Good day, and welcome to the Duluth Holdings fourth quarter 2022 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 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 touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now 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 fourth quarter and full year 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, Senior Vice President and 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 risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Such risks 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 for joining today's call. I'm pleased to share an update on our business performance and review plans for 2023 that remain aligned with our strategic objectives of evolving Duluth Trading Company as a premier lifestyle platform of sub-brands focused on building great innovative product, meeting our customers' needs in the channels they want to engage with us in. Duluth Trading Company was founded on the belief that there's got to be a better way, a better way to solve, a better way to make, a better way to be. We're on a mission to build better, harder working apparel and gear that helps enable everyone from the young to the young at heart, to take on life with their own two hands and live on terms that are uniquely their own. Our secret sauce is anchored on better brands, better innovation, better marketing, and better customer experiences. Duluth Trading is a brood of sub-brands, all bonded by the belief that you can accomplish anything that you put your mind and your own two hands to. We have a long, colorful history of product innovation and solution-based design. We create distinctive marketing made to break through the clutter. We pride ourselves on outstanding and engaging customer experiences. We remain keenly focused on growing a lifestyle platform of sub-brands with a well-established, digitally led, omnichannel business. We see multiple revenue growth opportunities led through five of our strategic Big Dam Blueprint pillars. We're making strategic investments to support long-term EBITDA margin expansion that are funded with operating cash flows as we have a strong balance sheet. Fiscal 2022 was a dynamic and challenging year as we all faced macroeconomic uncertainty, our industry was hit head on with a dramatic shift in consumer demand behavior earlier in the year, as well as continued inflationary pressures and supply chain disruption. In the face of these crosscurrents, our teams remained agile and flexible, navigating the turbulent year with an unwavering focus on servicing our customers day in and day out, while controlling the areas of the business that were in our control. I'm truly grateful for the hard work and dedication across our entire organization. We ended fiscal 2022 with net sales of roughly $653 million and adjusted EBITDA of $43.5 million. Although we met our most recent guidance following our mid-January business update, we are not satisfied with our financial performance for the year. That said, we're pleased with the progress made on our brand positioning and execution of our strategic playbook. The initiatives outlined in our Big Dam Blueprint reflect steps we're taking to position our business for long-term success. Having said that, key strategic milestones we achieved in 2022 include the launch of AKHG for women's, which added a new leg of growth in our multi-brand portfolio. New and exciting product innovations. Hiring of talent in sourcing and material innovation. Executing the replatform of our duluthtrading.com website to the next generation of e-commerce architecture, specifically tailored for site speed and mobile usability. Development of our store of the future concept to inform layout and design elements of future new stores and remodels, and the on-time and on-budget progress of a fully automated fulfillment center in Adairsville, Georgia. Our plans for 2023 build on the progress of these initiatives and further advance key elements of our strategic roadmap. To our fourth quarter results. Today, we reported net sales of $242 million, adjusted EBITDA of $20.6 million, and EPS of $0.23. As we shared in our holiday sales release, a softer consumer backdrop evolved during the fourth quarter, which was exasperated by a retail sector that was over-inventoried, resulting in a highly promotional environment. We were not immune to the sector-wide deep discounting and were more promotional than we historically have been. However, with a well-managed inventory position entering the peak holiday selling season, we remained competitive but made the near-term strategic decision to limit our discounting and not chase unprofitable sales. Our focus was on maintaining integrity of our unique products and brand stories, and although our decision may have resulted in a lower top-line outcome, we held our gross margin rate above 51%, as we firmly believe that price integrity of our offering is critical to the long-term health of our brands and business. As the quarter progressed, our top-line trend improved, with January representing the strongest month in the quarter, and the improving trends have continued into the first quarter. We ended the year in a well-balanced inventory position, up 26% to last year, as we made a purposeful planning decision to bring spring goods in earlier to avoid any lingering supply chain constraints which disrupted last year's transition from winter to spring. In fact, nearly half of our inventory growth year-over-year is in spring goods. In light of the continued macroeconomic uncertainty entering 2023, we are planning our business prudently with a focus on driving profitable growth, leaving room to chase trend shifts, as well as invest in strategic growth opportunities as they arise. Our plans call for appropriate management across inventories, expenses, and