Okay, great. Good afternoon. It's Matthew Boss, J.P. Morgan, department stores and soft lines. With us today, we have the team from Levi's. We have CEO Chip Bergh, and CFO Harmit Singh. So format for this is moderated fireside chat, and then we'll open it up for Q&A at the end. Chip, I don't know if you had anything prepared. I could pass it over to you or we can kick right off. Nope, I don't. I mean, thank you for having us here, Matt. Absolutely. We pulled our earnings forward today. Yes. 'Cause we've missed this historically because of the quiet period. Yeah. We're delighted to be here. It's a great opportunity, so thanks for inviting us. Great. Well, thanks for being here. Maybe I'll jump right into the the heart of what I would say is over the past two days here at the conference has really been consumer spending, consumer sentiment, health of the underlying consumer. maybe on the heels of your print last night what are you seeing from the consumer today? Are you seeing any signs of slowing, any change in the underlying health in your business? Maybe how best to characterize it. Okay. Well, we reported our Q1, which is December, January, February, last night, 22% reported revenue growth, 26% in constant currency. Half of that is volume growth, and the other half is AUR growth pricing. We've been taking pricing for the last 12 months or so in anticipation of higher costs coming at us, and you see that in our gross margin. We have record gross margin of 59.6, I think. Fifty. 59.4%. Fundamentally, demand is very, very strong. We're seeing that through March as well. The brand. I've been saying for probably the last year and a half, the brand has never been stronger. I think we may be at the point which is a parity claim, right? Mm-hmm. I think we may be at the point where I can say with confidence that this may be a point where the brand is at its strongest ever. We're stronger today than maybe any other time in the brand's history. We see that based on the high gross margins that we've got and our ability to pass pricing through. the consumer here in the U.S., I fundamentally believe is in a very good place. There's no question they are starting to see the impact of inflation. You go to the pump, you go to the gas or go to the food store, grocery store, they're clearly seeing it. a couple of data points. Consumer confidence in March was higher than February or January, almost at pre-pandemic levels. The economy, we are effectively at full employment. Anybody who wants a job can get a job right now, and there are parts of the economy where there are struggles to get labor. That's driving wage improvement. both salary and hourly wages are rising. I think that's part of what's contributing to the higher consumer confidence. The last thing is the consumer, the household balance sheet, if you will, is in a very, very healthy place. and you've written about it. The consumer during the pandemic, there was a lot of savings. The consumer largely has not had to tap into those reserves. The first indication that they've had to tap into it was just this past month. Mm-hmm. You we look at that, we look at the demand signals that we're seeing both from our own retail business, both brick and mortar and e-commerce, as well as from our largest wholesale customers. The combination of a really hot brand with the demand signal still being really strong, we feel like we're in a pretty good place. We beat our own internal expectations in Q1. We beat consensus in Q1. I would say under normal circumstances, we would have raised guidance. We were prudent, I think, to maintain guidance, which I think is a win, with all of the uncertainty today. It's largely based on the confidence that we see in the strength of our brand. We just some credit card data, maybe Harmit. Sure. Sure. You can hit the cr- Even before you go there, I mean, within that, to your point, maintaining guidance, maybe Harmit, some of the things that now you embedded in incrementally, meaning your core business, you effectively did raise. Right. 'Cause you've got Russia out, and you've got- Exactly. you've got $200 million of Russia and foreign exchange impacts that Exactly. weren't in the base or in the original guidance. We're offsetting that with fundamentally a slightly healthier core. Yes. Yeah. I think it's important for us to say this, and that is that we're looking at stuff on a regular basis. I mean, it's not that Chip likes to say we have our head in the sand. It's an evolving situation. The consumer is clearly facing higher gas prices, and inflation, and so we have to be very thoughtful. The data we see, besides the demand signals, we are seeing,, I've got data, and I get data on a regular basis. I just looked at the market pulse data that Mastercard just released on credit, spending in March. If you back out gas and you back out auto, it was up 8.4%. If you look at retail and stores, they were up 11%. If you benchmark that versus 2019, it's up 18%. Bank of America sent me their data this morning, and if you look at the March spending relative to three years ago, it's up 23%. February was up 23%. They see the H2 of March spending come back. The other data we look at is what's the impact and how are low-income and middle-income consumers spending on clothing and accessories, and they've seen that increase recently. you look at all this data and you say, "Okay, it's the consumer is strong." You