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spk_0: good afternoon ladies and gentlemen
spk_1: welcome to the purple innovation fourth quarter twenty twenty two earnings conference call at this time all participants are analysts and only mode
spk_0: a brief question and answer session will follow the formal presentation if anyone should require operator system during the conference please press start zero on your telephone keypad it is now my pleasure to introduce your home
spk_1: cody mcallister of i see our please go ahead
spk_2: did you for joining purple innovations fourth quarter twenty twenty do i call a copy of earnings gradually is available on the industry relation faction of purple website at www dot polka dot com i would like to remind you that certain statements will make making this presentation or forward looking statements the forward looking statements reflect purple innovations judgment and analysis only other today and actual results may differ materially from current expectations based on a number of factors affecting company's business accordingly you cannot not place undue reliance on the school looking statements for a more thorough discussion of the risks and uncertainties associated with the forward looking statements related this conference call and webcast with her for you to the disclaimer regarding forward looking statements included in our fourth quarter twenty twenty two earnings release which was furnished to the lpc today on for an ak as well or filings with the fcc referenced in that disclaimer we do not undertake any obligation to update or alter any forward looking statements weather because the new information future events or otherwise today a presentation will include references to get financial matters such as either a joke to be better adjusted net income and adjusted earnings per share a reconciliation of these non gaap financial measures to the most comparable get financial measures is available within earnings release which can be out on our website with that the call over the rug the marketing purple innovations chief executive officer
spk_3: thank you korean and good afternoon everyone agrees with me on the call today have been enough bomb purple chief financial officer as i reflect on my first full year as ceo it was certainly more challenging than i initially anticipated when i joined purple in january twenty two i know there was a knew there was a good deal of work to be done to turn the business around and return the company to profitability what i didn't fully anticipate was the difficult market conditions that we would be operating in the route two thousand and twenty two while i was expected that the industry would get back some of the coded related games it had captured and twenty and twenty one decade high inflation and the shift and consumer spending toward services and experiences put even more pressure on demand and lead to what has been cited by many as the worst the annual decline i'm in the history of the us betting industry with huge volume estimated to be down twenty to twenty five percent against the challenging back route backdrop organizations made significant headway towards improving the efficiency of the business and strengthening our foundation for growth as we executed the strategic initiatives that we believe position the company to deliver improve results even in the face of continued market had ones looking back on twenty twenty two we right sized our costs structure and lowered expenses to align with current demand this included the difficult but necessary decision to to meaningfully reduce our head count net of showroom growth headcount is down approximately forty five percent compared with this time year ago at the same time we eliminated inefficient and expensive advertising bringing advertising spend down nearly sixty percent from the twenty twenty one levels these two actions allowed us to increase profitability during the back half of twenty twenty two without sacrificing operational productivity
spk_4: we added new expertise to our leadership team to prepare purple for the next stage a profitable growth
spk_3: care hutchings joined the team and may as the company's first ever cheat innovation officer jeff has been busy reinvigorating are innovation department and filling our product pipeline additionally he's implementing a continuous innovation process to ensure we are consistently deploying new products that are truly innovative and authentic erik kain or our chief operating officer joined the team and june since that time he's made significant progress with raw material and operational costs improvements helping offset inflationary pressures eric's also help to drive continuous improvement in our productivity while balancing supply and demand distraction action along with rebalancing our production between our two facilities has helped maintain a sustainable structural plant cost position in line with the current the man projections he's also delivered significant improvement and safety and customer service care across joined our team is chief marketing officer in early november to lead our brand repositioning in support of our path the premium strategy she's been instrumental and in the coming launch of are elevated brand positioning that will happen in the second quarter of twenty twenty three and is leading the process to identify the most efficient way to reach and subs subsequently convert or consumers across all channels our new brand positioning will debut in mid may and most recently we appointed scott kirby as chief of own retail scott joined us in january of twenty three from sephora where he served as head of stores for canada since two thousand and nineteen scott's been tasked with elevating our company showrooms in the highly productive beacons of the new premium brand position while also continuing to expand the fleet as we continue to balance or direct channels with our wholesale channel jeff eric care and scott have helped solidify incomplete a strong senior leadership team that been assembled a purple finally we took a step to better position purple in the premium category with our acquisition of intel a bed
