Q2 2020 Caleres Inc Earnings Call
Good afternoon, and welcome to the Claire's second quarter 2020 earnings Conference call. My name is Erica and I will be your conference coordinator at this time all participants are in listen only mode. After the speakers presentation. There will be a question didn't answer session to ask a question during the session you wouldn't be depressed.
Star one on your telephone as a reminder, this conference is being recorded.
At this time I'll turn the call over to Logan Bono Corsi, Vice President of Investor Relations. Please go ahead Miss.
Good afternoon, I'd like to thank you for joining our second quarter 2020 earnings call in web casts a press release with detailed financial tables as well as our quarterly slide presentation are available at Claris 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 risks factors, including but not limited to the factors disclosed in the company's form 10-K, and other filings with the U.S. Securities and Exchange Commission.
Please refer to today's press release in our SEC filings for more information on risk factors and other factors, which could impact forward looking statements copies of 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 10, Hannah Senior Vice President and CFO, we'll begin the call with brief prepared remarks, and thereafter, we will be happy to take your questions I would now like to turn the call over to Diane Sullivan Dan.
Hey, Thanks slogan and good afternoon, everybody. Thank you for joining our second quarter earnings call and for your ongoing support of our company. We hope that you and your families are staying healthy and safe.
As I did last quarter I'd like to extend my thing. So my gratitude to declare his team for the resilience and ongoing dedication as we continue to navigate this rapidly evolving environment.
We once again demonstrated our ability to collaborate effectively work efficiently them respond quickly to ever changing market conditions.
As we have stressed in the past the health in the well being over associates, our consumers in our communities have been a guiding principle and our decision making over the last several months.
And this will continue to take priority through the duration of this global health crisis.
Before I jump into our results I'd like to TEP take a step back and remind you why collectors as a whole is positioned to be successful now and over the long term.
First of all our brands relate well to the consumers ever evolving mindset changing preferences and dynamic behaviors.
Casual athletic in sport inspired styles currently in demand by consumers make up a large and growing part of our portfolio.
For the trailing 12 month, approximately 85% of our total product mix resided in these categories.
Also our previous investments in our capabilities and ecommerce business has positioned us exceptionally well to capitalize on the accelerating shift to online purchasing.
Illustrating this progress for the trailing 12 months or ecommerce penetration grew to 27% up from 18% during the previous 12 month period.
We will continue to look for ways to invest wisely in our digital platform as we progress through this new marketplace.
And finally, our foundation is built on putting the consumer first and everything we do with that in mind. The vast majority of our business has been and his direct to consumer.
Now turning to the second quarter.
While we still experienced a significant impact on our business due to co bid 19 in the resulting economic disruption reads on shut down the company made significant progress during the period.
Reflecting the success of the approach we implemented at the onset is a pandemic for instance, caleres recorded sequential improvement in a number of key financial metrics versus the first quarter of 2020.
Including a 26% increase in net sales driven by robust ecommerce sales and an acceleration in the opening of our stores, resulting in a 16% improvement in adjusted gross profit and a 56% improvement in our adjusted loss per share.
In addition, we advanced a number of our strategic objectives that are helping to drive our recovery.
First the organization executed a phased inefficient reopening of our retail store fleet by mid June a vast majority of our retail stores were opened for in store service with enhanced safety measures and protocols.
At the same time, where we're our offering contract was curbside pickup at roughly 60% of our locations and are continuing to utilize the network of stores is distribution points to support our growing ecommerce business.
Second the shift.
From consumers to online purchasing accelerated during the period with famous footwear and brand portfolio continuing to capitalize on this ongoing shift in fact direct E. Commerce sales, which includes sales from our own ecommerce sites and dropship business expanded 80% year.
Over year and grew roughly 37% sequentially, notably ecommerce sales made up 34% compared <unk> percent of our total sales mix in the second quarter compared to about 17% on the same quarter last year.
I will detail specific ecommerce growth and just a few moments.
Finally, we continue to rigorously manage our expenses in working capital during the period.
Reflecting the strength of these initiatives, we generated approximately 67 million of cash from operations during the quarter and use that cash to restart our debt repayment efforts.
