Good day, and welcome to the Duluth Holdings first quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing Star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then one on a touch-tone phone. To withdraw your question, press Star, then two. Please also note this event is being recorded. Now I'd like to turn the conference over to Nitza McKee. Please go ahead. Thank you, and welcome to today's call to discuss Duluth Trading's first quarter financial results. Our earnings release, which was issued this morning, is available on our investor relations website at ir.duluthtrading.com under Press Releases. I'm here today with Sam Sato, President and Chief Executive Officer, and Dave Loretta, Chief Financial Officer. On today's call, management will provide prepared remarks, and then we will open the call to your questions. Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements, which can be identified by the use of words such as estimate, anticipate, expect, and similar phrases. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, and assumptions, and are subject to risk and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Such risk and uncertainties include, but are not limited to, those that are described in our most recent annual report on Form 10-K and other SEC filings as applicable. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. With that, I'll turn the call over to Sam Sato, President and Chief Executive Officer. Sam? Thank you, Nitza, and thanks for joining today's call. We made tremendous progress on key strategic initiatives over the course of the first quarter, and I'm excited to share some of the details. We know that our customers demand well-designed products that are grounded in durability, functionality, and are solution-based for the intended end use. Our customers take on life with their own two hands and embrace a can-do attitude in both work and play. To address our customers' various needs and attract new customers, we set out to create distinct positions for each of our sub-brands with product assortments that resonate and deliver against their expectations. I'm pleased to highlight that during the first quarter, we introduced our new Duluth by Duluth Trading Company brand logo. The Duluth sub-brand is focused on the lifestyle of Americana workwear. The first quarter also marked the transition of our Alaskan Hardgear brand to AKHG, and we launched our women's collection in April. AKHG is focused on more technical products needed to support outdoor activities, as well as the lifestyle of enjoying the outdoors. Importantly, our first layer business has undergone many updates. We've elevated our assortments through the creation of new innovative products and intensified our focus on growing categories. Collectively, these updates are meaningful steps forward to position our overall Duluth Trading Company business under a common umbrella that will enable each sub-brand to serve our customers' desire for being active in their work and their recreation. I'll share more shortly how we see the evolution of our business and brand positioning to address the growing active lifestyle of our target customers. First, I'll touch on our recent results. Today, we reported first quarter net sales of nearly $123 million, net income loss of $1.3 million, and earnings loss per share of $0.04. These results were better than our internal plan as well as our early projections and demonstrate our continued operational effectiveness in the face of a dynamic macro environment. With inventories reaching a healthier position at quarter end and digital marketing tactics that draw on elevated data analytics, we are meeting the needs of our customers and executing our strategies for long-term brand growth. The efficiency of our omni-channel model is producing a consistently strong gross profit margin, which for Q1 was 54.6%, an increase of 470 basis points over last year. We continue to fund our strategic brand development initiatives with an increase in creative asset investments supporting our Duluth by Duluth Trading Company and AKHG sub-brand launches. The new brand positioning features seasonally relevant items for active outdoor categories in swim, gardening, and hiking. As our receipts improve, the customer's response to our offering overall is strong and led to high single-digit sales growth in April. With the support of new brand awareness campaigns, the momentum continued through the Memorial Day weekend, with customer demand exceeding last year. Our reported net sales for the first quarter were nearly $123 million and were planned to be down to the prior year due to expected inventory delays and a strategic shift to carry meaningfully lower levels of clearance inventory. In fact, we ended the quarter with clearance goods making up 3% of total inventory compared to 8% last year. Our overall inventory position at quarter end is 6% higher than last year, a significant improvement from the beginning of the quarter where we are down 18%. Importantly, the makeup of our inventory i s significantly healthier compared to last year. The positive outcome of our strategic transition in inventory mix is that we are generating significantly higher gross product margins, fueling gross profit dollar growth while absorbing