Q2 2026 Groupe Dynamite Inc Earnings Call
Speaker #1: Good morning, ladies and gentlemen. And welcome to Group Dynamite Q2 fiscal 2026 results conference call. At this time, all lines are in listen-only mode.
Speaker #1: And the conference is being recorded. Following management's prepared remarks, there will be a question-and-answer session with financial analysts. If at any time during the call you require me the assistance, please press stars there for the operator.
Speaker #1: On today’s call are Andrew Lutfy, Chief Executive Officer and Chair of the Board; Stacy Beaver, President and Chief Operating Officer; and JP Lachance, Chief Financial Officer.
Speaker #1: This morning, Groupe Dynamite released financial results for the 13-week period ended August 1, 2026. The press release and related disclosure documents are available in the Investors section of the company's website at groupdynamite.com and on SEDAR+.
Speaker #1: A replay of the webcast will be available shortly after the conclusion of the call. Before management begins, please refer to slide 2 of Q2 2026 investor presentation for the company's full statement on forward-looking information.
Speaker #1: And to the appendix for a reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures. The call will now be turned over to the Chief Executive Officer and Chair of the Board, Andrew Lutfy.
Speaker #1: Please go ahead.
Speaker #2: Good morning, everyone, and thank you for joining us. Q2 was another strong quarter for Group Dynamite. We grew sales, expanded profitability, increased earnings, and free cash flow, and raised all three guidance metrics.
Speaker #2: But more important than any single quarter is the trajectory behind it. For 6 consecutive years, we have progressively improved key brand and financial metrics across the business.
Speaker #2: That's not luck. There's no such thing as 6 years of overnight success. And importantly, that performance has continued through very different economic environments. Supply chain disruptions, tariffs, geopolitical uncertainty, and rapidly changing consumer behavior.
Speaker #2: That gives us increasing confidence that what we are seeing is not simply a period of strong business model that has been deliberately built, tested, and refined over many years.
Speaker #2: Our luxury-inspired business model is working, and the premiumization of our brands is strengthening. As we enter the second half, we will lap 2 of the strongest quarters in our history.
Speaker #2: We knew that when we built the plan. So, I see Q2 as another proof point in a six-year progression and further validation that our model and our brands continue to strengthen.
Speaker #2: When we talk about our luxury-inspired business model, it starts with the deliberate premiumization of our brands. Garage and Dynamite are fundamentally two different brands than they were 6 years ago, and even 2 years ago.
Speaker #2: We have elevated every customer touchpoint, a product confection, the categories we compete in, the real estate, and ultimately the entire brand experience. Our AUR has roughly doubled since 2019, and we're not charging twice as much for the same white T-shirt.
Speaker #2: We have built a more elevated proposition and our brand has followed. That is the difference between raising prices and building brand equity, which creates real pricing power.
Speaker #2: And that power comes from the emotional equity we have built through an obsession with understanding our customer and staying culturally relevant. Another important part of the model is inventory.
Speaker #2: We view inventory as capital allocation. We intentionally operate lean and engineer scarcity into the model. In fashion, having too much of the wrong product is far more expensive than occasionally having too little of the right product.
Speaker #2: But scarcity alone isn't enough. We operate a pull inventory model. Then, we let the customer decide where that inventory goes. Our highest-productivity stores pull the hardest against global inventory because that is where demand and full-price sell-through are strongest.
Speaker #2: Our objective isn't to maximize inventory in every store. It's to maximize the productivity and gross margin dollars network-wise. That drives stronger full-price selling, fewer markdowns, faster inventory turns, and greater agility.
Speaker #2: That is how we take the fashion risk out of fashion. Real estate is another part of that same equation. Our philosophy is simple: the smallest house on the best street.
Speaker #2: Today, our investment-grade real estate tier 1 through 3 represents approximately $72% of sales, in 2017 it was roughly $28. Our highest quality stores don't simply generate greater volumes; they turn inventory materially faster than our lower-tier locations.
Speaker #2: So, as we shift more sales toward investment-grade real estate, we aren't simply improving the quality of our stores; we are improving the productivity of the entire business.
Speaker #2: Over time, that creates a higher quality network and continuously raises the performance standards across the portfolio. It's a positive flywheel effect. Canada and the United States represent different stages of the same story, shaped by garages' significant evolution.
Speaker #2: Historically, a denim and woven lead, casual brand, garages become a highly coveted LA-inspired lifestyle and active-wear brand. That's stronger positioning has also changed where the assortment resonates most: climate and culture, influence demand.
Speaker #2: But real estate is equally important. Canada has nearly 6 times the store density per capita of the U.S., with a greater share of its mature fleet outside the investment-grade locations we increasingly prioritize.
Speaker #2: Our strongest performance is concentrated in premium markets where the customer and the brand and the real estate are best aligned. Our pull inventory model reinforces that dynamic by directing product toward the strongest demand and full-price sell-through.
Speaker #2: The U.S. presents a very different opportunity. Substantially lower penetration, significant investment-grade real estate whitespace, and a customer and climate that align well with garages' evolved proposition.
Speaker #2: Our opportunity is to scale that success with discipline, opening the right stores, in the right markets, and directing inventory toward the strongest demand. That gives us continued confidence in garage U.S.'s runway.
Speaker #2: Not to mention the U.K. Ultimately, none of this is possible without our people. Our people are our true superpower. We are a genuinely culture-led organization, and that culture is revealed most clearly when conditions become difficult.
Speaker #2: In moments of uncertainty or disruption, our people draw on shared values such as ownership, empathy, curiosity, and passion, to move with urgency, support one another, and find creative solutions.
Speaker #2: These values are not words on a wall. They shape how we think, act, and lead. That is the foundation of our resilience. And because so many of our people are also shareholders, that ownership mindset is deeply authentic.
Speaker #2: People think and act like owners because they are owners. A combination of culture, ownership, and talent is extraordinary and quite impossible to replicate. It is not simply our competitive advantage; it is the force that will continue to carry Groupe Dynamite forward.
Speaker #2: When I step back from Q2, the message is simple: we have made deliberate choices for 6 years. Brand elevation over promotion, investment-grade real estate over growth at any cost, scarcity and agility over excess inventory, and a culture of ownership over bureaucracy.
Speaker #2: Those choices are working. Our brands are stronger, our network is more productive, our inventory turns faster, our economics continue to improve. And our runway remains significant.
Speaker #2: Q2 is another proof point. Our luxury-inspired business model is working. We're looking at a company that has spent 6 years getting better and still has a ways to go.
Speaker #2: And with that, I will hand it over to Stacey.
