Wayfair Inc. ($W)

Thanks. Good morning, everybody. My name is Christopher Horvers. I'm the broadlines and hardlines retail analyst at JPMorgan. And it's my great pleasure to introduce Kate Gulliver, Wayfair's Chief Financial Officer.

Good morning. Happy to be here.

Thanks for coming again this year.

Yes.

Really appreciate it. So it's an exciting time to cover the consumer. It's an exciting time to cover Wayfair. I want to talk about your share gains and what's driven your share gains. You've been outperforming the market by high single-digit percentage. We all operate in spreadsheets and want to, like, rank order things and loyalty and CastleGate. Like how would you think about this acceleration of share gains? What have been the biggest drivers of that?

Yes. So if you think about sort of when the share gain -- well, sort of stepping back, Obviously, for the vast majority of our history, we've been a pretty significant share gainer. That is what has fueled our outsized growth. Obviously, that fell back a bit sort of '21, '22, early '23, returned to a share gain in sort of the back half of '23. We were able to start -- I know it is a very -- we're very spread out here. We were able to start accelerating those share gains sort of towards the end of '24 and throughout '25. And what I think you really start to see happen there is once we got what we call our core recipe back into place following the post-COVID period, so price availability, speed, we were then able to start adding in a number of newer initiatives. And it's those newer initiatives that are really starting to hit, and then it's sort of the benefit that -- of those initiatives sort of all hitting together because they do all play off of each other. So the first and most obvious one that I talk about is the loyalty program. We launched that in October, rather, of 2024. So we're a little over 1.5 years into loyalty. The intent behind the loyalty program is to really expand incrementality of spend among a group of customers. We know that many of the folks that are shopping us are in the market 6 to 8 times a year for the breadth of what we sell. They're probably shopping from us about 2 times a year based on what we see on the customer data. And so there's a significant benefit for us if we can get even one incremental purchase and get half of the time that they're in the market, let alone another incremental purchase beyond that. What we're really seeing that we're excited about in loyalty is, one, from loyalty members, we are seeing this incrementality. So the program is bearing out the way that we designed it to. And then two, we're also seeing spend in other categories or sort of more frequency categories that we want to continue to expand and grow. We're obviously known, first and foremost, for sort of core furniture and decor, but we have a really great selection in housewares and accents and seasonal decor. And those categories tend to be shopped more frequently. And so it's a great way to sort of keep the customer engaged on your platform and not have to reacquire them. So loyalty, a pretty big driver ongoing of share gains today, but also into the future as we grow that program. The second piece that I'll mention is Wayfair Verified, which we launched in the summer of '24. So you know it's a theme here. Everything sort of started launching in '24. Wayfair Verified is where we really put our stamp on a product and say, we think that this is -- if you're looking for a mid-price point barstool, we think that this is the best mid-price point barstool for you. We actually touch and feel all these products that we put our Wayfair Verified stamp on. They are actually -- we often, in many cases, have a designer talking about the product and explaining it to the consumer so that she can understand it better. And it really helps folks sort of distill what is a very large catalog. So if you're not interested in the breadth and you want more of a sort of clear, here's what I should buy, this helps you with that. I point to those as there are sort of 2 very clear product launches, if you will. On top of that, though, there's been a number of improvements in the storefront experience. So -- we went through our replatforming efforts sort of '22 through '24 or '21 through '24. And most of our tech time was dedicated to the replatforming work. As we completed that towards the end of '24, early '25, we've been able to really improve the pace of change on the storefront experience on the site. Some of that is because we freed up developer capacity. Some of that is because in the replatform world, it's just easier to make changes on the site. The site is more sort of nimble and flexible, if you will. So when you start to think about what adds to share gain, it's overall better site experience, it's Wayfair Verified, combined with Wayfair with the loyalty program, combined with ongoing improvements in delivery. For example, we just launched Delivery+ actually about a few weeks ago where in this market in Boston, which is where we've launched it first, you can have sort of enhanced delivery experience as the product comes into your house. And so things like that, that we're now able to sort of roll out in a faster cadence as well.

So if you think about loyalty, it's interesting because most loyalty programs start in very high-frequency categories. And we've seen other retailers try to launch loyalty in big ticket categories, and they've struggled with it. So can you help us think about how this program is different? And what are you seeing in terms of taking that average 2 purchases a year, those 1 million or so customers, what's happening over the past 18 months?

