Good morning, and thank you for joining us for this next session of the Goldman Sachs Global Retailing Conference. My name is Brooke Roach, and I cover the apparel and softlines brands here at Goldman Sachs. It is my pleasure to introduce our next fireside chat with Carter's. Here today with me are Mike Casey, Chairman and CEO, Brian Lynch, President and COO, and Richard Westenberger, EVP and CFO. Welcome! Thank you. Good to be here. Thanks. Mike, would you like to kick it off with a few opening comments? I'll be very brief, just for those who might be a little less familiar with Carter's. We are the largest branded marketer of kids' apparel in North America. We own two of the best-known brand names in kids apparel, Carter's and OshKosh B'gosh. These are two brands that have served the needs of multiple generations of families with young children for more than 100 years. We own the largest share of a $35 billion market. Got the number one market share in the United States, Canada, and Mexico, and a growing share in Brazil. We sell essential core products for families with young children: bodysuits, washcloths, towels, bibs, blankets, blanket sleepers, pajamas, all the must-have products that families with young children buy with great frequency in those early days, months, and years of life. We are the largest supplier of young kids apparel to the largest retailers in North America. We do business with Target, Walmart, Amazon, Kohl's, Penney's, Macy's, T.J. Maxx, Marshalls, Ross Stores. Anybody who sells kids apparel in a meaningful way, you'll likely see a strong presentation of our brands. Over the past 30 years, we've evolved from what was largely a wholesale distributor to a specialty retailer. So today, we are the largest specialty retailer of young kids apparel in North America. We directly operate over 1,000 stores in North America. Our brands are sold in over 90 countries, largely through wholesale relationships. We have about over 40 wholesale partners, and we've got about 20,000 points of distribution of our brands throughout the world. Last year, together with our wholesale customers, the online purchases of our brands were over $1.2 billion. Prior to the pandemic, we had 31 consecutive years of sales growth through 2019. Long track record of growth, historically, a top quartile, double-digit operating margin business. Long history of strong operating cash flow. That's what attracted three different private equity firms to acquire Carter's over the past 30 years. Also, more than doubled their investment in Carter's. Then we've been public about 20 years ago. We went public. This next month will be our anniversary of being a publicly traded company. Over the past 10 years, we've returned nearly $3 billion of excess cash flow to our shareholders through dividends and through share repurchases. 2020, like many companies, our performance, the winning streak, the 31-year track record of growth was disrupted by the pandemic, but we retained a higher percentage of our profitability than most in our peer group. We kept selling our brands through the essential retailers: Target, Walmart, and Amazon. Those are three of our largest customers. Then in 2021, we came roaring back. Did about $3.4 billion in sales, had record profitability, over $500 million in EBIT, with a record operating margin, about 14.5% operating margin. So 2021 was a banner year for us, strong recovery from the worst of the pandemic. Like a lot of companies, we thought 2022 would be another banner year. First half of 2022, most of our wholesale customers were saying, "It's gonna be another good year. Let's get all that product in. Let's get ahead of the port delays that we're many companies were still experiencing." And so the year started off strong. 2022, we saw high single-digit comps in our retail business. Again, good demand from our wholesale customers, but then things started to change. So by late spring, it became clear that inventory was inflation was not going to be transitory. And all of a sudden, in the second half of last year, our wholesale customers started to pull back. It was a period of inventory correction in the second half of last year. That's why we're comp- that's what we're comping up against in the second half of this year. So in 2022, our sales and earnings were about 90% of the historic year, the banner year in 2021. And then in 2023, we planned the year down. We just felt as though the sales and earnings would be lower, particularly in the first half of the year. And again, first half of last year, we were built, most of our wholesale customers were building inventories, and we were comping up against that in the first half of this year. So we planned the business down, particularly in the first half. We're expecting an improving trend in the second half of this year. Last earnings call and the tail end of July, we were seeing a meaningful improvement in the trend in our business, particularly in our retail business. Whereas comps were down double digit in the first half, we're expecting the comps to be much better than that in the second half. Drivers of the improving trend in our business, inflation is moderating. Consumers, I think a year ago, had the historic