DLTH - NASDAQ

Good day, and welcome to the Duluth Holdings Inc. First Quarter 2023 Conference Call. [Operator Instructions] I would now like to turn the conference over to Nitza McKee. Please go ahead.

Thank you, and welcome to today’s call to discuss Duluth Trading’s first quarter financial results. Our earnings release, which was issued this morning, is available on our Investor Relations website at ir.duluthtrading.com under Press Releases. I am here today with Sam Sato, President and Chief Executive Officer; and Dave Loretta, Senior Vice President and Chief Financial Officer. On today’s call, management will provide prepared remarks and then we will open the call to your questions. Before we begin, I would like to remind you that the comments on today’s call will include forward-looking statements, which can be identified by the use of words such as estimate, anticipate, expect and similar phrases. Forward-looking statements by their nature involve estimates, projections, goals, forecasts and assumptions and are subject to risk and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in our most recent annual report on Form 10-K and other SEC filings as applicable. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. And with that, I’ll turn the call over to Sam Sato, President and Chief Executive Officer.

Thank you for joining today’s call. We’re pleased to share the first quarter results, reflecting strong demand for our spring and summer collections and the great progress we’re making on several strategic growth initiatives. Fiscal 2023 business is off to a good start with several positive trend reversals in the business from the fourth quarter, including overall net sales that increased from last year, an increase in total customers for the quarter and better inventory in-stock positions that are fulfilling demand and driving greater efficiency in our working capital. While we still expect the economic cross currents to weigh on consumer price sensitivity, our conservative business planning for 2023 provides flexibility in our go-to-market strategies to achieve near-term goals and we remain committed to our long-term objective, as outlined in our Big Dam Blueprint growth strategies to build a platform of can-do lifestyle sub-brands. It was 1 year ago that we announced the rebranding of Duluth by Duluth Trading Company and AKHG to align with our customers’ distinct use cases. Duluth is focused on serving the needs of our customers for durable functional work wear. Our target customers are fine-tuners, fixers and tinkerers who believe that calloused hands and dirty fingernails build character. A great example of serving our customers who like to dig in is our garden, landscaping and planting collection which has continued to build each year as we expand in both size and breadth across apparel and gear. This category was up nearly 30% compared to last year in the first quarter and represents a healthy long-term growth category for us. AKHG is our outdoor recreation brand for those who believe the work of outdoor experiences makes it worth it and the grind is part of the adventure. These folks live to be outside in their free time and they invest in outdoor experiences. For them, fun tends to start where reliable self-service ends. Since last year’s spring launch of our women’s collection by AKHG, we continue to see a tremendous positive response from our customers. I’ll share more details shortly regarding recent product performance, but I’m excited to share that along with the addition of women’s, AKHG men’s has also seen growth and the overall sub-brand was up 43% from last year’s first quarter. Additionally, we see opportunities to leverage our brand platform for potentially new brands we develop or through acquisitions that are in adjacent, underdeveloped categories with customers that have some similarities and crossover with Duluth and AKHG. We’re not going to stray far from who we are, rather move into underpenetrated categories within our current business and either develop or acquire expertise in categories where we don’t currently participate. We look forward to sharing more about the incremental brand growth opportunities when the time is right, but now, I’ll touch on our recent results. Today, we reported first quarter net sales of $123.8 million, an increase of nearly 1%, a net loss per share of $0.12 and positive adjusted EBITDA of $5.3 million. These results were in line with our plans and keep us on track with the full year outlook provided on our last call. Our inventory levels ended the quarter down roughly 5% from the same period last year and down 6% from the fourth quarter. Our disciplined efforts to appropriately plan our purchase and receipt flow has resulted in a well positioned inventory mix of seasonal year-round and clearance goods. Given the macro pressures consumers are facing with persistent high inflation and higher interest rates, we are seeing price and basket sensitivity as consumers remain selective in their discretionary purchases. However, the underpinnings of our brand remained strong, as evidenced by our strong unit sales growth of 6% over last year. Dave will share further details on our financial results, but I’d like to commend our teams for continuing to be nimble and focused on executing our plans and serving our customers at the highest level. Our improvements in the demand trend this quarter can be attributed to several actions we took, but most importantly, it starts with new innovative products. We continue to see success when we expand proven technologies and fabrications that our customers already love into new products. Our Armachillo material, originally designed for men’s underwear, is serving as the base fabric for a new line of sun protecting tops under our Sunperior collection for men and women. These lightweight long sleeve tops provide wicking and skin cooling attributes plus UPF 50 protection from the sun. In the shorts category, we combined our hero fabrication in Duluth Flex Fire Hose with CoolMax technology to provide a hot season cargo short for guys who need to work under the hot sun. With a 13-inch inseam, the extra coverage and wicking features keeps them dry and cooler than cotton, plus adding the flex and standard gusset features along with our bonus room elastic waste band allows for extra ease when stretching and twisting on the job. To address our customers’ affinity to get active in the water, our new Lost Lake Swimwear Collection for men and women was the #1 collection in AKHG for the quarter. We suspect that this new offering was going to be a splash as we shared on our last call and the positive reviews have been great with call-outs on the extra convenience features, built-in UPF sun protection and durable flexibility for the hike to the swimming hole or lounging under the beach umbrella. We will continue to innovate and infuse new materials that serve a purpose or solve a problem for our customers because it’s in our DNA. Like our new No Fly

