Shoe Carnival, Inc.

Good morning and welcome to SHU Carnival's first quarter 2022 earnings conference call. Today's conference is being recorded. It is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. Management's remarks may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward-looking statements should also be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments. I'll now turn the conference over to Mr. Mark Worden, President and CEO of Shoe Carnival for opening remarks.

Mr. Worden, you may begin.

Good morning and welcome to Shoe Carnival's first quarter 2022 earnings conference call. Joining me on today's call is Kerry Jackson, Chief Financial and Administrative Officer. I'm encouraged to share that our customers return to a more normal shopping pattern during Q1 of 2022. Footwear category trends and customer behavior closely resembled the first quarter of 2019 before the pandemic began. Importantly, during this quarter, we gained valuable insights into how our customers would shop for footwear without the massive government stimulus distributions during 2021 and without the retail store closures from the pandemic in 2020. As such, I'll be comparing results versus Q1 2019 throughout my speech as we see it as the most relevant and normalized quarterly benchmark since the pandemic began. Three key learnings emerged for Shoe Carnival. First, our strategies to double our profit generation model compared to the levels before the pandemic have worked. Second, market share growth from new customer acquisition and loyalty enhancements continues to advance our plans to become a multi-billion dollar retailer. Third, customers are highly engaged with the dress, casual, and sandals product categories, demonstrating a strong return to pre-pandemic lifestyles and trends. More specifically, profits for the first quarter of 2022 significantly exceeded expectations. Earnings per share were 95 cents, achieving growth of 107% versus Q1 2019. Results were driven by double-digit operating income and net sales growth of 25.1%. This marks the fifth consecutive quarter of growing sales by over 20% versus 2019. Further, the 2022 results highlight the staying power of the customer growth achieved. I'm thrilled to share that we've surpassed 29 million loyal customers at the end of Q1, which is up over 10% from last year and over 25% from 2019. During the first quarter of 2021, the government distributed over $400 billion in consumer stimulus, contributing to SHU Carnival growth of over 120% versus the prior year. As included in our 2022 annual guidance, Q1 sales and EPS were planned lower than the prior year. However, our EPS over delivery versus planning Q1 reinforces our confidence for the remainder of the year. As a result of the strong start, today we are reiterating our sales guidance to achieve net sales growth of 4% to 7% on top of the 36% annual growth achieved last year. Additionally, we are raising our EPS guidance range to $3.95 to $4.15. Combined, this generates a return on beginning equity between 24% and 26% for our shareholders. We faced inflationary and supply chain headwinds throughout the quarter, yet our team of seasoned merchants continue to navigate the complexities with excellence. The teams partnered with our strategic vendors to ensure a solid inventory position and ultimately strengthen our delivery against our customer expectations. Our inventory positioning stores has us set up well to capture rapid growth in non-athletic seasonal products, dress, and casual categories. We started seeing these categories reemerge as growth trends last year, and the team bought 2022 for the consumer to return to more historic splits between athletic and non-athletic categories. During Q1, we saw that shift happen with an approximately 600 basis point shift from athletics back to non-athletics for the total corporation. This returns our category mix back to our normal split of approximately 50-50 athletic and non-athletic. Our balanced business model gives Shoe Carnival significant advantages to pivot rapidly as customer trends shift like they did over the past three years. Despite the supply chain challenges globally and the backup of goods at the ports, our inventory per door is up approximately 20% versus last year and versus 2019. We are positioned to win the back-to-school season with these inventory levels. Kara will discuss the supply chain and inventory positions further shortly. Overall, enthusiasm to rapidly grow sales and profits permeates through the organization. We are consistently executing on our core strategic priorities, which I will now provide a brief update on. Number one, delivering the most modern store fleet and shopping experience. Our BRICS-first retailer mindset ensures we constantly reimagine our store design, our shopping experience, and customer service processes. A total fleet modernization plan is well underway, and the new store design and enhanced shopping experience has generated