Good day, ladies and gentlemen, and welcome to the Levi Strauss & Co. 1st Quarter Earnings Conference Call for the period ending February 26, 2023. All parties will be in a listen-only mode until the question-and-answer session, at which time instructions will follow. This conference call is being recorded and may not be reproduced, in whole or in part, without written permission from the company. This conference call is being broadcast over the Internet, and a replay of the webcast will be accessible for one quarter on the company's website at levistrauss.com. I would now like to turn the call over to Aida O’Rourke, Vice President of Investor Relations at Levi Strauss & Co. Thank you for joining us on the call today to discuss the results for our first fiscal quarter of 2023. Joining me on today's call are Chip Bergh, President and CEO of Levi Strauss & Co., and Harmit Singh, our Chief Financial and Growth Officer. We have posted complete Q1 financial results in our earnings release on the IR section of our website, investors.levistrauss.com. The link to the webcast of today's conference call can also be found on our site. We'd like to remind everyone that we will be making forward-looking statements on this call, which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Please review our filings with the SEC, in particular, the Risk Factors section of our Form 10-K and the information included in our quarterly report on Form 10-Q that we filed today for the factors that could cause our results to differ. Also note that the forward-looking statements on this call are based on information available to us as of today, and we assume no obligation to update any of these statements. During this call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results. Reconciliations of our non-GAAP measures to their most comparable GAAP measure are included in today's press release. Finally, the call in its entirety is being webcast on our IR website, and a replay of this call will be available on the website shortly. Today's call is scheduled for 1 hour, so please limit yourself to 1 question at a time to give others the opportunity to have their questions addressed. Now I'd like to turn the call over to Chip. Good morning, and welcome everyone to today's call. Coming off 26% constant currency growth in our year-ago period, we're off to a solid start to the year. We grew first quarter revenue 9% in constant currency and 6% on a reported basis to $1.7 billion, while driving strong progress on inventory and advancing the key initiatives of our strategic plan. In our direct-to-consumer business, growth accelerated to 16% in constant currency, with record DTC sales representing 42% of global revenues, 3 points ahead of last year. Our international business grew 11% in constant currency, accounting for 56% of our total revenues. Even excluding the planned acceleration of wholesale shipments to support our U.S. ERP implementation, we achieved solid top-line results and exceeded our expectations for EPS. Our performance this quarter clearly demonstrates our strategies are working, driven by the strength of our brands, the growth of our direct-to-consumer business, and the benefits of a globally diversified business model. We continue to make progress against our three strategic priorities, leading with our brands, prioritizing our direct-to-consumer business, and diversifying our portfolio. Please note that for the balance of our remarks, Harmit and I will reference year-over-year revenue growth in constant currency. Starting with our first priority, leading with our brands. Beginning with the Levi's brand, we grew market share again this quarter, achieving share leadership in the U.S. amongst the key 18- to 30-year-old target consumer group, and we continued to grow share in women's denim bottoms, closing the gap to the number one position. In the quarter, the Levi's brand was up 9%, with our men's bottoms business delivering a record Q1 and women's bottoms achieving its highest revenue of any quarter. Men's bottoms grew 9%, with growth across all geographic segments, and we continue to fuel momentum in women's bottoms, which grew 18%. We're planning a steady cadence of newness through the year, and we continue to lean into trends, like with our newly launched women's XL Balloon and Knaughty Boot, and the shift in rise from high to mid and wider leg openings, all of which drove solid growth in the quarter. 2023 is an important year for the company, marking our 170th anniversary and the 150th of our iconic 501, the blueprint for today's modern blue jeans. As we celebrate the heritage of our namesake brand, we're using this important milestone to cement the next generation of Levi's fans. In February, we launched our largest coordinated global marketing campaign, The Greatest Story Ever Worn. It kicked off during the GRAMMYs, where Bad Bunny also opened the show wearing a pair of vintage Five Oh Ones and has helped drive nearly 3 billion impressions with consumers worldwide. After all these years, love for the Five Oh One has only grown and continues to experience exponential growth, a solid proof point of the strength of the brand. Q1 net revenues were up 25% on top of 50% growth last year, and revenues for the Five Oh One this year are expected to reach close to $800 million, which is nearly 70% higher than pre-pandemic on a reported basis. As we move through the year, we're infusing energy and newness into our iconic 501 through new launches for him and her, inspired by historical fits. We also have a robust lineup of collaborations planned, like our recent drop with the iconic streetwear brand Stüssy, which sold out in 1 hour, and an exciting partnership with NewJeans, the popular K-pop girl band, furthering our ambition to engage younger consumers. Our global DTC business delivered a record quarter, up 16% versus year ago, driven by positive comp sales and traffic growth across brick-and-mortar mainline and outlet stores in all geographic segments, as well as e-commerce. Our U.S. DTC business also achieved another record quarter of revenue, with especially strong performance in