Q4 2022 Tupperware Brands Corp Earnings Call

Speaker 2: Greetings and welcome to the February Brands Corporation 4th quarter 2022 earnings conference call. Please note today's conference is being recorded. All on, have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session.

Speaker 2: If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. At this time, I will turn the conference over to Doug Lane, Vice President, Investor Relations and Strategy. Mr. Lane, you may begin. Thank you, Operator. Good morning and welcome to Tupperware Brands' fourth quarter 2022 Earnings Conference call. Joining me today are Miguel Fernandez, President and CEO , and Mariela Matute, CFO .

Speaker 2: We will be available for Q&A following our prepared remarks. Earlier this morning, we issued a press release announcing our preliminary financial results for the fourth quarter of 2022, which can be found on our investor relations website. Today's release is preliminary as management completes the year-end procedures and external audit with open items mainly related to tax matters.

Speaker 3: Before we get started, please note that beginning with the 2023 first quarter earnings release, we will be changing our reporting schedule. We will continue to hold our conference call on Wednesday morning at 830 a.m. Eastern Time, and the 2023 first quarter is tentatively scheduled for May 10th. However, we will issue our earnings release the night before, after the market closes. We will simultaneously publish a management commentary on our website. That way everyone will have plenty of time to digest the news and update models before the call. It will also allow us to jump right into Q&A on the call after brief introductory remarks. Now, back to this quarter just reported.

Speaker 3: Let me remind you that the following discussion and our responses to your questions reflect management's views as of today, March the 1st, 2023, and may include forward-looking statements. Actual results may differ materially from such statements. Additional information about factors that could potentially impact our financial results will be included in our Form 10-K for the 2022 fiscal year, subsequent filings with the SEC, and in our press release filed this morning. Please review the forward-looking statements disclosure on page 5 of today's press release. Please note that some references are being made on a constant currency basis, which reflects the application of current period foreign exchange rate to any prior period results, enabling comparisons excluding the impact of foreign currency exchange rate fluctuations. Please also note that all references, unless otherwise noted, are being made on a continuing operations basis. During this call, we'll discuss certain non-GAAP measures, including those we refer to as normalized measures. Additional disclosures regarding these non-GAAP measures, including explanations and reconciliations of these measures to the most comparable GAAP measures, can be found in today's press release.

Speaker 3: Finally, a replay of this call will be available on our investor relations website later today. And with that, let me turn the call over to you Miguel. Thank you, Doc. Good morning everyone and welcome to our fourth quarter call. 2022 proved to be a much more challenging year than we could ever expect it. We started that year bullish on our turnaround efforts in our direct selling business. Excited to expand into new channels of distribution and cautiously optimistic that the search of inflation in 2021 was behind us. That confidence in our early outlook of the year led us to authorize a $75 million stock buyback in February . Well, as it turned out, our initial positive outlook for 2022 changed quickly.

Speaker 3: Our exciting in general was dampened by a periphery conflict in Europe and the COVID lockdown in China and March. These events coupled with ongoing inflationary pressures, strengthening dollar and rising interest rates had a major impact on consumers globally and also in our financial performance throughout 2022. But as in the past, we reacted quickly to external challenges. We made meaningful leadership changes mid-year. In the second half of the year, we took further right-sizing efforts, implemented further improvements in our direct selling compensation plans and took additional price in actions, all while setting focus and executing our channel expansion plans. We first highlight our recent accomplishments that will continue to build the foundation for a more successful future. First, increase financial flexibility.

Speaker 3: Due to our operating performance last year, our financial leverage is much higher than we would like. Late last year, and nearly this year, we had discussions with our banks to amend our recent credit agreement to allow additional financial flexibility to pursue our growth strategies, and at the same time to accelerate our right-sizing efforts. The talks recently came to a successful conclusion, and we appreciate the support our lenders continue to provide us, even as market conditions became more difficult. Second, channel expansion. Despite the difficult external environment we faced throughout 2022, we did not allow those unexpected challenges to derail us from our most important growth in China. We successfully launched National Distribution in 1900 target stores in the US in early October .

