Nordstrom, Inc.

Q3 2021 Earnings Conference Call


spk_0: reagan and welcome to the nordstrom third quarter twenty twenty one earnings conference call at this time all participants are to and only mode we will begin with prepared remarks followed by a question and answer session if you like to ask a question please press daughter one on your telephone keypad if anyone should require operators has answer the conference please press star zero and your telephone keypad as a reminder this conference is being recorded at this time ultra mccall over to heather hollander head of investorrelations for nordstrom you may begin
spk_1: good afternoon and thank you for joining us before we begin i want to mention that we will be referring to flies which can be viewed in the investor relations section on nordstrom dot com our discussion may include forward looking statements so please refer to the slide with are safe harbor language participating in today's call or eric nordstrom chief executive officer pete nordstrom president and chief brand officer and and bremen chief financial officer who will provide a business update and discuss the company's third quarter performance and now altering the crawl over to iraq
spk_2: good afternoon and thank you for joining us we have long benefited from a commitment to customer service and are connected digital and physical assets and innovative brand partnerships however we need to move faster and more aggressively to better capitalize on those strings more quarterly results were in line with our stated plans and we are on track to deliver on the financial commitments we meet at our investor the in february and we look across the landscape we need to deliver more we need to grow market share and deliver greater profitability and we're acting with a sense of urgency to do so we've taken a comprehensive look at opportunities to improve our business engaging external consultants with function specific expertise across three key areas improving nordstrom rack performance increasing profitability and optimizing our supply chain and inventory flow we are not set of fight at all with our rack business as clearly our recovery is lagging what we think it should be however we are encouraged with a clear path improvement that we see in front of us and have identified clear actions were taken to improve performance and accelerate profitable growth first nordstrom rack has been challenged by low inventory levels in premium brands and key categories such as women's apparel and shoes customers are drawn to nordstrom rack to purchase premium brands at a terrific price and back ninety percent of the top brands at nordstrom are also sold at the rack these brands are more highly penetrate interact business than they are at other are price retailers are many retailers are dealing with mackerel related supply chain disruptions rack faces a unique challenge as our price procurement at the same top brands we carry at nordstrom is particularly difficult in an environment with production constraints and lower levels of clearance product rex top fifty brands represented approximately fifty percent of sales and twenty nineteen you did eight these brands represented only forty two percent of sales highlighting the outside gap in merchandise availability in response we are undertaking a comprehensive set of actions to increase our inventory levels and improve merchant ice floe for the rat in particular we're executing a multi layered plan to both grow our offer of the most coveted brands we carry as well as source from new ventures to ensure we had the selection our customers want to minimize supply gaps we are increasing are opportunistic use a pack and hold inventory allowing us to buy larger quantities of a relevant items when available then hold a portion of it to deploy and periods with high demand tight supply or system constraints given that we expect macro related supply chain disruptions to continue into next year where strategically evaluating our assortment and increasing our use of pack and hold inventory by a factor of two to three times we expect that action in these areas will not only yield benefits as we deal with macro related supply chain disruptions but also deliver sustainable benefits that will enhance our long term performances well while we're in the early days of these efforts preliminary results show sales responding positively and rack stores with improving him in tory positions second are mix has skewed too far to lower prices at the rack with a you are declining four percent versus twenty nineteen this shop sharper than expected decline results from a couple of factors first customers come to the rack for coveted premium brands at a great value this is the strength of ours as much of this product is scarce in the off price channel however we haven't had adequate supply of those brands as i just described next as we adjusted our assortment of and last year to add more product at lower price points we found that we went too far in certain categories we are now rebalancing are assortment to increase the breadth of selection and premium brands improve average selling price and better align with customer expectations third we are acting to strengthen racks brand awareness and drive traffic as part of this effort we launched a new more reasons to rack marketing campaign in september we're encouraged by early consumer research read which showed a meaningful increase in future purchase intent by improving inventory levels expanding our selection and top brands and increasing awareness and traffic we expect to grow market share and improve profitability at nordstrom rack with the actions were taking we anticipate improve any queue for with more significant improvement to follow in the first half of fiscal twenty twenty two turning to profitability we are committed to delivering significant improvement in merseyside margins and bit margin across the business we lost a comprehensive study of the factors driving on merseyside margin and found meaningful opportunities