Greetings. Welcome to the Columbia Sportswear First Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Andrew Burns. You may begin.

Good afternoon, and thanks for joining us to discuss Columbia Sportswear Company's first quarter results. In addition to the earnings release, we furnished an 8-K containing a detailed CFO commentary and financial review presentation explaining our results. This document is also available on our Investor Relations website, investor.columbia.com. With me today on the call are Chairman, President and Chief Executive Officer, Tim Boyle; Executive Vice President and Chief Financial Officer, Jim Swanson; and Executive Vice President and Chief Administrative Officer and General Counsel, Peter Bragdon. This conference call will contain forward-looking statements regarding Columbia's expectations, anticipations or beliefs about the future. These statements are expressed in good faith and are believed to have a reasonable basis. However, each forward-looking statement is subject to many risks and uncertainties, and actual results may differ materially from what is projected. Many of these risks and uncertainties are described in Columbia's SEC filings. We caution that forward-looking statements are inherently less reliable than historical information. We do not undertake any duty to update any of the forward-looking statements after the date of this conference call to conform the forward-looking statements to actual results or to changes in our expectations. I'd also like to point out that during the call, we may reference certain non-GAAP financial measures, including constant currency net sales. For further information about non-GAAP financial measures and results, including a reconciliation of GAAP to non-GAAP measures and an explanation of management's rationale for referencing these non-GAAP measures, please refer to the supplemental financial information section and financial tables included in our earnings release and the appendix at our CFO commentary and financial review. Following their prepared remarks, we will host a Q&A period. During which, we will limit each caller to 2 questions so we can get to everyone by the end of the hour. Now I'll turn the call over to Tim.

Thanks, Andrew, and good afternoon. I'm pleased to report that 2024 has started out broadly in line with our expectations. We are reiterating our full year net sales outlook while modestly raising our diluted earnings per share range. In this challenging environment, we continue to take a disciplined approach to expense management. And our commercial teams are working to maximize sales across all channels. Our fortress balance sheet enables us to take a thoughtful approach to unlocking the long-term growth and profit improvement opportunities we see across the business. During the quarter, we made meaningful progress on our top priorities. Our inventory reduction plan has yielded substantial benefits. Inventory was down 37% year-over-year exiting the quarter. I'm proud of our team's efforts to navigate the supply chain challenges over the last several years, while generating healthy gross margins. We are now shifting our focus towards longer-term supply chain goals, including improving inventory turns and enhancing the speed and efficiency of our operations. Growth is vital for our success. We are implementing strategies across the portfolio to accelerate the business. For Columbia, we're focused on bringing younger active consumers into the brand through a reinvigorated product line that further emphasizes innovation, performance and style. On the marketing front, we're targeting a more balanced full-funnel approach to drive consideration from new customers. We are also focused on elevating our product assortment and enhancing our in-store retail presentations across all channels. We have several proof points across the globe that this strategy is successful. We've driven meaningful growth in recent years in China and several markets across our Europe-direct and distributor businesses. We know that when we target the right consumers with our innovative products, we win in the marketplace. In our emerging brands, we have new leaders at SOREL and prAna formulating…

[Operator Instructions] The first question comes from Bob Drbul with Guggenheim.

I guess, Tim, on my 2 questions, the first one is inventory is down. Was it 37%? Is this the leanest that you've run inventories and heading into a fall season? Can you just talk about sort of your comfort level with the composition and sort of how you're positioned for the rest of the year? And I guess the second piece is can you talk a little bit more around the European business, the order book, the trends, just the health of the business in Europe and what you're seeing and expect in that region specifically?

Certainly. Yes. I think this -- the 37% reduction, we're very proud of that, especially in relation to the gross margin we were able to achieve. That was a function of really utilizing our outlet store fleet to help us to get the inventories down in the right area. We think, frankly, there's still more room for us to improve our inventory utilizations. We updated our inventory turns up to about 3, and we see great opportunities with, frankly, the automation we have in place now around estimating our demand and actualize the demand according to the plan. So more to come. And again, we think there's way more opportunity for us to be better in inventory management. But this is close to the best we've done, but there's still more room to improve. The European business has been good. I'm headed over there this -- at the end of June to celebrate the company's 30th anniversary of doing business in Europe. We occasionally hear from our partners and from our team members in Europe that the brand is not well known in Europe. But frankly, I'm just thrilled with the exposure we're getting as it relates to some of these global marketing efforts, including the Hike Society, the lunar lander. And I think there's great opportunity for us in Europe, and we'll continue to grow there, I think, rapidly.