go outside the U.S. and you look at Europe, and in Europe, our retailers, our wholesale customers, they pre-book demand for the next few seasons, and that demand is up in Europe outside Russia, and obviously foreign exchange. That demand is up. you triangulate it all in and say, "Okay, the consumer seems to be in a good spot." The brand has never been stronger. this is our fifth recession. What tends to happen, I think, in the last three or four of recessions that we have experienced, if you continue to connect with the consumer, even during tough times, when things start bouncing back, they tend to interact with brands they trust in the brands they interacted. As Chip says brand's never been in a strong place. Our styles have never been as relevant, and we're connecting with the young consumer. This is a good from our perspective it's a tough situation, but we're in a good spot. It's a really good point. I was looking at our Chase credit card data even this morning, and March actually accelerated 100 basis points relative to February. What's interesting in there is you saw a 400-500 basis point acceleration in travel and leisure and apparel more or less held trend. I think, and it's actually a good question that I was gonna pass to you, Chip, is a lot of the meetings we've talked about this move back towards reopening and how, you maybe different categories, different brands play into that. I think what's interesting with your brand is getting back out, going to events, going to concerts. it's getting back to normalcy. But then this overall halo of casualization that I know you've coined. Maybe how do you think about the overall maybe total addressable market coming out of this for denim? Secondarily, we still have this denim cycle- Right. on the fashion side. Denim on a past 12-month basis here in the U.S. is up 11%. It's growing faster than total apparel. I think we'll see the same thing on a global basis. The casualization trend, which has been going on for a while here in the U.S., is now also global. People that used to wear suits to work in Europe are no longer wearing suits. These tailwinds of both casualization and then the new denim cycle, which we led with the looser, baggier fits, which is both on men's and women's, unlike the previous cycle, which was skinny jeans, which was fundamentally a women's trend. These are tailwinds that I think we've got going in our favor. We are by far the leading brand in denim. I mean, we're bigger on a global basis. We're bigger than the number two, three, and four brands combined. I think we're in a really good place. The other thing, I know there's a lot of concern about recession and what's gonna happen to the consumer, high inflation period. I think the pandemic is gonna have a long-term impact on consumer behavior. One of the things that we saw kind of during the pandemic and then even coming out of the pandemic is prior to the pandemic, people were buying too much apparel. Sustainability has really come into the spotlight as a result of the pandemic. Consumers have kinda realized, I don't need to fill up my closets in houses in the United States that have been built in the last 20 years, closets are bigger. My wife's closet is bigger than the bedroom that I grew up in. Consumers have gotten smart. I think if we see anything that the concern around the economy, what we might see is consumers buying less, but buying quality. Buying brands that they trust, buying brands that represent real value, and we think that actually plays to our sweet spot. Yeah. I mean, one of the things, and I know we talked about this during the pandemic, was all of the changes that you made and some of the things that you've accelerated during a tougher time. Coming out of the pandemic, it feels like not just to the consumer, but internally, it feels like you're a much stronger company. We are a much better company. In fact the Chinese characters for crisis is also the same word as opportunity. Mm. Crisis creates an opportunity. When the pandemic hit, I still remember that quarter, it was our fiscal Q2. In an average quarter, we would do about $1.5 billion of revenue. We did less than $0.5 billion. It was a scary moment, but we declared then we're gonna use this opportunity to make this company a better company. We've reworked the P&L, we reworked our cost structure, but we continued to invest in the brand and continue to invest in connecting with consumers. As we've been coming out of the pandemic, we are structurally a much stronger company from a financial standpoint. The brand is stronger, and we're kinda clicking on all cylinders right now. It also seems like you have a lot more control over the brand. maybe, Harmit, could you talk about distribution, maybe even in particular in North America, some of the changes that you've made. I know you have the Target partnership, but then also changes at the department store, where as people worry about what's gonna happen in the next leg of the overall environment. To me, it seems like you're in a lot more control over your own inventory, distribution, presentation, and product. Yeah. pre-pandemic wholesale. People would argue it was not as healthy for us. We had department stores who had financial issues. We had underperforming doors. We had door closures, et cetera. our strategy was let's grow the business, but grow the direct-to-consumer business. Let's grow e-commerce as a