Q2 2025 Shoe Carnival Inc Earnings Call

Speaker #1: Good Good morning, and welcome to Shoe Carnival's second quarter, 2025, conference call. Today's conference call is being recorded and is also being broadcast via webcast.

Operator: Good morning and welcome to Shoe Carnival's second quarter 2025 conference call. Today's conference call is being recorded and is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. Management's remarks today may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward-looking statements should also be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date.

Speaker #1: Any reproduction or rebroadcast of any portion of this call is expressly prohibited. Management's remarks today may contain forward-looking statements that involve a number of risk factors.

Speaker #1: These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward-looking statements should also be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's earnings press release.

Speaker #1: Investors are cautioned not to place undue reliance on these forward-looking statements. Which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments.

Operator: The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments. I will now turn the conference over to Mr. Mark Worden, President and CEO of Shoe Carnival, for opening remarks. Mr. Worden, you may begin.

Speaker #1: I will now turn the conference over to Mr. Mark Worden, President and CEO of Shoe Carnival, for opening remarks. Mr. Worden, you may begin.

Speaker #2: Good morning, everyone, and thank you for joining us today for Shoe Carnival's second quarter 2025 earnings conference call. Joining me on today's call are Patrick Edwards, Chief Financial Officer, and Tanya Gordon, Chief Merchandising Officer.

Mark Worden: Good morning, everyone, and thank you for joining us today for Shoe Carnival's second quarter 2025 earnings conference call. Joining me on today's call are Patrick Edwards, Chief Financial Officer, and Tanya Gordon, Chief Merchandising Officer. Our second quarter results demonstrate meaningful progress on our corporate strategy. We beat earnings consensus by over 20% and expanded gross margins 270 basis points to 38.8%, our strongest Q2 margin in years. Our rebanner strategy is exceeding targets. EPS declined year-over-year from our planned rebanner investments as expected, but margins expanded faster than planned, driving our strong earnings beat for the quarter. Since our last call, we've completed our back-to-school season, the period that defines our year. Fiscal August represents less than 8% of our days but drives approximately 25% of our annual profits. As we moved into back-to-school in August, we achieved a significant milestone.

Speaker #2: Our second quarter results demonstrate meaningful progress on our corporate strategy. We've beat earnings consensus by over 20% and expanded gross margins 270 basis points to 38.8%, our strongest Q2 margin in years.

Speaker #2: Our rebounder strategy is exceeding targets. EPS declined year-over-year from our planned rebounder investments as expected, but margins expanded faster than planned, driving our strong earnings beat for the quarter.

Speaker #2: Since our last call, we've completed our back-to-school season. The period that defines our year. Fiscal August represents less than 8% of our days but drives approximately 25% of our annual profits.

Speaker #2: As we moved into back-to-school in August, we achieved a significant milestone. The company returned a positive comparable sales growth for this must-win period. Shoe Station grew sales high single digits and expanded margins.

Mark Worden: The company returned to positive comparable sales growth for this must-win period. Shoe Station grew sales high single digits and expanded margins. Shoe Carnival delivered positive children's category comp sales growth and margin growth. Rogan's Shoes expanded both comparable sales and margins. Every banner stepped up when it mattered most. Let me walk through what drove these results and why it matters for our future. Three strategic decisions shaped our quarter and back-to-school success. First, we prioritized margin dollars over pursuing lower quality, lower profit sales. Second, we invested in inventory depth to improve availability for back-to-school. Third, we continued investing in our rebanner program despite market uncertainty. These choices are paying off. Q2 gross margins reached 38.8%. That 270 basis point expansion came from disciplined pricing, improved mix, and better inventory availability, not from deep discounting. The rebanner strategy contribution was significant.

Speaker #2: Shoe Carnival delivered positive children's category comp sales growth and margin growth. Rogan's expanded both comparable sales and margins. Every banner stepped up when it mattered most.

Speaker #2: Let me walk through what drove these results and why it matters for our future. Three strategic decisions shaped our quarter in back-to-school success. First, we prioritized margin dollars over pursuing lower quality, lower profit sales.

Speaker #2: Second, we invested in inventory depth to improve availability for back-to-school. Third, we continued investing in our rebounder program despite market uncertainty. These choices are paying off, Q2 gross margins reached 38.8%, that's 270 basis point expansion, came from disciplined pricing, improved mix, and better inventory availability.

Speaker #2: Not from deep discounting. The rebounder strategy contribution was significant. Shoe Station outperformed Shoe Carnival by over 10% on merchandise sales during Q2 and back-to-school.

Mark Worden: Shoe Station outperformed Shoe Carnival by over 10% on merchandise sales during Q2 and back-to-school. Beyond top-line sales gains, we're seeing a shift in demographics from Carnival's sub-$30,000 household towards Shoe Station's over $50,000 range. This evolution in customer mix is driving improved economics across the portfolio and reducing the corporation's exposure to economic downturns. These new Shoe Station households shop differently. They purchase premium brands and build higher-priced baskets. The result: product margins expanded 280 basis points at Shoe Station in Q2 plus fiscal August versus the prior year. Shoe Carnival and Rogan's both expanded margins too, but the new customer buying higher-priced premium brands at Shoe Station is the big strategic win to highlight. All of this delivered $0.70 in EPS, beating expectations and giving us the confidence to raise our annual profit guidance range today.

Speaker #2: Beyond top line sales gains, we're seeing a shift in demographics from Carnival's sub 30,000 dollar household towards Shoe Station's over 50,000 dollar range. This evolution in customer mix is driving improved economics across the portfolio and reducing the corporation's exposure to economic downturns.

Speaker #2: These new Shoe Station households shop differently. They purchase premium brands and build higher-priced baskets. The result, product margins expanded 280 basis points at Shoe Station in Q2 plus fiscal August versus the prior year.

Speaker #2: Carnival and Rogan's both expanded margins too, but the new customer buying higher priced premium brands at Shoe Station is the big strategic win to highlight.

Speaker #2: All of this delivered 70 cents in EPS, beating expectations and giving us the confidence to raise our annual profit guidance range today. Turning to back-to-school, August was our first real test of Shoe Station at scale and we passed convincingly.

