Q3 2019 Earnings Call

October 24, 2019

Before we begin let me remind you that statements made on this conference call and then the company's presentation materials about the Companys outlook plans and the future performance are forward looking statements actual results may differ materially from those projected.

For a discussion of factors that could cause actual results to vary from those contained in the forward looking statements. Please refer to the companies. Most recent annual report filed with the Securities and Exchange Commission and the presentation materials posted on the company's website on this call. The company will reference various non-GAAP financial measurements.

A reconciliation of these non-GAAP financial measure minutes to the GAAP financial measurements is provided in the Companys earnings release and presentation materials also today's call is being recorded.

No I would like to turn the call over to Mr. Casey.

Thanks, very much good morning, everyone. Thanks for joining us on the call before we walk you through the presentation on our website like to share some thoughts on our business with you.

Growth was driven by our wholesale and retail businesses.

Target Wal Mart any Amazon are three of our top five customers and they are clearly benefiting from the closure of Toysrus last year and gymboree earlier this year.

Level and quality of our inventories are in line with our plans and in good shape heading into the holiday season.

As to consumers engaged with our new omni channel capabilities, we gather data.

Our investments in digital shopping experience over the past year include a relaunch of our website. This summer which are driving more site visits more meaningful engagement shopping with us on line and higher conversion rates.

Our co branded stores provide families with young children. The convenience of shopping for two of the best known brand names and children's apparel.

By comparison Ashcroft b'gosh as a plane rebrand best known for its iconic overalls.

Together, our brands have the highest share of the 27 billion dollar U.S. apparel market.

Given the consumers' response to our Cobranded model, we see an opportunity to create a better experience for consumers in our Standalone brand stores.

Beginning early next year. Some are most productive oshkosh products will be sold through many of those Carter stores.

Our wholesale segment was the strength of our business in the quarter, we continue to see an acceleration in demand for our exclusive brands, which collectively were margin accretive in the quarter.

Oh gosh, the gosh is contributing to the growth in our wholesale sales. This year in April we launched our Scotch and 600 target stores and plan an expansion to 1100 doors. This December .

Target smartly saw the opportunity to capture a portion of the toddler apparel market opportunity made possible by Jim Breeze store closures.

International sales grew 1% in the third quarter influx reflect the change in our business model for China.

We saw very good growth in Canada's e-commerce sales in the quarter, but lower comparable store sales driven in part by prolonged somebody like weather.

Similar to recent trends in the United States, where weather has turned cooler sales trends are better.

We plan to launch ecommerce capabilities in Mexico by the end of this year ecommerce market in Mexico with several years behind the United States in terms of consumer acceptance, we expect that market dynamic to change meaningfully over the next five years and plan to capture this market opportunity as it evolves.

Our objectives in China. This year were to stop the losses from operating a multichannel model and transition to a licensing model with a better partner, which we have done.

Our licensee in China launched our Carter's brand with Cosco, China in the third quarter. It planned to launch our child to mine brand with Walmart, China next year or.

Our licensee is helping us build a stronger more profitable foundation for growth in China.

The licensing model enables us to establish a presence in Canada, and Mexico years ago, We hope to replicate that success with our new China partner overtime.

And Amazon is expanding our simple joys brand beyond North America to include Europe , beginning in the fourth quarter. This year. This initiative, maybe a good source of growth for us in the years ahead.

Our supply chain performance was exceptional in the quarter with on time deliveries of our fall and holiday product offerings. Our sourcing team has negotiated low single digit cost decreases for our spring 2020 product offerings collectively the stronger dollar lower cotton and oil prices.

Earlier this year President Trump had threatened to impose a 25% tariff on children's apparel sourced from China.

Unmitigated exposure to our business wasn't total estimated to be about $100 million on an annual basis. The actual tariff imposed is currently at 15%.

To reduce our exposure to this cost increase we reduced units sourced from China from 26% of our total units at the beginning of this year to 15% heading into 2020.

We also renegotiated product cross with our China based suppliers, who were eager to keep our business and share in a portion of the tariff.

The trade dispute with China is resolved and related tariffs suspended we could realize a meaningful profit opportunity next year.

Since acquiring skip pop in 2017, we have grown its annual sales by over 50%.

It's a terrific brand, providing essential core products, serving the needs of families with young children were glad we bought it it's supported by a wonderfully talented creative and innovative team.

