Good morning. My name is Fran and I will be your conference operator today. At this time, I'd like to welcome everybody to the Victoria's Secret & Company Fourth Quarter 2023 Earnings Conference Call. Please be advised that today's conference is being recorded. All parties will remain in a listen-only mode until the question-and-answer session of today's call. I would now like to turn the call over to Mr. Kevin Wynk, Vice President of External Financial Reporting and Investor Relations at Victoria's Secrets & Company. Kevin, you may begin.

Thanks Fran. Good morning and welcome to Victoria's Secret & Company's fourth quarter earnings conference call for the period ending February 3, 2024. As a matter of formality, I would like to remind you that any forward-looking statements we may make today are subject to our Safe Harbor statements found in our SEC filings and in our press releases. Joining me on the call today is CEO, Martin Waters; and CFO, Tim Johnson. We are available today for up to 45 minutes to answer any questions. Certain results we discussed on the call today are adjusted results and exclude the impact of certain items described in our press release and our SEC filings. Reconciliation of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and the investor presentation posted on the investor section of our website. Thanks. And now I'll turn the call over to Martin.

Thanks, Kevin, and good morning, everyone. I want to first share my appreciation and gratitude for the hard work and dedication of our associates and partners around the world who executed our strategies, delighted our customers and delivered solid financial results in the all important holiday quarter. I'm pleased to report that fourth quarter adjusted operating income and EPS came in at the high end of our guidance. Sales in the quarter were up 3% compared to last year and were at the midpoint of our guidance. Our fourth quarter gross margin rate increased significantly compared to last year, exceeding our expectations, driven by disciplined inventory management and cost reductions related to our Transform the Foundation initiative to modernize our supply chain. Sales trends during the quarter were volatile by week, but we were encouraged by the improving quarterly sales trend in North America, driven by a sequential improvement in traffic and average unit retail in both our stores and digital channels, with traffic in our stores increasing in the fourth quarter as compared to last year. We were particularly pleased with our early holiday sales in November and during the peak days and weekends leading up to Christmas, both in stores and through our digital channels, led by strong response to our giftable merchandise assortment, improving customer experiences and marketing messages. The team strategically managed promotional activities to amplify key moments through the days weeks leading up to Christmas, and we entered the semi-annual sale period with lower inventory levels than last year, which allowed us to maximize margins during the sale period and enter the spring season with healthy inventories. Our international business continued its strong performance with system wide retail sales up more than 20% in the fourth quarter compared to last year, driven by significant growth…

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question now is from Alex Straton with Morgan Stanley. And your line is open, ma'am.

Great. Thanks a lot for taking the question. Just on the full year revenue guidance, it looks like there is an acceleration embedded after the first quarter despite compares getting harder. So can you just talk about what enables that acceleration? It sounds like it's particularly back half-weighted. And then I just have one quick follow-up.

Yes. Thanks for the question, Alex. So when we thought about the full year in relationship to first quarter and the trends that we've been seeing in the business, we made some assumptions around kind of where the domestic market share might go or the intimates market domestically might go. So as Martin mentioned in his prepared comments, the market for intimates has been down four quarters in a row now. As we look at the beginning parts of Q1 and 2024, it appears to us it's going to continue to be a challenge. We've assumed in our guidance that the domestic market for intimates will continue to be down through the spring season and will start to stabilize, not grow, but stabilize as we move into the back half of the year. So we've tried to align our forecast with that. We've tried to align our inventory and cost structure with that in mind. Additionally, as we move through the year, we recognize that many of the merchandising strategies that were articulated at the Investor Day in October will be in full flight as we move into the fall season. So things like category adjacencies that Greg spoke to, the relaunch of sport which Greg spoke to at the Investor Day. So those high-level merchandising initiatives that will put out different products and present differently in the store really are in full flight in the back half of the year. So the combination of an assumption around the stabilizing intimates market and newness in category and presentation and expansion of category, particularly as it relates to intimates and bras and sport are part of our assumptions for an improving trend, ever so slightly quarter-to-quarter as we move throughout the year. So down mid-singles, down low-singles for the year. You kind of get to flat to down low-singles the balance of year.

Great, that's super helpful. And maybe just one quick follow up, just with the headlines recently on the credit card late fee proposal or a ruling going through. Have you contemplated that in the guidance or how should we think about what that means for Victoria? Thanks a lot.

