Loandepot Inc

NYSE:LDI

Greetings, and welcome to a.k.a. Brands Holding Corporation Fourth Quarter and Fiscal 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

It is now my pleasure to introduce Emily Schwartz. Thank you. You may begin.

Good afternoon. Thank you for joining a.k.a. Brands to discuss our fourth quarter and fiscal 2024 results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call today are Ciaran Long, Chief Executive Officer; and Kevin Grant, Chief Financial Officer.

Before we get started, I'd like to remind you of the company's safe harbor language. Management may make forward-looking statements which refer to expectations, projections and other characterizations of future events, including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any such forward-looking statements.

This call will also contain non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and available on our website.

With that, I'll turn the call over to Ciaran.

Good afternoon, everyone, and thanks for joining us. This marks my first call as the permanent CEO, and I'm thrilled to build on the foundation we've established over the past few years and lead a.k.a. Brands through this next chapter of growth.

I'd also like to introduce Kevin Grant, our Chief Financial Officer, who was appointed to the role in the first week of January. Prior to becoming the CFO, Kevin was the company's Controller and a key senior leader at a.k.a. Brands since April 2021. Kevin joined a.k.a. from Walmart, where he spent 7 years in senior finance positions. And prior to that, he spent 11 years at Ernst & Young. I'm excited to have him on the call today.

2024 was an exciting and pivotal year for a.k.a. Brands, marking a fundamental shift in our trajectory. I'm particularly proud that we delivered results ahead of our expectations, which is a testament to our team's ability to execute at the highest levels. Thank you to our team for their hard work and dedication building next-generation fashion brands, as well as their consistent innovation and enthusiasm towards serving our customers.

Before I go through the results, I'd like to highlight some key achievements from the past year. In 2024, we achieved a significant milestone by stabilizing the business and returning to growth. We delivered $575 million in net sales, representing a 5.2% increase over the prior year. In the U.S., which is our largest market, we delivered an impressive 17% net sales growth, underscoring the strength of our brands and the long runway of opportunity ahead in the region.

We successfully attracted new customers while strengthening our bonds with existing ones, resulting in an impressive 9% growth in our trailing 12-month active customer base, surpassing 4 million customers.

We expanded our omnichannel initiatives to drive profitable growth and enhance brand awareness. We opened 5 Princess Polly stores throughout California, Arizona and Boston, and our women's brands furthered their wholesale tests with leading retailers such as Nordstrom.

We enhanced our assortment with fresh, high-quality merchandise, resulting in stronger full price sales and a 200 basis point improvement in gross margin to 57%.

And lastly, given the strength and flexibility of our business model, we delivered $23.3 million of adjusted EBITDA, which represented significant year-over-year growth of 69%.

Our strong financial performance and ability to execute our strategy gives me great confidence in a.k.a. Brands' many profitable growth opportunities ahead. As we look at 2025, we are steadfast in our focus on growing our brands and enhancing our overall profitability.

Our momentum continues with the quarter-to-date net sales growth consistent with our Q1 outlook of 4% to 6%. We're confident in our full year sales outlook of $600 million to $610 million, representing growth of 5% at the midpoint and adjusted EBITDA of $27.5 million to $29.5 million for the year.

Building on the success of last year, we remain focused on 3 key priorities. First, we will attract and retain customers through our direct-to-consumer channels. Our brands are early on in their journey, and we believe we have significant opportunity to grow awareness of our brands. This includes the evolution of our test and repeat merchandising model and delivering on our promise of curating new, on-trend, exclusive fashion to customers weekly. We'll also leverage differentiated and innovative strategies across multiple marketing platforms to deepen our direct connection with customers.

Second, building upon our early success, we will expand our reach and total addressable market through physical retail and growing our wholesale partnerships. As you saw in our press release this afternoon, we will open 7 new Princess Polly stores in 2025, with our first store in New York City slated to open next week. We're also expanding our wholesale presence. Princess Polly and Petal & Pup will launch across Nordstrom's entire store fleet this month.

