Q1 2023 Guess? Inc Earnings Call

May 25, 2022

Good day, everyone and welcome to the guests first quarter fiscal 'twenty to 'twenty three earnings conference call I would now like to turn the call over to Bruce kind of Rush, Vice President of Finance and Investor Relations. Please go ahead.

Thank you operator, good afternoon, everyone and thank you for joining us today.

Today with me are Carlos had very Chief Executive Officer, and Dennis <unk> interim Chief Financial Officer.

During todays call the company will be making forward looking statements, including comments regarding future plans.

<unk> initiatives capital allocation, and short and long term outlook, including potential impact from currency fluctuations the coronavirus pandemic and the war in Ukraine.

The company's actual results may differ materially from current expectations based on risk factors included in todays press release, and the company's quarterly and annual reports filed with the SEC.

Comments, which also reference certain non-GAAP or adjusted measures.

GAAP reconciliations and descriptions of these materials can be found in today's earnings release.

Now ill turn it over to Carlos.

Fabrice good afternoon, everyone and thank you for joining us today.

I am very pleased to report a great start to the year with a strong first quarter performance that exceeded expectations for both top line and operating profit despite a challenging environment.

Our revenues grew 14% in constant currency grew 21%, we delivered a 7% adjusted operating margin and our adjusted earnings from operations increased 61% from last year, reaching $41 7 million.

All segments contributed to our revenue growth and our adjusted operating margin expansion of 200 basis points was driven equally by improved gross margin and expense leverage.

We continue to navigate a dynamic environment that includes higher inbound freight and product cost a weaker euro and increase wages our associates across the world are executed and effectively capturing opportunities to grow our business increase our bottom line and deliver value to our shareholders.

Paul and I want to thank our great teams, who worked together with an unwavering passion to built on our vision for this amazing brand and company.

I will now share some color on our first quarter results.

Our retail business in America grew revenues by 7% in the period and delivered strong gross margin expansion.

As with the rest of our industry, we experienced meaningful expense pressure due to increased wages and inflation as well as invested in it services and marketing altogether. This resulted in almost five points of deleverage in the period, we are adjusting our model to mitigate these factors and do not <unk>.

Spec this much deleverage going forward.

Our Americas wholesale segment had another great quarter with both revenue growth and earnings growth of over 50%.

Our Europe segment exceeded our expectations achieving top line growth of 14% and operating earnings that was four times higher than last year's.

Our retail business in Europe enjoyed a full period with open stores compared to significant closures in the same year ago period and was the primary driver for the great results of this segment, we had strong margin performance and effective expense management, which also contributed to the growth and profitability.

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While the Europe wholesale business had lower revenues in the quarter as a result of timing shifts in the business and currency impact I am pleased that the business continues to trend well with the fall Winter 22 campaign closing up 14% and the pre spring summer 'twenty three campaign, starting strong with our Pos.

In response to the collections and the prospects for another double digit performance.

Not surprisingly given COVID-19 related shutdowns in China, our performance in Asia was significantly impacted in the quarter, but we were still able to deliver top and bottom line results consistent with last year's.

Finally, our licensing business achieved revenue growth of over 22% as the business continues to benefit from our strong brand momentum and as many of our licensees deliver product from prior orders that have not been shipped due to the supply chain disruptions plaguing the industry.

Turning to our product performance.

And our creative and merchant teams have done an extraordinary job repositioning our product offering and the customer is responding well to the new collections.

You know our brand elevation strategy focused on enhancing the styling and quality of our products across categories with a focus on key products to address our main customer groups, serving their lifestyles and participations.

Our global line is performing extremely well across all markets and the consistent performance by products, including best sellers across regions and channels is a clear proof that our customers responding positively to the assortment and our strategy is working well.

In women's we have seen that our customer has said renewed desire to get out and participate in social events and travel as a result, we are having great success with dresses, where we have introduced significant newness and fabrications textures prints and silhouettes.

We are also seeing strong performance in woven tops dressy sweaters pants and special outerwear pieces.

In addition, she.

She is buying accessories to complete the outfit our handbags have flying off the shelves and we are having a difficult time keeping inventory available to meet demand.

Beautiful colors, we offered the accordion it back to apparel lines to complement the outfit at very compelling prices make the offering extraordinary here also we have increased the quality of the product with additional fabrications and elevated trends in packaging.

Several other categories in accessories are also performing well, including women's travel accessories belts men's bags women's and men's highway and others.

Consistent with women's.

Our mens business has shown strength in dresses products, such as woven shirts, outerwear Blazers and patents.

And our Marciano brand was on fire during the quarter, we saw strong double digit sales growth in every region as our customer responded positively to the new products, we introduced monthly in stores online and at wholesale.

Here again dresses have been a driving force we are offering many sophisticated fabrications, including silk prints on share moves in several styles leather and sweaters.

At prices well below what you will find that the luxury market for comparable products I believe there is nothing like it in the market today.

I have said it before.

Gas is a true lifestyle brand that offers an enormous range of products to our core customers to support their lifestyle and multiple locations they show up for it.

It is at times like the present, one when we can leverage the power of that product range.

So from a casual offering to a much dressier and elevated one without compromising the DNA of our brand.

To elevate the brand image in our stores, we are remodeling multiple locations and opening new stores that offer a more elevated customer experience and growing the use of our new customer analytics tool omnichannel capabilities, better floor design and space allocation bigger fitting rooms, and seeding accommodations and more.

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This year, we plan to open 60, new stores in North America, and Europe and plan to remodel 370 additional locations between the two regions.

Considering the stores that we opened in remodeled last year by the end of fiscal year 'twenty. Three we will have 750 locations out of 950 or 80% of the total stores updated.

Yeah.

Regarding our digital transformation and CRM, we continue to make good progress on optimizing the new platform utilization and the implementation of our customer 360 solution.

This solution cover several areas that in the past were either not addressed or the solutions were not effectively integrated <unk>.

They include.

Our new CRM platform that allows us to see all information related to our customers and one screen from a single data depository.

Our new segmentation tool, which allows us to work on dynamic customer segmentation to easily identify common characteristics among our customer base given multiple variables.

Our new marketing tool to engage our customers by personalizing their experience through automated communications and multi step journey.

And our customer 360 in store client telling app.

Our plan is to finalize this implementation in Europe and integrate the system into North America by year end.

Regarding our supply chain disruptions caused by the pandemic are still very present and continue to impact cost supply and inventory availability.

