Thank you for standing by. This is the conference operator. Welcome to Aritzia's First Quarter 2024 Earnings Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star then zero. I will now turn the conference over to Beth Reed, Vice President, Investor Relations. Please go ahead. Good afternoon, and thanks for joining Aritzia's first quarter fiscal 2024 earnings call. On the call today, I'm joined by Jennifer Wong, our Chief Executive Officer, and Todd Ingledew, our Chief Financial Officer. Following prepared remarks, there will be an opportunity to ask questions. Please note that remarks on this call may include our expectations, future plans, and intentions that may constitute forward-looking information. Such forward-looking information is based on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions, as well as the competitive environment. Actual results may differ materially from the conclusions, forecasts, or projections expressed by the forward-looking information. We would refer you to our most recently filed management's discussion and analysis and our annual information form, which include a summary of the material assumptions as well as risks and factors that could affect our future performance and our ability to deliver on the forward-looking information. Our earnings release, the related financial statements, and the MD&A are available on SEDAR, as well as the investor relations section of our website. I'll now turn the call over to Jennifer. Thanks, Beth. Good afternoon, everyone, and thank you for joining us today. As we discussed on our last call in early May, sales were trending well entering fiscal 2024, and while we're pleased with sales results in Q1, we started to see a deceleration in trends beginning the first week of June. We believe this reflects macroeconomic pressure on our consumer, as well as opportunities in the level of newness in our product assortment, which I will elaborate on shortly. For the first quarter of fiscal 2024, our results were in line with our expectations as we delivered sales of CAD 463 million, an increase of 13% on top of outstanding growth of 65% in the first quarter last year. Comparable sales grew 4.1% on top of 29% last year. This growth was primarily fueled by our business in the U.S., which grew 22%, building upon growth of 81% in Q1 last year. In Q1, we saw a client growth across all geographies and all channels. This was fueled by a strong double-digit increase in our U.S. active client base, building upon outstanding growth of more than 200% over the previous 3 years. Our retail net revenue increased 14% in Q1, driven by solid comparable sales growth in our boutiques, as well as the progress we've made on our real estate expansion strategy. We opened one new boutique during the quarter, our fifth boutique in the state of Texas, at Southlake Town Square. In Q2, we plan to open a new boutique in International Plaza in Tampa, which is a new market for us. We will also open our two newly expanded boutiques in Short Hills, New Jersey, and in Boston. The strong performance of our new and expanded boutiques continues to result in better than expected payback periods. eCommerce net revenue grew 13% in Q1, driven by our business in the U.S. and higher conversion rates overall. We made further progress toward delivering eCommerce 2.0, with multiple personalization tests showing increased conversion rates. We will continue to refine our personalization strategies to ensure that we're bringing a captivating and curated experience to our clients throughout their shopping journey online. In product, sales of both client favorites and new products contributed to our growth in Q1 as we introduced successful new styles across multiple key fabric programs. From an inventory perspective, our position continues to normalize. At the end of Q1, inventory was up 62% over last year, and we continue to expect growth to more closely align with sales trends by the end of Q2. Over the past two years, our focus was to keep up with the unprecedented demand. Managing through COVID, supply chain issues, and all that came with it, we were working to ensure we successfully met the surging demand for our client favorites and top-selling items. In hindsight, this did cause us to be overly focused on existing items and developing newness through variations on these items. While many of our key programs have continued to perform well, we've identified opportunities in the level of newness across our product assortment. We've identified that this, in addition to macro factors, contributed to the change in our sales trend beginning in the first week of June. The team has refocused on our product pipeline, and we will see the benefit of this in the product assortment for spring 2024. Going into fall 2023, we have planned to introduce some additional newness, and with a more stabilized supply chain, we are able to return to a more normal operating environment and open-to-buy. We are confident in our ability to reorder in season for fall/winter, and certainly, we will be in a stronger position for spring/summer 2024. Shifting to supply chain, our new distribution center in the Toronto area, which will serve as a fulfillment hub for Eastern Canada and the Eastern United States, remains on track to go live in late August. We've had very successful hiring events to fill more than 600 roles, and we began onboarding associates last week. We'll be moving our inventory from our third-party facility to the new building in the span of one week in August. We've