Q2 2025 Carter's Inc Earnings Call
Welcome to Carter, second quarter, fiscal 2025 earnings conference call.
On the call are Doug palladini chief executive officer and president.
Speaker Change: Richard westenberger Chief Financial Officer and Chief Operating Officer.
And chief product Officer.
Sean Mchugh: And Sean Mchugh Treasurer.
Sean Mchugh: Please note that today's call is being recorded.
Sean Mchugh: I'll now turn the call over to Mr. Mchugh.
Sean Mchugh: Thank you and good morning, everyone.
Sean Mchugh: We issued our second quarter 2025 earnings release earlier today, the release and presentation materials for today's call are available on our Investor Relations website at IR Dot Carter's Dot com.
Sean Mchugh: Note that statements on today's call about items, such as the company's expectations or plans are forward looking statements.
Sean Mchugh: A discussion of factors that could cause actual results to vary from those contained in the forward looking statements. Please see our most recent SEC filings in the earnings release and presentation materials posted on our website.
Sean Mchugh: In these materials you will also find reconciliations of various non-GAAP financial measurements referenced during this call.
Sean Mchugh: After today's prepared remarks, we will take questions as time allows.
Doug Palladini: I'll now turn the call over to Doug.
Sean Mchugh: Sean Good morning, and thank you for joining us today.
Speaker Change: Just over 100 days ago, I began my journey as Carter CEO and President.
Speaker Change: Both an honor and privilege to lead this company and its iconic brands and I'm more energized and inspired than ever about our potential in the short time I've been here I've visited as many Carter stores. She accounts distribution centers regional offices and factories as possible to hear directly from our teams where our greatest.
Speaker Change: Lie and how best to get after them.
Speaker Change: I have also listened to feedback from many new existing and lapsed consumers, but based on my learnings I've been able to develop a clear picture of what success will look like as we move forward returning all Carter's brands to growth that is long term sustainable and profitable Carter's.
Speaker Change: Carter's brands are truly iconic and our legacy as a source of trust and strength our teams possesses talent acumen and drive all necessary to unlock the company's next tranche of success.
Speaker Change: And our market leadership before its carter's unparalleled competitive advantage.
Speaker Change: I'm going to share some details around the roadmap to future success shortly but first Richard is going to discuss our 2025 second quarter and first half results, which I believe offer proof that we have stabilized our business and put it in a position to grow again Richard.
Richard Westenberger: Thank you Doug good morning, everyone.
Richard Westenberger: But the first half of the year now behind US it's clear, we're navigating an unsettled world and marketplace.
Richard Westenberger: As the year has unfolded tariffs have emerged to present significant uncertainty and challenges to planning our business.
Richard Westenberger: We're obviously not unique in this higher tariffs are an issue across the industry.
Richard Westenberger: The incremental baseline tariffs, which have been implemented were not especially meaningful to our results in the second quarter, but they are expected to have a much more significant significant impact on our business going forward not to mention any additional reciprocal tariffs, which might be additive to what's already been imposed.
Speaker Change: <unk> been pleased with how our team is actively responding to these new challenges over.
Speaker Change: Over the years Theres been no shortage of unexpected events that we've had to respond to whether it was the sudden emergence of record high cotton prices record inflation or the market exit of a significant wholesale customers Carter's has staying power and I'm I'm confident we'll work through whatever the current environment throws our way.
Speaker Change: My comments on our second quarter and first half performance will track to the presentation materials, which are posted to the investor relations portion of our website.
Speaker Change: Beginning on page two of our materials.
Speaker Change: On page two we have our GAAP basis P&L sales in the second quarter were $585 million.
Speaker Change: Our second quarter reported profitability included $8 million in charges, which I'll comment on in a moment.
Speaker Change: Our Q2 reported operating income was $4 million.
Speaker Change: Our first half gaps P&L is on page three on first half sales of $1 2 billion. Our reported operating income was $30 million.
Speaker Change: Half reported profitability included $17 million in charges.
Speaker Change: We've detailed the second quarter and first half charges on page four we've treated these items as adjustments to our reported results.
Speaker Change: In the first half we incurred approximately $10 million in costs, largely third party professional fees in support of improving our product and brand development processes.
Speaker Change: We will talk further today about the benefits of these efforts are yielding overall, we believe this work will improve our capabilities and our ability to more effectively compete and grow in our marketplace.
Speaker Change: First half also included $7 million related to our leadership transition earlier this year.
Speaker Change: We're expecting far less significant charges related to these matters in the second half of the year $5 million, our last primarily as our use of third party external support Weinstein and our internal teams assume our go forward processes and work as.
Speaker Change: As we disclosed on our February earnings release, we also expect a noncash pre tax charge in the third quarter of up to $10 million related to the termination of the legacy Oshkosh B'gosh pension plan.
This morning, I'll speak to our results on an adjusted basis, which excludes these items.
Speaker Change: Some overall highlights of our adjusted second quarter performance, our summarized on page five.
Speaker Change: Our second quarter sales of $585 million representing growth of 4% over last year.
Speaker Change: This growth was driven by our U S retail and international segments U S. Wholesale sales were comparable to last year on the quarter.
Speaker Change: Our profitability, both adjusted operating income and adjusted earnings per share were down considerably versus a year ago, we had planned profitability to be down largely due to the year over year investment in pricing and retail and higher spending in some specific areas. Our objective now is obviously to grow profitability, we have much higher ambitions for our business then.
Speaker Change: Our second quarter profitability reflects.
Speaker Change: Second quarter is historically, our smallest quarter of the year in 2020 for our second quarter represented about 20% of our full year sales and approximately 14% and our full year adjusted operating income.
Speaker Change: Our adjusted P&L for the second quarter is on page six on our sales of $585 million gross margin in the second quarter was 48, 1% a decrease of 200 basis points from last year.
Speaker Change: The largest driver of the decline in gross margin was our investment in pricing in U S. Retail recall, we had planned approximately $20 million in incremental pricing for the first half given improved traffic and good sell throughs, we ended up spending a bit less than us pricing and yesterday tell us down about 3% in the second quarter.
Speaker Change: As we told you previously these pricing investments were concentrated in key value item baskets starters and in our key market share promotional events to be more competitively priced in the market.
Speaker Change: At this point, we don't believe further investment in lowering <unk> as needed in the second half we'll anniversary the significant investments, we made in pricing and marketing last year AUR.
