Q3 2019 Earnings Call
Good afternoon, and welcome to the Ross stores third quarter 2019 earnings release Conference calls.
I will begin with prepared comments by management, followed by question and answer session.
To ask a question during the session you will need to press star one on your telephone.
If you require any further assistance please press star zero.
Before we get started on behalf of Ross stores I would like to know that the comments made on this call will contain forward looking statements regarding expectations about future growth and financial results, including sales and earnings forecast new store openings and other matters that are based on the company's current forecasts of aspects of its future business.
These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations.
Risk factors are included in today's press release, and the company's fiscal 2018 form 10 Dash case in fiscal 2019 form 10, Dodge Q and establish case on file with FCC.
Now, we'd like to turn the call over to Barbara Rentler, Chief Executive Officer.
Good afternoon, joining me on our call today for Michael Hartshorn Group, President and Chief operating Officer private market Route Senior Vice President and Chief Financial Officer, Ekati, Cal Vice President Investor Relations.
Beginner called today with a review of our third quarter performance, followed by our outlook for the remainder of the year.
Afterwards, we'll be happy to respond to any questions you may have.
As noted in today's press release.
Please that our third quarter results were ahead of our expectation.
Earnings per share for the period for a dollar to free up from 91 cents last year.
Net earnings grew to $371 million from 338 million in the prior year.
Total sales for the third quarter increased 8%.
<unk> point $8 billion with comparable store sales up a strong 5% on top of last year, 3% game.
For the third quarter, we saw a broad based friends across both merchandise departments and geographic regions.
With children and the Midwest performing the though.
We also continued to see improving sales trends in our ladies apparel business.
Well this area becomes less important as we move into the fourth quarter. We believe the actions. We're taking here will lead to ongoing improvement during the holiday selling season, and then to 2020.
Operating margin of 12.4% was above plan, mainly due to better than expected sale and merchandise margin.
For the first nine months, a fiscal 2019 earnings per share with $3.32 up from $3, a six cents last year.
Net earnings were $1.2 billion versus 1.1 billion in the first nine months of 2018.
Sales year to date rose, 7% to $11.6 billion.
Comparable store up 3% on top of a 3% gain last year.
As we ended the third quarter total consolidated inventories were up 10% over the prior year, well packaway with 39% of the total compared to 41% last year.
Average in certain inventory at the end of the period were up 3%.
He does this have continued to perform well with robust above planned growth in both sales and operating profit.
Turning to our store expansion program, we opened 30, new Ross and 12 de de <unk> discounts locations in third quarter.
Leading our 2019 store opening program.
We expect to end the year with 15 husband 46, Frost and 259 D. These locations for a net increase of 89 for fiscal 2019.
Now I'll try to small cap will provide further color on a third quarter results and detailed on our guidance for the remainder of figure.
Thank you Barbara.
Let's start with our third quarter results.
Or 5% comparable store sales gain was driven by higher traffic and an increase in the size of the average basket.
Third quarter operating margin of 12.4% was above plan and similar to last year.
Cost of goods sold increased 10 basis points in the period.
Merchandise margin grew by 20 basis points, while occupancy in Bali, Levered by Kim and five respectively.
These favorable items were more than offset by distribution expenses, but increased 45 basis points, mainly due to the unfavorable timing of packaway related costs and higher wages.
Freight was flat for the pool.
Selling and general administrative expenses for the period decreased 10 basis points.
During the third quarter and first nine months of fiscal 2019, we repurchased 3.0 9.6 million shares respectively of common stock for total purchase price of 326.
$966 million respectively.
We remain on track to buyback a total of $1.275 billion in stocks for the year.
Let's turn now to our fourth quarter outlook.
As noted in today's press release, we continue to project fourth quarter comparable store sales to increase 1% to 2% versus a 4% game last year.
In addition, our guidance for fourth quarter earnings per share of remains unchanged at $1.20 cents to $1.25 cents, which now includes a one time non cash benefits of two cents per share primarily due to the favorable resolution of a tax matter offset by slightly higher pretax expenses.
The forecasted guidance compares to $1.20 cents per share and in the prior period, which also included a one time per share benefit of seven cents related to the favorable resolution of attacks.