undertaken a very detailed and methodical planning process to facilitate a smooth transition, during which we will leverage our existing fulfillment network. Turning to our strategic investments, our growing recognition has allowed us to continue attracting world-class talent. We continue to invest in key roles in product, real estate, and technology, while managing our labor count with discipline. We continue to make strategic investments with a long-term view, including scaling our infrastructure to match the unprecedented growth in fiscal 2022 and 2023, as well as building the groundwork for our future growth. In Q1, we completed the upgrade of our point-of-sale system in Canada, with the U.S. on track for completion this week, while laying the foundation for future enhancements such as mobile point-of-sale and additional omni-channel services. While we're thoughtfully investing in our future, we're also focused on optimizing economies of scale to more efficiently operate our current business and ensure scalability for our ongoing growth. We've identified a list of approximately 150 opportunities that we anticipate will deliver annual run rate cost efficiencies of approximately CAD 60 million beginning in the back half of the year. Turning to ESG, I'm proud to share that Aritzia was recognized in the Textile Exchange's 2022 Leaders Circle as among the top 10 companies in the fashion industry who made the greatest improvement in sourcing lower-impact materials. In June, we published our second annual ESG report, which outlines our community strategy, performance, and goals for the coming years. I will now pass the call over to Todd. Thanks, Jennifer, good afternoon, everyone. I'll first walk you through our results from the quarter, followed by our revised fiscal 2024 outlook, and finish with the setup for fiscal 2025. Starting with our results, we delivered another quarter of strong top-line performance, following two years of exceptional sales growth. In the first quarter of fiscal 2024, we generated net revenue of CAD 463 million, representing an increase of 13% from last year, on top of an increase of 65% in the first quarter of fiscal 2023, and 122% in the first quarter of fiscal 2022. Comparable sales grew 4.1% on top of 29% last year. Our growth continued to be driven by our business in the United States, where we delivered net revenue of $252 million in the first quarter, an increase of 22% on top of an increase of 81% in the first quarter last year. This momentum reflects our growing brand awareness and the contribution from our new boutiques. We also continued to grow our business in Canada, where net revenue increased 5% to CAD 211 million, on top of an increase of 52% last year. Net revenue in our retail channel was CAD 328 million, an increase of 14%. This was led by strong performance of our new and repositioned boutiques, particularly in the United States. In e-commerce, net revenue increased 13% to CAD 135 million, also primarily driven by growth in the United States, as well as higher conversion. We delivered gross profit of CAD 180 million, compared to CAD 181 million in the first quarter last year. Gross profit margin was in line with expectations at 38.9%, declining 540 basis points from 44.3% last year. As outlined, the decline was primarily due to the following headwinds: higher product costs, normalized markdowns, temporary warehousing costs, and pre-opening lease amortization for flagship boutiques and our new distribution center. These pressures were partially offset by lower expedited freight costs. SG&A expenses were CAD 153 million, up 28% from last year. SG&A, as a percent of net revenue, was slightly better than expectations at 33.2%, an increase of 370 basis points compared to 29.5% last year. The increase in SG&A expenses was primarily driven by investments in support office labor and retail wage inflation from the back half of last year, as well as distribution center project costs. Adjusted EBITDA in the first quarter was CAD 32 million, a decrease of 55% from last year. Adjusted EBITDA, as expected, was 6.8% of net revenue, compared to 17.1% last year. This margin decrease primarily reflects three things: ongoing inflationary pressure, multiple transitory costs, and the run rate from investments made in talent in the back half of last year. At the end of the first quarter, inventory was in line with our expectations at CAD 485 million, up 62% from the end of the first quarter last year. Our total committed inventory at the end of the first quarter, which includes inventory on hand, in transit, and on order with the factory, was flat with last year. We continue to expect inventory growth to more closely align with sales trends by the end of the second quarter and normalize markdowns in fiscal 2024 to be no greater than pre-pandemic levels. Our liquidity position remains strong at the end of the first quarter, with CAD 59 million in cash and 0 drawn on our CAD 175 million revolving credit facility. On May 26th, we acquired the remaining 25% ownership interest in CYC Design Corporation for CAD 15.4 million in subordinate voting shares. The completion of the purchase allows us to gain integration efficiencies earlier and will help support our growth plans for the Reigning Champ brand. I will now shift to our outlook. Beginning in the first week of June, we saw a deceleration in our traffic trends, which we believe is driven by macroeconomic pressure on our consumer. In addition, our focus over the last two years on ensuring we had depth in our client favorites to meet the exceptional demand, has created opportunities in the level of newness in our product assortment. As a result of the recent change in trends, net revenue in the second quarter is expected to be flat to slightly down from the prior year on top of two years of exceptional growth. 