Earnings Call Transcript - BBWI Q2 2022

Operator, Operator

Good morning. My name is Madison, and I will be your conference operator today. I would like to welcome everyone to the Bath & Body Works Second Quarter 2022 Earnings Conference Call. Please note that today's conference is being recorded. I will now turn the call over to Wendy Arlin, Chief Financial Officer at Bath & Body Works. Thank you. Wendy, you may begin.

Wendy Arlin, CFO

Good morning. Welcome to the Bath & Body Works second quarter earnings conference call for the period ended July 30, 2022. As a matter of formality, any forward-looking statements we may make today are subject to our safe harbor statement found in our SEC filings and in our press releases. Joining me on the call today are Executive Chair of the Board and Interim CEO, Sarah Nash; and Brand President, Julie Rosen. All results we discuss today represent the continuing operations of the Bath & Body Works business. The results of the Victoria's Secret business have been classified as discontinued operations. I will now turn the call over to Sarah.

Sarah Nash, Interim CEO

Thanks, Wendy, and thank you, everyone, for joining the call today. I am delighted to be here speaking with you in my role as the company's interim CEO. The more time I spend in the day-to-day operations of the business, the more I appreciate the talented and experienced management team who lead this business. I have also been so impressed by the associates in our business and our customer-first focus. The time spent with our team has only reinforced for me how the company's innovation capabilities and predominantly North American supply chain provide us speed and agility that set us apart. I would also like to appreciate all our vendor partners who support us in bringing our products to our customers. First, let's start with our second quarter results. We are very pleased to share with you that the results for the second quarter exceeded our most recent expectations. This was driven by improvements in both sales and expenses in the second half of July as we closed out the quarter, which enabled us to report earnings of $0.52 per share. During the month of June and during our semiannual sale, we saw a deceleration in traffic trends as compared to our first quarter. Although our customers love our sale, they love our newness more. So as we entered July, we listened to our customers and took action to deliver the newness that they were looking for. Fans were thrilled when we launched our coveted Halloween collection early. Accessories are a large part of this collection, and customers are loving how they pair with our spooky scents for ghoulish fun. Our nimble vertical supply chain enabled us to quickly react to customer demand. We also launched our new Poppy floorset in July, which included our notable fall scents. Poppy was the most successful single fragrance launch in July across 22 forms. Now for an update on loyalty. We are truly excited that loyalty has finally arrived for Bath & Body Works. This week, we successfully launched the program to our associates with significant enthusiasm, and we can't wait to launch across the country next week on August 22 and to invite our base of approximately 60 million customers to participate. Our store associates are excited and ready to go. We have numerous incentives and fun programs in place to encourage the buzz and enrollment, and they are dressing up for the occasion. In our test markets, we saw that our loyalty customers have higher spend and retention rates than our average customer. We look forward to enrolling a significant number of our customers in the first year as well as attracting new customers, capitalizing on enthusiasm for the brand and helping drive the growth of our customer base. Now a little bit about our positioning of Bath & Body Works for the future and some changes in our organizational structure. As we look to the back half of the year, we are investing in our customer experience, looking to chase winners and taking action to better position the business to drive future growth and improve profitability. We are proactively working to combat the inflationary pressures by challenging ourselves on expense management and working within our supply chain to decrease costs where possible, all without compromising quality and our focus on the customer, something we will never do. As part of our effort to more strongly position the business, we reviewed our operating structure and saw areas where we could streamline and simplify along with enhancing our omnichannel approach. Julie Rosen now has responsibility for the entire customer experience, including design, merchandising, marketing, planning, and the channel. We are committed to becoming a truly omni- and customer-focused company. As part of these efforts, we are eliminating 130 roles from the organization. Some of those are open headcount, which we will not fill, and some will be a reduction in force, primarily of leadership positions. Chris Cramer has decided to step down from his role as Chief Operating Officer to pursue other opportunities. We wish him all the best in his next chapter. We do not plan to fill the Chief Operating Officer role, and Chris' responsibilities have been absorbed by Julie Rosen, Wendy Arlin, and Tom Mazurek. With these changes, we are confident that the organization will be more effective and efficient going forward in addition to delivering a true omni experience for our customers. By shifting areas of responsibility and changing how our teams work together across the company, we will be operating like the truly global omni brand that we are. Taken together, we expect these organizational changes and additional cost control and margin improvement actions will generate savings of approximately $30 million in the second half of 2022. We will be taking meaningful actions to address the merchandise margin, and we are focused on pricing, promotions, and assortment. We are also focused on strong expense discipline as well as providing customers the best possible omni experience. Everyone, including those departing the business, has worked very hard to position Bath & Body Works for great things in the future. I am incredibly grateful to everyone. Over time, I see exceptional opportunities to capitalize on Bath & Body Works' existing strength, including our agility, our speed, our innovation, and our customers' love of our brand. We are excited to continue to extend the brand's global potential as we make the world a brighter and happier place through the power of fragrance. With that, I turn it back to Wendy.