Yeah, good question. Obviously, that's very topical at the moment, but It's not a new topic. It's been out there for several months and several quarters, but does seem to be picking up a little bit of momentum lately. First, I think it's important to understand that we do not necessarily recognize any revenue on some of the fees that are being discussed or debated, but certainly our provider does, and that impacts their model. So we've got a long-standing relationship with our partner, and we'll continue to try to work with them, but I think it's important to understand that some of the fees that are being discussed do not directly go into our P&L. It's certainly something that our partner relationship will need to work on now.

Thanks a lot…

I think additionally, Alex, you might recall or others might recall, too. The launch of the non-tender or multi-tender loyalty program in the middle part of last year, obviously, was a big, big move for the company and a big opportunity to communicate and incent customers differently than maybe in the past. So we do have a couple of different ways to be working with our customers to incent traffic and encourage them to continue to shop in our stores, not just one dimension like in years gone by.

Great, thanks a lot.

Thank you. Our next question now is from Ike Boruchow with Wells Fargo. Sir, your line is open.

Hey guys, good morning. Two questions for me, maybe both for TJ. Just on the guidance, can you talk to us about the flow through on the lower sales outlook? I think when we look at the guidance, it's about low single digits, 3% below street for revenue for next fiscal year, but it's 20%, 25% below on EBIT. How should we think about that? Are there things you can look at in the cost structure? It just seems like a lot of lost EBIT on not as -- not that much lost revenue, honestly. And then the second follow-up is just on the share buyback. How opportunistic do you plan to be with that as you kind of look out for the rest of the year? Thank you.

Yes, thanks for the question, Ike. In terms of the full year guide, it's difficult for me to speak to what others might have in their model, so I'll speak to how we're thinking about it and how it compares back to the Investor Day in October. So back in October, we talked to you about a number of things that needed to happen in our business in order for the operating margin to expand and the flow through to be significant to operating income. We talked about North America sales needed to improve and needed to move into the low single digit range. That has not happened yet. We're not forecasting that to happen in the current year. So that's a bit of a headwind. We talked about the international business needed to continue to grow and it will become a larger part of our business growth in the mid-teens or higher. Clearly, we just came across the fourth quarter of 2023 where that was the case. So I'll put a check mark next to that for a job well done by the team. We said that Adore Me needed to continue to grow both in sales and profitability. They were relatively close to their targets for 2023 and we have plans for growth in 2024. So we feel good about that element of the model. We said the gross margin rate would go up, would increase both based on sales, but also based on some of the cost work that we're doing around cost of goods sold. You started to see that come through in the fourth quarter and that's embedded in our first quarter guide. So that is working as intended. The expense rate we said needed -- we needed about a 1% to 2% increase in…

Yep it does. Thanks.

Thank you both. Our next question now is from Simeon Siegel with BMO Capital Markets. And sir, your line is open.

Thanks. Hey, everyone. Good morning. Martin, how are you thinking about marketing this year? I guess last year you had a tour in Mariah, I assume some big investments that were going to be lapping. So any learnings on those spends? How you are planning marketing this year? And then just maybe a little higher level, just recognizing the industry's top line pressures are what they are. And then TJ, the point you just made about despite operating profit guide down the gross margin is showing improvement. Any changes in how you are thinking about the value of promotions and maybe balancing the focus on revenue versus profits? Thank you.

Yes, thank you, Simeon. Good questions. I’ll Start with the marketing. We plan to invest marketing dollars at about the same percentage of sales that we did in 2023. So continue to invest in the brand. Essentially that's across the five areas that we talked about at our investor day. So firstly, in terms of customer, really deeply understanding the customer, segmenting the customer file, building data and personalizing. So more and more of our spend is going through personalized marketing, particularly through social media, but also through curated online experiences through the app and on site. Continued investment in our brand focusing on relevance and brand heat, positioning around powerful, confident, sexy on her terms and then supporting product launches. Our broader category appeal beyond intimates, getting back into sport, all of those initiatives will be supported with marketing dollars. And trying to find ways to go to market that are at the intersection of brand and product and entertainment. And to some extent, the World Tour was a sort of a tiptoe back into that last year. As we hindsight it, I would say we got enormous media coverage, like 17 billion media impressions that were in excess of 80% positive, so that was good. We were part of the narrative about popular culture and that was certainly our intent and it gave us some good assets that we could use in the fourth quarter marketing. To a large extent, it met our objectives. However, I think about the way that we went to market during the fourth quarter is more of a sequence. World Tour was the start of it, we then had the My Wings, My Way campaign, which was extremely successful and very popular. And then that led into Mariah Carey, which was our best…

Thanks, guys.