Speaker #1: Thank you, Andrew. And good morning, everyone. Andrew spoke about the strength of the model. What I want to focus on is how that model translated into execution in Q2.
Speaker #1: The story of the quarter was our ability to see, respond, and execute quickly. We entered Q2 with an opportunity to bring greater newness into our assortment.
Speaker #1: We recognized it early, acted decisively, and used the speed of our operating model to adjust product in season. The response was clear: sales strengthened throughout the quarter, and we exited Q2 with good momentum.
Speaker #1: That is an important distinction about Groupe Dynamite. We don't have to make every decision months in advance and hope the customer agrees with us.
Speaker #1: We stay close to her, read the signals, and move. Our advantage is not simply speed; it is speed with precision. And increasingly, we have the infrastructure to support that speed at greater scale.
Speaker #1: Our U.S. distribution center is reducing last-mile friction and strengthening our ability to move inventory closer to where demand is strongest. Turning to stores, our physical fleet remains one of our most powerful customer acquisition vehicles, and the fullest explanation of our brands.
Speaker #1: This quarter, sales per square foot reached $1,056, up 28.9% year over year. That productivity matters because our strategy is not simply to operate more stores; it is to operate better stores and better locations, generating greater productivity.
Speaker #1: We opened 7 stores during the quarter across the U.S. and U.K., early results from the U.K. openings of Blue Water Center and Oxford Street are very encouraging, and we are already applying what we are learning to inventory allocation and localized marketing.
Speaker #1: That is how we intend to scale internationally. Learn quickly, localize intelligently, and maintain the discipline that has driven our North American success. Turning to digital, e-commerce sales increased 31.5% in Q2, supported by healthy growth in both traffic and conversion.
Speaker #1: But we see digital as much more than another transaction channel. It is increasingly the connective tissue of our customer experience. Our roadmap is focused on greater personalization, removing friction, stronger social integration, and extending our brands to customers well beyond our physical footprint.
Speaker #1: We recently expanded shipping to 9 additional countries across Europe and Australia, meaningfully increasing our global reach. And with Henry Spear joining as Chief Customer Officer, we now have dedicated leadership focused on personalization, friction, and increasing customer lifetime value.
Speaker #1: Now to the most important driver of our business: product. Our teams are staying extremely close to culture and equally importantly to the customer signals that tell us where to move next.
Speaker #1: At Garage, our off-duty lifestyle continues to perform strongly. Our Wild Tempo campaign with Honey Balenciaga generated significant brand heat. While our Green Envy drop was a great example of the model working in real time—our community asked for it, our teams listened, and we responded.
Speaker #1: At Dynamite, Q2 delivered strong momentum led by dresses and supported by culturally relevant brand activations. From inserting Dynamite into the Montreal Grand Prix conversation to an influencer self-shot campaign in the south of France, we continue to elevate how and where the brand shows up.
Speaker #1: The objective is not simply awareness; it is to translate brand heat into product demand, full-price selling, and stronger customer relationships. And that brings me to the customer.
Speaker #1: Across the business, transactions grew in both stores and online. Our active customer base continued to expand year over year. Supported by stronger retention and increasing value per customer.
Speaker #1: And importantly, as customers engage with us across channels, we are seeing growth in their average customer lifetime value. That is ultimately what omnichannel should do: not simply move a transaction from one channel to another, but creating more valuable relationship with the customer.
Speaker #1: As we enter the second half, our priorities are clear. Stay close to the customer, move quickly. On product, increase the productivity of every customer touchpoint, and scale without compromising the discipline that got us here.
Speaker #1: We have strong momentum, increasingly productive stores, a growing digital business, and significant white space ahead of us. But none of that happens without our people.
Speaker #1: I want to thank our field associates and our head office employees. Your ownership, curiosity, agility, and passion are what allow us to operate at this pace and bring Garage and Dynamite to life every day.
Speaker #1: With that, I'll turn it over to JP to walk you through the financial results. Thank you.
Speaker #2: Thank you, Stacey. And good morning, everyone. Total revenue for the second quarter increased by $29.8% to $423.6 million. Brick-and-mortar comparables store sales grew 10.3% or 12.3% on a constant currency basis.
Speaker #2: That compares with a $28.6% increase in Q2 last year and on a 2-year basis is a stack of $38.9%, up from $35.6% in the first quarter.
Speaker #2: We also had meaningful contributions from stores opened over the past year including 3 locations in the U.K. and continued momentum across both banners. By geography, revenue in the United States increased $52.2% to $271.6 million.
Speaker #2: Canada was $145.1 million down 1.9% on a fleet that is 13 stores smaller. For the first half of the year, Canada is up 2.1%.
Speaker #2: The U.K. contributed $6.9 million in revenue in the quarter. Our Canadian business is mature. The United States is earlier in its penetration and the U.K.
Speaker #2: earlier still. So we expect brick-and-mortar growth to come primarily from the United States and in due course from the U.K. That is purposeful. Those are the markets where we are investing, where we are opening stores, where our most profitable stores sit, and where we are building momentum.
Speaker #2: Moving to digital, top-line growth was also supported by online revenue, which increased by 31.5% to $61.4 million reflecting continued strength in the channel with balanced growth across both stores and e-commerce.
Speaker #2: As a reminder, our long-term target for online revenue is 25% of total revenue. As we continue to generate momentum in brick-and-mortar and from new stores, online penetration has to grow faster still.
Speaker #2: We aim to add roughly 1 to 1.5 percentage points of online penetration per year toward that 25% goal. On a trailing 12-month basis, penetration moved from 17.5% to 18.5%.
Speaker #2: Turning to profitability, gross profit increased by 40.5% to $291.6 million. Gross margin expanded 520 basis points to 68.8%. That figure excludes the $9.4 million recovery of tariff refund claims, which appears as its own line on the P&L.
Speaker #2: Most of that improvement is the lapping of the elevated tariffs that hit the first half of last year. Gross margin also benefited from our disciplined initial markup, a pricing strategy that carries limited reliance on markdowns, and logistics efficiency from our U.S.
Speaker #2: Distribution center. Taken together, those are structural advantages rather than cyclical ones. Markdowns stayed at historically low levels. Roughly 95% of gross sales go at full price.
Speaker #2: Inventory turned 7.72 times in the quarter against 7.25 times last year. We chased more than half our receipts in season. That is how we read demand and react inside a quarter.
Speaker #2: On expenses, SG&A increased 21.8% to $106.8 million from $87.7 million. Wages and salaries were most of the increase. Selling and marketing rose to support growth.
Speaker #2: Admin costs rose on IT and software. As a percentage of sales, adjusted SG&A decreased 210 basis points to 24.6% from $26.7%. That is operating leverage with revenue scaling faster than SG&A.