The most recent lockdowns in China due to Covid and the energy crisis exacerbated by the war in Ukraine have complicated things further.

While we have seen some relief in port congestion and transportation costs based on further cost increases due to constraints and inflationary forces. We are assuming prices will remain consistent with the current environment for the remainder of the year.

Our teams have done an extraordinary job of addressing the complexities of the global operating environment and mitigating challenges to secure the appropriate inventory to support our business, we closed the quarter with inventories up 20% and much of the increase relates to in transit inventory growth and orders that we placed earlier.

To support our business and avoid late deliveries.

We're very pleased with the composition of our inventory right now and we feel that we have made the right moves to ensure monthly deliveries have protected for both our direct to consumer and wholesale businesses.

As I reflect on our results for this quarter and what they mean for the rest of this year and our future.

It tells me one thing very clearly.

Our strategy is working and our new business model is sustainable.

Our first quarter results further demonstrate the benefits of our globally diversified business and the power of the transformation. We are executing which is benefiting from the brand elevation I discussed earlier as we combine higher prices with increased full price selling will drive significant efficiencies in our product development and <unk>.

<unk> functions and we deliver increased store profitability as a result of our footprint optimization initiative.

As we look to the rest of this year our expectations for revenues remain in line with our power guidance on operating margin is slightly lower due to some factors in the macro environment, mostly currencies that have changed significantly since we last spoke in March.

We now expect revenues to grow by 4% in U S dollars or 10% in constant currency, we continue to see opportunities to grow our business through increased sales productivity and market share gains and category expansion digital business growth and expanding our store fleet in.

In addition, we plan to deliver at 10, 3% adjusted operating margin. This compares to the 10, 5% that we were targeting for this year back in March which includes a 100 basis points of currency pressures a.

I strongly believe our outlook for this year confirms that our model is highly sustainable in fact, if this year's currencies were at last year's levels, we will be looking at revenues growing at 10% and reaching $2 billion and $850 million.

And adjusted operating margin at 11, 3% with earnings reaching roughly $320 million.

Looking further out to fiscal 2024, we remain confident in our goal is to reach $2 $8 billion in revenues and achieve a 12% operating margin absent further currency headwinds as our assumptions for a more normalized cost and plans for increased operational efficiencies remain in <unk>.

Correct.

In addition to all that we're doing in our business to drive growth. We also continue to be committed to returning capital directly to our shareholders through our dividends and share repurchases.

During the first quarter, we repurchased over 500000 shares in open market transactions for a total amount of $11 7 million.

This was in addition to entering into a $175 million accelerated share repurchase program that should be fully executed by the end of July 2022.

We feel strongly about our cash flow generation power on our balance sheet, we just announced the completion of a new 250 million euro revolving credit facility to support our European business with this our total borrowing capacity will reach over $450 million the new facility.

Contains a feature by which the interest rate will benefit us with the achievement of specific sustainability goals, which demonstrates how committed we are to integrate the concept of sustainability into our operations.

In closing as I look back to the last couple of years and the challenges that the pandemic brought to the business and our lives I can stop reflecting on how this company and this team embraces change and adapt to a completely new way of thinking and a new way to run our business.

Paul and I couldnt be more proud of our teams across the world and we want to thank you deeply for your great passion and strong contributions.

And with this great teams, we are very well positioned to continue to grow our company and capture significant market share.

We have an amazing brand that is enjoying strong momentum globally. We have the best product we have ever had across all 25 categories, we do business and great marketing and customer awareness globally, a powerful distribution network leveraging all channels and are greatly diversified business model and.

This is a model that is delivering double digit operating margins and a high return on invested capital. We will remain focused on managing our business carefully and continuing to deliver for all our shareholders.

With that I want to more formally welcome Dennis seek or back to our guest family. It is a great pleasure to work with you again, Dennis Let me now pass it to you to review our financials and outlook in more detail. Thank you.

Thank you Carlos and good afternoon, everyone.

Before I jump into the numbers I want to tell you how excited I am to be back here at guests and help the team drive the business of this iconic brand.

Since I left a decade ago. The team has done an incredible job of expanding our business across all of Europe . The brand is well represented and we have a strong infrastructure to support it.

I'm also impressed with the team's execution over the last couple of years and how they've created a platform for sustainable and profitable growth.

I am looking forward to working with you all as well and to continue to support the company's goal to deliver outstanding value to our shareholders. So with that let's take a look at the quarter.

Our overall first quarter operating results exceeded our expectations. Despite some continuing headwinds, including global inflation the war in Ukraine, and some isolated COVID-19 restrictions.

We delivered strong double digit revenue growth with each of our business segments posting top line growth versus last year's first quarter.

We expanded gross margins and leverage our expense structure, improving profitability with a 200 basis point expansion of adjusted operating margin.

Solid performance that reflects both the resilience of our operating model and the strength of our team.

Now let me take you through the details.

First quarter revenues were $593 million.

A 14% increase in U S dollars and a 21% increase in constant currency.

Our revenue growth was primarily driven by last year's temporary store closures, which were worth roughly 8% of revenue growth as well as strong performance in our European wholesale business, along with higher Americas wholesale shipments.

Currency headwinds, resulting from the relatively strong U S. Dollar muted much of that growth negatively impacting U S dollar revenues by $33 million or 7% of revenue growth.

Getting into a bit more detail on our segment performance in Americas retail revenues increased 7% both in U S dollars and constant currency driven in part by the anniversary of last year's temporary store closures and an overall comp increase of 4% in constant currency.

Overall in the U S and Canada, our stores benefited from higher traffic as well as higher AUR, partially offset by softer conversion.

The higher AUR were fueled by the strategic price increases we implemented throughout last year to support our brand elevation.

Canadian store comps were especially strong as they have now anniversaried the severe pandemic restrictions that were in place a year ago.

In our U S stores higher AUR and traffic were offset by softer conversion as we anniversaried the stimulus checks hit customers bank accounts in the first quarter of last year.

Very encouragingly as well our tourist locations have outperformed the rest of our store fleet as leisure travel has regained momentum in the U S.

In Europe revenue increased 14% in U S dollars and 26% in constant currency.

The main driver for constant currency revenue growth was the removal and easing of many of the COVID-19 related restrictions from last year, which capped a substantial amount of the fleet, partially or fully locked down, especially in the first quarter last year.

Our stores posted 7% positive comp sales in constant currency for the quarter.

