Q4 2023 Brilliant Earth Group Inc Earnings Call

Participants

Stefanie Layton; Senior Vice President, Investor Relations; Brilliant Earth Group Inc

Beth Gerstein; Chief Executive Officer, Director; Brilliant Earth Group Inc

Jeffrey Kuo; Chief Financial Officer; Brilliant Earth Group Inc

Randal Konik; Analyst; Jefferies & Co

Oliver Chen; Analyst; TD Cowen

Edward Yruma; Analyst; Piper Sandler

Dana Telsey; Analyst; Telsey Advisory Group

Presentation

Operator

Good day and thank you for standing by. Welcome to the Brilliant Earth fourth-quarter and full-year 2023 earnings conference call. (Operator Instructions)
Please be advised that today's conference is being recorded. I would now like to turn the conference over to Stefanie Layton, Senior Vice President, Investor Relations. Please go ahead.

Stefanie Layton

Thank you, and good afternoon, everyone. Welcome to Brilliant Earth fourth-quarter and full-year 2023 earnings conference call. Joining me today are Beth Gerstein, our Chief Executive Officer, and Jeff Kuo, our Chief Financial Officer.
During the call today, management will make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a description of the risks that could cause our actual performance or results to differ materially from those expressed or implied in these forward-looking statements. These forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements.
In light of new information or future events unless required by law.
Also, during this call, management will refer to certain non-GAAP financial measures. A reconciliation of non-GAAP measures to the comparable GAAP measures is available in today's earning release, which can be found on our Investor Relations website.
I'll now turn the call over to Beth.

