Guess?, Inc. (GES) Earnings Call Transcript & Summary

Well, I think it's great to get started. Welcome, everybody, to UBS' Global Retail and Consumer Conference. It's great for -- it's great that you're all here. I am Jay Sole, UBS' Retailing Department Stores and Specialty Softlines Analyst and it's a true honor to be joined by Guess? Representing the company today, we have Carlos Alberini, who is the CEO; and also Dennis Secor, who is the CFO. And what we're going to do today is just going to have a little conversation about the business. We'll do maybe go for about 45 minutes, talk about some of the topical things, some of the big picture plans that the company has. And just -- I have to say the Guess? is personally one of my favorite brands. If you go back many years, the classic advertising. When I think about brands doing effective marketing and using imagery to really create an image, I don't think there's any company in the world that really can stand up to what Guess? has done over a multi-decade period. So a real treat for me personally to be able to have this conversation today.

So with that, Carl, I'd love to start by talking about Europe. Really, the Guess? brand has really been experiencing solid momentum over the world over the last 12 months, but particularly in Europe. What are the signs that you see to tell you that brand is really gaining traction with [ consumer ]?

Well, thank you, Jay, for having us here. We want to tell you that we greatly appreciate the invitation, and we are excited to share our story here with all of you. So that's a great question. I think that Europe has been a major driving force for the company. We have seen that during the last few years, the company has grown in total and primarily driven by the growth that, that market has experienced today. Europe represents almost exactly 50% of our total revenue base. And we feel that, that has accelerated. So the penetration has grown in spite of everything that has happened with COVID and everything else that impacted our performance globally. We see a lot of opportunity to continue to grow in Europe. And we are excited about how the customer is embracing all the things that we have done with the brand to the elevation of the brand with everything that we are doing with the pricing structure of our products, the quality that we are embedding into the products with a very strong focus on sustainability that market is embracing that as well. And then you look at -- there are some -- you asked about how do you know or how do you see that the brand is gaining momentum. And we always had a very strong presence. We spent significantly investing in advertising and marketing. If you go to any of the big European cities, you will see buses with Guess? marketing, you will see billboards. You will see a lot of great presence in magazines. There are over 100 magazines where we advertise there. So -- and we never stopped investing in advertising, which I think is a big deal. But then we have a big wholesale business. So we have our own direct-to-consumer business and several hundred stores that we run directly or we have partners that do so. And also, we have a big e-commerce business also anchored in Europe and all the countries where we do business. But then we have a wholesale business that represents about 50% of our total European business. So you have Europe in itself represents 50% of the total business for Guess? globally. And then within Europe, wholesale represents 50% of our business. So it's a major, major reference point and we watch how that market is behaving to understand how the brand is being perceived in the marketplace. And now for several seasons, we work with 4 seasons a year. For several seasons, I'm talking about several consecutive years where we have seen growth in that business sequentially. And for us, that tells us that we are gaining significant market share because we know that during those years, during those seasons, the market has not grown overall. So the fact that we are growing partially has been driven by new market or brand expansions that we have done. We introduced a new line of athleisure, for example, that really has been very, very strong and it became a pretty significant driver of our growth for those seasons. But in spite of all that, the brand continues to grow. And I think it's goes back to the product. The product is very strong and the quality and the elevation is taking hold in that market in a very significant way.

Well, so there's a lot to talk about in that answer, and I want to maybe start with brand elevation and product that you mentioned because really the company has been on a journey over the last couple of years, really transforming the whole company. And one of those parts of that transformation has been elevating the brand. Carlos, can you talk a little bit about within that brand elevation strategy, what you've done to the product, how you've elevated, how you've made it higher quality, how you really brought more into product into the styling to make where you want to be?

