Canada Goose Holdings Inc. Q4 FY2022 Earnings Call

Good day, and thank you for standing by. Welcome to the Canada Goose Q4 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Amy Schwalm. Please go ahead.

Thank you, operator and good morning, everyone. With me are Dani Reiss, Chairman and CEO; Jonathan Sinclair, EVP and CFO; and Carrie Baker, President. Our call today, including the Q&A portion contains forward-looking statements. Each forward-looking statement, including our financial outlook is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Certain material factors and assumptions were considered and applied in making these forward-looking statements. Additional information regarding these forward-looking statements, factors and assumptions is available in our earnings press release issued this morning, as well as the Risk Factors section of our most recent Annual Report filed with the securities regulators. These documents are also available on the Investor Relations section of our website. The forward-looking statements made on this call speak only as of today and we undertake no obligation to update or revise them. Lastly, our commentary includes certain non-IFRS financial measures, which are reconciled at the end of our earnings press release. With that, I will turn the call over to Dani.

Thank you, Amy, and good morning, everyone. Earlier, we released our Q4 and fiscal 2022 results, as well as our outlook for 2023. Despite the challenges in today's environment, I'm proud that we are closing the year with record sales, breaking the $1 billion mark for the first time. We are also ending fiscal 2022 with confidence and conviction in our brand, our business, and our team. It's against this backdrop that I will share our plans to achieve an even stronger outlook for the year ahead. We are excited about the key investments and progress we have made to significantly accelerate earnings growth in fiscal 2023. We expect to generate between 19% and 21% EBIT margins and revenue between $1.3 billion and $1.4 billion. This translates to EPS growth in the range of 47% to 74%. Turning to our results from the fourth quarter. From a geographic perspective, our retail performance in North America was the biggest driver of growth. Consumer confidence remains strong, and shoppers have returned to pre-pandemic trends. We saw a similar environment in the U.K., which drove an immediate increase. In the Rest of Europe, we saw softer local and international traffic trends. APAC was the only region that declined due to ongoing COVID restrictions, including store closures in Mainland China. The Chinese government has a strong track record of being very proactive in containing COVID outbreaks. We do not expect the prevailing circumstances to have a meaningful impact on results in our busiest season, which is reflected in our outlook. Recently, many peers have pointed to continued production and supply chain challenges, as well as logistical delays. This was not a factor for us in the quarter, nor do we expect it to affect the year ahead. We continue to be uniquely insulated against supply chain issues due to our Canadian manufacturing, which accounted for 84% of our total units in calendar 2021. As I mentioned earlier, we marked a revenue milestone in fiscal 2022. We also laid the foundation to achieve our fiscal 2023 targets on our way to the next $1 billion in sales. I would like to recap some of our announcements from this past quarter. Last month, Carrie Baker, a Canada Goose veteran and previously President of North America, was appointed President, Canada Goose. This new role consolidates our commercial leadership team and marketing under Carrie. I am so excited to see all that Carrie is going to accomplish given her incredible track record. In March, we announced the appointment of Belinda Wong, Chairman of Starbucks China and Executive Vice President, Starbucks, to our Board of Directors. Belinda has more than 20 years of extensive experience in China and the Asia Pacific region, and I'm thrilled to have her on our Board. And finally, we are very excited about recent developments to accelerate our business in two key markets in Asia-Pacific, building on the successful foundation that we have built in Mainland China over the past four years. Recently, we signed a distribution agreement with Lotte Group to significantly grow our South