Q2 2019 Earnings Call
Good day, and welcome to the Chico's Fas second quarter earnings call and webcast.
All participants will be in listen only mode.
Oh for today's presentation.
Opportunity to ask questions.
I would now like turn the conference over to Joey, Oregon, Vice President of Investor Relations Public Relations and corporate Communications. Please go ahead ma'am.
Thanks, Rocco and good morning, everyone welcome to Chico's Fas second quarter 2019 earnings conference call and webcast.
Joining me today are Bonnie Brock, our CEO and President and Todd <unk>, Our Chief Financial Officer, Our earnings release issued today can be found on our website at www Dot chico's that they ask dot com under Investor Relations press releases.
Let me caution you that today's comments will include forward looking statements about our current expectation.
Function plan estimates judgments and projections about our business and our industry, which speak only as of today's date, you should not unduly rely on forward looking statements.
Important factors that could cause actual results or events to differ materially from those projected or implied by our forward. Looking statements are included in our earnings release issued this morning in our SEC filings and in the comments that I made on this call. We disclaim any obligation to update or revise any information discussed in this call, except as maybe otherwise required by law.
In addition, our comments and discussion of second quarter financial results will be on an adjusted or non-GAAP basis, you will find the GAAP and non-GAAP reconciliation schedule included with our press release issued this morning, which is available on our website.
And with that I'll turn it over to Bonnie.
Thank you Julie and good morning, everyone.
Since joining the executive team as interim CEO in April and being officially appointed CEO and President last month my attention has centered on the three operating priorities. We discussed on last quarter's call first driving stronger sale with improved product marketing and customer engagement through enhanced selling tool.
Second optimizing the customer journey by simplifying digitizing and extending our unique and personalized service.
And third.
Transforming our sourcing and supply chain operations to increase product quality and overall efficiency.
And my main focus on these areas is improving product and sales performance.
Executing on these priorities is critical in the short term to stabilize the business.
It is also essential to ensuring we have the discipline necessary to drive sustainable profitable financial performance over the long term.
Well. This is indeed, a period of turn around we are making progress, which I will review in greater detail shortly.
Key to our work, establishing an organizational structure and team.
That drives both accountability and execution.
We have recruited world class leaders, who have proven track records of performance directly related to our business now in place.
In addition, we have been working diligently and quickly to optimize our structure, we reorganized how we manage our brands with responsibility for the Companys apparel brands, Chico's and White House Black market consolidated under one leader and our intimates brand Belmont and Telltale, continuing as a separate group.
[noise] apparel and Internet test specific market needs and this change creates clear lines of responsibility to accelerate our sales driving priorities.
As distinct groups.
We simplify simplify processes and decision making for the brand.
We're also continuing to have shared service benefits at the corporate level, including backup of synergies and the sharing of best practice knowledge.
And this change in our structure will have a positive impact on our time to market and increased cost efficiencies.
We are already becoming more nimble and agile and from a front of house product design merchandising marketing and customer perspective.
Well also safeguarding the unique DNA at each brand.
My role as interim CEO enabled me to see a deeper into the company and identify the skills and expertise we need it.
I am pleased that Molly Blankenstein has joined us as president of our apparel grew.
Molly is a 30 year retail industry veteran.
With a proven track record of building multiple verticals successful brands.
She has a solid retailer and merchant with fashion buying planning and brand development experience as well as operations and marketing.
Molly started in her role on August 1st.
And we are extremely pleased with her contributions and clarity already.
She has redefined expectations and injected new levels of accountability needed in the merchant organizations.
Mary Bond Prague, President of Intimates group will continue to lead our Selma and tell tell Brian .
As demonstrated by the terrific, 10.9% positive comp performance reported today.
And Selman four quarters of consecutive growth.
Mary and her team have done an excellent job driving the reinvention of our intimates business in all areas.
This film the team has delivered on product innovation, new channels of distribution momentum in digital impactful marketing a superior customer experience.
And strong customer acquisition.
I am confident that we have the right group president in each of our apparel and intimates organization to capture and retain new customer and deliver profitable sale over the long term.