Excluding both of these onetime items.
And if comparable sales only performed in line with our guidance.
Earnings per share are forecasted to grow 4% to 9% over last year.
The operating statement assumptions for the fourth quarter include the following.
Total sales are projected to grow 5% to 6%.
Operating margin is projected to be in the range of 13.0% to 13.2% compared to last year's 13.2%.
We expect net interest income of about $2.3 million.
Our tax rate is expected to be approximately 20% to 23%, which includes the aforementioned onetime tax benefit.
And weighted average diluted shares outstanding are projected to be about 357 million.
Based on our year to date results and updated fourth quarter guidance. We now project earnings per share for the full year to be in the range of $4 and 52, so to $4.57.
Compared to $4.26 in fiscal 2018, which included the previously mentioned onetime pershare benefit of seven cents.
Now I'll turn the call back to Barber for closing comments.
Thank you Travis.
As you mentioned earlier, we're pleased with our solid sales and earnings performance in the third quarter.
We believe these above plan results demonstrate that we are well positioned to compete effectively in today's volatile retail environment getting consumers continued focus on value and convenient.
However, as we look ahead, we expect another highly competitive fourth quarter.
In addition, we were up against strong multi year sales and earnings comparisons for shorten calendar between Thanksgiving and Christmas and ongoing uncertainty in the macroeconomic and political landscape.
Therefore, although we hope to do better we believe the best to maintain a cautious posture heading into the holiday selling season at this point, we'd like to open up the caught in the sponsor any questions you might have.
In order to ask a question you will need to press star one on your telephone to withdraw your question press the pound or housekeeper. Please standby it will be compiled accumulate roster.
And our first question is from Matthew boss with Jpmorgan. Your line is open.
Great. Thanks, and congrats on a on a really nice quarter.
Barbara maybe on the true on the top line any areas of sequential improvement you'd like to highlight that category, maybe how best to think about ladies apparel relative to the total comp going forward in any particular areas of assortment opportunity that you think it's worth noting into this year's holiday.
Well I, yeah, as we said in the common yeah, basically all merchandise theories. It was very broad based the performance.
Overall, the company took a lift.
You know as we look at Lady.
We really saw improved sale in the quarter.
And it performed slightly above our expectation you know when we were expecting to see ongoing progress in the quarter. So we were pleased with the pace of improvements, but at this point, we wouldn't provide more detail in terms of that.
Great and understand okay, sorry, the second question again.
Just went into a into the holiday any particular areas of assortment opportunity that you're excited about.
Sure I'm you know our main focus will be to build upon success or gift, giving assortment I mean, yeah, we built out gifts throughout the entire store and we feel good about that and we feel that we're offering gift items that really compelling values, because we really feel that value remains the most critical factor for her.
Where she makes her shopping decision and we believe that real really positioned to deliver on this.
Great and then just a follow up more on the margin side. So it sounds like free is as of now moderated and it's not that that's not the headwind for pretty much everybody out there. So I guess my question is if same store sales are consistently on a three to four range and as we're thinking now going forward is there any region is there any.
Reason to think that the algorithm has any different historically than it was on the bottom line. If again, if you're at that three to four comp range, just any margin headwinds or things to highlight it would be different than that historical 3% to 4% same store sales double digit earnings growth algorithm going forward.
Matt its Michael Hartshorn, So our long term earnings algorithm has not changed the you know a combination of a new store growth comp growth EBIT margin.
Expansion it at the high end and then the buyback program. The one thing that I would throw in the mid.
With a lot of uncertainty around it is tariff so net of terrorists I, we haven't changed our long term algorithm.
That's great best of luck.
Your next question comes from Mark Altschwager with Baird. Your line is open.
Great. Good afternoon. Thanks for taking the question I'm, just hoping you could give it to more color just on the distribution expenses in the quarter no that was bit of a headwind you expect after normalizing Q4, and then just more broadly hoping you could touch on the buying environment and how you'd characterize what you're seeing out there versus the earlier part of the year. Thanks.
Sure. This is trying to in terms of the distribution costs expenses as we said they were related to a couple of things one on favorable timing of Packaway and then also wages with respect to wages. There were a couple of things that have impacted that as you. All are aware last year, we raised our national minimum wage to $11 across the.
