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

Thanks. Good morning, everybody. We're very happy to have Frank Conforti here from Urban Outfitters for our next fireside chat. Frank, welcome.

Thank you, and thank you for having me.

Thanks for joining us. So the format of this session will be Q&A which will be between Frank and I. There's also an opportunity for you in the audience to submit questions, if you want. And I can see those, and we can ask those to Frank as the 40-minute session goes on.

So Frank, let's kick it off. The biggest question we've been getting is green shoots and where we're seeing them and are we seeing them. You called out a nice rebound in comp results in January and early February. Can you just discuss a little bit more detail behind that, stores versus e-com or geographies or categories? Any further insight you can provide on that would be really, I think, a nice place to start.

Yes. No, absolutely. There's certainly a lot to cover there. And first and foremost, thanks for having me and us again. And thanks to all of those in the virtual crowd for joining. So I'll start with January and then work our way through to where we are today. We really saw a nice rebound in our business in January, which was led by digital and led by Free People, which continues to be our strongest brand, and then followed by Urban and Anthropologie. And then that digital business continued into February and continued to perform really well. And then what's gotten us most excited recently is sort of towards the end of February, we started to see improvement in stores. And -- in stores in North America, I'll talk about Europe in a second. And more so in warmer weather stores than sort of the North. Sort of the further South you got, the better their performance went, with regions like the Southeast and Southwest Florida, Texas, Southern California, Arizona certainly outperforming anything North, which has left us extremely excited about the opportunity as the virus continues to -- hopefully, the impact of it continues to wane and the weather is getting warmer. In addition to just stores performing, digital has continued to perform at a high level. And we really haven't seen it drop off, which has been great to see. And by category -- and this is probably what has us the most excited, is we're starting to see women's apparel perform better than it has. And within women's apparel, we're starting to see, as Dick would call it, sort of the go out apparel performing much better than it has, quite frankly, for the past year, almost since we sat here a year ago, almost today. I know we mentioned on our conference call, 7 of the top 10 apparel items in Anthropologie that -- we were on the conference call, were dresses. That's not something we've seen in years for Anthropologie, and certainly for a year in either the Urban or the Free People businesses. And we feel strongly, and I know many others do, in that apparel is going to have a strong rebound this year and that the consumer is going to have a strong rebound as the impact of the virus does wane and the weather gets warmer and people want to go out more. And it's exciting to see the early green shoots of that and stores starting to improve and the apparel is starting to improve. The flip side of that and what still remains a challenge is the U.K. specifically, and then the EU and Germany a little bit followed by that. They remain closed and on lockdown. And I talk to that team almost every day, and I feel like they get crankier every day as they're sitting in their rooms and not able to go out and socialize. But that digital business has been incredibly strong. But if you think about that business coming into COVID, you're talking about a business that was probably about 80% stores and 20% digital. So it was a heavily store-based business. So while digital is a healthy triple-digit comp there, it hasn't made up for the store losses. Hopefully, as we get into April, that pent-up demand and they'll be out and about again, and we'll start see that recover. So Europe is a little different, and specifically, the U.K. is a little bit different than what we're seeing in North America. But we're extremely excited about the green shoots we're seeing in North America right now.

And then it's exciting that the store traffic is picking up in certain regions. Are you ready for that from an inventory perspective? And how quickly can you make sure you have the right product in the store?

Yes. I would tell you, our stores would want a little more inventory right now, for sure. And honestly, that's a good thing. I think buyers love to buy. They love the chase. And nobody likes to cut inventory. And I think one of the hardest things to do coming into this year is to predict, predict when that churn was going to happen, when the consumer was going to start to buy in a different way, when she was going to start to buy in stores and when sort of the product categories were going to be in this shift. So we probably could use a little more inventory in stores right now, and we are absolutely chasing. And that's a good feeling to have versus this time last year. It was all about how much could we cut and how do we get out of liabilities. The thing I would say is -- I know a lot has been publicized about the challenges from a logistics perspective, about bringing product into the country as well as just the port congestion that is going on. We air a lot of our apparel. I think Free People airs almost all of it, and then Anthro and then Urban Outfitters at a healthy rate as well. The congestion and the challenges from a logistics perspective are nowhere near that much of a challenge from an apparel when it comes to air versus boat. So that impact is more impactful on the home category. So as apparel does start to pick up and starts to trend up, we do have an opportunity to chase a new apparel faster than we would some of the other categories that have been trending over the past year, which does give us some opportunity. But yes, to answer your -- the short answer to your question is, yes, I think the stores would like a little more inventory right now.

