Zumiez Inc. (NASDAQ:ZUMZ) Q4 2022 Earnings Call Transcript

Zumiez Inc. (NASDAQ:ZUMZ) Q4 2022 Earnings Call Transcript March 9, 2023

Operator: Good afternoon, ladies and gentlemen, and welcome to the Zumiez Inc., Fourth Quarter Fiscal 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. Before we begin, I’d like to remind everyone of the company’s Safe Harbor language. Today’s conference call includes comments concerning Zumiez Inc., business outlook and contains forward-looking statements. These forward-looking statements and all other statements that may be made on this call that are not based on historical facts are subject to risks and uncertainties. Actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available in Zumiez’ filings with the SEC. At this time, I will turn the call over to Rick Brooks, Chief Executive Officer. Mr. Brooks?

Rick Brooks: Hello, everyone, and thank you for joining us on the call. With me today is Chris Work, our Chief Financial Officer. I’ll begin today’s call with a few remarks about the fourth quarter, then I’ll share some thoughts on the past year and what it means for Zumiez going forward before handing the call over to Chris, who will take you through the financials and some thoughts on the coming year. After that, we’ll open the call to your questions. We finished a challenging year with fourth quarter results that were ahead of our guidance but well below last year’s record results. We knew 2022 would be difficult given the tough comparison to 2021, a year in which we grew revenue 20% and diluted earnings per share of 62% as we successfully capitalized on a strong consumer that was flush with record levels of savings due to U.S. stimulus and child tax credit measures.

As 2022 unfolded, on top of the tough compares, other headwinds emerged and intensified, including higher operating costs, a continued tight labor market, unfavorable changes in foreign currency exchange rates and most acutely, high level of inflation leading to intense competition for declining discretionary dollars. Beyond the macroeconomic factors, we also experienced the pressure of skate hardgoods declines on the business as well as a push to more value-oriented offerings away from our higher price point branded product. And finally, an over-inventory marketplace led to steep industry-wide discounting especially during the important holiday selling season, which further impacted our full price selling model. On our third quarter earnings call in early December, we assumed that these difficult trends impacting the broader retail sector would persist through the end of the fiscal year.

We remain flexible and agile as the quarter progressed, focusing on the areas of the business that we can control to help offset some of the ongoing pressure. While our results were down significantly year-over-year, we were able to deliver sales and EPS results that were better than both our initial Q4 outlook and the update we provided in early January. Some bright spots during the quarter included, we exceeded our sales guidance for the quarter as the holiday season and in particular, January, played out better than expected in the U.S. We saw sales growth of 8.2% year-over-year in our European and Australian markets on a currency neutral basis. And while negative currency fluctuations masked this on a reported basis, we are pleased to see the continued efforts of our teams operating our international concepts.

Overall, expense management was strong, with most of our loss to prior year driven by the top-line sales decline. Our model continues to be highly sensitive to sales fluctuations, with sales increases showing a larger flow through to the bottom-line and a reverse impact during the sales downturn. Inventory was up 4.7%, driven by our international entities with larger store count growth, while our U.S. inventory was down 2.5% from the prior year. Diluted earnings per share of $0.59 in the fourth quarter was higher than our guidance of $0.51, driven primarily by flow through on incremental sales. And substantial work was completed on our long-term initiatives, including the opening of 32 new stores in 2022, with half of those openings furthering our international expansion and half of the openings helping us reach customers across the United States.

We are by no means satisfied with our recent financial performance. However, I am pleased that we’ve been able to navigate the recent volatility without changing the original philosophies, goals and ideals on which we built this business. While we have made several important short-term changes in how we operate and analyze the business as a result of the economic challenges, many of these changes have been behind the scenes and would not be evident to our customer. Furthermore, we remain focused on executing many of the long-term strategies that have driven our results for 45 years, including launching over 100 new brands each year to bring the newness and excitement that our customers expect while also focusing on the critical role our sales teams play in delivering a highly differentiated and highly localized product mix and sales experience.

One of the biggest learnings post-COVID continues to be the customers’ desire for human-to-human interaction as evidenced by the return to our stores post-pandemic. We’re now operating with digital penetration consistent with levels that we saw pre-pandemic, which only reinforces our beliefs about the importance of being present for the customer where they want, how they want and when they want. Looking ahead, we expect continued softness in demand because of the current economic environment and remain cautious in our near-term outlook that Chris will share shortly. Our plan is to be diligent with our spending, focused on the strategic investments that we believe will create significant long-term benefit for our customers, our business and our shareholders while managing carefully in the short term what we can control.