Wendy Arlin, CFO

Thank you, Sarah. I will be providing financial highlights, but I encourage you to review our slides, posted remarks, and press release, which each contain additional details. First, for the second quarter. As Sarah said, we exceeded our revised earnings guidance for the second quarter. We reported $0.52 per share as compared to our updated guidance of $0.40 to $0.42 per share. The increase as compared to our most recent guidance was driven primarily by improved sales in the latter half of July as well as some expense favorability. In U.S. and Canadian stores, first quarter sales were $1.16 billion, a decrease of 6% compared to last year. Sales were up $278 million compared to 2019 or 31%. Second quarter direct sales were $367 million, a decrease of 10% compared to last year. Sales were up $189 million or 106% compared to 2019. Our customers love and are continuing to take advantage of our omni-focused option of buy online, pick up in store. We ended the second quarter with BOPIS availability in more than 1,200 stores, which is 500 more stores than we had just a quarter ago. Our BOPIS sales are recognized as store sales. Our international business sales for the quarter were $90 million and increased 35% compared to last year. All franchise partners experienced growth in the quarter. Now to guidance for the remainder of the year. For the third quarter of 2022, we expect sales to decrease between mid to high single digits compared to the prior year. We are forecasting third quarter earnings from continuing operations per diluted share between $0.10 and $0.20, which includes an estimated $6 million expense for the previously announced and mentioned organizational changes. For the full year, we are forecasting sales to be down mid to high single-digits compared to 2021, in line with our most recent guidance. We are forecasting full-year earnings per share to be between $2.70 and $3. Our full-year guidance contemplates expected incremental inflationary costs totaling $230 million to $240 million and the estimated revenue deferral totaling approximately $40 million from the loyalty program rollout. Turning to the balance sheet. Total inventories ended the quarter up 33% compared to last year, in line with expectations. Finished goods units were up 13% compared to last year. The difference between dollar growth and unit growth is due primarily to inflationary pressures and product costs. Approximately one-third of the unit growth represents planned accelerated receipts to generate capacity during the third quarter peak period, enabling our agility in the back half. The balance of the unit increase relates to certain categories, including body care and soaps, where we were lean in the prior year, and a strategic investment in gifting and accessories. In summary, our guidance reflects a prudent outlook on the back half of the year as the environment remains dynamic and uncertain. We, of course, will be looking to chase sales upside, maximize margin dollars, and maintain a disciplined focus on expenses. I will now turn the call over to Julie.

Julie Rosen, Brand President

Thank you, Wendy. I'm excited as we enter the second half of the year. I'm thrilled to be leading this customer-focused organization. With merchandising, marketing, planning, and the channels all under my purview, we will be able to put the customer at the forefront of everything we do. This will accelerate our journey and provide the best omni experience for our customer. For the second quarter, we were able to deliver newness, innovation, and trends that really resonated with our customer. Our single fragrance launch, Poppy, was a notable success, our best-selling July single fragrance launch ever. The customer responded well to our packaging innovation and the collection's happy, bright fragrance. On social media, we had high levels of engagement across all platforms, including TikTok and Instagram. You might recall, we had another single fragrance launch success last quarter with Butterfly. These two launches are terrific proof points of our strategy going forward. We know how to leverage our product innovation capabilities in combination with our unique ability to introduce fragrance throughout the shop in every category: body care, home fragrance, soaps, and sanitizers. The customer clearly told us that they love our bold, cross-category offering. Soaps continued to perform well during the second quarter and benefited from the exciting July launch of our cleansing formula gel, which is formulated without parabens, sulfates, or dyes and in a PCR bottle. We will be testing aluminum soap dispensers and refill cartons this quarter as well. Men's continue to outpace our shop as our Father's Day collection of Hero, Sport, and Legend were all very successful. I've mentioned it before, but just to reiterate, men's is a huge opportunity for us. It's an $8 billion market. As a reminder, we delivered $400 million last year, and we believe we can double that business. We've had robust testing in stores right now on antiperspirant deodorant in about 600 stores, and we're very excited to roll this form to all stores in spring of '23. This is the #1 form in men's. So in order to gain share, we have to win with this form. Our Pride Collections performed well and was an opportunity for us to partner with nonprofits, including the It Gets Better Project to support the LGBTQIA+ community. Halloween, which launched in mid-July, was incredibly well received and drove both traffic in stores and sales online. Halloween is led by decor with our accessories and wallflowers categories where we saw success in our eyeball water globe and a distortion to our now-famous witch's hand. These items are prime examples of our strategic investment in gifting and accessories, where based on customer demand, we believe there's a greater opportunity. As we look forward to fall and a little teaser, we're excited to be launching a new innovative brand and exciting new product. More to come. In closing, we are navigating the current environment and taking aggressive actions to capture new opportunities and drive future growth. As always, we continue to focus on maximizing our performance by leveraging the strength of our brands, maintaining close connection to our customers, and delivering compelling products and experiences at a great value. Wendy?

