Urban Outfitters, Inc. (URBN) Earnings Call Transcript & Summary

Good morning. Welcome, everyone, to today's conference call. [Operator Instructions] Our conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn our conference over to our host, Mr. Matthew Boss. Sir, you may proceed.

Thanks. Good morning. It's Matt Boss, department stores and specialty softlines here at JPMorgan. I'm joined this morning by Urban Outfitters' CFO, Frank Conforti; and Oona McCullough, of Investor Relations. Frank, I thought I'd pass it over to you if you had any opening remarks. And then we can jump right into Q&A.

Yes, absolutely. Good morning, Matt, and thank you for having us, and thank you to everyone on the phone for joining us this morning. I hope all of you and your families and your loved ones are healthy and safe. Usually, we post this statement, but since this is a call and legal would will want me to state the following, so I'll do so. I need to start today's commentary by reminding everyone that the following discussions may include forward-looking statements. And please note that actual results may differ materially from those statements. For a list of our risk factors that could affect our results, please see our most recently filed 10-K with the Securities and Exchange Commission. All right. So now that's over, now we get into the substance of today's discussion. The global spread of COVID-19 is affecting every one of us right now and certainly impacting URBN as well. Our efforts as a company have been directed at mitigating the risk to our employees, our customers and our communities while trying to maintain as much business as we can, enabling us to continue to support our workers and our shareholders. As I'm sure all of you know, on March 14, all URBN stores around the world closed to the public. We were one of the first retailers to take such drastic action. It became clear to us that we could no longer keep our associates safe while inviting the public into our stores. With the virus now spreading, it would appear those stores will remain closed for the foreseeable future. While our stores have been closed, we have continued to operate our digital business. We are fortunate to have a vibrant, successful digital business. As a reminder, under normal circumstances, our digital business represents more than 40% of our Retail segment sales. We have seen this as a strength of ours throughout the years, and that certainly remains our opinion right now as well. Despite these challenging times, our digital business has remained positive over the month of March and the past sale weeks. While promotional at times, the fact that each of our brands has kept a digital comp positive right now, I believe, is a testament to how powerful our brands are. Clearly, as everyone knows, the coming weeks and months have nothing but uncertainty, so I can only truly speak to today. I want to assure you that we are a strong company and our long-term future is bright. In the short run, however, we have had to make many difficult decisions to ensure that sufficient cash is available to get through this challenging period of time and protect our future. Due to the impact of store closures and reduced Wholesale businesses, we are taking many measures to protect our financial position, which we announced yesterday. These include furloughing a substantial number of store, home office and wholesale employees. This furlough is for 60 days, although I hope our stores will be reopened before that time and we can begin recalling many of those affected. Impacted employees will continue to receive enrolled benefits during their furlough period. We've also suspended hiring, eliminated bonuses for fiscal '21 and delayed all merit increases. We have borrowed $220 million on our asset-backed line of credit facility to further protect our cash reserves, and we've reduced our capital budget by over $100 million, delaying or canceling many projects. We have significantly reduced our incoming inventory levels by canceling or delaying many orders in addition to negotiating for price concessions. I do want to pause here and remind everyone that I do believe, in addition to the strength of our digital business, I would see our speed and history of disciplined inventory management to be another strength of our company, and strength that is critically important in these uncertain times. Now moving back to our cost measures. We have also suspended the payment of rent temporarily in addition to delaying or canceling some new store openings. We have also reduced all nonpayroll-related expenses, including creative, marketing and travel, to name a few, and extended the payment terms for both merchandise and non-merchandise vendors. We have reduced investments in our growth initiatives, such as Nuuly and expansion into China. And finally, reduced senior leadership compensation for the duration of the furlough time period and eliminated Director cash compensation for the remainder of fiscal '21, as well as suspending stock buybacks for the foreseeable future. We have not taken any of these difficult decisions lightly, and we look forward to getting past these uncertain times and beginning to grow our business again. Now I'm happy to turn the call over and answer any questions that you may have and as many questions as I can.

Thanks, Frank. That was great. Maybe if you could elaborate on top line trends in the business at each of your 3 concepts as we think about trends that you had seen to kick off the spring prior to sheltering and now as you look at trends that you're seeing across your digital business since the store closure. Maybe if you could elaborate on comps you've seen across the concepts from a digital side, maybe relative to the fourth quarter. And just any category trends that you're seeing online since the sheltering versus what we were seeing before.

