Q2 2024 G-III Apparel Group Ltd Earnings Call

for a full range of products across our global distribution network.

The brand is globally well recognized but currently has limited North American distribution and almost no international distribution.

We were over-scooted on Canvas Footwear. We've corrected that. We've improved on our Canvas leisure footwear and that's working better. And our handbag business is not as good as I would like, but we've moved.

presenting multiple avenues of growth.

We also have the ability to act as a licensor for additional categories, creating another income stream.

The agreement also includes an option to purchase the brand. Additionally, the agreement includes an option to purchase the brand.

This morning we announced our new multi-year license with Hanesbrand.

designers and sourcing locations and we see it improving drastically.

that has wide global recognition. We will create quality heritage pieces that expand Champion's lifestyle offering.

So, but the quarter itself was not a standout in Handbag Simplow.

in channel reorders. We're getting our reorders from our typical customers. We're department store driven, and that's where our reorders are coming from.

This license aligns perfectly with our core competencies and will fit seamlessly into our already well developed out of where divisions.

The product will be distributed throughout diverse channels in North America as well as Champions Global Network with first deliveries available for fall of 2024.

We remain steadfast in our focus on expanding our owned and licensed brands, as well as bringing in additional brands that fit our long-term vision.

Supporting this growth is our well-developed corporate foundation, which consists of our high-performing, forward-thinking team and experienced senior leadership.

our strong merchant expertise in product development,

Our dominance of cross a broad range of product categories.

A well-developed sourcing and supply chain infrastructure across diverse geographies and a diversified distribution network of retail partners to reach an even broader range of consumers.

This foundation has enabled G3 to unlock the value of more than 30 licensed and owned brands in our portfolio, including some of the most sought after names in global fashion.

Good day and thank you for standing by. Welcome to the G3 Apparel Group second quarter fiscal 2024 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Neil Nackman, Chief Financial Officer. Please go ahead. Good morning and thank you for joining us. Before we begin I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in forward-looking statements.

We've built entirely new product lines for our brands across a diverse range of core categories.

Our work has enabled them to reach wider audiences, realize tremendous sales growth, and is essential to elevating their lifestyle appeal.

There are fewer promotions in retail today than there were pre-COVID, quite honestly. Everybody has found that the right product is accepted by our consumer. If you design it appropriately, put the right quality into it, present it appropriately, the consumer is willing to pay. There are less promotions around, whether it be Macy's or Dillard's or Dalk. The common belief is if you're sitting with an aggressive amount of inventory, you're going to have to take monstrous markdowns to move it. As we proved out, our inventory is down 23% and our gross margins are up. Thank you.

Our demonstrated track record continues to make G3 a partner of choice for brands and for retailers.

Over the years, our entrepreneurial and nimble culture has always enabled us to deliver results. Agility is at the heart of everything we do at G3, and we continue to evolve regardless of external factors. Since announcing changes to our Calvin Klein and Tommy Hilfiger licenses in December , we moved quickly to create the four new strategic initiatives I just discussed, with more to come.

In doing so, we're creating additional shareholder value. Now let me update you on some of our progress this quarter against our strategic priorities.

Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to non-GAAP net income, non-GAAP net income per diluted share, and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release, which is also available on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Maurice Goldfarb. Thank you, Neil, and thank you everyone for joining us.

A first priority is to drive up power brands across categories.

Our results continue to be led by strengthen out-of-wear, as well as dressier categories, including sportswear, dresses, and suit separates across our key brands, DKNY, Karl Lagerfeld, Calvin Klein, Tommy Hilfiger, and Levi's.

We also saw strength across Denim, Footwear, and Team Sports.

Looking ahead at our third quarter, the Autobup looks good and our inventory is aligned appropriately. We're well positioned for the important fall and holiday seasons.

We registered another strong quarter well exceeding our top and bottom line guidance. The second quarter caps off a strong first half for G3, demonstrating our ability to navigate what remains a dynamic environment.

As we look to the future, we think about

several key brands as being important growth drivers for our business.

This gives us confidence as we look ahead to the balance of the year and accordingly, we've raised our full year guidance.

including DKY, Donna Karen, Carlaga Fell, Wilbrican, Nordica and Austin, each of which have unique propositions. The varying aesthetic appeal to wide range of customer segments and lifestyle needs.

