Q2 2025 Levi Strauss & Co Earnings Call
Okay.
Speaker Change: Good day, ladies and gentlemen, and welcome to the Levi Strauss <unk> company second quarter fiscal 'twenty 25 earnings conference call for the period ending June <unk> 2025, all parties will be in a listen only mode until the question.
And answer session at which time instructions will follow.
Speaker Change: This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company.
This conference call is being broadcast over the Internet and a replay of the webcast will be accessible for one quarter on the company's website Levi Strauss Dot com I would now like to turn the call over to other orphan Vice President of Investor Relations at Levi Strauss <unk> company.
Speaker Change: Thank you for joining us on the call today to discuss the results for our second quarter fiscal 2025, joining me on today's call are Michele <unk>, our president and CEO and Harmeet, Zhang our chief financial and growth Officer, We have posted complete Q2 financial results in our earnings release in the IR section of our website investors don't leave us Trump dot com the linked to the web.
Today's conference call can also be found on our site.
Speaker Change: To remind you that we will be making forward looking statements on this call, which involve risks and uncertainties actual results could differ materially from those contemplated by our forward looking statements. Please review our filings with the SEC in particular, the risk factors section of our Form 10-K for the fiscal year ended December one 2024, and the MD&A section of our recently filed form.
Speaker Change: Thank you for the factors that could cause our results to differ also note that the forward looking statements on this call are based on information available to us as of today and we assume no obligation to update any of these statements.
Speaker Change: During this call we will discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results reconciliations of our non-GAAP measures to their most comparable GAAP measure are included in today's press release reconciliation of non-GAAP forward looking information to the corresponding GAAP measures. However cannot be provided without unreasonable effort due to the channel.
Speaker Change: And quantifying various items, including but not limited to the effects of foreign currency fluctuation taxes any additional U S. Tariffs are responsive non U S cat and any future restructuring restructuring related severance and other charges.
Speaker Change: Call is being webcast on our IR website and a replay of this call will be available on the website shortly.
Speaker Change: Please note that Michelle and her meet will be referencing organic net revenues our constant currency numbers unless otherwise noted and information provided is based on continuing operations.
Speaker Change: Today's call is scheduled for one hour. So please limit yourself to one question at a time to give others the opportunity to have their questions addressed.
Michelle: And now I'd like to turn over the call to Michelle.
Michelle: Thank you and welcome everyone to today's call I'm pleased to share that we delivered another standout quarter exceeding expectations across sales margins and EPS.
Michelle: We saw broad based revenue growth across channels and categories as well as strong margin expansion driven by the consistent execution of our strategic priorities.
Michelle: We arrive at the mid point of 2025 in a strong position with the confidence to raise our top and bottom line outlook, Amit will share more on our guidance later in the call.
Michelle: In Q2, we delivered another quarter of high single digit organic net revenue growth up 9%.
Michelle: Direct to consumer was up 10%, reflecting the 13th consecutive quarter of positive comparable sales growth with strong and increasing profitability across channels.
Michelle: Our wholesale business delivered another quarter of growth up 7% our U S business maintained solid momentum up 7%, while international was up 10% driven by outstanding results in Europe.
Michelle: And we continue to see strong performance in our core as well as outside growth in our key focus areas like women's and tops.
Michelle: And we reached the midpoint of the year I'd like to take a step back and reflect on the progress we've made transforming the business over the last 18 months.
Michelle: First we've made significant strides in accelerating our shift toward becoming a DTC birth business across both brick and mortar any commerce.
Michelle: Today, our owned and operated channels represent over half of our business and they continue to deliver consistent healthy com alongside improving profitability. This.
Michelle: This progress reflects our disciplined ship toward becoming a truly consumer led DTC one retailer.
Michelle: Second we are making measurable progress in our evolution from a denim bottoms business to a full head to toe apparel lifestyle brand, while maintaining our dominance in gene we continue to drive outsized growth in lifestyle categories, including top dresses outerwear and non denim bottoms.
Michelle: Accordingly, we've expanded our assortment with greater discipline, rationalizing skus and introducing newness that is delivering stronger productivity and higher full price sell through.
Michelle: These choices are key drivers of our sustained market leadership and rising AUR.
Michelle: Third we're narrowing our focus.
Michelle: As shared in May we announced the sale of Dockers, which followed our decision to exit our denizen and footwear businesses.
Michelle: These bold strategic choices are enabling us to deliberately distort focus to the Levi's brand, putting brand equity consumer connection and category leadership at the center of every decision.
Michelle: Or.
Michelle: Underpinning this transformation is a sharpened ability to operate with rigor and execute with excellence.
Michelle: From go to market acceleration and streamlining store operations to end to end supply chain efficiencies. We are re wiring, how we work embedding structure discipline and cross functional alignment at scale.
Michelle: These foundational shifts are unlocking growth enhancing profitability and enabling us to better serve our fans as we make progress toward becoming a $10 billion company.
Michelle: While the global operating environment has become more challenging with uncertainty around tariffs and broader consumer behavior.
Michelle: Navigating this period from a position of strength.
I'll now walk you through highlights from the quarter in the context of our strategy.
Michelle: Note that all numbers that Harmeet and I will reference are on an organic continuing operations basis.
Michelle: Let's start with our first strategy being brand led.
Michelle: The Levi's brand continues to resonate with fans around the world growing 9% overall with 6% growth in mens and 14% in women.
Michelle: Our unaided brand awareness and consideration remains best in class with our scored significantly increasing year over year in core markets across the globe.
Michelle: Our position as the most recognizable denim brand in the world is a powerful competitive advantage and a key indicator that our brand is stronger than ever.
We continue to invest in our brand through global marketing initiatives and impactful activation, ensuring the Levi's brand remains at the center of culture.
Michelle: This quarter, we launched the third chapter of our re imagine campaign with beyond day, featuring a recreation of yet another classic marketing spot from a rich archives.
Michelle: We brought this partnership to fans globally through a limited edition product drops and through our unique houses route network. We work directly with her team to create custom one of a kind looks for her cowboy Carter tour.
Michelle: Being front and center and use it culture remains key to our marketing strategy from the start of the music Festival season, we've shown up in a major way from dressing should be the stagecoach to hosting an incredible roster of influencers at Coachella.
Michelle: More recently, we are a leading sponsor for Primavera sound in Barcelona, one of Europe's biggest festivals.
Michelle: With three Levi's dedicated stages, we outfitted influential pop icon choice of on an operating exclusive product collection.