Beth Gerstein

Good afternoon, and thank you for joining us today. 2023 ended on a high note with our team's exceptional execution throughout the holiday season. Our record revenue in Q4 and the full year capped a strong 2023 performance. I'm pleased that in a year that we anticipated to be transitional and dynamic we delivered against our strategic priorities drove another year of healthy, profitable growth and gain significant share in the $300 billion jewelry industry.
Here are a few noteworthy highlights from 2023 and Q4. Q4 net sales grew by 4% year over year to 124.3 million, which was within our revenue guidance and which represented 97% growth on a four year stack. Full year net sales grew 1.5% to 446.4 million, which represented 122% growth on a four years. We estimate our full year revenue growth outperformed the industry by 750 basis points, highlighting the strong resonance of our brand among jewelry purchasers. Our Q4 product bookings growth, excluding engagement rings, increased 28% year over year. We also drove record order volumes. Total orders grew to approximately 53,000 for the quarter and 175,000 for the year, representing 18% and 17% year-over-year growth, respectively. Q4 gross margin was 58.7% or a 400 basis point increase year over year. Full year gross margin was 57.6%, reflecting a 430 basis point increase year over year. Both were the highest gross margins in company history. Our Q4 adjusted EBITDA of $5.3 million or a 4.2% margin was ahead of our expectations, and we delivered 26.2 million in adjusted EBITDA for the full year for a 5.9% margin. This was our fourth consecutive year and 10th consecutive quarter as a public company delivering positive adjusted EBITDA, reflecting our discipline in operating the business profitably and our ability to manage the business nimbly. I'm incredibly grateful for and impressed by our team and their ability to execute and deliver these results in a dynamic environment.
Our focus on elevating the brilliant earth brand, deepened our customer engagement throughout the year, ending with over 250 million organic video views. In addition, online searches for brilliant earth reached an all-time high in Q4, and we experienced 30% growth in our e-mail and SMS sign-ups in 2023. The positive momentum we saw across these metrics reinforces our prominence as a leader in social engagements. And our unaided brand awareness for both engagement and fine jewelry has more than doubled in less than two years. Our 2023 campaigns supported by celebrity and influencer partnerships throughout the year and culminating with our sole collection and holiday campaigns earned just over 2 billion media impressions and our partnership with Emmy nominated actress Camila Marone during the summer collection launch earned this recognition as one of us weekly Magazine's Best celebrity brand partnerships of 2023. More recently, we were delighted to see actresses IO at Berry, you know, Temple and z dash now each wearing a beautiful assortment of brilliant earth jewelry on the red carpet at the Emmys and Oscars. This visibility and elevation of our brand is incredibly exciting and shows our continuing success in driving high-profile awareness of brilliance.
Turning to our fine jewelry assortment, customers are increasingly seeking brilliant earth for their essential jewelry pieces like tennis, bracelets and necklaces as well as popular styles such as bangle and cocktail rings.
In 2023, we introduced curated assortments of distinctive trend, leading pieces with the launch of several new collections, including our sole collection. We are very pleased with the results we are seeing from Seoul with the collections productivity far outpacing prior collection launches, and we ended 2023 with record performance across our fine jewelry assortments in December, fine jewelry reached an all-time high at 21% of bookings, and we had our biggest fine jewelry quarter ever in Q4. We are succeeding in driving both new and repeat fine jewelry purchases as well as self-purchase and gifting as we continue distinguishing ourselves as the fine jeweler of choice for today's consumer. In fact, customers whose first brilliant earth purchase was from our fine jewelry assortment increased 46% in 2023, highlighting the increasing awareness of brilliant earth as a fine jewelry destination. Another area of strength was in wedding anniversary and fashion rings, which produced strong double digit growth in Q4. We believe we made significant bridal share gains in 2023, which was a challenging year for the industry in Q4, order volume for engagement rings above $10,000 increased year over year in a positive contrast to the trend from the past few quarters. Additionally, the average sales price for engagement rings was up 4% year over year in Q4, demonstrating the strong resonance of our premium brand with consumers, and we continue to lead in product innovation and design. Last year by launching new products like our capture collection, lab diamonds grown using carbon captured before it can be released into the atmosphere and our 100% renewable collection featuring lab diamonds manufactured with 100% renewable energy, both of which have resonated strongly with our customers we also continued to elevate our customer experience last year across our showrooms and e-commerce platform. We opened 12 new showrooms, including smaller formats in our first indoor mall locations, and we expanded our cluster showroom footprint with multiple locations in a metro area.