result. Two things happened during the pandemic. One, we were able to convert the wholesale business in the U.S. to a much healthier business. Target is a great example, where we just announced plans to expand the relationship to 800 doors. Plus, as we have interacted with the retailers, we've tried to elevate the brand and really focus on the performing doors, and spend our energy on the performing doors, plus work with them and grow the dot-com business. Our digital ecosystem, which includes Pure Players and wholesale.com, is now a fourth of our business. We have said that this should be a third of our business, if not more. E-commerce, our own e-commerce, which is now 9% of our business, was half that pre-pandemic, and is nowhere where we want it to be. I mean, this should be in the mid-teens to, closer to 20%. It's high gross margin. Our direct-to-consumer business in the U.S. is, which is our own doors, was largely an outlet business here. We had very few mainline doors. mainline doors have performed very well for us outside the U.S. These are 2.5 to about 4,000 sq ft doors. We have begun to open them. We'll have 25, 26 more doors this year than we had last year. We've got a few doors now in Boston. We had none. We opened the door in Dallas that we talked about. The thing that we're doing with the assortment is a little different because the women's business is on fire. As we are sorting in these mainline doors, we're giving equal space and to the women assortment. The mix we are seeing women and men's is close, in some doors is close to 50%. The women's business is accretive to gross margins, right? There was a time when it was diluted. I think we are changing the entire distribution structure, trying to grow the areas of the business where we can control to have the assortment, as well as work with retailers who are financially healthier. I mean, DTC, the only thing I would add, DTC has been strategic for us almost since day one when I got there. It is about controlling the brand. I'm a brand guy at the end of the day, and we are in complete control of the brand, and we have the relationship with the consumer. When I joined 10+ years ago, DTC was 20% of our business. This past quarter is 39%, and our ambition is to grow it way beyond 50, and we think we can get there. As Harmit says the other beauty of DTC is we can shape demand by how we assort the door. We're way under-penetrated on our women's business. It's now a little bit more than a third of our business. It was less than 20% of our business when I joined. It wasn't even $1 billion in sales when I joined this company. In our own stores, we can skew the assortment to women's and people are gonna buy what they see in the store. It's working. It's a big part of our strategy, and we think there's still lots of upside. Again, if you go back 10 years, we were almost entirely outlet, and now we have all these mainline opportunities since our mainline stores are very productive now. As we think about Europe, what type of demand signals are you seeing right now on the ground in Europe? It sounded like that yesterday on the call was another area of strength for the brand. Yeah. clearly in Europe, business is structured a little differently. 50% or slightly more is a direct-to-consumer business. We have a lot more mainline doors, not as many outlets, and the product is more the better and the best, and is across wholesale and our direct-to-consumer business. The demand signals, first we look at all the consumer data like we look at here, number one. Number two, in Europe, our wholesale retailers pre-book their product for the next few seasons. We look at that and say, okay, how does that compare to a year ago? It's up, right? That's why we said even if you back out our Russia business and you back out the impact of FX, Europe the will be up in the high single digit, which is what we started the year with. Mm-hmm. That gives us the confidence. The other piece is just demand from our own doors, and we're seeing that. The other thing we're seeing in Europe that we've also experienced this quarter in Asia is as economies open up, there is that pent-up demand and people are visiting the brands they trust. You take the U.K., which is now fully open, the business is very strong. France has had a strong bounce back. Germany they're still dealing with COVID, so you can see that business is coming back, but slower. We've seen the same in Asia. China, we had lockdowns because of the COVID resurgence, but the rest of Asia was up 20% because economies are open, and I think people tend to gravitate back to brands they have trust and the products they like. Asia is an area that you've done a lot of work since you got here, Chip, China in particular. Maybe talk about where we're at today, along some of that timeline of the work that you've done and what Asia and China potentially means long term and in terms of now an opportunity. Yeah. China is about 3% of our total global revenues. You benchmark that versus many of our peers. That's pretty light. It's a market that pre-pandemic, we really focused on dramatically accelerating our growth. When the pandemic happened, traffic is still down in China. Order of magnitude is almost 50% versus pre-pandemic. we're still dealing with COVID impacts and lockdowns in China right now, and it's a market that I do know really, really well. The other thing I should say is, back