As a global leader in fashion, we remain focused on strong execution of our business while pursuing our many opportunities for growth.

creating opportunities across an even greater number of retailers.

DKNY is inspired by the energy and attitude of New York.

This brand provides a modern wardrobe to carry you from day to night.

that attracts younger consumers looking for a contemporary product.

While Donna Karen is a modern system of dressing created to appeal to women's senses on every level, it addresses the full lifestyle needs of women in search of sophisticated products from one of the most recognizable American brands.

Karl Lagerfeld, an iconic name in fashion, embodies the aesthetic of its namesake, fused with a contemporary forward-looking spirit. The product features Parisian-inspired classics with a rock-chic attitude for high fashion.

Wilburkin, a status swimwear brand, cultivates a spirit of refinement and fantasy.

staying true to the casual charm with perfectly tailored and always in style product for a top tier clientele.

Grounded in classic Americana, Nordica is a lifestyle brand with nautical inspired designs that's iconic and modern with a casual fit, feel and function.

which appeals to shoppers in search of a more relaxed style.

and Halston, our most recent key license.

stands for simple and classic elegance that will offer an easy modern approach to dressing and appeals to consumer seeking aspirational style.

Our brands offer a range of price points, have tailored distribution strategies, and dedicated teams that design for their specific positioning. Each of our core brands complement one another and bring a distinct point of view to our portfolio which broadens our distribution opportunities.

Growing our owned brands, including dky car, laagaffel Donna Karen, velberan.

remains a key strategic priority as they represent an important longer-term profit driver by generating higher operating margins and providing licensing income for G3.

to do better than we have done historically with the licenses. Owning is far better than renting. And we're in control of our own destiny, which is an amazing luxury. And on top of it, we're getting the expected support from our business partners and trading partners.

They also enable us to further extend our global reach.

This year, with the ownership of the whole Karl Lagerfeld brand, our international sales will be up 20% to last year.

With $1.3 billion in annual revenue last year, we believe we can grow this business to over $3 billion in annual revenue over time.

with the knowledge that we know how to produce product and it's not necessarily the brand that drives it.

Our DKNY and Karl Lagerfeld businesses registered solid year-over-year growth in the second quarter.

It's a talent pool underneath it. It's the culture of the company. And we're transitioning to where we need to, to bring prosperity to ourselves as well as our stakeholders. So, we're quite happy with where we are. And it's amazing that our margins are increasing, and our staff is seeing a lot more women

It has now been a year since our acquisition of the full Carl Lagerfeld grant.

The integration of this business was seamless.

and it had a great transitional year.

We launched Karl Lagerfeld jeans in Europe , a new key growth category for the brand.

You know, an easy way to get Wall Street excited is to make an announcement that we're eliminating 20% of our staff and saving money. With this transition of PVH and all the new brands, it's amazing to me that we have said.

We will have two stores dedicated to just the jeans line.

one in Paris and the second in Madrid.

DKNY's Fall Marketing Campaign will be focused around the theme DKNY for You.

which explores the uniqueness of New York from a number of perspectives. This campaign will be amplified through a robust mix of media, including digital, premium outdoor placements, as well as social and influencer partnerships across the U.S. and key international markets.

Stable S, G and A, we've not added people, we've not fired people. We believe that the talent pool that has built G3 and not just an individual brand remains on and brings their talent to whatever brand they work at.

Coming off the momentum of the Met Gala, Karl Lagerfeld's fall campaign will be brought to life through high impact marketing activities around the globe.

That's great. It's not a new culture that has to be indoctrinated to new employees. So we're really, I hate to get off on a tangent, but I always feel that's the elephant in the room and let me address it.

The campaign will roll out across channels with a focus on digital including innovative NFTs, augmented reality filters, and more.

So, our AURs are up.

creative collaborations, and more.

Pretty much in all of our brands, which would even include, as I said in our presentation, Vilbrican, which is a high AUR. We're even taking an approach where we have a 400 and 450 euros swim trunks that we will concentrate on for a handful of doors to see how well we do with it. It's a nice percentage of our business.

