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

Good morning. My name is Brooke Roach, and I lead the apparel, accessories and brands research team at Goldman Sachs. It is my pleasure to introduce our next fireside chat with Urban Outfitters, which operates a portfolio of global brands, including Urban Outfitters, Anthropologie, Free People and more. Here to talk with us today are Frank Conforti, Co-President; and Melanie Marein-Efron, CFO. Welcome, and thank you for joining us.

Thank you for having us.

Great. Good morning. Frank, I'd love to kick it off with a question about what you're seeing in the consumer environment broadly. Urban recently announced record 2Q results. Can you identify what you believe are the key drivers of this momentum and the most important strategic initiatives that you have in place to drive sustainable market share gains going forward?

Sure. I'd be happy to. And this is an interesting entry into Zoom. I sort of felt like I was taking off on a rocket ship with the countdown. So thanks, everyone, who's virtually out there, for joining the call. Obviously, we're very happy with and very pleased with our results for the second quarter. As Brooke mentioned, it was a record quarter from a top line and from a bottom line EPS perspective. Sales growth was up 20%, with a Retail segment comp of plus 22%. I believe Urban was at 20%, Anthropologie was at 14% and Free People was a 53% Retail segment comp for the quarter. On top of that, all brands drove double-digit operating profit rates for the quarter, and that was driven by record-breaking low markdown rates at both Anthropologie and the Urban Outfitters brand. And I certainly don't want to slight Free People at all. Although they didn't hit a record, they drove over 400 basis points improvement in their markdown rate and their rate was extremely low for the quarter. By channel, stores really showed a healthy improvement, significant improvement in the second quarter from where they were in the first quarter. And we were happy to see that digital didn't fall off. Digital remained strong and remained in that mid-double digits range for the quarter and very healthy at all 3 brands. What was really driving the improvement and the acceleration in the quarter was really about apparel. So home remains strong for us, the home and decor categories. And apparel really started to pick up or continued to pick up and accelerate at all 3 brands. And fortunately, for us, it was driven by reg price which is why you saw the record low markdown rates. We are also very pleased that we were able to leverage SG&A in the quarter despite continuing to invest in marketing and continuing to grow our customer lists. We are still able to leverage SG&A. For us right now, what we think is going to continue to drive the sustainable growth is we think the consumer is still out there. We think that there's still a healthy desire to go out and socialize, maybe not in the same way that the consumer did a few years ago, but she's definitely getting out more and seems to be wanting to wear something new when she is getting out there. And we also think that there's some healthy fashion trends that are out there that are going to continue to sustain and grow and drive the business. So we still feel pretty optimistic about the business' trajectory over the second half. And obviously, we're very pleased with the second quarter results.

Great. Thank you for those introductory remarks. I'd love to dig in a little bit more about what you're seeing in the consumer environment today. How is back-to-school and fall trending so far across your banner of brands? And what have you seen as the Delta variant case counts have risen in the United States?

Yes. So I just want to preface that my comments will be sort of consistent with what we talked about as of the earnings release a week or so ago. And what we're seeing is the consumer is still out there and is still very healthy and is still buying. Our thoughts on the third quarter is that we could continue to drive double-digit Retail segment comp growth, that both Anthropologie and Free People could deliver results very similar to what they saw in the second quarter and that Urban Outfitters might slow just a bit from a top line perspective, and that's due in part to less promotions during the back-to-school time period, focusing on reg price sales as well as inventory constraints, which I know we're going to talk about the supply chain in a moment. I know it's top of everyone's mind. And I think the Urban Outfitters brand came into the quarter with inventory very tight and has seen some inventory slip and that's definitely going to hurt their top line a bit, but we still think they can drive healthy gains for the third quarter.

That's really helpful. I'd love to dig in a little bit more about the comments on Urban Outfitters specifically. Can you talk a little bit about your strategy to move a little bit more to an everyday price point at the brand and the lower promo activity that you're planning this year specifically? Any comments you can share on sequential trends at Urban versus some of the other banners in terms of what you're seeing now and how the positioning of the Urban brand might change going forward, it would be very helpful.