Country.
We did anniversary that after the second quarter. This year beyond that there are ongoing state and municipal wage increases, particularly in California, California wages went up in January by a dollar and they'll continue to do so for the next couple of years.
For the wage increases do impact both short and distribution centers, but as we manage the business. This year more of our cost mitigation efforts ended up in the S. DNA line in terms of guidance going forward, we feel comfortable with the guidance that we have we do expect some continued pressure and it's built into that sort of guidance. Okay.
And as it pertains to the buying environment I'm now versus the early part of the year isn't plenty of availability and marketplace pretty much all here I'd say, it's been consistent.
Whether it's better for any good Dan for tariff for Josh.
Supply coming from sales falling off in the department store sector, there's been a lot of goods all along and what we're really seeing is that the availability is broad based across brands and categories. So it's really it's really a good buying time.
That's great. Thank you best of luck over holiday.
Thank you.
Your next question is from Lorraine Hutchinson with Bank of America Merrill Lynch. Your line is open.
Thanks, Good afternoon.
The Packaway percentage is lower than it's been in quite a few years and I was just hoping you could give us a little bit of insight into how the in season buying is looking and how you'll manage through holiday with a lower level of of goods available in the packaway.
Sure Lorraine as we mentioned in her commentary total inventory was actually up 10% Packaway was 39% versus 41% last year, but on an absolute basis takeaway was actually up year over year.
The percentage was a function of higher inbound in transit so that was higher for us and we brought in product early to support the holiday.
Selling season, I'd say overall as Barbara mentioned, we continue to see plenty of availability of but our buyers are very strategic to ensure we had the best values and then I'd I'd also add that we did slow packaway to chase it had a planned sales in the quarter.
Thank you.
Your next question is from Paul the choice with Citigroup. Your line is open.
Hey, Thanks, guys I'm wondering if you could give anymore color on DTC comps versus Ross, maybe talk about the magnitude of the traffic and ticket increases that based on maybe a for each one and then second just depending on the.
The ability of product question are you seeing Barbara any any particular price strategy more available I'm just.
Hi, good better best as you think along those lines are you seeing outside the availability in any particular price points. Thanks.
Following on Bds, we don't break that out separately I just repeat what we said the commentary I'm very happy with the results the performed well.
And Ah you know robust above planned growth in both sales and operating profit in terms of the components of sales as we mentioned and accomplished driven by both higher traffic and an increasing the size of the average basket. The average basket was driven more by items per basket that was up well are you ours were down a little but terms.
The traffic versus basket it was pretty evenly.
And then in terms of availability of product from a good better best point of view you availability is truly rubright space and all three across all brands and categories. I mean is really a large assortment of products to choose from so I wouldn't say to focus on one I'd say available at all.
Gotcha. Thank you I mean, just one follow up home versus apparel any color you can provide there and also can just remind us the percent of the business at home represents an for Q versus the rest of the here. Thanks.
Yeah overall apparel versus non apparel results are pretty similar.
And homes, a little bit more <unk> more than a quarter of the business and it's slightly higher in Q4.
Thanks, guys. Good luck.
Your next question is from Kimberly Greenberger with Morgan Stanley . Your line is open.
Okay, great. Thank you so much.
Barbara I wanted to just here, you're sort of state of the union on the ladies apparel business are you happy it sounded like you you like the trend that are you satisfied with the performance across ladies at this point Travis I just wanted to ask you a follow up on the 45 basis points of distribution Center.
Headwinds.
Was it unfavorable packaway and freight or unfavorable packaway in wages I just wanted to get a clarification there and then on the unfavorable packaway.
Could you just clarify does that mean that sequentially from Q2 Q3, Packaway dollars would have declined sequentially and so you would have more more expenses flowing through the DC in the current period is that right.
Yeah, I guess, let me answer that question first Packaway dollars were actually higher year over year in quarter to quarter.
The unfavorability relates to sort of the magnitude of the increase compared to last years and they were up less than last year, we typically see a benefit in the piano from Packaway this quarter.
Your question on the 45 basis points, Yeah, It was packaway timing and wages.
Yes.
Okay, great and not just relates yeah, sorry, probably go ahead sorry.
