Q4 2023 Duluth Holdings Inc Earnings Call

Participants

Nitza McKee; IR; ICR, Inc.

Sam Sato; President, CEO, & Director; Duluth Holdings Inc

Heena Agrawal; CFO & SVP; Duluth Holdings Inc

Janine Stichter; Analyst; BTIG LLC

Jonathan Komp; Analyst; Robert W. Baird & Co.

Dylan Carden; Analyst; William Blair & Company

Presentation

Operator

Good morning and welcome to the Duluth Holdings Inc. first quarter 2023 earnings conference call. (Operator Instructions) Please note, this event is being recorded.
I would now like to turn the conference over to Nitza McKee. Please go ahead.

Nitza McKee

Thank you, and welcome to today's call to discuss Duluth Trading's fourth quarter and full year financial results. Our earnings release, which was issued this morning is available on our Investor Relations website at ir.duluthtrading.com under Press Releases.
I'm here today with Sam Sato, President and Chief Executive Officer; and Heena Agrawal, Senior Vice President and Chief Financial Officer. On today's call, management will provide prepared remarks and then we will open the call to your questions.
Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements. It can be identified by the use of words such as estimate, anticipate, expect and similar phrases. Forward-looking statements by their nature involve estimates, projections goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially and those expressed in the forward-looking statement.
Such risks and uncertainties include but are not limited to those that are described in our most recent annual report on Form 10 K and other SEC filings as applicable. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events.
And with that, I'll turn the call over to Sam Sato, President and Chief Executive Officer. Sam?

