Q4 2025 Aritzia Inc Earnings Call

Beth Reed: We'll now turn the conference over to Beth Reed, Vice President, Investor Relations. Please go ahead. Thank you, Operator, and thanks for joining Aritzia's fourth quarter fiscal 2025 earnings call. On the call today, I'm joined by Jennifer Wong, our Chief Executive Officer, and Todd Ingledew, our Chief Financial Officer.

Now ill turn the conference over to Beth Reed.

This president Investor Relations. Please go ahead.

Thank you operator, and thanks for joining our riskiest fourth quarter fiscal 2025 earnings call on the call today I'm joined by Jennifer Wong, Our Chief Executive Officer, and Todd English, Our Chief Financial Officer. As a reminder, please note that remarks on this call may include our expectations future plans and intentions that may.

Beth Reed: As a reminder, please note that remarks on this call may include our expectations, future plans, and intentions that may constitute forward-looking information. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions, as well as the competitive environment. Actual results may differ materially from the conclusions, forecasts, or projections expressed by the forward-looking information.

Constitute forward looking information such forward looking information is based on estimates and assumptions made by management regarding among other things general economic and geopolitical conditions as well as the competitive environment actual results may differ materially from that conclusion forecast or projection as expressed by then.

We're looking information we would refer you to our most recently filed management's discussion and analysis and our annual information form which include a summary of the material assumptions as well as risks and factors that could affect our future performance and our ability to deliver on the forward looking information our earnings release the related financial statements.

Beth Reed: We would refer you to our most recently filed management discussion and analysis and our annual information form, which include a summary of the material assumptions, as well as risks and factors that could affect our future performance and our ability to deliver on the forward-looking information. Our earnings release, the related financial statements, and the MD&A are available on CDAR Plus as well as the Investor Relations section of our website.

And the MD&A are available on SEDAR, plus as well as the Investor Relations section of our website I will now turn the call over to Jennifer.

Jennifer Wong: I'll now turn the call over to... Thanks, Beth. Good afternoon, everyone. And thank you for joining us today. Our results for the fourth quarter and full year of fiscal 2025 underscore the strength of our business model and growing affinity for the Aritzia brand. Underpinned by our assortment of beautiful products, our optimized inventory position, and our strategic marketing investments, we fueled accelerated momentum in the United States and in Canada, both online and in our On the heels of our strong fourth quarter performance and the continued momentum we're seeing in the new fiscal year, I'm confident we'll successfully navigate the current external uncertainties, including tariffs and the potential impact on our consumer.

Jennifer: Thanks, Beth good afternoon, everyone and thank you for joining us today.

Jennifer: Our results for the fourth quarter and full year of fiscal 2025 underscore the strength of our business model and growing affinity for the Auryxia brand underpinned by our assortment of beautiful products are optimized inventory position and our strategic marketing investments, we feel accelerated momentum in the United States.

Jennifer: And in Canada, both online and in our boutiques.

Jennifer: On the heels of our strong fourth quarter performance and the continued momentum we're seeing in the new fiscal year I'm confident we will successfully navigate the current external uncertainties, including tariffs and the potential impact on our consumer are.

Jennifer Wong: Our successful 40-plus year track record demonstrates our resilience across varying economic conditions. We are in a position of strength which will help us adapt to evolving macro developments and execute our growth strategy. Turning to our fourth quarter highlights, we delivered double-digit top-line growth in each month, resulting in a 38% increase in Q4 net revenue, excluding the impact of last year's extra week. Comparable sales grew an outstanding 26% as all channels and all geographies comped positively. Strength of the United States continues to drive our results. Exceptional client response to our winter and spring products and our investments in marketing propelled further acceleration in e-commerce growth and generated strong, double-digit comparable sales growth in our existing boutique.

Jennifer: Our successful 40, plus year track record demonstrates our resilience across varying economic condition.

Jennifer: We are in a position of strength, which will help us adapt to evolving macro developments and execute our growth strategy.

Jennifer: Turning to our fourth quarter highlights, we delivered double digit top line growth in each month, resulting in a 38% increase in Q4 net revenue excluding the impact of last year's extra week.

Jennifer: Comparable sales grew an outstanding 26% as all channels and all geographies Comped positively.

Jennifer: Strength in the United States continues to drive our results.

Jennifer: Exceptional client response to our winter and spring product and our investments in marketing propelled further acceleration in e-commerce growth and generated strong double digit comparable sales growth in our existing boutique.

Jennifer Wong: We also added to our portfolio a premier real estate location. All of this fueled an increase of 56% in net revenue in the United States, excluding last year's extra wages. In addition, our base of active clients in the U.S. increased by more than 40 percent, illustrating the strength of our brand, increased awareness, and growing appreciation for our everyday luxury offering. We're also extremely pleased with our accelerated momentum in Canada. Strong client response to our products, supported by our investments in marketing, drove a 16% increase in fourth quarter net revenue, excluding last year's extra week. In retail, we achieved an unprecedented expansion of our physical presence, opening 12 new and three repositioned boutiques in the last 12 months, our most openings ever in a single year.

Jennifer: We also added to our portfolio of Premier real estate location.

Jennifer: All of this field, an increase of 56% in net revenue in the United States, Excluding last year's extra week.

Jennifer: In addition, our base of active clients in the U S.

Jennifer: Increased by more than 40% illustrating the strength of our brand increased awareness and growing appreciation for our everyday luxury offering.

Jennifer: We're also extremely pleased with our accelerated momentum in Canada.

Jennifer: Client response to our products supported by our investments in marketing drove a 16% increase in the fourth quarter net revenue excluding last years extra week.

Jennifer: In retail we achieved an unprecedented expansion of our physical presence opening 12, new and three repositioned boutiques in the last 12 months, our most openings ever in a single year.

Jennifer Wong: In Q4, we opened four new boutiques across the United States, including two in Florida and one in each of California and Pennsylvania. We also opened our repositioned, iconic Fifth Avenue flagship near Rockefeller Center in Manhattan. This helped drive a 31% Q4 increase in our retail channel, excluding last year's extra week. In addition, strong demand for our products supported by our investments in marketing fuel double-digit comparable sales growth in our existing boutique. In fiscal 2026, we remain focused on our winning real estate strategy, which continues to prove itself over and over again. We plan to open a minimum of 12 new boutiques and five boutique repositions, increasing our presence in existing markets as well as broadening our reach across the United States.

Jennifer: In Q4, we opened four new boutiques across the United States, including two in Florida, and one in each of California and Pennsylvania.

Jennifer: We also opened our reposition iconic fifth Avenue flagship near Rockefeller Center in Manhattan. This helped drive a 31% Q4 increase in our retail channel excluding last year's extra week.

Jennifer: In addition, strong demand for our products supported by our investments in marketing fueled double digit comparable sales growth in our existing boutiques.

Jennifer: In fiscal 'twenty 'twenty six we remained focused on our winning real estate strategy, which continues to prove itself over and over again.

Jennifer: We plan to open a minimum of 12, new boutiques and five boutique reposition increasing our presence in existing markets as well as broadening our reach across the United States. We plan to open in five new markets this year, including Cincinnati, Pittsburg, Raleigh, Salt Lake City and Scottsdale.

Jennifer Wong: We plan to open in five new markets this year, including Cincinnati, Pittsburgh, Raleigh, Salt Lake City, and Scottsdale. In e-commerce, we improved our performance for a fourth consecutive quarter. Net revenue in Q4 increased 48%, excluding the extra week last year. This was driven by robust demand for our assortment of high-quality, beautiful products and our optimized inventory position. In addition, our focus on full funnel marketing fueled an increase in traffic of more than 50% in the U.S. We continue to drive growth in new, existing, and reactivated clients, further illustrating our investment in digital is paying off.

Jennifer: In ecommerce, we improved our performance for a fourth consecutive quarter.

Jennifer: Net revenue in Q4 increased 48%, excluding the extra week last year.

Jennifer: This was driven by robust demand for our assortment of high quality beautiful products and our optimized inventory position.

Jennifer: In addition, our focus on full funnel marketing fueled an increase in traffic of more than 50% in the U S.

Jennifer: We continue to drive growth in new existing and reactivated clients further illustrating our investment in digital is paying off.

Jennifer Wong: We also saw a 25% increase in omni-channel clients, our most profitable client site. During the quarter, we launched our new and improved Aritzia.com, which features an elevated client experience, including greater personalization and enhanced product discovery. This new platform will allow us to be much more agile, creating more competitive, innovative experiences that support our growth strategy. This, in turn, will boost customer engagement and drive incremental sales to higher conversions. We're thrilled with the e-commerce momentum we generated in Fiscal 2025, accelerating digital quarter after quarter, even with key initiatives still underway that our clients have yet to experience.

Jennifer: We also saw a 25% increase in omni channel client, our most profitable client segment.

Jennifer: During the quarter, we launched our new and improved Auryxia Dot com, which features an elevated client experience, including greater personalization and it has product discovery. This new platform will allow us to be much more agile, creating more competitive innovative experiences that support our growth strategy.

Jennifer: This in turn will boost customer engagement and drive incremental sales through higher conversion.

Jennifer: We're thrilled with the e-commerce momentum, we generated in fiscal 2025 accelerating digital quarter after quarter, even with key initiatives still underway that our clients have yet to experience feeling.

Jennifer Wong: These include an enhanced international e-commerce site that will be rolled out in the first half of the fiscal year, and a mobile app which we expect to launch by the end of the fiscal year. Turning now to product, our work to optimize the depth and breadth of our inventory enabled us to capitalize on the robust, broad-based demand for our product. This is reflected in our outstanding fourth quarter net revenue growth, which included a record performance over the holiday season. In February, spring was off to a strong start, with positive client response to our most beloved franchises, as well as exciting new styles and seasonal fabrics.

