Q2 2024 Designer Brands Inc Earnings Call
All participants will be in listen only mode.
If you need assistance. Please signal conference specialist by pressing the star followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press star.
And then one on your telephone keypad.
So the charter question. Please press Star then two.
Please note this event is being recorded.
I'd now like to turn the conference over to Justin Fisher Director of Investor Relations. Please go ahead. Good morning earlier today the company issued a press release comparing results of operations for the 13 week period, ending July 29, 2023 to the 13 week period ended July 31 2002.
Please note that the financial results that we will reference during the remainder of today's call excludes certain adjustments recorded under GAAP unless specified otherwise, Oregon Bleep reconciliation of GAAP to adjusted earnings. Please reference our press release.
Additionally, please note that remarks made about the future expectations plans and prospects of the company constitute forward looking statements results may differ materially due to various factors listed in today's press release and the company's public filings with the SEC.
<unk> assumes no obligation to update any forward looking statements joining us today are Doug Howell Chief Executive Officer, and Jared Poff, Chief Financial Officer, now, let me turn the call over to Doug.
Good morning, everyone.
We're discussing this quarter's performance I want to thank our team for their dedication and hard work during the quarter played out against a challenging macroeconomic backdrop.
Because of our team's commitment to improving results I'm pleased to share that we posted overall comp that improved throughout the quarter. In addition to posting sequential improvement from the first quarter.
Our gross margin also increased year over year and sequentially and marked the second highest Q2 rate over the past decade.
Sequential improvement alone is not enough within our organization, we are committed to producing year over year growth across our top and bottom lines.
As we work towards achieving that goal consistently I am pleased with our team's efforts to continue reading and reacting to a highly promotional environment, while simultaneously managing our inventory to inappropriate healthy level in both our retail and brand segments.
We are also showcasing consistent operational progress from an own brand perspective, we are very excited to have launched a completely new athleisure brands like here.
And the first month of Q3, and we are rolling out new collaboration as we diversify and strengthen our portfolio, which will drive our profitability over the longer term.
I also wanted to take a moment to highlight the very important hire we made during the month of July .
We're thrilled to announce that Laura it's been brought on board as our new president of designer shoe warehouse.
Barry joins us with an incredible resume.
Kind of an AC players and Michael stores, most recently as Michaels Chief merchandising officer.
Laura will bring her extensive merchandising background ability to forge strong vendor partnerships knowledge of augmenting customer experiences and importantly, positioning and elevating owned and national brands within our DSW specific channels.
With her leadership will be drawing our credibility as an on trend brand builder and read that.
This will help US drive the next phase of growth and will allow me more time to focus on D. V is overall strategic priorities.
Clothing, driving our own brands performance, both inside and outside of DSW.
Please join me in welcoming more.
I recently hit the 100 day, Mark and my New C. D V I feel and I wanted to take a moment to reflect on the progress we've made and the actions. We are taking to ensure we are well positioned for our next phase of growth.
It has become increasingly clear to me that we have two distinct and valuable businesses, our legacy retail business, and our new and growing brands business.
They give us distinctive synergy that do not exist elsewhere in the industry.
Laura fire balls, the organizational realignment, we institute a few months ago, which aimed to align our talent and resources more closely with the needs of our different businesses well setting the foundation for strong strategic growth.
Additionally, we recently announced that Bill Jordan will be stepping down from that as well.
With this change we intend to hire a seasons brand builder to help lead our growing brands business.
We are immensely thankful for the work Bill has led to help make designer brands, where it is today and wish him the very best.
Is that your brands truly is unlike any other company in the footwear industry and I firmly believe we have unique advantages that will deliver strategic growth into the future.
Turning to our quarter's results and our second quarter designer Brands' net sales declined seven 8% compared to second quarter last year, but improved 290 basis points versus the first quarter decline driven by increasing strength in our casual offerings.