Mark Worden: Turning to back-to-school, August was our first real test of Shoe Station at scale, and we passed convincingly. We ran one campaign idea across three banners with ruthless simplicity. We have the brands families want, prices that make sense, heavy digital, strategic social, surgical television, and rebanner markets. The fiscal August numbers were strong. Shoe Station grew comparable sales high single digits overall, driven by the children's category growing sales high singles with margin expansion and the adult athletics category growing sales in the low twenties, also with margin growth. Notably, Shoe Carnival delivered positive children's comp sales and margin growth for fiscal August back-to-school also, despite a challenging environment for the lower-income customer. Each banner contributed differently during back-to-school. Shoe Station attracted new, higher-income shoppers. Shoe Carnival competed effectively without sacrificing economics. Rogan's started its rebannering efforts towards Shoe Station and migration toward the more accretive pricing strategy.

Speaker #2: We ran one campaign idea across three banners with ruthless simplicity, we have the brand's family's want at prices that make sense. Heavy digital, strategic social, surgical television in rebounder markets.

Speaker #2: The fiscal August numbers were strong, Shoe Station grew comparable sales high single digits overall, driven by the children's category growing sales high singles with margin expansion, and the adult athletics category growing sales in the low 20s also with margin growth.

Speaker #2: Notably, Shoe Carnival delivered positive children's comp sales and margin growth for fiscal August back-to-school also, despite a challenging environment for the lower income customer.

Speaker #2: Each banner contributed differently during back-to-school. Station attracted new, higher income shoppers. Carnival competed effectively without sacrificing economics. Rogan's started its rebounding efforts towards Shoe Station and migration toward the more creative pricing strategy.

Speaker #2: Based on encouraging sales growth, results during the Rogan's rebounder start, we extended the campaign into fall. Now let me review the latest details on our rebounder rollout progress because this is where our strategy becomes reality.

Mark Worden: Based on encouraging sales growth results during the Rogan's rebanner start, we extended the campaign into fall. Now let me review the latest details on our rebanner rollout progress because this is where our strategy becomes reality. We acquired Shoe Station's 21 stores at the end of 2021. We entered fiscal 2025 with double the store count since the acquisition, with 42 Shoe Station stores, approximately 10% of our fleet. Through relentless execution, we're now at 87 Shoe Station stores, approximately 20% of the company. By the end of fiscal 2025, we'll operate 145 Shoe Station stores, approximately one-third of our entire fleet. By back-to-school 2026, we'll surpass 215 stores, 51% of the current fleet at Shoe Station. That's the tipping point where growth begins to overtake decline and we become a different company. The performance gap is developing as we anticipated.

Speaker #2: We acquired Shoe Station's 21 stores at the end of 2021. We entered fiscal 2025 with double the store count since the acquisition, with 42 Shoe Station stores, approximately 10% of our fleet.

Speaker #2: Through a relentless execution, we're now at 87 Shoe Station stores approximately 20% of the company. By the end of fiscal 2025, we'll operate 145 Shoe Station stores approximately one third of our entire fleet.

Speaker #2: By back-to-school 2026, we'll surpass 215 stores, 51% of the current fleet at Shoe Station. That's the tipping point where growth begins to overtake decline, and we become a different company.

Speaker #2: The performance gap is developing as we anticipated. Shoe Station rebounder sales are up 8% year to date through August, while Carnival comps decline high singles.

Mark Worden: Shoe Station rebanner sales are up 8% year to date through August, while Shoe Carnival comps declined high singles. The Shoe Station rebanners are generating product margins 270 basis points above prior year through August year to date. Importantly, we are growing sales with a more affluent target we aim to attract to Shoe Station, with sales now growing in the core demographic of over $50,000 household income. Shoe Station's back-to-school taught us valuable lessons. We won in athletics. We expanded margins across categories. We sharply grew our children's category penetration. Despite the growth achieved, we left sales on the table in the children's category, too conservative on depth, not prominent enough in key store areas. Valuable insights captured. Now we know how to grow the children's category even higher next back-to-school. Rogan's continues to exceed expectations. August sales and product margin growth surpassed the metrics we set.

Speaker #2: The Shoe Station rebounders are generating product margins 270 basis points above prior year, through August year-to-date. Importantly, we are growing sales with a more affluent target we aim to attract to Shoe Station.

Speaker #2: With sales now growing in the core demographic of over 50,000 dollar household income. Shoe Station's back-to-school taught us valuable lessons. We won in athletics.

Speaker #2: We expanded margins across categories. We sharply grew our children's category penetration. But despite the growth achieved, we left sales on the table in the children's category.

Speaker #2: To conservative on depth, not prominent enough in key store areas. Valuable insights captured. Now we know how to grow the children's category even higher next back-to-school.

Speaker #2: Rogan's continues to exceed expectations. August sales and product margin growth surpassed the metrics we set. Our response was decisive. Finished the rebounder process at all Rogan's locations to Shoe Station this year.

Mark Worden: Our response was decisive. Finish the rebanner process at all Rogan's locations to Shoe Station this year. The station model works. The economics are proven. Wisconsin becomes our next Shoe Station stronghold to expand from. Let me address Shoe Carnival directly, as transparency here is important. Carnival's Q2 comps declined high single digits, though we saw sequential improvement from Q1 and sharp improvement at quarter end as back-to-school began. August showed further progress, delivering low single-digit declines with growth in children's categories and solid athletic performance. The sub-$30,000 income consumer faces ongoing pressure. While we could pursue more aggressive promotions to drive traffic, we believe maintaining margin discipline is the right long-term decision versus propping up the customer segment we are strategically shifting away from. We're managing the Carnival banner as a cash generator during our transition to Shoe Station.

Speaker #2: The station model works, the economics are proven, was constant becomes our next Shoe Station stronghold to expand from. Let me address Shoe Carnival directly as transparency here is important.

Speaker #2: Carnival's Q2 comps declined high single digits. Though we saw sequential improvement from Q1 and sharp improvement at quarter-end as back-to-school began. August showed further progress, delivering low single-digit climbs, with growth in children's categories and solid athletic performance.

Speaker #2: The sub 30,000 dollar income consumer faces ongoing pressure. While we could pursue more aggressive promotions to drive traffic, we believe maintaining margin discipline is the right long-term decision versus propping up this customer segment we are strategically shifting away from.

Speaker #2: We're managing the Carnival banner as a cash generator during our transition to Shoe Station. Over each upcoming quarter, Carnival's percentage of our portfolio declined systematically.