Thanks, Sam, and good morning. For the first quarter, we reported net sales of $123.8 million, up 0.7% compared to $122.9 million last year. Sales in our direct channel were up 2.3% from last year in the quarter with slightly better trends from direct volume in store markets versus non-store markets. Online conversion was up 50 basis points across both mobile devices and desktop. A combination of enhancements to our website speed and functionality that reduced friction along with proven marketing conversion tactics helped to increase our channel efficiency. Our retail channel was down 2.1% with store traffic down 5.5% compared to last year, which is an improvement from the traffic trends in our fourth quarter and an increase in the traffic conversion rate of close to 300 basis points compared to last year. As we shared on our last call, we anticipated our mix of full price sales to be below last year, as was the trend in the back half of last year, with customers responding more to items on sale or clearance priced. As such, our average unit retail was down from prior year, but offset by an increase in the units sold. Our actions to improve the inventory flow and pull receipts in earlier than last year positioned us well during the quarter to capture both sales and core categories as well as make our seasonal offering more impactful with support from key marketing campaigns. As Sam shared, our development of a holistic gardening, landscaping and planting collection for women and men gained traction earlier in the quarter and continues to build on this anchored category that has many years of future growth. Our first quarter gross profit margin was 53% compared to 54.6% last year and reflects the lower mix of full price sales and deeper discounting that impacted the gross margins on items sold on promotion and on clearance. This represents a 2% decline in gross profit dollars from $67.1 million last year to $65.7 million this year. Mix of items sold at clearance price was roughly the same as last year. However, the degree of discount was greater in order to move through the clearance units and finish the quarter with this bucket of inventory, representing a mid-single-digit percent of the total as planned. The lower product gross margin was partially offset by expensing $3.9 million of expedited freight during the first quarter of 2022. Excluding the expedited freight charge, product gross margin was down close to 500 basis points year-over-year. We do expect the contraction in product gross margin to improve in the second quarter as we begin to comp the period last year when customers heightened sensitivity to pricing emerged. We estimate that total gross profit margin will be down as much as 50 basis points in the second quarter compared to last year. Turning to expenses. SG&A for the first quarter increased 3.2% to $70.2 million or 56.7% of sales compared to $68 million last year or 55.3% of sales. This included a decrease of $900,000 in advertising and marketing expenses, an increase of $2.6 million in general and administrative expenses and an increase of $500,000 in selling expenses. Selling expenses as a percentage of net sales increased 40 basis points to 16.2% compared to 15.8% last year and was the result of higher outbound shipping costs from a greater volume of direct orders shipped with a lower average order value. We controlled our variable store and fulfillment center labor expenses well during the quarter and kept variable operating costs flat as a percentage of total sales. Advertising and marketing costs were $11.4 million in the quarter compared to $12.3 million last year and as a percentage of sales decreased 80 basis points to 9.2% compared to 10% last year. An increase in national TV and streaming placements to support the March Madness advertising presence was more than offset by a reduction in creative asset development costs, which will shift into later quarters. As Sam noted, the execution of our merchandising and marketing plans are growing customer engagement and in sharing demand for our assortment remains robust. Our efforts in customer insights and data analytics are enabling a more flexible and nimble marketing strategy that is driving growth in both our buyer file and increases in retention rates, while acquiring a younger customer over time, which is a key strategic objective of our Big Dam Blueprint. General and administrative expenses during the first quarter were $38.8 million or 31.3% of net sales compared to $36.2 million or 29.5% last year. $2.6 million increase from last year represents additional personnel and depreciation expenses as well as fixed cost for the new Southeast fulfillment center scheduled to go live in the third quarter. We expect slightly higher deleverage in our second quarter for similar reasons. Adjusted EBITDA for the first quarter was $5.3 million or 4.3% of sales compared to $7.9 million or 6.4% of sales last year. Net loss per share was $0.12 versus a loss per share of $0.04 last year and was in line with our internal expectations. Moving to the balance sheet. We ended the quarter with net working capital of $89 million, including $9 million in cash and zero outstanding on our $200 million line of credit. Our cash balance is down $36 million from the beginning of the quarter, primarily due to the capital outlays associated with the new Southeast fulfillment center and investment in automated fulfillment capabilities and warehouse management technology. We’re excited to see this project go live in the coming months as it represents a truly transformational advancement in our supply chain capabilities that moves us forward in meeting customers’ growing expectations for online shopping speed and accuracy and positions us to gain operational efficiencies as early as our peak selling season this year. Our total capital expenditure plan for the year remains at approximately $55 million, of which nearly half was expended in the first quarter. To confirm our cash flow expectations, we expect the cash from operations will fund the capital expenditures in 2023 and we will end the year with positive free cash flow. Our inventory balance ended the quarter down 5% from the same period last year and is in a healthy position with roughly one-third of the mix in seasonal products and two-thirds in year-round products as planned. We are confirming our guidance for fiscal year 2023 with the following outlook. Full year net sales of $645 million to $660 million. Gross profit margin for the full year to be flat to up 20 basis points, reflecting continued price and basket sensitivity with improvements coming in the back half of the year. SG&A expenses as a percentage of net sales to be flat to down 20 basis points as we continue to prudently manage expenses with leverage coming entirely in our fourth quarter. Our interest expense, which includes cost of borrowings on our line of credit as well as imputed interest and finance lease liabilities are expected to increase $600,000 to $1.1 million from last year due to higher interest rates. Depreciation and amortization expense, including software subscription implementation costs are expected to be roughly $36 million. Full year adjusted EBITDA of $47 million to $49 million and EPS of $0.02 to $0.08. In closing, we’re pleased with the start of 2023 and have confidence in achieving our annual goals despite what remains a dynamic consumer and macro environment. Our actions to manage costs and inventory flow have positioned us well to weather the environment, while still advancing our strategic objectives of growing customer engagement and investing for future brand platform expansion, setting the foundation to enable extended growth into new channels, brands and customer adjacencies. And with that, we will open the call for questions.