Wendy Arlin, CFO

Thanks, Julie. That concludes our prepared comments. At this time, we would be happy to take any questions you may have. We plan to go until about 9:45 this morning. Madison, we are ready to go to Q&A.

Lorraine Hutchinson, Analyst

There are a lot of outsized SG&A pressures this year, seem to be particularly accelerating in the third quarter. As you look out to your longer-term plan or algorithm, can you talk about where you expect that SG&A rate to settle? And then also from a near-term perspective, just some of the larger drivers of that accelerated growth in 3Q?

Wendy Arlin, CFO

Thank you, Lorraine. Regarding SG&A, about two-thirds of our expenses relate to store selling and related costs. We aim to adjust store selling based on sales while also planning to consistently raise wages. Thus, you can expect low to mid-range increases over time as we invest in our store associates. As for the change from Q2 to Q3, this fall is crucial for our stores, and we're choosing to invest in our associates by providing a peak premium starting in Q3. The shift in store selling from Q2 to Q3 reflects our commitment to this investment during an important period. The second largest component of SG&A is home office expenses. In comparing Q2 and Q3, it's important to note that in Q2 of last year, we had about $20 million in corporate and legal-related expenses linked to pre-spin costs that were not present this year, which accounts for some of the difference. Additionally, due to business performance in the first half of the year, our bonus expense was minimal in Q2, but for Q3, our models currently suggest a standard payout. Another consideration for the Q2 to Q3 difference involves our technology expenses, which we expect to be more heavily weighted in the latter half of the year as we enhance our separation efforts. About one-third of this incremental spending occurred in the first half of the year, with the remaining two-thirds planned for the second half. Lastly, regarding future SG&A, our marketing expense typically aims to range between 2% to 3% of sales, depending on the time frame.

Jesse Sobelson, Analyst

This is Jesse Sobelson on for Ike. We noticed that 2Q gross margins were under pressure but remained above 2019 levels, while the second half gross margin guide implies a material decline versus 2019. This is despite similar AUR, mid-single-digit decline embedded in the plan and we're looking at slightly less inflation. Is this just conservatism? Or I guess, could you guys just kind of help us with the pieces there and understand the moving parts, please?

Wendy Arlin, CFO

Yes. Thanks, Jesse. So yes, as you've seen in our models, we do have a deceleration in the gross profit when you compare Q3 to Q2. And also, as you point out, our AUR assumption for Q3 and Q2 is about the same, so down mid-single digits in Q3. So in terms of what accounts for the drivers, about two-thirds of the sequential change, what you're asking about, is due to the merch margin rate. Lots of items in the merch margin rate. But the item that I would point out to be the most significant driver is the impact of the loyalty program, which we're super excited to launch next week. So as we've talked about, when we launch it and our customers accumulate points, we do book a revenue deferral related to the points accumulation. And as we're rolling that nationwide next week, we will have an impact in 3Q that you didn't see in Q2. Then I would say though after that merch margin is about two-thirds, the balance is B&O expense deleverage, also a lot of things in the details there. A couple of things I would call out is you've got a little bit of deleverage on the negative sales assumption. Our third-quarter right now is planned to be a little bit smaller than the second quarter. And then the second thing is, consistent with SG&A, our buying organization is in gross profit in that line in the P&L. And consistent with the SG&A part of the organization, we had no bonus in Q2, and we are planning a par, so to speak, in Q3. So those are the key differences.