capital outlays that align with our 2023 sales outlook, calling for flattish growth compared to last year. We previously shared our perspective on where Duluth can generate new legs of growth in the outdoor recreation apparel segment, where we are seeing our AKHG sub-brand succeed today. The infrastructure investments we're making now will establish a strong foundation to support a multi-brand platform on which we can scale and nurture complementary brands through acquisition. With the strength of our balance sheet, we are uniquely positioned to go on the offense when the opportunity arises to advance elements of our strategic roadmap. Over the near term, we will draw on our ability to flex when needed and drive growth in our target customer with new, innovative products. We are balancing the near-term focus on our existing sub-brands with the potential to add complementary brands under the Duluth Trading umbrella. To further our brand's deep connection with our customers and capture the attention of new consumers, we're focused on delivering creative and distinctive marketing that cuts through the noise of an increasingly fragmented media landscape, tells our innovation and product stories with compelling articulation of features and functions, including durability, performance, and problem-solving benefits, and drives broader awareness, consideration, and purchase behavior. During our 2022 peak season, our best performance came from collections that had newness, product enhancements, and compelling storylines, such Women's AKHG meltwater and Puffin, and First Layer collections. We were able to realize leverage in our marketing spend in the fourth quarter and finished the year with an improvement in our 12-month buyer retention rate. Building on success factors such as these gives us confidence that the underpinnings of our brand health is strong and resilient. Turning back to the fourth quarter merchandise performance, our women's business grew 1% overall, led by improvements in our new product expansions, the launch of AKHG in the spring of 2022, and overall improvement in our inventory position. Our women's First Layer category, which includes the No- Yank Tank collection, was up over 40% to last year. Our bra collection, including the recently introduced Line Tamer bonded bra, grew 10% in the quarter, driven by new innovations in fabric and design featuring soft and seamless construction to prevent lines and bulk. With the leveraging of proven technical materials such as Armachillo Cooling and Dang Soft fabrics, as well as adding extended sizes, we are building on our reputation as the destination for comfort and function within the women's intimate segment. We see this as a tremendous growth opportunity. With our customers informing our innovation design decisions, we are gaining significant recognition in this segment for unique product Women's AKHG apparel collection represents a sizable growth opportunity for Duluth's expansion into the outdoor recreation space. The new fall/winter assortment was met with great response from our customers. In our 2023 women's assortment, we're elevating the multi-year success we've had in the garden category with new prints and styles while launching our new No Fly Zone technology, as well as expanding into new short coverall silhouettes. These seasonal lighter-weight items meet the shifting needs when temperatures start to rise or rain may be in the forecast. We have also supplemented this growing business with expanded garden gear, including new products such as our Fire Hose garden stool and our Heirloom garden apron just in time for Mother's Day. Our men's apparel segment was down to last year in the fourth quarter. We did see pockets of strength within our core offering, including our Double Flex denim pant, which was up high teens in the quarter, and the expanded offering of men's underwear styles such as Armachillo, Dang Soft, and Bullpen. Our newest product release in men's underwear, Temp Tamer, also did very well, as did our fit expansion within our Longtail T program. Our customers continue to love and look forward to our fun and unique designs in underwear that celebrate holiday themes such as Christmas, Valentine's Day, and St. Patrick's Day. We'll be expanding this assortment this year to feature some of the most iconic beer brands. The launch of our spring swim collection for men and women is underway now and expands our AKHG Lost Lake collection with greater choice to mix and match tops and bottoms, all with the purpose of providing the necessary sun protection, fast-drying fabrications, and stylish patterns. During the fourth quarter, we worked to find the right balance of marketing investments and media channel mix. We prioritized an increased investment to drive greater brand awareness and measurable results. Web traffic and sales on mobile devices continue to increase as a percentage of the total at 68% and 52% respectively, both realizing a 300 basis point increase year-over-year. This trend speaks to our intentional shift to a younger target customer who are more digitally native in how and where they consume content, browse, and ultimately purchase products. We also prioritized targeting new customers in store geographies with digital and streaming audio tactics that help drive an increase in retail conversion rate of over 200 basis points. Throughout the year, we also focused on reactivation and retention of customers. Through the end of 2022, our strength in retaining customers who were not new to the brand in the prior year continued and led to a 40 basis point increase in the full year retention rate overall. Equally important, new buyers from years prior to 2021 are returning at a high single-digit rate of increase year-over-year. Personalized content was a key driver of our ability to