Levi Strauss & Co. (NYSE:LEVI) Q4 2023 Earnings Call Transcript
Levi Strauss & Co. (NYSE:LEVI) Q4 2023 Earnings Call Transcript January 25, 2024
Levi Strauss & Co. beats earnings expectations. Reported EPS is $0.44, expectations were $0.42. Levi Strauss & Co. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, ladies and gentlemen, and welcome to the Levi Strauss & Company Fourth Quarter and Fiscal Year-end Earnings Conference Call for the period ending November 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, levistrauss.com. I would now like to turn the call over to Aida Orphan, Vice President of Investor Relations at Levi Strauss & Company.
Aida Orphan: Thanks, Latif. Thanks, everyone, for joining us on the call today to discuss the results for our fourth quarter and fiscal year end 2023. Joining me on today's call are Chip Bergh, our President and CEO; Michelle Gass, our President and incoming CEO; and Harmit Singh, our Chief Financial and Growth Officer. We have posted complete Q4 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 you 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 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 measures are included in today's press release. Finally, this call is being webcast on our IR website, and a replay of this call will be available on our website shortly. Please note that Chip, Michelle and Harmit will be referencing constant currency numbers, unless otherwise noted.
Today's call is scheduled for one hour, so please limit yourself to one question at a time to give others the opportunity to have their questions addressed. And now I'd like to turn the call over to Chip.
Chip Bergh: Thank you for joining us this afternoon. As you know, this is my last earnings call. I want to acknowledge what a privilege it's been leading this company over the last 12 years. Over this time, we've transformed the company, and I leave proud of all that has been accomplished. We revitalized the Levi's brand by putting it back at the center of culture. And today, the Levi's brand is strong globally, resonating again with younger consumers, which bodes well for the future. We evolved the company from being a predominantly US men's bottoms wholesale business to being a much more diversified business today with more than half of our sales coming from outside the US and 43% of our sales coming from our own direct-to-consumer business.
We now have a meaningful women's business and evolved our brand portfolio with the addition of Beyond Yoga and we transformed our financials, enabling the strategic investments that drove profitable growth over the last decade. Our foundation is strong and much stronger than a decade ago. While we faced challenges over the last 18 months, particularly in the US wholesale channel, we ended the year on a high note with encouraging trends across the business. Our US business returned to growth, driven by a positive inflection in US wholesale growth for Levi's and continued strong momentum in the DTC channel, led by the strength of the brand. Michelle and Harmit will give you the full details on Q4 in a moment. My confidence in this company's future over the next several years is grounded on three things.
First, the Levi's brand. We have what almost every apparel company wish they had, Levi's, the original. And yet the Levi's brand still has so much potential, and Michelle's focus on becoming a denim apparel lifestyle business and transforming the operating model into a best-in-class DTC-first organization will be instrumental in unlocking the next decade of profitable growth. Second, our global productivity initiative or Project FUEL. We made a major transformation effort in 2014, which generated a significant amount of savings and was a key element of creating the growth curve that we generated from 2015 through 2021. I believe the transformation program underway now, which will generate the same magnitude of savings will be a catalyst to accelerated profitability.
And third, our team. At the end of the day, it's about the people and the leadership. I believe we have some of the most talented and dedicated people in the industry, whether that's in our retail stores, our distribution centers or at the top of the house and at every level in between. We've made changes to the executive team over the last 12 months, including the addition of Kenny Mitchell, as our Chief Marketing Officer; Jason Gowans as our Chief Digital Officer and most recently, the addition of Nancy Green to lead Beyond Yoga. These are all big impact players and sets us up longer term. Most of all, though, I have great confidence in Michelle, as she assumes the role of CEO. Michelle's successful onboarding has been my top priority, working together side by side for the last 13 months has convinced me that she will take this company to the next level and build on the legacy that I leave behind, and I'm looking forward to seeing her guide this company through the exciting new era of growth ahead.
Finally, I want to thank all of you for your support and your confidence and trust in me and my team. Michelle?