shock of inflation and started to pull back. But I think a year later, meaning now, I think the arrow is pointing up. I think they've adjusted to the new normal. They recognize interest rates aren't gonna be around 3%... Mortgage rates aren't gonna be around 3%. They're gonna be higher. They know the gas prices are gonna be higher for the time being. I think if you saw traffic in Atlanta, nobody's driving less in Atlanta, even though gas prices have doubled. So I think everybody's adjusting to the new normal. Inventories at wholesale are leaner. So I think the destocking efforts in the second half of last year were very successful. Most of our wholesale customers entered 2023 leaner on inventories. We saw starting in the Q4 last year, they were saying: "Hey, if you got the product, bring it in. We're a little light. Bring the new product in, because anytime you bring new product in, it gets the register ringing." We saw earlier than expected demand in the Q1 and in the Q2, so hopefully, that's a trend that continues. You'd rather have your wholesale customers running lean in inventory than backing up with inventory. So we actually think inventories are better going into the second half of this year relative to the second half of last year, so that should be some upside to the performance. On-time deliveries from Asia are about as good as they've ever been. Certainly back to the pre-pandemic level. So we've talked about what's gonna drive the performance. The fact that the product is here when it's expected to be here, the fall product for this year arrived on time. And the July earnings call, we just said, surprisingly, even though it's been unusually warm in many parts of the country, fall selling was off to a particularly good start. So we were encouraged by the fact that the product's here, it's on time, it's 100% complete, and here when the consumer needs it. So we're with leaner inventories, what we've seen during the pandemics with leaner inventories, the sell-throughs are better, price realization is better, margins have been better. So the quality of the business, I think is much better. Manufacturing capacity in Asia is opening up. So with the world pulling back with inflation, manufacturing capacity is opening up. The number one thing that drives product cost is capacity. If the capacity is tight, the product costs go up. If capacity is open and they have excess capacity, they're more likely to negotiate more favorably on our behalf and meet our margin objectives. So we're expecting in the second half this year, lower product costs, meaningfully lower ocean freight rates. So we're expecting margin expansion, continuing into the second half of this year. And then for next year, given the strength of our brands, the broad market distribution, favorable demographics, meaning, it was a 40-year high in weddings last year. Following the worst of the pandemic, where many people delayed getting married, there was a 40-year high in weddings last year. My family went to five different weddings. I don't know about you, but I think that was a common experience for a lot of people, the number of weddings you got invited to. And so that's good. Usually, family formation follows those weddings. Birth rates have been stable, thankfully. After a nearly 14-year decline in births in the United States, following the Great Recession in 2008, births stabilized in 2021. There were forecasts there'd be 500,000 fewer children born in 2021 following the pandemic. The experts were wrong. Births actually stabilized. It was an interesting change in human behavior, that following the pandemic, births stabilized and actually remained consistent in 2022. So we're encouraged by what we're seeing in birth trends. 60% of what we do for a living is baby apparel. It's a high-margin business, and it's a less discretionary purchase, so we're encouraged by what we're seeing in birth trends. Signet apparently came out, the jewelers came out with some indication that engagement ring sales are up, so they've seen a favorable trend in engagements. That's encouraging. Marriages usually follow engagements, and births usually follow the marriage. That doesn't always go that way, but just that. That's... Those are -- we're looking -- I think there is gonna be a post-pandemic recovery. We saw it in 2021. You know, people had access to the vaccines, they got rid of the mask, they started to travel again, reconnect with family and friends, and then it was disrupted. That wonderful recovery was disrupted by historic inflation. But I think the consumers are adjusting to the world we live in, and I think they'll be... I I think there's reasons to be optimistic going forward for the country, for generally speaking, and hopefully that's good for our business as well. So hopefully that brief overview was helpful to you. So we're expecting to return to growth. We give, given what we're seeing in our business, expect to return to growth in both sales and profitability. Making some forward-looking statements this morning, there are risks inherent in our business, and those risks are disclosed in our SEC filings. With those opening remarks, we're happy to take some questions from you. Excellent. Well, thank you for