Yes. So I would tell you, this has certainly been frustrating for us on many levels because we had a very strong February with -- honestly, with all 3 brands performing really well and their businesses being driven by healthy reg price sales gains on a year-over-year basis. And we were hopeful that the quarter was going to continue to progress in that fashion. And then obviously, the outbreak happened and it changed the trends. I will say, with that being said, that we've been, I think, pleasantly surprised that digital has held up the way that it has over the past few weeks. As I mentioned, certainly, there's been promotions that's helped to drive that. But digital business has remained positive in all 3 of our brands. And when we do run a promotion, we definitely see that trend spike to even higher levels. I think not -- shouldn't be a surprise to anyone. I think the trends, and you certainly don't want me as a CFO to talk too much about product trends. But logically speaking, it's been sort of more of a sort of a comfort and cozy and more tops than bottoms trend as to what we've seen over the past several weeks, which sort of makes sense. We sort of -- we joke here, the world has moved to Zoom and video conferencing. You can't really see the bottom, so maybe it's not as an exciting of a purchase for right now. The only thing I would say is while we've been really pleased and happy with how well the digital business has remained for each of the brands, it -- there's just a ton of uncertainty as to what's going to happen going forward and how the impacts of increased unemployment and just the overall economy is going to impact the business. And we are literally managing the business hour-to-hour and day-to-day. And I keep thinking that we're over a certain hurdle and news will come down a little bit tomorrow. And over the last 3 weeks, that just hasn't happened. And I'm sure that's been the case for everyone on the phone as well.

So as we think about stores reopening over time, I mean, I don't think anybody can call the exact timing of when that happens. But maybe how are you thinking about the pace of brick-and-mortar recovery in the months following? Maybe just any range of scenarios that you're thinking about, whether U shaped, V shaped. How are you guys thinking right now about what kind of demand you'll see once stores do reopen?

I think this comes back to us just being smart about inventory and having some speed and being able to chase into things if demand comes back faster. And we think, right now, it's really smart and in our best interest to remain as disciplined in inventory control as we possibly can. You're 100% right. I don't think anyone can predict when stores are going to come back online. We've got that modeled out, and that model may change tomorrow. Who knows right now? And I think what we have modeled is when stores do come back online, is that demand will be slow. I don't think there's going to be a huge charge right away to start buying fashion apparel out of the gate. So I think we're managing our inventory pretty tightly to see exactly what that demand curve is going to be, and then we'll chase into it if need be and if it's more robust than what we're currently modeling. But I think right now, to model the business on a conservative nature and think that the demand is going to be slow when the stores initially open and just gradually pick up over time, makes the most sense for us, knowing that we do have the ability to chase and build into the product curve -- product demand and customer demand if it does appear to be better than what we currently are forecasting.

And Frank, one of the points you mentioned was the economic backdrop exiting the crisis. Again, nobody really has a crystal ball. But if we look back, how did each of your concepts hold up in recessionary backdrops in the past? And just any learnings from the financial crisis you think you can apply for the go-forward if we do exit this in more of a recessionary backdrop.

Yes. Honestly, I just don't know that that's relevant right now. I think other economic recessions were driven in a very different way and with a different pace. So I don't know if that's necessarily applicable. I can tell you, historically, it's been interesting that we've typically seen the sort of that parent protect the Urban Outfitters customer; whereas we at times have seen during recessions, you would see the impact almost on an Anthropologie brand first as the consumer starts to curtail her spending and then may protect her children more and their spending starts to get curtailed later. So I know in previous times, during a recession, we've seen sort of that Anthropologie brand start to be impacted earlier and then Urban Outfitters later as a lot of families try and protect their children from change in spending behavior and patterns. That being said, I just don't know if that's going to be applicable this time around. I just think things are very different right now.

Great. On the marketing front, obviously, in light of store closures, how are you navigating this? How are you shifting ad spend as we think about digital? And then coming out of this, maybe just touch higher level on some of the opportunities we had talked about before this, whether it was customer data, the use of influencers. But maybe near-term to start out, what -- how variable is your ad spend? And how are you making changes given the dynamic, fluid situation?

