Q4 2019 Earnings Call
Good afternoon, and welcome to the clearest fourth quarter earnings Conference call. My name is just see Adobe or conference coordinator at this time all participants are in listen only mode. How did the speakers presentation. There will be a question answer session to ask the question during especially to press star one on your telephone as reminder, this conference is being recorded.
This time I'll turn the call over to Logan on of course, senior Vice President of Investor Relations. Please go ahead Miss.
Good afternoon, I would like to thank you for joining our fourth quarter 2019 earnings call in webcast a press release with detailed financial tables as well as our quarterly slide presentation are available at Caleres dotcom.
Please be aware today's discussion contains forward looking statements, which are subject to a number of risks and uncertainties.
Actual results may differ materially due to various risk factors, including but not limited to factors disclosing the company's form 10-K, and other filings with the U.S. Securities and Exchange Commission.
Please refer to todays press release at our SEC filings for more information on risk factors and other factors, which could impact our forward looking statements.
These are these reports are available online the company undertakes no obligation to update any information discussed in this call at any time.
Joining me on the call today, as Diane Sullivan, CEO, President and Chairman and Ken Hannah Senior Vice President and Chief Financial Officer, I would now like to turn the call over to Diane Sullivan, Diane Thank slogan and good afternoon, everyone.
Thank you for joining our fourth quarter call and for your continued support of Caleres.
Clearly there is a tremendous amount going on in the marketplace and all is happening by the minutes. So before we launch into the 2019 result.
I would like it briefly address the Corona virus and the cross functional steps, we're taking to protect our people and protect our business.
It goes without saying that our first priority is the health and safety of our global workforce to keep our team members safe we have implemented a comprehensive protocol that includes travel bans and returned to work restrictions ensuring the ability of our employees to work remotely.
Additional deep cleaning and disinfecting, where required and most importantly in times like this ongoing and timely communication.
As it relates to the Corona virus financial impact on our business. We believe we have reasonably good visibility into the supply chain and the effect unclear as to date.
And what is expected through the first quarter 2020.
As of today, all of our Fat factory partners in China are up and running worker return rates are in excess of 70% capacity utilization is increasing and product the lead times are subsiding.
On the other half consumer sentiment is harder to predict.
Our direct to consumer businesses, that's far had been performing well, making it difficult to anticipate the broader impact a prolonged health crisis could have on the retail sector and consumer demand overall.
As expected in times in these times of uncertainty, we're leaning in and taking actions to ensure we are projecting the business overall.
We are actively monitoring the leading indicators across the markets we serve.
Were assessing these every day and reacting in real time by managing our expenses accordingly.
Reducing our open to buy where necessary evaluating our promotional cadence and be being very disciplined in our management of inventory.
In short we will protect our people we will protect our business and ensure we are prepared to be positioned for the when the rebound comps.
Now lets transition toward 2019 performance.
Clarence deliver consolidated sales of 2 billion $921.6 million and adjusted earnings per share of $2.10 falling short of our expectations.
During the fourth quarter the weakness in the fashion footwear market pressured our results during the period, specifically, we experienced a shortfall in sales due the value channel as those customers pulled back.
In reaction to a poor retail footwear business and shifted towards lower priced offerings. This resulted in a declining demand for both close up product and new orders. Furthermore, our boot business was a standout up double digits through mid fourth quarter as on trend product resonate.
With consumers across the brands, however, unfavorable weather in the second half at the quarter stalled cold cold weather products, resulting in some share sales to fall short of our strong expectations for the business.
Specifically, our Sam Edelman brand experience to softening of cold weather product sales lower demand for tall shaft boots.
And a decline in replenishment and Reorders for core products.
Additionally, the brand experienced a difficult selling environment within the mid tier channel business.
And as you would expect Sam pivoted in season to inject newness into the product line, namely, adding multiple new sneakers.
And new silhouettes in sandals in dress with all of these new products showing signs of early success at retail.
As you know Sam has such a strong track record of knowing has consumer well and providing her with the styles and trends she loves.