And Frank, you touched on something that I think would be particularly challenging this year, which is planning demand. As we move into the summer, and maybe even most importantly, the fall and holiday time frame, how are you thinking about the inventory plans? And I guess, how much could you chase if you needed to?

Yes. Well, jeez, we had our Board meeting on Tuesday and had your conference today. And in between, I've had 3 different chase strategy inventory meetings with the brands, which is a good thing, right? And how much? I'm not certain just yet. We've always tried and keep inventory sort of within a couple of basis points -- a couple of hundred basis points lagging where our sales trend is. We believe right now that, I think, our retail segment can come in low single digits for the first quarter. And the improvement continues to progress based on what we're seeing now. So my inventory, I think, it's possible that you could see it in sort of low negative to almost flattish for the end of the first quarter. And we would feel pretty good about that and probably be hopefully continuing to chase into an improving trend into the fourth quarter. I think if we could get there, we'd feel pretty good about things.

Okay. And then business-mix-wise, it's exciting that the going out product is starting to sell. Home has longer lead times, and I think you've had some difficulty getting in stock there. How do you plan that business? Do you think that could be down this year as people favor the away-from-home categories? Or do you -- are you still seeing some strong demand there?

We're still seeing strong demand there. And I think that's what's really making us happy is -- right? So as stores have picked up, we haven't seen digital fall-off, and we haven't seen the home category fall off. So obviously, our comps are better than where they were in the fourth quarter. And it's apparel that accelerated and has become incrementally in addition. I also think, although, right, there was a strong tailwind in the home category last year, I really think what -- had COVID had not happened, we were destined for a strong home year regardless. I think Anthropologie continues to be focused on really growing that business. They call it the AnthroLiving business. It has had strong comps over the last several years, as had the Urban Outfitters brand. So I think both of those brands naturally are gaining a market share right now, and I think that will continue into this year, probably not at the same rate, right, that we had in our FY '21 calendar year. But I still do think off of really big growth last year, those businesses can continue to grow because I think they are doing something special in the market right now.

And then you saw e-commerce penetration surge last year during the pandemic. Where did that end up? And how do you think that, that impacts the business on a go-forward basis?

Yes. So it's a tricky question because it ended up north of 60%, right? But our stores were not where they needed to be. And naturally, if we were north of 60% with store comps being flat, it would be incredibly margin accretive. Our digital business remains a much more profitable business than our stores, even prepandemic. So its increasing penetration is a very good thing for us. Stores obviously lost money last year, and digital was able to make up for a large portion of that, not all of it. But we did get -- we did make a little bit of money for the year last year, and that was because of the strength of digital and because of the profitability of digital. So for us, where do we think it lands? I mean, I think, as stores recover and digital remains healthy, we're certainly, I think, going to remain north of 50%, plus digital business going forward as stores recover this year. I don't know exactly where that's going to land. And our opportunity, though, is as stores recover, they don't necessarily have to get back to where they were in calendar '19 and fiscal '20 for us to now have margin accretion and be able to see the benefits of the digital channel and the digital channel penetration flow through to gross profit and operating profit, which we haven't been able to see much of in this past year because stores meaningfully lower than we've seen -- than what we've been trending at. They don't have to get back fiscal '19 or fiscal '20 levels for us to see margin accretion. If they can get within shooting distance, you'll start to see the benefits of the penetration of digital. And honestly, the brand that's a little bit of our sort of -- within our company, the vision of the future is Free People. Where the company was in the mid-60s, Free People was in the mid-70s. And they were our most profitable brand last year, by far, from a rate perspective. And it's because their digital business is a much higher rate than stores, as it does with the other 3 brands. And you see the benefits of that because their store channel had shrunk so much in relation to how much the digital channel has grown.