reengage lapsed customers, an effort we will continue to focus on. Our plans for 2023 include continued investment in high efficiency paid social and digital advertising tactics with content that prioritizes three objectives. It leans into our core Duluth brand tenets of innovative products that are durable and solve problems. It fuels the continued growth and momentum of our AKHG sub-brand, and it drives increased overall brand awareness. Speaking of AKHG, more of our advertising investments will be going to grow this brand through digital video, social platforms, and with outdoor influencers. We also plan to focus on buyer conversion through paid search, Google Local, and Google Shopping channels, as well as cross-selling Duluth shoppers during key periods via email, product recommendations, and new buyer welcome offers. To support our core Duluth brand, our investments will focus on expanding brand awareness, acquiring new customers, and driving growth in both our men's and women's business. To further build brand awareness, we will focus national TV and streaming investments on high impact cable placements during high vis programming like March Madness, the new Yellowstone season, and live sports. Coordinating visibility across media channels that index extremely well with our target customer during these events creates deeper impressions and higher probability of success. In addition, introducing video and audio retargeting of recent browsers that leverages familiar content concepts drawn from national awareness ads further reinforces reasons to buy. We also intend to build on our success utilizing investments in influencers for both our Duluth workwear and AKHG outdoor recreation brands. Lastly, throughout our advertising placement activity, we will undertake media consumption surveys to ensure alignment of our spend to our target customer base and rigorous brand search and SEO optimization to maximize funnel conversion. During the fourth quarter, our retail store channel made progress on several key initiatives with sales and productivity trends improving as the quarter moved through the peak selling period. Heightened selling engagement and much better inventory positions in stores helped drive an increase in the units per transaction and strong conversion. We are also pleased with our fully operational mixed-cart capabilities, allowing store sales associates to add products to the customer's cart at the time of checkout for items or sizes that may not be available in the store that day. Our stores also continue to support our customers' desire to buy online and pick up in store, which generates incremental purchased items on roughly 25% of BOPUS orders. Additionally, the stores serve an important and strategic role during the peak season as they fulfill a large portion of direct orders. This past peak season, the stores fulfilled close to 20% of direct sales demand during the quarter. This omni-channel functionality is critical for clearing through seasonal and clearance goods in the store's inventory, making room for the transition to the new season, and allows the customers who shop with us online to purchase items that may have been stranded in the store and otherwise unavailable to them. During 2023, we plan to continue refining and building on our omni-channel capabilities, focused heavily on delivering a frictionless experience while generating more reasons to visit the stores through community outreach and special events that draw in traffic. We recently made store layout changes in 20 of our stores to expand the women's assortment, and we completed a remodel of our St. Charles, Missouri store based on customer feedback. The learnings from these changes are being captured and will be used to inform future new stores and remodels. At this stage, we do not expect to open any new stores in 2023, but are actively engaged in a new site selection process that we expect will give us good options to gradually expand the store base beginning in 2024. I'd like to take a moment to recognize the teams involved with our contact and fulfillment center operations. We're pleased customers reaching out to our contact center were serviced at levels above our targets. With the investments made to speed inbound receiving, improve sortation and cross-docking, and keep our retail stores in stock, our teams did an outstanding job on all fronts. We're also excited to see the progress on our new fulfillment center in Adairsville, Georgia. This center, equipped with automation technology by AutoStore, will enable high-velocity fulfillment, improved productivity, and faster delivery to customer. With the planned go-live date for Q3 of 2023, our project remains on time and on budget. Once operational, we will have the ability to shift over half of our direct order fulfillment to Adairsville for the peak season in 2023, and realize cost per unit output that is roughly half the rate of our current centers. Dave will share more in our guidance for 2023, but we expect to realize significant cost savings and a reduction in peak hiring needs this year. I'll also add that while the investment is as large as any single project we've undertaken, we are funding the roughly $50 million initiative entirely from cash from operations, leaving our balance sheet strong with no bank debt. As I mentioned earlier, our strategic flexibility is intact, and our ability to leverage the new infrastructure to grow our current business and for potential acquisitions is underway. We're confident about the key investments we're making to strengthen our premier lifestyle platform of sub-brands, as well as with the merchandising and marketing plans we have set for 2023 to support our growth. Our plans remain aligned with our Big Dam Blueprint, which is the foundation for our long-term success and gives us