Good afternoon, and thank you for joining us on the call today to discuss the results for our First Quarter 2022. Joining me on today’s call are Elizabeth Spaulding, CEO of Stitch Fix; and Dan Jedda, CFO. We have posted complete first quarter 2022 financial results and a press release on the IR section of our website investors.stitchfix.com. A link to the webcast of today’s conference call can also be found on the site. We would like to remind everyone that we will be making forward-looking statements on this call, which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please review our filings with the SEC for a discussion of factors that could cause the results to differ. Also note that the forward-looking statements on this call are based on information available to us as of today’s date. We disclaim any obligation to update any forward-looking statements, except as required by law. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the press release on our IR website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being webcast on our IR website. A replay of this call will be available on the website shortly. I’d now like to turn the call over to Elizabeth.

Thanks, Kenny. After the market closed today, we issued a press release with details on our quarterly performance and outlook. In Q1, we delivered top line revenue of $581 million, representing 19% year-on-year growth. We also achieved our highest gross margin ever of 47%, along with $38 million in adjusted EBITDA. We ended the quarter with 4.2 million active clients, an increase of 11% from a year ago. At the same time, our sequential net client additions were lower than prior quarters, and we are currently making changes to get this moving in the right direction. We are in a major learning phase right now as we build out our new Freestyle experience in full and we opted in Q1 to be conservative with marketing spend as we optimize our new onboarding experience and conversion. I will discuss this more ahead. Today, I will first share highlights on the quarter and our recent launch of Freestyle. Then, we’ll discuss why our approach is so highly differentiated in apparel retail. And finally, I will share our focus areas as we scale our ecosystem, a personalized shopping, styling and inspiration. First, on Q1, we’ve grown top line net revenue for Freestyle 40% year-over-year. We saw penetration increased quarter-over-quarter as we continue to see our clients leveraging both Fixes and Freestyle, demonstrating the complementarity of our growing offering. We are also capturing more purchase occasions through Freestyle and product categories that have been underrepresented in Fixes such as footwear, dresses, outerwear, accessories and sleep and loungewear. Today, these categories represent $90 billion in the U.S. women’s market alone demonstrate an opportunity ahead of us. In fact, footwear, accessories and dresses together saw an over 50% increase year-over-year in Freestyle, which is 5 times the rate of growth we see in Fixes for the…

Thanks, Elizabeth, and hello to everyone joining us on today’s call. In Q1, we generated net revenue of $581 million, representing 19% year-over-year growth. We saw continued momentum in women’s as well as in kids and in the UK, where we nearly doubled revenue when compared to the first quarter of last year. Additionally, Freestyle has grown 40% year-over-year as we ramp the offering. We grew active clients to nearly 4.2 million, an increase of 417,000 clients or 11% year-over-year. However, sequential net client additions of 15,000 were below our expectations. As Elizabeth mentioned briefly, since the full rollout of Freestyle, we have been iterating on new client acquisition and onboarding methods, and that has had an impact on fixed conversion. Also, in the first half of fiscal 2021, we launched a high dollar value referral program for new customers, which ultimately brought in clients who did not remain active as long as we had hoped. We have since ended the program. However, our net client adds were impacted by this in the first quarter, and we expect to continue to see the effects of this into the second quarter. And finally, we continue to face IDFA challenges in both historical and new channels as we evolve our marketing strategy. We expect a sequential decline in actives in Q2 and anticipate actives returning to growth in Q3. We continue to test, learn and involve our onboarding process and our marketing channels with the focus on adding new clients that engage with us over the long-term. As a result, we’re seeing healthy retention and engagement rates for new and recently acquired clients, which is driving the highest RPAC we have ever experienced. Q1 gross margin was a record 47%, representing a 220 basis point increase from the same quarter last year,…

Thank you. [Operator Instructions] We’ll take our first question from Mark Mahaney with Evercore ISI. Please go ahead.

Thanks. Two questions, please. Could you talk about the impact from Fix Preview, what impact that’s had in terms of spend per customer – the number of items, Fixes – the number of items per Fix that people are keeping. And then secondly, could you go through again the net add shortfall in the quarter? I get the IDFA part, but with the other factor that dragged down in the first quarter and it’s likely to continue in the second quarter, could you double-click on that, please? Thanks.