Well, so this -- the brand innovation has been a major initiative for us to really transform the business model and transform the company. Paul Marciano, he's our Chief Creative Officer. He's a co-founder of the brand. He has tremendous experience and a lot of history in this. And he led this primary initiative. We say that this one initiative has touched every aspect of our business. And if you look at the slide, we're -- we kind of like articulated what did this encompass? And I start with the elevating the taste, styling and quality of our products with a very strong focus in sustainability, as I mentioned before. This has been impacting every single product of us. We serve about 25 different product categories. So you can imagine, this is truly a lifestyle brand, and it touches multiple facets and occasions that the customer may participate in. So touching every one of those products to elevate the taste, styling and quality is a big goal, and I think we have accomplished it in a very significant way. And I think that the customer is embracing that with their shopping. The second big thing is about what we call a global line of product. In the past, we had 2 different lines, 1 in North America, 1 in Europe, and those 2 lines serve the different markets. And for many, many years, we thought about combining and launching 1 global line but we were always very reticent because we thought that the different markets have different needs. And we decided in the middle of COVID to go after this. It was a great move. Of course, we are benefiting from incredible synergies and a lot of efficiency because now we are delivering just 1 global line that is represented in every 1 of the markets where we do business globally. This has been a major drive for vendor consolidation. Just to give you an idea, a few years back, I'm talking about 3, 4 years ago. We had about 535 vendors to serve the entire Guess? ecosystem. Today, we have slightly over 100. And that was accomplished just by consolidating by really winning with all these efficiencies. Focus on key product categories. We have focused on key areas. The great thing about Guess? is that Guess? can go from casual to dressy very easily. We have a lot of flexibility and versatility and especially with what happened with COVID, when at the beginning, people were spending a lot of time in their homes. So that casual, that leisure type of lifestyle was prominent. We were able to react to that. Then people started going out. We were able to really go for the more dressy part of the assortment. And that has helped us win. We have outperformed the industry, we feel during the last few years, and we think that this has a lot to do with that. Increasing full price selling. This was a major goal that we had when we started with the brand innovation initiative. And the idea was to really buy product that was representative of the expected demand, not more than that. That was always very key to be able to really maintain the lower promotion activity that was not just in excess of what we wanted to be able to achieve full price selling to certain percentage of everything we bought. Of course, you never expect that, that will be 100% but we were able to really move those numbers pretty nicely. And as a result, our margin has reacted very favorably to that. Continue to perfect the image and photography and marketing websites and all advertising media that where we are present, this was a very ambitious goal as well. The idea was to really make sure that everything that represents the brand that the consumer has access to and sees is of the utmost imagery in terms of -- not perfection but beauty and representative of the brand. And this is not just in terms of the quality of the photography or the quality of the imagery, but also the consistency that all the same images are presented in the different markets at the right time, same thing with the website. And the last big thing is an ongoing process here is the elevation of the customer experience. This is a very, very challenging thing to do because we have so many points of distribution. So to be able to touch every one of those points is very difficult. But we have tackled this as a major commitment for us. We have remodeled and opened new stores with new concepts during the last 3 years now. We have touched 80% of our store fleet, and we are talking about 1,500 stores that we are doing business and talking about stores across the globe. We have upgraded our websites. We have invested in making the experience a lot more easy to navigate and easier to shop. We have invested with our partners to do things better in the territories and in the areas where they do business. And we are also very close to our licensees to do work better when they are distributing their products into other points of distribution. We are now investing in wholesale, especially in Europe. We are putting a lot of money to make sure that the shops and shops that represent the brand are also elevated as well. So this is just one big, big -- just pass at all the things that we have touched with the brand elevation initiative.

Well, we could probably spend the entire time talking about just 1 of those 6 items on that slide. I'm just a little bit curious about store design. You spent a lot of time really elevating the store design. Maybe can you just tell us a little bit about how you've done that, what you wanted to show the consumer?