Just as in the U S. The driver of our comp increase was a significant increased AUR, resulting from last year's strategic price increases.

Traffic and conversion followed a similar pattern to the U S with strong traffic increases being more than offset by conversion declines.

Our European wholesale business also delivered revenue growth, mainly fueled by our spring Summer order book, where orders were up for the season.

In Asia revenues grew 1% in U S dollars at 8% in constant currency, mainly driven by our direct retail operation of some of our South Korea stores, which we recently acquired from one of our wholesale partners.

This increase was partially offset by a 4% constant currency comp store decline as lower traffic more than offset the benefit of higher AUR from our price increases.

In Americas wholesale revenues increased by 50% both in U S dollars and constant currency.

This resulted from the timing of this year's deliveries to some of our partners, where we expect all of the year over year revenue increase will occur in the first quarter.

And finally in our licensing segment royalty revenues increased 23%.

This increase was primarily driven by strong global selling of handbags, where inventory was significantly constrained during the fourth quarter of last year.

In the quarter, we expanded gross margin with a 90 basis point increase to 41, 6%.

Leverage of our retail cost base drove the gross margin expansion.

Product margins were roughly flat as supply chain cost pressures and currency headwinds offset the benefit from last year's price increases as well as a higher mix of retail sales.

Adjusted SG&A for the first quarter increased 11% to $205 million, including a favorable currency impact of $10 million compared to last year's expense level.

Our expenses this quarter included an $8 million COVID-19 related subsidy to support our infrastructure in Europe.

We received a similar amount in last year's Q1 as well.

The largest increase in SG&A expenses was to support the reopening of our retail stores, where we are experiencing labor cost pressures given the impact of global inflation and the relatively strong employment in many of our markets.

We also increased our marketing and advertising investments to support our business and brand story.

With disciplined cost control, we managed our fixed overhead structure, well and with our strong top line growth, we improved our adjusted SG&A rate by 110 basis points in the quarter.

Adjusted operating profit totaled $42 million in the quarter, a 61% increase over last year's Q1 and.

And the adjusted operating margin expanded 200 basis points to 7%.

In the quarter, we recorded nonoperating net charges of $16 million related primarily to revaluations of certain of our foreign subsidiaries net assets and liabilities into U S dollars, along with revaluation of the assets, we hold to support our syrup.

The vast majority of the charges we recorded in the quarter were mainly unrealized and related to the relatively strong U S dollar and a relatively weak performance of global equity markets.

Our first quarter adjusted tax rate was 22% down from last Q1's rate of 28%.

Adjusted EPS in the quarter was 24.

Versus last Q1 'twenty one.

This year's adjusted EPS was negatively impacted by the non operating charges I just mentioned by <unk> <unk> per share while the similar negative impact last Q1 was three <unk>.

Adjusting for these non operating items adjusted EPS would have increased over 80% in the quarter.

Moving to the balance sheet.

We ended the first quarter with $148 million in cash compared to $395 million a year ago.

The decrease in cash was primarily driven by $238 million of share repurchases executed in the last 12 months.

Including our $175 million accelerated share repurchase program as well as $107 million of tax payments related to the IP transfer to Europe .

Our business model continues to generate strong operating cash flows that support our investments and our goal is to return capital to our shareholders.

We ended the quarter with a total of $221 million of borrowing availability on our various global facilities.

This amount does not include the $144 million of additional borrowing capacity that we added after the first quarter.

Inventories were $484 million up 20% in U S dollars and 31% in constant currency versus last year.

Our inventory investment includes a substantial increase in in transit inventories, reflecting our strategy to protect revenues in the current supply chain environment and to support our growth by ordering product roughly four weeks in advance.

We feel good about our overall inventory position and upcoming orders and believe we have the right assortment to satisfy demand throughout the year.

Our receivables were $295 million down 4% from $306 million last year.

On a constant currency basis receivables increased about 8%.

Our payables increased 12%, primarily reflecting the investments we are making to position our inventories.

Capital expenditures for the quarter were $29 million up from $9 million in the prior year, mainly driven by investments in Remodels, new stores and technology.

Free cash flow for the quarter reflects a net investment of $85 million versus a net investment of $65 million in the prior year, the change being mainly driven by higher capital expenditures.

As we announced last quarter, our board expanded our share repurchase authorization by $100 million.

Taking the capacity to $249 million thereafter.

After we entered into an accelerated share repurchase arrangement to repurchase $175 million of our shares with a final number of shares to be repurchased still to be determined when the program ultimately completes by the end of July .

In addition in the quarter, we repurchased another roughly 5 million shares for $12 million. This leaves $62 million outstanding on the authorization.

Earlier this month, we finalized a 250 million euro revolving credit facility in Europe more than doubling the region's borrowing capacity as it replaced several short term borrowing arrangements with European banks.

The initial term of the facility is five years.

Facility also provides an option of a two year extension and a 100 million euro expansion both subject to certain conditions. This is an important accomplishment for the company as it expands our access to longer term capital.

Today, We also announced that our board approved our quarterly dividend of 22, and a half which at recent stock prices represents a yield of roughly 5% return annually.

Feel strongly about our financial position, our cash flow generation power and our balance sheet.

So now let's talk about the rest of the year and next quarter.

Our overall assessment of our plan and profit expectations for this year remain largely unchanged compared to what we shared on last quarter's call.

However, there are a few factors that have evolved since march including our outperformance in the first quarter.

First our currencies currency headwinds, which were already strong intensified since March with the U S dollar and euro approaching parity.

Absent any material trajectory change and despite the impact of our hedging program currencies will likely represent one of the most impactful drivers affecting this year's key operating metrics.

For the full year based on our outlook and assumptions currencies will consume nearly six percentage points of topline growth compared to last year, roughly $40 million of operating profit and almost 100 basis points in operating margin.

In other words, all other things being equal currencies would be the difference between our current expectation of operating profit contraction versus modest operating profit growth.

Second our outlook now assumes that we will continue to deliver sales and operating earnings from Russia. This year.

As we mentioned on our last call we've been in discussion with our Russian partner on what potential actions, we can take in that market.

In the meantime, we have suspended investments in Russia, and the business has been operating except for our direct E Commerce site.

Next in Europe , our brand is doing well and we now expect even better performance of the fall Winter collection, which should benefit the second and third quarters.

Finally, we are experiencing modest cost increases, which will affect our arm use and in the U S. A higher mix of markdowns given our comparison to last year's relatively tight inventory environment.