for improvement and pricing category management and private label brands people take you through the detailed plans behind those were extremes in a moment within sta we remain focused on managing fixed expenses and twenty twenty we re based our overhead costs structure and we remain committed to sustaining a substantial portion of that reduction and while we seen significant macro related pressuring fulfillment and labor costs are concentrated on mitigating our overall impact from those pressures improving our supply chain and imagery flow is also a priority in response to macro related supply chain challenges we have identified various ways to improve our internal network and processes by diversifying or carrier capacity getting better and and visibility of inventory as it moves through our supply chain increasing velocity and throughput in our distribution as and fulfillment centers and better positioning our inventory to get a closer to the customer we expect that these initiatives will enhance the customer experience and drive topline growth at both nordstrom and or some rack by increasing delivery speed and expanding the selection for in store shopping as well as same day and next day pick up while also driving efficiencies and labor and fulfillment we expect to see benefits from these actions beginning in the first half of the twenty twenty two turning the third quarter performance we continued to see improvement in our nordstrom stores strong digital growth and benefits provided by the interconnected capabilities of our market strategy nordstrom banner sales returned to twenty nineteen levels in the third quarter and the southern portion of the us were forty four percent of our stores are located nordstrom comparable store sales grew eight percent over the third quarter of twenty nineteen or geographic footprint has been a source of strength for us historically with stores located and highly desirable real estate in the country's top markets however urban areas have been disproportionately impacted by the effects of the hang damage as a result or suburban nordstrom locations outperformed our urban locations by thirteen hundred basis points in the third quarter as discussed at our investor event winning and are most important markets and increasing our digital velocity or key strategic priorities for us and we're making progress in these areas the convenience and connection delivered by or market strategy continues to be a powerful enabler for the business we're leveraging a strong store fleet depositions as physically closer to the customer and drives value across the business as a result we are able to better serve customers and provide greater access to product by deleting our assets at the market level or market strategy delivers incredible convenience that provides customers with four times more product available for next day pick up a one day reduction in average shipping time and the ability to pick up orders at the nordstrom norstrom local or nordstrom rack location of their choice this quarter one third of next day norstrom dot com orders were picked up at rack stores showing continued evidence of the power of integrating capabilities across our two brands and across our digital and physical platforms in our top twenty markets where our market strategy continues to gain traction order pick up accounted for twelve percent of digital demand versus four percent in other markets since we launched order pick up at the rack last year we have seen seventy percent growth in the program as we head into the holiday season we are encouraged to see steady increases in order pick up demand each month which is evidence that customers are taking advantage of are integrated touch points this trend is also advantageous because by on online pick up in store provides our highest satisfaction customer experience which in turn drives more return visits it is also our most profitable customer journey the value of are interconnected model is evident as customers dramatically increase their spin when engaging across multiple channels banners and services for example the average customer the shops across both banners in store and online spends over twelve times more than a customer utilizing a single channel the call the inconvenience at the services we offer such as alterations and personal styling drive connection and engagement increasing customers spend by a factor of five to seven times versus customers who don't utilize those value added services we also continue to increase our digital velocity across nordstrom and nordstrom rack this quarter digital sales increased twenty percent over the third quarter of twenty nineteen digital sales represented forty percent of our business and que three and we continued to drive growth over twenty nineteen while store traffic improved sequentially before i turn the call over to pete we'd like to express our thanks to our exceptional team their dedication efforts and serving our customers and transforming our company drive or optimism about the future of the business or from has a strong foundation and unique competitive differentiate years and we are working diligently to accelerate our strategic transformation and build on our core advantages to be clear we recognize the need to move faster and more aggressively we're taking decisive steps to improve rap performance increased profitability transform our supply chain and create value for our shareholders all said we remain confident in our ability to achieve the top and bottom line commitments we set forth at at our investor event and continued to build capabilities to profitably grow our market share with that alternate over to pete thanks eric and good afternoon everyone is eric said we've taken a deep look at our business and identified areas of improvement in pricing category management and private label brands that are expected to drive a better customer experience as well as sales and margin improvements two decades of experience we learned that when you make things better for the customer you make things better for the business overall i'd like the first discussed these specific areas of opportunity before getting into our category performance and casper trends in the third quarter and finally our plans for the fourth quarter first we are using dynamic pricing analytics to optimize our promotional effectiveness and improve the pace and depth of markdowns to move product profitably at the end of each season