Yes. store design is definitely part of that elevating the customer experience and the -- all the remodels and the new stores that we open. We are always working on new store design. But in this particular case, we took a major approach to upgrading our stores and we touched our regular full-price stores. We touched at our outlet stores. Also, they are a good representation of our brand. And frankly, if you go to one of our outlet stores today, you will feel that you're shopping in a full price environment because they are just gorgeous, grade materials. We have also touched our Marciano stores that we have several of those stores that represent the brand. Purely also, Marciano is part of some of our Guess? stores distribution as well. We have like shop-in-shops inside the Marciano stores. We have done a lot to change not only the allocation of space as our different product categories have become more or less significant, but also the materials that we use to really portray the brand. And what you will feel now is that the stores feel more like a boutique versus the more kind of like product-intensive type of presentation that we used to have that was done in coordination with the new store design. So the density of product in our stores today is significantly less than it used to be. We think that the way the customer is shopping today, this way of servicing them is a much more effective one because they do a lot of searching before they come to the stores. So they have a pretty good idea of what they're coming to look for, and we can offer a much higher level of customer service with our people in the stores.

Interesting. I guess one more piece of that slide in addition with the elevation of the consumer experience is the investments that you've made in e-commerce. Salesforce, platform implementation, a lot of work on using customer analytics and developing those omnichannel capabilities, expanding the assortment online. Even within that one little part of the slide, there's another slide just on that. Maybe tell us a little bit about how much you've been able to focus on e-commerce and what kind of progress you've made?

Yes. It's a great question. And really, this is -- has been a major area of focus for me since I came back to the company 4 years ago, and we put together a whole strategic plan. One of the big levers was customer centricity, we called it. And within customer centricity, the idea was to really expand digital. And what we saw at the very beginning was that we didn't have the kind of tools that we needed to really put that business right next to the best-in-class in the industry. We look for the best solutions, and we concluded that Salesforce was a great partner for us potentially. I had used them before and with great success. So we put together a team, and we started upgrading the whole infrastructure. We started in Europe, but then we rolled that to the Americas. And now we have Salesforce operating all the websites that we run directly, every single country in Europe and everything that we do in North America. And then as we were finishing that project, we thought the customer analytics needed an upgrade as well. We didn't have the kind of tools that we needed in that area to do a good job to support customer relationship management. And coincidentally, Salesforce was working on a new suite combining several applications to really provide a great solution for a customer view and customer analytics. The suite is called Customers 360 and we invested in that together, and we have implemented that in Europe and now coming to North America with the same solution. And we are talking about improving customer analytics, so you can get better data collection. You can do personalization better, personalization and marketing, customer engagement and segmentation. So we are doing all that. We're also working on a client app. Our clienteling app to improve the tools that the people in the stores and used to really help customers, and that is growing very well. We are finishing that in Europe now, and the plan is to bring it to North America afterwards. And the last thing that I would mention is, we didn't have omnichannel capabilities that were similar to, again, best-in-class retailers or brands and we decided to invest in all that. So now we can do everything that anybody else can do like return store or pick up in store after you order online, everything that you see all the good companies doing today. So we invested a lot. We have gotten a lot of great returns with that, but we think that there is a lot more to come. We feel that our penetration in e-commerce, while it is significantly better than it was pre-COVID. It can be a lot higher. And that's what we are going for.

Got it. All right. Well, one more element of the transformation that's going on is the company's real concerted effort to target Gen Z and to really bring those customers into the brand. Carlos, tell us how is that working out?

Well, so I would say that it's working out great. Just we have 2 other consumers that have -- that represent a pretty significant part of our business. I'm talking about the Heritage consumer and the Millennial consumer between those 2, you're talking about over 80% of our customer base. So the remaining is Gen Z customers. So we do have a significant presence, but what I think is even more impactful and powerful is where we are going with this. We believe that Gen Z is our future as a customer base. And this is a very numerous group. I'm talking about a lot of people. These people have -- even through parents or what they do with their own just they have access to a lot of money. They pay full price if you have the right thing. And we feel that we have a very unique approach to going after this customer, Nicolai Marciano hit this operation. We call it brand partnerships. He's very connected in that world, in that community with artists, with people that are into just music, Hollywood type of personalities. And we have celebrities relationships that can be leverage to really put the brand in front of the consumer. And we have segmented the brand. We have 2 brands that he runs. One is Guess? USA, the other one is Guess? Originals and these are completely targeting that Gen Z consumer. And we use completely different going-to-market type of initiatives. So we do concerts that he sponsors and coordinate. We have celebrity relationships that are just so we do capsules of products, that is specifically for that consumer. That consumer wants to see scarcity in the number of units that you offer on any particular product, and that's what we do. And I think that all this has really repositioned the brand to -- in the eye of that consumer to be a very cool brand that is leveraging the more -- what we have in archives that is vintage that is more kind of like the resembling of the '80s, '90s and where Guess? was really a driving force for that type of product. So we are excited not only for what has been done but where we are going with this.