50% in the second quarter last year and 75% two years ago. Given the sales trends in the second quarter to date and the macro uncertainty for the remainder of the year, for fiscal 2024, we now expect net revenue in the range of CAD 2.25 billion-CAD 2.35 billion, representing growth of 2%-7% from fiscal 2023, including the 53rd week. This growth is on top of a 47% increase last year and 74% increase two years ago. We expect the lower annual revenue outlook to result in deleverage on fixed costs, both in gross profit and SG&A. We now expect gross profit margin for the year to decline by approximately 300 basis points compared to fiscal 2023. In the second quarter, we expect gross profit margin to decline by approximately 750 basis points. The additional 100 basis points of pressure compared to our prior outlook is solely a result of the deleverage on fixed costs from the revised revenue outlook. In the second quarter, gross profit margin is impacted by the same factors from the first quarter, with less offset from lapping of the elevated expedited freight costs in the second quarter compared to the first. We continue to expect the pressure in the first half of the year to dissipate in the back half of the year. The improvement will be driven by higher IMU due to selective price actions and lapping cost inflation from the second half of last year. In addition, temporary warehousing costs and pre-opening lease amortization are expected to subside as we open our new distribution center next month. We now expect SG&A as a% of net revenue for the year to increase by approximately 300 basis points compared to fiscal 2023. In the second quarter, we expect an increase of approximately 550 basis points compared to last year. Similar to gross profit margin, the additional pressure compared to our prior outlook is a result of the deleverage on fixed costs from the revised revenue outlook. In the second half of the year, we expect the SG&A pressure to also dissipate as distribution center project costs wind down and we begin to anniversary investments in support office labor and retail wage inflation. In addition to factors I already discussed, we expect that the improvement in the second half and into fiscal 2025 will be partially driven by one of our priorities for this year: optimizing economies of scale, which we expect to yield meaningful benefits. This is a cross-functional priority driven by the entire senior leadership team, with strong buy-in and momentum coming from all areas of the business. We have identified approximately 150 opportunities across the business, totaling estimated run rate annual savings of over CAD 60 million, with approximately 50% of the benefits expected to be realized this fiscal year. Categories of the opportunities include KPI improvements, process optimizations, vendor negotiations, and other improvements from scale. We expect capital expenditures for fiscal 2024 of approximately CAD 220 million, which primarily includes new and repositioned boutiques, our new distribution center, and support office expansion. Looking ahead to fiscal 2025, we expect top-line momentum to accelerate, with the majority of the approximately 15% of square footage growth for fiscal 2024 anticipated to occur in the fourth quarter, along with accelerated square footage growth of approximately 20% planned for fiscal 2025. We continue to expect meaningful adjusted EBITDA margin improvement in fiscal 2025, with 500 basis points of expansion driven by IMU improvements, cost efficiencies, subsiding transitory cost pressures, as well as leverage on fixed costs. To summarize, the investments made in the back half of fiscal 2023 and this year are to support our recent tremendous growth and to help drive our future growth. While we are lowering our fiscal 2024 outlook due to our revised revenue expectations and resulting fixed cost deleverage, we expect sales growth to accelerate next year from the planned higher new store openings in fiscal 2025. We also expect that the steps we're taking will ensure that our margins begin to normalize in the second half of this year, with further improvement in fiscal 2025. The expected revenue acceleration and margin expansion will drive significant earnings growth in the coming fiscal year. With that, I'll now turn the call back to Jennifer. Thanks, Todd. While we are seeing softer trends to the start of the second quarter, the fundamentals of our business remain unchanged. Aritzia has a proven history of disciplined business and financial management for almost 40 years. Over the years, Brian and I have successfully navigated cyclical challenges, driven by the resilience that has been built into our business model. Our strong balance sheet enables us to continue investing in building a sustainable platform for our future growth despite macro circumstances. We expect to emerge from fiscal 2024 in a position of strength. This and the Everyday Luxury marketing position, market position, and incredible strength of the Aritzia brand continue to give us confidence that we remain well positioned to capitalize on all of our growth opportunities. While we are carefully navigating the current macro environment, we are committed to staying disciplined in making further progress against our fiscal 2024 priorities, which I would put into four buckets. These priorities include, 1, spaces. We're completing the build-out of key spaces, including our new and expanded boutiques, flagship locations, and Toronto area distribution center. As a reminder, we expect sales growth to accelerate as our square footage growth increases from approximately 15% this year, which is heavily concentrated late in the second half, to 20% in fiscal 2025. 