Good morning, and welcome to the Duluth Holdings, Inc second quarter 2024 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 your telephone keypad. To withdraw your question, please press star, then two. Please note this 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 second 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 Heena Agrawal, 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 risk 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. And 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 with our second quarter performance as we delivered top-line sales growth of 1.8% while expanding our gross margin 90 basis points as we began to see the benefits of our sourcing initiatives. The quarter was highlighted by strength in women's and our first layer business, as well as strength in our cooling technologies across Armachillo and Dry on the Fly, keeping consumers cool during the hot summer months. We saw a trend line improvement in both conversion and transactions, coupled with healthy increases over last year in both average order value and units per transaction. Before I review our second quarter results, I'm excited to update you on a key addition to our leadership team. On August 12th, Eli Getson joined Duluth Trading Company as our Senior Vice President and Chief Merchandising Officer. Eli has more than 20 years of leadership and expertise. Most recently, Eli served as the Senior Vice President and General Merchandise Manager at Academy Sports + Outdoors, where he was responsible for merchandising, strategic planning, and product innovation. Eli brings with him a wealth of experience and knowledge and has hit the ground running. We look forward to sharing his insights on future calls. I'm excited to provide an update on the progress we are making on our key strategic initiatives, including product development and sourcing, logistics, network optimization, and our retail store portfolio strategy. As mentioned in prior calls, we are seeing the benefits of our sourcing and product innovation efforts. This remains a critical strategic unlock for the business, which is allowing us to bring to market high-quality, innovative products more frequently, increase our speed to market, and significantly reduce our product costs. As Heena will discuss, we remain on track to realize significant product cost benefits this year, with more to come over the next several years. I shared on the first quarter call that we identified and began phase II of our fulfillment center network plan to maximize productivity and cost. Our highly automated fulfillment center at Adairsville is now efficiently processing nearly 60% of all online orders and replenishment volume. This has increased overall network capacity and enabled us to exit one of our legacy fulfillment centers. With the variable CPU in Adairsville 65% lower than the average legacy facilities and elimination of fixed costs from the exit, we anticipate annualized run rate savings of approximately $5 million, with expected benefits to start late in the fourth quarter of this year. We're making great progress on our retail store portfolio strategy. Stores are a critical component of our omnichannel strategy, with nearly 2/3 of new consumers preferring to shop in-store. In addition, our omnichannel consumers spend more on average per order and shop at more than twice the frequency of our single-channel consumers. Stores also offer important services like returns, buy online, pickup in store, and fulfilling orders, creating a seamless consumer experience. Combining a digital-first strategy with a relevant and productive store portfolio is critical to winning in an omnichannel ecosystem. The three key pillars of our retail store portfolio strategy include new stores, existing store evaluation and rationalization, and revamping marketing to drive traffic and brand awareness. As we look to future new sites, our primary criteria are location, market share opportunity with our target customer, and productivity. Format and assortment will be based on our store of the future, with equal representation of men's and women's products. We've recently signed two LOIs and are targeting new store openings in the second half of next year. In terms of our current fleet, about 25% of our stores are coming up for lease renewals through 2026. We're evaluating these locations for remodel, relocation, or exit. In the short term, we're leveraging our strengths to capture market share and to optimize our marketing spend. Longer term, we're focused on building our existing presence in priority markets and entering new priority markets. We look forward to updating you on our retail store portfolio strategy on future calls. Our key strategies are on track with benefits flowing through. In addition, we're leveraging the benchmarking study to identify and implement structural improvements to improve the business model with a sense of urgency. Let me now provide key second quarter highlights on product innovation and consumer and brand marketing successes. Our level of newness sequentially improved in the second quarter and increased by more than 300 basis points when compared to last year. Some product innovation highlights that resonated with consumers include: our women's business grew nearly 6% this quarter, with positive results across both brands, particularly in Duluth. Growth was largely driven by strength in the women's first layer business, which grew by 22%. We continue to see success across our Armachillo, Buck Naked, and Dry on the Fly collections, and women's bras flourished with a 20% increase, driven