Capri Holdings Limited
Q1 2017 Earnings Call Transcript

Published: 10 Aug 2016

[Operator:]

Good day and welcome to the Michael Kors Fiscal First Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joe Parsons, Chief Financial and Chief Operating Officer. Please go ahead, sir.

[Joseph B. Parsons:]

Thank you. Good morning and thank you for joining us for our fiscal first quarter earnings call. Presenting on today's call are John Idol, Chairman and Chief Executive Officer; and myself, Joe Parsons, Chief Financial and Chief Operating Officer. Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that we expect. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website. Investors should not assume that the statements made during the call will remain operative at a later time, and the company undertakes no obligations to update any information discussed on the call. I will now turn the call over to Michael Kors' Chairman and Chief Executive Officer, Mr. John Idol.

[John D. Idol:]

Thank you, Joe. Good morning, everyone, and welcome to Michael Kors first quarter 2017 earnings call. We are pleased to report that we once again exceeded our revenue and earnings per share expectations in the quarter. We drove strong double-digit growth in our North American digital flagships, further expanded our presence in Asia, continued to develop our men's business globally, and expanded our luxury fashion product assortments. However, this progress was muted by the ongoing decline in mall traffic trends as well as the decrease in tourism, which negatively impacted our comparable store sales performance during the quarter. We remain intently focused on executing our multiple long-term growth strategies. Michael and our design teams are delivering exceptional fashion innovation for the fall season, particularly in our accessories and footwear categories. We are also excited about the debut of the Michael Kors ACCESS wearable technology line of watches and fitness trackers, which we believe represents a meaningful growth opportunity as we position ourselves to capitalize on this rapidly growing category. We continue to have many opportunities to build the Michael Kors brand and to generate excitement around our enhanced luxury product offerings. Our team has created a series of innovative branded marketing initiatives designed to deepen consumer engagement. For example, on National Sunglass (sic) [Sunglasses] (3

[Joseph B. Parsons:]

Thank you, John. We are pleased to report that revenue and earnings per share results came in above our guidance. Total revenue grew 0.2% to $987.9 million. In our Retail segment, net sales increased 7.6%, driven primarily by the opening of 221 net new stores since the first quarter of last year, including 145 stores associated with our recent acquisitions of Greater China and South Korea and the consolidation of our Latin American operations. Comp sales decreased 7.4%, reflecting a high single-digit comp decrease in North America and a low double-digit decline in Europe, partially offset by a high single-digit comp increase in Asia and strong performance of our digital flagships. Our North American digital flagships' sales contributed 210 basis points to our North American comp performance in the quarter. In our Wholesale segment, net sales declined 7.0%, due to lower sales in our accessories and womenswear line, partially offset by increases in our men's and footwear businesses. As expected, we saw a high single-digit decline in our Wholesale business in the Americas region, as we remain disciplined with the amount of inventory we flow into that channel. We also saw a low single-digit decline in Europe as well as a low single-digit decline in Asia, which primarily reflects the shift of our Greater China and South Korea businesses to the Retail segment during the quarter. In our Licensing segment, revenue decreased 20.9%. This was primarily due to the continued softness in the fashion watch category as well as lower revenues from our geographic licensing arrangements in Asia, due to our recent acquisition of our licensee operations. Gross margin declined 130 basis points to 59.9%. The decline in gross margin was primarily due to a 480 basis point decline in retail gross margins attributable to additional markdowns, partially offset by an increase of 210 basis points in our wholesale gross margin, primarily attributable to favorable product mix and improved sourcing. We also saw a benefit from changes in geographic mix as we saw a 14.8% increase in sales from regions outside of the Americas. Total operating expense grew 13.9% and increased 490 basis points to 40.9% of total revenue. The increase was primarily due to

[John D. Idol:]

Thank you, Joe. We are pleased with the ongoing strength in the Michael Kors brand around the world. And our compelling luxury product offerings continues to resonate with our consumers. We will continue to execute on our multiple long-term growth strategies and further enhance our leadership position in the global luxury market as we continue to develop our men's business and grow our brand internationally to capture the significant potential in these markets. Overall, we remain on track to deliver our total revenue and earnings per share goals for the year. In addition, we remain committed to increasing value for our shareholders, including leveraging our strong balance sheet to repurchase shares, demonstrating our confidence in our long-term growth outlook. With that, I will now open the call for questions.