The next question comes from Laurent Vasilescu with BNP.

I wanted to ask about the 1Q, the top line beat. January, I think on the last call, you commented, right, January had good favorable weather. But I think then the weather kind of got very challenging for the outdoor category in February and March. So I'm just curious to know, was there maybe a -- what was the upside surprise versus your guide when you guided February? Was there something like on the international side that we should consider? Was there a pull forward from 2Q into 1Q? Anything that you can share on that front, that would be very helpful.

Yes. The improvement and frankly a bit of a surprise was the January winter weather in North America. We would -- we'd just come off of very warm winter in the third and fourth quarter of last year. And the fact that the weather was nicely appropriate in the fourth quarter -- excuse me, in the first quarter of January was -- I don't want to say a surprise, but we were very glad to see it. Our business is much more weather-dependent than it is economically dependent. So when the weather is appropriate, our business is exceptional. And it's -- [ if anything ], it's vastly impacting. So that's where the numbers really were a bit of a surprise in Jan.

Laurent, I might add when we had our earnings call in February, we indicated that the upside that we were seeing from a weather standpoint through the month of January, that was reflected in our Q1 outlook. So when you look at the quarter, the -- we're about $17 million better, I think, on the top line relative to the high end of our outlook. And you can attribute most of that to slightly earlier shipments in the U.S. business. We don't [ expect a ] upside. Most of the quarter, I think, was right in line with where we thought it would be in either shift. So just days, not anything of any meaningful nature at least at this stage.

Okay. Tim and Jim, that's super helpful. And then because as you mentioned, Tim, that it is weather-dependent because there was better weather, it came late, but it did arrive. How do we think about that in the context of the U.S. business guided down mid-single digits? I don't know if you have any comment about what your order book on the U.S. wholesale side and how it's shaping up in terms of maybe reorders, cancellations? I mean it looks like you're calling for the U.S. business to be kind of flattish on the back half. Any comment there would be super helpful.

Yes. Well, remember, we take our order book primarily in November, December and to a certain extent in January. So it reflects the mood of our retail partners in that period. It will have some additional inventory in the event that the weather is much colder than a normal early winter. But for all intents and purposes, we're -- we've based this on an average winter weather year.

Laurent, maybe just to add in a couple of extra points. Our U.S. business, we'd contemplate that being down mid-single digit percent year-over-year for the full year. That's not different than where we thought we would be 90 days ago. And when you look at the wholesale business, the wholesale business will still be down in the second half of the year. That's more than, by and large, or partially offset, I should say, by the direct-to-consumer business through a combination really led by our brick-and-mortar business. So we continue to annualize new stores that have opened coupled with these temporary clearance stores that have been operating.

Excellent. That's very clear. And then maybe my last question is kind of a 2-part question, sorry. But Jim, can you comment about -- I know you kind of tweaked down the gross margins for the year. But can you kind of give us a kind of a range of where the 2Q gross margin should shake out? And then on the $75 million to $90 million of savings, how do we think about that over the course of the quarters? I don't know if you recognize anything in the first quarter, but kind of -- could it be equal tranches across the next 3 quarters on that savings?

Yes, Laurent, in our -- in the CFO commentary that we published, we did provide some detail on our Q2 outlook. So we do contemplate our Q2 gross margin being down 190 to 230 basis points. That's, by and large, a reflection of a year-over-year comparative difference with some sales and inventory-related provisions that were onetime in nature and favorable last year that we're anniversary-ing against. If you set those aside, our gross margins in the second quarter really -- are going to be essentially even to where we were last year. And then as it pertains to our profit improvement program, from an overarching standpoint, we're making great progress on that. And first and foremost, I'd say, with the great work that our operations and supply chain team and just collectively across the business that we've had in terms of getting our inventories back down into a more normalized level, that's certainly going to benefit the elevated carrying costs we incurred a year ago. In fact, our U.S. distribution third-party logistics costs next quarter, Q1, were down $10 million. We took some actions that Tim had referred to in the prepared remarks with regard to a reduction in force. That was executed late in the quarter, late March. So we would anticipate beginning to see the benefits of that until Q2. But we're very much on track in terms of being able to achieve that $75 million to $90 million that's built into our outlook.