And third, we remain committed to streamlining our operations and strengthening our financial foundation. As part of this, we will continue to harness the power of our flexible technology ecosystem, which allows us to explore new AI capabilities to deliver great customer experience and drive operational excellence with minimal capital investment and resources. In combination with our comprehensive set of customer data, we will leverage AI-driven solutions to personalize customer journeys, predict shopping behaviors, optimize marketing, streamline inventory planning and operational workflows.

Now let me share some recent highlights from our brands, as well as growth drivers for 2025. Starting with Princess Polly, our largest brand that's well known for its trend-driven designs and authentic connection with its customers. Princess Polly has climbed in popularity in the U.S. over the past several years as an online-only brand, and I'm pleased that the brand continues to resonate with its customers through innovative merchandising and marketing strategies.

Anchored on our data-driven test and repeat merchandising models, Princess Polly consistently drops new collections and styles to stay ahead of the trends and capitalize in big moments, such as upcoming festival, prom and graduation collections and lead an exclusive edit with Ashtin Earle, which launched earlier this week.

Core to the Princess Polly brand is its next-generation marketing approach, which blends traditional and cutting-edge marketing initiatives to foster a deep connection with its customer. In 2025, as part of our strategy to attract and retain customers, Princess Polly will lead with its influencer strategy on social media while also [ diversifying ] to over 30 different marketing platforms, including WeChat, Netflix and out-of-home billboards to build upon the momentum and brand affinity.

Though Princess Polly remains primarily a digital-first fashion brand, the brand is expanding its footprint to remain at the forefront of the next generation of retail. In September of 2023, Princess Polly took a significant step by launching the brand into physical retail roots for a store in Los Angeles. The in-store customer response exceeded our expectation, validated our omnichannel vision and led Princess Polly to opening 5 more stores in 2024.

The stores drive revenue and profitability. However, the strategic value lies in expanding brand awareness, acquiring new customers and creating deeper, more meaningful connections with our existing customers through enhanced touch points and physical experiences.

More than 30% of customers shopping in our stores are new to Princess Polly on their first visit. And importantly, while it's still early days, we've observed an incremental lift in our online business in the surrounding radius when a store opens, confirming our thesis that we're expanding our market share with each new location.

We are excited to announce that we will be opening our latest physical expression of the Princess Polly brand in SoHo, New York City, next week. The opening will be supported by an engaging series of launch celebrations featuring in-store grand opening events and citywide activations. We encourage those of you in New York to come out and experience the brand firsthand.

Moving on to store momentum. I'm excited to announce that Princess Polly will open 7 new stores across the U.S. in 2025, which would bring the total number of stores to 13 by year-end. In addition to New York City, Princess Polly will unveil stores in top shopping destinations across the country, including New York, Florida, California, Ohio and Pennsylvania. From a timing perspective, 4 stores will open in the first half of the year, with the remaining stores slated to open in the back half.

Building upon its omnichannel model, Princess Polly is also expanding its reach through its strategic partnerships with leading retailers. Following a highly successful pilot across 20 Nordstrom locations in the fourth quarter, Princess Polly will launch new styles across all Nordstrom stores nationwide in the first quarter, further validating that broader consumer exposure consistently drives strong demand for our brands. Princess Polly also recently launched over 70 styles on asos.com in the U.K., establishing the groundwork for future global expansion.

Petal & Pup, our other women's brand, appeals to females in their 20s and 30s with its stylish feminine designs that make fashion accessible and empowering for life's biggest moments. Building on its digital foundations, Petal & Pup is also strategically expanding into new channels, driving brand awareness while achieving strong performance across all partnership launches. As we announced in January, Petal & Pup had a very successful test across Nordstrom's website and 1/2 of their store fleet in 2024, and will now be featured in all Nordstrom stores later this month.

