Destination XL Group, Inc. (NASDAQ:DXLG) Q4 2023 Earnings Call Transcript

Destination XL Group, Inc. (NASDAQ:DXLG) Q4 2023 Earnings Call Transcript March 21, 2024

Destination XL Group, Inc. beats earnings expectations. Reported EPS is $0.08, expectations were $0.07. DXLG isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and welcome to the Fourth Quarter 2023 Destination XL Group Inc. Earnings Call. At this time, all participants are in a listen only mode. Later, we’ll conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. I would like to turn the call over to Shelly Mokas, Vice President of SEC and Finance Reporting. You may begin.

Shelly Mokas : Thank you, Michelle, and good morning, everyone. Thank you for joining us on Destination XL Group’s fourth quarter and fiscal 2023 earnings call. On our call today are our President and Chief Executive Officer, Harvey Kanter; and our Chief Financial Officer, Peter Stratton. During today’s call, we will discuss some non-GAAP metrics to provide investors with useful information about our financial performance. Please refer to our earnings release, which was filed this morning and is available on our Investor Relations website at investor.dxl.com for an explanation and reconciliation of such measures. Today’s discussion also contains certain forward-looking statements concerning the company’s sales and earnings guidance, long-range strategic plan and other expectations for fiscal 2023.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those assumptions mentioned today due to a variety of factors that affect the company. Information regarding risks and uncertainties is detailed in the company’s filings with the Securities and Exchange Commission. I would now like to turn the call over to our CEO, Harvey Kanter. Harvey?

Harvey Kanter : Thank you, Shelly, and good morning, everyone. I appreciate all of you taking the time to hear our update on the business. There are a few different topics that I will cover on the call today. First, I want to start with our Q4 and fiscal 2023 performance. After two years of unprecedented growth, delivering the strongest financial performance in the company’s history, we certainly felt our customer pullback with his spending and the frequency of visits this year. The biggest challenge that we fought all year was traffic, but I am proud of the way we stayed true to our brand positioning and we executed with rigor those fundamentals that were within our control. In a minute, I’m going to get into more details regarding our fourth quarter and full year performance and we’ll also talk about where we are through the first six weeks of the first quarter and our near-term expectations for fiscal 2024.

But before I do that, I want you to know that I am pleased with several areas in which we made significant progress this year. At the top of the list is further clarifying our vision, which culminated in the development of our long range plan. We have been calling it the LRP and I look forward to sharing with you today the opportunity we see in the long range plan beginning to come to life in fiscal 2024. For well over a year now, I’ve talked to you on each quarterly earnings call about our orientation towards becoming a true growth company. We believe the men’s big and tall business in the U.S. is approximately $23 billion a year. We also know this market is highly fragmented, where almost everyone who sells men’s apparel dabbles to one degree or another in big and tall, while others skim off their customers already shopping to tap into whatever fragments of the market share they can find for DXL, big and tall is all we do.

In 2022, we did a lot of work on the total addressable market or TAM as we referred to it, to box out the size of the opportunity and for the past year, we have been planning how to attack it. The LRP that we are now executing is centered on the thesis that certain big and tall men do not shop with DXL because either they do not know who DXL is or even that an exclusively big and tall retailer exists. This is an awareness opportunity. The awareness opportunity. This is the opportunity for DXL as the only pure play omni-channel big and tall retailer. They may know us, but they do not shop with us because there is no physical store in their vicinity or a store that is conveniently located near them. This is the white space opportunity. And finally, they know us online, but do not shop with us because we have not made the digital experience free of friction that frustrates them and this is then the digital opportunity.

Our solution to capitalizing on all these opportunities resides in our ability to, one, overcome the lack of awareness, and two, improve accessibility to DXL and the DXL experience. And by improving accessibility, I am referring to more stores, a better website and collaborating with other retailers to bring the DXL experience to their customers. I would characterize 2023 as a year of great learning and preparation to take on this challenge. We have spent the past year developing and optimizing our plans today and sharing with you some of our specific plans and laying out what we intend to accomplish in 2024. I am hopeful you will have a better understanding of what we think is possible over the next three to five years. But before I can talk about the future, I must touch on the recent past and want to provide you with a little more color on our 2023 performance.