higher than normal transportation costs. Our reported gross profit margin of 54.6% includes the additional expense of roughly $4 million in air freight costs associated with inbound inventory from last fall. Absent these incremental freight costs, our gross profit margin is as strong as we've seen in the last five years and a direct result of inventory management and pricing disciplines put in place. Our strategies continue to yield results that support improved operating margins, which Dave will go into further. Our EPS loss for the quarter of $0.04 reflects the impact of the $4 million in air freight costs I just mentioned, but also sound operational expense management. Absent the air freight costs, our earnings per diluted share in Q1 would have been a positive $0.05. Our business is not immune to the inflationary pressures in fuel, labor markets, and commodity prices. We will continue to make adjustments to our model to keep the momentum going across the business and continue to execute our strategic playbook. Our teams put many actions in place to address some of the headwinds we identified last year. For example, we've been selective in raising retail price points on certain core items and expect further adjustments to prices in our fall and winter assortment. We established early delivery dates from our manufacturers to account for continued supply chain congestion, and we also plan to air freight orders on certain new fall and winter products to meet key offer dates. We anticipate being well-positioned with merchandise to meet customer demand during the important sales periods, beginning with Father's Day and into the fall and winter seasons. We were able to flex our variable expenses below last year and realize expense leverage relative to our plans that support the continued investments we're making in our brand portfolio. These investments take advantage of the broader trends we see in our target customers to live an active lifestyle and are designed to unlock tremendous growth opportunities while mitigating the impact of near-term macroeconomic factors. To that end, we purposefully held back some customer acquisition dollars in our first quarter marketing spend given the lighter inventory levels. The benefit of being more selective on attracting new buyers is we've seen a higher average order size on their first purchase. As receipt flow improved, we dialed up digital prospecting in the back half of the quarter, and as a result, new buyer growth increased with much of the activity driven by our enhanced brand messaging and introduction of the women's collection in AKHG. New buyers who are motivated by the new assortment, focused brand messaging, and product stories are significantly more valuable to us. Net sales in our retail store channel for the first quarter was up versus last year 0.4%, driven by a higher average transaction value that is up 6% compared to last year. More recently, an improvement in our conversion metrics indicate that our heightened focus on store associate product knowledge training and assisting customers to build their basket, along with better inventory position, are paying off. Quarter to date, sales in the retail channel are trending up to last year. Net sales in our direct channel was down for the quarter 12%, largely reflecting the heavy clearance volume in last year's direct sales, but also our purposeful decision to run lighter in working media in February and March. With a better inventory position by April, we leaned into digital advertising and social media and paid search to accelerate the direct channel growth. In April, direct sales were up low teens% to last year. Our rebranding efforts are paying off. We introduced our new Duluth by Duluth Trading Company brand logo and have ramped up the messaging, providing a more unified voice across men's and women's. The customer response has been amazing. Duluth favorites such as DuluthFlex Fire Hose pants for men and classic Noga performance stretch pants for women are great examples of products designed to support an active, get-it-done lifestyle with features and durability that stand up to a wide range of work activities. This spring, we built upon the Duluth brand success we have had in our garden collection by introducing a short version of the women's heirloom garden overall and new styles that leverage our other well-known fabrications, such as Dry On The Fly, Double Flex Denim, and Fire Hose CoolMax. These are innovative lead products that are seasonally relevant and provide real benefits such as moisture-wicking, cooling, and comfort. Our brand realignment of AKHG focuses on outdoor recreation for our customers who embrace the work of play, addressing their needs for high performance apparel and gear that can stand up to the conditions they face while in the elements. Formerly Alaskan Hardgear, we've always infused this brand's identity with high quality, innovative clothing and outerwear that is functional and allows for comfort and movement while outdoor conditions change. While we know the collection can stand up in these conditions, we also know that most of our customers simply want to trail hike or fly-fish in a stream. This brand positioning opens up AKHG to a much wider consideration set and expands the brand's