Speaker Change: <unk> are planned up in the low single digits in our retail business in the second half versus down about 4% in the first half.
Speaker Change: In recent weeks, we've also seen some indications of competitors beginning to raise prices.
Speaker Change: Gross margin in the second quarter was also pressured back to your other factors, including a higher mix of excess inventory sales to the off price channel and the wholesale segment higher inbound freight rates and the net impact of foreign currency.
Speaker Change: The impact of higher baseline tariffs on gross margin in the second quarter was approximately $2 million as I've said, we expect these incremental tariffs to be more meaningful going forward.
Speaker Change: Royalty income was about $1 million lower than last year in part due to tariff related order cancellations of licensed product across our channels.
Speaker Change: Adjusted SG&A in the second quarter increased to $26 million to $273 million, an increase of about 10%.
Speaker Change: Largest driver here with higher storage related expenses. These include higher volume related costs, and having nearly 40 more stores across North America than last year.
Speaker Change: So our maintenance expenses were also higher than last year as we caught up on some deferred projects across the fleet.
Speaker Change: As we told you on our last couple of calls we expect SG&A to be higher this year as we're planning for a more normalized levels of variable performance based compensation compared to last year, but that's represented about $8 million of the increase in SG&A in the quarter.
Speaker Change: Our first half adjusted spending was up about 4% for the second half we are targeting an increase in the mid single digit range.
Speaker Change: Our adjusted operating income in the second quarter was $12 million, representing an adjusted operating margin of 2%.
Speaker Change: Below the line interest and other costs were about $2 million compared to $5 million last year. The improvement here relates to higher interest income and an FX gains driven by the weakening of the U S. Dollar since the end of the first quarter.
Speaker Change: Our effective tax rate in the quarter was unusually high at approximately 74%. That's high rate was due to stock option expirations in the quarter and the implementation of our global minimum tax rate in Hong Kong during the quarter.
Speaker Change: Given the noise in the quarterly rate, it's more meaningful to consider our full year forecasted effective tax rate, which we've estimated to be about 23% compared to about 19, 5% in 2024.
Speaker Change: With all of that on the bottom line adjusted earnings per share was <unk> 17 in the quarter compared to 76 cents last year.
Speaker Change: On page seven we summarize our adjusted segment performance in the second quarter.
Speaker Change: As mentioned, our U S retail and international businesses drove the revenue growth in the quarter U S. Retail sales grew $9 million and international sales grew by $11 million wholesale sales were comparable to a year ago.
Speaker Change: On profitability, our consolidated adjusted operating income declined $28 million with lower profitability in U S retail and wholesale accounting for most of that.
Speaker Change: I'll provide a little more color by business, beginning with U S retail on page eight.
Speaker Change: Demand in U S retail in the second quarter was good and we achieved a plus 2% total retail comp.
Speaker Change: The quarter started out strong with the buildup to the later Easter holiday this year in April.
Speaker Change: It may have been also some measure of a stock out phenomenon in April as consumers were reading the headlines about potential reciprocal tariffs and may have pulled forward some of their purchasing to get to get ahead of higher prices in the future.
Speaker Change: More of our pricing investment in the quarter was also concentrated in April.
Speaker Change: Business slowed a bit in may and around the memorial day holiday in particular, but we have several very good weeks of selling in June to finish the quarter.
Speaker Change: In terms of product baby the largest part of our apparel business continues to perform very well with double digit sales growth in the second quarter, which builds on growth we posted in baby over the past several quarters.
Speaker Change: Continuing to win in baby as a high priority. So we're pleased to see consumers response to the changes and improvements we've made to our assortment here.
Speaker Change: Our latest market share information indicates we've maintained our share in baby and grown share in the toddler and younger kids segment.
Speaker Change: We've also seen an improvement in the trend of new customer acquisition and retention building on the progress we began to see in the second half of last year.
Speaker Change: As expected second quarter retail profitability was lower than last year, we have lifted the primary drivers here, including the investment in lower pricing and expense deleverage.
Speaker Change: Our teams are focused on executing a good second half supported by several new product and marketing strategies and an overall planned improved inventory position versus a year ago.
Speaker Change: Third quarter sales are off to a good start July month to date comp sales in the U S are running up about 2% with average AUR is also higher than last year. We're also encouraged by back to school selling which is off to a got an earlier start than last year.
Speaker Change: We have summarized our U S wholesale and international segment performance for second quarter on page nine.
Speaker Change: In wholesale sales were comparable to last year as I have noted there's always a number of moving pieces in wholesale in second quarter was no exception.
Speaker Change: Year over year, we had higher sales in the off price channel as we were able to opportunistically move some excess inventory I would characterize this growth as more or less timing with full year clearance of excess inventory through the off price channel forecasted to remain very low by historical standards and planned down year over year in the second half.
Speaker Change: We had year over year growth of two of our three exclusive brand customers in the quarter.
Speaker Change: We've seen some good momentum for our new skip hop products within the wholesale channel.
Speaker Change: Unprofitability wholesale had a 14% adjusted operating margin decline versus last year reflects lower pricing changes in customer mix, including the higher clearance sales and expense deleverage.
Speaker Change: International was the standout area in the business in the quarter with all components of this segment posting sales growth over last year.
Speaker Change: The largest component of our operations outside the United States is our Canadian business, which had terrific performance with a plus 8% comp.
Speaker Change: Mexico has also continued its momentum with consumers and its market posting at plus 19% com.
Speaker Change: In our international wholesale business sales also grew in the quarter driven by higher demand from our partner in Brazil.
Speaker Change: International's operating margin was approximately 4% the stronger U S dollar compared to a year ago continues to weigh on the profitability of our international businesses.
Speaker Change: On the next several pages, we have summarized our first half performance in total and by business segment and this information is included for your reference.
Speaker Change: We have summarized our balance sheet and cash flow performance on page 13.
Speaker Change: Our balance sheet remains in very good shape we.
Speaker Change: We ended the second quarter with good liquidity and substantial cash on hand, essentially also full availability under our credit facility.
Speaker Change: And our forecast project good continued liquidity going forward.
Speaker Change: Inventory was up 3% year over year at the end of the second quarter about $17 million of our quarter end inventory balance represented higher costs due to tariffs excluding the cost impact of tariffs inventory was comparable to a year ago and inventory units at the end of quarter were down 1% versus last year.