[Operator:]

We will take our first question from Kimberly Greenberger with Morgan Stanley. Please go ahead.

[Kimberly Conroy Greenberger:]

Great. Thank you. Good morning. John, I have a question on the wholesale, global wholesale and North American wholesale. I think on the last earnings call, you suggested a high teens decline in global wholesale. We're only seeing about a 7% decline this quarter. Perhaps there's some seasonality there. I'm wondering if you can talk to us about your updated expectations for wholesale this year and if we'll get to that negative high teens run rate perhaps in fiscal Q2. And then secondarily, Joe, I'm not sure I understood the comment about retail EBIT margin inflecting in the back half. Could you just go through that one more time for us? Thank you so much.

[John D. Idol:]

Sure. Thank you, Kimberly, and good morning. Yes. I think you're going to see the inflection of global, really, North American wholesale increase as we go through the quarters, as we begin to pull back our exposure in that channel and further reduce also our promotional activity. In particular, that's going to start in calendar Q1 of next year. We will be removing ourselves from all store couponing, and that's for all of our retail partners in the United States and in Canada. And also, we will be removing ourselves from all of the department store friends and family sales as well. We think that this is critical for us to really do three things; number one, to protect our brand image. As you know, that channel has become very promotional and, in fact, is causing us difficulties in our own retail channel, which is why you see our gross margins declining because we're really trying to meet certain pricing that's happening to be competitive. And we don't think that's the right thing to do for our brand going forward. Secondarily, we think it's creating confusion in the consumers' mind relative to the value of the Michael Kors brand, when it's being seen so often on sale in so many different places. And third, mathematically, if you look at what's happened to our business, as I've stated in the call, we're shipping double digits in terms of increases in product, but we're reporting revenue declines, and that's predominantly driven by average order declining, and that's predominantly being driven by lower prices because of promotional activity. So you'll see that accelerate in the back half of the year. And you will also see further wholesale declines next year as well. And we planned all of that. Even with that, we are expecting earnings per share growth for the company this year and next year, as well as modest revenue increases for the company next year. So we're going to navigate our way through this. We know we're doing the right thing for the brand long-term. We know the customer continues to resonate with Michael Kors. Our engagement rates with our followers are higher than they've ever been. Our consumer research shows that she's more engaged and has a higher propensity to want to buy the brand than she's ever been. We have to correct something that we think is actually having a negative long-term effect on the brand, and so that's how you'll see that kind of manifest itself through the balance of the year.

[Joseph B. Parsons:]

Sure. Kimberly, we actually talked about operating margin as opposed to EBIT. But, in any case, we have a number of initiatives that we think are going to be positive for the rest of the year, particularly in the second half. We have a number of new products coming on, and we have the e-commerce launch in Europe. So we think that will have a positive impact for the rest of the year.

[John D. Idol:]

Yeah, and, Kimberly, you have a couple things also that are happening. Number one, as Joe said, we're going to have an increase in gross margin in the back half of the year. Part of that's a mix shift. And part of it's also we are going up against when all this kind of promoting, et cetera, started to happen. So we've done some things that we think will improve our retail margins, in particular in North America in the back half of the year. And we're already starting to see a little bit of that come through last month and a little bit beginning in this month. So we're pleased with the direction that we're heading. And the second issue is you can see one of the biggest issues that affected us this past quarter, and is going to affect us next quarter, is the increase in our G&A. And, as we've said all along, much of that spending, we'll start to get some of that behind us after Q2 for us. The European e-commerce operations will be up and running. We'll begin to bring on parts of Venlo. Remember, we're going to run two distribution facilities for a period of time in Europe. And there's some other initiatives that we've got going on inside the company that we think is going to be able to have a positive effect, really from the back half of the year going forward on G&A. So I think that, again, we're forecasting, excluding the one-time charges, a 21.5%, approximately, operating margin. We think that's still one of the best-in-class in the entire industry. So we look forward to delivering on that for you and for our shareholders. Thank you very much, Kimberly.

[Kimberly Conroy Greenberger:]

Thank you.

[Operator:]

Our next question comes from Omar Saad with Evercore ISI.