Now, let me briefly review our financial performance and update you on our operating priorities.
Second quarter results were aligned with our expectations.
Both for the top and bottom line.
Consolidated comparable sales improved over the first quarter driven by sequential improvement in Chico's and strong double digit comparable sales at Soma.
In fact, some of Q2 comp of 10.9%.
Is the brand's best performance in four years.
And we believe is one of the top performers that's a bar in the industry. This year.
In contrast, the near term challenges, we identified in Q1 and discuss last quarter for White House Black market also impacted our second quarter results with Mrs. In print in color.
As part of our efforts to improve sales at the brand we were aggressive in liquidating our nonperforming good and entered August with cleaner inventory.
On a positive note the talent we brought on board in the first quarter to support our fabric and design teams is benefiting results now.
Sales trends for our fall, one assortments, which set in stores and online in early August are trending better we anticipate that comps will continue to improve throughout the fall and holiday season.
Our dicom business continues to gain momentum.
Driven by investments in investing Oh, sorry in advancing our omni channel capabilities.
Sales through our online channel continued strong with a double digit increase this quarter.
Turning now to progress and executing our three operating priorities number one driving stronger sell through improved product and marketing as I mentioned this is largely where my focus has been in my first three months here and where we are challenging ourselves moving forward.
At the Chico's brand the improving comp trend was driven by a stronger presentation of key product categories and more effective promotions.
We simplified silhouettes and offered more sophisticated colors and artists and print.
We also just started our product assortment to focus on key items narrowing choice count and buying deeper into these areas.
We are telling a more cohesive story to our customers.
And making sure we are in stock to meet her needs.
As a result, we saw momentum in Penn sweaters, knit tops and fashion accessories.
We continue to win dissipate further improvement in our merchandise assortments throughout the back half of the year.
With a better balance of key items and fashion.
At White House Black market.
The steps we took to course correct are benefiting the brand.
We are offering more elevated fabrication and have refined both wear to work and polished casual.
Major business category.
As I mentioned, our fall one assortment, which set early August is resonating with customers and we are seeing encouraging improvement in sales trends.
I continue to be very involved partnering with Mali, and the Chico's and White house black market teams.
On improving product and fine tuning, our marketing programs with an emphasis on digital and social media channels.
That our data shows resonates with our customers.
We also continue to enhance our store and online visuals to compliment our new assortments.
We are confident.
That the improvements we are making will drive the topline.
We look forward to sharing Molly's vision next quarter as we finalized spring 2020.
While we have more work to do we are on a better path forward.
And continue to bring in high level talent with product expertise.
At Soma second quarter results exceeded stretch targets with double digit positive comps and significant growth in d. calm and momentum across the stores.
These results reflect the strength of new product launches.
Enhanced in stock positions.
And intensified marketing programs.
Well all categories performed well in the quarter, our innovative solution based products drove much of the outstanding performance.
We also recently celebrated somas 15th anniversary with a very successful in store and online special traffic driving event.
This two day event drove the top line and resulted in greater than 50000, new customers to the brand.
[noise] PC.
Okay.
We see our.
Sorry, we are committed to continuing the momentum and moving full force ahead.
Both optimizing and creating sales opportunities.
In the third quarter, we are launching the newest franchise dilution the vanishing Threesixty broth, which offers smoothness from all angles and we have significantly expanded our holiday gift collection.
To meet the customer demand and growth we are seeing.
And expect to continue.
We have increased our overall inventory position and are optimizing our market spend through enhanced digital.
We are very excited for the future potential of the Soma brand that it leadership team has unlocked.
And look forward to a highly successful fall and holiday season.
Next our second focus area optimizing the customer journey.
As CEO .
I'm emphasizing that the customer must be at the center of our thinking.
We're not only focused on our merchandise.
We continue to modernize and digitize their experience with us to that end with our new Clienteling tool styles connect now fully rolled out we are nearing completion of our associate training to optimize the personal connection with our customers and thereby deliver improved engagement and sales. We look forward to updating you next quarter on our progress.