Jennifer: These include an enhanced internationally commerce site that will be rolled out in the first half of this fiscal year and our mobile App, which we expect to launch by the end of the fiscal year.

Jennifer: Turning now to product our work to optimize the depth and breadth of our inventory enabled us to capitalize on the robust broad based demand for our product.

Jennifer: This is reflected in our outstanding fourth quarter net revenue growth, which included a record performance over the holiday season.

Jennifer: In February spring was off to a strong start with positive client response to our most beloved franchises as well as exciting new styles and seasonal fabric earlier receipts of our spring inventory. This year enabled us to maximize the transition from winter, we featured transitional seasonal products and a relevant and timely way.

Jennifer Wong: Earlier receipts of our spring inventory this year enabled us to maximize the transition from winter. We featured transitional seasonal products in a relevant and timely way, allowing our clients to refresh their wardrobe for spring as soon as the weather warmed. Our optimized inventory position and strong full-price sell-through resulted in a lower mix of markdown sales compared to the fourth quarter last year. This helped drive continued growth margin improvement. We continue to see great success with our strategic investment in digital marketing, both online and in our boutiques. Our performance resulted in Aritzia being recognized by Google in Q4 as the fastest-growing search term for U.S.

Jennifer: Allowing our clients to refresh their wardrobe for spring as soon as the weather warmed.

Jennifer: Our optimized inventory position and strong full price sell through resulted in a lower mix of markdown sales compared to the fourth quarter last year.

Jennifer: This helped drive continued gross margin improvement.

Jennifer: We continue to see great success with our strategic investment in digital marketing, both online and in our boutiques.

Jennifer: Our performance resulted in a risky are being recognized by Google in Q4, as the fastest growing search term for U S women's apparel we.

Jennifer Wong: women's apparel. We continue to build on our learnings with a focus on growing awareness and acquiring new clients, particularly in the U.S. In brand marketing, we curated an exciting opening weekend to celebrate our newest flagship on 5th Avenue in Manhattan. The event garnered significant media coverage, adding to the tremendous amount of buzz around the Aritzia brand and driving Aritzia's industry position as a leading fashion brand. To help grow awareness and strengthen our positioning as an everyday luxury retailer, we continue to refine our full-funnel marketing strategy, increasing the integration of marketing across the business and creating a halo effect on all of the boutiques in our portfolio.

Jennifer: We continue to build on our learnings with a focus on growing awareness and acquiring new clients, particularly in the U S.

Jennifer: In brand marketing, we curated and exciting opening weekend to celebrate our newest flagship on fifth Avenue in Manhattan. The event garnered significant media coverage, adding to the tremendous amount of buzz around the Auryxia brand and driving a ritchie as industry position as a leading fashion brand.

Jennifer: To help grow awareness and strengthen our positioning as an everyday luxury retailer we continue to refine our full funnel marketing strategy, increasing the integration of marketing across the business and creating a halo effect on all of the boutiques in our portfolio.

Jennifer Wong: As I reflect on fiscal 2025, I recognize that we have so much to be proud of. We've had an excellent year with impressive financial results. Our performance in the fourth quarter underscores the progress we made throughout the year across key areas of our business. This includes optimizing our inventory, increasing our marketing investment, opening a record number of boutiques, and unveiling our enhanced website. And all of these help contribute to delivering a 550-basis point improvement in our adjusted EPA DA margin. This resulted in a record annual earnings per share of $1.98 for fiscal 2025, more than double the prior year.

Jennifer: As I reflect on fiscal 2025, I recognize that we have so much to be proud of.

Jennifer: We've had an excellent year with impressive financial results.

Jennifer: Our performance in the fourth quarter underscores the progress we made throughout the year across key areas of our business. This.

Jennifer: This includes optimizing our inventory increasing our marketing investment opening a record number of boutiques and unveiling our enhanced website.

Jennifer: And all of these help contribute to delivering a 550 basis point improvement in our adjusted EBITDA margin.

Jennifer: This resulted in a record annual earnings per share of $1 98 for fiscal 2025.

Jennifer: More than double the prior year.

Jennifer Wong: Looking ahead, our momentum has continued into the first quarter of fiscal 2026. Fueled by a positive client response to our spring and summer product and our optimized inventory position. We remain focused on delivering our vision of everyday luxury with another exciting pipeline of boutiques planned for this fiscal year. We also have initiatives underway to support ongoing e-commerce momentum in the years ahead. And finally, 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.

Jennifer: Looking ahead, our momentum has continued into the first quarter of fiscal 'twenty twenty-six fueled by a positive client response to our spring and summer product and our optimized inventory position.

Jennifer: We remain focused on delivering our vision of everyday luxury with another exciting pipeline of boutiques planned for this fiscal year.

Jennifer: We also have initiatives underway to support ongoing e-commerce momentum in the years ahead.

And finally, our new boutiques and investment in marketing, our multiyear levers to help grow brand awareness in the United States, where we continue to have a long runway for growth.

Jennifer Wong: Recent macro uncertainty, including U.S. tariffs and concern about the health of the consumer, poses unique challenges for us and our entire industry.

Jennifer: Recent macro uncertainty, including U S tariffs and concern about the health of the consumer poses unique challenges for us and our entire industry. However.

Jennifer Wong: However. The strength of our brand has never been greater. We have an exceptionally loyal client base. Our financial position is extremely healthy and we have an agile global supply chain which is built upon long-standing partnerships with trusted manufacturers. Additionally, at this time, 40% of our revenue is generated outside the United States, and we have already on hand almost half of the inventory we anticipate needing for this fiscal year. We're currently engaged in opportunities to mitigate the impact of tariffs and protect our margins.

Jennifer: The strength of our brand has never been greater.

Jennifer: We have an exceptionally loyal client base.

Jennifer: Our financial position is extremely healthy.

Jennifer: We have an agile global supply chain, which is built upon long standing partnerships with trusted manufacturers.

Jennifer: Additionally, at this time, 40% of our revenue is generated outside the United States and we have already on hand, almost half of the inventory we anticipate needing for this fiscal year.

Jennifer: We're currently engaged in opportunities to mitigate the impact of tariffs and protect our margin. These include <unk>.

Jennifer Wong: These include. partnering with our suppliers to ensure continued resilience and commitment to our everyday luxury qualities. and fiercely protecting our margins while maintaining our commitment to providing everyday luxury value for our clients.

Jennifer: During with our suppliers to ensure continued resilience and commitment to our everyday luxury quality standards.

Jennifer: And fiercely protecting our margins, while maintaining our commitment to providing everyday luxury value for our clients as.

Jennifer Wong: as well as further diversifying our supply chain and realizing cost reductions across the business. Adaptability and executing with excellence are built into our DNA. With a world-class team like ours, adversity highlights our resilience and becomes a catalyst for growth and another building block to future success.

Jennifer: As well as further diversifying our supply chain and realizing cost reductions across the business.

Jennifer: Adaptability and executing with excellence are built into our DNA with a world class team like ours adversity highlights our resilience and becomes a catalyst for growth and another building block to future successes.

Jennifer Wong: In closing, the strength of our brand, the quality of our assortment, and our everyday luxury client experience are all resonating exceptionally well with our clients. This gives us confidence in our ability to execute and capitalize on the opportunities that lie ahead. We are focused on our fundamentals, our solid foundation, and our resourcefulness.

Jennifer: In closing the strength of our brand the quality of our assortment and our everyday luxury client experience are all resonating exceptionally well with our clients. This gives us confidence in our ability to execute and capitalize on the opportunities that lie ahead.

Jennifer: We are focused on our fundamentals are solid foundation, and our resourcefulness, our healthy balance sheet combined with the momentum in our business puts us in a position of strength to successfully navigate the rapidly evolving landscape, while remaining steadfast in advancing our key growth levers.

Jennifer Wong: Our healthy balance sheet, combined with the momentum in our business, puts us in a position of strength to successfully navigate the rapidly evolving landscape, while remaining steadfast in advancing our key growth levers.

Jennifer Wong: I'm incredibly proud to lead our team and grateful to our people for the perseverance and hard work required to generate the outstanding momentum we're seeing in our business. We remain committed to excellence as we build on our momentum, prudently managing our business for the near term and the long term.

Jennifer: I'm incredibly proud to lead our team and grateful to our people for their perseverance and hard work required to generate the outstanding momentum we're seeing in our business.

Jennifer: We remain committed to excellence as we build on our momentum prudently.

Jennifer: Prudently managing our business for the near term and the long term.

Jennifer Wong: This concludes my prepared remarks for today.

Jennifer: This concludes my prepared remarks for today.

Todd Ingledew: And I'll now turn the call over to Todd to discuss the details of our financial performance. Thanks, Jennifer, and good afternoon, everyone. I want to emphasize that we are navigating this period of uncertainty from a position of strength. as evidenced by our exceptional fourth quarter performance and our strong momentum in the first quarter.

Jennifer: And I'll now turn the call over to Todd to discuss the details of our financial performance.

Todd: Thanks, Jennifer and good afternoon, everyone.

Speaker Change: I want to emphasize that we are navigating this period of uncertainty from a position of strength.

Speaker Change: As evidenced by our exceptional fourth quarter performance and our strong momentum in the first quarter.

Todd Ingledew: First, let me walk you through our fourth quarter results. where we delivered net revenue that exceeded our outlook, meaningful gross profit margin expansion, as well as SG&A expense leverage. This resulted in our fourth consecutive quarter of substantial year-over-year improvement in adjusted EBITDA. Turning to the details of our performance, in the fourth quarter of fiscal 2025, we generated net revenue of $895 million. This represents a 31% increase from last. Excluding the extra week last year, net revenue increased 38%. Comparable sales grew 26%. as all channels and all geographies comp positive.

Speaker Change: First let me walk you through our fourth quarter results.

Speaker Change: Where we delivered net revenue that exceeded our outlook meaningful gross profit margin expansion as well as SG&A expense leverage.