our U.S. flagships and larger tourist destinations. We continued our store expansion in Q1, opening 25 Levi's stores globally, including 5 mainline stores here in the U.S. The investments we're making to elevate our consumers' digital experience and strengthen their digital connection to our brands are paying off. Even with consumers returning to our stores in large numbers, our e-commerce business grew 14%, driven by broad-based global growth and across all brands, including Levi.com, which was up double digits. We continue to expand the breadth of our offering online while improving the user experience. Our loyalty membership was also up almost 40% in Q1 to nearly 25 million members, and this continues to translate to a higher level of spend among loyalty members. Our direct relationships with consumers and continued strong performance in our international wholesale business helped mitigate the impact of softer U.S. wholesale revenue. Global wholesale grew 4%, driven primarily by Asia and Canada. In the U.S., we accelerated approximately $100 million of revenue from Q2 to Q1, primarily due to our Q2 ERP implementation. As a result, our U.S. wholesale business grew low single digits on top of last year's strong 25% growth. Additionally, while our core consumer has generally remained resilient, we continue to experience demand softness from the value-oriented consumers, most notably impacting our Signature and DENIZEN brands. As for our diversification strategy, we continued the strong momentum we have achieved in each of our major growth opportunities with international, women's, tops, and our other brands, Dockers and Beyond Yoga, each contributing positively to the first quarter growth. International revenues were up 11% or 14% excluding Russia. Europe saw 6% growth excluding Russia, with most markets growing, including our largest markets of France, the U.K., and Germany returning to growth. Asia continued its strong momentum, up 22%, as we experienced growth across all markets other than China. In China, after the zero COVID policy was lifted, we have seen a bounce back in traffic, with our latest results trending back to pre-COVID levels. Total company women's revenue grew 12%, led by strong double-digit growth in both the Americas and Asia. Our tops business grew 4%, following 16% growth last year, with strong performance in our DTC channel, up 12% for both women and men. Our other brands performed well in the quarter. Dockers continued to build momentum, with net revenues up 29%, driven by broad-based double-digit growth across geographies and channels, with DTC especially strong. Dockers e-commerce remained robust, with over 30% growth, in part supported by increased repeat customers and the brand's loyalty program, which is now driving over 30% of sales in this channel across the U.S. and Europe. Beyond Yoga continues to make solid progress, with revenues up 11%, driven by DTC, AURs, and volume, and continued success with the brand's expanded line of dresses. Our first 2 stores are off to a good start, with 2 more planned to open in Q2, along with several further openings through the balance of the year. Finally, Michelle Gass has now been with the company for 100 days as company President, responsible for the Levi's brand and our global commercial and digital operations. As I expected, she and I are working together really well, with both of us determined to make this a very successful transition. She has, not surprisingly, landed great inside the organization, establishing her leadership very clearly on her business. Her deep retail and e-commerce experience is obvious to the organization, and she is already identifying both executional and organizational opportunities which will help us accelerate profitable growth in our DTC, women's, and tops businesses. I was excited and confident when we hired Michelle as my eventual successor, and I'm even more optimistic about this company's future today than I was before. With that, I will turn the call now over to Harmit. Thanks, Chip. We achieved solid results in Q1, with sales up 9%. Excluding the benefit from accelerated U.S. wholesale shipments, primarily related to the ERP transition, our business grew low single digits. Focus on our strategic initiatives and the structural shift in our business fueled our results with our international business and direct-to-consumer channel driving almost 70% of the growth in the quarter. We made significant progress reducing our inventory with total inventory dollars and units down meaningfully. We have achieved this in part by taking deliberate actions to clear inventory in the U.S., as well as reducing receipts in H1, putting us in a stronger position as we move through the balance of the year. We remain committed to controlling costs with a focus on discretionary expenses while continuing to invest for the long term, including opening 18 net new stores and our ERP implementation in the U.S. following two successful implementations in Canada and Mexico. Despite the beat we delivered this quarter, we are maintaining our annual revenue and EPS guidance range, reflecting a cautious outlook on the macro environment, even as we remain excited about the momentum in our direct-to-consumer and international businesses and the progress we're making against our strategy. I will now provide more color on our Q1 performance and 2023 outlook. Net revenue increased 9%, driven by continued global momentum in our direct-to-consumer business. International revenues were up 11%, with greater than expected results across most markets, while the U.S. was up 6%. AURs were up mid-single digits, driven by broad-based growth across geographies, genders, categories, and brands. Our direct-to-consumer channel sequentially accelerated with net revenues up 16%, driven by broad-based positive comp sales growth on top of extremely strong first quarter comp sales last year, driven by higher traffic and higher volumes across geographies, including in the U.S. and Europe. Adjusted reported gross margin was 55.8%, 360 basis points below last year's record 59.4%, but 120 basis points ahead of 2019 pre-pandemic