Foot Locker, Inc.
Q3 2020 Earnings Call Transcript

Published: 20 Nov 2020

[Operator:]

Good morning, ladies and gentlemen, and welcome to Foot Locker’s Third Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. This conference call may contain forward-looking statements that reflect management’s current views of future events and financial performance. Management undertakes no obligation to update these forward-looking statements, which are based on many assumptions and factors, including the impact of COVID-19, effects of currency fluctuations, customer preferences, economic and market conditions worldwide, and other risks and uncertainties described more fully in the Company’s press releases and in reports filed with the SEC, including the most recently filed Form 10-K or Form 10-Q.

[Jim Lance:]

Thanks, operator. Welcome everyone to Foot Locker, Inc.’s third quarter earnings conference call. I hope you and your families are healthy and safe. As reported in today’s earnings release, we reported third quarter net income of $265 million, compared to net income of $125 million for the third quarter of last year. On a per share basis, third quarter earnings were $2.52, compared to earnings per share of $1.16 last year. This year’s quarter includes a pre-tax non-cash gain of $190 million related to a higher valuation for one of the Company’s minority investments. Pre-tax charges of $3 million related to the wind-down of the Runners Point banner and $1 million for costs incurred to social unrest. Excluding these items, on a non-GAAP basis, third quarter earnings were $1.21 per share, up 7% compared to earnings per share of $1.13 for the third quarter of last year. Unless otherwise noted, the figures and rates mentioned during our call today will be based on non-GAAP results. A reconciliation of GAAP to non-GAAP results is included in this morning’s earnings release. We’ll begin our prepared remarks with Dick Johnson, Chairman and Chief Executive Officer, who will provide highlights from our third quarter performance and an update on our strategic initiatives including how the Company is navigating the COVID pandemic. Andy Gray, Executive Vice President and Chief Commercial Officer will provide additional insights into the business drivers of the quarter. Lauren Peters, Executive Vice President and Chief Financial Officer will then review our third quarter results and provide some directional color around the fourth quarter of 2020. Following our prepared remarks, Dick and Lauren will respond to your questions. With that, I’ll now turn it over to Dick.

[Dick Johnson:]

Thank you, Jim. Good morning, everyone, and thank you for joining us. This third quarter was unlike any we’ve seen before. COVID-related uncertainty around the timing of school re-openings and team sports participation delayed and elongated the back-to-school selling season, yet despite kicking in later than usual, momentum built as the quarter progressed. We delivered a strong top and bottom line performance, demonstrating the resilience of the Foot Locker portfolio of brands.

[Andy Gray:]

[Lauren Peters:]