Sure. As it relates to sort of direct ad spend, that's managed pretty closely as a percentage to sales. So if you think about our direct load and our click-throughs, as demand goes up and down, that spend sort of travels in the same linear progression with that. And that's been the case. As demand has improved or slowed down in certain periods of time or certain days, we impact our spend accordingly. As it relates to sort of larger marketing campaigns, I think we have reeled in some of our -- just some of our creative expenses. Obviously, travel is not really easy right now and the amount that we're able to spend on -- and sort of being creative around those creative executions, we certainly have pulled back as an organization. I think it will be interesting to see how the consumer reacts when, I guess, the virus starts to dissipate and people start to come back and spend. I think it's going to be a lot about the content of marketing and where the consumer psyche is as to the type of marketing that you're putting out there. Is it very closed or is it not? There's different points in times where I think different marketing resonates in different ways with the consumer, and that's something that we've been having very active conversations with and seeing what she's going -- what she's reacting to now and then trying to be as quick as we can as to what we believe that she's going to react to in the future. As it relates to spend, though, I think all of our direct load spend will travel in direct parallel with where our digital demand is. So to the extent that it holds up, we'll continue to market and we'll continue to measure the return that we're getting on that ad spend. And if demand starts to subside a bit, then we'll take that spend down accordingly.

On stores, Frank. So prior to the pandemic, I think you were planning on adding 30 stores this year. How best to think about that road map and how are you navigating the new store plan?

Yes. I think it was 40 globally. And I can tell you that every store that we essentially have not completed construction on, we've gone back and looked for the ability to renegotiate terms given the current environment. And in certain stores, we have looked to potentially delay and/or cancel the projects if we can't get the terms that we want or improve terms from where we are. So I would say out of the 40 stores that we were planning for coming into the year, about half, if not a little more than half right now, are in that sort of ability to delay or cancel bucket that we're working on. So I call it around 20 or so stores that we're looking to push out of this year or potentially cancel, unless we're able to get better terms with our landlords.

Great. And maybe on that topic, what conversations are you currently having right now with landlords as it relates to rent? I know you included in your release some comments about near-term rent payments. But what's the flexibility here and just some of the fluid conversations you're having?

Yes. I wish I had a crystal ball on this one as to where it's going to land. I think we've taken an aggressive approach to occupancy-related expenses right now in April. And we're having very active conversations with many landlords across the horizon -- or quite frankly, across North America as well as in Europe. Those conversations are ongoing right now. I don't know where they're going to land and sort of where payments are going to land from a deferral standpoint, to a reduction standpoint, what percentage it's going to be, how that's going to look from one landlord to another. But I would tell you, in the current horizon though, we have taken an aggressive approach and are working with our landlords. But I don't know exactly where that's going to land right now.

Got it. Maybe just switch gears to margins. Frank mentioned the customer responding to promotions on the digital side. Where are you seeing the sweet spot? Meaning as we think about 25%, 40%, 50% off, where are you seeing that elasticity of demand that's needed from a promotional standpoint to drive the positive comps on the digital side?

It's a good question. Honestly, I don't know. I'm going to tell you, of course, it differs by brand and differs in moments in time. But yes, I guess what I can tell you is you were to go back, and I know everyone sort of tracks our promotional activity and sort of look at our promotions that each of the brands have run, so far, we have seen pretty nice response when we do run a promotion. She is definitely there, she is definitely online, and we've seen pretty robust and quick reactions when we have posted promotions. And it's been everything from sort of buy one, get one sort of discounts to straight discounts to shipping promotions. There's been different flavors that the brands have offered over different periods of time over the last couple of weeks, but she definitely has responded. I will say it's been -- we haven't had to rely on that constant day in and day out, but certainly, we have been more promotional than we were in February. And I'll be honest with you though, I'm happy that she is there and she is responding to the promotions. And we have been able to manage to continue to keep inventory moving and to keep the digital business in a comp-positive territory for all 3 brands through the month of March.

On that point regarding inventory, Frank. So as we think near term, what is your flexibility to cancel or delay orders as we think -- and maybe how best to think about markdown risk as we think about categories across both your national brands and then private label?

Yes. So I think we do benefit from the fact that we've been on the speed model, so we're probably not as committed as far out as some of our peers may be. And we've taken a pretty aggressive approach to canceling for certainly the month of April and May, whereas a lot of product was ordered and was slated to be manufactured and come in. We've been pretty aggressive in those buckets. And then we sort of look at June and July, where we were less committed, and brought our plans down and started to push inventory out and fabric buys out and manufacturing out. And we'll start to have action June and July as the weeks continue to progress. And a lot of that will depend on exactly what's going to happen in the stores and how digital demand holds up. But we've gone in, in sort of that April and May time frame where we did have a lot of product that we were committed to and aggressively canceled. As you can imagine, right, with stores being closed, at least it seems like, for the foreseeable future; and at least it seems like through April; and I'm not saying they're going to open in May, we just don't know right now, we've taken a very aggressive stance on store inventory for at least for the next upcoming months as well as taking digital down.