In addition, we expect the implementation.
BOPUS across our stores will be complete by the end of October buy online pickup in store provides us with another way to serve our customers in a way that's convenient for them.
And our third focus area sourcing and supply chain transformation.
In supply chain as a follow up to last quarter. We have completed our baseline network study for end to end supply chain operations.
As a result of this work we have identified a set of scenarios that we are currently vetting to determine our best option for the most efficient distribution network.
Our goal is to drive efficiency and strengthen our ability to deliver new products at a higher frequency better quality.
And lower costs.
To support our supply chain strategy, we are working very quickly to consolidate our vendor base and are making good progress.
We have reviewed all of our current relationships and over the next 18 months will significantly reduce our base to a key set of top vendors.
We will supplement that with a subset of smaller niche vendors to support is where we have unique needs.
And as we exit 2019, we anticipate a reduction in our vendor base of an additional 25% on top of last year's decrease of 25%.
As we reach scale with key vendors, we will have stronger partnerships.
A greater control over product quality, and the ability to achieve better terms and lower costs.
We also continue on a fast track to reduce our exposure in China over the next 18 months, we anticipate we will be in the low 30% range compared to our current penetration of approximately 40% as we shift more of our sourcing to Vietnam, Indonesia and India.
In summary.
We are committed.
To enhancing value creation at Chicos Fas.
And we are taking the necessary steps to do so.
We are making important improvements.
In product aesthetic and product architecture in structural changes to optimize our learnings.
And in attracting world class talent to ensure.
A successful turnaround of this business.
I'd like to now turn this mornings call over to our CFO Todd.
Thanks, Bonnie and good morning, everyone.
We reported consolidated comparable sales for the second quarter down 6.1%.
In line with our outlook, reflecting a better trends compared to the first quarter and a mixed performance across the brands.
We did see strength in ecommerce and believe our ongoing investment in our omni platform and customer journey.
We will continue to fuel healthy growth in this channel.
Moving to the bottom line, we reported breakeven adjusted earnings per diluted share in the second quarter, which excludes the accelerated depreciation charges related to our retail fleet optimization program.
Merchandise margin was down slightly and reflects the impact of clearing white house black market inventory.
Merchandise margin in both Chicos and Soma were strong we exited the quarter with total inventory of 1.6% compared to last year due to investments in long lived intimates.
To fuel continued growth in new and existing programs.
White House Black market, and Chico's inventories were down as planned.
Overall gross margin was down 230 basis points in line with our expectations.
This was primarily due to costs related to the expansion of our omni channel programs and do leverage of fixed costs on reduced sales.
This also excludes the impact of accelerated depreciation charges related to our fleet optimization program of 60 basis points.
Moving to SGN expenses second quarter, EPS, DNA was down $3.1 million compared to last year, which is better than expected due to favorable employee related expenses, partially offset by investments in intimates group marketing.
Our balance sheet remains strong and we ended the quarter with $163 million in cash and short term investments and $50 million in debt.
We continue to focus our capital expenditures on investments in technology, an existing store Remodels and refreshes.
For 2019 or plan for capital expenditures is approximately $45 million to $50 million.
We've invested $14 million Q2 year to date.
We closed 23 stores in the second quarter and 31 year to date, we are on track to close approximately 80 stores in fiscal 2019, as we continue to implement our fleet optimization program.
In the second quarter, we returned $10 million to shareholders on a trailing four quarters. We have returned approximately $94 million to shareholders in the form of dividends and share repurchases.
We currently have approximately $55 million outstanding under our existing share repurchase authorization.
Now I will turn to our financial outlook for the third quarter 2019, and our updated outlook for the full year 2019.
Our third quarter and full year outlook excludes the expected net charges related to the retail fleet optimization plan and any incremental impact from the implementation of new tariffs.
Importantly, we do anticipate gradual improvement in our sales and comparable sales trends throughout the second half of the year.
As our operating priorities gained traction, but we feel it prudent to take a conservative posture and our outlook as we manage through outer turned around.