Yes. I think what the brand believes, and we're fully supportive of and excited about, is that their pricing architecture can be a little more defined and felt like sort of if you think about the good, better, best pricing architecture sort of in 3 tiers, it's become too close. And to consolidate it, and there can be a bigger gap between good, better and best, and feeling like that entry-level price point, we can do a better job at having an accessible entry-level price point marketing and being known for that and not getting there via promotion. I felt like the brand had become, through the past few years, too reliant on promotions in order to get to that entry-level price point and be able to access a certain customer who is going to look for certain products at that price point. I felt like we could establish a different pricing architecture or a little bit more of a separation between sort of the 3 tiers and the pricing architecture and less reliant on promotions in order to get into that entry-level price point for the Urban Outfitters brand. And we've begun to test it in certain categories and classes and with certain products. And the early results have been -- have actually been really strong. So it leaves us pretty excited about the opportunity for the brand to sort of elevate itself a little bit, be known for having an accessible price point as well as having an elevated price point but not necessarily having to be known for promotions in order to get there. And we think you can elevate the brand's proposition -- positioning a little bit.

That's incredibly helpful color. One of the top of mind hot button topics for most investors today is on pricing and promotionality. Last quarter, the company saw a meaningful increase in full price selling trends. I was wondering if you could talk to how high the overall AUR is that you're seeing relative to 2019 across the business? And can you walk through how you're thinking about full-price sell-through and promotions progressing for the remainder of the year? How much of this is just due to the overall environment versus the strength of your strategies?

Yes. So I don't think we've given that number out specifically, but you can know that across both sort of stores and digital that our full price is -- AUR is up sort of double digit. And that's largely due in part to the record low markdown rates that we're driving and lower promotions. We obviously have taken some price increases across some certain items. I think we've been very strategic about where and how we've done that. We've tried not to do that in sort of entry-level price items. We've sort of tried to do that in the middle of the higher tiers in order to offset some of the inbound IMU sort of freight increased cost inflationary pressures that the business is experiencing. I think as we look out over the remainder of the year, we believe that the environment is going to continue to remain strong. We believe that probably supply will remain constrained and it should still remain to be a healthy environment for us to be able to drive reg price as the leading driver of our top line business and continue with a much lower promotional activity through the third and the fourth quarter. We're still operating inventories incredibly lean. The reality is we've probably walked a little bit of sales even in the second quarter based on how challenging the supply chain is. And I think that the consumer right now is eager and anxious to buy and to wear something new. So we would anticipate the environment continuing to be less promotional over the back half of the year and reg price to be the main driver of the top line of our business.

That's incredibly helpful. You touched on this a little bit regarding lost sales due to the challenges of the supply chain. The industry is facing unprecedented supply chain disruption even as consumer demand remains pretty strong. Can you talk to what you're seeing in the supply chain now? What your outlook is for inventory availability into holiday and spring 2021?

Yes. It's been a challenge. It's a challenge day in and day out. And I think the teams are reacting quickly and accordingly as we see the impact of COVID affect ports of origin in different ways or different times for us. And in the second quarter, it was India that faced significant restrictions and hurt their ability and their capacity to produce at a rate that we've seen historically as well as their ability to ship out of the country. Now the origin is Vietnam. That's probably the most difficult challenge. And so we just have to pivot and continue to push strategies of pushing our product into other origins, gaining as much capacity as we can and planning and reacting as quickly as we can. It's sort of a day in and day out challenge for the business and one that requires an incredible amount of sort of communication and teamwork amongst the logistics teams, amongst the sourcing teams and amongst the brand teams. And unfortunately, I just -- I think this environment is probably going to continue for the foreseeable future. I don't think it's certainly going to end during this year and probably will lead into next year that you're going to continue to see constraints. And it certainly has hurt our ability to chase. There's not a ton of availability out there to go and chase whether it's in the market or with own brand. And it's definitely hurt our ability to bring in product at the rate that we have historically. So that impacts our ability to sort of chase and react into certain trends and effectuate the top line. With that being said, we still do a very healthy growth in the second quarter, and we still think that we're going to be able to continue to do so in the third quarter as well. But the supply chain has been a challenge over the past year, and I think it's going to remain to be a challenge over the next -- certainly, over the next couple of quarters as well.

That's helpful. As we think about some of those pockets of challenges and some of the issues with Vietnam, are there any particular categories where inventory availability might under index demand relative to others? And on that specifically, how are you thinking about your inventory levels into second half and your comfort with those levels?

