Torrid - Q2 2024

Transcript

Operator (participant)

Greetings, and welcome to the Torrid Holdings, Inc. Q2 fiscal 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you Chinwe Abaelu, Chief Accounting Officer. Thank you, Chinwe. You may begin.

Chinwe Abaelu (CAO)

Good afternoon, everyone, and thank you for joining Torrid's call today to discuss our financial results for the Q2 of fiscal 2023, which we released this afternoon and can be found on our website at investors.torrid.com. With me today on the call are Lisa Harper, Chief Executive Officer of Torrid, Mark Mizicko, Chief Commercial Officer, and Paula Dempsey, our Interim Chief Financial Officer. Before we get started, I would like to remind you of the company's Safe Harbor language, which I'm sure you're familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate, and other words and terms of similar meaning. All forward-looking statements are based on current expectations and assumptions as of today, September 6, 2023.

These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC. This call will contain non-GAAP financial measures such as Adjusted EBITDA. Reconciliations to these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. With that, I will turn the call over to Lisa.

Lisa Harper (CEO)

Thanks, Chinwe. Good afternoon, and thank you for joining us to discuss our Q2 results. Before I begin, I'd like to acknowledge and thank the Torrid team for their hard work and dedication as we navigate many important initiatives. I will begin by discussing our Q2 performance, providing details on the progress we have made, as well as our focus going forward. I will then turn the call over to Mark Mizicko to discuss our merchandising and marketing strategies. Paula will then review our financials in more detail and provide our outlook for the remainder of the year. Our Q2 results reflect the impact of continued choppy customer behavior. They are more selective in their purchases and exhibit inconsistent traffic trends. In addition, we have identified missed opportunities in our casual product assortment that we are addressing immediately.

With that, we generated sales of $289 million and Adjusted EBITDA of $32 million for the quarter, in line with our guidance. From an inventory perspective, we are pleased with the progress we've made. We've ended the quarter with inventory down 13% compared to a year ago. We saw the largest decline in our intimates merchandise and are in good standing with our current levels. During the quarter, our customers responded well to newness in our assortment. We saw strength in new fabrications and leg shapes, and we plan to expand these going forward. As mentioned, our casual business was softer than we expected, and in hindsight, we realized that we did not offer enough variety, versatility, and innovation. Our customer file metrics have been consistent and stable over the last 12 months.

Our VIP customer retention rate continues to demonstrate strength, standing at an impressive 97%. We are seeing an increase in margin rates among key customer groups, such as Loyalists, VIPs, and new web buyers. Lastly, we are seeing a return to acquiring 60% of our customers in store, which is approaching pre-COVID levels. Overall, our strategies will continue to emphasize customer file growth via enhanced marketing investments, additional store openings, value rationalization, and improved product offerings. As we look ahead, we're focused on positioning the business to generate consistent growth over the long term. As always, we maintain a data-driven approach to ensure high-quality design, merchandise, and inventory. In addition to delivering great merchandise that fills every need in her closet and ensuring a flawless fit, our focus is directed towards three pivotal priorities.

These priorities encompass, 1, broadening our pricing strategy to rationalize the value of a product offering. 2, enhancing our marketing investments. 3, optimizing our cost structure and inventory. The first priority is to broaden our pricing strategy and place a greater emphasis on value. We recognize the importance of value and competitive opening price points, especially in this environment. In a highly competitive marketplace, she is increasingly looking for high-quality products that provide the best value for money. We have not had the ideal balance in value pricing, which we now see as having a negative impact on both customer acquisition and retention.

Our initial retail prices have risen too much in the last few years, and we are implementing a comprehensive strategy that balances both value and price, which will be fully integrated into our spring lines with a Good, Better, Best assortment and pricing strategy. Number two, turning to marketing, our second priority. We consistently strive to innovate our investments and engage in testing across diverse channels, all with the objective of driving both immediate as well as lifetime productivity. In the past several years, very little of our marketing efforts have been devoted to driving traffic to our stores. We have had a marketing bias toward e-commerce.... While we are becoming more productive in our digital investments, we are also rebalancing our overall marketing strategies to enhance the customer's Omni-journey.