In addition to its omnichannel expansion, Petal & Pup continues driving customer engagement through multichannel marketing strategies, leveraging influencer partnerships, social media campaigns, in-person events and out-of-home advertising, including high-impact billboards. The brand is equally focused on strategically expanding its assortment, highlighting key trends such as everyday basics, elevated floral prints and this season's trending colors.

Petal & Pup also continues to strengthen its exclusive style portfolio, capturing additional share of wallet with its second wedding guest Modern Romance collection, which exceeded performance expectations and deeply resonated with customers during the collection's debut last spring. I'm more confident than ever that Petal & Pup is well positioned to capitalize on significant untapped market potential.

Shifting to our streetwear brands. We've made great progress over the last 18 months optimizing Culture Kings' operations across both regions, and the results are very encouraging. We've added strategic hires in the beginning of 2025, including a new President of Australia and the Global Head of in-house brands, who brings valuable experience to both our U.S. and Australian operations, positioning Culture Kings for long-term growth and innovation.

Culture Kings stands apart in the streetwear landscape by leading with its in-house designed apparel, positioning the brand for sustained long-term growth. Culture Kings; in-house brands, including sought-after labels like mnml, Loiter, Carré and Saint Morta, consistently rank among top sellers, both online and at the Las Vegas flagship store.

To complete the streetwear outfit and enhance its market credibility, Culture Kings complements these in-house brands with exclusive footwear, headwear and accessories from premium third-party brands, including industry titans like New Era, Mitchell & Ness and New Balance.

In the back half of last year, Culture Kings began narrowing its focus on their top in-house and third-party brands that really move the needle. This included shifting our in-house brands to a test and repeat merchandising approach, which creates more fashion newness and reduces inventory risk.

Culture Kings' in-house brand, Loiter, is leading this merchandising transition and showcasing the effectiveness of the model. In the fourth quarter, Loiter put up another quarter of triple-digit revenue growth with gross profit dollars growing even faster year-over-year.

There is nothing quite like the immersive experience of the Culture Kings' Las Vegas flagship store, and we're actively looking for our next Culture Kings store location in the U.S., which will be smaller than our Vegas store while retaining key immersive elements such as the Half Basketball Court and Hat Wall. The immersive store and retailtainment atmosphere are core to the Culture Kings' marketing strategy of creating unforgettable moments around product launches, in-person experiences and tentpole moments that resonate deeply with its customer base.

Before I pass it to Kevin, I'd like to reiterate my thanks to our incredible team for delivering a great year. Our portfolio consists of young brands still early in their growth trajectories with substantial global potential ahead. I'm confident that we have the right strategic initiatives in place and complete alignment across our teams to drive another year of strong performance in 2025.

With that, I'll turn it over to Kevin to walk you through the financials.

Thanks, Ciaran. Let me start by saying that I'm thrilled to take on the role of CFO at a.k.a. Brands, and I look forward to working closely with all of you. As Ciaran noted, prior to assuming the role of CFO, I was the company's Controller and have been deeply involved in the company's financials since before our initial public offering.

Now let me dive deeper into our fourth quarter results, and give you our view on 2025. As Ciaran noted, for the fourth quarter, net sales increased 6.8% to $159 million and 6.7% on a constant currency basis compared to the same period last year. This was driven by strength in our U.S. business, in which net sales increased 21.6% compared to the fourth quarter of last year. This was partially offset by a 9.6% sales decline in Australia and New Zealand as compared to the fourth quarter of 2023. And net sales in the Rest of World region declined 13.5% year-over-year.

Early signs from Australia in 2025 are encouraging, and we expect the region to improve this year, thanks to our team's extensive work in transitioning Culture Kings to a test and repeat model while optimizing operational efficiencies across the region.