Speaker #2: Moving down the P&L, operating income increased 60.5% to $156.2 million. Adjusted EBITDA increased 55.9% to $187.9 million and adjusted EBITDA margin of 44.3%, our highest since we began reporting under IFRS.
Speaker #2: That is an improvement of 740 basis points, underscoring the strength and scalability of our luxury-inspired business model. That strength flowed through to earnings. Net earnings increased 77.5% to $113.4 million.
Speaker #2: Adjusted net earnings increased 68.1% to $108.9 million. Adjusted diluted earnings per share increased 68.7% from $57 to $96. Turning to cash flow and the balance sheet, free cash flow was $109.5 million against 72.6 million last year.
Speaker #2: From a balance sheet perspective, net leverage was 0.89 times. We ended with $31.9 million of cash and $312 million available under our credit facilities.
Speaker #2: We repaid in full the $20 million drawn at the end of the first quarter and extended our credit agreement by 2 years to May 2030.
Speaker #2: From a capital efficiency perspective, return on assets reached 38.9% from $24.1% last year. Return on capital employed increased to $73.5% from $45% in the same quarter last year.
Speaker #2: Turning to capital allocation, during the quarter we repurchased 993,605 shares under our NCIB at an average price of $63.50, for approximately $63.1 million. The framework has not changed.
Speaker #2: Capital expenditure comes first because the fleet and the platform earned our highest returns. Beyond that, we have been consistent buyers of our own stock, and we remain so.
Speaker #2: Looking ahead to the remainder of fiscal 2026, we are raising total revenue growth guidance to a range of 25% to 27%, up from 22% to 25%.
Speaker #2: We are also raising the bottom of our brick-and-mortar comparable sales range by a point, to a range of 12% to 14%. New store performance is what moved the revenue guide.
Speaker #2: Those openings are not in the comparable base, which is why the revenue range moved more than the comparable sales range. We raised the bottom of the comparable sales range on the continued shift of the network toward our best locations, as well as passage of time with half the year now behind us.
Speaker #2: As a reminder, on the second half, the brick-and-mortar comparable sales range implies 9.5 to 13% growth over last year. We are happy with how the third quarter has started.
Speaker #2: We exited Q2 slightly stronger than we began it, and we continue to run around that level today. The updated annual outlook we established today balances the dynamics of continuing momentum in the business with the toughest comparisons of our year which are immediately in front of us.
Speaker #2: From a real estate perspective, we now provide guidance independently of closures. We continue to expect 24 to 26 openings in fiscal 2026, including a total of 5 in the UK.
Speaker #2: The cadence of openings is weighted toward the back half of 2026. Openings and closures are not symmetrical. A store closure has effectively no impact on our EPS.
Speaker #2: Even several closures together are immaterial. A new store is roughly 4 to 5 times the revenue of one week close and the profitability gap is wider still.
Speaker #2: We have established a target of 350 stores by the end of 2028 across both banners. Our total addressable market is likely much larger. Looking at Garage specifically, we have 96 stores in Canada and 139 in the U.S.
Speaker #2: The United States market is more than eight times the size of Canada by population. We believe there is significant opportunity beyond 2028 to grow our store footprint in the US and internationally.
Speaker #2: From a margin perspective, we are increasing our adjusted EBITDA margin outlook to a range of 39.5% to 40.5%, from 38.25% to 39.5%. This increase comes from three drivers.
Speaker #2: First, gross margin, concentrated in the first half. Second, continued SG&A leverage as we scale revenue. And third, greater efficiency from our U.S. distribution center, which is now fully ramped.
Speaker #2: Once again, we are not including the recovery of tariff refund claims in adjusted EBITDA. As we move into the back half of the year, we have now lapped the tariff impacts that affected the first half of last year.
Speaker #2: That comparison alone accounts for most of the expansion you saw in Q2. The back half is a clean comparable period. We expect gross margin ahead of last year again, but by a much smaller amount and against a cleaner comparison.
Speaker #2: In closing, this quarter is a story about the strength and durability of our financial profile. We raised guidance across revenue, brick-and-mortar comps, and margin today, and we did it without leaning on any one-off items.
Speaker #2: The tariff refund recovery sits outside. Of our adjusted results entirely. Taken together, expanding margins strong cash generation and a healthy balance sheet give us a financial profile that funds its own growth.
Speaker #2: Those margins are structural rather than cyclical, and they continue to expand as we scale. That is the foundation we build the next several years on.
Speaker #2: With that, I'll turn it back to the operator to now take questions from the financial analysts.
Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by one, on your touch-tone phone.
Speaker #1: You will hear prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the 2.
Speaker #1: If you are using a speakerphone, please lift your hands up before pressing any keys. Your first question comes from Irene Nettel with RBC Capital Markets.
Speaker #1: Your line is now open.
Speaker #3: Thanks, and good morning, everyone. You know, the topic du jour everywhere is same store sales. Can you talk about what you're seeing in terms of customer behavior?
Speaker #3: I think you mentioned the traffic was up across the board. So, what are you seeing in terms of product demand, traffic counts, pricing, and where, or if, you're seeing any kind of weakness or deceleration?
Speaker #3: Thank you.
Speaker #4: Good morning, Irene. It's Andrew. So yeah, very good question. Great question. Listen, I and there's a lot in there, so let me let me endeavor to unpack this a little.
Speaker #4: What we're seeing is probably a bit of a tale of two cities; in this case here, I guess, it's a tale of two countries.
Speaker #4: You know, you've got the US economy that's really, really, really strong. The Canadian economy is definitely a lot softer, you know, and why it's softer—I think most of us appreciate why it's softer—and the data is the data, right?
Speaker #4: Like GDP growth is pretty anemic. It hasn't really budged in per capita GDP real growth hasn't changed in 20 years. And I think it's actually gone negative recently.
Speaker #4: So so the Canadian and and Canadians are anxious. You know, the on the subside of the border, really, you've got you know, you've got an economy that's firing on all cylinders, unemployment is low, personal indebtedness is low, wage growth is high.
Speaker #4: And then you've got a brand, you've got our garage brand, let's say, that has really pivoted over the last couple of years. And, you know, and as we keep, you know, premiumizing, if you will, or elevating the brand and the brand's equity and including the assortments, right, which which incidentally, we're moving in, you know, are more expensive more expensive product as we get into like activewear and whatnot.
Speaker #4: So combination of the evolution of the brand, as as, you know, as also extrapolated into the even the store footprint that we have in the US, where 85% of our stores are sitting in these investment-grade high-quality, high-volume assets, it's just really I guess we're seeing a big a big difference between the two countries.