Michelle Gass: Thanks, Chip. First, I'd like to take a moment to share my incredible gratitude for all of Chip's support and partnership this year. Chip and I have known each other for about a decade now, but this year cemented the great relationship that we've built over the years. Over the past decade, under Chip's leadership, Levi's has returned to a position of strength around the globe and re-accelerated the growth of our business. This strong foundation sets us up to deliver long-term value creation. On behalf of the Board of Directors and our 20,000 employees around the world, I want to thank Chip for his exceptional leadership these past 12 years. What you'll take away from today's call is our business strengthened in Q4, and we delivered solid results, including a strong holiday season.
The brand continues to have great momentum, helping drive full year company AURs up mid-single digits, and we have an incredible pipeline of newness and innovation coming in 2024 to continue to drive consumer demand. We have the right strategies in place, which we will accelerate by unlocking efficiency with the launch of our global productivity initiative, Project FUEL. We are seeing strong growth in our DTC and international businesses, both critical components of our growth algorithm. We have further strengthened the management team, who I am confident will drive our execution. While we're encouraged by momentum in our business, including continued positive DTC trends, moderating inflation and early improvement in US wholesale, we are taking a cautious approach to our outlook given the continued macroeconomic uncertainty.
Let's start with our fourth quarter performance, an important indicator for how the company is positioned for 2024. We ended 2023 on a strong note, growing Q4 revenues by 2% to $1.6 billion and expanded gross margin 200 basis points ahead of our expectations. The margin upside and our team's disciplined execution enabled us to deliver approximately 30% growth in EPS versus prior year. And we further improved our inventory position and generated positive free cash flow for the quarter and the full year. Our efforts to stabilize our wholesale business are working. Our global wholesale business showed meaningful sequential improvement in Q4, down 3% versus down 10% in Q3. The improvement was driven by US wholesale inflecting to growth for Levi's, which was up 5%.
Solid execution at our distribution centers has resulted in fill rates returning to normalized levels, enabling us to deliver better in-stock positions with our key customers and more newness in time for the holidays. And the surgical pricing actions we took late in Q3 are showing promising results, and we have no plans to take additional price cuts. As we look to 2024, while we're continuing to plan the wholesale business prudently, we are cautiously optimistic on this important channel. We're working closely with our partners on how we can strengthen our business in 2024 and beyond by improving execution, delivering more newness and innovation and exploring and testing new ways of working together. As you know, along with Levi's Red Tab, we operate two value brands that have historically played a role in our segmentation strategy.
Based on the work we've done, we have made the strategic decision in collaboration with our customers to discontinue the Denizen brand. Given the successful roll out of Red Tab in Target, our focus there will be on growing the higher gross margin Red Tab business, where we are seeing strong performance in comp doors. The Denizen exit will be about 1 point of impact to sales in 2024, and Harmit will share more on the outlook. Despite our exit from Denizen, we remain committed to the value segment and for supporting and growing the Signature brand. In addition to seeing positive trends in wholesale, DTC continues to drive outsized growth, giving us conviction that now is the time to accelerate our transition to operating the business as a DTC-first company.
For the quarter, the DTC business was up 10% versus prior year and comped positively in every region across every direct-to-consumer channel in mainline, e-commerce and outlet. Cost traffic was also up in every region and in every channel. We drove another quarter of double-digit growth in our e-commerce business, which was up 17% this quarter with traffic, units per transaction and AURs all increasing as we work to improve the levi.com experience and broaden its assortment. And we drove meaningful growth in our global loyalty program in the fourth quarter with membership up by almost 30% to 30 million in 2023, driven by strong double-digit growth in membership across all regions. For the full year, global DTC was up 13% to $2.6 billion on top of 18% growth in the prior year.
This represents 43% of total global revenues, 5 points ahead of last year and tracks with our long-term algorithm. The success we are seeing highlights the continued strength of our brand worldwide. For the full year, we grew Levi's brand revenue to $5.4 billion, a multi-decade high with AURs up 3% over prior year. Key to our success is our continued global leadership in denim bottoms. And for the full year, we retained our dominant number one market share position globally. Further strengthening and broadening our brand reach, we are attracting a new generation of consumers, increasing the number of 18- to 30-year old buyers globally. And our efforts to elevate our brand are attracting higher income consumers as reflected in our US mainline results, which were up almost 30% in the fourth quarter.