Mark Worden: Over each upcoming quarter, Carnival's percentage of our portfolio declines systematically. By back-to-school 2026, it will represent less than 49% of our company. This deliberate shift reduces our exposure to a more volatile consumer segment while we diversify our customer base by building our premium banner. Our financial position gives us advantages many competitors do not have. As of fiscal August end, cash and securities are up double digits year over year at nearly $150 million. Debt is zero. While others navigate covenants and credit lines, we invest from strength. We are investing approximately $25 million this year in our rebanner strategy, with an expected 2 to 3-year ROI payback, a strong payback model, and currently our highest profit return for our cash flow. We continue to evaluate acquisitions in a disciplined fashion.

Speaker #2: By back-to-school 2026, it will represent less than 49% of our company. This deliberate shift reduces our exposure to a more volatile consumer segment, while we diversify our customer base by building our premium banner.

Speaker #2: Our financial position gives us advantages many competitors do not have. As the fiscal August end, cash and securities are up double digits year over year at nearly 150 million dollars.

Speaker #2: Debt is zero. While others navigate covenants and credit lines, we invest from strength. We are investing approximately 25 million dollars this year in our rebounder strategy, with an expected 2 to 3 year ROI payback, a strong payback model, and currently our highest profit return for our cash flow.

Speaker #2: We continue to evaluate acquisitions in a disciplined fashion. Our aim is to elevate our customer demographics, expand into new markets, and do so at a fair valuation.

Mark Worden: Our aim is to elevate our customer demographics, expand into new markets, and do so at a fair valuation. As announced after the Q1 call, I asked Kerry Jackson to return to my executive leadership team. Kerry's 35 years with the company and over 25 years as our CFO is a great asset to have back at my side. I'm excited about this extra horsepower supporting our strategic growth initiatives. On inventory, yes, we're heavy. This is strategy reflecting the macroeconomic volatility, not accident. Our intentional inventory investment delivered sharply improved in-stock rates on key items during back-to-school versus last year. When demand spiked in August, we captured it and drove comp sales growth with accretive margins. That availability at a lower cost basis was a key element that drove our margin expansion and our Q2 earnings beat.

Speaker #2: As announced after the Q1 call, I asked Carrie Jackson to return to my executive leadership team. Carrie's 35 years with the company and over 25 years as our CFO is a great asset to have back at my side.

Speaker #2: I'm excited about this extra horsepower supporting our strategic growth initiatives. On inventory, yes, we're heavy. This is strategy reflecting the macroeconomic volatility not accident.

Speaker #2: Our intentional inventory investment delivered sharply improved in-stock rates on key items during back-to-school versus last year. When demand spikes in August, we captured it and drove comp sales growth with a creative margins.

Speaker #2: That availability at a lower cost basis was a key element that drove our margin expansion and our Q2 earnings beat. We expect to normalize inventory completion timing dependent on tariff and supply chain clarity.

Mark Worden: We expect to normalize inventory levels in 2026, with completion timing dependent on tariff and supply chain clarity. Understand this: with our balance sheet and our margin profile, carrying extra inventory that's selling profitably is a luxury problem. We'd rather have it and sell it than miss the sale entirely. Looking forward, our confidence is building on multiple fronts. Our rebanner strategy is delivering strong sales and margin growth. Gross profit margins are robust and on pace to exceed our high-side guidance given current trends. We tightened sales guidance to reflect Station's and Rogan's growth and Carnival's reality. Overall, we raised our annual EPS guidance range to reflect the Q2 profit beat and fiscal August comp growth results. Importantly, we can see the inflection points approaching. When Station hits 51% of our fleet next year, the math flips. Station growth begins to overtake Carnival decline.

Speaker #2: But understand this, with our balance sheet and our margin profile, carrying extra inventory that's selling profitably is a luxury problem. We'd rather have it and sell it than miss the sale entirely.

Speaker #2: Looking forward, our confidence is building on multiple fronts. Our rebounder strategy is delivering strong sales and margin growth. Gross profit margins are robust and on pace to exceed our high side guidance given current trends.

Speaker #2: We tightened sales guidance to reflect stations and Rogan's growth in Carnival's reality. Overall, we raised our annual EPS guidance range to reflect the Q2 profit beat and fiscal August comp growth results.

Speaker #2: Importantly, we can see the inflection points approaching. When station levels in 2026 with hits 51% of our fleet next year, the math flips. Station growth begins to overtake Carnival decline.

Speaker #2: Median income customers overtake deep discount shoppers as our core. I'll now turn the call over to Patrick to walk through the detailed financials and updated outlook.

Mark Worden: Median income customers overtake deep discount shoppers at our core. I'll now turn the call over to Patrick to walk through the detailed financials and updated outlook. Patrick?

Speaker #2: Patrick?

Speaker #3: Thank you, Mark. Good morning, everyone. Let me provide additional detail on our second quarter and back-to-school financial performance and our updated fiscal 2025 outlook.

Patrick Edwards: Thank you, Mark. Good morning, everyone. Let me provide additional detail on our second quarter and back-to-school financial performance and our updated fiscal 2025 outlook. Starting with our Q2 and August sales results. Second quarter net sales were $306.4 million compared to $332.7 million in the prior year. The 7.9% change reflects our strategic focus on higher margin business as we transform our customer mix and banner portfolio. Our 7.5% comparable store sales decline includes approximately 100 basis points of impact from the 20 rebanners we completed this quarter. The divergent performance by banner in the quarter reinforces our rebanner strategy. Shoe Station sales grew 1.6% with essentially flat comparable store sales. Through August year to date, Station rebanner comps are now up high single digits. In Q2, Shoe Carnival sales declined 10.1% as we maintained pricing discipline despite pressure on the low-income consumer.

Speaker #3: Starting with our Q2 and August sales results. Second quarter net sales were 36.4 million, compared to 332.7 million in the prior year. The 7.9% change reflects our strategic focus on higher margin business as we transform our customer mix and banner portfolio.

Speaker #3: Our 7.5% comparable store sales decline includes approximately 100 basis points of impact from the 20 rebounders we completed this quarter. The divergent performance by banner in the quarter reinforces our rebounder strategy.

Speaker #3: Shoe Station sales grew 1.6%, with essentially flat comparable store sales through August year to date, station rebounder comps are now up high single digits.

Speaker #3: In Q2, Shoe Carnival sales declined 10.1% as we maintained pricing discipline despite pressure on the low-income consumer. Shoe Carnival's high singles comp decline in the quarter was the main driver of our overall comparable store sale decrease.

