Oxford Industries, Inc.

Greetings and welcome to the Oxford Industry's fourth quarter fiscal 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jevin Strausser. Please go ahead.

Thank you and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or a financial condition to differ are discussed in our press release. issued earlier today, and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements. During this call, we will be discussing certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at OxfordInc.com. And now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO, and Scott Grassmeyer, CFO and COO. Thank you for your attention, and now I'd like to turn the call over to Tom Chubb.

Thank you, Jevin. Good afternoon, and thank you for joining us to hear about Oxford's record performance in both the fourth quarter and the full fiscal 2022 year. We appreciate your time and interest in our company. As always, our enterprise purpose is to evoke happiness, our enterprise strategy is to own a portfolio of lifestyle brands that create sustained profitable growth, and our enterprise objective is to maximize long-term shareholder value. Each of these important elements were critical to our tremendous success in fiscal 2022. We stayed anchored to these fundamental precepts during the year, and we are extremely proud of the incredible results achieved for our shareholders by our amazing team of people. During fiscal 2022, we delivered growth in all brands and all channels of distribution. Total sales grew 24% year over year, driven overwhelmingly by organic growth led by our largest brand, Tommy Bahama, which was up 22% for the year, followed by Lilly Pellitzer and our emerging brands group, which increased 13% and 29% respectively. The balance of the growth came from the addition of Johnny Was, which we are proud to have added to our portfolio during the third quarter of 2022. We generated this top-line growth while simultaneously expanding both gross margin and operating margin. This combination produced record adjusted EPS of $10.88 for fiscal 2022 compared to our previous record of $7.99 in fiscal 2021, a 36% increase on a year-over-year basis. The results we achieved in 2022 are directly attributable to our focus on evoking happiness in our customers through our portfolio of lifestyle brands. When we succeed in our purpose, it creates the sustained profitable growth that ultimately drives long-term shareholder value. So as always, our financial results are linked to our efforts to evoke happiness in our customers. We did an outstanding job on that front during fiscal 2022 as reflected by our customer KPIs. Not including the newly added Johnny Woz brand, we finished the year with 2.3 million active customers compared to 2.1 million active customers at the end of 2021. We were able to grow our active customer numbers by focusing on and reinforcing the power of our lifestyle brands. A lifestyle brand is different from an ordinary brand. In an ordinary brand, you are creating a product. In a lifestyle brand, you are creating a world or even a universe. And when that world resonates with people, they want to fully engage with it and ultimately live in it. When that happens, people can be very loyal to you for a very long time. Across our portfolio, we did an excellent job of being crystal clear about what each of our brands stands for and then delivering that brand message to their target audiences through inspiring marketing campaigns, differentiated and innovative product, and uplifting hospitality and shopping experience. During 2022, we did a good job managing both the composition of our portfolio and driving performance across the businesses within our portfolio. From a composition perspective, 2022 was the first year that our portfolio consisted exclusively of lifestyle brands having divested linear apparel during 2021. As previously noted, We were also pleased to have added Johnny Was, a California-based affordable luxury modern bohemian lifestyle apparel brand. From a portfolio performance perspective, as always, our priority in 2022 was on championing excellence in each key functional area necessary for a lifestyle brand to succeed. A terrific example of this was our creation of a marketing center of excellence to serve as the in-house agency for our emerging brands and to leverage resources and knowledge across the enterprise. Other examples include the establishment of an enterprise-wide corporate responsibility department, the enhancement of our long-term information technology strategy, aimed at maximizing our return on IT investments, the initiation of a project to optimize fulfillment across the enterprise, and enhanced leveraging of human capital across the enterprise. An essential part of driving shareholder value is sound capital allocation. Starting the year with $210 million in cash and short-term investments, and generating substantial cash flow, we were able to invest $47 million in the future growth of our business, acquire the Johnny Woz brand and all its potential for $270 million, buy back $92 million of our stock to complete a $100 million repurchase program, and return an additional $35 million to shareholders in the form of dividends. We are proud to have been able to both return significant capital to our shareholders and make significant investments in the future growth of our business, all while maintaining a very strong balance sheet. We are equally excited about our plans for 2023. Once again, we plan to have good growth in all six of our brands. Gross margins should also expand modestly during the year. Our plan for 2023 includes a top line that is almost 50% larger than it was in 2019, an operating margin that is almost double what it was in 2019, and operating income that is more than 2.5 times 2019's level. These are impressive growth numbers And to put it plainly, the size of our platform has not kept pace with the size of our portfolio of businesses or with the opportunity for future growth. Accordingly, and within the operating margin target I just outlined, we are excited to invest aggressively during 2023 in people, systems, stores, marlin bars, and fulfillment infrastructure to support our growing business. Our willingness to invest is confirmation of our belief in our strategy and our future growth prospects. Our confidence in our ability to blend art and science to deliver wonderful brand experiences to our customers through A-plus product, A-plus distribution, and A-plus communication has never been higher. The source of that confidence now, and as always, is our people. We are incredibly grateful to each and every one of them for all that they do. Thank you, and I will now turn the call over to Scott for additional color on 2022 and our plans for 2023. Scott? Thank you, Tom.