Offsetting some of this fourth quarter sales pressures was the solid performance from famous footwear.
Where we recorded a 5.1% and proven in same store sales year over year.
Well 2019 started slowly for famous we delivered sequential quarterly improvements as we progressed throughout the year.
This progression was driven by strong broad based improvement.
<unk> all of our channels categories genders, geography and format.
Specifically fourth quarter sales results were lifted by the strong performance from top brands, including Nike and 9.5% year over year improvement in kids.
60% year over year increase in premium brands improved consumer engagement.
And retention with our rewards program.
And higher E commerce, and brick and mortar sales.
Overall, we are pleased with the performance is famous and the team has just done an exceptional job is analyzing the consumer identifying opportunities and then executing upon clear and very well defined strategies.
Now I'd like to provide a quick recap on the significant progress we made on a number.
Value, creating strategic objectives across our business.
During 2019, we continued to strengthen the connections with our consumers it evidenced by our growing direct to consumer E commerce related businesses.
Which grew 23% year over year, we believe the ability just felt fulfilled this growing business and respond quickly the consumer demand.
10 used to be a differentiator for claris.
Beyond the E Commerce improvement, we continued to be pleased with the successful relaunch in execution of the famous footwear rewards program over the last 12 months, we have seen improvements year over year in our retention rate. The first time actually in five years as well as increased shopping in spending by.
Existing rewards members.
Next we continued to be highly focused on proactively managing our portfolio.
It remains imperative that we continue to develop our family of brands to drive brand strength and relevance.
In 2019, we entered into an exclusive partnership with Veronica beard, furthering our reach into the attainable luxury space.
In addition, we demonstrated our ability to create and transform brand with a relaunch of the heritage, though DAC brand at the same time, we made the decision to shift away from partnerships with D.F. and Carlos Santana and recently elected to reposition RV its bigger brand.
And finally, all year, we continue to focus on managing the variables within our control.
This includes a year over year reduction of capital expenditures and fixed costs.
Excuse me fixed costs driving declines in our inventory levels as well as shortening product lifecycles.
We also executed cost containment initiatives that will carry into 2020, including the voluntary early retirement plan.
That we will save between $8 million to $10 million on an annualized basis going forward.
Importantly, also during 19 Caleres generated approximately 170 million of cash flow from operations and put that cash to good use returning approximately 45 million to our shareholders through our share repurchase program and our long standing dividend where.
[laughter], we recently announced our 380 eightth on interrupted quarterly dividend payout.
And further reducing the borrowings under our credit facility by 16 million during the year.
Now as we look ahead to 2020, the strategic priorities that we laid out at our Investor day remain intact.
We are focused on leveraging the investments we've made for our future with these priorities guiding and informing our decision making.
At famous footwear for 2020 are a key focus air is our first and merchandising.
We're going to continue to leverage our strength in athletic and an athletic inspired shoes, while growing our iconic and premium brands. Our kids business is strong and our accessories businesses returning to growth, we had six significantly reduced our skew count and our overall inventory, allowing us to buy deeper.
And to the styles that are driving our business.
Second is marketing, where we will continue to evolve the famous brand and strengthen our brand voice to deepen our connection with consumers are medium X and marketing spend will shift to more customer facing initiatives and we will drive further customer loyalty through our rewards program.
And lastly, if our consumer experience, where we will drive sales with the growth of famous dot com and launch a new E com platform to offer new capabilities enhance customer experiences and the ability to quickly adapt to the changing consumer dynamic.
And if we turn to brand portfolio for 2020, we're going to continue to focus on product design and development and relevance in order to make sure. We continue to deliver the product the consumer wants.
There are gonna be multiple levers that we believe can contribute to our growth in 2020.
First of all product innovation will intensify with a focus on fashion sport.
Sure, we'll capitalize on our design in production capabilities to provide a competitor the edge in this category exploiting fashion sport across the portfolio at cared price points.
Ecommerce will continue to grow with the critical investments, we've made resulting in black best in class capabilities and the evolution of Naturalizer and Allen Edmonds, we'll continue with the recent rebranding of these two icons and we believe that will help drive market share growth.