Patrick Edwards: Shoe Carnival's high singles comp decline in the quarter was the main driver of our overall comparable store sale decrease. Rogan's Shoes delivered approximately $20 million in net sales in line with our integration plans. Let me now provide some additional color on our performance by major footwear category during August, our highest stake month of the year. Total company comparable growth was achieved with mid-singles growth in children's and low singles growth in athletics. Shoe Station far outperformed the total company, achieving high singles growth in children's and low twenties growth in men's and women's athletics. Total company men's and women's non-athletics declined low singles, reflecting the strong athletic cycle we are in, with Station also in the low singles, outperforming Carnival. Now moving on to gross profits. Our gross profit margin of 38.8% represents a 270 basis point expansion versus last year. Let me break this down.

Speaker #3: Rogan's delivered approximately 20 million in net sales in line with our integration plans. Let me now provide some additional color on our performance by major footwear category during August, our highest stake month of the year.

Speaker #3: Total company comparable growth was achieved with mid singles growth in children's and low singles growth in athletics. Shoe Station far outperformed the total company, achieving high singles growth in children's and low twenties growth in men's and women's athletics.

Speaker #3: Total company men's and women's non-athletics declined low singles, reflecting the strong athletic cycle we are in. With station also in the low singles, outperforming Carnival.

Speaker #3: Now moving on to gross profit. Our gross profit margin of 38.8% represents a 270 basis point expansion versus last year. Let me break this down.

Speaker #3: Merchandise margins improved 390 basis points, driven by three factors. Discipline pricing strategy across all banners, favorable mix shift as Shoe Station grows, and strategic inventory investments that improved in stock rates.

Patrick Edwards: Merchandise margins improved 390 basis points driven by three factors: disciplined pricing strategy across all banners, favorable mix shift as Shoe Station grows, and strategic inventory investments that improved in-stock rates. This more than offset 120 basis points of deleverage in buying, distribution, and occupancy costs. SG&A expenses were $93.6 million, or 30.6% of sales compared to 27.1% last year. Approximately 200 basis points of this increase relates to our rebanner investments, with the remainder due to deleverage partially offset by discipline cost management. Our effective tax rate in the quarter was 25.9% versus 26.3% last year. Net income was $19.2 million, or $0.70 per diluted share, compared to $22.6 million, or $0.82 last year. Our Q2 2025 earnings included $0.21 of rebanner investments and otherwise exceeded the prior year by $0.09.

Speaker #3: This more than offset 120 basis points of deleverage in buying distribution and occupancy costs. SG&A expenses were 93.6 million, or 30.6% of sales, compared to 27.1% last year.

Speaker #3: Approximately 200 basis points of this increase relates to our rebounder investments, with the remainder due to deleverage partially offset by discipline cost management. Our effective tax rate in the quarter was 25.9% versus 26.3% last year.

Speaker #3: Net income was 19.2 million, or 70 cents per diluted share, compared to 22.6 million, or 82 cents last year. Our Q2 2025 earnings included 21 cents of rebounder investments, and otherwise exceeded the prior year by 9 cents.

Speaker #3: Turning to our balance sheet and cash flow. We ended the quarter with 91.9 million in cash and marketable securities, up from 84.5 million last year.

Patrick Edwards: Turning to our balance sheet and cash flow, we ended the quarter with $91.9 million in cash and marketable securities, up from $84.5 million last year. Following our strong August performance, cash and securities exceeded $148 million, up over 10% versus prior year, and we continue to operate debt-free. Inventory at quarter end was $449 million, up 5% versus last year. This strategic investment delivered the product availability that drove our margin expansion and positive comps during back-to-school. Year to date, capital expenditures total $24.4 million, with approximately $20 million funding our 44 rebanner conversions. Let me provide more detail on our rebanner economics. The $0.21 second quarter EPS impact includes store closure cost, 4 to 6 weeks of lost sales during conversion, additional depreciation, customer acquisition costs, and grand opening expenses. Year to date, we've absorbed $0.36 of EPS impact.

Speaker #3: Following our strong August performance, cash and securities exceeded 148 million, up over 10% versus prior year, and we continue to operate debt free. Inventory at quarter end was 449 million, up 5% versus last year.

Speaker #3: This strategic investment delivered the product availability that drove our margin expansion and positive comps during back-to-school. Year to date, capital expenditures totaled 24.4 million, with approximately 20 million funding our 44 rebounder conversions.

Speaker #3: Let me provide more detail on our rebounder economics. The $0.21 second quarter EPS impact includes store closure costs, 4 to 6 weeks of lost sales during conversion, additional depreciation, customer acquisition costs, and grand opening expenses.

Speaker #3: Year to date, we've absorbed $0.36 of EPS impact. We now expect approximately $0.70 for the full year, or about $25 million in operating income impact.

Patrick Edwards: We now expect approximately $0.70 for the full year, or about $25 million in operating income impact. Given the margin increases and high single-digit comp lifts we are achieving, these investments are a compelling use of our resources. Now turning to our updated fiscal 2025 outlook. Based on our second quarter outperformance and positive August momentum, we are raising several key metrics. Net sales guidance is now $1.12 to $1.15 billion, tightened from our previous range. This implies significant sequential improvement in the back half, with comparable store sales improving from down high single digits in Q2 to down low single digits in the back half of the year. This improvement reflects a growing Shoe Station mix and strong event period performance, including August positive comparable sales. We're raising the EPS guidance range from $1.70 to $2.10, increasing the low end by $0.10.

Speaker #3: Given the margin increases and high single digit comp lifts we are achieving, these investments are a compelling use of our resources. Now turning to our updated fiscal 2025 outlook.

Speaker #3: Based on our second-quarter outperformance and positive August momentum, we are raising several key metrics. Net sales guidance is now $1.12 to $1.15 billion, tightened from our previous range.

Speaker #3: This implies significant sequential improvement in the back half, with comparable store sales improving from down high single digits in Q2 to down low single digits in the back half of the year.

Speaker #3: This improvement reflects a growing Shoe Station mix and strong event period performance, including August positive comparable sales. We're raising the EPS guidance range from $1.70 to $2.10, increasing the low end by 10 cents.

Speaker #3: This reflects our Q2 beat and confidence in sustained margin expansion. The wide EPS range reflects macro uncertainty and expected traffic volatility outside key selling periods.

