Q3 2019 Earnings Call
Well, we want to Asia, you continue experience weakness in traffic trained you know a brick and mortar stores integrated China region as the business disruptions caused by the ongoing process in Hong Kong and U.S., China trade tensions continue to impact business. These declines were partially.
Offset by favorable results across all digital businesses and the other major markets throughout Asia.
As a reminder, Calvin Klein as of significantly larger business present in Hong Kong than most of our competitors.
Moving to North America revenues declined 5% as planned largely driven by a decision to license the women's June .
Right.
Despite the challenging North American environment, Calvin Klein, North American business posted a healthy increasing earnings driven by significantly higher gross margins than last year.
I hope that we continue to see positive results from the digital businesses in our retail business constantly down 4% as we continued experience, but we can see traffic and consumer spending trends, especially in a international tourists locations.
You saw significant margin improvement compared to last year, driven by lower clearance markdown, we continue to be in focus on enhancing I'll store productivity as well as on merchandising efforts, which we believe will pay their any as we move forward.
Finally, our heritage businesses had a difficult quarter revenues that according to down 30, 30%.
Double store sales down to this day either margins, we met remained under pressure down 180 basis points as a wholesale and retail businesses experienced grossed more pressure attributable to the weakness in the overall North America, we can't last game.
Oh mass and Pureplay businesses continued to outperform our department store, a meteor counts in line with industry trends as we look to 2020, you continue to seek ways to optimize and streamline the heritage plans business <unk> returns you know.
Show business, we are looking at each brand services business bass.
Reevaluating the license plans, you know dressed functions and sportswear businesses.
In retail we can see the key to CUNY focused how we can spoke to rationalize a store portfolio that'd be move into 2020.
Finally, I <unk> as you look to the fourth quarter.
And actually are reporting before the Thanksgiving holiday I can only comment on trains. So the first two weeks of November which you have started off somewhat ahead of plans, but given the calendar shift business is difficult to the although I am cautiously optimistic about the holiday season.
We have taken a conservative approach to rejecting a fourth quarter results and I believe it or well position for the fourth quarter to outperform our sales and earnings diving. Despite the overall uncertainties until retail landscape.
A lot of turn it over the Mike to provide more color around our third quarter fourth quarter outlook.
Thanks Manning the comments I'm about to make up based on nine gap results in a reconciled oppressors.
And I got burnings per share for the quarter was $3 and cents that I was 10 cents better than the top and give up previous guidance. The beep is driven by strong Tommy Hilfiger performance in Europe , and Asia Pacific The actual deep from the business was about 20 cents with interest also better than guides like two cents plus.
Really upset by tax expense, which was higher than guided the 12th sense as a result of time.
Part of the businesspeople due to the acceleration 20 million of Tommy Hilfiger International shipments and it's shifting the timing of marketing expenses, which both benefited Tommy Hilfiger in the third color.
Ships when negatively impact the fourth quarter earnings projections by about 10 billion.
Moving out the guidance, they're still finding revenue in earnings conservatively for the fourth quarter pressure continues in the channels. We operate in North America as we look at the balance or the.
Continued to see heavier industrywide inventories and the channel than last year, along with a decrease in traffic.
International consume mystery shopping a tourist outlet stores or not in the U.S.A. at the same levels as last year.
In Asia and businesses continue to be impacted by Hong Kong protest, along with over a week or traffic jams across China.
European businesses receive Tommy Hilfiger, outperforming plans and Calvin Klein slightly better to flat.
The significant amounts of business to be done in the upcoming holiday period and with their earnings released earlier than prior years, you'd not reflected current trends and instead of reflected trends more in line with third quarter into the fourth quarter of current trends are somewhat better than our plans.
Also not going into changing the level of promotions in our business. We have anticipated a highly promotional math will retail environment and elevated industrywide inventory levels and all channels will result in higher marked down and then turn loads of some watches.
The full year 2019, we're projecting non gap earnings per share to be $9 and 43 to $9.45.
The much tighter arranged in a previous guidance with an improvement as 13 cents on the low end of the range and five cents on the high end of the range.