spk_4: in addition to the shared technology eliminating licensing barriers and opening for innovation potential the manufacturing expertise attractive financial profile and highly complimentary product offering made intel a bed an excellent said for purple until about a portfolio of higher power right mattresses compared to our legacy offerings provided a natural extension of purples purples product line this accelerated purples product development schedule by sober year years and immediately placed us in the five thousand dollar and up segment of the mattress market
spk_3: the addition of until a bad combined with jeff hutchings work accelerating our innovation engine generated a great deal of excitement among our wholesale partners at the las vegas market in january we came out of that show with commitment to significantly increase or retail presence this coming year both in terms of know her flop on the floor and increase point of sale materials which asked me to more later on the call despite the significant our ongoing challenges for the mattress industry were encouraged by the way twenty twenty two unfolded over the course of the past year we saw sales in march and stabilize and build after bottoming in the first quarter while our financial performance is not yet more we want it and know it can be including a tough start to the new year we hope you'll take away from today's call is that we believe we've taken the necessary steps to successfully operate in the current environment and upset the business up to achieve incremental top line and bottom line grow in the back half of twenty twenty three even if the macro environment remains challenged as a leadership team or commitment to and excitement for a long term outlet room outlook remains unchanged this category his repeatedly demonstrated resilience and durability through its history and i'm confident that the work we accomplish this past year has positioned as to whether the current environment and reestablish a strong growth trajectory one the market had one subside we remain confident that are for strategic initiatives accelerating innovation elevating the brand developing are three distribution channels and achieving operational excellence will be fundamental to our success the sheer in addition to that we believe that our new product launches new elevated branding position and the expansion within our with our wholesale partners will provide substantial tailwind as we begin to establish purple as the new premium lifestyle challenger brand or cover those an additional twenty three focus or as in more detail ahead of the q and a session but now turn it over to bennett who review the financial in more detail and share the outlook for twenty twenty three twenty had rom
spk_4: for the three months ended december thirty first twenty twenty two net revenue was hundred and forty five point one million dollars a decrease of twenty two point two percent compared to the one hundred and eighty four six point four million dollars in the prior period the euro rear decrease was do a number of factors including changing demand for home related products inflationary pressure on discretionary consumer spending and are intentional reduction in advertising spend or channel for his prior year direct to consumer net revenues decline thirty four
spk_5: five percent
spk_4: within the t c e commerce decline forty three point four percent primarily driven by market conditions and compounded by changes to consumer consumption patterns
spk_5: show net revenue increased forty one point three percent driven largely by the addition of twenty seven that new showrooms over the past twelve months the overall decline in the dtc channel was partially offset by an increase in wholesale net revenue of point three percent driven in part by the intel a bit acquisition gross profit dollars or fifty point seven million dollars during the fourth quarter of twenty twenty two compared to sixty four point seven million dollars during the same period in twenty twenty one with gross margin at thirty five percent versus thirty four point seven percent in the fourth quarter of twenty twenty one the increase in gross margin over the prior year can be attributed primarily to the cost reduction initiatives implemented this year partially offset by a higher proportion of wholesale channel revenue in the quarter which carries a lower gross margin than revenue from the dtc channel and any
spk_4: increase promotional so environment vs last year wholesale net revenues comprised approximately forty six percent of that revenues for the quarter compared with approximately thirty six percent in the same quarter year ago operating expenses decline