Thank you, Andy, and good morning, everyone. We are very pleased to report that we delivered a strong comp sales gain of 7.7%, and high single-digit earnings per share growth during the third quarter. Despite the COVID-related headwinds in the early part of back-to-school, our team executed well and skillfully managed to the dynamic environment. High-single-digit growth in top line sales, coupled with ongoing discipline in our expense management, helped to offset continued, albeit sequentially less, gross margin pressure from a greater mix shift towards digital and higher promotional activity. During the quarter, our stores were open for roughly 95% of potential operating days as COVID-19 mandated closures eased, particularly in North America. This was a meaningful improvement from the approximately 70% of operating days in Q2. However, the operating environment remains dynamic, given the potential for incremental COVID lockdowns as we head into the colder months. As Dick mentioned, over 10% of our store base is temporarily closed due to recent restrictions. As always, we will adhere to all necessary protocols to promote the health and safety of our team members and customers. Taking a look at our third quarter results in more detail. Total sales increased 9%. On a constant currency basis, total sales increased 7.7%. Our direct-to-customer channel continued to lead our performance with a 52% sales increase, more than offsetting an essentially flat result in our stores. As a percent of total sales, DTC rose to 21.4% for the quarter, up from 15% last year. Although the timing of school starts shifted later this year, we nonetheless had a very strong back-to-school season overall, a low-double-digit comparable sales decline in August was more than offset by high-double-digit gains in September and October. Store traffic remained challenged, down double digits across geographies, given continued social distancing protocols. However, our customers shop with purpose, driving conversion up more than 40% over the prior year level. Average selling prices were down low single digits in the quarter, while units were up high single digits. Nearly all of our divisions performed well during the third quarter, so sales strength across our geographies is mixed. In North America, Footaction led the way with a strong double-digit comp gain. Impressively, Footaction has also delivered a high-single-digit comp increase year-to-date. Congratulations to the team for an exceptional job in this unprecedented climate. Meanwhile, Champs Sports also posted a strong double-digit comp gain, while Foot Locker and Kids Foot Locker increased high single digits and low double digits, respectively. Foot Locker Canada, which was up against a double-digit comp gain last year, was down low single digits. Eastbay was down high single digits as lower sports participation due to COVID impacted sales of hard goods and performance product. Internationally, Foot Locker Pacific once again turned in solid results with comparable sales up strong double digits, the continuation of its impressive year-to-date performance, which is also up double digits. Congratulations to the Foot Locker Pacific team for such a strong performance. Last but not least, Foot Locker Asia delivered a high-single-digit comp gain. Turning to Europe. Business remained weaker in the region where COVID-related restrictions became more widespread as the quarter progressed. Foot Locker Europe posted a high-single-digit comp decline, while Sidestep decreased mid-single-digits. As we noted last quarter, although the direct business was nicely positive in Europe, it was unable to offset the decline in stores, given the lower digital penetration rate. Looking at our sales by family of business, our apparel business led the way this quarter, up double digits. But, we're also turned in another strong performance, up high single digits. Our accessories business continued to see pressure, down-double-digits, largely due to softness in bags, shoe care and hard goods. The results in footwear were solid across the board, led by a double-digit comp gain in women's followed by high-single-digit increases in men's and kids. By category, men's basketball remains a highlight in the quarter, delivering another impressive double-digit increase. The men's boot and seasonal business was also very strong, up high double digits. Men’s running was flat, while court and casual styles were down double digits. The terrific performance in our women's footwear business was fueled by ongoing strength in classic basketball and court style. Our kids business was driven by strong demand across grade school and infant sizes as the strong product trends we saw in men's carried over to Kids. Within apparel, kids was up strong double digits, and men's and women's were both up high single digits. The comfort trend remained a key driver, as you heard from Dick and Andy. Our North American and European apparel businesses saw strength across the board with solid gains in men's, women's and kids. In Asia Pacific, a nice gain in the kids business was not enough to offset declines in our men's and women's assortments. Turning to the rest of the income statement. Our gross margin delevered by 120 basis points to 30.9% in the third quarter from 32.1% last year. Our merchandise margin rate decreased 390 basis points, driven primarily by higher markdowns to clear aged goods and a greater mix of DTC, which carries higher shipping costs. Regarding markdowns, as Dick mentioned, we have flexibility with our vendors that allows