Korea business. This is a major untapped market in terms of both size and influence. This agreement allows us to further develop our brand in the country's best locations while providing a clear longer-term path to retail expansion and direct participation. As well, in March, we announced Canada Goose Japan, a joint venture with our longstanding partner, Sazaby League. Japan is the second biggest market in Asia and one of the most influential luxury markets in the world. This joint venture will have an immediate impact on revenue and gross profit. We expect Canada Goose Japan to double its revenue contribution this year versus last year and at a higher gross profit per unit. This new venture will accelerate our direct-to-consumer expansion in Japan, and I look forward to updating you on our progress. This leads me to the first tenet of our long-term growth strategy, driving our direct-to-consumer mix higher. In 2022, DTC revenue represented more than two-thirds of our business at $740 million. I am incredibly proud of our trajectory, having only opened our first e-commerce site less than seven years ago. Not only is our DTC strategy driving revenue growth, but it is driving the most profitable growth for us. In 2022, our DTC gross margins were 76%, with contribution margin in the high 40s. In fiscal '23, we plan to continue to expand our retail network, adding up to 13 stores globally. We also plan to strengthen our e-commerce business by expanding our omni-channel operations to the UK, as well as launching a new e-commerce site in Europe. Not only does our direct-to-consumer business allow us to reach consumers when and where they want to shop, it allows us to build deeper relationships and gain even stronger insights. Penny Brook, our Chief Marketing Officer, is now also leading consumer experience, and there couldn't be a more passionate person to take this on. Putting the customer at the heart of every decision we make has long been a top priority for us. Earlier this month, Forbes Magazine named Canada Goose one of the most consumer-centric brands in the world, and we could not be prouder. I look forward to the new heights we'll reach under Penny's leadership. Category expansion is another key driver of our growth strategy. We are seeing tremendous success from our year-round non-parka offering. In 2022, we saw our non-parka revenue grow by more than 70%, driven in large part by our lightweight down vests and apparel. This represents a huge opportunity for us, and I'm thrilled at the success we're seeing across such a large assortment of product categories. We also believe our products will reflect our commitment to protecting the planet. That commitment starts with the material we choose, using more recycled, organic, and other responsibly sourced inputs. Our Kind Fleece is an ultra-soft breathable fabric made with recycled and bio-based materials. This new fleece is one of our latest products that reflects our human nature platform to keep the planet cold and the people on it warm. Being a leader in sustainability is another key focus for Canada Goose. As part of that commitment, we recently issued our third Annual ESG Report. We continue to make important progress on our materials and operational goals. Most recently, we became Responsible Down-Certified as a brand and as a manufacturer. On the operations front, we continue to track well against our goal of net zero carbon emissions by 2025. In January 2022, I was also very proud to sign Canada Goose to the United Nations Global Compact. We remain absolutely committed to respecting and protecting the fundamental human rights of those directly or indirectly involved in our company and supporting inclusive, safe, and healthy working conditions. Before I turn it over to Jonathan to discuss the results and outlook in more detail, I want to thank the global Canada Goose team for all their efforts in building an even stronger foundation for future success. Our brand relevance and pricing power enable us to move with confidence in pursuit of the tremendous growth opportunities in front of us. Our confidence is reflected not only in our guidance but also in our repurchase of over CAD250 million in shares this past year. We look forward to an unprecedented year ahead and updating you along the way. And now, I'll hand it over to Jonathan, who will discuss our results in greater detail.