before the pandemic, about 30% of the doors in China were owned and operated. The balance were franchised. We really relied on franchised partners. Our plan at that point in time was to, over time, kind of reverse that and 70% owned and operated, 30% franchise, which implied quite a bit of investment in China. Because of the pandemic, because traffic still hasn't returned to normal, we are being a little bit more cautious, I guess, in terms of our investment. I guess appropriately diligent about not getting too far ahead of our skis in a market where there hasn't been full recovery yet, and there are these geopolitical tensions. I think what has happened with Russia has been a little bit of a wake-up call in terms of how much do you really wanna invest in markets where there could be some geopolitical fallout. We're gonna be a little bit more cautious. It still represents a significant opportunity. Brand health has gotten stronger in China over the last couple of years. We are connecting with the consumer much better. We had real success during Chinese New Year with product that was locally designed, locally made, locally sourced, which is something new for us because they used to have to completely buy off of the global line. We think that represents some opportunity as well. The brand is strong. We play at the super premium end of the market in China, and it's a good place for us to be. I'm optimistic, but we're not gonna get to 10% or 15% of the business overnight there, anymore. We'll be a little bit more diligent. As we think about different opportunities, and again, maybe even thinking about expanding out from the core, tops has been a huge opportunity for you. Active is now an opportunity with your acquisition, and as you cited, women's is a material opportunity. Maybe is there a way to kinda segment out from here maybe what you're the most excited about, where you're seeing that traction and just kind of how best to think about some of the other areas, maybe just outside of that, of that core for you? Yeah, I mean, you pretty much said it. I F you go back nine years, when we joined the company, we were a men's blue jeans bottoms business sold mostly in wholesale, mostly in the United States. A big part of our success over the last decade or so has been diversifying, really leveraging the portfolio that we had, 'cause even within Levi's being such a big brand, there was so much portfolio opportunity with women's, with tops, and that's been a big part of our success over the last five or six years, even kind of leading into the IPO. We still have enormous opportunities on tops and on women's. Our women's business, as I said earlier, was less than 20% of the total company when going back a decade. It's now a third, but we all know women buy more product than men do in apparel, and it should be half of the business. We've got our sights set on that. We think it's achievable. Our women's business is hot. It's really resonating. Tops, I jokingly say we don't even buy market share data in tops 'cause we wouldn't even scratch 1%. Enormous opportunity. we still sell more denim bottoms than we do tops, and that's the complete inverse of the way the industry is structured. Big opportunities there. Beyond Yoga was an opportunity. We can probably spend a little bit of time on it, but that athletic performance athleisure category is five times bigger than denim on a global basis. It dramatically expands the size of the market that we compete in. It's a small little brand, almost all of its revenue here in the United States between their owned and operated e-commerce business and a couple of wholesale customers. we've got core capabilities in brand building, and that's an opportunity. Brand awareness on Beyond Yoga is in the teens. The people who are aware are buyers, and they tend to be really loyal. There's a huge brand awareness opportunity, and we kinda know how to do that. There's a big channel opportunity. They have no brick and mortar. We've kind of figured out brick and mortar. We're pretty good at that. We have a pipeline built to roughly 60 markets around the world, over 100 where we actually have a presence. and all of our managing directors are like, "When can I get it?" We're gonna be disciplined and thoughtful about how we expand the brand. As I said on the call, we didn't buy it because we think it could be $100 million this year. We bought it because we see enormous potential for this becoming a big global brand and being a significant contributor to the portfolio of this company. As we think about channels of distribution, Harmit, help us to think about the digital business, the digital opportunity from here. Maybe what investments have you made, what kind of runway do you see for that business? Maybe anything you could provide maybe on the profitability of the digital business today. Sure. The only thing I'll add to what Chip talked about opportunities, most of the opportunities are accretive on gross margin. Direct to consumer, I mean, I'll talk about e-commerce in a minute. Women's higher gross margin than men's today. Beyond Yoga, higher gross margin than our base business. That's the good news. I mean, as we grow this, it should only help our margins structure. Going back to distribution and going back to the digital piece. our digital piece is, our own e-commerce is double what it was, but it's nowhere near where we'd like it to be. the 