Speaker #4: So to pinpoint exactly where and why, I can't tell you with great precision, but I think all these factors come into play.
Speaker #4: Evolution of the brand, the real estate strategy, right? We have 6 times the the store density, if you will, in Canada, relative to the US.
Speaker #4: So in the U.S., it's a much higher quality real estate portfolio. And consequently, we're dealing with a K-shaped consumer down there—you know, at the top end of a K-shaped consumer—who's probably more resilient, in a more resilient economy.
Speaker #4: So, I'm not sure that fully answers it, but it's ultimately what we're seeing.
Speaker #3: No, that's really helpful, Andrew. Thank you. And just sort of as a follow-up, if if I may, obviously we're seeing a very impressive gap between that sales store same store sales number and the total revenue number.
Speaker #3: How should we be thinking about the magnitude of that gap on a go-forward basis?
Speaker #5: Good morning, Irene. This is JP. Thank you for the question. So, you are correct in that in Q2 there was a noticeable gap, and obviously, this is the impact of new stores that are performing incredibly well.
Speaker #5: So, if you look at our comps for Q2 on a constant currency basis at 12.3%, versus the total revenue that was up almost 30%, that gap is almost 18 points.
Speaker #5: There is a little bit of it coming from a better e-com penetration rate, but the majority of that gap truly comes from store openings that were open in the past year, not only in the past quarter, because that's a year-over-year number.
Speaker #5: And that cohort, in the last year, has performed incredibly well. So, we are happy with the performance of those new stores, and in fact, that's why we were comfortable this morning raising the full-year revenue guide by 2 to 3 percentage points.
Speaker #5: So really, the new stores are doing well. We're happy to see that, and we believe that will continue for the next quarters ahead of us.
Speaker #3: That's great. Thanks. I'll I'll pass it off and get back into the queue. Thank you.
Speaker #1: Your next question comes from Chris Lee with Desjardins. Your line is now open.
Speaker #6: Oh, good good morning, everyone. Thanks for the color so far for for helpful. My first question is, if I take the low end of your revised full-year comp sales guidance, it would imply, you know, a continuing acceleration on the two-year stack basis to around 40 to 41% in the second half.
Speaker #6: Is that correct? And then, if so, what is your confidence in achieving this, you know, despite all the ongoing macro uncertainties out there? Thanks.
Speaker #5: Hey, good morning, Chris. So you are correct. Effectively, the lower end of the range on an annual basis—the 12%. So maybe if I take the whole range for a second...
Speaker #5: So the brick-and-mortar comp range is now 12% to 14%, which means that by difference, the back half is 9.5% to 13%.
Speaker #5: Now, if you look at it on a two-year stack basis, that will give you 40% at the lower end of the range and 44% at the top end of the range.
Speaker #5: And I think what is important here to note is that we feel good about this range. We are very comfortable with that range, which is why we've increased it this morning this morning, and effectively also you are right, pretty much every point here points to an acceleration versus Q2, which was also an acceleration versus Q1.
Speaker #5: So again, the business is not getting harder. The compare is getting harder as Q3 and Q4 last year were two of the best quarters in the history of this company.
Speaker #5: So we feel comfortable with the guide, and yes, your math is correct.
Speaker #6: Okay, that's helpful. And my follow-up is—I'm sorry if you disclosed this already—but can you share with us the breakdown in same-store sales between AUR and traffic this quarter?
Speaker #1: Good morning, Chris. I'll take that one. So AUR, as it has been over the last few years, is doing most of the work. While we have clearly stated in the past that we're targeting 2 times inflation, I want to be very clear with all of you that that's the output.
Speaker #1: The input is not taking a $20 top and charging $22 next year. The input is coming from an AUR strategy focused on brand elevation across three metrics, which Andrew's touched on, but I'll follow up with.
Speaker #1: One product mix so our positioning of off-duty and on-duty that can enable a bare top to move from 26 dollars to a 45 dollar retail when it shifts to a performance fabric with technical capabilities.
Speaker #1: AUR isn't just a higher ticket. It's elevating what we're actually offering, and our merchant and design teams know that we are not creating anything that anyone needs.
Speaker #1: We are creating things that people want. The second thing is our geography. So, geography—as you guys know, we've mentioned—we charge the same price in Canada and the U.S.
Speaker #1: So, as both gentlemen have spoken to our success in the U.S., just by penetration alone, we pick up AUR. Third is our real estate strategy.
Speaker #1: So as Andrew likes to mention, the smallest house on the nicest street. This is where actual units matter more than the actual transaction. Our order value rose in units.
Speaker #1: Our orders per price per units rose or I said that backwards, sorry. But generally, what I'm trying to say is if price is an issue, the units are going to fall first, and price and units are rising.
Speaker #1: So, we continue to believe in this two-times inflation as a strategy, but know that that is not actually the action we're taking. It's the three inputs I just mentioned.
Speaker #6: Very helpful. Thank you, Stacey. And all the best.
Speaker #1: Your next question comes from George Smith with Ventum Financial. Your line is now open.
Speaker #7: Yeah, hi, guys. Good morning. Congrats on the quarter. I think you mentioned early in the quarter the assortment was pivoted towards newness. I was hoping to get a little bit more color on that.
Speaker #7: And JP, I believe you mentioned the markdown rate is at 5%. I just wanted to confirm that number. Maybe you can tell us a little bit what that number was last year, and perhaps what's embedded in the guide for an exit rate this year.
Speaker #7: Thanks.
Speaker #1: I want to talk about that.
Speaker #5: Yeah. So Stacey, we'll start with newness, and then I'll take the markdown question.
Speaker #3: So newness is a factor.
Speaker #1: We're hedging really hard on it. We're watching it as a leading indication. Again, as I just mentioned, we can't keep taking up retails if we don't invest in that quality and that offering that we're serving up to the customer.
Speaker #1: So we're paying close attention to what's going on culturally. We're watching what the customer is telling her. And again, we're trying to create an emotion of a want that she can't pass it up when she walks in the store.
Speaker #1: There's too many options out there, competitively on needs, which is why we're trying to focus or create wants. So with that, the team's very focused, and with it, if we can turn faster, create those wants the AUR can come with it.
Speaker #5: On the markdown question, that's correct. Our markdown rate has remained at or around 5%, which was also consensus with the past couple of quarters.
Speaker #5: And in terms of what's being baked into our forecast, we effectively assume we'll remain at or around these levels. Could be a point to the left, could be a point to the right, but broadly speaking, we assume status quo.
Speaker #7: Yeah, thanks for that. It's a it's a quick follow-up. I was hoping to get a little bit of an update on denim. I know it was a pressure point last quarter.