Frank, to that point, if stores were to reopen on May 1 -- and again, nobody really has the crystal ball. But if that were the case, as we think about the first quarter, is there any way to ballpark a range of gross margin scenarios, maybe as we think about the fourth quarter? I think fourth quarter was down 350 basis points. But just any way at all to kind of think higher level, if the stores were to reopen on May 1, what a gross margin scenario might look like?

Yes. And listen, I appreciate the question. I certainly can't give a percentage because there's just so much uncertainty out there. I can tell you that I do think that we're in a pretty good spot in that we have continued to pick, pack and ship from our stores over the past month where we've had the ability to do so. Obviously, with certain states, certain facilities, we haven't been permitted to do so. But where permitted to do so, we've continued to pick, pack and ship. And I'd say for the -- on a normal basis, roughly 30% of our demand -- digital demand is actually fulfilled from the stores and that's a pretty big number for us if you think about the fact that our style count online is so much broader than what it is in the stores. So -- and we definitely have an active pick, pack and ship model. That percentage has been pretty close to that 30% across the month of March. So we've been very active in trying to clear through as much inventory as we can out of our stores to protect the sort of the seasonality of our business when we do open up the stores. Obviously, it's very different within certain product categories, right? The Anthropologie letter mug is fine, and that's the sort of a seasonless-type item, or certain styles within denim are seasonless-type items. But then there's other items that are much more trend and season-specific and trends in -- and fashion-trend specific that we are trying to move out of our stores as aggressively as we can. This way, when stores do open up whatever the month may be, we can get a new, fresh, exciting floor set in there that's season-appropriate. And like I said, we've been pushing to make sure that we're getting as much digital demand down into the stores to get as much inventory out of the stores. This way, we can protect that experience for when we do reopen again.

Frank, to circle back, I know you talked about how far out your bought from an inventory perspective. When does Urban need to make a decision on fall and holiday orders? Or what kind of flexibility do you have in terms of any variability with fall and holiday at this point in time?

I mean, I would say, right now, we have a ton of flexibility as it relates to fall and holiday. I think we've got fabric positions that we can go and use and that we can keep for an extended period of time. I think we're probably more focused right now on sort of June and July and thinking about what those trends are going to look like and how we're going to react into, up and/or down, from what we're currently forecasting. And we're leaving fall and holidays as open right now as to what we can build into and what the trend itself is going to look like. So I think right now as it relates to fall and holiday, we've got a ton of flexibility to work through from a quantity perspective as well as what -- just what the fashion it is that we're going to offer.

Great. And then as we think about the sales, just kind of trying to think through maybe the overall percentage of your COGS that's variable. Just any areas of flexibility that you have within that line.

Yes. I guess I would tell you that it's just not a question I can necessarily answer in this -- with this uncertain time. Because I certainly wouldn't have called occupancy variable. But right now, there's a certain variability to occupancy as we're in constant conversations and negotiations with our landlords. I wouldn't have called a certain amount of home office payroll variable, but there's some variability into it as we've furloughed certain number of employees in our home office. And all of these things have been done based on some assumptions that we've made on the go-forward business and what that looks like. And as I said in my prepared remarks, we're hopeful that things get better faster and we're able to recall some of those employees sooner than our initial plans of 60 days. But the inverse could happen and it could potentially be longer. So I would say there's not a ton that actually falls into the fixed category under these uncertain times. Certainly, you have things like your incentive compensation that's variable based on your performance, and that's been taken off the table for this year. You've got things like your logistics facility, and that ramps up with higher demand and ramps down with lower demand, so there's variability that's built into that. As you can imagine, we're not delivering to stores right now. So those employees, we've actually moved over into our fulfillment centers to support our digital business and reduced our reliance on third parties to fill in gaps there and tends to fill in gaps there. So there's variability built into COGS that way. The same amount of variability goes into SG&A around marketing. As we talked about, that flexes up and down relative to the digital demand. And then you've got incentive comp that flex up and -- flexes up and down as it relates to how the business performs. And then you have store payroll, which flexes up and down relative to store performance. Right now, we have furloughed a pretty meaningful number of our store associates in the field. And like I said, that's built on maintaining the cash flexibility that we need going forward. And that number can change. And hopefully, we're able to recall people back earlier versus having to extend out over a further period of time. But I would tell you there's not a ton that I would consider just fixed right now because we've had to take sort of significant measures that we've never taken before in our 50-year history. And I think, given the uncertainty that's out there right now, almost anything is -- certainly is on the table.