Michelle: And to further drive brand heat, we continue to lean into the power collaborations this quarter.
Michelle: After teasing at Paris fashion week last summer, we launched an elevated collection with fashion houses the Pi, which sold at a premium price point and performed exceptionally well.
Michelle: Turning to product or.
Michelle: Our evolution into a denim lifestyle brand is gaining momentum.
Michelle: Continue to lead the industry and deliver the best fit fabric and innovation striking the right balance between our authentic denim routes, while infusing newness into the assortment.
Michelle: We're staying true to our denim heritage as we build out a compelling head to toe lifestyle assortment.
Michelle: And our amplified focus on women and denim lifestyle is delivering outsized growth.
Michelle: We remain the unequivocal global leader in gene, we are driving the trends today, while setting the trends for tomorrow.
Michelle: Levi's bottoms business was up 8% driven by double digit growth in women's and men's was up mid single digits.
Michelle: While traditional debt like slim and straight lifestyles remain a closet stable loose and baggy continue to gain popularity for both women and men.
Michelle: Ahead of the summer we saw this trend accelerate in our short offerings, which grew double digits in both men and women.
Michelle: With the nineties and Y two K fashion in both Wayne longer and <unk> are in high demand.
Michelle: Confident we have the right newness and innovation like the baggy dad joy in place to deliver for our fans and drive this trend.
Michelle: Earlier this year and ahead of the warmer months, we introduced an expanded line of lightweight looks including our linen plus denim collection to appeal to our fans interest in lighter softer and more comfortable styles.
Michelle: We've infused these new fabric innovation across our assortment from dresses rompers genes and truckers to sweaters woven and polo.
Michelle: We've seen strong success across both men and women and we will continue to fuel this trend throughout the year as more consumers look for lighter weight offerings year round.
Michelle: Another notable style trend gaining momentum is what we're calling quiet western and evolution of the bowl Western theme, we saw pickup last year, but with a more subtle twist.
Michelle: With our robust denim lifestyle offering we're seeing consumers find that perfect pairing more and more often.
Michelle: Women are pairing our classic boot cut our flare gene with our simple essential web tank or one of our textured knits inspired from our heritage.
Michelle: And then are wearing a classic western shirt with a catchy Xx chino.
Michelle: Quiet Western is perfect for the Levi's denim lifestyle aesthetic and a natural place for us to lead.
Michelle: Last year, we reset our top business and that work is truly taking hold and propelling our evolution into denim lifestyle.
Michelle: This included bringing in new talent, new vendors and new capabilities, including a new top agility function on a shorter go to market cycle, which enables a more responsive and on trend assortments in tops and graphic Tees focus our DTC channel.
Michelle: Energized by this new capability, along with an elevated assortment overall, our top business grew 16% this quarter with acceleration across genders and channels.
Michelle: Looking ahead, we have everything in place to continue the momentum we've experienced this year.
Michelle: <unk> lineup of product innovation unique and exclusive product collaboration and globally relevant partnerships.
Michelle: We have a number of great marketing activities planned for <unk>, including continuing to fuel our women's business with the launch of an additional chapter of re imagine and the introduction of a new campaign focused on underscoring, our relevancy and authenticity with men.
Michelle: And you can expect to see the Levi's brand come to life with more exciting and innovative collaborations like our highly anticipated Levi's, Nike collab, which just dropped.
Michelle: For product, we're bringing even more fit and fabric innovation to excite our fans in the second half of the year, we're expanding our diversified portfolio to drive the Lutheran downward trend, while also introducing freshness and skinny and straight silhouette.
Michelle: As the quiet western aesthetic takes hold.
Michelle: Leaning into boot cut and western inspired fit to fuel this evolving style.
Michelle: And for our iconic 501, we're launching a breakthrough performance fabric with thermo regulating technology, bringing year round comfort denim to a closet staple.
Michelle: Now shifting to our strategy to be DTC first.
Michelle: Our global direct to consumer performance this quarter was up 10% with another quarter of very solid positive comps.
Michelle: Our strong performance came from increased store traffic better conversion rates and higher AUR is leading to growth both in stores and online across all geographic segments.
Michelle: As we have shared the past several quarters, we have been focused not only on driving DTC growth, but doing it in a healthy and profitable way and those efforts are paying off as DTC margins continued to improve meaningfully we continue to enhance our front of house consumer experience and back of house efficiency and.
Michelle: And we are driving full price sales as consumers gravitate to our new assortments.
Michelle: Our work is not yet done and we see opportunity for continued margin expansion in this channel.
Michelle: We also continue to expand our global store network opening 16, net new doors this quarter.
Michelle: Store opening highlights include mainland locations in Nagoya, Japan, South Korea, and in the U S. New Jersey. These stores have been designed and built to better reflect our enhanced denim lifestyle offer.
Michelle: We drove another quarter of double digit e-commerce growth up 13% in Q2 with both traffic and AUR is increasing as our efforts to elevate and improve the consumer experience on Levi Dot com are gaining traction.
Michelle: Our loyalty program is another key connection point to our consumers, enabling us to engage more deliberately with our fans, we're increasingly using data and analytics to personalized loyalty member product offerings and experiences and we're seeing members purchase more frequently and transact at a higher AUR than the balance of our consumer base.
Michelle: Yeah.
Michelle: With close to 40 million members worldwide. This quarter, we expanded the program across several countries in Europe and later this month, we're launching enhanced features for loyalty members in the U S.
Michelle: Now turning to our third strategy powering the portfolio.
Michelle: Our international business grew 10% in Q2 led by 15% growth in Europe last month, I had the opportunity to visit several of our key cities across Europe, including Paris, Barcelona, and Milan some of the most fashion forward cities in the World I was blown away by how strong and relevant the Levi's brand is in the market.
Michelle: Both in stores and with consumers, especially young shoppers.
Michelle: Our team has been hard at work elevating how and where the brand shows up and I am constantly impressed by their commitment and dedication which is another key driver in Europe overall performance.
Michelle: We spent time with some of our key franchise partners, who share our confidence with our growth prospects and are investing more behind our brands.
Michelle: We also met with key wholesale partners like the Lando in Galeries Lafayette, we're leaning into our broadened assortment and lifestyle, particularly with women and even though Europe is our second largest geographic segment, we still see a significant growth opportunity ahead.
Michelle: Beyond Yoga was up 12% in Q2, DTC was up 31% and we're encouraged by the very strong comp performance, we are seeing in our stores.