Thank you, Dani, and good morning, everyone. With fiscal '22 now completed, we're pleased with our momentum and feel optimistic about the year ahead. Despite new disruptions in certain markets, we see strong trends in our business. Consumer behavior and retail traffic are returning to normal in many areas, and our supply chain has become an even greater advantage. Carrying this momentum into the upcoming year, we have many significant opportunities for growth and profitability. I'll start by reviewing the fourth quarter, which ended on April 3, 2022, a week later than the previous year’s period, which impacts our seasonality. Therefore, we've also provided figures using the same trading weeks for both periods to better reflect our trend as we move into fiscal 2023. On a reported basis, total revenue in Q4 grew by 7%, with DTC growth at 8% and wholesale growth at 4%. Using the same trading weeks, total revenue would have increased by 24%, with DTC growth of 28% and wholesale growth of 8%. It's encouraging to see our algorithm work effectively in these times, with both DTC and wholesale gross margins improving compared to last year, arriving at 76.1% and 33.6%, respectively. Adjusted EBIT margin grew to 5.6%, and adjusted EPS was $0.04. For the full year, both metrics reached the upper end of our expectations, with adjusted EBIT margin at 15.9% and adjusted earnings per share at $1.09. Looking ahead to fiscal 2023, our key highlights are the range of opportunities before us and the strength of our operations. We have numerous avenues for growth and margin expansion, characterized by high supply certainty and limited pressures. We forecast total revenue between $1.3 billion and $1.4 billion. In DTC, we anticipate low to high-teens comparable sales growth alongside expansion of our retail network and omni-channel capabilities. As we move forward in DTC, like-for-like growth will be the main driver, and we will keep you updated as the year progresses. This channel is expected to account for 70% to 73% of total revenue this year. In wholesale, we project around a 6% revenue increase as we continue our strategy of controlled complementary growth. A significant new factor is our joint venture with Sazaby League in Japan, which we expect to contribute $60 million to $65 million in revenue in fiscal 2023. The revenue will come later in the year, as shipments to the JV will no longer be recorded as revenue upon shipment. This transition allows us to build a more substantial and profitable business in Japan. We anticipate an immediate increase in revenue per unit from our existing sales in this market, backed by an enhanced economic model for DTC expansion, partnered with local expertise. Another vital part of our outlook is product expansion, with non-parka revenue growing by 70% in fiscal 2022. Alongside growth in our core offerings, consumers are increasingly embracing our emerging categories, which we predict will continue to outpace the overall business growth. Our confidence stems from having a reliable supply in a fluctuating external environment. While others are just beginning to ramp up production, we have consistently maintained our production levels. In our last calendar year, 84% of our units were produced in Canada, followed by 14% in Europe, giving us a unique geographic advantage. We do not face significant supply disruptions and are entering the new year with considerable inventory flexibility. Moving on from revenue, fiscal 2023 is set to mark a significant boost in profitability with an adjusted EBIT margin forecasted between 19.2% and 20.7%. This is supported by three main factors: gross margin expansion, lower SG&A growth, and enhanced retail productivity. We anticipate consolidated gross margins to be in the high-60s percentage of total revenue, driven by a shift in the DTC mix. At the channel level, we expect to maintain our typical margins while investing in early-stage categories. Our history of price increases exceeding cost inflation remains strong, owing to the quality and functional value of our products. As a vertically integrated manufacturer with high average unit retail prices, we experience fewer inflationary pressures. With the easing of restrictions in our manufacturing facilities, output is increasing, and overhead absorption is improving, providing an additional boost. Specifically for wholesale gross margins, we will have a one-time increase from transitioning our Japanese business from a distributor market to a joint venture, eliminating significantly lower margins from international distributor sales. The second factor is lower growth in SG&A. Fiscal 2022 saw substantial upfront investments, including our footwear launch, along with increased demand creation and operational spending. We expect lower SG&A growth in fiscal 2023. The final factor is retail productivity, as we anticipate improved traffic alongside fewer closures and restrictions, resulting in greater store profitability. In unrestricted markets, we have observed a strong rebound from local consumers and early signs of increased international traffic from North American and European customers. Our margin outlook does not hinge on a complete recovery of international traffic or the return of Chinese travelers. Overall, we project adjusted EPS will range from $1.60 to $1.90, reflecting a growth of 47% to 74%. This is entirely organic, as our shares count remains unchanged without any share buyback activities planned. Before concluding, I want to briefly review our preliminary outlook for the first quarter. We expect total revenue to be between $60 million and $65 million. In our smallest quarter seasonally, this indicates a lower growth rate compared to our annual forecast for two reasons. One is the ongoing closures and restrictions in Mainland China, where four stores are shut, severely impacting traffic at those open. E-commerce logistics have also been disrupted. While consumer focus in this market is shifting from discretionary spending, we believe this is a temporary challenge in a period typically less impactful for trading. Demand for our brand remains strong, and our past experiences show how quickly Mainland China rebounds from disruptions. We anticipate a return to normal trading levels during the peak selling season. The other aspect is the conversion of our Japanese business to a joint venture, which shifts revenue recognition timing from shipment to a wholesale partner. Q1 previously represented a significant shipment window to this partner annually. Hence, we expect slightly negative wholesale revenue growth solely due to this change. For adjusted EBIT, we project a loss between $80 million and $75 million, corresponding to an adjusted loss per share of $0.64 to $0.60. In summary, we have navigated a challenging year and emerged stronger. We are looking ahead with enthusiasm as we see accelerating growth in markets and rising consumer demand for our emerging product categories. Additionally, we expect improvements in retail productivity, gross margin expansion, and reduced SG&A growth to enhance our bottom line. All of this is supported by our unique supply chain, allowing us to maintain product availability and effectively manage in a more inflationary landscape. We are very optimistic about the upcoming year and confident our strong momentum will make fiscal '23 a remarkable year. I will now hand it over to the operator for Q&A.