Speaker Change: The quality of our inventory heading into the second half is very good we have less excess inventory than a year ago and we feel good about the inventory investments we've made to drive the business in the second half with more newness and ongoing improvements to our assortments across the baby toddler and Kid categories.
Speaker Change: Also as summarized here, we've had a net use of cash year to date, which tracks to our lower earnings and higher inventory balance, including the cost of higher tariffs.
Speaker Change: We typically generate most of our cash is a business in the second half of the year and our forecast reflects the same expectation for this year, we're expecting positive operating and free cash flow for the full year.
Speaker Change: Turning to a couple of initiatives updates on page 15, as we've mentioned we've had a tremendous amount of work underway. The past number of months across several important areas first we've been comprehensively assessing and redesigning our end to end product development process from initial design concepts all the way through delivery of the finished product we have a complicated product.
Speaker Change: With multiple categories brands and channels to consider.
Speaker Change: Our assessment indicated we have an opportunity to shorten our product development lead times and improve this aspect of how we go to market with.
Speaker Change: We've also identified an opportunity to reduce the number of changes we made to the assortment during the process and to reduce overdevelopment.
Speaker Change: This has been a comprehensive project involving a lot a large portion of our organization with very active participation across our design merchandising supply chain wholesale and retail teams.
Speaker Change: We've already begun to see benefits from this work and have realized a meaningful reduction in our product development timeline.
Speaker Change: Is that good partnership from our vendors in Asia as part of this initiative as well.
Speaker Change: The end objective of this work is for us to become faster nimbler and better able to react to consumer preferences and continued to induce greater and more frequent newness in our assortments.
Speaker Change: In recent years. This has been a good spark to consumer spend purchase frequency and consumer retention.
Speaker Change: Additionally, we've completed a tremendous amount of work in assessing our retail store portfolio as Doug will describe more fully we have employed some meaningful new analytics to our store portfolio. This analysis has identified opportunities to close some stores and we will also strengthen the way we evaluate future store sites going forward.
Speaker Change: On the next page, we have repriced a page from our last earnings call tariffs continue to obviously be a topic of discussion across the industry.
Speaker Change: I frequently changing outlook for a potentially significant additional tariffs has presented a tremendous challenge and planning our business.
Speaker Change: We have a very well diversified sourcing footprint, we've meaningfully reduced our exposure to China manufacturing over the last number of years.
And now as summarized here, our largest countries of origin or Vietnam, Cambodia, Bangladesh and India.
Speaker Change: Unfortunately these countries are in scope for additional tariffs as the administration has announced.
Speaker Change: We've assessed the higher incremental tariffs, which have already been implemented an additional 10% duty for all countries and higher incremental duties for products from China, Vietnam and Indonesia.
Speaker Change: Relative to a few months ago, we're preparing for a world with higher and more permanent tariffs above the over 100 $100 million in duties, which we have paid historically.
Speaker Change: Our estimate of the additional baseline tariffs is that it would represent a gross additional tariff amount between 125 and $150 million on an annualized basis.
Speaker Change: If this is our new reality and again this is not an issue unique to Carter's it's our intention to be aggressive in our response as we would for any other meaningful increase to our cost structure.
Speaker Change: Our intended actions are summarized here on page 16, we are in active discussion discussions with our vendor and wholesale partners to share any additional cost of these tariffs depending upon what tariff structures are eventually inactive will continue to be dynamic and moving production to more advantageous geography, and we'll continue to look at our product assortments.
Speaker Change: The magnitude of the challenge, we also intend to raise our prices in the past when we've needed to raise prices because of product cost increases we've done so successfully.
Speaker Change: We will remain focused on the extraordinary quality and value that our that our brands are known for but we are also committed to managing a higher operating margin business going forward as well.
Speaker Change: As this morning's press release indicated we have not reinstated guidance given the overall uncertainty around tariffs and their potential impact on the business.
Speaker Change: I am encouraged by a number of things we're seeing in the business right now, particularly in U S. Retail consumers are responding well to our product assortments and marketing strategies and wholesale channel demand overall has held up well.
Speaker Change: We have a number of plans and initiatives intended to drive a good second half our product initiatives are focused on leaning into our best category of product, including little planet fairly soft and new hire style collections.
Speaker Change: As mentioned, we have also invested in an overall improved inventory position relative to the first half average in store inventory in U S. Retail is down low double digits in the first half and is planned to be comparable in the second half with increase as planned during the critical holiday selling season in the fourth quarter.
Speaker Change: Additionally, we have increased the depth and breadth of our top performing categories and our and our Assortments will reflect more frequent injection of newness or marketing plans also reflect increased investment over last year's second half we've been seeing very good returns on our marketing spend thus far this year.
Speaker Change: We're expecting some near term pressure on gross margin from higher tariffs, but in 2026 and beyond our planning assumption is that we'll be able to offset these costs. Our estimate of the net earnings impact in the second half of 2025 incremental baseline tariffs, which have been implemented as approximately $35 million.
Speaker Change: Key risks that we're monitoring include the prospect of additional tariffs consumer response to higher prices and the overall level and trend in consumer sentiment.
Doug Palladini: These remarks, I'll turn it back to Doug to share some of his observations and thoughts on our path forward.
Doug Palladini: Thank you Richard our Q2 and H one results show me the Carter's business is stabilizing as we control what we can.
Doug Palladini: I also believe that we now have the necessary foundation in place to return Carter's to long term sustainable and profitable growth.
Doug Palladini: As mentioned at the beginning of today's call I'd like to spend some time talking about what I've learned during my first 100 days plus in this role and where you intend to take Carter's moving forward.
Doug Palladini: So in today's presentation materials, we've provided links to a brand video and illustrative Powerpoint deck to bring this narrative to life.
Doug Palladini: Everyone I've met since my April 3rd start date has a story to share about Carter's or Oshkosh, something they were as a baby set their moms stored away as a keepsake.
Doug Palladini: Dress or pair of overall passed down through generations or favorite outfit. They have their kids wearing right now phones come out photos and memories are shared the fondness and warrants are palpable, it's exactly the powerful emotional response to our brands that any company leader would covet and it reinforces the tremendous privilege.
Doug Palladini: Carter's has as a part of People's lives during such a meaningful time when families are having babies and raising young children.
Doug Palladini: Our return to growth will be predicated upon this place of honor backed by 160 years of cumulative trust and fueled by our commitment to serve a new generation of young families with brands and products that emphasize high quality modern design and exceptional value.