Sam Sato

Thank you for joining today's call. Before I share some of the details of our business performance and progress on key strategic initiatives, I'd like to first introduce Heena and welcome her to the dilute family. Heena is joining us as our Senior Vice President and Chief Financial Officer. And with more than 20 years of finance and leadership expertise, Heena brings a breadth of experience across different facets of global finance, accounting, and mergers and acquisitions.
Heena was recently with Kontoor Brands holding the position of Global Wrangler and Global Contour Supply Chain Chief Financial Officer. We're thrilled to have attracted such a seasoned executive to fill the important Chief Financial Officer position at such a pivotal time for digital training. Heena's extensive experience and strong finance and leadership acumen will play a critical role in the evolution of dilutes long range plans as we remain steadfast on executing the pillars of our big dam blueprint.
As a brief review of our fourth quarter performance, net sales increased approximately 2% for the quarter was highlighted by growth in both the Duluth and AKHG brands driven by strong outperformance in our women's business, which registered year-over-year growth of 12%. We were particularly pleased with the continued momentum in our AKHG women's business, posting stellar year-over-year quarter growth of more than 20% product performance highlights in our women's business included positive momentum in our newest hero product, the heirloom gardening bib in which we introduced a line version, making it suitable for year-round wear panels and bras also played a significant role in our fourth quarter growth with both categories up strong double digits in flat-panels, our improved in-stock position benefited sales during the peak gift-giving period in bras.
The success we are seeing is a testament to our unique product innovation and growing brand loyalty and our T. lux broad was the number one style in its launch season for broad-based positive trends and exceptional customer responses across our women's business indicate continued growth potential in the fourth quarter. Our men's apparel business was flat. Men's AKHG first layer woven tops and bottoms grew as our unique product continue to resonate with our loyal customer base. This was partially offset by softer trends across our cold weather categories of outerwear, sweaters and footwear, which was impacted by the warmer weather product performance highlights in our men's business included double-digit growth in underwear, double flex denim and flat panels. Success with double flex denim was driven in part by the introduction of new elevated losses and was brought to market through our monumentally durable campaign. Men's Underwear with humorous photo real prints resonated with consumers and finals were bolstered by new pattern designs, color palettes and a strong in-stock position.
During the quarter, the industry saw consumers gravitate to promotional purchasing. We saw a significantly higher portion of our holiday sales occur during the Thanksgiving through mid cyber week period when we ran our global event, our Black Friday sales were the strongest in our company's history, and we saw a pull forward of sales from the following weeks. In January, we introduced new product innovation and saw sequential improvement with our full-price sales trends.
Let me spend a few moments on our product innovation strategy within our core categories as well as our AKHG brand, we introduced more newness than ever before. Most of these introductions came in the form of soft launches, but the successful initial results and consumer excitement highlights our ability to develop design and deliver innovative and unique first-to-market fabrications and features that set them apart in the marketplace.
Key new offerings late in the fourth quarter included a new addition to our iconic fire hose pant collection featuring the strongest flex work pant fabric on the market with a lighter weight than our original fire hose. This product, we've named flex fire hose HD. comes in two styles and truly represents the next generation of workwear. We also expanded our core Buck Naked category by offering men's Bucks move, which provides the same comfort and function as the fan favorite Buck Naked, adding a smoother, more vibrant and pattern construction. Our quick drying Dry on the Fly technology was expanded into tees and underwear across both men's and women's.
And finally, we launched AKHG fitness, our first ever fitness apparel offer the assortment built for Nature's Gym for both women and men includes tanks, shorts, hybrid jackets, and after sweat sweats. Our fitness apparel includes features and technologies that stretch with breed and drying the flash and is offered in sizes up to three times. KSG. business is off to a great start. And although a small contributor to the business today. We see this as a whitespace opportunity to build on our unique fabrics, features and functions to create and support AKG fitness as a growing and year-round category to bring awareness to our innovation and product offerings. Our marketing and creative teams ramped up our investments in social influencers, which delivered meaningful engagement and strong growth from new younger consumers. We continue to balance brand awareness and high converting digital tactics to optimize our return on investment and consistently deliver relevant content to both existing and new consumers.
With creative concepts across streaming, video and audio as well as cable TV. Throughout the year, we strategically we targeted pass consumers leading to an 11% increase in reactivated buyers during the fourth quarter personalized content reengaged lapsed consumers reinforcing the trust and loyalty they have in our brand. In addition, new buyers grew in Q4 as our high quality solution based product appeal to consumers who had not previously purchased from dilute our strategic shift towards targeting a younger consumer is gaining traction as our new consumers are on average five years younger and our existing consumers. Our previous investment in replatforming, the Duluth Trading.com website to the next generation of e-commerce tailored for mobile usability is paying off. Our goal is to enhance accessibility and provide a frictionless shopping experience. And because of our investment, we saw high single digit direct channel growth driven by higher traffic and conversion in mobile, more than offsetting retail softness in fact, Q4 mobile sales increased over 20% from a year ago, and mobile now represents our largest channel for consumer interaction and purchases accounting for over half of our total direct channel sales.
Shifting to the foundational drivers of the business, we remain steadfast on our commitment to the pillars outlined in our big dam blueprint as initially introduced in 2021. The five pillars of our big dam blueprint include one lead with a digital mindset to intensify our efforts to optimize our own DTC channels. Three, evolve the company's platform to grow into a multi-brand and multichannel business for prioritize test and learn to unlock long-term growth.
And lastly, five future-proof the business through investments in capabilities and infrastructure. I'm extremely proud of the tremendous progress we've made on related key strategic initiatives. The benefits of these investments are reflected in a greater penetration of digital sales, especially mobile, lower variable fulfillment costs and future gross margin expansion. These investments will also enable us to drive revenue growth opportunities in the future.
Let me update you on the progress we made in 2023. First, as mentioned on previous calls, we went live with our new highly automated fulfillment center in October and are achieving our plan to process up to 60% of all online orders and store replenishment volume through this facility.
In addition to shortening delivery times to keep pace with evolving consumer expectations, the enhanced automation in this center drove lower variable cost per unit to fulfill an order in this facility, which was 42% of the average cost of our three legacy fulfillment centers during the last four months of the fiscal year. As this approximately $55 million investment represented the largest individual capital expenditure in the history of deliveries. I'm proud of the cross-functional teams ability to execute and deliver the results we expected this step change in logistic capabilities allows us to further optimize our own DTC channels and serve as a significant enabler to future-proof and scale the enterprise.
Second, we meaningfully advanced our sourcing and product innovation functions, which we believe is another critical strategic unlock, allowing us to bring to market high quality, innovative products, more frequently, increase our speed to market and significantly reduce our product costs. Several team members were onboarded during the year, including our new Vice President of Sourcing during the fourth quarter. Our sourcing and product innovation team is accelerating this initiative and the benefits will begin to materialize in 2024 and continue to build over time.
Finally, we made great strides, completing several foundational initiatives to execute our technology transformation road map, continuation of which will become the primary focus of our capital expenditure outlays. These initiatives will enable the optimization of the business, focusing on a centralized data repository, customer data and analytics as well as tools to maximize the logistics network capabilities and strategic planning and assortment decisions. Our focus for 2024 will accelerate the operational improvements of the strategic roadmap by expanding our pipeline of new and innovative products, optimizing our marketing mix, improving gross margin rates and controlling what we can control by prudently managing expenses and inventories.
In closing, I'm proud of the progress we've made on our foundational initiatives and remain steadfast in our strategic roadmap.
With that, I'll turn the call over to Heena to discuss Q4 and the full year 23 financials and our 2024 outlook.

