Greetings, Welcome to the Torrid Holdings, Inc. First Quarter Fiscal 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Chinwe Abaelu, Chief Accounting Officer of Torrid Holdings. Thank you. You may begin. Good afternoon, everyone, and thank you for joining Torrid's call today to discuss our financial results for the first quarter of fiscal 2023, which we released this afternoon and can be found on our website at investors.torrid.com. With me today on the call are Lisa Harper, Chief Executive Officer of Torrid, Mark Mizicko, Chief Commercial Officer, and Paula Dempsey, our Interim Chief Financial Officer. Before we get started, I would like to remind you of the company's Safe Harbor language, which I'm sure you're familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate, and other words and terms of similar meaning. All forward-looking statements are based on current expectations and assumptions as of today, June 7, 2023. These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC. This call will contain non-GAAP financial measures such as adjusted EBITDA. Reconciliations to these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. With that, I will turn the call over to Lisa. Thanks, Chinwe. Good afternoon, everyone, thank you for joining us for a discussion of our first quarter performance. Joining me on the call today is Mark Mizicko, Chief Commercial Officer. Mark will provide an overview of the recent developments and our key focus areas in merchandising and marketing. Also on the call with me is Paula Dempsey, our Interim CFO. Paula has extensive experience in the retail sector, where she has held senior leadership roles in publicly held companies in finance and financial planning and analysis. I'm excited to work closely with her. She will provide an overview of our first quarter financial results, as well as our guidance for the remainder of fiscal 2023. During the quarter, we managed our business prudently and delivered adjusted EBITDA results in line with our expectations, despite the headwinds created by the economic landscape and weather. While traffic was volatile and challenging, both in store and online, we experienced good momentum in terms of conversion and average unit retail. These positive indicators demonstrate the effectiveness of our strategies to enhance customer engagement and loyalty. Our commitment to operational efficiency and prudent cost management enabled us to generate solid operating profits despite lower traffic trends. During the quarter, we made the strategic decision to pull back on certain promotions, given the inconsistent traffic patterns. Our focus in the first quarter continued to be aligning our inventory levels, and we are pleased with the progress we made. We ended the quarter with inventory levels down 2% compared to the same period last year. Excluding approximately $10 million of early inventory receipts, our inventory was down 8% compared to Q1 of fiscal 2022. We are committed to maintaining optimal inventory levels, diligently monitoring them, and adopting a dynamic approach to adapt to the ever-changing environment. During this challenging period of trying to best predict customer behavior, we have remained steadfast in our commitment to make the right investments for the long term. We continue to invest in strategies that will drive growth and enhance our market position. This includes strengthening our product offerings to cater to evolving customer preferences, optimizing our customer file, and expanding our store footprint. As part of our efforts to improve and enhance our product offering, we announced the return of Mark Mizicko as a member of the Torrid leadership team. In his role as Chief Commercial Officer, Mark leads merchandising, merchandise planning and allocation, marketing, and e-commerce. I'm confident in his leadership and vision for the brand. Our focus is to optimize our assortments to meet the needs of our customers and align our marketing with our offerings to create compelling and consistent messaging to our clients. We have prioritized customer engagement and loyalty. We're in the process of evolving our promotional activities, including our Torrid Cash events and our loyalty program. We intend to revitalize our promotional cadence by leveraging data-driven insights, ensuring that our offers resonate with our customers on a deeper level. Our loyalty program will also undergo a significant transformation, focusing on enhancing customer engagement, fostering a sense of community, and rewarding our most dedicated patrons. Through these initiatives, we are confident that we will strengthen our market position and build stronger, long-lasting relationships with our valued customers. Finally, we remain committed to our brick and mortar stores and are on track to open 30- 40 stores for the year. Our stores play a crucial role in building brand recognition and increasing our customer file. She initiates her relationship with Torrid by visiting in the store to see, touch, and try on products for a perfect fit, as well as to receive personalized recommendations from our sales associates. This provides a tangible experience that can foster customer trust and strengthen her bond with the brand. We know that once our customer finds us, she extends her shopping with us through our online capabilities, resulting in a strong omni-channel. In the first quarter, online sales continued to account for more than half of our total net sales. The ability to cater to our