2, finish what we started. We're finishing key projects that have been in progress for some time, such as our point-of-sale upgrade and rollout of omni-channel services. This continues to build on our foundation for growth and allows us to move on to new initiatives. 3, catch up. We're catching our infrastructure up to our recent explosive growth. This includes key areas such as technology and store development, which are critical for effectively running our new baseline business and enabling our growth. Fourth, economies of scale. We're optimizing our economies of scale to generate cost efficiencies across all areas of the business. In addition to subsiding transitory cost pressures and IMU improvement, we expect this to drive margin improvement beginning in the back half of the year. As mentioned, we're taking action on the opportunities that we've identified in our product development pipeline. As we resume to a more normal operating environment, we are confident in our ability to deliver Everyday Luxury to more and more new customers and build loyalty with our ever-growing active client base. In closing, all of us here at Aritzia remain very excited about the long runway of opportunities in front of us. All of the initiatives we're prioritizing this year are to enable our long-term strategic growth plan. We're continuing to execute on the three levers that we believe will propel us toward our fiscal 2027 targets: geographic expansion in the US, new client acquisition through increased brand awareness, and eCommerce growth fueled by eCommerce 2.0. I'm extremely proud of our brand strength, design and manufacturing capabilities, real estate portfolio, distribution center network, and most importantly, our world-class team of people. We are confident that our growth strategies and targeted investments will help enable us to maximize sales and create sustainable long-term value. With that, operator, let's please open up the line for questions. We will now begin the question-and-answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. Please limit yourself to one question and a related follow-up before getting back in the queue. Our first question comes from Irene Nattel with RBC Capital Markets. Please go ahead. Thanks, good afternoon. Kind of trying to wrap myself around all of the information that you provided. Can we start, please, with the demand side of the equation? Can you talk about where you are seeing, like, how this weakness in revenues is manifesting? Explain what you mean by the whole newness commentary, what gives you the confidence that you know, in the outlook for the balance of the year? Hi, Irene. Actually, I'm going to start with external first, because, you know, we made a point of sharing what we're seeing internally, but I do want to emphasize the external. What we're seeing in the trend is a macroeconomic pressure on our consumer. That goes without saying. We didn't say much about it because I think more people have said more about it, and there are smarter people out there about the macroeconomic environment than us. That, for sure, is putting pressure on our consumer. You know, the reason why we say that is you know, we're seeing this in a very broad-based way. It's not limited to a geography, it's not limited to a channel. It's across all geographies, including regions. It's across both channels, and it's, as I said, very broad-based. Whenever we're looking at our business, we're always at what we can control, of course. When we look internal, you know, our whole basis for building a successful business and continuing as a successful business is about continuous improvement. We always you know, reflect inwardly, and when we reflect inwardly and look internal, the point we wanted to share on this call today was about opportunities and product. I want to back up, and I want to say we're lapsing 2 years of unprecedented high growth. Last year, we had 50% growth, almost 50% growth. I think it was 47%, exactly, and the year before that, almost 75%. As I tried to explain in the prepared remarks, we were spending a lot of focus on making sure that we were, A, you know, at first it was sort of keeping up with the demand, and then it became meeting the demand, and then it was about fueling the demand. As I said, in hindsight, when we sort of step back, when we're not in the sort of a hectic situation where we're constantly pivoting, we reflect back, and we see, okay, well, the newness we developed was around, you know, variations of these items because they were performing well. Normally, you know, there's more of a balance in sort of in our product development, innovation, and product development pipeline. You know, what we're doing now is we've already refocused the team, and we're kind of getting back to normal despite sort of other macro things going on. We've been there before. We've dealt with that before, but certainly coming out of the COVID and supply chain disruptions, we're coming back to normal, and we're getting back to our more normal courses operations. We've