The next question comes from Jim Duffy with Stifel.

I wanted to start on the U.S. market. Your comments on the U.S. remain quite silver. Can you speak to what you're seeing from the U.S. consumer activity early in the spring season, as you see spring begin in earnest in certain U.S. regions? Are there any signs of life to be hopeful? And then I'm curious how all this kind of relates to the outdoor category as a whole in the U.S. Are we getting any indications that the COVID hangover is lessening?

Yes. I think there's a number of brands in the marketplace today, and we're competing with many of those. I think they may have been too exuberant in expansion of the business. And frankly, with our balance sheet as strong as it is, we're obviously going to be here when the dust settles. I think that the consumers today are anxious to get back out there outdoors. And again, as I said, the weather is impactful on how our business is functional. We do a significant amount of our business in Mother's Day and Father's Day gifts, and so there's all the expectation of what would that -- those kinds of activities will continue and be more robust as well.

And then, Tim, I'm interested in your efforts to bring new and younger consumers to the brand, the Hike Society initiative in Europe. Seems like you're -- something you're really pleased with and getting good traction with. Can you comment on evidence of progress with bringing the younger consumer to the brand in the United States?

Certainly. Well, it's interesting. Our PFG styles, which are one of the youngest part of our business, has traditionally been quite generous in their sizing. And as we add some of these new components to our PFG line, which are much more active fits, the uptake there has been quite frankly surprising. And so it looks like we've got the other people certainly approaching the PFG styles in a better way and in a more robust way. And then our footwear, as we begin to have styles, which are trail running and really designed for a more active person, we're getting a very good lift on that stuff. So I think the opportunity is there and the expectations are that we'll continue to define and design styles in those -- in that area.

And should we expect Hike Society to come to the U.S.?

It is definitely likely. I mean, it's been a really sort of a PAM -- a global uptick. We have Hike Society across Asia and the European uptake was super, and it's certainly a candidate for inclusion in our marketing efforts.

The next question comes from Jonathan Komp with Baird.

Can I just follow up on the gross margin? I want to ask about the competitive environment. And I may have missed the reasons to take down the gross margin guide slightly for the year, just given the progress you've made on inventory. Could you share a little more perspective there? And just related to that, can you comment on the temporary stores? I think you're up to 44 in the U.S. Any way to size up how much volume that's driving this year or last year, just to give more perspective there?

Yes. I can start and then let Tim jump in and add some color. As it relates to our full year outlook and the revision we've made to the gross margin, there's some puts and takes in terms of our revenue, and it withheld the revenue constant with our prior outlook. But when you get into the underlying composition of it, there's been some shifts in parts of the business. We took down our SOREL outlook slightly. We took down our e-commerce business down slightly. The area of our business that we took up was in the case of our brick-and-mortar with our outlet and clearance stores, and we continue to operate those through the balance of the year. And so as a result of that change in the mix of our business and with an increased dependence on the outlet and clearance locations, that's effectively what's driving a portion of the margin coming down. And then as it relates to the temp stores, you saw in the quarter, we're operating about 44 stores. We're operating at just under 2% of sales, I think, in the quarter. And then for the year, it will be a light amount. It will be slightly above that 2% of sales. And from an overall profitability standpoint, these stores are contributing very little to the overall operating margins. But they're obviously a great vehicle for us to liquidate inventory at a much more profitable vehicle and less disruptive than going through the wholesale closeout or value channel.

Our typical method of selling off-price merchandise would be to sell to T.J. Maxx or Marshalls, and those channels were frankly flooded with inventory. So the best approach for us was to take the -- take it and sell it ourselves in these temporary stores. So as that inventory has come down at decent margins certainly by comparison to what the other liquidation methods were, we will begin to close those temporary stores up and go back to our standard method of operating stores. So I think it really gives an opportunity to flush the inventory, and it didn't have the kind of broad impact on the marketplace that something with a big discount in our e-comm business would have done.

Makes sense. Looks like a good brand move there. Just one follow-up on your Columbia brand for the year, the revenue of about flat globally. Could you just comment, it looks like you're assuming something positive, maybe mid-single digits in the back half? So I'm hoping you could maybe share the visibility that you see and maybe the key drivers as we think about Columbia and whether you're baking in benefits from some of the newer growth initiatives or if those have a longer tail?