Speaker 3: The results exceed our expectations as we exited a quarter with a 10% category market share. So we're carrying good momentum into 2023. While still small, B2B sales grew strongly in the double digits in China last year despite difficult conditions out there. And we look for another strong year in 2023. In fact, the number of our markets reporting B2B activity in 2022 was 22 markets. In total, we added 50 retail chain customers around the world. As you may imagine, selling products into retail chains is a very different proposition from operating a direct selling distribution model. As such, we're building a new consumer-facing company within our legacy direct selling consumer push company. Perhaps no better showcase for a growth strategy was the success we had in Korea last year. Korea is among the most advanced markets in the process of building an omnichannel ecosystem. In 2022, Korea surpassed even issues our third largest market in the Asia Pacific region behind China and Malaysia.

Speaker 3: In total, Korea grew 16% last year in custom currency. As core sales increased in middle, single digits, and B2B expansion, particularly in TV shopping, added over 10 percentage points to growth. We're learning from this success and are sharing best practices in many markets around the world throughout this 2023. While it's still early days, this initiative has validated that our growth strategy to expand the consumer access to our products beyond the direct from distribution channel. Third, the new product introductions. We have many successful new product introductions over the past couple of years that really gained traction last year. It's our goal to continue to move into new product categories where we believe iconic top of our brand may resonate with consumers.

Speaker 3: Our entry into small appliances was highlighted with AirFire. We launched AirFire late 2021 in China. Due to its success, we expanded its launch to Philippines, India, Japan, and India, showing similar success. Our most successful product introduction last year was the Supersonic Chopper Compact, which uses a pulled cord quickly and conveniently to chop up herbs and vegetables. New products accounted for 14% of sales last year.

Speaker 3: This year we are moving into new product categories. First will be the cast iron coupe wear such as Dutch Obus. Second we will introduce a unique reusable silicone bag that are designed to replace the single-use plastic bags. Our system has an innovative sealed system that we have filed patents for. Every year over 500 billion single-use plastic bags are used worldwide, which is over 1 million bags every minute. At TopperWear we are looking to reduce single-use plastic anywhere we can. Fourth, right sizing. As we stated in our last call, we look to spend an additional $100 million in engineering costs over the next three years. In fact, we are running slightly ahead of schedule. By the end of the program we expect to realize more than $60 million in annual cost savings.

Speaker 3: We remain committed to right-sizing the business in food and manufacturing and supply chain optimization. And, fig, new leadership. Last spring, we hired a new CFO to help us better navigate our turnaround plans. In the summer, we hired a new executive by the presence of supply chain to help us optimize our supply chain network and improve service levels. We're already seeing results through our successful channel expansion activities, accelerate ring-generator networks, and the first facility closure that we've had in five years. And, finally, last quarter, we established a new position of chief commercial officer who provides holistic oversight of our commercial growth plans while the layering and see if we can find our go-to-market infrastructure.

Speaker 3: Now, let's turn to where we plan to focus our 2023 efforts as we pivot toward the next post-pandemic phase of our plan. First, in our direct selling business, we're facing out the virtual starting kit that we introduced in the early stages of the pandemic. At that time, it was a way to keep the recruiting engine running during the time of limiting in-person activities. However, given its relative inexpensive price point, we found that we were attracting more discount buyers with lower retention to the brand. With elimination of a virtual kit, we expect the pendulum to run soon back to business builders, who should also benefit from the recent return in-person events, since that's where recognition and training is most effective.

Speaker 3: While it is early days, we have already seen some favorable movement in those selling markets where we eliminated the virtual kids. We also expect the post-pandemic phase to benefit from increased consumer mobility. Many markets in Asia, particularly China, operate student models where are reliant on consumer food traffic. In these locations, consumers enter a location run by a member of our sales force to purchase our products. China had a very difficult 2022. Sales were down 27% on the year as zero COVID policy impacted consumer access to our products. Now that the government has reversed course, we expect the business in China to improve as the year progresses, but market conditions there remain uncertain. One bright spot has been the adoption of our digital tools in ETOP during the lockdowns, making China among the most advanced markets with regards to digitalization. Our initiatives for 2023 in China include accelerating the digitalization trend to improve retention and productivity, new product launches such as cast-iron cookware, on-the-move drinking bottles and small appliances, B2B channel expansion including e-commerce, and optimizing our cost structure.