Frank, on your Wholesale business, how are you dealing with disruption in that channel? How are you proactively working with some of your partners right now? So maybe, what are you seeing on the Wholesale front?

Yes. So I would tell you, it wouldn't surprise me if this channel is -- follows sort of a similar trend to our stores, and if not even a little more difficult than our stores. I think if you look at the sort of mix of partners that we have, I think -- I'm sure the department stores, as you've seen in the press, are doing everything they can to manage their business and I'm sure they've got a ton of inventory to deal with, which will have an overhang on all of the specialty that supports department stores from a product perspective. I would also say from the specialty accounts, there's those accounts that we hope are able to survive the time period here where store demand is 0 and that they're there on the other side. But we just don't -- we certainly just don't know. So it wouldn't surprise me if Wholesale was, out of our 3 sort of channels and their segments, is the 1 that's probably the most challenged for an extended period of time. I think that a lot is just going to depend on our partners and how they're able to navigate through in the coming weeks and months. I would say, we are hearing from our partners that -- and obviously, we're talking about Free People here, that the Free People brand continues to perform very well for them digitally. And with some of our partners, I think it's #1 or in the top 3 of the performance. So I think as the wholesale partners are going to want to, similar to us from a store perspective, get fresh product in there and lean in, in a bigger way on product that is working for them, I think that is the opportunity. I think the uncertainty is just exactly how much inventory they will have and their ability to navigate through these uncertain times.

Maybe to switch gears to the expense front. So the original road map for this year, I think, called for 9% SG&A dollar growth. Maybe how best to think about the baseline expenditures for this year. What do you still see as essential spending? I think you touched on this before, but what overall percentage of your SG&A do you see as more variable?

Yes. I guess I would tell you, everything is on the table. And there's just -- there's not a baseline that we're managing to. I think we're managing to this is our top line scenario, and we've gotten -- I think in the last 3 weeks, I've probably done more modeling and scenarios than I have in the first 20 years of my career. And we've got active scenarios that we're running and saying, "Okay, if this is what the top line is, then this is what we need to go and get from an expense structure standpoint." Obviously, there's things that are easier, that are more typically described as variable, like we talked about incentive comp or marketing or just that sort of part-time staffing in the stores that flexes up and down with store volume. But then we've already made more difficult decisions around cutting into fixed salaries within the home office as well as headcount within the home office as well as sort of property-related expenses. So I think it's going to all depend on exactly what happens around our top line and for how long it happens as to where our SG&A number comes. And what I can tell you is literally, the only certainty that I have right now is that there's just a ton of uncertainty. And my model from last week and, quite frankly, from 2 days ago, looks different than it does today. And things continually change. And that's just the trust that we are a very strong organization that came into this time period with a meaningful amount of cash. We came in with over $500 million of cash and securities on our books, we had access to over $200 million of additional borrowing capacity, and we had no debt on our books. So we came in, in a very strong position. And I think we're doing everything that we can and should be doing to protect that strong position going forward. And if more drastic measures were required for a longer period of time, we have the ability to do so. And let's hope that they're not, and we're actually talking about recalling people earlier. But to tell you what our base is, I would tell you, largely speaking, there's a ton of things that are on the table, and I think you've seen that by our actions already going forward.

But Frank, as we think about that difficult decision to furlough the substantial number of employees, I guess, how will you evaluate the pace at which to bring employees back over time? And how do you make sure that you maintain the talent that obviously has to go through this difficult time?

Yes. And listen, I think that's the tightrope that our industry is walking. We did furlough a substantial number of employees, but we did protect a substantial number in the field as well in trying to maintain that talent and maintain our ability to open up a store at a high level. And -- from everything, from a visual standpoint, from a customer service standpoint, from just the dotting your i's and crossing your t's, we tried to protect as many of those employees as we could. And it's not to say that from 1 to 24,000 isn't important to us, they obviously all are. But difficult decisions have to be made and we tried to protect as many as we possibly can. I do think that right now, it's our belief, but who knows what will happen, that store demand will come back over time. But it will be ratable. We don't think it's going to be 100% out of the gate. So I think we've done everything we can to stay engaged with those employees that we've furloughed. We have kept them on benefits, we have kept them active within the company and the organization. We have their phone numbers, and we're hopeful that we're able to call back as many as we can, as quickly as we can. But we have that flexibility to do so over a ratable period of time, depending on exactly what store demand dictates.

