Q4 2025 Torrid Holdings Inc Earnings Call
Speaker Change: Greetings and welcome to the Torrid Holdings, Incorporated Fourth Quarter, fiscal 2024 earnings conference call.
Speaker Change: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Then you want to require operator assistance, please press star zero or your telephone keypad, as a reminder, this conference is being recorded. It's not my pleasure to introduce Chinwe Abaelu. Thank you. You may begin.
Speaker Change: With me today on the poll are Lisa Harper, Chief Executive Officer, and Paula Dempsey, Chief Financial Officer.
Speaker Change: Ashley Wheeler, Chief Strategy and Planning Officer is also present and will be participating in the Q&A session.
Speaker Change: Before we get started, I would like to remind you of the company Safe Harbor Language, which I'm sure you're familiar with.
Management may make forward-looking statements, including guidance and underlying assumptions.
Speaker Change: Board-looking statements may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate, and other words in terms of similar meaning.
Speaker Change: All forward-looking statements are based on current expectations and assumptions as of today, March 20th, 2025.
Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC.
Speaker Change: This call will contain non-GAAP financial measures, such as adjusted EBITDA. Reconciliation to these non-GAAP measures to the most comfortable GAAP measures are included in the earnings release, furnished to the SEC, and available on our website. With that, I will turn the call over to Lisa.
Speaker Change: Thank you, Chinwe. Hello, everyone, and thank you for joining us today. Let me jump right into it. As we enter the new fiscal year, we are excited about our product direction and positive customer response to our sub-brand.
Speaker Change: We are driving awareness through integrated marketing efforts, leveraging influencer programs and enhanced storytelling.
Speaker Change: We have right sized the level and quality of our inventory position and we are chasing our successful sub-brand launches. We have developed and are actioning a clear path to optimize our store fleet, reducing fixed costs and freeing up funds to invest in growth.
Speaker Change: With that said, we recognize we are operating in an uncertain consumer and macro environment.
Speaker Change: Similar to what you've heard from other retailers, we experienced some choppy mess in our business during the early weeks of the quarter.
Speaker Change: driven by macro and consumer uncertainty, as well as adverse weather in February . That said, as the quarter has progressed, we are encouraged that we have experienced a trend line improvement in the business.
Speaker Change: We are managing the business with cautious optimism, controlling what we can control, taking an appropriate and prudent approach to spending while operating with flexibility and agility and a clear focus on our three strategic priorities.
Speaker Change: Enhancing our product assortment, driving customer growth, and executing our store optimization plan.
Speaker Change: Now, let me review our fourth quarter performance. For the fourth quarter, we exceeded expectations on both the top and bottom line, generating sales of $275.6 million, and adjusted EBITDA of $16.7 million.
Speaker Change: We saw a positive response to our holiday and early spring lines that offered a variety of newness across our product portfolio.
Speaker Change: Momentum continued to build into the latter part of the quarter, culminating in a productive toward cash events in January , and a very successful launch of three new sub-brands, which drove tremendous excitement and engagement for both new and existing customers.
Speaker Change: We are encouraged by the acceleration in our regular price conference, which increased 1.6% for the quarter, while simultaneously the negative drag from clearance sales began to moderate.
Speaker Change: This resulted in a comparable sales of negative 0.8% for the quarter, marking a significant sequential improvement.
Speaker Change: In apparel, we delivered a positive Q4 comp, driven by strength and denim, non-denum bottoms and sweater, as well as dresses which reached an all-time high demand in fourth quarter.
Speaker Change: We ended fiscal 2024 with 48.5 million in cash, an increase of 36.8 million compared to a year ago.
Speaker Change: Throughout fiscal 2024, we remain focused on right sizing both the depth and quality of our inventory position. And I'm pleased with our substantial progress.
Speaker Change: We ended the year with inventory up 4%, which was entirely related to higher and transit levels. On a two-year basis our inventory levels are down 18% with a significantly higher mix of spring forward goods.
Speaker Change: Importantly, we expect our sub-brands to comprise approximately 7% to 10% of our total receipt investment for this year, self-funded by a reduction in depth across less productive choices and a more strategic approach to replenishment of core items.
Speaker Change: We remain disciplined in our approach to inventory management, but also investing in white space assortment opportunities and maximizing the potential of sub-brands.