In total we reduced the borrowings under the credit facility by 88.5 million effectively cutting in half the coded related borrowing increased that we incurred during the first quarter of 2020.
We exited the second quarter with roughly 150 million of cash and 350 million borrowed against our 600 million revolving credit facility.
Now moving now to our second quarter segment performance in the recovery of our businesses.
The global pandemic has dramatically impacted the retail environment and the consumer landscape and accelerating a lot of change and forcing organizations to adjust to new conditions in consumer behaviors.
And while both sides of our business has been affected.
The pace of the recovery within each segment has been a bit different.
Beginning with famous footwear, while the disruption associated with Covance 19 continued to pressure results throughout the period, there were a number of bright spots, including several that underscore what we believe our in our inherent competitive advantages.
First after a challenging may we experienced a strong rebound in June.
Just a widespread reopening of our stores pent up consumer demand and ongoing strength and ecommerce driving the improvement in fact famous achieved record sales in the month exceeding last year's June sales by approximately $6 million.
Second.
Our end demand national brands and significant concentration in sport performance and leisure oriented styles.
Are well aligned with consumer preferences and the prevailing stay at home work from home environment. In fact, these styles make up 95% of the famous footwear total sales mix.
And it's our strong belief that in this uncertain environment.
Quality brands are more important than ever and that they provide consumers a sense of clarity comfort and confidence.
And a reflection of that is that our top 10 brands represented more than 70% of our sales during the period.
Third we continue to lean into our digital capabilities to accelerate our ecommerce momentum.
For the second quarter famous footwear ecommerce sales grew approximately 150% year over year and improved more than 50% from the high watermark achieved in the first quarter of 2020.
In addition, ecommerce penetration reached 25% of net sales up from just 10% and the second quarter of last year.
Lastly, at a time of heightened consumer health sensitivity in the ongoing desire that everyone has for convenience.
We really believe that famous has benefited from it strategic wealth cited locations, which are highly concentrated in off mall strip centers and outlets.
We believe this advantage geographic footprint, coupled with our contact list curbside shopping option, which is available and nearly 600 stores today uncomfortable shopping environment are providing particularly relevant and and providing value support for the ongoing recovery of this business.
Now during this unusual time one of the biggest questions that everyone's asking is what's going on with back to school.
So back to school season for sure looks dramatically different this year.
The uncertainty around school starts and the shift to distance learning across each month the across much of the country has certainly had an impact on the traditional back to school purchases, resulting in a sales peak that is much lower than the same period last year.
As we progress throughout the third quarter or through the third quarter, we're finding that the regions where school arrangements have been determined they've seen nice improvements post peak, while Conversely markets, where plans have not been finalized have experienced declines.
So looking ahead to if and as we see it right now we expect the concentrated back to school buying activity. That's typically taken place over a few weeks in late July.
And early August to be more evenly spread over an extended period period of time.
More specifically, while we're anticipating a sales decline in the traditional back to school timeframe. We do expect famous sales in the third quarter to improve sequentially, leading to a 15% to 20% decline compared to the third quarter of 2019.
We're confident that same Mrs prepared to succeed in any macro environment and as we approach the balance of 2020 and beyond we make sure. We continue to build on our strengths address our weaknesses and leverage the opportunities that we have to for two to drive profitable growth.
So, let's turn now to the brand portfolio segment.
During the quarter and very much in line with our internal expectations net sales declined 49% compared to the second quarter of last year.
The decline in brand portfolio was due in large part to store closures reduced orders from wholesale customers as they continue to work down seasonal inventory.
Both their retail shutdown and a shift in timing of new orders as retailers work to align inventory to expected consumer demand.
During the period the team was laser focused on addressing customer order cancellations aggressively reducing spring inventory across all channels driving digital demand and developing a virtual market capability.
To help bring our spring 2021 lines to market.
In order to strengthen our position heading into fall we worked closely during the period with our partners to aggressively reducing inventory levels moving pairs online through our own branded any and famous footwear sites and through our valued channel partners as they work to restock their stores post opening.