Speaker Change: This resulted in our fourth consecutive quarter of substantial year over year improvement in adjusted EBITDA.

Speaker Change: Turning to the details of our performance in the fourth quarter of fiscal 2025, we generated net revenue of $895 million.

Speaker Change: This represents a 31% increase from last year.

Speaker Change: Excluding the extra week last year net revenue increased 38%.

Speaker Change: Comparable sales grew 26%.

Speaker Change: As all channels and all geographies called positively.

Todd Ingledew: This accelerated performance was driven by four factors. First, we enjoyed an extremely positive response to our winter and spring products. Second, we supported that response with our optimized inventory position. Third, we made strategic investments in digital and brand marketing. And finally, we benefited from 12 new and three repositioned boutiques in fiscal 2025.

Speaker Change: This accelerated performance was driven by four factors first we enjoyed an extremely positive response to our winter and spring product.

Speaker Change: Second we supported that response with our optimized inventory position.

Speaker Change: Third we made strategic investments in digital and brand marketing and finally, we benefited from 12, new and three repositioned boutiques in fiscal 2025.

Todd Ingledew: Our performance continues to be driven by the strength of our business in the United States, where net revenue was $548 million, an increase of 48%. Excluding the extra week last year, net revenue in the United States increased 56 percent. Our U.S. e-commerce business was driven by meaningful traffic growth. In our U.S. retail channel, performance was driven by our new and repositioned boutiques opened in the fiscal year. which combined added 50% to our square footage in the United States. This included three brand-propelling flagship locations, two in Manhattan and one in Chicago. Finally, strong double-digit cost growth in our existing boutique also contributed to the outstanding performance in the United States.

Speaker Change: Our performance continues to be driven by the strength of our business in the United States, where net revenue was $548 million an increase of 48%.

Speaker Change: Excluding the extra week last year net revenue in the United States increased 56%.

Speaker Change: Our U S e-commerce business was driven by meaningful traffic growth.

Speaker Change: In our U S retail channel performance was driven by our new and repositioned boutiques opened in the fiscal year.

Speaker Change: Which combined added 50% to our square footage in the United States.

Speaker Change: This included three brand propelling flagship locations two in Manhattan, and one in Chicago.

Speaker Change: Finally, strong double digit comp growth in our existing boutiques also contributed to the outstanding performance in the United States.

Todd Ingledew: In Canada, net revenue was $347 million, an increase of 11%. Excluding the extra week last year, net revenue in Canada increased 16%. Driven by accelerated momentum in both our e-commerce and retail channels.

Speaker Change: In Canada net revenue was $347 million an increase of 11%.

Speaker Change: Excluding the extra week last year net revenue in Canada increased 16%.

Speaker Change: Driven by accelerated momentum in both our e-commerce and retail channels.

Todd Ingledew: Turning to our sales channels, net revenue in our retail channel was $517 million, an increase of 24%. Excluding the extra week last year, retail net revenue increased 31%. This was driven by double-digit comp growth in our existing boutiques in both Canada and the United States. as well as the strong performance of our new and repositioned boutique.

Speaker Change: Turning to our sales channels net revenue in our retail channel was $517 million an increase of 24%.

Speaker Change: Excluding the extra week last year retail net revenue increased 31%.

Speaker Change: This was driven by double digit comp growth in our existing boutiques in both Canada and the United States as.

Speaker Change: As well as the strong performance of our new and repositioned boutiques.

Todd Ingledew: In e-commerce, net revenue was $378 million, an increase of 42%. Excluding the extra week last year, e-commerce net revenue increased 48%. This was driven by strong traffic growth, fueled by the four factors I mentioned earlier. We delivered gross profit of $380 million, an increase of 45% compared to the fourth quarter last year. Gross profit margin expanded 420 basis points. to 42.5%. Our ongoing actions to further drive margin expansion generated benefits from IMU improvements, lower markdowns, lower warehousing costs, and tailwinds from store occupancy costs. These benefits were partially offset by higher freight costs.

Speaker Change: In E Commerce net revenue was $378 million an increase of 42%.

Speaker Change: Excluding the extra week last year E Commerce net revenue increased 48%.

Speaker Change: This was driven by strong profit growth fueled by the four factors I mentioned earlier.

Speaker Change: We delivered gross profit of $380 million, an increase of 45% compared to the fourth quarter last year.

Speaker Change: Gross profit margin expanded 420 basis points.

Speaker Change: The 42, 5%.

Speaker Change: Our ongoing actions to further drive margin expansion generated benefits from IME improvements lower markdowns, lower warehousing costs and tailwind from store occupancy costs.

Speaker Change: These benefits were partially offset by higher freight costs.

Todd Ingledew: SG&A expenses for the quarter were $246 million. leveraging 140 basis points as a percent in net revenue to 27.5%. The improvement was driven by fixed cost leverage and savings from our smart spending initiative.

Speaker Change: SG&A expenses for the quarter were $246 million.

Speaker Change: Leveraging 140 basis points as a percentage of net revenue to 27, 5%.

Speaker Change: The improvement was driven by fixed cost leverage and savings from our smart spending initiative.

Todd Ingledew: Adjusted EBITDA in the fourth quarter was $161 million. an increase of 122% from last year. Adjusted EBITDA as a percent of net revenue expanded 740 basis points to 18%. This was driven by our ongoing efforts to deliver multi-year margin expansion, SG&A expense leverage, and benefit from other incomes.

Adjusted EBITDA in the fourth quarter was $161 million.

Speaker Change: An increase of 122% from last year.

Speaker Change: Adjusted EBITDA as a percent of net revenue expanded 740 basis points to 18%.

Speaker Change: This was driven by our ongoing efforts to deliver multi year margin expansion SG&A expense leverage and benefit from other income.

Todd Ingledew: As we have communicated, the improvements we delivered in each quarter of fiscal 2025 represent a key step on our path back to achieving our historic EBITDA margin levels in the high teen.

Speaker Change: As we have communicated the improvements we delivered in each quarter of fiscal 2025 represent a key step on our path back to achieving our historic EBITDA margin levels in the high teens.

Todd Ingledew: Turning to the balance sheet, inventory was $379 million at the end of the fourth quarter, up 12% from last year. Importantly, prior to the implementation of reciprocal tariffs by the United States, we had already received the vast majority of inventory required to satisfy demand for our spring-summer season.

Speaker Change: Turning to the balance sheet inventory was $379 million at the end of the fourth quarter up 12% from last year.

Speaker Change: Accordingly prior to the implementation of reciprocal tariffs by the United States. We had already received the vast majority of inventory required to satisfy demand for our spring summer season.

Todd Ingledew: During the quarter, we generated $66 million in free cash flow. Our liquidity position is strong with $286 million in cash. No debt and zero drawn on our $300 million revolving credit facility at the end of the fourth quarter.

Speaker Change: During the quarter, we generated $66 million in free cash flow.

Speaker Change: Our liquidity position is strong with $286 million in cash.

Speaker Change: No debt and zero drawn on our 300 million dollar revolving credit facility at the end of the fourth quarter.

Todd Ingledew: I will now shift to our outlook for the first quarter and fiscal year 2026. We continue to see strong momentum in our business in the first quarter. Fueled by a positive client response to our spring-summer product and our optimized inventory position. Given quarter-to-date trends, we expect net revenue in the first quarter of fiscal 2026 to be in the range of $620 to $640 million. representing growth of 24 to 28%. Our net revenue outlook for the first quarter is based on continued performance in the United States and our ongoing momentum in Canada. Both driven by our boutique openings, comparable sales growth in our existing boutiques, and strength in our e-commerce business.

Speaker Change: I will now shift to our outlook for the first quarter and fiscal year 2026.

Speaker Change: We continue to see strong momentum in our business in the first quarter fuel.

Speaker Change: Fuel by a positive client response to our spring summer product and our optimized inventory position.

Speaker Change: Given quarter to date trends, we expect net revenue in the first quarter of fiscal 2026 to be in the range of $620 million to $640 million reps.

Speaker Change: Representing growth of 24% to 28%.

Speaker Change: Our net revenue outlook for the first quarter is based on continued performance in the United States and our ongoing momentum in Canada.

Speaker Change: Both driven by our boutique openings comparable sales growth in our existing boutiques and strength in our ecommerce business.

Todd Ingledew: We expect gross profit margin in the first quarter to increase approximately 200 basis points compared to the first quarter of fiscal 2025. This improvement is driven by leverage on rent, lower distribution costs, and continued IMU improvements. We forecast SG&A leverage of approximately 100 basis points in the first quarter. This is primarily driven by cost leverage due to the increased revenue growth and our ongoing smart spending initiative.

We expect gross profit margin in the first quarter to increase approximately 200 basis points compared to the first quarter of fiscal 2025.

Speaker Change: This improvement is driven by leverage on rent lower distribution costs and continued <unk> improvements.

Speaker Change: We forecast SG&A leverage of approximately 100 basis points in the first quarter. This was primarily driven by cost leverage due to the increased revenue growth and our ongoing smart spending initiative.

Todd Ingledew: Turning to the full fiscal year, we are forecasting net revenue in the range of $3.05 to $3.25 billion. representing growth of 11 to 19% from fiscal 2025.

Speaker Change: Turning to the full fiscal year, we are forecasting net revenue in the range of 3.05 to $3 billion to $5 billion.

Speaker Change: Representing growth of 11% to 19% from fiscal 2025.

Todd Ingledew: While our momentum across channels and geographies remains strong year-to-date, due to the dynamic macro environment, our outlook accommodates for a range of scenarios. Our fiscal 2026 net revenue outlook is underpinned by our boutique openings both this year and last. We plan to open a minimum of 12 new boutiques and reposition five boutiques. including the reposition of our Flatiron flagship in Manhattan. The openings this year will deliver total square footage growth in the mid to high teens, on top of 25% square footage growth last year.