Michelle: In June we opened our first beyond yoga location on the East coast in Greenwich, Connecticut, which showcases our new elevated format and design concepts and features our most comprehensive assortment spanning womens maternity and mezz.
Michelle: Our largest beyond yoga door to date. This store is already delivering nicely relative to our expectations and we're on track to open six more doors this year, bringing our total store count to 2014.
Michelle: Turning briefly to doctors in May we announced a definitive agreement to sell the brand through authentic brands group Dockers has been a leader in the global Kathy category and we're confident that authentic is well positioned to guide the brands next chapter I wanted to take a moment to recognize and thank the dockers team for their unwavering.
Michelle: Commitment creativity, and many contributions to Allison co over the past several decades.
Michelle: <unk> built an enduring brand with a loyal following and we're proud of all they've accomplished.
Michelle: In addition, I want to express my deep appreciation to the cross functional teams across elephant Po, who are working tirelessly on this transaction.
In closing this was another strong quarter across the board clear evidence that our strategic agenda is gaining traction.
Michelle: Entering the second half of 2025 from a position of strength with the right initiatives in place to sustain our momentum.
Michelle: Levi's as a brand with 172 years of Rich Heritage and has remained a global icon.
Michelle: As we look ahead, Levi's hasnt, even bolder future with a bigger legacy and quarter by quarter, We're building it.
Hermes: And with that I will turn it over to Hermes to provide a financial overview of the quarter and our expectations for the year Amit.
Hermes: Thanks Michelle.
Hermes: Strong finish to the first half of 'twenty five in <unk>.
Hermes: Quarter, two we delivered upside on sales gross margin SG&A EBIT margin and EPS.
Hermes: We saw broad based strength across DTC, and wholesale international and domestic womens and mens.
Hermes: And bottoms units and AUR.
Hermes: Especially pleased to see DTC again lead our growth with comp sales up high single digits.
Hermes: Our revenue productivity, coupled with better management of costs contributed to DTC EBIT margins, increasing approximately 300 basis points in quarter, two and approximately 400 basis points year to date.
Hermes: In addition, our wholesale channel accelerated to 7% plus growth posting is <unk>.
Hermes: Consecutive quarter of growth, while also experiencing improving margins there.
Hermes: Continued inflection of our financial performance is a direct result of our laser focus on the core Levi's brand and our DTC first strategy, we are fundamentally becoming a company with a higher growth rate higher margin profile stronger cash flows higher return.
Hermes: <unk> invested capital.
Hermes: Percentage of DTC.
Hermes: We arrive at the midpoint of 2025, and a very strong position with the confidence to raise our full year top and bottom line outlook.
Hermes: We'll share more on our guidance for the balance of 25 later in the call.
Hermes: Now turning to a review of our results overall, we saw continued strength across the P&L net revenue grew 9%. This was our third consecutive quarter of high single digit growth.
Hermes: <unk> was broad based as evidenced by the fact that DTC grew 10% and wholesale 7% E Commerce grew 13% and brick and mortar 10%.
Hermes: <unk> grew 10% and the U S, 7% women's grew 13% and mens 6%.
Hermes: <unk> grew 15% and <unk>, 7% and importantly, we generated a healthy mix of revenue growth with two thirds driven by higher volume.
Hermes: Hi.
Hermes: Yes.
Hermes: In order to our global wholesale business again exceeded our expectations.
Hermes: The wholesale channel in Europe returned to growth this quarter as we completed the transition of our new distribution center.
Hermes: Looking forward, our order books remain positive for the balance of the year.
Hermes: In the U S. Levi's wholesale grew 7%, reflecting continued strength in digital and premium accounts, our wholesale partners are embracing our head to toe offerings.
Hermes: Our product Assortments and fashion fit.
Hermes: Having a strong direct to consumer presence and focus gives us insight to product trends, enabling both us and our customers to have the confidence to buy and Phil flows.
For new product offers.
Hermes: 578 baggy for men is an example of a product that performed exceptionally well in DTC and is now in expansion mode in wholesale for the second half of 'twenty five.
Hermes: We have other new product offerings and expanded assortments launching with customers in the U S. This summer and as we head into fall.
Hermes: Encouraged by our wholesale performance this year as the actions we have taken to stabilize this business are working and while we continue to take a judicious approach to planning. This business. We are raising our full year 'twenty five projection for the wholesale channel to be between flat to now.
Hermes: Slightly positive.
Hermes: Gross margin for quarter, two was a record 62, 6% of net revenues expanding 140 basis points versus last year.
Hermes: This was driven by lower product costs and favorable channel mix. We also.
Hermes: Continued to benefit from higher full price sales and lower promotional levels as we improve the lifecycle management of our products are.
Hermes: Our key transformation initiatives and our pivot towards DTC first company.
Hermes: Adjusted SG&A expenses in the quarter were 54, 4% of total net revenues.
Hermes: There was a 50 basis point rate improvement.
Hermes: Mainly driven by leverage on higher sales.
Hermes: Distribution expenses increased versus prior year, given the ramp up of our new DC in Europe, and running parallel Dcs in the U S.
Hermes: The incremental distribution expenses associated with the consolidation of our D C. Denver.
Hermes: Temporary and we expect the transition to be complete as we exit the year.
Hermes: Also just completed the sale of Ken didn't distribution center for which we received $22 million in cash in the quarter.
Hermes: Digitally the transformation, we are making to our DC network enables us to establish a more hybrid footprint, which will improve service levels and optimize distribution costs supporting our evolution to a DDC first denim lifestyle leader.
Hermes: Now back to the numbers driven by both gross margin expansion and SG&A leverage we generated adjusted EBIT margin of eight 3% up 190 basis points to prior year.
Hermes: Year to date EBIT margins are up 300 basis points to 10, 9%.
Hermes: And the strong EBIT growth was the principal factor in delivering adjusted diluted EPS of <unk>, 22 cents, which was up 37% to prior year.
Hermes: Now, let's review the key highlights by segment the Americas net revenues were up 9% and the operating margin increased 270 basis points.
Hermes: As the prior year.
Hermes: 225%.
Hermes: Continued to see strong performance across both channels with DTC up 10% and wholesale up 8%.
Hermes: The U S business continued its strong performance and grew 7% with both DTC and wholesale up at similar levels.
Hermes: Full price stores continued to perform exceptionally well with comp sales up high single digits and as we look forward. We believe we can double our mainline store count over time.
Hermes: Latam was up 18%.
Hermes: Electing broad based strength across the region, including double digit growth in Mexico.