Speaker Change: Turning to fiscal 2025, we are focused on three strategic priorities, enhancing our product disortment, driving customer growth, and executing our store optimization plan.
Let's start with product.
Speaker Change: 2025 is the year of the product at Torrid, featuring more new items in the first half of the year than we've introduced in the past six years.
Speaker Change: We recognize that our product offering became too one-dimensional. Our focus for 2025 is broadening our assortments to cater to a wider range of fashion, aesthetics and provide more unique, differentiated choices.
Speaker Change: This strategic shift will enable us to expand our customer base while increasing our share of wallet with existing customers.
Speaker Change: Our new sub brand concept, which command higher margins, began rolling out in late December of 2024, and the initial response has been positive. Customers are loving the newness, variety, and differentiated looks that we are now offering.
Speaker Change: As a result, we are chasing into FFD for the back half of a year.
Speaker Change: In January , we launched Nightfall, an edgy, dark-fashion aesthetic, and retro chic, a more playful vintage inspired collection online.
Speaker Change: Knifele and Retro Sheep launched with exceptional strength, breaking among our top revenue driving campaign.
Speaker Change: The customer feedback was overwhelmingly positive, with praise focused on the range of lifestyle aesthetics and induce.
Speaker Change: Both collections generated strong site engagement at launch with key items selling out quickly.
Speaker Change: Kate media performance exceeded expectations, delivering high engagement and view through rates. Most significantly, these sub-rans are attracting younger customers with new buyers averaging in their mid-30s for both nightfall and retro chic.
Speaker Change: While our most engaged VIP customers have comprised the largest share of demand for these collections at launch, we anticipate a steady increase in new customer acquisition through these sub-brands as awareness expands.
Speaker Change: Initial results clearly demonstrate strong demand for these fresh lifestyle concepts and affirm our strategy of building an internal marketplace for this wildly underserved customer.
Speaker Change: As we continue to maximize the potential of these sub-reins, we remain equally committed to the modernization and evolution of our core tour
Speaker Change: Turning to marketing. Our marketing initiatives are centered on driving customer file growth. We have engaged a fresh lineup of influencers who truly embody the lifestyle and spirit of Torrid and each sub-brand. They live and breathe the culture authentically, seamlessly integrating our brand into their everyday lives.
Speaker Change: We are bringing that to our casting call our highly successful model search campaign which remains one of our most productive new customer activations.
Speaker Change: We received over 11,000 applications to be the new face of Torrid last year, and we anticipate an even more successful campaign this year with 8 to 10 casting events and multiple and store casting parties planned.
Speaker Change: In stores, we're equipping our teams with advanced tools like RFID technology and enhanced training to bring our brand story to life through visual merchandising events and strategic product launches across our sub-brands.
Speaker Change: We see opportunities to enhance the expression of our brand and stores, so align with the online experience and we are in the early stage of a testing a handful of store refreshes.
Speaker Change: Our priority is consistent messaging across all touch points, ensuring customers and counters the same compelling narrative whether on social media or website or in our stores.
Speaker Change: This integrated approach drives deeper engagement, Strenson's customer loyalty and enhances brand equity and supports sustainable revenue growth.
Speaker Change: Our third initiative focuses on optimizing our retail footprint by strategically closing underperforming locations while creating a more balanced mix between enclosed malls and outdoor shopping centers.
Speaker Change: We successfully close 35 stores in fiscal 2024 and are targeting to close an additional 40-50 stores in fiscal 2025 with the potential for the number to increase.
Speaker Change: As we continue to evaluate SOAR performance, alignment with channel demand, which would further reduce our fixed cost base and free up capital to fund growth investment.
Speaker Change: As I mentioned earlier, we significantly improved our cash position from $11 7 million a year ago to $48 5 million.
Speaker Change: And we ended the year with 158 million in liquidity.
Speaker Change: Our strong financial condition provides us with the confidence and flexibility to strategically invest in areas of our business that we believe will drive long term profitable growth.
Speaker Change: I'd like to take this opportunity to thank our teams across the organization as well as the board of directors for their hard work and dedication to support our efforts to position our business for success and long term value creation for all stakeholders.
Paula Dempsey: Now I'll turn the call over to Paula.
Paula Dempsey: Good afternoon, everyone and thank you for joining us today, I will walk through our fourth quarter financial results.