This journey is channel-agnostic in terms of service, but with a preference for store traffic, which provides a substantially higher lifetime return. In the Q2, our traditional digital investments were instrumental in delivering positive results during the Fourth of July sales and the July Torrid Cash Event. Moving forward, we will continue to drive the evolution of our marketing strategy, focusing on customer acquisition, frequency, retention, as well as maximizing lifetime value. Our third priority is to optimize our cost structure and inventory. After a comprehensive review of our operating structure, we have identified key areas to optimize: workforce realignment, product cost improvement, and inventory management. As part of our workforce realignment, we made the difficult decision at the beginning of the Q3 to eliminate several positions, resulting in a reduction of 5% in our headquarters staff.

By executing these essential cost-saving initiatives, our organization is effectively poised to reshape our business operations, fostering a more cohesive and streamlined approach that will position us for future growth. We are also conducting an in-depth analysis of our product costs. I recently completed a highly productive vendor trip to Asia, in which we had the privilege of personally engaging with our top suppliers. The primary objective of the trip was to strengthen our relationships and emphasize the significance of maintaining a competitive pricing and sourcing strategy. Based on this vendor alignment, we believe there is significant opportunity to improve our product margins over the next two years. Our speed model helps us pre-position fabrics with third-party factory partners, enabling us to accelerate product replenishment cycles, improve inventory turnover, and drive higher market share gains.

We rely on our read and react testing approach, which over time has helped us navigate inventory risk. As in the past, we believe that our data-driven approach will continue to drive market growth. The next step is to enhance our inventory management by expanding our Ship from Store program and testing clearance stores. As of August, we have successfully rolled out our Ship from Store initiative to an additional 200 stores, bringing the total of participating stores to approximately 600 locations. The program's outcomes have been positive, generating incremental sales and enabling us to optimize inventory from our stores. In addition, in the Q3, we will be testing the concept of clearance stores. We believe clearance stores could unlock... We believe clearance stores could unlock an effective strategy for accelerating the flow of discounted products, enhancing our profit margin, and attracting the attention of new customers.

Should the clearance store test yield favorable results, we will expand our network by converting underperforming stores. We are also implementing additional measures to enhance labor productivity across our retail stores, as well as our distribution center. We expect these strategic initiatives to generate substantial savings on an annualized basis over the next two years. In a rapidly changing retail environment, we are focused on exercising control over the aspects within our control. We believe that by streamlining our organization, enhancing our pricing strategy with value, and improving our inventory management, we are making the right investments to position the business for long-term growth. Our unwavering commitment remains achieving optimal results through our products, customer excellence, and fit, while maintaining a keen awareness of the ever-changing landscape. With that, I will pass the call to Mark Mizicko, our Chief Commercial Officer.

Mark Mizicko (CCO)

Thanks, Lisa. I'd like to start today by giving some updates on a few of the initiatives that our teams have been working on, and then I will briefly discuss some of the highlights of the Q2. As I discussed last time, our merchandising and planning teams are focused on driving gross margin expansion through better balancing our assortment to customer demand, improving product sell-through, and improvement in the efficiency with which we price and promote our product by channel and location. We've made progress in our pre-season assortment planning process, and with each successive buy, we've added guardrails that allow for data-driven assessment of the risks and opportunities in the business. We are finding meaningful opportunities in categories, fits, and fabrications that we've not invested in sufficiently despite substantial customer demand.

We've also made improvement in our channel planning and expect to see that tailoring our investments better to demand by channel will drive margin expansion in the coming deliveries. For the Q2, we saw some modest improvements in our product margin rates as we've increased our average retail through a better mix of right price selling by getting cleaner in our clearance inventory levels. We expect this margin expansion to continue in the fall season. We've improved our methodology for pricing by channel by initiating pricing levels that target product sell-throughs by an out date. In August, we rolled out our Ship from Store capability to the remaining 200 US stores and are seeing incremental sales and accretive EBITDA from these efforts, which also help us move through more regular price inventory. In marketing, we have begun to see some more successful promotional events.