Those factors taken as a whole should yield roughly the same expected level of adjusted operating earnings with slightly more revenue growth offset by a small contraction to adjusted operating margin.

For the full year, we now expect constant dollar sales to increase by about 10% with U S dollar sales growing by roughly 4%.

Now planning full year adjusted operating margin of about 10, 3%.

Given our strong performance in Q1, we are pleased that we are farther along already in delivering this year's profit than we had previously expected to be.

We are closely monitoring supply chain conditions consumer behavior, the latest developments related to COVID-19, especially in China, and finally market conditions and the promotional environment.

For the second quarter, we do expect the top line growth rate to naturally moderate somewhat now that we've passed most of the favorable comparison to last year's store closures and the different timing of shipments in Americas wholesale where we expect an annual segment revenue increase in the mid single digits, we expect.

Second quarter constant currency revenues to grow about 8% with U S dollar revenue growth of about 1%.

We're expecting second quarter operating margin of about seven 5%.

The year over year change in second quarter operating margin will be driven by several factors the.

The first is COVID-19 subsidies and rent relief, we received $10 million last second quarter and do not expect any material amounts this quarter.

Just as in the first quarter, we expect to continue to experience higher costs, both in our supply chain and in our retail stores due to overall inflationary pressures and currencies will continue to affect our margins.

While we are still planning for markdown rates to be lower than historical levels. We do expect the second quarter markdown rates to be slightly higher than last Q2 due to last second quarters inventory constraints.

650 basis point change in second quarter, adjusted operating margin, we expect roughly 400 basis points of that will affect gross margin and the balance will affect our SG&A rate.

That will conclude the company's remarks, and let's open up the call for your questions.

Thank you we will now begin the question and answer session.

Have a question. Please press <unk> one on your Touchtone phone. If you are using a speakerphone you may need to pick up your handset first before pressing any numbers. Once again, if you have a question. Please press <unk>.

Zero one.

On your Touchtone phone.

See anybody for question.

And our first question comes from Susan Anderson from B Riley FBR. Your line is now open.

Hello, Susan one moment.

Hello, and Susan Your line is now open.

Hi can you hear me.

Yes, Hi, Susan great Okay.

Yes. So I was wondering if maybe you could talk about the European business and kind of what youre seeing over there from a consumer perspective, I think last year at this time.

That down so was that is that helpful. Now this year and maybe just talk about just what youre seeing out of the consumer with inflationary pressures over there.

Yes, Susan I'll start and I'm sure Dennis will have.

Some comments to add here, but.

We are very pleased first of all because the entire fleet is open.

Except for what we are experiencing in Ukraine of course, but.

All our stores.

Reopened and they are behaving pretty much in line with what we had anticipated based on what we have learned through the.

Closures and reopens.

Both in that region as well as what we learned here in North America.

And we have been very pleased because margins behaving in line with what we expected the consumers responding very well to our assortments.

We had a.

A very nice series of off the.

Shopping days with traffic that has been a little bit better than what we had anticipated.

Extended to more recent weeks. So overall, we are very pleased.

Of course, when you think about the revenue growth for the first quarter was very significant only because we were comparing.

Our fleet open to too many most stores being closed a year ago.

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The product performance that I mentioned during my prepared remarks.

Very much applicable to what we're experiencing in Europe , as well and which gives us a lot of confidence about our global line development.

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The expectations that we have that we can continue to meet or exceed so it's all very good.

And then the wholesale business, which as you didn't ask specifically, but I think is also a very good representation of how healthy the market is our wholesale business continues to.

Outperform our expectations.

We closed.

A recent campaign with very good numbers at 14% increase.

And what we're seeing now with the early reads of our pre spring Summer campaign for 2023 is that.

We have an opportunity for a double digit growth again.

So just.

Overall, a very very good performance and very happy with.

The prospects of Europe , as we see it soon.

And I would just echo Carlos his comments I mean, if you. If you look at the first quarter performance with constant dollar revenues being up 26%, we comped positively 7% in the in the stores with strong traffic and AUR growth.

And we feel very good about the about the businesses.

Look forward, we still have the opportunity as we are.

We're going to we opened 71 stores last year, we opened 15 stores in the first quarter. So that will fuel some of the growth for the rest of this year. Our E. Comm business was relatively flat, but if you think about what's happening in the stores that was.

Largely reflecting a transfer of demand online with the stores. So we were up against that but overall really solid performance.

It makes us feel really good about the rest of the year.

Great that sounds good and then maybe if you could talk about the U S. Wholesale business also it was up pretty big this quarter, how should we think about that the rest of the year and I guess were there any shifts in there.

Yes, so just.

The numbers were very strong for the first quarter, but it's not something that you should.

Reed.

As an expression of the trend.

Have a lot of timing issues.

There were many orders that we didnt fulfilled the end of last year that.

Eventually fulfilled during the first quarter because of inventory restrictions.

And.

And we feel that.

There is a.

A big opportunity too.

To fulfill the trends that we were seeing but we are not expecting that that will continue for the upcoming three quarters. So Dennis maybe you can talk about the trend for the yes. The way we're looking at it we were up 50% most of that was what what Carlos described so the pattern will be unusual this this year with <unk>.

All the growth coming in the first quarter, but for the year, we're expecting the wholesale business to be growing in the mid single digits.

Right. So you will see a change in the growth and quarter over quarter, but over for the full year good solid performance.

Great. That's very helpful. Thanks, so much nice job on the quarter and good luck throughout the year.

Thank you. Thank you Susan.

Thank you as a reminder, if you have a question. Please press zero one on your Touchtone phone. Our next question comes from Cory <unk> from Jefferies <unk> Company. Your line is now open.

Hi, Good afternoon, and welcome back Dennis and thank you for taking my questions.

Yes, Hi, Corey.

On the Americas retail business can you provide a little bit of context as to what drove the growth there and it sounds like youre expecting there to be some higher promotions in that segment.

Can you talk a little bit about your XP.

Expectations for that segment going forward.

Yes so.

We were very pleased with our performance in Americas retail, we had another very strong quarter.

So just a nice.

Revenue growth.

Combined with our strong gross margin performance, we did have some.

Pressures on the expense line, but we were able to really.

Look at the model again.

Put a plan in place to mitigate some of those $5 going forward.

What you heard about our margins.

Last year was a very unusual, especially in the second quarter.

Tremendous demand and.