Hey Mark, thank you for the questions. Yes, I will answer those, and Dan, feel free to add on. So on Fix Preview, we really like what we have seen with that experience, and it’s continued as we further the rollout. So overall, we’ve seen increased average order values largely as a result of higher keep rates. Clients have an opportunity to see ahead, select a few things and then the Stylists finishes the Fix, and that’s had a positive impact on average spend. We also have seen improvements year-on-year on client retention, which we also think can be attributed to the positive experience of Fix Preview coupled with Freestyle. And then on the net adds, we pointed to really three different drivers, which we are focused on. So the first is, as both Dan and I mentioned, we’re incredibly focused on evolving the onboarding process to Stitch Fix, both for clients that are experiencing and wanting to get into Fixes as well as Freestyle. And so we see opportunity we’ve already made some adjustments as we’ve entered into Q2 and just more learning to just make it, frankly, a lot easier for new clients that want to get shopping right away to get into that experience as quickly as possible. The second that we pointed to that I think you were alluding to, Mark, is we had a – we’ve always really had a good client growth from referrals and incentive-based referrals. We tested a program last Q1 and into Q2 of last year that was offering a higher referral fee and that was something upon analysis we realized was not generating the kind of clients that we want in our ecosystem. And so we’ve ended that program, but that is having an impact not on the gross adds, but net adds as a result of delinquency. And then the third is kind of the impact of IDFA and the iOS privacy changes, which we’re continuing to learn and improve our performance within marketing, just given those changes similar to many other companies in that market.

Thank you, Elizabeth.

Next, we go to the line of Ross Sandler with Barclays. Please go ahead.

Hey guys. I guess I’ll ask about the revenue guide. So, you’ve mentioned that you’re having all these supply chain delays in getting product. And I know that inventory levels kind of dictate how many Fixes and how much Freestyle you can send out in any given day, week, month quarter. So how much of the decel is related to the client net adds that you just talked about versus not having enough inventory to then fulfill the demand that might be out there? And I guess just stepping back from these issues, how much of this do you think is kind of temporary versus pretty easily salvageable like could we get the growth rates back up in a matter of a couple of quarters? What’s your view on that? Thank you.

Yes. Thanks, Ross. Maybe I’ll start at a very high level, and then I’ll hand it over to Dan. I mean, I definitely think we think both of these are temporary, just the supply chain issues we would expect to subside over the coming year plus. And then onboarding, we’re learning a lot right now, and we’re confident we’re going to improve over the coming quarters. But with that, let me hand it to Dan to give more detail.

Yes. I’ll just add that with respect to the client actives and the impact that has, obviously, the client actives in Q1 and as we mentioned into Q2, we’ll have some downstream impact, although we do expect to return to growth in Q3 as we enter the spring season for client adds. So, we do view that as temporary, although it does have a quarter-on-quarter effect. In relation to inventory, we do have certain categories that we would like to have more inventory in, not all categories, and that does have an impact. Going into the back half of the year, we’re managing that as tightly as we can by looking at placing orders early and tracking through all the logistics. We’ll have to wait and see how that impacts our Q3 and Q4. So back – just to round this out, back to Elizabeth’s point, it’s really both, and we view them both as temporary.

Next, we go to the line of Cory Carpenter with JPMorgan.

I had two. Maybe first, I think, Elizabeth, you mentioned in the prepared remarks, dealing with short-term impacts of cannibalization. Could you just expand on that comment a bit and maybe what you’re seeing on the cannibalization side? And then just in terms of COVID, how sensitive is the business or consumer demand to COVID headlines? Are you seeing much impact at all when cases flare up? Or do you feel like we’re kind of past that at this point? Thank you.

Yes. Thanks for the question, Cory. So on the cannibalization point, I mean, I guess, I would think about that a couple of different ways. First is, we feel really good about the additive nature of Fixes together with Freestyle for clients in our ecosystem. I think the record high of $524 on RPAC is a really strong signal of the benefit of having both Freestyle and Fixes as well as the evidence of category growth rates in categories that have typically been underrepresented by Fixes like footwear. So that, we feel really good that on a long-term basis, we’re generating – over time, we’ll be generating higher LTVs with our clients. The short-term cannibalization that I was referring to is more as we think about onboarding new customers to our experience. Over time, we anticipate generating more traffic to site through both stitchfix.com, through product detail pages and new channels. But in the short term, people are making a trade-off between, do I want to try Fix? Do I want to try Freestyle? And so that’s the learning phase we’re in right now, that we see opportunity to get better and better at and really grow the overall net adds with our clients. But I think in the short-term, we anticipate some learnings over the coming quarters to really get that right. And one of the short-term adjustments we’ve already made there is, we know really high-intent clients, such as want to be styled, want to get a fix, making sure we get that signal and take them directly into that experience. But those are some of the learnings that we’ve had in the quarter plus that we’ve since open Freestyle.