exceptional customer response. As shared earlier this year, we have accelerated investments to complete the program faster. Today, 31% of the fleet modernization has been completed. Over 50% will be complete by the summer of 2023, and the full fleet plan will be completed by the end of fiscal 2024. One of the major advantages of the new design is to create distinct brand experiences and present customers with shop-in shop destinations. An example of this is our athletic shop-in shops, which provide a large, open, easy-to-shop environment with the nation's most sought-after athletic brands for the entire family. Another example is our seasonal pop-up shops that are focused on the hottest casual and sandals brands currently. Our new design is full of digital elements that allow us to pivot rapidly from one season to the next to the hottest new product, or to market the latest new brand in conjunction with our strategic vendor partners. Number two, our advanced CRM analytics and digital marketing. Understanding the footwear customer best and how to communicate effectively with them is a top strategic priority and core driver of our profit model. We elevated our capabilities in this space to accelerate profitable growth and to pinpoint desirable real estate. The Loyal Shoe Carnival customer base expanded over 10% this last 12 months and is now over 29 million customers that we can effectively engage with. Investments made in technology and team capabilities have transformed our promotional model into a highly profitable, personalized, digital-first approach. This has structurally shifted our gross margin levels upward by approximately 600 basis points, during Q1 2022 versus the previous highs pre-pandemic. Combined with our increased scale, the margin growth results in a sustainable operating income level that is double-digit and EPS that is more than twice the levels generated historically. This, in turn, creates strong operating cash flow characteristics to invest in accelerating future growth. Number three, leading store productivity. We completed our multi-year store productivity improvement plan this past year. The strategic plan eliminated all underperforming stores and those that were not positioned well to reach our core customer target. All comparable stores across the fleet generated positive cash flow and profit contribution last year. This past year, our sales per square foot also surpassed $300 for the first time compared to historically delivering $225 to $250 range. This quarter, we continue to deliver over $300 per square foot, and all comparable stores generated positive cash flow and profit contribution on a trailing 12-month basis. Based on our guidance, we expect to end fiscal 2022 with a strong cash flow generation and top-tier productivity. And strategy number four, rapidly expanding scale the existing fleet is highly productive the modernization program is progressing quickly we have structurally more than doubled our ongoing earnings per share we are now positioned to rapidly expand our scale profitably during december of 2021 we completed the acquisition of shoe station a leading footwear retailer in the south the second banner added a growth platform to expand store accounts across the southern markets We have smoothly completed the integration phase of the acquisition, and during 2022, are building out the banner's advanced CRM, analytics, and marketing capabilities. We opened our first shoe station store since the acquisition this past quarter, and sales have far exceeded our plans. Another handful of shoe station new stores have leases executed or near completion, and many more new stores are following on the heels. The SHU Station CRM and .com platforms are on track to go live ahead of plans and support our customers' holiday shopping this year. We are on track to double the footprint and sales of the SHU Station banner in the next two to three fiscal years. The SHU Carnival banner is also expanding store accounts and is moving into an accelerated growth mode in 2023. We opened a new store in Morgantown, West Virginia during Q1, and it also exceeded our sales plans and customer response. I'm bullish on sales growth and store account expansion for both banners. The total company fleet will reach 400 stores this fiscal year and over 450 stores during fiscal 2024. In closing, we see tremendous market share potential and a long runway for further store growth for our banners in the years ahead. Our inventory position is ready for a big spring sandal season that we are now in, ready for the upcoming back to school season, and is well positioned for the customer's return to a more normal 50-50 athletic, non-athletic balance between categories. I'd like to thank our nearly 6,000 team members, our customers, and vendor partners for contributing to our many successes in Q1. I would now like to turn the call over to Carrie And then we will open up for your questions. Kerry? Thank you, Mark.