spk_5: thirty four million dollars or thirty five point four percent to sixty one point nine billion dollars compared to ninety five point eight million dollars in the fourth quarter of twenty twenty one this was largely driven by an intentional decrease in advertising spin which resulted in reduction of marketing and sales expense of thirty eight point two million dollars or fifty percent compared with the prior year
spk_4: even with lower revenue our expense reductions drugs significant leverage in the quarter as a percent of revenue operating expenses improved eight point eight percentage points to forty two point six percent from fifty one point four percent in the fourth quarter of twenty twenty one operating loss improve twenty million dollars to eleven point one million dollars from thirty one point one million dollars last year
spk_5: net loss for the quarter was seventy point two million dollars compared to a net loss of twenty one point eight million dollars in a year ago period
spk_4: on an adjusted basis which exclude certain noncash items and other items we do not considered an evaluation of our ongoing operational performance including games from the change in our tax receivable agreement income and the change in valuation of our net to for tax assets
spk_5: net loss was nine point one million dollars or ten cents per just a chair compared with twenty three point nine million dollars or thirty five cents per adjusted share in a year ago period
spk_4: adjusted net income has been adjusted to reflect an estimated effect of income tax rate of twenty five point nine percent for the current year compared with twenty five point four percent in the year ago period he better for the fourth quarter was a hundred and fifty six point three million dollars compared with the loss of twenty million dollars in the fourth quarter of twenty twenty one adjusted ebitda would exclude certain noncash gains and losses and certain other items detail in today's earnings release was essentially great using compared to a loss of twenty three point four million dollars in the same quarter last year with our annual results available in earnings release and with many of the factors that drove our fourth quarter performance the same as the full year of going to move on to our belge
spk_5: as of december thirty first twenty twenty two we had cash cash equivalents and restricted cache of forty one point eight million dollars compared with ninety one point six million dollars at december thirty first twenty twenty one last month we completed a primary public offering that resulted in fifty seven million dollars of net proceeds for the company the primary purpose of this transaction was rise with the financial flexibility to execute our new product and brand strategy that we unveiled at the las vegas market trade show in early january there we announced
spk_2: number of exciting changes that we believe will be transformative for the purple brand and business and twenty twenty three as we reimagine our product lineup
spk_5: our brand messaging and are wholesale presence
spk_4: in february we also extinguished or twenty four point seven million dollars senior time room and reduced our existing credit revolver to fifty million dollars which currently has zero borrowings against it
spk_6: net inventories total seventy three point two million dollars at december thirty first twenty twenty two compared with ninety eight point seven million dollars at december thirty first twenty twenty one and ninety one point four million at twenty at september thirtieth twenty twenty two representing decreases of twenty five
spk_5: twenty percent and nineteen point nine percent respectively
spk_6: turning out or outlook
spk_5: we are confident that the work or teams completed and twenty twenty two has the company position to drive profitable growth in the years ahead
spk_6: which included the development of the new product line that was well received at the las vegas for kid in january while we're encouraged by or internal accomplishments we recognize the macro economic environment remained challenging with limited near term visibility taking all this into account we're expecting twenty twenty three net revenue to be in the range of five hundred and ninety two six hundred and fifty million dollars with adjusted ebitda between thirteen and seventeen million dollars
spk_5: in terms of how the your unfolds the challenge and market trends from twenty twenty two have continued into the start of twenty twenty three
spk_2: on top of this some retailers are clearing their inventories ahead of taking the initial sell and of our new mattress models of the second quarter which is adding extra pressure toward quarter one performance
spk_4: for the first quarter we expect that revenues to be approximately one hundred and five billion dollars and negative adjusted even the of approximately nine and a half million dollars driven by the new product launch should marry a stronger present throughout our also channel and new marketing programs we're projecting quarterly quarterly results to improve sequentially throughout the year with cute to revenue up nicely from porter one and similar to the second quarter of two thousand
spk_2: twenty two before returning to year over year growth in the second half to reach our for we're targets
spk_4: for modeling purposes fallen the sale of the thirteen point four million shares in our february equity offering are fully diluted share account is now approximately one hundred and seven million