We had a record-setting fourth quarter that capped a terrific 2022, driven by continued strength in all selling channels across the portfolio. Our operating groups executed very well during 2022 and delivered double-digit, top-line growth within each brand. Our largest brand, Tommy Bahama, had another exceptional year, with 22% top-line growth and 350 basis points of adjusted operating margin expansion to 19.6%. Lilly Pulitzer also achieved a 13% revenue growth and a 19.8% adjusted operating margin. In 2022, consolidated net sales were $1.41 billion, which included $73 million of sales for Johnny Woz, growing 24% of above last year's net sales of 1.14 billion, which included 25 million of sales from Linné Apparel. The growth in our existing brands was strong across all of our full-price distribution channels, with increases of 20% in full-price bricks and mortar, 13% in full-price e-com, 29% in wholesale, and 14% in restaurants. Additionally, we also had increased sales of 22 million in the Lilly Pulitzer e-commerce flash sales and 14% in their outlets. Meanwhile, in addition to increasing sales, adjusted gross margin expanded 50 basis points over 2021 to 63.5%. We benefited from lower freight costs after experiencing very elevated freight rates in the second half of 2021. We saw additional gross margin benefits from a better mix of sales, which was influenced by addition of the higher gross margin Johnny was, and the 2021 exit of lower gross margin linear apparel. IMUs increased as well as we've raised prices more than our cost increased. These items were partially offset by the impact of Lilly Pulitzer's larger flash sales and lower gross margin on the flash sales in 2022 due to extremely lean inventory in 2021. We also had higher inventory markdowns in our emerging brands group during 2022 as we wound up with some excess inventory as inventory purchases outpaced demand. Adjusted SG&A expenses were $684 million compared to $564 million last year. This increase was driven by increases in our existing businesses for employment cost, advertising cost, variable expenses, and other expenses to fuel and support sales growth. Also, 2022 included $41 million of SG&A associated with the Johnny Was business for the 19-week period that we owned Johnny Was. While SG&A dollars increased, they did so at a slower pace relative to our sales growth, leading to an 80 basis points leveraging of SG&A. Results of all this yielded $234 million of adjusted operating income, or 16.6% operating margin compared to $174 million or 15.3% in 2021 with the improved adjusted operating income driven by the strong results in Tommy, Bahama and the operating income of Johnny Woods for the 19 weeks since acquisition in September. This increased operating income was partially offset by a higher effective tax rate of 23% in 2022. and increased interest expense due to the borrowings associated with the acquisition of Johnny Wise. Despite these offsets, we exhibited EPS expansion from an already excellent 2021. This led to adjusted EPS growth of 36% to $10.88. I'll now move on to the balance sheet, beginning with inventory. With inventories up 58% or $106 million year-over-year on a FIFO basis, we are in a good position to capture the sales momentum we've built. Inventory levels at the beginning of the year were lower than optimal as demand outpaced inventory purchases throughout 2021, and we were unable to accelerate inventory purchases to keep up with demand. Additionally, two other factors contributed to the inventory growth. Twenty million dollars of additional inventory from our acquisition of Johnny was and the early receipt of about $25 million of incremental inventory to mitigate the risk of potential supply chain disruptions. Increased product costs raised inventory balances as well. Our planned revenue growth, which is 45% over where we were in 2019, outpaces our FIFO inventory growth of 37% over the same time period, even with the early receipt of product. Further, with our strategic focus on core and key products in recent years, our inventory has a much greater mix of core and key product items rather than fashion items, which reduces inventory risk. From a liquidity standpoint, we had $9 million of cash and cash equivalents versus $210 million of cash and cash equivalents in short-term investments at the end of 2021. We used our cash and cash equivalents and short-term investments to help fund our acquisition of Johnny Was. After considering our robust cash flow from operations, the acquisition of Johnny Was, capital expenditures and other items, as well as our $127 million of capital returned to shareholders through share repurchases and dividends, we had $119 million of borrowings outstanding under our $325 million revolving credit agreement at the end of 2022. I will also note that earlier this month, we amended our $325 million revolving credit agreement to extend the maturity of that agreement from July of 2024 to March of 2028. For all practical purposes, the asset-based loan agreement is consistent with the prior agreement, other than extending the