In Q4, Levi's brand revenues returned to growth, up 4%, driven by strength in men's and even higher growth in women's as the brand saw strong performance in our core offerings as well as from the newness and innovation we delivered in the quarter. And we were particularly pleased with nearly 40% growth in Levi's non-denim bottoms, driven by strength in the XX Chino. The 501 continues to stand the test of time, a clear barometer for the strength of the Levi's brand. The 501 grew 21% in Q4 and 11% for the year, reflecting strong growth across DTC and wholesale and approaching $800 million in annual sales, nearly 70% larger than pre-pandemic levels. The strength and investment in our brand continues to be a critical part of our growth. Over the past year, we have been laser-focused on putting Levi's at the center of culture, driving strong connections and building brand love with fans and consumers around the world.
This year, we partnered with some of the biggest names and biggest brands in fashion and music. This includes successful collaborations with Crocs and luxury label KENZO, tapping into use culture with the likes of Emma Chamberlain, a capsule collection with Stussy inspired by our shared California roots and an international campaign with the hot K-Pop band NewJeans. And just this morning, we announced the extension to the naming rights for Levi's Stadium through 2043. One of our highest marketing returns on investment, Levi's Stadium places our brand firmly at the center of culture, connecting us with new generations of fans through the unifying power of sports and music. These partnerships and collaborations expand our influence and generate a ton of PR and social reach.
Looking forward to 2024, we have a strong lineup of collaborations planned for the year, continuing to create a ton of buzz and energy around the brand. In terms of our strategic priority to diversify our business, our efforts are working. Our business continues to become more global. Our international business continued to outpace the total company, growing 4%, excluding Russia in Q4, on top of 5% in the prior year. For the full year, our international business accounted for 56% of our total revenues, 3 points ahead of last year. Asia today is a $1.1 billion business, growing nearly 30% versus 2019. Our growth this year in this segment has been broad-based across markets and channels and we view this region as one of our largest opportunities going forward.
Our total company women's business was also up 8% in the quarter, led by double-digit growth in our bottoms business. This was our highest Q4 revenue for women's in a decade. Now moving to Beyond Yoga. The business had a solid year, up 14% for the fourth quarter and 19% for the full year, achieving revenues of over $115 million. Under Michelle Wahler's leadership, we successfully incorporated Beyond Yoga into the LS&Co. portfolio and have opened 6 brick-and-mortar store locations in the US. Now, we believe that the brand is at an inflection point. Last week, we announced Nancy Green as Beyond Yoga's next CEO. Nancy is a proven brand builder with deep retail experience and a legacy of driving significant profitable growth, having scaled Athleta to nearly $1 billion from $250 million as the brand CEO, while at Gap Inc.
I am confident Nancy's appointment will unlock the next phase of growth for the brand. Dockers was roughly flat for the year and down 20% in Q4, with both periods marked by DTC and international growth, offset by weakness in US wholesale. In December, we saw US wholesale trends improve, driven by a healthier inventory position as well as strong comp store performance globally and gross margin expansion. As with the Levi's business, we are cautious on the US wholesale outlook for 2024, and we're planning this business prudently. I'll now touch on the product newness and innovation we have coming to the Levi's brand in 2024. First, across both men's and women's bottoms, we have two platforms that we are expanding to address warm weather markets and provide consumers with options that allow them to wear denim all year long.
This includes globally scaling our Performance Cool line, which has been a big success in Asia as well as a new launch of our lightest weight denim across our most popular fit. Second, we're leveraging our expertise in bottoms to continue fueling our Levi's non-denim bottoms business. To address this incremental opportunity, we've developed an innovative non-denim pant for him with technical properties, including moisture control and 360 mobility. This pant is versatile and appropriate for multiple wear occasions from working at the office to going on a hike and provides us with the opportunity to capture more share of his closet. One of our largest US men's product launches to date, the Tech Pant will be available early this year on both our direct-to-consumer channels and through key wholesale partners.
