Earnings Call Transcript - REAL Q1 2021

Operator, Operator

Ladies and gentlemen, thank you for standing by, and welcome to the RealReal First Quarter 2021 Financial Results Conference Call. I would now like to hand the conference over to your host today, Mr. Paul Bieber. Sir, please go ahead.

Paul Bieber, Head of Investor Relations and Capital Markets

Thank you, Mel. Good afternoon, and welcome to the RealReal's earnings call for the quarter ended March 31, 2021. I'm Paul Bieber, Head of Investor Relations and Capital Markets at the RealReal. Joining me today to discuss our results are Founder and CEO, Julie Wainwright; and Chief Financial Officer, Matt Gustke. I hope you had a chance to read our press release and stockholder letter that we distributed earlier today, both of which are available on our Investor Relations website. Before we begin, I'd like to remind you that we will make forward-looking statements during the course of this call. These forward-looking statements involve known and unknown risks and uncertainties, and our actual results could differ materially. You can find more information about these risks, uncertainties and other factors that could affect our operating results in our most recent periodic report on Form 10-Q, subsequent quarterly reports on Form 10, and in our earnings release earlier today. In addition, our presentation will include certain non-GAAP financial measures for which we have provided reconciliations to the most comparable GAAP measures in our earnings press release. With that, I'll hand the call over to Julie for introductory remarks, and then we'll go straight to Q&A. Julie?

Julie Wainwright, CEO

Thanks, Paul. Well, after more than a year of navigating the challenges created by COVID, it is great to say that we returned to growth in Q1 and also achieved our highest quarterly GMV in the company's history. Q1 GMV increased 27% year-on-year, a significant improvement from the 1% year-on-year decline in Q4. Our members increased by 1.5 million in Q1. We also added the greatest quarterly number of new consignors to date in Q1. And as of April, we have surpassed $2 billion in cumulative consignor commission payouts. For perspective, it took us 8 years to pay out the first $1 billion in commissions, but the second $1 billion happened in less than 2 years. Tackling the challenges of the past year led to numerous innovations and strategic initiatives, which have us well positioned to build on our momentum and support long-term growth. Specifically, we have significantly diversified our supply acquisition, expanded our retail footprint and brought millions of new members into the circular economy. We thank our entire team for their dedication to delivering a superior experience to our community throughout these unprecedented times. As we build on our recent momentum and march toward profitability, we remain focused on driving scale and operational efficiency gains. The pandemic still limits our forward visibility. However, our return to growth, combined with the widespread vaccination distribution leaves us optimistic about the balance of 2021. Importantly, I want to thank Matt. He has been my partner managing the company for the last 8 years, raising over $1 billion in capital and taking us public. Matt will be with The RealReal until we find his replacement, and he will ensure we have a successful transition with the next CFO. Now, back to the quarterly results. Now, we're ready for the questions.

Operator, Operator

First question comes from the line of Justin Post.

Justin Post, Analyst

I guess, I want to talk about GMV kind of flat quarter-over-quarter in the guidance. How do you think about 2Q seasonality? Of course, we can look back at prior years, but how are you thinking about that? And then specifically, we know how important in-home visits are. Are those going to be kind of ramping in 2Q? Or is the real benefit to that going to be in the back half?

Matt Gustke, CFO

Yes. I'll take the first and start the second, Julie. So the GMV guide for the second quarter of $320 million to $330 million is, as you point out, roughly flat. That's basically consistent with the non-COVID period. We typically see sequential flatness in the Q2 over Q1 as well as Q3 over Q2, with a kind of more hockey stick-like inflection in the fourth quarter each year. With respect to in-home, yes, I mean, your question was asked and answered basically. We began reintroducing in-home in March and then nationwide in April, still very early days. But we're seeing good indications that there's a lot of pent-up supply. So we'd expect to see that continue ramping throughout the balance of this year and beyond, frankly.

Justin Post, Analyst

Got it. And maybe one follow-up. So the impact of that, I mean is it going to be additive once you get that back up and running? And could we look for better than normal sequential trends in the second half?

Julie Wainwright, CEO

Well, this is Julie. We don't have a clear idea of what normal looks like as we emerge from COVID. I would say initial indicators suggest that we're seeing an increase in the number of units during our in-home visits compared to before COVID, but this may be temporary and could extend throughout the year. It's difficult to make precise projections at this moment, and we usually approach projections with caution. What we can say is that we're optimistic about these early signs.

Justin Post, Analyst

Good to see you back at growth rates again.