Speaker 3: and working capital to improve cash flow. Elsewhere, among our big four, the US and Mexico were impacted by low-recruiting, low-rolled sales force productivity, as well as lower volumes of enterprise increases. The US was further impacted by a longer-than-anticipating adoption of our compensation plan chains. Sales in the US were down 19% in 2022 and Mexico was down 7%. Our focus for 2023 in the US will be twofold. First, improved service both in pro-delivery and systems reliability. While we're entering the year with the smaller sales force, we have created a space for new members to make money from day one. So we think retention approach will improve. Additionally, we believe that a greater number of in-person events coupled with a promotional activity that increases the income to the lower-level sales force members should have drive top-line growth this year. Second, we will continue to invest in our D2B efforts in retail and come to the shopping. In Mexico, we will introduce new products in our cold-food storage categories such as stackable freezer mates and cold tapers. As well as one touch-fresh food, storage continues with easy-to-close and open-knit, which is one of our nearest global products.

Speaker 3: This along with an improved service should drive growth towards the second half of the year. Brazil ended the year with a good momentum as sales were up 15% in the fourth quarter, which we are currently expecting to carry into 2023 for the direction of the business. Added to that, Brazil is pursuing opportunities in e-commerce, loyalty programs, top-overstores, premium brand partnerships, and retail B2B. Finally, it is worth noting that Brazil and Mexico together account for over a quarter of sales and even more of our operating cash flow. And they will learn very healthy and profitable direct selling business. Now over to you Maria. Thank you Miguel and good morning everybody. Before I get started, please note that our results announced today are preliminary. As we complete our year-end procedures and external audits with open items related to tax, we plan to file our 10K before the deadline of March 16. For the full year 2022, dollar reports itself declined 18% to 1.3 billion.

Speaker 4: Excluding unfavorable currency exchange, sales declined 14%. Pricing accounted for an 8% benefit, which was more than upset by a declining unit volume of approximately 22%. 2022 also had an extra week, which provided for about 1% of growth. By region, Asia Pacific declined 19% in local currency, mainly related to lower recruiting and overall source activity. COVID locked down in China, logistics delayed that impacts our product availability, higher prices, and lower consumers' family malaysia, causing part by removal of government sub-city input essential.

Speaker 4: These were partially offset by strong performance in Korea, as Miguel highlighted earlier. Sales in Europe decreased 23% in local currency driven by lower source force activity and lower consumer spending because of the continued deterioration of consumer sentiment, higher inflation, higher gas prices, and price increases. In addition, the segment was negatively impacted by timing of our B2B business transactions, mainly in Germany. We are encouraged that Europe is showing signs of stabilizing since the end of 2022, beating our internal forecast, and it started 2023 in a similar fashion. North American sales decreased 16%, primarily due to lower recruiting and overall source force productivity, longer than anticipated adoption of compensation plan changes in the United States and Canada, and negative impacts from price increases. With that being proven, economic profile we began to see in Q4 was sustained in 2023. Thus, America's sales increased 10% in local currency driven primarily by Argentina from a larger total and active source force, including from higher retention, higher productivity, as well as higher prices due to inflation. With a strength in Argentina and the momentum in Brazil coming out of the fourth quarter, we are optimistic about this region in 2023. Thank you.

Speaker 4: Company-wide, we closed 2022 with an 18% lower active source than we did in 2021, which will continue to pressure the top 9 for our direct selling business, while this should be somewhat upset by expansion elsewhere. Those B2B channels are still relatively small as a percent of our overall business. Growth margin in 2022 was 64%, a decrease of 200 basis points from 2021. The decrease is primarily due to higher manufacturing value and best-eminent efficiencies due to the lower source volume, higher rising cost and other inflationary pressures, as well as adverse product mix, partially upset by the benefits from price increases. Growth margins were up year-on-year in the fourth quarter, for the first time in six quarters, as the benefits from our pricing actions throughout the year began to be realized.

Speaker 4: points in the interest rate of the term loans as a result of the debt refinancing in late 2021.

Speaker 4: We know that the interest rates have risen in the second half of 2022, and the basis points expressed on the debt have also increased as a result of the pricing from our recently amended credit agreement. Therefore, we will expect meaningfully higher interest expenses in 2023 than what we reported in 2022. The effective tax rate was unusually high in 2022, primarily due to the write-down of the four tax assets.