Total aspect head when I'm year continues to be estimated at 35 cents of translation no change to a previous guidance.
Continues to include the negative 20 cents impact from tabs.
Overall for the year, we're projecting wrestling revenues conservatively and to grow approximately 1% as recorded and approximately 4% on a constant currency basis.
Hilfiger revenues applies to include 6% as reporters and 9% on the kind of concurrence who plays basis.
Project, Calvin Klein revenues to be down, 2% as recorded and flat to last year on the constant currency basis.
Heritage businesses plants will be down 3% to last year.
Overall <unk> operating margins are planned down 60 basis points can be it.
Hilfiger operating margins of plan down about 120 basis points, which the prior yet.
Fourth quarter, Tommy Hilfiger, operating margins will be down almost 400 basis points.
Majority of this operating margins decline is in North America.
But it's also negatively impacted by the timing and Tommy International I mentioned earlier.
Calvin Klein operating margins are Brenda 50 basis points for the year and our heritage business operating margins are playing down 150 basis points for the.
Although you are holding our overall operating margins to a previous guys. We aggressively cleared inventory in the third quarter, resulting in gross margins lower than the class.
He said to continue to aggressively clear inventory three the fourth quarter and and media within mentors flat first the prior yet.
Lastly, we continue to plan Sherry purchases for 300 million on the year and a long term debt repayment plan to $50 million.
And with that operator will open it up for questions.
If he would like to ask a question. Please signal by pressing start one on your telephone keypad.
If you're using a speaker phone. Please make sure your mute function is turned dots to allow your signature retry equipment.
Once again that is star one to ask a question.
Well take our first question.
<unk>.
Yeah for morning.
Like when you get to talk about the promotional levels in the third quarter and in your expectations around promotions in the fourth quarter can you just talk through a little bit it'd be assumptions around mark down support the assumptions around you know just you know the absolute rich that you have any environment.
Just just how conservative here planning, the fourth quarter, and especially around gross margins.
Sure I look I think you know I mean, you see the results.
Especially some of our key accounts department store snack to <unk>, it's it's the third quarter as being somewhat disappointing when you look at the conference in the margins and we're expecting that that anyway.
Rejection point of view or projecting not trends continue.
I really believe there's very little legs.
Guidance and projections for the fourth quarter.
Bills being.
<unk> you know conservative estimates.
Margins and for what would be necessary as as well as a long gross margin walk down activity.
So I'm healthy environment I think we were in very good position.
To capture that as we go forward. So I think we only out.
The consumer and have a holiday trying to call me. It's given the calendar shift is shorter time between Thanksgiving and Christmas. It's just a hard a season to project at this point.
<unk> given our systems.
He's on a daily basis and walk away quickly like we'll stay on top of it but I I feel I feel good about offers Galveston projection for the core fourth quarter and feel that you know do you are really good shape to outperform against that guidance.
Yeah and.
I'm just wondering if he could spend a little bit more time on.
In Hong Kong, and and I guess more questions or are you, saying the impact from the Chinese U.S. trade relations impacting shorted the branch Tommy Hilfiger, Calvin Klein and when you think about the results there.
And you can you just talk generally around the total exposure that you have at this point on Hong Kong. Thanks.
Sure I really think the last part so I guess Hong Kong Who's just sitting there is about just a little bit over 1% of their own business hundred million dollars volume to that market and then we'll get back specifically, it's a big it's relatively speaking about competitive that is a big business for us some highly profitable.
So that's putting pressure on the region I think when we we've done during the third quarter. We do that we did some brand work in China around one issue you just talked about and we did not see from talking to consumers panels, and and talking to consumers, leaving office door.
You know talking over a thousand consumers, we didn't see any deterioration in the strength of our bland, although receptivity by both the Calvin Klein and Tom also good plan. So we haven't seen no I know some people are concerned about this.
Negative reaction to American Bland, we haven't seen that in any significant wedding in China, what we haven't seen it in a in putting in contact <unk> you know Calvin in particular was the first move instead of China market, we have a large.
Larger than most of our competitors position in China.
<unk> and we'll see the pressure on the brick and mortar store <unk> those quarter.