Brand partnerships with Vincent Veronica Beard will be critical with the first product launch a Veronica beard in spring 2020.
And finally at Bionic the founders are clearly at the helm.
And we expect fiscal year 2020 results to be better than 2019.
As we detailed on the third quarter call. We have moved from a twod or foresees in calendar to ensure that we're delivering trend right product and newness more frequently.
Further we are leveraging the data in the predictive analytics that had been successful for the rest of our brand portfolio to ensure we're leaning out our inventories and and delivering fresh product.
So you know, we're entering 2020 with momentum in our famous footwear brand and with confidence in the strength of our overall brand portfolio.
While the macro environment is uncertain.
Where we are confident in aclaris portfolio and believe it provides a compelling value proposition in this market environment.
Our brands are strong and relevant our financial foundation as solid and flexible and we will leverage the investments we've made in our platform and capabilities that are really positioned us to serve the consumer exactly in the marketplace exactly where they're going.
We are looking at the year with a laser focused on what we can control and we have our eyes wide open.
The Corona virus impact on our brand portfolio supply chain in the first quarter of 2020 is expected to be 15 to 20 cents per share and as a result, we're expecting to deliver earnings per share of between $1.95 and $2.15. This year.
And with that I'm going to turn the call over that can for financial review.
Thank you Diane and good afternoon, everyone.
As Diane mentioned earlier, we delivered a little over $2.9 billion in sales and $2.10 of adjusted earnings per share in 2019.
And while disappointing when compared to our expectations, we accomplished a number of our strategic priorities pertaining to consumer connections portfolio management and our capabilities.
For the fourth quarter, we've reported earnings per share of one cents. This included 27 cents for expense containment initiatives, consisting primarily of our voluntary early retirement program.
Three cents a brand port folio expense related to the repositioning of RBS Speaker brand and three cents related to the fair value adjustment associated with the mandatory purchase obligation for Blowfish Malibu.
Adjusted earnings per share in the quarter. Excluding these items was 34 cents.
Included approximately seven cents of dilution related to biotic interest and amortization expense.
Our consolidated sales for the fourth quarter of $698.9 million were down 3% from the prior year.
Building on its momentum in the third quarter famous footwear delivered a strong fourth quarter, reflecting increased brick and mortar and ecommerce sales continued progress with our rewards program.
Our total famous footwear sales were up 1.2% in the quarter with same store sales up 5.1%.
For full year 2019 total sales at famous footwear were approximately $1.588 billion down approximately 1% as we operated 43 fewer doors versus the prior year with same store sales up 2% for the full year.
We ended the year with 949 doors at famous footwear.
Our brand portfolio total sales during the fourth quarter were down 9.4% year over year.
As previously communicated this coincide with the decline in women's fashion footwear, and a slowing of the growth in sport inspired product. This decline was also driven by challenging selling conditions in the value channel reductions in reordering and replenishment and softness in our cold weather product sales.
We also consent continue to see a shift in order patterns from upfront to at wants to be a drop ship, resulting in a delay in the timing of our recognition of revenue from period to period.
For the full year brand portfolio sale for 1 billion $406.5 million up 7.1% year over year, driven primarily by 2018 acquisitions and market share gains.
Let's turn to consolidated gross profit and margin.
For the fourth quarter consolidated gross profit of $278.8 million and 39.9% of sales was up 133 basis points year over year.
Our famous footwear fourth quarter gross margin of 42.5% was down 20 basis points year over year, reflecting the growth in their ecommerce business.
Brand portfolio reported gross margin of 35% in the fourth quarter up 275 basis points from the prior year, including the impact associated with purchase accounting year over year.
The adjusted gross margin was 35.5% in the fourth quarter up 60 basis points over last year and includes the impact of higher tariffs on product coming out of China.
Our consolidated SGN a expense for the fourth quarter was $260.8 billion and represented 37.3% of sales.
And 1 billion $65.8 million for the full year 2019, representing 36.5% of sales leveraging 27 basis points from 2018.