Speaker #7: Maybe if you can just give us let us know how that's trending, and maybe as we exit the year. Thanks.
Speaker #1: Yeah, I'll mention it because I think my takeaway was wrong, or what I said was inferred incorrectly. Denim is downplayed in our assortment mix as we talk about shifting more to an athleisure lifestyle, both on-duty and off-duty.
Speaker #1: So off-duty for us is based around fleece bottoms, outfitting. Think of her going to and from campus, to and from the gym. On-duty is more technical.
Speaker #1: She can actually work out in it. It supports; it holds in all the right spots. So we have purposely downgraded our denim contribution to the business, and it's coming in as we planned it to.
Speaker #1: But as we've mentioned in the past, and Andrew just opened with, Canada and the US are in different spots on expectations. The US is picking up what we're putting down in on-duty and off-duty because they have no expectation.
Speaker #1: We're a new brand, and they're absorbing it. In Canada, denim is hurting a bit because we used to be like the general store up here.
Speaker #1: You could buy jeans and a plaid shirt. You could buy a dress for a homecoming event. We used to carry everything and were in some very remote locations where we were the only game in town.
Speaker #1: But when you go to the US and you have to compete, you need a point of view on your customer and your assortment. And as we've narrowed that and doubled down on this athleisure assortment, it is working in the States.
Speaker #1: Very aggressively. They're adapting to it. We're taking market share, and we like where we're positioned. In Canada, we need to work on that repositioning, and that's where you'll see a little bit of a degradation on denim.
Speaker #7: Great. Thanks a lot for your answers.
Speaker #1: Your next question comes from Michael Glenn with Raymond James. Your line is now open.
Speaker #5: Hey, good morning. I just want to go back to these to the strengths you're seeing in the new store openings. Should what should we anticipate as these new stores go into the comp base?
Speaker #5: Will they continue? Are you seeing a leveling off or a trending lower on the new stores as they mature a little bit? What are you seeing in terms of, say, a 2-year or 3-year trend?
Speaker #5: Hey, good morning, Mike. So historically, when we open up a new store, it starts off really, really strong, and then it continues to be strong.
Speaker #5: So we are not one of these retailers where we'll start at, say, 80% of performance and work our way to 100%. In fact, the first month is usually incredibly strong.
Speaker #5: So, as those stores eventually join the comp base, we are very excited by the dollar contribution that those stores are bringing because those are top-tier assets.
Speaker #5: However, if you look at the comp or the gain year over year in percentage terms, it's very healthy. Don't get me wrong, but the rest of the network is also healthy.
Speaker #5: So in terms of contribution to the comp in percentage points, it's not going to hurt us. Let me be very clear. But it's not going to add a lot of points to it either.
Speaker #5: It's really on the dollar side of things where these stores make a noticeable difference. Okay. Thank you. And then just on gross margin through the back half of the year, I know that we're dealing with a lot of the tariff noise, but in a normal year, would your gross margin increase sequentially from Q2 to Q3?
Speaker #5: I'm just trying to understand what what that cadence looks like on a relative basis. Yep. I'm I'm happy to speak to that as well.
Speaker #5: So, last year in Q1 and Q2, tariffs were very topical, and we talked about that, which is why in Q1 and Q2 of this year, our gross margin year over year is up 520 basis points.
Speaker #5: So as we get to Q3, we're now on the on the level playing field. So the comparison is clean, and it's a real comparable base.
Speaker #5: To illustrate what I'm saying, if you look at our LTM gross margin rate, at the end of Q2, we are at 66.3%. Effectively, that rate is Q3 and Q4 of last year.
Speaker #5: In Q1 and Q2 of this year. And as such, that number of 66.3% is not impacted by last year's crazy tariffs in the first half.
Speaker #5: That is a clean comparable base to start with. Back to my earlier comments in the opening remarks, we believe expansion in Q3 and Q4.
Speaker #5: However, the magnitude will be far smaller than what you've seen, because we no longer get the benefit of comping those tariffs. What we're going to get in Q3 and Q4 are the benefits of our USDC on logistics.
Speaker #5: And that is expected to be incremental to the gross margin. So starting from your 66.3 LTM, which is a good, solid, clean base, we expect to grow that a little bit with passage of time.
Speaker #5: But certainly not with the same magnitude that you've seen in the first half of this year. Okay. Thank you for taking the questions. Thank you.
Speaker #1: Your next question comes from Brian Morrison with TD Cowen. Your line is now open.
Speaker #4: Thank you. Good morning. Andrew, I think at the beginning of the call, you said that the AUR has doubled since a certain time frame.
Speaker #4: I didn't get that. But then Stacey highlighted product mix and US parity and higher US mix. To to to justify some of that. And at the beginning of the call, you said this reflects brand building and improved brand strength.
Speaker #4: I'm just wondering, has this resulted in any changes to your consumer profile, the average age to to a garage customer?
Speaker #7: Yeah, great question. And yes, it has. Yes, it's all changed. What we spoke about, or what I spoke about earlier, was basically a doubling in the AUR over the last six years.
Speaker #7: JP's looking at me.
Speaker #4: Yes. Yes.
Speaker #7: And and if you take a if you think about where the brand was 6 years ago, I mean, our target customer was our target market, our muse, if you will.
Speaker #7: She was 16 years old, and mathematically, we would land best customer, best markets, probably land around 14 years old. Today, our muse is 24 years old, and mathematically, we land at about 22 and a half years old.
Speaker #7: So for sure, the customer has aged up from 14 to 22.
Speaker #4: So the customer has aged up. But even the end use, again, Stacey mentioned. I mean, we used to be at denim and applied shirt, and, you know, and homecoming dress, and that's kind of like what you could expect at a garage 6 years ago.
Speaker #4: And, you know, today, today you're wearing our proudly wearing our booty shorts and and support tops, bear support tops into an actual wear class, a yoga class, Pilates class, kickboxing class.
Speaker #4: And furthermore, we're dressing in the right lifestyle to get you to and from that class. So the brand has evolved completely. The customer has evolved completely.
Speaker #4: The real estate and the real estate strategy has evolved completely. And, you know, this investment-grade real estate that we always talk about, I mean, it takes courage, right, like to do a store in Soho.
Speaker #4: These are big, big rents, or Oxford, between New Bond Street and Regent. These are big commitments. You're playing with the world's best brands, so you need to be at that level.
Speaker #4: And that's really what we've been, you know, quarter after quarter, that's what we keep doing is elevating that brand. And, you know, I know you're not you're not asking, but I'd like to follow up even to Irene's question is what's really, really important.
Speaker #4: I did mention in my opening comments, we run a poll model—a poll inventory model. What that really means is, we're not playing God.