Doug Palladini: Our newly crafted company purpose to embrace the wonder of childhood and uplift those shaping the future captures has positioned perfectly.
Doug Palladini: I'm also inspired by the talent and potential of many leaders and teams across the Carter's organization and we will certainly.
Doug Palladini: We continue to attract and retain the absolute best talent possible as we optimize our organizational model.
Doug Palladini: To that end several changes and additions to the Carter's leadership team have added substantial experience and acumen, where we require at most our retail leader Alison Peterson joined Carters with tremendous experience from best buy our new head of strategy Emily ever joined US officially in August moving over from Boston Consulting group.
Doug Palladini: After leading our transformation roadmap and Sarah Crockett recently joined Carter's from designer shoe warehouse as our chief marketing officer to drive demand creation and consumer connectivity.
Speaker Change: In my nearly 40 years of building and nurturing brands I have consistently seen that thoughtful measured investment drives profitable growth and that's exactly the path we're back on at Carter's.
Speaker Change: I've also learned that the strongest brands or those with a clear sense of identity and purpose knowing exactly what they stand for and what they don't and most importantly, I know that lasting consumer loyalty comes from balancing the transactional with the emotional combining value with meaning.
Speaker Change: Carter's we are returning to all these fundamentals to better know appreciate and thank our fans Carter's is taking several meaningful actions to more impactful we connect with our consumers. We've just completed the most significant consumer research study in Carter's history, which now forms the basis for an always on.
Speaker Change: LOE of direct insights and data informing every decision we make.
Speaker Change: We successfully removed a full three months from a product development calendar dramatically, increasing our ability to read and react to consumer signals and upscaling agility.
Speaker Change: Each year, our newest fans represent 90% of all U S births building on Carters loyalty member base of more than 9 million known consumers.
Speaker Change: Through this dynamic platform, we are elevating personalization of product content and offers for each shopper and presenting a seamless digital experience across app stores and websites.
Speaker Change: The name of top our Atlanta headquarters is Carter's the name above almost every retail door. We operate in on website Homepages as Carter's Carter's is our flagship brand full stop.
Speaker Change: As such our future success is inextricably tied to the Carter's brand and we're treating it with a commensurate level of care to regain lost market share and reinforced Carter's position as the number one baby apparel brand in all points of distribution and across all vital product categories, we have focused and redoubled our efforts to deliver relevant.
Speaker Change: And resident apparel to today's new parents. This prioritization is already showing signs of success across U S stores and ecommerce Carter's baby category sales continue to accelerate for the fourth straight quarter with plus 5% total growth in Q1, and plus 10% in Q2 versus.
Speaker Change: Last year.
Speaker Change: And emphasis on product newness is yielding more consumer acquisition up 8% versus last year and these new consumers deliver higher lifetime value.
Speaker Change: Carter's purely soft assortment has simply exploded in popularity and has a solid source of growth each season, and our must win baby category. This product is truly the softest I have ever felt in addition to selling at higher non promotional prices purely soft consumers visit us more often and spend more per visit than <unk>.
Speaker Change: Average.
Speaker Change: There is something very special about Oshkosh, B'gosh that goes well beyond its 130 years of denim heritage for many of US shopping regularly for new baby gifts, a pair of Oshkosh overalls and denim jacket for the perfect set and always adored by recipients due to its tremendous brand equity. We now have a clear line of sight.
Speaker Change: To Oshkosh, becoming Carter's most global and differentiated brands, we are updating the Oshkosh business model to really get after this opportunity and look forward to sharing details in the coming months.
Speaker Change: We are also incubating three emerging brands that showed tremendous promise skip hop little planet and Otter Avenue.
Speaker Change: Skip hop our hard line brand focus by parents for parents continues to resonate with its powerful blend a thoughtful design and functional innovation Q2 sales for skip hop, we're up 7% and <unk> was up four 5% to last year.
Speaker Change: Since its 2021 relaunch little planet has become a baby toddler and young children's leader in sustainable apparel made with eco friendly materials Little planet is high quality make and more sophisticated aesthetic command higher prices and give the brand much greater upmarket potential that we believe will generate solid.
Speaker Change: Growth and brand Halo and.
Speaker Change: And just this week Carter's launched its next emerging brand Otter Avenue named further Wisconsin, St on which Oshkosh B'gosh was founded this is our first ever brand specifically for toddlers crafted through insights around how kids begin to dress themselves and we believe it will keep our infant and baby consumers engaged as they are.
Speaker Change: <unk> growth.
Speaker Change: As with little Planet Otter Avenue commands higher prices through premium design.
Speaker Change: And and make and we believe it will experienced solid growth from its test phase this year into 2026 and beyond very early results are highly encouraging.
Speaker Change: These new brands are resonating little planet for example has grown its consumer base by 50%. This year, all new fans to carters with a lifetime value one five times higher than our average consumer.
Speaker Change: In Q2, our best products with higher <unk> outperformed our good and better buckets with sales up and outpacing inventory investment the best product category. Often features are most style forward assortments and carries an exceptional value overall.
Speaker Change: Come to understand and appreciate that Carter's products are not discretionary, but instead vital necessary and cherished from birth through all the fast growing and rapidly evolving early stages of life.
Speaker Change: Infants become babies babies become toddlers and toddlers become young kids with strikingly predictable regularity, our business model and strategic framework reflect this inherent strength.
Speaker Change: When your name is above the door consumers come in with higher expectations and rightfully so as both a fan and student of retail I know I do.
Speaker Change: Shoppers expect curated Assortments led by newness knowledgeable and engaged associates, a clear brand point of view and total value that's easy to understand and that is exactly what we are striving to deliver across our more than 1000 Carter's stores in North America and beyond.
Speaker Change: At the same time, it's important to remember that Carter's reaches consumers with unmatched scale last year, we earned more than 250 million visits to our own stores and digital platforms not to mentioned Carter's presence as a leading brand in nearly 20000 points of wholesale distribution across north Americas.
Most prominent retailers.
Speaker Change: Few brands have the opportunity or the responsibility to show up this consistently and meaningfully for families raising young children.
Speaker Change: And to that end each point of interaction must serve our consumer in a much more resonant way to drive brand loyalty and unlock lifetime value.
Speaker Change: One step we are taking is implementing a new fleet segmentation strategy, providing the right consumer experience at each point of own distribution for more off market style stores to value driven outlets beginning to rollout in 2026 I expect these segmented Carter stores to be key growth drivers.