spk_6: finally after the closed today we filed a twelve be twenty five with the fcc which provides a fifteen day extension for filing a hard time k this no way is needed in order for certain of our service providers
spk_5: to complete the evaluation over the effectiveness of their control environment
spk_4: we expect to file our ten k on or before march thirty first
spk_5: now i'll turn it back to up
spk_3: thank you a well we expect the current operating environment will remain challenging i am confident that are there were strategic initiatives will continue to act as the fundamental building blocks for our path a long range revenue and profitability in addition to these ongoing initiatives i want to call today by detail on a few period the focus that we believe will accelerate growth beginning in the back half of the year starting with the changes to our product lineup the until a bit acquisition and late wanting to provide us with an immediate entree into the luxury under the market since that time we've been working to integrate the premium until a bad products that while also engineering our existing product lineup get better be margins better me margin specifications needed across or distribution channels the for purple product line has been are organized into three tiers the purple essentials collection represent our most accessible products with prices under eighteen hundred dollars this collection is comprised of our legacy purple and purple plus mattresses along with our newly engineered purple new day mattress priced at one thousand dollars these products have been engineered for and will primarily be sold through our ecommerce channel or purple premium collection represents or new mid range offerings with six all new mattresses ranging from two thousand to four thousand dollars to restore restore plants and restore premier mattresses our are completely reengineered grid plus coil hybrid offerings
spk_2: there will be available in two distinct firmness offerings a first for purple that we believe will broaden appeal of our grid based technology or premium collection will be available in both our wholesale and direct to consumer channels
spk_3: and finally or purple lux collection will feature our highest and broad ranging from five thousand to seventy five hundred dollars this top of the line sleeping experience is delivered through three revamp rebranded intel a bed mattresses rejuvenate rejuvenate plus and rejuvenate premier these mattresses incorporate superior pressure relief through enhance joe grid plus intentionally designed to sit deeper within the mattress along with the enhanced foam layers and are responsive coil system from a channel standpoint deluxe collection will primarily be available to our showrooms and are wholesale channel initial testing with are also partners has been very positive so far while we're excited about our new product line up and believe this over reinvigoration of our innovation engine positions us for growth later in the year it is putting pressure on first quarter results as bennett outlined to prepare for the launch of our new mattress and may some retailers are working down there on hand him and tories by selling through our legacy models without replenishing orders which is temporarily impacting sales while this will make for a difficult started the year the response to our enhanced offering from are also partners has been very positive adding to our confidence that the upcoming launch will accelerate consumer demand as the year progresses with the understanding that the broader economic environment will also play a part in shaping the trajectory of our recovery in the near term
spk_2: turning now to our brand messaging cares been instrumental in helping develop a premium brand position that can support our single brand multi channel strategy and the distinct consumer segments we want to address to create an audible differentiated and highly consumer relevant positioning for purple and
spk_3: as the brand for life enhancing sleep we're finding or marketing strategy and twenty twenty three in several ways to begin were real imagining the purple brand to be bolder and more appealing to the premium customers that while we the store ugly had great success with marketing campaigns tailored to our dtc consumer has a product that has expanded into the premium space our target consumer has a bald you can expect to see us and raza higher and consumer with our brand messaging and twenty twenty three with a shift in measured messaging that better articulate the unmistakable benefits of are differentiated gel technology while many competitors attempt to differ hm differentiate themselves with common materials one of the hallmarks of the purple brand is revolutionary technology that provides a truly differentiated sleep experience will use our innovation to our advantage and twenty twenty three and position ourselves
spk_2: as a true alternative to the premium memory foam mattress segment