Jonna Kim with TD Cowen. Ma'am, your line is open.

Thank you for taking my question. Just curious what you've seen in terms of consumer behavior, quarter to date and in terms of traffic and conversion? And then also if you can talk about key drivers behind international strength and what gives you confidence that momentum will continue throughout the year? Thank you.

Yes, on consumer behavior, I would say nothing particularly meaningfully different year-over-year. We did see spikes in traffic. So traffic to stores came back at certain peak weeks, and that put pressure on our selling organization to be ready. We did see an increase in browsing traffic, so conversion was down in stores, and some peak times. We saw that our digital business performed slightly better in the quarter than our stores business. We actually picked up some share in digital. That's partly due to us being more efficient with our marketing dollars, partly due to the enhanced digital experiences that we're seeing. So honestly, I think it's more about us than it is about the consumer behavior. So I would say, nothing particularly meaningful. As we look across the different cohorts of customers behaviors were broadly similar at the higher end of the income bracket as they were at the lower end of the income bracket. As it relates to international, the headline is really about China, where our partnership with Regina Miracle continues to go from strength to strength, working closely with that team on digital experiences, direct to consumer experiences that are working extremely well. I think we're marketing the brand very well in China and we still have a lot of growth still to come. Across the franchise network, we saw health all around the globe. We're very pleased with our partner operations, getting a store model that enables us to expand. We're going to open 70 to 90 stores this year, so a smaller footprint with a lower capital expense that enables us to get to more customers more quickly. And also embracing digital in the international space, be it operated by us or operated by our partners, a combination of both. All of those factors are driving growth. We also see some opportunity in new markets in Scandinavia, Benelux, Balkans, again both in digital and in stores. So all across the system, and I didn't mention travel retail. I should mention strength in travel retail as well. So all across the system we see opportunity to continue to grow that business. So well done to the international team. Thank you for the question.

Thank you.

Our next question now is from Dana Telsey with the Telsey Group. And ma'am, your line is open.

Hi, good morning, everyone. Martin, can you expand on the Store of the Future, how it's looking to you and any tweaks since you first introduced it? And on the PINK apparel, the path to improvement there and how you're thinking about directional change along with the marketing message with the Victoria's Secret Collective and how that's progressing and how you're utilizing that tool? Thank you.

Yes. Thanks, Dana. Let's go to PINK first and then I might ask TJ to comment on the retail, on the Store of the Future question. So in PINK, we identified more on about 15 months ago that the PINK business was under significant pressure. We didn't like the customer that we had developed in the PINK business. We needed to get back to PINK being an on-ramp for Victoria and very clearly targeting a younger consumer, a collegiate age consumer. So we set about rebuilding the brand, the identity of the brand, the categories that we operate in, the way that we go to market, everything about the brand. Because it was such a big rebuild, we decided to buy very, very conservatively and not swing for the fences. And what we found during the fourth quarter was, we had an increase in the number of customers that came into PINK, so that was good. Our brand equity improved markedly during the quarter. And the perceived worth of the brand was up a touch as well. What we didn't see was awareness, top of mind awareness. We have lost top of mind awareness with that young consumer. How do we get it back? Well, it all comes down to the product, as you know. And so leading with intimates, being strong in bodysuits, being strong in innerwear, having a really strong and compelling gift assortment, a strong sleepwear assortment, all of those things were positives in the brand. The area that we found toughest is apparel, and I mean sort of outer-based apparel. So we continue to lean into that. We continue to find new ways to go to market. We're particularly pleased with the Going Places campaign with Natalia Bryant. That looks like that it's very positive for us. So the drag has -- PINK has reduced, but we still have work to do. We're taking it steadily and buying cautiously and giving ourselves opportunity to chase. We're in a better open to buy position right now than we've been at any time in the last three or four years. So we're almost completely open to buy for fall, which we've not been in that position for a while. So really giving ourselves the opportunity to test and learn and then buy aggressively into the things that are working. TJ, do you want to take the Store of the Future comment?