Heena Agrawal

Thanks, Sam, and good morning, but I'd like to express how thrilled I am to have joined the Duluth Trading family in just shy of four weeks in my new role as CFO, I have had the pleasure of meeting with our Board of Directors and the entire leadership team. I visited several stores and to all our fulfillment centers in there as well. And others, I'm impressed by the strength of our brands, consumer loyalty, innovative product design, engaging storytelling and a strategic choice to invest in infrastructure to capitalize on growth opportunities. I look forward to partnering with Sam and the entire leadership team as we further pursue our growth initiatives. I firmly believe Duluth Trading is uniquely positioned to expand its reach, and I am excited to leverage my experience to drive our next phase of profitable growth.
Let me begin with a review of our full year 2023 and Q4 financial results. Today, we reported full year 2023 net sales of $646.7 million, adjusted EBITDA of $33.4 million and EPS of negative $0.28. Our Q4 reported results were net sales of $245.6 million, adjusted EBITDA of $21.1 million and EPS of $0.21. Starting with the top line. For the full year 2023, net sales were $646.7 million down 1% in Q4. We saw a trend reversal from prior quarters as net sales grew 1.6% to $245.6 million, followed by acceleration in women's and AKHG women's business grew double digits across both the loot and AKHG. brands driven by Llanos intimates, fitness and garden collection. The men's apparel business reversed trend from prior quarters and was flat to last year with growth in AKHG. and growth in core dilute categories, of course, player bottoms and woven tops offset by declines in cold weather categories of outerwear, sweaters and footwear impacted by warmer winter weather.
From a channel perspective, our retail channel sales declined 12%. This was more than offset by our direct channel sales, growing 9% from higher conversions and greater penetration of mobile. As Dan mentioned, mobile grew 20 plus percent and moved up to our number one sales channel for the quarter.
Moving to gross margin for full year 2023, our gross margin contracted 230 basis points to 50.3%.
Our fourth quarter gross margin was 48.2%, down 300 basis points as we saw our highest ever Thanksgiving to mid Cyber Week sales contribution in the fourth quarter. During which we ran a global event, I will provide fiscal 2024 guidance details shortly through acceleration of our sourcing and product innovation initiatives. I want to reiterate that we expect gross margin benefits over the next several years.
Now onto SG&A. For full year 2023, SG&A decreased by 1% to $333.8 million and was flat to last year as a percentage of sales at 51.6% for the quarter, SG&A decreased 3.8% to $108.8 million and leveraged 250 basis points to 44.3% of sales for Q4. Leverage was driven by lower fulfillment costs across the network, primarily due to efficiencies from IT as well, further maximization of our marketing spend and prudent management of our general and administrative expenses. Full-year adjusted EBITDA was $33.4 million or 5.2% of sales.
Full year net loss was negative $9.4 million or negative $0.28 per diluted share. Eps was weighed down by noncash depreciation expenses from infrastructure investments. Q4 net income was $7 million or $0.21 per diluted share compared to net income of $7.5 million or $0.23 per diluted share last year. Fourth quarter adjusted EBITDA was $21.1 million, an increase of 2.4% over last year and expanded slightly as a percent of sales to 8.6%.
Moving on to the balance sheet, we ended the year with $32.2 million of cash and no outstanding debt on our credit line, leaving us with liquidity of $232 million and inventory was down 19% or $29.2 million. Our inventory composition is healthy with 90% in current products and a 30% decrease in clearance items. Our capital expenditures for 2023 of $53.2 million was funded by cash and was primarily used to invest in strategic infrastructure initiatives, including our new fulfillment centers in Israel and digital capabilities as for IT road.
Now turning to our outlook for fiscal year 2024, our full-year net sales guidance is $640 million to $660 million, including the 53rd week, which is worth approximately 150 basis points of growth. We expect the first half to be down low to mid-single digits as we continue to navigate a dynamic macro environment, we expect gross margin for the full year to be up 200 basis points with improvement expected to begin in Q1 and build throughout 2024, driven by our sourcing and product development initiatives. As I mentioned earlier, we expect further improvement in margin in the out years as we continue to optimize our sourcing, we expect SG&A to de-leverage by approximately 100 basis points in the coming years, mainly driven by higher fixed costs and depreciation from strategic investments, partially offset by improvements in variable cost benefits being realized from these investments.
Advertising expenses are planned to be in line with sales growth and approximately 11% of sales as we plan to continue to invest behind our brands, support new product innovation and drive omnichannel sales. Variable expenses are selling expenses, which include outbound shipping costs as well as labor across our contact center fulfillment centers and store fleet will continue to leverage driven by optimizing our logistics and fulfillment center network fixed expenses. Our general and administrative expenses will increase in 2024, primarily from annualizing depreciation and fixed costs from strategic initiatives.
We expect our year-over-year EBITDA improvements to outpace net income and EPS growth as we bear the depreciation impact of strategic investments in our CLOs. With that, our full year adjusted EBITDA guidance is $39 million to $45 million and EPS in the range of negative $0.22 to negative $0.07. This includes estimated diluted shares of approximately $33 million and a tax rate of 25%. Our capital expenditure spend will be reduced by more than half to approximately $25 million. And the primary focus will shift from the logistics network to our strategic technology road map, enabling efficiencies and scalability.
In closing, we are being prudent in our outlook for 2024 and are beginning to see the benefits from our foundational investments fueling adjusted EBITDA growth. Our capital expenditures are normalizing, and our liquidity remains strong. With that, we'll open the call for questions.