levels. The deliberate actions that we took to reduce inventories in the U.S. that I mentioned a moment ago, coupled with a more promotional environment, resulted in greater than expected pressure on gross margin in the short term. The inventory level sets us up in a stronger position as we move through the year. Gross margin benefited from price increases, lower air freight expenses, and favorable channel mix, despite a negative 40 basis points impact from accelerated wholesale shipments. Those benefits were offset by several largely transitory factors, including a 200 basis points impact from higher product costs, reflecting record cotton prices, higher ocean freight, and demurrage charges, as well as nearly 300 basis points impact from lower full price sales. As we move through the year, the headwinds impacting gross margin should begin to recede, including from product costs given lower cotton pricing, freight and demurrage, as well as lapping lower full price selling and unfavorable FX from H2 last year. The key contributors to our structurally higher margins that we have spoken to you about, such as favorable channel, geographic, and women's mix, will continue to benefit margins. Adjusted SG&A expenses in the quarter were $757 million, up 7% from last year, driven primarily by four-wall investment in support of the higher DTC sales and A&P investment to support our 501-marketing campaign, for which the spend is skewed to the first half of the year. While adjusted EBIT margin came in line with our expectation at 11%, down from 14.9 last year, the decrease was driven almost entirely by the decline in our growth margin rate. Adjusted diluted EPS was $0.34 with a $0.01 negative impact from FX. I'll now take you through our key highlights by segment. In the Americas, net revenues grew 7%, driven by the strength in DTC. The channel was up low double digits in the U.S. and achieved our second quarter of record revenue. Overall, Canada was up double digits and Latin America grew high single digits, driven by increases across nearly all markets in the region. Europe returned to growth, with net revenues up 6%, excluding Russia, on top of 21% growth in the prior year, driven by our DTC business. Geographically, growth was seen across most countries. Our largest markets, France, the U.K., and Germany, were collectively up low single digits, while Spain and Italy were up double digits. Strong demand for the Levi's brand in Asia continued, with revenues accelerating to 22% growth, driven by all channels and markets outside China, led by India. Asia, ex China, was up 28%. As Chip mentioned, we are seeing trends improve in China and now expect China to turn profitable this year. Asia operating margins also expanded 160 basis points to 18.5% due to higher revenues and lower SG&A. Operating margin dollars were an all-time record. Now looking to our balance sheet and cash flows. As discussed over the past year, as we execute the ERP transition and as a result of our actions to reduce receipts in H1, we are rapidly reducing our inventory levels. Q1 inventory was up 33% on a dollar basis, a 25% sequential improvement from last quarter of up a 58%. Core product represents more than 2/3 of our total inventory. We continue to expect sequential improvement quarter-over-quarter, with Q2 being substantially lower than Q1, and expect levels to be in line with sales growth by the end of the year. Adjusted free cash flow was negative $272 million in the first quarter, driven by the timing of capital and the implementation of our ERP. As a result of this, we used our revolver to support our cash position. As we sequentially improve our inventory through the year, we expect free cash flow to turn positive, enabling us to pay back our ABL draw. End of quarter net debt was approximately $834 million, and overall liquidity was $1.2 billion. Our leverage ratio remains strong, although it did increase to 1.4 times compared to 1.1 times at the end of Q1 '22 due to our negative free cash flow. In the quarter, we returned approximately $56 million in capital to shareholders, including dividends of $48 million, up nearly 20% from the first quarter of prior year. In Q2 2023, the company declared a dividend of $0.12 per share in line with last quarter. Moving on to our outlook. Even though we exceeded expectations in Q1, given it is early in the year and the macro uncertainty, we are maintaining a cautious stand and reaffirming our fiscal 2023 revenue and EPS outlooks. We continue to expect net revenues between $6.3 billion and $6.4 billion, reflecting reported growth of 1.5% to 3% year-over-year and EPS in the range of $1.30 to $1.40. While we're maintaining our guidance overall, the way in which we get there has changed from previous expectations. We expect the strong momentum in our global DTC and international businesses to offset softer wholesale trends in the US and Europe as retailers continue to be cautious with their open to buy. For the year, we expect nearly 60% of Levi's brand revenue coming from international and DTC as a mix of our total business in the mid 40% range. Our DTC channel and international businesses are both fast growing with tremendous opportunity given our under-penetration in these categories and importantly, our high gross margin businesses. In reported dollars, we continue to expect low single-digit growth in the Americas for the full year as strong growth in our US DTC business and Latin America will be tempered by US wholesale. We are pleased to see Europe return to growth in Q1, driven by the strength in DTC, with trends coming in better than expected. The outlook has improved, is still within the previously guided range of up low single digits. Based on the stronger trends we are seeing in Asia, we now expect low double-digit growth and improvement from mid-single digit growth in our previous guide. As I mentioned last quarter, we continue to expect 2023 to be a tale of two halves, with the first half weaker and the second half considerably stronger given a number of factors, including the year we are lapping promotional levels, record cotton prices impacting