Total retail comps were down 8.9%, while wholesale net sales were up roughly 20% versus last year as we integrate the kids and athletic brands and watch our newest brands Le Tigre.
Our long term strategy of doubling sales of our own brands from 2021, 2026 remains a top priority and we continue to move full speed ahead on our journey.
Year to date through the second quarter, our own brand penetration, including wholesale sales increased year over year by 60 basis points to 25% of total evi revenue.
This progress has continued into the third quarter, we are thrilled with the recent launch of the take rate.
We are equally proud that telco athletic has seen steady growth and continues to meet our expectations in terms of performance.
We are also excited to continue building our success with Hush Puppy and we have now become the exclusive licensee in the U S and Canada, including New DTC channel and international expansion.
[noise] ranked fifth by people Dot com for the hottest fashion launches you need to shop for this summer.
Dispersed mckeag relaunched as our newest brand and as of 814 customers being able to buy the brand and DSW.
As a reminder, the keyworth nudist footwear space and we are thrilled their inaugural athletic athleisure launches with us.
Now the bigger brands was established in 1977 rooted in New York City Street culture, and timeless style and we are bringing the board in this city race in the wild ready for anything spirits, you Disney collection.
Their first footwear line includes both women's and men's collections inspired by vintage athletic design and loaded with modern day comfort.
I couldn't be more excited about the work in the strategic approach that has gone into this launch our first ever launch maybe new national brands.
Turning to Hush Puppy, we recently signed an agreement to become the exclusive licensee of the brand in the U S and Canada. This was highly informed by the special relationship DSW already had with Wolverine related to exclusive U S distribution and is the salary expansion to our comfort and casual categories.
L brands.
Now the official licensee who will take over the Hush puppies dotcom business, which will be our sixth independent E. Commerce site, and we will have the ability to wholesale the brands in North America.
Hush puppies growth within DSW has been robust up nearly 60% in the quarter versus last year, driven by men with growth across casual dress Andrews.
Excitingly, our first product expression is anticipated for spring of 2024.
Returning to our progress in the quarter, our cash our integration continues to advance as expected. We also launched exciting operations in the quarter, both with recreational habits and stop.
First a recreational habits partnership produced a sophisticated Kate on the court sneaker in classic White and Greg Holloway.
Complementary to that our stock is designed to cater to the latest pick a ball craze and court sports enthusiasts.
We've implemented marketing activations that facts complemented by a robust influencer and digital campaign.
As part of this launch we excited customers with an actual pickup I'll hop off court inside Saks Fifth Avenue store in New York During July .
As part of our exclusive launch the product was initially available only through Saks fifth Avenue and <unk> channels and later this month, we are bringing the hype in house to be exclusively on guests dotcom beginning on September 22nd.
At Crown vintage Emma Roberts burst curated collection and mistakes loss during the quarter.
This included engaging video content, DSW, dotcom, which drove positive customer interactions and bus.
We also have new content coming with M&A in October around seasonal boots and booties.
This long term partnership continues to strengthen our brand positioning and relevance with our crown vintage targeted customer.
I've been smoothed out we're pleased to have launched our first men's franchise shoe line like 365 address neat casual style hybrid shoe collection.
As we build out this franchise with this line apart from the rest of the pack is the use of special technology and production not often found in non athletic men's shoes, including features like a supportive hustle for stability accretion lightweight missile for weight reduction and energy return and a rubber household protraction.
And durability.
We have merged the European inspire is little aesthetic with tactical comfort innovation to target. The modern male customer who is less likely to compromise on comfort in a post COVID-19 World. In fact 365 was recently highlighted in footwear.
Growing our men's business across all of the B I remain one of our largest white space opportunity and we believe represents a significant growth lever over the long term.
We believe that our new offerings for Vince.
<unk> will help us gain traction with male customers that are increasingly prioritizing the unification of comfort pant style.
Our continued success was evident in our Q2 results, where we stop intermodal net men's fail at 95% in Dot com.