On the digital front, we released hundreds of new features as we continue to provide an industry-leading digital shopping experience we're very pleased with the ongoing evolution of our omnichannel model and the key role our showrooms play in attracting new customers and deepening customer relationships.
In 2023, we made great progress towards our goal to transform and modernize the jewelry industry by leading in transparency, sustainability and compassion. We just released our third mission report where we highlight progress towards our multiple long-range goals among our contributions last year, we donated over 950 volunteer hours in our communities and sponsored a meal program for approximately 1,000 children in northern Tanzania. We also expanded our inclusive sizing ranges to our full assortment of rings, improve the energy efficiency in our new showrooms and reach our goal of auditing 100% of our lab diamond manufacturers for safe working conditions. You can read more about our impact and our mission report available on our investor website to better understand our commitment and industry leadership Turning to our outlook for 2024, we plan to continue making investments towards driving sustainable long-term growth and as always, to do so in a disciplined and responsible manner, be cognizant of the industry and macro economic environment. This includes continued brand amplification, product innovation, elevating our distinctive omnichannel customer experience and continuing to drive operational efficiencies across our business. We are already making great progress towards our 2024 product innovation and brand amplification goals. We continue to lead in product design with our recently launched two collection at Diamond micro pub a focused fine jewelry collection and curated limited edition pieces, such as our recently released Lunar New Year pendant.
Turning to our showrooms. Over the past three years, we have executed against our expansion plan, adding 28 showrooms across the country with a range of four new showrooms opened at least one year, have payback on average within 16 months and have demonstrated strong post-opening Metro. We continue to have strong conviction in showrooms as a key driver of our growth. Our showroom focus for 2024 will be on continuing to amplify the consumer and brand experience in our showrooms. John learnings from openings of recent showrooms across a range of formats and locations and planning for the next phase of our expansion. Understanding that retail requires constant reinvention and evolution. We believe this is a perfect opportunity to double down on our existing fleet. Customer experience enhancements will include amplified seasonal installations and visual merchandising and design enhancements to provide a richer experience of the brilliant brand for our showroom customers as we continue to amplify the customer and brand experience in our existing showrooms, we also plan to open two to four new showrooms in the second half of this year. We believe that both continuing to enhance the consumer experience in our existing showroom fleet and selectively opening new locations will put us in an excellent position to drive both near and long-term growth.
Turning to our financial guidance, in the first quarter, we've continued to experience a dynamic environment similar to recent quarters in this environment, we anticipate approximately flat net sales in the first quarter compared to Q1 last year. This reflects continued share gain for brilliance in the still normalizing bridal and jewelry industry. For the full year, we expect to continue making investments that will set the stage for long-term sustainable growth while also driving current and future share gains and profitability. We do expect 2024 to reflect a profitability turning point, with adjusted EBITDA margin increasing each year from 2025 to 2027. Jeff will take you through our outlook in more detail.
In closing, we have a compelling opportunity to make outsized share gains in this evolving environment by capitalizing on our brand strength, product differentiation, elevated consumer experience, agile, data-driven business model and strong balance sheet. We believe that our strategy, combined with our ability to execute, will position us well in both the near and long term.
With that, I'll now turn the call over to Jeff.