That sounds like that.
I I just wanted to <unk> make sure I understood the connection and that was related to the wage or the wage rate in quick increases in the state of California or have you not yet lapped wage increases in your distribution centers that were maybe implemented leader.
We we lapped the 11 dollar increase that we did sort of as a minimum across the company that was left after Q2.
And so these are primarily related to sort of state minimum increases.
There's state and local right minimum wage.
And as it pertains to Lady Yes, I said, you know the business performed slightly above our expectation.
And you know, we expect to see more ongoing progress and we were pleased with the pace of the improvement and the ladies business during the quarter, obviously I'm not going to go into more detail than that but you know we expect to see ongoing progress you know in Q4 and beyond.
Okay, Great Barbara and just a quick follow up question on terrorists, if I could I'm wondering if you have a with what the terrorists impact would potentially be incorporated into your Q4 guidance is there a way to quantify that and you have any because.
Ability for the and the impact of terrorist or potential impact of tariffs beyond the fourth quarter at this point.
Sure Kimberly for Q4, right now we have one to two cents built into the to the impact obviously that they just went in place.
Actually in apparel and shoes in the third quarter, its or too early to speak about the impact longer term, obviously the longer the tariffs remain in place the more pressure it'll put on the retail marketplace or so is it the situation remains very fluid at this point so we wouldn't.
Common.
At this point beyond that.
Okay understood. Thank send a really nice quarter here good luck for holiday.
Thanks.
Your next question is from Alex Walt This with Goldman Sachs. Your line is open.
Hey that thanks, so much for taking the question I might a few questions on the on the category dynamics. If I may you mentioned children's being a particularly strong category for you I'm can you talk about what's really working that and then you know a second question is on its own men's that's been you mentioned as a strong category for the last few quarters.
Can you talk about you know the progression of that business as well.
Sure the kids business really really benefited from you know strong execution of the merchandise strategy. You know we have very strong team.
They put a strategy in place and they really you know.
Stick to them Entre and then have done a really fine job the business itself, it's pretty broad base in terms of performances across total kids.
Our men performance you know has been strong construct for another year.
Continues to be strong and performed pretty much in line with chain average and you know.
We also feel like we have a solid strategy in there and the business continues to move seller I mean this supply there's you know.
Just isn't good opportunities and mental stuff.
Fantastic. Thank you and then maybe if I may have question I'm on your pricing trends in the market recognizing of course that you guys at a price for lose any comments on you know what youre seeing out that any thoughts on what pricing could look like you know across the categories in which you operate as you move into into next year.
I I and how you know, how how you're likely to respond that.
Sure.
So far we really haven't seen any material changes in pricing. So far I mean, the merchants are constantly competitive shopping and trying to stay on top of that but to your point you know we're not the lead for a follow and pricing. So we'll have to wait and see how you know different retailers ultimately react to the higher costs and how they approach to pricing.
And Nemacolin will go from there, but you know we're not lead would definitely follow and again today, we really haven't seen any material changes.
Marvelous thanks, so much.
Before moving on I would like to remind everybody to please limit yourself to one question on when you were next question comes from Michael Binetti with Credit Suisse. Your line is open.
Hey, guys congrats on a great quarter, thanks for taking my questions here.
Where would you I think is the second time, you've you've been very very direct with your expectation for an ultra competitive promotional marketplace in the fourth quarter I think excluding the onetime benefit you moved to kind of mid point down [laughter] penny or two I'm in the fourth quarter as far as what you expect now could you just tell us what changed since 90 days ago particulars.
Since you're delivering.
Really well in the top line in the quarter and I think I guess on the back of that you did mention some higher pretax expenses that moved and maybe you could just tell us a little bit about about what some of these expenses is worse than we can think about for model. Please.
Yeah.
Interest expense.
Did we did have a couple of extra pennies of expenses in Q4, and those are really split across cost of goods and and I asked you know.
I wouldn't be more specific really beyond that and Michael on the guidance. We didn't we didnt change the the guidance coming out of Q3 into Q4, you know as we said we are guided with comp at one one to two person and just to reiterate what we said in the commentary we expect.
To be highly competitive and especially with the recent a department store performance.
