Vera Bradley, Inc. (VRA) Earnings Call Transcript & Summary

Hello, everyone, and thanks for being here on today's call. During our prepared comments and when answering your questions, certain remarks we make might qualify as forward-looking statements under — and as defined by — the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995, as amended. Known and unknown risks and uncertainties apply to those forward-looking statements, and they could make actual results wind up materially different from what we anticipate. For a look at the known risks and uncertainties, please see today's press release along with the company's most recent Form 10-K as filed with the SEC. Investors shouldn't presume that anything said on the call will still be valid at a future point. We assume no duty to revise any information covered on today's call. Now I'll hand the call over to Vera Bradley's CEO, Jackie Ardrey. Jackie?

Thanks, Mark. Morning, everyone, and I appreciate you being with us on today's call. There's plenty to cover regarding the upcoming launch of Project Restoration, but first I want to offer a few remarks about Q1. On the whole, our first quarter results showed several trends from last year carrying forward. A lot of those came from the same economic pressures that a number of other specialty retailers have called out in their earnings reports. On top of that, we're in a transitional period as we approach the July consumer-facing debut of Project Restoration, which involves bringing in new Vera Bradley product assortments late in Q2. As you might expect, our first quarter came in somewhat uneven. I want to point out that we anticipated a good deal of this disruption, and our guidance for this year — which Michael will cover later on this call — remains the same. I'm particularly proud of the whole Vera Bradley organization for operating the existing business while at the same time shouldering the tremendous effort required to reach the launch phase of Project Restoration. We've been at this for more than a year now, and many elements are finally moving into place as we make this long-awaited shift. We couldn't be more thrilled. During Q1, Vera Bradley Direct revenues dropped 4%, largely tied to ongoing traffic difficulties in our outlet channel. We're observing how fewer visits and less spending are affecting every household income bracket and channel, though it's especially pronounced among households earning under $75,000, where our outlets have strong penetration. Full-line store and e-commerce revenues declined slightly, helped by moving our annual outlet sale in Fort Wayne into Q1 this year from Q2 last year, along with our recently introduced online outlet store, which has done well at generating revenue and bringing in new customers. Shoppers responded positively to a few of our newest product collaborations and to our more recent, smaller-quantity items such as leather and beaded bags. Still, taken as a whole, consumers kept being more selective about discretionary purchases given the macroeconomic backdrop. Over on the Vera Bradley Indirect side, revenues dropped 25%, since our wholesale partners held back on inventory commitments while waiting for our new launch products in Q2, and since a sizable off-price order moved into Q2 this year from Q1 last year. Pura Vida's first quarter sales on a year-over-year basis were down 37%, which we expected as a continuation of trends from earlier quarters, mainly because of declines in e-commerce and wholesale revenues. As we anticipated, prioritizing marketing efficiency and spending less on marketing, within a much higher cost environment, hurt e-commerce performance. Because of that, Pura Vida remains focused on spreading our marketing allocations across other channels. Wholesale revenues also declined, coming off a strong showing last year and with our partners being more selective in what they bought. The Pura Vida team also keeps working hard to control expenses. We keep making our already solid balance sheet even better, boosting our cash position compared to a year ago while also deliberately bringing inventory levels down; a strong balance sheet matters to us because it backs our Project Restoration initiative as we steer through an economic and retail landscape that remains uncertain. Let me now move on to Project Restoration. Just to recap, Project Restoration is the strategic plan we've put in place to generate profitable growth over the long term by tackling the consumer brand, product and channel elements across both of our brands, all resting on a base of solid business discipline, a deeply committed team, a healthy balance sheet and a powerful technology platform. Via Project Restoration, we're pushing meaningful change across practically every part of the business, and we're confident that carrying it out will bring long-term value to our shareholders. The bulk of our efforts centers on Vera Bradley, our biggest brand. Following over 12 months of foundational work on Project Restoration, we're thrilled about the customer-facing changes set to be revealed in mid-July, especially those involving our elevated Vera Bradley brand marketing, product, store design and website. Because of this, we anticipate that first half results will remain difficult while we get ready for our July launch. We anticipate that Project Restoration will deliver results in the second half. Through these turnaround efforts, we're turning the organization toward a promising future. At Vera Bradley, we're bringing our iconic brand back to the market in mid-July. We're meticulously aligning the debut of new and elevated products, refreshed branding and marketing, remodeled stores and updated in-store displays along with our enhanced web experience. We're noticing a number of green shoots across the business, including favorable reactions to our new products from the wholesale channel and other partners, as well as how our customers respond to limited-quantity product introductions such as leather and beaded bags, which come out of our new design work. When it comes to the consumer, our emphasis is on rebuilding brand relevancy, aiming at casual and feminine women aged 35 to 54 who appreciate fashion as well as function. Our concentration on this age group pushed us to seek out data to grasp where and how she shops, and our efforts on this initiative drew on consumer research and existing perceptions of the brand from both buyers and non-buyers. We're leveraging this data to reach new customers and pursue new partnerships, licensing deals and collaborations that broaden our reach. We're confident in our capacity to draw in new customers while retaining our existing fans through product innovations and fresh marketing campaigns crafted to spark joy and connection; we've built a multiyear customer file growth plan centered on this core consumer target, together with a suitable level of marketing investment to bring in new customers as we roll out new products under our refreshed brand vision in July. As for the brand, we're strategically promoting our distinctive and unique standing as a feminine, fashionable brand that resonates with consumers on a deeply emotional level. Vera Bradley has a powerful brand name that people know well, and we intend to strengthen it further through putting money into additional strategic marketing efforts. Something I'd like to stress is that the qualities making this brand special and one-of-a-kind — the ones millions of shoppers have cherished across more than 40 years — aren't being altered. Instead, we're simply leveraging that edge to build a fresh brand expression, one that feels more contemporary and attractive; our method is highly refined, and it has full backing from the customer data platform we brought on board a few years back. To be specific, our marketing resources are being redirected, with a greater share of those funds going toward broadening reach with greater precision via a thorough blueprint featuring the proper media blend. Creative campaigns in larger numbers, wider digital exposure, expanded public relations activity, and inventive in-store programs will all be part of our efforts, all meant to spark interest and bring in shoppers we haven't had before. Rather than concentrating on acquiring customers channel by channel, we keep moving toward a multichannel viewpoint so that our media works harder. Everyone here is thrilled about the collaboration we have with a famous celebrity partner along with other influencers, which we'll be revealing starting in July.