Our Torrid Cash redemption in July was a success, and we are seeing some modest improvement in this event as we have tweaked the timing, cadence, and the supporting marketing efforts. Our future marketing events will continue to evolve as we focus our message on the product that is hot at the time that our customer is looking for it. Our efforts to drive customer loyalty and engagement continue through store events, improvements in our online shopping experience, and more synchronized messaging across our shopping channels. We also launched a new data platform with our digital marketing agency in August, and the early learnings show that we have potential to optimize the amount and allocation of our digital spend, which we'll be testing over the coming months.

While I'm not pleased with our overall results in the quarter, I am pleased with the progress our teams have made in putting fundamental changes into place that will help us avoid some of the missteps that have been a drag on our performance. I'm also very excited to announce that Kate Horton has rejoined the Torrid team as Chief Merchandising Officer. Kate is a strong leader, a talented merchant, and brings a great understanding of our customer and a passion for the Torrid brand. Turning to a few Q2 highlights, we continued to see success in workwear this quarter. However, it was not enough to offset the softness in the casual part of our assortment.

Addressing the opportunity in our casual assortment is a key focus for our design and merchandising teams, and we're working to maximize the part of the casual business that has the versatility to be dressed up or dressed down, as these hardworking styles are seen as a value to our customers. In apparel, we had success in our 2 for $30 tops business, as our customer has responded to value. We'll be increasing our offerings in the opening price point portion of our business through the fall and into spring. Washable gauze, lightweight denim, and edgy casual looks were fashion highlights, as were bottoms in boot, flare, and wide leg. The wider leg opening in bottoms has been a success for us, but we did not capitalize sufficiently on this trend this past quarter. But we will have an increased penetration through the fall season.

By category, non-denim bottoms and leggings were strong, as were dresses and jackets. As was the case in the Q1, we saw much of the miss in our apparel business coming from underinvestments in key fabrics, fits, and in prints, all of which have a consistent history. As we progress through the fall, we've made further improvements to the way we utilize our historical selling data, and we should see improvement with each successive buy cycle in the way that we balance the assortment across the attributes that are important to our customers. In the Curve business, we had strong regular price selling in active, which continues to be driven by outdoor performance apparel, and also in the lounge and swim apparel businesses.

In our Curve foundations business, we have opportunities next year to fine-tune our prints, optimize our assortment by channel, and to change the timing of fall color palette getting set in stores. In summary, I am confident that the changes that have been made to our merchandising and planning process, the utilization of our selling and customer data, and the addition of Kate to the leadership team will result in improved assortments as we move through the fall and into next spring. And with that, I will now turn the call over to Paula.

Paula Dempsey (Interim CFO)

Thank you, Mark, and good afternoon, everyone. I will start with a detailed discussion of our Q2 results, followed by an update on our outlook. In the Q2, our customers continued to face headwinds related to the current environment, and in turn, we experienced challenges with traffic. However, we have carefully managed our business through disciplined expense and inventory management and generated net sales and EBITDA that were in line with our expectations. We not only met our quarterly guidance, but also launched initiatives that speak to a long-term strategic vision, as previously highlighted by Lisa in her review of priorities. We view fiscal 2023 as a rebuild year for Torrid as it relates to product, value, and our organizational structure. We have taken cost control measures that will prove to be effective, yet balanced, ensuring further opportunities in the near future.

Let's start by discussing our top-line performance. During the Q2, net sales declined 18.2% to $289 million, compared to $354 million last year, and comparable sales in the quarter declined 17.9%. We experienced slowing customer traffic during the quarter as the broader retail environment struggled with consumers shifting their spending to essentials and experiences. As we moved through the quarter, we saw sequential improvements in our Torrid Cash events. Specifically, the daily average sales during our July Torrid Cash event outperformed that of April by 13%, a result we attribute primarily to the heightened sense of urgency we successfully integrated in the event. Our gross profit margin was 35.5%, compared to 37.2% in the Q2 of last year.

The 170 basis point decline was primarily due to approximately 105 basis points deleverage in store occupancy, 70 basis points in a one-time benefit in private label credit card income last year, and deleverage 45 basis points in merchandising, payroll costs, and other reserves. This was slightly offset by product margin improvement of 50 basis points, driven by thoughtful pricing decisions on the web and promotional category activity in stores. SG&A expenses in the quarter were $70 million, compared to $79 million for the Q2 in the prior year. The $9 million decrease in SG&A is primarily due to a $3.7 million decrease in store payroll costs, $2.9 million reduction in performance bonuses, a $1.4 million decrease in property and equipment disposals, and a decline of $1 million in other store operating costs.