Total orders for the fourth quarter were 2.04 million, increasing 3.6% as compared to the fourth quarter last year. Our trailing 12-month active customer count rose to 4.07 million by the end of the fourth quarter, a robust 9.4% increase compared to a year ago. Our fourth quarter average order value was $78, increasing 2.6% compared to the fourth quarter last year.

Turning now to our profitability metrics. Gross margin was in line with our expectations and expanded 460 basis points in the fourth quarter to 55.9% compared to 51.3% in the same period last year. The increase in gross margin was driven by a higher penetration of newness and full price selling. And we also received the benefit of lapping markdown actions that we took in Australia in the fourth quarter of 2023.

Selling expenses were $44.6 million compared to $42.3 million in the fourth quarter of 2023. As a percentage of net sales, selling expenses were 28% compared to 28.4% a year ago.

Marketing expenses in the quarter were $22.3 million compared to $17.3 million in the fourth quarter of 2023. As a percentage of net sales, marketing expenses were 14% compared to 11.6% in the fourth quarter of 2023.

General and administrative expenses were $24.9 million compared to $22.3 million in the fourth quarter of 2023 due to an increase in incentive compensation and nonroutine legal matters. As a percentage of net sales, G&A expenses increased to 15.7% from 15% in the fourth quarter of last year.

We're pleased that we delivered adjusted EBITDA of $6.2 million compared to $1.3 million in the same period last year, ahead of expectations. Adjusted EBITDA margin for the fourth quarter of 2024 increased 300 basis points to 3.9% compared to 0.9% in the same period last year.

Turning now to the balance sheet. We ended the quarter with $24.2 million in cash and cash equivalents compared to $21.9 million at the end of the fourth quarter of 2023. And we ended the year with $111.7 million of debt. As a reminder, we've significantly reduced our leverage by over 1.5 turns over the past 2 years, and we're committed to bringing leverage down even further.

We ended the quarter with $95.8 million in inventory, an increase of 5% compared to a year ago. We are very pleased with our ability to effectively manage our inventory growth below our net sales growth, demonstrating the benefits of the test and repeat merchandising approach.

Looking at 2025, we feel good about the quality and composition of our inventory, and we are confident that we are well positioned as we head into our brands' key spring and summer seasons.

We generated $7 million in operating cash in the fourth quarter compared to $15 million in operating cash in the same period last year.

A quick update on our stock buyback program. We continue to believe that our stock is undervalued. And in the fourth quarter, we purchased 11,000 shares for a total cost of $243,000. As of the end of 2024, we have $1.3 million remaining in our share repurchase authorization.

Looking ahead, as Ciaran mentioned, we're encouraged by the momentum we're seeing and confident that our strategic initiatives will deliver solid top line growth and profitability over the near and long term.

For the full year 2025, we expect net sales of $600 million to $610 million, representing growth in the range of 4% to 6%, driven by double-digit growth in the U.S. region and improving trends in the Australia and New Zealand region, which contemplates an approximate $10 million FX headwind. Excluding the impact of FX, our 2025 net sales outlook would be growth in the range of 6% to 9%.

We anticipate adjusted EBITDA to be between $27.5 million and $29.5 million, representing growth in the range of 18% to 27% from last year. Our adjusted EBITDA outlook contemplates all tariffs enacted to date, inclusive of our actions to mitigate the impact. Our outlook also contemplates gross margin approximately flat to last year, modest leverage in both selling and marketing expense and slight deleverage in G&A expense, excluding stock compensation, depreciation and amortization and nonroutine items due to modest head count investments to support our channel expansion efforts.

For modeling purposes, we are planning fiscal 2025 stock-based compensation of approximately $8 million to $10 million; depreciation and amortization expense of roughly $18 million to $20 million; interest and other expense of approximately $10 million to $12 million; an effective tax rate of negative 40%; and weighted average diluted share count of approximately 10.8 million.

We expect fiscal 2025 capital expenditures in the range of $12 million to $14 million, primarily related to opening 7 Princess Polly stores this year.