Paula Dempsey: I like key drivers of our performance and provide an in depth look at our strategic priorities in fiscal 'twenty 25 outlook.
Paula Dempsey: We closed the year with strong execution delivering results that exceeded our guidance.
Paula Dempsey: Our ability to navigate a dynamic retail environment, coupled with disciplined cost control.
Paula Dempsey: Enabled us to drive profit expansion.
Paula Dempsey: Sales trends improved throughout the quarter, and we leverage our inventory management strategies to maintain a healthy balance sheet, while ensuring we meet customer demand.
Paula Dempsey: As we look at our financial position, we ended the quarter with $48 5 million in cash and cash equivalents of Sig.
Paula Dempsey: And if can increase from $11 7 million last year.
Paula Dempsey: With a balanced approach to managing working capital, we are well positioned to enter 2025 with solid liquidity and inventory discipline.
Paula Dempsey: Fourth quarter net sales totaled $275 6 million compared to $293 5 million last year.
Paula Dempsey: Excluding the impact of the 50 <unk> week in fiscal 2023 sales increased one 4%.
Comparable sales were down 0.8% driven by a significant improvement in clearance price comp sales and regular price comps demonstrating the effectiveness of our pricing strategies.
Gross profit was $92 6 million compared to 101.2 million a year ago.
Paula Dempsey: Gross margin declined 90 basis points to 33, 6%, primarily due to lower volume relative to last year, which was expected given the impact of the extra week in fiscal 'twenty to 'twenty three.
Excluding this timing shift impact on volume or product margin performance increased year over year.
Paula Dempsey: As we continue to balanced promotional activity with maintaining our premium product offering that resonates with her a core customer base.
Paula Dempsey: SG&A expenses were $73 8 million or 26, 8% of net sales compared to $80 6 million or 27, 5% of net sales last year.
Paula Dempsey: This decrease reflects our ongoing efforts to control costs optimize labor efficiencies and streamline operational processes, while still investing in key growth initiatives.
Paula Dempsey: Marketing expenses totaled $15 4 million compared to $16 5 million in the prior year, representing five 6% of net sales in line with last year.
Paula Dempsey: We continue to refine our digital and Omnichannel marketing efforts to maximize our return on investment and drive customer acquisition.
Paula Dempsey: We delivered net loss of $3 million or negative three cents per share compared to a net loss of $4 1 million or negative four cents per share in the prior year quarter.
Paula Dempsey: Adjusted EBIT increased to $16 7 million from $16 4 million last year. Despite a prior year benefit of $2 3 million from the 53rd week.
Paula Dempsey: Our adjusted EBITDA margin expanded 50 basis points to six 1% reinforcing our ability to drive profitability.
Paula Dempsey: Our financial position remains strong underscoring our ability to navigate the evolving retail landscape.
Paula Dempsey: We ended the quarter with $48.5 million in cash and cash equivalents and no borrowings on our revolving credit facility.
Paula Dempsey: Operating cash flow increased by two acts to $77 4 million from a year ago.
Paula Dempsey: Total liquidity, including available borrowing capacity stands at 158 million. Additionally.
Paula Dempsey: Additionally, we reduced total debt to $288 6 million down from 312 million a year ago further strengthening our balance sheet, adding financial flexibility and improving our debt ratio by 22% to 2.2.
Paula Dempsey: Inventory management remains a cornerstone of our strategy.
Paula Dempsey: We closed the year with $148 5 million in inventory, a 4% increase from the previous year, primarily due to the in transit timing, while reflecting an 18% reduction on a two year basis.
Paula Dempsey: This disciplined approach to ensure that we remain nimble, allowing us to quickly respond to shifts in consumer demand.
Paula Dempsey: We continue to focus on improving product mix and sell through rates, enabling us to deliver a more compelling and profitable format.
Paula Dempsey: One of our key strategic initiatives is the ongoing optimization of our store fleet.
Paula Dempsey: This project is designed not only to ensure that we operate in locations that maximize our unit economics, but also to align our sales demand channels more effectively.
Paula Dempsey: We remain strong believers in the power of physical stores.
Paula Dempsey: However, we also recognize an opportunity to optimize our footprint by closing underperforming locations and reinvesting a portion of those savings into marketing strategies that drive long term customer growth.