us to return a portion of slower moving product to them in a given quarter. However, because of COVID-related supply chain disruptions this year, the amount of returns to vendor product or RTVs, has been significantly reduced, resulting in a higher promotional activity to clear those goods. Markdown allowances from our vendors, while helpful, were not enough to offset the impact of lower RTVs. All that said, merchandise margin pressure was less in Q3 as compared to Q2. Our actions to clear aged product resulted in a healthy inventory position, both in level and composition as we head into the holiday season. At quarter-end, our inventory was down 8.5% compared to the high-single-digit sales growth. On a currency-neutral basis, inventory decreased 9.3%. Leverage of our relatively fixed occupancy and buyers' compensation provided us with 270 basis points of improvement versus last year. This was in large part due to $32 million of COVID-related tenancy relief during the quarter, primarily comprised of onetime rent abatement. We continue to actively negotiate with our landlord partners on this front. We improved our SG&A expense rate in the quarter by 120 basis points to 20.1% of sales from 21.3% in the same period a year ago. Our team's disciplined effort to manage expenses drove the lower SG&A relative to last year, despite roughly $4 million of incremental expense for personal protective equipment or PPE. Depreciation expense was $44 million, flat to last year. We incurred interest expense of $2 million as compared to $3 million of interest income last year, due to lower interest rates on our cash balances as well as higher fees related to our amended credit facility. On a GAAP basis, our tax rate came in at 28.2%, 120 basis points higher than last year, due in part to the geographic mix of income, given limits on our ability to book tax benefits for losses related to certain international operations. On a non-GAAP basis, our tax rate came in at 30.7%, above last year's Q3 rate of 27.7%. Looking at our liquidity, we ended the quarter with $1,393 million of cash and cash equivalents, an increase of $649 million from the end of Q3 last year, due in part to the increase in our current liabilities. And we have no outstanding borrowings on our $600 million credit facility. In terms of capital expenditures, we invested approximately $33 million into our business during the quarter, bringing our year-to-date total to $116 million. This funded the opening of 27 new stores, including the opening of our first West Coast community-based Power Store in Compton, California, as well as the remodeling or relocating of eight stores, bringing the total year-to-date openings to 50 stores. We also closed 95 stores in the quarter, which includes 70 Runners Point doors, leaving us with 3,032 company-owned stores at the end of Q3. For the full year, we now expect to open approximately 70 stores, remodel or relocate 90, and close 210. Looking forward, we remain on track to invest roughly $155 million in capital for the full year, in line with our prior guidance. As we think about the coming months and potential for incremental COVID-driven lockdown, we believe our strong net cash reserves and credit availability positions us with ample liquidity to manage through the near-term fluctuations while continuing to invest in the business. This brings me to our return of cash to shareholders. This quarter, we returned $16 million to our shareholders in the form of our reinstated dividend. Reflecting confidence in our financial position, earlier this week, our Board declared another dividend of $0.15 per share for the fourth quarter. With respect to our share repurchase program, we opportunistically repurchased 308,000 shares for $10 million. We will continue to assess additional buybacks going forward, based on the environment. The potential for COVID-19 vaccine in 2021 is a most welcome positive update. However, with increased uncertainty around the effects of the pandemic over the coming weeks, the extent of lockdowns and restrictions, and how these factors may impact shopping behavior through the holiday season. We are not providing guidance at this time. However, as you think about your models for Q4, it may be helpful to consider the following. With respect to gross margin, given the progress we made in Q3 with our inventory, we now anticipate less promotional pressure on merchandise margins in Q4. However, similar to Q3, we anticipate fewer RTVs, which could still result in higher than normal markdown rates. Additionally, we currently forecast rent relief to provide less of a benefit to gross margin in Q4, and we expect elevated freight costs to remain a headwind. With respect to SG&A, please take into account the following factors. Despite the likelihood for incremental store closures in Q4, a benefit to SG&A from government subsidies is presently not being contemplated. We had a bonus true-up in Q4 of 2019 that positively impacted SG&A by 70 basis points. We don't anticipate this recurring in Q4 of 2020. Lastly, we continue to expect PPE costs to be an ongoing expense for the foreseeable future. Looking at our non-GAAP tax rate, for the full year, we expect it to remain elevated relative to historical levels as geographic shifts and income may result in significant quarterly variances in the rate. Finally, on behalf of the entire Foot Locker team, I want to wish all of you a safe and happy Thanksgiving, 12 Days of Greatness, and a happy and healthy holiday season. With that, operator, please open up the call for questions.