Speaker Change: We are already Iterating on new stores as we open them and their sales comps are outperforming the balance of the fleet by 350 basis points.
Speaker Change: In addition, we are seeing strong proof points and key retail metrics such as conversion units per transaction and unit volume each showing meaningful gains for five quarters running in fact year over year active consumers and owned stores have delivered growth for the first time since 2022 and our unit.
Speaker Change: Citi has greatly increased comping six 3% versus last year.
Speaker Change: We have also launched a new proprietary algorithm to help us understand where stores should be opened moved or closed. The first outcome of this analysis is that we have identified approximately 100, Carter's stores, which we will close as leases expire.
Speaker Change: While we employ the same multifaceted set of inputs to relocate or open new doors and high traffic impactful locations. Our clear focus will continue to be increasing productivity, where we have already invested capital in existing doors.
Speaker Change: As we test and learn we're iterating on Carters business model in real time again to drive sustainable and profitable growth.
Speaker Change: Our key wholesale accounts remain a vital and substantial part of the Cri business model.
Speaker Change: Carter's global multichannel approach will continue to afford us distinct competitive advantage across all points of distribution and among our competitive set we have re mapped our north America wholesale model anchored by our big three Walmart target and Amazon to strategically include more of our brands and more.
Speaker Change: Doors with more accounts, while continuing to emphasize our exclusive brands retaining and growing our number one baby and toddler brand status. Among all key accounts is expected to continue to drive sales growth through outside reach and impact.
Speaker Change: Carter's aggressive promotional cadence must be rebalanced to support more sustainable profitable growth, we're already making progress investing approximately 15% less promotions than planned, particularly in must win categories such as baby.
Speaker Change: Given the early success of new investments, thus far we intend to elevate demand creation resources and position much of it to generate revenue growth against two primary areas store traffic and consumer loyalty.
Speaker Change: Every point of additional traffic across our current store fleet is worth approximately $10 million in revenue and $5 million in operating income a good example of the return on investment Im looking for.
Speaker Change: We are also building on our base of more than 9 million active loyalty members for each additional 500000 members Carter's adds we would expect an incremental $70 million or so in sales.
Speaker Change: We are also learning how best to generate global scale in the international markets, where birth rates outpaced that of the U S. Such as Brazil, where we've built a high performing partnership operating 81, Carter stores and more than 200 shop in shops, the outcomes of what we experience here inform how we think about geographic expansion and.
Speaker Change: Future.
Speaker Change: As we focus on what really matters to drive sustainable long term growth, we expect to become much more efficient and effective in every choice, we make which we believe can yield substantial SG&A savings some of which we expect to reinvest into our brands and capital expenditures that service our brands, we're thoughtful investment will provide.
Speaker Change: The greatest return on capital.
Speaker Change: Early indicators show that our foundational work is translating into real business momentum.
Speaker Change: But we're just getting started our plans will evolve as we read signals in the business and we will remain agile no matter the level of uncertainty.
Speaker Change: We will continue to be transparent pointing to proof in our progress as well as what we learned from what isn't working Mike.
Speaker Change: My confidence in our future prospects emanates from the trust placed in Carter's by generations of families. We are the largest and most significant company focused exclusively on young children's apparel and we must continue to honor that very special relationship at a very special time in People's lives.
Speaker Change: I look forward to sharing much more with you as we move forward. Thank you and with these remarks, we're ready to take your questions.
Speaker Change: Thank you if you'd like to ask a question. Please press star one one is for.
Speaker Change: Your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Jay Sole: Our first question comes from Jay sole with UBS. Your line is open.
Jay Sole: Great. Thank you so much.
Jay Sole: Doug. Thank you for all the comments today I'd love to ask you given everything that you talked about and everything you've learned in your <unk>.
Speaker Change: 100 plus days.
Jay Sole: Sales growth opportunity.
Do you see going forward for the company what kind of annual sales growth rate do you think you can deliver what kind of EBIT margin do you think you can get the company to over say a three to five year period and generally speaking if you had an earnings call.
Speaker Change: What kind of earnings do you think the company should be able to deliver thank you.
Speaker Change: Hey, Jay Thank you for your questions, Yes, I have a lot of earnings goals and sales goals, but we're not going to share specific numbers today.
Speaker Change: Can tell you I can just reinforce what I said, we have substantial and meaningful reasons to believe that we can return to growth.
Speaker Change: That that growth can be profitable and sustained over time, and then and thats accretive.
Speaker Change: Accretive for our brands it benefits our consumers that's what we're really focused on and.
Speaker Change: Yes, and that's what we're driving toward right now.
Jay Sole: Got it understood and maybe if I can ask one for Richard just talking about tariffs you gave the number I think it was.
Speaker Change: $125 million to $150 million gross can you just talk about how you gave some ideas or higher to offset the impact where they changed the product assortment customer with vendors et cetera can you dive in a little bit maybe give us an idea of like what the biggest potential offset would be the price increases is it something else and how much over time about 125. It sounds like you can offset a lot of it but like over what timeframe.
Jay Sole: Sort of what might be the impact to next year.
Jay Sole: Right and this is Jay our best kind of analysis to date on this obviously that the landscape is anything but certain on this it seems like every every day, there's a new announcement are different interpretations, even among the countries who are negotiating there. So it's been it's been tough even though China run the scenarios that we've shared this morning.
Jay Sole: I do think probably the most meaningful opportunity as price just in terms of the magnitude of the dollars just given just given the size of our business that said that's not the only tool that we intend to imply here with Dave one other ones that were listed in the presentation are very important tests as well we've had good partnership with our with our vendors we are sharing some of the price.
Jay Sole: Some of the tariff cost with our wholesale partners, we have raised our prices.
Jay Sole: It's tougher to do near term, obviously, because we have a good set of been ticketed. We have guys that have been sold in and Thats. The reference to the impact the expected impact for the second half of 2025, it's just tougher for us to cover near.
Jay Sole: Near term, but as I said working we're committed to growing the profitability of the company and we have a long heritage of being a high operating margin business. We have no interest in running a lower margin business, particularly due to tariffs and if this is something thats going to be a permanent increase to our cost structure, we have to find a way to cover it and that's why our ambition is for 'twenty and beyond that we would we would find a way to complete.