by the popularity of our TeeLUXE bra as well as plus sizes. Additionally, our Heirloom Garden collection continues to be a favorite for her, as evidenced by growth of 18% this quarter, bolstered by a variety of new prints. In our men's business, the Duluth brand delivered growth of 1% this quarter. The men's Armachillo collection led the way with a strong 10% increase, while woven shorts saw an 8% uplift, driven by the success of the DuluthFlex Fire Hose sweat management and Dry on the Fly lines. These collections were all haloed by our cooling technology focus that ran for the majority of June and July. Our Double Flex denim collection also performed well, with a growth of 3%. Our focus on expanding the woven shirt category resulted in growth of more than 40%, driven by strength in barbecue shirts and our Wrinklef ighter collection. Within AKHG, we saw double-digit growth in our women's Lost Lake collection, as well as Renew Bamboo across both men's and women's. With regard to our recently launched fitness collection, we remain encouraged by its performance in the first half and, as previously stated, is on track to be a meaningful part of our overall AKHG business this year. As part of our Hero underwear collection, we launched Bullpen 3D in July, an enhancement to our Bullpen technology that provides even more support and lift while reducing chafing and pinching. In early August, we introduced Souped- Up Sweats, Duluth's take on a better basic, which features a heftier 14-ounce brushed cotton for added softness and warmth. And later this month, we're excited to launch two new Duluth footwear collections, Founders and Ground Effect, which will expand our work and casual offerings. Looking ahead, we're introducing several exciting collaborations and new prints. In the coming weeks, we will continue our beer underwear collaborations with the launch of Hamm's, alongside a Pheasants Forever collab featuring a new on-brand underwear print. Building on the success of the Busch barbecue shirt from earlier this year, we're launching a Busch hoodie, T-shirt, and socks in October. We're adding new prints to our popular Heirloom Garden collection that will continue to drive excitement throughout the fall harvest season. Our strategic shift towards targeting younger consumers continues to gain momentum. New consumers are five years younger than existing consumers, with the average age trending younger for the past several years. Further, when looking at our active customer file for the quarter, the biggest gains in both customer count and sales growth came from customers below 50 years old. And importantly, women's buyers increased in penetration within our target customer. We're building on the success with our mobile-first strategy, as mobile penetration continues to grow as a percentage of total, both across visits and sales on our website. In the quarter, 70% of visits and 57% of sales came through a mobile device, reflecting increases of 100 basis points and 230 basis points, respectively. Further, conversion on mobile devices improved 10 basis points, and we saw a sales increase of nearly 10% in the quarter. On the marketing front, in the second quarter, we successfully focused our paid media on brand awareness, driving higher orders, conversion, and average order value. This is the first time we invested in Amazon Prime Video for Mother's Day and Father's Day, targeting new buyers in the 40- to 50-year-old cohort. We continue to grow our influencer program and launched targeted social and search tactics to drive consumer engagement, resulting in improved traffic trends. Our email optimization drove 10% higher traffic sequentially versus the prior quarter. We have exciting marketing campaigns and events planned for the second half of the year. On August 10th, we hosted our second in-store underwear trade-up event with much fanfare. The event was even more successful than the April event, as we not only experienced an increase in in-store traffic, but the brand building and awareness also drove higher traffic online. We are also pleased to see an increase in the proportion of women participating in the underwear trade-ups, a strategic consumer target as we continue to grow our women's business. We're thrilled to be partnering again with Yellowstone, which returns this November. We've planned some exciting new creative to air during the premiere episode and just in time for the holiday selling season. The creative will include a new brand spot, as well as a custom vignette featuring a Yellowstone cast member. As we move into the back half of the year, we'll be leaning further into audio media with several podcasts, as well as streaming media with Amazon Prime, Max, and Hulu. Collectively, these networks reach nearly 80% of our target 40- to 50-year-old consumer and more than 70% of existing Duluth buyers. In summary, we returned the business to top-line growth and expanded gross margin. Importantly, we're realizing benefits from our long-term strategic initiatives, including logistics and supply chain, product development and sourcing, and our digital mobile-first efforts. We filled an important merchandising leadership role. We're delivering a higher level of product newness and innovation, which is resonating with both existing and new customers. We're taking swift action on structural initiatives like phase II of our fulfillment center network restructuring plan, and we've made great progress on our retail store portfolio strategy. We ended the quarter in a strong financial position. During the quarter, we paid off the $11 million of outstanding debt