As a percentage of sales, SG&A was 24.2% compared to 22.3% in the prior year, an increase of 1.9%. Marketing expenses in the quarter were $13 million compared to $14 million in the Q2 of last year. As a percentage of net sales, marketing increased 70 basis points to 4.5%, compared to 3.8% in the Q2 of last year. The reduction in marketing expenses primarily due to lower spending on upper funnel activities, such as TV advertising and regional marketing events. We remain focused on optimizing our marketing spend by channel, aiming to enhance returns on investment and foster growth in customer acquisition and retention. Turning to our bottom line performance.

Our net income for the quarter was $7 million, or $0.06 per share, versus net income of $23 million or $0.22 per share for the same period last year. In addition to GAAP measures, we believe that Adjusted EBITDA is an important measure that we use to evaluate and manage our business. Adjusted EBITDA was $32 million, or 11.1% of net sales, compared to $52 million, or 14.7% of net sales in the Q2 of 2022. Turning to the balance sheet, our cash and cash equivalents stood at $19 million at the end of the quarter. Total liquidity, including available credit, was $149 million. Total debt at the end of the quarter was $313 million, compared to $335 million in the Q2 of 2022.

Our net debt to Adjusted EBITDA was 2.8 times at quarter end. Inventory at the end of the quarter declined approximately 13% to $158 million, compared to $181 million at the end of the Q2 of fiscal 2022. Given our projected sales for the rest of the fiscal year, we're comfortable with our current inventory levels. In Q2, we opened 3 Torrid stores while simultaneously closing 2 stores, ending the quarter of 639 stores. We still expect to open 30-40 stores for the remainder of the year. Turning to our outlook, we recognize consumers are facing external pressures to the current environment, and while we're encouraged to see our sales trends have stabilized, business has been anything but predictable this year.

We believe it is appropriate to assume that the back half of the year will continue to be volatile. Our focus remains on driving top-line results through our marketing investments and new product releases while carefully managing our inventory and expenses. We have implemented a cost reduction initiative that is projected to yield some annual savings this year, while anticipating a more significant acceleration and reduction in the coming year, driven by improved costs as well as the annualization of SG&A reductions made in 2023. Given this backdrop, we are revising our outlook for the year and now expect sales to be between $1.080 billion and $1.115 billion, and Adjusted EBITDA to be between $90 million and $100 million, which includes the impacts of the 53rd week.

We anticipate net sales of the 53rd week to be $14 million-$18 million. Capital expenditures to be $35 million-$40 million for fiscal 2023, reflecting technology investments and 30-40 new store openings, primarily in the Q4. For the Q3, we project net sales to range from $242 million-$251 million, and Adjusted EBITDA to be $11 million-$15 million. Despite the near-term pressures, we remain confident in the long-term potential of Torrid. We have a loyal and active customer base, which accounts for over 90% of our sales, who shop with us on average 4 times a year.

The changes we're making to the merchandising and marketing side of our business, combined with our disciplined approach to expense management, should position us to deliver solid top and bottom line growth over time. And with that, I will now turn it over to the operator for questions.

Operator (participant)

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. The first question comes from the line of Mark Altschwager with Baird. Please proceed with your question.

Amy Teske (Equity Research Associate)

Hi, this is Amy Teske on for Mark. So in regards to your pricing. In recent quarters, you've talked about refining your promotional strategy being part of your playbook, and strategic pricing was a growth margin benefit to this quarter, but you also noted plans to implement a deeper value strategy. So could you help us to reconcile those two comments and what impact you expect pricing to have in the coming quarters?

Lisa Harper (CEO)

It is two different aspects of pricing. So what we've talked about previously is promotional pricing to optimize margin and product based on ownership and desirability by channel. Which is underway and we've learned a lot, and we're starting, I think, to see results that we feel confident in terms of being able to expand moving forward. What I'm discussing today is a slightly different aspect of the business, which is, I think, also incremental to our promotional strategies that we've discussed before. Which is over the last several years, three years, our pricing, our retail tickets have gone up substantially.