spk_3: along with this messaging and the target demographic shift tactically were also focused on driving higher ticket values and twenty twenty three we will adjust our approach with bundle pricing and enhance or messaging with our mattress bases and mattress them hamsters like premium batting and pillows to drive increased add on revenue another key aspect of our twenty twenty three strategy is strengthening our wholesale partnerships that the las vegas market we shared our new product why up and new incentive structure combined with enhanced point of sale acids will drive increase sell through with higher average selling prices and higher margins the response was very positive and him and has resulted in the following results wholesale product placement comment commitments have far exceeded our inbound goal of twenty percent dozens of shop and shops confirmed with interest for several hundreds more an overwhelmingly positive feedback on the new trade up direction of the brand at the same time we remain focused on expanding are successful showroom channel and twenty twenty three we ended twenty twenty two with fifty five showrooms the forty six net new stores we've added of the last two years continued to perform in the current or challenge operating environment we remain very positive about the future of our showrooms and planned at eleven in twenty twenty three
spk_2: imposing i'd like to thank our employees for their hard work through a truly transformational year for a company while so much change such a short period of time is never easy your dedication to the challenge challenging period has enabled us to stabilize and changed the trajectory of our company during a very diverse
spk_4: full time for industry
spk_3: i'm proud of the progress we've made and twenty twenty two and i look forward to consider continued success with you in the coming year as i've had as i handed off to the operator take questions i'd like to remind everyone that the purpose of today's call is to dig discuss our fourth quarter and full year twenty twenty two results as well as our financial outlook as we head into the q and a we ask that you limit your questions to these topics operator we're now ready to begin to take questions
spk_1: thank you we will now be conducting a question and answer session if you would like to ask a question please pass star one i a telephone keypad a confirmation tell what indicate that your line on the question can you may press start to have you will by timothy a question from the kill
spk_7: ah participants using speaker equipment may be necessary to pick up your hands before pressing the starkey
spk_1: one moment with all the pa for question
spk_2: thank you and our first question it's from brad comments what keep on capital please proceed with your question i a good afternoon cases of my question i'm i want to talk a little bit more about the rollout of the new products and and i was one allow that she could talk a little bit more about the poor performance you hate have been seeing and making a be feet and families pilot prototype stores where you at
spk_3: had tested out on adding the and holiday products ah you know he at with the purple blanding arm and any other signs about what kind of the left a store may see ot when they get the assortment thanks read thank you it's a good question so bad to to frame for the group we have because of the pace of how we brought the new lux product to market we have sold in the fourth quarter and put the intel a bed mattresses with the simply a purple logo on them into approximately sixty different cars tumors across our customer base and we did that so when we went to las vegas we would have some evidence of results
spk_2: the trade of story quite frankly the a pretty easy concept to sell but in fairness or customer said you know great idea will it work
spk_3: and we were able to demonstrated that not only was until a beds results were they had distribution pretty a creative to a retailer we were able to take sixty stores and show them that not in every case but in the majority of the cases with no marketing you know very little branding on the product with the exception of a purple logo they were able to achieve during courage and results we think the incremental flops are probably worth maybe about a thousand one and a half thousand dollars a month across the new line in the and that along with them average retail price makes that a very good proposition for retailers the console that were expecting to get incremental placement in two hundred and fifty to three hundred stores have a television throughout the year or purple lux throughout the year
spk_8: the that getting your question bread
spk_3: def i get very helpful rob on it just it as we think about the timing of the rollout of there's a lot on on the on the take you for your this year he a lot more about some about timing milestone but we should think about yeah we've we will have you know the retailers are d stocking right now will she will begin to ship wholesale during april and will have a hard conversion to the new line on may fifteenth in our own channels so online and in store will synchronized wholesale with that conceptually but because you got so many moving parts across thirty five hundred
spk_2: source they'll be some little have that product a little bit early and they'll be some that will be later in the summer based on their internal plans so think about hard conversion may fifteenth of own channels and a transition country conversion of our partner channels in may june and july
spk_9: hi
spk_1: boy up i'm a lot of a the have gone on and and and love you
spk_10: thank you read thank you and our next question it's from care me hamblin web crack hallam please proceed with your question beg for now wanted to follow up on up about point the just make sure i understood our well i expected should be and it will and that made paint ah hard hogwash so how did a map that or quote more implied revenues and queue for about one hundred to two hundred seventy million a corner we are a deep into over the course of those three quarters twenty three to twenty seven million i'm in terms with thinking about