Also, the way we approach promotions is going to change—no longer will discounts be the main narrative we communicate. Instead, we'll execute a carefully coordinated effort around amplifying the brand, telling stories at the category level that spotlight important products, making offers aimed at bringing in specific customers, using well-designed strategic incentives to drive demand, and pursuing inventory management programs intended to clear slower-selling SKUs. When it comes to the product itself, we have thoughtfully reworked our assortment to suit a more contemporary customer and what she's looking for, while keeping those qualities that have traditionally been associated with Vera Bradley, such as our signature colors and quilting; we're enhancing our vibrant, feminine legacy, preserving what makes it unique while making it more aligned with current trends and modern through refreshed prints, colors, styles and designs. Plus, we'll keep launching strategic introductions of adjacent lifestyle products that resonate with our customers. These product adjustments came about thoughtfully following thorough analysis of customer data. The refreshed assortments will have a more focused category emphasis. By innovating and expanding what we already do well, we're refocusing on our strengths — for instance, bags. That includes hands-free crossbodies, belt bags, backpacks, travel pieces, and the smaller goods that live inside bags, like wallets and pouches, which give her a way to shape her look and stay personally organized. Within full-line accessories, we'll deliver distinctive, newness-driven product, anchored in a clear good-better-best tiering. We remain committed to adopting fibers that are more preferred, performance materials, and softer, higher-quality fabrics, while holding our current retail pricing architecture in place. Our products will have more contemporary, relevant silhouettes and designs, with an emphasis on artistry; additionally, we're increasing our solid penetration, which works well alongside our refreshed prints and patterns. Solids have been performing better and are anticipated to account for roughly 50% of our future sales volume. Since we brought leather back last fall, leather sales and customer reviews have been robust, and we're capitalizing on that success by broadening what we offer in bags, wallets, bracelets and other accessories. This collection will include an expanded color palette, which ties into our approach of providing more solids. Leather will receive its own dedicated fixture space in our full-line stores. The feedback from our wholesale partners has been encouraging after they saw the new products we presented in Dallas, Atlanta, and New York. A sharper line will be drawn between our full-line and outlet channels, covering both the goods we offer and the shopping experience. We'll bring in additional made-for-outlet designs, prints, and collaborations to our outlet locations and our outlet site, and a full leather assortment for the outlets arrives this fall. Partnering with other brands on products stays central to how we tell our brand story. The response to our tie-ups with Disney, Hello Kitty, and Peanuts continues to be very strong, and those efforts will continue throughout every channel. Together with our partners, we'll ensure the products mirror our refreshed brand aesthetic and elevated product approach, including the good-better-best product strategies inside the collection. As for the channel, we're establishing a balanced multichannel framework that lets customers shop at the time, place and in the manner they prefer. We're going to speed up our push to be digital-first and grow our online reach, and at the same time we'll keep wholesale relationships across the brand and look into partnerships that can bring us new customers. We'll put changes in place that make the distinction between our full-line and outlet assortments and experience much clearer. Optimizing our real estate is a key focus for us. Traffic is declining at certain sites, yet our store-level earnings have improved substantially thanks to a leaner management hierarchy, revised staffing approaches and rent renegotiations. Because of that, we've reduced how many closures we had planned and can now move more aggressively on new openings. Eventually, we expect an opportunity to expand our full-line store count, beginning with 3 locations launching in the current year. We're additionally exploring fresh full-line concepts, focusing on lifestyle centers. Across our entire existing full-line portfolio, we'll roll out updated branding and an enhanced shopping environment. Customers will notice stores that feel more contemporary, are less crowded and simpler to move through, featuring upgraded fixtures and lighting that highlight the merchandise. For this year, we've earmarked between $12 million and $14 million in capital spending — triple what we invested last year. A significant chunk of that covers our new locations along with the remodel work. By bringing elevated merchandise, fresh branding and a better in-store experience to our full-line locations, we'll draw an even clearer line between them and our outlets. As for the outlets, nearly all of them — the overwhelming share — are turning a solid profit. We're concentrated on ensuring our stores are situated where there's plenty of foot traffic and strong sales, while strategically repositioning those that aren't performing well. In the coming year, we anticipate opening around six new outlet spots, balanced against closing four to six weaker stores during the next 12 to 18 months. One major goal is to drive expansion in our e-commerce business. We'll accelerate our digital-first approach, boost our online visibility, and substantially improve the buying experience with the July relaunch of verabradley.com. This will include additional consumer-oriented features, storytelling, and tailored experiences. Our online outlet continues to exceed expectations, and we plan to introduce new items all year long. Maintaining the right wholesale partnerships for our brand is important, and we're pursuing new specialty retailers in places where we're confident our customers are already shopping. Existing wholesale partners, as I mentioned, have already expressed enthusiasm for the products we've just introduced. Over at Pura Vida, our longer-term emphasis is moving toward generating profitability via controlling costs and growing gross margin, all while striking a balance between the e-commerce side and our wholesale and retail store relationships. On the consumer side, we're refining our target toward those aged 18 to 24. Our research tells us we should adjust our marketing approach so it lands better with Gen Z. Where the brand itself is concerned, we're bringing our core identity back to embracing life to its fullest, featuring genuine moments, locations, and people throughout our campaigns. Our marketing dollars are going to more varied places, and we're doing more to keep the customers we already have. Funds are going toward new tools that improve how the e-commerce site performs and how many shoppers it turns into buyers, plus tools that make our promotions more intelligent and better targeted. We've grown more reliant on data, drawing on detailed customer information to connect with buyers we already have as well as those we might win, prioritizing acquisition but most of all repeat purchases and loyalty. With far better customer reporting and deeper analytics, our ability to diagnose issues has become much sharper. When it comes to products, we're focused on making unique, fun, playful items that are affordable and easy to find, and we're putting the most emphasis on bracelets and jewelry, along with other related categories that align with our approach. We'll keep innovating with string bracelets throughout the rest of our jewelry and accessory lines. One of the most exciting things we're doing this year is expanding our stretch bracelets and anklets, which tap into a trend that's building momentum, and we're adding a DIY bead box to our lineup. Custom jewelry — whether it's our Harper Charm bar, engravable items, or the personalization we recently introduced — is still a big opportunity for growth. As we always do, we'll chase prominent partnerships such as Hello Kitty, Shark Week and Harry Potter, which fans love and which draw new shoppers to the brand; when it comes to the channel, our attention stays firmly on bringing back profitable e-commerce growth along with strategic wholesale expansion.