Patrick Edwards: This reflects our Q2 beat and confidence in sustained margin expansion. The wide EPS range reflects macro uncertainty and expected traffic volatility outside key selling periods. Gross profit margin guidance increases 150 basis points to 36.5% to 37.5%, reflecting the structural margin improvement from rebanners and discipline pricing. SG&A is expected to be $355 to $360 million, including the increased rebanner investment. Capital expenditures are expected to be $45 to $55 million, with $30 to $35 million for rebanners. For the third quarter specifically, we expect net sales of $290 to $300 million and EPS of $0.50 to $0.55. In closing, we are successfully evolving our business mix toward higher margin categories and customers. Our rebanner investments are generating strong returns, and our balance sheet provides the flexibility to execute our rebanner strategy while remaining opportunistic on acquisitions. I'll now turn it back over to Mark for closing remarks.

Speaker #3: Gross profit margin guidance increases 150 basis points to 36.5% to 37.5%, reflecting the structural margin improvement from rebounders and discipline pricing. SG&A is expected to be 355 to 360 million, including the increased rebounder investment.

Speaker #3: Capital expenditures are expected to be 45 to 55 million, with 30 to 35 million for rebounders. For the third quarter specifically, we expect net sales of 290 to 300 million, and EPS of 50 cents to 55 cents.

Speaker #3: In closing, we are successfully evolving our business mix toward higher margin categories and customers. Our rebounder investments are generating strong returns and our balance sheet provides the flexibility to execute our rebounder strategy while remaining opportunistic on acquisitions.

Speaker #3: I'll now turn it back over to Mark for closing remarks.

Speaker #4: Before opening for Q&A,

Mark Worden: Before opening for Q&A, let me briefly summarize where we are. We delivered $0.70 EPS in Q2, beating expectations by over 20%, with gross margins at 38.8%, our highest Q2 margin in years. That 270 basis point expansion came from strategic choices that are working. We increased our annual EPS guidance range today, reflecting the Q2 beat and fiscal August results. Fiscal August delivered something significant. We achieved positive comparable sales growth during back-to-school, our highest stakes period. Shoe Station grew sales high single digits. Shoe Carnival delivered positive children's comps. Rogan's Shoes grew sales and margins while being rebannered. Every banner contributed when it mattered most. Our rebanner strategy is working. Shoe Station outperformed Shoe Carnival merchandise sales by over 10% in Q2 and fiscal August. Product margin resulting from our rebanner strategy expanded nearly 300 basis points.

Speaker #2: let me briefly summarize where we are. We delivered 70 cents EPS in Q2, beating expectations by over 20%, with gross margins at 38.8%, our highest Q2 margin in years.

Speaker #2: That's 270 basis point expansion came from strategic choices that are working. We increased our annual EPS guidance range today, reflecting the Q2 beat and fiscal August results.

Speaker #2: Fiscal August delivered something significant. We achieved positive comparable sales growth during back-to-school, our highest stakes period, Shoe Station grew sales high single digits, Carnival delivered positive children's comps, Rogan's grew sales and margins while being reboundered, every banner contributed when it mattered most.

Speaker #2: Our rebounder strategy is working. Station outperformed Carnival merchandise sales by over 10% in Q2 and fiscal August. Product margin resulting from our rebounder strategy expanded nearly 300 basis points.

Speaker #2: We'll operate 145 Shoe Station stores by year-end, on track for a majority of Shoe Station by next back-to-school. We've set out to build a company that serves median-income families with better brands and better experiences.

Mark Worden: We'll operate 145 Shoe Station stores by year end, on track for majority Shoe Station by next back-to-school. We set out to build a company that serves median-income families with better brands and better experiences. That company is no longer a concept. It's operating, it's growing, and it's delivering. With that, Patrick, Tanya, and I would be happy to take your questions. Operator, please open the line for Q&A.

Speaker #2: That company is no longer a concept. It's operating, it's growing, and it's delivering. With that, Patrick, Tanya, and I would be happy to take your questions.

Speaker #2: Operator, please open the line for Q&A.

Speaker #1: If you would like to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Mitch Cummins with Seaport Research Partners. You may go ahead.

Operator: If you would like to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Mitchel Kummetz with Seaport Research. You may go ahead.

Speaker #3: Excuse me, yeah, thanks for taking my questions. I've got maybe a handful. I'm first of all, Mark, I'm curious on the second quarter your sales came a little below plan, but obviously your gross margins were well ahead of plan.

Mitchel Kummetz: Excuse me. Yeah, thanks for taking my questions. I've got maybe a handful. First of all, Mark, I'm curious on the second quarter. You know, your sales came a little below plan, but obviously your gross margins were well ahead of plan. You talked about prioritizing margin dollars. I'm just curious, is there something about the quarter that was a bit unexpected, or did you kind of change your priorities in the quarter in order to kind of achieve the results that you did that were a bit different than what you kind of laid out three months ago?

Speaker #3: You talked about prioritizing margin dollars. I'm just curious, is there something about the quarter that was a bit unexpected, or did you kind of change your priorities in the quarter in order to kind of achieve the results that you did that were a bit different than what you kind of laid out three months ago?

Speaker #2: Hi Mitch, thanks for the question. You know, I think the opportunistic buys and additional inventory that the team brought in performed better than we expected.

Mark Worden: Hi, Mitch. Thanks for the question. I think the opportunistic buys and additional inventory that the team brought in performed better than we expected. We captured success at a lower cost basis and strength at a higher margin run first. Second, the Shoe Station performance continues to accelerate, and as that grows towards a higher % of our mix, that's helping us drive our margins higher than we expected. Third, we continue to see competitors do irrational things related to pricing, and we believe that's not the strategy for us. We stayed true while others were doing very aggressive profit dilutive activities before back-to-school. We stayed true and steady to our focus of where we're going to be ready to deliver growth when the customer is ready to shop profitably during back-to-school, and it delivered with comparable growth coming in Q3 right away as soon as back-to-school started.

Speaker #2: We captured, you know, success at a lower cost basis, and strength at a higher margin run first. Second, the Shoe Station performance continues to accelerate.

Speaker #2: And, you know, as that grows towards a higher percent of our mix, that's helping us drive our margins higher than we expected. And third, we continue to see competitors to our rational things related to pricing, and we believe that's not the strategy for us.

Speaker #2: We've stayed true while others were doing very aggressive profit dilutive activities before back-to-school. We've stayed true and steady to our focus of where we're going to be ready to deliver growth when the customer is ready to shop profitably during back-to-school.