And shooting distance, let's talk about that for a second. Is that 80% of prior productivity, 90%? What's sort of a ballpark in terms of where you need to be in the fleet to just get to margin neutrality?

Yes. And the reality of the answer to that question is it depends. Because if digital was flat and I was at 90%, that's a different answer than if digital was a plus 20% and I was at 90%. So there's a relationship there. But if digital was to remain sort of low double digits for us and we were to get into shooting distance of a 90%, % type range, you start to see margin accretion for the business, for sure, across -- say, across all 3 brands.

Okay. And then was there anything -- we've been hearing a lot about very low return rates in e-commerce across the industry during the pandemic. Was that a positive for you this year? And maybe can you just discuss the profitability of the channel in general?

Yes. So it was definitely a positive for us, and that was across all 3 brands. And some of it was category mix, right? So dresses are a higher return rate than home and decor is. So we got the mix benefit. But even within sort of categories, we definitely saw a lower return rate across all categories and across all of our businesses. That favorable trend continues right now. I think it will recover back to, largely speaking, where it was. I think it will ratably sort of recede back to normal rates as the year progresses, is my suspicion. I think it will actually probably coincide with stores improving as well. For us, I want to say north of 70% of our digital returns, our digital purchases, go to stores at the Free People and Anthropologie brands. So as store traffic has been down and the consumer has been uncomfortable going out, and there's been a natural just, "I'll keep the item, and I'm not going to return it." And I do think it will recover as the -- maybe recover is not the right word, but it will reverse to the mean as the year progresses. But right now, it is still favorable, and it was all year last year as well.

And then how about the profitability of the e-commerce channel?

Yes. So our e-comm channel during the pandemic, and with all the challenges that you heard about from a delivery perspective and from a logistics perspective and COVID -- dealing with the impacts of COVID, was more profitable last year than it was a year ago. So we've actually improved it from a rate perspective and from a dollars perspective and leveraged off on other expenses. So I think there's certainly headwinds as it relates to digital rates. So delivery continues to be something that companies have to solve for. Carrier rates continue to go up, and we've got strategies to reduce things like split shipments, out of market shipments, more reliance on regional carriers that help to offset and mitigate some of those impacts. I think wages are going to continue to go up. That will affect the fulfillment center in that logistics group. We're in the process of building a brand-new facility in Kansas City, Kansas. Right now, we're just completing a new facility in the U.K., and that is highly automated. So you're looking at 40% -- to 40% to 50% more efficient than our existing technology -- than our existing facility. So less reliant on labor, so it protects us a little bit from the increasing wage pressure. So there are other opportunities, but digital remains profitable. It was more profitable, like I said, on a year-over-year basis for us last year, which is pretty impressive.

And then on the other side of the business, the stores. Where are you in terms of trying to renegotiate some of the rents for places where you've seen traffic come down? And how much more opportunity do you expect to find there?