Question and Answer Session

Operator

(Operator Instructions) Janine Stichter, BTIG.

Janine Stichter

Hi, good morning and welcome here, and I wanted to ask a bit about the promotional strategy. If we think about the past few quarters, it's been the fact that consumers are shopping more around the promotions than they have in the past, but some pressure on gross margins. But as you think about the gross margin expanding 200 basis points next year, is that entirely due to the sourcing initiatives? I'm curious what you're assuming for planned promotions and then the consumer shopping behavior around those promotions?

Sam Sato

Hi, Janine.So maybe I'll just I'll answer at a top top level. And then I know he has got some comments. We expect there to be ongoing consumer headwinds and last year was heavily promotional, and we anticipate something similar this year. Having said that, a lot of the strategic initiatives we've put in place specifically around product development and sourcing, we believe will start to show benefits in this coming year, beginning with Q1 as as he has stated, gross margin improvement of 200 basis points is contemplated in our guidance over the course of the year. But we think that there's ongoing upside. And so we're going to remain balanced in our approach to our pricing and competitiveness with brand integrity and really rely more on our product development strategy to bring more newness more frequently. And as I said in my prepared remarks, we delivered more newness than ever before, and the pipeline as we go through Q4 looks really strong.

Heena Agrawal

Yes. Thanks, Sam. And in our hygiene, and thanks for your question, um, you know, yes, we did see a significantly higher portion of our holiday sales occur during Thanksgiving through mid cyber week period when we ran a global event and our sales during this period were the strongest in our company's history. We are evaluating the business performance, and we will continue to monitor the macro, economic and competitive environment.
Our guidance for 2024 assumes AUR to be similar to what we experienced in 2023. We are being prudent in our sales outlook and inventory management for 2024. As Dan mentioned, our sourcing and product development initiatives are enabling greater and more frequent introduction of new products, which positions us to drive more full-price sales. Our expectation on top line is to be down low to mid-single digits in the first half and our guidance for the full year, it reflects gross margin up 200 basis points.
As said in my prepared remarks, and that. And that is mainly driven by sourcing and product development initiatives while maintaining a you are year on year. And as I mentioned, we expect further improvement in margin in the out years as we continue to optimize our sourcing strategy.

Janine Stichter

Great. That's helpful. And maybe along the lines of and some of the sourcing initiatives enabling quicker product development, can you talk about some of the soft launches that you mentioned in the prepared remarks and how quickly you can chase into a broader a broader launch of those assortments?