the confidence that Duluth Trading Company can forge ahead. I'll turn the call over to Dave to provide more details on our fourth quarter results and discussion of our outlook for fiscal 2023. Thanks, Sam. Good morning. On today's call, I'll start with a brief overview of our fourth quarter and full year results for 2022. I'll conclude with commentary on our outlook and guidance for 2023. For the fourth quarter, we reported net sales of $241.8 million, down 10.7% compared to $270.8 million last year. For the full fiscal year 2022, net sales were $653.3 million and were within the range of our recent guidance. Direct channel sales were down 12% from last year in the quarter, with slightly better trends for direct volume in store markets versus non-store markets. Our retail channel was down 8.2%, turned to positive year-over-year growth in the month of January. Traffic conversion rate in our stores increased over 200 basis points based on our stores teams' engaged selling efforts and better in-stock positions. Our fourth quarter gross profit margin was 51.2%, compared to 53.8% last year, and reflects the higher mix of promotional and clearance sales. To keep seasonal goods moving and minimize clearance overhang heading into 2023, we proactively took action, ending the year in a healthy position. Looking forward, we anticipate the mix of our full price versus promotional business in the first half of 2023 will be relatively similar to what we experienced in the fourth quarter, with an improving trend as we progress throughout the year. For the full year of 2022, our gross profit margin decreased 140 basis points to 52.6%, compared to 54% last year, and represents our balanced and disciplined approach to meeting customers' pricing expectations while keeping inventory clean and protecting brand integrity. Turning to expenses, SG&A for the fourth quarter decreased 7% to $113.2 million or 46.8% of sales, compared to $121.4 million last year, or 44.9%. This included a decrease of $4.3 million in selling expenses, $4.1 million in advertising and marketing expenses, and an increase of $200,000 in general and administrative expenses. Selling expenses as a percentage of net sales increased 10 basis points to 16.5%, compared to 16.4% last year, was the result of a slightly greater mix of store sales versus direct sales during the quarter. We controlled our variable expenses well during the quarter with our store and fulfillment center operations delivering labor efficiencies. Advertising and marketing costs were $29.8 million in the quarter, compared to $33.9 million last year, as a percent of sales decreased 20 basis points to 12.3% compared to 12.5% last year. An increase in the paid digital media channels was offset by a reduction in national TV placements as we pulled portions of that awareness spend into the third quarter to align with more normalized inventory flow this year. As Sam noted, the progress we're making on retaining and reactivating lapsed customers is being driven by our ability to personalize content and deliver targeted re-engagement offers. General and administrative expenses during the fourth quarter were $43.4 million or 18% of net sales, compared to $43.2 million or 16% last year. Increased depreciation related to the technology and logistics projects, as well as fixed costs for the new Southeast fulfillment center scheduled to go live in the third quarter were largely offset by lower personnel costs. As of today, our store count stands at 65, with currently no planned store openings in 2023. We continue to evaluate potential sites and leverage the learnings from our recent store remodel test and expanded women's floor plan in roughly 20 stores to inform our store of the future format for new store openings and remodels. Adjusted EBITDA for the fourth quarter was $20.6 million or 8.5% of sales, and $43.5 million or 6.7% of net sales for the full year in 2022. Our net income for the fourth quarter was $7.5 million or $0.23 per diluted share, and $2.2 million or $0.07 per diluted share for the full year, which is within our current range of guidance. Moving on to the balance sheet. We ended the quarter with net working capital of $107.9 million, including $45.5 million in cash and zero outstanding on our $200 million line of credit. Our cash balance is down $31.5 million from last year-end due to our decision to receive inventory in earlier before the end of the year and avoid the gap in seasonal transition receipts from last year's supply chain disruptions, plus an increase in our capital outlay for the new Southeast fulfillment center. I'll provide more shortly regarding our financial outlook for 2023. I do want to share our objective that we expect our cash from operations will fund the increase in our capital expenditures in 2023, and we expect to be flat to slightly up in our cash balance at the end of fiscal 2023. Our inventory balance end of the year, 26% up from last year and is in a healthier position with more timely receipt of both year-round and seasonal goods. In fact, roughly 45% of our spring season goods were received by the end of January versus less than 10% last year. Our current balance of clearance goods is also in a good spot for this time of year. Our capital expenditures for the year were $31.5 million, including the cost of software implementation and are reduced from our previous guidance of $35 million. We reprioritized our technology investments to focus on the web platform upgrade, warehouse management systems in connection with the expansion of our fulfillment network, and the go live of first phases of our merchandise planning system. Our capital expenditure plan of $55 million in 2023 will largely be focused on the completion of the Southeast fulfillment center, which is progressing well and on schedule to be fully operational