[Omar Saad:]

Thank you. Good morning. John, the traffic issue, it's obviously not specific to Michael Kors. It's a lot of retail, especially soft goods sector. Maybe talk to us about how you're thinking long-term strategies to deal with that and address it. Is robust e-commerce platforms enough? Do you have to change marketing or the way you market? How critical is it to get (40

[John D. Idol:]

Sure. Thank you, Omar, and good morning. You're correct that we are all facing issues around traffic. And they're really driven by two things; first is mobile. I would use the word mobile, because as people today are not only purchasing on mobile but they're shopping on mobile. So we think that that has to become one of our core competencies and leading platforms that we are going to really communicate and engage with our customers. There's a number of technologies that are coming to market from some of our partners at Facebook and Google that are going to enable us to really on a geo-targeting basis be able to change the way that we market to our customers and get it much more ring-fenced in terms of how we can communicate. And then really try to tailor our offerings to that customer. We've just started testing some of this and the results have been quite extraordinary with customers, who might have actually been lapsed customers with us; without even any special offers, I might add. It's just really how we communicate to them and how we tailor those different messages. So that's one of the first things that we're looking at is it's not just e-commerce, but it's really mobile and how we're going to market with mobile. Secondly, I would say to you that we've launched something in about 35 of our stores that's just up and running and it will be fully completed in the next 30 days or so, and that's Kors Concierge, where all of our sales associates are equipped with devices that they can, number one, kind of know everything about what's happened with the customer from a transaction history standpoint, but, even more importantly, be able to create an experience for them that's more lifestyle driven and be able to create a curated fashion message for the individual customer. And the reason why that's important is I want to remind you that while we are a company that our predominant business is in accessories, we're a lifestyle brand. And we do 30% of our business in non-accessory type products. And we actually think that one of the ways that we can increase traffic inside the stores is by changing some of our messaging to be a bit more about ready-to-wear, a bit more about footwear, et cetera. And we're seeing accelerated growth because of that in those categories. Now, those aren't yet enough to offset what we've lost in – really remember, the number one decline of our comp store sales is watches. It's the number one area that's really hurting us the most when we look at our comp store declines. So we need to get some of these other categories to deliver at a higher rate than they've been in the past. We see digital marketing as being one of the critical ways to do that, and then really arming our jet set selling associates with the right tools to engage with the customer, both in-store and out of store. So I think that's the last piece that I would just like to say that's going to be important with Kors Concierge, is it's going to give the ability for the sales associate, who's standing inside of a store and maybe not seeing a customer walk in during the daytime, with their technology to be able to communicate directly with a customer during the day. So we're excited about what that holds for us. And again, hopefully, also one of the big headwinds that we've all seen in the industry is tourism, especially when you're a luxury brand like ourselves or some of the other fine companies that are here as U.S. fashion companies or European fashion companies. We're all suffering from the fact that people aren't traveling to the destinations, especially the major cities, the way that they were in the past. And we hope as some of these currency headwinds settle down, consumers will get a little bit more comfortable about traveling a bit more.

[Omar Saad:]

That's helpful, John. And then, maybe if I could ask a follow up on M&A, you've done the China license and brought that in-house. And at the end of the last call, you also mentioned the possibility of other acquisition opportunities. Maybe you can elaborate on that and talk about how you think about potential of buying another company versus buying your own shares when you think about uses of free cash flow?

[John D. Idol:]

Sure. I'd put it in the following order. Number one, Michael Kors still has significant growth opportunity. We've said that Asia could be a $1 billion business for us and we think that men's over the long term can also be a $1 billion business for us. So even if our accessories business stays flat or grows very slightly, we think those two businesses in terms of regional and/or product are going to be really exciting opportunities for us. So our number one focus in terms of use of cash and management of the assets of the company is to continue to grow our existing business, which we think we will have the capabilities of doing. Secondly, we think that share repurchase is absolutely going to continue to be a priority for us. We believe that our shares are significantly undervalued versus the marketplace. We think that the marketplace has more fear built into our stock price than actual reality of what our performance is. And so we will continue to be highly active. You saw we bought $400 million, or 5% of our shares outstanding back in the quarter. I think that's a pretty powerful statement about what our company and our Board of Directors feels about the value of our shares. And then lastly, we are absolutely looking at M&A activity in the marketplace. We've built a powerful platform. When I say platform, I'm talking about the infrastructure of the company, from our warehouse distribution to our – we own our platforms for our digital systems. So we think that we will be able to layer onto that, and we will be very cautious and prudent at what we look at, but we do think we have opportunities to grow this business, especially with our strong cash flows, and be able to use that in acquisition. And then lastly, we will potentially one day look at dividends as well, so, again, lots of good things happening at Michael Kors and lots of, we think, opportunity for investors as we move forward.