spk_3: we expect to see initial benefits from this work beginning and que for
spk_2: next we are working to improve our category management process we are using a data driven customer centric approach to define the role of each category at nordstrom and nordstrom rack and then optimize our assortment for the role each category place we benefit by attracting new customers and expanding engagement and share of wallet with existing customers
spk_3: we also gain efficiency by focusing on the most productive items eliminating redundancy and editing out our poor performers as a result
spk_2: as we shared during our investor event earlier this year we also have a meaningful opportunity with our private label business nordstrom product group we see that significant value that nursemaid brands represent delivering expanded options and better value for our customers while also giving us more control over our merchant i selection notably the gross margins of our private label brands are on average five hundred basis points higher than our third party brand product we recognize the opportunity and need to accelerate our efforts to increase or private label penetration we look forward to sharing our progress with
spk_3: you in the coming quarters turning to category performance this quarter we continued to see strength and pandemic related categories particularly home and active where our sales increased ninety five and fifty seven percent respectively compared to two thousand and nineteen levels are designer category continues to perform well with a strong double digit sales increase overnight team led by strengthened designer shoes handbags and designer men's apparel
spk_2: we saw signs of travel returning with sunglasses and swimwear posting double digit increases over two thousand and nineteen we are also encouraged with a sequential trend improve it and occasion base categories during the third quarter a promising signal that customers are beginning to return to social and work events dresses men suiting and dress shirts dress shoes and make up all showed sequential prove it during the third quarter and we are
spk_3: closing the gap to nineteen sales levels
spk_2: however we experience inventory shortages in the quarter especially in certain core categories such as women's apparel and shoes were demand came back stronger and faster than we expected we responded by trying to increase supply as quickly as possible that were able to land as much product as we needed in certain core categories and
spk_3: miss an opportunity to capture incremental sales as a result
spk_2: we're working to better align inventory levels and customer needs and uphold inventory receipts forward in anticipation of holiday demand we are confident that we're in a much improved position for the holiday season both in terms of quantity and balance of categories as we look at customer trends are nordic club loyalty program remains a powerful engagement driver and we're encouraged by positive trends within the program q three loyalty sales grew five percent versus two thousand and eighteen and loyalty penetration increase two percentage points to sixty five percent of sales we also saw increases and spend and trips per customer compared to pre pandemic levels
spk_3: as we look to queue for we're excited about our plans to continue transforming the business
spk_2: we are scaling or nordstrom media network which allows our brand partners to advertise directly to customers or north some dot com and nordstrom rack dot com
spk_3: and drive traffic and sales for their brands
spk_2: having successfully piloted the platform and que three we're expanding it and queue for and expect to see more meaningful financial benefit in twenty two
spk_3: as we evolve are merchandising approach are alternative partnership models have gain approximately three percentage points of total sales share since two thousand and nineteen to nearly eight percent today building on that progress i'm pleased to announce our new partnership with fanatics norte some dot com customers will now
spk_2: now have access to fanatics industry leading assortment of high quality lights and sports products this partnership demonstrates our ability to increase choice count quickly and at scale with fanatics will scale to ninety thousand new customer choices on norse and dot com an increase of over twenty percent and our total choice count without a corresponding increase in owned inventory or labor we're also excited to advance our partnership with a sauce and offer a broader sort meant to better meet the needs of twenty something customers we launched select a sauce brands on north some dot com and into pilot stores this month the we are in the early days preliminary read are very promising will expand our in store a sauce offering with a market rollout launch that spring nordstrom stores will be the only physical locations in the world where customers can buy a sauce product and we're excited about are opportunities to build on this partnership as you heard it our investor event in february we're expanding our choice count to both gain greater wallet share with our existing customers and attract new customers we entered queue for a record high choice count and will continue to significantly expand our selection using customer insights and enhance analytics to present a curated relevant assortment for the holiday season we're excited about our plans to use are integrated network of stores and digital platforms to showcase holiday dressing decor and gift offerings and provide festive experiences and convenient services that make shopping easy and enjoyable for our customers to drive holiday performance we're leveraging analytics as well learning from our anniversary sale or we combine the art of merchandising with data driven insights do with the right assortment in the right place at the right time to our customer analytics work we learned that we have a lot of opportunity to expand holiday gifting and a response we significantly expanded are getting assortment and featured gift shops both in store and online in closing we're excited to drive sales and delight customers with are compelling how the offering and the newness and choice count expansion from innovative partnerships with fanatics and a sauce