potential for the everyday outdoor adventure that may be closer to home. Our rebranding of AKHG coincided with the introduction of our women's collection. Since then, the AKHG women's segment has quickly reached a similar level of penetration as women's has for the Duluth brand at roughly 1/3. The five-star reviews are quickly adding up for the new collection, and our live action branding allows for a broader aspirational imagery of women and men together in highly photogenic and real-life settings. We're excited for the long run potential of AKHG in growing our women's segment. Our first layer products outperformed and remains core to our business. Serving both men and women, we consider our offering to be America's most comfortable unders and have collected over 40,000 five-star reviews. That being said, we see greater potential, particularly in the women's assortment. Included in this collection is the perennial favorite No Yank Tank. Expansion of our base layer tops and bras for women has seen significant growth of close to 40% in the first quarter. Lastly, within our family of brands is Best Made, which realized a healthy 30% growth rate in the first quarter, albeit still small relative to the other brands. The curated offering within Best Made allows for great storytelling about the source and craftsmanship behind the products, but also unique individuals that live and work a lifestyle embodied in the Best Made spirit. Our men's summer collection features linen tops and bottoms, swimwear, and beach accessories inspired by the Pacific coastline and tropics of Hawaii. In partnership with the iconic brand Kahala, we offered two exclusive Aloha shirt styles. On our last call, we shared details about our capital investment plans for the year and in support of our Big Dam Blueprint. I'm pleased to report that we are on track with the early stages of our logistics expansion and automation project, and we've kicked off core technology initiatives that serve to advance our internal capabilities and build the foundation to support long-term growth. Within our existing fulfillment centers, we are implementing capabilities that will be fully operational in advance of our peak season this year. These capabilities increase the speed, accuracy, and capacity of inbound receipts with sortation equipment that expands daily capacities. The quicker we can receive inventory into our system, the faster we can make it available to our customers. In addition, investments are underway to automate sortation and scanning equipment on outbound orders that facilitate quicker replenishment of our store inventory and shipping cost savings through automated carton labeling. The investments we're making in merchandising tool sets will ground our capabilities to continue driving efficiencies in how we plan, buy, and seamlessly move from one season to the next. The enhanced systems will allow for quicker and more insightful assortment decisions. Ultimately, our merchandise planning tools will generate automated recommendations based on deeper trend analysis and allow our teams to focus on higher value merchandise activities. The utilization of customer insights and data analytics will better enable our merchandising strategies and long-range brand growth decisions. We've been engaging in a number of deeper reviews of our customer base, the interactions we have with them, and measuring the opportunities for greater market and channel penetration. These reviews are informing our plans as well as the technology we're investing in to activate our plans. In summary, despite the external environment posing challenges, we continue to see healthy underlying demand from our customers for products and shopping experiences that meet their needs. We are in a strong financial position with ample access to liquidity, positive cash flow, and earnings power that support our strategic growth plans. With that, I'll turn it over to Dave to provide more details on our first quarter and our outlook for the balance of the year. Thanks, Sam, and good morning. For the first quarter, we reported net sales of $122.9 million, down 7.9% compared to $133.4 million last year, and up 11.8% compared to the same period in 2020. The decrease in clearance sales between this year and last was roughly $11 million and was the contributing factor in our sales declining year-over-year. Our direct channel sales were down 12.1% from last year, while the retail channel was up 2.4%, driven largely by a 6% increase in average transaction value in the stores. As we shared on our last call, we anticipated softer sales in the first quarter due to the heavier clearance position we were in last year and continued transportation delays on new seasonal and core year-round products. Because of these two factors, we focused much of our business on selling at regular price and preserving some of our traffic-driving media spend until later in the quarter, when inventory reached a better position and our new sub-branded collections were in hand. By April, our customers responded well to the new spring assortment, the new brand messaging, and better in-stock positions on core items. Customer traffic and conversion through both our store and digital channels improved in the back half of the quarter. As Sam