Operator, Operator

Next question comes from the line of Oliver Chen from Cowen.

Oliver Chen, Analyst

The vendor program has been impressive. What do you see ahead in terms of the vendor program momentum and also capabilities, whether that be human capabilities or infrastructure, that you're building and how might that manifest? Would just love your view on New York, L.A. as well. And as we reopen, what is your hypothesis for acquiring goods in those regions as well?

Julie Wainwright, CEO

The vendor is an alternative channel for us, and we have upgraded our management and improved our technology, allowing us to add SKU depth, which we plan to launch on time in the summer. Although the vendor is important, it remains relatively small as a percentage of our total business, and we don't expect significant growth as our in-home visits begin to expand, especially since they are becoming very aggressive. We are pleased with the progress and growth in both Los Angeles and New York, although we are not reporting on these regions separately. The vendor channel is beneficial for us, but it is still not as strategic as focusing on in-home visits and working with our individual consignors.

Matt Gustke, CFO

Yes. And the capabilities with respect to vendor are tracking, and we continue to work on them. And over the course of the next quarter or so, we expect to enhance our capabilities that would really be more customer facing.

Oliver Chen, Analyst

Okay. As we look ahead to the reopening, what do you think will happen with the product mix? Do you expect that apparel and UPTs will pick up? It seems like buyers' incentives will return to normal based on your comments. What are your thoughts on seller incentives in the marketplace as well?

Julie Wainwright, CEO

All incentives are currently stabilizing for both buyers and consignors, returning to pre-COVID levels. We are utilizing consignor incentives mainly when launching neighborhood stores to promote the drop-off concept. While we might occasionally run small promotions to address specific product needs, these have generally become routine. We're thrilled about this development. Regarding the return of apparel, it did see growth in the first quarter but hasn't yet regained its previous importance in our offerings. Shoes are also down but are experiencing some growth. We're uncertain when things will revert to normal levels. We speculate, although it could be incorrect, that a return could happen in the fall. Meanwhile, our average order values are at their highest ever, even though the mix of items in purchase baskets has shifted.

Operator, Operator

We have the next question comes from the line of Michael Binetti from Credit Suisse.

Michael Binetti, Analyst

Congratulations on returning to growth. I noticed that the gross profit per order remained relatively flat despite a notable acceleration in GMV. I’m wondering if you could provide more clarity on the path towards achieving $100 per order in gross profit by the end of 2022, as mentioned in your shareholder letter. Are there additional key leverage points beyond what you've already noted? I understand that a lot of the automation initiatives you have discussed over the past two years are now implemented. Also, Matt, could you help us revisit the path to profitability? Initially, you suggested that reaching break-even on EBITDA would require around $2 billion in GMV and $100 in gross profit per order. Is this still the correct framework, or have investments affecting gross margin shifted those expectations?

Matt Gustke, CFO

Sure. So on the gross profit quarter, there was a decent amount of disclosure in the shareholder letter. So yes, roughly flat. We do expect that to increase this quarter modestly, mostly due to buyer incentives coming down. We don't know, as Julie mentioned, exactly what the AOV trend is going to look like longer term. But roughly speaking, AOVs and take rates are nearly perfectly inversely correlated; as AOV goes up, it is a little bit additive to gross profit per order. So we think that's not going to be a major driver getting towards $100, continuing shipping leverage, getting the buyer incentives down and leverage over some fixed cost is mostly what gets us there by the end of '22, as you point out. With respect to the path to profitability, we're not in a position to update any longer-term projections, because we're still in such a fluid environment with COVID, but no fundamental changes. I think to the extent that you saw forever elevated mix in terms of high-priced goods and a higher AOV, it would take a slightly higher amount of GMV, all other things equal, but that's not necessarily our long-term view. So no real update to speak of.

Michael Binetti, Analyst

Okay. You mentioned in the shareholder letter that some of the cash from the recent trial was intended for international investments. Could you share your thoughts on the near term and provide some additional insights for the medium term?

Julie Wainwright, CEO

In the near term, which we define as the next six months, we are not seeing a return to normal across Europe and other countries. Therefore, we still have our sights set on some international small expansion for 2022, though it is likely to be pushed to the latter half of that year. Currently, we are focused on planning and development work, but COVID has caused some delays.

Operator, Operator

Next question comes from the line of Erinn Murphy from Piper Sandler.