COGS in H1, and supply chain disruptions progressively getting better. I will now provide color on Q2 and the full year. For the second quarter, the over delivery reported in Q1 will temper growth in Q2, but will not have an impact on the first half or full year. In Q2, we now expect revenues down high single digits to low double digits. Given that we are in our ERP implementation and associated downtime, our ability to ship product in the U.S. in excess of what we have contemplated in our guide is limited. Q2 gross margin is expected to meaningfully improve versus Q1 as a result of a higher contribution from DTC but will be down slightly to last year's. We continue to expect SG&A to be up mid-single digits relative to a year ago. In respect to the full year, given the higher levels of promotion than we previously anticipated, we now expect full year gross margin to be down approximately 50 basis points versus prior 57.5%. We remain confident that second half gross margin will sequentially improve as headwinds moderate. We now expect the full year tax rate to be low to mid-teens versus our prior expectations of mid to high teens. Prior to Q&A, I'd like to make three key points. First, while we expect to face continuing challenges through the year, the strength of our brand gives us confidence in sustaining our top line momentum, and our Q1 performance serves as a proof point that our strategies are working. Europe's return to growth, as well as our strengthening international performance and broad-based momentum in our direct-to-consumer business are all fueling our profitable growth. 2. Gross margin will progressively improve as we move through the year and headwinds abate, and we expect to end the year with gross margins above 57% on our way to our long-term goal of 60%. Three, we will continue to focus on controlling the controllables by reducing discretionary spending while continuing to invest in growing DTC as we open new doors, grow comp sales, and accelerate e-commerce. With that, I'll now go ahead and open the call for Q&A. Thank you. The floor is now open for questions. If you have a question, please press star then the numbers one on your telephone keypad. Due to time constraints, the company requests that you ask only one question. If you have an additional question, please queue up again. If at any point your question has been answered, you may remove yourself from the queue by pressing star one again. Thank you. Our first question comes from the line of Bob Drbul of Guggenheim. Your question, please, Bob. Hi. Good morning. Morning, Bob. Hi, Bob. Hey, guys. Good morning. If I could just focus a little on inventories and gross margins to start off the call. On the inventory side, can you just talk about sort of, you know, where you ended up, the up 33% versus your plan, you know, where you think inventory levels are, you know, specifically at your U.S. wholesale partner levels? On the gross margin side, you know, tying it together with the inventory, can you just talk about the expectations on, I mean, Q2 gross margins versus your assumptions around the promotional activity specifically in the U.S.? Thank you. Thanks, Bob. You asked the question that we thought you'd ask. Let's start with it. Overall, we made meaningful progress on inventory. As I mentioned in my prepared remarks, it's down meaningfully, both in dollar and unit terms. It's sequentially improving. If you recall, we said when we reported Q4 that that's the peak and it gets better, which is what is happening. You know, we do believe that by the, you know, the sequential improvement continues into Q2. As I mentioned, inventory is largely clean. We did, you know, get rid of inventory to the extent we could. That did hurt margins. I'll come to margins in a while. I think the inventory improvement is largely driven by the fact that we proactively cut H1 buys, you know, we were able to clear inventory. To your question about, you know, is this largely driven by the U.S., yes, unequally it is U.S. U.S., for example, inventory levels at the end of Q4 were, you know, up 90% year-over-year, and Q1 is down to 35% year-over-year. It's dramatic improvement in the U.S. You know, that's why we think that, you know, it gets better progressively as the year progresses, you know, from that perspective. To your question about gross margin, the miss against our expectation was largely because we proactively were able to clear inventory as well as promotional levels were slightly higher than we anticipated. You know, quarter one is not a great read if you look at it last year for full-year gross margins. It was a record gross margins last year when, you know, in basically there was very little promotion. Gross margins were at an all-time high of 59.4%. We ended the year at 57.5%. You know, a year ago into what's happened on gross margins in the quarter. Let's start with what I call the good guys, and a lot of these good guys are gonna be here for a while, which is the fact that, you know, we took prices up. We are seeing lower air freight and a favorable channel mix. If you quantify all that, it's about 150 basis points that we see continue through the year. You know, what I call or what we call transitory, it will recede as the year progresses. you know, 200 basis points is a combination of commodity increased cotton, you know, in H1 was bought. you know, our product was bought when cotton was an all-time high. That along with some demurrage costs, et cetera, is about 200 basis points. That begins to recede as we step into H2. About, I think, the tailwind is about, you know, I would say 170-180 basis points because, you know, there is some inventory that we bought in H1 that we'll clear in H2. The rest is promotional levels, which were much higher than a year ago. The two pieces, one, you know, last year at this time, we didn't really sell anything under the full price. Now we're selling something a little higher, and then promotion is high. We expect, you know, and we're conservatively anticipating this. It's difficult to predict, but we're anticipating that promotion levels continue through the year. As you