Hermes: Europe's net revenues were up 15% in quarter, two and operating margin for this segment was 17, 2% up 210 basis points to prior year, we saw broad based strength across markets, including double digit growth in France, the UK, Italy and Spain.
Hermes: Momentum continued in the DTC channel up 9% driven by comp sales, reflecting strength across mainline outlet and e-commerce and our wholesale business was up 23% benefiting from the resumption of normalized shipping at D C in Germany as well.
Hermes: Strong performance from top customers.
Hermes: Year to date, our wholesale business in Europe is up 7% and we continue to expect this channel to be positive for the balance of the year.
Hermes: Asia net revenues were flat to prior year.
Hermes: As we took proactive actions to improve the structural economics of this business, including reducing sales to less profitable partners in India, taking back a portion of our franchisee business in Malaysia and continuing to rationalize.
Hermes: Franchisee base in China as a result of these onetime actions operating margins in the quarter contracted 150 basis points.
Hermes: We continue to see solid performance in DTC, which was up double digits in several markets, including Japan, Turkey, and South Africa.
Hermes: <unk> strong growth.
Hermes: Year to date Asia grew 5% and EBIT margins were up 40 basis points to last year.
Hermes: We expect year to date trends to continue in Asia remains on track to deliver mid single digit growth for the year.
Hermes: Turning to the balance sheet and cash flow in the quarter, we generated free cash flow of $146 million and delivered a return on invested capital of 18% of full points to prior year.
Hermes: We've also declared an 8% increase in the dividend to <unk> 14 per share and we plan to return at least $100 million from net proceeds of the darker sale to shareholders in the form of share repurchases.
Hermes: We ended the quarter the reported inventory dollars up 15% approximately half the increase is to support sales through holiday while the balances.
Hermes: Balances, mostly attributable to product board brought in early to navigate the uncertain tariff impact the disruption in the Red Sea and a market buybacks in Colombia in Malaysia.
Hermes: We expect to end the year with inventories roughly in line with revenue growth.
Hermes: Before turning to guidance, let me briefly address the topic of tariffs.
Hermes: After the announcement on April 2nd our internal task force has focused on understanding the financial impact of tariffs, but also designing and implementing comprehensive actions to mitigate the impact.
Hermes: While the situation is still fluid.
Hermes: <unk> assumes an additional 30% tariff on goods, arriving in the U S from China.
Hermes: And an additional 10% tariff on U S imports from the rest of the world.
Hermes: Based on these assumptions, we estimate a gross impact before mitigation of approximately 50 basis points to our gross margin for 2025. After mitigation. We expect the net impact of tariffs to be about 20 basis points headwind to our full year gross margin.
Hermes: Our approximately of 40 basis points impact in the second half.
Hermes: This will result in a two to three cent impact 225, adjusted diluted EPS split evenly between quarter three and colorful.
Hermes: A key mitigation initiatives include promotion optimization targeted pricing actions when the negotiations and further supply chain diversification.
Hermes: Looking beyond 25 should tariffs remain in place at these levels given our transformation initiatives, which provides us multiple levers. We believe we are better positioned than most to manage through this uncertainty.
Hermes: I will turn to our outlook for the full year and quarter three as we look to the remainder of the year we're closely.
Hermes: Monitoring the evolving dynamics in addition to consumer confidence and behavior.
Hermes: Given the upside in the first half of the <unk>.
Hermes: Continued strong execution and momentum in our business, we are raising our top and bottom line guidance for the full year, we have increased our expectations for organic net revenue growth by one percentage points to 4.5% to 5.5%.
Hermes: We are increasing our reported net revenue growth by three percentage points. This equates to a reported net revenue growth of one 2% for the year.
Hermes: This incorporates a 50 basis point drag from foreign exchange versus the 250 basis points incorporated in our prior outlook.
Hermes: Our guidance continues to assume a three point headwind from the exit of Denison footwear business and the 50 <unk> week.
Hermes: We continue to expect gross margin expansion. This year. Despite Dennis as noted above we expect an approximate 20 basis points net impact.
Hermes: Our full year expectation for gross margin is now up 80 basis points to price.
Hermes: Ah.
Hermes: A new record.
Hermes: We still expect our SG&A rate to be around 50%. We also expect our gross profit dollars for the year to be significantly higher than the SG&A dollar increase leading to EBIT margin expansion of 70 to 90 basis points to prior year.
Hermes: As a result, our full year EBIT margin expectations are maintained at 11 four to 11, 6%.
Hermes: And we are raising our adjusted diluted EPS by five.
Hermes: To between $1 25 to $1 30 for clarity. This guidance now includes a net tariff headwind of two to <unk>.
Hermes: Our 14th send headwind from tax and FX versus prior year.
Hermes: Compared to the 20 zoomed in our previous guidance.
Hermes: Now let me provide details in quarter three for the third quarter organic net revenue from continuing operations is expected to be up 4% to 5%. This is on top of a 4% organic growth in quarter three 2024.
Hermes: We expect quarter three reported net revenue growth of 3% to 4%. This includes a 100 basis points tailwind from FX and a 200 basis points headwind from business exits.
Hermes: Gross margin is expected to be flat to up 30 basis points after incorporating the impact of tariffs.
Hermes: We expect adjusted EBIT margin to be in the range of 10.8 to 11, 2% while below last year. This is due to a shift in the timing of marketing expenses from quarter four to quarter three.
Hermes: The launch of our new campaign, and as mentioned above and increase in distribution expenses as we progress through our DC transition, which will be completed by the end of the year.
Hermes: And we expect our quarter three adjusted diluted EPS to be in the range of 28 to 30.
Hermes: This includes an approximate 1% net impact from tariffs and about <unk> from a higher tax rate versus prior year.
Hermes: In closing.
Hermes: We have started the year with momentum growing faster than the category with both channels contributing.
While there is still uncertainty on the macros largely driven by <unk>. We are in a good position to mitigate the adverse impact given our brand product and profitability momentum.
Hermes: Our transformation to a more profitable DTC first denim lifestyle retailer is working and positions us well to drive mid single digit organic growth annually and build a road map to deliver 15% operating margins over time I will now open up the line for Q&A.
Hermes: Thank you.
Hermes: Floor is now open for questions. If you have a question. Please press star then the numbers one one on your telephone keypad.
Hermes: Due to time constraints the company request that you ask only one question.
Hermes: If you have an additional questions. Please queue up again.
Hermes: If at any point. Your question has been answered you may remove yourself from the queue by pressing star one one again.