And I think that's really just and that kind of you know what position as a premiums I I'm not a luxury brand at a premium brands I think that particular segment of the market is P.L. in the classroom.
Consumers feeling we project so you're missing negative comscore trains in all brick and mortar and despite really strong growth on the digital platforms, given the size of or within one of the that it's not enough to offset that amazing trend. Some of other competitors have relatively small school days.
And I were always similar to our online, but they don't have the pressure that we have lost stores I think you know as he turned into the fourth quarter between.
<unk> my comments.
Two weeks all we'll see if that continues but that's good with some some way as we move into the the important fourth quarter in China. So we'll see how that all possesses that <unk>. So.
Expanding happy thanks, Yeah.
That'd be nice good enough.
My next question comes from airing Murphy with Piper Jaffray.
Great and good morning meeting or something you can talk a little bit more about your view on the current cycles.
Yeah.
It seems like from from a year periods.
Go down in that trying to just curious how you feel the tiny brand of position. They speak I went to 2020 and securities on overall.
I think all.
Look I think it's a good call out.
Psycho I think there's there's still a key portion of the businesses gone there I think as we move into spring in the United States, You'll <unk>, we'll see a.
And share tobacco is more hawk or sportswear.
Glories key items core.
And you'll see more <unk>, you'll see last logo products still appropriately. The brand is always has important components in logo, but we're not happen that we both both you know in both in the performance area down on the area logo continues to do.
Keep part of that business.
Being strong trends in the atomic Jews business overall.
Actually I think we move even pre her to move away from the logo trends, particularly in Europe and Asia I think we're we're benefitting with that with bad shifted cosine strong growth.
<unk>.
Jeez.
It throughout Europe , and Asia, and I think that trend should continue as well. It's it's clear both for Calvin and comedy logo is continues to be <unk> important part of the product offerings, but it's just you just reduce the the exposes too.
<unk>.
Okay. That's helpful and then I guess your second question.
<unk>.
That night last last year, they get traces going unpacked, a little bit more on the driver <unk>.
String that market here in North America, and Britain and.
Okay <unk>.
<unk> you see it in the third quarter I think that you'll see gross margin improvement continues to fall quarter. I think you then when you look at operating margins.
Having on the shifting marketing and whatever I think you really need to look at the six months season. So I think you look a third and fourth quarter gross margins are we up in bulk water and operating margins for that period of time should be up as well as we've really been focusing on that product execution moving forward and I think.
So as you go into 2025 to keep party was already yeah.
Focusing on on our on our product walkways and enhancements that we see coming forward. So I think that's going to be a key issue for us to starting to see it now <unk> perform operating income performance and gross margin performance and that trenches K.P.H. and.
So instead of the fourth quarter.
Product, thank you and pay holidays.
Thank you. Thank g. is.
The next question comes from my company, which credits.
Yeah. Thanks for taking all the questions here, maybe I I know you don't want to get over your skin.
You know pass 2019, I know, there's some fairly.
Oh and tangible puts and takes in a business next year. We can see comedy was pretty good then doing this year I remember on this call a year ago.
And I talked about their being Sir translational effects coming in 2019 as you said there was no transactional effects. It's all been translational so far as you've recorded and pass transaction wise.
Down and down impact and the following year is it fair to assume we should already expect that shop next year, a little bit and then who knows on tariffs obviously dollar equal <unk>. This year is largely intersection half if there's no change you know, we'd probably get the other half of them. The first half of next year or any other broad brush strokes puts your takes we should think about.
Higher level about though you know though.
As your longer term earnings algorithm for for the business as we usually try to look at.
Well do I think you hit to to keep.
I I think you have to choose from everyone.
<unk>.
<unk>, yeah foreign currency transactions will be a haggling, depending whether dollar wanting to go out some time.
Cases, Dean whose heads out long before long.
As we look at it so.
Pat passes prolog.
That you will see that the command.
It's really hard to understand what's going on because we're not sure exactly what's going to be displayed given the false that are going on with <unk>, but you said it correctly work about 20 cents issue. That's a bigger tries to comes into the next year all exposure overall goes the other way.