[Operator:]

Our first question today comes from Jay Sole from UBS.

[Jay Sole:]

Great. Thank you so much. Dick, I wanted to ask you a question. It sounded like basketball was really strong. And you said casual was down. I think that's what I heard. And that's sort of interesting because the whole work from home, the comfort, cozy trend that's playing out, could you just describe sort of what's happening where basketball was strong and some of the casual stuff was not as strong?

[Dick Johnson:]

Thanks for the question, Jay. We've talked a lot about basketball and the heat that's coming. And again, we get far more hung up on categories than our customer does, right? Our customer wants what's cool. And right now, the heat is really coming through the basketball silhouettes. And we're seeing great product from Nike, great product from Jordan. We're seeing secondary strategic vendor partners of ours coming in the basketball with Puma and New Balance. So, they're just bringing the heat, and our consumer absolutely responds to heat. And as they're sitting around their homes or whatever, they still want the coolest product. And as I said, right now, it's basketball. Still a lot of great stuff in the casual world, right? We had a really good start to the boot season, if you will, with Timberland and UGG. So, there's a lot of casual stuff that's working. It's just how does it compare to last year is really the difference, Jay. And again, more heat in basketball this year than a year ago, a little less great product in some of the casual categories, and that causes the percentage slips up and down the way that we qualified it.

[Jay Sole:]

Got it. If I could just follow-up on the merchandise margin, I think, you mentioned a 390 basis points change year-over-year. But part of that was promotions and part of that was just mix shift to e-commerce. Is there any way to sort of break down the merchandise margin into how much was promotions and how much was mix?

[Lauren Peters:]

Yes. We don't break out that $390 million that’s granularly our disclosures but suffice it to say that both of those elements were material to that result.

[Jay Sole:]

Got it. Okay. And then, maybe Lauren, if I can ask one more. Just on the stake in Goat, can you just remind us what -- obviously, with the value of that investment being increased, what is the value of that investment today? And sort of what's the strategic plan going forward with the partnership with Goat?

[Dick Johnson:]

Yes. We invested in Goat, I think, 18 months, two years ago. I forgot exactly when we made the first investment in it. And clearly, we think that Eddy and the team at Goat provided great connection with this broader sneaker community. So, as we think about it both from an investment point of view, and again we mentioned that they had successfully gone back out into the marketplace for a good round of funding, which is what triggered the increase in the valuation, but we see it as more than an investment. We see it as a strategic partnership as we connect deeply with that broader sneaker market. So, again, we continue to work with the Goat team to find connection points and deep engagement with the broader sneaker community.

[Operator:]

Our next question comes from Robby Ohmes from Bank of America Securities.

[Robby Ohmes:]

Hey. Good morning, guys. And terrific, terrific quarter, and great execution in a very challenging environment. My question, I was hoping, Dick, and Lauren, maybe you could chime in on this. So, overall, back-to-school, you guys said was very strong. So, there was a shift in timing, which you explained to us. You're talking about some of the -- your inventory sounds like it's in a better position going into holiday. Now, I get the whole concern about lockdowns, but maybe could you just talk about where the overall demand is? It sounds like demand was just really strong overall for back-to-school. Is there -- what did stimulus play in that in your view? And why wouldn't the demand remain very strong for holiday. You guys are getting better all the time at servicing customers without them coming into your stores. Maybe just -- I know you're not giving guidance, but are there other things to be concerned about for the fourth quarter from a comp standpoint? It's a much easier comparison than the third quarter was, and it sounds like momentum remains really strong in your business.

[Dick Johnson:]

Well, we really like the product lineup going into the fourth quarter, Robby. It's -- we've expanded our Week of Greatness to 12 Days of Greatness trying to spread out the holiday season a little bit as we try to take precautions to make sure that we've got the health and safety of our employees and our customers as the top priority. So again, we feel good about where the product lineup is. And clearly, the thing that we can't control are some of the government mandates that we don't know when they're going to come down. As Lauren and I both mentioned, we've got over 10% of our fleet closed right now. Clearly, you all study the same COVID numbers that we do and you see surges all over. We don't know how different local governments are going to react. We feel confident that we can shift volume to our digital channels. Clearly, we saw that back in March and April when the world was shut down essentially. So, again, I think, the product where we ended the quarter from an inventory perspective, we feel the inventory is in a really healthy position. And as we look forward, we feel good about the product pipeline. So, they just are -- in 2020, there are probably more unknowns, Robby, than there's ever been in our life as it relates to what's going to happen with the coronavirus and lockdowns from local governments, et cetera. But again, I think, our team has learned how to react and be very proficient at closing and opening stores, not one of those skills that you really want to have, but the team has done a great job with it. And I feel good about the fourth quarter. I feel good about the pipeline. And as we think about shopping across various channels through both actually getting goods and buying gift cards, we've got a lot of unknowns going into the fourth quarter.