on our line of credit, leaving us debt-free. Our total liquidity stood at $210 million, and our ending cash balance was approximately $10 million. We're leveraging and benefiting from Heena's deep experience, expertise, and leadership in identifying and driving structural improvements and strategic priorities with financial discipline. Our can-do spirit continues to fuel all that we do. I'm incredibly proud of our team's hard work in what remains a dynamic consumer environment, and I look forward to building upon our many successes. Now I'll turn the call over to Heena to discuss Q2 financials and our full-year outlook. Thanks, Sam, and good morning. Echoing Sam's comments, I am proud of the team for delivering top-line sales growth, coupled with gross margin expansion this quarter, in what remains a resilient and value-seeking consumer environment. We not only successfully returned the business to growth with expanding gross margins, but also took important steps towards improving the structural aspects of our business model. As I stated on our first call, our primary focus is to unlock the full profit potential of the enterprise and to strategically deploy capital to unlock growth and white space opportunities. Realizing savings from phase II of the fulfillment center optimization, evaluating the existing store portfolio to increase productivity and profitability, and allocating capital to new stores are key steps towards making structural changes to drive sustainable, profitable growth. As Sam mentioned, we started phase II of our fulfillment center network to maximize productivity and capacity. We are leveraging our most efficient and cost-effective Adairsville fulfillment center for a planned exit out of our Dubuque, Iowa, facility by the end of October. This will incur restructuring expenses of $7.4 million, with $4.4 million in cash and $3 million in write-offs. The $7.4 million in restructuring expenses will be spread between two quarters, with $1.6 million recognized in Q2 and $5.8 million in Q3 this year. We expect to begin realizing savings late in Q4 for a full-year annualized run rate savings of $5 million. Adding more color to the progress on our retail store portfolio strategy that Sam spoke about earlier. We have identified priority markets and are on track to open two new sites in the back half of 2025. As it relates to our existing fleet, 15 stores, or almost 25% of our current store portfolio, are coming up for renewal by 2026. We are actively evaluating options, including remodel, relocate, or exit, to enhance the productivity and profitability of our portfolio. We are revamping our store marketing efforts to include local advertising, experiential events, and targeted digital marketing to drive traffic and brand and store awareness in priority markets starting this fall. More to come on the glide path of our strategic initiatives and structural improvements to the business model in future calls. Now, speaking to our Q2 results. Today, we reported second quarter 2024 net sales of $141.6 million, up 1.8%, with gross margin expansion of 90 basis points versus last year to 52.3%. Our reported EPS loss is $0.11, and Adjusted EPS loss is $0.02, favorable to last year by $0.04. Adjustments to EPS include $1.6 million in restructuring charges and a one-time sales tax contingency of $2.4 million. Adjusted EBITDA for the quarter was $10.6 million at 7.5% of net sales, up $2 million or 23.9% versus last year. Starting with our top line, our Q2 2024 net sales growth of 1.8% to $141.6 million was fueled by strong growth in the average order value, driven by higher units per transaction. All months of the quarter were positive, with June representing the strongest growth contributor. Shopper conversion increased slightly over the prior year and remained strong across both our direct and retail channels. Our women's business posted strong quarter growth of 5.8%, driven by strength in the first layers business. Men's trend improved sequentially to almost flat year- over- year, driven by strength in Armachillo and the Double Flex denim collection. From a channel perspective, both direct and retail channels saw improved sales versus prior quarter. Retail store sales declined 4.4%, as traffic trends improved sequentially, declining 4% versus 7% in the prior quarter. Direct channel sales grew 5.6%, a significant reversal from Q1, benefiting from double-digit growth in units per transaction. In addition, mobile penetration of site visits and sales continued to increase over last year. Moving to gross margin. For the second quarter, our gross margin expanded 90 basis points to 52.3%, driven by improved product cost from our direct-to-factory sourcing initiative. We have now sold through the older, higher-cost inventory, and our gross margin year- to- date is 30 basis points higher than last year. Partially offsetting the improvement in product cost was a lower AUR, driven by deeper promotions and a higher-than-planned mix of clearance sales this quarter. Moving to second quarter SG&A expenses. SG&A expenses increased 4.6% to $76.3 million, at 53.9% of sales. This included a non-recurring $2.4 million estimated sales tax expense for prior fiscal years. Excluding the one-time sales tax expense, adjusted SG&A increased by 1.3% to $73.9 million and leveraged by 20 basis points to last year, at 52.2% of sales, ahead of our expectations. The favorable leverage was mainly driven by efficiencies across logistics and our fulfillment center network, partially offset by higher fixed costs and depreciation from foundational investments. For the quarter, advertising