in the third quarter. We expect that meaningful cost savings will be realized once the new automated facility is up and running from lower cost per unit processed, lower outbound freight expenses for more efficient packaging and lower parcel weights. We'll be reaching a greater portion of our direct customer base in three days or less, enhancing the service and speed of delivery. Our multi-year technology roadmap to support strategic growth objectives will address critical foundational needs for scale. We are focused on replatforming our data systems to drive foundational improvements across our technology investments and completing the WMS upgrades across our logistics network. Moving to our outlook for fiscal year 2023. Our full year net sales guidance is $645 million-$660 million, with the first half of the year slightly down to flat compared to the prior year and the back half flat to slightly up. We expect sales trends between our direct channel and retail channel to be similar, reflecting no change in the number of store locations and our omni-channel marketing approach designed to drive traffic in both channels. We expect gross profit margin for the full year to be up 20 basis points-40 basis points, with the gains beginning in the second quarter. Advertising expenses are planned at roughly 10.5% of sales for 2023, leverage being gained throughout the year with flexible adjustments between traditional linear TV, streaming, audio, and digital media. In aggregate, these media channels comprise roughly 80% of our advertising and marketing expenses. Selling expenses comprised of outbound shipping costs and hourly labor in the stores, customer service, and the fulfillment operations are expected to leverage over 2022 in the range of 10 basis points-30 basis points as a percent of total sales. Our general and administrative expenses will increase in 2023, primarily from incremental depreciation on technology and logistics investments, plus the fixed costs related to the new Southeast fulfillment center and additional personnel costs. As a perent of sales, our general and administrative expenses are expected to increase and is reflected in the total SG&A expenses deleveraging up to 50 basis points. Our interest expense, which includes cost to borrowings on our line of credit, as well as imputed interest on finance lease liabilities, are expected to increase $700,000-$1.3 million year-over-year. Our depreciation and amortization expense, including software subscription and implementation costs, are expected to be roughly $37 million. Our full year adjusted EBITDA guidance is $47 million-$49 million and EPS of $0.02-$0.08. This includes estimated diluted shares of 33 million and a tax rate of 25%. In closing, we are confident that the investments we're making for the long term and scale are balanced well given the current backdrop of consumer uncertainty. The steps taken last year to bolster our balance sheet liquidity and ongoing actions to prudently manage inventory and expenses will allow us to continue to achieve our customer focus strategy and brand positioning objectives. With that, we'll open the call to questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speaker phone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Once again, ladies and gentlemen, that's star then one if you have a question. Today's first question comes from Jonathan Komp at Baird. Please go ahead. Yeah. Hi, good morning. Thank you. I wanna ask just firstly that the recent sales trend you're seeing, could you comment on what your full price sales look like? I think last year you had low clearance inventory, just wanna understand the underlying trends you're seeing. When you think about the back half revenue projection, could you just comment on what you need in terms of a volume or unit growth perspective, improvement, just given any changes in pricing? Last year, you'll be cycling also some elevated discounting. Just curious, you know, what drivers you see supporting the back half guidance. Yeah. Hi, John. This is Dave. You know, our sales trend that we articulated here, improving coming out of the fourth quarter, still down to last year, but relative to our holiday sales, not down nearly as much, so improving. That's what's continued into the first part of the first quarter here. You know, tied to that is really the mix of sales between full price and promotion, which continues to be in the same general direction as what we had before. You know, we're not immune to deep discounting in this environment. You know, the promotional environment is driving that. I think what we're pleased about is that inventory levels are in a good spot. Only a small portion of the increase in inventory at the end of the year relates to clearance goods. Most of it is pull forward spring. A lion share of it is women's. That sets us up well for not having to take aggressive pricing action. The environment is continuing. Okay. That's helpful. Thank you. Maybe one more just as you think about the performance of the core men's business for the Duluth brand, could you just comment on the trend you're seeing there and if you've been able to isolate any factors that have led to some of the weakness? Maybe just the broader strategy as you talk about adding new brands to the platform over time. You know, why does that make sense when, you know, the core brand is not performing up to your expectations? Hi, Jonathan. It's Sam. Yeah, men's apparel segment was challenged this last quarter. As I said in my prepared remarks, you know, we saw some pretty good pockets of strength, specifically with products like our Double Flex denim, which was up high teens for the quarter, as well as, you know, the expansion into some new technologies within, you know, our big men's unders program was equally great. You know, our