Yes, it's a great question. So first, certainly, for purchasing, our AOV is a little over $300, right? And purchasing a couch, you do somewhat infrequently, a bed, you might do somewhat infrequently. But to the point of, like, is this a high-frequency category or a low-frequency category relative to consumables, obviously, extremely low frequency. Relative to luxury furniture, certainly higher frequency because we're selling all those other pieces as well. So I do think within each category, while the big furniture ticket items are lower frequency, buying kitchen accessories is actually a few times a year. And so when I say that we want to sort of move our customer into spending in those categories, which we already sell, we have the selection, we have the great price points, all of that, we know that there are some things that we can do in loyalty to make that more appealing to her. So part of what we've done is work with our suppliers to make sure that for loyalty customers, we have really compelling offering in certain categories. So we can differentiate more of the catalog in something, say, like, housewares or we can do special promotional events in those categories that are access for loyalty customers only. Generally, the vast, vast majority of what we sell ships free because the average AOV is $300. But even if you're buying -- if you just want to replace 2 glasses, if you're on loyalty, that will ship for free even though it's below our threshold, right? So we're trying to make those incremental purchases easier for her. And what we are seeing is that we are getting that incrementality. We gave out a stat when we updated on the loyalty program in the sort of fourth quarter call of last year around the number of loyalty program members that are buying -- the vast majority are sort of buying 3-plus times a year, right? So they're actually coming into the market and sort of buying on a regular cadence. We've also seen really nice renewal rates. So we had sort of the first renewal class start to come through. And we're seeing really nice renewal rates, which means it's not just folks wondered if we may just get folks coming into the loyalty program for a specific project and then cycling back out. And what we have seen from the renewal is that we are starting to see behavior where folks are staying in the program. So maybe they initially came in for a project, they're seeing other benefits from it and therefore, are holding on to the program.

And just as an aside, in a little bit, we will open up for audience questions and then also take online questions. So please engage with any questions. So I want to -- didn't want to jump into margins, but it's a good just quick tangent as we think about investors get nervous when they see gross margin pressure.

Do you think they get nervous? I haven't noticed in the share price, but...

20, 30 basis points. Well, it's indicative of customer acquisition costs. It's indicative of pricing power, so to speak. So can you maybe talk about that? And is it -- should we think about it as more one-for-one offset to advertising leverage? Or do you think actually between these 2 lines, it ends up being a net benefit?

So let's step back first and talk through, again, the philosophy around sort of where we drive gross margin contribution margin and ultimately, EBITDA margin. We are very clearly marching on this path to north of 10% adjusted EBITDA margin. Nothing has changed about our objectives there from when we launched that at Investor Day in August of '23. And if you remember at that time, we were basically breakeven. So in 2 years -- 2.5 years, whatever, we've gotten north of 6%, right? And so we're quite confident in our ability to get to the 10% plus adjusted EBITDA margins. When we think about how to do that, our focus is generally on how can we grow gross profit dollars, contribution margin dollars such that we're sort of maximizing the growth to ultimately drive that EBITDA dollar and EBITDA margin faster. So our sort of North Star that we're looking at, we actually focus even more internally on owners' earnings. So the EBITDA less the SBC, less the CapEx because we do think about the SBC as a real cost. But in general, we're far more focused on EBITDA dollars, EBITDA margin. That is the direction that we are going in. In terms of the puts and takes on that, -- we -- when we make an investment like the loyalty program, which does have an impact on gross margin, we are doing that because when we look at the math, we see that it actually optimizes on those gross profit dollars, optimizes on these contribution dollars and therefore, actually helps us achieve that EBITDA margin, EBITDA dollar growth rate that we're targeting faster than we otherwise would. So that's why we make those investments. Now when we think about the loyalty program specifically, obviously, it has a drag on gross margin because of the 5% back, but those customers come to us increasingly direct. So that's probably actually accretive on the contribution margin line because it's probably more than offset on the marketing spend. Now on the other hand, there are investments that we make on the marketing spend that we think makes sense. So we said, hey, we're just going to hold that at 15% right now because we think that's the right place for contribution margin to be to again maximize that EBITDA dollars and EBITDA margin. And so that's sort of how we think about the puts and takes up and down the P&L.

So maybe the strength of your top line against what's been a very uneven market. So maybe we can talk about the market backdrop a little bit. Last year, we got to -- it was a flattish market. And then we sort of tilted down low singles, down mid-singles quarter-to-date. So what do you think has happened? What do you think is happening? And as you look ahead, do you worry that sort of this whole cauldron of energy prices and post-stimulus consumer behaviors? How do you think about how the category might shape out for the rest of the year?