think about the year, annual expectation on gross margin, I think we're gonna be about, relative to last guidance, about 70 basis points down at the end of the year, and that's largely driven by higher promotion levels, which we expect, offset by better channel mix. DTC is gonna be higher, international is gonna be higher, Europe is, you know, rebounding nicely. I think that's how we're thinking about gross margins. As you know, large piece of what we sell is core. We brought a lot of newness into our assortment with the 501 150th anniversary, all that helps. I hope that addresses your question, Bob. It does, Harmit. Thank you. You're welcome. Thank you. Our next question comes from the line of Matthew Boss of JPMorgan. Your question, please, Matthew. Great. Thanks. Maybe, Chip, could you just update us on health of the Levi's brand? Maybe what you're seeing in the U.S. and Europe marketplace today as it relates to the denim category. Harmit, to your points before, any change in the pricing strategy, just given the dynamic consumer backdrop out there? Yeah. Sure. Good morning, Matt. Let me first talk the category since that's part of your question. I think you all know that the data that we get on a quarterly basis is U.S. only, still, you know, a major part of our business. We don't get the rest of the world on a quarterly basis, but sort of as we had thought and would expect, the category is back to growth again in the quarter, in the most recent quarter. It's up 1%. That's on top of a prior year quarter of up 16%. If you remember, at the last call, we talked about how coming out of the pandemic, we saw a big spike in denim, and then we had 2 quarters of kind of mid-single digit softness. We're back to growth now, that's good. That 1% growth in the category, you know, compare that to what we reported in our U.S. DTC business with record volume that was up low double digits. We are clearly gaining share. We talked about it in the prepared remarks. You know, we are now the outright leader in men's and women's 18-30-year-old jeans market after gaining 1 point of value share in the past 12 months and past 3 months. We continue to grow share in women's denim bottoms. You know, closing the gap, we are now knocking on the door of being the number 1 brand in the U.S. That has not happened in my entire 11 and a half years at this company. You know, we continue to have momentum while others are struggling. You know, in terms of brand equity, a couple of things. I guess the first thing I would point to is just the strength of our overall DTC business, where we are in control of the brand and how we engage with the consumer and how we show up. It shows up in the business results. You know, our global DTC business delivered a record quarter. We were up 16% versus prior year. We comped positively in all regions. Our e-commerce business was up double digits, too. I think that kind of speaks to, you know, consumers are still coming to this brand. You know, one other data point is, you know, as we do our brand equity studies around the globe, you know, we do get at price perception for Levi's, and this is price perception, right? Levi's jeans is a leader in being worth paying more for quality and longevity. We, you know, as a result of that, we're pretty well positioned to continue to navigate through, you know, this inflationary period. I don't think we said it in the prepared remarks, but our AURs were up mid-single digits again this quarter, despite the promotional environment. On Europe specifically, Europe revenues were up 2%. I think we said this in the prepared remarks. That up 6% excluding Russia, sequentially improving versus last quarter, again driven by the strength of DTC, which was up 16% excluding Russia. Comps were positive every month across North and South Europe. They were also positive in the quarter in mainline and outlet stores as well as e-commerce. Every market in Europe grew with the exception of a couple of the smaller markets in the Nordics. Our largest markets, France, U.K., Germany, were all collectively up low single digits. Spain and Italy were up double digits. You know, so Europe is doing a little bit better than what we thought it was gonna do going into the year. It's still kind of in the range of what we guided originally. you know, I guess the last thing I would say about Europe, just like the U.S., we're pretty cautious about our wholesale business there, as retailers are, you know, playing their open to buy budgets pretty close to their best given all of the macroeconomic uncertainty. Matt, your question about any change in pricing strategy. If the question behind the question is are we taking prices down, no, that's not what's happening. Yeah, we're not necessarily pricing up in today's environment. We're, you know, promoting smartly like most retailers. You know, we're not necessarily number 1 in promotions. We are competitive, but we're not necessarily 1. We've got a lot of newness in our assortment, that's why, you know, how we are, you know, attracting traffic, you know, et cetera. Where we can price, you know, for example, you know, the organic stuff that we bring in, we price thoughtfully. Overall, we're being mindful of, the fact that the, you know, consumer generally, especially in the western part of the world, are, you know, just, you know, are tight, on spending. Great. Best of luck. Thank you. Thanks, Matt. Thank you. Our next question comes from the line of Jay Sole of UBS. Please go ahead, Jay. Great. Thank you so much. Harmit, I heard you say you expect SG&A dollars to be up mid-single digits in Q2. I'm not sure I caught what you expect SG&A dollars to do for the full year and how that impacts your operating margin guidance. Is it possible could you just expand on that a little bit for us, please? Thank you. I would say low single% to mid-single% on a full year basis. You know, largely the way we are thinking about SG&A, Jay, is wherever we can cut discretionary expenses, we are. You know, we have really tightened new hires. We have tightened things like travel, unless it's business critical, et cetera, et cetera. I think where