<unk> did you say well in that you could you could stuff that.
What was this year is it.
You should see it's similar in style next year on top of that so how we're looking at it goes to keep football league or or what we're trying to now yeah I don't think it really.
I think you think about all the long term.
Algorithms I don't think it changes anything on a constant penalty.
<unk> zero or sales in there.
The 345 per se.
And we can only be go our our bottom line double digits <unk>. So that algorithms continues and we have to deal with <unk> currency.
Although unfavorable plus a business model I think the underlying distracted the brand continues to be a place in the coffee.
Gotcha, and let me let me ask you I guess a longer term questionnaire I have to ask if you think about you reflect back on this year last year I guess, you think about the next several several years in that business. How do you feel about your U.S. distribution footprint today.
I think.
Look I think you need I think on <unk> like when you think about the Calvin when Tommy brands.
We have significant.
Shrank result was brown and we will yeah <unk>, we have consistently style right channels of distribution for cell phone and it seems to department stores will continue to be a critical for portion of all gross so those two grand you know, maybe we'll continue to do <unk> keep.
Customer for us.
We can do a P.D.V.D.P. customers.
<unk>.
We also have a direct to consumer business here in North America, and I did we can manage that business as we go forward, Arizona customers gateway as well.
No no surprise when you talked about is is too much retail.
Real estate realized Dave I think we're going to continue to see that shift down for Ross, we've always manage the U.S. marketed as well as a slow growth market and will continue to manage it that way.
Online online.
Notice that continues to grow both <unk> directly and to a number of off to play we sell it.
I was Lucky Department store retailers here, so I I'm confident that that will continue wrote the real wrote for us with those aren't you glad she didn't continue to me international markets and that's how we're looking at it as we go from there.
[noise]. Thanks.
<unk>.
Thank you.
[noise] Hi next question comes from Chase Huh, what T.B.S.
Right. Thanks, so much as follow up on a tariff question you know it seems like for this <unk> the third quarter to fourth quarter, no prices were sort of blocked and that sort of put the burden of what's going to tear of costs more than France, and maybe other parties.
Just looking back over the last reminds us negotiations have gone on you know to see more of a sharing of the cost burden or ability to catch it on Oracle just give us any color about how the dynamic exchange about who absorbs the terrorists.
Look into.
You know it it is a it's continues to be a volatile environment there because the uncertainty just continues and using the talks go on and you know you hear one source telling you that is that there's a there's a there's a phase one agreement commenting that they'll be no <unk>.
Arabs and so it's very hard to plan.
Partly on this or he factors and all key factors are working with though.
<unk> spill and.
There's going to determine what happens posts blame as we move forward. If you know all these long lasting power saving short term in nature. If they continue to be short term and made sure I think I'll factories are going to partner with us to work through it as we go forward at the same time, we'll inducing all exposure we should be around.
10% to 12% expose U.S. for for the out of China will be about 10% of all overall <unk>.
And I think <unk>, three or four years ago close to 30, 540%. So I think we we are moving strategically at the time that that that should be somewhat of an offset <unk> targeted price increases as we go over that we have to be also <unk>.
Consumer and not going to hard too fast they're working with all these all partners. So that's an ongoing discussion and I think they're they're all leverage to pull and we we were pulled out.
So and so that it's it's a challenge and no certainty is is making it more of a challenge.
Got it and then I I apologize.
Term question, but just on the calendar this year for the six year days between Thanksgiving and Christmas you know I'm I'm sure as many retailers look at their concert over the last week, you know like significantly down European here and you see assumption is like over the next week. They you know everything gets make back up and everybody's back to square with X. like being that sort of just the rest of excuses. The rest of the season or you don't <unk>.
What point because she said at the top to call. It it's sort of hard to kind of figure out where the businesses that given the chefs you know at what point you you know say just the average retail at their decided okay things aren't tiny has finer what point is maybe the retail environment get concerned you know discount ships, having a negative impact if we give true cyber Monday and things aren't good then there's only.