The profit contribution from skip has not met our expectations, we expected by its second full year, it would be earning about $15 million a year, but it will earn less than $5 million. This year.

Last year Skip lost its largest customer win Toysrus closed international demand for the brand is lower than we had expected and its product costs increased.

Due to new China related tariffs.

Lack of progress improving skit pops profitability triggered the impairment charge.

That said given the slow start to fall selling we've tempered our growth estimates for the fourth quarter, given our outperformance in the third quarter. We are firming up our previous outlook for 2019 within the range of growth we envisioned possible this year.

Richard will now walk you through the presentation on our website.

Thank you Mike good morning, everyone.

Begin on page two with our GAAP income statement for the third quarter.

Reported results for the third quarter and year to date periods included unusual items in both 2019, and 2018, which are detailed in our press release and presentation today.

Excluding this charge operating income in Q3 declined about $20 million compared to last year, but diluted earnings per share down about 12%.

On page three we've provided some context on the charge in the quarter.

We acquired skin pop almost three years ago in early 2017.

We are required to regularly assess the carrying value of the intangible assets on our balance sheet and then a third quarter, we determined that the value of this kept pop trade name was impaired.

The reduction in value was driven by lower actual and forecasted sales and earnings for step up relative to our previous expectations.

Several factors have worked against us and the time, we have on skip Hot summer, which are summarized on page three certainly the loss of toys R. US, which was kept pops largest wholesale customer and more recently the imposition of significant tariffs on China imports are two of the most noteworthy.

As I've said, we continue to believe that's can pop as a very good asset for us we've been able to meaningfully grow the brand during our ownership and our forecasting it will represent over $200 million in net sales in the next several years.

We've integrated skip hop durable products in our store and online Assortments and the U.S., Canada and in Mexico.

And we've continued to grow the brands wholesale distribution in the U.S. and around the world.

We also remain focused on improving the profit contribution of the brand as we leverage the investments we've made and that's part of our business.

Our year to date gap you now is included on page four in addition to this kept chart skip hop charge I just covered our year to date results also included a charge related to refinancing our senior notes.

Relative to our expectations, we saw earlier than planned demand in U.S. wholesale and lower sales in our U.S. and Canadian retail businesses.

As we believe demand for fall product was affected by unusually hot weather, which has only recently begun to change around the country.

Profitability increased nicely in the third quarter with adjusted operating income up 7%.

Turning to page seven and our adjusted PNM for the third quarter.

Net sales were $943 million up 2% versus last year, we achieved growth in all of our segments, which I'll speak to in more detail in a moment.

We managed to spending tightly on the quarter with adjusted EPS Jeanette growth of about 1% and achieving about 20 basis points of leverage over last year.

Our adjusted operating income grew 7% with 60 basis point expansion and adjusted operating margin.

Below the line third quarter net interest and other expense was roughly comparable to last year at $10 million.

Our effective tax rate in the third quarter was 18.2% a bit less than our year to date effective rate of approximately 20%.

Our average share count declined 4% compared to last year, reflecting the benefit of our use of capital for share repurchases.

So again on the bottom line third quarter, adjusted EPS was $1.87 up 16% compared to $1.61 last year.

On page eight we've summarized our year to date adjusted results through the first three quarters net sales grew 2% to $2.4 billion. It's worth noting we've managed to spending very well this year with adjusted EPS genetic essentially flat in dollars and down 50 basis points and right.

Turning to page nine with a recap of our balance sheet and cash flow.

Our balance sheet and liquidity remained strong at the end of the third quarter, our cash on hand and available capacity under our credit facility totaled approximately $625 million.

Net inventories at the end of the third quarter grew 4% compared to last year inline with our forecast.

Our excess inventory position was meaningfully lower versus last year's third quarter. When we were working through the unplanned liquidation of toys R us and excess inventory in China under the previous operating model.

We are forecasting that net inventories will be up in the mid single digits at year end.

We've generated good operating and free cash flow in the first nine months of the air and expect to do so in the fourth quarter as well.

We recently reached an important milestone and then our cumulative return of capital to shareholders. Since 2007 has now reached a total of $2 billion.

As a segment results for the year to date period are included on page 12 for your reference.

Turning to Sue third quarter results for U.S. retail segment on page 13.

Well the U.S. retail segment sales grew 1% in the third quarter total comparable sales declined to just under 1%, reflecting good ecommerce growth that was offset by lower store comps.