we're spending the dollars is as we open new doors, you know, we'll have on a net basis, 80 doors, you know, this year, between our three brands, and that is gonna fuel the direct to consumer business, which is important. You know, advertising, you know, a little bit, especially with the 501 campaign. You know, on basic infrastructure like the ERP, which is being implemented as we speak in the U.S. as well as the distribution capacity that, you know, we're gearing up for the long term. I think those are the areas where the spending is, which drives a little bit of the SG&A, but where we can tighten, we'll continue to tighten. Okay, thank you so much. You're welcome. Thank you. Our next question... Oops, one moment. Pardon me. Our next question comes from the line of Ike Boruchow of Wells Fargo. Your question please, Ike. Hey, everyone. Thanks for taking the question. Maybe Harmit, can you talk a little bit more about the implications the ERP has had on U.S. wholesale? Just maybe specifically, can you quantify the dollars that were pulled forward into the first quarter from and the dollars that'll be pulled out of the second quarter? Maybe specifically, could you give us embedded in that down high single to low double, what is the U.S. wholesale decline planned in 2Q? Any other color on U.S. wholesale, whether it's order books or plan in the back half would also be great. Thanks. Sure, Ike. You know, when we were talking about a quarter ago, I think we'd anticipated the timing of the ERP and the discussions we were having with our key customers. The range of the, you know, the sales push between Q1 and Q2 would be about $80 million to $100 million. As we mentioned on the call, I think the timing is about $100 million between Q2 and Q1. I do wanna thank our wonderful customers because, you know, they were able to work with us in getting this, you know, just, you know, as we work through the timing of the ERP. The ERP is currently being implemented, you know. Our DCs, for example, are shut as we speak, and we're in the process of cutting over. I think to your question about, you know, Q2, a large piece of, you know, the $100 million is what we actually take from Q2 and put it in Q1. Q2 will be impacted, you know, with that. Yeah, you know, and that's why as we think about what to expect in Q2, you know, we're guiding down high single-digit, low double-digit. That obviously also has a positive impact on gross margin. That's why we're saying gross margin will be down a little bit, not, you know, what you saw in Q1. I think that's how we're thinking about it. We do expect the impact of the ERP to largely be in H1 because the ramp up really happens in May, which is the last month of the quarter. By the time we get into quarter three, I think we should have this behind us. As you know, you know, we have implemented the ERP in Canada and Mexico, and it's largely a very standardized module that's being implemented in the U.S. The benefits are largely gonna be in data insight and simplification for our operators. You know, that's what we're seeing in the two markets, and that's the benefit that we see. This is foundational to everything else we're doing. Especially as you grow e-commerce and you grow our direct-to-consumer business, this gives us the foundational base to actually accelerate automation and connect with the consumer a lot better. Great. Thanks. Thanks, Ike. Thank you. Our next question comes from the line of Dana Telsey of Telsey Advisory Group. Your question, please, Dana. Hi. Good morning, everyone. Good morning. Hi. As you think about the performance of denim versus non-denim, what did you see there? Chip, you've given out in the past what the overall apparel category, how that performed versus denim. What are you seeing there? Can you just expand upon with wholesale, how do you expect that to progress through the year? Is there a difference between the department stores or the discounters and what you're seeing in order rates? Thank you. Yeah, there's a lot there. First of all, you're right. I normally do give the apparel category, I didn't this time, I've got the number here in front of me. Apparel was up 2%. This is U.S. data, again, for Q1. Recall I said that the denim category was up 1% off of a base of +16%. Apparel was up 2%. I don't have what the base period is for total apparel, but it was up slightly ahead of denim, that's consistent with everything we're seeing and hearing that, you know, some of the more dressier categories is doing a little bit better. We're even seeing that in our own business. Our non-denim business has done pretty well. It was up low double digits as well. Some of our bestselling items right now are chinos and cargos and things like that. We're seeing it really, those categories move really well. What else was in the question? I think, Dana, you asked about our expectations for wholesale. As you know, or I just wanna clarify, if you think of the U.S. wholesale business, and the year we're lapping is important. You know, the first half, I think the U.S. wholesale business was up close, a little over 20%. 25% in Q1, 20% in Q2. We are lapping strong numbers, and then we have the ERP timing. Our expectation for the year, and this is wholesale in total, our expectation for the year is down in the low to mid-single digits, but made up by our Direct-to-Consumer business. I think if you think of the business structurally, this is going to... You know, our direct-to-consumer business, which is about 42%, but for Levi's, it's close to the, you know, 45%, continues to get stronger. You know, strategically, that's really what we said in Invest Today. This is a business that should head towards 55%. It gets stronger, the gross margins are better, et cetera. You know, I think 2023 is a good reset year from that perspective. We're taking, you know, it's unfortunate what's happening in the Western world in terms of the macroeconomics, but if the company emerges structurally a better company at the end of the year, it's a good thing. Yeah. The only other thing I would add on top of that, Dana, is, you know, in talking with our wholesale