For the third quarter of fiscal 2019 compared to last years third quarter.
We expect a low to mid single digit decline in total net sales in consolidated comparable sales gross margin as a percent of net sales to be down approximately 100 to 125 basis points, primarily due to clearing of seasonal inventory.
Our SGN expenses will be approximately flat to down slightly reflecting ongoing cost management.
Offset by investments in marketing and our intimates group.
We're fairly full year 2019 compared to last year, we expect a mid single digit decline in total net sales and consolidated comparable sales.
Gross margin as a percent of net sales will be down 150 to 200 basis points.
Due to primarily to incremental costs in the first half of the fiscal year associated with our omni channel programs and with clearing of seasonal inventory.
SGN aid to be down approximately $10 million, reflecting ongoing cost management and lastly for the third and fourth quarters, we expect the tax rate in the range of 20% to 25%, which excludes accelerated depreciation related to our fleet optimization plan.
Before we address your questions.
A brief comment on the tariff situation as it relates to our second half guidance.
We will be impacted by the list for terrorists planned for September Onest, we've taken advantage of air shipping to reduce.
To receive goods before September onest.
And we've taken advantage of.
Working with our vendors on cost sharing opportunities to mitigate our exposure.
That said at this time, we anticipate an impact to gross margin in the back half of the year, which is not factored into our guidance.
Now I'll turn the call back over to Julie for today.
Thank you Todd at this time, we'd be happy to take your questions and I'll turn the call back over to Rocco to begin.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone. Please pick up your handset refreshing that she's just wondering Tom. The question has been addressed and you like to withdraw your question. Please press Star then too.
Today's first question comes from Susan Anderson of B. Riley FBR. Please go ahead.
Good morning. Thanks, so much for taking my question nice to see the improvement and Chico's and the strong sales at Selmo.
Bonnie I'm curious to get your thoughts around Chico's and White house in their ability to get held back on track in terms of product. It's clearly there has been some missteps there and it looks like you are heading in the right direction, maybe if you could give some color on the magnitude of the white house comp improvement, so far or any color around sell throughs of new product styles versus old styles that would be great and then I'm just curious to get your thoughts around and competitors are there any doing well out there.
And because I'm curious in this environment do we just continue to see women's apparel consolidate and if thats. The case, how do you win in this environment. Thanks.
Well I think there is lots of room for us to win in this environment. Thanks for the question.
You know.
Q2 was I wouldnt say well under way.
When that when I joined the business and in my role and in the first month, we made very strong progress at White house Black market and revamping the merchandise for some of the fall deliveries, but mostly that lets canceling product really that did not align to our new expectations.
We adjusted style.
And.
Some of the colors, where possible and we actually went out to market for key items and yes, we are seeing better results with our early fall product at White House.
And we believe that the remainder of the deliveries that we have for this year I certainly more in line with the.
Appropriate DNA of the brand.
We are extremely excited however, about what we're seeing first Frank.
I would say that.
You know, we're really changing the organization to be product upset and customer obsessed and we do very much believe that.
Our that the future.
Both the Chico's and White House business.
Is within our control.
And.
Molly here in the room with Thats actually in cheese and she is nodding her head we.
We have seen a lot of opportunities already within the business that are within our grasp and.
I would say the that we're making some significant changes in the organization no question, but that the team is very charged and excited about these changes and the direction that we are sort of unlocking.
So we're pretty we're pretty excited here.
Great that's good to hear.
And then Todd maybe if you could just.
I guess I had a question on the gross margin when looking at third quarter I guess most of the decline related to continued clearance sales from last season are also I guess, maybe related to some fall clearing or more promotion. This given the product, especially at White house is not kind of fully shifted to the new aesthetic and so if you give some color maybe and gross margin our merch margin at Chico's two in the quarter as kind of curious versus White house, and then expectations for third quarter. Thanks.
Sure. So for Q2, I actually Chico's did a very nice job staying on top of their inventories as they work through the quarter you can see their comp did have an improvement versus first quarter, which.
Certainly help.