Speaker 4: that represented over 70% of our pre-tax income, as well as your additional list of mix of earnings. We expect the tax rate to remain elevated for the near future. In our 10K, to be published by March 16 or earlier, we will also include the closures of material weakness in the income tax process. As the company did not design and maintain effective internal controls related to the accounting for the completeness, occurrence, accuracy and presentation of the income tax provision and related income tax assets and liabilities.

Speaker 4: Adjusted EPS was slower due to lower source volumes and margins mentioned above, coupled with a higher adjusted tax rate than in 2021. Additional foreign currency was at 81 cents per share hit to EPS for the year. Our trailing 12 months bank governance leverage ratio was 4.9. In our recently amended maximum leverage ratio for the fourth quarter of 5.25. In our new amended credit agreement announced this week, our maximum leverage ratios increased. They are now 6.25 for the first, second and third quarters of 2023.

Speaker 4: stepping down to 5.75 in the fourth quarter and first quarter and second quarters of 2024. Then stepping down to 450 for the third quarter and beyond of 2024. There is also a change in the numerator since we would no longer have set our debt balances with net cash. For example, our 4.9 leverage ratio in the 2022 fourth quarter will have been 5.6 under the new formula. As we close the book on 2022, our financial goals for 2023 are simple. Shore up our financial foundation and continue to invest in our growth initiatives.

Speaker 4: We will protect the growth margins with additional pricing for users as necessary. We will have a later focus on reducing our inventory levels and recycling our fixed cost-based and optimizing our manufacturing and supply chain footprint. Meanwhile, we're investing in new products, new categories, and most importantly, new ways to reach consumers as our successful entities target stores in the US and our creation of a healthy omnichannel ecosystem in Korea have shown us. When consumers have access to top-of-the-top products, they choose them. With that, we will open the line for questions. At this time, I would like to remind everyone if you would like to ask a question, simply press star 1 on your telephone keypad.

Speaker 3: Your first question comes from the line of Anthony Lebedinsky with Sidoti. Good morning and thank you for taking the questions. So first I wanted to see if you guys can talk about the China. What have you seen since they stopped the zero COVID policies? Have you seen any incremental improvement? How should we think about that? So, hi, good morning Anthony, this is Miguel. So, actually it was last week in China. The way we saw it is that when it opened up, obviously a lot of people got sick right then. It was a little bit of a small revolution because people were taking care of their own health. But the outlook looks much more positive. Obviously people are coming back to a new normality and an as I said in my previous remarks, we see that China is only going to get better. But obviously we need to wait for the consumer reaction in this next three or four months.

Speaker 3: Got it. Thanks for that, Miguel. And then, you know, in terms of the sales to Target and some of the other sales channel expansion activities, can you guys talk about, you know, is there any way you guys can quantify sales to Target and some of these other expansion channels? So, we, you know, obviously, you know, let me just start with the most important thing. We're ahead of our expectation and also Target's expectations in our initial efforts with them. So, it's one of the bright spots of 2022. Still, overall company, we're just initiating, obviously, our relationship with all these retailers around the world. So, it's not material yet, but it's going to, obviously, we expect high growth in that area. So, that's all we can share right now. Thank you.

Speaker 4: Got it. Okay. Thanks for that. And then you're just switching over as far as the new credit agreement, Mary Ella. What's the interest rate that we should think about as far as we update our models with this new credit agreement and also as a follow, just as a quick other question as far as the tax rate obviously was elevated. What's the right way to think about the tax rates for 2023? Thank you, Anthony. So before I start answering your questions, let me point out that our press release had an error in the growth profit of the fourth quarter and clarify that the growth profit for the fourth quarter, the appendix is correct. And it was 196.5 million for this quarter and it was 240 million for the year ago. So let me now answer your question about interest rate as you have seen the macro trends of what interest rate is going to increase as a result of our bank agreement as well as the macro trends. And we expect that the triangle will continue as you would as you saw it in the Q4 results. Okay. Gotcha. Okay. And then just in terms of the tax rate also if you could just just obviously this was unusually high.

Speaker 4: tax expense that you had in the fourth quarter, if you could just help us think about, you know, the tax rate here going forward. Yeah, so for our tax rate, we expect the tax rate to continue to be elevated. In this year, we have a series of one-time items related to the evaluation of our deferred tax assets. When we exclude those breakdowns, the breakdown was over 70% of our pre-tax income. So we are still a half-plans to normalize the tax rate in the coming years. For the next year, I will expect the tax rate to be higher, excluding this deferred tax assets right down. Understood. Okay. Well, I...