Erinn Murphy, Analyst

Could you provide more details about the neighborhood stores? You mentioned some promising metrics regarding buyer engagement with that format. Can you elaborate on brand awareness and any observed customer drop-off? What types of units are consumers returning when consigning? Additionally, regarding the roadmap, Matt, will your upcoming departure affect the ability to secure a strong pipeline of leases for the second half of this initiative?

Julie Wainwright, CEO

The neighborhood stores are surpassing our expectations in both demand and supply, and the longer-established locations are performing even better than anticipated. It's important to note that we are still working under COVID restrictions in all markets, which limits the capacity for both buyers and consignors. Despite this, we’re receiving an incredibly positive response to our small neighborhood stores. We’re so encouraged by this performance that we plan to open three more stores than we originally intended this year. After that, we will take a moment to assess the impact as we hopefully move past the limitations affecting both consignors and buyers in the stores. For now, these stores are exceeding our expectations, even as we navigate what we feel are restrictive conditions. Overall, the outlook is promising.

Matt Gustke, CFO

On the second question and the answer, simple answer is no, almost all of the leases of those 13 are already signed, and I wouldn't expect to have any difficulties securing future locations.

Julie Wainwright, CEO

Plus Matt is not going anywhere for a while. We're just giving you guys the heads up here.

Erinn Murphy, Analyst

It's good to hear. Regarding the announcement this afternoon about closing the Brisbane Center as we progress through the summer, how do you view the opportunity in the latter half of the year to reduce some of the losses, possibly due to a decrease in the expense base?

Matt Gustke, CFO

Yes, I can start with that. Yes, so unfortunately, with the move into Arizona, which provides us with a lot of benefits in terms of cost leverage over time, we made the difficult decision that we will close the Brisbane, California location sometime at the end of the third quarter. So yes, we'll be rolling off of some operating expenses, which are roughly equal to what the Arizona facility, although it's double the size, costs. So it will be helpful. And as we start to leverage the Arizona facility, that's where we start to throw off some meaningful fixed cost leverage.

Julie Wainwright, CEO

I want to share a couple of points regarding our transition. We reached out to every employee at the Brisbane facility and offered them an opportunity to join us if they were in good standing. I'm pleased to report that we received a higher-than-expected response, and all the experts are remaining with the company in some form. This means we are carrying over core talent as we move to Arizona. Additionally, the State of Arizona provided us with incentives to relocate, which was not a focus for the State of California. We are very excited about expanding our presence and making Arizona a major hiring priority for the future. We look forward to our growth in the state.

Operator, Operator

Next question comes from the line of Edward Yruma from KeyBanc Capital Markets.

Edward Yruma, Analyst

First, regarding marketing expenses, I understand you utilized it in the first quarter as your supply situation has stabilized. Can you share your thoughts on whether this leveraging should continue for the remainder of the year? Additionally, Julie, could you elaborate on your experiences with the neighborhood stores? Historically, these stores were designed for consumers to purchase items, and you mentioned some points in your shareholder letter about consumer receptivity to shopping there.

Matt Gustke, CFO

Sure. On the marketing side, yes, we do expect leverage going forward. It's not always going to be a straight line, because the cadence of our marketing spend is not like direct short-term relationship to our GMV expectations. But we do expect marketing expense to be slightly down quarter-over-quarter this quarter and leverage on the full year significantly even versus the pre-COVID baseline in 2019. And notably, in the quarter, we saw in Q1 substantial leverage in marketing and our buyer acquisition cost was down significantly. So we're pleased with where we are trending.

Julie Wainwright, CEO

It's still too early to determine what's happening in the stores, but things look very positive right now. I'm hopeful we can move past COVID restrictions. There are still lines outside the store, and people are willing to wait to either shop or consign, which is very encouraging. Some stores are already well on their way to profitability, even under conservative estimates. Overall, it seems promising. However, we plan to assess our situation further before making any major decisions, as we are still navigating uncertain times.

Operator, Operator

Next question comes from the line of Ike Boruchow from Wells Fargo.

Ike Boruchow, Analyst

Matt, I have 2 questions on the direct business. Well, I guess, first one, just on the direct gross margins, I understand the buyer incentives are there and it's muddying the waters a bit the last quarter or two. But where do you see the gross margin structure for that channel once you kind of move past that maybe into the back half and beyond?