Jeffrey Kuo

Thanks, Beth, and good afternoon, everyone. As Beth highlighted, we finished the year delivering record quarter and full year net sales, strong market share gains and Q4 profitability that exceeded our expectations despite the challenging external environment.
Let me take you through some highlights from my end. In the fourth quarter, net sales of 124.3 million represented a 4% increase year over year and was within our guidance range. Full year 2023 net sales grew 1.5% over the prior year to $446.4 million, which represented 122% growth on our four year stack. Q4 order volume increased 18% year over year and full year 2023 order volume increased 17% compared to 2022. Total orders for 2023 reached approximately 175,000, another new record for us. In addition, we realized 22% year-over-year order growth from repeat customers in 2023, illustrating the success we are having in driving repeat customer engagement, our Q4 average order value or AOV was down 12% year over year. And for the full year, AOV was down 13% for Q4 the year-over-year changes in AOV were principally driven by growth in fine jewelry, which we are thrilled to see as fine jewelry becomes a larger and larger part of our product mix we expect overall AOV will continue to moderate.
Looking at the collections independently, the average selling price or ASP for engagement rings increased 4% year over year in Q4 and ASP for Fine Jewelry increased 3% year over year in Q4. These ASP. games illustrate the strength of our premium brand and proprietary product suite. Q4 gross margin was 58.7%, which is a 400 basis point expansion over the prior year and a slight sequential increase over Q3 2023. Full year 2023 gross margin was 57.6%, a 430 basis point increase year over year. The sustained strength of our gross margin demonstrates the competitive advantage of our premium brand proprietary products, price optimization, engine procurement efficiencies and our enhanced extended warranty program. Our strong gross margin, together with disciplined cost management contributed to us exceeding our adjusted EBITDA expectations for the fourth quarter, delivering $5.3 million in adjusted EBITDA for a 4.2% adjusted EBITDA margin. This brought our full year 2023 adjusted EBITDA to $26.2 million or a 5.9% adjusted EBITDA margin. Sg&a for the quarter and the year continue to reflect our investments in growing the brilliant earth brand, expanding our omni-channel reach and scaling the business.
Sg&a was 57.8% of net sales for the quarter and 56.6% of net sales for the year adjusted SG&A, which nets out items that are added back in our presentation of adjusted EBITDA such as equity-based compensation expense, showroom, preopening expense, depreciation and amortization and nonrecurring charges with 54.5% of net sales for Q4, representing approximately 900 basis points of deleverage year over year from investments in marketing, our team and other G&A marketing costs as a percentage of net sales grew by approximately 570 basis points year over year. For the quarter, our ongoing investments in building the brilliant or brand continue to pay off in terms of growing awareness and demand for brilliant earth as we have seen in our strong order growth market share gains and higher brand awareness, while we saw deleverage on a year-over-year basis due to the headwinds in the bridal industry and the investments made in the largest brand campaign in our company's history. We believe that these investments will drive continuing growth of brand awareness and support long-term profitable growth.
During the quarter, adjusted employee costs were higher as a percentage of net sales by approximately 80 basis points year over year. As we discussed previously, we are focusing on investing in a disciplined fashion in both new showroom employees as well as key corporate talent to support our current and future growth adjusted other G&A as a percentage of net sales increased by approximately 250 basis points year over year during the quarter, including higher showroom operating costs such as when our balanced approach in 2023 allowed us to realize significant market share gains while making investments for long-term growth and delivering in year profitability. Our business model has also delivered working capital efficiency. Our inventory turns in 2023 significantly exceeded the industry average. In addition, we ended 2023 with a $1.5 million decrease in inventory ending the year at $37.8 million compared to 39.3 million in 2022. Even with our growth in fine jewelry and the opening of 12 new showrooms, highlighting the benefits of our asset-light model and our ability to use data to efficiently and dynamically manage working capital.
We finished the year once again with no net debt and a strong balance sheet. Our cash balance increased year over year ending at 156 million as of December 31st, 2023, even with the investments we made to expand our showroom footprint and after paying down over 3 million in debt, our ability to decrease inventory, increase, cash, pay down debt and operate with negative working capital in 2023, while accounting for substantial expansion speaks to the exceptional execution by our team, our agile business model and our discipline in cost management. All of this was accomplished during the year with a challenging consumer backdrop. Our strong balance sheet puts us in a position to continue to make strategic investments in this environment. And I would also like to highlight that as we continue to manage the business in an agile fashion to maximize our ability to capture opportunities as they arise, we recently amended our debt facility to suspend the testing of our consolidated fixed charge coverage ratio covenant through Q2 2024 and added