Our customers bought fewer items and gravitated towards more opening price point products this year than they did over the past two years as we saw deeper penetration into private brands. We experienced sales acceleration when we took in-season markdowns and clearance sales to expand on in season markdowns. I’ll remind you that we mentioned in November that cold weather seasonal categories such as sweaters, outerwear, boots, were off to a slow start and that trendunfortunately continued throughout Q4. Inventory continues to be a focus for us in the regimen we have in managing the business and taking markdowns in season to manage risk and it’s a proven way to minimize greater downstream liabilities. As I have noted previously, inventory management continues to be a high watermark of our operating discipline.

We have strategically improved our inventory position on other fronts as well by optimizing receipt flow and reducing our inventory levels in our distribution center. We have made great progress rebalancing our receipt flow to align with sales demand, and compared to last year, our year-end inventory was down $12 million or 13%, while the inventory return has improved by over 30% from fiscal 2019 pre pandemic. Last fall, we announced the launch of UNTUCKit, and I’m pleased to report that our customers love it. UNTUCKithas surpassed our expectations. Emerging as one of DXL’s most successful product launches ever. We have launched try-on capsules in 10 stores, 10 physical stores and we’re expanding that to 30 stores in spring and have a plan to grow that to 50 stores in fall.

This has been a big win for DXL. Fit by DXL is critically important. As we have mentioned previously, we continue to explore strategic collaborations with other brands that are widely recognized due to their industry leading product offering and marketing efforts which complement our curated assortment. Our recent launch of Faherty and Boss, as in Hugo Boss’s new line are other examples of this and both have been received well, very much out of the box. Lastly, before I move on, I do want to share that we are in the final stages of an agreement with another retailer that will allow us to sell our product through a new distribution channel that is aligned with DXL’s leading retail consumer experience. There is not much more I can say at this point, but we are truly excited and optimistic.

We will be in a position to elaborate more on alliances and collaborations later this spring. Now with regard to marketing, 2023 was a year of foundational improvements. There was work to be done below the waterline to improve infrastructure, process and capabilities. To be in a position for accelerated growth, we first had to deliver a compelling and comprehensive brand framework. This began with reframing our brand positioning within the context of newly learned customer insight and allowed us to further drive into our differentiated and ownable brand pillars, the DXL factor, if you will. This all led to the articulation of Wear What You Want and our brand ethos. This work provides the framework and the cornerstone positioning for the upcoming brand campaign and ensuing greater investment in marketing in a long-range plan.

We have now truly defined what is our unique, differentiated and most importantly, relevant proposition for big intel consumers. We expect and exist to provide the big intel man with the freedom to choose his own style. Following an extensive review, we have selected a creative agency of record Barrett Hofherr and Media Agency — Mediassociates. Both agencies are world-class talent and will strategically and tactically help us further position the DXL’s to deliver the growth we expect. The consumer insights we refer to have been driven by work we conducted in a brand awareness study with existing customers and big and tall consumers who do not shop with us. We feel that quantitative research to deepen this customer understanding from purchase drivers to brand preference and value perception, to awareness and competitive intelligence.

This work validated our brand positioning while providing rich context and a better understanding of customer dynamics in the evolving customer environment. There was also considerable work done to improve our tech stack to deliver better investment and stronger performance in our email program, which was driven by shopping behavior and unique customer segmentation. We augmented our email program with new dynamic technology that allows us to personalize messages for specific customers based on segmentation. And all of this will lead to important and meaningful gains in both company results and our future opportunities. As we have previously discussed, improving our data and analytics capabilities continues to be a priority to deliver better investment decisions, provide customer intelligence and enable more agile pivots in our marketing mix.

We improved our omni-channel data infrastructure to better target specific customer segments and attribute sales to our marketing activity. We also improved cloud data warehouse capabilities for use in marketing and see our applications and work is progressing well with the migration to a new more agile website platform. And finally, we are refining the mechanics of our loyalty program, the program to improve the health of the program’s success while continue to reward our best customers. We’ve also evolved our messaging to address the consumer’s changing macro environment and conditions. Our research showed that customers see our loyalty program as a key driver of value. So messaging leaned into the fact that certificates can be used on every purchase with no exclusions at any time our customer chooses and given our brand positioning of not being promotional, but offering exclusive loyalty events, the value embedded in our loyalty program is important, and for us, it ultimately relates to customers spending more money, which then creates more loyalty certificates and the opportunity for add-on downstream revenue as well.