spk_3: with that i'll turn over to and to discuss our financial results
spk_4: thanks pete i like to begin with the review every their quarter results then take you to our approach to queue for overall net sales decreased one percent in the quarter compared to the same period in fiscal two thousand and nineteen the time he shifted the anniversary sale with roughly one week fallen into the third quarter of twenty twenty one positively impacted their quarter sales were partially two hundred basis points nor some banner sales return to two thousand and nineteen levels driven by improving store trends sequential store traffic improvement and increasing spend per customer nordstrom rack sales declined eight percent as inventory procurement and flow challenges negatively impacted performance and if eric mentioned the team a taking specific actions to improve rocks performance and capture market share and the off price sector on the digital front we continue to serve customers desire for online shopping experiences with strong digital growth even as north from store traffic and sales continued to recover for the third quarter digital sales increased twenty percent over two thousand and nineteen and sixteen percent after adjusting for the timing of the universe refill reaching one point four billion dollars gross profit as a percentage of net sales increased eighty basis points compared with the same period in fiscal two thousand and nineteen primarily due to leverage and buying an occupancy costs and higher merchandise margins ending inventory increase thirteen percent compared with the same period in fiscal two thousand and nineteen in transit product represented the majority of our inventory increase in the quarter as we pulled received for to address continuing supply chain backlogs and support the anticipated earlier holiday demand entering the fourth quarter our inventory his current with new exciting product for the holidays looking ahead we anticipate elevated inventory levels through the end of the fiscal year as we position product to meet customer demand and invest in pack and whole inventory for the rack total se ne at the percentage net sales increase two hundred sixty basis points compared to the same period in fiscal two thousand and nineteen as a result of continued mackerel related fulfillment and labor cost pressures partially offset by continued benefit from resetting the cost rupture and twenty twenty now turning to our outlook for the remainder of the year as you've heard today we're excited about our plans for the fourth quarter with a great selection of compelling products and experiences to serve hello demand both in store and online our outlook for the remainder of the year assumed that economic improvement and increasing mobility will continue to draw consumer spending given third quarter performance in line with their expectations and plans for continue progress in the fourth quarter we are real for me are guidance for fiscal twenty twenty one we expect revenue growth of more than thirty five percent versus the school twenty twenty and we were still projecting flight sequential problem on improvement from que three to queue for we expect to deliver a that margin of a partially three to three and a half percent for the for here i like to provide a bit of collar on our fourth quarter for compared to two thousand and nineteen for the fourth quarter we are forecasting significant growth margin improvement versus the fourth quarter of twenty nineteen reflecting the benefits the lower promotional activity in higher regular price fell through this year we expect that sg in a pressures primarily related to fulfillment and labor costs will continue and queue for resulting in sc ne d leverage similar to what we experience as quarter after excluding and impairment charge that we record in the fourth quarter of twenty nineteen turning out a copper allocation we remain committed to are ongoing priorities with our first priority being investment in the business we're planning capital expenditures life levels of three to four percent with an emphasis on supporting supply chain and technology capabilities our second parades reducing our leverage we're committed to an investment grade credit rating it remain on track to decrease or leverage ratio to approximate three times but the end of this year and a partially two and a half time for the and twenty twenty two through a combination of owning improvement and debt reduction or third priority is returning cash to shareholders and we continue to expect to be in a position to do so by the end of the year as you've heard today or third quarter results show some pockets of strength is well several areas for improvement we made progress toward our goals with strong digital growth and improving trends and or norstrom banner stores and remain on track to deliver our fiscal two thousand twenty one targets and the commitment with that for that or investor event delivering even margins greater the six percent in a new operating cash flow greater than one billion dollars as eric said earlier we recognize that we need to deliver more and we are acting with a sense of urgency these medium term targets are a step on the way to delivering greater profitability and cash flow as regrow share optimize across platforms and drive skill we are confident in our path forward in excited about the future of our business i like to know turned over to heather brooke una