Next, we go to the line of Edward Yruma with KeyBanc Capital. Please go ahead.

Hey thanks for taking the question. I guess first, back this net new customer number. How much of it is driven kind of both with the gross numbers being softer versus higher churn of the existing customer base? And I guess just stepping back, I know you identified to the onboarding processes as a particular sticking point. But it’s been kind of the same process for an extended period of time. So, I guess why is it that you think you’re starting to encounter some of these newer problems today? Is it that maybe you’re starting to exhaust the people that would be open to this type of product? Do you need to kind of reintroduce it to them? Or kind of help us understand why it’s an issue today versus maybe six months, 12 months ago? Thank you.

Yes. Thanks, Ed. So on the net adds front, it was really a combination of those two things. So both acquiring fewer clients, we opted to spend less on marketing and then also the headwind of just the temporary effect of a higher dormancy rate. On the onboarding, we really had never onboarded clients directly into Freestyle. The plurality of our clients even today still using Freestyle are Fix customers that we’ve introduced to Freestyle. We have started to add a lot of new clients, and we’ll be adding more as we improve our onboarding experience to Freestyle. But I think what we’re learning is, how do we make it as simple as possible for people to start to explore. There isn’t a logged-out exploration experience yet with Stitch Fix. And so you can land on a product detail page through Google Product Listing ad or a Facebook ad on a particular item or you can come to stitchfix.com. We did make a number of improvements before launching Freestyle where our signal capability on fashion and style preference, I would say, has improved quite a bit over the last several months. But just this idea of how do we make it actually even easier to just get shopping right away. And I think now that it’s open, we’re seeing places and opportunities to continue to test and expand that. And I did want to go back. I apologize, Cory, I missed the second part of your question on COVID. So in addition to those questions from Ed, with COVID headlines, what impact do we see, I mean I think maybe there’s two things that we have seen with that historically and all the chapters of COVID over the last year and a half. First is we tend to see new signals of what consumer product category preferences are. Typically, when we go into a shelter-in-place mode, there’s been more nesting, more comfortable close versus when we see a reopening. Like, for example, in Q1 of this year, we saw a 100% increase quarter-on-quarter on people looking for commuting-based close, so kind of going back in the office. So what we typically see is just changes in category preferences. And then I think, in general, there has been just the trend to online accelerates during these time periods of higher rates of COVID. But on the flip side, as a general category, we know that apparel, some of that shopping does go down. So net-net, it’s been a positive for us. But really, the trend spotting is now what we look for as we go through chapters of COVID.

Thank you.

We go next to the line of Erinn Murphy with Piper Sandler. Please go ahead.

Good afternoon. Two questions for me as well. First, on the men’s business, that has been weak for a couple of quarters now. Can you just talk about what you attribute that to? And then secondly, what’s the right way to think about marketing spend here in the second quarter? And then as you move back into the second half of the year? Thank you so much.

Thanks, Erinn. I can start with the men’s question, and I’ll hand it to Dan on the marketing question. Yes, I mean, overall, the UK business doubled in the quarter. Women’s and kids are both very strong. I would say men’s has been slower to reaccelerate in this COVID time period. We’re testing a lot of new things. We’ve added actually a lot of new brands. We are starting to acquire customers through that product detail page experience, a few highlights we’re excited about is we’ve seen footwear and denim is a great starting point for those clients. So, we’re learning what they’re looking for in this time period. But I think what we’ve realized is some of our messaging on Fixes and that approach was just less resonant during the COVID time period. I think we’re pretty excited about what Freestyle represents, and we’re in really test-and-learn mode to get that business accelerating once again. On the marketing side, let me hand it to Dan.