Speaker 2: That's all I have here. I'll pass it. Also to complement our tax strategy, we are in the process of finalizing our strategic plan of growing several countries and then expanding the retail channels. And as we do that, it would take some time to match our tax structure to our countries where we are rapidly growing. Understood. Yes. Thank you. Best of luck. I'll pass it on to the next caller. Your next question comes from the line of Jason Bender with City Group. Great. Thanks for taking question. Morning everyone. I'd like to start on the inventory side. Obviously you've talked about the inventory management efforts. Can you tell us what inventories were at the end of the quarter? And just given how much cost inflation there's been this year, is there any way to dimensionize how much of that inventory is up on a volume basis?

Speaker 4: we ended the quarter with $250 million of inventory, which was down for about 230 a year ago. And the trend continues to repeat. We have planned to repeat that reduction in the coming quarters. Got it, thanks for that. And just kind of staying in the vein of inventory and cash management as it relates to...

Speaker 2: the updated credit agreement. Obviously you've said that you expect to remain compliant and clearly with the amendment, you've got a little bit more breathing room over the coming years, but can you just speak to your confidence in remaining in compliance with that and perhaps touch on some of the assumptions you have for the business that kind of underpin that confidence? Yeah, so we have a very supportive bank group with our, across our negotiation process. We have a plan to continue to produce EBITDA in this company and better EBITDA than the past year of 2022, plus cash generation from our working capital management.

Speaker 2: as well as our engineering plans that will produce and use benefits in the years to come, as we continue to resize this company and place software products in all the channels where consumers look for them. So we expect to continue to generate cash as a company, and then the bank agreement will will now allow to continue the turnaround plan for the year 2023. So as of today we're confident that we will be able to operate without a substantial doubt in 2023. Thank you for that. And then just switching gears, I believe on the pricing side you've mentioned for the price increases expected in 23. Just wanted to confirm if that's still the case. And if so, can you perhaps encolor around what the magnitude of those increases might be. And then clearly we're seeing the impact of the prices you've taken in 22. You know, full of thrown elastic season markets like North America. But you know, perhaps you can dimensionize how elastic these have shaped up compared to the expectations.

Speaker 3: And how do you think about managing the trade-off between the two? Jason, again, Miguel here. So basically, 2022 was a really tough year from the pricing point of view. As you know, we had inflation everywhere in the world, really high. We took even a double-dead price-increasing country that we've never, you know, we haven't taken, you know, a price increase in 10 years. So obviously, that had an impact in consumer and consumer sentiment. And that was one of the big headwinds that we had last year. This year, which is very different, we're going back to our normality of pricing increases, which, you know, in the countries that, you know, they have higher inflation. This is what we've been doing for years. So we don't expect anything different in the ones that we haven't taken or traditionally take, you know, less than 5%. We're going to take less than 5%. We feel that we already protect our margin. We're in a good space. The variations that you see are perhaps, you know, either coming up with a counter-makes or product mix, but we're in the range that we want to be in. So that is one of the big headwinds that we're going to have in 2023. Got it. I appreciate that color. And sorry, just one last one I apologize for being a hog. I get that the, you know, expansion to target and some of those only channel efforts are still relatively small. And I get that they were structured originally in such a way that they would be augmentative to the additional effort from the future.

Speaker 3: Salesforce, but now that the product has been on shell for effectively a quarter, has there been any change in sort of behavior attitude from the Salesforce members now that they are, you know, in a sense competing with target, I get that's competing is not exactly the word, but now that the two are effectively live and, you know, product is available at the same time. So you're right, you know, competing is not the right word. I think it's, it's for us, it's a learning and it's balancing, but I think as we gave us an example, Korea in the, in the previous remarks, even when we create a perfect on-the-chall-leak system, it works really well. And it, you know, some of them, you know, obviously grow more than other ones. In terms of the US, the prog that we've chosen are, you know, just a couple of them are very similar, but other ones are prog that we've never sold in the US. And, you know, some of them are heritage lines, which are the top sellers that, you know, we used to sell them in the US, but long-term ago. And this is the way we want to operate, because it brings brand relevance. And it's like, I'm going to call it paid advertising, because we obviously, we made, you know, we want to make money in these retailers, but also brings, you know, the top of our brand and that iconic, you know, that's the way we want to operate.