big program around men's woven bottoms underperformed our expectations. What we're really doing is shifting, you know, as trends and consumer demand shift, we're shifting our investments into some of these, you know, higher demand items like that Duluth Flex denim pant, so that we start to ramp that up to meet the current demands and what we expect is going to be the future demands of the business. As well as, you know, shifting our marketing initiatives to focus on some of these, you know, emerging hero products, I guess, as I would put it. In terms of our longer term strategy, you know, we think that the infrastructure investments we've made and what we're making that enables our business to scale is not just about growing the current Duluth business, but it is about continuing to evolve the Duluth Trading enterprise into a platform of sub-brands. We'll focus on a multitude of initiatives that help us grow long term. Near-term focus is around the Duluth Trading Company business, it's around the AKHG business and holistically, you know, our women's growth. As we potentially see an acquisition as, you know, an opportunity for us to further our strategic roadmap, then we'll do that. Make no mistake, our priorities are on growing the current business, but ensuring that we're keeping an eye on, you know, the long-term opportunities for us to scale the business. Okay. Maybe last one just for me, if I could. The gross margin and the move down to the low 50s% the last couple of years, could you just comment, is there anything in the current view that's more temporary in nature from the gross margin? As you think about some benefits from the investments you've made and any other drivers over time, is there any path to get back to, you know, a meaningfully higher gross margin, you know, more in the mid- to high 50s%, as we think about the margin potential for the business over time? Yeah. Jonathan, it's Sam again. I'll address, you know, the kind of future viewpoint. You know, as we invest in different elements of our infrastructure as well as our organization, I'll remind you of two specifically. The investment in Adairsville into this fully automated fulfillment center, you know, we believe will drive meaningful cost efficiencies. In fact, once operational, the fulfillment center in the southeast on a CPU basis will be close to half of what it is in the current network. You know, in addition to speed to market and accuracy, you know, we're gonna get much more cost efficient around the input costs to flow through merchandise both to our retail stores and our consumers. That leads to, you know, some improved flow through. At a higher level, you know, we recently announced the hiring of a executive to oversee our sourcing and materials innovation. We believe that starts to open up the door for us to expand our IMUs as we move forward. As we think about, you know, that group and what they'll be able to deliver, we really think that we'll start to see some of that improvement as we head into 2024. Okay, that's helpful. Certainly would welcome any quantification of some of those benefits as you get more color over time, just given the, you know, the level of gross margin that would be appropriate for a premium direct brand. Any color over time there would be helpful. That's it for me today. Thank you. Great. Thanks, Jonathan. Thank you. Our next question today comes from Jim Duffy at Stifel. Please go ahead. Thank you. Good morning. Two lines of questioning for me, guys. The first more strategic. To return to growth, you either need more customers or more velocities in dollar per customer. Which of those two do you think is more important for Duluth to get back on a growth path? How are you know, kind of managing the business accordingly? Yeah. This is Sam. I, you know, I don't know that I would say either is more important than the other. I think they're equally important. You know, again, I would point you to some of my prepared remarks around, you know, our focus, certainly what it has been and where we're gonna continue to drive focus through our marketing and advertising initiatives. A big chunk of that is on opening up broader brand awareness. Certainly, you know, I spoke a lot about our focus and success last year and what we'll continue to focus on this year in terms of re-engagement and retention. You know, the new customer and maintaining our current customers are really important for sure. Your second point was on. No, that was it. No, you've covered it. Yeah. Okay, great. Second question was more related to cost, but I do have a follow-up on just the multi-branded strategy as it relates to your more customers or dollars per customer. Sam, How do you ensure that, with the media mix spread across multiple brands, that's not spreading the dollars too thin? Yeah. It's kind of a combination of things. What we're doing is we're being really, really strategic about where we place those dollars. At a high level, you know, as we look at ensuring that we're investing against the growth of each of the brands, you know, in a increasingly fragmented marketplace, you know, more and more of our consumer insight research is telling us where we're getting the highest engagement from our target customer, and we're really gonna place bets there. That means that there's going to be some channels that may be important to our customer, but they're lower on the priority list in terms of how much they engage or how much content they consume there. We're gonna just, We're gonna start from the top in terms of, you know, where we get the biggest visibility and eyeballs, and we're gonna place, you know, bigger bets there. Okay. Dave, this one for you. It's on Adairsville and the cost savings opportunity. $50 million investment to a big number. Can you talk about how you get to comfort on the