Speaker #2: And it delivered with comparable growth, coming in Q3 right away, as soon as back-to-school started. It was an exciting period of time.

Mark Worden: It was an exciting period of time.

Speaker #3: And then Patrick, on a third quarter, you gave us guidance in terms of sales and earnings. Is there anything more you can say in terms of kind of what your comp expectations are for the quarter?

Mitchel Kummetz: Patrick, on a third quarter, you gave us guidance in terms of sales and earnings. Is there anything more you can say in terms of kind of what your comp expectations are for the quarter, and then also, you know, margins growth versus SG&A?

Speaker #3: And then also, you know, margins growth versus SG&A?

Speaker #2: Hey Mitch, thanks for the question. Yeah, there's a little bit more detail that we can provide on our on our third quarter results. First, our on our sales, the 290 to 300 million dollar range that we've given is down two to down five.

Patrick Edwards: Hey, Mitch. Thanks for the question. Yeah, there's a little bit more detail that we can provide on our third quarter results. First, on our sales, the $290 to $300 million range that we've given is down 2% to down 5%, so midpoint somewhere in the 3% range, similar to our annual guide in the back half of the year. We don't have any meaningful difference in stores, so our comp would be very similar to our total sales on that front. With respect to margin, we earned 36% in the quarter last year. We would expect a number that is 100 to 150 basis points above that in Q3 this year. Targeting a number of like 37% to 37.5% would be the thought process.

Speaker #2: So midpoint somewhere in the in the 3% range, similar to our to our annual guide in the back half of the year. We don't have any meaningful difference in stores, so our comp would be very similar to our total sales.

Speaker #2: On that front. With respect to margin, we earned 36% in the quarter last year. We would expect a number that is 100 to 150 basis points above that in Q3 this year.

Speaker #2: So targeting a number of like 37 to 37 and a half percent. Would be the would be the thought process. SG&A, I think the best way to think about that is a pure number that is 95 million dollars.

Patrick Edwards: SG&A, I think the best way to think about that is a pure number that is $95 million, so consistent with what we spent in Q2, which was about $94 million.

Speaker #2: So, consistent with what we spent in Q2, which was about $94 million.

Speaker #3: That's very helpful. And then just as a follow-up to that, I mean, it sounds like August is up to a very good or three Qs up to a very good start given August.

Mitchel Kummetz: That's very helpful. Just as a follow-up to that, it sounds like Q3 is off to a very good start given August. Could you maybe talk through your expectations for the balance of the quarter in order to get to sales down 2% to 5%?

Speaker #3: Could you talk through your expectations for the balance of the quarter in order to get to sales down 2% to 5%?

Speaker #2: Sure, that would, that's a pretty easy take to make for us. The low end of our range at $290 million would assume comparable sales and total sales declines in the high singles.

Patrick Edwards: Sure. That's a pretty easy take to make for us. The low end of our range at $290 million would assume comparable sales and total sales declines in the high singles, consistent with what we've seen in the first half of the year. At the low side of it, we see a number that is more flat. The midpoint is, you know, this 3% sort of decline, which is a meaningful improvement from where we've been in the first half of the year.

Speaker #2: Consistent with what we've seen in the first half of the year. And then at the low side of it, we see a number that is that is more that is more flat.

Speaker #2: But the midpoint is, you know, this 3% sort of decline, which is a meaningful improvement from where we've been in the first half of the year.

Speaker #3: And then, Mark, you made a comment in your prepared remarks that your managing Shoe Carnival as a cash generator. Can you just elaborate on that?

Mitchel Kummetz: Mark, you made a comment in your prepared remarks that you're managing Shoe Carnival as a cash generator. Can you just elaborate on that?

Speaker #2: Yeah, I think that comes back to our margin integrity and not chasing traffic gains at any cost for that sub $30,000 household. You know, we're we're seeing the competitive set go after that low income strapped household with very aggressive pricing activity.

Mark Worden: Yeah, I think that comes back to our margin integrity and not chasing traffic gains at any cost for that sub-$30,000 household. We're seeing the competitive set go after that low-income strapped household with very aggressive pricing activity that's eroding margins and delivering different outcomes than we just put up with, say, our 270 basis point growth in Q2. That was discipline. We think that's the right thing as we're strategically moving away from that sub-$30,000 household. Instead of propping that up, chasing unprofitable, low-quality sales now, we decided, and we'll continue to decide with Shoe Carnival not to prop up that segment. We will expect to see in our guidance that lower-income customer choosing to shop elsewhere and that median-income household shopper, $50,000 and up, choosing to shop at us. It's profitable. It's where we're heading, and it's the strategic path.

Speaker #2: That's eroding margins. And delivering different outcomes than we just put up with, say, our 270 basis point growth in Q2. That was discipline. We think that's the right thing as we're strategically moving away from that sub $30,000 household instead of propping that up, chasing unprofitable low quality sales now.

Speaker #2: We decided and will continue to decide with Shoe Carnival not to prop up that segment. So we will expect to see in our guidance, you know, that lower income customer choosing to shop elsewhere.

Speaker #2: And that median income household shopper $50,000 and up choosing to shop at us. It's profitable, it's where we're heading, and it's the strategic path.

Speaker #2: With that, Shoe Carnival throws off very strong cash characteristics. And as, you know, we shared, cash up sharply as we sit here today positioning us to fund fully our growth initiatives to fund fully this transition to Shoe Station, the median customer, and to be ready for further strategic, you know, initiatives as they arise.

Mark Worden: With that, Shoe Carnival throws off very strong cash characteristics. As we shared, cash is up sharply as we sit here today, positioning us to fund fully our growth initiatives, to fund fully this transition to Shoe Station, the median customer, and to be ready for further strategic initiatives as they arise.

Speaker #3: And then maybe last for me, you mentioned that once Shoe Station gets to like 51% of your store base, kind of the model flips.

Mitchel Kummetz: You mentioned that once Shoe Station gets to like 51% of your store base, the model flips. That would happen midway through next year. Does that mean that the impact of the rebannering is kind of net neutral to next year's earnings? Whatever drag that you see in the first half gets offset by a tailwind in the back half. How should we think about that? I know you're not giving next year's guidance yet, but you could just walk us through that intuitively.

Speaker #3: You know, that would happen kind of midway through next year. Does that mean that the impact of the rebounding is kind of net neutral to next year's earnings?