And they did say on top and ended up roughly flat on merch margin versus last year, which was a fantastic sign.
No White house with their comps it is not surprising that is their sales were coming in lower than what they had bought too. So white house did have more discounts than they had planned at that point.
And that did have an impact on the overall merchandise margin for white house black market not surprisingly.
As we go into Q3.
White house could only moved through a certain amount of their inventory, there's a little bit of carryover I would say they did a good job of clearing through most but there is a little bit of carryover going into Q3.
And then as we look at expectations going into Q3 again.
We are making sure that we're taking a conservative stance and that we do allow ourselves the room to be able to stay on top of those inventories and that we make sure that we are taking the appropriate discounts as we go through the quarter to to really end up where we need to be as we go into the all important fourth quarter.
Great Thats helpful. Thanks, So much good luck next quarter.
Thank you.
Our next question today comes from Kimberly Greenberger of Morgan Stanley . Please go ahead.
Great. Thank you so much.
Bonnie it sounds like you're very excited about white house black market as you get into early 2020, I'm wondering if you're feeling like the product is strong enough that we might actually see white house black market get back to positive comps.
As soon as Q1 and Q2 of 2020, and then I'm wondering if you can just talk about.
Product at Chico's and sort of when you feel that the chico's product will be.
At at a level of execution, where you think we could see some improving comp trends, there or let's say positive comps I know they can certainly get a bit less negative.
And then Todd I just wanted to follow up on your comment on terrorists the.
The not including the tariff impact in the back half guidance I know, it's a fluid situation is it just that it's it's too difficult to know exactly what the tariff payments will be at this point and so it's it's tough to calculate or would you be prepared to share that information with us on the November call. Thank you so much.
Okay. Thanks Kimberly.
I do want to go for sure. Okay. So ill talk about tariffs for for what we know at this point Youre right. It is a very fluid situation.
The good news is our vendors have been very proactive in working with us on how we can mitigate those costs as we go through the course of this second half have been pleased with how those relationships really have paid benefits for us.
If we look at what we know now the US trade representative come out with more rules last night around.
By timing and amounts I would caveat that with.
Lord knows things change quickly.
But based on what we know now if the 15% does come into.
Being and it is on September 1st as you know, we have 40% of our goods coming through China store unmitigated exposure is.
Fairly significant for us it would be over $15 million, but with the mitigations that we are getting from our vendors and then even without counting the other things. We're working on we would expect our conservatively expect our exposure to be in the $5 million to $7 million range and we give much better I think more confident guidance as we go into Q3.
But again at this point things are very fluid and we are trying to be as transparent as possible, giving you what we know at this point.
And part of that is that an annual exposure the $15 million grows to five to 7 million net.
Yes. Thank you for qualifying that is.
Clarifying that is just the 2019 remainder of the year exposure.
Okay. Thanks.
No Kimberly sorry, <expletive> I haven't answered your question yet.
I would say that the work that Molly is doing and and that.
Her team is doing.
Well definitely impact spring at both White House and Chico's.
Chico's takes a little longer given the breadth and the variety that collections and the unique styles, which is part of the DNA and I would I would say that I think we can impact white house black market, a little faster and one of the things that were definitely working on is reducing some of our lead times on product and we are moving quickly to try to have product still new product here for fourth quarter.
So.
We are excited about the things that are coming on and definitely working towards that you know.
Continuously improving each quarter.
On the on the topline.
Thank you. Our next question today comes from Janine Stichter of Jefferies. Please go ahead.
Hi, Good morning, everyone. Thanks for taking my question.
I just wanted to ask a little bit about your decision to unite the apparel group under one leader and bring in Mali versus having two separate brand President you talk little bit about the thought process. There and then maybe some of the benefits you expect to see just in terms of New York structure and any efficiency do you expect from that division.
Sure.
First of all Molly is.
As as I think people realize a very seasoned.
Merchant and executive and she's already led multiple brands at the same time in her career.
So.
What we're doing is ensuring that we have the right merchant design lead and very strong teams in place for each brand.
The brands also are keeping their individual marketing team to drive the DNA and the messaging to the customers.