Absolutely. So Dana, we continue to be very encouraged by Store of the Future results, both in this new class of stores from 2023, as well as the class of stores that was executed in 2022, which are now in their second year. So the stores that have been remodeled the longest continue to see double-digit sales increases, so that's a very strong performance, very good due for us. The stores that have most recently been renovated are more likely in the mid to high single digits and growing. Again, same narrative as what we experienced in the 2022 stores. They start out at one level and they continue to build, particularly through traffic over time. So we're very happy with the remodels and renovations. What's changed or what's different? Candidly, we've tested and gotten comfortable that we can do, I’d say, a less disruptive remodel, meaning, kind of utilizing or better utilizing some of the walls and fixtures that were in place, so there's less construction that needs to happen. So it's a less disruptive process at a lower cost. That's something that we've learned and obviously we like the lower cost element of it at the same productivity. So that's a good do. I think another big win as it relates to Store of the Future is our opportunity to consolidate stores. And what I mean by that is, bring a freestanding PINK store together with a freestanding VS store to have a combined location. As the PINK business has been challenged, obviously, that challenge is freestanding stores. And additionally, it just gives our team, Becky and her team, an opportunity to really leverage and be more productive with the teams we have in place. So bringing stores together we're seeing footage go down 20% or 30% and sales maintain. So sales per square foot are much, much higher. And then the last point that I'll mention and just underline from Martin's comments on international. Getting to a Store of the Future format, there's smaller square footage, easier to navigate, and easier to shop has really opened up the doors in a big way to expanding and increasing the number of new stores we're adding on an international basis. So it's a lower cost due for our partners and ever as productive. So a lot of key learnings. I think as I think about new stores in the Store of the Future format. We've had very good success today in off-mall, particularly in outlet centers. So as we work to decrease our mall exposure in certain locations or in certain markets where malls might be consolidating. We're finding off-mall, particularly outlet center with the new Store of the Future format is a very, very good do for us. So a lot of good learnings and very encouraging results continue in Store of the Future. Thanks.

Thank you. Our next question now is from Matthew Boss with JP Morgan and your line is open.

Great thanks. So Martin, maybe on current initiatives, could you speak to initial customer response to the recent Body by Victoria bra launch? And just larger picture, if any way to elaborate on customer trends that you saw in February and early March? And then just for TJ, what supports your view for back half improvement in the intimates category? Or what have you embedded for the promotional outlook in the first versus second half of the year?

Great. Thanks, Matt. Thanks for the question. The Body by Victoria launch was our biggest and most successful bra launch in five years. So we talked previously about Love Cloud being a very big initiative for us. The BBV launch was even bigger and even better. Invisible lift technology meets endless comfort, and very much on trend in terms of lighter, thinner memory pads. Plus we had innovation in the online segment of our bra category. We also had a minimizer bra in that assortment which is very innovative and has proved to be very successful and with relatively low level of marketing customers finding it. Within BBV we have expanded sizes and expanded skin tone coverage and we've also seen success with the new shimmer panty that supported that launch. So kind of all across the franchise, we've seen strength, and we're very pleased with the performance of it. To your point about trends, it definitely supports trends for lighter, more comfort bras. So we feel very pleased with that overall. The challenge that we have is that. while that bra launch has been very successful overall, we haven't been able to lift the overall bra business. So finding a way to unlock great launches and at the same time maintaining the level of sale across the rest of the bra franchises where we're really, really focused. To your broader question about consumer trends. I think as we look at say the Valentine's Day period what we would observe there is that. we had more success with casual flirty comfort driven merchandise than we did with sort of traditionally overt, more sophisticated, overtly sexy and provocative merchandise. Whether that's a long-term permanent trend or just a short-term remains to be seen. We feel appropriately covered on both of those dimensions. As we talked about before, an important thing for the Victoria brand is that we don't just show up as one way of being sexy, that we're sexy on her terms. And that means that we embrace all aspects of a woman's journey through life and provide better comfort and sport bras than anybody else in the market. So that's how I would respond to the customer trends. TJ?