[Omar Saad:]

Thanks.

[John D. Idol:]

Thank you, Omar.

[Operator:]

Our next question comes from Brian Tunick with RBC. Please go ahead.

[Brian Jay Tunick:]

Thanks. Good morning, guys. I guess two questions, wondering, you talked about the tourism, a lot of focus on the factory outlets and particularly this earning cycle, so just curious if you guys would give us any color on how your factory stores might be performing versus your retail stores? And then, as you decrease your wholesale exposure, are you monitoring the capture rate at your own retail stores? We've seen those exclusively our signs that are up in some your stores. What do you expect from a transfer perspective to take out of wholesale and capture in your own retail stores?

[John D. Idol:]

Thanks, Brian. In the first question, we don't break out the factory versus full price. But I will tell you that, as I think some of our other competitors have reported, factory traffic is down versus its historic level, although not really that significantly. So it's not an area that we see as volatile as the full price side. And really the full price side, for us, the volatility, as we've talked about many times, is happening in major markets, whether it's New York, South Florida, certain parts of Southern California and you see this all with currency. So whether it's the Brazilians that hurt us down in South Florida area, whether it's the Mexican peso that hurt us certain parts of Southern California, whether it was the euro because, as you know, we have close to a $1 billion business and so Europeans coming to New York were very important to us. Or in Europe, where all of a sudden with these horrific atrocities that took place in France, now certain Asian consumers are nervous about traveling to that marketplace. So those are big markets for us and they're meaningful markets for us. And as we look across our fleet of stores, where we're suffering the greatest is really in the tourist markets. Where we're not heavily penetrated by tourists, actually those markets are relatively healthy, with the local customers inside there. So that's kind of the state of what we see in that area. In terms of what we're expecting in transfer, Brian, we're really not, for the time being. I've done this for a few times in my life. And somehow, when things go away, you don't just see it all of a sudden transfer to another place. What we are expecting is our average order, our average consumer purchase, to increase, and we expect that to increase substantially. Again, we are looking to actually sell less units. So hopefully, when I'm on this call with you at this time next year, we will be happy to be telling you that we are selling less units into the marketplace. And dollars, we will more than make up by increasing average order value, which is where we need to get back to and we're going to work very hard. You heard me say that we are going to remove ourselves from all coupons, from all friends and family sales. That will happen starting in February. That's a very, very big statement on Michael Kors' part to show that we believe in our brand, we believe in the quality and the design that Michael and our teams are putting forward. And we believe that as the leading American luxury fashion brand, we have an obligation to give our consumers the right vision on our product and not one that's driven by promotion and sale activities. Thank you, Brian.

[Brian Jay Tunick:]

Thank you.

[Operator:]

Next, we will take Matthew Boss with JPMorgan.

[Matthew Robert Boss:]

Hey. Good morning. So, John, on the pricing front, have you tested at all the pulling of promotion in your stores or maybe at any of your retail partners, just to understand the potential customer reception? Just what provides you the confidence in the modest revenue increase next year in light of such a strategic shift?

[John D. Idol:]

Well, two things, Matthew; first off, good morning. Number one, we must do this. It's not an issue of testing or not testing. This industry has evolved over the past few years to accelerated promotional activity. And we know that that's the absolute wrong thing to do for a business over the long-term. And so we have put in fairly significant planned declines in certain areas of the business, one of them, obviously, being wholesale. But we also have things that are going to offset that. So we have regional growth. Because remember, this is a North America or actually United States and Canada conversation that we're having. And we have significant businesses in Europe. We have significant business and growing rapidly in Asia, which we think will continue to offset the declines that we're planning in United States and Canada as it relates to the wholesale piece. And additionally, we have new product categories that we're entering, men's in particular, which we think will also help offset this. So I don't want you to think that we don't understand that there will be a decline in certain categories because of less promotional activity. We absolutely understand that, believe that and, quite frankly, want that because we want to ship less units at lower prices. That is not the way to ultimately build a luxury business.