Now focusing on women's. In women's denim bottoms, we set the trend, building upon our success with loose fit, which now represent half of our women's business, we are introducing multiple new fashion fits, including our latest, the XL, which has the option to be worn either as a high or low rise. Beyond bottoms, we are evolving our position from being a denim bottoms brand into a true denim lifestyle brand. Just as we today stand for the most authentic and highest quality pair of jeans in the world, we see a tremendous opportunity in broadening this position to all things denim. This denim dressing goes across many untapped segments for us, such as skirts, dresses, tops, outerwear and accessories. While we've made progress this last year with denim skirts and dresses helping drive these categories up nearly 50%, we are in the very early stages of this exciting opportunity and have lots of newness in the pipeline coming in 2024 and beyond.
I will briefly touch on our tops business, which was up low single-digits in the fourth quarter. While we have a meaningful tops business today at over $1 billion, we've not delivered a consistent tops program to commensurate with the strength of our bottoms business. Over the last year, our teams have been hard at work to deliver an end-to-end reset of this business in 2024. Our focus is establishing a stronger core essential business in categories like T-shirts, wovens and polos. We're encouraged by the early response we are seeing to recent introductions such as in outerwear, which was up more than 20% in the fourth quarter. Overall, we are really excited about the innovation platforms that we are rolling out this year. I feel confident the newness and energy we are delivering to market will drive growth in our core business while also fueling the adjacent incremental businesses we're building as part of our long-term vision to own denim lifestyle.
Finally, as I mentioned earlier, we launched our global productivity initiative this year that we are calling Project FUEL. As we are tightening our strategies and accelerating DTC first, this work will be ongoing and is expected to deliver approximately $100 million in net savings for fiscal 2024. The majority of the savings is related to a 10% to 15% reduction of our global corporate workforce. In addition, we've identified savings related to streamlining our global operating model, rewiring our go-to-market process and improving productivity and profitability across our channels. Consistent with our values, this work will be done with respect and thoughtfulness as we work to become a more agile and focused company. To conclude, we are pleased with our fourth quarter performance.
We have a solid foundation to build on and I am confident in our 2024 and long-term outlook. Harmit?
Harmit Singh: Thanks, Michelle. Let me start by thanking Chip for being a tremendous leader, thought partner, mentor and friend. Under Chip's leadership, we have grown the revenue of the company by nearly $1.5 billion and improved the structural economics of the business by improving gross margins by nearly 1,000 basis points. I look forward to partnering with Michelle and our incredibly talented teams as we scale the business to over $9 billion in revenues and grow operating margins to 15% over time. And with that, I will turn to our results. Revenue in the quarter was up 2%, led by an inflection to growth in the US, our largest market and 10% growth in our global direct-to-consumer channel. Comp sales saw seventh consecutive quarter of broad-based growth.
And along with our franchisee partners, we opened a record number of stores in fiscal year '23, 105 net store openings, excluding Russia. We ended fiscal '23 with a system-wide store count of more than 2,400 stores. In the quarter, transitory headwinds, most notably product costs shifted to tailwinds, enabling us to deliver gross margin ahead of our expectations, along with the key contributors to the structural drivers of our gross margin, including DTC, international and women's, we expect continued improvement in 2024, as we progress on our path to 60% as discussed during our 2022 Investor Day. For the holiday period of November and December, we saw low single-digit revenue growth versus prior year, including 9% growth in our direct-to-consumer business and a continued positive trend in US wholesale and we saw robust gross margin expansion versus prior year.
And while we have momentum entering 2024, we are taking a conservative approach to our outlook for the full year, primarily reflecting a cautious view on the macro environment, especially in the US and Europe. We're taking actions to further improve the structural economics of our business, solidifying the path to 15%. And as Michelle mentioned earlier, to accelerate profitable growth, we launched Project FUEL. While we are in the early stages of this initiative, we have already identified approximately $100 million in expected net savings in '24 from streamlining our organization structure with the elimination of positions within our global workforce, enhancing our procurement capabilities across most categories of spend, further improving our cost of goods sold and driving enhanced productivity in our stores.
In the first quarter of '24, we expect to record estimated restructuring charges of approximately $110 million to $120 million. The savings of these initiatives are expected to start in Q2, accelerate as '24 progresses and continue into 2025. We expect to identify additional savings opportunities that will flow into 2025, and we will continue to share updates over the coming quarters. Let me share a few more details on our adjusted gross margin of 57.8%, which came in better than our expectations, driven primarily by product costs. Gross margin expanded a robust 200 basis points year-over-year or 320 basis points above Q4, 2019. Expansion was driven by lower product costs in part from cotton, favorable channel mix, higher full price selling, favorable FX and lower airfreight.
