Earnings Call: Q3 2019

Oct 30, 2019

Ladies and gentlemen, thank you for standing by, and welcome to the Crocs Inc. Third Quarter 2019 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Marissa Jacobs, Global Head of Investor Relations. Thank you. Please go ahead. Good morning, everyone, and thank you for joining us today for the Crocs' Q3 2019 earnings call. Earlier this morning, we announced our latest quarterly results and a copy of the press release can be found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward looking and accordingly is subject to the Safe Harbor provisions of the federal securities laws. These statements include, but are not limited to, statements regarding future revenues, gross margin, SG and A as a percent of revenues, operating margins, CapEx and our product pipeline. Crocs is not obligated to update these forward looking statements to reflect the impact of future events. We caution you that all forward looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10 ks. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs' annual report on Form 10 ks as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross margin, SG and A, operating margin and earnings per diluted common share are non GAAP measures. A reconciliation of these amounts to their GAAP counterparts is found in the press release we issued earlier this morning. Joining us on the call today are Andrew Reese, President and Chief Executive Officer and Ann Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I'll turn the call over to Andrew. Thank you, Marissa, and good morning, everyone. I'm really pleased with our Q3 results. We delivered revenues of $313,000,000 a new 3rd quarter record for crops. This represents 20% growth or 21% on a constant currency basis. Our operating income grew 187% to $39,900,000 or 13 percent of revenues. And our EPS rose to $0.51 compared to $0.07 in last year's Q3. Wholesale, ecom and retail comps all grew nicely with the Americas delivering exceptional growth driven by another successful back to school season. Our brand continues to resonate strongly with consumers as a result of our impactful marketing and our iconic product. Given these stellar results, we are once again increasing our 2019 guidance. With revenues now anticipated to grow 11% to 12%, we expect our 2019 revenues to be the company's history. Looking ahead to next fiscal year, we expect growth to continue to accelerate with 2020 revenues growing between 12% 14%. Focusing first on our brand, we have exciting new data to share. Earlier this month, Piper Jaffray released the results of its fall 2019 Taking Stock with Teen survey. We advanced in the all teen preferred footwear rankings to the number 7 spot, up from number 13 last year and number 27 2 years ago. Results are also in from our own brand survey, measuring participants' views about the Crocs brand. Our 2019 results were up double digits for each of our key metrics, brand desirability, brand relevance and brand consideration. We have now averaged double digit growth across these same metrics over the past 3 years. Since our last call, we have continued to roll out exciting new marketing content and collaborations. We've done additional drops with Chinatown Market, Vivien Tam and Beams along with the first time collaboration with Ruby Rose, the newest Batwoman. We also launched our Crocs account on TikTok, a popular video sharing app. This included our hashtag $1,000 Crocschallenge, which had over 1,500,000,000 views in just the 1st 2 weeks. It's also worth noting at Crocs, we don't recognize October. It's all about Croctober. We organized celebrations throughout the month and on October 23rd, which is Croct Day, we dropped our latest shoe design for the occasion. It was lit and our fans loved it. There's much more to come. We have an amazing slate of brand ambassadors lined up for our 4th year of our Come As You Are campaign. We are excited to announce that we will be joined by award winning actor, activist and entrepreneur, Priyanka Chopra Jonas. Zooey Deschanel, Kim Sejeong and Susu Hiroso will return for 2020. In addition to Priyanka's role as a brand ambassador, we're collaborating together on a series of donations through UNICEF to aid children around the world. Next year, we will unveil the final addition to our 2020 lineup of brand ambassadors to address our China market. We'll also roll out another full slate of collaborations that expand the reach of our partnerships in fun and surprising ways. I'm confident our consumers will love our new offerings. Returning to the present, our success has been driven by disciplined execution against our strategic priorities, growing revenues by prioritizing clogs, sandals, visible comfort technology and personalization. In our full holiday collection, we refreshed our core clog assortment with seasonally appropriate colors and prints and of course led in great offerings of line clogs, which are perfect for cooler weather. We also introduced LiteRide for