Paula Dempsey: Our historical data as well as insights from recent closures indicate that we can retain up to 70% of our customers when a store closes.
Paula Dempsey: Fiscal 'twenty twenty-five presents a significant opportunity to reassess our real estate portfolio as nearly 60% of our leases are set to expire or have kick out clauses coming due this year.
Paula Dempsey: This flexibility enable us to exit certain locations without any financial impact.
Additionally, this shift enabled us to increase our penetration in outdoor centers, where we have consistently seen higher conversion rates and profitability.
Paula Dempsey: Ensuring our locations align with our customer preferences.
Paula Dempsey: For fiscal 2025, we plan to close an additional 40 to 50 stores, while selectively opening four to eight new locations in high performing markets.
Paula Dempsey: By optimizing our fleet, we can balance our store mix better serve our customers and drive higher profitability in the long term.
Paula Dempsey: As we entered a new fiscal year, we remain courage by the positive response to our product Assortments and brand positioning.
Paula Dempsey: However, like others in the industry, we're navigating a dynamic consumer environment.
Paula Dempsey: We are approaching the year with a balanced and strategic outlook focusing on growth, while maintaining financial discipline.
Paula Dempsey: Key components of our guidance include full year sales expected to range between 1.080 billion and 1.100 billion, reflecting our prudent approach given the current environment.
Paula Dempsey: Adjusted EBITDA is projected to range between 100 million and $110 million.
Paula Dempsey: Supported by ongoing margin expansion initiatives and cost efficiencies.
Paula Dempsey: Capital expenditures are forecasted to be between 15 and $20 million with a focused on continued technology upgrades that started in the prior year.
Paula Dempsey: Store refreshes and infrastructure improvements to enhance both the customer experience and operational efficiency.
Paula Dempsey: As Lisa previously mentioned the first quarter got off to a choppy start but we're encouraged by the trend line improvement we're seeing in the business.
Paula Dempsey: In the first quarter, we expect sales to range between $264 million and 274 million with adjusted EBIT are anticipated between 24 million and $28 million, reflecting our shift in our marketing spend.
Paula Dempsey: To better align with our fiscal 2025 strategies, we are reallocating marketing investments from the fourth quarter to the first half of the year to support our programs such as the sub brands lunches and model search.
Paula Dempsey: Looking ahead, we're confident in our strategy and ability to drive sustainable growth.
Paula Dempsey: Our focus remains on delivering elevated product experience enhancing our marketing approach and refining the customer journey across all touch points.
Paula Dempsey: While the macroeconomic environment presents challenges, our financial discipline strategic initiatives and commitment to innovation position us well for long term success with.
Paula Dempsey: We remain committed to balancing short term execution with long term value creation, ensuring that we continue to strengthen our brand and optimize our operations and enhance shareholder returns.
Paula Dempsey: With that I'll turn the call back to the operator for Q&A.
Paula Dempsey: Okay.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star wondering itself.
Speaker Change: The confirmation tone will indicate your line is in the question queue. You May press star to remove yourself from the queue. We.
Speaker Change: We do ask that you limit yourself to one question and one follow up for participants using speaker equipment and may be necessary to pick up the handset before pressing the star keys.
Speaker Change: One moment, while we poll for questions.
Speaker Change: And our first question comes from Brooke Roach with Goldman Sachs. Please proceed with your question.
Brooke Roach: Good afternoon, and thank you for taking our question.
Speaker Change: Lisa I was hoping you could elaborate on your latest thoughts on the health of the torrid consumer what is driven the trend line improvement <unk> to date and what level of contribution do you expect to drive from the comps this year from scaling some of the recently successful sub brands.
Brooke Roach: Thanks Brook.
Speaker Change: I feel the the.
Speaker Change: Fundamental strength of the toward customer is still intact as you well as you know very well are are we have an enormous.
Speaker Change: Enormously dedicated customer very high involvement in our.
Speaker Change: Our loyalty program, sorry about that and so we still see that engagement.
Speaker Change: We're seeing positive traffic trends they are being a little bit more conservative in terms of a conversion in the short term we have a we see that to be a little bit choppy here, but we're certainly getting traffic eyeballs and add to cart I think overall, a little bit softer on more cautious in terms of the.
Speaker Change: The actual final purchase.
Speaker Change: And we've seen that improve I think of over the quarter and continue to see it improve.