Yes, Erinn, on marketing going into Q2, which can be a weaker quarter for us, at least in the November, December time period to the holiday. We’re looking at slightly lower marketing spend probably from Q1. But for the full year, we are likely going to spend close to what we spent last year. So think of that as 9% to 11% of revenue as we ramp up in the spring, as we improve our onboarding experience and as we continue to branch out in new channels. We’re going to test, iterate and learn and scale what’s working well for us from a traffic and conversion standpoint as well as the new channels that Elizabeth alluded to, such as the SEM channels and the influencer and brand-based channels, all of which were ramping. So in total, it’s – we’re really looking at back to that 9% to 11% of marketing spend.

Next, we go to the line of Kunal Madhukar with UBS. Your line is open.

Hi, thanks for taking the questions. A couple, if I could. One, Freestyle revenue increased 40% year-over-year. UK revenue has doubled in. What does that mean for the core business, U.S. revenue? Did that increase or decline? That is one. And second is, can you talk to the effectiveness of the Algo plus Stylist plus the Preview, when 80% of the Fixes, the first Fixes have at least one accept, which means 20% don’t have any accepts and there could be more non-accepts within that 80% kind of vicinity. So, how personalized is this? How effective is the Algo, how effective is the Stylist and how effective is the Preview? Thank you.

Yes. Thanks, Kunal. I can take that, and Dan, feel free to chime in. Yes, we did mention those growth rates with Freestyle and the UK. For Freestyle is still a much smaller percentage of our business than Fixes. So the core Fix business is growing. The UK is an earlier stage market, and we love what we’re seeing there gives us a lot of confidence of global expansion. And we know, as I mentioned, with Freestyle that as we get more new customers into that experience, which we’re very early stage on that growth rate, really represents subsequent purchases by existing Freestyle customers that were already Fix customers. So I think we’re very early stage of opening up Freestyle to new customers, and we are still seeing growth in that core Fix business. On the effect of Algo plus Stylist plus Preview, we’ve mentioned the strength, and it was an earlier question on what have we seen with Fix Preview. We have seen just continued positive increase on keep rate and overall average order value, which really is a sign of a strength of that signal of being able to generate previous clients and really get the Fix experience right. For clients that don’t request specific asks within their Fix, which is about half of our clients, the first step of that Preview is actually algorithmically generated and we’ve done a lot of testing to show the power of that experience. And then we know in the second step that our Stylists had a lot of value of finishing that fix out. I think you referred to that 80% successful for Fix. And we’ve seen that to be actually a very strong indicator of the first experience and it’s a pretty high bar we set for ourselves. It both means that the client not just kept something, but they also are positively anticipating their next Fix. And we’re constantly working to improve that stat. But if you think about it, this is a pretty – a very different experience than typical shopping and yet to have that high percentage be successful is a really good sign of the power of the combination of our data science together with Stylists.

Thank you.

Next, we go to the line of Youssef Squali with Truist Securities. Your line is now open.

Thank you. Two questions for me, please. First, your fiscal year guidance implies, I think, about 10% growth in the second half. Can you maybe just parse out the mix of growth in unit versus price? Is it fair to assume that the bulk of that 10% is still going to come from price rather than unit growth or active clients growth? And then relative to that and maybe stepping back and looking at the bigger picture. If I look at your performance last quarter and then this past quarter – well, the last two quarters, it seems like your LTV to CAC has gone up pretty dramatically. So has your thinking about maybe the growth prospects of the business changed to a certain degree and therefore, you may be putting maybe more emphasis on the economics of the business on a profitability or LTV to CAC standpoint, considering how much better have gotten relative to what you thought maybe a year or two ago? Thanks.

Yes. Thanks, Youssef, for the great questions. Let me hand this to Dan.

Hi, Youssef. You’re right on the back half, it does imply around that 10% growth rate. And it is both unit and rate as well. We – as I mentioned earlier, we do expect actives to go – to grow in the back half of the year, especially as we enter into the spring season. We are continuing to see very solid order economics in terms of AOV for both Fix and Freestyle. So it is a combination of both in the back half. It’s not a rate only. We do expect units and actives to grow as well. To your second question on LTV to CAC, I think I’ll remind everyone, we’ve talked briefly in prior calls about the unit economics of both Freestyle and Fix, which are very strong. If you exclude marketing on an overall basis, we’re north of 30% in contribution profit. So very strong unit economics, very strong order economics. And we’re investing a lot in the product and the tech to continue to grow in scale. And so I would not say that we’re optimizing for profitability over growth. What we are optimizing for is an amazing, our client experience that will ultimately lead to higher growth rates and long-term free cash flow. And the unit economics that we have – the order economics, the unit economics and the overall contribution profit that we generate allows us to invest heavily in the customer experience, which will accelerate growth on a forward-looking basis.