customers' preferences for both physical and digital shopping experiences creates a seamless and convenient journey, ultimately strengthening the brand, customer relationship, and driving business growth through customer file expansion. Our top priority is to maintain an unwavering dedication to our customers by providing unmatched offerings and services. We understand the importance of meeting and exceeding their expectations, especially when her wallet may be constrained. By delivering exceptional experiences, we can not only retain our existing customers, but also attract new ones, further solidifying our brand. As a leadership team, we recognize the significance of improving and streamlining our processes. It is our goal to ensure that our company remains agile, efficient, and adaptable to the evolving market conditions. To that end, we will continue to evaluate our cost structure to identify areas where we can optimize our spending while maintaining our competitive edge. The objective is to align our expenses with our strategic priorities and revenue potential. In conclusion, while the first quarter presented us with some challenges, we remain optimistic about our future. Our focus on driving store growth and loyalty remains unwavering, and we will continue to adapt to the ever-evolving retail landscape. We are confident that our strategies will enable us to navigate through the current environment and position us for success in the long run. Before I turn the call over to Mark, I'd like to express my sincere gratitude to our dedicated employees, who have demonstrated remarkable resilience and commitment. Their hard work and dedication are the driving force behind our achievements, and I am immensely proud to lead such a talented team. Thanks, Lisa. It's great to be back, and I'm excited by all of the opportunity that we have as a brand. I'll start by highlighting a few of the initiatives our teams are working on, and then we'll briefly discuss some of the product highlights for the quarter. Our merchandising and planning teams are focused on driving gross margin expansion through better balancing our assortment to customer demand, improving product sell-through, and improvement in the efficiency with which we price and promote our product by channel and location. We have begun to see a small amount of traction in our margin trends online and have more recently begun specific promotional pricing in stores. We expect that we will begin realizing additional margin expansion in the back half through better assortment balance and our targeting of higher online sell-throughs, aided in part by a change to our store fulfillment strategy. In marketing, we believe that there are significant opportunities for us to better engage our existing and potential customer base through optimization of our marketing investment, reinvention of our promotional calendar and cadence, and expansion of customer lifetime value through personalized customer journeys and improved loyalty program, and through fostering a community through store events and social media. We have begun making changes to our marketing investment and have seen some improvements in short-term ROI. In the third quarter, we expect to be up and running with a new data platform with our digital agency that will allow us to even further optimize our marketing investment. Loyalty, both as a program and in terms of customer lifetime value, is a big opportunity for us. We are currently testing changes to our promotions and customer discounts. We'll begin engaging the customers through in-store events this summer and are in the early stages of developing customer journeys that will lead to increased engagement and higher lifetime value. Turning to a few first quarter highlights. While the overall results were not what we were hoping for, we nonetheless saw many bright spots in the business and have many opportunities to build upon these successes for the balance of this year and for next year. In apparel, we successfully launched four new fabrics. All four were well received by the customer, and we see potential for expansion across all of these fabrications. By apparel category, non-denim bottoms and jackets were very good performance for the quarter. These categories were both driven by our Studio Collection of workwear. In general, our more put-together looks were better received than our casual offerings, though there were bright spots in casual dressing as well. In casual dressing, we see future upside in offering more edgy looks and increasing our investment in graphic and licensed tees. For tops in general, in many cases, we swung too far from the successes of prior years in fabrics such as gauze and challis, and from color and print into neutrals. Correcting these investments will be a significant opportunity for us as we move forward. In the curve business, we saw a strong quarter from swim apparel, and cover-ups, which was driven by new categories in beachwear, as well as strength and novelty in prints. We have opportunity next year to reflow our swim deliveries, to evolve our assortment into fashion early in the season and to further optimize our swim pricing. In active, we saw strong performance in our outdoor active assortment that was driven by stretch woven, ripstop, and super soft performance jersey across all silhouettes. We'll continue our expansion into outdoor throughout this year and into next. In summary, while we have strengths in the businesses that we will build on, overall, we