For the first quarter of 2025, we expect net sales to be between $121 million and $124 million, which contemplates an FX headwind of approximately $1.5 million, representing growth in the range of 4% to 6% and consistent with our annual outlook.

Adjusted EBITDA is expected to be in the range of $1.5 million and $2 million, driven by sales growth and gross margin expansion as we lap the targeted inventory actions at the Culture Kings brand in the first half of last year.

We are expecting weighted average diluted shares of 10.7 million in Q1.

In closing, we made great progress delivering on our key priorities in 2024, leading to strong top and bottom line results. We are well positioned to build on this momentum as we move into 2025, and I look forward to an exciting year ahead.

Now we'll open it up for your questions.

Thank you. [Operator Instructions] And our first question comes from Ryan Meyers with Lake Street Capital.

First question for me. So it sounds like you were saying that the United States growth in the 2025 guide should be double digits. But just curious if you can comment on maybe what you're seeing outside of the U.S. that gives you confidence in a rebound there?

Yes. Thanks, Ryan. Look, I think overall, it's great to see the progress we're making. The U.S. growth of 22% in Q4, it's great to see that kind of continue. Also just the improving comps we've seen in the Australia region. I think we've seen improving comps across the brands and I think as we continue to bring more and more of Culture Kings' own brands on to our test and repeat model. But look, we know that model is so strong. We are seeing good performance there.

I think as we talked a little bit about Q3, Loiter continues to be a standout there. We saw comps of up over 100% in Q4 across all regions for Loiter and gross margins up even further. And I think as we continue to roll out that test and repeat model, we expect that performance to continue.

And look, we have added more talent to the Culture Kings team. We've a new President of Culture Kings in Australia, Justin Hillberg, who has a deep background in the region in that streetwear space and across stores and online. And we've also brought in Brad Lancaster to head up or as Head of our first-party brands. And really kind of seeing them already make an impact in the last couple of months and looking forward to what they can do there, just to help Culture Kings grow, not just in Australia, but really across all regions.

Okay. Got it. And then just thinking about the potential impact of tariffs here in the United States, maybe comment on your guys' ability to be able to take price and not have that come at the expense of volume or even maybe customer growth.

Yes. Thanks, Ryan. Look, I think our guidance does contemplate all that we've seen in tariffs at this point, and we're happy to see that our EBITDA is going up even with the impacts of tariffs.

I think we are primarily sourced out of China today. Our sourcing team is actively working with vendors to mitigate the impact of the tariffs we've seen to date. But look, I think we are uniquely positioned with the business model that we have to take price. And for us, we think about that because we're pretty much exclusively online to date, although we are adding stores in wholesale, the product we have is exclusive to us. But also with our test and repeat model, right, as we're launching new products each week, we just have a unique opportunity to take price there. And I feel with the strength of our brands, we can do that.

It's certainly not where we want to go first. We're actively working with our vendors, looking at moving sourcing to different locations. But we feel good about the guidance and feel good that we can offset the impact of tariffs.

And our next question comes from Ashley Owens with KeyBanc Capital Markets.

I wanted to start on the gross margin guide. I'm just curious. In the past, you've discussed how strong margins have really been underscored by the test and repeat model, and we really saw that play out within the second half of the year. Could you just give us some perspective as to some of the puts and takes for that flat gross margin guide this year and maybe the magnitude of impact from increasing wholesale penetration tariffs? And maybe just also some color on the shaping of the year would be helpful.

Yes. Thanks, Ashley, for the question. As Ciaran mentioned earlier, we're really forecasting in our outlook that gross margin will be roughly flat to FY '24. And there certainly are some puts and takes to that. As we've mentioned, that guidance embeds the impact of known tariffs as well as the actions we're taking to mitigate those tariffs. From a shaping perspective, we certainly will see towards the first half of the year, we're lapping some promotional actions taken in Australia in FY '24. We'll see some improvement there.