Yes. I was laughing at the beginning because I think we've used every possible word to describe the category over the last few years, flattish, choppy, bouncing along the bottom. All of this to say the category has not been great, right? The category has not been a tailwind, yet for us, at some point, this is a cyclical category will recover. But our expectations for 2026, our guide for the second quarter, none of that assumes a category recovery. So when we think about what could happen in '26, our operating mode is that the category basically stays where it is. If we think about sort of what happened over the past few years, generally, this category is sort of a GDP-plus grower, right? So it should grow 3% to 4%. That's been the long-time historical CAGR of the category. And we obviously have not seen that even if you were to take 2019 and CAGR it out to 2026, where we think we're sort of double digits below actually where that trend line would be. That's not the annual comp. I'm just saying sort of overall in terms of sales that have been missed out and sort of are being held back in the category right now. So there's quite a bit of pickup at some point to happen. We did start to, we think, see the category start to stabilize towards the back half of last year, as you pointed out. And then I think at the early part of this year, some of the challenges were weather comps. You heard us and other folks in the space talk about that. I think that sort of sounds a little bit silly coming from an e-commerce retailer. But as we've learned, when the customer gets very distracted by significant weather, they do not shop our category. They are getting what they need. They're focused on getting their kids -- getting the driveway cleaned up, getting their kids back to school, getting whatever their heat working again. And so it tends not to be a time that they shop. So the beginning of the year was actually quite choppy from that. We started to see some recovery and then obviously, the consumer has been a bit under pressure. You, Chris, have actually had a number of reports that have shown sort of the tax refund benefits. I do think there's been -- the consumer has been able to hang in there a little bit because of stimulus sort of helping when gas prices have gone up. They've had the stimulus benefits of sort of helping to buttress that a bit right now. When we think about sort of where the category can go, what can drive the category, certainly, if the consumer feels under pressure, discretionary spend in general takes a bit of a hit. Our category is already so far off its trend line, though, I think there's a reasonable question on how much further of a hit could this category itself take. And then from a housing perspective, at some point, housing will turn around. We're not projecting any sort of recovery this year from that, but that will be a tailwind when that does happen, not if, but when. So as we look at the rest of the year, though, we're saying, let's assume the category sort of stays where it is, which is down from even '25. Even within that, we believe because of our share gain efforts, we can continue to nicely outpace. We obviously guided to a mid-single-digit number for Q2, so sort of a 10% 2-year stack there. So we're continuing to sort of see expansion. And I think that's all the pieces that we talked about at the beginning from the share gain really starting to hit and drive that.

And so April was -- as you think about the category down mid-single-digit quarter-to-date, obviously, April is a big month for tax refunds. So -- and it got -- did get worse from the first quarter, which was down low single with definitely significant weather issues overall. So is that like the -- I guess, how do you think about that trajectory, especially as you think about how maybe energy prices hit the consumer?

Yes. I think what you start to see in March and probably into April is a bit of the impact of energy prices. And again, pulling on the consumers' wallet and more share of their wallet has to go to nondiscretionary items, they are going to pull back in discretionary categories. You also did have some Easter timing. Easter moved around quite a bit. So I do -- as we look at April, I think that's an important thing to keep in mind in terms of sort of general retail comps, obviously. Even within our category, you had pretty significant movement there. It was like a 3-week difference this year. So that was sort of all factoring in, in March and April as we looked at it.

Right. So I guess said succinctly that down low single, down mid-single could have just been the Easter shift.

Yes. I mean, I think, the down low singles in the Q1 was weather, then you start to, in March, get some Mid East impact, April, probably a combination of those things.

Yes. Got it. And then as we -- I guess you've talked a lot about share gains, obviously, have had good traffic, generally good traffic overall, but the category has also seen a fair amount of tariff inflation coming through. And so can you help us think about maybe how much has that benefited your business? And then as you think about the lack of inflation theoretically, if tariffs stay at this current level, do you think that has any impact on your ability to gain share? Because asking the question in a better way, if the marketplace did suppress pass-through of price, that would have accelerated your share gains. Are you concerned about lapping that in the back half?