Yes. As it relates to the outlook itself on a full year basis, Jon, that's right. We're about flat. And looking at the second half, in particular, we do contemplate growth in the brand. I would say that, that leans more towards the apparel category, footwear. I think as Tim touched on, the outdoor footwear trends remain challenged. So I'd expect to continue to see some challenges there, at least in the near term. But longer term, we've got a lot of confidence in the direction we're taking from a footwear standpoint. And then that growth that we're planning for in the back half of the year, some of that is based on our wholesale order book. And for Columbia apparel, the wholesale order book for the fall '24 season, we're anticipating modest growth out of the wholesale business. So that's encouraging. And I think there is the benefit of this -- the brand continues to perform well from an international standpoint. And certainly, that will be the brand when we look at the brick-and-mortar side of the business with our store fleet and additional stores. That will see the most benefit from that part of business.

The next question comes from Mitch Kummetz with Seaport Research.

I guess my first question, just on the order book. I think when you guys reported 4Q, you mentioned that fall orders were down low to mid-single digits. I'm wondering if there's any change in that now that we're a little bit further into that process. And then also on the SOREL guide change, I'm just wondering if that's order book related. Or are you changing other assumptions around SOREL? And I have a follow-up.

Yes. The biggest change in the case of SOREL, more a reflection of what we saw in the e-commerce business in the first quarter in which the business had been down a bit more sharply than we had anticipated. And so with that in mind, it's been a tough environment. We revised the outlook down to the -- reflecting down mid-20s. Obviously, we've got order book in hand for fall '24 that would be also be indicative of those declines. And we've got new leadership in place and looking forward to the updates that they make to the brand, the product line, and really looking forward to reinvigorating growth. But it's going to take some time and obviously challenging in the near term.

And then is the order book -- the consolidated order book still in that down low to mid-single digit range? Has that changed at all?

I think -- so on a global basis, our order book for the fall '24 season is contemplated to be down a low single-digit percent. So call it the 1% to 2% range.

And then just a second question on the gross margin. So you guys showed nice gross margin in the first quarter, but you expect to be down pretty substantially in 2Q. From a kind of puts and takes standpoint, what's the main reason for that big swing?

The biggest one is what I was referring to. I can't remember who asked the question a little bit earlier. But Q2 of last year, we had some exceptional provisions related to sales and inventory that benefited gross margin. So there were onetime adjustments last year were favorable. We don't have those same things this year. If you take those aside, we're basically neutral on margin in Q2. And then, Mitch, as you think about the back half of the year, we planned our gross margin up and by far, in a way, the thing that's going to drive gross margin in the latter part of the year is the healthier inventory position that we have. And even though we continue to operate the additional outlet clearance locations, the assortment of merchandise that we'll have available within those stores to sell is a better assortment that will -- that we expect to drive a better margin that's planned in that outlook.

The next question comes from John Kernan with TD Cowen.

This is Alex Douglas on for John. So my first one was on some of the fiscal '24 -- one of the fiscal '24 gross margin puts and takes, specifically the lower inbound freight costs. I know you said something you guys have commented on, on the last couple of earnings calls. So I was just wondering, what's the timing for when you guys will start lapping those lower freight costs? And would it maybe be fair to assume that by the end of the year, that impacts either for a flat or a [ flexible ] headwind?

Yes. The more meaningful impact that we've experienced each of the last several quarters as it relates to inbound freights coming off the highs in terms of what we're seeing in inbound ocean freight charges from over a year ago. And as you look back on our last 4 quarters, our gross margin has benefited in the tune of, on average, 300 basis points per quarter. Q1 was plus 200 basis points. So as we move forward from here, beginning in the second quarter, we would expect that to be far less of a benefit. Having said that, just given lower overall demand and supply being built overall, the freight negotiations that we're in currently would indicate to us that there's continued opportunity, where we see those freight rates come down a bit more but certainly not on the order of magnitude of what we've seen over the course of the last year.

That's very helpful. And then my next question was on one of your comments on inventory turns. Just more of a clarifying question. You mentioned the goal of 3x. Is that more of a long-term goal or end of fiscal '24 goal? Just if you can help clarify that for modeling purposes, it would be very helpful.

Yes. That will improve our inventory turns over prior periods. But to get to 3, which is a good goal for the company, and other companies achieve this, we believe is attainable, but it would be more of a long-term goal.