term, converting LIBOR to SOFR, plus 10 basis points. increasing the spreads on variable interest rate borrowings by 25 basis points, and an increase in certain amounts allowable for inclusion as eligible assets for the borrowing base calculation. Over the last year, we have returned $127 million of capital directly to shareholders via dividends and open market share repurchases. $92 million of this came from repurchasing a million shares during 2022. representing the December 2022 completion of our 100 million share repurchase program initiated in the fourth quarter of 2021. In total, we purchased more than 6% of the outstanding shares from the commencement date of that program. Looking forward, I am pleased to announce that our Board of Directors declared a dividend of $0.65 per share for the first quarter of 2023 payable in April, which is an increase of 18% from the prior quarter's dividend of $0.55. I'll now spend some time on our outlook for 2023. For the full year, we expect net sales to be between $1.62 billion and $1.66 billion, growth of 15% to 18%, compared to sales of $1.41 billion in 2022. The increased sales plan in the 53-week 2023 includes the benefit of the full year of Johnny Was, as well as growth in our existing brands in the mid-single-digit range. which consist of full-price brick-and-mortar and e-commerce channel growth, generally flat wholesale and outlet store sales, and lower e-commerce flash sales at Lilly Pulitzer, as Lilly Pulitzer is not having an e-commerce flash sale in the first quarter of 2023. We anticipate modest gross margin expansion in 2023, including the expectation of a higher proportion of full-price direct-to-consumer sales and a lower proportion of e-commerce flash and wholesale sales, and the inclusion of the higher gross margin Johnny Was business for the full year 2023. These higher sales and improved gross margins are expected to be partially offset by increased SG&A, which is expected to grow at a rate higher than sales in 2023 as we invest in our business, including information technology spend in SG&A, higher employment costs, additional brick-and-mortar locations opening in 2023, and increased depreciation expense resulting from both IT spend and brick-and-mortar locations. Considering all these items, we expect that operating margin will decrease modestly from 2022 levels. Additionally, we anticipate higher interest expense at $5 million to $6 million, with about half that interest expense in the first quarter smaller increases in the second and third quarters, and a decrease in the fourth quarter. This compares to $3 million of interest expense in the full year of 2022. We also expect significantly higher effective tax rates of between 25% and 26%, compared to 23% in 2022, which benefited from certain favorable items, such as prior year operating loss utilizations and the reversal of some valuation allowances. After considering these items, 2023 adjusted EPS is expected to be between $11.50 and $11.90 versus adjusted EPS of $10.88 last year, with the inclusion of a full year of operating income of Johnny Was and an increased operating income in our existing businesses being partially offset by the increased income tax expense and interest expense. In the first quarter of 2023, we expect sales of $405 to $425 million compared to sales of $353 million in the first quarter of 2022. In the first quarter of 2023, we expect many of the same factors driving our results that impact the year, but higher sales, modest gross margin improvement, some SG&AD leveraging, higher interest expense, and a higher effective tax rate. We expect this to result in first quarter adjusted EPS of between $3.60 and $3.80 compared to $3.50 in the first quarter of 2022. Expanding on the theme of 2023 being an investment year, I'd like to briefly discuss our CapEx outlook for 2023. Capital expenditures in fiscal 2023 are expected to be approximately $90 million compared to $47 million in fiscal 2022. The planned increase is primarily due to increased investment in our various direct-to-consumer technology systems initiatives, the commencement of a significant multiyear project at Alliance Georgia Distribution Center to enhance its direct-to-consumer throughput capabilities, executing on our pipeline of Marlin Bars, including three expected to open in 2023, the addition of Johnny Was, which is increasing its store count by 10 or more stores this year, and increases in store openings in our other brands. We expect this elevated capital expenditure level to continue into 2024 before it begins to moderate in 2025 and beyond. Moving beyond income statement, we have a positive outlook on our cash and liquidity position as well. Cash flow from operations are expected to be very strong, giving us ample room to make the previously mentioned investments fund an 18% increase to a quarterly dividend while also de-levering throughout the year. Thank you for your time today, and now we'll turn the call over for questions. Stacy?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Ed Ruma with Piper Sandler. Please go ahead.