A handful of weeks left before Christmas and then maybe people struck incrementally promote maybe more than they are exactly how does it how does it play out in terms of how retailers are going to think about their decision, making process you know because surely counter.
Okay.
[laughter].
Let me, let me start by saying is.
Our assumption guidance is it is going to be promotion.
Christmas is going to come late.
Incoming later it'd be throughout the last you know five years.
Later, and this compressed calendar I think is only going to put more pressure on it. That's why we're trying to be as Conservatives is we are about fourth quarter margins and fourth quarter small stress I think if we're going to get a really good picture you know the end of this as as we get through side there Monday in Israel.
Next week.
Is there.
Will be a catch up there, obviously, but how big a catch up and then how much.
Even if you are somewhat behind which I would expect to be because you have <unk> shopping days at that point.
There's going to sound you make the the next two or three weeks is going to what is going to be positive cost during that period of time year over year because of the compression on the calendar.
Everybody will be watching I I have to be honest <unk>. Our assumption is this going go be more promotional we feel that way because let's be honest <unk> was not as strong quarter seasonal weather patterns <unk> early selling this spring.
Also bouncing business early November so so so some really good sound.
Cold, which is a good so I. So now we're looking to see a little plays itself out and it's.
Nobody laws discounted setting up the way. It is like this is what we're trying as the only thing we're trying to be as prudent as you can about the Jackie out.
Yeah.
Got a super helpful. Thank you so much.
<unk>.
Hey, I. Good morning, everyone. I guess managed to question I wanted to focus on on Tommy Hilfiger profitability. So we saw the marches and thing two three and when you get the guidance for Q4 I guess my question is is what exactly was driving the marking degradation.
The promotions and to be leveraging in North America retail fleet and then the follow up to that is assuming that there's no improvement and tourism and and and and the dynamics that are usually causing that should we assume that that continues into the first half next year, because she really didn't start to see that pressure building until this quarter. So I guess, that's my way of kind of out.
On the market in performance into next fiscal year, well, no you're not giving guidance as it's safe to assume there's probably more upside or more earnings growth in the backup next year relative to the first have just kind of curious how you would answer all that stuff.
We're not getting guys can next year, but that we put some color. So because I think yeah. Some of what you're saying is <unk> is not <unk>.
The the.
<unk> convex, Tommy Hilfiger, 2000 and needs to.
<unk> North America costs, <unk> up between six and stuff.
We are strong trends come in.
Given that trying to business, we bought into a a portion of that sales glove.
We started to see in the first quarter of last year at starting February we started to see a will pull back and use the national terrorism trends in into the U.S. and he started with the negative com that intensive thought he was second so poor so.
Starts to lie <unk>. This this negative com score a trend beginning in the first cause we're really going into the second quarter, Oh 2000, and mine to see that comparison also we bought into into those sales training you know six months out.
<unk> it needs to be moved and we move the glass and we would lead to move to that in Minnesota and that's the question you saw the cell office flows some those big in the second in the southeast water and insist they call. This issue that we are assuming it's going to continue to be promotional so margins.
The under pressure in the fourth quarter that she needs a bit.
Close quarter, and then you should really starts a psycho that as you go into the second quarter of 20. Each one so I think that's got to look you have to look at it and keep in mind Tommy Hilfiger in North America business is coming off of three years of significant common store grow.
Into 2019 year 2080 was a record you know from Brian and I escaped so it laughing at as being challenges.
Bowling I think it starts to let allowed.
Which one each morning.
Makes many that's helpful and just a quick follow up I mean, we've had some consolidation in the luxury space announced this week.
Maybe your state of the Union on you know the industry is is challenged would you expect more emanating into space and then kind of how how how are you thinking about that as it pertains to to see your company.
Sure I think well the next 12 to 24 months I think they we tell factor in the retail cows sector is going to have consolidation beeps.
And given the dynamics of the industry.
To me, it's almost a given challenge I think.
You are I'm, an eight point of view I <unk>.
This point financial Fine with me markets are those strong.
Crazy is available we got was very strong balance sheet.
<unk>.
Transaction that we'd be looking.
The lucky both doing that one of the challenges you always stays as a sector has gone through a multiple compression is.