Partially because of all of the stimulus checks and all the money that.

It was coming into this space and we did not have as most retailers broadly we did not have.

<unk> inventory to be able to maximize.

That demand.

And be able to service.

Just the entire demand expectations from the customers then.

As a result of course, we did not.

Mark down or take any significant discounts throughout the season.

Which will be.

The representation of a more normalized.

Way of running the business.

So this year, we are in a much better inventory position. We are very pleased with what we own and of course, we own more and the demand is.

Aligned with that inventory ownership, but we are expecting that the.

The cadence of.

The markdowns and promotional.

Activity will be more normalized still pretty much in line with what we have been talking about elevating the brand.

But a little bit.

Less of a margin driver than what we saw last year and the numbers are very small and we are not talking about a significant deviations here, but we are just trying to be.

Extremely transparent and give you all the levers that we see could impact the business in the next quarter and the rest of the year.

Very helpful. And then could you provide some more color as to what drove the gross margin outperformance. I think you were first estimating some gross margin could be down, but it was actually up.

And then maybe how we should be thinking about that throughout the rest of the year.

So just when we came into the year, we were facing a lot of challenges and headwinds, especially in supply chain inbound freight all kinds of things that we know.

Can impact our margins significantly. We are also we were also seeing.

Big pushback from vendors on on costs. So it's been difficult for us to further negotiate and <unk>.

Being able to really navigate through all of those different headwinds.

As it relates to inbound freight we have done a tremendous job our teams have done an incredible job in trying to minimize airfreight for example, which is something that is if you get it this quarter you see the immediate impact on the bottom line in <unk>.

Unfortunately that has been very effective but there are multiple examples of that so.

Most of what you see also there is a little bit of mix, but I think a bit more significant parts of that really helped us do better than what we had anticipated in margin.

A combination of.

Lower cost.

Coupled with lower.

Promotions and discounts at the point of sale.

And that is true in both regions in North America and in Europe .

Understood and then just lastly.

Could you talk about how a little bit in a little bit more detail about how FX is going to be affecting the model throughout the remainder of this year.

Yeah sure I'll take that.

As I said in my in my prepared remarks, the currencies, given where they are relative to last year will be one of the most impactful drivers on our P&L. This year with a top line compression based on our current assumptions of about $150 million at six points.

Both $40 million of operating profit and about.

A point of operating margin so.

Significantly.

<unk> as I said the difference between operating margin contraction this year and operating.

<unk> profit growth so <unk>.

Significant significant impact.

The three ways that currencies affect our.

Our our P&L. Our first there is the translation of non U S. Dollar reported earnings into U S. Dollars. So the way to think about that as the stronger U S. Dollar gets to less U S dollars come through the translation in Europe is the best example of that so so as the U S dollar gets stronger against the euro.

Those those earnings get reduced as do the <unk>.

Sales then there is the transactional.

The impact of currency as the example, there is Europe purchases a substantial amount of its inventory in U S. Dollar, but there are euro based entities. So the more.

U S dollar strengthens they have to use more euros to buy their inventory that obviously puts pressure on their margins and there is the last one which you saw us fairly significant one this time is the mark to market of <unk>.

Non functional currency balance sheet items as they get mark to market based on currency rates at the end of the quarter. The challenge Youll have is that each one of those is impacted impacted with different timing. So it's difficult for you to gauge, but I appreciate it.

It's a simpler way to think about it as a strong U S. Dollar gets stronger you'll see some natural reduction to earnings you will see some impact on margins that will be somewhat delayed and it will also be cushioned by the hedging program that we have in place on the <unk>.

Transactional items so.

I know, there's a lot there, but hopefully that's helpful.

Very helpful. Thank you very much and best of luck.

Thank you thank you Corey.

Thank you. Our next question comes from Dana Telsey from Telsey Advisory Group. Your line is now open.

Good afternoon, everyone.

And then hi, you mentioned social events, and then strengthen dressy in terms of the sales there.

Denim do you what are you seeing there and then within macro headwinds of inflation and supply chain. What how are you handling pricing and how do you think on the SG&A side on the cost of labor and freight and those portions of the expense buckets. Thank you.

Yes, Thank you Dana.

Well, so with respect to Michael.

My comments about social events and people going out and traveling and all but it's definitely impacting our dressy part of the assortment in a very significant way and we are very pleased with that.

The cash flow side of the assortment is not performing as strongly.

But we are pretty much in line with our plans both at retail and in our wholesale.

<unk> business. So we are still seeing.

Some growth across the board even in those categories that have not trending as.

As strongly as the other ones.

But overall, we are very pleased with the overall performance of benign of course.

We introduced the at leisure line.

Just as Covid started.

And that line was on fire for many seasons.

<unk> seasons.

We are seeing that those.

Growth is leveling.

<unk> now, but it's completely in our men's business enacted.

It seems to be very strong, but we're seeing that.

Women's side is not as strong as we see for the.

The third part of the assortment and the Great thing is that we do have all these different options for the customer and I think that the customer is definitely leveraging those and we have seen that they are now buying the whole outfit. So it's not just.

Addressed but it's also the handbag. It's also a pair of shoes is also other accessories and we are seeing it.

In.

And the way that they are hoping today, especially women.

With respect to <unk>.

Pricing.

We of course, when we started the year, we were looking at what to expect for.

Inbound freight and all the different <unk>.

Pieces that had impacted especially.

Especially the back half of the year for Us last year, and we built our plans based on that we had already put in place significant price increases across the board.

But many of those have not been anniversaried, obviously, so those pricing increases were.

In place throughout the year, and we are going through that on utilization as we speak.

We are monitoring very carefully if we see that the demand for those specific.

Products impacted because of the price changes and we are being very careful with that fortunate in the overall we have been in.

In a pretty good place, we don't see that.

<unk> demand.

Sell throughs have been impacted negatively and if we do see some of that.

May make adjustments here or there, but so far they have not been significant and I think what's helping here is that the way we have set those prices as.

We have talked quite a bit about perceived value pricing.

New methodology that we are using and just trying to be very careful with how we assign a price to any product and we do this through our benign.

Paul on the product teams they spend.

Excruciating time, just going through the entire line product by product and reassessing, whether this is the right value for that particular product.

Idea in every case is well it is the right value then we should expect to sell whatever 80%, 90% of this product at full price and.

Based on that is is how we assign the number of units that we will buy for that particular style and this method is working very well for us and.