Sam Sato

Yes. So at it as I said earlier, some items items like up flex fire hose, HD. as we build on our our iconic fire hose pant program came in and the reception to that was really strong. Flux mood is interesting. We've talked about, but smooth leading up to Q4 as being a new innovation in fabric that allows us to actually print kind of photo real print on there and that that was met with overwhelming success.
I would also add our intimates program in women's. We've introduced some new bras to Luxtera theme in our number one brand in its first season. And then last call, we talked about the excitement around our AKHG fitness category, and that came in the last the last week or so of December and really came out of the gate strong. And we think that across AKHG in total, but specifically AKHG fitness, that there's a long runway. So a lot of these things are not just about items. They're they're kind of strategic building blocks to some of our other key merchandising initiatives like our strategic focus on growing the women's business, the women's penetration was 30% and it increased 200 beeps. And so we've mentioned in the past that we think the women's opportunity to be a larger business in total and a larger share of our business. Some we're starting to see some traction in that regard. And women's, again, double digit increase for the quarter, up high single digits for the year. And so a lot of the soft launches were were, yes, item driven, but is a that critically a critical component of the strategic building blocks of some of these other longer term product initiatives.

Janine Stichter

Thanks very much for the color and best of luck.

Sam Sato

Thanks, Jeanine.

Operator

Jonathan Komp, Baird.

Jonathan Komp

Yes, hi. Thank you good morning. I want to follow up. I know there is reference to seeing an inflection in the business during the fourth quarter. If you could just maybe share a little bit more, are there some underlying metrics or full-price selling or anything that you would highlight just because from a reported perspective, still seeing your gross profit dollars declining?
So it's hard to see signs of the inflection. So just hoping you could maybe share more insight there.

Sam Sato

Yes. Hi, Jonathan. Well, so a couple of things, I'll say one is the holiday or the Black Friday weekend through the mid point of Cyber Week was the strongest sales results we've seen in the history of the Company on it was as we've as we've traditionally done over that time period. That's where we run our global event and there's competitive aspects to that. And because of the global event plus the amount of demand on it drove a bit of a top line. But you know, the flow-through clearly wasn't what we expected or what we've seen in the past and so on that, that was a bit of of drag on us. It also has, as the holiday season played out, it was clear that it pulled it pulled sales forward from the weeks leading up to Christmas where we typically do more business at higher margins. And so that was a bit tough for that.
As we go back and we're assessing the business both today and during during the quarter, we did see a sequential improvement in our regular price of sales bucket as a percent to total sales, especially as we started to bring in early these new spring goods and launched them in the back end of the fourth quarter and so of January, in particular, as all of those items I just mentioned to Janine on as those new items started to hit the last week of December. It really moved the needle for us from a regular price perspective in January when. So we expect, you know, while we expect kind of the headwinds to remain challenging as we go through the first half of this year. We're also we're also optimistic about the sales on early launched goods as well as what the product development and sourcing initiative is bringing us. And so we believe that while the top line will be challenged, we're going to get better flow through over the course of the year yes.

Jonathan Komp

Thanks for that color. That's helpful. So I mean, just as a follow-up, can you maybe just speak to ideally or from a target perspective, what percentage of product would you like to sell at full price? And and how far off are you today? And then really a broader strategic question, just what needs to change and sort of that focus some if you look at the guidance here for the year, I'm still still not profitable at a net basis, even though you're realizing benefits now from some of the multiyear supply chain initiative. So what needs to change? And if you could share any more that I had on the strategy here, although cover our full-price.

Sam Sato

Yes, absolutely. So couple of things on the product development and sourcing initiatives, as you know, is about creating more newness, more new innovation more frequently, which this is now just kind of starting to ramp up on.
We really started this initiative last year. And so this is this is kind of the first full year based on our order time line that that the work that was done last year starts to come to retail. And so we expect that as, as Hannah mentioned, gross margin improvements. And yes, while while today it's still adding up to a negative, you think about over the last year and a half or so with where our margins have moved towards from a competitive perspective, this becomes kind of the starting point for us to move the margin upwards as we move through 24 and beyond. And then and then there's real really just kind of got up and running in Q4 of last year, really October so call it the end of Q3. And you know, as I shared on the Q3 call, we saw some some benefits and some of the metrics, whether it was CPU or time to delivery in that last month of Q3. And then Q4 on we saw lower their variable costs per unit. And the actual what the actual number is, it's about 42% of our average legacy FC on cost per unit. So as we go through this year, we expect to see the variable costs coming out of that fulfillment center, helping us leverage the total costs, total variable costs of our FC network. So I guess what I would say is a lot of the things we've invested in are now starting to show some benefit. And I think 24 becomes the year where we start to realize them over the course of the full year. And as we start building on top of those you'll see incremental improvements in gross margin, for instance.