[Robby Ohmes:]

Got you. And just a quick follow-up. Dick, how are you and the vendors planning for the first quarter of next year, such a -- that was when you had everything closed and business kind of went away. How are -- any kind of color you can give us on how you plan against that?

[Dick Johnson:]

Well, we always plan to win in the marketplace, Robby. So, again, as we work with our strategic partners, they've all got their plans as it relates to their supply chain and the product pipeline. But we certainly believe -- we closed our stores generally globally on March 17th. So, we had the All Star situation in Chicago. We had a great All Star game in February, followed by suddenly a shutdown and people not sure what was going on, then ultimately, the stimulus coming through later in the quarter. So, the first half again will be a little bit bumpy as we work through some of those comparisons. But, we're planning positively with our vendor partners.

[Robby Ohmes:]

Terrific. Look, thanks, and best for Black Friday and holiday season.

[Dick Johnson:]

Thanks. Happy Thanksgiving, Robby.

[Robby Ohmes:]

You too.

[Operator:]

Our next question comes from Michael Binetti from Credit Suisse.

[Michael Binetti:]

I know, Lauren, you didn't want to break down the merch margin too much, but is there any way to think about the ATV impact -- or so the RTV impact? And then, I know there's a lot of noise on the gross margin, but I did hear a lot of items in the language that are transitory, like the rent offsets and the vendor allowances. But, how best to think about the structural parts that you're seeing now, Dick? Do you still have line of sight to the 32%, 33% gross margin target from the -- over the next few years from the Analyst Day?

[Dick Johnson:]

Yes. Things from our Analyst Day haven't really changed, Michael, right? I mean, this is a -- certainly, 2020 has caused a little bit of a roller coaster ride up and down as we look at some of that -- as you put a transitory items that hit the margin. But certainly, our long-term belief is the same. Channel shift might be a little bit different than we would have talked about in March of 2019, emphasis on different categories may change. But again, our consumer is all about what's cool. Our vendor partnerships and the work that we do with all of our strategic vendor partners, continues to be healthy. So from a margin perspective, we see progressing towards the same spots that we talked about in the Investor Day in March '19.

[Lauren Peters:]

Yes. I would echo those thoughts and that there is more transitories to use your word and what we're seeing this year been longer term. I guess, perhaps the only exception to that would be the penetration rate into digital has certainly been really strong. And while we expect, as you think longer term for that perhaps to moderate from the elevated levels that we've seen in the last couple of quarters. It probably is not going back to pre-pandemic penetration rates. And so, from a gross margin perspective, there is a freight element that comes with higher digital that would be factored in. But, even with that, we still feel very good about the profitability across the channels. You get to a little bit different answer on gross margin, but finished margins, leave us really pretty much agnostic as to where the customer wants to shop. They got to shop however they want to. But, from our perspective, there wouldn't be anything that would cause us to want to steer them one way or another.

[Michael Binetti:]

Okay. So, you say you make it up on the EBIT margin line, I guess, and you said that to us before. I guess, I'd also be curious on the SG&A leverage point more broadly, once -- you mentioned the $4 million of COVID cost and love to announce it's the same size in fourth quarter, if it's bigger, just because of the bigger volume period. But once we're through that, how do you think about the SG&A leverage point as we move into '21?

[Lauren Peters:]

On the PP&E, the $4 million in Q3, relative to what we can see now, that's a pretty good run rate. But, we're learning. We're learning about usage just anecdotically, folks seem to like their own hand sanitizer. They develop a preference for it, and so, they cope their own. So that doesn't impact on usage. So, that will be a factor go-forward. But then, also, as supply we set with demand, we would expect some change in the unit cost of some of those items? So, to speak to your broader question about leverage, it still is a mid-single-digit comp that allows us to leverage on the SG&A.