Matt Gustke, CFO

Sure. So the direct business, as you know, has inherently lower gross margins, given that we have to recognize GMV as revenue in this case. So we did see about 300 basis points of margin improvement quarter-over-quarter in Direct and we saw that in the consigned businesses as well. So they tend to trend together more or less. We expect that to continue going up, particularly as the mix with indirect starts to move more toward purposeful direct revenue, where we have bought inventory upfront on purpose rather than just out of policy returns. So we'd expect to see direct margins trend up over time, not necessarily in a straight line, but several percentage points as we get through the year. It does impact consigned and direct roughly equally.

Ike Boruchow, Analyst

Understood. And then just one more. I think in the shareholder letter, you mentioned a large vendor transaction in the fourth quarter, which helped you in 1Q, and should help the rest of the year. Can you give any more detail on that comment and what exactly that is?

Matt Gustke, CFO

Yes, we completed our largest vendor transaction ever in the fourth quarter of last year. While it wasn't overly large in the grand scheme of things, it was significant for us. We have begun to sell through the inventory, experiencing good sell-through, solid margins, and relatively high selling prices for those products. We anticipate this trend will continue throughout the year and will speed up once we implement new functionality on the website that allows us to display multiple quantities behind the same image, which we currently do not have. Therefore, we expect sell-through to accelerate once this technology is enabled.

Operator, Operator

Next question comes from the line of Mark Altschwager of Baird.

Mark Altschwager, Analyst

Great to see the in-home appointments back. I guess relative to pre-COVID levels, can you quantify the level of supply you're generating from that channel in the March and April period? Then you mentioned in the shareholder letter and on the call, you're seeing evidence of pent-up supply. Was hoping you could expand on that a bit, just maybe any metrics you can share on the productivity of the in-home appointments or kind of number of units or GMV you're generating kind of per appointment versus kind of where you were before?

Julie Wainwright, CEO

So we just started really in March, offering it. It wasn't even something you could choose by looking at the website, and then April we changed the website to make sure it was in-home, and May 1 is when we're really going sort of full throttle on offering, meaning it's our first option we're offering for consignors if they're comfortable. Prior to COVID, an in-home pickup would yield between 17 and 20 units per pickup. Now, when we're going in, it can be, on average, 30 units, but we don't know how long that's going to last. So we're still in a pretty small percentage for Q1, because, again, you couldn't choose it if you were going to the website; does that mean you couldn't choose in-home, you could only choose virtual, so that the reps we have would say we're now offering in-home if you're comfortable. So we expect to see that accelerate. It's still a pretty small number, even in April, because it was in transition where it was evident on the website that you could actually book an in-home appointment, and people are getting much more comfortable as they're getting vaccinated.

Matt Gustke, CFO

Yes. It's still relative to COVID, but still substantially lower volume as a share of the appointments in consignor volume now. So a long way to go.

Mark Altschwager, Analyst

And if I could just follow up on the marketing front. Could you speak to the decline in the buyer acquisition costs and the drivers there? I know it's early in the neighborhood stores. Is that moving the needle? Or are you seeing efficiencies in other areas?

Julie Wainwright, CEO

Last year was quite unusual for us. Typically, in the first quarter, we invest heavily to prepare for spring cleaning, which gets people thinking about tidying up their closets. We had followed this pattern in March last year with our usual spending levels. However, this year, we opted for a different strategy, taking a more cautious back-end approach. Given the uncertainty around COVID, we intentionally reduced our marketing spend, assuming that the spring cleaning trend might not materialize during the pandemic. Surprisingly, we still observed better results. This situation is part of ongoing testing with our marketing efforts. As Matt mentioned, we expect our marketing strategies to be significantly more efficient than last year since we had halted our marketing entirely when our facilities were closed. In the last quarter of Q4, we increased our spending to prepare for a robust Q1, which indeed proved effective. Overall, this year is likely to be uneven, but we anticipate a noticeable reduction in acquisition costs moving forward.

Matt Gustke, CFO

Right. Just to pick up on the point that Julie made. So last year, we didn't really reduce our marketing spend until we had already made it through the month of March, even though we had half of the month where the business was disrupted significantly. So some pretty inefficient spend in the second half of March. So we got that freebie. But beyond that, yes, the stores are absolutely helping a meaningful share of our new consignors, and a significant number of new buyers are coming through our stores. And we are always testing and optimizing our media mix, and the team is great at finding new and innovative ways to stay one step ahead of the curve. So I think they'll continue to do that as we go throughout the year and beyond.

Operator, Operator

Next question comes from the line of Lauren Schenk from Morgan Stanley.

Lauren Schenk, Analyst

Great. Inventory was up quite a bit at the end of the quarter, both year-over-year and sequentially despite the strength in direct revenue. Could you just help us think about sort of the drivers there? And then how you're expecting that to trend through the rest of the year?