identified that increasing the level of newness in our product and making sure that as our client favorites go through a fashion cycle, that we continually have a pipeline of new product. Okay. Just taking what you just said, Jennifer, making sure that we all understand that. What I'm hearing where you had new products, they sold better than where you had variations on some of your proven favorites through newness and color? Well, again, I want to reiterate, we are very, very comfortable with where we're positioned in our client favorites, and really the focus is just on developing new product. You know, our client favorites, as they are performing well. I think I mentioned we're still performing well in many of our programs. It's just an additional opportunity in developing more new. Okay. Follow-up, follow-up question. You opened 1 store in Q1. What was the demand like in that store relative to the existing store base? Any differences there? This is the South Lake store? The South Lake store. Yeah. is performing. Yeah, the South Lake. I think we were talking about this yesterday. We actually revised our plan on upwardly on that store. It's performing exactly how we planned it. I think maybe for the year it might perform slightly better. Thank you. Thank you. Good. Thank you. The next question comes from Martin Landry with Stifel. Please go ahead. Hi, good afternoon. My question is for Todd. Todd, you alluded to fiscal 2025, you touched on an EBITDA and margin expansion. I think you mentioned 500 basis points of margin expansion that you would expect in fiscal 2025. With the decrease of 600 basis points this year, that would bring you to around 15% EBITDA margins for next year, which seems to be a little lower than your 16% that you were talking about last quarter. Just wondering, trying to understand a little bit, what has changed in the long-term outlook that prevents you from attaining your 16% target that you laid out previously? Thanks, Martin. The key change, obviously, is the revenue decline for this year and then the corresponding revenue position next year. Hitting the 16 will be dependent on where the revenue finishes next year. However, as I said, we are extremely confident in delivering the 500 basis points of improvement, which is driven by three things. 150 basis points for my new improvements from select pricing actions and the product cost savings, as well as 150-200 basis points from our optimization of economies of scale initiative. Again, there's approximately 150 opportunities identified there, with projected run rate savings of 60 million CAD, that'll benefit both gross profit and SG&A. We have the transitory costs, 125 basis points from transitory costs subsiding, and that's primarily the temporary warehousing costs that we're experiencing right now, as well as the pre-opening lease amortization pressure subsiding. We do expect as well, benefit from leverage on fixed costs as our revenue grows. Again, you know, while we're, we may not be hitting the 16, depending on the revenue position, we are confident that, you know, the investments we're making to spur our growth, we'll still be in a position to make those, and that we will be able to regain 500 basis points of adjusted EBITDA margin in fiscal 2025. Okay. Just to follow up to that, wondering what are the implications longer term for your fiscal 2027 targets that you established at the Investor Day, you know, given that this year is a little more difficult than expected, you know, does that put your fiscal 2027 targets at risk? No, it does not. You know, we finished last year ahead of where we were expecting, and we will be well-positioned from our range that we've provided to achieve the revenue range, to still achieve our range of CAD 3.5 billion-CAD 3.8 billion by FY2027. We're, I've just finished describing, you know, we're confident that we'll be regrowing the EBITDA margin as well. Okay, thank you. The next question comes from Mark Petrie with CIBC. Please go ahead. Hey, good afternoon. I wanted to just follow up first on the, on the revenue commentary and specifically the opportunity for newness. I guess I just want to clarify, is it, is it that you think you didn't have enough new product to stimulate traffic or demand? Or is it that what you did have did not perform as well as you had expected it to? Specifically, our new product did perform. What we're talking about is the level of newness, specifically. Okay. list of common questions and answers about the Aritzia NCIB. **What is an NCIB?** An NCIB, or Normal Course Issuer Bid, is a program that allows a company to repurchase its own shares from the open market. This is often done to reduce the number of outstanding shares, which can increase earnings per share and potentially boost shareholder value. **Why would Aritzia implement an NCIB?** Aritzia might implement an NCIB for several reasons: * **Return Capital to Shareholders:** It's a way to return excess capital to shareholders, especially if the company believes its shares are undervalued. * **Offset Dilution:** If Aritzia has stock option plans or other equity compensation programs, an NCIB can help offset the dilutive effect of new shares being issued. * **Improve Financial Metrics:** Reducing the number of outstanding shares can improve per-share metrics like earnings per share (EPS) and return on equity (ROE). * **Signal Confidence:** An NCIB can signal to the market that the company's management believes its stock is a good investment. **How does an NCIB work for Aritzia?