our customer are responding very well to our product assortment. So in terms of what we can control and what we were working on the product again, starting with product.
Luke Hannan: Or the Canadian customer responded very well to our assortment I believe the marketing that happened in Q3 helped keep a risky are top of mind with that customer and when she was ready to buy we have the inventory to fuel that demand. So we were kind of again prepared and ready on several different.
Luke Hannan: And that helped.
Luke Hannan: Lift our Canadian business. So we're obviously the U S still drives our top line, but it was really great to see the Canadian business improve and again I'm, especially pleased to see that has carried into Q4.
Speaker Change: That's great. Thanks, and then for my follow up you talked about I think I heard you correctly that freight was an 80 basis point headwind during the quarter.
Speaker Change: When we think about moving forward. So there's a couple of moving parts. One you are going to be facing easier.
Speaker Change: Easier comps I believe from from that perspective, considering I think it was around this time last year that free began to pick up but also I think freight rates in the markets continue to go a little bit higher as well. So can you just help us think about maybe the near term next three six months, how should we be thinking about free.
Yeah, absolutely. Thanks, Luca so yes, we are seeing approximately 80 basis points of pressure in the third quarter, we're forecasting to see that continue into the fourth quarter and frankly into the first quarter next year.
One of the key components to driving our rate increases is the fact that we rerouted.
Speaker Change: Almost all of our sea freight through the L a port and.
Speaker Change: It won't be until we shift back to using Vancouver, They will see.
Speaker Change: A meaningful reduction in those costs and we don't lap the start of that until it was I think may June timeframe, where we started and rerouting. So.
Speaker Change: We're looking at likely.
Speaker Change: Likely the second quarter were by then we're anticipating that the disruption should be all but done in Vancouver, and we will be able to rewrote our shipments there, but the teams have been doing an excellent job to ensure that we have our product on time and and we're extremely pleased.
Speaker Change: With that you know how it worked out from my perspective.
Speaker Change: That's helpful. Thank you very much and congratulations.
Speaker Change: And your next question today will come from Stephen Macleod with BMO capital markets. Please go ahead.
Stephen Macleod: Oh, Thank you good evening, everyone and.
Stephen Macleod: Congrats on a very strong quarter and very strong outlook.
Speaker Change: Lots of color. So far are so thanks for that but I just wanted to follow up on two things. So I know, you're you've kind of characterize the Q3 strength was fairly broad based which is great to see but is there any way to quantify like how much of that strength and how much of the momentum to continue into Q4.
Speaker Change: Would have been driven by the flagships and the.
Speaker Change: Associated momentum and.
Speaker Change: Brand awareness around them.
Speaker Change: Thanks Steven.
Speaker Change: Yeah.
Speaker Change: Again, as I said, a few minutes ago, when things are going this well.
Speaker Change: It is difficult to pinpoint it and and isolate any one.
Aspect of it it is everything working together it is that cliche thing that the whole is greater than the sum of the parts and so you know I what I, what I could do is outline what what you know what we think are the important component the first being product always start with product.
Speaker Change: We had a great product assortment the inventory with optimize.
Speaker Change: Really capitalize on the excitement and awareness around the flagship opening you know one thing that we would.
Speaker Change: I would say in terms of the momentum and the sustainability of the momentum going into Q4 and further is while this all started during the black Friday a sale period.
Speaker Change: Black Friday sale period was only is a 12 day period for us and we go off sale in between the day after cyber Monday until boxing week, and then and now we're off sale and remind you where were in or.
Speaker Change: We're not a promotional driven organization. So when we're all felt you know the sales momentum continue even when we were off that was the point I'm trying to make here and so the sales that we were experiencing were good quality sales and I think at the end of the day, if we're executing really well in all the areas and starting with product.
Speaker Change: We see this continuing into Q4 and beyond and again really excited about what we're experiencing right now and and we're moving into the future.
Speaker Change: Yeah, Okay that makes a lot of sense. Thanks, Jennifer and then maybe just maybe just thinking about you know.
Speaker Change: Aligned with that or my follow up I guess.