Also, the traction we're seeing in retail locations has pushed us to seek out additional sites. In May, we launched a new Pura Vida shop in Destin, Florida, and we anticipate launching one more site before this year is over. At this point, I'll hand things over to Michael Schwindle, our CFO, so he can walk through the financial results. Michael?

Thank you, Jackie. Good morning to all of you, and I appreciate you being here with us. In just a few minutes we'll begin taking questions, but before that I want to walk through some quarter highlights and give a quick update on our guidance for the year; just so we're all on the same page, everything I cite today is non-GAAP and leaves out the charges described in the press release issued today. You can find full details of what's excluded from the non-GAAP figures, along with a reconciliation between GAAP and non-GAAP, in that same release. During the first quarter, consolidated revenues came to $80.6 million, versus $94.4 million in last year's first quarter. Net loss for the first quarter was $6.5 million, or $0.21 per share, against a net loss of $2.6 million, or $0.09 per share, a year ago. In this year's first quarter, Vera Bradley Direct segment revenues reached $56.4 million, down 4% from $58.9 million in the comparable period last year. As Jackie mentioned minutes ago, the trends that started last year have persisted, though our Direct revenue — our Direct segment revenue results did improve on a sequential basis from quarter to quarter. Comparable sales fell 9.6%, driven mainly by softness in the outlet channel. Total revenues also took a hit from 6 full-line store closures that occurred over the past 12 months. We expect our sales trends to reverse in the future as Project Restoration rolls out late in the second quarter. Vera Bradley Indirect segment revenues were $11.5 million, a 25% drop from $15.4 million in the first quarter a year ago. That decline stemmed largely from reduced sales with certain specialty partners and key accounts, plus the timing of a large off-price order that moved to this year's second quarter from last year's first quarter. As Jackie said earlier in her remarks, our indirect partners are waiting for the new launch products, and the response from our wholesale partners to the new Project Restoration assortment has been strong. Pura Vida segment revenues came in at $12.7 million, down 37% from $20.1 million in the prior year first quarter, mainly because of lower e-commerce and wholesale revenues. Let me remind everyone that our central focus with Pura Vida has been, and remains, running the business for long-term profitability rather than simply chasing revenue growth. With digital marketing costs climbing quickly, the Pura Vida team is concentrating on marketing efficiency along with diversifying digital marketing. Non-GAAP gross margin for the first quarter was $42.7 million, or 53% of net revenues, compared with $51.7 million, or 54.8% of net revenues, a year earlier. This year's rate took a negative hit from moving our annual outlet sale into the first quarter from last year's second quarter, partly offset by reduced shipping and freight costs. Non-GAAP SG&A expense came to $52.4 million, or 65% of net revenues, versus $55.6 million, or 58.9% of net revenues, in the prior year first quarter. Expenses for the quarter just reported came in below the equivalent period a year ago. The main drivers were our cost-cutting programs and a decrease in costs that vary with volume, such as marketing tied to softer sales volumes. Our teams keep getting more rigorous and focused when it comes to managing costs. As a result, the first quarter non-GAAP consolidated operating loss came to $9.3 million, which equals 11.5% of net revenues, versus an operating loss of $3.5 million, or 3.7% of net revenues, a year earlier. Let's shift now to the balance sheet. Cash and cash equivalents at quarter end added up to $55.2 