Simeon Siegel: Thanks, everyone. I hope you’re doing well, and have a nice Thanksgiving. I was hoping you could give any color on gross versus net adds maybe a client this quarter. And then if I heard it correctly, and apologies if I didn’t, and I was hoping you could elaborate a little bit on the comment about consumers having choice where to shop impacting the net adds. I guess that sounds a little bit more typical for traditional retail. So I guess you guys had been maybe insulated given the loyal fixed shoppers. So are you seeing a pivot in the existing base or the customer approach to your company? And if the active client positioning is now competing against traditional retailers, does that change how you focus on running and forecasting the business? Again, if I mistake or misheard, I apologize. Thanks, guys.
Elizabeth Spaulding: Yes. Thanks, Simeon. I can start, and Dan, feel free to chime in as well. So on the gross versus net adds, I think Dan touched on that, where we did see an increase in clients in our gross add quarter-on-quarter, so Q1 versus Q4. That said, we also saw an increase in clients who haven’t shopped with us in 12 months plus, and that is something I think we attribute in part to the macro environment and just to pull back that overall, I think the category is seeing in retail spending. We believe that a lot of the efforts that we’re focused on in terms of retaining clients longer, improving the experience, reactivating clients, some of what I talked about on the marketing front, all will be important in terms of driving improvements over time.
The competition with traditional retail, I think what we were referring to there is quarter-on-quarter, we did see increases in things like our AOV, and our average unit retails. That said, we did see softness in Freestyle relative to what we would have anticipated. And we could see, as we compared it to a lot of the pull forward in the promotional calendars of other players in the space that we were impacted by some of those promotional offers that happened August, September, just far earlier than we typically would have seen. And then I think Dan mentioned the cohort to cohort spending. Our consumers are telling us that in this macro environment that they are just being more judicious with their spending. And so while our keep rates and our average order values are holding steady, we are seeing some stretching out of frequency and stretching out of those freestyle purchases.
So we still believe we are very unique in our core value proposition. We compete on things like Discovery and fit in human relationships. That said, I think Freestyle in particular, is probably more impacted by really, really promotional environment, which we saw in particular in that August, September, October time frame.
Simeon Siegel: Got it. Thanks, that’s very helpful. And then just, Elizabeth, maybe just a follow-up on that comment you made about the quarter-over-quarter ASP. How was the year-over-year ASP this quarter?
Elizabeth Spaulding: Yes. I think quarter-over-quarter, we saw a few percentage points increase on AOV and similarly on an ASP basis, in part I think ASP was over 10% up quarter-on-quarter. Part of that is seasonal. We do see it leaning into outerwear and goods that are slightly higher priced. But overall, I mean, we saw health, I would say, in general, within our AOVs and average unit retail, I think it’s more maybe a frequency of spending that we saw more of a pullback.
Simeon Siegel: Great. Thanks so much, guys. Best of luck for the rest of the holiday.
Elizabeth Spaulding: Thanks, Simeon.
Operator: Thank you. And our next question comes from the line of Mark Altschwager with R.W. Baird.
Mark Altschwager: Good afternoon. Thanks for taking my question. With respect to the shift in marketing strategy, is this a temporary shift in the current macro? Or what are the proof points that you want to see in the transformation to give you confidence to more aggressively go after the TAM of consumers who haven’t engaged with the platform before?
Elizabeth Spaulding: Yes. Thanks, Mark. I it is in part a response to the environment but also a really strong belief that really happy clients and reactivating clients are some of our best channels for marketing and believing there is opportunity to further expand those. In addition to the areas of TAM expansion into some of these new marketing channels that we’ve just historically been underpenetrated. One thing I think we were very deliberate about and I think Dan mentioned this in his remarks, as did I, is just being very focused on near-term positive ROI. And so I think what we really work through is just being more deliberate and really raising the bar of our payback thresholds, which we’re always very disciplined. We just essentially made the decision given the ambition of free cash flow positivity, EBITDA positivity and just what we’re seeing in the macro backdrop to be even more disciplined in terms of those payback periods.
We are also using it as an opportunity to go even faster at really doubling down on opportunities to reactivate clients that have loved us in the past. That pool and that opportunity has obviously grown over time as we become a more mature business. And so Dan mentioned the 5% to 6%. That’s our best view for the full year. But we will learn over the next few quarters. And based on the paybacks we’re seeing, we may opt to spend more as we go forward. But it’s not a permanent shift. It’s more let’s learn into this and be even more disciplined on paybacks in the near-term.