[Operator:]

Our next question comes from Adrienne Yih from Barclays.

[Adrienne Yih:]

Yes. Thank you so much, and great news on the progress. Lauren, I was actually wondering if you can…

[Dick Johnson:]

Thank you.

[Adrienne Yih:]

You're welcome. If you can talk to us about sort of the RTV -- and I know your inventory is extraordinarily clean. So, is the decision to withhold inventory and therefore have better margins but send back that product or was it just to make sure that your stores are full, so when the customer comes in, they have a full array and assortment of product to purchase? And then secondarily, some of your vendors are actually starting to implement pretty significant IT initiatives such as RFID. What did that imply in terms of outfitting the stores with that capability.

[Dick Johnson:]

I'm going to just speak to the dynamic on RTV. And again, we're reviewing this as just response to what happened with a supply chain that had massive disruption to it early in the year. So, you think about the closures, just globally and the recognition that reverse logistics are returning product to a vendor for them to move it where and how doesn't make sense. So, therefore, the decision that we would liquidate that inventory in place rather than send it back through a pipeline, so therefore, looked more like support through vendor allowance to help us through that dynamic. So, again, we would view that as not being a long-term dynamic. On the question about RFID, we're very excited about the potential for RFID. And in fact, at this point, have much of our business in Europe, RFID enabled. For reasons of needing to put price stickers on the product in Europe ourselves, we have been putting in those RFID and tags. We don't have that same situation in North America. So, we're not RFID tagged yet here. But, we see a lot of information that you get about the product movement. It helps us stock keep very well and it improves inventory accuracy. They just are so many benefits. We're very excited about the potential for a long term for our business.

[Adrienne Yih:]

Great. Thank you very much…

[Dick Johnson:]

Especially as the vendor start -- as the vendors start adding the RFID chips and tags early on in the process, it certainly changes the dynamic dramatically. So, we're really excited about RFID.

[Lauren Peters:]

Yes. And the timing of that, I mean, it sounds like a 2021 initiative here possibly in the U.S.?

[Adrienne Yih:]

Yes. Each of our vendor partners is at a different place in the journey, but I would think that we would see -- certainly see some enablement in 2021 and certainly a better uptick in 2022?

[Lauren Peters:]

They've embarked and we're very excited about that.

[Operator:]

Our next question comes from Chris Svezia from Wedbush.

[Chris Svezia:]

Good morning, everyone. Thanks for taking my questions. I guess, first, just on the stores that are closed, 10% you referenced, I'm just curious, did any of that have any impact at all at the tail end of Q3? And just where are those stores right now? Is that largely Europe? And Lauren, I know you love these merchandise margin questions, but fair to say that the promotional activity was the bigger headwind on merchandise margin in Q3 than shipping costs? Those are my first two questions. And I have a follow-up.

[Dick Johnson:]

I'll start with the store closures and then let Lauren jump in on the merch margin because she does love those questions. Chris, you know her well. The store closures are dominantly right now in Europe, but we do have places in the U.S. down around El Paso that are closed, et cetera. So, it's a little bit of a moving target. Europeans have taken a little bit of a harder line in certain countries in terms of closures of shopping in other places of gathering. So, as the cohort numbers surge, we're not quite sure what to expect. I think, the Europeans closed starting -- a few of them in late October, more into mid-November. Most of the reopened dates are late November, early December, but always open -- those are always subject to change. So, again, we're trying to remain as fluid and agile as we can, as we work to serve the consumer through whatever channels we have available, and they sort of migrate to the open channel at any given moment. So, I'll turn the merch question over -- merch margin question over to Lauren.

[Lauren Peters:]

Yes. So, yes indeed, markdowns are a bigger impact than the digital shift. In part due to, as we described it, RTVs being significantly lower.

[Michael Binetti:]

Is it fair 70-30? Am I in the ballpark?