I'm excited to share with you some financial highlights from a very successful first quarter. And in doing so, we will help demonstrate the sustainability of the structural changes in our profitability profile. In my remarks, I will continue to compare our first quarter results with first quarter 2019. But I also weave in comparisons to our record-setting first quarter last year where appropriate. Net sales in Q1 were 317.5 million. This is the second highest first quarter sales results in our history. Excluding last year's record Q1 performance, this was the highest Q1 sales results, being any other Q1 by more than 20%. An indicator of the strength of the quarter against the more typical first quarter of 2019, total sales were up 25.1% and comparable store sales were up 16.8%. Breaking this down further, our brick and mortar comparable store sales were up 9.1% and e-commerce increased 154.4%. As Mark mentioned earlier, we planned on our annual guidance lower Q1 sales when compared to Q1 last year. Against last year's stimulus-enhanced Q1, total sales were down 3.3 percent and comparable store sales declined 10.6 percent. These results were against a net sales increase of 122.7 percent and a comparable store sales increase of 125.8 percent in Q1 last year. our Q1 gross profit margin was 35.5%. This was the second highest quarterly margin in our history and was up 590 basis points over Q1 2019. This increase was driven by a 680 basis point increase in our merchandise margin, partially offset by a 90 basis point increase in buying, distribution, and occupancy expense as a percentage of sales. Against last year's first quarter, our merchandise margin decreased 130 basis points and buying distribution occupancy expense as a percentage of sales increased 280 basis points. Due to current global supply chain issues and transitory inflation, we incurred in Q1 this year significantly higher transportation and fuel costs, which reduced our merchandise margin by 150 basis points and increased our distribution costs by 190 basis points. I'd like to point out, excluding the unusual 150 basis points in fuel costs, our merchandise margin would have increased in Q1. Furthermore, these additional costs decreased EPS in Q1 by 29 cents. While we expect to incur higher transportation and fuel costs through the remainder of the year, We feel the year-over-year increase will moderate in Q2 and beyond, partly due to mitigations we have put in place. SG&A expense in Q1 was $77.5 million for 24.4% of sales. The increase in SG&A against Q1 last year was driven primarily by increased investment in advertising and store-level wages, partially offset by lower incentive compensation expense. Q1 operating income was $35.4 million, or 11.1% of sales. This is in line with our expectations of annual double-digit operating margins, which are more than double our historical rent rate. Net income for the first quarter of 2022 was $26.9 million, or 95 cents in diluted earnings per share, Once again, this is the second highest Q1 diluted EPS, only surpassed by Q1 last year. However, to put this in further context of the transformation of our profitability, earnings in Q1 by themselves would be the fourth highest annual earnings in our 43-year history. We closed out the quarter with inventory of $345 million, which is up $76.4 million compared to the prior year, or 22.6% on a per store basis. Approximately 40% of the increase was due to the addition of SHU station stores, with the remaining increase due to the accelerated receipts of merchandise to help protect our store inventories against supply chain delays. The acceleration of merchandise receipts has put us in a solid position for spring and SHU's position as well for back to school. We continue to have ample liquidity to fund our growth initiatives Mark outlined earlier. At the end of Q1, we had total cash equivalents and marketable securities of $97.1 million and no outstanding debt. During the quarter, we purchased approximately 683,000 shares of our stock at a cost of $20.5 million. We currently have 29 remaining on our $50 million share repurchase program. With Q1 sales results in line and diluted EPS ahead of our expectations despite higher supply chain costs, we are reiterating our sales guidance for fiscal 2022 of 47% growth and raising our diluted EPS guidance to $3.95 to $4.15 from previous expectations of $3.80 to $4.10. In closing, this morning we announced the continuation of financial results, which are significantly elevated from our pre-pandemic profit levels. We have confidence in the sustainability's elevated earnings levels, and we are better positioned financially than ever before to execute on our growth strategy which combines organic store expansion and modernization on the one hand and a selective acquisition strategy on the other. This concludes our financial review. Now I'd like to open up the call for questions.

If you'd like to ask a question, please press star then 1 on your telephone keypad. Our first question today is from Mitch Cummets with Seaport Research. Your line is open.