Hermes: Our first question.
Hermes: Yes.
Speaker Change: It comes from the line of Matthew Boss of Jpmorgan. Please go ahead Matthew.
Matthew: Thanks, and congrats on a great quarter.
Matthew: So in Q Michele could you speak to drivers of the demand strength that youre seeing today have you seen any moderation of momentum for the Levi's brand globally to date and maybe could you help size up market share gains relative to the industry and then for Harmeet could you just walk through the clear inflection that you've seen in <unk>.
Matthew: Gross margin what has structurally changed what levers are durable and really support the higher margin profile that you cited in the release and on the call.
Speaker Change: So Matt Thanks for the question I mean, we're just so pleased to report this quarter, our third consecutive quarter of high single digit growth plus 9% and of course with the confidence as we raised our full year guide.
Speaker Change: We are seeing broad based growth across the business, both direct to consumer and wholesale international and our U S domestic business women and men tops and bottoms, we're seeing at unit, we're seeing it in rising AUR. So it is evident that our key strategy.
Speaker Change: We're making to become a DTC first company and not just PTC only to their wholesale business also was supporting that business. It grew as well.
Speaker Change: But really rewiring the company to be a best in class retailer and the evolution from a denim bottoms business to April head to toe lifestyle business.
Speaker Change: The team is executing our product is resonating the pipeline has never been more robust a lot of newness freshness, whether that in debt.
Speaker Change: Loose baggy still doing really well fabric our win in denim was a big hit earlier. This year shorts are doing really well warm summer so probably is doing great.
Speaker Change: And like I said mens and womens in women's we are just starting to focus as you know because we are underpenetrated.
Speaker Change: And we're once again double digit there.
Speaker Change: Rand has never been stronger and Thats being fueled.
Speaker Change: Really by a variety of things.
Speaker Change: Built on a strong foundation heritage, but you do have to earn it every day and so showing up where the consumer is under that social media center of culture music beyond say dressing should movies as they say you are the company and Keith and we've got pretty good company and today Nike joins at family as well and based on the lines out the door.
Speaker Change: This morning, we think Thats Nike collaboration is going to be a really big hit.
Speaker Change: And in terms of as we look forward as we moved into June we've seen that trend continue and I don't think we have any reason to believe they're going to fall off because this is core to the strategy of the business and then the only thing I would add is market share. We continue to maintain our global top market share position and then our number one.
Speaker Change: Condition here in the U S for men and women already so on gross margins.
Speaker Change: Let me start by.
Speaker Change: Just reinforcing we are building a stronger more focused higher performing company.
Speaker Change: One defined by accelerated growth expanding margins and superior returns on invested capital. So to answer your question about gross margins. The gross margins were hitting a record every quarter.
Speaker Change: And we'll hit another record in end of this year 23 as you know.
Speaker Change: <unk>.
Speaker Change: Around 57% so what are the drivers.
Speaker Change: Matt.
Speaker Change: One is the structurally.
Speaker Change: Structurally the fact that higher DTC higher women's higher international higher gross margin, but that's something you guys have heard over the last couple of years is consistent.
Speaker Change: We're really leaning into it you've seen.
Speaker Change: In terms of delivers us the second is narrowing the focus did help.
Speaker Change: Exit of Dennis and exit of Dockers made a difference and then in the end.
Speaker Change: Part of the and what does the end here.
Speaker Change: First is as part of the transformation, we are taking a harder look at.
Speaker Change: Productivity and in us and our Assortments.
Speaker Change: Lower turning skus, let's eliminate them in our go to market calendar, let's get tighter.
Speaker Change: Et cetera.
Speaker Change: Leads to higher Cogs over time, and then the product pipeline is really resonating really driving full price sales and reducing promotion. So that's really how we're thinking about it there's some headwinds on tariff I've talked about it FX, maybe a little but we hedge it so some.
Speaker Change: Some puts and takes but we feel good and I would say.
Speaker Change: Some of you are thinking are we at.
Speaker Change: At the peak of gross margins I will say.
Speaker Change: We're not done yet.
Speaker Change: That's great color best of luck. Thank you.
Speaker Change: Thank you.
Laura: Next question comes from the line of Laura <unk> BNP Paribas. Please go ahead Laura.
Speaker Change: Good afternoon. Thank you very much for taking my question Michelle.
Speaker Change: Michelle Army I wanted to ask about organic wholesale revenues.
Speaker Change: And Tonight.
Speaker Change: It shows that they were up 6% per one age, but I think you called out that wholesale should be up slightly for the year, which would imply <unk> should be.
Speaker Change: Down low single digits.
Speaker Change: At the same time, I think Amit you called out the order books remain positive.
Speaker Change: For the balance of the year. So can you maybe square away.
Speaker Change: Are we rectify that in terms of math.
Speaker Change: Asked another way how should we think about <unk>.
Speaker Change: Wholesale revenues yeah.
Speaker Change: First to answer your question that you asked couple of weeks ago, We did deliver 13 consecutive quarter of same store sales.
Speaker Change: To put that to bed to your question about hold.
Speaker Change: Fred I wanted to make sure I can answer you four weeks ago I can answer it now to your question about wholesale we're just being prudent.
Speaker Change: Lauren.
Speaker Change: And judicious in our approach.
Speaker Change: Our view is as our wholesale customers with the pre book and the demand signals, we're getting lean into all of the product.
Speaker Change: <unk>.
Speaker Change: This.
Speaker Change: Channel will continue to grow.
Speaker Change: It's just important to be prudent as a channel we don't control.
Speaker Change: Overtime.
Speaker Change: We believe the channel should be flat to positive it's a big piece of our business and we have wonderful partners. If you think of the wholesale business, we're getting growth from.
Digital channel, we're getting growth from our premium customers and department stores in the U S.
Speaker Change: A smaller piece of our business, but we are working with them to grow this business over time.
Speaker Change: So to the growth in <unk> wholesale.
Speaker Change: Organically.
Speaker Change: Something like low to mid single digits is that the right way to think about it on mute.
Speaker Change: Yes, we don't disclose that channel, but I'd say, we'd probably leaning in quarter three more than Q4, only because we're filling the floor for the holiday season. The other thing just.
Speaker Change: For you and for everybody's benefit think of our business on a two year stack. So the first half we were up 9% last year, we were probably flat. The second half we were probably up last year and a four 5% and so a 4% organic photo five organic growth over 4% last year in quarter three actually.
Speaker Change: Growing at the same pace.