I had an opportunity to go and work strategically with our core vendors, understanding from the mills and fabric investments, cost of goods, the CMT, and the country of origin opportunities in terms of understanding and strategizing pricing strategies and resourcing strategies that would drive benefit and cost of goods, as well as allowing us to have a variable pricing strategy at retail. Meaning, Mark mentioned our 2 for $30 program. It's done very well. We have an inventory that appropriately... We just set up the store with much, a much stronger presence of key items. We'll be introducing core programs and dresses and tops, and shorts, and as we go into spring, that have a Good, Better, Best strategy, that have an opening price point variation.

So our ticket prices have gone up an average of $10 by every category, and we know that our customer has a bit of sticker shock. Not—we won't be eliminating the fashion from our product. We will be adding more into the opening price point, into the goods section. So there's a combination of sourcing strategy, cost of goods strategy through the sourcing initiative, as well as assortment strategies that allow us to have a more varied pricing structure for the customer. And what we've done so far, they've responded very, very well to. We feel like it's incremental business as we move forward. And, we'll have, we have some programs, and right now we'll have more fulsome programs as we enter the spring season. So it's two different things. Promotions and pricing are different. Initial pricing are different.

Amy Teske (Equity Research Associate)

Okay, thank you for that. So, you know, you did talk about the product costing opportunity. So how should we think about the net effect of the product costing opportunity versus the need for sharper price points? To what extent are you going to be reinvesting the savings?

Lisa Harper (CEO)

There's I think the product costing gives us an improvement in COGS, which has a fundamental benefit to our bottom line as we move forward. From a pricing perspective, we think it's opportunity to build average order value and add incremental units to the mix. So there's - it's a multifold, multifaceted benefit. One, which is where they may not be buying their basics from us, and then it's accelerated away as we think they should, so opening up that part of the assortment. And then on the other side, COGS basically is a benefit across all of the inventory. Does that make sense?

Amy Teske (Equity Research Associate)

Yes. Thank you.

Lisa Harper (CEO)

Thanks.

Operator (participant)

The next question comes from the line of Alice Xiao with Bank of America. Please proceed with your question.

Alice Xiao (Equity Research Analyst)

Hi, thanks for taking my question. Can you please give more detail on the cadence of sales trends throughout the quarter by month? I know you touched a bit upon the Torrid Cash program component, but just the total sales trends, and then what, also what you're seeing quarter to date, please.

Lisa Harper (CEO)

The trends of the quarter were choppy, and the first and third months were softer than the middle, so we are still managing what we'd refer to as that choppy customer behavior. I think we have more confidence in terms of near-term results and in terms of the early Q3 results, and what we're seeing is our ability to be more predictive and consistent in terms of delivering on our forecasting. And so I think that we've, as an organization, been able to absorb the behavior of the customer and work it into our forecasting more effectively. We're starting to see trends in terms of merch margin or product margin improvement that are more and more consistent. We're seeing nice response to early fall products, so we're happy about that.

So, you know, I wanna be clear. It's a challenging kind of transformation for us at the organization, but we're very optimistic by what we're seeing with the customer, some level of predictability, and we're managing all of these aspects of the business to drive to an inflection point. And so what we're seeing right now is better results in terms of product margin and more predictability in terms of our performance as we're forecasting it. So, that makes us feel more confident as we're moving forward.

Alice Xiao (Equity Research Analyst)

That's helpful. And then I wanted to ask about the clearance stores that you're testing next for this quarter. What criteria are you considering for current stores to underperform enough to become a clearance store? And also, can you elaborate a little bit on the impact to margins you expect from this testing and, and also just incorporating more clearance stores into your portfolio? Thanks.

Mark Mizicko (CCO)

Yeah, I mean, the centers that we've chosen so far have been in outlets, I think where outlet centers where the customer has more of an expectation of a higher penetration and clearance product. And so, you know, we looked at several things, but, you know, one of the key considerations was the stores that would be feeder stores that, you know, presumably would get some amount of the margin benefit that we expect to see. And look, we opened them, you know, in a few days. I think it's a little premature to talk about the margin that we expect before we've even opened one. But, you know, we, of course, have our models, and like all models, they're not gonna be exactly right.