Yeah, thank you. I've got maybe a handful of questions. So, Kerry, could you start? He talked about the higher transportation fuel costs. I think if I add up the merge margin and BDO, it's about like a 340 basis point hit on the quarter. You mentioned that you expect that to moderate through some mitigation strategies. Can you maybe just elaborate on that? Like, what do you think that is? maybe in the second quarter or for the year, and then talk a little bit about the strategies that you're employing to bring that down. And then I've got some other questions.

Well, Mitch, we're not going to get specifically into it because it's still a little bit of unknown because we can't control the fuel costs on that. We expect to see Diesel would be about the same looking out, so we don't expect to see much on that. However, on the transportation side, what we saw was a shortage of availability to transport goods out of the ports because of the congestion. That congestion is kind of slowing, is clearing out a little bit, so we're seeing more favorable rates on transportation costs. That's why we think that we're going to be able to improve on that as the year goes along. We're working aggressively to lower those costs because that was quite a penalty in Q1 for us. What we would see is that both of those, that BDNO would not be leveraged to that extent in Q2 and beyond as we did in Q1. We think that's going to be the high watermark.

Okay. What was the Shoe Station contribution in the quarter from a sales and EBIT perspective, if you have it?

You know, we look at Shoe Station as one of our, a store of growth. It's a separate banner, we call it, but we're not going to break out the pieces between the two because we look at it as one enterprise, similar customer base, similar issue base. So it's going to be one company.

Okay. And then on the comparable store sales, I think on a year-over-year basis, down 10.6. How did that break out, kind of traffic versus ticket? I think your prior full-year outlook was maybe sort of like slattish. So I'm kind of curious how you think about that playing out for the balance of the year.

Hi, Mitch. It's Mark. Good morning.

Good morning.

As Gary stated, we're confident in our guidance of sales growing 4% to 7% for the year. And importantly, now that we're past the Q1 stimulus and major headwinds, We see us in a growth mode in that range starting off this quarter and continuing to grow the sequential quarters the rest of the year. In terms of the diagnostics, traffic has been in line with expectations. During Q1, we saw lower conversion rates, which was driven primarily due to the $400 billion of stimulus consumers had available from mid-March to the end of the quarter last year. That made conversion record highs last year. We're very pleased with where conversion landed this year, but we would say that the less discretionary funds and the high inflation didn't slow down traffic, but it slowed down their ability to make multiple purchases for the higher ticket purchases in the category this quarter.

okay and then um kind of to your point mark um on the accelerate so when i look at the sales the kind of the run rate on a three-year basis i guess q1 was up 25 the the sales guide on the year implies a three-year sales growth of kind of mid-30s which is an acceleration from where you were in the first quarter Is the confidence that you have in that largely due to maybe the better inventory position you are in today versus kind of what you were in going into the quarter? Are there other things that are also contributing to what you would expect to be an acceleration of that three-year sales growth rate?

It's multiple factors. The largest is just the comp we had to go against for Q1 and the stimulus, again, versus one.

Yeah, but I'm talking about on a three-year basis.

Yeah, on a three-year basis, we captured significant share growth since 2019 or three years ago. The consumer did not have the discretionary funds available in Q1, and the inflation, as I said, was a challenging headwind. We're seeing that already mitigate in the early part of this quarter and are very encouraged with the early trends we're seeing in the first weeks of Q2. We're seeing the consumer now get into a more normalized state. and accelerated growth compared to 2019, to your question. Q1 was truly an anomaly with the inflation shocks I think consumers were digesting. We're seeing them get into a more normal stage in these first few weeks of Q2 and very pleased with the growth being able to deliver in line with the 4% to 7% guidance.

Got it. That's helpful. And then lastly, just on Sandals, Sounds like you're encouraged about sandals. And I guess just I'm curious kind of how they perform in the quarter. I think the weather wasn't necessarily ideal. Maybe your inventories for sandals weren't ideal in the quarter. And probably a lot of that has improved subsequent to the end of the quarter. Can you just talk a little bit about that? And then I'm good. Thank you.