Some of the long-term strategic investments we believe are important to push forward include, continued investment in our people through best-in-class training and mentoring. 2022, we’re able to execute all three of our in-person national events that are focused on intense training, connection and recognition. This included the return of our January 100k event celebrating the best of our sales teams and connecting them with our key brands; optimizing performance by trade area to ensuring that we have the right product in the right places to best serve our customers as quickly as possible; continue to work with brands to increase speed and flexibility while increasing margins; investing in innovative ways to generate human-to-human connections with our customers and engage with them in new ways that enhance the shopping experience; continuing our international expansion with a focus on Europe and Australia.

Brands emerge locally and grow globally. Our international presence provides us the opportunity to better serve both our customers and our brand partners, while we continue to optimize these operations with many of the initiatives we have proven across North America. Before I close, I would like to thank all of our teams and our brand partners for their dedication and commitment to Zumiez over the last year. I’m immensely proud of how we have collectively navigated these most recent set of challenges. So we’d like to say periods of significant change create opportunities, and companies who have the right people, strategies, and resources in place can take advantage of times like this to advance their brand and business. I’m more confident than ever that this applies to Zumiez.

With that, I’ll turn the call to Chris to discuss the financials.

Chris Work: Thanks, Rick, and good afternoon, everyone. I’m going to start with a review of our fourth quarter and full year 2022 results. I’ll then provide an update on our first quarter to-date sales trends before providing some perspective on how we’re thinking about the full year. Fourth quarter net sales were $280.1 million, down 19.2% from $346.7 million in the fourth quarter of 2021. The year-over-year decrease in sales was primarily driven by increased macroeconomic headwinds as inflation weighed on consumer discretionary spending during the current year quarter. Growth was also negatively impacted by 147 basis points related to unfavorable changes in foreign currency. From a regional perspective, North America net sales were $219.8 million, a decrease of 23.4% from 2021.

Other international net sales which consist of Europe and Australia, were $60.3 million, up 1.1% from last year. Excluding the impact of foreign currency translation, North America net sales decreased 23.1% and other international net sales increased 8.2% compared with 2021. From a category perspective, all categories were down in the total sales from the prior year during the quarter, with men’s being our most negative, followed by hardgoods, women’s accessories and footwear. Fourth quarter gross profit was $95.3 million compared to $133.9 million in the fourth quarter of last year. Gross margin as a percentage of sales was 34% for the quarter compared to 38.6% in the fourth quarter of 2021. The 460-basis point decrease in gross margin was primarily driven by lower sales in the quarter driving deleverage in our fixed costs.

The key areas driving the change were as follows; store occupancy costs deleveraged by 180 basis points on lower sales volumes, product margins decreased by 120 basis points, web shipping costs increased by 80 basis points, distribution center costs deleveraged by 70 basis points, and buying and private label costs increased by 20 basis points. The negative impacts were partially offset by a 30-basis point reduction in incentive compensation based upon results. SG&A expense was $80.1 million or 28.6% of net sales in the fourth quarter compared to $82.2 million or 23.7% of net sales a year ago. The 490-basis point increase in SG&A expenses as a percent of net sales resulted from the following. A 170-basis point increase due to both deleverage of our store wages on lower sales as well as increases in wage rates that could not be offset by our hours reduction.

A 130 basis point increase due to deleverage of non-wage store operating costs. 80 basis points increase in non-store wages. 70 basis point increase due to our in-person 100k training event held in Q4 2022 but was not held in Q4 2021 due to COVID concerns. A 50-basis point increase due to store impairments. A 40-basis point increase in other corporate costs. These increases were partially offset by a 60-basis point reduction in incentive compensation based upon results. Operating income in the fourth quarter of 2022 was $15.2 million or 5.4% of net sales compared with $51.7 million or 14.9% of net sales last year. Net income for the fourth quarter was $11.4 million or $0.59 per diluted share. This compares to net income of $38.2 million or $1.70 per diluted share in the fourth quarter of 2021.