9% should be 20% or 25%. especially if the consumer is shopping more digitally. The way we are and the digital ecosystem, which is about a fourth of our business should be in 35% or 40%. I think that's where we see the opportunity. The e-commerce business for Beyond Yoga is 50% of the business, so there's no reason why it shouldn't be higher. A couple of things we're working on. because we were starting from behind, we had to roll out e-commerce by launching our own websites. once we were happy with that and we got that scale around the world, then we said, "Let's go with mobile app." We've got mobile app now in nine countries. Okay, that is nowhere near where we wanna be. We'll be adding more countries this year and then scaling that up. Because today, the younger consumer and all of us, I think, are using the mobile app a lot more. That's one. Second, loyal consumers. we have 8 million loyal consumers. For a brand our size, it should be 100 million loyal consumers. We are scaling that up, through programs. Loyal consumers, A, interact more frequently with the brand, plus we're able to provide newness collaboration directly to the loyal consumers first. Scaling that up, I think, is important. The third is just the basics, foundationals. One of the things that happened during the pandemic, at least in our company, as well in other companies, is the agility and the speed to get changes made. We rolled out buy online, pickup in store in a matter of weeks when we were looking at doing it this year. Now we're scaling that around the world. The ship from store. With all the logistic issues we're seeing, we've got that scale in the U.S. We're scaling it up in Europe. Basic things like personalization 24/7 shopping that we can provide. Those are the things we're still working on. We call that the basic, but that's important. Then just ensuring that our e-commerce consumers get access to the new stuff on a more regular basis. That's something we're learning from Beyond Yoga because they're bringing newness or there's something new on a daily basis there. I think thinking of that is important. Now, good news for us is even at 9%, the business is no longer unprofitable. It actually is making money. It's mid-single digit. When it doubles, it get it won't be dilutive to our overall EBIT margin structures. It's all about scale and getting that going. It does require investment, and so. We have the cash, and we have the capital, and so we're investing that over time. The one other thing I would add about digital, especially here in the U.S., which is our biggest market, is, and I said on the call yesterday, you probably remember it, that the one place where I was not happy is our e-commerce growth. Mm-hmm. Which was 13%. You kno o it lagged the company average. It's getting a lot of my personal attention right now. Mm-hmm. Let's just kinda put it that way. It's a lot of our opportunity is just basic blocking and tackling. If you go to the most popular items and the most popular sizes, sometimes we're out of stock. Mm. West of the Rockies, we brought all of the distribution for e-commerce into our Henderson distribution center. East of the Rockies, we're still in a third-party logistics provider, so it's a separate pile of inventory that goes out of stock more frequently than our own distribution centers. We will now open east of the Rockies in the next year or so a new owned and operated facility. I t should be our best store. Our e-commerce site should be our very best store, and it shouldn't be out of stock on our best-selling items in the most popular sizes. That will also be a big help. I mean, some of this is just basic blocking and tackling and really leveraging the strength of the brand to connect with the consumer. I think it will continue to represent a growing part of the pie of our business, and there's lots of upside there. Yeah. What's interesting too is I know that you've cited continued opportunity with your own stores at brick-and-mortar as well. Yes. You always used to use the Boston example. Yeah. No, I can't use that anymore. You can't use that X anymore. How many examples like that still are there? How many opportunities out there do you see at brick-and-mortar still going forward, or maybe where do you think we stand? Yeah. We have a new managing director of our business in the U.S. and Canada who came from. He was running our business in India, and he's been on the ground now for about six weeks or so. Mm-hmm. He was here in New York, just last week or two weeks ago, and he walked all of New York. He was like, "New York could be as big as our India business? Mm. Manhattan could be as big as our India business." He's super excited. I mean, the good news is, if you go back to when we joined the company, our mainline model wasn't really working in the U.S., and it was for a lot of reasons. We believed we had to have much bigger stores 'cause we had to stuff all of our stores with everything we sold, which meant that we wound up in bad locations and meant that we wound up with bad stores that weren't very, very productive. We've totally flipped it on its head. Our new model is these smaller footprint stores that Harmeet just referenced 2,500-4,000 sq ft, where we can put it in great locations, and then we assort the stores smartly, leveraging data science and who's shopping in that particular mall, so that we can assort the store very, very