can do better at aligning our inventory investments with customer demand at both an item and attribute level. Balancing our assortment across fabrics, colors, and fit will allow us to build the business on the back of past success. Again, I am very pleased to be back at Torrid. I strongly believe in the potential of the brand and in our ability to deliver our customers the assortment, the experience, and the community that she expects and deserves. With that, I will now turn the call over to Paula. Thank you, Mark. Good afternoon, everyone. I'm pleased to be here today as the interim CFO of Torrid. I have spent my career working in publicly and privately held companies, holding roles in various finance capacities. I look forward to working with Lisa and the leadership team. Torrid is an incredible brand that aims to be inclusive and fashionable while donating millions of dollars through our Torrid Foundation with the support of our customers and employees. We will begin with a detailed discussion of our financial results, followed by an update of our outlook for the second quarter and for the rest of the year. Let's start by discussing our top-line performance. During the first quarter, net sales declined 11.8% to $294 million, compared to $333 million last year, and comparable sales in the quarter decreased 14%. Similar to other retailers, we experienced a traffic slowdown starting midway through the quarter. This impacted our Torrid Cash event results for the first quarter. As Lisa mentioned earlier, we were pleased with our positive average selling price compared to last year. Moving to profitability. Gross profit margin was 37.7%, compared to 39.0% in the first quarter of last year. The decrease of 134 basis points was mainly due to inflationary impact on product costs, an increase in store occupancy and merchandising payroll, partly mitigated by enhanced pricing strategies and other favorable factors. SG&A expenses in the quarter were $71 million, compared to $72 million for the first quarter in the prior year. As a percentage of sales, SG&A was 24.3%, compared to 21.7% in the prior year. The increase of the percentage of net sales was primarily driven by store payroll due to wage pressures in our markets. Marketing expenses in the quarter were $13 million, compared to $18 million in the first quarter of last year. As a percentage of net sales, marketing decreased 85 basis points to 4.5%, compared to 5.4% in the first quarter of last year. The reduction in marketing costs was primarily driven by lower spending on the upper funnel activities, such as TV advertising. Turning to our bottom line performance. Our net income for the quarter was $12 million, or $0.11 per share, versus net income of $24 million or $0.23 per share for the same period last year. In addition to GAAP measures, we believe that adjusted EBITDA is an important measure that we use to evaluate and manage our business. Adjusted EBITDA came in above the midpoint of our guidance at $38 million or 13.0% of net sales, compared to $52 million or 15.5% of net sales in the first quarter of 2022. In terms of our balance sheet, we maintained a strong financial position during the first quarter. Our cash and cash equivalents stood at $18 million at the end of the quarter. Total liquidity at the end of the first quarter, including available credit, was $149 million. Total debt at the end of the quarter was $329 million, compared to $357 million in the first quarter of 2022. Our net debt to adjusted EBITDA was 2.2 times at quarter end. Inventory at the end of the quarter was $175 million, compared to $179 million for the same period last year. Excluding early inventory receipt of around $10 million at the end of Q1, inventory declined approximately 8% compared to Q1 of 2022. Based on our projected sales for the remainder of the fiscal year, we're comfortable with our current inventory levels and will continue to exercise caution considering the prevailing demand conditions. In the event of an improvement in demand, we will draw on our inventory receipt reserve. In Q1, we opened 5 Torrid stores while simultaneously closing 6 stores, ending the quarter with 638 stores. Our projected store openings for the year are estimated to be within the range of 30-40 stores. Turning to the outlook. Given the uncertainty in the macro environment, we expect the second quarter to follow similar demand trends that we have seen in the first quarter. For the second quarter, we project net sales to be between $280 million and $295 million, and adjusted EBITDA to be between $32 million and $38 million. For the full year, we estimate our sales to be between $1.095 billion and $1.145 billion, and adjusted EBITDA to be between $115 million-$130 million. This outlook assumes our growth margin will see improvement throughout the year when compared to fiscal 2022. Capital expenditures between $35 million and $40 million for fiscal 2023, reflecting 30- 40 new store openings and other investments. The revised annual outlook takes into account a more challenging macroeconomic environment than our prior expectations. Looking ahead, we remain optimistic about the future of our business. We have a robust pipeline of innovative merchandise, and we will continue to invest to enhance the customer experience across all channels. We are committed to expanding our store footprint strategically, both domestically and internationally, and we see significant growth potential. Despite the presence of short-term obstacles, the long-term view of our business remains positive, and we continue to leverage our strategic initiatives, adapt to evolving consumer demands, and optimize operational efficiencies to drive sustainable growth. We are confident in our ability to create long-term value for our shareholders. With that, I will now turn it over to the operator for questions. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question is from Mark Altschwager with Baird. Please proceed with your question. Good afternoon. Thank you for taking my question. It sounds like a pretty big change in trend, top line trend from when we last spoke in late March. Maybe just help us unpack what you think is macro consumer versus weather versus perhaps some company-specific product or execution opportunities. Then, you know, relatedly, I think the guide for the year implies, you know, stable to maybe slightly worse trends in the back half versus the first half when looking at a multi-year basis. I think you had previously seen some room to drive an improving trend through the years that some of the initiatives unfolded. Maybe just walk us through your framework with that new guide. Thank you. Sure. Hi, Mark Altschwager. The situation that we experienced in first quarter was we actually had a nice February with positive trends. In the middle of March, we had a shift in traffic trends that was relatively dramatic that continued through April and into early May. The good news is, in the back half of May and going into June, we're seeing improvement in traffic trends and customer behavior. I'll make it as simple as possible. We are moving forward with a forecast that considers the trends that we experienced in the first quarter. We felt it was the most prudent thing to do based on the volatility that we've seen in 4 short months in terms of traffic trends that we've experienced with the customer. It looked very good at the beginning of first quarter. The middle of the quarter hit a more challenging traffic trend, and we're starting to see it look good again. It is a bit of a roller coaster of customer behavior. I would also say currently, our trends are more predictive in terms of what we've seen historically in our business, so we're able to have more confidence in the short-term forecast of our business. Honestly, we made a decision to take what we had experienced in the first quarter and use that as a basis to forecast the balance of the year. I will say that the first quarter was the most challenging from a year-over-year comparison basis, and we do think comparisons are getting better as we go later in the year. We continue to think our inventory is well positioned to optimize margin while still delivering results, and we'll keep you updated. I mean, our choices were to give you second quarter and not comment on the balance of the year, but because we thought it the most prudent thing to do was incorporate some of the trends that we've seen from a macro basis, into the full year forecast. That's very helpful. Thank you. I mean, it sounds like gross margins should improve as we move through the year here, which is given the change in the sales trajectory and the sales expectation. Any comment on how we should think about markdowns over the next, you know, quarter or 2 here? Are there any excess spring goods that need to be cleared? I'll let Mark answer that. No, we're on top of the inventory levels. As you heard, they're down. They'll be down even further as at the end of this quarter. We're proactively managing the seasonal product and feel great about the way the inventory is positioned for the balance of the year. Okay. Thank you. Maybe one last one from me, and I'll pass it on. I guess just despite the change in the sales expectation, your adjusted EBITDA margin guidance, or I guess the implied EBITDA margin guidance, ... it didn't move too much. I mean, it sounds like lower marketing, lower variable marketing might be a bigger driver there, but maybe help us understand, where you're driving the savings, to offset, and how much of this might be more structural? Thank you. Hi, Mark. This is Paula Dempsey. Yes, you're absolutely right about some of the optimizations that are taking place right now. As you think through the rest of the year, and you look at all of our expenses, we should start seeing leverage starting in the second quarter through the full year. We are currently doing several projects at the moment to mitigate some of those expenses, such as, you know, things that we're currently doing. We have partnered with some of our vendors currently, renegotiating certain contracts all over the organization. Also, you know, as Mark even mentioned earlier, we are taking a much more efficient approach to our inventory management, so we should start seeing also improvements there. Overall, we're just optimizing our expenses for the remainder of the year. We should see our EBITDA margin to be quite favorable. That's great. Thank you, and best of luck. Thanks. Thank you. Our next question is from Alice Xiao with Bank of America. Please proceed with your question. Hi, thanks for taking my question. On the gross margin puts and takes again, can you help us walk through the magnitude of benefit from the freight and cost inflation normalization we can expect this year in second half? Longer term, you know, how big of a benefit do you think is possible from some of the new sourcing strategies, you know, vendor bases, new countries of origins, and also the, you