In total we cut our inventory levels by 33% year over year.
And while these necessary actions certainly impacted our results during the quarter there were a number of highlights.
Counterbalancing the decline in sales to our wholesale partners to some degree was a significant improvement in our ecommerce channels.
Our digital direct to consumer capabilities supported the business during the store closures in those sales levels have remained elevated poster was sumption events or operations.
Given this ongoing shift to increase digital purchasing we are continuing to maximize our focus on that digital marketplace and making sure that we're leveraging our resources.
To ensure optimal wedded web design effective marketing and appropriate inventory levels in order to drive improvement across the business.
Specifically, the company's branded Oneq ecommerce sites increased 35% when compared to the second quarter of 2019.
Led by exceptional performance from Bionic, and other sport and comfort oriented oriented brands, including right and Dr. Scholls.
Furthermore, ecommerce penetration for the brand portfolio grew to more than.
46% of total net sales in the period.
This strong ecommerce performance underscores the strength of the company's portfolio of lifestyle brands.
And in short while consumer demand for dress styles continues to remain under pressure.
The balance of our mix across our casual athletic and sports styles are really helping out.
In summary, given the significant reduction and seasonal inventory encouraging feedback for fall and proven ecommerce performance, we expect a sustained recovery for the brand portfolio segment in the years second half.
No were pleased with our ability to react quickly to the changes that we've seen in the environment, which we view as an important validation of the capabilities of our people and our model.
Looking ahead, we remain confident that we have the REIT strategies in place to drive long term profitable growth.
Importantly, we possess a strong business model that has several advantages, including a powerful portfolio of lifestyle brands rooted in casual athletic in sport inspired styles.
And a robust direct to consumer brand and famous footwear, that's really perfectly aligned with consumer trends and leading among the destinations for family footwear.
This structure enables collectors to not only benefit from the insights of trending customer purchase behavior, but also benefit from the diversity and our customer base and channels of distribution, providing the benefit of not having to rely on any one brand at one trend for channel for our success.
This structure combined with our strong liquidity and disciplined management of expenses has Ics helped us exceptionally well to position navigate in the near term and capitalize on the opportunities that lie ahead for market share growth.
We're excited about our future and our ability to capitalize on the rapidly changing consumer behaviors.
And what certainly is going to continue to be a dynamic marketplace and ensure that we make we we drive value for all of our stakeholders.
And with that let me turn the call over to can.
Who will give you more details around our financial review Ken.
Thank you Diane and good afternoon, everyone.
Despite facing ongoing pressure from the lingering health crisis Im pleased with how we have further strengthened our competitive position during the period.
We remain focused on appropriately managing expenses in working capital we remain committed to controlling the controllables improving inventory turns reducing SGN and lowering capital expenditures and we remain confident with more than adequate liquidity and our ability to weather the downturn.
I'd like to start to discussion this afternoon by providing an update on our liquidity position and capital structure and discuss our second quarter results and finally provide some additional color on the outlook for our business for the remainder of the year.
As we communicated on our last call, we believe deleveraging to be the most value creating use of cash given the volatile marketplace.
To that end during the second quarter, we made debt reduction or priority in our capital allocation process, we paid down $88.5 million and revolver debt, reducing the outstanding balance to $350 million at the end of the quarter.
Our cash balance of $148.5 million and our 600 million dollar revolving line of credit provide adequate liquidity for us to navigate these uncertain times.
Notably we have no significant debt maturities until 2023.
Looking ahead, we expect that debt reduction will continue to be a priority for our capital allocation process for the balance of 2020.
Now moving all under review of our second quarter financials.
Reported a loss per share of 83 cents, including 13 cents of adjustments for cobot 19 related expenses.
14 cents related to the fair value adjustment associated with the mandatory purchase obligation for Blowfish Malibu.
Our adjusted loss per share in the quarter. Excluding these items was 57 cents per share.
Our consolidated sales for the second quarter were $501.4 million down 33.4% from the prior period.
At famous footwear total sales were $333.9 million down 20.5% from the second quarter of fiscal 2019.
Excluding stores that we permanently closed during the second quarter famous footwear sales would have been down 17.5%.