They'll probably be directionally correct, but I don't think we're prepared to talk about the margin benefit before we've opened.

Lisa Harper (CEO)

I think the thesis is that as we use feeder stores to feed a particular clearance store, what we have been able to test is putting more fashion SKUs in those stores that take up the space that was originally, you know, committed to higher levels of clearance in stores. We have seen positive movement in terms of getting more fashion into those stores that would be feeder stores. Again, we'll test three. They'll open in the next week or so, and we'll be able to report on the next quarterly call on how that's working, what the margin implications are, and how, if it works, we would be accelerating it and making the decisions in terms of the particular stores and feeder stores that would be applied.

Alice Xiao (Equity Research Analyst)

Thank you.

Operator (participant)

The next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Brooke Roach (VP)

Good afternoon, and thank you for taking our question. I was hoping you could quantify the cost savings that you've identified across the various initiatives you've discussed today, and what proportion of those cost savings are realizable in 2023 versus 2024? How are you thinking about the opportunity to drop those cost savings to the bottom line versus reinvestment in the business? Thank you.

Lisa Harper (CEO)

So if we're talking about the SG&A cost savings, for this year, it's $2 million. On an annualized basis, it'll be about $4.5 million. I think the bigger opportunity is... And those should drop to the bottom line. The bigger opportunity is the cost of goods that I was discussing and inventory management from Ship from Store to clearance stores, those types of things, and how that will be able to shift our inventory investments and over time. So, it's something that we look at constantly, Brooke, and I think that, you know, we've gone to a point that we feel really comfortable with in terms of an organizational investment that allows us to deliver on our initiatives and really deliver growth in this business.

So, we'll continue to look at that on a consistent basis, but I feel like right now, our biggest opportunity is going to be more in the COGS and the inventory investments that we think we can improve upon.

Brooke Roach (VP)

Great. Thank you very much. I'll pass it on.

Mark Mizicko (CCO)

Thanks, Brooke.

Operator (participant)

The next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question.

Katie Delahunt (Equity Research Associate)

Hi, this is Katie Delahunt on for Alex Straton. I know you spoke to, accelerating traffic trends throughout the quarter, and that kind of differs from what we've heard from other reporters this earnings season. And I was wondering, you know, how much are you attributing that to, you know, the macro environment versus how much are you attributing to maybe company-specific, decisions?

Lisa Harper (CEO)

Actually, we saw variable traffic trends in the quarter. So actually, the best traffic trends were in June, and the other months were softer. So it didn't improve as we went to the back end of the quarter. I missed the rest of your question. Was there more?

Katie Delahunt (Equity Research Associate)

Oh, sorry. I was just wondering, like, how much you attribute kind of performance to more macro conditions versus more, like, company-specific execution?

Lisa Harper (CEO)

Oh, okay. That's a very hard distinction to make, I think. We do think there's the, as everyone has discussed, some level of macro pressure. That is not something that we can, you know, manage effectively internally, meaning it's an outside influence. What we do focus on is what we can manage internally. And so some of the things that we've talked about, about enhancing our casual presentation, about pricing, value pricing, opening price point, cost, cost of goods improvement, are the things that we're really focusing on as an organization. And I think that we have a runway there to really drive some true value in the business.

Katie Delahunt (Equity Research Associate)

That's helpful. Thank you. One more from me. We've heard from a number of companies about increased credit card delinquencies. Can you speak to any trends you're seeing, in your own credit card business?

Alice Xiao (Equity Research Analyst)

Yes. Hi, this is Paula Dempsey. So we actually saw an improvement from a credit card delinquency on this quarter compared to the prior quarter. However, when we're looking versus the prior year, we have certainly seen an increase, just like everybody else in the industry. But at this point, it's not something that we are extremely concerned in our business. So hopefully that, that answers your question.

Katie Delahunt (Equity Research Associate)

Thank you.

Operator (participant)

There are no further questions at this time, and I would like to turn the floor back over to Lisa Harper for any closing comments.

Lisa Harper (CEO)

Thanks for joining us today. We look forward to sharing our progress as we move through the balance of the year and look forward to talking to you after the Q3. Thanks for joining us.

Operator (participant)

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time.