Simeon Siegel, Analyst

So at this point, I guess, what is the breakdown between price versus units in the 45% sales growth versus '19? And then you're referencing it, I mean, you guys have a really nice cross-section of the U.S. population. So how divergent are the results that you're seeing between high versus low income? And then how are you thinking about approaching the balance between revenues with discounts versus maintaining the higher margin and potentially giving up some discount-driven volume?

Wendy Arlin, CFO

Yes. Why don't we go to Julie for that question and I can add some color at the end.

Julie Rosen, Brand President

Simeon, can you just say the first part of your question again?

Simeon Siegel, Analyst

Sure. So I think price versus units versus prepandemic, I think you said sales were up 45%. So just trying to think through the AUR that you've been able to get and retain and how you're thinking about that going forward?

Wendy Arlin, CFO

Yes, I can address that, and then Julie can add further details. In terms of Average Unit Retail, we've consistently observed AURs that are about 20% higher compared to 2019, which indicates that we are experiencing price growth. The remainder of the increase is attributed to unit sales. Now, Julie, I’ll let you take it from here regarding the income question.

Julie Rosen, Brand President

Yes. So we are seeing pressure, Simeon, in our lower-income customers spending less. That is where the pressure is, which is why we are diligently working and doing aggressive testing to figure out what is the sweet spot. That being said, it is very clear to us that our customer comes to us for fashion trend and newness. And if they love it, they're going to buy it. So there are a lot of pressures out there macroeconomically, and we're just trying to balance all of those things and figure out the sweet spot and ensure that we're delivering enough newness to capture their share of wallet.

Wendy Arlin, CFO

Does that cover all your questions, Simeon?

Alexandra Straton, Analyst

Congrats on a nice finish to the quarter. If August month-to-date is trending in line with the down mid-single-digit to high single-digit third quarter guidance, does that mean you've seen a step down from the second half of July performance? I just want to make sure I'm understanding that correctly. And if I am, kind of what are the drivers of that dynamic?

Wendy Arlin, CFO

Sure. So I would say that our overall business trends so far in the month of August is generally consistent with what we saw in July. So we were generally seeing consistent trends. Keep in mind, though, we're only two weeks in, in the month of August. We've got a lot of quarter left and a lot of key weekends and events in front of us. And we think that we're well-positioned, but we also think that our guidance is prudent given the quarter to come. So more to come.

Leah Jordan, Analyst

This is Leah Jordan on for Kate. Our question is around the improvement opportunities for the merch margin. What are you primarily focused on in the near term? And how should we think about any timing impacts? Also, the review that you're undertaking seems fairly comprehensive. Should we anticipate more initiatives as the year goes on?

Wendy Arlin, CFO

Great. I'll start and then hand it over to Julie for further insights. Our current priority is to succeed in the fall and during the holiday season. We are also working on expanding our merchandise margin. Throughout our comprehensive review, we see opportunities for further improvements in 2023 and beyond, rather than just in the short term. We are analyzing various aspects such as pricing and promotions, and we hope to achieve some decrease in our cost base. We have excellent partnerships with our vendors and are focusing on value engineering. Numerous initiatives aimed at enhancing the merchandise margin rate are currently in progress, and we expect many of these to be realized in 2023. Julie?

Julie Rosen, Brand President

Yes. Maybe I can add some color there as well. So obviously, we are constantly evaluating our ticket prices as inflationary and macroeconomic costing pressures continue. So we are taking a very targeted approach to both ticket pricing and our multiple unit pricing. We have taken a good, better, best approach in many of our categories, which we haven't necessarily had in the past, as opposed to a single price point for each form. We have also increased prices in body care, where we have reformulated in better-for-you formula. And we have also gone back and taken up some of our multiple pricing. So for instance, in soaps, we've gone from five for $20 to five for $25. We've also raised our wallflower multiple pricing for five for $25. And I know you all know, but we continue to have a robust testing agenda where we're constantly testing alternate pricing ideas to see really where we can garner more gross margin dollars. And we're looking at different ways to build the basket with pairings of different multiples. So it's a multipronged approach. We test and learn and apply.