Speaker Change: We feel that our strategy of you know what we're doing in terms of product. We are very careful to ensure that the core elements of the business that our customer relies on our covered in them and the kind of modern modernized way.
Speaker Change: And we're seeing continual improvement and it seems like denim, which is core to our business improvement and non denim bottoms.
Speaker Change: And great dress business I would say is we are going into this year. So we're seeing.
Speaker Change: Positive momentum in traffic.
Speaker Change: Positive in core categories kind of green shoots that we're seeing and then that layered on with the sub brand excitement and traffic that we're getting related to sub brand.
Speaker Change: Shows us that this customer has an appetite for a broader range of products for a broader range of aesthetics.
Speaker Change: So fundamentally solid very consistent through the multiple cohorts in terms of.
Speaker Change: Household income and those types of things, we're not seeing a distorted behavior on any kind of any of the household income cohorts and we're encouraged by the traffic that we're getting a spring kind of is ahead of us and the and the enthusiasm and excitement we're seeing around the evolution of the product.
Speaker Change: As a whole.
Speaker Change: That's great and then for Paula can you quantify the impact of the 40 to 50 additional store closures. This year what impact does that have to revenues within your guide and what benefit does that have to EBITDA margins as you annualize these closures.
Speaker Change: Yeah. So the 40 to 50 closures the majority of those will happen in Q4, so we're going to take advantage of having the ability of.
Speaker Change: Exit some of our leases the majority of these leases will be on I Wanna say January 31st of 2026, which is so fiscal 'twenty five so you don't necessarily get that much of an impact. This year, it's primarily will be the next year, but having said that we are planning.
Speaker Change: On closing between Q1 and Q2 currently just because some of the closures already taking place anywhere between 10 to 13 stores right. Now so you wont see a large impact just yet you won't see that impact more in the next year.
Speaker Change: As I think about that impact.
Speaker Change: So we are gaining actually will gain the benefits from the 35 closures from last year right. So 2024, we closed 35 stores were gonna see the benefits this year plough through our financials not just in G&A, but also in margins and.
Speaker Change: We expect to see a higher improvements from the 40 to 50 stores in fiscal 'twenty six.
Speaker Change: Great. Thanks, so much I'll pass it on.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from Dylan Carden with William Blair. Please proceed with your question.
Speaker Change: Thank you sticking with that topic.
Speaker Change:
Speaker Change: You mentioned kind of the percentage of your stores you had this opportunity over the coming years I mean do you anticipate this being a <unk>.
Speaker Change: Prolonged campaign of closings.
Speaker Change: And I'm kind of curious that 70% figure.
Speaker Change: I assume that's kind of year, one and then it might taper off over time.
Speaker Change: Is there an opportunity here to kind of come back to some of these markets with maybe a different store.
Speaker Change: Or reengage these customers in another way.
Speaker Change: Yeah.
Speaker Change: So we do have the ability to review, 60% of our store fleet this year.
Speaker Change: Having said that not all of course, not all 60 per site of of that fleet.
Speaker Change: Great majority of that is actually great stores currently.
Speaker Change: So I think as we think about that we have the opportunity. This year and will also have a smaller opportunity coming up in the next in the next year. So I don't see this being a prolonged project Dylan necessarily I would say probably in the next two or three years.
Speaker Change: Continue to reveal since we have a large portion of our fleet ex expiring. So a lot of these stores are expiring are stores that are opened and the 2015 timeframe or around that time frame. So that's why we have the opportunity now and I think I you know, we do we will have opportunities depending.
Speaker Change: You know as we're measuring these store closures and measuring the market as we exit some of these Lisa Li says we may want to reopen in the same markets right just in a different format. So far is the majority of these stores that we're exiting are in enclosed mall locations and our preference and our customer preference today.
Speaker Change: <unk> is in power centers outdoor centers. So we will continue to look for that for those types of locations.
Speaker Change: Until in the this is Lisa.
Speaker Change: As Paul is that just to reinforce its this year and then we have some opportunity next year because if we go back to 15 16 17, Thats. When we were really aggressively opening stores and so a lot of those are coming up for <unk>.
Speaker Change: Review the other thing is I think.
Speaker Change: A lot actually answer the 70% transfer question, but I will say that we're testing other formats as we learn more and more about sub brands as we learn more about the breadth of the product that the customer wants to see we are testing and looking at a larger store footprint that.