Our first question comes from the line of Ike Boruchow from Wells Fargo. Your line is now open.

Hey, good morning, everyone. First, just congrats to Carrie, kind of curious, stepping into the new role, what your biggest priorities are to take the brand to the next level? And then maybe, Jonathan, just more specifically on the outlook. Thank you so much for all the quarterly cadence, that’s helpful. But the comment on Mainland China, can you just expand on how we should think about the bridge from 2Q to 3Q? You're talking about returning to regular trading by peak season. So does that mean you're assuming continued business under pressure in the second quarter? And when you say returning to normal, I think, something along those lines for peak season, is that relative to pre-COVID levels? Just trying to understand exactly what is embedded for China during your peak season sales? Thank you.

Good morning, Ike. Thanks for that. So I'm very excited to take on the new role and to work alongside Dani as day-to-day we run global commercial operations, which will give him more bandwidth for long-term strategic initiatives. So when I think about all of the commercial opportunities in front of us, my biggest priority is to make sure that we execute with excellence, and that means being purposeful and disciplined about creating impact in everything we do. So both from a consumer perspective but also from a financial perspective. And the great news is we have an incredible brand, a strong business model, and an incredible team to bring that all to fruition.

Okay. Let me discuss China briefly. We have observed a downturn in Mainland China during Q4, and currently, there are closures and disruptions affecting this quarter. We anticipate a gradual recovery as China begins to open up again. Historically, we have experienced similar disruptions that have typically been short-lived, and Mainland China has shown a strong ability to rebound quickly. Therefore, we expect Q1 to be significantly impacted, but we anticipate gradual improvement in Q2, leading to a return to normal business levels in Q3.

Thank you. Our next question comes from the line of Oliver Chen from Cowen. Your line is now open.

Hi, good morning. This is Katy on for Oliver. Thanks so much for taking our question. I would love to know a little bit more about the wholesale channel and how that's sort of progressing versus your expectations? And sort of what are you seeing within the wholesale channel? And is there any sort of deterioration on the consumer front there? Or is it just about in line with your DTC channel? Thank you so much.

Katy, thank you for your question. Our wholesale channel is progressing as expected and very well. Last year, our sell-throughs at wholesale were very, very strong and we're happy with that this year. Our wholesale order book has increased as expected and remains in single digits, and we will continue to strategically work with wholesalers to enhance the valuable ramp. Consumers have been responding very well, and consumer behavior in the United States has returned to pre-pandemic levels, and the U.S. is absolutely much harder and we're really excited to see that both on our own channel and through wholesale channels.

I'd add that the wholesale assumptions behind our guidance are obviously pounded on our order book, and so we feel we're in very good shape.

Thank you. Our next question comes from the line of Jonathan Komp from Baird. Your line is now open.

Yes. Hi, good morning. Thank you. I want to ask about the initial revenue growth guidance for 18% to 27% growth. Could you maybe just help bridge the difference compared to your typical thinking? I think pre-COVID several years ago, you had three-year targets closer to the mid to high-teens. So maybe if you could reconcile the difference this year? And then on the earnings growth going forward, given that the EBIT margin still is quite a bit below peak, do you think there could be several years ahead where you see faster than the typical, I think, it was 20% earnings growth that you used to outline?

So taking those in sequence, as far as the revenue growth is concerned, we're looking at a healthy level of comp growth underpinning how we see the business developing. We're very clear about our pricing power. We're very clear that, that's going to enable us to see some components that together with some unit growth as well in our like-for-like stores alongside, of course, the development of the retail network. We've already talked about wholesale in that context. We obviously have shown a range; life has its uncertainties at the moment, but we feel pretty good about this level of growth in this environment, and we see this as very consistent with our longer-term ambitions. On earnings, clearly, getting ourselves back to the 20% mark and beyond is very important; it’s something that's a big focus for us. This year marks an important step in that journey, but it's an important step. It's not the end growth. And so as the business continues to grow, I see this is something that we should expect to see continue for some time to come.

Okay, thank you.

Thank you. Our next question comes from the line of Michael Binetti from Credit Suisse. Your line is now open.

Thank you for the detailed guidance in the press release. I believe you mentioned a change of $60 million to $65 million with the distributor. Could you clarify how much of that change is incremental for Japan and Korea compared to the revenue generated last year under the previous distributor model? Additionally, how does this change impact the overall margins of the company, whether it’s accretive or dilutive? In our discussions a few quarters ago, you expressed optimism about margins potentially exceeding 20% this year, suggesting significant room for expansion. However, I notice that the low end of your current range is somewhat below that figure. I’m curious if you’ve adopted a more conservative outlook since then, especially in relation to China or any new costs you've considered for the business this year.