expenses declined slightly compared to last year, leveraging by 20 basis points to 8.3% of sales. For the first half, advertising expenses as a% of sales are in line with last year as we continue to invest behind our brands, support new product innovation, and drive omni-channel sales. Variable or selling expenses, which include outbound shipping costs, as well as labor across our customer contact center, fulfillment centers, and store fleet, continued to improve, leveraging by 120 basis points. The favorable leverage was driven by optimizing our outbound shipment network, new parcel agreements, and efficiencies across the fulfillment center network, particularly at Adairsville.... Fixed expenses or general and administrative expenses, excluding the sales tax contingency, increased 6.7%, deleveraging by 120 basis points, primarily from annualizing depreciation and fixed costs from strategic initiatives like the Adairsville investment initiated in Q3 of 2023. As mentioned earlier, we recognized two discrete expenses this quarter. The first was a $1.6 million restructuring expense from the exit of one of our legacy fulfillment centers. The second was a $2.4 million estimated sales tax expense recorded in SG&A. After reviewing the company's sales tax positions, it was determined that certain local sales taxes within one state had not been fully collected in the prior fiscal years, resulting in a contingency expense. Our Q2 adjusted net loss was $0.6 million, or $0.02 per diluted share, compared to a net loss of $2 million or $0.06 per diluted share last year. Adjusted EBITDA was + $10.6 million in the second quarter and + $12.4 million year-to-date. Inventory balance was up 7% or approximately $11.6 million, with clearance inventory at 11% versus 7% last year, and 89% in current products. Our capital expenditures for the first half were $8 million versus $34 million in the prior year, primarily used to invest in strategic digital capabilities as per our technology roadmap. As Sam mentioned, during the quarter, we paid off $11 million of outstanding debt, ending the period with no debt on our line of credit. We had $9.8 million of cash and cash equivalents at the end of the quarter. Our balance sheet remains strong, with liquidity of $210 million. Now, turning to our outlook for fiscal year 2024. We are reconfirming our full-year top-line sales guidance of $640 million, which includes 60 basis points from the Costco order and approximately 150 basis points of growth from the 53rd week. Our Adjusted EPS guidance is -$0.22, which excludes the impact of restructuring and the one-time sales tax expense. We are reaffirming our Adjusted EBITDA guidance of $39 million for the full year. We expect to continue to benefit from year-over-year gross margin expansion in the second half, driven by lower product costs, partially offset by higher clearance inventory. We are now projecting full-year gross margin expansion of 150 basis points. Our product sourcing and innovation efforts are expected to continue to reduce product costs and expand margins for the next four years as we increase the percentage of product sourced direct from factory. We expect SG&A, excluding the sales tax contingency, to deleverage by approximately 80 basis points, an improvement versus prior guidance, as we realize additional savings from efficiencies in fixed expenses like services and contracts, and benefits from our fulfillment center network optimization initiative, expected to begin late in Q4. Advertising expenses are planned to be in line with sales growth at approximately 11% of sales. Variable or selling expenses will continue to leverage by over 120 basis points, driven by transportation savings from addition of carriers as of mid-April and continuing Adairsville efficiencies. Fixed expenses or general and administrative expenses are expected to be higher, deleveraging by approximately 200 basis points, primarily from annualizing depreciation and fixed costs of strategic initiatives. With that, we are confirming our full-year Adjusted EBITDA guidance of $39 million. Our Adjusted EPS guidance is -$0.22, with estimated diluted shares of approximately 33 million and a tax rate of 23%. Our liquidity remains strong, and our capital expenditure is on track to be reduced by more than half to approximately $25 million, with a primary focus on our strategic technology roadmap. In closing, as we build on a solid Q2, we are focused on managing our business prudently, maximizing return from our foundational investments, and taking swift structural actions to improve our business model to unlock profitability and invest in growth. With that, we open the call for questions. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. We'll pause momentarily to assemble our roster. The first question comes from Janine Stichter at BTIG. Hi, good morning, and congratulations on the progress. We want to start out with some questions around the store fleet. I guess first off, we'd love to hear more about the two sites you're planning for next year, what you looked for in terms of site selection. As you think about the 25% of the fleet that's up for renewal, you know, some, maybe some parameters of how these stores look versus the rest of the fleet, either in terms of comp performance or profitability, and how we should think about what the range of outcomes might look like for this portion of the fleet. Yeah. Hi, Janine. I'll maybe take the first part of your question, then I'll allow Heena to dive in a little more detail. So, the two LOIs, we're excited for their locations. We haven't announced