strategically. Those stores are highly productive and profitable. Once we've got a degree of confidence that that model works broadly our ROIC is very good. It's cookie cutter. We have markets. I think we opened our first mainline door in Seattle just a couple of months ago. We just opened our first couple of mainline doors in the Boston and Greater Boston area. We have markets where we have no mainline. I mean, Nashville, which is booming, we don't have and it's country western town, right? I mean, you would think Levi's would kill it there. We don't have a single mainline door. We've approved one. We've actually approved two, I think, in the last two months or so. There are lots of markets where we might only have one or two mainline doors where we could easily. You look at Manhattan, we could easily have half a dozen more stores in the greater Manhattan area even alone. There's lots of opportunity. We'll do 25 or so mainline doors in the U.S. this year. We've said over a three-year period of time, 100, but that may be light if they all work. Yeah. Most of them work. With the strength of the brand, you cited, you know the brand might never have been stronger than it is right now. How do we think about pricing? Are you seeing any pushback whatsoever with some of the pricing actions? With some of the rising input costs and some of the rising cost of doing business, how much can you use pricing as a lever to basically net out on the positive side against this? Well, we did start taking pricing early. We saw the cost increases coming. Mm-hmm. If you get behind the curve on pricing in a very inflationary period of time, it's almost impossible to catch up. We got out ahead early, which is part of the reason why our gross margins are as healthy as they are, combined with the fact that inventory levels have been generally very healthy around the world, so that means lower promotion. The combination of those two things have helped from a pricing standpoint. We're being much more scientific about pricing, so, we didn't go take a 5% price increase across the line. We used data and data science and advanced analytics to help us isolate where do we have the greatest opportunity. That is why the pricing has stuck. I mean, our AURs were up 10% this last quarter. They were up 10% the prior quarter versus year ago as well. We've got more pricing coming because we expect costs will continue to be under pressure. At the same time, we're watching it like a hawk. I mean, I don't want people to take away that we're completely oblivious to what people are saying and writing about and what economists are saying. We will have options if we need to pull back. We'll watch it real closely. Right now, we've seen no resistance to price increases. We haven't seen consumer pushback. I mean, our unit volume grew, drove half of our growth this past quarter. T he brand is really strong, which gives you pricing power. As Jim Collins likes to say, "You don't have to hold a prayer meeting before you raise prices. Mm-hmm. That's kinda where we are right now with the strength of the brand. Harmit, gross margin was a material area of upside in the Q1. Maybe could you just walk through some of the assumptions now embedded for the remainder of the year on the gross margin front? Sure. The gross margins were up because pricing action was taking. They're all helping to offset inflationary pressures that we're seeing. The higher direct-to-consumer mix is making a difference. G rowth we saw in Europe making a difference because of higher gross margin business and same in Asia. A lot of factors that, worked in our favor. As we think about the year, we took our gross margin expectations up a notch, right? That is despite Russia suspension as well as China slowdown because those are high gross margin businesses, so we're offsetting that. As we think about the year, there is pricing coming in the H2, and the reason we said it's coming is because we are selling into the retailers as we speak, and is really done with the purpose of offsetting some of the cotton inflation that we saw. I think if you think about, there's a little bit more effects because that also hurts us. Having said all that, I think we see the impact of the Q1 carry itself through the end of the year. We'll still end the year at a record gross margin, because last year was a record and this year. As we think about gross margins going forward, and we'll talk more about Investor Day because you love to ask what your growth algorithm is. The pieces of the business that we're focused on growing are actually margin, gross margin and creative. I think more will come from that perspective. So on- The only thing I'd say on the gross margin is we have in the second half built in an increase in markdown and promotional expectations because we if the consumer is feeling the pinch, if inventories are higher across the board we could see that. We built that. If that doesn't happen, there is that. Is it fair to say that on that point, that's not something that you've seen yet that's been built in? Yeah. We haven't seen it. We didn't experience it in Q1, but we're just being cautious. Yeah. On the expense side, what's the best way to think about SG&A expense dollars relative to top line going forward in the model? Yeah. I mean, I think we need about 3 or 4% top line going to offset what we call normal inflation. Mm-hmm. As we grow our direct-to-consumer