Thank you, Mike. Let's discuss the joint venture first. There has been a noticeable increase in reported revenue, which has roughly doubled. This represents an immediate impact on revenue from that market. We believe this market has strong potential for high EBIT margins, and we are very optimistic about it. We see direct-to-consumer development as a key part of our strategy there, given how the Chinese market is structured, and we anticipate significant activity in this area. Although the joint venture is just starting, we are committed to adapting to how we see it evolving. Regarding margins overall, as I mentioned, we are currently facing some uncertainties. In this quarter, we do not expect to conduct any significant business in Mainland China, which we have accounted for in our previous comments. As conditions improve, which we are confident will happen, we can return to achieving the levels we have experienced in the past. The core earnings model remains the same; we just need to navigate the current circumstances.

Yes, on the second Jonathan fundamentals have not changed. Pre-pandemic, we were in the 25% range, and we expect to get back there and beyond that and continue on our journey towards 30% as international tourism and profit trends are back to the normal pre-pandemic world.

Thank you. Our next question comes from the line of Meaghen Annett from TD Securities. Your line is now open.

Thank you. Good morning. So looking at the balance sheet, still in a position of strength. Can you give us an update on your capital allocation priorities, specifically how you're thinking about share repurchases in fiscal '23? And is there anything we should be thinking about in terms of major capital investments forthcoming in the near term? Thank you.

So our capital allocating priorities haven't changed in the sense that the best use of cash for us is to invest in this business. We continue to enjoy very high ROIs in our store estate, and obviously, that's an area we continue to invest in. We also invest in our manufacturing facilities as part of scaling the business as we continue to grow. But fundamentally, we don't see a very different level of underlying capital expenditure. To the extent that we build surplus capital up in the business, then we look at how else we might allocate it. You've seen in the past, when we believe there are opportunities, we've been in the market and conducted a buyback. The current NCIB is fully exhausted, and so we'll keep that under review over time.

Thank you. Our next question comes from the line of Brooke Roach from Goldman Sachs. Your line is now open.

Good morning. Thank you so much for taking our question. Can you provide some color on the assumptions that underpin your confidence in achieving a low to high-teens comp improvement in your DTC business this year? How does that break down by geography? And then specific to the North American domestic consumer, where momentum has just been particularly strong, how are you planning the year in that region? Thank you.

In terms of comparable growth, we are considering a couple of factors. Firstly, we anticipate the usual impact of pricing, and as we develop our product categories, we expect unit growth. Additionally, we foresee a gradual return of customer traffic, which we are also taking into account. We don't believe this level of comparable growth is excessive as the business continues to recover, and we feel quite confident about it. Now, I'll hand it over to Carrie to discuss the North American segment further.

So for North America, we see continued growth. Obviously, we're very strong at home in a mature market, but the U.S., in particular, I would say, is a market where it's very early days. We have strong opportunities. We have opportunities to get outside of the Northeast, and that's what we've already seen through this year and expect that to continue next year as well.

Thank you. Our next question comes from the line of Adrienne Yih from Barclays. Your line is now open.

Good morning. It's great to see the progress. Dani, could you elaborate on the comments you made regarding pricing? Where do you currently stand in relation to 2019 pricing levels? What are your initial price increases for 2022? I understand you might not want to share specific numbers, but any additional context would be appreciated. Jonathan, regarding average unit cost, you mentioned that the price increases would exceed the inflationary trends. Can you provide any insights on how that might affect the flow-through of basis points on gross margin? Thank you very much.

Thank you for your question. So our ability to continue to take price year-after-year is one that's underpinned by the value that we provide in our products. Every year, we strive to enhance our offerings, and that is because across our best-in-class made in Canada we perform function first, and I don't believe that there's a better value to product in the market of our kind today. And that's what enables us to have the levers to increase our prices as needed.

When considering cost pressures, they are not very significant. We manufacture a large portion of our products ourselves, which provides some help. While we do experience some price pressure from raw materials, it is not particularly substantial. Given the inherently wide margins and relatively high average unit retail prices, there is minimal pressure on our margins. Additionally, I want to remind you that our approach involves both tailwinds and headwinds. The tailwinds include pricing, scale, and sourcing. We invest not only in managing input price inflation but also in developing new products and categories. Consequently, at a gross margin level and across various channels, our management is focused on maintaining margins while continuing to invest in product development.

