And if you don’t change your lifestyle, it unfortunately creates a yo-yo, and we’ve heard that already. We’ve heard a couple of our investors literally say they’ve been on it they needed to go back to their doctor, get a prescription refill and their doctor wanted to chat with them before that. It took them three weeks and they gave five pounds back. And I tell you all that because that’s more catalyst for the unfortunate reality of going up and down. And our consumer, first of all, is big and tall and if you’re 6.5 and 280, you’re not going to go to 6.5 and 180. It’s unlikely you’ll ever get below a big and tall size. You just might change your size. And then equally, potentially unfortunate if you’re on it and you get off it and you don’t have lifestyle changes, you potentially could gain way back.
So for us, as a business, we see it as a catalyst we’re hopeful that our consumer becomes healthier, loses weight and all those things, which, of course, you would want. But in reality, the practical reality is not going to move out of big and tall in most cases. He’s just going to really require new close for a loss in weight and potentially might require new clothes for a gain back of some of that. So, hopefully, that helps you understand how we’re thinking about it. We really haven’t baked anything in. But as we talk and explore this, we do think it’s a catalyst for greater business opportunity just because of changing sizes.
Raphi Savitz: Very helpful context. And then, Peter, just a couple of hopefully quick financial questions, I guess from a capital allocation standpoint, like how are you thinking about hurdle rates for these various investments, whether it’s the stores, whether it’s kind of brand investments or any other investments you’re kind of making in the business? And then just a simple one on cash taxes, you talked about cash taxes this year, but how do we think about cash taxes out for the next few years?
Peter Stratton: Sure. So, I’ll take the last one first. So cash taxes out for the next couple of years, it’s going to depend on just where we come in with net income. But I do think — this year will be very low cash taxes. Next year, we would be very low. But once we get through 2024, we will start to be reaching the end of the NOL usage. So, I would say, once you get out into ’25, ’26, we’ll be back to sort of more normalized cash tax cycles. I think when it comes to investments. We, I think, do a pretty good job of holding ourselves to a pretty high standard, for example, when we’re opening stores, we’re looking at — we want to make sure that on a sales per square foot basis, we believe that — our new stores that we’re opening can achieve sales per square foot levels that we would consider in the top quartile of our store portfolio, whether they actually do that or not, we’ve got to wait until we get the movement, but at least going into it.
We’ll have an expectation. We also look real carefully at sales to invested capital. I think for a — for us to be able to invest $1 in capital in return $1.5, let’s say, in sales is something that we’re interested in doing. And then finally, we look at internal rate of return. And as long as we’re getting a 25-plus IRR, we typically consider that a good capital investment. But again, it all comes back to — how can we grow the top line — and we want to make sure that we’re putting money to work that can grow the top line but can grow it responsibly.
Raphi Savitz: And on that note, in terms of the new stores, I guess, as you’re thinking about, I guess, a few stores this year and then kind of maybe 10 stores next year and more beyond that, I guess how many of these leases do you expect to sign kind of near term versus kind of waiting and seeing how at least this cohort of new stores does before kind of going out and committing to a larger — your development program?
Peter Stratton: Yes. So as the number that we’ve been talking about is 50 new stores and the cadence of getting those open three this year and 10 next year. So that’s 13 of the 50 by the end of next year. By that time, we should start getting a decent read on how these stores are opening up — and then the following year, maybe it’s 15 to 20. But I think it will be a good year before we have a real solid read on how the actual performance is — but we’re encouraged, and we wouldn’t be pursuing them if we weren’t hearing from our customers that the biggest obstacle to their shopping with us is often that there’s not a store in their location or in their market or it’s just inconvenient to drive to whatever the nearest store is.
Harvey Kanter: Thanks, Rafi. Listen, it’s Harvey and Peter and we’ll sign off now. We want to thank everyone for attending the call today. We greatly appreciate your interest in DXL, and we’re excited about the opportunities ahead. And hopefully, as we’ve articulated, we’ll navigate through these continuing challenging times well and well enough to really get to the bigger opportunity of double-digit growth and meaningful engagement with a broad-based customer. So thanks much. Have a great early fall, and we will talk to you in 90 short days.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