those opening remarks. Pleasure. There's a lot there that I'd love to dig into, but maybe we can start with a little bit more on current trends. The children's wear market has historically been very stable, has recently been volatile. You've talked a little bit more constructively on that in late July, when you reported results. Can you talk a little bit more about what you're seeing in kids and baby wear trends, and any thoughts on how we're navigating back to school? In terms of the market generally, in kids apparel? I think it's been fairly resilient, particularly in baby, and most of what we do for a living is in baby apparel. I think it's been fairly resilient. The market, at least in the United States, is off about 3%, and baby continues to be the strongest part of our business. So if you think about our product categories, generally, it's baby, sleepwear, playwear. The younger age segments are doing well, and I'd say baby's been the more consistent performing part. Typically, baby apparel is the first thing you buy when you find out a child's on the way, either as a gift for someone, a friend, family. If it's your child on the way, you're buying that product months in advance of the child arriving. And then, given the rapid growth in that child in those early months, years of life, it's a very frequent purchase. Play or sleepwear business has been good. It was particularly good during the worst of the pandemic as kids remotely learning, kids were hanging out in their pajamas more. So we're kinda comping up against those kinda disruption to family lives of families with young children. Back to school, I would say we don't have a big back-to-school business because we skew younger on the age range. But I would say what we saw in terms of fall selling as kids headed back to school, the performance was good. We were surprised how good it was, given how hot it was. Well, you know, most kids go back to school now in the fall with what they were wearing in the spring. I'd say, generally speaking, that we're seeing an improving trend in the business. That's great. One of the things that, you know, a lot of folks think about when we think about a tough macro is what's happening with pricing, and affordability has always been a key focus area for your business. What does the consumer looking for value mean for Carter's and your strategy today, and how are you thinking about the outlook for pricing and promotions? So our average price point to the consumer is about $11 and change, and that includes a lot. That's inclusive of many multi-packs, five pack bodysuits, four pack PJs, a number of multi-packs, three piece playwear sets. So I look at the value we offer. Carter's, Carter's and OshKosh, but particularly Carter's, has always been known for great value. We generally try to stay within a buck or two of private label. Private label is our competition, and the major retailers leaned into private label in a big way when the Great Recession hit back in 2008. They all leaned into private label, cut out a lot of, you know, lesser-known brand names, but they leaned into private label, and they leaned into Carter's. Because Carter's is the best-selling brand in young kids apparel. Consumer expects to see the best-selling national brand when they're shopping for kids apparel, and they've got a good basis of comparison with private label. So we've even during this kind of historically disruptive time in the world, we try to always have tried to stay within a buck or two of private label. And that strategy has worked for us for a long period of time. We have a high relative share to the private label. Our share of the market's around 11%, mostly Carter's. The highest private label brand has around 6% share. So we have almost double the share of the nearest private label brand. Very good competition, beautiful product offerings, but the consumer expects to see both when they're shopping. We've taken the pricing up since the pre-pandemic period, largely through inventory management. You know, fewer, better SKUs, higher margin SKUs, big SKU rationalization. When the pandemic hit, we closed a lot of low-margin stores. We walked back a lot of brand-erosive, margin-erosive promotions during the pandemic, and we got skinnier on inventory. That's the largest purchase we make, and if you're leaner on inventory, you're seeing better sell-throughs, better price realization, better margin. Going into 2024, right now, given the fact that product costs are lower, ocean freight rates are significantly lower, and we've done some other things to stay lean on the organization, we don't see much of a need to continue to raise prices going into 2024. We're actually more in a mode. Are there some spots where we could selectively adjust pricing to improve the competitiveness? I would say that's more the exception than the rule. We have visibility into the first half of next year. We've sold in spring and summer. For next year, we saw good demand for spring and summer for next year for wholesale, and we're planning growth. And those prices, I would say, are comparable to slightly lower, given the fact we're seeing lower product costs. We're planning margin expansion going into the first half of next