We're also committed to strengthening our relationships and expanding our business with the national brands that are most relevant to our customers.
This strategy remains on track as we continue leveraging our position as the top point of distribution.
As part of our edit and amplify strategy, we continue to be excited with our Nike partnership and we announced last quarter we.
We will leverage this relationship should provide an athletic offering across mens womens and kids, giving our customers an elevated physical and digital assortment.
Finally, we continue to be more cognizant of providing increased value to our customers.
One of our greatest strength is our long standing vendor relationships and associated opportunistic close out buys with large national brands.
As such as part of our long term relationship with Walgreen, we executed an advantageous by that provided us with an opportunity to offer a compelling savings to our customers on Sperry Saucony, Merrell and chocolate products in the quarter we.
We look forward to offering additional events for our customers in the fall.
Before I hand, it over to Jared I want to quickly speak to our full year outlook.
Although we anticipate macro pressures will continue through the end of the year and in fact have the potential to increase today, we reaffirm our full year 2023 guidance.
Supported by the sequential improvement we saw from Q1 into Q2.
We still have our Sep tober and holiday selling season ahead of us and we continue to be laser focused on meeting and driving demand with on trend product.
Jerry will go into more detail on this in a few moments.
As we move board, we continue to prioritize value, creating opportunities and are committed to returning capital to our shareholders. In fact year to date through September 5th designer brands as return 91, 1 million to shareholders through a combination of dividends and share repurchases.
I'll, let gerald speak more on our strategic capital allocation plans for the back half of fiscal 'twenty three.
I look forward to updating you all on our strategic initiatives as we move through the back half of the year with that I'll pass it over to Gerry.
Darren.
Thank you, Doug and good morning, everyone.
I want to reiterate doug's comments and say how excited I am to welcome Laura Weil, Who's our new president of DSW.
She will be a tremendous asset in driving our strategic vision for our DSW business, focusing on tactical merchandising marketing and our overall experience all of which will be anchored to our current and target customers. We.
We believe that there is meaningful growth to be had at DSW and now more his leadership will help us unlock that growth.
Sure Doug feeling of pride in our organization in this team's ability to continue managing through the increasingly challenging current environment, allowing us to deliver a second quarter adjusted EPS of <unk> 59 cents in line with our expectations.
We saw sequential improvement over the first quarter in both our sales and gross margin and as a result, we are reaffirming our current full year guidance, despite continued industry and macro headwinds.
Now, let me provide a bit more detail on our financial results.
For the second quarter sales decreased seven 8% from last year to $792 $2 million and an improvement from the first quarter's results.
The continued pressure on consumers' high inventory across the industry and an extremely promotional retail environment. All contributed to this decrease.
From a wholesale perspective sales were up roughly 20% driven by the acquisition of cats, our launch of <unk> and acquisition of Turbo Athletic and our retail segment's total retail comps were down eight 9% compared to last year, but improved sequentially from the first quarter.
U S retail costs, specifically were down nine 2% in the quarter, but also sequentially improved from a pressured Q1.
While Canada posted comps down seven 3% in the quarter. This was on top of a very strong post COVID-19 recovery call of just over 47% in the second quarter of 2022, we remain pleased with the results. We are seeing in Pennsylvania Dot Com one of our premier DTC channels with comps up 50 basis points on top.
Roughly 43% comp last year.
Consolidated gross margin was 34, 5% in the second quarter compared to 34, 4% last year, an increase of 10 basis points and a sequential improvement of 250 basis points versus last quarter.
This sequential improvement was primarily driven by lower markets.
Importantly, our gross margin continues to be fundamentally strong with consolidated gross margin up 400 basis points compared to the second quarter of 2019.
Year over year profitability improvement was also driven by consolidation of our fulfillment centers.
Significantly lower logistics costs, including freight shipping and distribution expense.