Speaker Change: So that's what I like I like to think about it.
Speaker Change: Okay. Thank you very much best of luck.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Dana Telsey of Telsey Advisory Group. Please go ahead Dana.
Dana Telsey: Hi, good afternoon, and congratulations everyone on the very nice results.
Speaker Change: Michele as you think about the brand and the marketing initiatives I thought some of the Nike things today and I agree with you it was definitely very busy.
Speaker Change: What are the other marketing activations that we should look forward Amit how do you think of marketing spend and price increases where are you in price and how much more does AUR half to go.
Speaker Change: Which categories do you think theres opportunity. Thank you.
Speaker Change: So.
Dana Telsey: I can make my im pretty pretty brief here Dana.
Speaker Change: As we said in our remarks, the brand has never been stronger and that is being fueled by relevant product.
Dana Telsey: Very exciting to see our vision.
Dana Telsey: Head to toe denim lifestyle.
Dana Telsey: Come to life and the consumer is responding.
Dana Telsey: Investing in the brand so <unk>.
Dana Telsey: I always talk about being at the center of culture, and we are driving it and the kinds of partners and collaborations that are emerging and people who want to partner with US is super exciting. So whether that was the kai very elevated designer out of Japan, We had a very successful launch there today dropping Nike beyond <unk>.
Dana Telsey: <unk>.
Dana Telsey: Has been a great success and we've just been thrilled with her being a bit of an imbalance in the brand and boozy wearing our product at the festivals and then as we look forward. We still have more of the answer to go and then we are going to have a really exciting campaign oriented to men.
Dana Telsey: So when we think about fall and holiday I feel like we're really well positioned to make certain brands days.
Speaker Change: Certainly John on your question of marketing expense Dana around 7%.
Dana Telsey: There is a timing change between Q3 and Q4.
Speaker Change: And that we indicated.
Speaker Change: That's how we're thinking of.
Speaker Change: Marketing to your question about <unk>, let.
Speaker Change: Let me first start with another quarter, where volumes were two third of our growth.
Speaker Change: So it is again the magic of the think I like to say it is good to have both.
Speaker Change: You are.
Speaker Change: Essentially.
Speaker Change: Broad based across geographies across channels and across <unk>.
Speaker Change: Categories and the other thing is not coming at the expense of volume and we have products.
Speaker Change: That are being rolled out there will continue to improve this it think the blue desk, which is a premium tier one offer this done very well.
Speaker Change: In Asia, So again room to grow from where we are today.
Speaker Change: Okay.
Speaker Change: Thank you thank you Dana.
Speaker Change: Thank you. Our next question comes from the line of.
Speaker Change: So UBS. Please go ahead Jay.
Speaker Change: Super. Thank you so much I have two questions Michelle at the top of the call you talked about the four key drivers.
Speaker Change: That's been going on.
Speaker Change: Part of the strategy for the last 18 months can you just dive into the operate with rigor a little bit and just tell us.
Why is it it seems like now that there is an acceleration happening in the business that fit the capabilities to serve seem to be getting better.
Speaker Change: He has been working for a long time on operating with rigor and narrowing our focus and becoming a lifestyle brand.
Speaker Change: Maybe if you can touch on what what's really happening now give us an anecdote from say supply chain or something thats happening thats, allowing the company to have.
Speaker Change: Strong results that you were talking about today and then secondly, just on the tops business. I think you said tops were up 16% can you just talk about the quality of the tops business I think in the past Theres a lot of traffic to your logo Tees back when things like that talk about the kind of top selling today and talk about how.
Speaker Change: How you feel about that and give us maybe a little context around how that tops business is evolving and the confidence you have that you can keep growing at a strong rate.
Speaker Change: Great.
Speaker Change: To your first to your first point as I did say earlier in the call. We are operating with greater rigor and discipline and really infusing the entire company with a DTC first mindset.
Speaker Change: And what does that mean.
Speaker Change: First if we start with products. We are in process, we have been talking about reducing the time of our go to market that is happening we're introducing agility track. So we can chase product better or in things that turn quicker like Todd said, just on a shorter cycle, but that is happening number two.
Speaker Change: We have had a massive effort.
Speaker Change: To have it more globally directed assortment and if I look back a couple years ago that number was in the single digits of what was common across the globe that number is more than 30%.
Speaker Change: First half of the year and it's growing we can imagine the kind of efficiencies that you get from that and along with that.
Speaker Change: We are being really disciplined on reducing nonproductive skus. So the reduction is in the team to make way for fresher newer product that can ultimately turn better.
Speaker Change: We are putting a lot more rigor you commented on the supply chain in terms of service levels. So that service levels in our stores and service better service levels in wholesale and then to your point on top I mean, this was a complete end to end reset and the team has done phenomenal work they set a new vision.
Speaker Change: And in design capability merchandising capability vendor supply chain you name it and.
Speaker Change: Success is broad based and that's what's so exciting so we saw growth in men.
Speaker Change: 14.
Speaker Change: C.
Speaker Change: Similar women's up 19% overall for me that knee numbers about the cross channel.
Speaker Change: Denim tops are really driving it I mean, we are the leader in denim pushing not sweaters workwear and then on the womens side things like dresses jumpsuits are in the top category and as we said, we really want to understand a lifestyle anything even categories like outerwear. So this is no longer a T shirt business just T shirt business that we have.
Speaker Change: We are in the Tox business full stop.
Speaker Change: Got it okay Super helpful. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Chris <unk>.
Please go ahead Chris.
Speaker Change: Thanks, guys.
Speaker Change: Can you help us think about how the margin profile of your DTC business has evolved over the last couple of quarters and where it's at today.
Speaker Change: Just trying to think looking out into next year is there anything structural preventing you to returning our business to a sub 50% SG&A rate as you strive towards that 15% margin goal over time I'm just trying to think through the puts and takes of DTC weighted algorithm could prevent you from reaching your medium term plan yes.
Speaker Change: Chris I'm glad you asked this question DTC.
Speaker Change: Yes.
Speaker Change: The aggressive growth or the <unk>.
Speaker Change: Double digit growth in DTC or the 13th.
Speaker Change: 13 consecutive quarters of same store sales and DTC, becoming a 50% plus business total mix is not a drag on EBIT margins anymore.
Speaker Change: It is actually progressing well.
Speaker Change: Year to date is up 400 basis points.
Speaker Change: Two last year last year, we ended at about 400 basis points is probably in the high teens.
Speaker Change: There is a gap between wholesale and DTC it used to be probably in the low teens couple of years ago.