<unk> is a very.

Good method to ensure integrity and the pricing structure for the entire line and <unk>.

Of course, if we see that the model starts.

Just not being as effective we will reconsider adjust but so far I think we are in a very good place and then with respect to labor.

Just.

As we probably most companies in our space that just we increased wages pretty aggressively we once we have our great people to stay with us and to continue to be super productive and excited about being part of this family in.

And of course, when we turn into the new year and started <unk>.

Assigning in allocating hours.

To do the job, especially when we open stores or even those.

That are promising.

For a bigger business and so forth.

It was it was more challenging because the rates are significantly higher but we think that we got it.

And of course, we will continue to be competitive and do what we need to do to attract the best talent and keep it in and I feel that we are in the right place now and of course, nobody knows what's going to happen in the future.

Very low unemployment and.

And I think that inflationary forces continue to drive a lot of this decision.

We are absolutely committed to remaining very competitive on that.

Our business is a people business.

We want the best.

Thank you.

Thank you Dana.

Thank you and our next question comes from Janet Kloppenburg from J&J Kaye Research Associates. Your line is now open.

Hi, everybody.

Hi.

Good quarter.

Thank you Jonathan.

Yes, you're welcome.

I got on a little late Carlos Thank you.

<unk> had about casual being good maybe not as good as the recovery categories, which is to be expected.

Did you say anything about denim trends in housing.

That category and then I wanted to ask Janice Hi, Dennis.

Alright.

Hi, one time I wanted to ask Dennis.

Yes.

Key factors in play as a tailwind.

As the year goes along in other words that it wouldn't be moderating because it sounds like from your comments.

Might be.

And just on licensing should we expect the strong trends.

Can you always got a timing issue like wholesale business. Thank you.

Okay. So let me take those two questions and then Dennis can probably touch on your freight question. So yes, I did say that casual while it was growing.

In line with our plans it was not growing so.

And overall category I'm talking about was not growing.

As aggressively as the dressy part of our business so and.

And it's something that we kind of anticipated.

And within those categories, you have things such as denim U S. But also knit tops and some other categories that are.

Again more on the casual side.

With respect to licensing.

We had a phenomenal quarter and it was driven by some of the of the similar type of forces that drove our wholesale business in the first quarter.

There were several categories that we'll reach our licensees couldnt fulfill the demand that we saw especially in the fourth quarter and.

<unk> ended up delivering a lot of those products in.

Part of the first quarter and that helped us with with a bigger royalty business licensing business, we do not expect that to repeat on an ongoing basis.

Because again it was somewhat abnormal.

Move of orders into the first quarter now that said I want to say that.

Wasn't just a timing issue.

What drove the business, but also the strength of the brands, we have seen that the brand has tremendous momentum in globally and.

Of course that impacts our core business, but it also impacts significantly our licensees.

And I think that they are doing an incredible job with product development and distribution and all of that is showing in.

Extremely grateful towards handbags is a standout for sure but we're also seeing tremendous performance out of fragrances. We are seeing good performance out of watches.

Just.

Footwear had a very good year. So there are multiple.

Bright lights here to two <unk>.

Celebrate.

But don't expect that we're going to have a 23% increase in royalties every quarter here.

Thanks Scott.

By the way with a great March and by the way.

Yes.

Yes, Janet with respect to freight and overall supply chain cost pressures.

We did begin to see them.

In the back half of last year. So you are right we will be lapping.

If freight is one component.

Of that so we still see overall cost pressures throughout the year, but it's one of the reasons why the margin compression in the second quarter is going to be the strongest because some of those pressures all of them seem to be landing in the second quarter and then some will start to ease all other things being equal.

As we move through through the year. So that's why we're down 650 basis points.

In the second quarter. There is some other one time things there, but overall.

We expect pressure for the full year, but it should ease as we get to the back half.

Yes.

I'd like to touch on our inventory.

I know that that was not your direct question, but I think is such an important points here.

We closed the.

The quarter with $484 million in inventory and that compares to $404 million a year ago to $80 million.

Over the year ago period that represented 20% in U S dollars, but up 31% in constant currency, which is just you look at the number and you say Wow, that's a big number.

I just want to make sure you all.

I understand that.

What is driving this number is.

That we are not buying more but we are buying earlier and I think that is an important distinction because we have added about four weeks of supply in a way to make sure that we could fulfill the demand that we are expecting to come we don't want to Miss any orders, we don't want to Miss any sale.

All set.

Point of sale with our ultimate customer. So we have about four weeks of supply added each week.

Practically speaking represents about $20 million have call, so thats $80 million, which kind of coincidentally is about the number that we have at our business is trending.

Up about 4% based on the guidance that we share with you today and.

We are.

<unk> that.

Lot of that inventory is going to be here earlier than it would have been to be able to satisfy that growth. We are seeing that units are up we have about 8% more units than we had a year ago.

That represents about half of that growth.

And the average cost is also up as a result of all the inflationary forces an increase in production costs.

We were talking about and that number is up about 10, 5% in U S dollars as average cost per unit.

But that number will be about up about 18%. If you were given in constant currency. So you put it altogether.

If anything we are running a more efficient model. We are excited because the day that this forces that are driving us to order earlier.

Go away and we are hoping that that will happen at some point.

We will be able to run a more efficient business and.

We can wait for those days.

So also.

The price increase is obviously embedded in our model. So the fact that our average cost is up 18% doesn't mean that it's impacting our margins because our average unit retail is running about 19% for the total company so anyway.

Thought that that.

That will be good for you to have.

Thank you.

Thank you Janet.

And presenters we have no further questions in queue at this time.

Alright, well, thank you operator, and thanks again to everyone for your participation today, we really appreciate it.

Very busy with many other calls and to be part of this we greatly appreciate it.

Proud of our results and we are very confident in our plans for the rest of this year and for the future and I believe that today for multiple reasons. Our company is in a ninth deal position to capitalize on the opportunities that this current environment presents.

Wanted to know that our team is really im very excited to tackle both opportunities head on so happy Memorial day weekend to everyone and we will.

Talk soon I'm sure good day to all of you. Thank you.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect.

Okay.

Yes.

[music].

Thank you operator, good afternoon, everyone and thank you for joining us today on the call.

Today with me are Carlos Halle, Berry, Chief Executive Officer, and Dennis <unk> interim Chief Financial Officer.

During today's call the company will be making forward looking statements, including comments regarding future plans and strategy.