Yes, certainly not '24. Our expectation though would be that -- and while we don't want to give a specific inventory forecast at the end of the year, there's a lot of complexities to that. Our expectation would be that we'll be able to manage inventory down year-over-year relative to where we exited out of '23. So we'll see that inventory efficiency and that improvement in the turns.

The next question comes from Paul Lejuez with Citigroup.

Curious within the U.S. DTC bricks-and-mortar business. Can you maybe talk about how much of that business is being driven by traffic versus ticket? I don't know if you could share what comps were, excluding the additional temporary clearance locations. And just one point of clarification on those. Did you say 2% of total sales in the second quarter? That's what those represented? And then how many do you plan to have in the back half?

Yes. We consider ourselves really to be a wholesale company, so we really don't release a lot of information on the KPIs around our retail business. But I can tell you, generally, the traffic numbers have been good in those markets where we're operating outlet stores. And the conversion rates have been exceptional, so the brand is in high demand. And really, the focus for us is to -- on these temporary stores to get our inventories down with high gross margins for the company overall and then to operate the suite of stores really in line with what we believe our long-term inventory liquidation plans should be as we begin and continue to operate at an efficient turn level for our inventories.

Yes. And then just a follow-up point on there. You asked about the comps. And as Tim touched on, we don't provide specific retail KPIs of our business. Having said that, in Tim's prepared remarks, we did indicate that the growth from a direct-to-consumer brick-and-mortar perspective was a combination of the temporary new stores but also included productivity gains. So you can take away from that, that it's a positive comp, and some of Tim's comments with regard to traffic and conversion help contribute towards that. And then, yes, my prior comment was with regard to our temporary clearance stores, but those represented just slightly less than 2% of consolidated net sales for the first quarter. And on a full year basis, we plan for that to be slightly greater than 2%. But again, back to my point, these are modestly profitable. And as we think out to 2025, we begin to ramp down and exit out of the lion's share of these.

Got it. And then just one follow-up. Can you just give us an update on clearing through the PFAS product, where you are in that process?

Yes. We believe that by the end of this year, we will be virtually out of PFAS products, and they -- it will hopefully be a topic that's in our rearview mirror.

Yes, we've made great progress. We feel good about being able to work through the balance of what inventory we do have. Most of which is already sold and allocated to a customer that we intend to sell through our own direct-to-consumer business. And to the degree there's excess that remains there, certainly, when you look at the clearance capability we have from an outlet standpoint, this is perfectly salable, high-quality inventory. We don't envision that being a challenge and being able to move through that profitably.

[Operator Instructions] The next question comes from Alex Perry with Bank of America.

I wanted to ask about China actually. Can you talk about what's driving the outperformance there versus a lot of your peers? Is it strong new product reception? Are you doing any distribution expansion there? And then maybe just remind us on how the margins of the China business compare to the other regions?

Sure. Well, just as a reminder, we've been doing business in China for about 20 years, operating the business directly ourselves for near 5, 6 years. And we underperformed there for many years. Even though we were first in the marketplace, we were underperforming. So when you look at our business by comparison to others, we're smaller. And the fact that we've turned the business around, it maybe has some outsized results when you compare it with the rest of the business. I would say that the bulk of the improvement is a function of just cleaning up our operations and making them much more relevant for the local market. We haven't really expanded our distribution. It's a great way, but we've been focusing on improving our monthly performance and store productivity by utilizing a number of different ways, including key retail operations as well as directly designing merchandise, which is a -- has been improved for the local market, more focused on the local market's requirements. And lastly, the management team that we have is exceptional. It's been really instrumental in making the business much better.

Yes. I'll just double down on Tim's talking points there. From a distribution standpoint, we're operating no less. In fact, we may be operating a door or 2 less than we were a year ago. So this is all coming through productivity gains within our existing store fleet and online dealers that we work with. And then one other follow-up point to your question, Alex, with regard to the margins in China. We'll provide specifics on it, but I can share that it's among the most profitable parts of our business from an overall contribution perspective. Certainly far above the overall corporate operating margin.

Perfect. That's really helpful. And then I just wanted to parse out the DTC guide a bit more. I think sort of the implied guide for DTC brick-and-mortar is for it to be up quite a bit. I guess, what's the driver there? Is that just year-over-year door count? And then I think it implies some acceleration in DTC dot-com as you move through the year. Can you maybe talk about what would be driving that?