So on that point about where you're going with this, can you tell us about some of the strategic priorities that you have today. Obviously, a lot of work has been done looking forward [ what do you see ]?

So I would say we have 5 big things. The first one, I'm going back to this brand elevation because we don't think that this is ever finalized. So we want to continue to do better. If you listen to our call a couple of days ago, Dennis talked about trying to improve our margins through lowering further our promotional activity and lowering markdowns. So brand elevation will continue to be a big part of our focus. The second big thing is about growth. We think that we have achieved a lot of margin expansion, but we think that now is time for us to pick up the growth opportunities and we have talked about 4 big pillars. The first one is about increasing sales productivity and market share gains. This is more about using our existing network of stores, wholesale accounts, licensing, everything that we have in the portfolio to really do a better job and increasing the sales productivity of that. The second one is about organic growth. And we have a lot of opportunities. Well, we have a big presence in several countries and markets. We have a lot of opportunities to really grow significantly and we are going to go with that. We're going to be very judicious and very careful with this, but we see a great opportunity to grow through organically. The third big thing is about brand extensions and category expansion. And I talked a little bit about the example of athleisure, we see more opportunities for the brand to really play a bigger role in the categories that we already have a big presence or expand into other categories or segmenting the brand further. Guess? USA and Guess? Originals is an example of brand extensions. And we think that because the brand touches so many different potential customers and genders, we think that there is that opportunity to really go even further. And the last thing is something that we haven't talked in the past, but we see a big opportunity to better leverage our core competencies and that is through potential acquisitions of both brands or businesses. And we are excited about this. We think that there is a lot out there. We have a very strong capital structure and we think that we can take advantage of that. So that's growth. The third big thing is about efficiency. And while we have improved efficiencies significantly in multiple areas of our operations, we see a lot more for us to do. And I'm talking about inventory turnover. We think that we have an opportunity there. We have an opportunity to continue to optimize our portfolio of stores. We have an opportunity to continue to make our business model more productive and deliver a better return on invested capital by making it more asset light. So, we are pursuing opportunities to really make it more asset light. And then the supply chain. Supply chain, while I think that we have a very strong supply chain infrastructure that works well and we proved that even during the disruptions that everybody in the industry experienced in the last couple of years, we think that the supply chain is still -- can still be further optimized, and we are now pursuing something what we call proximity sourcing, just trying to bring sourcing closer to the markets where we're going to be distributing the product ultimately. And we see a lot of opportunity with that as well. The fourth big thing about key strategic initiatives for us is the Gen Z consumers that you just mentioned. We want to develop a very strong plan to go after this consumer and make investments accordingly. And the last big thing is about talent. We think that during the last few years, there has been a lot of turnover in the industry. A lot of change in the way people live and what they prioritize in life and so forth. And we think that we have an opportunity to go and attract great talent into the company and retain the great talent that we do have. Those are the big ones.

That's a nice list. I guess the -- I think on the slide that was up on the screen a moment ago, talks about a lot of those opportunities for growth, whether it's new markets, new categories, obviously being a global lifestyle brand, creates a very large total addressable market. So obviously lots of opportunities out there. Can you give us an idea of what your vision is around what kind of growth you're aiming for? What kind of -- everything beyond '23 -- we'll talk about guidance in a little bit and talk about the quarter. But just maybe if you can frame for us a little bit how you're thinking the opportunity given there are so many opportunities out there for the company given the strength of the brand.