Speaker Change: That well be able to incorporate more ideas for the customer they want the variety and we think.
Speaker Change: Our number one priority there is to provide as powerful and experience in the store environment as we provide online.
Speaker Change: And that we have a much more aligned.
Speaker Change: Presentation of the brand and much and really treating the stores as more of an innovative and exciting place to shop, which we're doing that not just with new store formats, but with updates in our existing stores.
Speaker Change: So we're still investing in that we still think that's important but we this is a very opportunistic time to kind of rightsize some of the markets and re read blend into more outdoor centers and potentially as we open stores opening a little bit of a bigger store to incorporate more of these product ideas, you'll have actually talk about the 70%.
Speaker Change: <unk>.
Speaker Change: Recovery right now Hi, Joanne.
Speaker Change: Related to the 70% retention or recapture rate so.
Speaker Change: Because we have such a high propensity of omni customers that are accustomed to shopping both of our channels and it's not a year one retention by a multiyear retention beyond that so it's really about just migrating the portion of her spend that she would otherwise spend in a clothing store onto a nearby store in that market or.
Speaker Change: Our online channel, where she's accustomed to shopping.
Speaker Change: Got it thank you.
Speaker Change: And then curious.
Speaker Change: How new product performed in.
Speaker Change: In this period of sort of softer traffic, if theres any sort of insight there.
Speaker Change: For the call.
Speaker Change: Yeah.
Speaker Change: What happened for US is we brought in a line on December 27th and then two new lines in the middle of January. So unfortunately at the very beginning of February It was probably our we have the least amount of newness that we're planning to have so but we have seen improvements since those first couple of weeks with <unk>.
Speaker Change: <unk> and and engagement with that with that business I'm happy with kind of a recovery in the business that we saw post that time period.
Speaker Change: I will say that we have Belle Isle launching next week, which is of kind of a feminine preppy or east coast oriented aesthetic and then we have new deliveries of Fusty nightfall and retro all happening in April in conjunction with Tori cash. So we feel that we have a very powerful lineup.
Speaker Change: Head of us that will give us a lot more insight into those types of questions.
Speaker Change: And then I went to visit that Alright, I was gonna add related to the newness and the sub brands. So even in an environment, where I think there was a bit of uncertainty as we came into the year and February in particular, we have seen the sell through on these sub brands there to be very very high.
Speaker Change: And they've been excluded from all discounting so I think the consumer's appetite for newness and and differentiated product remains even in an environment of uncertainty.
Speaker Change: Yes. Thank you.
Speaker Change:
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Alex Stretton with Morgan Stanley. Please proceed with your question.
Speaker Change: Hi, This is Katie on for Alex. Thank you so much for taking our question.
Speaker Change: I was just wondering what is your guidance embedding on the tariff impact of the year.
Speaker Change: Great Hi, Katy.
Speaker Change: Right now it and it includes all tariffs that we know about two day and so there is a again one of the.
Speaker Change: Approaches that we've had to the year as kind of a flat approach really to enable us to be able to navigate the types of changes that we're encountering on a day by day week by week basis.
Speaker Change: Again, we have a lot of flexibility in our sourcing structure, we've divested and de risked out of China, we are and Vietnam and so we're very cautious about the potential opportunity there, but we are expanding into Cambodia, Indonesia into Egypt into Turkey and to Bangladesh. So.
Speaker Change: We have a flexible structure and our sourcing categories.
Speaker Change: And I'm very good relationships with our vendors, who are being great partners and and in this time period. So.
Speaker Change: And then we've only.
Speaker Change: Included what we know and there's not a where we're not hedging forward in terms of any type of additional tariffs essentially we have no visibility to that at this time.
Speaker Change: Great. Thank you maybe I can just ask one more what is your guidance embedding in terms of the macro environment is embedding.
Speaker Change: You were kind of stays as is more pressured level or any sort of improvement throughout the year.
Speaker Change: Yeah.
Speaker Change: We are this is Paula Katy we are being more prudent to our approach with our guidance in regards to chew our consumer during this time by as Lisa mentioned before and Ashley we have seen improvement you know to in demand and in the last few weeks.