These positive benefits were partially offset by the targeted pricing actions we took in quarter three to drive volume and capture market share, which we will anniversary in H2 of 2024. Adjusted SG&A expenses in the quarter was $750 million, largely flat to a year ago, in line with our guidance. Lower A&P and incentive comp mostly offset DTC expansion, where we grew our own stores by 8% to a total of 1,172 globally. Adjusted SG&A as a percentage of net revenues leveraged 130 basis points. Adjusted EBIT margin was 12.2%, up 320 basis points to prior year, in line with our expectations. We are encouraged by the improvement in profitability we are seeing in both wholesale and direct-to-consumer channels. In quarter four, wholesale margins improved, driven by more full-price selling.
And over the course of the year, profitability of brick-and-mortar sequentially improved. Fully allocated adjusted EBIT margin for e-commerce also improved several points to high single-digits and is on the path to being on par to our overall business. Adjusted diluted EPS was $0.44, in line with our expectations and up nearly 30% versus last year. Now let's review the key highlights by segment with all revenue growth in constant currency. In the Americas, net revenues inflicted to growth, up 4%, driven by a return to growth of the US, which was up 4%. The increase was primarily driven by double-digit growth in direct-to-consumer, including 13% growth in e-commerce. Specifically, within brick-and-mortar, the increase was driven by solid comp sales growth in the US and Canada.
Our wholesale business was also positive, as previously discussed. In Europe, net revenues excluding Russia returned to growth, up 1% despite the continued unfavorable heat through the first half of the quarter. DTC momentum continued with another quarter of double-digit growth, up 10%, excluding Russia. This was driven by broad-based increases across markets and a particularly strong performance in e-commerce, up 33%. The strength in direct-to-consumer was partially offset by continued softness in wholesale, which was down 7%, excluding Russia, due to continued conservatism from our partners. While we saw sequential improvement in wholesale in the quarter, we remain conservative on the outlook for this channel, especially in the first half of 2024.
Asia was up 7% in the fourth quarter versus a year ago or on a two-year stack up 24%. And for the full year, Asia grew 18% on top of 24% last year. This quarter's growth was driven by continued momentum across channels and most markets. Revenues in China grew 13% for the quarter, closing the year up 21% and returning to profitability for the year. Overall, Asia's Q4 operating margin expanded 50 basis points to 11.9%, while fiscal '23's operating margin expanded 220 basis points to 13.9%, as we continue to scale this business, driving strong operating leverage. Now looking to our balance sheet and cash flows. We exceeded our quarterly inventory target in Q4. Reported inventory dollars decreased 9% or 17% on a comparable basis. This represents an 18-point improvement from last quarter.
Inventory in the US remains significantly below last year's level and we expect to continue to make progress in Q1, with overall inventory expected to be below prior levels both in Q1 and full year on a comparable basis as we work to further optimize inventories, improving terms and working capital. Adjusted free cash flow was a positive $202 million in the quarter, up from negative $54 million in the fourth quarter. Adjusted free cash flow for the year was positive $120 million, up from negative $40 million in fiscal 2022. We expect continued improvement and positive free cash flow in fiscal '24. For the full year, we returned $199 million in capital to shareholders, primarily in dividends, which were up 9% to prior year. And for Q1 '24, we've declared a dividend of $0.12 per share, in line with last quarter.
We currently have $680 million remaining under our current share repurchase authorization and expect to be active in the market in the coming year to offset dilution. Now let's turn to our fiscal '24 outlook. As we look forward, we are confident in the strength of our brand and strategies and continue to expect profitable growth in 2024. We see continued strength in our global DTC business, but have assumed caution in our outlook, as we acknowledge their risks ahead, including uncertainty in the macro economy, including Europe and challenges in the wholesale channel. For fiscal '24, we expect net revenue growth of 1% to 3% year-over-year, which includes an approximate 200 basis points negative impact, primarily due to exiting the Denizen business, planned lower off-price sales and FX, partly offset by the benefit of a 53rd week.