Speaker #4: We, you know, planning and allocating and where we send the inventory. We actually don't. We send a very small percentage of the inventory sprinkled all over the place.
Speaker #4: And then we basically let the customer, and ultimately the demand coming out of those store locations, dictate where the inventory is going to go.
Speaker #4: So when you have a store and as you think about these amazing assets that we're opening up in the US, right, and again, we are only one sixth as penetrated in the US as we are in Canada, let's not even talk about the UK that's overperforming.
Speaker #4: You know, these assets are pulling hard on the inventory. And we like engineered scarcity because I hate inventory. So as we keep pulling on this inventory unfortunately, you know, that store and Sudbury Ontario you know, and Tertiary Market and nothing against Sudbury you know, may may ultimately pay the price, right?
Speaker #4: And so this is all part of a very deliberate and strategic evolution of the brand. And at the end of the day, if you look at our 6-year stack of numbers, it's continuous improvement in every single metric.
Speaker #4: And quite frankly, I like it. I, you know, I like this idea of running a a a more science-based, engineered business that has greater predictability and resiliency.
Speaker #5: Thank you.
Speaker #7: Sorry about that.
Speaker #4: No, that's no problem. I mean, I was kind of curious if you've seen that age difference at 70 years.
Speaker #5: Yeah.
Speaker #4: Yes. Okay. Okay. And then sorry, Stacey. Go.
Speaker #7: No, no. She was she was just agreeing.
Speaker #2: Staying with intentional. Yeah. It was targeted to.
Speaker #7: That that customer's has aged up roughly about 6 years. And listen, it's a much bigger addressable market. And that's strategically why we chose to go there, you know?
Speaker #5: Yeah, yeah. Okay. As a follow-up, just in terms of the retail sales per store, I see the runway and growth in the US, but they look to be double or more of that in Canada.
Speaker #5: 40% or so is is currency. And I understand the optimized real estate footprint. Can you provide to us what the average size four walls in the US or average size square foot in the US is relative to Canada?
Speaker #5: I'm afraid no. I'm afraid we won't go into these details. Brian, but I can say that certainly US stores versus Canadian stores aren't average.
Speaker #5: Our form is profitable. And when we look at new store openings these days, they're also accretive to the chain average. And those are in US dollars.
Speaker #5: So certainly we we notice the impact of those openings in the US market.
Speaker #4: Thank you.
Speaker #1: Your next question comes from Steven McCloud with BMO Capital Markets. Your line is now open.
Speaker #4: Thank you. Good morning, everyone. Lots of color on the call so far. So thank you very much. I just wanted to ask about just sort of some of the fuel inflation that we're seeing and have been seeing and how that impacts the guidance or how how that's considered in the guidance.
Speaker #4: And and whether you have more exposure to that factor just given your high level of inventory turns.
Speaker #5: Good morning. So yes, certainly the dynamics we're seeing around fuel inflation are considered into our guidance. So we are very much mindful of the situation out there.
Speaker #5: And we have taken conservative assumptions in our guidance to make sure that it reflects the current market conditions. So yes, this is a cost that we need to be thoughtful about.
Speaker #5: And you're absolutely right. We do turn our inventory very, very fast. And as such, this cost would impact us sooner than later in the P&L.
Speaker #5: And yes, we have reflected it in our guidance.
Speaker #4: Okay. That's great. Thanks, JP. And then just on on the on the store mix, you know, tier one to three versus tier four to five, you know, you gave an updated number, Andrew, on on on kind of how that breaks down right now.
Speaker #4: I'm just curious when you think about the tiers you know, four to five becoming closer to 100% of the store mix of the network mix, how how how do you what's the cadence of that growth?
Speaker #5: Yeah. Steve, I can take that question. So as it stands today, in terms of stores, 57% of our stores are in tiers one, two, and three, which we believe to be investment-grade.
Speaker #5: However, if you look at it in dollars, that percentage gets you to 72%. If you look at our target, which is 350 stores by the end of fiscal 2028, we assume that 70% stores versus 57% today will be in investment-grade locations.
Speaker #5: And as such, the dollars percentage will also go up. So I think if you're thinking about it this way, moving from 57 to 70 in two and a half years from today, I'd say you'd be in the right zip code.
Speaker #4: Right. Okay. That's great. Thanks, JP. Appreciate the color.
Speaker #5: Thank you.
Speaker #1: Your next question comes from Vishal Sridhar with National Bank. Your line is now open.
Speaker #6: Hi. Thanks for taking my questions. I wanted more perspective on the Canada assortments change and and the customer reaction in particular. Since Q1, did the did you rotate the assortment back to the more traditional assortment, or is the intent to to elevate the Canadian assortment along the lines of what you've done in the US?
Speaker #6: And secondarily, did did the Canada performance on a same-store basis, did that stabilize in in in Q2 and and should we expect those trends to recover in Q3, or or do we expect some delays to persist in Canada?
Speaker #4: Regarding the second part, JP, why don't you take the second part and I'll take the first part?
Speaker #5: Sure. So on the Canada same-store, as you know, Vishal, we do not disclose comps by geography, nor by banner in Andrew's opening statements. We did say that Canada in totality was down 2% with 13 fewer stores.
Speaker #5: And as such, Canada's same-store performance was, call it, flat-ish. Now, we won't give you a Q3-to-date number on that metric, and we'll refer you to our annual guidance on comps, which, again, has been increased this morning from 12% to 14%.
Speaker #5: On the Canada mix, I'll leave it to Andrew to answer that question.
Speaker #4: Yeah. So listen, so to go back to the you know, to answer your question very very clearly, no, there's there's really no change in the strategy.
Speaker #4: There's only one strategy, and it's always only been one strategy. For for all countries. So there is no change there. And listen, this is a brand that is deliberately in transition, and this transition has been taking place over the last six years.
Speaker #4: And every quarter we keep nudging it up and nudging it up and nudging it up and nudging it up. And so what that means is if you think of, let's say, what we call casual street, which would have been denim, sweaters, woven shirts, and so on and so forth, six years ago, order magnitude, that could have represented 70% of sales.
Speaker #4: You know, and planned as such, today it might be I don't know, 15% of sales, or something like that. And every quarter we keep planning it down and down and down and down because ultimately that is not what culture is going.
Speaker #4: That is not where premium brands are going. And that's not the white space that we want to address in the athleisure and activewear markets.
Speaker #4: So there will be, I guess, good news is is there's not much left to trim. From that assortment, what I would say is is I think the bigger thing at play is is the pro model.
Speaker #4: Again, we have engineered scarcity, right? We intentionally buy not enough inventory. So what ends up happening is those stores—you think about an Oxford Street, right?