And we really do believe that this is more efficient to combine the businesses under under one team because.
We are learning a lot and those learnings can be quickly applied across functions and that will be very important to our.
Agility in the next six months it was critical.
So we're actually already seeing the benefit of that Don in terms of the structure were very pleased will it result in cost efficiencies to be honest that was not our objective our objective was speed and agility.
And making necessary changes too.
To design and to merchandising team primarily.
Got it that's helpful. Thank you and then just one more question on the Ash and I think you reiterated the guidance for ever down 10 million year over year as you look at the cost structure. Do you think there are additional opportunities or do you feel like you've kind of Kai everything that you're comfortable cutting and at this point. If you were to reduce expenses more it would be kind of coming from customer facing areas that you wouldn't necessarily want to add one to reduce.
Got you and then yes, Oh, sorry, so we've always said and I truly believe I.
Good organization always finds ways to continue to look for expense savings and I think that is we've proven that over time that that is a core skill set for us and it will continue to be.
At this point.
We believe in our guidance, we think it's appropriately.
Hi is stated, but we absolutely continue to look and it's helpful to have Bonnie and Maui come in with a different lens.
To give a fresh perspective on other types of things that we should be looking at but we will continue to look at SGN. A there is absolutely no doubt.
Great. Thank you.
And our next question today comes from Roxanne Meyer of I'm sure.
<unk> partners. Please go ahead.
Great Good morning.
My first question is a follow up thanks.
You heard that it could prove you Roxanne your life.
Skip that and.
Im sorry, MKH management your line is breaking up.
Can you hear me.
You are still breaking it out ma'am.
Oh, well I might have to get back into the queue. Yes now move onto the next question. Today's next question comes from Paul Trussell of Deutsche Bank. Please go ahead.
Hi, Good morning. This is gabby carbone on for Paul.
Kind of going back to the gross margin guidance, how should we be thinking about the impact from your omni channel programs moving through the remainder of the year.
Given that the implantation of both those will be completed at the end of October and I just had a quick follow up thanks.
So for our ship from store program that we implemented last year.
We are wrapping around on the implementation of that program and that has.
Then a program that has some cost for us we.
Hi, as you talk about shipping from store in shipping individual products. There is some cost to that now we think that we have more than offset those costs with sales upside our dycom.
Channel continues to grow and part of it is driven by.
Oh, allowing greater visibility to those goods as well as just plain and improving the overall feature function.
For our online channel.
As we go into focus.
We would.
We're early we're in the testing phase I don't want to get too far ahead of ourselves, but really the purpose of buy online pickup in store is that when she comes in our sales associates, who are known for their service can give for visibility to other items that are within the assortment that.
I may help augment whatever it is that she is buying and so that should be a net wins to us in a lot of ways. So I again. We're early we're just testing end of October we expect to be.
If all goes well life for the entire company and I think as we go into our next earnings call. We'll have a much better more fulsome answer for you on that.
Got it thanks, I mean, what is driving the cod in the Capex guidance for the year and should we kind of assume it in this range beyond.
19.
Oh, I don't think we've gotten to 2020 , yet, but we've been consistently in that.
50 to 60 range over the last several years.
As we look at this year and there's just a lot of timing as you look at store remodel programs and refreshes and technology enhancements.
There are a lot of timing.
Hi, ins and outs as you look at the timing of when equipment comes in when you're able to get the right consultants and so I would say that's part of it as well as just plain containing and.
By controlling our spend is as we always do.
Great. Thanks, so much.
And ladies and gentlemen, as a reminder, if you would like to ask a question. Please press Star then one this time. Today's next question comes from morning should Marni Shapiro of the retail tracker. Please go ahead.
Hey, guys.
Welcome Malian Bonnie.
Thank you have you both here so I have two quick questions one just for Todd.
On the tariffs do you guys that you air ship the goods in is that an increased cost of will that hit in the third quarter.
And then.
If you said there were two hits to the tariffs that would be in the fourth quarter or is that more of a 2020 events sorry, if I missed that from an earlier question.