Speaker #3: Because you know, whatever drag that you see in the first half, you know, gets offset by, you know, a tailwind in the back half, how should we think about that?

Speaker #3: I know you're not giving next year guidance yet, but if you could just kind of kind of walk us through that intuitively.

Speaker #2: I can give you a broad strokes, as you said, we're not ready to provide full financial thought on it, but you got it right.

Mark Worden: I can give you broad strokes, as you said. We're not ready to provide the full financial thought on it, but you got it right. We believe when we hit 51% of our fleet is operating as Shoe Station next back-to-school, we start seeing sustained comp positive versus a sporadic, which we're delivering now in key event periods. We think about it in our early planning that the back half of next year is where we start showing a comp positive for the total corporation for the Q3, Q4 period. Shoe Carnival will still represent a significant percent, and we still expect that will be a headwind from that lower-income customer. We're not anticipating high or mid-single-digit comp in the back half of the year, but rather it turns at inflection points to, you know, low singles, just barely comp. That's something to build on as we continue the transition.

Speaker #2: We believe when we hit 51% of our fleet is operating at Shoe Station next back-to-school, we start seeing sustained comp positive versus a sporadic, which we're delivering now in key event periods.

Speaker #2: So we think about it in our early planning that the back half of next year is where we start showing a comp positive for the total corporation.

Speaker #2: For the Q3, Q4 period. Shoe Carnival will still represent a significant percent and we still expect that will be a headwind from that lower income customer.

Speaker #2: So we're not anticipating high or mid single digit comp in the back half of the year, but rather it turns that inflection point to, you know, low singles just barely comp.

Speaker #2: But that's something to build on as we continue the transition. Financially, we're not really ready to share broader thoughts on that beyond that comp directional concept.

Mark Worden: Financially, we're not really ready to share, you know, broader thoughts on that beyond that comp directional concept. The rebannering fact of, you know, a significant amount in the guide would be rebannered in Q1 and Q2, and those financial implications will provide more guidance, you know, as we get further along this year.

Speaker #2: And the rebounding fact of, you know, a significant amount in the guide would be reboundered in Q1 and Q2. And those financial implications will provide more guidance, you know, as we get further along this year.

Speaker #3: All All right, that's helpful. Thanks and good luck.

Mitchel Kummetz: All right. That's helpful. Thanks and good luck.

Speaker #2: Thank you, Mitch.

Mark Worden: Thank you, Mitchel.

Speaker #1: You're next. The question comes from the line of Sam Luther with Williams Trading. You may go ahead.

Operator: Your next question comes from the line of Sam Poser with Williams Trading. You may go ahead.

Speaker #3: Good morning, Mitch got to a couple of mine. I'd like to talk to you about the inventory levels in the gross margin guidance and get some color on maybe where inventories are at the end of August.

Mitchel Kummetz: Good morning. Mitch got to a couple of mine. I'd like to talk to you about the inventory levels and the gross margin guidance and get some color on maybe where inventories are at the end of August. Just looking at the pre-Q guidance and the gross margin guidance there, it looks like you'll sell $60 million, $70 million of cost of goods in Q in August, give or take, but you have $449 million of inventory on hand. How do you keep the gross margin guidance as high as it is with all this inventory? Doesn't the rubber have to hit the road sometime?

Speaker #3: And, you know, just looking at the pre-Q guidance in the gross margin guidance there, you know, it looks like you know you'll sell 60, 70 million dollars across the goods in Q in August.

Speaker #3: Give or take. But you have 449 million dollars of inventory on hand. How do you keep the gross margin guidance as high as it is with all this inventory?

Speaker #3: Doesn't the rubber have to hit the road sometime?

Speaker #4: Hi, Sam, it's Tanya. Just to expand on your question in terms of inventory at the end of August, to answer your question, it's really in line with where we ended Q2, up mid singles.

Tanya Gordon: Hi, Sam. It's Tanya. Just to expand on your question, in terms of inventory at the end of August, to answer your question, it's really in line with where we ended Q2, mid-single. We strategically went after inventory to build for back-to-school, which helped us deliver that comp growth in the month of August. We also worked through and bought opportunistic buys, which were carrying in that inventory. That number that you see in terms of inventory is opportunistic buys that will carry until we get to spring of 2026. That's just carrying through. The balance where we built, we built in sandals and opportunistic buys for 2026. The other place that we're carrying additional inventory is in the athletic business, specifically in kids' athletics, because we built that for back-to-school, which again helped us deliver that comp growth in the month of August.

Speaker #4: And we strategically went after inventory to build for back-to-school, which helped us deliver that comp growth in the month of August. We also worked through and bought opportunistic buys, which were carrying in that inventory.

Speaker #4: So that number that you see in terms of inventory is opportunistic buys that will carry until we get to spring of 2026. So that's just carrying through.

Speaker #4: And then the balance where we built, so we built in sandals and opportunistic buys for 2026. And then the other place that we're carrying additional inventory is in the athletic business, specifically in kids athletics.

Speaker #4: Because we built that for back-to-school, which again helped us deliver that comp growth in the month of August. And those are all in key items high margining, styles that will carry all the way through the season.

Tanya Gordon: Those are all in key items, high-margining styles that will carry all the way through the season. We recognize we have more inventory than we would like to, but we strategically did that for better margin opportunities and growth as we work through third quarter into the balance of the year. On the margin side of the equation, Mark spoke to that, but again, we continue to see better margins based on the opportunistic buys that we've done, our disciplined pricing, which we will strategically be disciplined through the balance of the year, the key item position that we have this year, and the better key item position that we're in this year than we've ever been.

Speaker #4: So we recognize we have more inventory than we would like to, but we strategically did that. For better margin opportunities and growth as we work through third quarter into the balance of the year.

Speaker #4: And then on the margin side of the equation, Mark spoke to that, but again, we continue to see better margins based on the opportunistic buys that we've done.

Speaker #4: Our discipline pricing, which we will strategically be disciplined through the balance of the year, and the key item position that we have this year and the better key item position that we're in this year than we've ever been.

Speaker #3: Which is just to follow up, we know a hard number. The inventory was 449 million dollars. That's a hard number that can tell us what's happening.