Hey, good afternoon, guys. Thanks for taking the questions. I guess first, Tom, on the shared services, I know you guys historically run a very decentralized organization. So I just wanted to unpack maybe some of the investments you're making. Does it change kind of the orientation of the business? And then I guess as we think in the medium term, when should we expect a resumption of SG&A leverage? Thank you.

Okay. Thank you, Ed. So our objective really with the centralized part of the company here at headquarters is what we want to do is look at all the key functions that you need to be good at, to be successful at, to successfully run a lifestyle brand. And then our approach to that is to drive excellence in each of those key functions, make sure that each of the brands is functioning at a very high level in each of those key functions. And then as we say, bundling where appropriate. And what that means is we will do things on a shared services basis where it makes sense to do so. We're not gonna just default to that, but we'll do it where it makes sense to do so. And the example I gave in the prepared remarks, which I think we may have discussed with you previously, was that with respect to the emerging brands group, the three smaller brands, we thought that in order to be able to achieve the excellence that they need to have in digital marketing to be successful as lifestyle brands, that we needed to bundle that digital marketing effort. So we did exactly that. We established and built a digital marketing center of excellence during 2022. We started about a third of the way through the year and by the last third of the year, we were going wide open in that function and we're very pleased that it's achieved very good results within the Emerging Brands Group, and that was part of the reason that they were able to deliver that 29% year-over-year growth. Then we talked about also during the prepared remarks establishing an enterprise-wide corporate responsibility department. That's focused mainly on what I would call ESG-type efforts. As you know very well, Ed, we've always been a company that's been about doing the right thing, and there's now both market and regulatory impetus to do more in the ESG front. Tommy Bahama, our largest brand, had been out front on this, and had set up their own corporate responsibility function, which was highly professional, some great people working in it. And what we decided was that that was a function that all the brands need to be excellent at, once again. But we also thought that we would benefit from the scale of doing that on an enterprise-wide basis. centralized that as well. We actually moved the Tommy Bahama team over and made them a corporate enterprise-wide function. So that's sort of the thought process that we're going through. We're not going to centralize everything. Things like product design will never centralize, I don't think. Things that are very customer facing and directly touching the customer, I don't think that we're going to centralize. In those areas, we'll just focus on making sure that we're excellent. And then in areas where we think there is an economic advantage to bundling, we'll do it. Does that help?

Yes, it does. And on the SG&A, when can we kind of pencil in resumption of leverage on that line? Thank you.

Yeah, as we said in the remarks, we expect some D leveraging this year. And hopefully when we get into 24, that'll start turning. But we've got a lot of investments in systems projects. And we also are, you know, adding some resources in the form of people in some key areas. We also have a lot of retail activity going on, including three Marlin bars. And as you know, these Marlin bars, from the time you take possession until you open, it's about a six-month period. So you have all the pre-opening costs, including rent, going through your P&L. So we have a lot of items, but they're exciting items that I think are going to help fuel future growth of the business. And to be honest with you, we're playing a little bit of catch-up on SG&A. Our business has grown dramatically in it. When you grow a business the way it's grown, you're always – it's hard to get that infrastructure ad as quick as the sales are growing. So we're playing a little bit of catch-up in 23.

Thanks so much, and congrats on the great results.

Thank you, Ed.

Next question, Dana Telsey with Telsey Group. Please go ahead.

Hi. Nice to see the fourth quarter results. As you're taking a look at next year and you talked a little about some of the increases in expenses, as you think about each brand, if it was better than expected, are there new products or categories that we should be looking for as we go through this year? And then just lastly on the wholesale business, we had talked about flat, I believe. What are you seeing on the wholesale business overall, and how do you think about the health of the consumer with the exit rate as you exited the quarter? Thank you.