We continue to capitalize on opportunities to leverage our own brand's recognition through highly profitable licensing arrangements.

This quarter, we secured renewals from some of our key licenses, which is another good indicator of our brand's strength.

Additionally, we are in the process of adding licenses in entirely new categories, exposing our brand to a wider audience.

But we're opening stores that will have that as the biggest percentage of their business.

Extending our global reach is another important priority.

So that's working well. And our retailers, AUR, in all classifications, have gone up. They've gone up somewhere around 10%. And performing well, we don't see any slippage because of price increase.

We have unique partnerships for Karl Lagerfeld that drive notable international exposure.

Last month, the brand officially opened its first five-star luxury hotel in Macau with 271 opulent guest rooms and a restaurant featuring a Michelin-starred chef. This project represents Carl's design vision as he personally worked on it for six years prior to his passing. The grand opening was hosted with Academy Award winner Michelle Yeoh and attended by other internationally renowned VIPs and 2,000 other guests. This hotel is a sophisticated luxury endeavor, creating another major brand experience and attracting a global audience.

So, you know, we're really, really doing nicely. And if you look at

go back to our presentations, probably our last half a dozen presentations.

We speak about our desire to grow Europe because Europe is the golden territory. If you listen to our competitors speak about their performance, then the US is a non-performing area or a poorer performing area.

In June , we announced the second Karl Lagerfeld Hotel Tower at the SAIL Development in Malacca, Malaysia, a UNESCO World Heritage Site that is rapidly emerging as an international tourist destination. The site is located at the SAIL Development in Malacca, Malaysia, a UNESCO World Heritage Site that is rapidly emerging as an international tourist destination.

somewhere around 23% this year come to last year.

It will feature the tallest nine tower linked structures in the world and resemble a ship. The official summer opening of Vilbrican's new beach club La Plage has been a major success offering guests an elevated beach experience.

So, we're on.

every tentacle there is to find the best opportunities for this company for the future.

I'm not sure I answered all your questions, but I probably answered some. Dana, if I missed one. You answered most.

This summer, the club quickly became a destination for international vacationers as the brand hosted several high-profile celebrity and corporate events at the Beach Club during the Cannes International Film Festival.

Just the last thing, what's your outlook on holiday? How are you thinking about it? And given the diversification of wholesale accounts with Champion, how do you see wholesale evolving? Thank you.

So, the remainder of the year, I guess our guidance tells you how we feel. We're not aggressive on inventory ownership. We kind of learned our lesson. We weren't able to manage as well as I would have liked.

This concept has enabled us to rapidly replicate the model to franchise and licensing opportunities for beach clubs.

We are actively working on additional opportunities as we continue to create more VLPRCAN experiences which will increase global awareness, enhancing the status appeal of the brand.

the logistics crisis that occurred and money is more expensive today than it was yesterday. So our inventory levels will be adjusted.

The brand also opened two new international stores during the quarter, one in the Bahamas and a second on Paris's Rue de la Paix, which will offer a higher penetration of our luxury line enabling us to increase our store AURs by double digits.

fairly dramatically, will manage a different type of business, which doesn't give us the upside opportunity. If you own the inventory, you have a good opportunity to sell it. So our guidance has got some upside opportunities, but not as huge as they had been historically because our inventory is managed differently.

We continue to build our DKY International business.

In Europe , our Milan office has been working to expand the brand's presence.

Our franchise partners continue to open stores and have already opened three to date with additional openings to follow.

As far as what occurs for the future, there's, you know, that's...

We continue to invest in resources in our digital and omni-channel expansion, which remains an important priority to drive growth for our brands.

that's political, it's economical, it's the economics of our country and our world. It's not all targeted as to whether we have the right fashion at the right price. We have all that embedded in our business. We're doing all the right things.

Our North American digital business with our pure play partners and our owned DKNY and Karl Langenfeld parasites was up over 60%.

not in control of what we can't control.

I work with Amazon, Fanatics, and many sites operated by them, as well as other digital-only retailers paying off.

So, you know, we do consider the inflationary issues and the politics that evolve around us when we do give guidance. So there is some level of conservatism that's factored into our guidance that considers ourselves. Thank you.