business, it is a bit of a SG&A drag because it takes a little time to ramp up, but it still leverages on an EBIT perspective because the gross margin on D2C is higher than the SG&A. I think we'll talk more in our Investor Day, as our growth expectations, tick up, you should be able to see some leverage. That's what will drive EBIT margin growth over time. Now, the areas where we'll probably invest we'll continue to look at advertising and if that unlocks, higher revenue growth, that's an equation that I think is acceptable to all, and it reaches out to consumers, et cetera. From an infrastructure perspective, we've got these DCs we're talking about, the ERP upgrades, and we're doing it over time. It's not like it won't hurt us in one year. It'll happen over time. I think you will see EBIT leverage you k as the years progress, just because of the revenue growth and our focus on costs. Maybe I'll ask one more, and then we'll open it up to any questions in the room. Just capital allocation. How would you rank priorities for cash flow going forward and how best to think about the balance sheet? Yeah. I think when we did the IPO we laid out three areas of spend. One was capital. Think of capital at 3%-4%. L ast year it was closer to 4%. We think spending capital to grow this business was largely in the form of new doors, technology, to unlock growth and some infrastructure I think will continue. That's important. The business, the beauty of this business is a s you grow the business, it generates a lot of cash. The second is we're a dividend-paying company. We don't have a dividend policy. We said historically, we've grown dividends, and that's been our practice. W e suspended it during the pandemic, but then we reinstated it, and it's higher. That will continue. The second piece of return, returning back to the shareholders was, buying back stock to offset employee stock dilution. We've done that, but then we said, okay, we have a decent amount of cash. We just completed a $200 million program on share buyback. The third was acquisitions, which is both organic, things like the take back of Thailand, like Denizen. We're kind of running out of that. The inorganic, like the Beyond Yoga. We're not going to do a lot more acquisitions till we prove it out. I think as you think about Investor Day, one of the things we have heard from investors is, okay, you do pay dividends. Can you give us some clarity on how you will think about dividends, over the long term now that you have enough cash and there's enough float? Because when you went public the public float was less than 10%. Today, it's close to 25%. Will you be doing share buybacks higher than dilution? We're thinking through that. We'll have a discussion with the board, and we'll talk more about it at Investor Day. Great. With that, I'll open it up to any questions in the room. Sure. As it relates to inorganic acquisitions, how does what you've experienced so far with the one you've done inform your path for the next one, if at all? Well, I guess what I would say is, I don't think we have license to do another acquisition until we prove this one out first. We're kind of in a little bit of a holding pattern. We're looking at things, but we're very optimistic based on everything that we've seen from the Beyond Yoga acquisition. We talk about the importance of cultural fit. We've got a really unique culture. There is a very strong cultural fit. All of the employees at Beyond Yoga stayed at the time of the acquisition. I think we've lost maybe three in the three or four months since the deal closed out of 80 or so employees. As Harmit said, we're learning as much from them as I think they are from us. T hey're a lot smaller. I mean, it's an entrepreneurial kind of startup, and they're scrappy. O ne of the things we've learned from this, they drop a new product every single day on their e-commerce site. I'm like, we're a much bigger brand, and we don't do that. How come we don't do that on Levi's? It is a win-win. I would say having a really clear path on how it's gonna create value, kind of short, medium, and longer term, is one of the things that is really, really important. W e had a thesis when we did the acquisition. We're kind of proving that thesis out as we get on board. T he big opportunity here is scaling it. This is a sub-$100 million brand, which we think has huge potential. How do you build the capability to scale without getting too far ahead of your skis to collapse the structural economics of the business? It's a really profitable business. The pacing and where you put your bets in terms of the talent that you need and the capabilities that you need is part of the magic of putting this together. there are other categories that over time could be really attractive to us from an acquisition standpoint. We need to make this one work to get licensed to do another one. W e haven't done an acquisition as a company in over a generation decades. The other thing I would say is, one of the things that the role I guess I've played, is making sure that the big company doesn't squish the little company. Like, there's a lot of magic in that little company, and we need to make sure that we treat it with tender loving care while integrating it. T hese guys were private with a private investor. The father of the founder was the main investor. N ow they're part of a publicly traded company that has to