Yes. I think additionally, Matt, your question on February and early March. In the first quarter, what -- the basis for our guidance was really based on early results here in the first five weeks of the quarter. And what we really saw was characteristics that were very similar to the fourth quarter. Put aside the extra week for a moment, the characteristics that were very similar to the fourth quarter on the top line, but we were getting there a little bit differently. So in the fourth quarter where traffic in our stores and mall traffic was much better than earlier in the year and conversion was a little bit lighter, we move into first quarter and really mall traffic and our store traffic is more challenged and it's down to last year and conversion is relatively flat. So it's producing a similar outcome on the top line. Certain of the key metrics are behaving a little bit differently here in the early part of Q1 relative to holiday. Holiday is just a much different proposition for us and for our customers. The second part or maybe third part of your question around assumption on go forward. We did make an assumption that the intimates market would continue to be difficult in spring, we made an assumption that it would stabilize, not improve, but stabilize as we move into fall. So that's a market assumption. Inside the box in terms of what we're doing differently to try to get a different outcome. As we mentioned in earlier remarks, some of the new merchandising strategies that Greg spoke to at the Investor Day will be more in full flight in the fall season. And that includes sport bras. As we've talked about on a number of occasions, the market is growing in sport, and we're under-penetrated. The market for sport, as it relates to overall bras, is in the range of about 30%, and it's not 30% in our stores. So as we move towards a similar market representation of product and go after the sport business, we think that ought to help in the intimates category as well. And that's, again, newness in the back half of the year. So there are things we're doing that hopefully change the trend in the intimates performance. And we are assuming, at some point, a stabilization. And we picked fall for that stabilization in our guidance assumptions. So when you work through the overall model what you kind of get from a top line perspective, you got down mid singles here in the first quarter and you've got down low singles for the year. So it's not as if we have a significant hockey stick, but we are assuming some level of stabilization in the back half of the year.

Great color. Best of luck.

Thanks.

Thank you. Now our next question is from Marni Shapiro with Retail Tracker. And your line is open, ma'am.

Hey, everybody. Just touching on this whole sales notion, because it sounds like the goal here for 2024 is to drive sales. Martin, could you touch on a little bit some of the new products like Fun and Flirty, like Wink, like Body by Victoria? I know they are newer this year, but are they driving traffic to the stores, and are they driving sales? And it sounds a little bit like even as some of the new stuff is selling, it's not driving the rest of the store. Do we hear that right? And then I noticed in a couple of stores that you have a Adore Me in the Victoria's Secret stores. Could you talk a little bit about the strategy there as well?

Hi, Marnie. Thank you for the question and thank you for noticing the newness that there is in store. You know, when our brand is at our best we have abundant newness. We have newness across every category. That's what drives the business. And so, over the last few years, we've been putting in place an innovation pipeline to get back to having multiple bra launches per year. BBV bra launch was probably the most important, because it's our biggest bra franchise and it was overdue and overhaul. All of our bra franchises need an overhaul. We have to be continually renewing and refreshing. The good news is, and you hinted at it, that when we do that the customer notices. So BBV, biggest and best launch we've had in over four years. The Wink bra customers notice immediate impact. The PINK seamless there, notice. The featherweight max sports bra, notice. So yes, the customer finds the new product and appreciates the new product, and our store's feedback channel tells us straight away when she sees it. The challenge is we've got to get more people into the franchise overall. So that means more relevant marketing. It means targeting our spend to get new people into the file. And the good news for us is one of the key ways that we have to do that is the loyalty program. Our loyalty program is now up to 26 million people -- over 26 million people. That enables us to be much more surgical in the way that we target so that we can point the appropriate products at the appropriate people. And that means just a more structured marketing investment, a more targeted marketing investment. So I think there's significant reasons to be careful that when we develop the new…

Great. Ans can I ask one more follow-up on bras? There is a broad trend bubbling up that bras are actually coming back in style. Push-up bras are actually coming back in style, not the way they were back in the day. But what could this mean for your brand? Because it feels like if this trend continues to bubble up, it could be pretty significant for you guys, because bras have been out of style for a couple of years now.

Yes. I mean, look, if you think about what the different trends of bras have been over the years, the one that we would like to come back the most and the strongest would be the push-up bra because we dominate that part of the market. Our share in push-up is significantly higher than it is in online or in sport or in any other aspect of bras. So yes, that would be great. I don't see that as a structural change right now in the data that I'm looking at. But from your lips to God's ears, if that is a trend, we'll be very, very well positioned to take advantage of it, Marni.

Okay, great. Thanks, guys.

Thank you. Our next question now is from [Warren Chang] (ph) with Evercore ISI. Sir, your line is open.