Yes. So there are certain categories that we use out of certain origins a little bit more and deeper penetration. At the same time, we're trying to move and adjust as quickly as we can and replace those categories with other origins and other manufacturing as well. It's just do everything we can to speed up the process within those origins. It's a pretty fluid situation. So I don't want to necessarily comment on where the risks are. I think -- and as well, honestly, it continues to change on a day in and day out basis. So I feel like the sooner I give you that information, the more stale it will be. Like I said, in the second quarter for us, it was India that was probably one of our bigger challenges. Now it's Vietnam. And a month or now maybe it will be a different origin. And sorry, what was the second part of your question?

Just your comfort level with your inventory levels?

Yes. So in certain areas, where there's less fashion risk, specifically home and decor, we have planned to bring product in earlier than we would have normally and anticipated seeing inventory levels slightly higher than what we would have normally. So in that sort of home and decor, which don't have the same fashion risk and the same fashion turn that our apparel product does, we would anticipate the inventory levels in those categories being elevated sort of in the end of the third quarter when we report going into the fourth quarter. And that was intentional to try and protect those categories and protect those sales going into the fourth quarter and the holiday period. As it relates to apparel, which we've predominantly been utilizing air for a high percentage across all 3 brands this year, we didn't necessarily plan on bringing in a meaningful amount early. And obviously, it's probably where we're seeing some of our challenges right now as we've seen some slides in delivery dates due to various reasons up the supply chain. So we would have anticipated our inventory being at and maybe slightly below our sales trend as of the end of the third quarter. I still think that we can get there, but it's possible that actually it could even be lighter than that. You could see an even bigger delta between sales and inventory balances by the end of the third quarter if the supply chain remains as challenged as it is now.

Got it. And just a follow-up on that, as you mentioned airfreight. One thing that we've heard consistently is that the cost of product sourcing and delivery is getting much more expensive, particularly that airfreight piece, to get product here in time for key selling periods. Can you talk to the costs that you're seeing here? And any mitigation strategies that you have in place on the margin from the offset?

Yes. So the reality is we absolutely have seen increased costs on inbound freight. And it's not just air. So yes, the cost of air on a per kilogram basis is up versus where it was in fiscal '19. But it's also we have moved a higher percentage of our business to air. So we've moved it off of container, off of boat into air. So that has an impact on our cost basis as well. As well as within the containers and within the boats, the vessels that are coming over, they're more expensive on a container-by-container basis. So it's really 3-pronged in what's driving the increased cost in our inbound and outbound freight. The offset for us has been we have taken price. And like I said, we haven't just gone across the board and just raised prices. It's been very strategic. It's more in that sort of middle to upper price tiers architecture across all 3 brands. We wanted to remain accessible with some of our entry-level price points across 3 brands. So it hasn't been just a blanket price across the board. I think that price is being able to offset about half of the inbound pressures that we've seen from a deleverage standpoint relative to increased cost in each of the modes that we just talked about. And then obviously, because we've been able to drive the business with reg price sales and less promotions, our favorable markdown rates have been able to more than make up for the remaining piece of the inbound cost pressures.

Got it. I know we've spent a lot of time on supply chain, but it is such a top-of-mind question for investors right now. Final question for you on this one is you did mention that you think that some of the supply chain pressures may bleed into next year. As you think about the cost and the supply chain issues that we're seeing today, what do you think will likely be more transient versus more permanent?

I think I'll cover this one, Frank. Brooke, yes, inflation is definitely affecting us and others in the business, but I want to highlight that the pressures we're experiencing are in our forecast that we spoke to in our August earnings call. The most notable areas inflation are wages and transportation costs that Frank had mentioned. We're experiencing higher wages across all of our business, but these pressures are greatest in our distribution network, but they're also -- we're also experiencing our store labor costs being higher and at our home office. And I would expect these pressures to persist. In addition, Frank mentioned the higher transportation costs that we're experiencing within our supply chain relating to inbound product costs for ocean and air [ receipts ]. We don't believe these are permanent, but honestly, our latest thinking is that will continue for the foreseeable future.

Yes. I think you -- and thank you, Melanie, and you're right. And I think for us, we increased the percentage of how much we have aired this year. So I think you could see that normalize for us. So that could be a transient nature that could favorably affect costs as well as I do think some of the premiums that you're seeing on containers right now and then some of the premiums that you're seeing even on air flights right now, both of those will be transient. I don't know, and I think it's going to take time for them to get back to 2019 levels. But I certainly don't think that either of those sort of cost per mode are going to remain at the levels that they're at right now. And I'm sure everyone has seen sort of in the news, right? You've seen containers that historically would run at an average of around $2,000 a container, and some people are paying up to $25,000 a container. That's not going to persist forever. But when does it get back to $2,000? I think it's going to take time. So I think it's the magnitude of where those costs are right now that will be transient, but I don't know if it will necessarily get back to where it was in 2019 anytime soon.