Our effective tax rate for the fourth quarter of 2022 is 29.2% compared with 25.1% in the year ago period. Looking at our full year results, net sales in 2022 were $958.4 million, a decrease of $225.5 million or 19% from $1.1839 billion in 2021. The decrease in sales was primarily driven by continued inflationary pressures on the consumer, foreign exchange rate fluctuation and the benefits from domestic stimulus in the prior year, when consumers were less likely to spend on travel and in-person entertainment due to COVID-19. Growth was also negatively impacted by 149 basis points relating to unfavorable changes in foreign currency. From a regional perspective, North America net sales were $802.4 million, a decrease of 22.2% from 2021. Other international net sales, which consists of Europe and Australia, were $156 million, up 1.8% from last year.

Excluding the impact of foreign currency translation, North America net sales decreased 21.9% and other international net sales increased 12% compared with 2021. 2022 gross margin was 33.9% compared with 38.6% in 2021. The 470-basis point decrease was driven by deleveraging our fixed costs as well as rate increases in several areas. The key areas driving the change were as follows. Store occupancy costs deleveraged by 240 basis points on lower sales volume. Web shipping costs increased by 90 basis points. Distribution center costs deleveraged by 70 basis points. Product margins decreased by 50 basis points. Buying and private label costs deleveraged by 40 basis points. And increase in inventory shrinkage of 30 basis points. These gross margin reductions were partially offset by a 30-basis point benefit related to lower incentive compensation costs.

Annual SG&A expense was $293.6 million or 30.7% of net sales compared with $298.9 million or 25.3% of net sales in 2021. The increase as a percentage of net sales was driven by an increase of 260 basis points in store wages tied both to deleverage on decreased sales as well as wage rate increases that could not be offset with hours declines. 140 points of deleverage on non-wage-related store costs. A 100-basis point increase in non-store wage costs. 70 basis point increase in corporate costs, and a 70-basis point increase in our training as we shifted back to in-person events throughout the year. These increases were partially offset by a 70-basis point decrease in annual incentive compensation and a 30-basis point decrease related to a one-time German subsidy received in the first quarter of 2022.

Operating income in 2022 was $31.1 million or 3.2% of net sales compared with $157.8 million or 13.3% of net sales last year. Full year net income was $21 million or $1.08 per diluted share compared to $119.3 million or $4.85 per diluted share in 2021. Our effective income tax rate for 2022 was 35.2% compared to 25.7% in the year ago period. Turning to the balance sheet. The business ended the quarter at a strong financial position. We had cash and current marketable securities of $173.5 million as of January 28, 2023, compared to $294.5 million as of January 29, 2022. The $121 million decrease in cash and current marketable securities over the trailing 12 months was driven primarily by share repurchases of $87.9 million and capital expenditures of $25.6 million.

As of January 28, 2023, we have no debt on our balance sheet and continue to maintain our full unused credit facility. We ended the quarter with $134.8 million in inventory, up 4.7% compared with $128.7 million last year. The inventory growth was driven by sales and store count increases in our international business, while the inventory in the U.S. is down 2.5% from the prior year. On a constant currency basis, our inventory levels were up 5.7% from last year. Overall, the inventory on hand is healthy and continues to sell at a favorable margin despite being more aged than this time last year driven by the difficult sales environment. Now to our first quarter to-date results. Net sales for the 35-day period ended March 4, 2023, decreased 15.5% compared to the same 35-day period in the prior year ended March 5, 2022.

Comparable sales for the 35-day period ended March 4, 2023 were down 16.6% from the comparable period in the prior year. From a regional perspective, net sales for our North America business for the 35-day period ended March 4, 2023 decreased 21.9% over the comparable period last year. Meanwhile, our other international business increased 13.9% versus last year. Excluding the impact of foreign currency translation, North America net sales decreased 21.7% and other international net sales increased 19.2% compared with 2022. From a category perspective, all categories were down for the first quarter to-date. Men’s was our largest negative category followed by women’s, footwear, accessories and hardgoods. With respect to our outlook for the first quarter of fiscal 2023, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity in estimating sales, product margin and earnings growth given the variety of internal and external factors that impact our performance.