Looking at the stock price for the evaluation and they're comparing to that was 12 and 15 months ago and that we've decided when a bit.
My sense of what.
<unk> valuations option you are.
And all this uncertainty.
General feeling is there will be consolidation and then they will be a coupon from the P.H. as well and I will continue to look for opportunities.
Okay. Thanks happy holidays, everyone.
Thank you.
Oh My next question comes from being a caffeine caffeine by Jacob.
Good morning, everyone.
Just following up on the an acquisition you've done small acquisitions in like acquisition. We've done acquisitions is online and data and then you have also done brand acquisition. What do you think it's most appealing to you that helps to move the needle and and enhancing the platform at the entire business going far away. Thank you.
Sure.
The acquisition principally acquisition you Don has has been recapturing or Calvin Klein anytime you open your business International business.
Australian in South Asia, South East Asia, looking at the zero and number to transaction that you're trying to transaction the few years ago.
So that's been the focus of the last three to five years I take back that consolidation. There's a few things still to do but relatively speaking nothing but dramatically to use them either you know.
We're really reason behind as long Brandy design, we we think about can be looking to add.
<unk> portfolio or you know a collection of brands depending on the acquisition I think scale is becoming more and more importantly, I say.
Things that you need to make in order to be competitive digital journeys that we're all on the shifting channels of distribution moving online more more so we investments in order to compute the average you need to make I think scale becomes even more important as your best <unk>.
I think we have demonstrated track record of knowing how to do acquisition.
Grade them to get the benefit batteries out of it how to manage that from a portfolio companies, which I I think people overstated.
No you land is to keep what's critical to operate the brands alright keep those separate from the design products steady point of view and being able to leverage the back office all of the system capabilities and the strategy as you normally take advantage of that and make the investments.
Each of the blonde.
<unk>, that's <unk> aggressively look is due to moving in that direction.
Thank you.
[laughter] ticker next question from have there been skiing with bank of America.
Oh.
Oh, so cute.
<unk>.
And yet so it's just your thoughts on that it takes one is for operating American.
Oh.
According to that you'll be talking about <unk>, okay. They changed okay. It sounds like a new product.
He just talked about the trends are seeing I'll say, we have channel anything more often.
Yeah.
Okay. So I think what Ah Calvin business.
Here, we're looking at.
We're looking at operating margins up about.
50 basis points I think we were looking for slightly higher than that at the beginning of the year, but some of the pressures that's gone on particularly in Asia.
The Hong Kong and try to do everything has played impact on that.
I think over the next three years the opportunity to expand margin to another 200 basis points. I think if we are taking care of are not giving guidance, but I think if you're looking at next year.
Looking for something between 40, and 70 basis points <unk> <unk> <unk>, yeah, and hopefully get out the format, but that's how we're thinking about the business I think the second part of your question will one day and then.
Because you broke up a little bit apologize I think it would seem really well see good results.
Then product.
On the on Jews and bottoms is here to the United States. That's been the driver is is the bottom side of our men's business.
G. three just launched the one this product here in North America. It was set to believe that probably who's been outstanding.
Really strong sellthroughs, there and they're starting and they've gotten strong placements and I could you could just go to Herald square you see outstanding presentation. They have their <unk>.
And actually I think we're probably six months ahead of where we all enough America International product I think is really taking upgrades to see very strong. So please.
All tops and bottoms throughout Europe and in all regions would be Shoshana China's given the dynamics that are going on there you see this says there's a product. So I think this is good.
Products from the consumer.
<unk>, which is our best indications or continue to be very strong for the Calvin Klein juice products in the spring and initial also your product to spoil. So I think are on the right track with that product back to the brains.
And I think to reset tivity with our product that we see that ticketing international.
Companies in the turn around that.
Great. Thank you very much and and you could get my question to thank you.
Next question.
The next question comes friend, Jamie, Maryland, which <unk>.
Oh, thanks, very much just picking up on that and many topic you on you know at the friends that you acquire whether you have a preference for you know.
You know, what you know like Calvin Klein and kind of <unk>.
Interested in grants that have.