Despite all this progress I’m laying out for you, there is no escaping the fact that our fourth quarter results clearly missed our expectations and our business continues to be challenged by a macro environment that is difficult. For the fourth quarter, comparable sales were down 10.1%, driven primarily by decreases in traffic. We were also coming off a consecutive year-over-year double-digit growth rate and record sales in 2021 and 2022. Given those results in specifically Q4, we were lapping at 10.8% prior year comp for the quarter and a 23.7% comp for January of 2023, the year-over-year comparison was challenging this past year and continues to be challenging. For the first six weeks of fiscal 2024 comp sales are roughly down 11%, but we are expecting modest improvements through the first six months of the year.

We expect our marketing initiatives and our LRP that I will talk about next to start deliver small but incremental positive results in the second half of the year, which Peter is going to go through in our guidance for the year end at the end of our call. But I wanted to acknowledge our current trend before moving on to the next topic. As I said at the start of the call, I will share with you our longer view perspective. So here we go. We believe that DXL’s growth trajectory can change, and to do that, we need to expose our brand to new consumers. As we head into fiscal 2024 there are four specific long-term growth initiatives that we are now starting to fund with resources and investment dollars. We are making specific investments in marketing and store expansion in the digital experience and collaborations all to accelerate growth and acquire greater market share.

We have selected a creative agency of record to develop and execute our brand work. We have hired a real estate agency to lead our site selection and portfolio work. We’ve engaged with a best in class provider to develop. The best-in-class provider to develop and launch a new e-commerce platform for our evolving digital online consumer experience. We have a very bold and ambitious plan, and that plan will require us to make investments. We believe we can materially grow our top line while maintaining what we can consider to be a minimum acceptable level of profitability and free cash flow. And over the next five years, we expect to grow our top line significantly with scale and return to double digit EBITDA margins. We are energized by the plans we have in place and believe they are necessary to unlock the potential that exists in a highly fragmented, big and tall men’s category and market.

I will now spend a little more time taking you through each of these four areas in more detail. First is marketing and brand building. As I mentioned, we have selected a new creative agency and media agency to develop, build, and execute a campaign that will drive awareness and create an emotional connection to DXL. We are planning a multimedia matched market test and are targeting pre Father’s Day for the launch. We are prepared to conservatively invest in this initiative with total marketing costs increasing to approximately 7% to 7.5% of sales and with favorable results, we plan to fund our marketing and brand building initiative at greater levels over time. Next is store development. While we have stores in every major metro market across the United States, there are geographic voids in certain markets where big and tall consumers are not being served by a store.

Our research indicates that 44% of big and tall men reported they do not shop with DXL because there is no store near them, while 35% self-reported, they do not shop with us because a store location is not convenient. These are the facts. This past year we opened three DXL stores, our first store openings for since 2019. We plan to open eight stores in fiscal 2024 and 15 new stores in 2025 through 2027 each. We also converted 11 casual mail stores at DXL this year and expect to convert another five by the end of 2024. All new stores and conversion investments are subject to DXL’s rigorous ROIC hurdles that are in foreign IR prior history and experience. Third is our new website platform. We are upgrading our website platform from our legacy infrastructure to a new modern e-commerce platform with various features, headless architecture and functionality launching through 2024.

We believe this upgrade will provide immediate performance improvements and customer experience benefits by eliminating friction, by eliminating friction points, optimizing search capability and enhancing speed and response times, which over time should grow conversion across multiple elements of the funnel flow. The new platform is engineered by commerce tools and will position us to respond faster and more effectively to any continuing ongoing required changes in our future. And finally, I want to talk about our ambition for alliances and collaborations. A few minutes ago, I mentioned that we are in the final stages of an agreement with another retailer that will allow us to sell our product through a new retail distribution channel that is aligned with DXL’s leading retail consumer experience.

While it is not yet final, we are working through the DSLs and I am very hopeful that we will be able to announce this alliance to better serve and engage the big and tall consumer across a much wider distribution network and do this soon. DXL believes a curated product assortment and a highly engaging consumer experience is an attractive asset for collaboration and greater alliances. We are in the early innings of collaborations, but we believe product collaborations and broader distribution relationships have an incredibly exciting potential for the seasons ahead. I have shared with you our higher level long-term view perspective and our belief that we can change DXL’s growth trajectory, creating even greater inflection over a period of time.