mentioned, total net sales for April increased high single digits, and the momentum has continued with strong customer demand through the Memorial Day weekend. During the quarter, average order value and sales per customer overall increased mid-single digits, driven by the demand strength of our core offering and being strategically less promotional compared to last year. The higher customer sales productivity is combined with an improving trend on retaining customers who have shopped with us more than once and were new buyers prior to last year. Buyers who were new and purchased primarily full price items spent significantly more on their first purchase and are returning more often. Our retention rates in the first quarter are much stronger for these conventional buyers, and the spend per customer is higher by roughly 30% versus price-driven buyers. With these insights, we are adjusting our marketing mix and customer segmentation to strategically target the conventional buyer, which leads to higher customer lifetime value. The amount of clearance inventory was down almost 70% at the beginning of the quarter relative to last year, driving significant improvement to our product gross margins and an increase of 470 basis points in our reported gross profit margin to 54.6% compared to 49.9% last year. Our first quarter gross profit amount of $67.1 million, compared to last year of $66.5 million, included nearly $4 million in expedited freight expense that was spent last year to air freight certain items into bypass the shipping ports. Those items represent our best-selling year-round core items, such as men's Fire Hose pants and Buck Naked briefs, and where we strive never to be out of stock. Absent the incremental freight costs, our first quarter gross profit margin would have matched a historical high for our first quarter at nearly 58%. We do anticipate some expediting activity this year, although not to the same magnitude as last year, and it is factored into our guidance. Turning to expenses. SG&A for the first quarter increased 5.2% to $68 million, compared to $64.6 million last year. As a percentage of net sales, SG&A expense increased to 55.3% compared to 48.5% last year. This included increases of $2.8 million in general and administrative expenses, $1.1 million in advertising and marketing expenses, and a decrease of $500,000 in selling expenses. Selling expenses as a percentage of net sales increased 80 basis points to 15.8%, compared to 15% last year, driven by the higher hourly wage rates implemented across our store fleet and fulfillment center network in the back half of 2021. Additionally, fuel surcharges on our outbound customer shipments contributed to the selling expense deleverage. We expect to realize a similar deleverage in selling expenses in the second and third quarters before annualizing the wage rate increases and realizing efficiency gains to offset the higher costs. In terms of the fuel charges, we are anticipating the elevated levels will continue throughout the year. As planned, advertising and marketing costs as a percentage of net sales increased 160 basis points to 10% compared to 8.4% last year as a result of the development of creative content for our new brand positioning of Duluth and AKHG. These investments represent roughly 30% of the total cost this quarter and will support brand messaging and feature products in future awareness and customer acquisition campaigns. In addition, we reduced the direct mail catalog portion of our working media by roughly 50% in a continued strategy to leverage more flexible digital media targeting a higher return on ad spend. Our paid digital media spend represented about 40% of the total advertising spend this quarter, and we expect that to increase to close to 60% in the second quarter, representing the largest component increase in our marketing mix. Additionally, brand awareness investments designed to develop new customer audiences represent roughly 25% of the total spend and are strategically important to establish momentum in the subsequent quarters. Overall, we expect the second quarter advertising and marketing costs will increase and deleverage 80-100 basis points. General and administrative expenses as a percentage of net sales increased 440 basis points to 29.5% compared to 25.1% last year. The $2.8 million increase from last year represents additional personnel and technology costs as well as fixed costs for our Cherry Hill, New Jersey store and Salt Lake City fulfillment center that opened in the back half of last year. We expect additional deleverage in our second quarter for similar reasons, but to a lesser extent. For the back half of the year, we expect to realize expense leverage in G&A expenses in connection with anticipated sales growth. As of today, our store count stands at 65, with no planned store openings for the balance of the year. As we discussed previously, we are evaluating locations for potential store sites in 2023 and will share more details once we have signed leases. Adjusted EBITDA for the first quarter was $7.9 million, a 17.5% decrease from last year and 80 basis points of adjusted EBITDA margin contraction. Our net loss was $1.3 million or a loss of $0.04 per diluted share compared to a net income of $500,000 or $0.02 per diluted share reported in the first quarter last year. Excluding the expedited freight expense from last year, our EPS would have been a positive $0.05 per diluted share. Moving on to the balance sheet. We ended the quarter with net working capital of $106 million, including $40 million in cash and $0 outstanding on our line of credit. Compared to the same period last year, we had $26 million in cash and $17.6 million outstanding on the line. We anticipate minimal borrowings on our available line of credit, which stands today at $150 million. Our inventory level is roughly 6% higher than last year at quarter end and is in a significantly healthier position than where we were at the beginning of the quarter. Spring and year-round receipts that were delayed as of year-end have arrived over the course of the quarter, supporting the sub-brand relaunches effectively. Our current mix of clearance inventory is 3% compared to 8% last year and is at the appropriate level for where we are in the spring and summer season. Our capital expenditures, including the cost of software implementation, is expected to be $40 million in 2022 versus our previous guidance of $57 million. The lower amount represents timing of progress payments for our new fulfillment center facility. On the heels of our lease signing for the building in Adairsville, Georgia, we finalized the contract with our automated storage and retrieval systems provider and have reflected the updated cash flows in our projections. The shift in timing of progress payments will impact early 2023 and benefit our 2022 year-end cash position. We now expect free cash flow for 2022 will be roughly $15 million-$20 million. As we shared, the investments we're planning to make across the business will facilitate expanded and more efficient distribution capacity, product and brand development capabilities, and add to our customer insights and data analytics to better inform our assortment and marketing mix. These investments are all focused on being more digitally led as a business and are key components of our Big Dam Blueprint. To summarize our outlook for the second quarter and back half of 2022, we expect sales in our direct channel to be up mid-single digits in the second quarter and up low teens in the back half of the year. For retail sales, we expect sales to be up mid-single digits in the second quarter and through the back half of the year. We expect gross profit margin to be flat to slightly up in the second quarter and down roughly 50 basis points for the back half of the year. We plan to increase advertising expense by roughly $2 million in the second quarter over last year and spend roughly the same amount in the back half of the year compared to last year. With selling expenses, we expect the second and third quarters to be similar to the first quarter in the increase as a percent of sales and the fourth quarter to be roughly flat to last year as a percentage of sales. Overhead expenses in the second quarter will increase as a percent of sales by 150-200 basis points and be down 50-100 basis points in the back half of the year as a percent of sales relative to last year as we gain leverage on sales growth. We are reaffirming our full year guidance with net sales of $730-$755 million, adjusted EBITDA of $84-$88 million, and EPS in the range of $0.93-$1.02. In closing, we are pleased with the great start to the year, particularly given the dynamic environment. Our teams remain focused on the needs of the business and our customers and executing on our strategic plans. With that, we'll open the call for questions. We'll now begin the question and answer session. To ask a question, press star, then one on your touchtone phone. If you're using a speakerphone, you may need to pick up your handset before pressing the keys. To remove yourself from the question queue, press star then two. The first question comes from Jonathan Komp with Baird. Please go ahead. Yeah. Hi, good morning. Thank you. I wanted to start by following up on the brand realignment, and I think, Sam, you walked through pretty clearly the rationale. But I'm curious if you could share more on the consumer reception so far, and if you know, the differences are being noticed and any feedback you've gathered. Then, you know, as you look forward, sort of any changes in brand character or positioning or sort of the product approach, uh, as a result of the realignment that you see going forward? Yeah. Thanks, Jonathan. Appreciate the question. Yeah, so at a high level, you know, this was part of, you know, our initial work within the Big Dam Blueprint, and it was to create these really purposeful and distinct positions for each of the sub-brands. It allows us, not only from a product development perspective, to be really narrowly focused on all of the performance and benefit features in developing and designing the products, but then gives our brand marketing team the ability to really lean in heavily and capture the intended use of these products. You know, at the start of our strategic work, you know, that was one of our priorities, to create distinction and a unique position. I will say that, yeah, we've seen some pretty incredible response, and I would point you back to our prepared remarks around AKHG