spk_1: thank you and before we get started with you and i we ask the participant limit their responses to one question and one followup will now move to the q and a session
spk_5: thank you
spk_0: if you'd like to ask a question please press star one on your telephone keypad a confirmation tonal indicate your lies in the question kill you my press star to if you'd like to remove your question from the kill for participants you think bigger equipment it may be necessary to pick up your head that before pressing the star keys our first question is from omar thought with evercore i as i please proceed with your question
spk_6: good evening better take my question i love read a diving deeper on the rack challenges and opportunities in iraq business maybe talk about retro wait between external factors impacting that business vs your merchandising better merchandising other think you guys we do internally to improve that goodness i'm on could you also maybe talk about a book is great digital platform homage our platform the market or local market model maybe you could help us understand why and all the data and analytics the combat already got this been isn't helping you to ah be better place in the inventory and buying inventory and getting it work if the be the right a majority worth your loot the be a little bit the filing a goblet maybe the habit of premium brands thanks
spk_7: a target their it
spk_8: the airdrops
spk_9: presumably there's external headwear inspector sure everyone's dealing with those
spk_8: i put it on eternally we have not responded as quickly as growth of a way of as we need to with right a particular roosters or source of goods or source of goods
spk_9: are taught disrupted the pandemic arab or it resulted in both are just flat out shortage of inventory
spk_2: we've been significantly for under inventory plans all year
spk_10: we've for
spk_11: the lot for fall out of our on order
spk_3: but it's also resulted in in a mix issue which to thought about in that prepared remarks
spk_2: of
spk_8: not having that the quantity of our top premium brand the brands that are are top brands that are not sure banner
spk_2: which tend to be or higher price point branford rack and and really is to the truth that gets customers excited to come to rack
spk_12: these great bravery know at at great prices are we have an arab or not that bad
spk_9: up your added to that we've we've been are just too slow to to just about of and adjustments which are are underway is both working with these top brands
spk_8: to to get that for product we need for and often times that is making two minutes or further in advance
spk_13: but also with there's kinda categories and and price point or cuts were drafted for and and we can't get it from your brand area to go to bram beach
spk_8: so ah well the working on that
spk_9: nother issue job which is related to it his are are you are average price been down for the percent i no way do that for lot of pressure on our operations for it just isn't what the customer lot the democrats for watch these these top premium brands
spk_11: i felt are mix has skewed
spk_8: old more lower price that are cause for alarm for our hair and a medical a pressure on our or operations as well
spk_9: so yeah there's external factors it that start or a lot of this but the figure within our control or we have a plan to a few things were actually determined to get be found the right path to get this fixed or and and we will do that
spk_8: your second question
spk_9: i have a data from our army capabilities of the murder strategy driving inventory placement your the i think from your your question
spk_8: we've talked about our image or issues or it has been most pronounced for or rock band or the murder strategy is much more about or notion batter them to interact and ourselves
spk_9: the data ah that we have a huge helping us our interval our norse from banner
spk_8: as we've started to link or correct store tomorrow to stretch it really been as a refit pick up point for motion dot com orders
spk_9: we do have that multi channel data for customers wear it which is helpful
spk_14: so we are you that we were even seeing some for benefit from it
spk_9: that we see a lot of at it coming a had both as our sources of goods become a more stable more predictable
spk_15: in also as as we continue to leverage out our data said and apply
spk_0: analytics to to get the quantity inventory we want and need our customers want
spk_16: the content and the location that serves your business bass thanks
spk_15: oh i am i didn't want to add on the air pump action of an opening up the raptors of if we them flowing to rid of some inventory and here and with somebody ran into we're seeing him early read on this ah in the quarter and that given into of an optimism on that part on that momentum like a lawful very early were actually them seem to mount pleasant make them matt is edward a room with keybank capital markets pleased to see with your question hagan after a day's shaking the question to ask about as dna on i understand you guys did the the position and took a lot of destiny last year although there's been some rebuild and some of it's been due to higher cost pressures but i guess you guys think about the medium term at an incremental or layers of national you can remove or will leverage really be reliant i'm just driving higher top line and then as support to that he does he think that iraq repositioning getting this and are an era where incremental investment for ministry new perspective is needed thanks
spk_17: pirate and i'm gonna take that first one as she ne and then i can talk a lot about the rockies and and erica think