Speaker #4: Like a locomotive store, Soho or any of these, and soon we're going to be opening one on Fifth Avenue, right? These are high-profile, high-premium, top-of-the-K-shaped-economy type of customers.
Speaker #4: They fall hard on the inventory and unfortunately, you know, Canada at times ends up paying the price. So and and I'll I'll just put out there, not all tier fives do the same volume, right?
Speaker #4: Like, this whole tier thing is ultimately based on a very rigid set of standards. None of them actually have to do with sales, right?
Speaker #4: It's more about, you know, is there luxury or isn't there? Is there public transportation or subways, or aren't there? So, I would venture to say a tier five in Canada performs far less than a tier five in the USA.
Speaker #4: So you know, this is really the pro model at work. But at the end of the day, I would just like, again, look at our six-year performance, look at our growing EBITDA margin, look at our growing margin, look at our same-store sales.
Speaker #4: They keep growing. And listen, you you know, the the we've we've firmly advocate this strategy, you know, and and are excited to to keep keep on the same path.
Speaker #6: Thank you.
Speaker #1: Your next question comes from Adrian Yee with Barclays. Your line is now open.
Speaker #7: Hey, everyone. It's Mike Vuon for Adrian and thank you for taking our questions. So first, Stacey, thanks for all the color around the e-commerce channel.
Speaker #7: That was super helpful. And I know it's pretty important piece of the overall story out there. So I guess with that said, as you continue investing behind, you know, the digital platform to achieve that long-term e-com penetration goal, where are you seeing the biggest opportunities to improve the customer experience and further strengthen that omni omnichannel model in general?
Speaker #7: And then I guess along with that, are you seeing any kind of changes or differences or resonance with the online shopping by geography versus another?
Speaker #8: Good morning. Thanks. Yeah. On online, as you guys, we've thrown out there our goal is over time to hit a 25% penetration. It's not a date we've thrown out to hit it, but it's a ratio we're trying to move it.
Speaker #8: It moved 20 basis points year over year for Q2. You should also know that Q2 is our lowest penetration, and Q4 ends up being our highest.
Speaker #8: So, when you're looking at penetration, you need to look at it year over year, but also quarter over quarter. We still know we have tremendous run room here on e-com.
Speaker #8: The thing that holds us back is a positive. It's a bigger denominator in the stores being so strong. So the ratio moves slowly because the stores grow just as much.
Speaker #8: They grew 30% this quarter overall and e-com grew 31. So it's hard to move that penetration number. But we're not targeted on it. What things are moving the needle here, as you just asked, was headless commerce.
Speaker #8: So we launched that on our app and we opened the UK with it on their website. It launches this month in North America. So we're excited about that.
Speaker #8: We're moving some of the friction points in how we're moving the customer through the journey. And we're really excited that Henry Spear joined us this this month as a chief customer officer.
Speaker #8: He's clear. His mandate is personalization, removing friction, and lifetime customer value, not just on digital, but that omni omnichannel customer. So we're excited about the growth of digital
Speaker #7: Great. And then as a follow-up, so as we were approaching holiday, how are you thinking about inventories, promotion, pricing, customer demand, and then like what are you counting for in the back half of the year related to the overall apparel environment and how you're thinking about that?
Speaker #8: I can take it.
Speaker #4: Yeah.
Speaker #8: Again, regardless of the quarter, we're always looking to watch what the customer signals are, what's going on culturally, and create product that is exciting.
Speaker #8: We know she comes out in Q4 because there's generic reasons that she needs to shop, whether it's a holiday party, a company party. There's so many activities that women need to dress for that we call it a a moment in time where she's coming out.
Speaker #8: We need to be top of mind. So we're working on that in Q3 to grow our customer base so we have more people to contact into Q4.
Speaker #8: But in most times, as Andrew just told you, he hates inventory. Q4 is no different time. He holds that across all four quarters. But also we also hate promotions.
Speaker #8: So again, we're putting all of our effort into what is new, what is exciting, what is she going to want, and when she wants something priced really doesn't matter.
Speaker #8: And when she doesn't want something, also price doesn't matter, which is why we don't play the POS or the up and down game or try to drive revenue off of markdowns.
Speaker #7: Got it. Thank you so much.
Speaker #8: Thank you.
Speaker #1: Your next question comes from Martin Landry with Stifel. Your line is now open.
Speaker #9: Hi, good morning, guys. Congrats on your results. I want to touch on the gross margin. They were extremely high this quarter, near 69%. I'm just trying to understand—at what point do you think, "Okay, we're comfortable with these margins; the rest of the increase we want to pass on to our customer in the form of more value in our products?"
Speaker #9: You know, because I I I got to think that at some point when your margins are growing that much, you know, is there a risk that the customer sees less value in your products?
Speaker #7: Morning, Martin. Listen, as I think it was Stacey actually who mentioned, part of this is also mix, right? As we do less business in Canada as a percent of the whole and more business in the USA and even the UK and UK being modeled after the USA, right?
Speaker #7: You're you're naturally going to see expansion in margin. It's just math, right? So that's part of the story. The other part of the story is this.
Speaker #7: You know, as I mentioned in my opening remarks, 20 roughly about 28% of our of our revenue came out of what I would call investment-grade assets that might address that might address, you know, a a upper top quartile, consumer in terms of discretionary income.
Speaker #7: Today, it's 72% in every quarter – keeps going up. You know, 80/20 rule of life – we'll probably be at 80% at a certain point. So you've got the smallest house on the best street.
Speaker #7: You've got a mixed conversation between the countries taking place. So it is not as egregious as it would seem from a customer standpoint. And I'll remind you, you know, our our competitors are you know, actually, I've been more not to mention who our competitors are, so I won't mention my the competitors.
Speaker #7: But, you know, you could think of best-in-class North American active wear athleisure brands out there, right? That those are our competitors. And their prices are anywhere from 50% to 250% more expensive than us.
Speaker #7: So even if they raise their prices at the rate of inflation, right, I don't see them compressing our margins. So as they keep raising the prices at raise it twice the rate of inflation, it could take like 25 to 50 years to actually catch up to them.
Speaker #7: So I'm very comfortable with with the strategy and I hope that answers your question.
Speaker #9: Yeah. It does. And maybe just as a follow-up, you've increased shipping to international destinations. The more countries this this quarter, just how many countries do you ship now internationally and and is there further room to open up other countries in in in the near future?
Speaker #8: Yeah. So I'll answer that. We've opened up shipping to nine additional countries across Europe and Australia. We're reading this to see where the demand is for a further roadmap for brick and mortar to open up down the road.