Jonathan Komp

Okay. And just last question for me, but I mean, would it make sense to maybe you've change focus instead of targeting top line growth and it looks like you're embedding inflection as the year goes on for total revenue. But would it make sense in the short term to focus back on on profit instead of ancillary revenue in terms of how you're managing the organization or just any thoughts there.

Sam Sato

But again, yes, I think yes, I think it's a combination of both. We have to be focused on the top line. And that's what's driving, you know, a big part of our product development and sourcing is how do we create a pipeline of more frequent new products because that that also drives to your earlier question, greater full-price sell-throughs, which then translates to greater bottom line profits of the Company. And so I think it's a combination of both. What I'll tell you is that the variable costs of our business will continue to improve as we move forward on and leverage as a percentage to sale of where our costs are continue to grow a bit, our on the fixed side of it because of the investments we've made in these strategic initiatives.
So our P&L as you know, you know, is it's hampered a bit by the depreciation associated with those investments. But in terms of the manageable costs and the benefits we're getting out of these investments on that part of the expense structure is starting to lever, and that's what we're looking for right now. And then there becomes this inflection point as we move forward specifically you know, CapEx is now going to be less than half of it's high last year, and that's largely going to be associated with our technology road map that should result in improved sales and margin because of our ability to better allocate BISx style size, color and location as well as ABEL other opportunities for us. So I think I think we're being prudent about how we're managing the business and we're doing it in a very intentional way without cutting our nose off to spite our face in.
Do you have anything you want to add to that?

Heena Agrawal

I would say, you know, the focus for 2024 will be to accelerate the operational improvements that you're seeing from the strategic road map by expanding our pipeline of new and innovative products and optimizing our marketing mix, improving gross margin through our sourcing initiatives and controlling what we can control by prudently managing expenses and inventories.
The other point I would make is, as I said in my prepared remarks, we are seeing capital investment cut in half in 24, and we will continue to see EBITDA adjusted EBITDA outpaced from net income and EPS as we get through the depreciation that from the capital investment we've already made in the past years, it be announced.

Jonathan Komp

Okay, appreciate all the color. Thank you.

Sam Sato

Thanks, Jonathan.

Operator

Dylan Carden, William Blair.

Dylan Carden

Thanks. Yes, it's kind of similar line of question a bit. I guess I'm trying to think about the decline in gross margin over the years, know, 700, 600 basis points on that for 2015, 2016. Is that all best understood and increase in promotion? And then or can you quantify or even directionally sort of the margin drag from the retail channel on kind of over that same period, you've seen productivity in your stores effectively have just taking those two things together to kind of think about how then you glide path back to above the line on profitability? Is there a risk around kind of having your customers now so used to higher promotions, so et cetera, and sort of how you maybe get the retail chain that comes on firmer footing?

Sam Sato

Thanks. Heena, go ahead.

Heena Agrawal

So on your long-term gross margin question, we've meaningfully advanced our sourcing and drivers development initiatives. And as I mentioned in my guidance, we are expecting 200 basis points of improvement, which will continue to build over the coming years and get back to pre-pandemic levels in a few years. So we see a path forward to get back to those higher gross margins.

Dylan Carden

What is that? Can I stop you there? But if it does that, but the promotional impact, I guess I get the sourcing and the benefits that can do. But as far as how much you're embedding as far as being able to get back to a higher price point, higher initial mark on whatever, however, you want to quantify relative to what was implemented on 2021?

Heena Agrawal

We are being prudent in our outlook and we are not assuming any AUR improvement in. I think it would be I'm looking at what our business performances and how to optimize it. And constant our new and new innovation can drive position us to drive more full line full price sales.

Dylan Carden

Okay.

Heena Agrawal

So that's one thing. And then on the store question, I've been able to visit several of our stores which have a unique and engaging experience for the consumer and they are part of our omnichannel strategy along with digital and mobile, and they create an ecosystem, very helps us and get consumers and retain them.
And so they are a critical part of our strategy going forward, all of our stores are cash flow positive. Having said that, we do have an opportunity to in the context of the omnichannel environment. I look at and the size, the format, the depth of assortment to make them even more efficient and profitable. So so we will be instituting more rigor as we think about new locations going forward.

Dylan Carden

Okay. Thank you.

Operator

Yes, concludes our question-and-answer session. The conference has now also concluded. Thank you for attending today's presentation, and you may now disconnect.