Great. Thank you both.

We go next to Lauren Schenk with Morgan Stanley. Your line is open.

Hi, this is Nathan Feather on for Lauren Schenk. Can you just quantify the impact of supply chain disruptions in 1Q and what you’re thinking about that for that – for the remainder of fiscal 2022? And then is that supply chain impact primarily in lower inventory and therefore, revenue that you’re able to actually get in those specific categories? Or is there some impact to gross margin as well with higher rates? Thank you.

Thanks, Nathan. Let me hand both questions to Dan.

Yes. In Q1, the impacts were muted from supply chain simply because we had ordered in advance of the major delays with now our ordering is six to nine months out. That said, we are starting to see the impacts of it coming into our Q2. I made the comment on our inventory being down sequentially. We are seeing one to four week delays in inventory. And so we are seeing certain categories lighter in inventory than we like. Other categories are fully funded. And that does have the impact of Freestyle – of impacting Freestyle in the back half just because we can’t offer the full selection of the catalog in certain categories. Now we are working to manage and mitigate that to the extent possible by placing orders even earlier than we normally would and ensuring that we’re doing everything on our end to alleviate any of the supply chain constraints. But yes, it does have an impact in the back half of the year for us.

Great. Thank you.

Next up is Mark Altschwager with Baird. Your line is open.

Good afternoon. Thanks for taking my question. I guess, Elizabeth, first, just to clarify some of your earlier comments on the cannibalization. Are your learning’s that more new clients coming to Stitch Fix are opting for Freestyle versus trying their first Fix? Or are you seeing that existing clients are either canceling Fixes or changing the Fix frequency once they’re becoming more aware of the Freestyle offering?

Yes. Thanks, Mark, for the question. We’re seeing really strong metrics on retention of clients with Fixes and in general, the continued health of that business. What I was more referring to is in the onboarding process. We’re kind of introducing a little bit of paradox of choice. And for some of our clients, they probably are very high intent that just wanted Fix. And I think we acknowledge in the onboarding, we may be distracting some of those clients with shopping in Freestyle when in reality, they just want the support of a Stylist. So that’s an area of one opportunity. We’ve already made some adjustments on that. And then for those that are really interested in just personalized shopping, making sure that they get access and availability to that as quickly as possible. But I think what we found is, we expect, over time, those two things to be highly additive. But in the short term and part of what we saw in Q1 was that not being as additive as we thought it would be in the new onboarding of conversion, but not an issue to your question of once those clients are inside of our ecosystem.

Thank you. And just one more, if I may. You talked about the transformation being kind of a multiyear endeavor and sounds like there’s some bigger tech investments that you’re planning here in the near term. So my question is, how should we be thinking about the medium-term revenue growth algorithm? Do more of these multiyear investments need to be coming online in order for revenue to kind of reaccelerate back to the target ranges we were seeing prior to 2022?

Yes. Thank you for asking that. Let me start, and then I’ll hand it to Dan. I mean, first of all, I would say, we feel like we probably haven’t been as explicit as we could be on the magnitude of transformation that we’re going through. It’s a very exciting phase for the business. If you think about the first nine years of our existence, it was building this incredibly disruptive model of Fixes. And now in the last year and half, we’ve embarked on our second chapter. And it really changes so many elements of our business to build on the foundation of personalization that we’ve built. So it absolutely takes advantage of our understanding of the style graph benefiting from million people playing Style Shuffle monthly, understanding what drives it. But opening up personalized shopping has a huge set of investments for us to understand and make on making our infrastructure scalable, ensuring we’re building it to launch into new markets, taking our algorithms that were largely behind the scenes and making them highly available and client-facing. And so a lot of what we’re doing right now are making those investments. We don’t have an exact time line, but it also means building the right team. So another big focus, and you can see that in areas like SPC is we’re really growing our tech talent. We’ve added a new Chief People Officer. We’ve added a number of VPs and Directors. We’ll actually be looking for a new Chief Product Officer in next fiscal year, our current Chief Product Officer will be departing. So there’s just a lot of investments we’re making to get that right over the coming quarters. And we anticipate we’re doing this for the long game of acceleration in the future. We haven’t given a specific time frame. But Dan, I don’t know if you want to add on to that and sort of the investments that we’re making.