We -- short answer is no. We are not concerned about lapping that. Again, we're quite confident in the ongoing share gain story. What we had actually said in Q3 of last year is that in general, we believe that suppliers are working quite hard to maintain where their prices are, particularly on the products that are moving and that are selling. Now we've been asked, as there may be refunds, we'll see how -- the sort of the pace at which those might get paid out. As a reminder, we are not the importer of record. So those refunds would go to the wholesalers. As there may be refunds as the tariff world keeps moving around, do you think that prices could come in even more? I don't expect that to happen. I think these suppliers have been under pressure. They did their best to hold in there. Anything that they get -- they will sort of use to offset some of what they sort of had to absorb last year as they were moving through that. On the other hand, we have not seen revenue being driven by inflationary pricing, to your point. In general, if you look at our own AOVs, those have moved and our own order volume, you've seen revenue growth a pretty nice mix of both. And again, normalized AOV growth in this category is roughly 3%. So that's like the 20-year long sort of history of AOV growth in this category. So generally speaking, that's a pretty normalized pricing environment for us. Folks have also asked and this is sort of a piece of your question, do we think we sort of disproportionately benefited last year during the tariff environment. I certainly think that our model is set up to do well in times of complexity. I would argue we're operating through another time. It's been nonstop complexity for the last 5 years. But our model does tend to do well there because of the marketplace dynamics. So because of the marketplace dynamics, we're able to really keep pushing towards the customer what is best at that given moment. And that allows us a lot of agility in how we operate. So even now, while you may have some suppliers sort of managing fuel surcharges and sort of container rates, again, we're able to help our customers sort of get the best value that's out there. And I think that, that continues to be a strength of ours.

I'll pause here for any questions from the audience. If you do have a question, we just wait for the microphone. We got one right here.

I really like the point around Shopify -- or sorry, Wayfair Verified and kind of the customer discovery journey. Could you talk a little bit about the Universal Commerce Protocol initiative? And maybe what's the scenario analysis that you and your team have done around the long-term impact of the business? And would be really appreciative for any color specifically on any potential impact to the cost structure around like sales and marketing and things like that.

Yes. Great question. So just so everyone is aware, Universal Commerce Protocol or UCP is Google's shopping protocol that they're developing for agentic shopping. We were announced as an early partner in developing this with them. Google is a long-standing partner of ours. But I think it speaks to our overall philosophy and approach here, which with agentic shopping. Sort of generally speaking, then I'll go into sort of how we think this category might evolve. Generally speaking, our view is we want to be where our customer is at. And if that she's on Gemini or she's on ChatGPT or she's on Claude and she's searching, we want to show up there. We want to be well positioned there. We tend to do well when we're at the forefront of helping to develop these products. So we're -- we will work with the breadth of LLMs and help them develop what agentic shopping in this category may look like. That's sort of how we've always approached ads, for example, in the past. And given our scale in the category and the breadth of first-party data that we have in the category, we are an attractive partner as folks start to understand what this looks like. I often get asked, okay, so if agentic shopping takes off, won't many of your manufacturers start to go direct to the customer? And I do not believe that, that will happen. This is a very complicated category. There is a reason why, frankly, it has been challenging for others to build the online platform that we've built because it's not just the upfront discovery, which is critical and important, I'll get to some of the changes that we think might happen there in a minute. It is the entire back-end process, which really requires the logistics network that we've built, which is a very important moat for us. This is a category that has high incidence rate. It's a category where people come into your home to bring the product into your house, where the AOV is relatively high. And so if you have an issue, you want to be able to know that you can talk to the retailer that they can solve it. And all of that requires a pretty significant sort of back-end experience. And so unlike a consumable where you're sort of replenishing that on some sort of regular cadence and maybe your agent can go across multiple platforms and sort of tell you where the best tie pods are from a price perspective at any given moment, this is a place where you do need trust in the retailer to make sure that it is fulfilled the way you want it to be fulfilled. On the front end, this is a category where breadth matters, right? That's why we've always operated across millions of products. We know that the consumer values choice here. It is highly emotive, right? The consumer wants -- she feels that this is sort of a part of how she defines herself, right? What her home looks like is part of her reflection to the world. And so similarly, in the way that for many folks, fashion and apparel could be that this for our customer is sort of quite reflective of her. And as a result, the discovery process is really important. And it's not the kind of thing where you'll sort of be able to -- or you may be able to have the agent complete the entire process for you, but it's generally a place where consumers are going to want to actually think about what they're buying and look at it, at least in our 25 years of experience in the category. So when we think about discovery, I do think that, that will evolve quite rapidly, and we're really excited about what we can do on our platform as well. So there's what we can do with our partners as we work with the LLMs and then there's what we can do on the Wayfair platform. How can we help you take a photo of your room and then you describe what you want it to look like and then we can populate that image with all of our products, right? And then that's immediately buyable on the site. How can we continue to personalize so that when you show up, your style preferences just keep getting tighter and tighter and tighter? AI helps us pretty significantly with those leaps, which are things that we've been working towards for some time that now get accelerated. And so I think it's actually -- as you think about sort of how the shopping experience can change, it will evolve quite rapidly, but a lot of that can happen on our platform. And to the extent that there's shopping outside on other platforms, we are happy to partner with the LLMs and work with them on that and then ultimately be the retailer of record.