Speaker Change: So what is really making the difference.
Speaker Change: First is revenue per square foot I mean, the fact that comp sales are up the fact that revenue per square for us.
Speaker Change: As the Prime driver is actually the prime driver of.
Speaker Change: The DTC EBIT margins is a big is a big thing. So really we are measuring it we are looking at ways to improve the throughput up for new product golfers is making a difference. The fact that we have more women product in the underfloor stops Michel talked about I think that's probably.
Speaker Change: We are making the difference taking a hard look at cost management the cost of new builds the cost of.
Speaker Change: Things like Labor management et cetera.
Speaker Change: <unk> is also helping.
Speaker Change: Those are the factors that tank.
Speaker Change: Driving it.
Speaker Change: I believe we are in the early innings of this.
Speaker Change: And as you make this pivot to DTC first.
Speaker Change: This is something that's going to be important and the only other factor I would say sometimes it gets lost in translation. Our E. Commerce business is now a profitable business it used to be a drag.
Speaker Change: Always said, you'll grow the topline you leverage cost and Thats whats happening in the business is growing in the mid teens.
Speaker Change: That's making a difference as we bring our distribution network make it more omnichannel that should again help because its youre leveraging fixed cost as against variable costs.
Speaker Change: Thanks, Amie and good luck.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from the line I apologize.
Speaker Change: Please go ahead Paul.
Paul: Hey, Thanks, guys as it relates to the tariff assumptions I think I heard you say, 10% and 30% curious.
Speaker Change: Were you planning Vietnam, and maybe some of the other countries.
Paul: So we've heard about.
Paul: Then on price increases I am curious what you have planned for the back half and what the implied.
Paul: Driver of top line is in terms of units versus.
Paul: Thank you.
Paul: Paul.
Paul: It's.
Paul: The tariff situation is fluid.
Paul: It's difficult.
Paul: In our plan.
Paul: With every day.
Paul: Theyre being unexpected change so what we decided to do for this.
Paul: Guidance is zoom, an additional 30% for China.
Paul: And an additional 10% for every other country around the world, that's what would be affected.
Paul: This stage I quantify the impact $25 million to $30 million for the year and 50 basis points of gross margins I also talked about things, we are doing to offset it and the net <unk> impact.
And on the business overall, the way, we think about it is competitively well positioned despite all the uncertainty 60% of our business is international a lot of our core products, our multi shows both geographically as well as through vendors and we're thinking 26 at this stage to your question about.
Paul: Pricing, it's targeted as minimal are we using the new products.
Paul: Vehicle to try and drive that but more importantly, we really focused on.
Paul: Reducing promotions driving full price sales.
Paul: All right. Thank you good luck thanks.
Paul: Thanks.
Paul: Thank you.
Paul: Our next question comes from the line of.
Alex Stratton of Morgan Stanley Your question. Please Alex.
Paul: Thanks, So much just a couple for me maybe first just on the on the sale of <unk>. So far this year.
Paul: Mid single digit organic even higher than that so as we think about a more normalized growth trend as we get some of these kind of temporary factors out of the business.
Speaker Change: Where do you think Levi should be growing at medium term and then just have more nearer term question. It looks like the full year guidance assumes that backup SG&A falls compared to growing in the front half can you just remind us what's enabling that change in trend. Thanks, so much yes, so Joe.
Speaker Change: First question about topline I'd say mid single digit growth is what Michelle and I and the rest of the executive team are focused on.
Speaker Change: And doing it consistently so that you can get to the 10 billion over time to your question about SG&A. The fact is.
Speaker Change: Alex we have leveraged.
Speaker Change: Unit.
Speaker Change: Year to date.
Speaker Change: Full year basis, because you were looking at organic revenue is a good Tom rule and our view is SG&A at 50% does leverage.
Speaker Change: Where we are spending is largely in areas that make us a better DTC focused company as against anything else. So I talked about distribution expenses.
Speaker Change: <unk> map is happening a big shout out to our distribution teams will collaborate with our commercial teams to ensure that we meet the demand which is that as we make this change. The second is I talked we talked about earlier. The fact that we are going to be opening stores right on the <unk>.
Speaker Change: Net basis, 50% to 60 stores.
Speaker Change: 90% of 30% of that franchise with largely through this being operated we're taking a few markets back.
Speaker Change: So that's the other piece and then the.
Speaker Change: ERP upgrade is the other piece that we're working on but overall our view is that S.
Speaker Change: It does begin to leverage, especially as we get to the mid single digits. The way we are.
Alex: Thinking about it Alex is.
Alex: Does the gross profit dollars increased more than offset the SG&A increase and we're seeing that and flowed through in an EBIT margin.
Speaker Change: Great. Thanks, so much good luck. Thank you.
Alex: Thank you.
Speaker Change: Our next question comes from the line of Peter Goldrick of Stifel. Your question. Please Peter.
Peter Goldrick: Hi, there. Thanks for taking my question I was curious on the enhanced loyalty program you pointed out some encouraging directional drivers as you rollout in the U S. Can you point to any expectations for contribution embedded in the back half.
Speaker Change: You roll that out in the U S.
Speaker Change: Yeah, we don't break out at first Peter welcome.
Speaker Change: Second we don't break it out by channel or by geography.
Speaker Change: What you heard from others, what you heard from us.
Speaker Change: Our more loyal consumers are more loyal fans drive higher frequency and are definitely embracing the denim lifestyle offers.
Speaker Change: And this will continue to be an opportunity for our brand and our size.
Speaker Change: Michelle.
Speaker Change: The team joke about it we shouldn't be having probably $100 million.
Speaker Change: In our loyal fans of kind of consumer so.
Speaker Change: And this used to be zero.
Speaker Change: Until just after Covid and so that's really how we're thinking about it.
Speaker Change: I appreciate that color. Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you our next question.
Speaker Change: Comes from the line of Paul <unk> of Barclays. Please go ahead Paul.
Paul: Hi, Thanks for taking my question I know, it's broad based by geography channel, but can you give us some additional color and detail on the AUR lift for the quarter between promos price or mix and then second can you talk about the expectations on the wholesale business, how retailers are managing inventory and how is the growing lifestyle assortment.
With women's and tops, enabling new opportunities with retail customers. Thank you.
Paul: Okay.
Paul: On AUR.
Paul: Yes. It is broad I'd, I'd say, DDC, probably little stronger than wholesale I would say women's probably even stronger than men's and regions I would say the U S and Europe, probably little stronger than Asia.