Thank you. [Operator Instructions] The first question comes from Janine Stichter with BTIG. Please go ahead.

You have Ethan Saghi on for Janine this morning. Thank for taking our questions. First off, just could you give us some more details around what drove the acceleration in the men’s business in the first quarter? And then on top of that, if you could give any more details on the – on what you’re planning for inventory levels in the second half of the year? That would be super helpful.

Hi, Ethan. Thanks. This is Sam. So I’ll take the first part on the men’s business. Yes, we’re pleased with the significant trend improvement from the prior quarter. We are down slightly in men’s, but compared to a double-digit decrease ending Q4, really pleased with that. We continue to see pockets of strength as we’ve gone through the spring season. And as I said in my prepared remarks, consumers reacting really well to our spring and summer offer. And in particular, we’re seeing strength across seasonal fabrications like Dry on the Fly, Armachillo, Breezeshooter. He’s responding really well to these lighter weight technical fabrics and new colors. What’s interesting about the men’s business is a big chunk of it is on our year-round goods. And so we have to continuously innovate and find ways to bring him into the store or online, especially as discretionary spend is more challenged. And so, yes, we’re really pleased with the progress and acceleration of that business, and in particular, the reception that he’s showing to the new products that we’re introducing.

Ethan, I can address the inventory question for back half of the year. So we are on track with inventory levels coming in below last year. This first quarter, we were below last year, about 5%. And so we’re going to expect that to continue kind of mid-single-digits. And then in Q2 and Q3 and Q4 start to decline even more upwards of 10% to 15% below last year at the end of the year. So we’ve been able to adjust that inventory flow given the business trends we’re on and feel good about the supply chain traction that we’ve got this year.