kids and rolled out new gibbets to keep our selection fresh. Our consumers responded with enthusiasm. During Q3, clog revenues grew approximately 36% and made up 63% of our footwear sales, up from 55% during last year's Q3. We increased clog sales in every region with exceptional growth in North America. Clogs are obviously more in demand than sandals in the back half of the year, but that didn't prevent us from growing our sandal sales by 9% over last year's Q3. Sandal revenues generated 19% of our footwear revenues. It's our 11th consecutive quarter of sandal revenue growth as we continue to increase global awareness of Croc sandals. With respect to visible comfort technology, in Q3, we expanded our LiteRide franchise to incorporate kid sizes and the response was very strong. Give it charms, our unique offering for personalizing our footwear continue to grow at an accelerated pace. We're updating the assortment regularly to provide consumers with fresh offerings. We've also added a new personalization tool to our website that enables consumers to visualize their chosen gibbets on a clock and quickly move them to the checkout basket. Over the past few months, several wholesale accounts successfully tested Jibbitz in key locations and by year end they will be available in many more doors. Additional accounts will also introduce Jibbitz into their lineup in 2020. Let me now turn briefly to our sales channels. 3rd quarter wholesale revenues grew dramatically, up 25% following last year's 9% growth as our wholesale customers are increasing their buys to meet rising consumer demand. Our DTC comp, which combines our retail and e comm results, was up 16% and our 2 year stack was up 34%. E commerce grew 28% on top of 23% growth during last year's Q3. This represents our 10th consecutive quarter of double digit e commerce growth. Increasing brand heat continues to drive more traffic to our own sites, plus we're seeing good traction on global marketplaces with revenues growing accordingly. Retail comps were up 12%, our 9th consecutive quarter of positive comps. Our 2 year stack was up 27%. Total retail sales grew 9% even as we continue to absorb the impact of last year's store closures. Throughout the year, we have been executing against our growth strategy. Product acceptance and brand heat are rising. Hence, we are driving sustainable profitable revenue growth and effectively leveraging our cost base. We're on an exciting journey and one that's just getting started. I'm very optimistic about the path that lies ahead. The progress we are making is a result of a team effort. I work with an extraordinary group of talented and dedicated colleagues and I want to thank them for everything that they do. At this time, I'll turn the call over to Anne to review our Q3 results and guidance. Thank you, Andrew, and good morning, everyone. Let me begin by providing a short recap of our Q3 2019 performance. For a reconciliation of non GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. As you've already heard, we had a record setting Q3 exceeding our revenue, gross margin and SG and A guidance and significantly improving our EPS. 3rd quarter revenues came in at $312,800,000 compared to $261,100,000 in the Q3 of 2018, a 19.8% increase or 21% on a constant currency basis. Currency negatively impacted our revenues by approximately $3,000,000 while store closures reduced revenues by approximately $4,000,000 absent which our sales would have been up 22%. This is our 10th consecutive quarter of organic sales growth and the 5th consecutive quarter of double digit organic sales growth. We sold just under 16,000,000 pairs of shoes, an increase of 19.3% over last year's Q3. Our average selling price for footwear during Q3 increased slightly to $18.99 with the increase attributable to less discounting and higher prices on certain product, which more than offset the impact of changes in our channel mix and the negative impact of currency. The Americas had another phenomenal quarter. Revenues were up 35.2 percent to $185,200,000 with minimal impact from currency. Growth was robust across every channel. Following terrific work to increase capacity in order to keep up with rapidly rising demand, our Classic clog inventories have been restored to appropriate levels. Additionally, the relocation of our Americas distribution center from LA to Dayton is on track and the LA facility will be closed by year end. We are excited about the great benefits we anticipate receiving from our Dayton facility, including higher throughput, greater efficiency and an improved customer experience. We are evaluating investments in similar projects next year and beyond that would support our anticipated growth. In Asia, 3rd quarter revenues were $74,300,000 down 1.2% from last year's Q3. On a constant currency basis, revenues rose slightly. E commerce was up significantly due to growth across our own.coms and our expanding marketplace presence. Lower wholesale revenues mainly reflect the timing of