Release Date: June 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Product margins improved by 130 basis points compared to last year due to lower markdown rates and improved initial markups.
- New marketing efforts are being tested to create greater connectivity with existing customers and attract new ones.
- Implementation of new merchandise planning and allocation tools, as well as warehouse management software, is expected to improve operational efficiencies.
- Despite challenges, the company continues to invest in long-term improvements, including new markdown optimization software and enhanced search engine optimization capabilities.
- Total inventories were down 3% compared to the same week last year, indicating better inventory management.
Negative Points
- Total net sales decreased by 6.3% compared to last year's first quarter.
- Comparable net sales, including e-commerce, decreased by 9.4%, with physical stores down 8.6% and e-commerce down 10.8%.
- Total SG&A expenses increased by $1.9 million, primarily due to higher non-cash store asset impairment charges and increased store payroll costs.
- Pretax loss was $19.6 million, or 16.9% of net sales, compared to $16.2 million, or 13.1% of net sales, last year.
- The company experienced complications with new system implementations, which slowed product replenishment to stores during May.
Q & A Highlights
Q: Are you seeing any positive trends in your stores, particularly on the junior side, and can you impact a more significant percentage of the inventory for the back half of the year?
A: We see positive signs from initiatives started in February, but it's too early to expand on them. You'll see more of the right trends in our inventory over time.
Q: How are you planning to bring in lapsed shoppers and younger customers? Will you drive marketing as things improve?
A: We started a new campaign a couple of months ago and are exploring the age of our target customer. Results will be more visible in the third and fourth quarters.
Q: Can you provide any color on the relative performance between men's and women's merchandise?
A: We believe we are in the right spot with the balance between men's and women's merchandise. Historically, we lead with men's, but this is evolving.
Q: Any updates on the CEO search and changes to the merchant team?
A: No changes are planned for either position at this time.
Q: Where do you stand on lease negotiations for 2024, and how many stores might you close this year?
A: We have two new stores to open and four to five known store closures towards the end of the year. We are still negotiating many leases.
Q: Can you estimate the earnings impact of the $18.4 million sales hit to the third quarter?
A: It's difficult to predict without knowing the back-to-school season's performance. The start of the back-to-school season will give us a better idea.
Q: How much of a sales benefit are you anticipating in the second quarter due to the shift?
A: Approximately a $15 million benefit to the second quarter due to the shift of back-to-school sales into the second quarter.
Q: Any notable trends in weekly sales cadence, particularly around Memorial Day?
A: We experienced some complications with new systems, causing fluctuations in May. However, we believe we are back on track and cautiously optimistic about future results.
Q: Was the warehouse management system a reason for the slightly heavier inventory per store?
A: Yes, partly due to timing differences and conscious efforts to offset potential risks from new system implementations. We are also bringing inventory earlier to avoid size shortages.
Q: What are you expecting for gross margins in the second quarter?
A: We expect gross margin improvement but cannot estimate the exact amount yet. We are working on various initiatives to improve margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