Matt Gustke, CFO

Yes, we had about $50 million in inventory, which is relatively small considering the size of our business. A significant portion of this was from a large vendor transaction at the end of the fourth quarter, along with other similar purchases. Until we implement certain technology that allows us to merchandise products more effectively, the sell-through will be slower because only a small portion of the inventory is available for purchase at any one time. This situation should improve once the technology is in place, and I don't anticipate inventory growing at that pace as we move into the latter part of the year.

Lauren Schenk, Analyst

Okay, great. And then, is there any sort of high-level commentary you can give about trends that you're seeing in April or quarter-to-date versus maybe what sort of the March or Q1 broadly run rate was?

Matt Gustke, CFO

I considered that in relation to our guidance, but at this point, the numbers feel a bit absurd as we move past COVID, making short-term growth rates somewhat irrelevant. Instead, we are focusing more on our performance compared to the pre-COVID period in 2019. The results are looking very encouraging and positive, with some acceleration compared to the same period in 2019. Therefore, we are quite optimistic about both the short and long-term outlook.

Operator, Operator

Next question comes from the line of Simeon Siegel of BMO Capital.

Simeon Siegel, Analyst

Sorry if I missed this, but can you provide any insights on what you're expecting for the take rate going forward? Also, regarding the stores, it's great to see increased productivity. How were the average unit volumes and shopping frequency of those customers before they started using the stores? I'm trying to understand the lift you're experiencing as they embrace an omnichannel approach and what type of customers they were previously.

Julie Wainwright, CEO

We have some information in the shareholder letter. We're still attracting a high percentage of new consignors and new shoppers to the stores. From an efficiency standpoint, these new consignors are beneficial for us, and we're excited about that. Regarding the average order value, the new stores are significantly contributing to our mix. Nearly half of the reason our average order value is at an all-time high is due to the influence of these stores, as customers tend to spend more dollars per unit, even if they purchase fewer units overall.

Matt Gustke, CFO

Sure. To add to both points, while every store differs, averages can be somewhat misleading. Generally, as Julie mentioned, about half of those who visit the stores are new to us. However, those who have previously shopped online and then visit the store tend to have their store visits as an addition to their overall activity. Their online engagement continues at the same frequency and spending level as before they started visiting the stores, which is very beneficial for both buyers and consignors. Regarding the take rate, we currently do not have a clear outlook. For the short term, we are observing that our average order values remain very high, so the take rate is relatively low compared to pre-COVID levels, but they balance each other out. It’s important to focus on gross profit dollars per order. Over time, we expect normalization, but the timeline and extent are uncertain.

Operator, Operator

The next question comes from the line of Susan Anderson from B. Riley.

Alec Legg, Analyst

Alec Legg on for Susan. My question is just on the first look subscription, where customers can view items a day in advance. How big is that subscription service relative to your consumer ecosystem? And any details you can provide on consumers to utilize that, such as their consumer spending habits? I mean, do you think that service could be a meaningful portion of your revenue going forward?

Julie Wainwright, CEO

Our most engaged customers are involved with this service, which is still relatively small. However, it was somewhat overlooked during COVID. We plan to reassess it to understand the potential benefits of marketing it more aggressively. When customers sign up for First Look, they tend to make frequent purchases, around three to six times a year, with some buying every month. While the customer base is still small, it is significant, and Matt has some statistics on it.

Matt Gustke, CFO

Yes. The direct revenue line is quite small and not significant. There are many individuals with access to First Look who are not paying members, including our VIP consignors. In total, those who engage with First Look account for approximately 20% of our gross merchandise value, and this figure has remained stable over time. This information is detailed in our S-1 filing. Therefore, while the number of participants is limited, they are still very important to us.

Alec Legg, Analyst

And then, I guess just a follow-up, it's great to hear about your offering relocation assistance for the Brisbane employees. And we've seen some companies having trouble finding employees and are offering hundreds of dollars just to get them to sign up. Have you seen or have you had any challenges finding employees to work in your authentication centers? And then are you expecting any meaningful wage costs to materially impact the rest of the year?