That's helpful. I'd love to pivot for a minute to some of the channel strategies of Urban Outfitters. Mel, I'd love to hear a little bit about how you're thinking about the balance of e-com and retail stores playing out for the rest of the year and the future. How are you thinking about digital penetration? How are you thinking about e-commerce growth? And how does that compare to what we've seen recently?

So in our most recent quarter, our digital penetration was about 50% for retail segment. Now this varies, of course, by brand with -- in the case of Free People that penetration is closer to the 70s. But going forward, we are focused on delivering a terrific shopping experience wherever and however the customer would like to shop our stores or our online experiences. While we would hope store traffic trends continue to improve, we still believe that these elevated digital penetration levels will remain in place.

Got it. And as you think about the margin and profitability of that e-commerce business, can you give us some color on how e-commerce margins are trending compared to your stores? Are you leveraging any new initiatives that we should be focused on to drive profitability higher in that segment?

I'm so glad you asked that question. I know it can be confusing, but I want to start by saying our digital business is profitable and actually is more profitable than our store business. The thing to think about here is that the digital business has lower fixed expenses and higher variable expenses. In our digital expenses -- in our digital business, we have logistics and delivery expenses, which are variable, versus our store channel where occupancy is largely fixed. So when it comes to making our stores more profitable, our focus continues to be on reducing the fixed cost nature of our stores. We've learned a lot in the last 18 months about how we can operate our stores more efficiently. And in addition, we're continuing to seek opportunities for variable rent leases.

I just want to add into that. Thank you, Mel. That over the next 3 years, we have over 40% of our leases coming up for renewal. This year, we have over 80% of our leases, of our new leases, not our total, of our new leases are variable based. I think that's a high number. I would love to be able to say that it'll be over 80% going forward. I don't necessarily think that's the case. But I do think that we are disciplined and determined to get a much higher variable rate -- a much higher percentage of our leases to be variable going forward, and we have a significant opportunity with the amount of renewals that we have coming up over the next 3 years to really affect sort of and lower our cost basis. Our fixed cost basis, as Melanie referenced in our store channel, in addition to, as you mentioned, leveraging. Whereas I think we were already doing a great job at managing payroll, but I think we've pushed it even further and learned sort of new levels that we could get to and some new tricks up our sleeve as well during the past 12 months that we'll continue going forward that we can manage the stores even more efficiently from a payroll perspective as well.

Great. And as you put some of the -- some of those bits and pieces together, on SG&A, can you discuss your longer-term plan for SG&A leverage between each of the aspects of the business? Where do you think some of those incremental SG&A investments might come from over time? And where is the room for incremental efficiencies?

So absolutely. So first off, I just want to note that we have been able to leverage SG&A for the most part in the last several years. And so for our long-term investments, we will continue to invest in people, technology and marketing. And just like in recent years, we will target to grow these expenses at or less than our sales growth. Well, of course, while we haven't completed plans for next year, that's how we're going to seek to plan SG&A growth to be very close to, but below sales growth.

Yes. And that's absolutely right. It doesn't sit within SG&A for us, but the investment that I do want to call out has really been in fulfillment. As you've seen our capital be elevated this year, and it won't be elevated at the same level next year, but still should be elevated next year. And that's really around -- we had added capacity into our network due to the strong growth that we've seen, especially within the digital channel. And not only did we add capacity, but we've added capacity that's much more efficient than what we're able to operate today. So we're able to store and produce through the facility at double the rate that we're at right now with half the amount of labor. And as you know, obviously inflationary pressures have hit across the board, but certainly a ton within the logistics and fulfillment wage. From a wage perspective, having a much more highly automated facility in is going to help us to offset and leverage some of those wage cost pressures going forward. So while that doesn't sit in SG&A for us, I know it does in some other companies, it sits actually within gross profit for us. That is one of the bigger investments that we've made as a company in expanding our capacity and expanding our capacity in a much more efficient way than what we've currently been able to support in the digital channel.