Our traditional comparable store sales were up 14.7% during the quarter.
Sales at famous footwear improved 75% sequentially, reflecting reopening of its brick and mortar stores and marking the beginning of our recovery.
Our Brenda portfolio total sales were $183.6 million, a decrease of 48.9% year over year.
As previously mentioned this decline was driven by store closures reduced orders from wholesale customers as they continue to work down seasonal inventory.
And the shift in timing of new orders as retailers work to align inventory to expected consumer demand.
Our consolidated gross margin of 36.4% compared to gross margin of 40.7% in the second quarter fiscal 2019.
The 424 basis point decline.
It was driven primarily due to the addition of our Bogo promotion.
Utilized to help drive down inventory levels at famous footwear.
A larger mix of ecommerce sales and the resulting shipping costs that hits gross margin.
As well as the aggressive liquidation of our spring inventory.
At famous footwear, they had a gross margin of 35.7%, which compared to a gross margin of 43.4% in the same period last year.
Again, the margin decline was driven by the addition of our Bogo promotion period, which helped fuel the reduction of seasonal inventory and some high shipping costs associated with the larger mix of ecommerce related business in the quarter.
Brand portfolio had gross margin of 34.9%.
It was relatively consistent with gross margin of 30 pool, 4.7% in the second quarter last year.
Our consolidated SGN, a expense was $201.3 million, representing a decline of approximately $66 million compared to the second quarter of last year, and roughly $24 million lower than the first quarter of this year.
This decline reflected lower corporate in store payroll expense as well as the ongoing benefits of our expense reduction programs.
Notably our quarterly cadence for M&A will be very this year as some cost savings were more beneficial in the second quarter due to the timing of certain events, including work force reductions.
Furloughs through compensation adjustments and the closure of retail stores.
While we remain committed to managing our costs, we project SGN a expense in the second half for the year will be slightly higher than the first half as conditions improve and requirements of the business increase.
Lower sales and gross margin more than offset the improvements in SGN, a and led to an adjusted operating loss of $18.7 million.
This compares to an adjusted operating income of $38.4 million in the second quarter of last year.
At famous footwear, we were pleased to posted adjusted operating profit of $1.6 million.
The brand portfolio adjusted operating loss was $9.6 million.
And the company's adjusted net loss was $21.1 million or loss of 57 cents per diluted share.
This compares to adjusted net income of $25.8 million were 62 cents per diluted share last year.
As I mentioned earlier, our inventory at quarter end was down 27% and included a 23% decline at famous footwear and a 33% decline at the brand portfolio, reflecting great work by the teams to liquidate spring inventory.
The net cash provided by operating activities was $66.8 million consistent with last years levels with capital expenditures totaling $4.1 million.
Net interest expense for the second quarter was $13.4 million and includes $6.6 million a fair value adjustment associated with the blowfish Malibu purchase obligation.
The effective tax rate for the second quarter was 9.4% the rate was impacted by certain discrete tax items of $2.7 million.
If these discrete tax items had not been recognized the effective tax rate would have been 17.3% for the period.
Our tax provision includes a tax benefit associated with the cares Act, which permits the company to carry back 2020 losses, two years with a higher federal tax rate.
In addition to our progress on debt reduction, we also returned approximately $13.1 million to shareholders through our share buybacks and our longstanding dividend.
Given the ongoing uncertainty and limited visibility, we will not be providing formal fiscal year 2020 guidance.
But we will revisit this traditional practice as conditions stabilize.
However, I would like to give you some perspective in color regarding how we see the outlook for the third quarter.
We expect net sales to improve when compared to the second quarter of 2020.
The resulting in a decline between 20% to 25% year over year.
That includes famous footwear sales being down as Diane mentioned earlier, 15% to 20% year over year.
And brand portfolio sales are expected to be down approximately 30% year over year.
Our gross margin rate should improve versus the second quarter.
As we shift out of the promotional cadence required to reduce bringing inventory.
Our ESG DNA as a percent of sales should be slightly better than the second quarter.
And $30 million to $35 million favorable to the third quarter of last year.