year. You brought up wholesale, so maybe we can transition there. Sure. There's been a lot of conversation about several quarters, about what's happening in inventory in that channel from a destocking perspective. Can you provide an update on what you're seeing on sell-in versus sell-through today? How is that trending by key customer types between mass and department stores? Sure. Right. That's, yeah, I think the, I guess, quote, "destocking," I feel like most of that's kind of behind us now. I think, you know, folks got in trouble last year with inventory when inflation hit hard, and it started last summer, that folks not only had too much patio furniture, but they felt they had too much apparel as well. So there was, you know, some cancellations. There was destocking last year, and then the supply chains weren't performing at a high level, so product was coming in later than folks had requested it, and they had too much inventory to begin with. So that was kind of a situation that occurred end of Q2, Q3, and early Q4 last year. I think since we got to. They ordered later this year based on projections that they had last year. So, I think that we also have commented on that, in terms of replenishment, some people we do business with actually either dialed their models down or turned them off for a few weeks to a couple of months last year. So we think that's kind of behind us. I think if you comment where we are now, we've had, in the wholesale business, I think we're on three consecutive quarters where some of our customers have pulled inventory up, pulled orders up if we had the inventory, and we've shipped them, you know, a couple of weeks earlier. The inventory is in good shape at wholesale. I think the selling has been good. Obviously, led by the baby business, which continues to be our best, most successful business, and our replenishment trends have been positive so far. So, we're expecting a good year. I think that folks did plan conservatively, and the shipments are thankfully for us, and I think a lot of other folks, the supply chains have stabilized. So product's getting here on time. We're back to historical levels of on-time performance. And with that, I think the inventory is in a good place. We'll see how it portends or portrays to the future. I think for spring 2024, we saw positive signs in our bookings, and we hope to return to growth next year, as Mike said. But in terms of the destocking and folks getting leaner on inventory, I think they've done that. I think a lot of companies, including ours, have learned that we can do a good business and with good margins at those inventory levels. So just as in our stores, where we reduced inventory in our stores from over 40,000 units a store to down to the high 20s, I think a lot of retailers have done the same thing. I don't expect them to necessarily cut any further, but now the selling and the order call-outs are kind of in line with demand. So if demand's good, the business will be good. Maybe we can switch to some of the longer-term opportunities that you have here. Exclusive brands has been a big growth driver for Carter's the past few years. As you think forward, what are the opportunities to grow that exclusive business longer term? Are there additional doors, more partners? I'd say it's largely focused on things other than babies. So we've had success expanding into the older age segments, particularly toddler. And there's some door expansion. I think what we've heard from some of our customers, they wanna replicate the success they've had on the grocery side business on what they call general merchandise, the non-grocery side. And so they're focused on how to give the... Depending on the retailer, they're trying to make sure they hang on to those consumers that swung over to mass during the pandemic. They wanna hang on to that consumer with a better experience. So a lot of the conversations we're having with them, how do we improve the in-store experience? How do we have less redundancy? How do we make sure there's clear value proposition? So I think, you know, the better retailers are figuring out, "Hey, we're gonna run leaner out with inventory, but the inventory we have, we wanna make sure it's much more productive." So, there are opportunities, particularly coming off what we went through in recent years, where, you know, they were building, and then they were correcting. Now, they're trying to figure out, where's the consumer going? Can they hang on to the consumers that swung to mass for the ease of one-stop shopping? But we expect that. We expect the exclusive brands for everybody benefit. We're talking about Target, Walmart, and Amazon. So years ago, Target called us, they asked us for the Carter's brand. At the time, we decided we can't give you the Carter's brand. We'll develop a brand by Carter's for you, called Just One You. Two years later, we launched with Walmart, because Walmart said: "You know, we'd love to have what Target has." But we said: "We can't give you what Target has, but we'll develop a brand just for you, called Child of Mine." And then in more recent years, Amazon was knocking on the door in Atlanta saying: "We'd love to have the Carter's brand, too." We developed