in particular. You know, we've created some clear separation relative to what that represents in comparison to Duluth and Best Made. Really, you know, we saw it as we launched the women's piece in April, it immediately went to a similar penetration point as women's has for the much larger Duluth brand. The combination of distinct positions from a product development and from a brand marketing perspective, I think is serving us well, and importantly, is creating a clear understanding by our customers. Great. That's really helpful perspective. Maybe a follow-up on the full year outlook. I know you mentioned that Q1 exceeded the internal plans. You've maintained the outlook for the year, understanding it's early in the year. Are you baking in any additional conservatism in your outlook for the balance of the year? Just trying to understand your thinking and your confidence level after you know, better than expected Q1 results. Yeah. I'll answer quickly, and then I'll let Dave maybe provide a little bit more color. You know, one of the things we were thinking about all along as we planned our receipt flow this year, and in part, you know, with supply chain constraints that we faced last year, you know, our team took some really purposeful and intentional action, like, scheduling earlier receipt dates, to ensure that we accounted for, you know, these multiple weeks of delay. I think that's starting to show in the receipt flow as we went through Q1, and expect that to be the case as we go through Q2, and then importantly, through, you know, the build-up in Q3 and into the peak holiday season in Q4. As a reminder, last year, you know, we were talking about coming out of Q3, how our inventories were now dipping into the mid-20% below 2020 levels, and that continued through Q4. Part of our forecast and our planning for this year includes, you know, what we expect was some or what we thought was projected was some demand we left on the table last Q3 and Q4 in particular because of the lack of inventory. Yeah. That makes sense. I guess when you look at April specifically, could you maybe further isolate some of the tailwinds that you saw and maybe relate that to the discussion about some of the marketing reallocations and the strategies for the balance of the year, and whether or not you could carry forward some of the successes that it looks like you may have seen in April? Yeah. I think, you know, what has impressed me since joining the company a year ago, Jonathan, is the flexibility in our ability to target and increase or decrease purposeful ad spend. You know, this is unlike anything we've experienced in terms of, you know, supply chain and its impact on availability of inventory. The great news is, you know, when inventory flow isn't what we need it to be, we can dial that back. As we start to see inventory flow in at a higher rate, you know, we can dial that up pretty quickly. Part of that's because we made a strategic shift over the last couple of years to a more digital marketing strategy, which is much more flexible than, you know, the linear advertising vehicles we would use in the past, where you had to commit to contracts, you know, well in advance, and then you're locked in. You know, our brand marketing team is doing an unbelievable job of pulling levers throughout, you know, the months and the weeks, quite frankly. In the case of April, you know, as inventory started to flow in, and especially things like the AKHG women's launch, you know, that was initially planned to launch in March, and because the receipts weren't here, we pushed it out. As soon as we saw that stuff start to hit our fulfillment centers, they ramped up their plans on really targeted marketing initiatives, and that drove a lot of business to both the stores and to our digital site. Yeah. Jonathan, I'll just add, you know, balance of year is, you know, still a lot of business ahead of us. I mean, our first quarter only represents, you know, 16% or 17% of the total annual sales. Quarter to date, through Memorial Day weekend, where the business is up in the low single digit range, and obviously, you know, needs to continue to accelerate to get to the back half of the growth rates that we have. I think it's just early in the year still, and that's reflective of our, you know, guidance that we're reaffirming. Great. That's helpful color. I'll pass it on. Thanks again. Thanks, Jonathan. The next question comes from Jim Duffy with Stifel. Please go ahead. Thank you. Good morning. Hey, Sam. I wanted to ask about some comments you made in your response to the last question. I'm curious about the indications on return on incremental marketing spend. During the first quarter, you pulled back on some marketing. If you had the inventory to do so and set out to scale the business, do you have high ROI initiatives that you believe would derive growth? Yeah, absolutely. As I said, you know, as the inventory flows in against, you know, our planned launches or new collections, we're able to flex that marketing spend up or down depending on the choppiness of receipt flow. Today, you know, we've got some unbelievable new products that we're launching, we're excited about. I'll give you a couple of examples. We've got a hunting capsule in partnership with Mossy Oak, which