And most importantly, we expect to return to a positive adjusted earnings per share.
In closing, our consumer driven brand portfolio advanced capabilities and actions taken during this disruptive period to shore up our financial position will enable colors to move through the balance of the year focused on the near term challenges, while executing on our long term strategic objectives driving.
Profitable growth and creating shareholder value.
With that I'd like to turn the call over the operator for questions.
That's a reminder to ask a question you want me to press Star one on your telephone to withdraw your question press the pound key.
Sand five will be come out of Q1 day roster.
Your first question is from a Laura Champine with loop capital.
Thanks for taking my question.
Appreciated the in the deck that you gave a mix of your business that sport inspired or more casual of 86% well would that have been a year ago.
Oh, it it would be somewhere in the probably 82%, 80% somewhere along their Laura.
Yes, they expected payments famous has always been very much in that area, you know up and they.
90 to 90 plus always.
They are sitting at 96 now brand portfolio would be the one that has sort of lag and we're going to have to continue to pivot.
As we move forward to make sure that where you know have all the product categories of lined with where consumers are going and if that's appropriate for the brand to we have to take that have that in mind as well so.
It was roughly about 80 80, 182% last year.
Got it and as we think about sort of moving into the back half I. Appreciate the range of expectation by segment for Q3 would indicate that brand portfolio recover slower should that slower trends persist until we get people.
On more of a normal away from the home schedule that meaning it will famous footwear likely stay stronger than brand portfolio as long as there is such a big trend towards casual and away from fashion footwear.
Well I think it's a combination of a couple of factors. The short answer is yes, I think famous footwear is definitely going to be the leaving segment out of five out of this pandemic for the company primarily because it all as a direct to consumer business right and we have we have complete control over what products, we present in front of those.
Consumers and they were already in the sweet spot of where consumers are today that brand portfolio has to work through a number of things as.
More of our partners continue to open up their stores as they look at their business and how they developed their assortments in their plans. We're seeing many of our brand partners planning down in that 30% range, which is kind of where were making sure we're planning as well so.
I think it's clear at least for the next quarter or to those as a kind of dynamics that you should you should expect I think from both segments of our business.
Understood. Thank you.
Hey learning thanks.
Okay.
Your next question is from Rick Patel, with Needham and company.
Good afternoon, and hope everyone is well.
Thanks, Greg same to you.
Thank you.
Can you talk about comps were stores in markets that have been opened the longest I'm just curious how things look on a year over year basis for that cohort of doors and are you assuming that markets that reopened at a later time follow a similar path.
You know, it's not so much the timing of.
Openings anymore, because we kind of saw most of that happened through the month of Joan.
It really is now what ended up happening risk and.
In late July last couple of weeks of July we saw you know some of the markets being hit with the second Impactive Covance and whether it was in the south of the West and we saw that actually become the biggest issue.
With respect to how the consumer with Refiling, particularly as it related to our brick and mortar. The good news is that we have not seen a decline in our ecommerce business. So that business that we were capturing during the first and through the second quarter really appears to be holding so now the class.
One is.
As we get more information around when kids are going back to school, what ends up happening potentially with the stimulus checks and all that kind of thing well. We think is it's going to help extend that back to school time period, and we will not have though we wont have and haven't had that.
But we think it'll extend through.
Third quarter, which is why it's there's so many variables you can't judge.
Right now market pipe market. It changes you know some are up 50 summer down 50, some are up.
Three summer you know down 10 ended there there is all different correlating factors so.
It's really hard to find one which is why we really try to projects through this and look at the full quarter and give you some kind of sense or you know around it down 15% to 20% is where we think this will all shakeout.
And it seems that the strength that you've seen in digital has been stick even in the face of new store openings. So I'm curious as that happens how are you thinking longer term about your score for footprint and how many doors you should have over the long runs.
We are constantly looking at that and so it's a great question you know and you know we have been.
Really opening my many fewer in fact, we've had and net closures really for the last couple of years. So we've been really focused on that.