close the quarter with a great deal of granularity to meet SEC requirements. The first close was an interesting experience because we had to get levels of detail out of the business that they just weren't used to providing. They're learning about how to run a more disciplined business from a financial reporting standpoint. There have been some growing pains along the way, but I have to say that I'm much more optimistic about the long-term potential of this business now that we've had an opportunity to really crawl underneath the covers and meet the talent. It's a super talented team, and they really, really know their consumer. The product is part of what makes the brand unique and special. It is a very distinctive product with a buttery soft hand feel that when we get consumers into it, they love it, and there's no going back to what they wore before. That's the marketing challenge ahead of us, and that's a pretty easy marketing challenge. I think there's a lot of opportunity here. Barbara, the one thing that's changed from the timing we got in, is how we are operating the company. Let me explain that a little bit. Dockers was a brand that grew up from within the company, but it was part of the Levi's group. The merchants were part of the Levi's merchants. The marketeers were part of the Levi's. Dockers, as has struggled. W e had a couple of choices 18 months ago. We could either exit Dockers, but we would give it to a private equity who would find a way to dedicate time and turn it around. Or we could keep it and run it like private equity. That's what we chose to do. We actually separated the team from the Levi's group because there's so much opportunity in Levi's. We wanted Levi's to focus on Levi's. We set up an operating structure for Dockers, and they are incentivized, okay, on the value Dockers creates for the mother brand. Because we ran it as a private company, so we had external valuations valuing the company. That allowed us to help turn around Dockers. For the first time, Dockers is now no longer a drag. It's actually growing. That structure is what we've used for Beyond Yoga. It's an independent operating structure. W e have an operating board like any private equity, and we're running it like that. We provide what I call capital and strategic ideas to a group that is empowered to grow the business on a regular basis. If this works, right, then you could talk about a company that has a portfolio of brands in different categories and scaling it. The other thing, as we looked at acquisitions, we said, "Let's not do a bet the farm move." Okay. Let's not focus on turnarounds because we've done one turnaround. We may be doing two. Let's look at opportunities that can scale and grow because we have a business that's global. I think that's the other opportunity as we look at other smaller acquisitions over time is because we do now have a type of supply chain back of the house, infrastructure and people that we can easily scale over time. In fact, I mean, one of the things that you mentioned that triggers a thought is, Beyond Yoga wasn't being shopped. We contacted them proactively. We were very interested in that category, because of its size, because of its growth rate, because of the structural economics of the category, because of the casualization trends. This is just a continuation of the casualization trends. We proactively reached out to a number of companies and brands. Literally, the moon and stars kind of aligned with Beyond Yoga because they had gotten to the point where they needed capital. They were at the point where they had run their business. They'd been around for 15, 16 years in a very disciplined way. They were profitable every single year that they've been in existence. They kind of built their business the old-fashioned way, made money and reinvested it back into growing the business. They had hit a point where they started to really need capital as they continued to expand. Just to pay for the inventory, they needed more working capital. As they started thinking about the need to do retail stores, obviously, that's capital intensive. They had hit a point where to continue to grow the way they wanted to grow, they were either gonna have to sell part or all to private equity, go raise some debt or think of a strategic buyer perhaps. We proactively reached out right at that point in time where they were wrestling with what do we do from a capital structure standpoint for the company. What attracted them to Levi's was our culture. In fact, when they announced the deal internally, they showed the Levi's Circles ad, which was the ad that we had, I don't know, four or five years ago, which showed the diversity of our consumer base, basically. They said, "This is the company for us." They talked about the culture fit with Levi's as being what attracted them to us. It was one of the big lessons is, you don't wait for the deal to come to you. You've got to be out there figuring out what it is that you want and going after it and identifying your targets and developing the relationships. This was a case of needing to build a relationship. It took several months as a result of that, but the outcome, I think we will prove over time, was well worth it. I think that's a perfect place to close. Thanks for your time today, guys. Great. Yeah. Congrats on the momentum in the business. Thanks, Matt. Thank you. Thanks for having us. Great.