Sorry, just one quick follow-up, and thank you for the response. As part of the UCP deal, does Wayfair share first-party data with Google and other partners?

Yes. We have not talked about data sharing, but generally, the way the UCP works is we sort of overall help develop what that should look like. And then ultimately, because the transaction is happening on our site, we're capturing that -- the purchase is actually happening through us. So we're capturing that customer in that data.

Could you talk about just your advertising philosophy? You guys cut marketing spending last year. Was that because of the tariff and kind of cyclical dynamics? Are you guys doing something structurally marketing-wise? And how do you think that's going to evolve in the next 2 or 3 years?

Yes, great question. We sort of started actually ramping up dollars in the back half of '24 and early '25. And that was to do a number of things. One was to sort of test in a bunch of new channels all at once, but a bunch of channels that we were actually slower on and farther behind, frankly, than we would have liked, but that we thought had promised an opportunity in our category. And then we were also retesting sort of where the limits and thresholds were in some of our existing channels like PLAs, like Pinterest, et cetera. And so you did see an inflated ad dollars in back half of '24 and early '25, Q1 of '25. We use all of those inputs to help us rebalance the media mix modeling and improve -- not change our thresholds, but sort of improve what we truly understood is incremental from each of the various channels. We have a payback period that we expect for each channel. Generally speaking, those payback periods held for quite a long period of time, but we will sort of rebalance across the media mix as we get new data. We also then, in '25, did holdout tests. So what you're referring to, the ad spend went quite a bit lower in Q3, we did a large -- we said at the time we're doing a large holdout test in Q3, a PLA holdout test that can have quite a big impact on the total dollars spent in that quarter. And so that was a little bit artificially low in Q3 of last year, and we did call that out at the time. But as you think about, in general, we've obviously improved the ACNR quite a bit. And that has really been as we were able to get back into a period, once we got sort of the site experience back to where we wanted to be, we were able to get in a period where the testing would matter, and we were able to improve the overall media mix as a result of that testing.

So maybe talk a little bit about your store strategy. It is an omni category. And you've got some specialty retail brand stores. Now you're opening up various sizes of the larger Wayfair store. One is coming to Westchester County, where I live next year, next spring, which I'm very excited about. So maybe talk about how you're thinking about how -- like the differentiation between the Wayfair versus the specialty retail brands and how scaled -- and how could -- how big could this opportunity be?