No Malian, Ken and the team are looking at going market by market right now and looking at what kind of penetration of stores do we need with the growth that we're seeing an E commerce and how do we optimize each of those markets based on consumer acquisition.
And the thought process behind that so we're we're sort of working our way through all of those markets ensuring that we're thinking about what that right footprint isn't that right combination is so ongoing work.
On that and I can see that happening really for quite some time.
And last question is around the brand portfolio. So to what extent has this pandemic change your thinking about the brand portfolio strategy going forward in other words.
Given E com accelerate and you're finding you have genuine strength in the brands themselves should we expect your focus the shift away from your traditional wholesale channels and more into a DTC model as we come out of this.
Yeah. It's a good question you know and I think the there's a couple of things that I I think its reinforced I mean, I think its reinforce number one that we feel are really.
We'll have that we made the investment and the capabilities that we did over the last couple of years specifically.
Around our consumer fulfillment capabilities, because frankly, Rick if we had not done that we would not be in a position BG driving there our digital business today. So I think it confirms that I think it confirmed.
That you know our brands.
Do have a lot consumer loyalty out there and there is an opportunity for us to continue to figure out how to how to grow those where we know that the speed piece.
And how we really think about inventory and how we buy inventory and slow it in order to really drive turns better generate more cash in all of that I think that's had a profound impact on the way our teams are thinking about.
Our businesses here and I guess that maybe the two less things about brand portfolio, specifically, we really believe that and you can see and a lot of the data that came out in the second quarter.
You know brands that have comfort properties, and we have a lot of them in our and our business and we can even see the the strength of bionic I mean that that business was up 120% on there on their ecommerce business that those brands that sort of speak to that are doing really well. So we think we.
Really have to do even better job of innovation and storytelling.
Around what were what we're doing in our in our in our comfort brands and then lastly, I think youre going to see us.
Think about other.
New digital.
Concepts sorta digital first concepts that take our brand portfolio and begin to present those to the consumer in new ways. So it's been a difficult time for everybody, but it's also been a time that really does challenge you and challenges some of the thinking that you have about what were the lanes of opportunity and I would tell.
I think we sort of we feel really re energized around what the potential night might be here and you know it's not always just growth for topline sake and now we we think we are like at this point, where we can really think about the the quality of what we're doing in the earnings as we go forward here. So I think it's been I think it's been.
Good a good thing for for US. So just give you that's a little flavor for some of the things we're thinking about.
I appreciate it all the best in the back half.
Thank you ready appreciate it.
Your next question is from Steve Marotta with CL King and associates.
Good evening, Diane can and Logan and in your initial remarks, you mentioned that back to school seem to be better in markets where the.
Programs were finalized and yes, you mentioned there was even if it was digital just sort of settling into consumers had what's what is helpful am I reading into that properly.
Yeah, No thats true that it's it's definitely post peak, because we really peak as you know and let the last two weeks of July the first three weeks of August is really.
Our our key time period, and what we're seeing as as its more clearly defined in those markets about when they're going back to school, our business actually improves relative to where it had been it's still not up to those peak level, Steve, but we see an improvement in that performance. So we see like.
Even what I think today, they announced that New York schools were going back mid September or something like that in the northeast right now for US has not been terrific really at all.
So we think that as more of that clarity comes to the consumers mind that we we expect to see you know our business continue to improve we have no delusions that is going back to that peak level or anything like that which is why.
No I can and I, both talked about that 15% to 20%.
But we know that actually this could be healthy it's a tough way to have to go through that could be a healthier thing long term that that you know theres more on continuous buy now wear now and all of that as we go forward. So on so that that's a little more color on on that on that point.
Considering that digital commerce was so strong in the recent period can you comment at all about your new customer file how much of that has grown over the last year. During this period.
Yeah additional data your gathering on the customer.
Well I can tell you that we normally get a pretty good slug of consent, new consumers coming in I'm speaking now for famous through our stores and digitally but we actually found that.
A little over 90% of new if we had 90% new customers shopping on line.
And ace at pretty good percentage of I'm doing this from memory now is a pretty good percept percentage of.
Continuing to stick and and stay in shop from an omni channel perspective, so new to online they were almost 94% increase over the customers. We had last year. So now our job is obviously.