customers, virtually all of the customers are keeping their open to buy budgets pretty tight given the uncertainty. The only other thing I would add is that we are seeing pretty significant softness in our Signature DENIZEN business, you know. That value consumer is really being squeezed. There's definitely a bifurcation happening where the lower end consumer is making hard choices and either trading down or just not buying denim. That middle income consumer and up, which is kind of the sweet spot for the Levi's brand, is doing well and is still buying denim. That is driving the growth of the Levi's business, the growth of our DTC business, and the strength that we are seeing in our direct to consumer business. Thank you. Thank you. Our next question comes from the line of Paul Lejuez of Citi. Your question please, Paul. Thanks. It's Tracy Kogan filling in for Paul. I don't think I heard you talk about 3Q, and I was just wondering if you're still expecting high single digit sales growth there, and if you have anything, you know, like order books to support or give you confidence in that growth? Thanks. Yeah, no. Tracy, hi. Good to connect. We don't, as you know, guide quarterly. You know, we talk about the year. If you do the math, you know, our H2 is up higher than, you know, mid-single digit. You know, H2 will closely approach probably the low end of our growth algorithm. You know, so we're beginning to progress this. You know, what we have said earlier is, you know, a tale of two halves. The first half weaker, the second half stronger. It's also driven by the year we're lapping. If you go back and benchmark it to, say, 19, the difference between the first half and the second half is not that dramatic. It's just the year that we're lapping. Plus, you know, our expectation really is, you know, things, you know, get a little better as the year progresses, and we're able to work out all the inventory issues, et cetera. Great. Thanks. Just on freight, I think you said air freight was a tailwind, but ocean freight was a headwind this quarter. I guess it netted out as a headwind. I'm just wondering how you're thinking about those pieces of freight for the remainder of the year. I mean, H2, it becomes a, you know, a tailwind, both pieces of freight and, you know, that's how we're thinking through it. Great. Thanks very much, guys. Bye. Thank you. Our next question comes from the line of Laurent Vasilescu of BNP Paribas. Your question please, Laurent. Good morning, Chip and Harmit. Thanks for taking my question. Harmit, I just wanna square away some math here. I think in your prepared remarks, you mentioned that DTC should be about mid 40% of the percentage points of the overall sales for the year. Does that imply global wholesale would be down high single digits? I might be off with the math, but just wanted to confirm. If that's the case, how much of that decline is coming from U.S. wholesale? Maybe drilling down further, just curious, I think last quarter you mentioned that mass was down high teens. Just curious to know how you're thinking of how it performed this quarter and how you're thinking about it for the full year. Yeah. The mid-40s is largely Levi's. You know, if you think of the company, you know, Dockers, you know, has about 30% of the business is DTC. Beyond Yoga, it's, you know, half the business. If you, if you know, you think of the company, we are in a little better than 42% at the end of the year. That's the projection. If you do run the math, our view is global wholesale is down in the low mid-single digit. It's largely the U.S. and Europe, where, as Chip mentioned, our customers have, you know, cautious in the open to buy. We are building that into our expectations and really focused on driving our direct-to-consumer business. If things change, you know, obviously you'll see that, you know, roll into the numbers, you know, from that perspective. Very helpful. Any color on the, on the mass channel, how it performed this quarter and how you're thinking about for the year? Yeah. Yeah. You know, the mass channel is down about 13%. You know, in quarter 4 it was down 19. It was lapping a 10% growth quarter in 2022. We're planning it down. We're planning it down, you know, low double digits. Again, you know, we sell to two wonderful customers, largely, Signature and DENIZEN, and they're cautious and they're open to buy. We're reinforcing. The good news for us is one of the customers, we are, you know, taking women's out, DENIZEN women's out of doors and really, you know, working with them to grow our Levi's Red Tab, and that does help premiumize the brand. Very helpful. Thank you very much. Thank you. Our next question comes from the line of Brooke Roach of Goldman Sachs. Please go ahead, Brooke. Good morning, and thank you so much for taking our question. I was wondering if you could talk to the sell-through trends that you're seeing in U.S. wholesale for the core Red Tab business, and how consumer engagement with the brand at wholesale may be differing relative to the stronger trends that you're seeing in North America DTC. Then Harmit, can you clarify, is the more cautious view on wholesale a function of a more cautious open to buy, or has there been a slowdown in sell-through trends versus your prior expectations that may be driving this outlook? Yeah. You know, March is a, as you all know, it's a very difficult month to read, you know, because of tax refund checks, the weather, you know. I think, as we think about the quarter, you know, April, for example, and, you know, it's early days, but, you know, we've seen, you know, traffic come back and, you know, things are looking a lot better. To your question about, and our DTC business, which is a real representation of how the brands showing up in our assortment is doing well. To your question about the cautious on view on wholesale is largely the opened buy, you know, that we're thinking, you know, that's driving that decision. If that opens up, you know, things get better. That will probably over time, as inventory is tightened, should also improve the promotional environment. Thank you. You're welcome, Brooke. Thank