Speaker Change: Just in terms of the investments I mean, I know you've made a lot of investments in digital and a lot of investments around flagships that obviously have paid off and in consumer response and customer response.
You know do you kind of expect this to be maybe like a new run rate in terms of marketing spend or is it I know you've had a sort of a test and react strategy. So perhaps that's something that you don't want.
Around this as well, but just trying to get a get a sense of like how these investments will continue to rollout and.
Speaker Change: Over the next call it 12 to 18 months.
Speaker Change: Certainly as it relates to marketing as we've mentioned we've seen a amazing response with the marketing and it's not really a change per se, it's sort of an evolution of our marketing and the refinement of what we're learning is working and we're going to continue to employ anything that that's working for our business obviously that.
Ed the marketing spend is going to remain in the low single digits as a percentage of revenue. So I'm not worried there at all but what I think you'll see are some really interesting and creative things.
Speaker Change: Things coming out of our marketing.
That's great Thanks, Jennifer and congratulations again.
Thank you.
Speaker Change: Your next question today will come from Mauricio Serna with UBS. Please go ahead.
Mauricio Serna: Oh, great. Thanks for taking my question and congratulations on the results.
Mauricio Serna: I was wondering if you could talk a little bit more about the sequential acceleration that you saw them month after month and it seems like that was also like broad base, maybe could you talk about what do you think like the factors in each market that that drove that and just one follow up on the gross margin Q3 performance could you provide like a.
Mauricio Serna: Breakdown of the drivers behind.
Well 400, plus expansion that you experienced in the quarter.
Speaker Change: I'll take the first half of that and I'll, let Todd take the second half of that as we reported the trends accelerated sequentially in each month of the quarter and in particular are really accelerated in the third month of the quarter again.
Speaker Change: I know it sounds like a broken record, but it was it was broad based everything with everything with performing a as I said the top line.
Speaker Change: Performance is driven by our U S business and has it has been now for a couple of quarters E Commerce contributed.
Speaker Change: Contributing to the topline probably next and than we thought.
Speaker Change: Comps even comps in our existing stores in the mid single digits that contributed and then certainly Canada came online partway through and into November and that continues. So every single dimension regionally channel wise, it's all performing.
Speaker Change: The end of the day, it's driven by all of our growth in the U S and the new store openings.
Speaker Change: That we've made.
Made in the in the last 12 months and really excited to see that this is going to continue into the fourth quarter.
Speaker Change: And from a gross margin perspective, we're extremely pleased to have delivered the it was actually 430 basis points of gross profit margin expansion in the third quarter and you know again, we're projecting 400 basis points of expansion in the fourth quarter, which is delivering.
Speaker Change: The annual number at an increase of 450 basis points.
Speaker Change: Extremely pleased with how that has been moving along through the quarters.
Speaker Change: The drivers really are the same as they've been so I am you improvements lower markdowns ongoing spend management lower warehousing costs in the quarter. All four of those items continue to deliver the gross profit margin expansion and that that 400 basis 430 basis points.
Speaker Change: <unk> as we were just talking about was actually delivered despite all of those higher freight costs.
Speaker Change: Described so we're extremely pleased with what we're seeing and you know.
Speaker Change: The actions that we're taking are are driving meaningful improvement and we expect to continue to see improvement.
Speaker Change: Next fiscal year as we move into FY 'twenty six.
Speaker Change: Great and just one quick follow up on the guidance for Q4, the sales guidance I think you mentioned in earlier in the call that that includes roughly high teens comp I just want to make sure. That's like a total comp for the company or is that.
Speaker Change: Oh yeah.
Speaker Change: Thank you Brito.
Speaker Change: Total comp so our retail E Comm, Canada U S. Combined we expect.
Speaker Change: The team's comp growth.
Speaker Change: Okay, great congratulations and thank you.
Speaker Change: Your next question today will come from Dylan Carden with William Blair. Please go ahead.
Speaker Change: Thank you just another point of clarification on the guidance Todd you mentioned earlier in the call you thought was more prudent to put guidance. How you exited the quarter as opposed to current trends I. Just wanted to just make sure does that imply that things have decelerated or is that just simply that you're sort of no longer in holiday period, I just want to kind of.