And Malian Marci and the team or you know obviously always thinking about this what do we have to do to attract retain and grow and this gives us a totally new based the consumers to begin to communicate with so so while we did the stores where an open to the weren't a lot new to brick and mortar obviously there were quiet.
Lot too new to online.
And last question pertains to spring of 21, I know that this is really looking very far out, but considering the branded portfolio has a major wholesale.
Component to it can you talk a little bit about what you're seeing there from an open to buy dollar standpoint, I know again, its preliminary and I'm sure that retailers are holding the close of the best in wanting deliveries later, but can you.
Give us a little indication of how that process is.
Flowing yeah, I would say it it really is too early to tell you know we had our first meetings in early August.
And I think everybody is trying to figure out right now.
You know how to how to work through third and fourth quarter, and what's that going to take and in some cases inventories are pretty light. So what do we have to do to help support our partners with with inventory of goods that are really is really working so we're seeing a bit of that I would say, Steve that you know there there today still.
Trying to figure out what they think the rest of the year is going to look like I think they're going to planned very very conservatively, they're not going to take any chances were going to make sure.
You know we work to chase everything that we possibly can we're going to continue to be very disciplined and very tight around the inventory that we buy so I think the whole system is getting used to trying to figure out how to do what we need to do with much less inventory everywhere.
So it's a little unclear how that will all all shake out right now for next year, but I would think you know some somewhere in late September will be one I have a pretty good view of what that's going to look like because we'll have a better feel of how we feel how we think fall 2020 is gone.
Going and then that's going to be a very important indicator for for spring 21, too, but we feel you know again, we feel like where we've got great relationships, we're working with the right folks.
You know I think our capabilities and as a company that we've built you know they know that.
We can support them.
We are well capitalized so there's a lot of reasons why.
Were you know one of the go to places going forward to two to work with our partners. So.
But more more on that as we learn a little more.
I understand thank you very much.
Thanks, Steve Thanks, Steve.
Your next question is from Sam Poser, what's Susquehanna.
Hi, this is well on for Sam.
Oh I just wanted to ask what what impact do you believe that nike's decision.
I'm not sure if you seem to prune the host to prune some of their wholesale partners, we think that she's going to have on the on the famous business and are you see.
Crew availability of product and improved allocations.
Pruning. Some these partners right we have I'm thankful for the question, we have obviously heard about it and seeing it and I know Nike has been working and thinking about this for quite some time about how do they.
From the partners to some of the best we do think it is definitely going to be an opportunity for famous in the marketplace. I mean, a I think we did a quick calculation that was somewhere in the 300 to 400 million of retail sales that were potentially shifting around.
Arguably somewhere in that range anyway.
And you know, where we think that where you know very important strategic partner to them and so we do expect it to be advantageous for us over a period of time and right. Now you know their businesses you very no very wall is very good and our business with them is very good so.
Hopefully a lot more the follow on that.
That's great color. Thank you.
And then you mentioned you've expanded BOPUS to 600 stores.
How how much can you give us a sense of how much focus as it is a part of E com what pet what's the penetration of BOPUS.
Well the ecommerce business.
Yeah, I think it traditionally like when we originally launched it we expected it to be upwards towards between 15, and 20% of our business and so when we when we go through the.
We buy online pick up in store, we also segregate outcome of that curbside, so when what Diane was referring to.
Was really our curbside opportunities obviously, we can do buy online pick up in a mall.
It is little bit harder to do the curbside minimal.
Gotcha.
And then and then I guess, you're thinking for the E Commerce business for brand portfolio was up 35% that that's just the old websites or is that he is the Adam could drop ship. The wholesale okay. Yeah, I think it's our owned ecommerce sites gotcha.
And then just one final from me. So you mentioned on the once you called out accelerating.
Store closures 160 stores across the across the statements we.
How many doors, you're going to close in Twog and that's why Twentys and are you still planning on opening any doors I think you said 14, one chip.
Yeah, We think we ended up opening like five in the in the second quarter and then.
Obviously.