Okay. Dana, I'll start with a wholesale question. And I think that we're planning on it being flat, as you know very well, because you follow so many of these people. Most of the major retailers are being very, very careful and cautious about their forward inventory buys. Most of them are actually buying down on a year-over-year basis. So in our view, and we see this in the results that we're achieving on the selling floor. Flat is actually an outperform in the wholesale this year, so we're really pretty happy with that. And while we'd love to see growth, we also like to see the big retailers being prudent about their inventory buy. Then on the health of the consumer, what I would tell you, and this shows up very much in our fourth quarter results, is that the health of the consumer has been good for the consumers that we service. I think the health of the consumer has been good. We expect it to continue to be good. We're not looking for a major macro rebound in the economy, but we think our consumer will hold up pretty well through the year. And I think the primary risk at this point, to be very direct about it, is probably what's been happening in the banking world and the Fed and sort of regulatory response to that. Our belief is that we will get through that, that the Fed and the regulators will navigate us through that without it becoming a much larger risk. problem but you know that would be the one sort of uncontrollable factor that I think is out there at the moment and again we think they're going to get through it our consumer will hold up but you know this week in particular it's hard not to have that sort of top of mind and what was the third thing opportunities opportunities yes from a product or category standpoint Dana, I think that there are some big opportunities that are really more about growing existing categories. So I think in Tommy Bahama and the women's dress category, we've got a lot of room to run. Our dress business has been very strong there. But I think we can continue to build that. And as you know, that is a very large category within the total apparel market. I would tell you the same thing within Johnny was. I think they have a very large opportunity in dresses in particular. And again, they're having very good success with it. They're building it very nicely. Historically, they've been a little light on dresses as a percentage to their total, and I think they've got lots of room to grow there. Then in addition to those types of opportunities where we can grow a big category at a sort of an enhanced rate of growth, I think throughout the company there are some fill-in opportunities and one that's not going to be huge overnight and probably even over the long term I don't think is an enormous category, but we recently started in Lilly Pulitzer, some enhanced home product. And the concept there is to be the destination of choice for sort of an elevated, elegant hostess gift. And we've started out, you know, with a small assortment of items, some picture frames and things like that. But we're pleased with the early performance and we think we can do some business with in that space. I think we've got similar opportunities like that across the company.

Thank you.

Thank you, Dana.

Next question, Paula Gray with Citigroup. Please go ahead.

Hey, thanks. It's Tracy Cogan filling in for Paul. I have two questions. The first one was on your ST&A. In fourth quarter, I was wondering if you could uh talk about how much uh markdown levels or they're up or down versus last year um and then what was freight relative to last year and then for both of those pieces what's what's embedded in your gross margin guidance for 2023 i think you said moderately up just wondering what you're assuming for markdowns and promotions uh versus freight and then i have a follow-up when you're done with that thank you okay

Freight rates pretty much returned to pre-pandemic levels in the fourth quarter, and our use of air freight was down considerably from what it had been earlier, maybe a tiny bit elevated from pre-pandemic. So there really wasn't a lot of freight noise in our fourth quarter. And going into 2023, freight rates are – much better, and we think our supply chain, we have accelerated our merchandising calendars, so we really expect very little air freight this year. So I don't think freight will really be much of a negative factor at all in gross margins in 23. And the markdowns? Sorry. As far as inventory markdowns, we had... We had in our emerging brands group, we did take some inventory markdowns last year, and we do not anticipate anniversaring those. Lilly Flash Sale, we think will be a little bit smaller in 23 than it was in 22. And so overall, I think our inventory markdown rates will be a tiny bit less year over year. And we think we'll start with a little bit higher IMU, modestly higher IMU. And then we do have the added the Johnny Wise business for the full year, which will help. And then wholesale will be a little bit lower piece of the mix. So I think we have some mixed advantages. You know, they'll be running through 23 that will help gross margin some.

Got it. Thank you. And then I just had a follow up. I think you said you expect to open 10 or more Johnny was stores. And I was wondering if you could talk about what what you what the new store model there looks like in terms of the new store investment and your payback period compared to a Tommy or Lily store. And was wondering how many of those leases you've actually signed already for 2023. Thanks.