Our first quarter to-date results are consistent with our results during the fourth quarter of 2022, and we believe are impacted by the continued high inflation pressure in discretionary spending. With that in mind, we are planning total sales for the first quarter will be between $178 million and $184 million. We expect that our first quarter 2023 product margins will be down between 100 and 115 basis points from the first quarter of fiscal 2022 as we continue to work through some aged inventory in a challenging operating environment. Consolidated operating loss as a percent of sales for the first quarter is expected to be between negative 12.7% and negative 10.7%, and we anticipate loss per share will be between negative $0.95 and negative $0.85.

The decline in earnings is largely due to deleveraging the cost structure on lower sales base coupled with margin pressure. Our biggest area to deleverage continue to be tied to fixed costs such as occupancy expense, base hours in our stores that are driven by mall operating hours and other corporate costs. As we consider the outlook for the full fiscal year 2023, there remains uncertainty and volatility in the macro environment. Given that we will refrain from giving specific annual financial guidance but do want to add some context around how we currently believe the business will trend throughout the year. Sales results in fiscal 2022 became more challenged each quarter as the year progressed when compared to a more normalized historical sales trends.

We believe that we will continue to experience top-line pressure, particularly in the first and second quarter. The quarterly comparisons become easier throughout the year, suggesting more opportunity in the back half of the year when compared to fiscal 2022 results. Product margins were down 50 basis points in fiscal 2022 after 6 consecutive years of growth. The majority of this year-over-year decrease was driven by our fourth quarter 2022 product margin, which was impacted by increased discounting as we work to right-size the inventory balance. For fiscal 2023, we believe the product margin will be tougher in the first half of the year as we work through aged inventory and the market remains promotional with retailers continuing to drive inventory in-line with current sales trends.

We believe that margins may stabilize and possibly expand in the back half of the year as inventories come in line and comparisons get easier. As Rick mentioned earlier, our model is sensitive to sales fluctuations, and we have seen deleverage of sales decline in fiscal 2022, while the opposite was true in 2021 when we experienced record sales and operating margin driven by meaningful leverage. We continue to diligently manage expenses as we navigate the current environment and are positioned to take advantage when conditions improve. We are currently planning our business assuming an annual effective tax rate of approximately 34%. We are planning to open approximately 23 new stores during the year, including approximately 8 stores in North America, 10 stores in Europe and 5 stores in Australia.

We expect capital expenditures for the full 2023 fiscal year to be between $21 million and $23 million compared to $26 million in 2022. And we expect that depreciation and amortization, excluding noncash lease expense, will be approximately $22 million. We are currently projecting our share count for the full year to be approximately 19.5 million diluted shares. And with that, operator, we’d like to open the call for your questions.

Q&A Session

Operator: Thank you. . Our first question comes from the line of Mitch Kummetz from Seaport.

Mitch Kummetz: Yes. Thanks for taking my questions. Chris, let me start with the outlook for the full year. I know you’re not giving formal guidance, but you talked about sales pressure in the first half and then easier comparisons as we go through the year. I mean, do you think sales or comps can be up for the year? Is that kind of how you’re planning it or flattish? Any thoughts around that?

Chris Work: Well, I think, Mitch, this is obviously a challenging question because we’re not going to talk about the full year. I think we have a range of scenarios, as you would expect. And I think when we look at the business, we are going to bifurcate it by the different components. And I think it’s probably very much bifurcated, the way we disclose it. When you kind of look at North America and specifically the domestic business, which makes up the majority of North America, there’s a different trend line than what we’re seeing international and also just based on where the business is. So I’ll start with North America. I mean as we looked at Q1, I’ll give more detail. We looked at kind of where we’ve been trending based on pre-pandemic levels.

And that was kind of our easiest way to look at, at least a period where we knew there was a different level of stability than what we’ve seen in the last couple of years with some highs and lows around closures and stimulus. And we plan the business sort of on that trendline because we’ve seen some levelization there. And I think that when we look across 2022, we did see sort of trailing numbers to those pre-pandemic levels. And so that gives us some thought that there’s more opportunity in the back half than the front half. I think we couple that with some of the macro environment discussion that’s out there plus the fact that if we look at this business, we can look back at ’08 and ’09, we can look back at 2015 and 2016 as tougher times in our performance.

We’ve led into the recession in ’08 and ’09. We came out much stronger out of the recession than what happened to us during the recession. So we’re looking at some of those periods anticipating there’ll be a recovery in our North America business. Internationally, I think as we look at the year, it is a different story. While there continues to be high levels of inflation and challenges in some of the international markets that we operate in, we also have a growing store base and a real growth concept. And I think you see that even in some of the quarter-to-date results that we talked about, where their sales numbers are compared to where we are in North America. So tying that back to the year, without giving specific guidance, what I would tell you is I think we have some modeling that would show what happens when comps are up and our sales rebound as we move through the year.