It is famous we were down 37 stores. So we were at 973 a year ago.
We did include it in my prepared remarks.
To share with you get year over year kind of what our sales were excluding those stores. The 37 that were permanently closed.
But we're on track and continuing to close I think we accelerated maybe 11 stores in a in the second quarter as a result of some of it the covert closures.
We continue to March down the path that we laid out in last quarter's call.
Sure. So what's so can you just give us kind of a range of what you expect to a net closure list this year.
And.
Hence taken a look well well okay. Thank you.
Yes.
So we've got this year I think the net number is gonna be close to 35.
And the data.
That assumes that.
And we opened around 11.
So we we opened five stores at famous footwear in the second quarter.
And then obviously, we're we're looking at the remaining ones on the grid, but that's got to us that got US closing this year about 46, and and as I mentioned earlier, we close 37.
In the second quarter over last year.
Got you. Thank you.
That's it from L. personal.
Thanks, well thanks will.
Your final question is from William wider with Bank of America.
Good afternoon.
Good afternoon parcel.
Thanks.
I have a two part question so with regard to your lead times course seasonal kind of cold weather footwear.
I guess what are your lead times on the branded portfolio side and on the famous footwear side and I guess I'm just curious based upon that this summer it was fairly easy to go out and socially distance outside so seasonal.
It will probably did well you might be more challenging this winter how you think about that in the context of one you're going have to make decisions.
On the volume of of inventory.
Yep, well you know, we expect actually that whole category of.
Waterproof boots outdoor hiking and all of that to be actually you know pretty good category early reads on.
Boots, it's very early not necessarily in the performance side that had been in okay. Our lead times from a brand portfolio perspective would be you know somewhere around 90 days on goods that and on an item that we have already placed before and can turn around the turn it around a in that.
Period of time up for us to introduce something new build something new today would take US you know closer to a.
120 days to really be able to do that so I'm on the on the famous side you know same kind of thing they would have been placing goods.
You know in the spring for their holiday time period. They can typically augmented Ah you know if they really see something going well I think everybody right now is trying to figure out how did they keep their inventories as lean as possible and try to respond is quickly. So we.
We'll see it's a good question, we'll see in that category. How fast people can can you know turn and respond to respond to changes as we as we go forward, but based on kind of how we're seeing the length of seasonal selling for sandals. We would expect that you know boots could really you know go into.
Got it lets assume the consumer keeps you know doing the same thing into a into a march of this year. So keep your fingers crossed from that because it gives you more time to really respond and liquidate.
And then just my last question.
Across different consumer products, whether its apparel footwear I'm hearing of companies that are attempting to take less fashion risk in an effort to cannot be stuck with things and actually a tightening their product assortment, which could have some benefits in terms of.
You know some efficiencies of manufacturing is that something would you expect you're going to be doing and we'll get more lithia tailwind to gross margins.
Yes, I you know I think so I think the whole supply chain sort of the development and the supply chain and the way people are buying is definitely all tightening out for sure I think theres less development. That's happening there do you have to be more focused I think how you place I'm your assortments are our.
Our much clearer and cleaner and fewer I think the flow of the inventory to is going to change quite a bit so as opposed to selling in and selling it down I think you're going to see more frequent flows of not only existing goods, but fresh inventory along the way. So all of that we think is going.
To be healthy it'll take a little while for the whole you know supply side in two to work through all that but yes, we do think thats going to be a healthier for you know the overall margin profile of of our business. It doesn't mean that the consumer doesn't want newness because that is they really.
Do actually what we see is what is performing pretty well or some of the things that are knows he got to keep injecting newness, but you've got to do it at a at a pace that allows the whole system to be able to digest you know digest that inventory. So great question I definitely thing that think that will have a positive impact on our March.
Just going forward.
Great. Thanks for taking the questions and good luck.
Thank you very much.
No no further questions at this time, Dan I'll turn the call back over to you for closing remarks.
Thank you very much everybody for your continued support of our company were excited about the progress that we've made a we think we're in a good position to continue to keep.
Our focus on a continuing to two really add shareholder value here Claire. So thanks again talk too soon bye now.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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