And these investments have created digital capabilities that we are leveraging across our entire portfolio.

We're excited about the opportunities ahead with these partners and believe this is just the beginning of the digital growth that we can create. Our brick and mortar business across our department stores and our wholesale accounts is key. As customers continue to shop in store, our teams have done an incredible job of getting the right product and the right channels at the right time to maximize sales as evidenced by our strong performance in the quarter. We've created a differentiated business model to support our success at wholesale. Our teams are uniquely comprised of strong planners and merchandisers who partner with our designers to create data-driven designs which deliver desirable products. And on the sales side, they work hand in hand with our retailers to plan their buys, again informed by our data, ensuring the appropriate product is in their stores and is well positioned on their floors on a timely basis. Your investments…

what we can control. Thank you.

Champion. Champion is wholesale. It's not retail for us. Believe it or not, our license was just signed. Negotiations have been in place for a couple of months.

but there was a confidence level that we would get there, and there's a complete collection ready to go. And there's excitement that surrounded it. We previewed with some of our customers.

including Haines for their own needs, for their own global distribution.

and were applauded for just creating this.

this amazing product with an athletically inspired, athletic inspired attitude that really doesn't exist in the form that we created it. And in the timeline, it's just amazing that this this company achieved it. And that goes for everything we've done. There's you know where...

In analytics enable us to design and continually revise our lines, capitalize on the needs of the retailer. Additionally, a proven formula for building each category line creates a strong mix of product that meets consumer demand, creating some of the strongest self-reuse that ensure we drive our retail partners and our business successfully. This makes us a best-in-class partner to retailers.

Where do you get notified that you're losing half your business six, seven months ago and you've replaced collections?

that are applauded the way our new collections have been. That would be Donna Karan, that would be Nordica, that is not yet Halston, but we're very close to getting Halston ready to market, and Champion. That's not imaginable, and this company's achieved it. We're armed and ready to go with assets.

Lastly, I'm pleased with our board refreshment efforts, which with three new independent directors having just recently joined us.

that are in our eyes going to replace everything we lose. And more efficiently and more profitably.

Overall, we've added six new independent directors over the past four years. Our impressive list of new board members include Bob Johnson, founder and chairman of RLJ companies, and founder and former chairman of BET, Victor Herrera, the CEO of Australian brand, Lobisa.

Thank you.

Thank you. Thank you all. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.

and former Chief Executive Officer and Director of Guest.

Daddy, lets start.

Former Chief Merchandising Officer of Macy's and currently a leading fashion consultant.

Dr. Joyce F. Brown, president of the Fashion Institute of Technology.

Michael Schaffer, recently retired Chief Operating Officer and Chief Financial Officer of PVH Corp.

And in external advisor to a number of fashion businesses.

An Andrew Yeager.

Global Head of Jefferies Strategic Equity Transaction Group.

Each of them, along with our current board members and management team.

provide independent, diverse, and valuable perspectives to G3.

Having new points of view during this time in our company's evolution is important to better position us for the future.

In conclusion.

We've done a great job successfully executing our strategic priorities. And I feel great about our product.

Strength across our wholesale segment, digital increases, and our prudent inventory management, financial discipline, and enthusiasm of our team.

Based on the strong second quarter performance and our order book, we have confidence to raise our fiscal 2024 outlook.

We now expect fiscal 2024 net sales of $3.3 billion.

We're raising a non-gap.

And that ain't come for a diluted share to be in the range of $3.20.

to $3,030.

compared to $2.85.

in fiscal 2023.

I will now pass the call to Neil for a discussion of our second quarter financial results, as well as guidance for the third quarter and full year fiscal 2024. Thank you, Mars. With respect to our results of operations, the comments I'm about to make on a non-gap basis, a full reconciliation of our gap to non-gap results are included in our press release this morning. Thank you.

Net sales for the second quarter ended July 31, 2023, increased approximately 9% to $660 million from $605 million in the same period last year, and we're approximately $65 million above our guidance.

Included in our sales of this quarter, with $38 million of additional sales of the acquired CarLagafel business, which became a wholly owned subsidiary on June 1, 2022.

Accordingly, the results of the Orlaga-Fell business were included in our results commencing with the last month of the prior year's second quarter. Net sales of our wholesale segment increased approximately 9% to $639 million from $588 million last year.