it publicly yet. We keep that pretty close to the vest, but, as was stated in our prepared remarks, you know, our primary criteria is obviously location, and we look at adjacencies. It's the size of the area opportunity within the market share, for our target consumer. And then undoubtedly, you know, we've got some financial criteria that we look at. You know, we stated on our last call that in 2023, our entire fleet was four-wall profitable, and yet, you know, we continue to look for improvement and want to ensure that we set appropriate hurdle rates on key metrics so that, you know, the store fleet continues to be additive to the company's results, both in terms of sales and profits. And just to add to that, as we look at the fleet that's coming up, so we have about 15 stores coming up for lease renewal by 2026. And the way we are evaluating it, we are looking at a higher threshold of profitability as the renewals come up for those sites. And we are evaluating all options, whether it's remodel, relocate, or exit, so that as we look at our entire portfolio structurally, we want to make sure that it's improving in profitability overall. Perfect. And then, also wanted to ask about gross margin. So it sounds like, you know, you're really seeing the benefits from the sourcing initiatives. Maybe a bit more color on how that unfolds, and sounds like there's a longer tail on those benefits, so kind of what that looks like over the next year or so. And then on the flip side, it sounds like you're seeing consumers continue to gravitate towards clearance. Just more color on what you're seeing from a consumer lens, you know, how you're seeing them shopping and what you're expecting from a promotional standpoint. Yeah, you know, we talked about the introduction of our product development and sourcing strategic initiative. You know, in a vertical operation like ours, that's one of the most critical and important strategic unlocks to allow us to not only compete long term and improve our profitability, but quite frankly, it's about bringing to market high quality, innovative products, importantly, more frequently, increase our speed to market, meaning from ideation to actual, you know, on the floor, so to speak. And obviously, at the same time, leveraging our size and expertise to improve our profit margins. And, you know, as we have now, over a handful of quarters, started to really build out that team and bring in expertise to help us, leverage our relationships, our team has historically done a really great job within product development. I think this is the next level to that, and, you know, based on our timelines, you know, we're now starting to see the benefits of that and see it flow through. In terms of the consumer today, you know, we're being cautious about, you know, our outlook as we move forward. At the same time, you know, we've talked a lot about our philosophical approach to ensuring that our inventories remain clean and healthy. You know, our clearance inventories ticked up a little bit at the end of Q2, and we are swiftly taking action against that, and that impact we've contemplated within our guidance. You know, at the end of the day, we don't want to be carrying past seasons' clearance inventory into the next season, and certainly not into the next year. So we're gonna be really focused and urgent about getting that in line. The great news is, although it ticked up a bit, the quality and health of our inventory is in a really good place. You know, nearly 90% of our current inventory is current season's goods. So, you know, this is a moment in time. We've got to address it and maybe not unlike, you know, other times we've had or will have, but we're gonna stay focused on turning that inventory and focusing on new product innovation and bringing just great, great products and stories to market. Yeah, and just to add on the gross margin piece, Janine, we, you know, like we said, in Q2, we delivered 90 basis points. For the full year, we have line of sight to 150 basis points, net of the inventory clearance issue. And as we look ahead, this is a tailwind that is expected to continue for the next four to five years as we source a higher percentage of our products directly from factories. And, you know, our goal is to get us back to, and ultimately exceed, the gross margins that we had pre-pandemic. Just in terms of a little bit more color on where gross margin is going. On the promotion piece, you know, we are going to continue to be flexible and agile. Our approach is to stay competitive, make sure our brand has integrity with our pricing, and that we are balancing both sales and margin. And so that's kind of our approach as we are looking at the second half. But we feel very good about our second half in terms of all the innovations coming to market that Sam mentioned. And with Eli on board, we are really excited about the disciplined approach he's going to bring to the merchandising. Perfect. That's helpful color, thanks so much. I can pass it on. Thank you. The next question is from Jonathan Komp at Baird. Yeah. Hi, good morning. Couple questions this morning, maybe first following up on the store topic. When you look at the retail stores, I'm curious, you know, what you make of the traffic declines that you're seeing? And, given that the lower traffic, do you still expect the store base, all the stores to be profitable this year? And if you were to consider closing some stores in the future, any sense of what impact that might have on your direct business in those markets? Yeah, Jonathan, a couple of things I'll say. You know, as we've discussed