a liquidity covenant over the same period. This will provide additional flexibility in making appropriate investments in the first half of the year, we also announced a share repurchase program in which the Board authorized the repurchase of up to $20 million of our Class A. common stock through December eighth, 2020. As a growth company, we are keenly focused on seizing value creation opportunities, including when we see an opportunity to strategically buy back our common stock. Our strong balance sheet provides the ability to execute the share repurchase program and to realize the significant opportunity we see ahead. While we did not make any repurchases in 2023. Given that we adopted the share repurchase program late in the year, we intend to use this program strategically while balancing our overall investment decisions, including consideration of factors such as trading volumes and our public float.
Turning to our outlook for 2024 and beyond, we expect to continue making investments that will set the stage for long-term sustainable growth while also driving in-year growth, share gains and profitability in the context of a still normalizing industry, our outlook includes the assumption that the path towards a more normalized bridal market continues over the next few years and that the broader economic environment remains relatively unchanged.
For Q1, we expect net sales between 96.5 and $98.5 million this represents approximately negative 1% to positive 1% growth over Q1 2023 also reflects continued share gain for Brillion earth through this transitional period for the bridal and jewelry industry. We expect Q1 adjusted EBITDA of one to 2.5 million. This includes an expectation of similar gross margins as we saw in the second half of last year. Annualization of investments made during 2023, as well as the fact that seasonally the first quarter is our lowest net sales quarter of the year. Our expansions such as rent and employee expenses do not have a significant degree of seasonality. Therefore, seasonally lower Q1 revenue contributes to lower Q1. It's EBITDA for 2024. Our current expectation is for net sales between 455 and 469 million, which is approximately 2% to 5% year over year growth with acceleration as we progress through the year. This represents positive momentum in the context of the still normalizing bridal and jewelry industry. As Beth mentioned, we believe there are compelling opportunities to invest in this environment to drive long-term growth. These include investments to amplify brand awareness, enhance the show and consumer experience and technology investments, including in AI and machine learning to drive operational efficiency. We are also annualizing certain costs such as showroom staff and rent expenses from investments made last year. As a result of these investments, we expect adjusted EBITDA for the year between 14 and 22 million. We expect some modest sequential increase in adjusted EBITDA from Q1 to Q2 with a significant majority of adjusted EBITDA in the second half of the year. Similar to our previously mentioned comments on Q1, we expect gross margin for the year to be at a similar level as H2 of last year. We expect quarterly marketing expense as a percentage of net sales to be similar to the 2023 average and to drive leverage in marketing expense as a percentage of sales in Q4. This reflects disciplined continued investment in the business as we believe that there are compelling investment opportunities in this environment that will deliver long-term profitable growth and shareholder value while still delivering year profitability.
As we look beyond 2024. We would also like to introduce a medium-term growth outlook, which will provide visibility into how we plan to manage the business as the bridal and jewelry industry gradually normalize over the next?
Yes. For net sales, we expect net sales growth accelerating from low to mid single digit growth this year to a low 10s growth rate in 2020. We expect this to be driven by the gradual normalization of engagements over the next few years, growth from existing showrooms measured acceleration of new showroom openings compared to 2020 for continued outperformance in fine jewelry and other non-engagement assortments as well as growth of our brand awareness. We expect our gross margin to remain in the high 50% through 2027, but we do not expect the same pace of annual expansion that we achieved in recent years as we strike a balance between driving top line growth and margin expansion. We do see further opportunities to increase gross margin through our premium brands, proprietary product collections, price optimization, engine procurement efficiencies and our warranty program.
On the expense side from 2025 to 2027, we expect to increasingly drive leverage in marketing costs compared to 2024. We expect that growing brand awareness, increased conversion from our showrooms and continued success in fine jewelry will all contribute to driving increasing leverage in marketing costs from 2025 to 2027. We anticipate that 2024 will represent the peak of our investment growth as a percentage of net sales and expect profitability to increase sequentially beginning in 2025 through 2027, with adjusted EBITDA margin reaching double digits in 2027.
In closing, our performance for the quarter and the year reinforces the ability of our brand, seamless omnichannel experience, unique asset-light business model and exceptional team to deliver profitable growth and share gains in a capital-efficient manner. And we believe our continued discipline and balanced approach this year and over the next few years positions us well to deliver strong shareholder value.
With that, I'll turn the call back over to the operator for questions.