Speaker Change: So we don't have a broad approach we are more prudent in our overall approach to the year based on the volatility that we experienced early and but we are not predictive of kind of other other improvements or or challenges as we move forward. We are looking at the overall.
Speaker Change: Consumer behavior in a very prudent way.
Speaker Change: Great. Thank you so much.
Speaker Change: Yeah.
Speaker Change: Thank you and our next question comes from Cory <unk> with Jefferies. Please proceed with your question.
Cory: Great. Thanks, and good afternoon, let's see you mentioned in your remarks that the negative drag from clearance sales is moderating I was just curious if you could talk a little bit more about.
Cory: The impact that you're seeing from a promotions in your business and what you have embedded in the outlook going forward from a clearance and promotional perspective.
Corey: Sure Hi, Corey Thank you.
Corey: The negative drag does moderate as we go forward into kind of positive territory, particularly February was a pretty high clearance month and so we saw some positive territory you know positive comps in the clearance side.
Corey: We think that'll moderate as the whole year. It goes out and we look for improvement both in the clearance bucket as well as red price as we move forward we are anticipating.
Corey: Anticipating more promotional activity I think that kind of begs the question about the consumer mindset and and kind of.
Corey: The lack of clarity in terms of how the macro plays out this year, but we haven't that adds some pressure on first margins in AR related to potentially more promotional activity as we move along I think you'll still see a solid margin result for the year, but that we've hedged that.
Corey: A little bit based on you know what what could possibly happen for the year. There was something else that you asked about what was embedded.
Corey: Just promotional and clearance.
Corey: Cadence throughout the remainder of the year.
Yeah, I mean I think.
Ashley Wheeler: Hi, Cory this is Ashley.
Ashley Wheeler: As we've said before we expect our clearance levels and the sales to come from MSB more.
Ashley Wheeler: Represents half our consistent with history. So we no longer have the drag from Anniversarying very aggressive liquidation in 2023, we are seeing clearance profitable clearance sales at the levels that we expected to at this point.
Ashley Wheeler: We have had to respond to a little bit of the macro uncertainty with a little bit more promotion in the first quarter.
Ashley Wheeler: But we expect product margins for the year to be relatively flat year over year.
Speaker Change: Great. That's very helpful. And then just on the infusion of newness into the business with the new sub brands.
Speaker Change: I've seen the product online and stores very exciting.
Speaker Change: It's selling out even online or in certain items, we have seen so is there a.
Speaker Change: And have a way to put into context, how sizable these new brands could be from a SKU perspective versus the overall and then how do you put that into context with how you're thinking about.
Speaker Change: Inventory growth for.
Speaker Change: For the remainder of the year.
Speaker Change: I can take that core eight so yes.
Speaker Change: Yes, we are I think we're being we're nurturing these I'll say to start and they represent close to 10% of the business pretty ear and about 10% of our receipt investments are not not.
Speaker Change: A huge investment per se off the gate and we're self funding them. So we've found opportunities in the core line to reduce our.
Speaker Change: Inventory depth in some cases SKU count reduction within the core line, if those that where he has a long tail of choices that were less productive to fund. These so overall inventory for the for the year, we expect to be relatively flat there will be some timing quarter to quarter that may have a little bit different year over year as we launch these.
Speaker Change: But all in all our average inventory for the year will be pretty consistent with the levels. We saw last year.
Speaker Change: And I would just reinforce the goal with this is new customers and average younger customer broadly in the business build frequency share of wallet and then there's a margin expansion opportunity with the sub brands as well so that in conjunction with what we're doing in the core line.
Speaker Change: I think our expression of the brand right now online, particularly is as good as I've ever seen it I think the kind of a curated aspect of the core line. In addition to what we're doing with sub brands has.
Speaker Change: Then very very well received by the customer and Theres a lot of excitement associated with that this customer has always told us. If you give me more choice I will spend more money and we're gonna caller on it this year so.
Speaker Change: The fundamental of the customer file growth because the demographics of the customer, bringing a younger customer into the overall mix I mean going from 42% to 35 is our core.
Speaker Change: And then building that frequency is oh.
Speaker Change: The very outset as we're nurturing this all have positive indications.
Speaker Change: Our goal of reactivation with these as we planned so far as Lisa noted the average age of new customers coming through these sub brands are in the mid <unk>, which is what we were aiming for and I think that the new customer and reactivated customer that's coming through adopting this newness is allowing us to be.