million, against $25.3 million at the close of last year's first quarter. At quarter end we still had zero borrowings drawn on our $75 million ABL facility. Inventory at quarter end came to $125.2 million in total, a 12% decline from $142.7 million at the close of last year's first quarter. We keep taking strategic steps to bring inventory levels down, and we believe our positioning is appropriate as we get ready for the new product launch in July. In the first quarter we also bought back roughly $6.3 million of common stock, which works out to about 1 million shares at an average price of $6.62. Roughly $19 million is still available under our $50 million repurchase authorization, which runs out in December of 2024. Let's now turn to our guidance for fiscal 2025. Keep in mind that all forward-looking guidance figures are presented on a non-GAAP basis. As we said on our previous earnings call, we anticipate fiscal 2025 will very much be a tale of two halves. We're still operating in a turbulent environment, as a number of other retailers have already pointed out in their earnings releases. Fiscal 2025 is also a rebuilding year for Vera Bradley, and Project Restoration moves into its customer-facing phase at midyear. As Jackie mentioned at the start of this call, we anticipated much of this turbulence. We expect to keep facing some revenue challenges in the second quarter, with sales and profitability trends then improving over the second half of the fiscal year. We also keep diligently seizing opportunities to improve both gross margin and our expense structure. Consequently, we are reconfirming our fiscal 2025 guidance, based on current and expected macroeconomic trends along with the rollout of Project Restoration's customer-facing phase. For context, please also remember that the current year is a 52-week year, whereas the prior year consisted of 53 weeks. To be specific, for our full year fiscal 2025 guidance, we expect consolidated net revenues of $460 million to $480 million. As a reminder, net revenues in fiscal 2024 were $470.8 million, or $464.8 million on a 52-week basis; we expect Vera Bradley brand sales to grow by the low-single-digits for the year, with accelerating sales in the second half as we launch our new products, branding and marketing. For the Pura Vida brand, we're expecting sales to fall somewhere in the mid-teen range. That's because we'll keep running the business with an eye on profitability, tackling the marketing inefficiencies that have been dragging down e-commerce sales, though that will be partly offset by growth in retail sales. On consolidated gross margin, our expectation sits at 54% to 55%, versus 54.5% in fiscal 2024. Looking at fiscal 2025, gross margin should come in relatively flat against last year, since product margin gains and reduced supply chain costs get offset by higher shipping expenses. For consolidated SG&A expense, the range we're looking at is $229 million to $239 million, against $234.7 million in fiscal 2024. On a year-over-year basis, SG&A should be relatively flat versus last year, tied to extra marketing investment meant to drive sales and speed up customer file growth, offset by reductions in expenses across the company and lower Pura Vida expenses; that leads us to anticipated consolidated operating income of $21 million to $24.5 million, against $22.6 million in fiscal 2024, plus diluted earnings per share of $0.54 to $0.62, against $0.55 last year, or $0.54 on a 52-week basis. Consequently, we anticipate net cash flow of roughly $10 million, against $44.2 million in fiscal 2024. And as Jackie mentioned earlier, we also expect net capital spending of roughly $12 million to $14 million, against $3.8 million last year. That spending reflects investments tied to new and remodeled stores, along with technology and logistics enhancements. That wraps up our formal remarks. Rob, could you please open up the line for questions?