No not at all.
When we look at airing in goods that I, we did all the math around what is the benefit we get from those goods waves of savings, we get versus the extra cost and so we did it in a way that would not have material incremental costs for us is the amount of goods that ended up getting aired in.
Hi, Yes, I wouldn't worry about trying to model in extra costs forward. It just is not material overall to our arm maintain margin.
At this point.
In terms of when the cost for the tariffs come in a sense we are already.
Into Q3 and those goods.
We don't recognize those terrorists until the goods eventually get sold it just inherently most of that.
Exposure unmitigated would fall into Q4.
So we are we are looking at yes fourth quarter being the main quarter that.
We're going to see impact obviously, some will be Q3 that Q4 is much more significant.
Great and then I guess, Bonnie could you talk a little bit about you said there was improvement sequentially was that at White House.
At all or was it just chicos and was that true online in outlets and in the full line stores.
Sorry, Marni are you talking about August .
Yeah, you've talked about a sequential improvement in the company in sales and I want to know if that was specific to chico's or is at Chico's and White House and did you see it across all all points of distribution. So.
Did the retail stores improve as well as your online stores as well as your outlet stores sequentially.
Right I'm learning I would say that the that there has been a significant improvement in light has so we are.
I'm confident that that that will continue and we have seen that in August .
And as you know our Dicom is.
Certainly growing faster than the sales in the stores and we're not alone in that situation on but we are actually thrilled with our R&D calm double digit increase so where we're continuing to drive a lot of our sales through the digital channel No question, our outlet business is strong and both brands.
We are certainly looking for sequential improvement.
Excellent. Thank you guys best of luck.
And and Soma is on fire, so were pretty excited about that brand and Mary and her team have done a brilliant job.
Driving that business.
To this new level. So it certainly is obviously, helping the whole company.
And our next question today comes from Roxanne Meyer of MKM partners. Please go ahead.
Hi, Good morning can you hear me.
We can indeed, welcome back Oh, Oh perfect perfect.
I had a question on Chico's I made a comment earlier that chico's could take longer to turn relative to white house and I. Just wanted to follow up on that is it a matter of getting the right balance of fashion and basics, which actually thought was under way or is it more about the overall innovation. If you could just to clarify on that would be great.
Sure you know the DNA of Chico's Fas.
It's something that we've been working diligently on because.
I think that that is critical to the go forward and that May sound like an easy task, but in truth is complicated and we are.
Very much focused on.
Bringing back the DNA of the brand, which was our seasonal and when you look at the best seller over the last number of years, we are by the way looking at all the books from the last 10 years.
And looking at the very best years of the company and why and investigating every single garment.
So theres a lot of work going on here very diligent work detailed work and.
The the sale did largely come and the DNA came from our seasonal product and that is a product that you can't turn around on a very short lead time.
So that I hope that clarifies your question.
It does thank you so much and best of luck.
Thank you, thanks, Roxanne and by the way Roxanne I don't mean to say that we are bringing that faster you now when when Malian I joined the company.
The lead time was a what we would say exceptionally long and one of Mali strength and Sashays that working diligently already on is.
Shortening our lead times, so and as much as yet some of the things from Chico's or certainly our seasonal et cetera, we are planning to shorten the lead time in the company overall.
Thank you ladies and gentlemen, this concludes our question and answer session I'd like to turn the conference back over Bonnie Brooks for any closing remarks.
Thank you very much rocket in conclusion.
We are moving forward quickly to bring in talent with proven track record.
And to make necessary changes to the businesses to priorities and disciplines.
We are raising our expectations of the teams in product marketing and selling and we are building brands that will have compelling competitive advantages.
We're confident that we can gain back last customer.
And attract new customers. This fall and look forward to continue all improvements in the spring and summer collections.
And that was having the most impactful changes.
We are also evolving our corporate culture to become a product and customer obsessed organization focused on growth.
We are excited about the future and the shareholder value creation that we expect our plan to deliver.
And thank you very much for all of your questions and for all of you joining us today.
Thank you today's conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.