Speaker #8: But yes, we will also open up digitally first as we go down this path. But first and foremost, these first nine nine locations are off to a pretty good start and very telling of whose resigning or who has already a strong awareness of the brand.
Speaker #9: Okay. So, nine countries plus Canada, the US, and the UK. So, available in 12 countries right now. Is that correct?
Speaker #8: Yes, I'd have to check my UK and Europe mapping there, but yes.
Speaker #9: Okay. Thank you. Good luck.
Speaker #1: Your next question. It's from Mauricio Serna with UDS. Your line is now open.
Speaker #7: Great. Good morning. Thanks for taking my question. Just was wondering on the you know, the Q2 comp self-performance. I guess it implies an acceleration versus what you were seeing quarter to date.
Speaker #7: Could you elaborate on what drove that acceleration? Is it like traffic, AUR, conversion, and so forth? And then, quarter to date, how should we think about that plan?
Speaker #7: Like is it still like would is it fair to say like a low double digit is the quarter to date at this point? Thank you.
Speaker #8: Yeah. I'll start, which I address my opening comments, but Q2 did pick up each month of the quarter. Again, we identified early on or even coming out of the tail end of Q1 that there was an opportunity for more newness.
Speaker #8: So if you guys are watching Garage closely, you can see the color drops work very well for us. I also called out that the green color we dropped was an actual customer request that came through our social channels.
Speaker #8: So we are looking for things that were resigning, but we probably were missing a little newness as we were depending on color of similar items to keep going.
Speaker #8: So there was a strong injection at the beginning of Q2 to drive more newness. And that really resulted in top-line sales. So we know the momentum we're on there and we're excited by it.
Speaker #8: And JP is going to take the second part of your question.
Speaker #7: Yeah. So I guess the the second part of your question was on Q3 to date. So look, I think what we're comfortable saying here is that Q3 to date is off to a good start.
Speaker #7: We are happy with how Q3 is going so far. That is reflected in the full-year guidance that we gave you this morning, 12 to 14%, which was increased.
Speaker #7: And that's as far as we'll go at this time.
Speaker #1: Your next question comes from John Kiepour with Goldman Sachs. Your line is now open.
Speaker #7: Hi, guys. Thank you for the question. Knowing that you guys won't disaggregate comp by geography, I'm just curious if you could size the magnitude of the the closures in Canada.
Speaker #7: Let's just ignore the the renovations and relocations. Just wondering what like the the actual sales drop from those from those closed stores was.
Speaker #9: Yeah. Thank you for thank
Speaker #7: you for the question, John. So look, we will not break that down, unfortunately. What I'm comfortable saying, though, is that store closures are financially speaking immaterial to earnings per share.
Speaker #7: The overall revenue of stores that we close versus stores that we open the magnitude is very large. Think of it as four to five times, sometimes even larger.
Speaker #7: And as such, when we close, 13 stores in Canada in the last 12 months, the impact on revenue is negligible and the impact on earnings per share is virtually nil.
Speaker #7: And I that's as far as I can go with this morning, but hopefully that gives you good color on the fact that store closures are really not impactful to our earnings per share.
Speaker #1: Your next question comes from John Zampero with Scotiabank. Your line is now open.
Speaker #7: Thanks very much. Good morning. I'll keep it to one question because I see we're past the hour. I wanted to come back to the USBC.
Speaker #7: And I wonder if you can say broadly, JP, what contributed to margin expansion in the quarter. I think it was up over 500 basis points on a gross margin basis.
Speaker #7: I wonder if you can give a sense of what the USBC is contributing, and are USBC sales or margins on those close to in line with those?
Speaker #7: Good morning, John. So, in Q2, year over year, the gross margin expanded by 520 basis points. I would say there are three drivers here.
Speaker #7: The first one is by far the biggest one. And more than half of it. So that would be the tariffs that we faced last year.
Speaker #7: So that is by far the biggest. And then the other two factors would be IMU expansion. Through a stronger AUR, which we have talked about in earlier responses on this call, and the third factor would be your USDC.
Speaker #7: So I don't think we'll give you a hard number in terms of the contribution, but it would be a very small fraction, the 520 basis points.
Speaker #7: And it would be factor number three in the pecking order.
Speaker #1: There are no further questions at this time. I will now turn the call over to Andrew Lutfi for closing remarks.
Speaker #2: Thank you. And thank you, everyone. Appreciate everyone's time. So listen, I just want to take a step back and and if I can maybe close out and, you know, given a lot of thought over the over the last couple of months as to, you know, the you know, the the reaction to some of the some of the earnings and some of the comments.
Speaker #2: And and sometimes we kind of get like locked up in front of a tree and we don't see the forest anymore. And so I just want to close out and really talk about the how strategic we are and and ultimately the forest.
Speaker #2: Six years ago, we made a deliberate decision to to evolve the brand. And, you know, we strategically chose to address a a customer acknowledge a K-shaped economy, address a customer that is a global customer, you know, in the in the top quartile, if you will, in terms of disposable income.
Speaker #2: And in a leisure world that is gaining market share, it is a tide that is rising, right? So we made these deliberate choices.
Speaker #2: We also as a result, you know, deliberately over the last eight years, six years, deliberately shut down tons of stores and invested more importantly in these high-profile global locations with amazing success, amazing success.
Speaker #2: And and at the same time, you know, like I I do like predictability and and to me science and engineering and creating like a rigorous processes.
Speaker #2: Support that. I don't like inventory. In you know, in inventory comes with fashion risk, right? Because more inventory you have, the more further out you've made a commitment.
Speaker #2: And honestly, it's hard to predict fashion a year or two years out. Stacy mentioned, you know, we we had an early feedback on Glean, the customer who wanted green, and it was like, you know what, that makes a lot of sense.
Speaker #2: We were able to act on that in in in a couple of months. So we run a a full model that that creates scarcity.
Speaker #2: We by design want to have as much in-season flexibility and open to buy as possible. And, you know, as we fill the pipe, right, based on information, based on knowledge, leveraging AI, AI predictability, I got to tell you, like nine out of ten times, we're right.
Speaker #2: So listen, strategically positioned in terms of a customer, the economy, disposable income, global brands, with a strong you know, science-based engineered solution. So I'm very comfortable very excited as to where we're going to be not in the next quarter, but where we're going to be in three years from now, five years from now, and seven years from now.
Speaker #2: That's ultimately my obsession. I've been doing this for 40-odd years. So it's three to five years seems near term. So with that, again, thank you so much.
Speaker #2: And leave it at this. Have a wonderful day.
Speaker #7: Thank you.
Speaker #1: Thank you. Ladies and gentlemen, this concludes our conference call for today. We thank you for joining us.
Speaker #3: Everyone else has left the call.