Mitchel Kummetz: Just to follow up, so we know a hard number. The inventory was $449 million. That's a hard number that can tell us what's happening. Is that what is the number? I mean, I don't know, since we don't know what the mid-single digit increase year over year means, is what I mean, what is the number? Is it higher or lower than $449 million? Is it, since you had a strong argument, is that now at $420 million? You know, because it's really what the number is, not what the increase is. It's looking forward, not looking backward.

Speaker #3: Is that what is the number? I mean, I don't know since we don't know what the mid single digit increase year over year means, is what I mean, what is the number?

Speaker #3: Is it higher or lower than 449? Is it since you had a strong? Is that now at 420? You know, because it's really what the number is, not what the increase is.

Speaker #3: It's looking forward, not looking backwards.

Speaker #2: Sam, Mark, we're not going to give an interim inventory. For right this second, books aren't closed, you know, for all of that. We're sharing sales are closed for fiscal August and we're really delighted to be able to give the full back-to-school growth and margins closed.

Mark Worden: Sam, Mark, we're not going to give an interim inventory for right this second. Books aren't closed for all of that. We're sharing sales are closed for fiscal August, and we're really delighted to be able to give the full back-to-school growth and margins closed. We're really delighted to be able to share that and the category information. Here's the message on inventory. We have too much, as I said in my speech. As Tanya said, we have it in places we feel good about delivering strong margins as we work through the fall season, the spring season, and the key items. Next year, once we have complete clarity or better clarity on the supply chain and tariffs, we will be working through and normalizing inventory levels.

Speaker #2: We're really delighted to be able to share that. And the category information. Here's the message on inventory. We have too much, as I said in my speech.

Speaker #2: And as Tanya said, we have it in places we feel good about delivering strong margins. As we work through the fall season and the spring season, the key items.

Speaker #2: Next year, once we have complete clarity, or better clarity, on the supply chain and tariffs, we will be working through and normalizing inventory levels.

Speaker #2: But we do not see that margin erosion becoming relevant in this fiscal year. And we do not see that product being margin deteriorating next year.

Mark Worden: We do not see that margin erosion becoming relevant in this fiscal year, and we do not see that product being margin deteriorating next year. It's good product.

Speaker #2: It's good product.

Speaker #3: Okay, and then just a little question. Are you guys going to see Jordan product for spring 2026? And you know, with the Shoe Carnival business comping down, you know, high singles, could we assume that their brands, such as Birkenstock and Skechers and others, that we're probably significantly better or possibly up and it was a lot of the real low end moderate non-branded products that that really drove the comp down because the even the lower income customer want those sort of high in demand brands.

Mitchel Kummetz: Okay. Just a little question. Are you guys going to see Jordan product for spring 2026? With the Shoe Carnival business chomping down, high singles, could we assume that there are brands such as Birkenstock and Skechers and others that were probably significantly better or possibly up, and it was a lot of the real low-end, moderate, non-branded product that really drove the comp down because even the lower-income customers want those sort of high-end demand brands?

Speaker #2: Yeah, I'm going to grab that, Sam. We're not going to share with our competitors what new products are coming in. I have great confidence we have outstanding exciting brands that will be on our sales floor in early 2026, but I'm not going to share what those are with our competitive set to think about that.

Mark Worden: Yeah, I'm going to grab that, Sam. We're not going to share with our competitors what new products are coming in. I have great confidence we have outstanding, exciting brands that will be on our sales floor in early 2026, but I'm not going to share what those are with our competitive set to think about that. On the second part of that question, our higher ticket items, best brands in the world, whether that's a footbed or an athletic in performance, performing outstanding. We've seen those drive the results. We're seeing those lead to capturing the higher-income customer, to delivering sales growth, to delivering margin growth. Without a doubt, it's tight focus on the best brands in select segments and not private label.

Speaker #2: On the second part of that question, our higher ticket items best brands in the world, whether that's a footbed or an athletic in performance performing outstanding.

Speaker #2: We've seen those drive the results for seeing those lead to capturing the higher income customer, to delivering sales growth, to delivering margin growth. Without a doubt, it's tight focused on the best brands in select segments and not private label.

Speaker #2: It's been a winning recipe for us being a retailer and not a manufacturer. And we're seeing that play out incredibly well at this point of time, while others navigate their covenants and manufacturing, we just stay focused on buying the world's best brands.

Mark Worden: It's been a winning recipe for us being a retailer and not a manufacturer, and we're seeing that play out incredibly well at this point in time. While others navigate their covenants and manufacturing, we just stay focused on buying the world's best brands and delivering margin growth.

Speaker #2: And delivering margin growth.

Speaker #3: Thanks. And then lastly, how are you seeing like the, like how are the brands in general taking price? What are you seeing from price increases?

Mitchel Kummetz: Thanks. Lastly, how are you seeing, like, how are the brands in general taking price? What are you seeing from price increases going into, you know, for the balance of this year and going into next year due to the tariff impact from your wholesale partners?

Speaker #3: Going into the balance of this year and going into next year due to the tariff impacts from your, you know, your wholesale partners?

Speaker #4: Hi, Sam. Just recently, it had been a little quiet because we're on a on a pause, a 90-day pause with China right now. So China at 30%.

Tanya Gordon: Hi, Sam. Just recently, it had been a little quiet because we're on a 90-day pause with China right now. China at 30%. When they came back with Vietnam, with the additional 10, it was 10 on top of 10, we're starting to get some more increases there. As we move into spring, we're looking at price increases between 5% and 7% in total based on what we've gotten back thus far.

Speaker #4: But when they came back with the Vietnam, with the additional 10, so it was 10 on top of 10. We're starting to get some more increases there.

Speaker #4: So as we move into spring, we're looking at price increases between five and seven percent. In total, based on what we've gotten back thus far.

Speaker #3: Okay, thanks very much.

Mitchel Kummetz: Okay, thanks very much.

Speaker #1: Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. There are no further questions at this time.

Operator: Again, if you would like to ask a question, please press star then the number one on your telephone keypad. There are no further questions at this time. I would now like to turn it back over to Mark Worden, closing remarks.

Speaker #1: I would now like to turn it back over to Mark Worden closing remarks.

Speaker #2: Thank you all for joining us for our second quarter call. We're excited about the progress we're seeing with our growth strategy. And look forward to discussing it in greater depth with you at our Q3 call later this year.

Mark Worden: Thank you all for joining us for our second quarter call. We're excited about the progress we're seeing with our growth strategy and look forward to discussing it in greater depth with you at our Q3 call later this year.

Operator: That concludes today's conference call. You may disconnect.