Speaker Change: While our momentum across channels and geographies remains strong year to date due to the dynamic macro environment, our outlook accommodates for a range of scenarios.

Speaker Change: Our fiscal 2026 net revenue outlook is underpinned by a boutique openings. Both this year and last we plan to open a minimum of 12, new boutiques and repositioned five boutiques, including the repositioning of our flatiron flagship in Manhattan.

Speaker Change: The openings this year will deliver total square footage growth in the mid to high teens on top of 25% square footage growth last year.

Todd Ingledew: Turning to tariff impacts, the tariffs currently being imposed by the United States result in just over 400 basis points of gross margin pressure in fiscal 2026. To offset this pressure and work to maintain our margins, we are focused on the following. Shifting production into countries with lower tariffs. Partnering with our suppliers to help absorb the added cost. realizing cost reductions from across the business, and continuing our focus on our multi-year IMU opportunities. With this in mind, adjusted EBITDA as a percent of net revenue is expected to be approximately 14 to 15% in fiscal 2026. compared to 14.8% in fiscal 2025.

Speaker Change: Turning to tariff impacts the tariffs currently being imposed by the United States resulted in just over 400 basis points of gross margin pressure in fiscal 2026.

Speaker Change: To offset this pressure and work to maintain our margins we're focused on the following.

Speaker Change: Shifting production into countries with lower tariffs.

Speaker Change: Partnering with our suppliers to help absorb the outage costs.

Speaker Change: Realizing cost reductions from across the business.

Speaker Change: And continuing our focus on our multi year I am you opportunities.

Speaker Change: With this in mind adjusted EBITDA as a percent of net revenue is expected to be approximately 14% to 15% in fiscal 2026 <unk>.

Speaker Change: Compared to 14, 8% in fiscal 2025.

Todd Ingledew: We expect depreciation and amortization in fiscal 2026 of approximately $110 million compared to $84 million in fiscal 2025. We expect capital expenditures for fiscal 2026 of approximately $180 million. This includes $110 million related to investments in new and repositioned boutiques for fiscal 2026 and the start of construction for boutiques opening in early fiscal 2027. We continue to see our most recent new boutiques tracking the payback in approximately one year or less. exceeding our target of 12 to 18 months. Our TAPAC spend also includes $70 million, primarily related to the expansion of our distribution center network, including our new facility in the Vancouver area.

Speaker Change: We expect depreciation and amortization in fiscal 2026 of approximately $110 million.

Speaker Change: To $84 million in fiscal 2025.

Speaker Change: We expect capital expenditures for fiscal 2026 of approximately $180 million.

Speaker Change: This includes a $110 million related to.

Speaker Change: Investments in new and repositioned boutiques for fiscal 2026, and the startup of construction for boutiques opening in early fiscal 2027.

Speaker Change: We continue to see our most recent new boutiques tracking the payback in approximately one year or less exceeding our target of 12 to 18 months.

Speaker Change: Our Capex spend also includes $70 million, primarily related to the expansion of our distribution Center network, including our new facility in the Vancouver area.

Todd Ingledew: We plan to renew our NCIB this month, and throughout fiscal 2026, we expect to purchase shares opportunistically to offset the dilution of option exercises.

Speaker Change: We plan to renew our NCI view this month and throughout fiscal 2026, we expect to purchase shares opportunistically to offset the dilution of option exercises.

Todd Ingledew: In closing, while the recent U.S. tariffs pose a significant challenge for our industry, the strength of our business model, our 40-year proven track record, the strong momentum in our business, and our healthy liquidity position give us confidence in our path forward.

Speaker Change: In closing, while the recent U S tariffs pose a significant challenge for our industry the strength of our business model, our 40 year proven track record with strong momentum in our business and our healthy liquidity position give us confidence in our path forward we are.

Todd Ingledew: We are well-positioned to successfully navigate the continually evolving macro environment as we remain focused on delivering our everyday luxury experience to our clients and advancing our key strategic levers to drive long-term profitable growth for our stakeholders. Thank you.

Speaker Change: Well positioned to successfully navigate the continually evolving macro environment as we remain focused on delivering our everyday luxury experience to our clients and advancing our key strategic levers to drive long term profitable growth for our stakeholders.

Speaker Change: Thank you.

Operator: With that operator, let's please open up the line for questions.

Speaker Change: With that operator, let's please open up the line for questions.

Operator: We will now begin the question and answer session.

Speaker Change: We will now begin the question and answer session join the question queue. You May Press Star then one on your telephone keypad.

Operator: To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. that we can get to everyone on the call today. Please limit yourself to one question before getting back in the queue.

Speaker Change: Her tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any key.

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Luke Hannan: The first question comes from Luke Hannan with CannaCode Dignity. Please go ahead. Yes, thanks, and good afternoon, everyone. I wanted to start on the topic of production. You mentioned that you're diversifying the supply chain that you have right now. Can you give us a sense of the sourcing breakdown as of today and then what you envision it looking like perhaps six months or 12 months from now? Again, assuming that things stay where they are, I realize it's probably a big assumption at this point, just given the fluidity of everything going on, maybe just a further breakdown on how you envision your production base looking like down the road.

Speaker Change: The first question comes from Luke Hannan with Canaccord Genuity. Please go ahead.

Luke Hannan: Yes, Thanks, and good afternoon, everyone I wanted to start on the topic of production you mentioned that youre diversifying that.

Speaker Change: My chain that you have right now can you give us a sense of the sourcing breakdown as of today and then what you envision it looking like perhaps six months or 12 months for now again, assuming that things stay where they are I realize there's probably a big assumption at this point just given the fluidity of everything going on but maybe just a further breakdown on how you envision your.

Luke Hannan: Your production base looks like down the road. Thanks.

Jennifer Wong: Thanks, Liz, for that question. You know, I want to start off by saying that quality is paramount for us at Aritzia. So, when we're thinking about our sourcing, ensuring that we maintain the integrity of our product and the quality of our product is top, top priority. So, at this point in time, the majority of our production is in three countries. There will be China, Vietnam, and Cambodia. The remainder of our production is spread over 10 countries. So, effectively, we are in a total of 13 countries across four continents. Obviously, where tariffs are most impacted is in China, and we've reduced our production already from 25% to 20% for fall-winter.

Luke Hannan: Oh. Thanks for that question you know I wanted to start off by saying that quality is paramount for us at a red yeah. So when we're thinking about our sourcing.

Luke Hannan: Ensuring that we maintain the integrity of our product and the quality of our product is a top top priority.

Luke Hannan: So at this point in time, the majority of our production.

Luke Hannan: Mm three countries that would be China, Vietnam, and Cambodia, the remainder of our production is spread over 10 countries. So effectively we are in a total of 13 countries across four continents.

Luke Hannan: Obviously, where tariffs are most impacted is in China, and we've reduced our production already from 25% to 20% for fall winter. We are working to further diversify that and we see that being mid single digit percentage for spring of next year, which is less than a year away.

Jennifer Wong: We are working to further diversify that, and we see that being mid-single-digit percentage for spring of next year, which is less than a year away. And so, you know, the good news with some of this acceleration in our existing strategy of diversifying is that the quality will at least remain consistent with where it is today. If not, I think in some cases, we'll even improve the quality with some of these shifts.

Luke Hannan: Hey.

Luke Hannan: And so you know the good news with some of the acceleration in our existing strategy of diversifying is that the quality will at least remain consistent with where it is today if not I think in some cases will even improve the quality with some of these shifts.

Luke Hannan: Okay, thank you very much.

Luke Hannan: Okay. Thank you very much.

Luke Hannan: Yeah.

Mark Petrie: The next question comes from Mark Petrie with CIBC, please go ahead. Yeah, good afternoon. I wanted to ask about sort of the thought process around and maybe openness to price increases. I know this is a multi year journey around IMU. But I think in the past, this has been something that there's been some reluctance to sort of take and at the risk of maybe disrupting the momentum with consumers, even when competitors were taking price. So, I'm just hoping you could talk about the current mindset, particularly in light of the tariffs. And I guess, specific to Fiscal 26, I know, as you mentioned, a bunch of the product has already landed, but what would be the timing on that decision if they would be in place to offset whatever tariff impact is actually felt?

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

Mark Petrie: Hey, good afternoon, I wanted to ask about sort of the thought process around and maybe openness to price increases I know this is a multiyear journey around I M U.

Mark Petrie: But I think in the past this has been something that theres been some reluctance to.

Mark Petrie: Sort of take in and at the risk of maybe disrupting the momentum with consumers even when competitors were taking price. So I'm just hoping you could talk about the current mindset, particularly in light of in light of the tariffs.

Mark Petrie: And I guess specific to fiscal 'twenty six I know you mentioned a bunch of the product is already landed but what would be the timing on that decision.

Mark Petrie: If if those.

Mark Petrie: If they would be in place to upset whatever tariff impact is are is actually is actually filled.

Jennifer Wong: Hi, Mark. I'm going to start with, that's a very compounded question there. I'm going to start with pricing. It's really important that we get across that the customer is at the center of all of this, right? Ensuring that we stay committed to our everyday luxury value proposition and providing value to our clients is first and foremost a priority along with the quality of our product. And we're fiercely committed to protecting our margin, but at the same time, just as committed to providing the value to our clients. And in the number of strategies that we've listed to mitigate the tariffs, we believe that, and after looking at the business quite carefully, we believe that all of the things that we've listed will confidently mitigate the tariffs as we know them today.

Mark Petrie: Yeah, Hi, I'm, Mark I'm going to start with that.

Mark Petrie: Very compound question, there I'm going to start with pricing.

Mark Petrie: Yeah, it's really important that we get across that the customer is at the center of all of this right are ensuring that we.

Mark Petrie: They are committed to our everyday luxury value proposition and providing value to our clients is first and foremost a priority along with the quality of our product.

Mark Petrie: And.

Mark Petrie: Where.