Question and Answer Session

Operator

(Operator Instructions) Randal Konik, Jefferies.

Randal Konik

Hey, thanks, guys. I guess question for Beth and then a question for Jeff. I guess that I just want to get some perspective from you to unpack the idea of a normalizing environment, kind of give us your perspective on where we are in that kind of pathway and what does like what does normal look like to you from an industry perspective as we kind of think about the next couple of years? Because I'm trying to get an understanding of the baseline you're looking at from an industry growth perspective and appreciating all the share gains that you're you're you're undergoing in the in the industry. And then, Jeff, I guess what I'd like to understand from you is when you unpack the commentary or can we unpack commentary around double digit margins by 2027? I just really have always been focused on the SG&A portion of the business. So is it your view that most of the incremental degradation in our EBITDA margin has been just marketing expense and you are going to kind of keep that now like going flat and after 2024, I just want to understand the different areas of SG&A where you're going to pull back or keep flat or whatever it is as we get towards that double digit EBITDA margin again in 2027.

Beth Gerstein

That does Great.
Thanks, Randy, for the question. In terms of how we think about engagement rings, we do expect to see more gradual normalization over the next several years. Keep in mind that our customer demographic, the Gen Z millennial audience they're still facing continuing pressure. So inflation rent hikes, and they're still adjusting to a lot of the changes that they've been experiencing over the last couple of years. So we do expect to see this category come back. It's a very resilient category where people end up shopping with the budget. So overall, this is the the overall jewelry industry is 300 billion. We're expecting that mid-single digit growth in the long term. But we just recognize that we are experiencing a little bit of headwinds right now, and we do expect that to normalize, I think great aspect of what we shared in the call earlier. It's just a significant share gains that we've experienced. So it's been a challenging environment, but we are executing exceptionally well. I also think in a time when you start to see more challenges in the bridal segment, recognized that two thirds of our industry are independence. And so in more challenging times, you do see an acceleration of closures within these independents. So as we're gaining more share as a strong omnichannel brand, we just see an enormous opportunity as we look to further out years.

Jeffrey Kuo

And then, Randy, with regard to your question about SG&A and the path to adjusted EBITDA, wanted to talk to a few different things. And we have seen deleverage this past year in marketing expenses as we've been making investments, including the largest brand campaign in our company's history in Q4 in a still normalizing environment, I think we've been seeing a lot of very strong results as a result of these efforts, including the share gains that we've been making, strong order growth, brand awareness. And we believe that these are really setting the stage for both current and long term long-term growth. Our approach, as you know, has always been to be very dynamic in terms of how we're thinking about allocating our marketing spend and focused on driving efficiencies. And we're very confident in our approach and big reason why we've been successful as a digital-first company because the outlook has could keep up going forward for this year. We're expecting marketing spend at a similar level as a percentage of sales as this past year and actually getting to leverage year over year as we get to Q4 and then looking further ahead from 20.5 to 2027, we expect to progressively drive additional leverage in each year as we have success with growing our brand awareness, getting uplift from our showroom portfolio, driving success in areas like fine jewelry, and that will be a meaningful contributor towards our path to increasing our adjusted EBITDA in 2027 to the levels that I spoke of.

Randal Konik

Yes.
Right.
So just to follow up there, because it sounds like you would assume that through 2027, we keep the gross margins in the high 50s. Is that correct and then be out to 27 within, would that then assume that you would keep marketing dollars kind of flattish out to that 27 a year to get that leverage?

Jeffrey Kuo

Yes.
So first, with respect to gross margins, yes, we do expect gross margins to be in the high 50s through that time horizon through 2027, we do see opportunities to continue to drive some incremental gross margin improvements through areas like leveraging the strength of our brand and our products the price optimization engine and other areas. So we do see opportunities there, although not at the same level of magnitude that we've seen in recent years with a few hundred bps per year of improving as we're striking the balance between top line and gross margin expansion. So we are we do we do see opportunities there.
And then with regards to marketing how we think about it is we as always, be balanced in the approach and look for opportunities to drive efficiency as we're still growing brand awareness and growing growing the overall business to manage manage within there to get to that overall increase in adjusted adjusted EBITDA. We do expect that as a percentage of sales, it will it will go down over each year from 25, 26 and 27 and then will contribute towards that the EBITDA EBITDA overall going up to that double digit level as we get top-line growth getting to the low 10s by 2027.

Operator

Oliver Chen, TD Cowen.

Oliver Chen

Hi, it's Tom on for older vessels. Just if you could just talk about the strength you're seeing across price points and really the main drivers of the ASP. increase in Q4. And then it'd be great to hear your view on the competitive environment in the fine jewelry category up from both the pricing and innovation standpoint,