** Under an NCIB, Aritzia would typically announce a maximum number of shares it intends to repurchase and a period over which it will do so (usually up to one year). The actual repurchases are made through the stock exchange at prevailing market prices, subject to certain daily volume limitations and other regulatory rules. **What are the key terms of Aritzia' Perfect. Okay, great. Thank you for that. My question is just around the price increases that you guys have sort of planned for fall/winter. I think maybe some have already gone into the market, but maybe you could just confirm that. Would welcome any comment that you could share about the reaction you've seen. You know, more broadly speaking, does this slowdown that you're seeing, does that affect your plans or how you think about passing through those price increases? Thanks. Well, you're right. Some of the pricing has taken effect now. The majority of the pricing action that we've discussed so far will occur in the fall. I suppose to answer your question on how confident we are in our approach, I just want to Well, actually, what I'll tell you is I got a FaceTime call this morning from our head of creative product, and she showed me, she hung up in the screen there, of an item that we have taken some pricing action on. She told me that, "Well, here's an item we've taken some pricing action on. Just, you know, wanted to tell you how excited we are, because after we increased the prices, the sales went up. She was very clear to emphasize the sales went up, not because we increased the prices, but because we sold actually more units. The way we approach our pricing, which is on an item-by-item basis, and we take into account all kinds of things, from what the competitive set's doing, to what our actual cost base is, to, like, whether we've improved the product to, you know, always ensuring that there's value for the customer, and we literally look at it item by item. I think the way we've approached our pricing by being very selective and very strategic, gives me confidence that what we're doing makes a lot of sense. At the end of the day, our pricing action really is only in the low single digits. It's not a broad-based sort of price increase. Yep, understood. Okay, thanks for all the comments, and, I'll pass the line. Thank you. The next question comes from Mauricio Serna with UBS. Please go ahead. Great. Good afternoon, and thanks for taking my question. Maybe if you could elaborate a little bit more on, you know, on the quarterly cadence, you know, thinking about going back to May, when you provided the outlook for the first quarter, you know, how things changed in May, and then in June, I know you talked about deceleration. Maybe if you could provide a little bit more detail on whether that came, like, in the form of traffic, you know, transaction, basket size, anything that you could provide on that would be very helpful. Thank you. Yeah, when we spoke with spoke with you in early May, you know, we were seeing a healthy start to the quarter and to the fiscal year, as I said. Really, where the top line trend started to change was in early June. You know, some data points on what we're seeing is that, you know, for instance, our existing clients, who are leading our sales right now and demand, they're just simply buying less. I would say that the pace of our new client growth is decelerated, which we would have expected. These are some of the indicators that we're seeing that we that we're seeing just more general, which leads us to believe that there is a macroeconomic pressure on the consumer in general. Got it. If I may, just a quick follow-up on, I guess, like, the implied revenue growth for the second half. I mean, I think it can range from, like roughly 1%-8%, you know, depending on where you're modeling for the year. Just trying to understand, like, what kind of implied comp sales are you expecting, like, this quarter? What kind of improvement are you expecting on second half because of the newness? I mean, I guess this is more of a fiscal year 2025 story, but trying to understand if there's any improvement that we should see in comp sales in the second half. Yeah, thanks. I'll take that one. Our growth that we're seeing today is effectively flat, our overall growth, with slightly negative comps. Our range for our outlook contemplates negative mid-single-digit comps to slightly positive comps. Basically, you know, the way we're looking at it is we will have the benefit in the back half of the additional week, which has to be taken into account. That's part of why the growth is 2%-7% for the year. We have new stores that are, you know, lapping and not part of the comp. We have put in, effectively, the trends we're seeing today with slight downside and slight upside from those trends in our range. That's how we've modeled it out. Got it. Very helpful. Thank you so much, and goodbye. The next question comes from Dylan Carden with William Blair. Please go ahead. Thank you. Yeah, I wanted to revisit a question I asked on the last call, in and around kind of these higher inventory balances you've been carrying and the fact that you'd kind of pulled forward, you know, 100% of the order, as opposed to historically closer to 75%. I'm just curious if this sort of lack of newness, potentially lack of flexibility in that assortment, you know, is part of what you're seeing as far as, you know, apart from the macro, I guess, and consumer behavior around the offering. As I mentioned, we're very comfortable in the