Sure. Thanks again, Mitch. I'm going to ask Carl Shabetta, our chief merchandising officer, to elaborate on that one.

Hi, Mitch. How are you doing? You're right. Sandals in the first quarter started slow. The weather was unseasonably cool, especially in the middle to northern part of the country. Late, late first quarter, as weather started changing, we saw a significant increase in sandal performance. And as the warm weather has hit the first two weeks of May, we're seeing customers' acceptance of our sandal offerings very, very strong. We're well positioned from an inventory standpoint. And we look to have a strong second quarter in the seasonal categories.

Great. All right. Thanks, guys.

Appreciate all the color. Our next question is from Sam Poser with Williams Trading. Your line is open.

Good morning, everybody. I just have a few questions. One, I'll get to the good stuff in a sec, but You mentioned on the fourth quarter call that you had with your same day delivery, you had brought on DoorDash to do some of that. I wondered, Mark, if you could give us a little update on some of these improved customer facing initiatives you have, including that one.

Good morning, Sam. Thanks for joining us today. We're very pleased with the work our team is doing to make our shopping experience easier and faster. as well as cost-effective for them. We're building in enhanced systems throughout our omnichannel, including upgrading our entire backend system to the leading Salesforce platform, and that has just gone live in the last quarter. We couldn't be more excited with what this new platform is going to allow us to do. Additionally, on specifics, we're very pleased with the early days of our Same day delivery services and partnerships. Our customers are taking advantage of it. And it gives them that one more option of whatever's easiest for them. Most we find shoe carnival shoppers still love the experience in store and want to come into the store. But many are taking this opportunity as well.

So we're very pleased with the capabilities.

Thanks. Historically, you've given us the breakdown by category, kids, adult athletic, women's and men's not. I wonder if you could provide us that data, both on a versus last year and versus 19. Hi, Sam. It's Carl.

Versus 19. Like was said in the earlier remarks, the non-athletic categories continue to accelerate. So women's non-athletic was up in the 30% range, really driven by dress and sport. Men's non-athletic was up in the mid-20s. Kids was up in the low 30s. And athletics were down very slightly, singles versus 19, versus 21, The non-athletic categories continue to outperform the athletic categories versus 21 in the stimulus money from a year ago. And that has brought us back to our 50-50 breakdown of athletic versus non-athletic.

Can you give us some specifics, as you just did for last year, on what you gave for 19?

Sure.

Let me pull that. Women's non-athletic was up mid-singles. Men's non-athletic was up low singles.

Children's total was down in the high teens. And adult athletic, actually, yeah, adult athletic was down right at 20%. And that takes us back to pre-pandemic sort of breakdown of our business.

And with the athletic business, how much of that do you think was just all the stimulus from last year versus delivery timings this year? Because we're hearing a lot of the athletic guys have been late, late, late, late, late. And so I'm just wondering, you know, what you're seeing there and how you're thinking about that for the balance of the year.

A big part of when stimulus money is in the marketplace, whether it's tax refunds or stimulus money, really accelerates our athletic business significantly. With the amount of money that was in the market last year, it obviously had that great effect. We're now back to where we were in 19, which is... that 50-50 breakdown, athletic, non-athletic, which is frankly the strength of our formula. Not going to ignore the fact that there are issues with deliveries coming out of, let's just say, goods manufactured in Vietnam. But we have been very aggressive, and we do believe we're going to tend to see some slippage there, but we have been able to manage through it. for almost two years, so we're confident we'll get what we need.

Thanks. And then lastly, when do you anticipate seeing the benefit of your largest vendor's decision to eliminate quite a bit of distribution? Are you starting to see some of that now, or is that something that – when do you anticipate seeing some of the benefits from that?

