Janine Stichter: Great. And any update on how wholesale is performing?
Sam Sato: Yes. Wholesale, we’ve got a small test with tractor supply and that that continues. As we learn more and they learn more and give us good insights. We’re adjusting assortments and quantities and store base and whatnot. And so that’s going well. Wholesale, we see as clearly an opportunity for us. I think that that’s a little bit down the line, as it requires some enablements. The DC in the southeast will be one of those things that allow us I think to potentially be in a better position to do that. And then there’s a whole organizational investment that we’ve got to make. And again, while we see that as an opportunity, it’s a little bit lower on the priority list just as we’re building other infrastructure capabilities to drive and scale the current business and any other potential business we might consider adding.
Janine Stichter: Great. And then maybe just a follow-up on marketing, I think you said leveraging to 10.5% of sales this year. I’m just curious on the thoughts of how you arrived at that level. Is that kind of where you see it sitting sustainably for the business? Or is there a situation where perhaps you consider putting more into marketing, let’s say the environment starts to improve and you want to make sure you’re capturing market share?
Dave Loretta: Yes. Hi, Janine. The 10.5% is a point in time that we feel is appropriate given the environment. And as we shared in the fourth quarter, we did reduce some of the spend as €“ just as soft business was playing out and not wanting to throw dollars away. So it’s a balance with the current environment, the marketing mix that Sam referred to and looking at where the most efficiency is. Longer term, we continue to see improvements in the efficiency in digital media and that longer term should allow us to potentially leverage further. But on the other hand, in this environment where we’re planning at 10.5%, if we see some opportunity to invest deeper, then we’ll also consider that because we can see that it can drive profitable growth.
So it’s €“ the beauty of the marketing mix right now is, is it’s more flexible than it ever has been with less dependent on upfront buys on TV and catalog circulation. So we’re a lot more nimbler on that investment. And we’re finding our ability to kind of reach the customer, whether it retained or new with those channels is being even more granular and precise. So that’s how we’re thinking about marketing spend going forward.
Sam Sato: Hey, Janine. I wanted to get back to you. You also asked about the women’s expansion and I didn’t mean to overlook that question. So we had 20 stores where we expanded our women’s assortment. And in those 20 stores, we’re obviously pleased with the greater assortments in those stores. And I had mentioned on our last earnings call that new customers coming to our brand now are split 50-50 between men and women. So we’re really focused and dialed in on growing this women’s part of the business. So the women’s expansion, those 20 stores over our measured period have all outperformed the rest of chain, the company average €“ the store-based company average that is. And yes, they’re doing well and we continue to make tweaks and adjustments as we get greater and greater feedback from her.
But yes, we’re pleased with that and we’re going to continue to drive the women’s business. We had about a 200 basis point increase in overall penetration of our business to now be about 28%. And our kind of longer term goal is we think it could be in the high-30s, even touching 40% of the business. So as we look to 2023, our focus is to continue to improve that penetration percentage and make our way towards that high-30s potentially 40% penetration rate.
Janine Stichter: Perfect. Thanks so much for all the color and best of luck.
Sam Sato: Thank you.
Operator: Thank you. And our next question today comes from Dylan Carden with William Blair. Please go ahead.
Dylan Carden: Thanks a lot. Yes. Just kind of curious on the guide, just topline I guess for now. Last year really I think a lot was predicated on sort of new inventory flow. This year it doesn’t seem like you’re talking as much about that. So if you’re sort of breaking down the components of your comfort level, there’s still presumably some not insignificant acceleration here in the first quarter given kind of where trends feel like they are and where you kind of expect to land the front half. Is that easier comparisons mixed with sort of a more targeted marketing and then maybe some efficiency borne from better retail online integration that’s kind of hear €“ more what I hear you guys speaking of this year?
Dave Loretta: Well, yes. Hi, Dylan. Certainly inventory positioning out of the gate here is a benefit for us relative to last year. But the headwind is still a soft consumer backdrop and softer trends that we’re seeing in the consumer. So that’s why we’re cautious and how we’re going to plan the business this year. I think we’ve gotten through the thick of it coming out of last fourth quarter and the trends are now improved. But we simply as much as we’ve got the inventory in position, we’ve got great new products coming out for spring, they’re already out there. And we’ve got a marketing plan that’s going to support product focused messaging, the consumer is still not where they were a year-ago. And so we’re just planning around that, that aspect more than the other factors that’ll help lift us when that backdrop kind of lifts itself. So that’s how we’re thinking about the sales plan.
Dylan Carden: Thank you. And as you’re kind of thinking about margins, and I guess that a lot sort of isn’t in your control as it relates to the consumer, but to the extent, you’re sort of just perched above breakeven net income margin. I mean, do you €“ if you €“ is there more downside risk? Should sales sort of not come in where you expect or you have confidence you can kind of maintain certain aspects of the model to make sure that you don’t dip into sort of negative earnings territory?
Dave Loretta: Yes. Running a profitable business is certainly a core tenant of ours and that’s what we would intend to do if sales trends were to worsen on us. We do have flexibility in the model to make adjustments as we kind of proved last year and even the pandemic year. So yes, I think that’s paramount gives us not only a stability in positive earnings, but helps maintain our access to liquidity as well. So that’s important to navigate through the period we’re in right now.
Dylan Carden: Well, and would a big piece of that being Georgia opening up? I mean, is that kind of been €“ I guess, how much of a weight has that been on the P&L?
Dave Loretta: That definitely has some of the capital cost that we’re starting to realize and the fixed cost of owning the building or renting the building. But that’s such a strategic benefit and we’re going to see realization of value as early as six months from now. So yes, that is in the near-term weighing on the P&Ls, I’ve called out in my remarks and it’s got a long-term return on investment there, but it’s core to adding the foundation for us to be a larger and scale brand and house a brand. So we think that’s important and we’ve chosen to prioritize that over other things that we have pushed off and decided to wait on in terms of investments.