in the past, you know, traffic trends in the stores have been challenging. You know, we saw the trends improved sequentially this last quarter. Having said that, we're starting to see where we're getting benefits from a multi-channel market strategy. Although stores have declined, you know, we're seeing improvements in our online business in those markets. Importantly, you know, we've started to maybe unlock some real local in-store events that are, in fact, driving traffic back to the stores, that it's not a price-driven event like this underwear trade-up event. I said in my prepared remarks, and I wanna just emphasize this because it's really, I think, important, but gives us a optimism around an event like that, is in the first one in April, we had a pretty good response from the female consumer that was actually participating in the trade-up event. And that number, in terms of the proportion to total, people coming to the stores to trade up, the proportion of women participating jumped dramatically. And so we think that we've now had a couple of those. We've had smaller tests in some other categories that are showing similar results, and so we believe we've unlocked some really, really valuable and relevant experiences for the consumer. As it relates to the profitability and back to, you know, Heena's comments around our store portfolio strategy, you know, we're looking at a combination of new locations as well as rationalizing the current portfolio based on productivity and profitability. And as stores come up for renewal, you know, we've got about 25% of the chain here in the next, call it, year and a half. We're also looking beyond that and engaging our landlords in discussions where we believe we can make some meaningful improvements in the profitability. And in some cases where it's, we just don't believe it's gonna meet our thresholds, you know, we're open and prepared to exit those locations. So our focus is really, really deep on ensuring that the retail portfolio is a profitable contributor to the overall enterprise. At the same time, we recognize the importance of a multi-channel ecosystem and the benefits it provides the company from a consumer engagement and sales and transaction perspective. Got it. And then maybe to follow up on inventory, just to ask a little bit further. You know, the sequential dollar increase from the first to second quarter looks pretty substantial, maybe the largest that we've seen in the past for Duluth. So could you maybe give a little more color? Were there any early receipts? Are there signs some of new categories aren't resonating? And maybe a broader question about sort of SKU proliferation and how you avoid you know, adding too much in terms of the overall SKU count as you pursue some of these new categories? Yeah. So in Q2, you know, we shared in Q1, coming out of, let me be clear. Coming out of Q4, sold a lot more units in a highly promotional environment, so, we came out of Q4 in a much leaner inventory position than what we had projected when we were placing that spring season's orders. And so one of the areas that we sold through at a higher rate was our core inventory, which had an impact on our Q1 sales. As we ramped up heading into Q2, not only were we able to react to our core products, but the team did go back and react to some areas within the spring/summer collection that we were light on. Those orders weren't received until April. And so, candidly, it cut short our selling window, which impacted our sell-throughs and led to higher clearance inventories. And as I said before, you know, we're gonna address that here this quarter. We're gonna continue to see sequential improvements in our inventory levels, clearance specifically, as it relates to the penetration to the total. And, you know, largely, I think the health of our inventory, as I said to Janine, nearly 90% is current seasoned stock, and so we feel good about where we are today, and we've got a little bit of this moment in time where inventories are ballooned. Are you willing to share how much incremental markdown pressure? I know you given the outlook on a net basis for the gross margin, but how much, you know, incremental discounting pressure are you assuming or any detail there? Yeah, that's contemplated in that 50 basis points that we took back, you know, for the year-end guidance. Yeah. So Jonathan, just reiterating, we had 200 basis points product cost and sourcing initiatives, and we've layered in 50 basis points to ensure we come out clean and are able to take mitigating actions for clearance inventory in the second half. Okay, great. And then, Heena, just one last one, if I could follow up. I know you don't guide quarterly specifically, but, third quarter typically is your lowest profitability quarter. So I'm wondering, if you're expecting to be, you know, flat or positive on Adjusted EBITDA or, you know, any other just directional color as we think about modeling the quarters? Yeah, you know, I think, you know, from a top-line perspective, the quarter is expected to follow the seasonality as in prior years. From a margin perspective, I would say, given the clearance inventory, we will see higher pressure in Q3 as we try to clean out of it sooner rather than later. Okay, great. Appreciate the color. Thanks again. Thank you. Thank you. Our next question is from Dylan Carden at William Blair. Thanks. I'm curious if you can provide any color on just the range of performance between the stores, and sort of what's the best way to think about, you know, the productivity, if you go all the way back to kind of 2017, when you