Thank you. Our next question comes from the line of Camilo Lyon from BTIG. Your line is now open.

Thanks and good morning, everyone. I think you mentioned that you're planning on opening 13 new stores. Can you tell us where the stores are planning to open? And then I think, Jonathan, you talked about Q3 returning to normalized levels of productivity in China. Can you just remind us what those look like or actually, if that's true for your assumptions on a store productivity level for China and how that might compare to a more mature market level of productivity like in North America?

Thank you, Camilo, for your question. So we're currently planning to open 13 new stores around the world. These are relatively balanced geographically, including significant contributions from the States, EMEA, and Mainland China and Japan, and it's balanced across all those markets.

Okay. And then when it comes to China, I think the other thing that's really important to remember is that we have enjoyed and continue to enjoy similar levels of sales density in Mainland China that we do in the rest of the world. So when that business is not impaired in terms of traffic, that's what we enjoy, and that's what we expect to enjoy this year.

Thank you. Our next question comes from the line of Robby Ohmes from Bank of America. Your line is now open.

Hi, thanks for taking our question. This is Alex Perry on for Robby. Just first, I wanted to ask, what does the guidance assume for North America store traffic? Maybe I think you talked about some green shoots you're seeing in terms of the international tourists. Maybe give us a little more color there? And are you back to pre-pandemic traffic levels in your domestic stores despite the absence of the international travelers? Thank you.

So as far as North America, generally, I'm going to segment that into the U.S. and Canada. I think when it comes to the U.S., we already talked about the fact that we were seeing a very strong rebound in traffic and pre-pandemic levels of sales. We talked about that extensively at the end of Q3. I think that's something we expect to continue. Remember, we did all of that with pretty much domestic sales. I think when it comes to Canada, the domestic component of traffic is coming back to where it was. Obviously, international will come back when it comes back.

Thank you. Our next question comes from the line of Mark Petrie from CIBC. Your line is now open.

Good morning. I just wanted to follow up on a question regarding the sales mix and the sales growth, sort of, by category versus other markets. So I'm not looking for specific numbers, of course, but just on a relative basis, is there any difference in the take-up on lightweight down, accessories, or footwear in Canada versus other markets? And then also appreciate that you take a measured approach to new product launches. But just wondering if you could share any comments with regards to the response to the footwear launch and anything you can share with regards to your expectations for growth in fiscal '23? Thanks.

I think the key takeaway here is that the focus is more on the channel rather than the geography. What's crucial for us is how we communicate the stories related to our new product categories, how we develop our consumer base, and how we integrate these products in our stores globally. This approach is applied in Canada, the U.S., Europe, and Asia, reflecting our global presence. As such, we do not perceive significant differences in consumer reactions since it all hinges on our storytelling. However, there may be variations in consumer responses between wholesale and our own stores, as we have more control over the offerings in our stores. Typically, we prioritize our own channels when launching new products.

Yes, Jonathan, just to add to that, on footwear, it's a really exciting new category for us, which has done well. It has brought a completely new perspective to the marketplace. It exists in a space in the market where I believe there's significant whitespace and there are comparable products. But at this stage, the collection is small in terms of sales distribution. We start small as typically how we manage new categories and we grow into them. That means it's not a significant revenue contributor today, but we do expect that it will be a material contributor in the long term. This is standard. This is part of our playbook, which is to take a disciplined, gradual approach to building new categories, and I'm really excited about what lies ahead because I know that this category is a well-balanced category.

Thank you. Our last question comes from the line of Jay Sole from UBS. Your line is now open.

Great, thank you so much for taking my question. I guess, I was just hoping you can elaborate a little bit on your comment that your outlook does not depend on a 100% return of international traffic or return of tourism from China. Can you just maybe tell us what the incremental sales impact would be if there was a 100% return of international traffic or return from tourism from China and then sort of compare that to the dollar figure that you expect in the guidance from those factors?

Thank you, Jay, for your question. I mean, we didn't feel it was responsible to include a full return of international tourism from China. It's really anybody's guess as to when that's going to happen. A lot of people have made guesses for years, and we did not include any of that in our outlook. So I would say that if it were to all return, whenever that might be at whatever point in time, I would imagine there would be a pretty significant amount of revenue. But at this point, it's not returned, and we've assumed none of it in our guidance.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.