The 2023 executive compensation program focused on 2023 financial objectives and key priorities, consistent with focus areas discussed during our earnings calls, as well as absolute and relative stock price appreciation. The program framework and goals reflect our commitment to a pay-for-performance compensation philosophy while accounting for the heightened uncertainty surrounding both the consumer and macro environment at the time the plans were set.
| ● | The incentive plans were designed to motivate and engage the organization and leadership with linkage between strategy, business plan and incentives. |
| ● | Plan design focused on Growth, Profit and Colleague. These elements were to support key business priorities and promote strong operating and financial performance. |
The incentive plan designs reflected a focus on key 2023 business priorities.
| ● | The metrics in the annual incentive plan were weighted 80% on the financial goals of Adjusted EBITDA and total revenue (weighted 40% each) and 20% on a Culture Index. |
| ● | We continued to use PRSUs and RSUs in the long-term incentive plan with a mix of 50% each for all NEOs. The 2023 PRSU plan had two equally weighted metrics: 2023 - 2025 rTSR and 2023 Adjusted EBITDA margin. |
| – | Given the uncertainty in the macro environment and the volatility of the retail industry, the CMD Committee made the decision to use 2023 Adjusted EBITDA margin in the PRSU plan. Following the one-year performance period, there is an additional two-year vesting period to align with our historic vesting practices and help ensure retention. This approach enabled us to set meaningful performance targets that maintained the rigor of the PRSU program during the year in which the Company completed a transition of the Chief Executive Officer role and incentivized the leadership team’s focus on profitable sales growth, inventory management, cost discipline and strengthening the balance sheet. As a part of its annual review of the compensation program, the CMD Committee resolved to revert to using a 3-year performance period for all metrics in the 2024 PRSU plan. |
| – | The rTSR metric continues to be based on a three-year performance period and uses the S&P Retail Select Industry Index as the benchmark group. |
| ● | The payout ranges in both the annual and long-term incentive plans were 25% - 200% of target, consistent with 2022. |