We have modeling that is more challenged than that. And I think that’s kind of the fine line that we have to walk here of kind of managing the investments, the expenses and making sure we’re preparing for the long-term with some of the short-term components that we’re experiencing right now.

Mitch Kummetz: Okay. Two more questions. I’ll ask them individually. Rick, you mentioned that one of the challenges in ’22 was skate hardgoods. I’m curious if you guys can say where hardgoods penetration ended up for the year and if you think that skate hardgoods is kind of nearing a bottom. It sounds like of the comp pressures quarter-to-date, it seems like for Q1 today, it had the least negative impact on the comps. I don’t know if that’s an indication that maybe it’s getting close to a bottom, finally.

Rick Brooks: Yes. I’ll just make a couple of quick comments. And Chris actually does have the numbers to share with you Mitch. Again, I think as we’ve discussed previously, skate hardgoods goes through cycles like this. And I think as much of like the last 3 years, this is really an unusual scenario, when skate hardgoods really began to uptick significantly after a multiyear down run in the late really from 2016, 2015 through 2019, we had that beginning in 2019, skate hardgoods took off everywhere. So we thought we’d have multi-year run, which is typically what happens. And then, of course, we had a pandemic year later, and I think what we had was all a huge amount of demand pull forward on skate hardgoods, and Chris can talk a little bit about the peak of the skate hardgoods business, too.

And I think it’s magnified somewhat for us, to mention from the point of view that I think we own a larger share of skate hardgoods market than we’ve ever owned across the markets we’re doing business in. And I just think there’s been a lot of consolidation over the last decade. So I think that will reflect some of what — where we got to in the peak and what it probably means for the downside. With that, let me let Chris share the numbers.

Chris Work: Sure. And Mitch, you know these pretty well. But just as we look at the last 10 years, we’ve kind of had two troughs of right around 10% of sales is kind of where skate hardgoods and snow, we report them together, but the lion’s share of what we’re doing in the hardgoods category is skate. So in 2018, as Rick mentioned, we were at 10% of sales; 2019, that grew to 13% of sales, and then the real peak in 2020 was at 19% of sales. Last year, in 2021, it came down to 16% of sales, and we’re actually just below 13% of sales right now. So you can see there kind of the impact of where we’re at. And as it relates to Q1, remarkably almost all categories were actually pretty consistent. So we did see drops there in hardgoods as we laid it out as well, but they were fairly consistent.

I think as we talk about sales and maybe even tying back to your earlier number and we look at this number being kind of just below 13%, this is where we see some opportunity, too, in the year. We think that the more larger company trends get better as we move through the year and specifically as we get into mid-summer, the same is true for skate hardgoods. So we are optimistic there’ll be some benefit there, not to mention our ability to keep launching new brands and try new things and find that next kind of hot trend key item or key brand.

Rick Brooks: And if I remember, Chris, the 19% was a peak, correct?

Chris Work: The 19% was an absolute peak. Yes. Yes.

Mitch Kummetz: Okay. And my last question has to do with other international, which continues to outpace the North America business in terms of its sales performance. I don’t know if you can comment on profitability, particularly on the Blue Tomato business. I feel like that business has gotten near profitability a couple of times and it sort of backed off. I don’t know where it is today and kind of what your expectations are in ’23.

Chris Work: Sure, sure. I’ll comment on both Europe and Australia because I do think there’s two things going on here. I think from a Europe perspective, as we said for a few years, our teams are just pounding it over there and really, really working hard to grow that brand after meaningful closures in COVID far more impactful than what we felt here domestically. 2022 has now brought a war in Eastern Europe, extreme pressure on energy prices, high levels of inflation, and most recently, a pretty challenging snow season as we looked at kind of Q4 and what that has meant to the business. So despite all that, as Rick mentioned in the prepared remarks, we’ve got sales of about €126 million, up 8.8% from last year. While this is below our budgeted amounts, really, we’ve got a lot of new stores there, and the snow impact in some of those other macro items that I’ve mentioned, it is showing growth with where we’re at.