depth of our inventory around client favorites, for sure. I mean, that's just sort of part of our model, where we don't usually we don't ever take a position on anything that we know isn't what we've called a client favorite. I think what I'm pointing out here is just enhancing our overall assortment with making sure we return a focus to developing new product. Okay. Then on the inventory, you know, up sort of over 60%, not too much of an improvement from April. You know, there's been some thought here and kind of watching your promotions that you've ticked up or at least pulled forward some promotion here in June. You know, the path to get back to more normalized growth by the end of August, does that require kind of an elevated promotional cadence, you know, for the commentary around sort of by the full year, you'll be at historical levels? You know, does that allow for, I guess, more in the immediate term? When you say promotional, do you mean markdown? Markup, depth, and breadth, or however you want to kind of categorize it. I'll let Todd answer that. Yeah. Our, our markdowns are obviously normalizing, as we've said, compared to the prior year, but they still remain below pre-pandemic levels. You know, I think the clearest indication of the fact that we're trending towards, you know, lower inventory levels is the fact that our total committed inventory, which again, you know, represents on-hand, in-transit, as well as the on-order, is now flat with last year. You know, it's only a matter of time as we work through receipts that we will become flat with the prior year. You know, also for fall/winter, we've returned to our typical buying strategy of leaving room for open-to-buy in season, and, you know, we can adjust that in season to ensure that we have the right level of inventory in frankly, the right product. We're still expecting that our year-over-year growth will more closely align with sales trends by the end of the second quarter. It doesn't include elevated promotional cadence. Although, you know, we will be selling through at a higher markdown rate than last year due to the low levels last year. Understood. Thank you. The next question comes from Brian Morrison with TD Securities. Please go ahead. Thanks very much. Good afternoon. I guess I wanna understand that a little bit further, Todd. You talked about some examples of success with your initial IMUs, but your updated margin reflects simply deleverage on fixed costs. I'm a little bit confused as to why you're so confident that markdowns will not be greater than normalized, citing the lower sales forecast, and then your ability to put through IMUs in general, which is a big bucket to your fiscal 2025 guide, you know, how that can be implemented widespread. Can you just elaborate on that, please? Yeah. The fiscal 2025... I'll start with the end of that. The fiscal 2025 portion is driven by two things, and it's primarily the second, frankly, which is improvements in the product costs as opposed to pricing. That's where we're expecting to get the majority of the benefit on the IMU improvements next year. It's not from pricing increases. As far as our, you know, our cadence of promotion, the answer is exactly as I said before, that we're expecting more normalized markdowns as we've communicated, and we haven't added any additional pressure into our guidance. The increase from CAD 650 that we were expecting in Q2 to CAD 750 that we're now expecting, is all driven by deleverage from the lower revenue outlook. Okay. With slower sales, you don't think that you'll need greater clearance or greater markdowns? No. I guess another question. On the updated guidance, when I take a look at it looks like margin decrements are basically in the 50% range. Is that a good rule of thumb to think about going forward? Every CAD 1 will be a plus or minus CAD 0.50 to their EBITDA contribution? I don't know. I'd have to look at that and get back to you. Last question: With the current balance sheet strength and obvious pressure that will be on the share price, are you thinking of being a little bit more active with your NCIB? Yeah, since the commencement of the latest NCIB in January, we've actually repurchased 282,000 shares for a total outlay of CAD 10 million. You know, I think we've talked about this before, but we do have meaningful investments in infrastructure to support our growth this year, you know, CAD 220 million in CapEx. We continue to target repurchases of approximately 1 million shares, which is what will offset our option exercising. You know, as we grow our cash balance through the back half of the year, we may look at repurchasing opportunistically at a slightly elevated pace from what we have been. Thank you very much. The next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead. Thank you. Good evening, good afternoon, Just a couple of questions. First one is, are $60 million- I'm sorry, it's... We can't hear you clearly. Oh. Your question is not discernible. Stephen, if you can hear us, we're going to have you disconnect and dial back in, and the operator will put you back in the queue. I think your cell phone connection was spotty. Operator, can we move on to the next caller? The next question comes from Luke Hannan with Canaccord Genuity. Please go ahead. Thanks. Good afternoon. I just wanted to go back to the level of newness commentary that's gone on throughout the call here. Jen, maybe it might be helpful if you could provide context on... I get that there was less newness in the assortment now