Beth Gerstein

Sure, absolutely.
So as it relates to our ASP increase, we were really pleased to see that ASPs were up for the engagement ring selection, 4%, and we saw particular strength in that $10,000 plus customers. So I think it speaks to a lot of the investments that we've been making in terms of creating that premium brand and customer experience and overall, because of the experience we're providing as well as a differentiated product, we're really able to drive higher price points. We continue to look across a variety of price points make sure that we are introducing a curated selection that's highly productive. And I think we're also just seeing that that customer is responding really well to some of these investments that we're making. So as it relates to the fine jewelry category and another, I think, really bright spot for the Company, the fact that we hit the strongest fine jewelry quarter ever with 20% of our bookings in December just speaks to the strength in all of the efforts that we're making in terms of fine jewelry, I think what we're really focused on is providing a really curated assortment and the strategy that we're introducing, which is to introduce innovation, really fresh trend forward product and then amplifying that, that product differentiation across the marketing across our channels is really, I think, some of the and what's been sparking, strong engagement and really strong results there. And we've been doing this across a variety of price points. I think the fact that we're able to drive repeat and drive new as well as self-purchase and gifting kind of speaks to the efforts that we have in one of the statistics that I was also proud of is the fact that we have a 46% increase in customers whose first purchase is fine jewelry. So we're increasingly being known as a destination and for higher price point fine jewelry and really across a wide range of assortments.
So we're able to meet customers where they are.

Oliver Chen

Great.
And a follow-up on the opening of the new mall format would be great to hear any color you have on neutral on productivity and performance there. And then any considerations we should model in pre-opening costs and inventory build as you continue to open more mall formats in the future?

Beth Gerstein

Yes.
What I would say about those the mall locations, you know, we recognize it's early, definitely pleased with the locations that we've selected. And what we're encouraged by is that we've seen good foot traffic both inside and outside showrooms and in particular for walk-in. So we've been able to accommodate that appointment experience that we are so well known for. And we are also encouraged that for our mall locations, the walk-in business is double the share of the business versus the rest of the fleet. So it really showcases how important that walk-in experience is. And we really like this combination of walk-ins plus appointments. So overall, I would say still early in terms of on par. We've only have three of these locations but seeing promising results.
And then in terms of the inventory costs and build, as you know, we do have some inventory needs for our showrooms as we open them. But we do run in a very inventory efficient fashion, leveraging things like our virtual inventory so that we don't have to it scale up the inventory at the same level that the rest of the industry does as we build out the fleet. And I think one point that we're proud of is that over this past year, we were actually able to decrease inventory as we opened open 12 new showrooms and saw success in areas like fine jewelry. And I think that's a very helpful data point to show you how we can be nimble and agile to keep working capital efficient even as we open new showrooms. So we will we will add as we open new showrooms. But as we've seen with our recent results, we'll do so in an efficient fashion.

Operator

Edward Yruma, Piper Sandler.

Edward Yruma

Hey, good afternoon, guys. Thanks for taking the questions. I guess first on some interesting commentary on some of the repositioning of the store fleet on adding new new kind of new functions, new features, is that a capital-intensive process or are you expecting rental expense line? And I guess kind of what gives you the confidence that now is really the time to embrace kind of multichannel retailing? And then as a follow-up, and then could you hear the commentary and $10,000 higher price point. Do you think that that's because you're seeing just better engagement trends there or have you done something proactively in the assortment side that's allowing you to penetrate this premium side of the market more effectively? And thank you.

Beth Gerstein

Great. Well, thanks for the question.
Ad on in terms of how we're thinking about them, the overall store fleet. Maybe Jeff, do you want to just talk about how that's flowing through?
Yes.
So for the for the investments for the investments in the store fleet, we're going to approach how we make the amplification of the experiences in the existing store fleet, similar to how we've opened new showrooms. And that is to say that we do it in it capital will in a capital efficient way being constant and really trying to drive drive strong ROI as we as we invest in the showrooms. And so I think the overall approach will be to do so capital efficiently and in a targeted way where we're really seeing really seeing results. And that's been our approach to opening and managing the showrooms and just overall managing our capital.