As you can initiatives capital allocation and short and long term outlook, including potential impact from currency fluctuations the coronavirus pandemic and the war in Ukraine.

The company's actual results may differ materially from current expectations based on risk factors included in todays press release, and the company's quarterly and annual reports filed with the SEC.

Comments will also reference certain non-GAAP or adjusted measures.

Get the conciliation and descriptions of these materials can be found in today's earnings release.

Now I will turn it over to Carlos.

Good afternoon, everyone and thank you for joining us today.

I am very pleased to report a great start to the year with a strong first quarter performance that exceeded expectations for both top line and operating profit despite a challenging environment.

Our revenues grew 14% in constant currency grew 21%, we delivered 7% adjusted operating margin and our adjusted earnings from operations increased 61% from last year, reaching $41 $7 million.

All segments contributed to our revenue growth.

Our adjusted operating margin expansion of 200 basis points was driven equally by improved gross margin and expense leverage.

We continue to navigate a dynamic environment that includes higher inbound freight and product cost a weaker euro and increased wages.

Our associates across the world are executed effectively capturing opportunities to grow our business increase our bottom line and deliver value to our shareholders.

Paul and I want to thank our great teams, who work together with an unwavering passion to built on our vision for this amazing brand and company.

I will now share some color on our first quarter results.

Our retail business in America grew revenues by 7% in the period and delivered strong gross margin expansion as with the rest of our industry, we experienced meaningful expense pressure due to increased wages and inflation as well as invested in services and marketing.

Altogether. This resulted in almost five points of deleverage in the period, we are adjusting our model to mitigate these factors and do not expect this much deleverage going forward.

Our Americas wholesale segment had another great quarter with both revenue growth and earnings growth of over 50%.

Our Europe segment exceeded our expectations achieving top line growth of 14% and operating earnings that was four times higher than last year's.

Our retail business in Europe enjoyed a full period with open stores compared to significant closures in the same year ago period.

And was the primary driver for the Great results of this segment, we had strong margin performance and effective expense management, which also contributed to the growth and profitability.

While the Europe wholesale business had lower revenues in the quarter as a result of timing shifts in the business and currency impact I am pleased that the business continues to trend well with our fall Winter 2002 campaign closing up 14% and the pre spring summer 'twenty three campaign, starting strong with a partner.

In response to the collections and the prospects for another double digit performance.

Turning to our product performance.

And our creative and merchant teams have done an extraordinary job repositioning our product offering and the customer is responding well to the new collections as you know our brand elevation strategy focused on enhancing the styling and quality of our products across categories with a focus on key products to address our <unk>.

Customer groups, serving their lifestyles and purchase occasions.

Our global line is performing extremely well across all markets and the consistent performance by products, including best sellers across regions and channels is a clear proof that our customers are responding positively to the assortment and our strategy is working well.

<unk> woven tops dressy sweaters pants and special outerwear pieces.

In addition, she is buying accessories to complete the outfit our handbags have flying off the shelves and we are having a difficult time keeping inventory available to meet demand the.

The beautiful colors, we offer the accordion it back to apparel lines to complement the outfit at very compelling prices make the offering extraordinary here also we have increased the quality of the product with additional fabrications and elevated trends in packaging. Several other categories in accessories are also performing well including womens.

Accessories belts men's bags womens and mens eyewear and others.

Consistent with womens our mens business has shown strength in dressy products, such as woven shirts, outerwear lasers and patents.

Here again <unk>.

This has been a driving force we are offering many sophisticated fabrications, including silk prints on share moves in several styles leather and accrual sweaters oil prices well below what you will find in the luxury market for comparable products I believe there is nothing like it in the market today.

I have said it before.

<unk> is a true lifestyle brand that offers an enormous range of products to our core customers to support their lifestyle and multiple locations they shop for.

It is at times like the present, one when we can leverage the power of that product range and grow from a casual offering to a much dressier and elevated one without compromising the DNA of our brand.

<unk> shopping areas.

This year, we plan to open 60, new stores in North America, and Europe and plan to remodel 370 additional locations between the two regions.

Considering the stores that we opened in remodeled last year by the end of fiscal year 'twenty. Three we will have 750 locations out of 950 or 80% of the total stores updated.

Sure.

Regarding our digital transformation and CRM, we continue to make good progress on optimizing the new platform utilization and the implementation of our customer 360 solution.

This solution cover several areas that in the past were either not addressed or the solutions were not effectively integrated the.

They include.

Our new CRM platform that allows us to see all information related to our customers and one screen from a single data depository.

Our new segmentation tool, which allows us to work on dynamic customer segmentation to easily identify common characteristics among our customer base given multiple variables.

Our new marketing tool to engage our customers by personalizing their experience through automated communications and multi step journey.

And our customer 360 in store client telling app.

Our plan is to finalize this implementation in Europe and integrate the system into North America by year end.

Regarding our supply chain disruptions caused by the pandemic are still very present and continue to impact cost supply and inventory availability.

The most recent lockdowns in China due to Covid and the energy crisis success operated by the war in Ukraine have complicated things further.

While we have seen some relief in port congestion and transportation costs based on further cost increases due to all constraints and inflationary forces. We are assuming prices will remain consistent with the current environment for the remainder of the year.

To support our business and avoid late deliveries.

We are very pleased with the composition of our inventory right now and we feel that we have made the right moves to ensure monthly deliveries have protected for both our direct to consumer and wholesale businesses.

As I reflect on our results for this quarter and what they mean for the rest of this year and our future.

It tells me one thing very clearly.

Our strategy is working and our new business model is sustainable.

Sourcing functions and we deliver increased store profitability as a result of our footprint optimization initiative.

As we look to the rest of this year our expectations for revenues remain in line with our prior guidance on operating margin is slightly lower due to some factors in the macro environment, mostly currencies that have changed significantly since we last spoke in March.

In addition, we plan to deliver a 10, 3% adjusted operating margin.

This compares to the 10, 5% that we were targeting for this year back in March which includes a 100 basis points of currency pressures.

And adjusted operating margin at 11, 3% with earnings reaching roughly $320 million.

Looking further out to fiscal 2024, we remain confident in our goal to reach $2 8 billion in revenues and achieved a 12% operating margin absent further currency headwinds as our assumptions for a more normalized cost and plans for increased operational efficiencies remain intact.

In addition to all that we're doing in our business to drive growth. We also continue to be committed to returning capital directly to our shareholders through our dividends and share repurchases during.