Mark Petrie: Fiercely committed to protecting our margins.

Mark Petrie: But at the same time, just as committed to providing value to our clients and in the a number of strategies that we've listed to mitigate the tariffs.

Mark Petrie: We believe that after looking at the business quite carefully we believe that all of the things that we've listed will confidently mitigate the tariffs as we know them today and obviously the situation is fluid.

Jennifer Wong: And obviously, the situation is fluid. So we'll continue to do what we've been doing now for decades, for four decades, for 40 years. We do evaluate our pricing on a seasonal basis. We want to make sure that value to our customer is first and foremost. Given these other mitigation strategies that we've listed, particularly with diversification and the cost management initiative, we, at this time, do not see that we need to commit to increasing prices as a result of tariffs. That said, we will continue with our IMU improvements. As you know, that includes evaluating our prices, but the majority of that is driven on the cost side.

Mark Petrie: Well continue to do what we've been doing now for for decades for four decades for 40 years.

Mark Petrie: We do evaluate our pricing on a seasonal basis.

Mark Petrie: You know we.

Mark Petrie: Want to make sure that value to other customer is first and foremost I'm given these other mitigation strategies that we've listed particularly with diversification and the cost management initiatives. We at this time I do not see that we need to commit to increasing prices.

Mark Petrie: As a result of tariffs.

Mark Petrie: That said, we will continue with our I M. U improvements are as you know that includes you know evaluating our prices, but most of the majority of that is driven on the cost side. So if we execute as we are setting out on all four of those mitigation strategies pricing is not oh.

Jennifer Wong: So if we execute, as we are setting out on all four of those mitigation strategies, pricing is not a primary lever at this point in time.

Our primary our primary lever at this point in time.

Mark Petrie: Okay, thanks for all those comments, Jennifer.

Speaker Change: Okay. Thanks for all those comments Jennifer appreciate it.

Irene Nattel: The next question comes from Irene Nattel with RBC Capital Markets. Please go ahead. Thanks and good afternoon, everyone. Great quarter. And it sounds as though the momentum is continuing into Q1.

Speaker Change: The next question comes from Irene Mattel with RBC capital markets. Please go ahead.

Speaker Change: Thanks, and good afternoon, everyone great quarter.

Speaker Change: And it sounds you. So the momentum is continuing into Q1. So can you walk us through how you're thinking about the evolution of the year from a demand perspective, and then also from a margin perspective cause if half of your product is onshore.

Jennifer Wong: So can you walk us through how you're thinking about the evolution of the year from a demand perspective and then also from a margin perspective? Because if half of your product is on shore and was prior to the tariffs, then that must mean that we should be sort of thinking about the first half being strong and the second half being more challenging. Yeah, thanks, Irene. I'll take that one. Starting with the revenue side of things, we are, as you said, we're continuing to see strong momentum in both countries and in both channels year-to-date, which is very encouraging.

Speaker Change: Was prior to the tariffs then that must mean that we should be thinking about.

Speaker Change: In the first half being strong in the second half being more challenging.

Irina: Yes, Thanks, Irina I'll take that one.

Irina: Starting with the revenue side of things. We are as you said, we're continuing to see strong momentum in both countries and in both channels year to date, which is very encouraging.

Todd Ingledew: Our outlook does accommodate for a range of scenarios due to all the uncertainties with, you know, the broader macro environment, including the potential in the back half for a consumer slowdown. So the top end of our range assumes, you know, effectively business as usual, and then the bottom of our range assumes a meaningful deceleration. And that's why we've broadened the range for the year. From a cadence perspective, the Q1 guidance assumes total comp growth in the mid- to high-teens, and then for the remainder of the year, our guidance assumes trans-moderate each quarter, so, you know, getting further and further pressured as we go through the year.

Irina: Our outlook does accommodate for a range of scenarios due to all this uncertainties with the broader macro environment, including the potential in the back half for a consumer slowdown. So the top end of our range assumes effectively business as usual and then the bottom of our range assumes a mean.

Irina: <unk> deceleration and Thats why we broadened the range for the year.

Irina: From a cadence perspective are the Q1 guidance assumes total comp growth in the mid to high teens and then for the remainder of the year our guidance assumes trends moderate each quarter. So you know.

Irina: Getting.

Irina: Further and further pressured as we go through the year and that's because obviously, we're annualizing an extremely strong topline growth in the back half of FY 'twenty five but also the potential for a slowdown is increasing through the through the back part of the year and so bottom line.

Todd Ingledew: And that's because, obviously, we're annualizing on extremely strong top-line growth in the back half of FY25, but also the potential for a slowdown is increasing through the back part of the year. And so, bottom line from a revenue perspective, we're extremely pleased with the strength that we're seeing today, and we're executing to mitigate on our tariff impact. But we're going to continue to deliver on all of our growth levers as we work through the year and are obviously charging for the top part of our range. From a SG&A and a gross profit perspective, we've got it to 200 basis points of gross profit margin expansion in the first quarter.

Irina: From a revenue perspective, we're extremely pleased with the strength that we're seeing today and we're executing to mitigate on our.

Speaker Change: Tariff impacts but.

Speaker Change: We're going to continue to deliver on all of our growth levers as we work through the year and there are obviously charging for the for the <unk> part of our range.

Speaker Change: From a.

Speaker Change: SG&A in a gross profit perspective.

Speaker Change: We've guided to 200 basis points of gross profit margin expansion in the first quarter and then we expect that we'll start to see a slight impact from the tariffs in Q2 at.

Todd Ingledew: And then we expect that we'll start to see slight impact from the tariff in Q2. The end of Q2 is the launch of our fall season in August. And then, you know, to see the full impact of the tariff in the back half of the year. And then from an SG&A perspective, we've got it to 100 basis points of SG&A leverage in Q1. And then we expect slight improvement for the balance of the year. And, of course, all of this is based on what we know today. So, you know, taking into account the current environment.

Speaker Change: The end of Q2 was the launch of our fall season in August and then to see the full impact of the tariffs in the back half of the year and then from an SG&A perspective, where we've guided to 100 basis points of SG&A leverage in Q1, and then we expect slight improvement for the balance of the year.

Speaker Change: And of course all of this is based on what we know today, so taking into account the.

Speaker Change: The current environment.

Speaker Change: That's usually helpful. Thanks, so much.

Michael Glen: The next question comes from Michael Glen with Raymond James. Please go ahead. Thanks for getting me in. Just on inventory, we're reading a lot about dropping shipments in the news. I'm just wondering if you have any concerns about your ability to actually get the inventory you need, or how you're taking steps to ensure you get the inventory you need for the fall season. We're not seeing anything.

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

Michael Glen: Oh, Thanks for getting me in just on inventory, we're reading a lot about dropping shipments in the news I'm. Just wondering if you have any concerns about your ability to actually get the inventory you need or if you're taking any steps to it how you're taking steps to ensure you get the inventory you need for the for the fall season.

Michael Glen: We're not seeing anything hi, hi, Michael. Thank you for the question, we're not seeing anything right now are in our supply chain of again, we're very proud of our agile and our global partnerships.

Jennifer Wong: Hi, Michael. Thank you for the question. We're not seeing anything right now in our supply chain. Again, we're very proud of our Agile and global partnerships. So, at this point in time, we, again, fluid situation, but at this time, we're not seeing any risk.

Michael Glen: At this point in time, we again fluid situation, but at this time, we're not for any.

Michael Glen: Any risk.

Michael Glen: And then are you able to give us some granularity at all in terms of how your cost of goods sold breaks down across different buckets, supply chain, freight, apparel and product, just the different broad buckets, how to think about the breakdown of cost of goods sold? Yeah, Michael, we don't provide that breakdown. Okay.

Speaker Change: Okay, and then are you able to give us some granularity at all in terms of how your Cogs cost of goods sold breaks down across different buckets supply chain freight.

Michael Glen: Apparel and product.

Michael Glen: Different broad buckets, how to how to think about the breakdown of cost of goods sold.

Michael Glen: Yeah, Michael we don't provide that breakdown.

Michael Glen: Okay, that's it for me.

Michael Glen: Okay.

Michael Glen: Okay. That's it for me.

Mauricio Serna: The next question comes from Mauricio Serna with UBS. Please go ahead. Great. Good afternoon. Thanks for taking my questions. I guess I just wanted to get a better sense. So, is it fair to assume you mentioned the 400 basis points impact from the tariff?

The next question comes from Mauricio Serna with UBS. Please go ahead.

Michael Glen: Great.

Michael Glen: Good afternoon. Thanks for taking my questions I guess, just wanted to get a better sense.

Michael Glen: So is it fair to assume you mentioned is a 400 basis points impact from the tariffs.

Todd Ingledew: I mean, how are you thinking about Full year, like the gross margin contraction, I assume there's a contraction net, so how much of a gross margin contraction would you be expecting for a full year? And just to confirm that, that's assuming, you know, 145% in China, 10% elsewhere. Is that like a fair way to think about like the underlying assumptions there? Yeah, thanks for the question. Let me walk you through that.

Michael Glen: How are you thinking about.

Michael Glen: Full year like the gross margin contraction I assume theres a contraction map so how.

Michael Glen: How much of a gross margin.

Michael Glen: And would you be expecting pool for full year, and just to confirm that that's assuming 145% in China, 10% elsewhere. It sounds like a fair way to think about the underlying assumptions there.

Michael Glen: Yeah.

Michael Glen: Thanks for the question, let me, let me walk you through that we're not going to we have we've only guided to adjusted EBITDA. So we're not going to breakdown the specifics between gross profit and SG&A for the guidance beyond what I, just said related to the cadence.