is this unbelievable brand that brought kind of this new age of camouflage to the market. We're excited about that, and we'll ramp up advertising against that as it comes in. We've got. I mentioned in my prepared remarks that bras as a category within women's first layer is delivering some outsized growth. You know, we've got this whole new women's offer called Line Tamer, and it's seamless line disguising first layer for her, and we've got a pretty good marketing campaign against that. Really, as you know, Dave mentioned in his prepared remarks, you know, we're increasing our ad spend in Q2 because we're seeing the receipt flow of some of these new goods and new collections, and we'll continue to flex that as you know, our receipts flow in. But we absolutely have some really incredible and exciting new products, new innovation in the pipeline that are coming. It's just working through the choppiness of the receipt flow. Understood. Now I wanna dig in to another level of detail there. Is this established proof of concept with new customer acquisition efforts that you can use to grow the customer file, or is this simply you know, compelling product that you're using to reengage the existing customer base? Yeah. I think it's a couple of things. One is, you know, we've always had a rich treasure trove of consumer data. As we've mentioned over the last handful of calls, you know, as we continue to invest in and stand up our data insight and customer insight tools, you know, we're gaining a lot of really good actionable information. In fact, we recently hired a new director of customer insight who brings an unbelievable amount of experience and has already shown us the way he can chop that data up and add really great perspective and where we should target our customer acquisition strategies. One of the things that he has shown us, and Dave mentioned it in his prepared remarks, is this difference between consumers that we acquire primarily through price versus what we call conventional spenders or those that are coming to us, and over time, or have come to us because of the product needs they have. Over time, they are significantly more valuable to us because not only in the size of their basket, but the frequency of their interaction with us. You know, we're targeting lookalike customers through different types of channels, largely through digital acquisition. That's even making our ad spend that much more effective because we can narrow in and be selective on who it is we're trying to attract and retain. That's great. The full price selling penetration is super encouraging, and I think this dimension of a shift to focus on the conventional buyer versus the price-driven buyer seems powerful. I'm curious, how does that change the addressable market and potential size of the revenue base? Does that narrow the potential size of the revenue base, but improve the margin, structural margin opportunity for the business? How do you think about that? No. Yeah, no, I don't think so. Listen, I think, you know, whether you're in kind of inflationary times like we are now or not, even in an expanding market, you know, everyone considers price in, you know, when they make choice. I think ultimately, the size of the market for where we serve and the types of product and price value, the durability, the build of our products is a large opportunity for us, and you know, we're just scratching the surface in terms of market penetration. Great. Thank you, guys. Thanks, Jonathan. Oh, Jim. I'm sorry. Thanks, Jim. The next question comes from Dylan Carden with William Blair. Please go ahead. Thanks a lot. Kind of continuing on some of this same vein, I guess, kind of further up the P&L, you're flirting around sort of peak gross margin or underlying gross margin to kind of back out some of the artificial cost headwinds. I'm curious, you know, you're speaking a lot more towards full price selling, you know, being more efficient with your promotional cadence, which is something you've long talked about. Is there kind of a structural level of gross margin that sort of underpins the blueprint? Is there any consideration here from a mix shift standpoint for some of these other portfolio brands that's kind of embedded in that conversation? Yeah. I'll start there, Dylan. The you know I guess foundational gross profit margin that we see can continue is certainly kind of in the mid-fifties long term. And so there's room to continue to grow there. It is driven by strategically more full price regular price with the appropriate mix of promotional activity. The big benefit that you know hopefully we will continue to deliver on is inventory levels are in control, and that prevents the clearance activity that we really had over the last two years. It's about managing that level of that mix of the product that's gonna support the consistent gross margin and gross profit margin delivery on us. In terms of the product categories in a mix shift, you know, we strive for all of these sub-brands to be at a comparable gross margin. When we're selling to the, you know, to the end customer, which is what we do, we look for that opportunity on the value of the cost and the price competitiveness to have a consistent, you know, initial markup and kind of gross margin on