I have a few questions, and I'll attempt to merge them if that works. Considering the softness you're seeing right now — from the macro side as well as the scheduling of the initiatives and the pressures they create — could you share, I suppose, how confident you are and just how robust your second half will be? Then, taking into account the first quarter sales and the softness you anticipate in quarter two, clearly it appears you're looking for a year-over-year gain during the latter six months. Do you perceive any chance for extra upside beyond what you've already guided? And on that same note, which key risks do you identify for the second half of the year?

I appreciate your question. I'll begin, and then I'll let Michael add anything I've left out in my response, but — once more, we definitely anticipated a portion of this softness during this quarter. When a transformation at Vera Bradley reaches completeness, with products such as what we're launching next month, it's typical for wholesale partners to reduce their buying of the old product and hold off for the new; so what's occurred here doesn't worry us. We're aware that things can shift on a weekly or even monthly basis, so we're keeping close tabs on what our indirect partners and the retail locations are telling us. That said, we do have orders on the books, and we're feeling quite positive about how the second half of the year will play out. The one thing we can't predict, naturally, is how consumers will react. We've pulled out all the stops — using our internal data plus external studies — to align with what we believe our shoppers are after, and to go after the customers we aren't yet reaching, building a really powerful, persuasive marketing strategy aimed at producing the growth we anticipate in the second half. The piece we can't predict, naturally, is how the broader economy behaves. As I noted, this quarter clearly showed a sharp gap in how often households earning below $75,000 came to see us, and that hit the outlet business especially hard. We're keeping our fingers crossed that shoppers will start feeling a bit more upbeat, though we believe we've done everything within our power to make the second half of the year really appealing.

Absolutely, and I can tack on a few more granular observations here. When you examine the first quarter on a year-over-year basis, clearly the Pura Vida piece represented a significant weight; we've been discussing for several quarters that this is something we chose to do. It's quite intentional; the goal is to set that brand up for profitability over the long haul. So it was fully expected on our end. That didn't catch us off guard. On the wholesale front, with Vera Bradley, things are somewhat uneven, and a large portion of that stems from the fact that we're beginning to provide visibility into the upcoming book of new product — what we're calling Project Restoration assortments. Having that visibility gives us substantial confidence that what we're seeing is largely a timing distortion, and we'll begin to see that improve in the back half of the year. Some of that improvement should show up, I believe, in the second quarter, though the bulk of it comes in the back half, which aligns with what we've described as this tale of two halves. To address your question, everything else involves challenges of varying degrees, though I certainly don't want to downplay them. The traffic environment has been difficult, especially within the outlet arena. And that's also — incidentally, that's also in line with what we've been hearing from certain landlords regarding the character of traffic heading into outlets and the frequency — the count of store visits along with dwell times; so I think the last thing I'd note here is that because we reaffirmed our guidance, a substantial portion of this was anticipated; we expected the first half to be uneven. We anticipated some degree of macroeconomic headwinds; we do perceive some upside in the business during the back half of the year. Regarding your questions about relative risk and opportunity, I'd say we're attempting to take a somewhat conservative posture, which would suggest there's upside, but risk always exists too. So I won't claim there's no risk, and I won't claim there's no opportunity either.