Our depreciation and amortization for the fourth quarter was $16.6 million down 4.6% versus the prior year.
Fourth quarter reported operating earnings were $5.7 million and adjusted operating earnings were four were $19.6 million.
At famous footwear fourth quarter adjusted operating earnings of $10.3 million were up almost 68% from a year ago.
For the brand portfolio fourth quarter, adjusted operating earnings were $18.6 million.
Our net interest expense for the fourth quarter of $7.8 million includes 1.5 million a fair value adjustment associated with the blowfish purchase obligation.
Interest expense, excluding the fair value adjustment was down $500000 from a year ago as we have paid down the balance on our revolving credit facility used to finance the October 2000 team.
Position of Bionic full year, 2019 interest expense was $33.1 million, including $5.4 million, a fair value adjustment associated with the blowfish purchase obligation.
Our full year tax rate was 21%.
Adjusted earnings before interest taxes, depreciation and amortization for the full year 2019 was $204.3 million with adjusted EBITDA margin of 7%.
Our famous footwear full year adjusted EBITDA was 100 point $7.1 million with an adjusted EBITDA margin of 6.7%.
Brand portfolio adjusted EBITDA totaled $105.6 million in 2019, with an adjusted EBITDA margin of 7.5%.
Our capital expenditures were $50.2 million for 2019, reflecting a 16.7 million dollar decline year over year.
Now turning to our balance sheet, we ended the year with $45.2 million of cash and equivalents.
Our outstanding borrowings under our revolving credit facility were $275 million at year end down $60 million for the full year 2019, and down $85 million from a $360 million. Following our October 2018 acquisition.
Our consolidated inventory position at the end of the fourth quarter was $618.4 million down almost $65 million were 9.5% year over year.
At famous footwear, we ended the year with inventory down 5.8% year over year, due primarily to fewer stores than a focus on SKU reduction to improve our inventory turn and flow of goods.
For our brand portfolio, our inventories were down year over year as the teams effectively balanced inventory in the house and at our partners. We're particularly pleased with these results in light of our retail partners increasingly ordering closer to need.
Our 2019 operating cash flow was $170.8 million up approximately 32% over 2018.
During the year, we returned $45 million to shareholders comprised of $33.4 million of buybacks and $11.4 million of dividends.
In 2020, we are committed to continuing our capital return program, which will include investing wisely in our business with capital expenditures of $40 million in 2020.
Executing further on our buyback program.
Paying the dividend and reducing our revolver borrowings still further.
We currently have approximately 5.2 million shares of remaining authorization under our share repurchase authorization program.
Moving now to our outlook.
We are expecting full year 2020, consolidated net sales to be flat at $2.95 billion with brand portfolio sales expected to be flat to up low single digits and famous footwear same store sales up low single digits, we will close approximately 50 stores at famous footwear and.
Open approximately 20 new stores.
As Diane mentioned, we're expecting headwinds in the first quarter of 2020 relating to supply chain disruptions due to the Corona buyers. We're currently anticipating a 15 to 20 cents per share Corona virus impact on the brand portfolio supply chain in the first quarter of 2020.
For the remainder of the year, we will continue to actively assess this very fluid situation and the impacts.
To that end, we expect to deliver earnings per share of between $1.95 cents to $2.15 per share this year.
We've not included any potential erosion in consumer sentiment that may arise due to the Corona virus. We're entering 2020 highly focused on the strategic pillars, we have laid out and with an emphasis on managing what we control.
We believe we've created a unique portfolio that is built for agility in execution and as expertly prepared and positioned to benefit when the market ultimately terms.
Now I'd like to turn the call over to the operator for today.
Thank you at this time I'd like to remind everyone in order to ask the question. Please press Star then one on your telephone keypad will cost us moment to compiled acuity roster.
Your first question comes from Rick Patel, with Needham and company. Your line is open.
Thank you good afternoon, everyone.
Tim you mentioned.
Hi, Hi, Dan can you mentioned that your guidance does not reflect a deterioration in consumer sentiment related to the virus I just wanted to follow up on that so.
