Mark Webb: What I would say, Jeff, in addition to what Claire just mentioned, the first thing is we have a big second quarter and a large Mother’s Day business, which we’ve talked about previously. So, the calendar shift for us pulling in essentially what would’ve been May week, one week into this quarter and losing February week, one week, which is typically end of season clearance and small versus lead up to Mother’s Day big at the end of the quarter, does have an impact for us, which is why we were as explicit as we were. And then I would say, in addition to what Claire said, she mentioned it was still a bit bumpy coming into February, a little bit of improving trend at the end of February, but a lot of the big weeks are in front of us. It’s a small month and they’re small weeks. And so, the bulk of the quarter is in front of us.
Jeff Lick: Great. Thanks for the clarification. Best of luck.
Operator: Your next question comes from the line of Dylan Carden with William Blair. Your line is open.
Dylan Carden: Thanks a lot. Just curious, this might be a tough question, but broad strokes, kind of backing out the extra week, did the retail channel, excluding weather, perform more line with the direct channel kind of down low single comp?
Mark Webb: So, Dylan, generally speaking, what I would say is, and it’s in the sort of results that you’ll see, the direct business continues to improve. And in fact, when we think about Q4 and the performance against our guidance that we reaffirmed earlier in the month of January, the traffic in the stores was – we mentioned it, surprising. The weather was widespread across the US. It impacted that channel. The benefit, we were pleased to see direct offset. And then just the benefits of the operating model, carrying less inventory overall, less markdown inventory SKUs, the sales into full price. So, even in a quarter where we mentioned it was a more promotional quarter, we expected it to be back at the Q3 report, and it was.
That’s still a better trade-off at full price than a markdown. And then the markdown, margin benefits. AUR benefits with so many fewer markdown units. So, that both benefits, those both benefit gross margin, and that was the lion’s share of our beat in Q4, but driven on the back of a fairly strong direct.
Dylan Carden: I appreciate that. And that kind of dovetails into my next question, which is, and apologies if I missed this, but for the guide this year to kind of get to the margin, would you expect to be able – it sounds like it’s mostly positive and SG&A investments in the new systems and what have you, right? So, gross margins relatively flat, maybe some modest improvement is – how should we think about that?
Mark Webb: We got it to relatively flat, Dylan. The macro …
Dylan Carden: Okay. I missed it.
Mark Webb: Which again, out there you’ve got a little bit of freight noise popping back up. And then we have some benefits that we’ve talked about for a while, but with raw materials, particularly cotton that we’ve said those should be neutral across the year. And then it’s really behind the guide is, on the revenue side is units supported by some of these initiatives that we talked about, POS, conversion in the stores, continuing enhancements in direct, et cetera.
Dylan Carden: Got it. And on the new stores, I just want to be clear about that. So, it’s five net new stores for the year, but five closures in the front half. So, 10 openings in the back half, did I catch that right?
Mark Webb: Yes,
Claire Spofford: Yes. Up to five net openings in 2024.
Dylan Carden: Okay. And kind of where are the new stores? How should we think about kind of their ramp and productivity versus the fleet? I know it’s going to be a drop in the bucket just from a scale standpoint, but anything to comment on there.
Mark Webb: Yes, I would say, Dylan, in the full-year and the guide, the stores are at the back end of the year, right? So, there’s very little assumed in our guidance aside from the store base, aside from how we’re planning on the closure activity against the opening. A lot of the stores, and we’ve mentioned this before, but on that 20 to 25 list, a lot of those markets are reentry markets for us. And a lot of the first opportunity stores to reopen are likely to be in reopened markets. And the good thing about our store fleet is we open and hit ramp pretty quickly once we’re open within the first year, and have a pretty stable performance across new stores. They’re forward – unlike some others who open to low awareness and ramp up over several years, we tend to, again, reentry markets have a customer we open back up.
We’ve done it now with better, more fair, I would call them economics in sites that are right for our brand. And that tends to be – that first year is a pretty good indicator of the store’s revenue.
Dylan Carden: Got it. And how are you feeling about your customer here? I know kind of coming into holiday, there’s some incremental softness there in your client core, higher income consumer, older. How is she feeling? How are you feeling about them kind of coming into this year?
Claire Spofford: Yes, coming into this year, again, we always field this customer tracker primary research. We are pleased to see the outlook showing some signs of a positive shift coming into Q1, and we also saw a high level of satisfaction with our early spring assortments right at the core of who we are as a brand coming into spring, loving our fabrics, our colors. So, some positive energy there, but – and I think we talked about in the scripts that the file remains healthy, particularly with our best customer segments, with some pressure due somewhat to the macro environment at the lower spend cohort. But all in all, I think a good balance and some nice positive energy in her mind coming in, but it’s relative to where she’s been. Still a lot of uncertainty out there in the macro environment, for sure.