Great, that’s super helpful. And then one last quick one for me. You kind of highlighted the cautiousness from the consumer. Could you just talk about the cadence of sales you saw in the first quarter and now you’re seeing in the second quarter so far? And just talk about what you’re seeing heightened cautiousness from the consumer, things like that?

Yes, sure. The first quarter for us started out soft in February and then began to improve into March and even better in April. So we had pretty decent April business that brought the full quarter to the slight positive overall top-line. But throughout that period of time, there was continued margin pressure in the customers looking for the deal. But what really triggered the increase overall was the newness in garden and in the swim collection that we called out and those items that Sam mentioned. So innovation and newness really helped pull the period positively. So that’s the trend we’re on.

Great. Thanks so much.

Thank you.

Thanks, Ethan.

Our next question comes from Jonathan Komp with Baird. Please go ahead.

Hi, good morning. Thank you. I want to just follow-up on the comments around price sensitivity. Could you expand a little bit where specifically in the store, online, you’re seeing the sensitivity and the behavior you’re observing? And then how do you plan to react to either to the current environment or any changes you anticipate?

The sensitivity to pricing, Jon, is, for the most part, a little bit across the board. I think men’s is feeling it a little bit more and that’s reflective in those results, but that was really a continuation from last – back half of last year. So I don’t think we can point to any particular categories other than when an item is really seasonally right, we’ve got more impact and better pricing outcome on those categories than those items that are the year-round. So I’d say, when it’s seasonal categories, that’s where we’re seeing the better – kind of better promotional impact than in the year-round category.

Jonathan, this is Sam. I’d add that when we look at the underpinnings of our brand, we believe it remains strong. Demand is high. Unit sales growth for the quarter was up over 6% versus a year ago. As I stated in my prepared remarks, our AKHG brand, up nearly 43%. Total women’s grew 14%. And so, yes, while there is a sensitivity to discretionary spend around price and basket size, as Dave said, when the offer is right, we’re going to continue to capture some of that business. Importantly, we’ve been talking a while now about how we’re planning our inventories. And I think this last quarter is the start of what we intend on doing relative to sales growth and inventory growth, but inventory is being well managed, purposely planned, down 5% compared to a year ago. We’re in a really good – not only good stock position, but the inventory mix is well balanced. And as I’ve stated in the past, we’re going to be competitive, but we’re not going to chase unprofitable sales. At the same time, we got to be mindful of generating top-line and flow-through to profits. But we’re not going to do that at the expense of just throwing the baby out with the bathwater, so to speak. And we’re not under undue pressure because our inventories are bloated, we’re in a really well position right now. And so we’re going to be smart and strategic about how we compete from a price perspective.

Okay. Great, that’s very helpful. And then just two last follow-ups, maybe first, Dave, I just want to ask about the full year guidance. If I compare it to fiscal 2019, it looks like revenue up in the 10% to 12% range implied by the guidance for the year. First quarter was up I think about 4%. So I just want to understand your confidence there. Is it based on the April, May trends you’re seeing or some other contributors to the business as we go along here? And then just, Sam, just given the success you’re talking about on some of the product innovation on the core business, why does it make sense to still consider acquisitions or adding any new complexity into the model? Thank you.

Yes, Jon, on the sales guidance, I mean, we feel good about that, certainly relative to the prior periods. I’d say, the trend that we are on this quarter is reflective in that guidance and we will see that play out each quarter going forward. We are not expecting any big gains in Q2 or Q3 or Q4. So, I would expect us to still be within that range of annual guidance. But in terms of the acquisition, I don’t know, Sam, do you want to touch on that?

Yes, sure. Yes. Good question. So for us, as I have said and shared in past discussions, acquisitions really are something that we are thinking about along with other opportunities to grow the business, be it, wholesale or other distribution models. This is not to suggest that it’s something that we are definitively going to do, but it’s certainly something that as we think about our strategic framework from an infrastructure perspective is with those types of opportunities in line. We have completed a formal target profile framework work project where we have identified some pretty specific filters that we would use to vet potential acquisitions. But I think importantly, Jonathan, the purpose of us sharing that is that part of our infrastructure enablement strategy is to allow us to enter into new channels of distribution or build or acquire new brands and allow us to have the capabilities to service that. So, we are not suggesting that it’s here in the near-term, but certainly, it’s something that we are thinking about and positioning ourselves if the time arises and it’s a good time for us to do that.

