Andrew McLean: With the – again, great question. With licensing, you have to control your brand. I mean, it’s really important that you find like-minded partners. I think that with a lot of years of licensing experience behind me, if you go out and find a partner who necessarily offers the best rates, you don’t necessarily get the best for your brand and it’s not great in the long term. So, you have to find someone who is like-minded. The first year of an arrangement tends to be about 18 months long, and you use the first six months to really build the brand book and get a meshing of the DNA fully baked between your brand and the partner, and then ultimately you write in control over that. So, we have control over the assortments with rights of approval.
And then increasingly specifically for categories like swim, it’s our product, we design it, and it’s a tech pack that the partner will then produce to our standards. So, a lot of control goes into that because you’re building something for the long term. That’s how I look at it. It’s how we look at it as a business, and it tends to run maybe a little slower on startup, hence that 18-month first year, but really it’s the right way to do it, and it builds something long lasting and enduring.
Bernie McCracken: And from a more technical or execution side, the interesting thing for the licenses that we’ll provide, especially the kids and the shoes licenses, there’ll be two aspects to that license. Our partners are going to sell on our website also and they will put that product in our warehouses to be sold to our customers in the same bags and boxes that they receive other Lands’ End product, but then those partners will also be going out to third parties and performing wholesale sales that we will then make a royalty on.
Eric Beder: Right. Last question. Inventories, you’ve done an incredible job producing the amount of inventories. How should we be thinking about, A, what is ideal? And, B, what should be thinking about inventory levels into 2024? Thank you.
Bernie McCracken: Yes, I think the key here is we do have an ideal number and we do want to drive higher terms. And we’re looking to turn in a couple of years a full turn faster than we do today, but this really comes from our ability to improve our supply chain so that we can shorten the length of time that it takes for us to receive products, so that we can make later decisions and have more newness in our assortment and carry less inventory and be able to be faster in replenishment. So, that will take some time yet, but we are definitely going to continue to reduce inventories and drive more newness and turn in our business over the next year.
Andrew McLean: Yes, I don’t know if you caught it in the call, Eric, but if I would draw your attention back to it. We’re using – we use our European business a lot to test concepts out, they’ve been incredibly open-minded to this. One of the concepts we tested out last year was really how much speed can we put into the mix? And the area we looked at was market goods. Again, from my background, I have experience in buying market goods. And by buying market goods, you don’t necessarily own the IP of the product. You can put your own label in it, but you might find it somewhere else. But what it allows you to do is go out and test, or it allows you to fill holes in your assortment. And as an underlying piece of that, you start to leave open to buy open that you can fill later in the season, and that gives you speed that almost can be guaranteed in terms of the gross margin that it delivers.
(Audio difficulty) where you want to take the business in future years, and that’s something we’re going to lean in and do more of. We’re starting to do that in our US business, and that will be an incredibly powerful element that we bring to bear in terms of what we bring to market and when we bring to market meshing against the journey that our customer is on and their expectation at that moment.
Eric Beder: Okay. Congrats and good luck for 2024.
Operator: Thank you. Our next question will come from Alex Fuhrman with Craig-Hallum Capital Group.
Alex Fuhrman: Great. Thanks, guys, for taking my question and congratulations on everything you guys have accomplished in 2023 and so far this year. I was wondering if I could ask a little bit about the licensing business as well. Just thinking about your outlook for the full year of a low to mid-single digit increase in GMV, is that more or less consistent with what you’re expecting to see in footwear and kids, or should those categories perhaps accelerate more over time in future years as your licensees start to explore other channels for those categories?
Andrew McLean: Hey, Alex, how’s it going?
Alex Fuhrman: Excellent. Thanks, Andrew.
Andrew McLean: We’re going to accelerate that, Alex. We stepped into it – let’s review why we stepped into licenses. I mean, one, it is obviously asset-light and there’s a – it’s a great driver of return on investor capital. We’re a $1.5 billion company, and we are an iconic American brand that covers family variety in retail. We can’t be as good as we want to be in everything at $1.5 billion. By doing licensing, this allows us to concentrate our efforts on our best at, and the solutions business that we see out there that we really wanted to lean into was swim and outerwear and women’s and men’s. And in doing that, we were able to accelerate those. We took the pressure off ourselves with kids and shoes by going to a partner who is experienced in those and has the bandwidth to really build them the way we want to build them and we’ve always envisioned.