Jay Sole: It may mitigate what were estimating that the analysis gets a little circular because theres a lot of data that suggests that you lose some unit intensity when you raise prices and therefore that affects the number of units that you're importing into the country that are subject to tariff. So we'll see where it all lands I as I said I am pleased with how aggressive our teams have been in responding to this.
Jay Sole: The end of this jet into this challenge and that's.
Speaker Change: That's the challenge at the moment and I think it's one for the industry as well as the leader in young Kids apparel, we expect to lead in this regard as well and.
Speaker Change: We'll be as aggressive as we can without overtime, if I could just add one note I really want to applaud the agility of our supply chain team.
Speaker Change: They've done incredible work diversifying our existing sourcing base and we will continue to be agile. So as we get clarity on what's happening with the tariff situation. We can we can move among the countries of sourcing that we have and I think.
Speaker Change: We have tremendous agility and it is a competitive advantage for us I would just add that as an important factor thats working in our favor irrespective of the uncertainty.
Speaker Change: Got it thank you so much.
Speaker Change: Thank you.
Speaker Change: Next question comes from Paul <unk> with Citi. Your line is open.
Speaker Change: Hi, This is Kelly on for Paul Thanks for taking my question.
Speaker Change: John Thanks for all the color I was wondering if you could just double click on on your plans on the U S. Retail business I think you talked about closing some stores as leases come up I guess, when we think about sort of the net stores 800 chain in the U S would you expect those those stores at the store count to move lower.
Speaker Change:
Speaker Change: And just any color on.
Speaker Change: Where you're seeing opportunity to closed stores first is <unk>.
Speaker Change: Opening stores and just just.
Speaker Change: More detail on that.
Speaker Change: GTT Jackie thanks.
Speaker Change: Yes. Thank you Kelly for the question. The first thing I would tell you is that I really believe in this new multifaceted algorithm that we have that is proprietary to our company.
Speaker Change: It's a more analytical look at our fleet than we've ever had before so we have more inputs and I think we're making much more intelligent choices.
Speaker Change: That said all options are on the table closing more stores moving stores opening new stores relocating.
Speaker Change: The re modeling we're going to look at every possible option available to us and we're going to use all of this insights to decide what's the best moving forward. The other thing that we're really leaning into as I discussed is this fleet segmentation strategy.
Speaker Change: It's going to be very important for us as we want to deepen consumer connectivity and be more resident with product assortments in each point of distribution to ensure that our outlet stores are in line stores are more up market stores reflect the consumer who's shopping in those spaces. We believe there is a tremendous opportunity.
Speaker Change: City, there and Youre already seeing us distort assortments in different stores to try to try new things to appeal to consumers with good results by the way as we have detailed today.
Speaker Change: So we will continue to test and learn.
Speaker Change: And we will continue to employ all the information available to us to make the most informed choices possible.
Speaker Change: And yes, that's probably the most detail I can give right now.
Speaker Change: Kelly I just.
Kevin Kelly: Kevin Kelly.
Doug Palladini: Briefly on to that we are continuing to see good real estate opportunities I think to Doug's point, we're increasing the analytical rigor around those new site selections, but our last two classes of new stores are the best performing.
Kevin Kelly: In the fleet at the moment, so we're encouraged by that.
Kevin Kelly: At 100 stores that Doug mentioned around closing they represent probably around $75 million to $80 million of revenue actually I think there is NOI gain that we got when you factor in the fact that we're going to transfer some of those sales from closed stores to the existing store base. It is really about improving the productivity of the existing store fleet.
Kevin Kelly: Our focus but that doesn't mean, we don't have opportunities to continue to.
Kevin Kelly: And expand over time and open new stores.
Kevin Kelly: Any any timeline for when you expect to close to 100 stores.
Kevin Kelly: Over the next several years that the leases expire we've gone to the analysis that theres really not a strong NPV case to be made for closing the stores before lease expiration. We have some situations, where we have lease kick outs that would be kind of a handful of locations is our expectation and we're continuing to read it but we think the best decision is to have these stores close out there.
Kevin Kelly: At their lease expiration so thats over the next several years that won't that will hit the 100 stores.
Speaker Change: Got it and just last question on pricing and so you have maintenance pricing investments in U S. DTC.
Kevin Kelly: I think to help the comp.
Kevin Kelly: You also made some investments in pricing in the U S wholesale channel.
Kevin Kelly: Thank you units were up six sales were flat I guess, how do we square that with your plan.
Kevin Kelly: Increases in the back half of the year like have you started to raise price and youre in Youre seeing a good consumer response.
Speaker Change: How flexible are you on pricing here.
Kevin Kelly: What feedback are you getting from your wholesale partners.
Kevin Kelly: So we have begun to raise prices, including in the wholesale channel that was something that started.
Kevin Kelly: Late late last month, as we started to ship fall product I would say the dialogue with our wholesale customers has been very constructive. This is an issue as I said thats not unique to Carter's theyre, saying it in their own private label sourcing theyre seeing from their other vendors.
Kevin Kelly: I think it's just understood that there has to be some measure of sharing they've responded really well. So that's how we're handling it in the wholesale channel we have probably more flexibility in our own retail channel obviously to change prices dynamically based on what we're seeing.
Kevin Kelly: And as I mentioned in recent weeks, we're actually seeing competitors raise their prices. So it's our intention to to probe up where we can we will obviously read the situation with what how the consumers respond interestingly the best performing part of the assortment is our best.
Kevin Kelly: Set up set of products the products that have the most.
Kevin Kelly: Added benefits and features and carry the highest price points and so clearly our consumers recognize when we've added to our Assortments. We've added features and benefits are willing to pay for that and that's why we're leaning into that part of the assortment in particular that helps on the pricing front as well.
Kevin Kelly: And just to add on that just to add to that we are seeing reasons to believe that our consumers.
Kevin Kelly: Appreciating those opportunities again, I referenced specifically little planet and purely soft which is a carter's assortment as examples of where we're seeing real achievement. There. It is helping bring new consumers in more often as well. So it's not just what we have to raise prices on its what we want to raise prices on so we are being more.
Kevin Kelly: Proactive and director of ourselves already.
Speaker Change: Great. Thank you so much best of luck. Thank.
Kevin Kelly: Thank you.
Speaker Change: Thank you. Our next question comes from Jim Cartier with <unk> Crespi Hardt. Your line is open.
Jim Cartier: Hi, good morning.