spk_11: israel
spk_3: versus what you're expecting in the back half of the earth is it sounds like they're still going to be sadness and que to and then you're expecting a meaningful optic he should we be thinking about by second half of the year where you're you're looking at one hundred seventy five million plus the quarter revenue or you know any any type of countered that you could share our that and again he knows maybe some some tangible evidence in terms of the how we can kind of back into that bad you would be super helpful okay jerome they could hear me so will be obviously que one is is softer than we expected some of that is clearly d stocking but some of that is also
spk_10: are still product not performing as well as the category and the categories not very strong so the combination of that has produced a q one that has us the five ninety six fifteen that we gave you is a lower number than we started planning for the year driven by that que one so that is reflected in that has been outlined with spec you to to be pretty typical with a normal quarter in queue in twenty twenty two and so then from there you guys can do the math
spk_3: that is there is a the definitely an uphill year and i don't really like plan on that way but given that we don't start to launch until may fifteen we are planning for expecting and realize the challenge that creates were you guys when you model this have a very strong back off okay and in our me through you know that the confidence or bad just the you know a little bit more so back then you know product placements presumably the a flop that are going to increase i think you are exceeding your goals of twenty percent and then in your building just a little bit more colorado that kind of the a p change that you're expected get a the the mix change that you know across the total business will be driven mostly by a purple locks
spk_2: or premier prices are ever so modestly a little sharper than the business were pulling out so that really won't add to the a speech to the a people and will come from
spk_3: the purple lux business but if you think about the growth year on year there's there's really three to a for component so so the wholesale growth we talked about we've got a nice healthy growth and slots and we know what those are worth and we have hair cut them pretty sharply on the incremental side thinking that each slot we put into a store stores probably worth a bit less than the last slot the we have but we've also got showroom maturity you know yet forty six stores that are less than two years old and twenty six that are old that the haven't even and realised yet so that will contribute growth through the year and then marketing is up eleven for some at the number eleven percent on the year but about forty percent on the back house
spk_10: because we under invested into one that also contributed to the softness because we're trying to save the powder for the launch so the combination of annual as asian new wholesale slots increased marketing spanned and although in a we're expecting but we didn't put a lot of building block
spk_12: walk on the quality of that marketing that's it cures on the line the letter don't repeat that we expected to get better though we didn't build and
spk_3: volume for that but those are the component of that growth and it'll start in may and be heavily delivered in the second half and and clarifying that leave the eleven percent increase a marketing spam that the that you're planning for for the year
spk_4: or that the that that is correct that's correct
spk_3: okay yeah well you're on top of that jeremy last year was
spk_10: q one was by far our highest span and this year it is by far are low spend and yet the spend his up eleven percent on the year
spk_13: but you near to date or for the total for the year now totally here
spk_14: here today i don't have that number try me but that year to date spending in the quarter is probably about fifty percent of what it was year to year ago
spk_2: got it
spk_3: okay guys fighting or best way
spk_2: thank you german
spk_3: thank you are next question of term bobby griffin with raymond james please proceed with your question that nobody thinks you take my questions on robben team i'm in a clearly a lot of moving parts you the product loss on the side effect get out there you have an estimated of of what the
spk_4: he bedard drag from the part of the law says you're gonna helping support the the retailer then whether it's just any typos you know what we can kind of try to get a feeling of the underlying profitability of the business this year
spk_2: when you mean a bit a dry but i do you mean tell me what to say more about me and the product construct yeah one is the school and one time costs that you're absorbing here and retired i guess would be ignored come to the launch something as big as you're locking down a given the history the company is the biggest product
spk_3: like it cures you that he great dollars either around that of what product launch costs here are any way to kind of like back in the that where we can kind of get a better feeling of of where the underlying profitability that but yeah and turn it around a good way to answer that it's customary practice in this industry that for samples go in as half their normal wholesale cost so in a reef resetting thirty four hundred dollars there is a price to that i don't have that in front of me though we can figure that out and sure that with you