So as it relates to the operating loss and your question about where we’re at, the miss in sales did impact our overall loss. We saw operating margin declining and losses widening from 2021, as we just really challenging to leverage our fixed costs and around occupancy and labor on a sales mix. So while we lost more than 2021, I am happy to report this is still in the millions of dollars. This is not in the tens of millions of dollars. The impact as you probably saw in our results had a negative impact on our tax rate, but maybe even more meaningful with the U.S. income being down and what the negative result in Europe meant against a smaller U.S. income. I think how we play this out long-term, obviously, we continue to believe in this investment in Europe.

I think we’ve seen some really positive things happened this year. All categories were up, with the exception of hardgoods, from a comparable growth perspective. At the same time, we did see some meaningful growth in Germany, which is one of our largest markets in Europe and will be obviously very impactful to the model. We’ve seen some really good results in our new countries like the Netherlands, Norway, Sweden and Finland, which is really good to see because this is much more of a market-by-market approach. And as we look at store growth in 2023, we talked about in the call we’re going to have 10 new stores is our plan. We’ve been in the mid-teens levels, and I think part of that is really just to really focus on the profitability component of where we’re at here and our teams are driven behind that.

So I think we’re in a really good spot in Europe. We’ve said for a while we think we’re one of the biggest lifestyle retailers there. We really have good relationships with brands and what’s happening there. So I do think good things are ahead for Europe. On the Australia side, as you called that out, Australia was definitely our number one performing country in regards to 2022, and we’re really proud of our team there. It’s small, but mighty, that’s for sure. But they’ve really done a great job growing stores, and we’ve seen really good customer engagement across all the new markets we’re opening there. And so we’re really proud of what our teams have done in Australia.

Mitch Kummetz: All right. Thanks guys. Good luck.

Rick Brooks: Thank you, Mitch.

Operator: Thank you. . Our next question comes from the line of Bill Dezellem from Tieton Capital.

Bill Dezellem: Thank you. Relative to potentially having customers trading down, within each category, are you seeing a greater unit decline in higher-priced items relative to the — just on a unit basis relative to the lower-priced items?

Rick Brooks: Again, I’ll ask Chris to make sure we get this right from the data, Bill. But generally, AUR through the year was flat to up. So the answer to your question would be, no, from that perspective, on an overall average base. Now what is unique about our business, and I’ll let Chris talk about the private-label component here in a moment as part of this discussion is, throughout the year, as we saw more of a challenge as consumers looked for value in their purchases, we definitely did a lot of promotions around bundling of our private-label product. And in those bundles, we would toss in marked down, we would give our teams the ability to toss in marked down branded product into the bundles, too, but it was predominantly private-label products.

And so four for $120, those kinds of combinations of things and you imagine the mix can be different at back-to-school versus holiday. So that, obviously, as you drive promotions like you’re driving some higher ticket items like that, too, across there and more units. So it’s a complicated analysis because, yes, some of that private label categories are lower than the branded categories, but we’re starting to create value through bundling of those products together. So it’s a complicated analysis. And I think maybe Chris will give you some color around where private label was for the year.

Chris Work: Yes. I’ll definitely touch on private label here. And as Rick mentioned, AURs, generally AUR have been up, units down. We have seen those units declines and obviously, that impacts your dollars per transaction. And we’ve seen an overall transaction drop is the biggest impact. And from a private label perspective, we talked about throughout the year kind of the growth we’ve had around all the different things that Rick mentioned, but we’re really excited. I mean, it’s been really successful, up almost 600 basis points to 18.4% year-over-year. So we’ve seen really good growth in private label. I think it kind of speaks to your question of sort of trading down and finding that value.

Bill Dezellem: Thank you, both.

Rick Brooks: Thank you.

Operator: Thank you. At this time, I would like to turn the conference back to Rick Brooks for closing remarks.

Rick Brooks: Thank you. Again, I just want to reiterate how much we appreciate everyone’s hard work across all our teams and our brand partners and our partners outside of our brand partners for supporting us and continue to drive our business in what’s been a really challenging environment. But also as we look forward to making those key long-term investments that are going to drive our business, we come out of this tougher macro environment. So I just really appreciate all the hard work and effort across all our teams and our brand partners, and we look forward to — we’re talking to you again in early May or early semi-June when we report first quarter results. Thank you, everyone.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.