Speaker Change: Doug you've talked about the need to invest to drive sustainable profitable growth.
Jim Cartier: Can be.
Jim Cartier: Quantify give me a sense of how meaningful those investments would be and are those investments near term dilutive to margins.
Jim Cartier: So I'm not going to quantify the investments I will tell you that that.
Historically I do not believe we have invested sufficiently in demand creation.
Jim Cartier: And reaching our consumers with the best possible stories, that's a real opportunity for us going forward, where we are already investing more.
Jim Cartier: The ROI.
Jim Cartier: And the return on the investment is is outstanding.
Jim Cartier: And that I will just reiterate the two places where I believe.
Jim Cartier: Demand creation investment is going to yield the greatest upside for US one is store traffic and web site traffic and the other is consumer loyalty and again that return on invested capital.
Jim Cartier: As we model it is very high both in terms of revenue and operating income. So we think we can continue to justify these increased investments and we believe that they will drive growth that is profitable for us.
Jim Cartier: And then in terms of investing behind.
Jim Cartier: That product.
Jim Cartier: The best performing parts of the assortment, where does kind of second half stand.
Jim Cartier: In terms of the changes that were made year over year relative to the first half.
Speaker Change: Yeah, I will tell you that the assortments are starting or continuing to expand in this in the best bucket again are reasons to believe are showing us that there is real resonance with our consumer with these products and they are so theres no reason to slow down so you will see more inventory.
Speaker Change: And you will see higher AUR as you will see more of this product in a more expansive way to reiterate something that Richard said I think you will see more newness more frequently from us.
Speaker Change: Throughout our platforms as well in the second half and breadth and depth of investment.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from Chris <unk> with Bank of America. Your line is open.
Speaker Change: Thanks, guys. Good morning, So just will be refreshed view on the business I'm curious to hear why you think the category has been relatively weak over the last several years and just how the competitive landscape in the category.
Speaker Change: <unk>, maybe you can put into context, how much the category has grown and your confidence in really getting this business back to growth.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: We know the market is down approximately 2% overall.
Speaker Change: But.
Speaker Change: But what we've seen is.
Speaker Change: The primary change in the landscape is around private label.
Speaker Change: When you go into a lot of our key account partners you will see much greater investment for them in our category I think thats, where primarily what we're seeing is growth from them.
Speaker Change: But I would also tell you that as I have met with a lot of these key accounts directly what they have told us they expect us to grow our business as their primary baby and toddler National brand.
Speaker Change: So yes more competition from private label in these key accounts, but also more of an opportunity for us as the leader.
Speaker Change: And we continue we definitely are leaning into that and plan to continue to build on that as well.
Speaker Change: Yes. The other note. The other note I would happy to just is to keep an eye on international because there's a lot of great signs there for us as well.
Speaker Change: And we are again are leaning on our awareness.
Richard Westenberger: 160 years of trust means something in a lot of places around the world and we benefit from tremendous awareness, especially around quality, we find that that's something where we've outpaced all of the other brands and Thats true outside of the United States as well Richard spoke to our results in Canada, Mexico and <unk>.
Speaker Change: Talked about Brazil as good examples there.
Speaker Change: Got it very helpful. And then just a quick follow up on the wholesale business I noticed the exclusive business to the three year growing has there been any material change in sell through or just the health of inventory in the channel and then also youre pushing more of your best product into the market is there opportunity to expand shelf space.
Speaker Change: Little plant add purely soft in your newly launched brands like how big of an opportunity is that over the next couple of years.
Speaker Change: So Chris I would say that there is an opportunity for us to broaden the availability of our brand portfolio in the wholesale channel and that's something that Doug has.
Speaker Change: Then help helping us prioritize I think there is an opportunity to see greater penetration of little planet.
Speaker Change: A new brand that we've launched since we got our Avenue.
Speaker Change: Only days into it, but we think thats, a great opportunity, where its differentiated product, it's a white space in the market.
Speaker Change: And so we think thats an opportunity with a number of our wholesale customers over time as well I would say on balance sell throughs have been good we're kind of early in that early on to kind of fall winter selling that will start to ramp up here in coming weeks, we'll get a better read on back to school here with our key customers in the next number of weeks, but.
Speaker Change: On the on balance as I said in my remarks.
Speaker Change: The outlook for demand in the wholesale channel has held up very well for fall winter product and I'm encouraged about what the next few months could be it could mean in that segment of the business and I would just.
Speaker Change: I would just also refer back to my comments about redrawing, our wholesale landscape because I think you will see as I said more of our brands and more accounts and more doors as we move forward.
Speaker Change: Traveling the country visiting these accounts directly with our wholesale with our wholesale leader, we clearly have that opportunity and that invitation from our key accounts.
Speaker Change: Alright, Thanks, guys. Good luck.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from Ike <unk> with Wells Fargo. Your line is open.
Speaker Change: Hey, good morning, everyone couple of questions for me I guess I know, there's no guidance on revenue, but I guess, just when we think big picture.
Speaker Change: In the back half of the year, which channel whether it's direct to consumer wholesale would you expect to outperform in the back half and then I guess.
Both channels would you expect the rate of change on our revenue from where we are today to worsen or stay the same.
Speaker Change: As you push price now youre talking about pushing price a little bit more aggressively than you were in the first half.
Speaker Change: So I'd say on balance we have higher revenue growth planned in the second half relative to the first half and that would be led by the largest business routes, which is which is our direct to consumer business. So we have I'd say, probably more direct control over what gets executed in our own retail business than we do on the wholesale channel we've sold down obviously fall winter.
Speaker Change: <unk> were planned kind of comparable year over year, we have replenishment demand planned up slightly in the second half.
Speaker Change: So I think the outlook across our channels and of course continued momentum to Doug's point in international we've been on just a great straight there and so I would expect that demand profile to continue on our international segment. So unbalanced forecasting some acceleration of revenue growth in the second half we do have an extra week in the second half just to be transparent on that we're in a 53 week year, so that contributes to the second half as well.
Speaker Change: <unk>.
Speaker Change: Okay. Thanks, Richard and then I guess just to move to margin.
Speaker Change: So on the $35 million that you guys talked about it's roughly I think 200 basis points in the back half I guess just Richard just you are talking about EUR is that were down for now Youre planning up low singles can.
Speaker Change: Can you just do the math for me.
Speaker Change: <unk> were up low singles, how much of that roughly 200 basis points to age headwind gets offset.