The impact of consolidating our proton centers, specifically, the Columbus fulfillment center into the New Jersey E. CLC allowed us to achieve a more favorable level of fixed and variable expense leverage.
This benefit was partially offset by increased promotions. The continued rebuilding of our clearance business and deleverage of our fixed store occupancy cost.
Our adjusted SG&A ratio for the second quarter was 26, 9% of sales compared to 26, 5% in the second quarter of 2022.
Although we are experiencing modest deleverage given our current retail comp performance, we saw sequential improvement from a dollar and rate perspective versus the first quarter.
Going forward increased marketing investment to build brand equity and maintain customer awareness could put pressure on sustaining this ratio.
This trend.
May see volatility as we continue rolling out our new DTC sites and execute other strategic initiatives, but we will continue to pursue opportunities to trim costs across the entire business.
For the second quarter adjusted operating profit was seven 9% of sales compared to eight 2% in the prior year and sequentially improved from three 5% in the first quarter of 2023.
In the second quarter, we had $6 $9 million of net interest expense and our effective tax rate on our adjusted results was 29, 3% compared to 31, 8% last year.
Finally, our second quarter adjusted net income was $39 4 million or 59 cents diluted EPS per versus $46 $1 million or 62 cents last year at $35 8 million or <unk> 48 cents in 2019.
We ended the second quarter with inventories of 600 to $6 $8 million down roughly 13% compared to $694 million last year, and Dallas sequentially from $637 $4 million in the first quarter.
On a retail inventory square footage basis, we ended down 10% versus the second quarter of 2022 and down 4% compared to Q1 of 2023.
Wholesale inventory ended the second quarter down, 10% and adjusted for the acquisition of Tokyo, and Keds inventory would have been down 33% when compared to last year.
Because we have remained nimble in our approach to our assortment, we feel good about our inventory positioning heading into fall, ensuring we have the flexibility necessary to chase and take action on opportunistic buys.
As a reminder, at the end of the last quarter, we announced the commencement of our Dutch auction tender offer which allows us to invest in our own stock in mid July we announced the final results of the offer which included repurchasing $14 $7 million of our class a common stock at a price of $10 per share.
Under our existing board approved share repurchase program.
As always we maintain an ongoing dialog between management and our board of directors on our capital allocation strategy.
Together, we continue to believe that our most prudent use of capital at this time is to return it to our shareholders. As a result, we have continued to purchase shares in the open market, we view that as a vote of confidence in our long term strategy.
In the first two quarters of fiscal 2023 based on trading date, we retired $32 $9 million to shareholders through dividends and share repurchases.
Thus far in the third quarter, we have added to that total by $58 $3 million through September 5th Thanks to the continued open market repurchases.
We ended the quarter with $46 $2 million of cash and our total liquidity, which includes cash and availability under our revolver of $279 $9 million.
As of the end of the quarter, we had $233 $7 million available to draw on our revolving credit facility.
However, given the share repurchase activity mentioned previously that has occurred since the end of the second quarter, our current availability to draw on our revolving credit facility was $227 $9 million as of 95 2023.
As a reminder to help fund our capital allocation priorities. We previously announced that we had entered into a five year term loan upon closing that facility on June 23rd 2023, we immediately drew $50 million under the term loan and anticipate drawing the additional $85 million.
Throughout the course of the year.
The proceeds of that subsequent draw will immediately be used to pay down outstanding debt under the revolving credit facility.
We continue to await the receipt of the remaining $40 million of our cares Act tax refund due to us from the IRS. We are happy to report that the IRS has formally closed our standard audit for which this refund applies with no adjustments and as such we are now simply waiting on the refund request to work its way through the appropriate approve.
All channels at the IRS and Treasury Department for Ultimate funding.
Before I conclude I want to share a few remarks on our current guidance.
As discussed last quarter, our updated guidance assumes the continued pullback in consumer spending with a recovery delayed until later in the year.