Got it. That's incredibly helpful. We talked about a lot of puts and takes in the margins and a lot of investments and opportunities that you have to drive leverage. As you kind of put all of this together, the near-term headwinds and some of the inflation comments as well as the leverage opportunities and those investments. Can you talk a little bit about how you're thinking about your strategic EBIT margin opportunity? How are you balancing those industry trends and the strategic initiatives? And how are you looking to drive stronger margins?

Sure. I think for us, if you think about coming into COVID, pre-COVID, we were already starting to set record low markdown rates as a company, and it was really being led by Urban Outfitters and Free People. We had spent a ton of time and effort and energy on speeding up our supply chain, getting into a chase model, buying closer into the consumer demand, so we could be more accurate and so we could lower our promotional cadence and lower our markdown rate and our mistakes. And in Urban Outfitters and Free People, we're really starting to feel the fruits of that labor. Whereas Anthropologie, especially in apparel, was still lagging behind. While Anthropologie set a record low markdown rate in the second quarter, their apparel is performing incredibly well right now. And we think incremental opportunity to how we've historically run our business is getting Anthropologie back to sort of their record low rates and getting them to start and to achieve new rates like the Urban Outfitters and the Free People brands were achieving coming into COVID, as well as, I think, we've learned even at Free People and Urban Outfitters a new low. We thought there was a minimum amount of weeks of supply and speed of inventory turn that we could operate with. And we've sort of been forced into a test and managed to a new low. So I think there's opportunity there as well. But it's really a big markdown rate opportunity of getting Anthropologie to where the Urban and Free People brands were managing coming into COVID that can have a nice, healthy impact on our operating profit margin rates within the company. I think the others, as I just talked about, is being able to affect change in our fixed costs in our stores. With 40% of our leases coming up for renewal over the next 3 years, including this year, there's a meaningful opportunity for us there to lower our cost basis as well as to be able to put a variable nature into the cost basis there. So as traffic goes up and down, and then hopefully our performance and our cost will travel up and down within that store fleet. And I also think that the distribution investments that I mentioned earlier are a structural improvement that we're in the process of putting into our business where we can be more efficient in our DCs and less reliant on labor.

I was wondering if we could pivot a little bit to some of your growth strategies. Free People Movement is one of your prominent growth initiatives. And that brand is growing strongly. Can you talk about your long-term vision for the brand? What does that customer look like? How is it driving new customer growth? And on the financials, what growth rates and margins do you think this can achieve? And how big of a portion of the business can it be?

Yes. So we're extremely excited about FP Movement. And I know we talked a lot about it, and we 100% believe that they can be $1 billion-plus brand and believe that it has legs to do so, and it's certainly hitting exceptional growth right now. And not just from a sales perspective, we are seeing really healthy customer growth. And what we're seeing that's a little different from Free People is we are seeing a broader consumer, a broader age range and demographic from the consumer that is accessing the brand, which is really exciting for us and leaves us pretty confident to the size of the brand going forward. We started to open up stores this year. I think we had 2 opened up just recently coming into the year, and then we opened up an additional 8. That performance has been strong. We're very encouraged by those results. And the brand is obviously very heavily digitally penetrated. And those results have been incredibly strong as well. And I think the brand is sort of -- is hitting it, knock on wood, on all cylinders. The product is performing exceptionally well. The marketing is being extremely well received, and it's certainly rewarding us with healthy customer growth. And then there's an experience aspect to the brand as well, where they are doing sort of events that they're able to run out of those physical stores where they bring in people and they run classes within a store or within a lifestyle center where they operate, where they run -- they go and they do runs, and they're able to really develop a strong sense of community. And it's nice to see it grow. So we've got a ton of high expectations for the size of the brand. As it relates to the profitability of the brand, I think it's a strong business with strong healthy margins. And I think there's no reason to believing versus traditional apparel that, that business can't be a double-digit operating profit business down the road. But right now, we're just super excited about the customer growth that we've seen and the top line growth that we've seen and it is -- and the profit that we've seen as well from the Movement brand.

If we could stick with Free People for a little bit longer. At wholesale, you made the strategic decision to cut back on Free People wholesale in order to prioritize higher full price sell-through. Can you discuss the progress of this initiative so far and the most important drivers of enabling that higher operating profit margin in that business?