In Q3, and we're obviously up against a strong multiyear can comparison, we have a shortened calendar between Thanksgiving and Christmas Christmas and there continues to be uncertainty in both the macroeconomic and certainly the political landscape I I'd add historically a shorter calendar.
Compresses sales with minimum impact to the overall quarter on that said the shorter calendar can add some uncertainty if there's a weather disruption for instance, especially near the Christmas holidays.
It's more difficult to overcome but we believe it's the best way to manage our business.
With a cautious posture during the during the holiday season.
That makes sense me I guess, one follow up a little longer term question as we look at some of the components. One thing that's fairly noticeable unimpressive that you've kept the merch margin expanding.
Slightly you know call it in around 20 basis points pretty consistently on a run rate basis for a while talking years not quarters, but you have been able to do that on pretty consistently lower you are as well.
I think spend a few years since we heard the are you are up is that is that a dynamic that that's sustainable you know going forward on a multi year basis is you know you're thinking that.
We continue to prioritize value and the plan. The are you are three down slightly but that the merch margins can continue to be up is that there is there any reason that dynamic what changes. We look you know lift rise to next year and beyond.
You know what the key for US it's the plan the business cautiously and if we can be the sales plan a one we can turn faster which helps on the markdown line and then too we chased the business with Closeouts, which typically.
I have better margins. So that's the that's the secret sauce, if we can beat our sales plan that's our opportunity.
Okay. Thank you very few ours is not something that we plan we don't.
Don't.
Target a specific to your it's really an outside of the process none of them.
Okay. Thanks Lucas.
Your next question comes from Paul Trussell with Deutsche Bank. Your line is open.
[noise]. Thank you good afternoon and good print just wanted to have you talk a bit more about a new store performance maybe discuss in what you're seeing in terms of some of the existing markets as you backfill and what you're seeing in.
New markets as well and you know is there any reason why we shouldn't think that.
100 doors, a year is a gold unit was a good gulfport number.
Sure, Yes, our new store performance has been pretty consistent for the last couple of years as you might imagine performance in our established existing market tends to be a little bit higher it's a little bit lower in our new market, but the average has worked out to around 60% to 65% over the last couple of years and we're still seeing though.
If we talk about sort of a the opportunity for future growth, we're pretty comfortable with 100 stores per year, we've been doing that hundred prosperous per year been doing that for a little while now and that we think it sort of aligns with our ability to make sure. We find the Rightside Oh, we're not sort of course to make decisions that we wouldn't.
No that sort of wouldn't be as beneficial to us.
And we can open them in a way that that sort of drive their success and I would just add that on the new store openings or line of sight is really just a couple of years out. That's a we can see in the hopper from a real estate standpoint, so we're comfortable with it.
Your next question is from keeps it sounds with RBC capital markets. Your line is open.
Yes, hi, thanks, so much I'll add my congratulations as well my question is on inventory receipts you had slowed them earlier had it back to school and it looks like that decision, obviously really reap rewards in the third quarter, maybe just how is it adjusting your views on inventory flows headed into holiday hurt in store inventories up 3% I, but.
Please so maybe just curious about the decision behind maybe adjusting some of those receipt timing is headed into the fourth quarter. Thank you.
Yeah, I mean for US it was really about the compressed calendar and we thought we had some opportunities that we hate may have missed a going into the quarter last year. So that was a it was in our plan.
At the beginning of the year and we executed good.
Your next question is from a Daniel Hofkin with William Blair. Your line is open.
Good afternoon.
I'm just a quick question I think you talked a little bit about home and I believe it was kids any other category commentary or kind of regional.
Variances, but you would care to comment on that's my first question I just had a quick follow up.
Yeah sure as Weve discussed kids was the top performing category.
Form it was pretty broad base to both cat across both categories and geographic regions. Aside from kids. Some of the shoes was also strong category geographically the southeast and southwest were also strong performers, but again performance was pretty broad based.
Okay and.
Any anything you can kind of as as you're getting further into that kind of being you know the improvement would then I'll ladies apparel anymore color you could share on kind of what what do your shoes were or have been <unk> that you're now correcting.
And then I guess lastly on not just online resellers curious if there's any updated thinking about you know what you're seeing out there.