a brand called Simple Joys, made by Carter's. So each of those major retailers wanted to have the best-selling brand in Carter's. We developed an exclusive brand for each of those three. That's been the source of strength. Those have been growth. You know, particularly during the pandemic, those were defined as the essential retailers. Whether it's Prime Day or any other type of measure, it that we have reason to believe where our performance is at least comparable to, if not better than their private label brands. And our market share would suggest that that's the case. But there's always been opportunities to strengthen the product offering. You sometimes get additional space within the store. You see. And as they get... I think they use different language, our internal language, "Focus on fewer, better things. Fewer, better, higher margin activities." Those are the conversations we have with each of these retailers and our other wholesale customers. How do we make sure we strengthen the present, the product offering, the presentation of the brand, the marketing capabilities in store and online? So these have historically been very good growth customers for us. We expect it will be. And again, the opportunity is, you have mom's first purchase of a wardrobe for their new baby, whether direct to consumer or through our wholesale customers. How do you extend that relationship into toddler, and then into four to seven? We have the number one market share in baby, toddler, four to seven. And once you get to that eight to ten-year-old child, that's kind of the upper limit of our brands. But the opportunities in those younger age segments are more significant. Let's transition to your own retail business. Comps here have been under a little bit more pressure, but you talked about a little bit of improvement the last couple of months. Can you talk about the drivers of returning those stores back to positive comp growth? Sure. Brian, thoughts? I think we always like to start with the product. We think we have a much better product offering than we had in the past. The creative continues to get better every year. Our inventory is in a better position. Again, there was a lot of disruption to supply chain in the last 18 months, so I think we're in a better position there. We're working on the customer experience. We continue to look at new store models and new ways to assort and merchandise the product, so that the consumers feel great about it. And our marketing efforts, I don't think have ever been stronger when I look at attracting folks to our brands, attracting folks to our website, and to our actual stores. But there's- It has been challenging the last couple of years. I will say that, we're also up against some tough comps in the past. Between the collective efforts that we're doing with inventory management, better product, better marketing, better customer experience, we think through our Omni-channel efforts, that we'll continue to improve and that trend will continue. Yeah, comps have been under pressure. I think the consumer has been under pressure, and so it's a reflection of that. So, I think the comps were down just so everybody benefit, if you don't follow the company closely, I think we were down 13% in the Q1, down 16% in the Q2. I think the trend in the comps was closer to 7%-8% in the Q3 to date. So again, for a lot of reasons, historic inflation last year rocked the consumer. At least once a week, the consumer is reminded when they go to the gas pump, that they don't have as much money as they had before the pandemic. Shouldn't cost you $80 to fill up your tank, but today it does. And so, we're seeing signs in our business that comps, the trends are improving. Brian's point, we're focused on making shopping with us more convenient. So we're opening more stores in high traffic centers. We're closing some stores when leases come up for renewal, and outlets in other locations where traffic patterns have changed, co-tenancy has changed the conditions of the center. So rarely do we close a store early. We see a very high return on investment in stores. 70% of kids' apparel is bought in stores. And, you know, the balance largely bought online. Our stores are the number one source of new customer acquisition. I think it's the very best presentation of our brands. If you've never been in our stores and you want to know more about the company, visit our stores, but then visit our competitors' stores. I'm biased, obviously, but I, I think we got the best presentation of kids apparel in the market. No one's even close. Stores are gonna continue to be. We see very high return on investment in stores. We've been opening stores for over 30 years, and the plan is this year to open up some portion of 50 and then we'll see how those stores go. We focus on the best site. Others have a strategy, we're gonna concentrate in the market. We've had that advice over the years. We haven't taken it. We figured, let's go to the best site, the best center we can have, where the returns are attractive, and that will continue to be the plan. Rarely do we close a store early, only because the unit economics are attractive, right? But I think a very high percentage of our stores