Well, I would say -- I mean, they're all within those big 4 pillars. But I would say that the biggest opportunity for us, if you look at more short to medium term, is going to be in improving productivity today because we do have a lot of stores. And over the years, we saw some erosion on sales productivity in those stores, which partly is because of COVID and how people are shopping today. We continue to see a lower customer traffic just in terms of -- compared to prepandemic patterns. And we think that there is an opportunity to bring some of that back. It doesn't necessarily have to be just more customers, but we think that we can get more sales from our existing networks. So I would say that, that will be first. Right next to that, I would add the digital expansion. We are seeing opportunities to increase penetration, as I mentioned before. Now when you look at the different geographic differences, I would say that Europe is -- will continue to be a driver for us. We think that there is a lot more to be had in several markets within Europe, and we are going to go after that. And the last thing I would say, the Americas -- we feel that also often an opportunity on sales productivity improvement. With respect to Asia, Asia is -- has been a very tough region for us, especially China and Japan. But we are working on developing some new plans. We have rightsized those markets in terms of number of stores. We have closed a lot of stores in China. And I'm talking about going from 165 stores down to 60 now. So we have really rightsized that portfolio significantly. And we have done the same thing in Japan. Japan has always been a lot smaller. But we think that there is a big opportunity in the market, and we are going to go after that, and we are working on putting together our plan. With respect to the other things, just too early to tell.

Okay. Well, it's interesting because obviously, you mentioned e-commerce a couple of times and the opportunity to improve productivity of the investments that you've made. I guess conceptually, when you think about the investments you're making, talk to us about how you think about where the consumer is going when you think about wholesale versus retail. Obviously, you mentioned how strong and important the wholesale business in Europe is. But as you think about directing the company, what's your view of where the consumer is going and how you need to sort of align, what you're investing and where you're going with that vision.

Yes. It's interesting. During COVID, a lot of people thought that retail was not a place to do business. We always remain very, very strongly confident about how important retail and having stores is. Just for us, it's not just a source of revenues, but it's also a representation of the brand. The people that are in our stores are our best ambassadors for the brand. These are the people that really create relationships with the customers. We think that, that is super important to make sure that the customer engages and seize the brand as a very positive influence and driver. We feel that also because we do a lot of business at wholesale, a lot of this wholesale or retail customers present product by merchandise classification, instead of presenting product as a lifestyle outfit type of presentation, which means that now the customer is choosing, I don't know, a handbag among many different brands of handbags or assortment. But the customer in those types of retail stores, he cannot see the full lifestyle that we are trying to portray with the brand. In our stores, that's exactly what we do. So we can show the entire lifestyle through our presentations in stores. And that's what we believe in. So very important retail. Yes, of course, we love our wholesale business because it's just a high growth. We can expand distribution very quickly. We can generate a lot of sales, high margins and the capital that is being utilized is very light. So all that is very attractive, but the retail business is critical to the brand.

Understood. Well, since we did talk about growth drivers, and you mentioned efficiency gains, which I think is partly in stores, but also a margin story. And obviously, there's been a lot of margin improvement given the consolidation of the product line to 1 global product line. But as you go forward, can you talk about some of your margin aspirations and some of your goals and a couple -- if there's any other drivers besides the ones that you've mentioned?

So this is for Dennis.