spk_15: well the just in general on the fixed cost expenses we didn't take out significant portions and twenty twenty we are actually on track to fight we had of our target of that prominent reductions of of three hundred million this year and we believe that will come in that will continue to be ah a that short and medium term ah take out a cost going for the structure the add that to as teenagers really going on the variant what are their fear because there was some of the way to create pressure that we're seeing and stores as well for distribution center supply chain or and then on top of that it's really about for a cost of shipping costs ah itself in a long were actively welcome to offset some of those not just to talk like that really through a number of lever sense of all and unlimited a couple of the impulsion context around that as as pete and eric both talked about their number of lovers of pulling our innermost like margin pricing him again the most profit out of the in the season hundred marked out of onto itself through his way well as private little brands and supply chain were making a number of improvement that we are things resulting in two thousand twenty two and really about improving processes in our network
spk_8: really diverse by our care to pass the was you're already doing right now i've been getting really better and and disability and the toward ensure that we can we have fewer touches as it goes to the our ecosystem were stealing from of our supply chain of deficit was made on the west coast
spk_9: it will reducing of our cost
spk_18: around order pick up and getting just general scale on our platform those are all offset the variable had ones that we're seeing the to or is it with called out so the we're very optimistic about how are progressing on this out with you part in the opening common with we've got a lot of hopes dreams and away at to get after death and happily that it will
spk_9: not only help us achieve our are invested a target stuff
spk_7: i go beyond that as well the good thing about the long term future
spk_11: they are gonna get forgot the of have enough to make a rat
spk_2: here are your from
spk_9: greg what are your we have our two channels we have a really big additional channel in rock dot com or we've been making investments there and and regret dot com
spk_0: in particular
spk_19: i used is to preserve her contribution march there are are we know there's a lot of demand and there's not much competition for online off price the product they're so we've we've been making it doesn't fare that earth that are paying off and and photo has been or integrating on the back and we got wrecked dot com
spk_15: honor motion dot com platform
spk_4: earlier this year and we're starting to see the benefits from that i'm a store side we do think there's opportunity to i had stores
spk_15: to have some store growth but are short term folks right now is to get get our com stores going we see a lot opportunity there we know it or issues are how we know how to fix some ah but we need it we need to get after that before we invest a lot of money in that channel thank you
spk_9: next is dana tell thing with healthy advisory group please proceed with your question
spk_20: good afternoon as you look at the person takes of enhancing the supply chain and optimization what should we be looking for is the guide poses we looked as as we move through twenty twenty one into twenty twenty two how do you see this optimization of inventory and being able to take get the different elements of supply
spk_8: a chain where you want both for the full line and for the wrath businesses thank you
spk_9: it was the same a think that the question as we as we think through twenty one twenty he was i mentioned work during number think that we measure not just on the caused by the also on the time to serve customers how could get a choice available for customers and how we can enhance the customer to era
spk_21: are getting their purchases for the problems
spk_9: looking at the market strategy and an increasing things like order pick up and using our assets in the to the market to or to him that cesspit that piece to it i'm so we're going to continue to to talk about that work today to optimize that the author really reducing some of the the happy to see on the classified as well i'm in from the puts into
spk_15: aches we would you expect our to get on some some leverage in our overall our platform for supply chain i we also expect to see improvements ah i'm going forward on the us in a piece that as well as fair to the crisis add a your last several years under a america strategy we scaled it to her top twenty marketers which is thirty five percent of our sales or and i guess you know i'm a big part of that is lecturing the the product or way of has caused our customers and be able to leverage the product as a market and we're seeing ah
spk_19: real good results from that continue to ah you're adding the rax barracks doors as a pickup point for dot com orders are now seeing one third of our next day by mine pick up and store orders being picked up at the rack
spk_22: i hand or vog strategies delivering four times more selection for next day pick up their customers are ever shipping time is her had a one day reduction already
spk_0: i had
spk_23: in our top twenty markets or pick up his accounting for twelve percent of our digital demand purses four percent are other markets so a point there is or seeing or approve point to those are the type of proof points that you should they continue to see as we optimize anomaly are are marked as marcus drives you pay particular up optimize our our inventory placement and then think i'll just finish up with the conversation on aren't and that with an inventory and landmark about some of the open confident get older
spk_7: text we do believe it's look at continue to be than have lenses are twelve inventory coming in the worst making an effort to make sure that we pull for inventory his sure that we got the right product at the right time for our customers and example that the holiday would give for to two three him the hollywood feet and will expect to do that again for spray