are cash flow positive. Rarely do we take advantage of a kick-out clause. These are 10-year leases, usually you can bail after five years if you decide that was, you made a mistake. Rarely do we take advantage of that. So stores will continue to be important. Stores drive e-commerce, and e-commerce is our highest margin business. When you open a store, e-commerce in that market goes up. When you close a store, e-commerce in that market goes down. What a consumer wants today, she wants the convenience of shopping online, and to be able to go to a, on a short ride to a store in the, in the hometown to pick up the purchase. We've invested in capabilities. We call these Omni-channel capabilities, to make it convenient for the consumer. Even if she's got a couple kids in the, in the, car seats in the back, swing up to the store, we'll run it out to the curb. Most of our stores are in open-air centers. That's just how our company has evolved from outlets, into specialty retail. Most are in open-air centers, where it's a—they're a much more convenient experience for the consumer, as opposed to malls. We have malls. It, probably about, about 10% of our stores are in malls. Because we've been highly selective on malls, so those they're some of our best performing stores. When Gymboree and other retailers went out, our real estate team said: "Hey, no, you don't like malls, but there are some we can make a lot of money in some malls if we're." So we've been highly selective. We probably got some portion of 70 or 80 mall stores, and, you know, we'll continue to be selective on the sites. But we love our wholesale customers. It's a very good business, but I think when we show how you can present the brand to the consumers, I often think our stores, our direct-to-consumer business, actually inspires our wholesale customers to do a good job presenting our brands in their stores. Thank you. One of the comments you made about some of the drivers of the recent comp pressure in your stores has just been that the consumer is under pressure. And one of the questions that we're asking all companies at our conference today is their view of the consumer backdrop. Do you see the consumer facing more headwinds or less headwinds in 2024 compared to 2023? And how are you thinking about the potential impact from trade up or income demographics into next year? Sure. I think that we're seeing in our business, the trend is up, not way up, but the trend, I think the consumer is recovering from a historic disruption in their lives and are moving on. Absent some other huge disruption in the world and in the market, I think the general trend will be improving. That's my expectation. And then your comment on. Sorry, your question was? Demographics or trade up, trade down. I think the risk of trade down was most significant when inflation hit. And I think it, even when the pandemic hit, in most stores, but for Target, Walmart, and Amazon, which have the most successful Private Label brands. When the pandemic hit, more people swung to the essential retailers where they had those choices, and there was a good period of great uncertainty. That was a time when I think the risk was high on trading down, and then when inflation hit last summer, another risk. We haven't seen any big moves in Private Label, a shift to Private Label. We just have we haven't seen that. Historically, Private Label share has been any in the low 20s. You know, it's been 21, 22. I think the latest thing is 23. So the best information we have, it's imperfect data. Market share data is imperfect, but the best information share is they picked up some portion of 1 point of share when everybody during the inflation had swung over to the mass channel. So I think the risk of a big shift trading down if that's how you want to describe it trading down to lower price, it's a beautiful product offerings, private label, but to trading down to slightly lower price brands, I think that risk. If things stay stable going forward, I think that risk is largely behind us. Again, we're always mindful. We gotta stay within a buck or two of private label. A big portion of what we do for our wholesale customers is baby apparel. Everybody knows somebody having a baby, and if you're picking up a gift, a big part of baby apparel is gift giving. You say, "I, I picked you up one of these private label brands from various retailers, or I paid a buck or two more, I got you something from Carter's or OshKosh B'gosh." Our market share would say, more often than not, they pay the buck or two more for the best-selling national brand in baby apparel. That's great. Thank you. Let's shift to margins for a moment. You mentioned in your opening remarks a lot of benefits and tailwinds that you're starting to see from supply chain, from freight, from product costs. Maybe put it all together and help us quantify some of the benefits that you're getting in the second half of this year, and what tailwinds that you see, and maybe the magnitude of those tailwinds, that will continue into 2024. Sure. Well, we're bullish on the outlook for margin, gross margin, specifically. As Mike said, we made a number of changes during the pandemic. I think we're running a better business than