Africans humor kind of market strategy. Thanks.
But I think it's Tuesday I think.
I think is if you look at our balance or or wholesale or retail, we're probably a on a dollar bases with with with 55 45.
When you think about that really breakout and as you move internationally, yeah, even more go right to consume.
<unk> throughout Asia <unk>. The most part is is probably 80% <unk> direct to consumer and our your business is probably not 55, 45% range.
When you think about wholesale versus resell it too.
I said the market is different when you're in Europe , and when Youre versus the United States or when you're in South America, and and Asia. So you know or wholesale businesses continue to be on most profitable businesses overall or at least know businesses are highly profitable as well.
Hotel business.
<unk> and the Department store, a trap channel internationally continues to be really healthy for us I think we are comfortable running on both a direct to conceal model, which would which would be as both Calvin and find me any more comfortable understanding how to manage that whole said channel distribution.
Even more important to me how to manage both at the same time, we we have always been multi channel. We sell any we understand that you have to you know speak to the consumer wherever they want to buy the product and I think we understand how to really go after basketball smaller so it would depend on the brand aware that brand is currently intuition.
I'm trying to just to be I'll ask questions, but it's it's it's kind of hot.
We'll take our last question from John printed with County.
Make it more intense take my question.
Yeah that can you talk about.
Theme of speed any ability to flow inventory faster.
Control markdowns better throughout the entire retail ecosystem. It feels like there's a long term opportunity here I know you're you're using data you made a lot of investments in digital cap actually stepped up quite a bit they'll have several years I'm just wondering.
When you think P.D.H. in the industry in general is going to reach a point where.
Working capital on the way task and improve across the entire ecosystem.
Okay. So I don't I want to stick to the whole industry, because I find me apparel industry would be one <unk>.
<unk> can be accessed product the O.D.C.'s.
To be was advertised to create more <unk> yeah, okay. So I.
Industry I think is it on disciplined industry in many respects.
I think we've made tremendous investments and continue to make investments in.
Well easy design.
I don't know shortly Mario Cuomo's punishment business businesses, do we reduced need times overall and I think.
You'll see that continuing I think over the next two years in particular, you'll see more and more of that in the business environment and did that yep yep.
The challenge is that going on.
Intellectually honest is is.
As long before quarter of 2008 to just put things in perspective industry was coming off of a very strong for.
Everyone bought into that and there's just so <unk> department store business in North America in particular, and our business all business in China, and mostly which I was really solid feel depressed about business.
Lead times people boys the positive Comsys as friends most of the sales trends in North America in particular, the low single digit negative minus two three that's got worse. So quarter I think you know when you're trying to really get a headed guy trendy you know cycling lead time says improves or not.
Six months.
Six days, so those cycles or and buying it actually is really what causes the challenges the block overall retail from private label programs in department store them Oversaturation certain brands is putting pressure on business. The fact that we had the tower.
That everybody was dealing with people or accelerating shipment in it to the United States in order to avoid these the the deadline deadlines on tariffs.
<unk> into that.
People to to take the 30 to 45 days earlier than planned and then the entire if they've got pushed out and that was done again in September those crushes a real and it's no no you have to deal with what's coming out of his.
That's partially the reason why why would see somebody heightened them inside I think when I know the way we've <unk>, we've seen a wheel titles to both into by dollars most more conservative conservatism being built into south plans I think next year.
Much more of a margin yeah as opposed to the top one broke yeah.
America or not I think you have to plan the business and think about it but crazy investments to be made across the board to remove the Ah leave times down the visual marked down as long as you as your best <unk>.
And I I agree it's a good call you a whole lot, but you industry overall is not being leading ones come for leadership in managing any changes in the in capital. So he believed it moves forward on that.
So.
So thank you so it looks as if you want to wish everybody happy and healthy Thanksgiving Your your family.
We also issue happy holiday season going forward. When you look both seem to see you on off.
<unk> have a great holiday season, all the best I agree with that.
Thank you.
Second could stick his presentation. Thank you for your participation you may not disconnect.
Yeah.
Ah.
Yeah.
Mm.
Yeah.
[laughter].