spk_9: wang spring received ah as we execute for to few one additionally in particular and the rackspace we are investing pack and all believe it well it will be a loved one hundred that men and hold it through it's related issue with that rape you know product of a customer senators know that that's like a disruption
spk_8: thank you best of luck to you next is oliver ten with cowan pleased to see that your question
spk_9: hi thank you ever growing rack and what's happening ahead and the how would you contrast is relative to the the price doors strategy a you had earlier and as you think about pack in hold on which sounds prudent i'm what why is it prudent now versus using the less so in the past i'm would also love your dad
spk_2: on promo that the methanol you pulled it out on you're prepared remarks but what are the aspects on where you the opportunity i do think you have a pretty advanced digital analytics platform so what happened with promo affect the of and or where the lower hanging fruit thank you yeah are all girls i'll start with of the rack question first question there on the price store strategy that we've be the or sure that we saw opportunity to
spk_24: in particular brochure a wall at of customers who are interact stores
spk_8: can in buying premium product from us the going to other opera retailers for lower price product
spk_9: so we did bring and have brought more lower price product in over the year
spk_25: frankly we went too far we brought some or price pride and categories that we from customers the is not what they're looking for now overall we have seen a good performance from our our price stores particularly in customer acquisition
spk_9: but we also know that tied young doctor hot stuff is is kind of hot everywhere so for example i used to be handbags up
spk_8: your that the twenty thirty dollar handbag market is is not our sweet spot
spk_9: having access to really coveted brands and and brands mean a lot in that category we should have that and all our stores and we can sell it and in our stores so
spk_8: it's not
spk_9: it's not surprising to us that we've had to adjust a a merchandising strategy wow that was a new effort what's been her added to the difficulty there was the lack of receiving the premium brand products that we normally have so going to much with the price strategy product and not getting the plo that we ordered on the premium brand products are compounded the situation to where we ended up having a lower a you are then then we should have i wish that someone for you relate your crush on pack and hold up we don't pack and whole for in particular we did quite a bit of did when we were more aggressively opie opening rack stores
spk_26: it it really helped us have the right flow of goods for these the store openings
spk_3: and when we pulled back on our store openings couple years ago we pulled back on on pack and hold with which was fine at the time our source of goods
spk_9: protect me from these premium brands that are the same brands that we work with him before price channel
spk_27: they had at once product they had short term product were for we could adjust our buys a and that's just gone away during the pandemic his friends do not have to supply of of goods in the short term that we normally have had ah
spk_28: i given that and given the disruptions in the supply chain
spk_0: it says she's pretty obvious to us that what we can do to react to his death
spk_16: to have more product that were packing holding an hour because we do believe we're going to continue to have some level of these disruptions going into next year and this this pack and hold were really smooth out our inventory globe i became an internal
spk_9: yes sir so i'm a relative to our approach their on how to do a better job with markdowns emmett it's really feeds into what you've heard of talk about the for in a digital can have a date of first approach and how doing as i think what's your just see from us as more a surgical effort to
spk_27: how to leverage that data to make markdowns both related to timing and get the markdowns in a way that maximizes the proper billy i know that on garbage and we both and a version of that but i think taken card the extra step to to take a more analytical approach to that it's something that we think will bear fruit and i'm something we we piloted and worked on the path i think we can apply that that methodology more broadly and we believe
spk_29: that there's a lot of good second come from that that will act or proper building positively
spk_9: turns out we have time for one more question
spk_27: thank you our last question comes from mark told i was bored please proceed with your question
spk_9: good afternoon thanks for sweden the and year and i gets first following up on that the rack investments day it as you look to to broaden the product availability of in and it sound like increase and flexibility with brand and price points or other incremental investment needed in merchant teams or supply chains the i was on
spk_30: ready and contemplated in the market strategy against the is this just about rebuilding rebalancing or those changes needed to drive the type of consistent girls you want longer term
spk_15: yeah it's p m i think the biggest thing with the rack is everything that happened the pandemic really affected upon law as we'd known for a lotta years nerd mention that you're having the great relationships we do with these premium brands allowed us to been have a good position to be able to do a lot at once just in time type of our inventory planning and lot of what we learned of fortunately through the pandemic is that if he didn't make those those by the front it was hard to react and really short time to build the do that so
spk_1: you know i think
spk_0: we'd had to learn from matt and though we would guide be better at planning that out and making sure we have a more balanced approach to flowing the inventory and you've heard that we would pack and all that at a mitigating stretching out i will be good for us and the same is true with our own label browns which there's an application for

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.