Yes. I mean, give you a chance to breathe. I mean I'll start with -- I think the thing that I'm most excited about as I think about margin expansion is when we're talking about the opportunities to grow and improve productivity potentially grow through acquisition because the great thing about our model is we have the infrastructure in place that can really drive a much larger business. All that investment has been made to the extent that we can drive additional productivity into our stores. Investment is there. That drops very healthily to the bottom line to the extent that we can acquire a brand that we see has the potential to have international legs and can leverage our infrastructure, that can be very expensive to the operating margin structure. But to me, when I hear him talk about that vision, that's the thing that gets me most excited because that can be -- it doesn't require a lot of additional investment and employment of assets. It could be very profitable to us. There's other thing -- I mean one thing that's just very obvious in our own model, just the impact that currencies have had on our margin structure. This year alone, we lost 140 basis points of margin just through fluctuations and the strength of the U.S. dollar. Not predicting anything, but to the extent that, that stabilizes and then turns that can be a significant driver for us. We've already seen some relief in freight costs coming down, but still not fully normalized to where they were before. So there's another opportunity. And as we talk about this year, last year, particularly at the end of the year, there was a lot of inventory in the system. So there was a lot of reliance on -- and we were very proud of the way we manage our inventory, but there was a lot out there, and that drove perhaps an overreliance on markdowns. And if we can return to a more normal cadence there. That's another opportunity for margin expansion.

Got it. Well, you touched on the end of last year, sort of the beginning of this year, you just reported earnings. So maybe a focused conversation a little bit more on today. First, can you just give us a quick recap of the quarter, some of the highlights, some of the things that maybe we should be mindful of as we think about where we are right now.

Sure. Let me talk a little bit on the quarter and then the year because we're very proud of both. We grew the top line in constant currency by 8%, in the quarter. Those currency headwinds consumed a lot of that. So we were up 2% in U.S. dollars. And the dynamics behind that was the European business was very strong. It has been strong all year. And one of the things that is such an advantage in our model is that we're well diversified. So geographically, Europe was very strong this past year because this was the year that it came -- really emerged from COVID. This is the first year that, that consumer was unleashed back into the stores. That happened a year earlier in the U.S. So we had a really strong business last year. So we were up against that in the U.S., but Europe was very strong. Europe grew 20% in constant dollars in our business in the fourth quarter and 21% for the year. The comps in the fourth quarter in Europe in constant currency were 20%. So very strong performance, strong traffic. The brand elevation strategy that Carlos talked about drove a lot of improvements to AUR. So very strong business there. Within the North America retail business, the -- in total, we were down in constant currency, 1 point, the comps were down. And the dynamic within that is U.S. was up against very strong numbers from the year earlier. Canada looked a lot more like Europe did this year where it came out and emerged this year, Canada is a much smaller business for us. So that played out in that dynamic. Asia, South Korea has been very strong for us. The Asian business for us was down in U.S. dollars but up slightly in constant currencies. There was some noise because we acquired some stores there. But then you step back to that for the year, we were up 12% in constant currency. Every one of our operating segments grew in constant currency for the last fiscal year that we just reported. And then the margin structure. We delivered 12% operating margin a year earlier. We delivered 9.8% for the full year this past year. And what happened within that, there was a lot of headwinds in our own structure with inflation hitting our own rent costs and labor costs, a lot of pressure on the cost structure, but we were able to mitigate that through other expense reductions in the model as well as the leverage that we got from the very strong growth and some mix. What we couldn't bridge was the impact of currencies. That was about -- we were a little more than 2 points down in operating margin. I think 2/3 of that was currency. And the other thing is we got COVID relief the year before, we got less of it this year. So that was also a part that it's not normal in the operating model, but we couldn't bridge that. But we're very proud of the ability that we were able to pull levers to offset a lot of the headwinds that existed in the margin structure.

Got it. All right. Well, I think thinking about the guidance that you gave for fiscal '23, maybe you can just talk about some of the drivers of the top line? And maybe if you walk through geographies, U.S., Europe, China, a little bit about what you're seeing right now?

Yes. Just let me start and then maybe Dennis can complete this. But just we are guiding to what we consider to be a reasonable prudent outlook, 1% to 3% top line growth and 8% to 9% operating margin. Hopefully, we can do better than that. We think that the consumer is in a very sensitive area right now. So it's very difficult to read what's going to happen and in the future. But we feel that as we go into especially the fourth quarter, things get better in the way we're thinking about this model. But we are trying to be prudent and conservative as we look into the first 3 quarters of the year.