Yes. Good question. So as it relates to the brick-and-mortar side of the business, the combination of the new stores we opened last year, our plans for this year, combined with those temporary clearance stores, we ramped up those temporary clearance stores throughout last year. So you're going to see the annualized benefit of them being open throughout this year. Case in point, we had 44 that we operated in Q1 of this year versus 8 last year, and so we'll continue to see the annualization of that -- associated with that. To a lesser degree, we are contemplating some improvement from a productivity standpoint. Keep in mind, given the excess inventory that we're flushing through the outlets for most of last year, the assortment size around color that we had available for the consumer in those stores is pretty weak for different points in time throughout last year. As we've got better assortment in the stores this year, we believe there's opportunity where we left revenue on the table last year and we can recapture that this year. So that's, by and large, the brick-and-mortar side of things. Not to mention the brick-and-mortar business, we had international and particularly in Asia and our China business that, that will drive growth as well. And then with respect to the e-commerce business, we do contemplate some degree of improvement of that in the back half of the year. And as Tim touched on, late last year, mid last year, we began making changes, particularly on columbia.com in the U.S. with regard to the degree of promotions. And so in the earlier part of the year, we were highly promotional and discounted. As you get into the latter part of the year, we essentially backed off of that toward a better representation of the brand online. So as we get in the latter part of this year, Alex, we'll be comping against that so it's more -- it's in [ a year comp ], if you will, and some of that's also reflected in our outlook. I think the other thing I would mention as well. We have been, over the course of the past few years, been making strategic digital-based investments. And so we've made enhancements to our membership program, and our digital teams are working on efforts to better personalize their site for the consumer and how we market to the consumer. So I think increasingly, as we get in the back half of this year, we're able to begin leveraging the same type of returns on some of those investments.

The next question is from Mauricio Serna with UBS.

I guess the first question, maybe could you talk about the sell-through that you've seen in the U.S. and European businesses? That will be super interesting to hear. And then on the sales guidance, just wanted to reconcile. I think you beat like the midpoint of the guidance for Q1 by about $30 million. But then, you're keeping it pretty much stable, so I wanted to just make sure to understand like what drove that outperformance? And what like -- where is that being offset in the upcoming quarters? And then just lastly, I think like if you do the math on the SG&A -- inside SG&A, relative to the previous guide, like it's a decline of about $10 million or something like that. I just wanted to understand like what is like the changes in the SG&A versus the previous guide, as you're already -- like you're keeping the savings plan.

Yes. Mauricio, I can tell you that the -- in the North America market, our sell-through is about an average year, where it is on an average year. So we're pleased with that. It looks like the liquidations through our stores and our retail partner stores are about on average. In Europe, they're slightly ahead of where they would typically be. So we're pleased with how that's performing, which looks like it's going to be a positive for us. You can carry on.

Yes, I can jump in on the other couple of questions. So first, as it relates to the Q1 revenue beat, that, Mauricio, is by and large earlier wholesale shipments. That can be days or within a couple of weeks different, so that's just a timing difference between first quarter and second quarter. And hence, you're not seeing any changes to our full year outlook. So that came out of Q2. And then with regard to SG&A, there's slight adjustments that we're making in fine-tuning the SG&A forecast where we brought that down slightly. I think it's going to be a reflection of the efficiency of what we're capturing from a cost reduction standpoint and just being able to manage the business with discipline. So nothing of specific note outside of that.

Got it. And just a very quick follow-up on the temporary outlet stores. Like essentially, you're using it this year to clear down a lot of -- there are a lot of merchandise. But how is it going to be like the approach next year as you wind them down? Is it going to be like gradual or just like, I don't know, like all out in Q1? I just wanted to understand because, I guess, like from a consumer standpoint, I don't know if that would affect like how the consumers perceive the pricing of the company's stores.

Yes. The temporary locations are really going to be timed as a function of how effective we are at liquidating the inventory. So they're month-to-month, so I would expect that we'll be gradually closing these stores over the next really year, to the point where they'll virtually all be gone. Or there may, in fact, be one or 2 or some small number that are converted to permanent stores if we like their performance. But basically, these are established to help us liquidate that cloud of inventory that we had around 18 months ago.

Okay. We have no further questions in queue. I'd like to turn the floor back to management for any closing remarks.

Well, thank you all for listening in. We're excited about the potential for the business, and the future looks very bright. We will talk to you next quarter.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.