revenues between quarters and ongoing efforts to reposition our business in China. Retail comps declined primarily due to continuing unrest in Hong Kong and weakness in our Korean shop in shops. EMEA revenues rose 12.3% over last year's Q3 to $53,300,000 On a constant currency basis, revenues grew 16.1%. Our business is benefiting from steadily growing brand heat and our continued focus on digital commerce. Our 3rd quarter adjusted gross margin was 53.6%, well above our guidance of 51.5%. Our adjusted gross margin rose 30 basis points compared to last year's Q3. Various headwinds, including channel mix, higher distribution costs and 130 basis point drag from reduced purchasing power relating to currency were more than offset by a variety of tailwinds, including lower promotions and higher clog sales in the Americas, plus savings associated with exiting our own manufacturing last year. Adjusted SG and A improved by 6.40 basis points to 39.4 percent of revenues versus 45.8% in last year's Q3. On a GAAP basis, SG and A came in at 39.6% of revenues versus 47.9%. The work done in 2017 2018 to reduce costs is now enabling us to drive significant leverage from revenue growth even as we continue to invest more in marketing. Operating margin rose 7.50 basis points to 12.8%, while our adjusted operating margin at 14.2% almost doubled. Q3 tax expense was dramatically lower than last year, higher than anticipated U. S. Profits enabled us to use tax benefits accumulated during prior years. Our diluted earnings per share rose to $0.51 compared to $0.07 in the Q3 of 2018, reflecting very strong business performance and a tax benefit of approximately $0.03 associated with the lower tax expense. Our adjusted diluted earnings per share tripled coming in at $0.57 compared to $0.19 in last year's Q3. During Q3, we repurchased approximately 1,000,000 shares of our common stock on the open market for $25,000,000 at an average share price of $23.99 Year to date, we have repurchased approximately 5,700,000 shares of our common stock for approximately $133,000,000 at an average cost of $23.47 per share. Approximately $520,000,000 remains available under our plan for future share repurchases. Our balance sheet continues to be very strong. We ended the quarter with $87,900,000 in cash. Our outstanding borrowings at the end of the quarter were $185,000,000 down from $215,000,000 at the end of Q2. Inventory at the end of the third quarter increased 18.8% to approximately $140,000,000 and our turnover ratio was 4.5 turns per year. I'm extremely pleased with our performance during Q3. We executed well on all fronts leading to significant top and bottom line growth. As we turn to guidance, want to remind you that our guidance is based on current currency rates. With respect to the Q4, we expect revenues to be between $245,000,000 $255,000,000 compared to $216,000,000 in last year's Q4. Our guidance incorporates approximately $2,000,000 from negative currency impacts as well as another $2,000,000 reduction from revenues associated with our lower store count. At the midpoint of our guidance, this represents growth of approximately 16% or 18% on an organic basis. Adjusted gross margin will be approximately 50%. We expect gains from increased pricing, higher clog sales and leveraging our fixed supply chain costs to more than offset a headwind of approximately 100 basis points associated with reduced purchasing power related to currency and changes in channel mix. Our GAAP gross margin, which includes 100 basis points of non recurring charges associated with our new distribution center will be approximately 49%. SG and A is expected to be approximately 47% of revenues compared to 52.7% in last year's Q4. We are continuing to leverage our cost base even as we invest more in marketing activities to drive future growth. Our forecast calls for us to make a profit in Q4 for the first time in 8 years. This speaks to the growing relevance of clogs, which are clearly in demand year round, as well as to the operational improvements we've put in place to successfully improve our bottom line. For full year 2019, we have once again updated our guidance and laid out all of the specifics in our press release, which would result in record high revenues and adjusted gross margin of approximately 51%, SG and A of approximately 40% of revenues and adjusted operating margin of approximately 11%, meeting our near term target of returning to a double digit operating margin. As Andrew noted, with respect to 2020, we currently expect revenues to grow between 12% 14%. This estimate assumes currency will have a negative impact of approximately $10,000,000 in 20 20. 