Speaker Change: Well I'd say, it's a portion I don't know if I'll be as discreet as all the basis points, but.
Speaker Change: As I said, it's just tougher to cover the impact from the tariffs near term with pricing. There are some measure of an offset but it won't completely offset the.
Speaker Change: The impact of $30 million to $35 million is the net effect after taking some benefit from pricing are there other offsets in terms of vendor sharing and such.
Speaker Change: The net amount to your point, though we are planning AUR is up in the second half and so thats less of a drag.
Speaker Change: There's also if you recall from just our guidance earlier in the year the dynamics.
Speaker Change: Second the shift of that independent of tariffs between first half and second half first half was a bit more of that drag from lower AUR and the retail business far lesser than actually prices planned up in the second half what becomes a bit more of a swing factor is product costs themselves are higher in the second half independent of tariffs and that's that's conscious on our part that's where we've made investments in the product that's what's driving momentum with the.
Speaker Change: Tumor and so that comes through that comes through a Venezuela discreetly looking at product costs.
Speaker Change: Okay. So the $35 million is after.
Speaker Change: They assumed price increases go in that's a headwind that's correct.
Jay Sole: Okay, Great. That's helpful. And then my last one for Doug bigger picture I think just to go back to the first question a J S question I think obviously, we're all interested in long term earnings power and growth in all of that but I'd like to ask more so the short term honestly I mean, it seems like you guys are in reset mode, and 25% likely goes deeper into 'twenty six you're dealing with tariffs.
Jay Sole: To accelerate investment anywhere way to frame, where you see the bottom of margin or profit dollars as you looked at the utilization I assume in the next 12 plus months.
Jay Sole: Any other help you can kind of give us would be great.
Jay Sole: Yes.
Jay Sole: I really don't think that there's much more detail we can provide beyond what we've already said I would just reinforce a couple of things to you.
Jay Sole: My primary long term objective is long term sustainable profitable growth all three of those things must be true for Carter's to win.
Jay Sole: We've given back some market share in the past few years, we have a very clear plan to win that back and we're going to win that back.
Jay Sole: With product that is profitable and so again, we're already seeing reasons to believe that we can do that and thats resonating with our consumers the newness that we're putting in the marketplace is yielding.
Jay Sole: The best results that we have.
Jay Sole: Our wholesale partners are encouraging us to grow with them as they grow this part of their business their dedication to what we do is a big part of their future success as well.
Jay Sole: So long term sustainable profitable growth sound like a broken record.
Jay Sole: But but that's short term midterm and long term, what we're focused on here.
Jay Sole: Thanks, a lot.
Jay Sole: Thank you.
Speaker Change: And our last question comes from Paul Cooney with Barclays. Your line is open.
Speaker Change: Good morning, Thanks for taking my question I guess with the outlook for yours to increase low single digits in the back half what is your expectation for promotions in the market and relative to competition or the planned price increases in line with what you are already starting to see.
Speaker Change: Competitively in the market.
Speaker Change: So I think it continues to be a very promotional marketplace I don't know if its more so than it has been.
Speaker Change: As I said, we are starting to see some indication of <unk>.
Speaker Change: Response from the across the industry across the competitive set to presumably tariffs and so we will read that I think our retail team in particular does a great job and kind of scraping the competitive price information out there and making sure that we are competitively priced that that's our that's our mission is to not be an outlier, we want to be competitive, but our brands are worth more.
Speaker Change: And we think that we will have the ability to successfully price up to cover so that's kind of how we're thinking about it.
Speaker Change: Alright.
Speaker Change: When you think about improving the store productivity the DTC business I know you can't.
Speaker Change: Quantify it but can you help maybe rank some of the shifts and SG&A spend between.
Speaker Change: It would be taking out some costs and what are the bigger buckets of reallocating and reinvesting between marketing or product or anything else just ranking some of the puts and takes on SG&A to improve productivity long term. Thanks.
Speaker Change: Sure well I would say in general stores are expensive to operate they have they have a high fixed cost structure. There are SG&A intensive and so as we look to close 100 stores that SG&A comes out of the base and these are stores that are kind of marginally productive there, making a few million dollars, they're losing a few million dollars that they're at the margins by definition, so that that <unk>.
Speaker Change: Name comes out of the base, we have a good ongoing productivity program I think we've done in general good job managing SG&A over the last number of years, we are trying to keep a lid on on hiring where we can organizational costs. We have a great indirect procurement program, where we become much more disciplined in how we go to market and prepare the things that we need to run the enterprise.
Speaker Change: We would like to find more savings there and.
Speaker Change: I think our destination would be in some of this market marketing investments that we've talked about we want to drive more demand in the business. So that would be an area of possible reinvestment overtime, yes, I would just add and reinforce a couple of things that I said.
Speaker Change: Our in store metrics.
Speaker Change: Our performing much better quarter over quarter, two for multiple quarters now our opportunity is driving greater traffic, there's a lot of ways to do that.
Speaker Change: Better real estate decisions, all the way through demand creation.
Speaker Change: And.
Speaker Change: That's the unlock for US right. So that is one of the two key investment buckets I talked about we need to bring more people into the stores onto our websites.
Speaker Change: And then once there I think we're doing a much better job of converting them and keeping them keeping their loyalty.
Speaker Change: Okay last one if I could just squeeze one more in.
Speaker Change: I think just on tariffs you mentioned you expect to mitigate them in 2026 and beyond.
Speaker Change: I mean do you expect to fully offset them in 2026 or should we be looking at 2274 additional offsets our intention would be to offset them fully in 2026. So we'll have more to say over time, but that's that's the direction, we've given to the organization and the teams are moving out against that priority.
Speaker Change: Thank you and best of luck.
Speaker Change: Thank you Paul.
Speaker Change: Thank you that's all the time, we have for questions I'd like to turn the call back over to Doug <unk> for closing remarks.
Speaker Change: Yes, we're at time, so I'll be very brief here. Thank you all for your time and interest in Carter's hopefully you've seen as I do that our business is stabilizing and that we are in a position to grow again, obviously myriad reasons to believe that we're moving into a phase of long term sustainable and profitable growth, but please remember we're just getting started.
Speaker Change: Got it and I look forward to sharing much more with you as we move forward. Thank you.
Speaker Change: Thank you for your participation. This does conclude the program you may now disconnect everyone have a great day.
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