U.S. retail sales in the third quarter got off to a good start with the July 4th holiday selling period, but were below our expectations overall for the quarter.

As mentioned, we believe the hot weather across the U.S. and Canada dampened demand for fall product substantially all of them as to our forecasts in our U.S. retail business occurred in the month of September .

Demand from international consumer shopping in our U.S. stores and on Carter's Dotcom showed some trend improvement versus the second quarter that the recovery was not as strong as we had forecasted in part we think because of the continued strength of the U.S. dollar.

As Mike mentioned, our October month to date retail comp in the U.S., a slightly positive inline with our plan.

Our net store count at the end of the third quarter is pretty consistent year over year, but the quality of our store portfolio has continued to meaningfully improve we've closed over 20 underperforming stores. This year, a good portion of which were older legacy outlet locations.

The new stores. We've opened this year have been Cobranded, Carter's Oshkosh locations, which are performing well against their pro formas.

The adjusted segment margin for the U.S. retail segment was 10.9% and the third quarter and improvement of 60 basis points over last year.

This performance reflects product margin expansion and ecommerce expense leverage partially offset by store expense deleverage on lower comparable sales.

For full year 2019, we expect U.S. retail segment net sales to grow in the low single digits, along with operating margin expansion.

On page 14, we've included a thought of a new Cobranded mall store near Richmond, Virginia, and this store, which opened just recently.

Testing a focused assortment of newborn to five t. product in a slightly smaller footprint than our typical co branded stores.

Turning to page 15, we continue to make progress with our marketing and omni channel initiatives.

We launched the Carter's credit card nationwide at the end of the second quarter Carter's credit card is integrated with our successful rewarding moments loyalty program and is off to a good start.

We're planning for good growth in the program in the fourth quarter, when we typically see much higher levels of store traffic.

Q3 represented the first full quarter of availability of our same day buy online pickup in store service.

This capability allows us to leverage our store inventories and get product into the hands of our customers in a very expeditious manner.

Lastly, we're piloting historical element of online orders and a select group of stores.

The initial test has utilized to stores on the west coast and has meaningfully improve service to our customers and this geography, resulting in delivery times of three days or less on average.

Longer term, it's possible, we could make use of stores in other parts of the country to improve service and delivery times more broadly.

We think this capability may also be an important way of addressing the trend of rising cost to serve within the ecommerce channel. We will continue to read this test during the balance of the air.

Moving to page 16, with an update on Carter's dot com over the past few months, we've relaunched our website with a number of new and enhanced capabilities.

We have improved site navigation may decide easier to shop for guests and to assemble outfits and enhanced personalization.

One important changes that Weve replatformed, our site to better optimize performance on mobile devices, which customers are using more and more frequently as they shop online.

On the back end, we've also upgraded our order management and call Center technologies to improve response times service and better integrate with our omni channel capabilities.

In addition to our website were also making investments to strengthen our mobile app, which we plan to relaunch in 2020.

On page 17, we've summarized the latest data on consumer engagement with our brands on social media, where we continued to build on our leadership position in the third quarter.

Other moms get a lot of their information on social media and I'd like to share their perspective and interact with their favorite brands online.

During the third quarter, our posts on Instagram continue to drive the greatest engagement with moms among peer brands.

The next several pages. We have included in some examples of our marketing for the upcoming holiday season.

On page 18, we feature iconic Carter's Christmas Pajamas. These products have become an annual tradition with many families. This year, we have even more options for the entire family to get into the Crescent spirit, including mom and dad.

On page 19, we show some of this season's Carter's products focused on making celebration of babies first Christmas special.

And finally on page 22, our focus on tapping into the a notion of the holiday season will carry through to our store experience as well the windows of our stores will feature product displays focused on holiday family dressing as well as key promotional messages to drive traffic.

Turning to page 23 with results for our U.S. wholesale business and the third quarter.

Our business isn't U.S. wholesale was strong with stronger than we had forecasted as several customers accelerated their demand for fall seasonal product.

Given its earlier demand in the third quarter, we're expecting U.S. wholesale net sales will be down in the low single digits in the fourth quarter.

But we'll be out in the low single digits for the full year.

We've had good traction with our age up initiative at wholesale with sales of toddler products up double digits to the first three quarters of there.

Adjusted segment operating profit grew 8% to $73 million compared to $68 million last year segment operating margin improved by 90 basis points to 20.9%.