Additive landscape. Thank you.
Oh sure so back to the Lady scenario, what I would say about ladies <unk> rather than rehashing is that we believe that we have to write initiatives underway to drive down. The road you know for the fourth quarter and then it into into 2020.
You have a continuous the improvement them and you know.
Although we're never fully satisfied with any part of our business never happy that you know it's moved into right direction and we feel like we have a strategy in place.
As because routes one time.
On the on the resell.
Competition relative to the you know read resale business model.
We believe we have a differentiated value offering you know we've obviously competed with many different retailers over the years than our focus is making sure. We continue to offer our customers the best branded value as possible.
Your next question is from featuring <unk> with Barclays. Your line is open.
Good afternoon, let me add my congratulations Barbara on to longer term questions and a quick one for Mike.
What if anything would you would have to happen for you to contemplate the launch of a potential ecommerce business and then how do you think about the expansion plans.
No in the U.S., what you know at what point in time, <unk> would you accelerate sort of in northeast regional expansion and for Michael.
You talked about some rent trends, what's happening with all small rent and is impacting it all sort of where your break even comp is on fixed expenses. Thank you very much.
Adrian I'll jump in there and take a take on three of those so on E. Commerce. Our view has not changed we think that the moderate off price business, which is what we're in would not work in an online environment with a 10 to $11. A you are the economics with free shipping.
And returns are just not financially sustainable and we don't see anyway that that business would be accretive to our to our profit in terms of real estate road over the next several years, our focus will continue to be.
Building in the Midwest about call it.
10% to 15% of those stores and a continued to grow in existing markets and we'll continue to do that over the next couple of years before we would enter into the Oh rest of the country, including the northeast.
And then real estate trends really are not significant changes, we've not seen any significant changes in terms of rent or lease terms recently.
Your next question is from Michael Picken with Nomura. Your line is open.
Thank you guys are two follow ups.
Juan Carlos we're supposed to be a three cents to the back half you said one to two in the fourth quarter does that mean that they impacted by one to two cents in the third quarter. In other words are we still looking for three cents in the back half.
And then a follow up on the fourth quarter guidance any slightly higher pretax expenses should we consider those to be one time as that two cents benefit that you mentioned you specifically called out as onetime or are these slightly higher pretax expenses more just ongoing business expenses.
Mike on on the terrorists or original guidance assumed a penny impact in Q3, and then the one to two cents in the in the fourth quarter.
As I mentioned earlier, the tariffs just went into effect.
For the latest fronds tranche for a a in September so mid mid quarter.
I would I'd also say that we had pre Sarah packaway inventory and pre to tear purchase orders.
That enabled us to mitigate the impact in Q3, where you saw <unk>, we had a 20 basis point improvement of merchandise margin.
On a two cents of additional expenses those are just for we expect this just before Q4.
Your next question is from John Kernan with Cowen Your line is open.
John Kernan with Cowen Your line is open.
[noise], Hey, guys think sorry about that congrats on another nice quarter.
Just wanted to go back to the inventory question.
Your inventory turns improved consistently.
The last several years, it's obviously had great effects on free on the growth of free cash flow just wondering.
How much faster you think you can try and how much more productive.
You think you can be with inventory and working capital. Thank you.
You know I think going forward, it's been down if you go back a decade I mean, we brought down inventories.
Over 40% in front of the customer.
Given the way we plan to business, if we posture the the plans at a at a lower level and we can beat those plans that's really like margin that's our opportunity.
To turn faster.
Your next question is from Atlanta, Telsey with Telsey Advisory Group. Your line is open.
Good afternoon, everyone. Congratulations on the very nice results can you. Please talk a little bit about beauty and women's apparel are you still seeing the progressive improvement from Q1 in Q2 that was in the plan and on the beauty side, how is that growing and as that becomes a larger piece of sales. Thank you.
So the beauty business has been one of our growth areas and continues to expand as we add additional classifications of products and broadens the assortments and so we feel good about beauty as the growth business and it continues to grow.
Yeah.
Finally quarter to quarter.
Ladies apparel business, you know as we've gone through the year has progressive Lee.
Improves and as I've said as as we were looking forward you know, we expect to see ongoing progress.