were really ramping the count? You know, it's more or less half since then. So is that the entire fleet? Is that a factor of sort of an early pop from direct business? I guess, and the ultimate sort of aim here is just to kind of get a sense of what the potential impact could be as you, you know, close or renovate. Yeah. So, Dylan, maybe I can just give more of a, you know, how we are thinking about the store portfolio. The stores play a critical role as we think about our omni-channel strategy. Our customers that come to the stores and, and shop online, they, on average, have a higher, transaction or higher order value. Plus, they, they shop more than twice, with more than twice the frequency compared to single channel. So stores remain a critical part of our, overall omni-channel strategy. They, they play off each other. They also offer a lot of services, like buy online, pick up in store, returns, et cetera. So they are a critical component of offering that, seamless consumer experience. In terms of profitability of the fleet, you know, like any fleet, there is a normal curve. So, some stores are in the top 15, some are in the bottom. And that's why we have a three-pronged approach. One is to address one of the things that was asked earlier on store traffic. One prong is making the brand awareness and store awareness for the entire fleet higher by having locally targeted efforts on marketing and experiential events. The other one is rationalizing our current fleet and holding them to a higher standard of profitability as we come up for renewals naturally, whether it's through remodel, exit, or relocate. And then the third one is adding new sites to gain market share with our target consumer in the context of our omni-channel market. So that's kind of how I would look at the overall portfolio. The goal is really to grow that entire portfolio profitably. I guess, as you think about square footage growth over the next five years, then, as these leases come through, between openings and rationalization, is the goal to kinda maintain a flat overall square footage at a more productive level? Is that sort of broad strokes, what we're talking about here? We will give you more specifics on those as we get deeper into especially the renewal portfolio. Like we said earlier, we are on track to open two new stores in the back half of 2025, and we, you know, our goal is to maintain a healthy level of stores that are growing and profitable. Okay, let me try another one. It seems like you've got a better handle on sort of line of sight into a lot of really nice cost efficiencies here. I'm curious, as you kind of roll those through, you know, when you might expect to kind of get back to a level of more consistent profitability? Is that something that you think you kind of mentioned four years there, on at least sort of the gross margin side. Is this gonna be a sort of relatively slow process, or you think this model can inflect relatively quickly, kind of in the next year? Yeah, I think, Dylan, you know, Heena has brought some incredible rigor and insight into how we're going about both our benchmarking studies as well as then the application of those findings. You know, evident, you know, in part with the announcement we made to close one of our legacy fulfillment centers through the lens of the investment we made in Adairsville and the efficiency gains we're getting out of that. And so I think that that's an example of where there's some real-time benefits that we will continue to look for, as well as ensure that we have visibility to what the longer term implications are. That, coupled with some of the benefits we're starting to see from some of these other initiatives, like our product development and sourcing initiative, I think, you know, we're getting some benefits on the margin line. We're getting some benefits in the SG&A line. You know, this legacy fulfillment strategy, the capacity and optimization strategy, it's leading to, you know, Q4 benefits of this year. And then on an annual basis, a new baseline run rate of about a $5 million reduction in our SG&A line, and that's real money. And so, you know, we believe that benefit is actually not coming at the cost of us doing more business or flowing through greater profitability. So it's a combination of the different line items that are attached to our different strategic initiatives. I think this is an ongoing focus of ours. There's really no end in sight in terms of us continuing to look for ways to optimize our costs and get ourselves into a place where, you know, our investment strategies really are driving greater top line and flow-through. Very good. And just I just wanna be sort of crystal, the comment that you can get gross margins above pre-pandemic. Are you talking about getting back to, if not above, the 57%, just so we're using real numbers? Yeah, I would just say directionally, our goal and what we're marching towards is getting gross margins at or better than pre-pandemic levels. Okay, and then I had one more that's escaping me. Apologies. Oh, freight, and maybe I missed it, but is there any contemplation of higher freight rates in the guide? Or is it that given how you turn inventory, that that's more of like a 2025 story that we can kind of wait for? Yeah, that's more of a 2025 impact- Great. versus a 2024 impact. But we've, yeah, we've contemplated the various headwinds and tailwinds in our guide. Excellent. Thanks a lot. Thanks, Dylan. Thank you, Dylan. This concludes the question and answer session, and concludes the conference. Thank you for attending. You may now disconnect the call.