we were before the pandemic. So you look for the silver lining in bad situations. So the combination of running with less inventory, focusing the assortment on the most productive part of the SKUs, winnowing out the kind of the dogs of the assortment, having longer life product cycles, closing lower margin stores. But specifically, on the product input costs, which we do have some tailwinds that are gonna benefit us. So right now, we're forecasting second half product costs to be down low single digits. We had a period of product cost inflation as we moved through the pandemic. As Mike said, there's a lot of capacity in Asia. Our vendors are hungry to do business with us. I was just in Asia a few weeks ago, and there's a lot of enthusiasm for continuing to grow with Carter's. And so that capacity is the single biggest determinant of product cost, and there's a fair amount of capacity, and we're negotiating very good forward product costs at this point. Some of the other input costs we've referenced. Cotton costs are lower after a period of some inflation, and then the ocean-going freight rates is probably the other most significant factor that we're starting to benefit now. So, we probably spent about $50 million more than typical on ocean-going freight in the last year or so, so we're seeing some portion of that benefit here in the second half of this year. Thirty to thirty-five million would be my estimate, and then we'll get a full year's benefit next year. So the outlook, I think, for product cost and margin is good. And then how are you thinking about balancing that with SG&A, whether that's incremental investments or opportunities for cost savings? Sure. Sure. So our SG&A is about $1.1 billion, and it's been about $1.1 billion back when our revenue was about where it is now, about $3 billion. So we've looked at that, and it is a balancing act because we do think the sun is gonna come back out again. This is a business that's been around over 150 years, and we expect it to be around for the foreseeable future. We wanna balance the ongoing need to invest in the business. We are opening new stores. Those are very high return investments for us. We're continuing to invest in marketing, continuing to invest in technology investments, but where we can, we are pulling back. So, just in response to the environment, we've constrained headcount-related costs, all the variable-related spending, since the overall top line is lower than it had been. I think it's been well managed. So we're looking for opportunities to defer things where we can. If it's not mission critical and we can push it out in time, that's what we're trying to do. But it is balancing. We're managing the long-term future of this business. This is a business that does require investment, but we're being tough on spending in the company right now. So put that all together for us. How do you think about the opportunity to achieve a normalized level of margin rate in the company, and what are the pace and levers to get there? Yeah, I think our guidance implies that an adjusted operating margin around 11%. We've been as high as 14.5%. Our planning horizon would show good, steady improvement in that operating margin over time. You can have differences in the gross margin line, the SG&A line. We look at that operating margin as really sort of the great equalizer. We think that's a good measure of the quality of the business. Our objective would be to make good, steady progress in that operating margin over time. I wouldn't say 100 basis points a year, but we'd like to get back into that low to mid-teens over time. And then on inventory, you've seen some really nice improvements the last couple of quarters. Level set us on what the opportunity is for continued improvement from here. Sure, sure. Well, I think this is one of the enduring benefits we're planning on retaining from the pandemic, is just running the business with less inventory. I think it's led to good disciplines across the organization. We're not in a hurry to source all this beautiful product from Asia and then throw it on the clearance rack. So the fact that we're running with less inventory, our stores are running with meaningfully less inventory levels than pre-pandemic. We're gonna continue that discipline. There's about $100 million of inventory we came into the year, which we termed as Pack and Hold. This was inventory that we had procured for sale last year, but given what happened with inflation and the slowdown in consumer demand, the best decision was to hold that inventory. I hope that's not a permanent part of our business model, but we've made good progress working that Pack and Hold inventory down. We're selling that at good margins. So we'll continue to see that benefit over the balance of this year. Inventories at the end of the Q2 were down, from memory, just over 20%. They're continuing to be forecasted down for the balance of this year. Excellent. We are just about out of time. So with that, I would like to thank the Carter's team for joining us today. Thank you. Thank you for all of you in the audience who listened in. Thank you very much for joining us today. Thank you. Good to see you. Thank you. Thank you all very much.