This margin performance reflects lower inventory provisions and lower bad debt expense.

Offset in part by lower royalty income.

For the full year, we're planning U.S. hole to U.S. wholesale segment margin to be approximately 19%.

On page 24, we've included some lifestyle imagery from simple Joyce our exclusive brand with Amazon.

Watched only a few years ago. The simple joys assortment has expanded to include a wide range of products for newborns and toddlers, including shoes and accessories.

Recently launched categories include new new holiday Pajamas, outerwear sleep bags and additional sets.

Well George has posted good growth this year and we're expecting continued good growth in the fourth quarter.

Moving to page 25, and international segment results for the third quarter total International segment sales were up 1% and up about double that on a constant currency basis.

The most meaningful component of our international operations is Canada, which had a down quarter in at stores similar to the U.S. temperatures in Canada, where unseasonably warm throughout the quarter affecting we believe demand for fall product.

We did see strong demand online in Canada is continuing to Goodyear, we're having a Canadian e-commerce .

Consistent with our experience in the U.S., we've seen demand pick up in Canada as colder temperatures have arrived in a more consistent way.

Yeah, good comps planned in Canada for the fourth quarter, we've improved our in store inventory position and the quality of the assortment versus a year ago.

International segment operating profit grew 4% and the third quarter with operating margin up 40 basis points here again profitability was affected by the lower Thompson, our Canadian retail stores and the negative effect of the stronger U.S. dollar.

Benefited in the harder from the elimination of operating losses in China as we've transitioned in that market to a full license business model.

Beginning on page 26, we've included a few photos of two of our newest retail stores, which we've opened to near Mexico City.

Cash and skip Hot products, then available in our current Mexico retail stores.

Initial results have been gut and these stores our teams in Mexico is doing a good job and growing the distribution of our brands in this important market working in partnership with our U.S. team to leverage our broader retail marketing and supply chain capabilities.

We expect to open to more of these larger co branded store locations in Mexico in the fourth quarter.

On page 28, one of our International partners recently opened a new Carter's store and Argentina, bringing the store count to three locations in this market.

Our brands have a strong following with Argentinian consumers, who have historically driven significant demand and our U.S. stores and on Carter's dotcom.

Collectively our and our international partners present, our brands and nearly a thousand points of distribution around the world at wholesale and then freestanding retail stores.

Now moving to page 30, and our outlook for the balance of the air.

For the fourth quarter, we expect net sales will grow approximately 1%.

Planning low single digit comparable sales growth and our U.S. and Canadian retail businesses.

Again as a result with a strong demand we saw in the third quarter. We expect U.S. wholesale net sales will be down slightly in the fourth quarter, but up low single digits for the full year.

We expect fourth quarter adjusted earnings per share to also grew about 1% over last year.

We are forecasting comparable gross margin in Q4, we expect to benefit from a higher mix and contribution from our retail businesses and continued progress in pricing.

These games will be somewhat offset by the impact of incremental tariffs, which we've estimated to be approximately $4 million in the fourth quarter.

We expect to continue to control spending well in the fourth quarter with some modest leverage planned.

Risks. We're monitoring include the success of our marketing and pricing strategies the level of international consumer demand in our U.S. retail businesses.

The performance of our U.S. wholesale customers and the status of trade negotiations between the United States and China.

Our first question will come from Ike Boruchow with Wells Fargo.

Profit for the wholesale business for the year and you maintain profit for retail so I'm just kind of confused because it looked like wholesale was good and retail was a little weaker, but but the down but the guidance or it's coming down on wholesale versus retail can you help me understand what's going on there.

Yeah, I would say, we have a slight change in our forecasted mix of products and that carries with it sends some changes in the margin of profit outlook for for the for the fourth quarter primarily for wholesale.

Got it so the second question is on tariff. So two quick questions. One you said 4 million for Q4 is the 30 million an annualized number or should we think it's 34 million because.

No, it's it's a less than $30 million and that's up for 2020.

Okay.

Got easier I guess, what back this year in 19 is closer to 7 million.

[noise] about 4 million for list, three and 3 million for list for [noise].

Well I guess, what am I guess I'm getting at is we know what's already in place now if the Sars tariff did not go into place what would that number move lower too.

Yes, my understanding is if the if the October delayed tariff action as well as December 15th action, which has not been commented on recently were to not occur that reduced reduce the whole lot impacting 2020 by about $4 million.