know, assortment balancing and improved online sell-through that you talked about in your prepared remarks? Like, how big longer term of a benefit you think those pieces can be? Thanks. Yeah. Hi, Alice, it's Paula. I would say from a gross margin in the first quarter, I would say that 85% of that decline that you saw, in first margin is really due to inflationary pressures, and that would also include our inbound freight. The majority, the great majority of that is due to inflation at this point. For upside, as we move forward, there is room in every line of our business to improve. We anticipate cost of goods improvement. As we mentioned, we anticipate broadly leveraging SG&A for the balance of the year. All of that being done with appropriate investments into supporting the current business and growth in the business. I think that we have started and are moving quickly down a path of rationalizing all expense lines, including cost of goods and other goods, not related to retail, and we're seeing quick progress there to be able to leverage this business. I'm, you know, I think we have a very meaningful EBITDA margin, and I think that, as I've said in other calls, we think that there's more room with that. We wanna make sure that we're protecting the opportunity to continue to grow the top line and engage our customer. At the same time, we have room to expand our performance on the EBITDA margin line. Got it. Secondly, can you just elaborate on the loyalty program transformation, and how much investment that might require? Are the in-store events you're planning this summer gonna be incremental to last year? Also, does that require additional investment? Thank you. Yeah. We're in the early stages in testing some things for loyalty, and what we're really interested in is stickiness in traffic at both the store level and online. We'll be testing some things as far as getting additional customer visits. Part of the opportunity and loyalty is also for us to reassess and decouple some of our promotional events that in the past have been loyalty participation required. For example, Torrid Cash has been, in the past, a very important part of our business. There's been some softness in the Torrid Cash promotions, and so we're doing some reinventing there that is promotional, and then also on the loyalty front, making it not a requirement. You know, touching on the store event activations, these are incremental to what we've done last year. Expenses of that are fully baked into the EBITDA margins that you see in the marketing for the back half, so. I would just add that philosophically, we believe and continue to see, some promising movement in terms of customer engagement with frequency, store activation of new customers, as well as reactivation in general. We feel strongly and are starting to prove out that creating these store activation events are incredibly productive for us, engage the customer, bring in new customers. It's part of a broader marketing strategy moving forward that has a more 360-degree approach versus just a purely digital approach. Of course, everything is symbiotic and works together, but where, historically, as the company over the last several years has been very focused on primarily top of funnel digital, that, and Mark can speak more to this, that strategy has changed to be more of a 360, strategy that incorporates the stores more fully. Yeah, and. Thank you. To touch on what Lisa just talked about, you know, a majority in the early part of first quarter of our digital marketing spend was being aimed at new customers. We've reinvested more into the middle funnel, and we're seeing some positive traction in terms of traffic, in terms of digital-driven sales. You know, counter to what we had thought would be the risk, we're actually not losing, we're gaining in the amount of new customers, even as, you know, we're not specifically seeking them out in our audience matrix. All of that looks promising, and we're continuing to experiment. I think there's a lot more room to optimize, particularly as I mentioned a little earlier, as we get a little bit more data insights from the new data plan. That's super helpful. Best of luck. Thank you. Thank you. Our next question is from Dana Telsey with Telsey Advisory Group. Please proceed with your question. Hi, good afternoon, everyone. Can you parse out a little bit more the traffic trends between online and stores and what you saw, if there's any difference regionally also? Just unpacking the gross margin a little bit, the inflationary impact of product costs, how are you planning for that through the balance of the year? With the pricing strategies that are being refined for the third and fourth quarters, what should we be looking at in comparison to last year, and does it differ online versus store? Thank you. Traffic was down in both channels, kind of in lockstep from the middle of March until the middle of May. We're starting to see, traffic normalize at kind of baseline levels in both channels. It was consistent regionally and by channel, the shift in the customer traffic trends. Do you wanna do the gross margin? Yeah. As for gross margin, Dana Telsey, we are expecting the second half not to be as pressured with inflationary challenges. The reason truly is we are in the process of depleting all the inventory that was acquired with even higher freights last year. We're anticipating really recognizing that benefit in the later on half of the year. That's really what we're gonna see, the