We also want to be -- we're in that now second year with that European consumer post COVID. So we want to be mindful of how they behave. In terms of the margin structure, a lot of the same dynamics that affected last year, we see continuing this year where we have levers to offset. So we do see some inflationary pressure continuing to impact our model through expenses, rent in our stores and the like. We've also got the same dynamic I mentioned before where we did receive some subsidies from -- on COVID that we no longer expect to see any of that. So that creates a natural headwind in the margins. And last year, even though we're very proud of the performance, we didn't hit all of our performance-based compensation goals. So we didn't accrue to the level and we reset every year. So you take those 3 -- and that could represent about 250 basis point headwind in the margins. We see an offsetting similarly sized tailwind when we look at the impact of now falling freight costs as supply chains have become healthier again and beginning to normalize. We talked earlier about the reliance of markdowns, given the level of promotionality in the malls. If that inventory level is better managed again in the system, we're very proud of how we've done it, then that can be an opportunity for less reliance on markdowns. And then with a fairly modest increase on the top line and some mix, we think there's about 250 basis points of tailwinds that could mitigate those. But again, the one thing that is still out there is currencies. Even though they've stabilized on the top line for us, there are some headwinds in our margin. We quantified that as about 70 basis points based on where the currencies are right about now. And that's the delta. So we delivered 9.8% for the year. The top end of our range, as Carlos said, was 9%. And it's that remaining 70, 80 basis points that we don't think we can mitigate.

So I think our big opportunities in the top line, just our model is highly synergistic and the flow-through of top line growth is very, very beneficial to the bottom line performance. We are trying, like I said before, we're trying to really position our model, so then we can continue to capitalize on an asset-light type of model and our return invested capital has been very nicely growing during the last few years as we expand our margins in the business, but just the top line growth is going to become a major driver of that improvement. And we think that we have a lot of opportunities it is, again, taking up a prudent approach, but the product looks amazing. The marketing that we are doing, I think, is difficult to find something in the marketplace. So that power, thank you for the comment. And what we are doing within the different segments and channels to really optimize the performance of those, we have great partners in the wholesale world. During COVID, a lot of brands did not pay significant kind of attention or care for the customers the way we have and I think that we are seeing the return investment in our brand from those partners. I think that people don't forget those things and we were there for them. And we have great partnerships that we think can continue to grow as they decide to invest more in our brands than in others. We feel that there is a big opportunity in digital, and we are going after that as well. And then just -- as we pivoted to a more dressy assortment of product, and we capitalize on that. And we -- just we had great sales of dresses and both Guess? and Marciano things that, that customer was looking for to enjoy those different occasions. We think that now the customer may go the other way. And so we are investing heavily in new designs and new products in the casual side of the assortment. And we think that there is a big opportunity for that on the top line.

Got it. All right. Well, maybe in the last minute, just real quick. Just talk about the strength of the balance sheet because maybe some of the work you've done to renegotiate rents, how you're managing inventory. People obviously in the audience worry about recession. Give us a little flavor for how you're thinking about balance sheet this year.

Balance sheet, we're very happy with the balance sheet is. We ended up the year with $270-ish million in cash, about $350 million availability on our lines throughout the world. So good liquidity position, a very modest, I think, 1.3, 1.4 turns of EBITDA, the debt we carry. So that's in good shape. And we're generating very strong cash flows that we think we're excited this year. Last year, we got ahead of supply chain issues and invest it in earlier deliveries, not more deliveries, but earlier deliveries of product and that consumed cash as we held that inventory. That growth has been narrowing. We were up 11% on inventories in the year. At the end of the year, and we expect to turn that. And the combination of that along with our earnings, our goal this year is to generate $150 million of free cash flow. So we feel we're in very, very sound shape there.

Super excited about having the dry powder, if you will, to really make sure that we can execute on these great initiatives that we have especially if we're going to invest into new business and new acquisitions.

Got it. All right. Well, I think that's a great place to stop. Thanks Carlos and Dennis, thank you so much for your time today. [indiscernible]

Thank you. Thank you so much, Jay, and thanks for having us.

Great. And thanks, everybody, for listening.