Maybe can you talk about what the trends.
For famous has been like as we think about late February through the past couple of weeks I'm, just curious as consumer concerns about the about the about their health and the fear factor related to those virus that increases whether or not it's had a negative impact on traffic and to what extent that is embedded in guidance right now.
Yes, as we had mentioned we saw good momentum coming out of Q4.
That momentum continued all the way through Feb, and it really wasn't until we got into the first week of March where we we started to see some impacts across the portfolio.
It's changing on a daily basis.
This point, we haven't seen anything material, but.
Just in throughout the course of today, obviously, we've seen.
Different things being canceled events being pulled back and so.
We have no way to assess exactly what all of that means but you can bet that we will actively manage it.
As we move forward.
And is it safe to assume that your performance at famous has been relatively intact.
Yes, absolutely that that was what we were speaking about Rick certainly the momentum at famous continued into February and that we had not seen any kind of slowing down on that really until the maybe the last couple of days, but I think again, if you think about the performance that they've had in that fourth quarter going into February again, it's on a cross.
So many geographies and categories in products and consumers and trends and you know so while we again, we have our eyes wide open about what the potential to can be so far the momentum has been good there and were tracking one of the things that we felt was really important and we started this two weeks ago.
Actually with respect to sort of a market tracker you know we've been actively managing obviously this crisis with a crisis management team since really mid January and again with that focus on protecting our people and managing the supply chain and everything in China, but even more recently on the business side for 2020, we really wanted to make.
Sure that we looked at postponing any kind of discretionary investments, we had we didnt need to make looking at capital, making sure. We were you know a managing our capital well looking at the inventories just all of those things really even coming out of January and the you know that we felt was important and now we have the.
Are really looking through famous through our brand portfolio through our retail partners exactly what's going on in each of our market. So we're looking at that and real time and feel like we're going to be able to.
Make sure that that where we've got the real time information to have all the information that where that's possible to address any of those opportunities and concerns or challenges.
That's very helpful and can you also provide some color on your expense savings initiatives, perhaps in more detail on where the inefficiencies, whereas we think about famous versus the brand portfolio.
Flip side.
I guess, where the investments would be needed to drive growth die and you just mentioned that you're pulling back on what you view is discretionary investments, but just curious where you would consider to be critical to drive growth going forward that may offset some of those expense savings yeah. Okay, Grech sure I'll do us a little bit and I'm sure Ken Ken will add to this I mean I think it certainly.
Guided last year as we looked at our expenses overall as you can see on to our X DNA and everything is presented sales, we managed really well so all through last year as we were.
Challenged we were making sure that we were addressing most of that and real time. It was really a lot through and October into November you know the voluntary early retirement plan and that restructuring that really you know has given us the the I would say a little bit of a tailwind going into two.
2020, and that is that eight to 10 million and it was probably.
Somewhere in the neighborhood of you know a you know 100 or so folks that were affected in our in our system. So that was a significant thing and there was many cases just to give you a little bit as an example, where it was more efficient we really loved to our regional structure at famous footwear.
Sure how many regional managers to managers district managers, what was the span of control. So we looked really through everything and then it was about what brands were.
Adding value and and and or not it can adding guy where was where was the economic contribution there. So again as we looked at things like D. The effort parallel Santana and then thinking about via Spiga. We were really able to you know reapply some of those resources to the brands that we felt where you know had much more growth opportunity.
Okay and make sure that we were leveraging those capabilities.
As well so it was a combination throughout the year as lots of different things and Ken I don't know if you want you to add to add to that to the only thing I was but add is as we had had mentioned we've made the investment in the capabilities in particular be able to to meet the ecommerce and digital growth requirements and so.
So we were moving forward.
And attempt to try to leverage those investments so we're reducing our capex levels down to what we believe our back to maintenance type levels and there's really no large projects that we have.
Taking on we're completing the the work on our.
Replatform and E commerce, but all the distribution center automation is completed and those facilities are performing well. So it's really about of the leveraging those investments that we've already made.