you. Our next question comes from the line of Alex Straton of Morgan Stanley. Your question please, Alex. Great. Thanks so much for taking my question. Just a couple on my end. First, I totally understand that promos are higher year-over-year given the change in environment. I'm wondering how promos change sequentially in the latest quarter compared to the prior, and maybe how you would characterize the broader environment there. Then secondly, just on inventory quickly. Want to understand if that in line by the end of the year with forward sales growth is a longer timeline than I think you may have previously communicated. I think most brands are saying they'll be clean entering the back half, so I'm just wondering what's different on Levi's here. Thanks so much. Yeah. Yeah, I mean, you know, Alex, our view is we're gonna be clean. We're, we're clean, we're cleaner today than we were a quarter ago. We'll be clean by quarter two. It's not about, you know, is the inventory clean. It's just question about, you know, our view on inventory is, you know, we think quarter two, the growth rate relative to a year-ago is mid- to high-teens, slightly higher than what we anticipated a quarter ago, just given where U.S. wholesale is. As you know, in U.S., the inventory is largely poor. So, you know, that's guiding our thinking on getting inventory back to, you know, sales levels, from that perspective. In terms of the promotional environment, we've just been cautious. It's difficult to predict. You know, in our latest expectation of gross margins, we have built in, you know, slightly higher promotions level in H2. If that doesn't pan out, obviously that translates into higher gross margins. That's really factored in, into expectations. The only other thing I would add is keep in mind that the base period promotional environment changed pretty dramatically between first half and second half. Last year, first half, you know, there were all the supply chain issues, and a lot of people didn't even have enough product, so everything was being sold at full price. The second half, it started to get a lot more promotional. The year-over-year change is quite dramatic in the first half for us. The year-over-year change in the second half should be much less dramatic and have less of a overall impact on the gross margin. I think, you know, I think if you're trying to understand, Alex Straton, the progression of gross margin. Last year, Q1 was 59.4, ended at 57 to the point Chip Bergh was making because, you know, it got promotional as the year progressed. This year, Q1 is 55.8. You know, 200 of that is really commodities, which gets better, you know, as we step into H2. That's why we think, you know, there is progression in gross margin getting us back to slightly over 57%, you know, as we close the year. Plus, you know, you know, I think the promotional environment gets better. It's not gonna be as promotional, our view. We're building in some promotions in H2. you know, it's not gonna be as bad as Q1 and Q2. Thanks a lot. You're welcome. Thank you. Our next question comes from the line of Chris Nardone of Bank of America. Your question please, Chris. Hi, guys. Good morning. Two quick questions. On second half guidance, can you just talk about your confidence in maintaining that strong DTC momentum on a potentially lower promotional environment compared to last second half? Quick question on Asia. You increased your guidance up low double digits, and that's on top of mid-20s% growth last year. Is there any way you can elaborate on where you're seeing the most strength in Asia, and how much is coming from new doors versus comps? Thank you. Yeah. Yeah. Thanks, Chris. Asia, as you know, growing Asia, is one of our strategic initiatives. The last 2 years, you know, the noise has been just COVID, you know, with some country closed, et cetera, et cetera. I think, you know, Q1 is a good read, you know, from that perspective now. Q1 doesn't reflect, you know, the reopening of China, because that happened largely in February. Most markets in Asia are off to a great start. You can see the leverage in our operating margin as well as operating dollars. In, you know, whether it's India, whether it's Australia, whether it's other South Asian countries, we had a good quarter, you know, from that perspective. The brand strong is largely a DTC business, the Direct-to-Consumer business is, or the growth is largely driven by comp sales performance, you know, which is the good news. We haven't really factored in any upside, should, you know, what we see in China continue or sustain itself for the rest of the year. That's the Asia story. You had another question, Chris. one was. Strong DTC. Yeah. Strong DTC. Strong DTC. One, you know, we think Asia sustains itself as the year progresses, because, you know, the brand's strong. Consumer's a lot more resilient. It's a younger consumer, so I think, you know, all that really helps. To your point on DTC last year did slow down in the second half. Largely Europe was down. Q3 and Q4 was down. We've seen Europe rebound. The consumer in Europe, our view is a lot stronger than everybody anticipated. While wholesale customers continue to be tight on the open to buy, you know, we see the DTC growth continue. The other piece is, you know, we do have a new chief digital officer, and Michelle's putting a lot more emphasis on driving our retail performance. I think those things definitely will benefit us because there is low-hanging fruit. As we continue to focus on improving execution, our operators on the ground do a good, you know, great job, but there are clear opportunities. I think as we continue to optimize that, we will continue to see DTC performance improve. Thank you. At this time, I'd like to turn the call back over to the company for any closing remarks. Thank you, Lateef, and I wanna thank everyone for dialing in and for their questions, and we'll look forward to talking with you at the end of the next quarter. Thanks very much. Have a nice weekend. Thank you. This concludes today's conference call. Thank you. Please disconnect your lines at this time.