Unidentified Analyst: This is Alice Shaw on for Lorraine Hutchinson. And please send Jill our best. So 2 bigger picture questions. Any changes to how you’re thinking about the 2 acquisitions per year sort of business model? And like is the shift now towards focusing on collaborations and new channels maybe? And then also on the long-term goal of obtaining low to mid-teens operating margins, what are updated expectations on the time line to get there?
Ciaran Joseph Long: Yes, on the first question, I think for where we are right now, I think — we are really happy with the 4 brands that we have. They are — they work well together, very synergistic. I think we feel that they’re very early in their life cycle and have just a huge amount of long-term growth. And I think kind of leveraging the authentic relationships that they have today is kind of the right time now to be pushing into wholesale and the omnichannel initiatives with them. I think with that, yes, I would say kind of this year, we’ll be certainly focused on those initiatives, strengthening the balance sheet. And I think it’s kind of probably — that’s the focus area for use of cash. I think we’ll continue to look at acquisitions as opportunities.
But I would say the 4 brands that we have today and growing them organically is kind of focus number one. And then from a long-term EBITDA model, I absolutely believe we can be kind of long term in the kind of those low to mid-teens. I think we’re obviously going through a very disruptive period from a macro environment perspective, still going through it. I think when I look at the middle of the P&L and kind of what we can control, we certainly have the cost structure and the business model to get there. I think it will just take a little bit of time to get sales volume up, really to bring down that G&A percentage and leverage there.
Operator: Our next question is from the line of Edward Yruma with Piper Sandler.
Edward Yruma: Thoughts for Jill on a speedy recovery. Two quick ones for me, I guess, first on Rebdolls, I know it wasn’t that significant, but is this part of a broader kind of strategic rethink of the portfolio or is this just really a one-off? And then second, as it relates to wholesale, if you do make a bigger push in there, is there investment required to build out the requisite team to service wholesale accounts?
Ciaran Joseph Long: First, in Rebdolls, look, we’re big fans of the brand. We’re big friends of Grisel, the CEO there. I think what we saw is that at its size, and it did see a lot of growth when it came into the AKA family and portfolio. What we saw is it was doing about $10 million and really just not at the size where it could get the full benefits of the AKA platform. And with that, we just felt for the long-term success of the brand, it was really better back with Grisel as the owner and running that brand. So I would say, a one-off very much looking for the continued success of that brand. And then just from a wholesale perspective, at the AKA level, we do have people with expertise in wholesale with a lot of expertise in wholesale from a relationships deal structure, things like that.
And with our flexible technology stack, it’s easy for us to kind of add in additional tools, orders, information can flow through the Shopify platform and very seamlessly flow through all of our systems. We’re already doing that today for some of the wholesale orders that we’ve processed. And so don’t feel or don’t feel a need to have a big investment or kind of a difficult technology to work through for us to scale wholesale.
Operator: The next question is from the line of Oliver Chen with Cowen.
Unidentified Analyst: This is Tom on for Oliver. In terms of quarter-to-date trends, just curious if you could characterize consumer behavior in January and February relative to prior months. And then in terms of inventory composition and the decision to keep promotions flat relative to last year, is it that you feel comfortable with the current quality of your inventory? Or how long do you think it’ll take inventory levels to essentially normalize?
Ciaran Joseph Long: As it relates to the consumer, I think maybe stepping back a little bit to frame of Q1 is kind of what we saw in Q4. And I think we saw that consumer was holding back a little bit in the first half of the quarter and then leaning in more in the second half of the quarter. But at a time when it was much more promotionally intense and certainly buying more markdown products than we had seen in kind of seen or experienced in the past. I think we saw that continue through January and into the early part of February. I think we’ve seen promotions slightly ease as we have gone through the quarter. I think we’ve kind of — we still expect it to be quite promotional as we go through the year. And certainly, the first half, I feel there’s still a lot of inventory out there.
As it relates to our own inventory, I think we’ve made really nice progress on bringing down the inventory dollars as we’ve gone through the back half, so down $17 million at the end of the year versus June of last year. Year-over-year, we’re up about 9% on inventory dollars, but we are down 2% on units. And so I think just to see those units down year-over-year is nice progress. We’ll continue to make progress on inventory as we go through the year and bring down the dollars on each quarter on a sequential basis. I think as we go through Q2, as we kind of finish Q2, I feel like we will be really in check with kind of a balanced inventory growth versus sales growth. And really for us, I suppose, stepping back from a philosophical perspective, we do want our inventory growth lower than our sales growth.
And I think we should be back on that by Q2.
Unidentified Analyst: And in terms of the CapEx outlook, could you provide some additional color on the nature of those investments? And then additionally, on the expense management side, what additional opportunities lie ahead this year?
Ciaran Joseph Long: Yes. On CapEx, it’s really a combination of some maintenance capital, I would say, on the fleet of stores that we have, some spend in the fulfillment centers, continuing to bring in automation, just to make us more efficient as we kind of bring on more sales and more volume. And then obviously, a little bit of dollars in there for the new omni initiatives that we have in the back half of the year. From an expense area, yes, it’s interesting. I was reflecting there — we talked a lot on this earnings call about the omni initiatives and the progress we’re making. I would say that there is the same level of work and intensity going across all areas of the business, right, whether that’s product design and getting really great products, like quality for our customers and also on just cost saving initiatives across the different areas of the P&L, whether that’s insight and fulfillment centers, optimizing shipping carriers, getting — improving the balance of airfreight and sea in all areas of the business.
We have those; I think they’re all small initiatives but we all know kind of basis points add up pretty quickly. And we’ve seen — you’ve seen nice bit of progress there even in the Q4 P&L, right, that our selling expenses are down versus Q3 in a time where you have more surcharges from carriers and those extra charges, I think, is kind of progress and kind of gives us confidence as we think about next year’s P&L and the long-term model that we have in this business.
Operator: Our next question comes from the line of Youssef Squali with Truist Securities.
Youssef Squali: So maybe talk a little bit about the contribution to the P&L that Rebdolls had last year, maybe on the top and bottom lines. Just so that we can put in perspective as we look at your 2023 guide. And then on the balance sheet, how much cash do you need to continue to run the business? Is it fair to assume that with all the initiatives that you have going on, the Q4 kind of cash level is where you will trough, assuming inventory efficiency continues and CapEx goes down, et cetera. Just help us understand liquidity position and kind of how do you look at the strengthening of the balance sheet throughout the year?