Thanks, very much and all the best this year.
Thanks, Greg.
Your next question goes from Chris, but feel with Wedbush. Your line is open.
Good afternoon. Thank.
Thanks for taking my questions.
Good afternoon, Chris.
So I guess first.
On the supply chain.
Just walk.
Yeah, that's 15 to 20 cents.
What does that comprise is that just.
No.
The sales cancellations product delays just more specifically what that what then bodies and I assume after Q1.
He basically just Q1.
Most of the two two <unk> first of all drama.
Yeah, Chris and so I mean, you mentioned kind of what all that is comprised of when we look at our at our Q O Q1, we've got roughly $20 million of sales that were counting on that has not been receded and those products are in various stages in the in.
The supply chain, some of which will need to be aired to get here in time for for customers some of which is going to need to be applied a discount.
Because of the timing and some of which.
We will slide.
Out of the quarter and and run the potential of being canceled. So I think those are the different elements of what we've tried to take into consideration.
Okay and then as along here is just really why do then you're not anticipated. This carried into Q2 or what will support yeah. I think we expect that but as we get into two Q2 that the factories are up and running they do have some some capacity available and that we are.
Seeing the delays subside and so as a result of that we think that we're going to be able to minimize the impact on Q2, obviously you know what happens in terms of consumer sentiment is something that we're watching very closely but from a supply chain standpoint, we feel like we've got pretty good bye.
His ability there and kind of nowhere, where things are and the timing of which we will receive those goods.
Okay and just the on you mentioned earlier.
Thats were seeing some cancellations or pull back is that.
Is that how to do.
The branded portfolio, what does that factored in Chile, we have.
Given we haven't family CMP any cancellation of these are pulled back a little box didn't say that.
Okay. Okay.
Okay I thought you did in response to the other no no question.
Now we were talking about the famous footwear momentum that actually accelerated going into February but in the last month, we turn to March it slowed down a little bit.
Okay got it.
So just on that on that point of view and are you expecting things to continue that moderating trend throughout the balance of the first quarter or just how you how you're thinking about that.
I mean, I think what we tried to illustrate we exited Q4 it at above 5% comp and that we saw that momentum continue through February we guided for the year flat to up low single digit. So we've tried to put in a normalization of what we would expect at famous.
Well, we don't know is.
As there continues to be cancellations of events and you know.
Phil and be a in and NHL, It which may have been where where we were earlier referencing cancellation.
We were not talking about borders.
That.
We have to believe that that will have some impact on the future demand and we tried to.
Do the best we could take that into consideration in the way we guided but.
We've not been able to assess any significant changes to what we're seeing today.
Okay got it and I'm now on the branded portfolio side.
When you step back.
I guess, how do you think about your visibility into that business, just kind of given where it stands no less pre bought more out once drop ship.
I'll talk about sort of flat to up low singles for the year and sort of your visibility in order to attain that how do we think about that cadence is as the your progress as I said Q1 is down some level just sort of give enough supply chain issues, but just your thoughts about that.
Well, it's interesting Chris you know when you look at the brand portfolio in the fourth quarter, and I and II and you think about its performance you know there were while many of the brands were a little light to some of our expectations. You know we did see a lot of the different categories and enter and brands in our port.
I will grow in different places you know for example, like ours, our sport business grew in the quarter. It was up 11% as we delivered new styles and a lot of our brands like Benson.
Naturalizer shells rank the BZ and even blowfish was let's really good we did see nice syndications two on some of our retails were up on average a dollar our I am use improved quite a bit and actually in the measured part of the marketplace. We we grew but I think the real the real an opportunity for.
Isn't all the capabilities that we have been building over the last year or two and our E. Commerce business was up 22% in the quarter. It represented 33% of our sales in the quarter versus 25 last year.
So as I begin to think about where our opportunities lie and what how we think about that going forward, we really think that as and I think this situation that we're a whole finding ourselves than today with potential schools closing and all the things that are happening that that move to that that the comfort in the car.