inflationary pressure kind of starting to go away. Got it. Just the pricing strategies for the back half, will it be the same level of promotions, or does it adjust? Anything different on the product side that you're bringing in to drive demand? One other thing, Lisa, did you see, is it more basics or more fashion, where there's been more of a change in sales trend? Thank you. I'll touch first on the pricing. I, you know, I think we've made a big improvement in pricing on the website, more targeted by item. You know, there are some brand new products that are being well received out the gate, that in the past, typically, we would have discounted immediately, and we're holding off on discounts and finding that she is still responding to the product that she wants. We'll continue to try to optimize and gain more margin expansion online. A lot of that margin expansion online will come through better sell-throughs, not necessarily through the pricing. As we start to see better sell-throughs, particularly as we get later in the back half, then we'll be adapting our pricing strategy accordingly, so we don't anticipate having to discount as much online. In the store channel, we're in probably the earlier innings in terms of getting more targeted in our promotions. For example, in swim, we were able to do some targeted swim discounts by store group based on how well they were turning through the goods. We'll have a lot more room to do that in seasonal goods, as well as just in things that are doing really well and turning through versus things that are a little softer and need a little bit more discount. Our goal in both channels is to get better at allocating discount to what needs the discount versus just a more general overall discount. On the basics versus fashion, what we saw pretty universally in the first quarter is she was still shopping, and she was still buying very specific to need. We, I think that in the prepared remarks, we said something about pulling back on promotions. We essentially could not find the elasticity in promotions and some of the decisions that we were making that would have traditionally had levels of elasticity that we would be happy with. In response to that, we responded to her behaviors and pulled back on some promotions. To Mark's point, you know, really surgically managed pricing online and worked more on a category basis by store group and stores. I think as we have brought in new basics, she's responded really well to them. We brought in some new ribs and tops and some dress categories and some jackets that she really responded to. She's responding more likely to respond right now to fashion and a little bit softer on basics. As the weather has changed in the last couple of weeks, we've also seen basics accelerate a little bit. During the first quarter, she was primarily driven by specific need and more oriented toward fashion. Thank you. Thank you. Our next question is from Brooke Roach with Goldman Sachs. Please proceed with your question. Excuse me. Our next question is from Corey Tarlowe with Jefferies. Please proceed with your question. Yeah. Hi, good afternoon, and thanks for taking my question. I guess, Lisa, you talked about seeing good momentum in conversion and AUR. Could you talk a little bit about what you think is driving that? It's nice to see that, even in spite of kind of traffic being a little bit worse than what you might have thought to see the momentum in conversion, and AUR. It'd be helpful if we get a little bit more color there. Sure. I would say broadly with conversion, that there is more positive chatter. If you know, I know you guys have a lot of different ways to gauge kind of customer sentiment broadly. In terms of that, the customer sentiment toward the product was positive. When she came in to buy, she had a specific need, she was finding what she wanted, and she was converting. I think, you know, that combined with some of the pricing strategies that Mark talked about, really aided the AUR and will continue, I think, to accelerate as we move forward and become more adapted to this, more adept at those choices. Also our AUR should improve as we go through the year, primarily because we were clearing through so many goods last year. It's hard for us to discern if kind of this challenge that we had in the first quarter with the choppiness of traffic was exacerbated by the fact that we had been discounting so heavily going into this because of our inventory situation. Good news is the inventory is in great shape. Good news is we really like the composition of the inventory. The good news is, when she the customer sentiment is quite positive. The hardest quarter of the year is behind us. That being said, you know, as I mentioned in my earlier remarks to Mark Altschwager, that, and his question, that we're taking a conservative approach for the balance of the year. We have a lot of very, I think, very exciting initiatives underway that are proving out, and that we're, we are expecting and are seeing, you know, merch margin expansion, and we'll continue to see that and are addressing the aspects of gross margin that will help drive that as well. That I would say, you know, to find a good story in the midst of that, which I appreciate you asking the question, is, we will see, I think, expansion from this point, both in customer behavior and pricing and margins. It was just after the choppiness of first quarter, we felt like it was prudent to be conservative, moving through the