ROI for that? You talked about the cost per unit at half the rate of what it is currently. Can you help us isolate, you know, what that cost component translates to and benefit to margin? Yeah, sure, Jim. You know, the cost savings on cost per unit, you know, it's part of the pick, pack, and ship process, is gonna be very compelling. As we plan to get volume up to, you know, almost half of our volume of direct outbound orders in the back half of this year, that will translate into savings that's reflected in the 10 basis points-30 basis points of selling expense margin for the year. Now heading forward, we certainly expect that to continue and get the full year benefit and it will continue to be refined. That 10 basis points-30 basis points easily would be slightly larger next year in 2024, and ongoing, you know, help offset cost increases in fulfillment operations from wage rates, et cetera. We're seeing this as our first test in automating the fulfillment outbound facilities and see that that's gonna be a meaningful improvement in the P&L cost structure for us going forward. Okay. We should think about that fulfillment expense just continuing to lever in 2024 and 2025 based on benefits from Adairsville? Certainly in 2024, we'll see incremental increase in 2025. You know, we'll see. That's a bit far out, and we haven't given much more color around that period of time. Understood. Thank you. Thank you. Our next question today comes from Janine Stichter with BTIG. Please go ahead. Hi, good morning. Was hoping you could comment, in light of just taking a pause on opening new stores this year, any updated thoughts on expanding wholesale? Just curious how those tests are going. Was wondering if there's anything else you can share on the initial learnings from the 20 stores that you've reconfigured. Thank you. Hi, Janine, welcome to the call. Thanks for the question. This is Sam. Yeah, the, you know, as, you know, we've said on previous calls, you know, the physical store is really important piece of our omni-channel strategy for a number of different reasons. You know, we wanna make sure, you know, that we're doing the right level of deep dives around the consumer, where importantly, you know, our brand would resonate from a physical store perspective. We're in the middle of a pretty intense site selection process. We think we've got a few locations potentially nailed down for 2024. The pause was really just about us as we came out of COVID, making sure that we kind of reset ourselves in terms of our priorities and where we are going to invest in the business. While, again, stores really, really important to our long-term omni-channel strategy, we had some other priorities like the automated fulfillment center that we thought made more sense for us to tackle ahead of opening new stores. Our plan is to gradually expand the store base as we move, you know, into 2024 and beyond. Great. Any update on how wholesale is performing? Wholesale, you know, we've got a small test with Tractor Supply and that continues, you know, as we learn more and they learn more and give us good insights. You know, we're adjusting assortments and quantities and store base and whatnot. So that's going well. Wholesale, we see, you know, as clearly an opportunity for us. I think that that's a little bit down the line, you know, as it requires some enablements. The DC in the southeast will be one of those things that allow us, I think, to, you know, potentially be in a better position to do that. Then there's a whole organizational investment that we've gotta make. Again, while we see that as an opportunity, it's a little bit lower on the priority list, just as we're building other infrastructure capabilities to drive and scale the current business and any other potential business we might consider adding. Great. Then maybe just a follow-up on marketing. I think you said leveraging to 10.5% of sales this year. Just curious on the thoughts of how you arrived at that level. Is that kind of where you see it sitting sustainably for the business, or is there a situation where perhaps you consider putting more into marketing, let's say the environment starts to improve and you wanna make sure you're capturing market share? Yeah. Hi, Janine. you know, the 10.5% is a point in time that we feel is appropriate given the environment. As we shared in the fourth quarter, we, you know, we did reduce some of the spend as just as soft business was playing out and not wanting to throw dollars away. It's a balance with the current environment, the marketing mix that Sam referred to, and looking at where the most efficiency is. you know, longer term, we continue to see improvements in the efficiency in digital media and that longer term should allow us to potentially leverage further. On the other hand, in this environment where we're planning at 10.5%, we if we see some opportunity to invest deeper, then we'll also consider that because we can see that it can drive profitable growth. The beauty of the marketing mix right now is it's more flexible than it ever has been with less dependent on upfront buys on TV and catalog circulation. We're a lot more nimbler on that investment. We're finding, you know, our ability to kind of reach the customer, whether retained or new, with those channels is being even more granular and precise. That's how we're thinking about marketing spend going forward. Hey, Janine, I wanted to get back to you. You also asked about the women's expansion, I didn't mean to overlook that question. We had 20 stores where we expanded our women's assortment. In those 20 stores, you know, we're obviously pleased with the greater assortments in those stores. I had mentioned on our last earnings call that new customers coming to our brand now are split 50/50 between men and women. You know, we're really