Speaker Change: Less rely on promotion in general So that was also a go with us than where we're pleased with.
Speaker Change: Great. That's very helpful. Thank you so much thanks.
Perry: Thanks Perry.
Thank you.
Speaker Change: Our last question comes from Dana Telsey with Telsey Advisor Group. Please proceed with your question.
Speaker Change: Hey, everyone just one more focus back on the real estate optimization.
Speaker Change: Is there a store number that you're targeting or you think that's appropriate for toward after you rationalize the store base and then on the gross margin and the SG&A. How do you think about the puts and takes and the cadence throughout the year that we should be mindful of what could be good guys or what could be bad guys. Thank you.
Hi, Dana as fallout.
Speaker Change: I don't think we have a number on it.
Speaker Change: Our mind in our minds about how many stores, we should keep our should not eat. So this is a pretty detailed analysis and reviews that we continue to make to make sure that our demand channel aligns with our sales channel and that's how we're going to continue to analyze just making sure we're aligning exactly the demand in the sale.
Speaker Change: [noise] channels.
Speaker Change: So we believe because we have this opportunity in front of US. This year was 60% of our at least with being able to be exited or and et cetera. We do have an opportunity to leave some of these older locations and older types of you know in closed malls. So.
Speaker Change: This is where we are today, we believe that the opportunity right now in front of US. It's 40 to 50, this year with potentially being higher.
Speaker Change: Higher depending on what we see what the closures that continued with the closures right.
Speaker Change:
Speaker Change: So that's that's one and we continue really to be focused on keeping that in balance.
Speaker Change: Of you know in closed malls are moving more to outdoor centers right, that's where we see that unit economics truly improve from a store perspective. So we're going to continue to balance that fleet to be more of an outdoor centers, but the opportunity to open new stores remain there. We are still planning on open you now open.
Speaker Change: Four to eight stores this year, but he will be in markets and locations that we believe would be unprofitable locations for us.
Speaker Change: And as far as or our guidance for the year, we are taking a prudent approach to our top line sales and as you know our topline our topline typically stays pretty even throughout the year when it comes to our G&A or SG&A in general.
Speaker Change: You're going to see a little bit higher in the first half because we have shifted some of the marketing expenses investments that would typically do in Q4 into Q1 and Q2.
Speaker Change: Aside from that we shouldn't really see that much more in G&A for the year compared to the prior year.
Thank you and Lisa with the sub brands that seem to be trending.
Speaker Change: What is the what are the other categories of sub brands that you're most excited about for 2025.
Speaker Change: So we have three four more to launch four more ideas for launch Belle Isle launches next week.
Then we will launch Lovesick and early July and Lovesick is for a younger more junior oriented customers I would think of Hollister I would think of garage as kind of the mindset. There were relaunching active as a concept called true by Torres and then we're going to relaunch wear to work again.
Speaker Change: With studio in studio looks as we get into September.
Speaker Change: That's enough. So the team is the team is like Okay. That's enough were very.
Speaker Change: Ashley's word earlier that we're nurturing this we have very specific goals and guidelines.
Speaker Change: Expectations on each of these launches.
Speaker Change: We're being conservative with her and really using our ability to chase.
Speaker Change: And manager inventory in a very nimble way I think that and I think the marketing team has done a tremendous job with the launch of the first three that you can see online with busty nightfall and retro chic. So that that's really the story again back to building an internal marketplace.
Speaker Change: Where we can.
Speaker Change: The fulfill every need of this customer that she is deeply underserved. She is deeply under stored and we feel like we can leverage our knowledge of this customer knowledge of or fit in our all of our other capabilities too to to drive. These these new customers to the brand and build free from.
Speaker Change: Let's see on our existing customers. So so far so good but well you know I'll keep love to keep you guys in the loop and let you know how how that's working but I'm very proud of our ability the team's ability to execute on this I really think that the brand is coming together in a very powerful way.
Speaker Change: Thank you.
Dana: Thanks Dana.
Speaker Change: Thank you there are no further questions at this time I would like to turn the floor back to Luisa Harper for closing remarks.
Thanks to everyone for joining us and for your interest in the company. We look forward to sharing the progress and we will speak to you again in June and this format take care.
Speaker Change: Great. Thank you. This does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.
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