balance of the year. We wanted to do that as well, so that our inventories were also managed incredibly and responsibly. I'm encouraged by several of the KPIs that we're seeing, broad improvement in, and then, recovery that we're seeing right now. That's great. Then just to follow up on an earlier comment that you made, Lisa, you talked about optimizing spending. Could you maybe give a little bit more color about where you expect some of those optimizations to occur and what you think the opportunity could be going forward? Sure. I mean, I think a big chunk is store payroll, that I have a much more detailed approach to store payroll and how we staff our stores and manage the payroll to customer traffic trends. I think we have a lot of opportunity there. Paula Dempsey mentioned that we are, you know, we have it across every aspect of the business, that big chunks there. I think we do have freight that's gonna benefit on the gross margin side. We have, we're building. If you guys remember, last year, at this time, we were putting in a new ERP and putting in a new distribution center, we're having trouble shipping things out of the DC. That is working very smoothly, we're getting more and more productivity out of our distribution. We're saving there on cost per unit, is going down on incoming and outgoing, distribution and fulfillment charges. The opportunity is broad, and, we are finding it in pretty much every line of the and talking about that. We're very, very aligned on that, to focus on making, the right decisions there. I think that, as you said, as you, we've said several times, we will see leverage in SG&A in the balance of this year. Great. Thank you so much for all the help, and best of luck. Thank you. Thank you. Our next question is from Brooke Roach with Goldman Sachs. Please proceed with your question. Good afternoon. Apologies for the technical difficulties earlier. Lisa, I was hoping that you could dive a little deeper into the assortment mix between some of the sophisticated neutral styles and the edgier looks that Torrid has been known for in the past. Can you elaborate on the magnitude of the changes of the assortments that you've identified and the timeline of driving that? Then subsequently, on inventory, can you provide a little bit more color on how we should expect the inventory cadence to move as we go through the year on a year-on-year growth basis? Thank you. Sure, I'll start that, I'm going to turn it over to Mark. I would say that over time, many kind of core processes in terms of assortment, attribution, channel planning, has been muddled, I would say, is the right word. There were broader swings in investments than you would normally expect. It's really a process-oriented solution. Mark is on top of the aspect of exactly how we're buying by department, by channel. I'm going to turn it over to him to give more color on that and also kind of the inventory trends for the year. Tagging on to what Lisa Harper said, Brooke Roach, you know, I think in terms of magnitude of shifts between core product and edginess, that's really not what we see driving big changes. That's an important part of putting in front of her, you know, the looks that she's responding to from a fashion perspective. Even more of our opportunity comes from just building on what the customer responds to. For example, you know, there were some core fabrications in tops last year that we probably walked away from in a much bigger way than we should have. They were selling through, they were performing at a high margin, they were well received by the customer, we just kind of moved on to something new. Whereas we, in hindsight and what we're building on the go forward is, how do we continue to build on successes rather than walking away from a success in hope of finding a bigger success? I hope that makes sense. That is a bigger part of what we're doing in the process, and changes to that process are from the very beginning, you know, in the beginning of when we're first talking about concepts to when we're line planning all the way through our hindsighting and our buys. There's a lot of focus on how to make the core part of our assortment work harder, which we know will benefit us in terms of choice productivity as well as improving our initial markup. That work, I would say, in terms of the magnitude, is much bigger than the swings from core into edgy looks. Regarding inventory, you know, I guess we said it before, we're happy with where the inventory is. We'll be down even a little bit more in inventory in this quarter than we were at the end of first quarter. We like where our receipts are for the back half of the year, and we like where our inventory levels will be for the back half of the year. We anticipate better sell-throughs at reg price, which, you know, is behind a lot of the margin rate upside that we're anticipating. Very pleased with where we're positioned for the rest of the year in inventory levels. Thank you. I'll pass it on. Thank you. Our next question is from Jonna Kim with TD Cowen. Please proceed with your question. Thank you for taking my question. Just a quick one from me. Could you provide any detail you have on consumer behavior by income, different income groups? Also, you mentioned you're pulling back on marketing. As you think about driving demand still in this environment, what are your key priorities in the marketing fronts, while ensuring you drive highest ROI? Thank you so much. I got the part on pulling back on