Frank, I know it's early and obviously a very fluid situation. But any views on any of the government actions as it relates to your company or the larger retail sector? Anything you guys are pushing for that would help, if we could get accomplished on the governments or on the stimulus side?

Yes. And I think it's different from country to country, but speaking specifically about the United States, we're still working through the details of exactly what will benefit us and what benefit we'll look to be able to utilize. And I don't think all of the details are out just yet on the U.S. CARES Act and exactly the sort of interpretations of things that are out there. We do think that there are some things out there that we should hopefully be able to take advantage of that's sort of your run of the mill -- not run of the mill because they're not important, because they are. Sort of deferral of payments that the government has put out there, that certainly helps from when you're trying to manage your cash position right now and having 0 receipts in from stores. There's some measures out there that offers some assistance in paying employees who are not as productive or who are furloughed under this current time period. We're certainly exploring all of our options and opportunities there as well. And looking at every opportunity, I would say, we have from the United States to the north of us in Canada and all of the different countries that we operate in, in Europe. I definitely think there's going to be things that we're going to be able to take advantage of. Exactly what that means for us right now, it's a little early to tell, but I do think there's going to be opportunities. The easiest one I can talk about is just some of the deferral of tax payments and other payments that the Fed is offering, the states have offered. Certainly stuff that we'll take advantage of and will be helpful.

Last touch point, Frank, is just liquidity. And you touched on it briefly before. But maybe could you just walk through balance sheet liquidity, how you feel about the company's ability to weather this storm. And to that, what is your access to the capital markets? Or how would you rank additional options if you needed it from here?

Yes. I would tell you right now, we feel very confident, based on the models that we've built, based on the strength of our balance sheet coming into this, right? I mentioned the $500-plus million of cash that we had coming into this, the additional borrowing of the $220 million to add to our cash reserves, our ability to come through this. I do think that there's some additional capacity that's available to us in the public markets. Certainly, that is not what it was 2 months ago for any company that's out there right now. But I think we would have the opportunity to potentially expand our ABL in certain ways and utilize some other assets to sort of support that facility if we so chose to do so or needed to do so. So I do think there's additional capacity that's out there. But right now, I would tell you that we feel very comfortable, based on sort of our current modeling and forecasting, that we will come through this with -- still with a very strong balance sheet and the flexibility that we want to be able to support our business going forward. And continue to look at whatever resources are out there to protect that for as long as we can.

Frank, last question I had was just what's the flexibility -- or maybe percentage of your accounts payable that you're able to extend? Or just any way to think about that. And secondly, what's the level of maintenance CapEx? Or how lean could you run on the CapEx side?

Flexibility of payables, I would say, is sort of an ongoing conversation that's similar to what were happening with vendors around product cancellations and delays, similar to what we're having with landlords around deferrals and discounts and renegotiations. We're having the same with -- as it relates to payment terms, and that's an ongoing conversation. I would say though, we believe that we have the ability to extend our terms with the majority of our partners and our vendors that are out there. And what was your other question?

Maintenance CapEx. Just how lean [ could you run ] on that front.

Oh, maintenance CapEx. To be honest with you, it's a low number. We've been able to cancel over $100 million worth of projects. We did push out our North American distribution center out. It looks like going to be out of this year from kicking off that project. As I mentioned, there's 20 or so stores that are in play from a delay or cancellation standpoint. We don't have a ton of maintenance-related capital. That number is very, very small. Most of our capital is specific around growth initiatives, in supporting new stores, in supporting new IT projects or supporting incremental distribution and capacity as well as efficiency. The lion's share of our capital is around those sets of projects. There's a very small percentage, I'd say it's in the 10% to 15% range, if that -- that is sort of just maintenance capital that's needed. That's not a big chunk of our spend. Most of our spend is basically around growth-based initiatives.

Great. I think that's a great place to wrap up. Frank and Oona, we really appreciate your time. And Frank, thanks for all the transparency during tougher times right now. Best of luck weathering this storm. And thanks, again.

Yes. Thank you, and thanks to everyone on the call. Appreciate it.

This does conclude today's conference call. We thank you all for participating, you may now disconnect, and have a great rest of your day.