Fiscal 2024 will be defined by the launch of our strategic growth initiatives. These ambitious, — these initiatives are ambitious and are necessary and will require us to make significant investments in our future. They will begin to come online in late spring and will be a catalyst for sales growth for the balance of the year. We believe that we can invest in these gross initiatives while maintaining acceptable level of profitability and free cash flow and over the next five years, we expect to grow our top line significantly with scale and then return to double digit EBITDA margins finally unlocking the potential that exists in the big and tall men’s market. And now with that, I’m going to turn the call over to Peter for a review of our financials.

Peter.

Peter Stratton: Thank you, Harvey and good morning, everyone. I’ll start with some additional color around our fourth quarter and full year financial performance. As many of you saw in our press release that was filed this morning, sales for the fourth quarter came in at $137.1 million as compared to $143.9 million in the fourth quarter of fiscal 2022. Our fiscal calendar included an extra 53rd week this year, which contributed $7.1 million of sales in the fourth quarter. After adjusting for this extra week and for closed stores, our sales decreased by 10.1% on a comparable basis. This result was in the range of what we previously communicated in our holiday sales press release and reflects a further deceleration of the business in January.

As Harvey noted, the decrease in comps was driven primarily by traffic and January performance was up against a very strong prior year, which had a 23.7% sales increase. For the quarter both our store channel and the direct business experienced similar trends with stores down 9.4% and direct down 11.3%. Conversion rates and dollars per transaction held relatively flat but we did observe a shift in consumer behavior towards our opening price point brands. For the full year, our comp sales decreased by 4.6% but 2023 still marks the second highest sales year in our company’s history. Gross margins inclusive of occupancy costs for the fourth quarter were 47% as compared to 47.7% a year ago. This decrease was primarily driven by the drop in sales, which caused our occupancy costs to deleverage by 90 basis points.

We were pleased that our merchandise margins held up quite well and actually improved by 20 basis points over the prior year fourth quarter. Our merchandise margin improvement was primarily the result of decreased freight costs, which offset smaller increases in markdown rates and raw material costs. I’d like to emphasize two operational successes, which allowed us to maintain our margins despite the traffic challenges. First, we resisted the temptation to prop up holiday sales by becoming hyper promotional. Even as many others around us used those tactics to buy sales. And second, we remained laser focused on disciplined inventory management. inventory management increasing markdowns on slower moving seasonal products before it hit the clearance racks.

For the full year, our gross margin rate was 48.4%, or a 150 basis point decrease from last year, which was slightly better than our 180 basis point estimate back in November. For 2024, we expect our gross margins to experience some occupancy deleverage in the first half due to lower sales expectations, but we expect gross margin leverage to improve in the second half. For the full year, we expect 2024 gross margin rate to be down approximately 30 to 40 basis points. Moving on to selling general and administrative expenses. Our SG&A costs for the fourth quarter were 38.5% of sales as compared to 37.8% of sales in the prior year, and for the full year there were 37.7% of sales as compared to 36.4% for fiscal 2022. On a dollar basis, SG&A decreased by 1.5 million for the quarter and 2.3 million for the year with most of the decrease coming from marketing costs and performance-based incentive accruals partially offset by new positions to support our growth initiatives and approximately $2.7 million of costs for the 53 week.

Our results for the fourth quarter and fiscal year also reflect the termination of our frozen retirement plans, which we talked about earlier this year. This was a unique opportunity for us to capitalize on this year by taking advantage of higher interest rates, due to the high interest rate environment last year, the gap between our pension liability and our plan assets was relatively small. We were able to eliminate this variable liability from our books at a low cash cost of approximately $2.5 million. We completed that process in the fourth quarter, and our results for the fourth quarter and full year include non-operating charges of $1.5 million and $5.7 million respectively to flow the previously unrealized loss from the retirement plans through the P&L.

After adjusting for this one-time transaction, our adjusted EBITDA for the fourth quarter came in at $11.7 million or 8.5% of sales, and for the full year our adjusted EBITDA was 55.9 million or 10.7% of sales. Although this result is down from the prior two record breaking years, we are proud of the fact that this was the third most profitable result in the company’s history and demonstrated a strong operating discipline by the team. The significant EBITDA we have generated over the past three years combined with improvements in working capital management have helped DXL build up a significant balance of cash and short-term investments totaling $60 million at fiscal year-end. We produced $32.2 million of free cash flow in fiscal 2023, which included $49.6 million of operating cash flows, partially netted down by $17.4 million in capital expenditures.