This segment now includes the acquired Carl Hagerfeld business results. Net sales of our North American retail segment were $34 million for the second quarter compared to net sales of $31 million in last year's second quarter.

Our gross margin percentage was 41.9% in the second quarter of fiscal 2023, compared to 37.8% in the previous year's second quarter.

The wholesale segment's gross margin percentage was 40.6%, compared to 36.2% in last year's compatible quarter.

As we have stated before, the acquired Carl Lagerfeld business operates at a higher gross margin percentage than the rest of our wholesale segment.

Their inclusion in the quarter resulted in increased wholesale gross margin percentages of approximately 150 basis points.

The remainder of the increase in gross margin percentage is a result of a decrease in inflationary pressures in product and transit costs.

The gross margin percentage in our retail operation segment was 50.5 percent compared to 51.6 percent in the prior year.

non-GAAP SG&A expenses were $237 million, or 36% of net sales, compared to $186 million, or 30.7% of net sales in last year's second quarter.

SG&A grew by approximately $29 million, primarily related to the inclusion of the acquired cartilagafil business in our results for the additional two months in the quarter.

In addition, we had increases in compensation and warehousing costs, as well as overall inflationary pressures.

Non-GAF net income for the second quarter was $19 million or 40 cents per diluted share, compared to $19 million or 39 cents per diluted share in last year's second quarter.

driven by the higher sales we achieved and the associated gross margin flow through

This was significantly above the midpoint of our guidance of a break-even quarter.

Turning to the balance sheet, we made good progress with respect to our inventory levels.

As compared to last year's second quarter, inventory levels were $805 million, decreasing approximately $236 million, or 23% from last year's $1.04 billion.

We had cash and availability under our revolving credit agreement of approximately $825 million at the close of the quarter. This was after we repaid $75 million of debt in the quarter. We expect strong positive cash flows this year that will continue to reflect our normalization of inventory levels. We believe that our liquidity and financial position provide us the flexibility to invest in our future growth. As for our guidance, I will provide non-GAAP guidance. Again, a full reconciliation of GAAP to non-GAAP results is available in the press release we issued this morning.

Based on our performance in the second quarter and our current view of the second half of the year, we are raising our guidance. For the full fiscal year 2024, we now expect net sales of approximately $3.3 billion.

On a non-GAAP basis, we expect net income for the full fiscal year 2024 of between $152 and $157 million, or between $3.20 and $3.30 per diluted share.

This compares the non-gap net income of $139 million or $2.85 for the alluded share for fiscal 2023. Folier fiscal 2024 adjusted EBITDA is expected to be between $284 million and $289 million compared to adjusted EBITDA of $266 million in fiscal 2023.

For the third quarter of fiscal year 2024, we expect net sales of approximately $1.13 billion compared to $1.08 billion in the same period last year. On a non-gap basis, we expect net income between $96 and $101 million, or between $2,3 in 2013 cents for diluted share.

This compares the non-gap net income of $66 million or $1.35 for the alluded share in the third quarter of fiscal year 2023. As a reminder, last year's third quarter included significant one-time demurage charges of approximately $27 million or $0.40 for the alluded share.

We do not expect the anniversary of these costs in this year's third quarter. Let me add some context around modeling. We expect continued gross margin improvement during the balance of fiscal year 2024 and anticipate ending the year with gross margins up approximately 450 basis points compared to the fiscal 2023 rate.

The second half of fiscal 2020 for gross margin will benefit from a few factors. As I just mentioned, we do not expect to repeat significant one-time logistics costs, and additionally, freight costs are significantly moderated.

While we are anticipating improved operating margins in both the third and fourth quarter, we anticipate S-GNA will de-lever as we continue to expect elevated wear housing costs as well as continued inflationary pressure on costs.

We expect non-GAAP interest expense to be approximately $45 million for the full year.

We are estimating a tax rate of 28% for the balance of the year. We have not anticipated any potential share repurchases in our guidance. That concludes my comments. I will now turn the call back to Mars for closing remarks.

Thank you, Neil, and thank you all for joining us today. We're seeing the results of our performance.