It's genuinely thrilling to watch you choose to expand your store count in both directions. What prompted that choice? And going forward, how do you view physical locations compared with e-commerce as the engines of growth?

Eric, I'm glad you asked that. Regarding our store base — and I think this marks the first occasion we've gone into greater depth regarding the full-line stores and our genuine desire to cease shuttering them. What has been most pivotal in reaching that choice, I'd say, is figuring out how to boost the profitability of these locations. We've accomplished a fantastic job laying out precisely the methods by which we will keep going and have already tackled the profit performance of those stores; so while we ramp up and intend to keep going — or rather to start generating top-line expansion, we need to align that cost structure within those stores so that we're positioned for a genuinely strong outcome once sales materialize. So it truly came down to assessing profitability and examining our staffing frameworks and lease renegotiations to establish exactly where we needed to land, which shopping centers, which spots. That effort continues at quite a granular level to make sure we can once again enlarge the store fleet. Turning to online, I consider it in clearly, 2 distinct manners: our vb.com operation, which is set for a fairly major overhaul next month featuring entirely new tools, functionality, and creative. It's going to be — it will genuinely amount to an excellent relaunch — plus the always-on VBOO site. That one debuted at the close of last year and has genuinely surpassed what we anticipated regarding revenue and fresh customer acquisition. So we truly view it as 2 components, with each site serving a distinct purpose for the shopper and carrying different merchandise, since right now they may be somewhat too alike. With Project Restoration, we will certainly witness a lift in the vb.com product mix and, in a sense, a carrying forward of our current merchandise selection at the outlet site. So when you combine all of that, we anticipate expansion in e-commerce. We've stated repeatedly that we're digital-first; that principle is truly cemented within this organization. We're putting in considerable effort to determine what our online product mixes ought to be versus what our stores carry. What does she, the customer, desire? How do we reach her with marketing? So much work is underway, and it will start reaching the market next month with the debut of Project Restoration.

Great. Let's spend a bit of time on how full price versus outlet breaks down, plus a few of the elements involved. You brought up leather. Leather, as I understand it, has performed very strongly in full-price locations. So what's your plan for bringing that into the outlet stores while still providing, I suppose, an appealing value proposition on leather? Also, I'd like to get something straight. You said collaborations exist in both full-price and outlets. Historically, those haven't occurred simultaneously. Does that reflect a shift in thinking, where you'd want certain collaborations to run at the same time in outlet stores and mainline stores?

Yes, that's a very perceptive question. Thank you, Eric. We will feature product collaborations across both channels, though possibly not simultaneously. So it's not a given — or I should say, you might or might not see, a particular property appear in the outlet and full-line assortments at the same time. What we're doing is looking strategically at our customer base, who shops where, where those properties fit best, and when those launches should happen. The scale of them too — everything is getting close scrutiny — how do we create differentiation in price points, in styling, and in look, so that the outlet shopper and the full-line shopper alike can appreciate those properties regardless of the price point or the look they're after.

Alright. Here's something for Mike. Inventories. You've handled the inventories really well. As Project Restoration begins reaching the stores and going live, what's going to happen with inventories?

Thanks. I'm glad you asked that too. Our inventory has come a long way. Looking ahead, there's a pretty significant shift happening — quite literally right in front of us at this moment as we move the new assortments into the brand stores and the online properties, and begin a bigger migration of the current assortments into the outlet channels and the other value channels. Regarding our inventory outlook through the end of the year, we're expecting it to be flat to slightly down by year-end. That will include perhaps a small amount of average cost creep, plus this movement, which will still leave us with a bit of a hangover. So I do believe we'll keep seeing structural improvement in how we manage inventory through the end of the year and beyond that as well.