[Matthew Robert Boss:]

Great. And then, just a follow-up, it sounds like versus the guide three months ago, it was really the deceleration in Europe and the decrease in North American tourism that really accounted for the comp miss this quarter. How should we think about more specifically on Europe; same-store sales down negative low double digits this quarter? How should we think about that progressing this year and forward?

[John D. Idol:]

Yeah, Matthew, we've already seen a rebound in this quarter in Europe. We're still planning it down kind of mid-single-digit for the year. The pound's moving around very rapidly. We have not seen the tourism return to certain key markets for us yet, the way that we would hopefully expect that to come back. So we're being cautious through the balance of the year. The overall market's going to continue to grow for us. And, again, we see it as a very healthy market for us. But we just want to plan this cautiously. We also, again, don't want to put too much inventory in the stores and start to create any kind of a situation where consumers would see accelerated markdowns. Some of the European department stores have begun to do certain things that we think is not healthy for the long-term state of their industry. As you know, the UK has started Black Friday. There's different things going on in certain marketplaces that begin to look and smell a little bit like the U.S., not anywhere near as dramatic, but they're struggling as well with low traffic in the stores and difficult performance. So we want to be very careful. Again, remember, as we hopefully continue to shoot for a 21.5% operating margin, which we think puts us as one of the best-in-class. We have an aggressive share repurchase program. We are forecasting earnings per share growth in the company. We have ways to get through this that don't have to put us in a position where comp store sales is the single most important thing that we have to do. We'd rather manage our brand through this, what we consider to be, difficult time, deliver great results for our shareholders and make sure that our balance sheet stays very, very clean and grow for the future.

[Matthew Robert Boss:]

Great. Best of luck.

[John D. Idol:]

Thanks.

[Operator:]

Our next question is coming from Erinn Murphy with Piper Jaffray.

[Erinn E. Murphy:]

Great. Thanks. Good morning. I was hoping to follow up a little bit on the retail gross margin. You mentioned that you were seeing some improvement thus far. Obviously, they were worse in the quarter than I think a lot of us anticipated. But can you just speak to what initiatives you're doing to really improve that gross margin in the Retail segment? And then how should we be thinking about that in the second quarter and the back half?

[John D. Idol:]

Yeah, Erinn, first of all, the second quarter's going to have probably another sequential decline and then the back half will start to increase for the year. But the sequential decline in Q2 is going to be relatively modest. And what we're doing is we're starting to introduce groups and products that we will not promote inside the stores. So we're kind of excited about that. We also think that we have categories that are coming into the store that are slightly higher margin. And that's through some initiatives that we've done from a manufacturing standpoint. And you saw some of that show up in our wholesale margins, as well. So we've got a number of initiatives that we think will really help to improve that. And then, of course, as Joe stated earlier, geographic mix is going to help to improve that as well, as Asia comes on stronger and is more important in total revenues, you'll see that show up in the retail gross margins.

[Joseph B. Parsons:]

So remembering that Greater China was in only for essentially one month in this quarter. It will be in for the rest of the year.

[Erinn E. Murphy:]

Okay. Thanks, Joe. And then, just following up on Europe on the former question, it's good to hear it's rebounded a little bit thus far, but just to remind us, I know you're launching the digital flagship kind of program as you get into the month of September. Just remind us about how you're planning the impact on your brick-and-mortar comps. Thanks.

[John D. Idol:]

Well, if it holds true in Europe what has held true in North America, it is not all one plus one. So we do believe there will be impact on the brick-and-mortar. As you bring on a website that offers free delivery, free shipping to and return, it gives a customer the opportunity to be able to purchase mobile or on desktop. So we do think it's going to have a impact on our brick-and-mortar business. But we believe that the overall increase will be beneficial. We think it's even more so in Europe than it is in the United States, where you have situations where people are – especially in Eastern Europe, there's not as many malls to be able to drive and shop for a product. And we think that that's going to be an important venue for us. And that really happens in phase two. It's happening more in the spring of 2017. But we do think that there will be impact on the brick-and-mortar piece of the business. Thank you, Erinn.

[Operator:]

And our next question comes from Lindsay Drucker Mann with Goldman Sachs.