Consistent with prior views the largest uncertainty continues to life squarely with the discretionary consumer while also contemplating a multitude of other pressures, including competitive inventory the health of the consumer and overall macroeconomic headwinds.
Our current guidance assumes that our retail comp performance improved throughout the balance of the year as the macro pressures on the consumer began to subside and as our prior year comparables become wider.
That being said pressures continue to weigh on the consumer and therefore potential for headwinds to worsen remains.
I do want to cover a few updates within our assumptions.
With the previously discussed repurchase activity our share count is now expected to be approximately 64 million weighted average diluted shares outstanding for fiscal 2023.
With the new term loan interest expense is now expected to be approximately $35 million for the full year.
Thus the incremental interest of the term loan essentially offsets the benefit of the lower weighted average outstanding share count for fiscal 2023 EPS figure.
Additionally, our estimated tax rate is anticipated to be 30%.
With all of this in mind and given the sequential improvement seen in our most recent quarter in terms of sales and margins. We are reaffirming our fiscal 2023 EPS guidance range of $1 20 to $1 50.
As Doug noted, we have made incredible progress in our evolution as a company, including recent leadership hires launches of new brands growing with existing brand partners and accelerating our journey as a brand builder I have strong conviction in our path forward.
With that we will open the call for questions.
Operator.
Thank you.
To ask a question. Please press Star then one under telephone keypad.
If youre using a speakerphone please pick up your handset before pressing.
To withdraw your question. Please press Star then two.
Today's first question comes from Gabby Carbone with Deutsche Bank. Please go ahead.
Hi, good morning, Thanks for all the color today.
So first I was wondering if you could maybe discuss the changes you saw in category performance if any from QQ first one <unk> and then as we look to the fall season, obviously, the boot category becomes quite important just curious how you're thinking about inventory there. Thank you.
Yeah. Thanks, Debbie this is Doug.
As it relates to category performance, we continue to see wait and see in the casual category.
Lastly, the capitalization trend just continues to gain momentum and the team's done a nice job of reacting to that with managing the inventory. So again, we feel really good about that.
Checkpoint.
Dominant penetration in the category is very very early on we talk a lot about September .
Which is the key time based selling so I'd say the majority of that season is ahead of US I would say we are seeing some nice initial results on fashion.
It really driven by western.
So we're cautiously optimistic about that but again the majority of the season is selecta.
Got it and then if I could just sneak in one more so moving ahead, obviously, it's been promotional out there curious just was kind of baked into your guidance on the promotion front and then are there certain categories, you're seeing more promotional activity and then you mentioned that like you're still seeing high inventory levels across the market place. So curious if you have any view.
Yeah. Good question.
<unk> actually done a really strong job of managing our margin and largely that is fueled by the fact that warehouse inventories in really good shape. So we didn't feel the need to get overly promotional we are seeing that.
Okay improve as we move through the back half, particularly in the athletic category I think we'll start to see that inventory starts to normalize, which hopefully will allow us to be less promotional so we're staying very close to that but you know as you said it's.
Choppy macroeconomic environment out there so we will definitely stay close to it.
Great. Thank you so much.
Thank you.
And ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one.
Today's next question comes from Richard <unk> with UBS. Please go ahead.
Great. Good morning, Thanks for taking our questions first I wanted to you know.
Ask if you could provide maybe some color on what you see on quarter to date performance you know in any degree man.
In Q2, and if we think about second half.
He is the like any big difference between the sales growth in Q3 and Q4, then just on the margin you know talked about SG&A probably.
The eco neighborhood, he probably being a little bit more pressure because of the marketing and the launching of the website.
So does that mean, the SG&A dollar growth will accelerate in the second half or how should we think about that and then just lastly on the balance sheet. You know you very encouraging to see all the you know the buyback continuing in Q3, they're like Oh, well protect before even more given the how.
The there's also.
The higher leverage on on the on the balance sheet at this point. Thank you.