As we go through the year, we'll see a shape that looks very similar to FY '24. As we continue through Q4, Q4 is our more promotional period, and we'll see gross margin is lower than Q2 and Q3. We do see -- we will see over time an impact of the growing wholesale initiatives upon our gross margin. In this year, it's not going to be a tremendous impact, but we feel confident with our outlook and where we're heading for FY '25.

Okay. Great. And then, I guess, just second on that and just talking about the wholesale channel for you guys. Doing more in terms of expansion this year, but also adding in some of the Polly stores as well. Could you just provide updated thoughts on overall mix of the business? And any thoughts as to how big of a contributor wholesale could be or get to over the next couple of years? So I think more so in 2026 and beyond, just based on what you just said, but any color there?

Yes, sure. Thanks, Ashley. Look, I think we're really happy with the progress we're making across all of the brands and leaning into that strategy of putting our product wherever our customers are once it's brand enhancing and has the right economics.

I think we've really seen that in the U.S. with that continued plus 20% growth in kind of the back half of 2024. Also, with our active customer count up 9% year-over-year, just really strong engagement there.

I think for us, doing that test in Nordstrom with Princess Polly and Petal & Pup in Q4 and seeing them move quickly to wanting to bring bold brands in-house for spring/summer across all of their chain, I'd say, look, gives us a lot of confidence on the wholesale opportunity and I suppose the opportunity that we're seeing across wholesale stores and online for all of the brands.

I think we feel there's a huge opportunity there. I think as a mix of business, I think long term, we're always going to be predominantly online, but we feel it's just a big opportunity across our brands in all of the channels.

And our next question comes from Eric Beder with SCC Research.

Let's talk a little bit about Culture Kings. It seems like you're making significant progress there. You mentioned in your remarks potentially about adding a store in the U.S. What would kind of be the performance or the markings you would see before you decide that would be something that you'd want to tell us through? And how should we be thinking about that?

Yes. Sure, Eric. Look, I think we are -- we've continued to see great progress with Culture Kings in the U.S., right, from an online perspective, also in their Vegas store, and so they continue to use marketing activations in the store to bring that brand to life online and that unique retail payment aspects that they have. I think all of that gives us confidence on the long-term opportunity for Culture Kings in the U.S.

I think as we've moved more and more of their first-party brands onto the test and repeat model, we're also seeing improved sales comps, improved margin performance and really, just great customer reaction to the new product they're bringing in. So I think we're certainly bringing together all the pieces we need to continue kind of going after that Culture Kings expansion opportunity.

We are looking for store locations for Culture Kings. We're working through what aspects of the Vegas store we will bring into that new location in the U.S. We would like to have 1 this year, and we will share more on timing as we get clarity on the location.

Great. And in terms of Princess Polly and the store expansion, you're up to 6, coming to 13. What level of infrastructure do you need to build to make sure that the stores kind of maintain the quality control that you want them to have? And how should we be thinking about the ability to leverage -- after infrastructure's in, have you the potential to leverage it going forward?

Yes. Thanks, Eric. Look, we're really pleased with what we've seen so far on the Princess Polly stores. And as we think about that, it's around building that brand. We see 30% of the customers coming into the store are new to the brand. We've also seen very clearly now that the stores are having a halo effect within the region of the store, and we're kind of measuring that on about a 10-mile radius. So all giving us a lot of confidence.

I would say, look, the stores are new to Princess Polly and working through that. They have added some talent last year. That is doing a great job of rolling out the new stores, operating them. I feel -- look, we have -- we've high expectations for the brand, we've high expectations internally, and we're continuing to -- the team are continuing to push themselves to do better, do better from a merchandising and a visual merchandising perspective in the store.

We will add some -- we will continue to add some talent this year in our -- to go after those store opportunities, but pretty modest, and all contemplated in our guidance. And look, I feel like there's just a lot of opportunity for Princess Polly themselves across all their channels that they're in to continue to build that brand.