Yes, great question. So our specialty retail brands are Joss & Main, AllModern and Birch Lane and then our luxury brand is Perigold. We actually started opening up stores with the specialty retail brands because those were much smaller format. They're about 8,000 to 10,000 square feet per store. So they were a little bit easier to get open, and they allowed us a chance to learn in a just sort of lower risk environment. And we have a handful of -- we have 2 Joss stores, 3 AllModern stores and 4 Birch Lane stores across the country. And then we have 2 Perigold stores that we opened this year. And then we have 2 Wayfair stores currently opened, the Chicago store, which is the first Wayfair store opened in 2 years ago, actually this month, and then Atlanta opened about a month ago. Those are both large format 150,000 square foot boxes. And then the Perigold stores are sort of 20,000 to 30,000 square foot boxes. One of those is in Houston and one in West Palm Beach. So sort of stepping back, overall, we believe that the category -- a large portion of the category will remain offline. I can't tell you exactly if that's 50% of the category stays offline or if it asymptotes at 60% offline, who knows. But somewhere within there, there will be a large chunk that stays offline. And most of the things that are required to be a good offline retailer in this category, many of those things we had already built. So in this category, as we talked about in terms of the rise of agentic shopping, you do need a logistics network. and we've already built that out. You need a broad supplier base. Obviously, we have that. You need a large brand. We have the brand. We have 100 million customer file, right? So many things that we've invested in to build the e-commerce channel over the last 25 years are also applicable to the offline channel. And then you obviously need to learn how to operate stores, which we're in the middle of learning. But we do believe it's an omnichannel category, and it's really important to show up in both places. As we look at the stores, we expect the stores to hold to certain payback thresholds. And we are looking at not just the sales within the store, but we're also looking at sales that we can attribute to the store and sort of broader halo stores. Sales that we can attribute to the stores are sales that we know are from a quote that was made in the store. If you shop in the store and the Wayfair stores, you are encouraged to pull up the app to sort of build a quote or to look at sort of broader selection online. So we can actually geolocate a lot of customers to having been in the store, and then we can see what their purchase behavior is 5, 30 days after being in the store. And then we then see, as we've tested the Chicago market, we see this enduring sort of ongoing halo effect in Chicago from the presence of the store, which has sort of a broad signage on the 2 major highways. There's obviously some local marketing associated with the store, and that helps lift the area. We will now be able to compare that to Atlanta. So now we've got another store open, we'll be able to sort of test that out in Atlanta. Atlanta has opened very well. It's opened much stronger than actually the initial Chicago store did as we should hope because we spent 2 years learning at this point. And you should see us sort of ramp up the pace a bit. Columbus will open this summer, Denver in the fall, Westchester in the spring of '27. We have 2 other leases on the Wayfair stores already signed for '27 that we announced. We just announced Cincinnati last week and then Fort Lauderdale, we announced a few weeks before that. Generally, what we're trying to do in each of these new locations is sort of learn something incremental and new. So the size of the store may change a little bit. The one in Columbus is a 70,000 square foot store. 70,000 to 150,000 is a pretty big range. I think we'll find that the ideal store is probably somewhere in the middle there, but that gives us sort of the bookends of where we might want to be. The types of shopping centers are a bit different. So some are sort of more grocery-based shopping centers, some are a little bit sort of more furniture corridors like the Columbus stores in a great shopping mall, the Polaris Mall in Columbus, but it's also on a nice furniture corridor. There's a number of other furniture stores right in that area. Given how furniture is shopped because of the desire for breadth selection, it's -- you generally do see furniture stores clustered, so we'll be testing that out there. So the rollout allows us to test these things and sort of incrementally learn. We're quite excited about what we're seeing, and I think you should expect this to sort of continue to go at pace.

Is there any part of the strategy on the Wayfair store? Should we marry it up against some of the CastleGate facilities that you have?

It is helpful to have a store within a day drive at the CastleGate facility. We have the country very well covered from a fulfillment center network. And when we think about where we put in new stores, we certainly want to -- you're probably not going to -- I always use Maine as an example because that's where I'm from. So I know the job. You're not going to put a store in rural Maine, but for many reasons, you want to do that, but that's not near any sort of CastleGate facility. But most of the country in the large urban centers are near CastleGate facility. So it doesn't really rule anything out. The Chicago store serviced by Romeoville. The Atlanta store, we have an FC right outside of Atlanta. So -- but in terms of sort of are there chunks of the country that wouldn't be accessed because of that, not really because of the way that the network is set up.

Additional audience questions? Time for one. Big question that we are -- the energy prices are up. You do -- part of the complexity of this category is delivery and you ship a lot of heavy stuff around the United States. So can you talk about any potential risks around fuel prices?

Yes. So product generally ships to the customer domestically, 1 of 2 ways, either it goes on the -- on an existing small parcel network, largely through the FedEx network or it goes through our folks in terms of our home delivery operation that depends on the size of the product, obviously. It is very common in small parcel contracts to have fuel surcharges. To the extent that a fuel surcharge gets kicked in, we then pass that through to the customer in terms of the sort of ultimate retail price. So that does protect our margins. And then in our own network, obviously, sort of with local players that we're working with, it's also very common to have fuel surcharges, but we can do things to try to minimize that. For example, with FedEx, we can move the inventory as far forward as possible that's efficient. So we'll zone-skip so that you're running less on the network if you need to as you try to balance there. In general, given our scale, we're probably better positioned than others to sort of manage that. But we do sort of move that through in terms of price and the margins hold up as a result.

Great. Thank you so much.

Thank you. Appreciate everyone being here.