Yes. So with a lot of our renegotiations over the course of the past year, we pressed hard for abatements. So the stores were closed and on lockdown for April and May. We looked for 2 months free, and the landlords weren't certainly very much looking forward to lower rates going forward and lowering sort of contractual longer-term leases. If you're on the shorter-term lease, of course, they were willing to renegotiate an adjust the rate going forward if you're willing to commit longer terms. And we weren't interested in committing to longer terms. So we have about a little more than 40% of our fleet comes up for renewal over the next 3 years. So that's more than 250 stores come up for renewal. We are seeing, by far, the best deals that we've ever seen certainly in my 14 years here, whether it be a relocation or whether it be a completely new store. We're seeing variable rent, which is percent rent to sales, and not only is it variable rent, which is great because it gives us the ability to -- as traffic fluctuates up or down, then our rent adjusts up or down, right? So during the pandemic, our percentage rent stores, so that we didn't have to go back and get a reduction and then have to go back and negotiate a reduction. So now we see variable rent, but it's also a much lower rate to sales than what we're seeing with our legacy stores. In addition to that, we're seeing break clauses. So historically, we would have signed a 10-year lease with 2 5-year options. After that, we're getting break clauses after a short -- a period of time within the 10-year lease now, which adds flexibility. And we're getting significant capital contribution. So over 80% of our capital for our store buildout next year is actually paid for by the landlord through tenant improvement allowance. So we're seeing much, much more productive and profitable deals. But to your point, there is a legacy of stores there and more so in some of these legacy sort of metro markets that have been the hardest hit, right, where you're sitting in New York City right now, that are a bit of a drag on the business. And we're going to -- we're planning on closing 22 stores this year, and we're going to continue to close those stores if the landlords don't adjust their expectations. And we've got over 250 coming up over the next 3 years. And as many of those as we can accelerate, we will. I think we want a little bit of clarity as to where traffic recovers to, as to exactly which store and how hard we're going to push, whether it be for closure or for a new deal or for just walking away altogether. But as traffic starts to improve, I think what we'll gain that clarity as the year goes on.

Okay. And then can you give us an update on the store fleet? You gave a closure number for this year. But where do you see opportunity for more store openings by geography or brand?

Yes. I would say, right now, we really haven't changed our numbers or our thoughts on Urban and Anthropologie domestically. Both -- I think Urban is in the 190s and Anthropologie is a little over 200. I think you can see those numbers relatively stay consistent over the next couple of years with changing out some of the legacy stores for some of these newer, more profitable stores. Free People, I think you could see, get close to about 200-plus stores -- or 200 stores and get up to where Urban and Anthropologie are. I think they're in the 150s or 160s right now. So they'll continue to grow, and again, continue to take advantage of some of these new profitable stores. Free People Movement, we've got all of 2 and a pop-up right now. But we're planning on -- I think the number is around 16 new stores this year. I would tell you that the 2 that we've opened or the 3 that we've opened have far exceeded, I think, our expectations during the pandemic. So they have actually hit their pro forma numbers because they were on the slate before the COVID outbreak. They hit their pro forma numbers that we had -- pro forma before the outbreak. And I think that's pretty impressive given how constricted traffic still is right now for them to be performing at that level. So I think the future for their store growth looks pretty healthy. And we'll see how the new stores continue to perform and how they trend, but I think you'll continue to see store growth for Free People Movement here domestically. Internationally, so you've got Urban Outfitters, I think, is around 60 or so stores throughout Europe, pretty heavily penetrated in the U.K. and then Germany. We think they can get to north of 100 stores. And honestly, I feel the same about Anthropologie and Free People. Anthropologie is on the lower end of around 20 or so stores, and Free People is, I think, around 10 stores. So still early days for both of those brands. And both those brands actually still have a fair amount of opportunity in the U.K., and then we'll probably move on to Germany and some other countries as well. You won't see us, though, build 20 European stores in a given year. I think it will be a ratable build as the right deals and the right locations become available.

And can you talk a little bit about the management changes at the Urban Outfitters brand and how you're trying to fill that brand president role, either internally or externally?