Speaker Change: So instead of.
Speaker Change: No.
Speaker Change: This is the opposite in fact is that we have seen trends accelerate into the fourth quarter and continue through two today. However, just given the fact that we are still coming up to our spray them. All we felt that it was prudent.
Speaker Change: Prudent as I said.
Speaker Change: To guide more closely with us.
Speaker Change: The the rate that we exited the third quarter in November.
Speaker Change: Thank you and then for modeling purposes, as we kind of look to next year I know youre not going to give obviously guidance, but how are you at least thinking about productivity of these new larger format stores you know I know that you Havent had.
Speaker Change: A long run with them and it's been holiday new promoted them, but at least sort of conservatively how should we think about their productivity on a square foot basis.
Okay.
Speaker Change: Yeah, I mean, we haven't provided that specifically, but.
But I think what I would say is that it's not just the flagships.
Speaker Change: We're delivering.
Speaker Change: And in this last year's case 11, other new stores in this fiscal year, along with the one new flagship and then and then the three expansions and reposition.
Speaker Change: As far as the growth goes that's building a fantastic base for our growth for next year.
25% square footage growth is heavily weighted to the back half of the year. So that's going to create a great base.
John: Looking forward and then as John noted, we have a strong pipeline next year as well it will layer in to that growth.
Speaker Change: We expect.
Speaker Change: From a productivity perspective.
Speaker Change: To continue to see the strong productivity frankly on a sales per square foot basis that we've enjoyed in the past.
Speaker Change: Awesome. Thank you very much.
Okay.
And your next question today will come from Michael Glen with Raymond James. Please go ahead.
Michael Glen: Thank you for getting me in just a question on the mobile App are you able to indicate.
Speaker Change: What we might see assist mobile app comes up or would you expect a meaningful uptick in e-commerce sales to result.
Speaker Change: As you get the mobile App up and working.
Speaker Change: Thanks, Michael Good question I'm really excited of all the initiatives I'm, probably most excited about the mobile app. It is the one with the longest are the longest built you know build time.
Speaker Change: That said I view, the mobile App this will be our digital flagship.
Speaker Change: And I envision a meaningful amount of digital business running through this channel.
Speaker Change: Some of the things that you know well.
Speaker Change: Sure here.
Speaker Change: What we've got going because we don't want to unveil it closer to the time, but the team has really conceptualize.
Speaker Change: Creative innovative app, but I think well.
Speaker Change: <unk>.
Speaker Change: Well differentiator, it's yet in terms of our digital it's going to connect the customer across our ecosystem stores and digital we envision more frequent engagement from our customers with this there'll be endless inspiration and content they'll be end to end personalization.
Some really exciting and some really cool stuff and so as I said with all of the talk about our physical flagship. We can think of this mobile app is our digital flagship.
Speaker Change: Okay.
Speaker Change: And.
Speaker Change: The inventory system or inventory management system that you have that you would have underlying and how the.
Speaker Change: The mobile App with interact with your current warehouse and omni channel like do you have everything in place for inventory tracking or inventory software that you need with this new app.
Speaker Change: Well, that's a really interesting question.
You know where are our platform that were on our.
Speaker Change: Our ERP is S E T and that's something I'm very proud of that we put in back in 2000 and aid and we that was a strategic decision to put that in place way back then because we knew that it would support any strategic sort of decision that we might have made in the future whether it was in retail in our stores or if it was.
Speaker Change: And it allowed us to go live with E Commerce in 2012 without having to change a bunch of backend infrastructure. So oh of the backend infrastructure that is required to support the spelling aspect on the App and quite frankly in our digital business period, even auryxia dot com all in place all in place.
Speaker Change: Okay. Thank you for taking the questions.
Speaker Change: Thank you.
Beth Reed: Includes the question and answer session I will now turn the call back to Beth Reed for closing remarks.
Beth Reed: Thanks, everyone for joining us today, we're available for any follow ups and have a great evening.
Beth Reed: This concludes today's conference call you May now disconnect. Your lines. Thank you for participating and have a pleasant day.
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Beth Reed: Yeah.
Beth Reed: Yeah.
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