Todd Ingledew: We've only guided to adjusted EBITDA, so we're not going to break down the specifics between gross profit and SG&A for the guidance beyond what I just said related to the cadence. However, from an adjusted EBITDA perspective, we are, as you noted, guiding between 14% and 15%, which is roughly flat with what we achieved last year in FY25, and that includes the just over 400 basis points of pressure from the reciprocal tariff. And obviously, the situation is evolving, but I'll give you some context as you reflected around the assumptions and then our current mitigation plans. From an assumption perspective...

Michael Glen: However from an adjusted EBITDA perspective, we are as you noted guiding between 14, and 15%, which is roughly flat with what we achieved last year in FY 'twenty five and that includes the just over 400 basis points of pressure from the reciprocal tariffs.

Michael Glen: And obviously the situation is evolving but I'll give you some context as you robust at around the assumptions and then our current mitigation plans.

Michael Glen: From an assumption perspective.

Todd Ingledew: we're using what's currently in place. So reciprocal tariffs of 145% in China, 10% for the rest of the world, the elimination of China from the de minimis, which actually takes effect tomorrow. And then for fall winter, we've assumed approximately 20% of our production will come from China. So those are kind of the key assumptions that you need to understand how we've built out the just over 400 basic points of pressure.

Michael Glen: We're using what's currently in place so reciprocal tariffs of 145% in China, 10% for the rest of the world the elimination of China from the de Minimis, which actually takes effect tomorrow.

Michael Glen: And then for fall winter, we've assumed approximately 20% of our production will come from China. So those are kind of the key assumptions that you need to understand how we built out the just over 400 basis points pressure and then from a mitigation perspective.

Todd Ingledew: And then from a mitigation perspective. We have, first off, approximately 50% or half of the impact is going to be mitigated by margin improvements that we had previously anticipated for FY26. So that covers half of it, and then the other half, the remaining 50%, is offset by cost reductions, the acceleration of diversification out of China that Jennifer already mentioned, going from 25% to 20% for this coming fall-winter, and then the sharing of costs with vendors. So those three things are the remaining 50%. And I guess the bottom line is that under the current set of assumptions, we're working to ensure that at a minimum, we maintain margins with the levels we achieved last year.

Michael Glen: We have.

Michael Glen: First off approximately 50% or half half of the the impact is going to be mitigated by margin improvements that we had previously anticipated for FY 'twenty six so that covers half of it and then the other half the remaining 50% is offset by cost reductions.

Michael Glen: The acceleration of diversification out of China.

Michael Glen: Jennifer already mentioned going from 25% to 20.

Michael Glen: For fall Winter this coming fall winter and then the sharing of cost with vendors. So those three things.

Michael Glen: Are the remaining 50%.

Michael Glen: And I guess the bottom line is that under the current set of assumptions, we're working to ensure that at a minimum we maintain margins with the levels, we achieved last year.

Mauricio Serna: Understood.

Mauricio Serna: And then quick follow-up, you mentioned something about, you know, the guidance for sales implies, you know, in both situations that there's like a deceleration in the comm sales, you know, throughout the year, depending on whether it's like, you know, you know, a weaker consumer outlook, it could be faster, you know. So just thinking about, like, in the downside scenario, what kind of comm sales are you baking in, like, you know, by, like, for Q? In the downside by the fourth quarter, the comps in certain scenarios could be negative. And I'm talking about for the fourth quarter, because we had, as we just reported, you know, extremely strong performance in the fourth quarter last year, and then there's a downturn in effect, the comps could be meaningfully pressured, and that's what the downside contemplates.

Michael Glen: Understood and then a quick follow up you mentioned something about.

Michael Glen: The guidance for sales implies.

Michael Glen: In both situations out there just like a deceleration in the comp sales throughout the year, depending on whether it's like you know.

Michael Glen: A weaker consumer outlook it could be faster.

Speaker Change: So just thinking about like in the downside scenario, what kind of comp sales are you baking in like Mike <unk>.

Michael Glen: Uh huh.

Michael Glen: In the downside by the fourth quarter.

Michael Glen: Comps in certain scenarios could be negative.

Michael Glen: Okay. Okay.

Michael Glen: Hey, Mike.

Michael Glen: And I'm talking about for the fourth for the fourth quarter, because we had as we just reported extremely strong performance in the fourth quarter last year and and then if there is a.

Michael Glen: Downturn in effect are the comps could be meaningfully pressure and thats what the downside.

Michael Glen: Contemplate.

Mauricio Serna: Super helpful.

Mauricio Serna: Very last one, depreciation. You said $110 million for the year. How much of that is like the depreciation that is not related to rent? Oh, that is that's the non rent amortization like that's the pure depreciation. Yeah, yeah, but then there's like, you know, out of that, some of that is rent, some of that is not rent. Like, what is the part that is not rent?

Speaker Change: Okay understood Super helpful. Last one depreciation you said $110 million for the year, how much of that as well.

Michael Glen: Appreciation that is not related to <unk>.

Michael Glen: Oh is that is that the non.

Michael Glen: Rent amortization like that.

Michael Glen: Pure depreciation.

Michael Glen: Yeah, but then there's like how does that what some of that is rental that is not quite as important that is.

Michael Glen: Alright, well Wolf will follow up with you on that.

Todd Ingledew: We'll follow up with you on that, Mauricio.

Mauricio Serna: Thank you, and congratulations.

Speaker Change: Thank you and congratulations.

Operator: So that we can get to everyone on the call today, please limit yourself to one question before getting back in the queue.

Speaker Change: So that we can get to everyone on the call today. Please limit yourself to one question before getting back into queue.

Martin Landry: The next question comes from Martin Landry with Stiple.

Speaker Change: Our next question comes from Martin Landry with Stifel. Please go ahead.

Martin Landry: Please go ahead.

Martin Landry: Hi, good afternoon and congrats on your great result. Todd, I would want to continue on the discussion you just provided on the 400 bps pressure coming from tariffs on your EBITDA line. You do mention that 50% is going to be abated by mitigating measures that you're taking and 50% feels like you're eating it up right now. Obviously, these tariffs are going to have an impact, as you mentioned previously, half of the year. How do we think about this and the spillover effect into next year? I know it may be a little early, but is there going to be a spillover effect that we should take into account or do you expect mitigation measures to accelerate towards the end of the year so that tariffs may have a very small impact into next year?

Martin Landry: Hi, good afternoon, and congrats on your great results.

Speaker Change: Todd I would want to continue on the discussion you just provided on the 400 bps.

Speaker Change: You know pressure coming from terrorists on your EBITDA line.

Speaker Change: You do mention that 50% is.

Speaker Change: Gonna be abated by mitigating measures that you're taking.

Speaker Change: And you.

Speaker Change: 50% is it feels like Youre eating it up right now.

Speaker Change: Obviously.

Speaker Change: You know these terrorists youre going to have an impact as you mentioned previously half of the year.

Speaker Change: How do we think about this.

Speaker Change: And the spillover effect into into next year.

Speaker Change: And maybe a little early but is there going to be a spillover effect that we should take into account or do you expect and mitigation measures to accelerate and towards the end of the year so that.

Speaker Change: So that tariffs may have.

Speaker Change: Very very small impact into next year.

Jennifer Wong: Hi, Marta. I'm going to take that question because it's a longer range view. And I think, you know, it's clearly and obviously the situation continues to evolve. And it is, it is, you know, if there's 1 thing we're certain about, it's very uncertain. I'm sure you've heard that already before. And so our guidance that we're sharing today contemplates what we see for this fiscal year. And we are very confident and clear in the plan as we know the situation today. But, you know, we will continue to evaluate things very closely. The situation is very fluid.

Speaker Change: Hi, Martin I'm I'm going to take that question, because it's a longer range view and I think you know clearly and obviously the situation continues to evolve and it is it is it you know there's one thing we are certain about it very uncertain.

Speaker Change: You heard that already before and so our guidance that we're sharing today contemplates what we see for this fiscal year and we are very confident and clear on the plan and we know the situation today, but you know we will contend to continue to evaluate things very.

Speaker Change: Mostly are the situation is very fluid I don't think it helps anybody to get into hypotheticals at this point in time and the team we have a task force here that is planning for various scenarios.

Jennifer Wong: I don't think it helps anybody to get into hypotheticals at this point in time. The team, we have a task force here that is planning for various scenarios. You know, my thought is, and this is the collective thought of the team, is we are being proactive. We are being extremely proactive. I like the fact that we've been proactive. We have to remain flexible, agile. We're remaining flexible and agile. We're monitoring constantly. I think we have to be responsive and prepared for the various scenarios. And I'm really proud that we, that we are in that mode.

Speaker Change: My thought is and this is the collective thought as a team is we are being proactive we are being extremely proactive I like the fact that we have been proactive we have to remain flexible agile we're remaining flexible and agile we're monitoring constantly I think we have to be responsive and prepared for that.

Speaker Change: Various scenarios and I'm really proud that we that that.

Speaker Change: But we are in.

Speaker Change: Mode.

Jennifer Wong: We're ruthlessly prioritizing all of the things that we're doing and what we're spending money on. You know, we're, you know, immensely focused on the customer, our product, and our everyday legislative experience. If there's 1 thing that we will prioritize and keep at the forefront, it's that. And, as you know, we have to balance the short term with the long term. And that's kind of the name of the game, I think, for everybody in our situation. And what we must do is we must execute. We must execute on our business model. We must execute on the plan that we have in front of us for this fiscal year.

Speaker Change: Ruthlessly prioritizing all of the things that we're doing and what we're spending money on them you know at work.

Speaker Change: Immensely focused on the customer.

Speaker Change: Our product and our everyday luxury experience if there's one thing that we will prioritize and keep at the forefront if that and as you know we have to balance the short term with the long term and that's kind of the name of the game I think for everybody in our situation well.

Speaker Change: What we must do what we must execute we must execute on our business model, we must execute on the plan that we have in front of us for this fiscal year. We are focused on getting those 12, new boutiques opened those five new repositions and were focused on servicing the customer with an everyday luxury value proposition and I think if we execute with excellence that is putting.