Yes. I think the brand made the decision that I think it would be healthy for the brand overall, not just the wholesale segment, but the brand overall to show up in a different way within the wholesale channel and focus more on regular price selling and sort of be a little more disciplined about the doors, the amount of doors that they were in and how they showed up within that doors. And obviously, that has hurt a little bit of their top line opportunity this year. But that being said, we think the top line is much healthier now. It's a much higher rate of regular price sales versus what we would call closeout or promotional sales. And as we get into the back half of this year, I think you'll see the sustained high teens operating profit rates, healthy operating profit rates, which, knock on wood, should be nicely favorable to what we operated in calendar 2019 or fiscal 2020 and really sets the brand up for better positioning. I think it supports the brand in a better way within all the channels that it operates. And we do think once we get into next year, that we can begin -- we can continue to grow the business off of this year's base. But we think -- and we think that, that growth will be a much healthier, profitable rate of growth than what we were sort of executing to previously.

That's helpful. And then on Urban Outfitters wholesale, it's still in an early stage, but you seem pleased with the initial results. Can you walk us through the wholesale strategy as it relates to Urban?

Yes. So we are really pleased with the early results. I think they did a little north of $5 million this past quarter, which puts them above sort of a $25 million run rate. I think the brand really started working on this last year. So it's really in their first full year now beginning to operate the business. Having a $25 million-plus type tech wholesale business is nice to see and it's really proud accomplishment for us and for that brand. I think -- we think there's no reason why Urban Outfitters Wholesale can't get into a couple of hundred million dollar type of business. We think both labels -- that they're wholesaling BDG, which is their denim label and their denim brand. And then the iets frans label, which was developed and has been really nicely developed or created and developed out of our European team, can continue to grow. And we think both those labels continue to grow and support Urban Outfitters Wholesale, which we believe can begin to be a couple of hundred million dollar and healthy, profitable business for that brand and a driver -- one of the drivers of growth for that business over the next couple of years.

One of the other differentiated businesses that you have is Nuuly. And on the last couple of conference calls, you've talked to changes in consumer behaviors around subscriptions and how that's trended with COVID. Can you talk to your learnings in this business and the new Nuuly Thrift initiative that you've recently announced?

Sure. So let me start with rental. One of the many things that frustrated us during COVID and obviously, the list is long. What was sort of the stunted learnings of Nuuly rental. Rental was chugging along there subsequent to launch with some nice healthy subscriber growth. And then that growth certainly got stunted during the time of the pandemic as people pulled back. And Nuuly is about wearing your clothes and having great access to a much bigger closet than you could ever have on a personal basis and there wasn't a ton of need for that during the pandemic. Well, as we started to see some of the impacts of the pandemic dissipate a bit and people are starting to go out more, we have now started to see and recapture some of that subscriber growth, and that's exciting for us to see. So we sort of look at this business, even though we've been operating it for 2 years, is that it's still very much in the early stages, and we're still very much learning. But we're happy to see the business start to grow again from a top line perspective and continue to sort of see our interaction with the consumer and learn and perfect sort of our consumer experience with that customer and learn the business going forward. So we're encouraged now by the growth that the business is starting to achieve again. And for Nuuly Thrift, we thought it was a perfect opportunity for us to leverage that Nuuly platform, leverage that team to develop out and get into the resale market and the thrift market, which is obviously, as you know, is growing at a very, very healthy rate. And we constantly see, when we look at these websites, the Anthropologie and Free People brands being some of the top sellers on these thrift sites and on these retail sites, and we're seeing a consumer begin to adopt this at a higher rate. And felt like there was no reason that we couldn't leverage our Nuuly platform to get into that game as well and do what we do best, and develop a very curated, very strong experiential site and experience for the consumer and begin to take part in some of the growth that's going on in that channel as it is a growing channel within our industry. And we felt like leveraging that Nuuly platform was a great opportunity for us to do it and speak to sort of the breadth of the consumer that could be out there. So we could cover, wrap and present Anthropologie, Free People as well as many other brands that would be sold on a peer-to-peer basis initially as well as selling some of the used Nuuly products within that thrift site. So we're pretty excited about that. We're hopeful that we'll be able to launch that platform this fall and then begin to learn how to perfect that customer experience as well as we are right now with rental.

Frank, Mel, this has been such a great fireside chat. I really appreciate you joining us at our GS Global Retailing Conference this year, and you have a great day.

Thank you very much for having us. Take care.

Thank you.