marketing. I think, you know, in marketing dollars, there's been a slight adjustment for the back half of the year. As a percent, we're pretty steady to where we've been. I don't anticipate any traffic or conversion headwinds from any marketing adjustments we've made. As I talked a little bit about earlier, I think the bigger story in marketing is how we're investing and how we're getting those incremental visits and how we, what we're working on is getting an ROI that is a little bit more immediate. To say that differently, rather than getting a new customer ROI that could pay back over a year or more, we're looking for some ROIs that pay back over the next quarter or two. Trying to get flow through to EBITDA a little sooner than where we were positioned at the first part of the year. If you could repeat the first part of your question? Oh, I have it. I'll answer it. Okay. I'm sorry. You asked about performance by income group. That's right, yeah. It was. Yeah, is that it, right? It was down across all income groups in the first quarter. We haven't seen that, and we don't anticipate that being the case as we move forward, but for the first quarter, it was more consistent than it has been across income strata. Got it. Thank you so much. Thank you. Our next question is from Alex Straton with Morgan Stanley. Please proceed with your question. Great. Thanks a lot for taking the question. Two from me. Just on the Torrid Cash event, I know you were considering some changes to the structure of that, so I'm just wondering, have any of those been implemented, or how are you thinking about that differently in this upcoming quarter? Then for Mark Mizicko, I know you're newer, returning here, so maybe which initiatives do you think you can act on or you're most excited about in the near term, that you can kind of immediately action? Then maybe on the longer term ones, what are the barriers there in terms of the changes that you've outlined on the call so far? Thanks a lot. Sure. Thank you. I guess, you know, for Torrid Cash, in first quarter, you know, we tried some things we hadn't tried before in terms of what we distributed and who we distributed Torrid Cash to. And we also had a second Torrid Cash event. I'd say that, you know, we weren't really pleased with adding a second Torrid Cash to the quarter. It didn't work out the way we'd hoped. For this quarter, what we're planning to do is we moved the event from where it was going to be in June into July, where the product is gonna be a little bit more transitional, so there's more reason for her to buy. We've also shortened the number of days. We're trying to provide more of a sense of urgency around the event and, you know, trying some different things to rehabilitate it, so to speak, as far as trying to create a little bit more scarcity of the Torrid Cash. Those are a few of the highlights that we're making. In terms of some of the short-term things, initiatives that I'm excited about, I mean, we talked a little bit about changes in our approach to marketing. We talked a little bit about pricing and promotion. We haven't really touched on ship from store. We kind of reimagined the way that we use ship from store as a way to drive additional sales, margin, and EBITDA. Starting toward the end of March, we turned this capability back on. We had somewhat mitigated it for, you know, a good number of months. What we're seeing is it's driving incremental sales. It's driving incremental margin. There appears to be a really nice flow through in the way that we're managing it compared to the way that we managed it in the past, and what we're including to be eligible for ship from store and what we're not including. We're seeing an additional, you know, mid-single digits of inventory that's available on the online channel, and she's buying it. That's exciting, and we anticipate, as we move through the year, that that's going to allow us to clear a lot more units at regular price and less units at clearance. There is a margin rate upside that we have contemplated as far as what we're gonna get ship from store. You know, the web sell-through being increased in conjunction from ship from store is very powerful, and that's something that we're going to see and as we get into the middle of the back half. I guess, from a longer term, you know, we hope to get some impact this year, but more of the impact will be next year, and that is around our cost of goods strategies. Getting to a place where by being a little bit more strategic about our assortment and standing for core in a bigger way, that we're gonna be able to negotiate some better costs. I anticipate that that is gonna be a much bigger 2024 benefit than 2023. A lot of the balancing of the assortment that we're doing, you know, we're gonna definitely see some impact in the back half, but we're only gonna see a few deliveries of impact, whereas we'll have a whole year of delivery impact next year. I expect that the benefit we see from that will get bigger as we move into next year. Thanks a lot. Good luck. Thank you. Thank you. There are no further questions at this time. I would like to turn the floor back over to CEO, Lisa Harper, for closing comments. Thanks, operator. Thanks, everyone, for joining us. Appreciate your questions and your focus on the brand. We look forward to being back with you, I guess, at the end of the summer with the Q2 results. Thanks again. Thank you. This concludes today's teleconference. You may disconnect your lines at this time.