Olivia Tong Cheang, Analyst

I want to ask you a question about the reduction in management. Obviously, based on the anticipated savings from the role reduction, it looks like fairly senior positions. So could you discuss if there are any specific functions or categories and whether it suggests any change in terms of your strategic initiatives?

Wendy Arlin, CFO

Thanks, Olivia. Yes. As we mentioned and as you have pointed out, our focus was primarily on leadership positions. First of all, we've been a public company for a year. So over the last year, we've been settling in as a public company and thinking about how to run the organization and what makes sense. And we saw some opportunities to really simplify and get synergies across the organization in a way that really benefits us being focused as an omni retailer. So you heard in our opening remarks that we are really emphasizing that. And we did a lot of combining teams, in particular, under Julie's leadership to really think about the customer as one customer and to think about us using one voice to the customer and thinking about managing inventory across all of our channels consistently. So it's truly a reorganization to focus us to be nimble for the future and continue to grow as an omni-focused organization.

Stephanie Schiller Wissink, Analyst

Hopefully, these will be two quick ones, but I wanted to just hear a little bit about your customer file size, the 60 million that you quoted, how that's changed over the last couple of years. And Wendy, I think you mentioned that the $6 million onetime cost for the restructuring is included in your EPS guidance. I just wanted to clarify that, that your EPS is GAAP and not non-GAAP. Would you like us to back that out or keep that in the EPS estimate for the third quarter?

Wendy Arlin, CFO

Okay. Stephanie, I will address the second part first and then turn to Julie regarding the customer question. The $6 million is part of our guidance. We decided not to exclude it based on materiality. So, it is included in the guidance range of $0.10 to $0.20 for Q3. Julie, would you like to discuss the customer aspect a bit?

Julie Rosen, Brand President

Yes. I mean, as we all know, we had explosive growth in our customer file during the pandemic. So in 2019, we had about 53 million customers, and we got upwards of 60 million during the pandemic. And I am thrilled to say that we have lost very few customers. So we feel that while we grew our customer base, they're still coming back. They still love us. And with the addition of this loyalty program that we'll be launching next Monday, live, I think that the opportunity to get the 60 million enrolled in the program and incredibly loyal will only reap great benefits for us in the back half.

Alec Legg, Analyst

Alec Legg on for Susan. On the trends throughout the quarter, can you talk about store traffic and online traffic and how that trended throughout the quarter in addition to the conversion rate as you rolled out newness and saw gas prices coming down?

Wendy Arlin, CFO

The second quarter presented an interesting situation. We began in May, maintaining our initial guidance for the quarter, and performance aligned with our expectations. However, in early to mid-June, we observed a decline in store traffic, which continued into early July. In response, we initiated a semiannual sale, a crucial event for managing our inventory. This allowed us to effectively clear older units through the sale. Moving into July, we recognized that customers were likely looking for new items. Knowing our customers appreciate new products, we launched a new fragrance, Poppy, and brought forward our Halloween collection. These fresh offerings, combined with other new displays, improved our performance in July compared to the semiannual sale period. That summarizes the quarter. Julie, do you have any additional insights?

Julie Rosen, Brand President

Yes. I think that what we really saw was that the customer got a little bit tired of the semiannual sale. And while they are slightly price-conscious, they still want fashion trend and newness, and we deliver that for them. So we've taken a look at our flow calendar through the rest of the quarter and the year. And we will be, as usual, delivering new themes, single fragrance launches and ideas every four to six weeks, but you will see other drops basically every week just to get that excitement and to garner more traffic.

Matthew Boss, Analyst

So Julie, could you just maybe elaborate on the demand that you're seeing across categories in August, maybe early customer response to your fall assortment? And what do you see as the constraint to traffic that you're seeing versus the first quarter? And then, Wendy, I guess, maybe just high level. On AUR growth relative to 2019, what do you believe is the fair number to hold on to over time relative to the 20% growth that we entered the year at?

Wendy Arlin, CFO

Great. We'll go to Julie first.

Julie Rosen, Brand President

Yes. So I mean I think that traffic was a bit up and down in the quarter. I think that where we saw traffic softening, as we have said, is during our semiannual sale. I think that we have always put a semiannual sale that was anywhere from 28 to 35 days. This sale, quite frankly, was 30 days, so not longer than in past, but the customer got tired of it. So what is happening is the mindset is shifting. And they're sort of moving on to new ideas and new items sooner. The beauty of our agile production capability is that we were able to move Halloween up and really move fall up and give the customer what they wanted about a week early. So we're finding that when we have the right deal, the right product, fashion trend and newness, we get the spikes in traffic. Which is why, as I just mentioned, we're going back and looking at how we're delivering all of our drops to ensure that we're garnering the most traffic possible as well as offering the right deals that hit the right mindset.