Jennifer Wong: We are focused on getting those 12 new boutiques open, those 5 new repositions, and we're focused on servicing the customer with an everyday luxury value proposition. And I think if we execute with excellence, that is putting us in our best position of strength to deal with the uncertainty.

Speaker Change: That's in our best position of strength to deal with the uncertainty.

Martin Landry: Great. Understood. Thank you.

Speaker Change: Okay understood. Thank you.

Stephen Macleod: The next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead. Thank you. Good evening, everyone. Thanks for all the color so far. I'm just going to shift gears a little bit. Just wanted to get some specific, just sort of dig in a little bit on the supply chain. You talked about diversifying your supply away from China to 20% and then down to the mid-single-digit range. I'm just curious, where does that incremental supply come from? Is it in existing markets or are you seeking out new markets and are you having to seek out new suppliers at the same time?

Speaker Change: The next question comes from Stephen Macleod BMO capital markets. Please go ahead.

Stephen Macleod: Thank you good evening everyone.

Speaker Change: Thanks for all the color. So far I was just going to shift shifting gears a little bit just just wanted to get some.

Specific.

Speaker Change: Digging a little bit on the supply chain, you talked about diversifying your supply away from China to 20% and then down to the mid single digit range I'm just curious.

Speaker Change: Where does that incremental supply come from is it is it in existing markets or are you seeking out new markets and is are you having to seek out new suppliers at the same time.

Stephen Macleod: Just trying to get a sense of how easy it is, and maybe easy is not a fair word, to make that shift.

Speaker Change: I'm just trying to get a sense of how easy. It is it may be easy it's not a fair word.

Speaker Change: To make that shift.

Jennifer Wong: Hi, Stephen. Yes, all of the above. All of the above. We are taking the word diversification right down to the very epitome of what diversification means. And so the good news is, is we have lots of, you know, established, long-standing partnerships who are diversifying themselves, and it literally means all of that. Existing countries, exploring new countries, it does mean diversifying our supplier base, and that's where I think that's somewhat of the exciting part, where I think we're getting into facilities and with suppliers that can improve upon our product. And so, you know, again, this has been part of our existing strategy to diversify now for nearly a decade.

Speaker Change: Hi, Stephen Yeah, all of the above all of the above and we are taking the word diversification right down to it.

They're hesitating me of like diversification means and so the good news is is we have lots of you know established long standing partnerships, who are diversifying themselves and it literally means all that all of that existing.

Speaker Change: Existing country exploring new country, it doesn't mean diversifying our supplier base.

Speaker Change: And that's where I think that some of the exciting part where I think we're getting into facilities and with suppliers that can improve upon our product and so you know again. This has been part of our existing strategy to diversify now for nearly nearly a decade, we've been at it for nearly a decade and it just means that we have access.

Jennifer Wong: We've been at it for nearly a decade, and it just means that we've accelerated on that.

Speaker Change: <unk> on that.

Jennifer Wong: Great. Thank you, Jennifer.

Speaker Change: Great. Thanks, Jennifer.

Corey Tarlow: The next question comes from Corey Tarlow with Jeffreys. Please go ahead. Great. Thanks.

Speaker Change: The next question comes from Cory Tullow with Jefferies. Please go ahead.

Speaker Change: Great. Thanks.

Jennifer Wong: First question is just, as the weather has gotten a little bit warmer, is there any color that you can provide on products and trends that are working at the moment. And then secondarily, Todd, in your remarks, I think you referenced really strong traffic several times. So, what I wanted to ask as a follow-up to that is, how do you think about traffic versus ticket in the guide as we look ahead?

Speaker Change: First question is just as the weather has gotten a little bit warmer Ah is there any color that you can provide on <unk>.

Speaker Change: Products and trends that are working at the moment.

Speaker Change: And then secondarily Todd in your remarks, I think you use you referenced really strong traffic several times.

So what I wanted to ask as a follow up to that is how do you think about.

Speaker Change: Traffic versus ticket in the in the guide as we look ahead.

Jennifer Wong: Hi Chris, thank you for your questions. On the product side, you know, when business is as good as we're seeing it in Q4 and going into Q1, it's pretty broad-based. Everything is working well, all the categories, styles, fabrics, colors. You know, we were able to transition into spring and February quite nicely with lighter weight fabrics. We've got great colors. I love the colors that I'm seeing in our assortment this season. And so, and we continue to be, you know, performing very well in our existing franchises. So, really, you know, super pleased that everything is resonating with the customer.

Speaker Change: Hi, Chris. Thank you for your questions are on the product side.

Speaker Change: You know when business is as good as we're seeing it in Q4 and going into Q1, it's pretty broad based so everything is working everything is working well all the categories style fabrics colors.

Speaker Change: We were able to.

Speaker Change: Transition into spring in February quite nicely with the lighter weight five ramps up we've got a great colors I love the colors that I've seen them in our assortment.

Speaker Change: And so and we continue to be you know performing very well in our existing franchises. So really yeah Super pleased that everything is resonating with the customer and we couldn't be more pleased with our inventory position at the same time, because it's meeting the demand when the customers coming in and wanting to buy these.

Jennifer Wong: And we couldn't be more pleased with our inventory position at the same time, because it's meeting the demand when the customer is coming in and wanting to buy these things. As it relates to traffic, our trends are driven by traffic. Again, we're seeing. No real change, no material change, no change at all really, it's consistent in terms of the average basket size, the units per transaction, the average dollar, all of that remains consistent. Really, this is a story about increased traffic growth across both channels and both geographies.

Speaker Change: As things.

Speaker Change: As it relates to traffic our trends are driven by traffic and again, we're seeing.

Speaker Change: No real change no material no material change no change at all really it's consistent in terms of the average basket size of the the units per transaction. The average dwell all of all of that remains consistent really this is a story about increased traffic growth across both channels and both geography.

Corey Tarlow: Got it. That's very helpful.

Speaker Change: Got it that's very helpful. And then just as a an additional question is there anything that you could share on April.

Corey Tarlow: And then just as an additional question, is there anything that you could share on April, on recent April trends? I think it's safe to say that when we say we've entered into Q1 with momentum and that spring is off to a strong start, that would apply to April. Okay, thank you very much.

Speaker Change: On recent April trends.

Speaker Change: I think it's safe to say that when we when we say we've entered into Q1 with with momentum in that spring is off to a strong start that would apply to April.

Speaker Change: Okay. Thank you very much.

Brian Morrison: The next question comes from Brian Morrison with TD Cohen. Please go ahead. Oh, thanks very much. Good evening.

Speaker Change: Our next question comes from Brian Morrison TD Cohen. Please go ahead.

Brian Morrison: Oh, thanks, very much good evening.

Brian Morrison: Sorry to beat this question again, but is that 400 basis points represent tariffs for the year or half the year, or is that an annual impact? And I understand your net impact with mitigating factors. Is that 200 basis points like X tariffs would have been closer to the 16 and a half percent range and I respect quality, but can you mitigate 321 by allocating your client favorites to outside China in a rapid manner? Thanks, Brian. I'll take that. Yes, first off, from a margin perspective, we would have been in the 16% to 17% range had we not had the impact of tariffs.

Speaker Change: Sorry to beat this question again, but is that 400 basis points represent tariffs for the year or half a year or is that an annual impact and I understand your net impact with mitigating factors is that 200 basis points like ex tariffs would it be then closer to the 65% range and I respect quality, but can you mitigate three to one by allocating.

Speaker Change: Your client favorite stay outside China in a rapid manner.

Speaker Change: Thanks, Brian I'll take that yes, the first soft from a margin perspective, we would have been in the 16% to 17% range.

Speaker Change: Had we not had the impact of tariffs.

Todd Ingledew: And the 400 basis points, or just over 400 basis points, is for this fiscal year. That's not an annualized number.

Speaker Change: And is the 400 basis points or just over 400 basis point is for this fiscal year.

Speaker Change: That's not an annualized number.

Todd Ingledew: However, I don't actually think it's pertinent to look at an annualized number, because by the time we get to spring, we'll be in a different situation, regardless of what's going on with the reciprocal tariffs. So, yeah, it's a FY26 number. And then from a supply chain perspective, it can take up to six months to move from one supplier to another. But as Jennifer said over and over again, we are not going to sacrifice quality. through this process and will be willing to take the impact of that. Understood.

Speaker Change: However, I don't actually think it's pertinent to look at an annualized number because because by the time, we get this spring we'll be in a different situation, regardless of what's going on with the reciprocal tariffs.

Speaker Change: So yeah, it's a.

Speaker Change: It's a FY 'twenty six number and then from a from.

Speaker Change: From a supply chain perspective.

Speaker Change: It takes.

It can take up to six months to move from from one supplier to another but as Jennifer said over and over again, we are not going to sacrifice quality.

Speaker Change: Through this process and we'll be willing to take the impact of that.

Brian Morrison: Thank you very much.

Speaker Change: Understood. Thank you very much.

Speaker Change: Okay.

Mark Petrie: We have a follow-up question from Mark Petrie with TIBC.

Speaker Change: We have a follow up question from Mark Petrie with CIBC. Please go ahead.

Mark Petrie: Please go ahead. Yeah, thanks.

Mark Petrie: Yes, Thanks, I wanted to ask about your customer mix.

Mark Petrie: I wanted to ask about your customer mix, and specifically at the flagships, how the mix of new versus existing customers compares to other stores, and then what you see on those new customers that might have been visiting, repurchasing back in their home markets, either in store or online.

Mark Petrie: And specifically at the flagships How's the mix of new versus existing customers compares to other stores and then what you see on those new customers that might have been visiting repurchasing back in their home markets either in store or online and I guess related to that if you also have a sense of the halo effect from the new non flagship.