That makes sense. And apologies, I may have misspoke on the comparison. So David, just to clarify, it looks like your – you don’t assume a major acceleration or deceleration in the trend and that would get you to the full year guidance. Just so I am clear, since I may have misspoken?

Yes, that’s right. That’s right, Jon.

Okay. Thank you very much.

Thank you.

Our next question comes from Jim Duffy with Stifel. Please go ahead.

Hi. This is Peter McGoldrick on for Jim. Thanks for taking our questions. I just wanted to start, could you talk about your newer customers, both the younger customers acquired through sports television and the women’s consumer? How is their make-up relative to the heritage men’s Duluth customer? Are you seeing difference in promotional engagement, basket size or frequency of purchase?

Yes. Peter, this is Sam. So, a couple of things I will say. As we described in our Big Dam Blueprint, our target customer, 40 to 50 versus our average customer currently is north of 50 years old. And so we are being purposeful in trying to target that younger consumer. And as we stated, we are seeing success there. In fact, nearly half of all of our new customers acquired in Q1 were under the age of 50 years, so somewhere in our target range, which is what we want importantly. The size of spend is important there. And just for our future growth, we need that slightly younger consumer. From a women’s perspective, it’s interesting because nearly half of our customer count is female. And where our opportunity really was is because the percentage of our total women’s business was somewhat lower than that customer count. It was clear to us and we affirmed it through analytics that she was buying a lot of his clothing. And so our intention to focus on her needs, I think was not only a good unlock for us, but it’s starting to pay dividends today. And so what we are really seeing is, we have always attracted this female consumer. We just didn’t necessarily have the breadth of offer to really compel her to shop with us versus other places she shops. And as we have continued to invest in her, specifically around how we are speaking to her, what channels of marketing we are engaging with her, some of the investments we have made in our stores to expand our women’s offer is starting to pay dividends and we see that in our results.

Okay. And then one question I had on something that wasn’t discussed was the wholesale business. Could you give us an update on your wholesale distribution aspirations? How big is this business today in terms of revenue and doors representing the brand? And how do you view this as a volume driver this year and beyond?

Yes. Wholesale for us today is just – we are still in a kind of a test and learn phase. It’s largely limited to our Tractor Supply partnership. The real intent of that is really as a target for our infrastructure investment strategy. So, as an example, the Adairsville fulfillment center that will be fully automated allows us to not only distribute direct-to-consumers that are shopping with us online, but also fulfill our retail store inventory needs, but additionally to that, will allow us to be able to service wholesale accounts. And so the opportunity we think is significant for our brand across wholesale. There is obviously other components that we will have to invest against like personnel, a wholesale team. But the infrastructure from a strategic perspective I think has been well documented internally. And again, the purpose of some of these investments we are making in back of the house is really to allow us one day to enable that opportunity.

Thank you. I will pass it on.

Thank you very much.

Our next question comes from Dylan Carden with William Blair. Please go ahead.

Thank you very much. Yes. Just curious, the 50% of units being handled through the direct channel for the holiday period, is that kind of the end target for the sort of total capacity utilization of that center? And kind of how does that inform some of your margin outlook for the year?

Hey Dylan, this is Sam. Yes, it’s 50% out of Adairsville or Adairsville will handle 50% of our direct sales demand, and that’s just as we are ramping up. The fulfillment center actually has greater capacity than 50%. And so obviously, as that amount grows and we reduce some of the more expensive labor-driven CPUs in the other fulfillment centers, there is an opportunity for us to gain even greater efficiencies. But for the most part, that 50%-some of capacity is – of demand is built into our current model, largely it will be reflected in the fourth quarter.

Excellent. And correct me if I wrong, you have quantified kind of the contribution benefits from doing that. Can you remind me?

Yes. So, we estimated roughly 20 basis points of leverage in our selling expenses this year, again, back end and fourth quarter weighted. But next year, you could go to 20 basis points to 40 basis points on a full year basis of leverage once we really have that operating at full capacity and through the full year period.

Excellent. And then the initiatives around kind of marketing efficiency and even promotions, I get that promotions are kind of comping up against maybe harder comparisons as far as sort of depth is concerned. But where do you feel you are as far as meat on the bone from kind of continuing to drive efficiencies on both of those costs?