[Lindsay Drucker Mann:]

Thanks. Good morning, guys. I had two questions. First of all, John, as you think about the North American comp, which you said was down high singles versus last quarter, I think was down about 1%. Could you talk about what actually was the incremental negative driver quarter-to-quarter? And my second question is, I think you mentioned that even though you're expecting wholesale to be down a lot, or to be down again next year in terms of revenue as you pull shipments out of the channel, could you tell us, is there a certain number of wholesale doors that you plan to exit? Or is this just sort of tightening up inventories? And also, you mentioned that you thought sales would be up for the total company, even though wholesale would be under pressure. I was just curious where you were looking for growth? Thanks.

[John D. Idol:]

Sure. Yeah, Lindsay, as you may recall, we had guided to a mid-single decline in comp for the quarter. We obviously were disappointed and we came in in the high single digits, approximately 7%. And that was really caused by what happened to us in Europe. We were anticipating a decline of the level in North American comp, so we weren't surprised by what happened. And really, we knew that this quarter was going to be a highly promotional quarter for the entire Retail segment in North America. And I think we, unfortunately, were right. The amount of promotional activity from many of the people who carry our line was at its all-time high and we had to compete to be able to move our inventories during that period of time. So when you do that, it just lowers your average order value. And you can't keep up with – even though our conversion was up double digit. So, again, that's the whole cycle that we're going to get ourselves out of come the spring season and really rebalance the brand from where it was previously. In terms of the question regarding the increase in sales for next year, that's really a function of, as I've said before, we're going to grow our men's business. We're going to grow our business in Asia. And our business in Europe is going to continue to grow. So that will offset our planned decline in the North American marketplace, even with the reduction of the department store inventory. We are not planning on reducing doors in the department stores today. Again, even with our reduction, with most of our accounts, we are still one of the highest productivity lines on their floor today, in terms of sales per square foot. So while we will have less product there, and I think ultimately they will also experience a higher order value, which will hopefully balance out some of the reduction in inventory, we're still a very important line for these stores to carry in, not only accessories, but in footwear and women's ready-to-wear, and watches and in fragrance. So I think it's just balancing it and getting it to a point where it's less about promotion and more about full price selling. Thank you, Lindsay.

[Operator:]

And our final question comes from Oliver Chen with Cowen and Company.

[Oliver Chen:]

Hi. Thank you. John, regarding the watch category and your new product, the ACCESS product, as well as smart jewelry, will that offset the declines you're seeing, which have been pretty significant? Also, can you just brief us on the crossbody SLG (1

[John D. Idol:]

Sure. Oliver, first off, good morning. Number one, the watch part of our ACCESS launch we're extremely excited about and, as you know, we think we've got one of the best products in the marketplace. So we're competing in a different arena. We're competing against some very significant competitors, being Apple and Samsung and et cetera. But we think with our partnership with Google and the fact that we believe that we've got a product that's better looking from a fashion standpoint, and the consumer research that we've done, in particular with the female customer, is bearing out that absolutely she wants something that's exciting looking and not quite as just tech looking, so more fashion in its nature. You're going to see it. It will arrive in the next few weeks. September 1 is when the launch begins. The marketing campaign behind it is absolutely extraordinary. Our team has done, I think, one of the best jobs in the industry in terms of putting together the messaging around it. I don't think it's going to offset the decline that we saw in where the watch business was before. This is a higher priced item, even though we're very competitively priced at $350 to $395, it's still higher priced than a $225, $250 current watch. So this is going to take more time for the consumer to get comfortable with it. I think we'll see it accelerate modestly through Q2. And then into Q3 or calendar Q4, I think we'll see some very nice lift from this. And by the way, it's not only in our own stores. It's in our current department store partners. And this is a global launch, so the initiative is massive. We're really excited about the smart jewelry. I might say that we're very competitively priced at $95 to $145. You can assume who the competitors are out there. And we don't think anyone's doing the type of assortment that we've done. There'll be major outposts in our partners' locations as well as our own stores. We see this as a very, very big gifting opportunity during the holiday season. And we think this is going to give us a pretty significant lift in our own stores as well as our partners, so good things to come on that front. And we're pleased with technology, partnership and execution on how that's being developed. As it relates to the crossbody and SLG (1

[John D. Idol:]

I'd like to thank everybody for joining us today. We look forward to talking to you for our next earnings call. Thank you very much. Have a great day.

[Operator:]

And that concludes today's presentation. We thank you all for your participation, and you may now disconnect.