Well, broadly speaking, we've been seeing growth in our athletic market share for multiple years now. And we're confident with the lay of the land. We've got the right strategic partners, a broad, diverse set, and we're going to continue to grow market share. We can expect that to continue to accelerate as we get into back to school and holiday season this year, based on our relationships across the slate of the world's best brands.

All right, I'm sorry, one more thing. With ShoeStation, you originally had guided ShoeStation to do about $100 million in revenue and at a 10% out margin. Has anything changed within that number within your guidance? Or can you just give us any color as to what you're seeing there? by getting up earlier on some of the CRM and with a shoestation.com. Will that potentially facilitate more revenue? Anything you can give us there.

Sure, Sam. Again, this is Mark. We're very pleased with the early results. We're confident in delivering that early guidance. And there's an opportunity with integrations going so smoothly with our leases starting to get signed and outperforming. and our dot com coming online before the holiday there's an opportunity for us to start to capture some of that growth towards the end of this year importantly we think we're set up to grow rapidly as we get into the next fiscal year and have all those pieces in place but to reiterate we're very confident in delivering our original expectations and have an opportunity to beat

And you said you were going to open like, it sounds like around seven stores, seven or eight stores this year, and then accelerate from there to 23. Is that, am I, did I get that right from prior call?

We're committed to get to 400, so that's roughly right. We're working hard to get above seven. It's going to come down to just real estate availability if that happens towards Q4 or in Q1. We're trying to make it real clear, 450 is a number we'll surpass as we get into fiscal 2024. We're going as quick as we can. We're finding very attractive real estate. It just matters how fast we can close those deals. But yes, we'll accelerate in 2023 into double-digit store growth and accelerate again in the following year, making a minimum of 450 stores for the enterprise at the end of fiscal 2024.

Okay, great. Well, thank you so much and continued success.

Thank you, Sam. Our next question is from Jim Chartier with Moness Crest v. Hart. Your line is open.

Good morning. Thanks for taking my questions. First, I believe last quarter you said you expected first half sales to be flat to up 2%. I just wanted to see if you're still comfortable with that expectation.

We are. We're really happy to get past the compare of Q1, and we're expecting comp increases in Q2, 3, and 4 as we had originally expected. Like we said before, is that we expect the Q2 comp to be on the lower side of the average for the remainder of the year because of some residual still benefits of the stimulus from last year. But we're still in line with our expectations there.

Great. And then your SG&A came in a little bit higher than I would have expected, given that you're comping against the big incentive comp accrual last year. Were there any incremental costs to integrate ShoeStation in first quarter? And then you mentioned higher advertising expense. When was the expected benefit from that expense, and what's the plan for advertising for the rest of the year?

Our SG&A came in line with our expectations. We're needing to invest in our store-level wages, as we've done before, so we have a good, positive store experience where our customers come in. And the other one was advertising, utilizing our digital CRM analytics to drive that spend to be more effective and drive that margin of sales. We're in line. The unusual thing that was interesting is that offsetting those a little bit was a lower incentive compensation compared to last year, because if you remember last year, we had such a breakout first quarter. It was higher than the average typically.

Good morning, Jim. It's Mark. One build on that. We're very proud to share that our cost structure now includes all shoe carnival, full-time employees are at $15 or above. And we've been working many years to have what we believe is the strongest employee base also compensated at a strong living wage. And this quarter, we have achieved that, and we have that built into our guidance for the annual year, which we've just raised today. That's great.

And then the shared purchases, much more aggressive and kind of historical. You know, has there been a change to your approach to share purchases? And, you know, how do you think about that going forward?

Jim, we typically are opportunistic on that. And we saw our stock under pressure in the first quarter and utilized that to buy back some shares a little more aggressively.

Great. And then the last question, any areas where inventory is constraining sales?

Hi, Jim. This is Carl.

Not that we see at this point inventory for the SHU, on the SHU Carnival comp basis versus 19 is up per door about 8% and our sales are up just over 16, as Terry reported. So, we think that's a really good ratio making good efficient use of the inventory that we have. We're well positioned going into the second quarter for a as the weather warmed up for a great seasonal selling season and preparing for back to school.