after selling. We don't see a big impact due to the sub-brands growing and having that kind of alter our gross profit margin opportunity. I guess what I'm getting at is sort of mid-50s% is where you've been, looking back at least, you know, in pre-pandemic history, maybe a little bit above. You're sort of flirting around high 50s%. You know, is it crazy to think that you're growing up a high 50% kind of underlying margin from here? Or is what you're saying that sort of the core business structurally still runs at kind of that mid-50s% level? Yeah. I mean, when I guess talk about high 50s%, you know, our product margins sell at that kind of level, and then we have, you know, other costs that are baked into our gross profit margin. So yeah, I think that's definitely achievable to maintain on a kind of rolling twelve-month basis. Okay. Across the brands, I guess, where are you Duluth core, Duluth legacy versus sort of the combined portfolio brands from a revenue penetration standpoint? The opportunity to kind of cross-sell among those brands, are you kind of early days? Are you sort of exploring some of that opportunity? I know the customer profiles are gonna be different, but there's got to be some overlap. I'm just kind of curious if there's any commentary there. Yeah. Just at a high level, Duluth or I should say AKHG and Best Made represent just under 10% of the business, with Duluth being the balance. You know, our plan is to continue to grow AKHG and Best Made at a much faster rate than we are Duluth to have that be a larger share of the percentage as we move forward. In terms of crossover, as I was saying earlier to Jonathan, you know, we've set out to work really hard to create these distinct positions for end use intended and. Geared for a like consumer. You know, we're working hard from an assortment perspective intentionally not to have a lot of crossover products because it's end-use focused. We believe that allows us to build the basket size because customers aren't making a choice between, you know, a flannel shirt in Duluth versus a flannel shirt in AKHG, that they are in fact buying them for different needs. We're actually seeing some of that happen in terms of average order value in particular. Sorry. That would mean that there's high crossover potential, right? Because if I'm buying a flannel shirt for one use case, and I'm buying a rain jacket for another, my total basket is, you know, the combination of both of those and not cannibalizing each other, right? That's correct. Not cannibalizing each other. Are you actively out there kind of marketing to those sort of distinct customers that might be a customer of one brand and not another, or is that sort of something that's yet to come? Yeah. Distinct end use is first and foremost. Okay. Similar customer. As you know, we learn more about, you know, different consumers and how they're engaging with us, there's opportunities for us to market, for instance, someone that's buying primarily AKHG to market, you know, some potential consideration items within Duluth or Best Made. I know we've talked about it a lot on the call. I'm still a little bit lost. The pulling back on marketing when you didn't have the inventory makes all the sense in the world to me. Yet marketing actually delevered, if I understood it right. I'm just curious, and it sounds like, did I hear you right? You've gotten rid of some of the catalog as well. I'm just kind of trying to understand, you know, the go-forward outlook for marketing. Should it sort of rest around or maintain the sort of low double-digit% of sales level? Yeah. Yeah. Yeah. Two things there is, one is over the last couple of years, we've been pulling back on catalogs. We're still investing in catalogs. It's still a great brand building piece for us. Importantly, you know, as we've rebranded Duluth and repositioned AKHG, it gives us an opportunity to really do it cross genders. We're doing it over key time frames like Father's Day, for instance. Our Father's Day catalog is hitting this week. We'll take those key moments to tell those family of brand and full family stories. In terms of the deleverage part, you know, part of it is, and maybe we just have to explain it a bit better. We've got working media and non-working, and non-working is really creative brand building. For instance, as we launched women's AKHG and the repositioning of Duluth by Duluth Trading Company, we spent money on creating brand messaging and brand positioning, marketing versus targeted commerce-driven marketing. Gotcha. That makes more sense. An ultimate kind of resting level of ad spend should be kinda high single, low double. I mean, I guess maybe you probably won't commit to that right now, but just out of curiosity, if I can get you to. Yeah. Historically, it's kind of been in this low double-digit range, and I'm comfortable in saying that today we're probably in the range of where we'll be, you know, as we move forward, somewhere in that low double-digit range. Very good. Thanks, guys, for taking all the questions. Nice work. Yeah. Thanks, Dylan. Appreciate it. Thank you. This concludes our question and answer session, which also concludes today's conference call. Thank you very much for attending today's presentation, and you may now disconnect.