And in some of the consumer shopping even more on line I think plays very well into the investment [laughter] facilities that we've made so.
You know I I think it.
I have to all be written yet for sure it's a little bit of an uncertain time, but but I like our chances and I like the bets, we've made and and I think that's going to prove out over the long term.
Okay last one for me just on the.
On the balance sheet, and just sort of how you think about cash flow uses of cash.
Several parkinsons dividend and debt I'm, just curious how do we think about I mean, obviously.
Foxton pot more than half.
See what's going on.
But I also now that you want to pay down revolve. Our so I'm just curious how do you weigh into those as you look at today.
Total capital allocation.
Yeah, I think we mentioned, we've got 5.2 million shares remaining on our current authorization.
We generated $170 million of operating cash and in 2019 and as we look look forward. We will continue to modestly pay down the debt I think it's important to understand that as the fed as could continue to cut rates the costs.
Most of that have that borrowing is like 2.5%. So you know weve committed to continue to bring those levels down but would plan to take any excess.
Once we've we've accounted for the $40 million of Capex that we have in our plans and look to return that back to shareholders.
Okay got it. Thank you all the best.
Thank you Chris.
Again, if you like US the question. Please press Star One. Your next question comes from Sam Poser with full Schiano. Your line is open.
Good afternoon. Thank you for taking my question I just have a couple of questions on [laughter] homework on the guidance here. What is your expected tax rate for next year and then what do you how do you foresee the interest expense in other income and all those.
One thing.
So from a tax standpoint, I mean, we're expecting a rate that's been around 25%.
In terms of interest expense, if you take the reductions where we have paid down we ended the year with $275 million outstanding on the revolver.
That level below where we were in the 2019 would account for a 4 million dollar reduction in our interest expense in 2020 and then.
Any incremental paydown will be a trade off with share buyback. So we're expecting a minimum of 4 million dollar reduction in interest expense.
I'd put it around 29 million if I'm not mistaken that's right. Okay, and then and then on on the other income.
The other the other income it's really not a lot.
It's changing there about 8 million again 8 million again give or take yeah. That's that most of whats coming in there Sam as the return on our pension investments.
So obviously.
That's.
That's tied to those assets in the actual return that we generate the service cost is still up in the operating expenses.
And then can you give us I mean, you're telling us what the impact is too as in Q1.
But what I mean can be talking about what's the sales impact can you just say like you know you if that we think it we think that it is about a 20 million dollar sales impact in Q1.
So then the against that trend so just for the sake of argument in you said you guided.
You guided the brand portfolio to flat to up low single correct correct. So if we took flat and we took 20 <unk> I mean, you would say Nok $20 million off of like a plus one of the half or something is that a fair number to use like the mid that's right. If you go to the if you go I think we did a rob.
$340 million last year in brand portfolio.
And so in a flat.
Environment.
You could assume that there's a 20 million dollar reduction that's associated with kind of what we're seeing in Q1 supply chain.
Off of flat. So then so you're basically thinking the low end just given how Q4 was for Q1 of your guidance and then yes, we look at as we look over the year right. Obviously in a flat to up one we just were down 9.5% in Q4 so.
So you can assume that.
We're planning to be relatively flat through.
The first half of the year.
But for a 20 million dollar impact from the supply chain in Q1.
So you're expecting a lot of acceleration in the back half of your brand portfolio, even with the introduction of Veronica beer.
In the right.
Yes, we're introducing veronika beard, where we're not assuming a ton of growth in the back half and that's that's why we guided flat to up low single.
[music].
And then zodiac also being introduced.
Yes, zodiac and and brought a career will.
The introduced this year.
Alright. Thanks.
What I need it will look forward to catching up thank you all right. Thanks Sam.
Again, if you like that's the question. Please press star one.
There are no further questions at this time.
Thank you very much operator, and thank you everybody for joining our end of year 2019 call we wish everybody.
Much health and hope everybody is is fine we will continue to keep you updated as to our progress and look forward to chatting with you over the next couple of weeks thanks very much.
[laughter].
This concludes todays call you may now disconnect.
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