In reported dollars, we expect low single-digit growth in the Americas and Europe and high single-digit growth in Asia. And for our other brand segments, we expect low to double-digit growth. By channel, our expectations include continued high single-digit to low double-digit growth in DTC for the full year. In wholesale, as mentioned, we're taking a prudent approach to planning this business and expect the channel will be down low single-digits for the full year. This reflects wholesale down in H1 with a return to growth in H2. For gross margin, we anticipate expansion of 140 basis points to 150 basis points to over 58%, driven by lower product costs, higher full-price selling and growing faster in areas that are gross margin accretive like DTC, international and women.
We also expect continued improvement in our wholesale profitability driven by the US. Adjusted SG&A dollars are expected to grow between 2% to 4%, which is inclusive of the year one benefits of our cost savings plan. The increase will be driven by continued DTC expansion and a normalized level of incentive compensation. We expect A&P as a percentage of revenue to approximate 7%. Overall, we expect adjusted EBIT margin to be between 10% to 10.3% or approximately 15% higher in dollar terms versus prior year. We expect interest expense to be approximately $15 million per quarter and a full year tax rate in the mid- to high-teens, up from 6% in 2023, as we get to normalized levels of tax in the high-teens. Adjusted diluted EPS is expected to be in the range of $1.15 to $1.25.
The expected earnings range incorporates $0.05 negative impact from the aforementioned revenue items and also a $0.12 drag from getting back to normalized tax rates. We continue to invest behind high ROI growth initiatives. Uses of capital in '24 include full year CapEx to be around 4.5% of revenues. We continue to expect cash flow to be positive. In terms of net new stores, we expect to open more than 100 globally as a system, inclusive of around 80 company-owned stores. I will now share some color on H1 versus H2 and then some H1 quarterly detail, largely given the US ERP implementation that took place in the first half of 2023, which was detailed in our guidance and results at that time. While it is a little complicated, I'm going to do my best to simplify it for all of you.
In Q1, we expect reported revenues to be down high single-digits to low double-digits. Sales will otherwise decline low single-digits, excluding the impact of our US ERP shift exiting Denizen and the final liquidation of our Russia business last year. Recall, there was a large $100 million shift from Q2 into Q1 last year, primarily related to our US ERP implementation. Russia no longer impacts our business beyond Q1. In quarter two, we expect revenues to be up high single-digits, given the US ERP shift, partially offset by exiting Denizen. Overall, this results in H1 expected revenues to be down low single-digits to prior year or approximately flat to slightly up, excluding Russia and Denizen. This implies an acceleration to mid-single-digit growth in H2, which is primarily a function of the benefit of the 53rd week contributing roughly a point of growth in H2, as well as direct-to-consumer expansion with more doors opening in the second half and a return to growth of our business in Europe and US wholesale.
Looking to gross margin, we expect Q1 up approximately 150 basis points and Q2 down approximately 50 basis points given channel mix normalization related to the US ERP shift. The implied gross margin improvement from H1 into H2 is primarily due to anniversarying the strategic pricing actions we took in H2 2023. And with respect to EBIT margin, we will also see an improvement in H2, as higher sales are expected to leverage SG&A, inclusive of the benefit of our productivity initiative Project FUEL, offset by higher incentive compensation and a normalized cadence in A&P versus prior year, which is lower in the second half of '23 due to the 501 campaign launched in H1 '23. Before I turn it over to Q&A, I want to leave you with four key points. Our fourth quarter performance and our holiday period performance demonstrate our ability to deliver profitable growth in the year ahead.
Our strong gross margin illustrates the health of our brands and we expect continued improvement with several headwinds inflicting to tailwinds. In 2023, we grew direct-to-consumer 13%, lapping 18% growth in 2022. Our plans for '24 assume high-single to low-double-digit growth driven by positive comp sales, continued growth in e-commerce and 80 company net store openings. And we continue to improve the agility and efficiency of our business with the launch of our cost savings initiative, which will result in stronger profitability in '24 and '25 and help solidify our part to deliver 15% operating margins over time. And with that, I'll turn it over to Q&A.
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