Hi, good morning. Thank so much for taking my question I sat in the corner.

Okay, Great and then added something if you can maybe talk about your performance have your mall based stores versus your other stories. They just curious did you see any benefit from the shut down it can vary in those mall based stores. It then performance like notifying all very since the off mall.

Just a four or five years, but we identified earlier this year an opportunity to explore some portion of about 100, New mall opportunities. We always had a bias against loans because strip centers felt more like outlets to us and we've had a good experience in the outlets over the years, because the number one market share and number two market share in the.

Outlet centers, so we evolved from the outlooks into strip centers.

We stayed away from Alex I malls, rather malls at the beginning his mall stores at the beginning this year alone. We're only some portion of about 6% of our total store portfolio. So I would say were under.

Great and laugh when it make enough when mark and on the performance that baby person toddler versus older Kids. I think you had said baby wasted pressure point, which I believe maybe all year just curious if that's improved in all now and then also maybe if you could talk about I think hi, Larry you mentioned much at double digits, but then there's change the older.

Can't that performing fair. Thanks.

So so overall I think it's what's important to note the baby apparel market to let latest data we have the market for baby apparel dropped from about 9 billion to 8 billion. This past year. So the market has been down that said our baby apparel sales this year will be comparable year over year. So we view that.

All of our nearest competitor Tyler as a company grew a over 4% year to date. The strength has been this have come from this a age up initiative that we launched a couple of years ago, a we've seen the highest growth in our four to 14, a each segment. That's that's been a good source of growth for so our merchants are designers.

Our sourcing teams involved in a good job.

They they the number one request we've had from people shopping with us over the years they wish they could stay with the brand longer. So we can develop developed a product offering that enables them to stay with our brands longer and they've responded positively to the strongest growth is going to the older age segments like I'd just add that the the wholesale accounts as part of Egypt stretch are also.

Leveraging our brands to grow their toddler business, where the gymboree opportunity. We've had we've had a good business at Kohl's and Macy's, but Lester Amazon added.

Tolerate segments, which is doing really well, we've got incremental distribution in Walmart. This year, we child the mine for Tyler, they're expanding and 2020.

And then we gain policemen and target for spring of 2020, but that just one you ran for Tyler. In addition to two aren't growing business with the Oshkosh brand a at targets. So Oh, we certainly excited about age up not only for our retail business with the new sizes, but in wholesale more of a toddler play and they're reaching out to us and we feel good about that.

Great and they can get like this holiday.

Thanks very much.

Thank you. Our next question comes from Paul, Let's you with Citi Research.

That would make you think that that better demand wouldn't wouldn't continue in that in that wholesale business. I guess, that's a question one and then on the retail side curious on the launch of the credit card how much of that helped the business what percent failed to that represent you know that private label credit card and now where do you hope that would go and for.

Where our experience over the years tells US is when you get new product the hits the floor. It drives better selling so I think they anticipate in anticipation of a good holiday season. They wanted to get the product on the floor sooner if the product sells well that that may lead to better better demand than we're currently forecasting for the fourth quarter.

More to share next year.

Good morning, guys. Thanks for taking my question I just on the gross margin outlook for fourth quarter, given the price increases just curious why don't you expect to see margin improvement there and how you see gross margin by channel in the fourth quarter and whether the promotional environment, having any impact on your outlook.

Thank you my congratulations on a a great start to fall here I'm, a little by little bit more color. If you would on the pricing progress that you that you all are making I you know I'm hearing, but I don't want to read too much into this or are you characterizing it is coming.

I know, it's still little bit early so just wanted to kind of get a little bit color there. Thanks.

And when they come in the store, we're experiencing about a quarter of the time they buy additional product, which is great. So I would say was low single digit a portion of the online orders out of the gate, which was good it was on plan.

Right. Thanks, Good luck for holiday.

Thank you.

Thank you. Our next question comes from Jim's Garcia with Monness Crespi in Hearts.

Hi, Thanks for taking my question.

I guess, how long is just you know a new business like that take to ramp to maturity, how long did Walmart and target take after you launch those businesses. Thanks.

Oh, the margins have improved scale, the business is growing or they're going to expand to the E. U five countries next year I.

So I wouldn't say was meaningful it started to recover in the third quarter, but with the forecast on exchange rates were I don't think.

The tough weekend for you how did that perform I know you said September overall was challenging but have to labor day, specifically work out for you.