We returned much of this free cash flow back to shareholders in the form of a share repurchase program. Over the course of 2023, we bought back 5.4 million shares at a cost of $24.5 million. Our authorization was for up to $25 million, and we finished the remaining allotment in the first week of fiscal 2024. One question that I’m sure is on the minds of some of you is whether we intend to continue to buy back shares in 2024. At this time, we have chosen not to put another share repurchase plan in place for 2024, and the reason is twofold. First, we have already talked in great detail about our planned investments in the LRP. I’m going to go through our 2024 guidance in a minute, but we do expect to generate a modest amount of free cash flow this year.

We are very pleased to be in a strong liquidity position, but we are going to remain cautious, especially in the first half of the year, and that leads us to the second reason we are pausing share repurchase. Right now, the business is not performing at an acceptable level and while we have expectations that our initiatives will take root and our business will improve in the second half of the year, we remain cautious over the first half. We will continue to revisit the share repurchase question periodically as we look for opportunities and the right timing to return capital to shareholders. With $60 million of cash and short term investments, no debt and a clean inventory position we believe our balance sheet has never been stronger. As we embark on the LRP that Harvey spoke about, I have great confidence in our ability to financially support our investments and fund these initiatives to see them through to fruition.

That leads me to the last topic that I would like to discuss with you today, which is our fiscal 2024 financial guidance. As we noted earlier, 2024 will be defined by the launch of the LRP and will include increased investments in marketing, stores, in e-commerce technology. We have explained that we expect to increase marketing from 5.9% of sales in 2023 to a range of 7% to 7.5% of sales in 2024.We also expect to increase our capital expenditures from $17.4 million in 2023 to a range of $22 million to $25 million in 2024, with the increase primarily driven by stores and website development. However, it will take some time for these initiatives to build momentum to the point where they become material to our sales results. In the meantime, we continue to face the reality of consumer headwinds arising from the past two years of elevated inflation, a shift in consumer spending from goods to services and the uncertainty associated with an election year.

We expect consumer discretionary spending to recover slowly over the course of 2024, and we expect to start seeing a small modest return from our LRP initiatives starting in the second half of the year. Accordingly, we have set our sales guidance at $500 million to 530 million, which assumes a mid to high-single digit decrease in comparable sales for the first half of the year, followed by improvement to a low to mid-single digit comparable sales increase for the second half of the year as our initiatives start to have some limited impact. For the full year, this guidance would correspond to a comp sales in the range of minus 4.4% to positive 1.4%. From an earning standpoint, we expect the midpoint of our sales range to result in net income of approximately $17 million and EBITDA of approximately $36 million.

Our management team has spent a tremendous amount of time developing, sensitizing and evaluating our LRP. Moving forward with this plan is not something we are taking. is not something we are taking lightly. There is no hiding from the fact that we are offering guidance this year that has a lower sales midpoint than we actually delivered in fiscal 2023. Nor is there any hiding from the fact that we expect our adjusted EBITDA margins to compress by more than 300 basis points this year. We believe a 7% adjusted EBITDA margin together with a credible growth strategy is an acceptable trade off as we execute the LRP. We believe that the investments we are making today, will generate enough scale such that we can restore our double-digit EBITDA margin percentage on a significantly greater scale.

I’m now going to turn it back over to Harvey for some closing thoughts. Harvey?

Harvey Kanter : Thanks, Peter. And given consistent is defined as what is consistently done, I could not close without acknowledging that I remain incredibly inspired by the grit and perseverance of our entire DXL team. Through the challenges we’ve experienced, the volatility and the ups and downs of our own success, we, and by we, I really mean they work every day. And what the team has achieved over the past four years is remarkable. From a company, some thought we would potentially not be around long to our mostthree — most recent three years, every one of which could be characterized as one of the best in DXL’s history. None of this would be possible without the hard work and dedication of all of our people in the stores, in the distribution center, in the corporate office, and of course in the guest engagement center.

It is because of this talented team and the culture that we have created together that I want to get up every morning and keep moving on this journey. Thank you to DXL for all your hard work and commitment in our pursuit of serving big and tall men and making DXL the place where they can choose their own style and wear what they want. And with that operator, Peter and I will be happy to take questions. Thanks.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Raphi Savitz with RYS Advisors.

Raphi Savitz : You had mentioned that traffic has been a challenge, but if you look at the total of 2023, are your active customers growing?