Yes, no, absolutely. First, let me just take a step back and talk about Sheila a little bit. So Sheila is coming up on almost 20 years with the company and has really taken a leadership role of Free People over the last 10 years. And I'm not -- and I don't want to sound sort of arrogant, and she's certainly not a person who would brag, so I'm going to do it for her. I think Free People has been one of the strongest brands that you can look at over the last several years. I think it's something like 16 of the last 17 quarters they've had comp positive business. And I think that is a direct reflection, and I think I know it's a direct reflection of her, her leadership and the team that she's built underneath her as well. They finish each other's sentences and they have worked incredibly well together. And if you think about Free People Movement, which we think absolutely can be a $1 billion brand, that was Free People -- that was Sheila. Sheila has built that brand and has built the success of that product and where it fits in the marketplace and where it fits with the consumer and the opportunity there. So her taking over Urban Outfitters and -- we see as an exciting opportunity to really sort of press Urban to continue to grow and to look for their next leg of growth. And I think she's the right person to go out and to execute it. 100%, she's going to need help. So yes, we are looking for a president role in that brand, and we're looking to give her some help. Of course, there's always looking internally, but we're looking externally as well. I'll tell you, I've been surprised at just how deep and how eager the sort of talent pool has been. We've really gotten and spoken to several extremely talented, well-respected candidates. And I think we'll have some staffing and some solids there at the Urban Outfitters brand -- solids in the near-term that we're going to feel pretty good about.

And then just shifting to gross margin. You guided to several hundred basis points of decline in the first quarter. Can you talk about how much of that is Europe and the store closures there? And then as you think about it going forward, I know you haven't provided any framework for us. But could we get to a point where by 2Q, 3Q, the stores have recovered to the levels we talked about earlier and e-commerce is growing, and you're actually in an up gross margin position versus 2020?

Yes. So the answer is absolutely, we can get there. And as stores continue to improve as well as Europe sort of opens, that provides for opportunity. Europe is a healthy piece of that. I want to say almost 1/3 of the margin degradation is just due to the fact that those stores are closed and the drag that it puts on the business. Again, like I said, digital is doing a really good job of capturing a certain amount of volume. But they can't make up for all of that profit because there's still a certain amount of just fixed cost base there that we can't get out of. The opportunity is as North American stores, though, continue to improve, is to go and you then just start to see the benefit of the digital channel, I think that -- I can't speak to exactly what I think Q2 is going to look like yet or Q3 is going to look like yet, because I don't exactly see where store traffic trends get to. But with the improving trend, we feel pretty optimistic and certainly by the back half of the year, I think we can see growth. And I think in the second quarter, we can see meaningful improvement from what we're guiding to and thinking about for the first quarter as well.

And then shifting to SG&A. How should we think about growth this year and in the outyears? Are there any big investments you need to make to support the changing business environment?

Yes. So I think we sort of benefited from a lot of the trends that sort of were accelerated via COVID, like digital-first, something that we already had a high penetration. So our platform is already in a really good place and really stable, as I knock on wood, and really scalable. So from an IT perspective, a lot of that spend is more around enhancement, right? So getting better at all of the different things that they talk about, personalization and recommendation and those things, sort of bells and whistles and functionality that you put on the website. All of those things that should have sort of an ROI, you should be able to see the benefits, whether it be conversion rate, whether it be customer attraction, retention so forth and so on. So there's not a huge heavy lift from an IT perspective. A large portion of our SG&A is more marketing and creative. So it's variable, right? So as digital continues to perform at a healthy level, we'll continue to feed the marketing and feed the creative and support that business. And as it adjusts up or down, then we'll adjust that variable spend. In addition to that, sitting in SG&A is incentive comp, and specifically, bonus. So fiscal '20 wasn't our best year. So it wasn't a high bonus payout year across shared services as well as, obviously, within the brands. So we're hopeful that fiscal '22 will be a better year. So there's an accrual in there. So we think with Q3, obviously -- or Q1, excuse me, starting out slower than where we hope to finish the year, that their SG&A growth rate will probably be in the low single-digit range. But we'll get to mid-single-digit for the full year, sort of ratably growing as the sales grow correspondingly from Q2 through Q3 through Q4. The one thing I will say, and it doesn't necessarily show up big in SG&A, that is the spend that we were not -- I guess, we were prepared for, but certainly accelerated and left us a little bit out of capacity is around fulfillment. So we had planned on that new facility in Kansas City, Kansas and planned on being able to meet the demand certainly for the next few years. But our digital demand doubled, right, what our plans and expectations were in our fiscal '21. So we've accelerated that facility. And so that's why you'll see our capital be elevated around $250 million for this year, and then you'll see some of that be elevated as well in fiscal '23. I don't know if it will necessarily be quite that high, but it is sort of a 2-year project. We think that the building itself being complete around the 4 quarter of this year from a building perspective, and then the MH&E, which is really complicated to build and to test, takes almost another year or 2 to complete before it's fully up and running and we're able to get the efficiency out of that building. So there's some capital costs as well as there's some bridge facility costs in order to get through peak of this year that will hit the P&L.