Yeah.
Yeah. Thanks, Brett.
There's a lot of that back there I think you have to add four part questions I'll take the first two on that current requirements and then Q3 Q4, I'll turn it over to Gerry.
Seek to SG&A in the balance of the year.
No we don't.
Comment on sales in the current quarter.
Having said that.
We haven't seen anything that would lead us to change our guidance, which is why we're maintaining our outlook.
We think about sales growth in Q3, and Q4 definitely a tailwind we feel certainly as regards to we're up against softer comps in Q3, and most notably in Q4 nice tailwind as our.
Our fall campaign that we're going to be kicking off a DSW to really focus more on brand awareness, which we're optimistic about and then secondly, as we shared last quarter. The return at Nike. We are very excited about continuing to elevate that partnership. So again those are two tailwind, but again as we navigate through.
Choppy macroeconomic Mecca tougher economic environment.
Obviously, the <unk> with us.
And why would I want to Echo one thing that Doug has said to make sure. It's clear we've reiterated this a few times in our current guidance, which we reaffirmed we are assuming there is a pretty material change given the current trajectory that we've experienced year to date, that's always been the case and we believe especially at the beginning.
Easier comps, but that is why we believe we.
To date, we have not seen that but we haven't planned to see that yet but that is what it is anticipated that that is why we called out there is certainly I would say our net risk position as it pertains to the macroeconomic conditions and turning seeing that turn to the degree that said our current guidance hasn't there but for now it is on trend and that's why we've reaffirmed.
Thanks.
To your last two questions on the SG&A rate I'm actually very glad you you spoke there asked about that because in my mind that.
Now where the consensus modeling is probably most.
Disconnected for the fall and when I take you back to a moment to our initial guidance for SG&A for the year and what we had said was that we had done the reward that we talked about it as cost savings initiatives that slipped about $25 million year over year out of our legacy business.
But we also have about $15 million of SG&A to add into the overall company.
As of Keds, Togo, and the 50, <unk> week and right now I'm not seeing consensus reflect that on a total year basis. In fact, it's looking like most consensus has that SG&A.
Below L Y. So I think that one of the biggest disconnects that are currently out there and consensus so that in and the new interest given the loan I want to call you back to that as I gave guidance Joe.
We look at a change in SG&A dollars on spring to fall there is about $40 million shift to kind of get to what I just talked about our full year guidance, that's coming from a few big buckets.
One we've got marketing.
We we shifted about $15 million of marketing across the company out of spring and fall as we were not seeing the traction or the incremental traction that we would have expected to see with that marketing. So we've moved that into fall we use spot some of that for back to school and we're very excited to be launching.
For the first time in a long time, some DSW brand a top of funnel marketing.
Video heavy in the fall as well so that shift has moved we also have about.
$9 million of that 50, <unk> week, that's being added in there. So again, that's unique to fall not.
Not happening in spring and then about $4 million related to coming off the TSA with our kids.
A transition and that is that has always been the case, we just weren't sure when that was going to materialize that final month, we had a month of catch up to do and that happens to be in Q3. So all of that together along with selling expenses related to an improvement in our comp performance totals about 40 million.
Shift in SG&A are between fall versus spring and more in line with that total year guidance that we gave at the beginning of the year, which I just want to make sure you guys are properly modeling.
And then the last question was our repurchases.
Right.
We wanted to take advantage of what we think is a very opportunistic price and we funded that with with a term loan liquidity and we've been executing we get 11, again, which we get color in the current quarter because it was it was much heavier than even what we accomplished in the second quarter.
There is some remaining we never commenced to future activity. So you know we've equally up through yesterday are up with debt.
That's I think proof of how confident we feel in our long term strategy.
Great. Thanks, so much world details.
Okay.
Thank you and ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one our next question today comes from Dylan Carden with William Blair. Please go ahead.
Thank you very much geared to sticking with that let Scott.