Jennifer Wong: And I guess related to that, if you also have a sense of the halo effect from the new non-flagship stores, if that's evolved at all from what you've called out previously. Great question on customer. The halo effect on opening new stores and new markets continues to show that we get a 70% halo effect in e-commerce for that first year, so super pleased to see that. You know, our flagship performance, you know, we expected our flagships to Be fantastic. And it is, it is, they are, they're fantastic. You know, it's more than a financial payback for us.

Mark Petrie: Doors, if that's evolved at all from what you've called out previously.

Mark Petrie: Great question on customer the Halo effect on opening new stores in new markets continues to.

Mark Petrie: So that we get a 70% halo effect in e-commerce for that first year. So super pleased to see that you know our flagship performance are where we expected our flagships too.

Mark Petrie: Fantastic and it is it is it is they are they are fantastic.

Mark Petrie: You know, it's more than a financial payback for us it's about a brand propelling marketing vehicle that showcases everyday luxury and offers the broadest product assortment.

Jennifer Wong: It's about a brand-propelling marketing vehicle that showcases everyday luxury and offers the broadest product assortment. Feeling really great about all of those things as it relates to the flagships. Certainly, we're seeing new client growth in all of our new stores, and that is, of course, includes the flagships. I think what happens is a lot of customers, particularly international visitors who have heard about our brand, they, you know, they come and see our stores on those very popular streets, whether it be in Soho, Fifth Avenue, or Michigan. And if our U.S. customer growth at over 40% is any indication about the client acquisition vehicle that these new stores are, particularly the flagships, I think it's more than meeting our expectations.

Mark Petrie: Feeling really great about all of those things as it relates to the flagship certainly we're seeing new client growth in all of our new stores and that is.

Mark Petrie: Of course includes the 560 I think what happens is there's a lot of customers, particularly international visitors who have heard about our brand.

Mark Petrie: They you know they come and see our stores on those are very popular street, whether it be in Soho fifth Avenue on Michigan.

Mark Petrie: Mm mm, if our U S customer growth at over 40% is any indication about the client acquisition vehicle that these new stores are particularly at the flagship I think it is it's more than meeting our expectations.

Mark Petrie: Okay, thanks for that, all the best.

Mark Petrie: Okay, Thanks for that and all of us.

Luke Hannan: The next question comes from Luke Hannan with Canaccord Genuity. Please go ahead. Yeah, thank you. Just a quick follow-up for me on the new CapEx guidance. So, you took it up to $750 million for between fiscal 24 and 27. That was at $500 previously. Can you help us think through how much of that is attributed to some of the square footage acceleration that you would have seen in the past versus maybe what you've had planned going forward? I recognize there's a currency aspect to this as well, but I guess what I'm trying to get at also is you've talked about higher square footage growth for this year.

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

Luke Hannan: Yes. Thank you just a quick follow up for me on the new Capex guidance. So you took it up to $750 million.

Luke Hannan: For between fiscal 'twenty, four and 'twenty seven or is that 500 previously can you help us think through how much of that is attributed to some of the square footage acceleration that you would've seen in the past versus maybe what you had planned going forward I recognize just the currency aspect to this as well, but I guess, what I'm trying to get at also as you've talked about higher square footage growth for this year should we be thinking of.

Todd Ingledew: Should we be thinking about this being the case for fiscal 27 as well? Yes, 100%. And you have kind of answered the question in your question. But as we've talked about, we've been tracking ahead of our initial expectations for really over a year and a half now that we had initially laid out during our investor day. And that's because we've increased the cadence of the new store openings and because we've increased the average size of those new stores. And obviously, the stores are paying back in less than 12 months. And the growth that they represent is creating a fantastic foundation for our annual growth each year.

Luke Hannan: This being the case for fiscal 'twenty seven as well.

Luke Hannan: Yes, the 100% and you have kind of answered the question in your question, but.

Luke Hannan: As as we've talked about we've been tracking ahead of our initial expectations for really over a year and a half now than we had initially laid out during our investor day, and that's because we've increased the cadence of the of the new store openings and because we've increased the average size of those new stores.

Luke Hannan: And obviously the stores are paying back in less than 12 months and that the growth that they represent is creating a fantastic foundation.

Luke Hannan: For our annual growth each year.

Todd Ingledew: So it's extremely well-deployed capital, but that is the bulk of the additional CapEx. And there are inflationary increases as well, increases across the project. But the majority is from the additional stores as well as the additional square feet. And then the impact of FX, obviously, because the majority of the capital is being deployed in the United States with all the new stores there. And so the The guidance originally was done at 1.3, and obviously we've been close to 1.4 as of late, so. Those are the main puts and takes.

Luke Hannan: It's extremely well deployed capital, but that is the bulk of the additional capex and you know there are inflationary increases well increases across.

Luke Hannan: The project.

Luke Hannan: But the majority is from the additional stores as well as the additional square feet and then the.

Luke Hannan: The impact of FX, obviously, because the majority of the capital is being deployed in the United States with all the new stores, there and so the.

Luke Hannan: The guidance originally.

Luke Hannan: At 1.3, and obviously, we've been close to one four as of late so.

Luke Hannan: Those are the main puts and takes.

Todd Ingledew: Okay.

Luke Hannan: Okay. Thanks.

Stephen Macleod: The next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead. That's fine. I was going to ask about the CapEx, so I've already got the color. Thank you.

Speaker Change: Your next question comes from Stephen Macleod with BMO capital markets. Please go ahead.

Stephen Macleod: That's why I was going to ask you about the Capex. So I've already got the color. Thank you.

Speaker Change: Okay.

Mauricio Serna: The next question comes from Mauricio Serna with UBS. Please go ahead. Yes, great. I just had a couple of follow-ups. I got a little bit confused about that comment that without tariffs, margins would have been 16%, 17% because the comment was like, it was like the impact of the tariff was 400 basis points. I just wanted to understand that better.

Speaker Change: Your next question comes from Mauricio Serna with UBS. Please go ahead, yes.

Speaker Change: Great.

Speaker Change: Got it.

Speaker Change: Please about that comment that without tariffs back margins would've been 16, 17% okay.

Speaker Change: The Commonwealth.

Speaker Change: It looks like the impact on the tire was 400 basis points that I just wanted to understand that better and the other follow up I wanted to ask if he had seen in your Canadian business any sort of like benefit or.

Todd Ingledew: And the other follow-up is, I wanted to ask if you have seen in your Canadian business any sort of benefit or type of tailwind from what we're hearing is more consumers in Canada are turning more towards actually domestic brands, just given the dynamic that is happening in the US. Yeah, okay, I'll take the first part and then Jen can take the second part. So yeah, just to reiterate Of the mitigation of the 400 basis points, 50% is coming from margin improvement that we were previously anticipating effectively for FY26. That's from the ongoing IMU improvements we've been talking about, the freight tailwinds, rent, smart spending, all of that was already anticipated and that would have gotten us to that 16 to 17% range.

Speaker Change: Tailwind from what we're hearing more and more consumers in Canada are turning more towards actually domestic brands just given the dynamic that is happening in the U S.

Speaker Change: Yes, Okay I'll take the first part and then Jan can take the second part.

Speaker Change: Yeah just to reiterate.

Speaker Change: Of the mitigation of the 400 basis points, 50% is coming from.

Speaker Change: Margin improvement that we were previously anticipating effectively for FY 'twenty six and those are that's from like the ongoing IMU improvements we've been talking about the freight tailwind rent smart spending all of that was already anticipated and that would have gotten us to that 16% to 17%.

Todd Ingledew: And then the other half of the mitigation, the other 400 basis points or 200 basis points is from the cost reductions, the accelerated diversification of our sourcing and then the sharing of costs with vendors. But it's that initial part of the margin improvement that is what would have gotten us back.

Speaker Change: <unk> range.

Speaker Change: And then the other half of the mitigation. The other 400 basis points or 200 basis points is from that the cost reductions the accelerated diversification of our of our sourcing and then the sharing of cost with vendors, but it's that initial part of the margin improvement that is what would have gotten us back.

Jennifer Wong: And on Canada, just an overall statement. I know a couple of quarters ago, we had shared that we were starting to see softness in Canada, probably going back to Q2 of last year. You know, what we're really pleased to see is that Canada has strengthened. Clearly, it's strengthened in Q3, Q4, and that has carried over into Q1. So Canada has definitely strengthened for us, the customers responding well to our product assortment, etc. And pleased to see that that continues for us into spring. You know, despite what we're hearing in the media or what you're hearing in the media about by Canadian, I would say there's nothing in our data that is showing that.

Speaker Change: And on Canada, I'm, just an overall statement I know a couple of quarter two quarters ago. We had shared that we were starting to see softness in Canada, probably going back to Q2 of last year.

Speaker Change: What we're really pleased to see is that Canada has strengthened clearly.

Speaker Change: Thank you for that that has carried over into Q1, So Canada has definitely strengthened for us the customers responding well to our product assortment et cetera.

Speaker Change: And are pleased to see that that continues for.

Speaker Change: For us into spring.

Speaker Change: You know despite what we're hearing in the media or what you're hearing in the media about by Canadian.

Speaker Change: I would say there's nothing in our data that is showing that we continue to be strong in both countries, Canada and the U S and I'm very pleased to see that.

Jennifer Wong: We continue to be strong in both countries, Canada and the U.S., and very pleased to see that.

Mauricio Serna: Great. Thanks. Thanks for the follow-up and congratulations. Thank you.

Speaker Change: Great. Thanks, Thanks for the.

Speaker Change: Congratulations.

Speaker Change: Thank you.

Operator: This concludes the question and answer session and today's conference call.

Speaker Change: This concludes the question and answer session and today's conference call.

Operator: Thank you for joining and have a pleasant day.

Speaker Change: For joining and have a pleasant day you may now disconnect your lines.

Operator: You may now disconnect your line.

Operator: Goodbye.

Speaker Change: Goodbye.

Speaker Change: Uh huh.

Speaker Change: [music].