Great. Good luck for '25.

Thanks.

[Operator Instructions] And our next question comes from Randy Konik with Jefferies.

Sorry, I got on a little late here. Ciaran, just walk us through your thoughts on just the environment right now. It seems like you guys are getting to see some stabilization trends and getting more visibility in the business. Maybe just walk us through that, where we've come from over the last few quarters and then how you think about kind of the trends. And your idiosyncratic trends of your business relative to the environment would be super helpful as we think about the balance of 2025.

Yes. Sure, Randy. And look, I'm delighted with the work the team has done to kind of bring us through the journey and bring a lot more stability to what we have and really, I think just keep demonstrating the opportunity that we have long term with all of these brands.

If I think maybe regionally, I think we are seeing improvements in comp in Australia. And I think as I talked about, a lot of that coming from moving Culture Kings on to that test and repeat from the merchandising model. I think we feel very confident that we would continue to see improvements there coming from moving them on to that test and repeat model, but also the talent that we've brought in and the opportunity that they can go after there. So feeling good in the progress that we are making there.

I think, look, the standout for us continues to be the U.S., right? Overall growth of 17% last year, coupled with a 9% growth in active customers. As Kevin talked about, margins up, EBITDA margin's up significantly year-over-year. And I think really showing, I think, the power of this model and the strength and opportunity we have across these brands.

I think for us, it's been -- I would say Q1, we certainly saw, I suppose, a distracted consumer in that January period and a combination of the fires, weather, TikTok distraction as well. I think we are seeing improvements in comps as we've gone through the quarter.

I think particularly at Polly and Petal, that spring/summer product has really kicked in. We feel really good about the inventory and the newness that we're bringing in. For Polly there, white dresses has kicked off in a big way. A little bit later than last year but becoming strong.

And for Petal, just doing a really nice job with the newness that they have across prints, some of the elevated florals and from a color perspective, just doing really well on their gelato pastels is performing really strongly for them.

So look, I think we feel really good about the opportunity. We feel we've got a unique model here that allows us to operate differently and just gives us a great long-term opportunity.

Super helpful. Last question. I saw the announcement about the Princess stores, Princess Polly stores in 2025. Can you give us your thoughts on like a broader long-term vision on how you think about different channels of distribution now that you're building more of a stores business? You have -- you've done some stuff in wholesale and obviously the DTC with e-comm. Maybe give us your thoughts on how your vision, let's say, 3 to 5 years away, on how you kind of think about the different channels and how they should kind of commingle?

Yes. Thanks, Randy. Look, I think, again, a huge opportunity. I think that the tests we've done across the brands have been really informative for us, and I think it's fantastic the success that each of the brands have seen in the different channels.

And as we think about it, it's very much back to that strategy, right? Are we putting our product in front of customers where they are? Is it brand enhancing from a customer brand building perspective? And also, does it have the right economics for us?

I think they are really the choices we make. I think as we think about the different channels, our online business is uniquely positioned with our test and repeat model to bring in newness every week. That's core to what we do. It's core to the brands. It's really what our customers want. I think that's something we want to bring to life in our own stores, and we are working to do that. That newness every week really works for us.

I think with wholesale partners, that's a little bit more difficult, but still great places to just show off great product, put it in front of new customers. And look, we're seeing that success in what we're doing at Nordstrom and some of our other wholesale partners.

So I think we continue to lean into those 3 areas. And I feel like we will make sure -- I think long term, we'll predominantly be a direct-to-consumer business. But I feel there's big, meaningful opportunities for us with our own stores and from a wholesale perspective.

Great. And I'll look forward to seeing you in a couple of weeks at the Princess store.

Yes. We invite you all to come there. It's a super store, and we're delighted to open it up in New York next week.

Thank you. There are no further questions at this time. That also does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.