During the first quarter, we repurchased over 500000 shares in open market transactions for a total amount of $11 7 million.

This was in addition to entering into a $175 million accelerated share repurchase program that should be fully executed by the end of July 2022.

<unk> contains a feature by which the interest rate will benefit us with the achievement of specific sustainability goals, which demonstrates how committed we are to integrate the concept of sustainability into our operations.

In closing as I look back to the last couple of years and the challenges that the pandemic brought to the business and our lives I can stop reflecting on how this company and this team embraced change and adapt to a completely new way of thinking and a new way to run our business.

Paul and I couldnt be more proud of our teams across the world and we want to thank you deeply for your great passion and strong contributions.

And with this great teams, we are very well positioned to continue to grow our company and capture significant market share. We have an amazing brand that is enjoying strong momentum globally. We have the best product that we have ever had across all 25 categories, we do business and great marketing and customer awareness globally.

Our powerful distribution network, leveraging all channels and are greatly diversified business model.

And this is a model that is delivering double digit operating margins and a high return on invested capital will remain focus on managing our business carefully and continuing to deliver for all our shareholders.

Thank you Carlos and good afternoon, everyone.

Before I jump into the numbers I want to tell you how excited I am to be back here at guests and help the team drive the business of this iconic brand.

Since I left a decade ago. The team has done an incredible job of expanding our business across all of Europe . The brand is well represented and we have a strong infrastructure to support it I am also impressed with the team's execution over the last couple of years and how they've created a platform for sustainable and profitable growth.

I am looking forward to working with you all as well and to continue to support the company's goal to deliver outstanding value to our shareholders. So with that let's take a look at the quarter.

Our overall first quarter operating results exceeded our expectations. Despite some continuing headwinds, including global inflation the war in Ukraine, and some isolated COVID-19 restrictions.

We delivered strong double digit revenue growth with each of our business segments posting top line growth versus last year's first quarter.

We expanded gross margins and leverage our expense structure, improving profitability with a 200 basis point expansion of adjusted operating margin.

Solid performance that reflects both the resilience of our operating model and the strength of our team.

Now let me take you through the details.

First quarter revenues were $593 million, a 14% increase in U S dollars and a 21% increase in constant currency.

Currency headwinds, resulting from the relatively strong U S. Dollar muted much of that growth negatively impacting U S dollar revenues by $33 million or 7% of revenue growth.

Getting into a bit more detail in our segment performance in Americas retail revenues increased 7% both in U S dollars and constant currency driven in part by the anniversary of last year's temporary store closures and an overall comp increase of 4% in constant currency.

Overall in the U S and Canada, our stores benefited from higher traffic as well as higher AUR, partially offset by softer conversion.

The higher AUR were fueled by the strategic price increases we implemented throughout last year to support our brand elevation.

Canadian store comps were especially strong as they have now anniversaried the severe pandemic restrictions that were in place a year ago.

In our U S stores higher AUR and traffic were offset by softer conversion as we anniversaried the stimulus checks that hit customers bank accounts in the first quarter of last year.

Very encouragingly as well our tourist locations have outperformed the rest of our store fleet as leisure travel has regained momentum in the U S.

In Europe revenues increased 14% in U S dollars and 26% in constant currency.

The main driver for constant currency revenue growth was the removal and easing of many of the COVID-19 related restrictions from last year, which kept a substantial amount of the fleet, partially or fully locked down, especially in the first quarter last year.

Our stores posted 7% positive comp sales in constant currency for the quarter.

Just as in the U S. The driver of our comp increase was a significant increase to AUR, resulting from last year's strategic price increases.

Traffic and conversion followed a similar pattern to the U S with strong traffic increases being more than offset by conversion declines.

Our European wholesale business also delivered revenue growth, mainly fueled by our spring Summer order book, where orders were up for the season.

This increase was partially offset by a 4% constant currency comp store decline as lower traffic more than offset the benefit of higher AUR from our price increases.

In Americas wholesale revenues increased by 50% both in U S dollars and constant currency.

This resulted from the timing of this year's deliveries to some of our partners, where we expect all of the year over year revenue increase will occur in the first quarter.

And finally in our licensing segment royalty revenues increased 23%.

This increase was primarily driven by strong global selling of handbags or inventory was significantly constrained during the fourth quarter of last year.

In the quarter, we expanded gross margin with a 90 basis point increase to 41, 6%.

Leverage of our retail cost base drove the gross margin expansion.

Product margins were roughly flat as supply chain cost pressures and currency headwinds offset the benefit from last year's price increases as well as a higher mix of retail sales.

Adjusted SG&A for the first quarter increased 11% to $205 million.

Including a favorable currency impact of $10 million compared to last year's expense level.

Our expenses this quarter included an $8 million COVID-19 related subsidy to support our infrastructure in Europe.

We received a similar amount in last year's Q1 as well.

The largest increase in SG&A expenses was to support the reopening of our retail stores, where we are experiencing labor cost pressures given the impact of global inflation and a relatively strong employment and many of our markets.

We also increased our marketing and advertising investments to support our business and brand story.

With disciplined cost control, we managed our fixed overhead structure, well and with our strong top line growth, we improved our adjusted SG&A rate by 110 basis points in the quarter.

Adjusted operating profit totaled $42 million in the quarter, a 61% increase over last year's Q1, and the adjusted operating margin expanded 200 basis points to 7%.

In the quarter, we recorded non operating net charges of $16 million related primarily to revaluations of certain of our foreign subsidiaries net assets and liabilities into U S dollars.

Along with revaluation of the assets, we hold to support our surf.

The vast majority of the charges we recorded in the quarter were mainly unrealized and related to the relatively strong U S dollar and a relatively weak performance of global equity markets.

Our first quarter adjusted tax rate was 22% down from last Q1's rate of 28%.

Adjusted EPS in the quarter was 24.

First as last Q1 'twenty one.

This year's adjusted EPS was negatively impacted by the non operating charges I just mentioned by <unk> 20 per share while the similar negative impact last Q1 was <unk>.

Adjusting for these non operating items adjusted EPS would have increased over 80% in the quarter.

Moving to the balance sheet we.

We ended the first quarter with $148 million in cash compared to $395 million a year ago.

The decrease in cash was primarily driven by $238 million of share repurchases executed in the last 12 months.

Including our $175 million accelerated share repurchase program as well as a $107 million of tax payments related to the IP transfer to Europe .