Jeffrey Kuo

So so we're going to do it, but we're going to do it in a targeted way.
And I think what I would add to that is we feel really great about the customer experience that we've created. But we continue to realize that we need to evolve the overall experience and have a big focus internally just in terms of doubling down on on such a strong fleet that we have already.
And in terms of how we think about multichannel retailing, I mean, I would say that we have been thinking about an omnichannel approach from the beginning and really thinking about looking at multiple formats where and that location and the dam and metro market really dictate what type of format we have. So I wouldn't say that the approach has necessarily changed there. I would just say that we recognize that we've been opening a large number of showrooms at this point. We want to just make sure that we are maximizing the productivity that we're enhancing the experience as we lay the foundations for additional acceleration of showroom expansion into 2025 and beyond.
And then I guess your second question as it relates to the $10,000 plus, I would say that we're it's really a result of the engagement we're seeing from our customers and some of the more brand enhancing activities that we're doing. So we know that we're resonating with a higher price point higher income customer. We also know that the showrooms do end up driving a higher ASP. And as we see success with the showrooms, I think that that's naturally one of the consequences.

Edward Yruma

Thanks so much.

Beth Gerstein

Thanks, Edward.

Operator

Banking One moment for our next question. Our next question will be coming from actually Owens of KeyBanc Capital Markets. Your line is open.

Great, thanks.
Just wanted to circle back really quickly on sign. Just curious on your thoughts as to how large this portion of the business can second thing that 20% in December, do you think there is a scenario down the road where this growth rapidly in surpasses engagement? Or how are you thinking about the product mix and growth opportunities seeing the reception you have in fine?

Beth Gerstein

I think that this is very much a massive opportunity for the Company.
Now if you look at most independents and other jewelers, you really see the mix of fine and BiDil about 50 50 so we have a ways to go before we get there. And it's definitely growing incredibly fast. And I think we're investing a lot in order to become that fine jewelry destination but I see a huge potential for the Company.
Thanks.

Operator

Dana Telsey, Telsey Advisory Group.

Dana Telsey

I didn't hire everyone as you think about 2024 compared to 2023, given the consumer and how your mix shift is adjusting, what should we be looking at as we compare against anything to note on the cadence and then that inside that, my voice, I lost my voice and then Pat, as you think about fine jewelry and engagement and overall average selling price points. What's happening with raw materials and newness in the product offering and how you envision pricing in 2024 compared to 2023? Thank you.

Beth Gerstein

Yes. Well, maybe I'll start with kind of the last question that you asked, Dana, and thanks for the question really is, as we think about pricing, this is a very dynamic and aspect that we manage the business very nimbly. So the way we think about it is we provide a variety of different assortments within different price buckets and as we see enhanced productivity, we're constantly introducing new products and shaping the assortments based on how the customers are responding. We're also really thinking about how do we maximize margin while also considering that we're driving growth. So I don't know if I have a crystal ball for 2024 and pricing other than other than that, we continue to believe we have a real pricing advantage based on the brand and the differentiation that we have. And we'll continue to just continue to test and learn there.
As it relates to, you know, some of the raw materials. I think one of the great things about our model is even in the face of increased metal costs, for example, we've still been able to maintain those high margins. And I think the fact that we're inventory light just allows us not to invest capital at a higher cost. We're going to be really nimble. So I think we have a real advantage in the marketplace overall as it relates from 20 or versus 2023. I think that a lot of the strategy remains the same in terms of investing in brands investing in fine jewelry. No, we see a big opportunity with showrooms, but we really want to make sure that we're driving optimization productivity and just the best customer experience that we can in the current fleet as we're still being more selective in how we're opening. And then overall, you know, we do expect that more gradual normalization with engagement rings while we continue to experience really strong growth across our non-engagement ring selection.

Dana Telsey

Got it. Thank you.

Operator

Thank you. This does conclude the Q&A session for today. I would like to turn the call back over to Beth Gerstein for closing remarks. Please go ahead.

Beth Gerstein

And thank you, everyone, for joining us for our Q4 2023 earnings call. I look forward to talking to you next quarter.

Operator

This concludes today's conference call. You may all disconnect.