Yes. I will just add that obviously, there’s investments that that are shorter term that will have a bigger impact, such as our investment in increasing selection, the improvements that we’re making, the features in the onboarding experience, the product features that we’ll launch. And then as you noted, the investments that we’re making in tech and infrastructure, which are basically investments that we need to scale into new categories and new regions, those will be a bit more long-term. And so I can’t answer your question specifically on growth rates, but there’s a lot we’re doing that’s going to have an immediate payback, and there’s a lot that we’re doing for the long-term to scale into new categories, new products and new regions.

Thanks for all the detail.

And we do take our final question today from Simeon Siegel with BMO Capital Markets. Please go ahead.

[Indiscernible] off an earlier one. Did you say what are you expecting just for gross adds in the guided decline in actives next quarter? And then the same idea but a little bit zooming out, I think we used to talk about the lapsed customer database being this really large opportunity to mine for Freestyle adopters. So any update on that lapsed customer reactivation, learnings you’ve gotten from the rollout? And then just lastly, Dan, I mean, congrats on that gross margin strength. Do you want to talk about how you view gross margin opportunity from here? Maybe speak to the differences between Freestyle and Fix and then any important inventory management discrepancies between the two. Sorry, that was a lot. Thanks guys.

Thank you, Simeon. You were – I think we maybe missed the very beginning of your question. What I heard was a question on gross adds relative to net in Q2 than activating our prospects and then gross margin. Were those the three questions? Or did we miss anything in the upfront?

No, that was perfect.

Okay. Why don’t I mention the prospect opportunity and then I can let Dan chime in on the gross adds as well as the gross margins, the first and third question, so I’ll take the second. Yes, so as you’ve mentioned, we have actually millions of clients who have signed up historically with Stitch Fix but not converted to Fix. And so we are always testing on dormant reactivations with those base of clients. And now that we have Freestyle available, we’re excited to embark on greater marketing and activation of those clients. And we have seen some accelerated performance with that group, but nothing so big that we’re kind of pointing out separately, but we’re excited with what we’re seeing and see opportunity to just have more to offer to that client base with the opening up of Freestyle. So I think it still represents a somewhat untapped opportunity and as we continue to expand the client experience. The thing I would say is like clients that are in that population that are within one month, three months, six months, those are a lot more likely to be engaged than folks that went through that sign up for two years ago. So we’re really focused on the more recently engaged. The rest of those folks almost behave like pure new prospects. But it’s absolutely a segment that we have been marketing to and learning how to activate them with Freestyle in addition to Fixes. I’ll hand it to Dan for the other two questions.

Yes. I mean, on your first part on gross adds, I think it was in reference to Q2. And obviously, the Q2 is one of our weaker quarters. That said, gross adds, we do expect to be – to continue similar – in a similar vein that we saw in Q1 and then before starting to grow in Q3. And so just given the marketing channels that we have and what we’re seeing with the healthy clients that we are acquiring, gross adds will be similar in Q2 versus Q1. And the reason for the guide down in net adds is simply because of the high dollar referrals that we referenced earlier on. We are comping that as that program ran through Q2 of last year before we ended it. So that’s a very – that is a short-term comp that we have, which is the reason for the guide on nets – net actives being down quarter-on-quarter before we start to see growth again in Q3. In terms of your question on gross margin, the 47% was a very strong gross margin that we had in Q1. We do expect that gross margin to come down slightly over the next several quarters for a variety of reasons. One, we are seeing a mix into more national brands as we continue to launch, that will have a slight impact on gross margins. And we also are seeing product costs continue – start to come up, which is really across many industries for that matter, higher raw material costs, higher shipping costs. And we do expect gross margins to come down and be similar from a full year perspective as they were in 2021, which was 45%. So from a full year perspective, we see gross margins trending in that direction for the remainder of the year and for the full year.

Great. Thanks so much guys. Best of luck, for the rest of the year and happy holidays to you and your families.

Thank you.

Thanks, Simeon.

Thank you, everybody, for joining us on today’s call. We look forward to keeping you updated on our progress.

Thank you. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.