Harvey Kanter : Raphi, our repeat rate is one of the greater challenges. And our new two file is equally under some pressure. The absolute growth rate of our customer has shrunk, obviously at some level with respect to the business itself. You can see the fourth quarter where that negative 10 happened. So directly, and answer your question, fourth quarter we shrunk in on the overall year about held to own.

Raphi Savitz : And we’re talking about a pretty significant investment program, both in terms of OpEx and CapEx. I guess what sort of operational metrics are you open to sharing along the way to show us that these investments are paying off?

Harvey Kanter : The two things. First of all, I want to regroup and make sure it’s crystal clear that the two investments we’re making are driven by facts. They’re not driven by anecdotal perspective, they’re not driven by opinion, and they are required, and we believe really critically important to changing the trajectory of our company. And so, let’s be clear, the awareness level of our company unaided is under 10%, and the aided awareness level of our company, DXL, is under 30%. The fact that 44% of consumers say that they don’t shop with us because there’s no store near them, or 35% saying there’s no store convenient near them, those facts require us to make the investments we’re making and we believe that they will materially grow the business.

Ultimately, the brand campaign, which is really the awareness campaign, will be judged by one single metric, which is the reversal of traffic decline. It requires us to see more people coming to a store and more sessions on our website. From a store perspective, obviously it’s some variance of that as well, but then there’s extensions beyond that. So obviously you have to drive traffic to our stores based on greater awareness and the accessibility of those store openings. But ultimately we have sales plans for those stores individually, and the sales plans are basically driven by three key metrics, which is traffic, ultimately ticket, are they spending money in the stores because we have a great assortment and is it keeping pace with our normal ticket,.

And then conversion, which for us has been a high watermark and something we’re quite excited about the ability to continue to leverage based on the experience in the stores, the product we sell and the price points we sell product at.

Raphi Savitz : And will or maybe I should ask this a different way, is there openness to giving us additional disclosure on those various metrics going forward?

Peter Stratton: So I think the biggest one that we’ll continue to give guidance on Raphi is, we’ll certainly be talking about traffic every month. I think we’ll be or every quarter. We will certainly be talking about store openings. I think we’ve been pretty transparent in the size of the store. You can see what the store sales are and we can come up with store expected sales for new openings. So I think as we go along, we’ll continue to talk about how we’re dealing with stores. We will continue to talk about brand awareness and we’ll be talking about customers to a certain level as well.

Raphi Savitz : And it may be helpful, you may want to think about kind of going forward to kind of paint the picture of how these all interplay, right? And showing an example of a new store opening. You don’t need to say what city it’s in, but just kind of how those sales developed, how the awareness changed and so just paint?

Harvey Kanter : I assume you have been on the site and seen the investor deck. So to Peter’s point, we’ve provided a fair amount of detail in what a store opening looks like and store growth. But yes, to your question, we will provide updates each quarter on the success of our store openings, the timeline. And ultimately the question you asked at the beginning is our file growing and obviously our file will grow if we have –if we drive basically trial, which is greater awareness, traffic obviously then to our stores, our website, hopefully there’ll be trial, which ultimately means conversion. And with conversion our 12 month file will grow. And that will be then addressing the first question you asked, which is our absolute file growing.

And obviously the expectation we have is when we use the words greater scale, it’s not just revenue, it’s taking share of market. It starts with share of eyeballs, for lack of a better way to say it, share of voice and ultimately drives to share of market, which is revenue driven. But the opportunity to make good on that has to happen.

Operator: The next question comes from Michael Baker with D.A. Davidson.

Unidentified Analyst : Keegan on from Mike right now. I just wanted to ask on the profitability, like you said, it’s going to go down to 7% this year. I was just wondering, like with the investment process, what is the plan for ramping it back up to double-digits? Is this kind of like a one-time investment year or is it a multi-year investment cycle?

Harvey Kanter : I’ll start it and then Peter will follow-up at whatever level required it. The most important thing you need to hear is if you’re going to develop greater level of brand awareness, unaided or aided, it’s not like a light switch. It takes time. Hopefully, you heard that our initial launch of the brand campaign is a matched multi-market test. We will launch it in three markets. We will test it before we invest at a greater level, and we acknowledge that we would’ve conservatively invest and with outcomes that we are comfortable with, we will continue to invest at a greater level potentially. But we also want to be clear, this is not a match market test. It didn’t work and stop. If you are going to build awareness, it’s multiple years.