Paul: Thinking about the color on.
Paul: The customers are thinking.
Paul: Yes, good to your question on wholesale I think we'd say, it's largely inventories are in good shape across the channel.
Paul: And your question on how are they responding to our lifestyle assortment and I think it's been very positive and certainly some customers are further ahead than others.
Paul: If you take say Europe, or we have more premium offer even in wholesale and that business is doing really well with partners like Galeries Lafayette, Landau, who are leaning into lifestyle and to women's in particular, but we're also seeing that take hold here in the U S. I think as we sit here and even though a big part of our growth.
Paul: There's going to be DTC.
Paul: It is why we increased our guidance for this year, that's flat to slightly positive for wholesale but it will continue to be an important channel that reaches millions of consumers and we're excited and our customers are excited about all the newness, we are bringing to them.
Speaker Change: Excellent. Thank you vessel luck. Thank you. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Oliver Chen of Cowen. Please go ahead Oliver.
Oliver Chen: Thanks, Michelle and Harmony, you had really nice broad based strength, but men's lagged women's and also Asia was weaker than we expected I know you are undergoing changes there and would love your thoughts there and how it in here.
Speaker Change: Guidance interrelated with your your order books. It sounded like you are pretty encouraging order books, but was it.
Speaker Change: Methodologies to raise guidance given the uncertain environment and then as you mentioned lifecycle management products.
Speaker Change: Do we know about what inning you are all in our merchandise margins.
Speaker Change: Not peak ish, given the feedback you offer them a call harmeet. Thanks.
Speaker Change: Yes, so on the question of guidance.
Speaker Change: It's important.
Oliver Chen: Oliver if you're in our shoes, you would feel the same is important to be prudent and judicious.
Speaker Change: And.
Speaker Change: Given the demand signals we are seeing.
Speaker Change: Build part of it and so given that we've had three quarters of high single digit growth.
Speaker Change: We see the momentum continuing because of consumer I think as Michelle said generally resilient.
Speaker Change: Continued fan of the brand. So that's question one two a lifecycle management. This is.
Speaker Change: Although going back to CVC first right. This is about making sure.
Speaker Change: Our store associates and are our operations and commercial assuming around the world, especially with the new product offers are able to drive higher full price sale over a period of time before marking it down seeing sell through by store versus by country things as simple as that so we are in the <unk>.
Speaker Change: Really.
Speaker Change:
Speaker Change: No.
Speaker Change: Our focus on driving an opportunity you had a question you had a question about wholesale or Asia, and then I can take that yeah. So on Asia Oliver.
Speaker Change: We are long on.
Speaker Change: It's a business that we feel were underpenetrated there are markets like India and a couple of other markets. Japan. For example that are growing very nicely China is a small piece of our business it's about 2%.
Speaker Change: 25 is the year.
Speaker Change: Where we reset China and our teams are on the ground right now thinking through that.
Speaker Change: Probably get back to growth sometime in 2006.
Speaker Change: Or over the year, reaching Asia grows in the mid single digit EBIT margin expense and then Michele.
Speaker Change: So going to your question on men's and women's I mean, I actually use Oliver is again I mean, we already have so much market share in the men's business and we've got a continued obviously protect it and grow it but 6% outlook.
Speaker Change: Quite strong and the men businesses responding to the innovation, we're bringing in and bought on things like the linen denim value moves.
Speaker Change: And the last specified 70, baggy get to chase that wasn't even a bit and then our tops business demand.
Very nicely up 14% for the quarter.
Speaker Change: Clearly, we are seeing a outperforming and women's as we should because we are still underpenetrated. There were only 38% and I think we all know that that business should be at least half of our business and we're making really good progress I mean, I think for context.
Speaker Change: This business is up almost twice in 2019 to apps.
Speaker Change: Five years ago, and yet we still have so much runway ahead. So I don't think it's an either or I think as nance.
Speaker Change: Okay. Thank you and did you did you think merchandise margins RP cash in terms of where you are relative to pricing.
Speaker Change: No a square foot.
Speaker Change:
Speaker Change: I think the.
Speaker Change: I think.
Speaker Change: Our view is that and the answer is no.
Speaker Change: We are in.
Speaker Change: No way.
Speaker Change: And they are in the middle of the journey for DTC first we're probably in the early innings. So I think as we get better at retail and retailing.
Speaker Change: It probably improves over time.
Oliver Chen: Best regards thanks Oliver.
Speaker Change: Thank you. Our next question comes from the line broke approach of Goldman Sachs. Please go ahead Brook.
Brook: Good afternoon, and thank you for taking our question Michelle Hermes I was hoping you could dive a little bit deeper into the momentum that you've seen in the Europe business outside of the distribution center adjustment are there any other one time drivers of outperformance that you think might normalize for the rest of the year and given the stronger performance is stronger partnerships.
Brook: What do you think the medium term run rate of growth could be in the European market ahead. Thank you.
Brook:
Brook: To your question about one time.
Brook: The best way to look at Europe is to take a year to date view wholesale is up seven I think Europe year to date is up in the in the high single digits. The demand looks for those footfall a positive. So you know our view is.
Brook: <unk> of Europe in the mid to high single digit is a good way to look at it secondly.
Brook: When the company was.
Brook: Over $7 billion Euro for the $2 billion business right now, it's 1 billion. So we have clear opportunity we have a great team on the ground.
Brook: They are working through it a couple of years ago Brook, we got little hugs, because we didn't have the products on the floor.
Brook: To respond to warmer weather.
Brook: And today.
Brook: Yes, Linda.
Brook: In that.
Brook: Michel talked about we have like to wear denim.
Speaker Change: Stops we have a lot of shots and so we are we have product in response to global warming.
Brook: Michel you were just there so I'm sure.
Speaker Change: You have some insight.
Speaker Change: Just I know, we're at time, but I would just say on the balance of the market phenomenon.
Speaker Change: Executing like Crazy.
Speaker Change: It's super strong the product is relevant and all the things we've been talking about brand relevance and our culture.
Speaker Change: Pipelines that we are well along on Europe, we still think there's a lot of opportunity.
Speaker Change: Great. Thanks, so much thanks, Brooke and with that we'll close out the call. Thanks, everyone for joining and we look forward to speaking with you next quarter.
Speaker Change: Thank you. This concludes today's conference call. Please disconnect your lines at this time.
Speaker Change: Thanks Latif.
Speaker Change: My pleasure.
Speaker Change: Okay.
Speaker Change: Okay.