Wendy Arlin, CFO

Great. Thanks, Julie. And Matt, to the second part of your question, I would say it's upper teens to 20. It's generally consistent with what we've been saying in terms of what number you should look to for AUR growth.

Dana Telsey, Analyst

As you moved up the introduction of the Halloween collection that seems to have garnered a lot of interest, how are you thinking about the cadence of other collections moving forward in terms of timing? And then as you think about promotions and the cadence of promotions and the depth of promotions relative to last year, how are you planning it and how are you thinking about the AUR as a result of that?

Julie Rosen, Brand President

It's nice to hear your voice. So yes, we did move Halloween up a week. The thing to note is this year, we had planned two drops of Halloween. So we had the opportunity after we pulled the first drop up to then follow through with the second drop. So that was very successful. As I mentioned, we will be delivering every couple of weeks a new idea, whether it's a cross-category single fragrance launch or whether we deliver our best in fall with our favorite fall scent, an early Christmas preview. So we have a lot of ideas every couple of weeks to spark newness and excitement. So we are not worried about that because as you know, we're about to go into Q4, which is our largest quarter, as Wendy likes to say, the Super Bowl of our...

Wendy Arlin, CFO

Of quarters.

Julie Rosen, Brand President

And we will have our Christmas preview late in September and then in October, really go out full on with Christmas. So we feel like we're covered with many, not only great themes and ideas in single fragrance launches, but the scents and the olfactive spaces that our customers love from us and expect to find.

Wendy Arlin, CFO

For Q3, we anticipate our Average Unit Retails to decline by mid-single digits, which aligns with our performance in Q2. In Q4, we expect this to improve somewhat due to significant promotional events, such as Candle Day, which are crucial for us. During these major events and busy weeks, we do not plan to lower Average Unit Retails much in those promotions. Therefore, while we expect a slight improvement in Q4, we are projecting AURs to decrease by mid-single digits in Q3.

Jungwon Kim, Analyst

Just wanted to delve deferring to the promotion strategy. Do you think it's up versus 2019? And maybe if there are things that change now versus 2019. So we'd love to hear more color on your promo as you think about the back half.

Wendy Arlin, CFO

Yes. I'll begin and then Julie can provide additional comments. Although we plan to be more promotional compared to last year, our promotional levels in the second half will still be significantly lower than they were before the pandemic. Our strategy continues to be less aggressive than during that previous period.

Julie Rosen, Brand President

Yes. I mean I think from a promotional situation, the thing to focus on is that based on prepandemic, our AUR is up. So we are not more promotional than we were then. We also have e-mail exclusives that we do, and those are down. So we are winning on key event weekends, and that's really what we're focusing on, how big can big be, and how do we win even bigger.

Korinne Wolfmeyer, Analyst

So I'd like to touch a bit on the BOPIS capabilities. I mean you mentioned that's taking about 10% out of the digital demand. So I'm putting that back in, it does seem like maybe digital was a bit stronger than the numbers suggest. One, is that the correct way to be thinking about that? And then going forward, should we expect that kind of 10% to stay consistent? Or are you expecting that to kind of increase over time as you roll it out to more stores?

Wendy Arlin, CFO

Thank you for your question. We're really excited to launch this capability. Currently, we are present in nearly every store in the U.S. that we planned to be, and we've received very positive feedback from our customers. They appreciate this capability, and often our store associates are successful in encouraging them to purchase additional items when they visit the store. We believe that BOPIS is not only an excellent initiative for our customers but also beneficial for us, as it allows them to experience the store, and our associates excel at upselling. The impact is evident, as we've noticed some customers who previously engaged with us online are now shifting to in-store purchases. It's difficult to predict exactly how this will evolve. We just expanded to 1,200 stores this quarter, which we believe is right for our customers and our brand. Over time, we will see how this develops in terms of percentages. Korinne, thank you for your question. That concludes our call this morning. We appreciate your ongoing interest in Bath & Body Works. Thank you.

Operator, Operator

That concludes today's conference. Thank you for participating. You may disconnect at this time.