Your next question is from like Virtu with Wells Fargo. Your line is open.
Hey, good afternoon, everyone I'm question for the team Oh, I guess just high level question nothing specific but you know the company had a decade plus of margin expansion behind them in and you know this will be the second year in a row of operating margins declining.
Just I guess my question is the outlook for freight seems to be a little bit better the outlook for wages doesn't seem like there's any broad base wage inflation to be can make sure can this can the business get back to potentially a period of of margin growth I'm just kind of curious the puts and takes again, just just big picture looking out.
Yeah, I I think if we look ahead you know certainly we'll start a year with you know cautious outlook on sales and and drive the head of the sales plan, that's where a margin opportunity is going to be this year I would point out even though.
Weve been able to mitigate the tariff impact you know the home accessories and cosmetics Unitranches one through three had been in place all year and you know we spent a lot of time trying to mitigate those and then you know here with returns for so again, what's there.
Front going into next year is tariffs, which are very and services.
Your next question is from Marni Shapiro with retail tracker. Your line is open.
Hi, everybody, congratulations and I'd like to add it's a pleasure, having such a boring conference call.
[laughter] [laughter], that's a compliment it's a great thing every time.
Well, Brian a big picture Ladies question Party. They spent a lot of talk about the lease business.
When the business got tough in the stores did you see the shopper not buying or was she shifting to other departments, whether that's anecdotal or you can you can tell by her receipts and credit card data and if she wants shifting to other departments are you seeing that shift back or is she took buying more.
Sure I'm curious how the dynamics working in the store.
I think would look I think you know when you're Lady ladies apparel business. It's tough it you know our core customers. The woman. So obviously you know it make it makes the entire business more difficult, but you know we think about ladies customer. We don't think about her is just apparel. So we think of promotional.
Basically so we think the Paris apparel and shoes in cosmetics, all the handbag all the things that satisfy her.
So you know when when this is all accessible so this isn't going to be anything from you know any fact other than.
The other businesses that were healthy like beauty were healthy they helping continued to grow lady's, let's difficult and so you know I I don't necessarily I I think she bought others other products in the store. However, I think she probably would've bought those.
Product, even if ladies apparel had been good or better I should say then then what it was because those businesses are growing you know.
That's potentially and there's lots of products and things for her to choose them. So I think in the end at all just becomes about the assortments that we deliver if we deliver compelling bargains and compelling assortments.
Now and we do that and ladies apparel than we do with all the other things that satisfy her personally all businesses and all ships will arrive, but I think also when you know we don't do that.
In an area as big as ladies there potentially some total impact I think to the total store, but I think that's very difficult to quantify but if we think that he's our core customer.
No.
It was the logical.
Your next question is from Bob Terminal with Guggenheim Securities. Your line is open.
Hi, I'm. Good afternoon, I'm just I was wondering if you could talk to did weather impact your business at all throughout the quarter and it was there any variation sort of month to month and I guess the last piece you mentioned handbags, but could you maybe just talk about minimum handbags and accessories and how that as a category in are you seeing play out at this point. Thanks.
Yeah sure. This is Travis we don't specifically comment on results from month to month generally speaking it wasn't a lot of variation in terms of whether again it wasn't a significant impact at all for the quarter.
In terms of accessories and performance again, it perform pretty close in line with the chain.
Since our last question comes from a Laura champion with <unk> capital. Your line is open.
[noise] should be quick one on the ladies business was a youre down more in that category than it was for the company overall.
We don't we don't generally talk about sort of yours by specific Atlanta business.
I've got a plan b the mid Atlantic [laughter], the Midwest region comps better than than average can you give us a reason why you think it was was the strongest region in the core.
Yeah. The Midwest has been one of our best performing regions ever since we entered the market. Many years ago you know we.
I think the customers responded well to sort of the values and the product that we offer them and so we've been very pleased with the performance ever since we entered.
Got it thank you.
Sure.
Ladies and gentlemen, this does conclude the Q and a portion of the call I'll now turn things back over to management for any closing remarks.
Thank you for joining us today for your interest in bras stores have a great day.
Ladies and gentlemen, this does conclude today's call. Thank you for your participation and you may now disconnect.