I wanted to hear your latest thoughts on Wholesale. You were in the midst of some pretty big changes there prepandemic. How do you think about the recovery potential of that business, the partners you're working with and what margins could look like?

Yes. Wholesale is another great example of sort of COVID gave us the opportunity to accelerate some change. And I think what the Free People brand has done is they've sort of rightsized their business and removing some doors that were unprofitable for them and they didn't feel like we're the best representation of the brand. So I think Wholesale, you could see being down low double digits, at least for the first portion of the year. But you could start to see it recover into sort of that high teens operating profit rate again, as it been a much healthier business, growing your digital consumer base and growing with the appropriate doors here domestically as well as internationally. And I think the upside, too, for Wholesale is really around some of our new initiatives. So Free People Movement continues to a attract a lot of partners and a lot of opportunities that we're working through this year, and I think, could end up outperforming and help to improve that low double-digit plan that we have right now. And Urban Outfitters is wholesaling their BDG, their denim lifestyle line. And it's very early days, but that continues to perform well and provide for some opportunity for the longer-range growth of wholesale as well.

Can you talk about plans for capital deployment?

Yes. So our biggest plan is that facility that we're talking about -- that I talked about. So we just completed the facility in Peterborough. That will be up and running by early summer -- fully functional by early summer this year. And there was some capital that bled into this year to -- for that facility. And then there's the new Kansas facility that will sort of cross between this year and next year, again, building being this year and the MH&E and being more into the following year. That will elevate our capital number. So we think we could be around $250 million this year. As we think about deployment, it's the same order, right, so supporting the business, supporting our initiatives. And then we remain committed to returning cash shareholder. That would be via buybacks. I think, right now, we're going to continue to see how the stores perform and how our business performs throughout the first quarter before, I think, you would see us considering being active. And we'd probably be a little conservative with our cash in our balance sheet right now in the first quarter of the year. And then as the business performs, we'll continue to look at what our free cash flow looks like And think about what return to cash -- or return to shareholders -- return cash to shareholder strategy will look like as the year progresses.

I wanted to ask about Nuuly. A pandemic is quite a time to be trying to build a new business. Has anything changed in your confidence in that concept? And then how long do you see the path to profitability?

Yes. So I would tell you, yes, it's been a difficult year for Nuuly, right? So Nuuly's built on sustainable fashion and getting a ton of utility out of your closet and for being able to go out or going to work for any occasion. It's not special occasion, but just being able to go out. And there hasn't been a lot of going out, right, in the past year. So it's obviously stunted Nuuly's top line growth. It did to give us to work on efficiency projects and get much more efficient in our distribution centers, which we did, and work on some other sort of other operational items and reporting and systems, which was great. And actually, we'll -- as we're now starting to see subscribers grow will help us get to profitability faster. So that's -- I'll take the positive and the glass half full there. But certainly, it was a very difficult year around subscriber growth and a very difficult year in just sort of reading consumer behavior. Because we saw so many go on pause, and their primary response to us was, "Listen, I'm just -- I'm cutting back on expenses," and understandably so. It's funny, now as the weather gets warmer, you can almost literally watch temperature -- as the average temperature grows, the Nuuly subscriber count grows. There's this -- as we started to see improvement in stores, we've started to see improvement in the Nuuly subscriber count now as well. And it's starting to grow again, which leaves us excited. I think where and how we get to profitability, we're probably a quarter or 2 from talking a little bit about that. But we've made some nice headway on sort of what we call the box economics, and I'll spend more time as we get a couple of quarters later talking about that. But if you think about just like a store four-wall, it's similar as to how we think about sort of the box economics of sending out the package, the cost of delivery, the cost of product that's in that package, the cost to get it back to your warehouse, in your fulfillment center and fulfilling it. Those box economics are improving. And that's favorable then is we're able to grow subscribers, and we should start to be able to see some leverage off of the fixed expenses that we've invested in, namely the distribution center.