It's about a 10 comp last year, they were comping up one, which we'd say comping up one against.

A couple of up 10 last year is a good performance, where we had a tough comparison were hopeful that as we move into the balance of the quarter cooler weather arrives at more parts of the country and and don't be on track to achieve a two to three come for the fourth quarter.

Right, that's looking for holding thanks very much.

Great. Thanks, So much you just if you think about your wholesale portfolio you know the last few quarters, you've talked about toys R. US it's come up on this call that was a headwind somebody other.

Retail partners that have caused a lot of stores has also been a headwind looking at the portfolio as it stands today and thinking about next year you know how do you evaluate how store closures might impact your wholesale business you know looking out into 2020.

We are proud about the fact that you know we think we're gonna have record sales with four of our top five accounts and they're gonna collectively grow double digits. This year. So the teams are doing a great job on there and then in the mall based department stores are around 11% of our sales now. So there has been a rotation in the channel shifts there's no question.

Plans to really highlight the gifting opportunities for Carter's he just remind us of you know how you felt about gifting in 2018, and maybe what you feel about the bonus plans and strategies for 2019, and if it represents an opportunity to drive incremental pop in your stores this year.

Yeah, I think gifting is a key opportunity we're focused on one of our key strategies and the company on the five pillars of growth is really to win in baby. It is a you know it does represent a little more of a challenge based on what might talk about where the market, but we put I would say significant efforts forward, we remodeled or the front of of our about 400 stores. This fall with ER. This summer I should say.

Yeah, I would say we've invested significantly in the first few years too.

And then maybe last one you know did the website relaunch have any impact on sales was there any disruption or cause any slowdown in sales that might see where you might see improvement in fourth quarter and beyond next year as we lap it in Threeq.

No consumer embrace the changes right out of the box. We we had actually expected there might be some short term disruption as they've gotten used to the site and we were were surprised to see that there was there was no disruption so that the performance in the third quarter, an online was very good for us.

Okay got it thank you so much.

You're welcome.

Thank you. Our next question comes from Warren Chang with Evercore ISI.

Good morning, Thanks for taking my questions I, one follow up on Susan's question about the stronger trends on the non baby side.

We had some new tools this year to go after some of the opportunity that's opened up.

So the first is you know where where's the <unk> the agent product available today, and where the plan what are the plans to scale that out and 2020 and then the second is is the Oshkosh launch and target is that something some of your mall based wholesale accounts might be interested in.

I think there's two things in terms of Egypt, or you know that that strategy is for older sizes and for Todd that we talked about adding sizes in the past we added size eight a few years ago and it became about $100 million in revenue over three or four years, we just had one side and the Carter's brand. So fastest growing part of the business is is this age up strategy. This.

For the 14 range or the product is available primarily in our retail channel both online and in our source. We have had some folks in an wholesale pick it up primarily in sleep, where they do a very good job of older age sleepwear, but at wholesale I would say our age up strategy to grow beyond babies more of a toddler strategy, which I shared earlier with the please.

What do we have in some really great retailers in any additional distribution, we're getting balls. This fall and next fall. So we feel good about that it's the best part of the company.

In terms of growth in an ice kasha target as doing well.

We do have Oshkosh in several other accounts overall and we do expect to grow the brand.

Welcome.

Hi, Thanks for taking your questions <unk>.

I also think at 2020 and beyond you mentioning in your prepared remarks expectation. It's a good growth in sales and earnings next year, what would you like as the most significant drivers that for all at wholesale Scott, but really more broadly behind what would still be and implied reacceleration in earnings growth.

To get back on track with your five year plan to take care of 7%.

Well, we're not we're not planning if you're talking about sales growth our earnings growth at 7%.

Yeah the earnings cash.

So right now our expectations that we will have a low single digit growth in sales mid single digit growth and operating income in higher single digit growth, a any P.S. and ER and again there are number of margin opportunities that enable us to have better income operating income growth relative to sales will have a higher mix.

Cobra co branded stores fewer margin dilutive stores that we were of will close over the next five years, we'll close at least 100 stores over the next five years.

Hi, Thank you very much you're welcome.

Thank you that concludes our times for questions and answers I'll now turn it back to Mr. Casey for closing remarks.

Thank you all for joining us on the call. This morning, we look forward updating again on our progress early next year Goodbye.

Thank you, ladies and gentlemen that concludes Carter's third quarter 2019 earnings Conference call you may now disconnect.

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