focused and dialed in on growing this women's part of the business. The women's expansion, those 20 stores, over our measure period, have all outperformed the rest of chain, the company average. The store-based company average, that is. Yeah, they're, they're doing well, and, you know, we continue to make tweaks and adjustments as, you know, we get greater and greater feedback from her. Yeah, we're pleased with that, and we're gonna continue to drive the women's business. We had about a 200 basis point increase in overall penetration of our business to now be about 28%. You know, our kind of longer term goal is we think it could be in the high thirties, even touching 40% of the business. You know, as we look to 2023, you know, our focus is to continue to improve that penetration percentage and make our way towards that, you know, high thirties, you know, potentially 40% penetration rate. Perfect. Thanks so much for all the color, and best of luck. Thank you. Thank you. Our next question today comes from Dylan Carden with William Blair. Please go ahead. Thanks a lot. Yeah, just kinda curious on the guide, just top line, I guess, for now. Last year, really, I think a lot was predicated on sort of new inventory flow. You know, this year it doesn't seem like you're talking as much about that. As you're sort of breaking down the components of your comfort level, you know, there's still presumably something, not insignificant acceleration here in the first quarter, given kind of where trends feel like they are and where you kind of expect to land the front half. Is that easier comparisons mixed with sort of a more targeted marketing and then maybe some efficiency born from, you know, better retail online integration? That's kinda more what I hear you guys speaking of this year. Well, yeah. Hi, Dylan. Certainly inventory positioning out of the gate here is a benefit for us relative to last year. The headwind is still a soft consumer, you know, backdrop and softer trends that we're seeing in the consumer. That's why we're cautious in how we're gonna plan the business this year. I think we've gotten through the thick of it coming out of last fourth quarter, and the trends are now You know, improved. We simply, as much as we've got the inventory in position, we've got great new products coming out for spring. They're already out there. We've got a marketing plan that's gonna support, you know, product-focused messaging. You know, the consumer is still not where they were a year ago. We're just planning around that aspect more than more than the other factors that'll help lift us when that, when that backdrop kind of lifts itself. That's how we're thinking about the sales plan. Thank you. As you're kind of thinking about margins, and I get that a lot sort of isn't in your control as it relates to the consumer, but to the extent, you know, you're sort of just perched above break-even net income margin, I mean, is there more downside risk should sales sort of not come in where you expect? Do you have confidence you can kind of maintain, you know, certain aspects of the margin model to make sure that you don't dip into sort of negative earnings territory? Yeah, you know, running a profitable business is certainly a core tenet of ours, and that's what we would intend to do. If sales trends were to worsen on us, we do have flexibility in the model, to make adjustments as we kind of proved last year and even the pandemic year. Yeah, I think that's paramount. Gives us not only a stability in positive earnings but helps maintain our, you know, our access to liquidity as well. That's important, to navigate through the period we're in right now. Well, would a big piece of that be Georgia opening up? I mean, I guess, how much of a weight has that been on the P&L? You know, that definitely has some of the capital costs that we're starting to realize and the fixed cost of owning the building or renting the building. That's such a strategic benefit, and we're gonna see realization of value as early as, you know, six months from now. Yes, that is in the near term weighing on the P&Ls I've called out in my remarks. And it's got a long-term return on investment there. But it's core to you know, adding the foundation for us to be a larger and scale brand and house a brand. We think that's important. We've chosen to prioritize that over other things that we have pushed off and decided to wait on, in terms of investments. To that point, I mean, it sounds like, you know, how do you think about if you become, you know, that allows for different channel distribution, wholesale, obviously supporting more stores, you know, to the extent that you add another brand here maybe in 2024, 2025. Do you feel like Georgia kind of gives you enough headroom to kinda lay out what you're talking about here, or will there be sort of more needed 2024, 2025, particularly as you sort of grow a portfolio strategy? Yeah. No, that will address, you know, provide significant more capacity for us to support stores, direct order, and wholesale or another brand. You know, we still have our three other centers that we've invested automation in, not the same kind of automation, but more inbound sortation and outbound efficiencies. They operate very efficiently. As a network, we've got now, with Adairsville coming live, we'll have the capacity to handle our volume for the next few years and then it's a look forward beyond that. That's a big needle mover for us in terms of strategic flexibility and capacity increase. Awesome. Thank you very much for the time, guys. Nice work. Thank you. Thank you. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any final remarks. No, nothing here. We're excited about the new year and look forward to sharing more with you on the next call. Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.