versus maybe where it was pre-pandemic. Can you give any color or commentary as to what that magnitude is now and when you might plan to, or what the timeline would be to get back to what your maybe target level of newness would be down the road? Well, I'll reiterate that our product development life cycle is such that, you know, as I said, that, you know, we're confident that spring, summer 2024 will benefit from this course correction for certain. As we enter into fall, which is already been in development, we have already planned to introduce additional newness, of course. Really, the benefits of what we're talking about now and refocusing and correcting for it, having identified it, and, like, firmly having a handle on it, will show up in spring, summer 2024. Okay. A quick one on Reigning Champ. Todd, I think you had mentioned that now that you've acquired the remaining stake of that business, you have the opportunity to realize some integration benefits that previously you weren't able to. Just curious to know if you can share what exactly you anticipate those integration benefits to be? It's really all related to the technology integration, where, you know, keeping Reigning Champ as a separate entity created just an insurmountable task, or maybe one that wasn't worth the effort in the time period, as better said, from a technology perspective, to keep two separate entities, but integrate them within to our technology platform. By purchasing, we basically pulled forward the purchase, although we've left the incentive components still in place. The actual underlying components of the deal haven't changed. We just now own 100% of it, which allows us to fully integrate their business within ours, and in a much more streamlined fashion than it would have been if we had to keep them separate. Understood. Thank you. The next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead. Thank you. Sorry about that. Hopefully, this reception is better. My question was just around the CAD 60 million in cost savings opportunities that you identified. Is that incrementally new from, you know, when we talked after Q4? We had discussed benefits from the initiative at the time, and where it was more around the basis points for the FY2025 period. The number has grown since then, and that's why we've brought in the potential benefit from it to the 150 to 200 basis points. Yeah, it's been, as I was saying, extremely well received, and we put a cross-functional task force together that has really uncovered a number of opportunities for process improvement that are all sort of centered around our scale and gaining efficiencies from the scale that we now have. Yeah, it's actually ongoing. The number is still growing, but that's where we're at today. Yeah. Okay. That's, that's helpful. Thanks, Todd. Just, just curious if there have been any noticeable changes in traffic trends from when you identified it first sort of decelerating the first week of June. Is there anything noticeable that's been different from that since over the last, you know, call it five or six weeks? No, I wouldn't say that there's anything noticeably different from that first indicator at the beginning of June. It's been consistent. Okay. That's, that's great. Thank you. The next question comes from Alice Xiao with Bank of America. Please go ahead. Hi, thanks for taking our question. Two quick ones. One is just a follow-up on the two prior questions on the promotional levels. How much markdown headwind, if any, is currently embedded in your second half guidance? A moderate headwind within our second half guidance. a little smaller than the 200 basis points in the first half, I'm guessing? Yes. Is that right to think about it? Yeah. Okay. Secondly, how are you thinking about the current competitor landscape? A lot of brands, you know, like to make dupes. Do you think brands like Abercrombie are potentially capturing a trade-down customer by using a similar aesthetic and lower average price points? If so, are you doing anything to try to retain that customer, you know, bring them back, keep them. Thank you. Alice, I'm glad you asked that question. I was strongly advised not to bring up that whole topic, I will not mention any names. What I will tell you, as an additional opportunity that we've identified internally, is we will promote and market our product and our items and our client favorites in a way that we are known for our exceptional product. As I've talked about many times before, the quality of our product, whether it's the depth of design, quality of fabrics and materials that we use, the quality of the construction, and of course, the exceptional fit. I think our clothes fit better than any competitors out there. Offering all of this at an attainable price point, I can almost guarantee you nobody can come close. What I really wanted to say is people will often imitate you, but they'll never duplicate you. I said it. Sorry, everybody, I said that. I think, you know, if there's an additional opportunity that we've identified, is we're gonna take a much stronger approach on making sure we're known for our products. I'm gonna make sure of that. This concludes the question and answer session. I will now turn the call back over to Beth Reed for any closing remarks. Thanks again to everyone for joining us this afternoon. We're, of course, available after the call to answer further questions, and we look forward to providing another update at the end of next quarter. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.