spk_2: and then in a couple of cases and we have built in some some dollars to clear inventory marked down in in rare cases maybe even pick up and resell and another format so there definitely is a costs tied to that i don't i don't have a good roll up for you right now we'll get one and follow up with you
spk_3: okay i get get you have that for thirty four hundred doors we can copy that we can back into a private there's an what the you know the average fk ewe you know that's gone and per door and i could buy back in the russian air yeah we're going to move from pre launch about four point four beds per door
spk_2: and that will go up about one and a half the one point eight
spk_3: okay
spk_2: going to example and then i guess is on the court itself is it that be will the in gross margin from the forty one five the thirty five that we just supporting the fourth quarter it that all on just the change neck you know that went up five hundred basis points i know we talk previously about a more promote on barman to
spk_15: yeah me as we said going into when we wrapped up to three we knew
spk_16: it would be more promotional that probably cost us a couple of points channel next cost us a couple of points and those are the two big steps
spk_17: okay and in a rob lucky for me i understand your comments about your your product been you know you got to get the new product out there really gonna see what's going on demand it out for do you think the industry itself during in the year to date period has a stabilize or these think it took a further step down
spk_3: i feel to as now i think our brand is underperforming the market right now because the product is still on that's part of that is off order i'm not pin and all that on the category but i do the it did feel as q one can a week on we got weaker after january okay and then they compared with start to get it gets easier for the industry here toward the in a march with that correct and your via
spk_17: though i hear
spk_18: have had an easy compares the jet bobby
spk_1: yeah both look for to things think
spk_2: well let me let me say more let me say more positive though we are confident in a wholesale expansion the worked it's going to go on and our show rooms
spk_19: and fresh marketing and product to to reenergize e commerce i i clearly believe we grow behind this initiative
spk_3: irregardless regardless of the health of the category okay fair enough i appreciate the details in bad luck era with this big watch or attack you bobby
spk_4: thank you are next question it's from set the charm with like by security please proceed with your question
spk_20: thanks for and good afternoon or first that is making sure i understand they had planned to the revenue games for the first quarter an obviously retailers are stuck and baby product like imagine that too much that a hit year sales considering they probably or less than two weeks or so is the vast majority of the area decline in
spk_21: growth that you're expecting for sales driven by the the airport your product yellow that a pressure from the industry
spk_3: i edit the says i think that's fair it's definitely not the majority of it but i do think it's a meaningful peace i also think brand underperformance because we got product that's been out there were three plus years without being refreshed and
spk_2: is contributing and then i think the you know the category kutcher contribution is probably the smallest of those three components
spk_3: but we've got to perform better there's no question about it got it okay can understand the market i may add on that it
spk_2: your alma add to that the marketing
spk_3: expanding into one are also didn't make us on a stronger because we were saving investment to put you will see us invest at year ago up levels until may
spk_22: got okay and ten question and the slot that you're gaining any sense from retail partners that was the most lot
spk_3: now i did when we were in vegas the number of folks asked us that they're very much not you know they were pretty from on what we were going to get
spk_23: they really do not communicate word comes from i would tell you i don't think it comes from temper
spk_18: in in so it would come from you know other players but it's it were not pushing them off the floor we're really trying to present an idea that gives the retailer and alternative premium brand to put in that position directly next to temper
spk_0: got and i'll ask questions on a new product line than that pure merchandise margin rate of those products routed per year prior line is that materially iron
spk_24: lux the definitely is the others are not materially or higher there are a little bit better in most cases and a little bit sharper for the retailer so they're not in a we're we're not where we gotta do it by grow and units it isn't engineering margin the get back
spk_2: good profitability we did look very hard at the prices we were off the margins we're offering the retailer the margins we were making and the prices were or product needed to be competitive so we don't get a big uptick in unit margin in the restore line we obviously do and rejuvenate line
spk_3: understand our i thank you so much anger lot i think so
spk_24: thank you
spk_25: our next question at a marker under with roth and can play spicy with your question
spk_4: i get guys good afternoon i'm i'm just started attackers from a different angles out at the back half of the year