Hey, good morning. I was wondering if you guys could walk us through the shaping of the gross margin through the year a little bit in a little more detail. It sounds like leverage picks up a little bit in the second half. I think you said promotions will be higher in the first quarter. I know there's some moving pieces with cost savings, but maybe if you can contextualize for us the drivers this year and any call-outs on shaping.

Yeah, Warren, this is TJ. I'll do my best there. So I think at a very high level, we would expect the margin rate to be up for the year, largely driven by the cost of goods sold initiatives that we have in place as part of the Transform the Foundation. Additionally, here in the early part of the year, we continue to see favorability from a transportation standpoint. So transportation rates that are embedded in our inventory are lower year-over-year, so that's a net positive. On the flip side, as Martin mentioned, we are seeing slightly more promotional activity here in the front part of the year. So those are the key elements from a margin perspective. And then the last one would be B&O deleveraged, which is really going to follow sales. So if you think about how we just talked about the sales trend or what the embedded sales trend is for the year, I would expect us to have cost of goods sold initiative benefit throughout the majority of the year, especially the first three quarters. When we get to the fourth quarter, we start to anniversary what just happened in this most recent fourth quarter. So it's more present in the first three quarters of the year. The transportation opportunity, we still think, is available to us in first quarter and potentially second. We don't necessarily have a crystal ball in where transportation rates will go in the back half of the year. So that benefit likely impacts spring in a positive way. From a promotional standpoint, Martin mentioned, we do expect to be a little more promotional than last year, here in the first quarter. As we move through the year, if our assumptions are correct, and the intimates market stabilizes, hopefully that promotional need abates a little bit. And then as I mentioned, B&O will track where sales are going and what sales trends look like. So down mid-single digits here in the first quarter, down low single for the year, or slightly better as we move through Q2, Q3, and Q4. So that's kind of how I would think about the key drivers. I do think there's an opportunity for the margin rate just in total, obviously, to be up in the first quarter and potentially up in the second and third. We had a very strong gross margin performance in the fourth quarter that we just came across. So I think anniversarying that might be a little bit more challenging, but we'll see what we can do when we get there. So I feel very good about the gross margin opportunity, again, on lower sales based on how the teams are managing inventories in our stores and our distribution centers.

Thanks, and I also just wanted to clarify an earlier comment on the impact of the CFPB ruling. It sounds like you're saying the late fees don't flow directly into the P&L. I wanted to clarify whether they flow indirectly or are you saying it's just not an input to your credit sharing arrangement?

It's not an input to our P&L. That's something that is between our provider and the customer.

Thanks, good luck.

Yes, great. Thanks Warren. Fran, I think we have time for one more question.

Then our final today is from Mauricio Serna with UBS and your line is open.

Great, good morning. Thanks for taking my question. You just wanted to ask about the operating margin outlook. Maybe you could help us reconcile on the SG&A. As you were mentioning earlier in the call, I think you called out, first quarter it seems that SG&A dollars are up, like $10 million, $15 million year-over-year in Q1, which is roughly like 2% to 3%. Just wondering if that should be the run rate we should assume for the rest of the year, excluding the impact of the additional week on Q4. I just wanted to get more sense. If that increased, what kind of -- where is that coming from? Is it technology, marketing? What would be the building blocks for that? Thank you.

Yeah, we're not breaking down Q2, Q3, and Q4 at the line item at this point, Mauricio, so I can't really help you too much further than what we've done. Other than to say, expense hours being up slightly here in the first quarter is really being driven by two or three things. I think, first off, we're continuing to lean into investing in technology and customer experience initiatives that were talked about at the Investor Day. I think the second piece that Martin referred to a moment ago, we are seeing some timing on marketing spend principally at Adore Me business to grow the file and grow sales over the entirety of the year. We will still have some level of merit pressure across our 800 plus stores and distribution centers and 25,000 associates or more. So there are some level of merit pressures. So I think on a base of roughly $450 million or so in the prior year, being up slightly, we think is managing the business pretty tightly in a difficult environment. So I feel very good that the team is able to accomplish an SG&A leverage point in that 1% to 2% range throughout -- on an annual basis for the year.

Got it. Thank you very much.

Thanks.

Okay, thanks everyone. Appreciate the time today. Have a great day.

Thanks everybody.

Thank you. We are now concluded. Again, thank you very much for your participation. Please disconnect at this time. Have your great day.