Great. Best of luck for the rest of the year.

Again, please press star one if you'd like to ask a question. The next question is from Mitch Comets with Seaport Research. Your line is open.

Yeah, I just have a couple quick follow-ups. One, just on the gross margin, so you've got this outsized growth. right now of non-athletic versus athletic. Are there any, you know, margin implications to that in terms of that penetration going up?

Yes. Mitch, hi, it's Carl again. Typically, typically the non-athletic areas run a slightly higher margin than the athletic areas do. And we have that built into our plan for the balance of the year.

Okay. And then, Carl, it sounds like you guys are particularly bullish on casual dress, seasonal, kind of based on what the current reads are there and what your thoughts are for maybe the balance of the year. I'm sure you have a pretty good sense as to maybe how some of your competition is positioned in those categories. Do you feel like there's an opportunity to pick up market share in those areas, maybe over the balance of the year, just kind of given the commitments you've made to those areas versus Maybe a lack of commitment by some of your competition?

Well, Mitch, I'm going to talk about our competition, but we started seeing the reflow of the categories to the non-athletic categories, frankly, April of 2021. And it really picked up where we were headed in 2019. We took that as a as an alarm or an opportunity, I guess I should say, to go after those categories. We continue that throughout the balance of 21 and aggressively has ourselves in a position for 22. We see that continuing. We believe we've taken market share in those areas, and we believe we're ahead of the curve on that.

Okay, that's helpful. Thanks again. Good luck.

The next question is from Sam Poser with Williams Trading. Your line is open.

Carrie, I was wondering, can you give us some more data on your loyalty members as to how loyal they are and how much business you're getting from them? And, you know, you talked about share growth in a broad sense, Mark, but, you know, where do you see the share growth coming from? And then lastly, probably for Carl, when built into your plans to take into account the mix of product, the benefits of the mix of product, how do you foresee the promotional environment within your plans with, say, versus 19? I mean, last year was almost perfect. So versus 19, how do you foresee that?

First, Sam, it's Mark. I'll take that first. If we talk through our advanced CRM capabilities, it continues to grow faster than we expected. As reported, total membership grew over 10% versus the prior year. We were very encouraged to see that sustained growth during Q1. That puts both our total members as well as our gold members, our most valuable customers, who are both up approximately 10% for the end of Q1 for the Trailing 12. And as I said, over 29 million members hitting a new watermark. That's so important because now with that enhanced technology, we can engage with that consumer via effective, cost-effective digital vehicles and personalize the messages and offers. Ultimately, that strength is parlaying to that nearly 600 basis points of enhanced margin that we talk about. That's where the real excitement is. Effectively, efficiently promoting our best products, our best brands, without having to dilute the profit per pair or engagement. We couldn't be more encouraged by where we're going there. There's a lot more upside, though. We always talk, where are we in the baseball game? We're still early innings. We absolutely know how to play the game. We have all the tools. But there are many, many more innings of growth we can derive from this in the years ahead.

But what percent of your sales are coming from those loyalty members, and how has that changed, let's say, now versus last year and now versus 2019?

Yeah, we're still hovering between the two-thirds and low 70s on any given quarter, Sam. We still have a lot of runway and believe the upside potential is in the years ahead to get that in the high 70s or 80% of our revenue to truly climb to best in class. We've completed all the investment phases, as I said, upgrading to, we believe, the best platform available for what we need. And we think that over the years ahead, we can continue to gain that efficiency for cost and effectiveness or reach and move from that range I just said significantly up year over year.

Thank you. Thank you.

We have no further questions at this time. I'll turn it back to the presenters for any closing remarks.

Thank you all for joining us in our Q1 call, and we look forward to talking to you again in the next quarter. Have a great day.

Ladies and gentlemen, this concludes today's conference call and webcast. Thank you for participating. You may now disconnect.