I am sorry, Dylan, you are talking about the costs, selling costs or…?

Yes. I guess I am talking about – it seems to be there is an ongoing journey in kind of rationalizing promotional activity. And so as you look to a more normalized period, kind of how you feel about the opportunity to kind of reduce or make more efficient rather some of that activity? And then on marketing, again, being more targeted, bottom funnel kind of approach, I guess sort of where we are on pulling some of those costs out of the business? Does that make more sense?

Let me handle the promotional thing. Dylan, this is Sam. So, the sensitivities around price, as I have said earlier, has kind of stayed with us through Q1 and what we are seeing into Q2. We had hoped that Q2 would see a little bit of relief after coming out of a really highly promotional year in ‘22, but that’s kind of stayed with us. And so we are now expecting that. We think as you get into Q3 and Q4, you will start to see a reduction in promotional activity. For us, as I have said earlier, inventories have been planned really well. Our team has done a great job of planning our purchases and our receipt flow. And so while we have got to be promotional to an extent to remain competitive and certainly to address the consumer headwinds relative to their sensitivities on price, we are certainly not in a position from a bloated inventory perspective to have to chase unprofitable sales. And so we expect that Q2 will remain highly promotional and we will continue to see price and basket sensitivities from the consumer. But we are going to be really purposeful and selective in how we cadence our promotional activity.

Yes. Dylan, I guess to tack on the question around the marketing and the spend there, we will see close to 100 basis points of leverage this year on sales that are flat to slightly up. So, we are seeing some savings upwards of $5 million to $6 million of less ad spend for the full year. And that’s because we have just gotten continued efficient processes that allow us to be more nimble and digital and pulling dollars out of upfront linear TV spend. There has been a dramatic shift over the last couple of years on how people are consuming their media and so much less of it is on the cable TV side. So, we found efficiencies through digital and through streaming and on that side and we will continue to leverage the ad spend accordingly.

Yes. Dylan, I will just add one final comment to Dave’s response. In addition to leverage, I think the real story is around the efficiency and the effect that our brand marketing team is really having on our spend. And so it’s a complex, holistic effort from top of the funnel and creating brand awareness all the way through conversion tactics and it’s a balance of long-term brand health and awareness versus immediate tactical conversion tactics that result in near-term sales. So, our team continues to look at this highly fragmented market and doing a great job of identifying where our consumers are consuming content and engaging with us and they are allocating dollars. The great news about digital marketing, while we are still playing in linear television, but it’s really targeted. Digital, our teams are able to flex and change their allocation of spend almost on a daily basis and they are doing that. Every single day, they are working on pulling different levers as they see different results come across the wire. So, I think our team is just getting better at understanding our customers, where they consume content and then they are just dialing in. And in some cases, like we saw in March Madness, they are placing big bets that translate to ongoing awareness, but then also drive opportunities to convert those consumers more near-term.

Excellent. And I don’t know how much you are going to speak to this just given sort of maybe competitive positioning. But as you kind of look at the opportunities across the offering in a white space extension, either acquisition or just sort of internal vertical extension, do you think that there is an opportunity to grow more within kind of the work category and kind of remove maybe some of the seasonality promotional need of the brand? Is that one area that you are focused on as far as extension?

Yes, absolutely. I mean product innovation is, as we have always talked, is the lifeblood of our business. And acquisition aside, our teams are always thinking about not only new product and new innovations within the categories we currently participate in, but also where are the opportunities within – specifically in Duluth, the work wear space that we are not either servicing the consumer or have an opportunity to expand that. So, a great example is, we have talked a lot on this call about the gardening and landscaping category for us. We really believe we are just scratching the surface. And the reason this business continues to grow is, we started out with that kind of that garden bib overall, and that’s expanded into a number of different silhouettes. And similarly, in men’s, we are starting to grow the men’s landscaping part of the business. So, that’s a great example of our team seeing the category that’s getting traction, starting to expand it into other genders or other categories, product categories that is within the collection. And so, yes, we think that there continues to be really good opportunities within Duluth. From an acquisition perspective, as you and I have talked in the past, it’s really about addressing adjacent consumers as expanding our customer base beyond just work wear and outdoor rec is a big opportunity for our brand.

Excellent. Very good. Thank you both.

Thank you very much.