Closing out the second quarter, well exceeding our top and bottom line guidance and our order book gives us confidence in our raised outlook for the full year. The strength of our balance sheet affords us tremendous financial flexibility to invest in our business and consider additional opportunities. Our diversification is a testament to the stable business model and solid foundation we've created, enabling us to navigate any environment. I'm very excited about the new opportunities we've secured, which our team is working hard to bring to market.

We have strong plans in place to drive G3 with our focus on strategic priorities and these new growth drivers. I'd like to thank our entire organization, our many partners, and all of our stakeholders for their continued support.

Operator, we're now ready to take some questions.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

The first question comes from Will Gartner with Wells Fargo. Your line is open. Hey, guys. Thanks for taking my question. Maybe we could talk a little bit about the guide. So you guys beat by $65 million, but the flow through was only $10 million on the top line. Can you just, is it not just a matter of being conservative or can you just kind of...

Yeah, well, that's us looking at the order book. We go through a very thorough process throughout the company in terms of the future forecast. We speak to every division. Again, we look at the order book that's in place. So those are just refinements. Most of that really came out of our internal fourth quarter expectations. And just one more follow up. On Champion, is this going to be similar economics to the other licenses you've had previously? And maybe just frame out how big you think that this licensing deal could be for you. So yeah, the framework of the Champion license is very much the same as our other COTE license.

The added feature is for Champion, there is demand in the athletic stores for the brand in the outerwear sector. Dicks and Footlock are potential opportunities for us where our fashion brands really don't have that audience in those venues. It won't be our largest business, but it will be an important business in our portfolio and it will function alongside with approximately the same sales volume as our other brands that include

Calvin Klein, Tommy Hilfiger, Levi's and DKNY and Karl Lagerfeld. So it's in the same scope, same scale, that's the plan.

Just the economics are the same from like a – from an EBIT margin perspective. Is it similar economics?

It is and we're afforded yet another I'm sorry what I left out is Haynes is agreed to give us exposure in Most of their global venues so hopefully we can build an international business out of that

Whereas Calvin, Tommy, we were limited to just North America.

Thank you, I'll pass it along.

Please stand by for our next question.

The next question comes from Mauricio Cerner with UBS. Your line is open.

Great, good morning and thanks for taking my question. I just wanted to get a little bit more detail on, I think the implied growth for the second half of the year is around 5-6%. I just wanted to understand how much is that driven by wholesale versus retail and in general like during this quarter, what can you tell us about the performance of the key brands?

which ones had a stronger performance, which ones maybe you saw under performance. And I don't know if you mentioned this, but did you provide any long-term expectations on how much the champion business could reach over time in the long term?

a stronger performance, which ones maybe you saw some underperformance. And I don't know if you mentioned this, but did you provide any long-term expectations on how much the champion business could reach over time in the long-term? Thank you.

Thank you Mauricio, thanks for your question. I'll start with the last one. We generally don't provide a dollar value or a dollar number for our classification brands. But it fits right in the mix of our other brands.

Thank you Mauricio, thanks for your question. I'll start with the last one. We generally don't provide a dollar value or dollar number for our classification brands, but it fits right in the mix of our other brands.

with additional opportunity. But we're planning it similar to all our co-brands. Your question on the growth, the growth is primarily through the wholesale distribution that we have, which are department stores and the typical distribution that we have, it doesn't have an aggressive retail plan. The retail will be flat to last year and we have a very small retail business.

as it relates to your question on brands performance, where we don't have any losers. We have a standout might be considered Carl Lagerfeld. Carl has gotten great exposure. We're growing it very well in the United States as well as in Europe .

We have opportunities that still haven't surfaced. Door counts have increased, product has gotten better, and the consumer has gotten more interested in the brand. So we're seeing great appeal digitally, our own retail, and the distribution that we have for the product.

The rest remains pretty much the same. Our brands are operated with amazing teams that Bob and Weave relative to the market needs. I do not have a brand today that...

that I would classify as underachieving. Very helpful and congratulations on the results.

that I would classify as underachieving. Very helpful and congratulations on the results. Thank you, Mauricio.

Please stand by for our next question. The next question comes from Paul Kearney with Barclays. Your line is open.