And have you heard any feedback from customers that they're less interested in a rental subscription model post-COVID?

No. Like I said, as the weather has gotten warmer over the last days and weeks, we started to see subscriber count grow, and there's an incredibly strong following there, that they've been in touch with us and said "I'm just on pause. I can't wait to come back." And we're seeing a ton of reactivations as well as new customers start to grow. And I think as she wants to go out more, I think we still believe in the concept in that it's a great sustainable utility of your closet of being able to put in 6 new items every single month and have a ton of convenience to be able to do so.

And then Free People Movement, you've mentioned earlier the potential to be a $1 billion brand. How does the brand differentiate itself from a relatively crowded athletic and athleisure market? And how do you see the pace of this business going as we all do go out a little bit more this year?

Yes. Yes, it's a crowded space. But I would tell you -- and this is probably not the -- I'm probably not the best person to answer this question. I really feel like their look and aesthetic is very different than many others that are out there. It has a very fashionable feminine feel and look and aesthetic to it, from the product itself to the creative and to the marketing. I think it's very different than a lot 0of what a lot of others are doing out there. And I think they're meeting the sort of -- those requirements from a functionality and a performance standpoint as well. That's not -- we're not going to win off of that. But I think there's obviously a standard that you have to meet and that she's going to hold you accountable to, and we feel comfortable that we're there and we're doing a good job there. And then just to look and the feel of the aesthetic. I think it's very different than things that are out there right now. The other thing, too, it's important to think about, as you think about sort of it comparable to the Free People brand, it's a much broader range of customer than the Free People brand. The Free People brand is a very specific look and feel. And while Movement has that as well, we're seeing younger and older -- both ends of the spectrum, we're seeing a broader range of consumer for the Free People Movement opportunity, which is what also leaves us so bullish on where we think we can get to in totality of that brand. Absolutely similar to the home category, I think athleisure has a tailwind, right, in just in our fiscal '21 or calendar '20. And we certainly benefited from that. That being said, I think there's been a trend that's been going on for some time now. And I've got a 12-year-old daughter, and I guess, it's just acceptable to wear what I used to call like tights to school now. Like it's just a common uniform, and it doesn't -- those girls are going to continue to grow up into adults. And I don't trend is going away, and Free People Movement has a really specific look and feel for it. So maybe the tailwind won't be as strong this coming year, but I think we're gaining market share, and I do think that they're still going to remain a tailwind into that category for years to come.

Then I just wanted to ask one question on ESG. Your consumer certainly cares about sustainability. Is she giving your feedback on that? Do you think she's willing to pay more for more sustainable goods? And how do you think about meeting that need?

Yes, no, absolutely. And it varies as to whose consumers are more vocal, depending on the brands. And each of their brands have their initiatives of what they're working through. I know BDG has goals around their denim and water usage and how much of that material is recycled and -- but there's no question that -- and each brand has a little bit of a different flavor for it. We sort of -- we allow for states rights here because we feel it's important that the brands remain focused on who their consumer is and what's important to their consumers. So each of their goals are a little bit different amongst each brand. But it's absolutely a focus of each of the brand leaders, and we definitely continually hear from it from the consumer, and our sourcing organization remains focused on it as well.

Great. Thanks, Frank. Well, it looks like we are running low on time. So I wanted to say thanks so much for joining us today, and get back to those chase meetings. Good luck for the rest of the year.

100%. Thank you so much for having us. Good luck for the rest of your conference. Take care.

Thanks.

Bye.