[Lauren Peters:]

Markdowns were more material than digital shift.

[Chris Svezia:]

Okay. And lastly, just on the inventory. You've made all this progress, and I know you cautioned Q4 could see some markdowns. I guess, the question is, are you reacting to potentially sales slow when you need to move product, or do you look at your inventory and aged or quality you feel like there is still more that needs to get done, that you'll just be promotional regardless, or I'm just trying to understand that if comps are still strong, do you still need to price that product, or is that just a function of if there's slowdown and closures, needs more aggressive to move that product?

[Dick Johnson:]

Yes. We feel good about where our inventory is at from an aging perspective and the quality of the inventory. So, ideally, it doesn't turn into a promotional situation across the marketplace. And our merchants will react accordingly if it does. But again, I think, that the question in Lauren's prepared remarks were more around with the supply chain disruption that we've seen. We're pretty positive that RTVs will be at a lower level than historic. So, we just remained ready to move through inventory as necessary. But the team did such a tremendous job managing through Q2 and Q3to get us into this great position headed into Q4 that I believe that the promotional activity will be less. From our own point of view, it depends then on what happens in the marketplace.

[Operator:]

And ladies and gentlemen, our last question today comes from Paul Trussell from Deutsche Bank.

[Gabby Carbone:]

Hi. Good morning. This is Gabby Carbone on for Paul. Congratulations on the nice quarter. I wanted to ask about the variations you're seeing in different store locations, A mall to C mall, flagship other locations. And then, just how do you feel about your overall presence and exposure within the mall? And any changing view around your Power Store strategy or international expansion plans? Thanks.

[Dick Johnson:]

Well, we've talked about it. The tourist locations are the toughest hit right now, right, from a traffic perspective. The traffic in those stores is just not there because of the lack of tourists moving between countries and cities, et cetera. So, from the A to F mall sort of perspective, the traffic has been fairly similar, ex any tourist locations, which are being more impacted. So, we really haven't really thought the strategy as it relates to our Power Stores. We're still very much inclined. We talked about the Compton store opening. We're just about to announce openings of Power Stores in Vancouver and Toronto. There's a press release that will be out either today or tomorrow -- or Monday, excuse me, that talks about those. So, we're continuing forward. And clearly, our strategy in Asia continues to be a positive strategy. And Asia was kind of positive this year -- or this quarter, excuse me. So again, very much inclined to add stores where appropriate, but our team continues to work our portfolio really hard, identified times and places to pivot out of malls, et cetera. So, we're -- our channel retail includes physical stores. Connecting those physical stores through -- with better digital experiences is all part of that process. So, we feel good about our store strategy, our digital strategy and most importantly, our omnichannel strategy.

[Gabby Carbone:]

Great. Excellent color. And just one last quick question. Wondering if you think you've experienced any pull forward demand into 3Q from 4Q?

[Dick Johnson:]

It's a great question. And the truth is that our consumer responds to great product when it's available, right? So, again, as the high heat comes, whether it's a Jordan, whether it's an Air Force 1, whether it's some of the other great products that Andy called out, our consumer responds to it. So, it's really important that we understand the product pipeline because our consumers, right, there's a lot -- awful lot of data points that they can go out and find out when that great product is coming. So, I think that fourth quarter’s demand is going to be spread out across the quarter, right? I mean, based on Black Friday deals starting in Halloween in many cases. We've tried to stretch it out with our 12 Days of Greatness as opposed to just a Week of Greatness. We've tried to spread it out across those key days on those six weeks. So, I think demand is going to be stretched out. But, I think less about the pull demand into Q3 from Q4 because our consumer just responds to great product. And you know, there's a lot of great product coming in Q4.

[Operator:]

And ladies and gentlemen, at this time, we'll end today's question-and-answer session. I'd like to turn the conference call back over to Mr. Lance for any closing remarks.

[Jim Lance:]

Thank you for joining us today. Please join us again for next earnings call, which we anticipate will take place at 9

[Operator:]

And ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for participating. You may now disconnect your lines.