spk_3: potentially needs to be out of in the eighteenth below twenty percent growth
spk_23: how much of that growth is is coming from units versus the a the improvement you're gonna get from the new watch
spk_2: ap man how are you disconnect in the launch from the us i mean it definitely is unit growth in the back out
spk_3: and then mix growth because lapses analyzing and in the line i got but the majority of your nexus is always shut them down the majority but you know the mean even the lux units are not a year to date is is a is slower than the rest of the line because of their bringing bryce
spk_23: i am a lot of make it worse
spk_26: go ahead
spk_1: the target god rock than she would you do your part of it as a realizing that intel a bad business
spk_2: i believe there are only four months of that and twenty twenty two okay great and then maybe just could you talk about the gross margin progression and just given that yeah the backup is going to be mostly yeah i agree that that like probably some better utilization for that show at his house would be a about other factors and to to gross margin improvement and i think about flying those dollars back and
spk_3: to be are investing in and marketing
spk_2: yeah i'm any idiot because of the downsizing work that we done and some of the efficiency that eric has brought you know this business is
spk_3: very sensitive to the going we put through the plants we get that unit growth will contribute to that and then mix is also helping in the back out of twenty twenty three academic articles one up on gets like it thanks man thank you i next question attempt keep you with to a security please proceed with your question i'd like you have with a of the line are you changing all other side historical advertisement tell op
spk_2: we'll yourselves person or salads we can be different than what it's historically been a purple on that they bought
spk_0: yeah i'm sorry where will you be given a question again i'm sorry mister for that
spk_14: yasser on with and lot the new products are you changing your advertising cooperate with the way dollars or some of the retail get off floor and that a plane things like that is a different than it's been historically
spk_27: now we have sharpened the margins the for an hour and this language is used to censor the what i'd call front margin
spk_3: basically what i buy for what they sell it for we've sharpen those in the restore line to try to get had some of the historical dragged it was on the wholesale business in most cases are i can't think of a case where with change the back end at all yeah with there are not cases were changing in the back end it's we have sharpened the front end a bit and then as lux get into the line
spk_27: that margin dramatically helps the vendor margin as they look at how much purple contributes because those are very rich sales for the retailers that sell purple locks okay like very much
spk_3: thank you
spk_4: our next question is from i call my sparring with you bf
spk_3: please picky with your question
spk_27: good evening thanks a lot for taking my question rob i'm going apologize in advance but i also have a back half question on so a lot of exciting stuff clearly going on now with product launches the incremental slots but what have you assume for industry growth in the back half that dub globe like what's embedded in the guidance
spk_28: we have not as a assumed industry growth with assume share growth in the industry and
spk_1: have you can tell me what the plan i'll do that but we didn't
spk_29: our our say we also we didn't improve we didn't include further decay either got it hum and then oh my follow up is on the gross margin i think you mentioned a few hundred basis points track from promotions hi promotions in the fourth quarter ah please correct me they're fun not though beside her that's correct but would have used zoom go for promotions for twenty twenty three and related to that what does the risk that olds increase promotions good condition your customer to expect the so offers even as he launched the higher quality new batch
spk_6: we do have planned in the year some improvements in discount levels and in most cases we've already begun to see some of that mitt a little hard to read and wholesale right now because of the d stocking noise that in there but we have assumed modest improvement in discount levels across
spk_30: all three channels
spk_29: he had taken to a decrease in promotional a term say that clearly right
spk_3: awesome thank you very much and good luck with this year thank you tour thank you i next question is from part of me go with bank of america proceed with your question
spk_12: academic actually taking her am
spk_31: just why i guess clarify
spk_30: what's gone from a slaughtered prospectus so i think is sad
spk_32: four point four per door it's growing up by ah
spk_33: i'm a half or so maybe a little bit more is is that that rightness that across all offer to two hundred doors
spk_6: or just a portion
spk_34: yeah what what what what ultimately will that look like when you're done
spk_3: rated at me that i was given me a blended rates but we're not going to put lux into a significant majority of our doors
spk_35: we've got thirty four hundred doors and yield across the average it'll end up being maybe one point two to one point bore somewhere in there
spk_4: increase me up
spk_36: oh okay
spk_1: and then just on the point about the store and stores
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