Julie Wainwright, CEO

I'm going to start with that, and then I'll pass it over to Matt. All of our experts and those we train in the program are successfully recruiting. There is some slight resistance at our Perth facility, but it's a small percentage. I would say we still have openings in Perth. From what we've heard, although it's just anecdotal, it seems the government is providing incentives that make some people prefer not to work. It's worth noting that we generally offer competitive wages, with a starting pay of $17 an hour. There are indications that some individuals might choose to stay at home instead. I truly hope the government considers reducing support for workers, as there may be a connection to the low unemployment figures. It's an interesting time, but we have a high retention rate of our experts. Our Arizona facility is fully staffed with experts, which has allowed us to focus on recruiting hourly employees. Many employees realize that the combination of benefits, a reliable job, and the opportunity to build a career is appealing. We believe this will encourage them to choose working over staying at home since $17 an hour isn't enough motivation. However, I do feel that the government might be overpaying. Do we need to raise our wages? No, we don't think so; we believe things will balance out. In Perth, we have about 725 employees and 50 openings, which is more than we've ever had. While this is a challenge, we consider these to be great jobs compared to others in the area.

Operator, Operator

Next question comes from the line of Marvin Fong from BTIG.

Marvin Fong, Analyst

Great. Just a couple. Maybe at a high level, I realize you're not disclosing supply units anymore. But maybe you could just give us some qualitative assessment on how supply units are tracking versus GMV? Do you feel like it's in balance now with demand? Any commentary there would be great. And then second question, just as I try to unpack guidance and sequentially flat. Just curious, I know we've asked about stimulus in the past, but do you feel like stimulus in the first quarter had any impact, and that might explain some of the flatness going into the second quarter? Any commentary there would be great.

Julie Wainwright, CEO

No. I mean, I'll address some of it. The truth is, we have no indication that stimulus affected our business. It's really about our ability to generate supply. As we've always noted, it's challenging for us to differentiate between supply driven by demand and stimulus. Last year was particularly tough for us due to a complete shutdown in California for supply acquisition, which was prolonged, and natural COVID fears further slowed things down. However, I'm pleased to report that we are returning to a favorable balance. If we had more supply, we could sell it, but everything feels like it’s progressing in the right direction at the moment. It's a very positive time for the company.

Matt Gustke, CFO

Yes. Supply and demand are always closely linked in our business. If we observe any divergence in supply and demand trends, we will consider providing some level of transparency in supply metrics. Currently, they are perfectly aligned. Regarding our guidance, I would reference the typical quarter-over-quarter trends, where flatness is standard for our business. Importantly, we are just beginning to resume guidance, so our willingness to share it reflects high confidence at this moment.

Operator, Operator

All right. Perfect. Your last question comes from the line of Aaron Kessler from Raymond James.

Aaron Kessler, Analyst

Could you clarify the target for gross profit per transaction for 2022, which is set at $100? Should we consider this a basic goal or a more ambitious one? What are the key factors influencing this number? You've mentioned this before, but what are the main elements that will help us achieve this target? Additionally, what do you think is the likelihood that we can reach this figure by the end of 2022?

Matt Gustke, CFO

The biggest factors haven't really changed. It's AOV and take rate and their relationship together. So if the product of one and the other is essentially our tick dollars per order per unit. Return rates do come in there, but they've been very stable, lower during COVID are normalizing. And what's left is predominantly shipping expense, which we have seen substantial leverage and expect to continue seeing leverage over time. Short term, we have buyer incentives that have been an offset to progress there, but we expect to see those normalize, as well. And then the rest of it you get from scale, leveraging certain fixed costs that are in cost of goods. So our confidence of getting there by the end of next year is high.

Aaron Kessler, Analyst

Got it. Just quickly on a follow-up. In terms of like going out wear for dresses, etcetera. Are we starting to see the pickup in that? We've seen some mixed data points so far in 1 of the companies recently said March was a big month in the quarter for more going out wear. Are you starting to see that trend as well?

Julie Wainwright, CEO

Apparel is experiencing growth, but not as significantly as fine jewelry, handbags, and watches. It has returned to a growth phase, although the sales mix has shifted toward higher value items.

Operator, Operator

I have no further questions this time. I would now like to turn the conference back to Ms. Julie Wainwright, ma'am.

Julie Wainwright, CEO

So that concludes our Q1. I'm pleased to say there's been a remarkable change over the past year. There’s a lot of positive energy among employees and the team. People are excited to shop both online and in stores, and we hope this enthusiasm persists. Ultimately, it's all about getting people vaccinated and the government easing its support measures. Right now, it feels like we're in a completely different place compared to a year ago, and it seems like we are coming back stronger than ever. Thank you for your time, we appreciate it, and we'll speak again soon.

Operator, Operator

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.