The IRS refund.
Hi, Mary.
It's Jim.
Better how are you thinking about that.
Yes.
The lion's share.
Our revolving credit facility. So just mechanically as soon as that comes in that will immediately be used to pay that down.
We will always assess as we always do.
<unk> current stock price versus our liquidity and overall capacity to buy so that we aren't in net income to deploy that in one particular fashion and on day, one it would be used to pay down our ABL debt, but that's.
There is no commitment or earmarked for those funds at this point.
Great.
I wanted to make sure I understand kind of.
The bounds of guidance so.
We have a lot of tailwind.
Comparisons in Nike, etc.
The consumer should take.
A leg down here.
Would that be sort of detrimental to guidance at this point.
Just given some of the rhetoric.
Yes, Sir Sir Magellan and you hit it on the head at as we look out for the year and how we built that guidance range we're anticipating.
Pretty material shift in overall year over year performance than what we've experienced in the spring Thats always been the case, that's what we've what we've always communicated.
And we do have some tailwind and you hit him on the head we've got easier comps, we've got Nike coming in we've got some new branding.
Advertising going on that I, just talked about so there certainly are a tailwind at the end of the day, though and then we've been seeing it across the entire retail and especially people who sell to the consumer discretionary consumer.
We're seeing a lot of caution and and right now I'd call. It I feel like we're in a net risk position.
But as it pertains to our current guidance, but it really lies squarely with that discretionary consumer how they're feeling it's going to fall.
The last one we haven't talked about sort of the loyalty program.
Just curious how these new brands.
Interact with or built under that.
William.
How much of yourself.
Okay.
Okay.
Yes, John This is Doug you know again, we're pleased with the progress that the brands that we mentioned in his remarks with regards to get enterprise leg and then most recently with <unk>, but it's very early days on obviously, we're excited about that has to do with the first.
A large part of the DSW, but we believe that there's opportunity to extend that outside of <unk> channels of distribution, which is a broader opportunity as we move forward in general so.
I realize those sale than our own channel. So just more prominent fitness this strategy that we're going to be deploying going for.
The one thing I would add to that.
Until one is and I mentioned it with our with our SG&A. We this month, we will be basically fully off that transition services agreement actually a little ahead of schedule with cats. So while this has been a pretty transition later in the year for cats and they've been they've been performing at their acquisition models.
We're really excited to have them now on our infrastructures for wholesale for DTC and really excited about positioning down to start to add strategic growth I'll now that theyre actually our systems.
Got it.
Just another one I couldn't hear not Nike can you.
But I think what was it.
Historically.
I think I'm right in this sort of a new relationship with Nike, we engage the channel.
Okay. How are you thinking about.
It's scale to pace the timing dynamics.
The dynamics of that relationship.
I think it watch this fourth quarter right.
Yeah.
Yeah and John This is Doug again, we continue to be very optimistic about that elevated partnership with Nike.
We actually are going to be delivering that product a little bit earlier than we originally anticipated about a month earlier, we actually have some proactive on our site that will have cigna.
A significant amount of units rolling out to our stores in the next couple of weeks.
And again that's.
About a month earlier than we had anticipated so again that that is definitely a tailwind.
So we feel good about that.
We have insurance because they make.
With regard to how our separation we'd be we shared obviously what it was historically that we'll manage that very carefully we manage all of our portfolio brand and it will really be.
In Florida, obviously by what the customer is demanding and where we're seeing that the top line.
Okay.
Okay.
Yes.
Thank you and ladies and gentlemen. This concludes our question and answer session I would like to turn the conference back over to Doug Howe for any final remarks.
Well, thanks, everyone for tuning in today and I just want to reiterate thanks to our team for all their dedication as we move throughout <unk>.
A challenging macroeconomic backdrop, we look forward to keeping you updated on our progress will be moved through the back half of the year and export. So thanks again.
Okay.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Okay.
[music].