Yeah, I'll make a quick comment on it and then let Scott follow on. But I think Johnny has a slightly different approach to stores than our other brands. They're a little bit smaller. I think their average square footage is 1,600 or so square feet, so a little smaller than most of the, well, really than all of the Tommy stores fundamentally, and a little bit smaller than Lily runs as well. They also go into some what I would call somewhat nichier type locations. So in the past, really even since we bought them, they opened in Santa Fe, which is the first store that we have in Santa Fe. But we think that's a great spot for them. And we're excited about that one. Another example would be a tiny little store that they did in Vero Beach, Florida. I think it's like 600 square feet. And it's almost like a little beach bungalow. And it's just so ripe for the brand. It looks terrific and all that. And then what they do is they tend to do these smaller, niche-ier type locations. And then they really work with what's there and just sort of make it their own. So the build-out cost actually tends to be a little bit lower than in our other brands. And I'll let Scott fill in some of the details on the investment level and the payback.

Yeah, Johnny West is investing less, so the paybacks are usually less than two years on a retail store, some even quicker than that. You know, very productive. They also usually build in different, several kick-out rights and leases. But we usually are 10-year leases, but several ways to get out if it doesn't work. Of the 10 or so that we're going to open, we've probably got six or seven signed, and we've got multiple other ones in various stages of negotiations. Some could open this year. Some might be next year. So we're excited about the growth. We think there's still a lot of runway for new stores. We're also opening stores in the other brands. I mean, Beaufort Bono opened some stores. Southern Tide will open quite a few stores. Lilly will get a couple open. And we've got three Tommy Bahama Marlin Bars that we're very excited about. That pipeline in the Marlin Bars was something that takes a while to get going, and now we have a real pipeline in Marlin Bars. So I think we'll be able to you open at least three next year and for the next several years. So the brick-and-mortar front, I think we've got a lot of exciting growth happening.

Great. Thanks very much.

Thank you, Tracy.

Our last question comes from Noah Zatkin with KeyBank. Please go ahead.

Hi. Thanks for taking my questions. First, wondering if you could provide any color on the exit rate leaving 2022 and then relatedly, on top line growth by brand contemplated in the 405 to 425 million dollar one key revenue guidance range. And then second, just on inventory, how are you feeling about the position and overall composition? I think you noted that the increase versus 19 was driven by 20 million dollars of incremental Johnny was inventory and I think 25 million dollars of earlier receipts. But just if you could help unpack that a bit. Thank you.

Okay. Regarding the exit rate for the fourth quarter of 2021, I assume you mean the, or excuse me, fourth quarter of 2022, you mean the sales trajectory?

Yep.

Yeah. So if you remember, Noah, back in our December call, we said that November had actually been a little bit softer than the prior year. That did not seem out of whack to us because in 2021, people had bought so early. So we weren't entirely surprised by that. And what we saw was a very normalizing environment in Q4 where November was not as good as November of 21, but much more like what prior Novembers had looked like. And then obviously, as our fourth quarter results reflect, the rest of the quarter ended up being strong. And then in February, we also had a good month. I've seen a lot of other people in our space talk about February being tough, but we actually had quite a good February. We were pretty happy with what we saw in February and As we sit here today, March has been slightly choppy, but we believe we've factored all that into our forecast, and we think that as the weather turns and the Easter and spring breaks approach, which are a pretty meaningful catalyst for us on the sales front, and then we get into all the summer holidays, Memorial Day, Mother's Day, Father's Day, Fourth of July. We couldn't be more excited about what we've got ahead of us.

As far as the inventory, we have $20 million more than Johnny was, and we have about $25 million from accelerating the supply chain. There's been interruptions out there, and we wanted to bring goods in earlier to make sure we had them. earlier, we also mentioned that our lines are, we have a much heavier focus on core and key items. And a lot of those programs, you tend to bring in the season's inventory at the beginning of that season versus fashion, where you're bringing in monthly, you're bringing in deliveries. So that tends to, when you have a more core key item business, you tend to carry a little more inventory. So when you, we like to compare back to 19 and even despite the Johnny Woz and the acceleration You know, our anticipated sales are expected to much outpace what the inventory growth has been. So we feel good about our inventory, the composition of it and the levels, and we think we're, you know, set up well to capture demand in 2030.

Thank you very much. Thank you, Noah.

Thank you. I would like to turn the floor over to Tom Chubb for closing remarks.

Okay, thank you all very much for your time and your interest in our company, and we look forward to talking to you again in June, and hope all is well with you until then.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.