Speaker 3: that we have brings it to the mind of consumers that we're not accessing right now. So it's a matter of time to get there. But you gotta remember that our sales force, they normally, on any given month, they sell over 200 different SKUs. Whereas we have a very limited amount in Target. Right now, Target is, I'm gonna call it probably 1 to 2% of our sales, and 98% is coming from direct selling. So it's a, obviously it's a journey, and we're gonna continue to learn. But right now, Target has such low penetration that we haven't seen any change in the behavior of our sales force. Got it, appreciate the quote. Thanks Miguel, thanks Mary, I'll pass it on from here. Next question comes from the line of Linda Bolton-Wiser. Linda. I'm sorry, we cannot hear.

Speaker 4: We had in average in the Q4 we still saw an increase in input costs and I think it was driven by some logistics disruptions we have been trying to open up as well as our plans to improve service levels across the...

Speaker 4: So, but what ecosystem for 2023, we are expecting some of our resting costs to go down as well as our supply channel logistic cost in line with what you're seeing in other industries. Okay. And then, you know, I think in the past, Maryella, maybe you had mentioned or talked about a little bit like some IT investment and things like that that needed to be done in the company. What are your thoughts on that and are there?

Speaker 4: Do you have a thought on what capital spending might be in 2023? Yeah, so we continue to prioritize our investments and balancing our decisions with our desire to deliver this company and reduce that over time. We put a summary of a copy plan that is similar to what we've skewed in 2022. And some of those investments are dedicated to upgrading our digital infrastructure to allow our tools for us to transit online as well as upgrading our...

Speaker 4: Network internally to be global, standard and those investments continue. From time to time we may slow down the pace to balance our obligations with our depholders as well as other commercial investments with the Plan Continuous Linda. Okay. And then are there any thoughts, you know, I did see your product at Target and it looked very nice and it was a nice array of skews and then the next time I went to see it was all gone off the shelf and then I didn't see it replenished very quickly. So have you done so well at Target that you're having trouble actually keeping the supply replenished or like how is that going? So we do. It's going really well. It's going better than their expectations and our expectations. We know that we've been fulfilling Target.

Speaker 3: the way we agree with. So every time the POs come in, we're being, obviously it's a big priority, it's a high priority for us. So I think it might have been in that store a little bit of a logistic issue within Target. You know, it might have been probably bad luck, but yeah, I mean, things are going well, really well for us in Target. Okay. And then can you just maybe give a little more color on the North American decline? Because you did make some comp,

Speaker 3: plan changes and I know it was like a matter of time before those Kind of got settled out and stuff. So it is still in place the cop plan change and Like can you just get some color on why that was so disruptive and then is it gonna get better or kind of what's the situation there? So obviously we believe it's gonna get better and it's gonna be Better from many points of view, but this is what I call sustainable profitable growth and profitable growth. So the way was designed before was that every time we grew Our variable cost grew just as much. So we couldn't we couldn't capitalize on the growth in terms of bottom line. So we made a few changes on the

Speaker 3: compensation of the top leaders, which obviously has an impact on their on their morale and their attitude. We believe we're still, you know, compensating pay it perly and competitively compared to other companies. And the other big change came from the from the little guys, so the stars are the guys that are just beginning. When we were in COVID, we implemented a virtual, virtual kid, which was pretty much

Speaker 3: almost free to get into the business and immediately you would get 25% of discount, which is the maximum discount. So basically that is a friendly proposition for a consumer but not a friendly proposition for a person who is starting a business because obviously everyone has access to that 25% discount so I don't have space to make money. So that was all the change we made. We were eliminated that and that virtual key. Obviously our recruiting numbers are going to go down but the recruits that we're going to have are business oriented people.

Speaker 3: where they're actually gonna make money. And we believe that if the new people start making money, then eventually it's gonna benefit. You know, the top guys are gonna have higher volume and they're eventually gonna go back to the absolute dollars that we're making, you know, before obviously the return on sales and the profit and the margins in the US look much better right now than it used to look, you know, six months ago. We took the heat on sales, but now we have a solid foundation to build a profit.

Speaker 3: And we are going to continue to build this company to where it belongs and make the business as big as our brand. Thank you very much.

Speaker 1: This concludes today's call and you may now disconnect.