20. We're anticipating a strong finish to the year with record revenues and a return to a double digit operating margin. This sets us up nicely for another terrific year in 2020. At this time, I'll turn the call back over to Andrew for his final thoughts. Thank you, Anne. With 3 quarters of the year behind us, we've seen great success from adhering to our focus on clogs, sandals, visible comfort technology and gibbets. Our great product offerings are being amplified by impactful marketing and operational improvements are enabling us to flow a greater percentage of our revenues to the bottom line. We've made tremendous progress over the past few years and have established a clear strategy that we are confident will result in continued revenue growth and increased profitability for years to come. Operator, please open the call for questions. Your first question comes from Mitch Kummetz from Pivotal Research Group. Your line is open. Please go ahead. Yes. Thanks for taking my questions and congratulations on the quarter. Andrew, on the 2020 guide, I'm just curious how much visibility do you have at this point? I would imagine you've got in your spring order book. I don't know if you could speak to that. But then how are you thinking about that versus other drivers of revenue growth for next year? Yes. Thank you, So let me talk sort of I think more broadly around the drivers of revenue growth for next year and then I'll come back to kind of visibility. So as we look forward into next year, I think the vast majority of what's underpinning our guidance is our strategy is working, right? We can see it working this year. We can see it accelerating through the year into next year. And that's really backed by a lot of the things we talked about in our prepared remarks and have talked about consistently. Our product focus on clogs, sandals, visible comfort technology and gibbetts, we can see the growth of each of those product categories accelerating. Our marketing is clearly working both from a Kaya perspective, our ambassadors that we've used this year and we're really excited about next year and just also our social and digital cadence and collaborations. From a regional perspective, Americas has been incredibly strong this year. We see it being strong next year, but we also see very solid growth from both EMEA and Asia next year. And then from a channel perspective, as you know, we focus very heavily on digital. We focus very heavily on our e commerce marketplaces, new marketplaces we've gone into, e tailers that are an important part of reaching our core consumer. And so we feel really good about our strategy and we see our strategy accelerating. In terms of visibility, yes, obviously we don't comment on order book or give pre book numbers, but we look at our springsummer product line. I would say it's been very well received as we visited wholesale accounts in this country and around the globe. So, we feel really good about the visibility we have and it underpins the guidance that we were able to provide. Okay, great. And then, Anne, you mentioned that at 11% operating margin, you've achieved your intermediate term target of double digit margin. I'm just wondering when you guys are going to give us a new intermediate term operating margin target. When you think about what maybe the operating margin opportunities are long term, is there anything that you can kind of address today in terms of where that might go? Especially, I think when I look at the SG and A, you're talking about 40% of sales this year, which is obviously a huge improvement over last year and the year before. But on the surface, that number still seems like it's a little high and maybe there's some room for opportunity there. How do you think about that? Yes. Hi, Mitch. Thanks for the question. So from a long term operating margin perspective, we wanted to give an early revenue preview. So a look for next year. We will come back out in when we do our Q4 call and give a full P and L results. What we've said previously is obviously to get to a double digit operating margin, our gross margin would be in the low 50s and our SG and A would be in the low 40s. And we will achieve that this year. And then next year we'll give more visibility for 2020. Okay. All right. Thanks. Good luck. Thank you. Your next question comes from Erinn Murphy from Piper Jaffray. Your line is open. Please go ahead. Great. Thanks. Good morning and congrats on a really strong quarter. I guess maybe Andrew first for you. On the Americas wholesale business, it was up incredibly strong in the quarter almost 70%. Can you just walk through kind of what you're seeing? Is that reorders? Is it new accounts you're going in to? And you mentioned with the Jibbitz business, you're starting to just test that within wholesale. Maybe share what you're seeing here in the North American market with that business? Yes. We're absolutely thrilled with the performance in the Americas. So it's really a number of things. I would say through the over the last 12 to 18 months, we have added accounts. We've penetrated key accounts that we thought were important to our brand and to enriching our core consumers. I think the biggest increase in terms of dollars was sell through was increased placement, accelerated sell through at our core accounts. That was really the biggest dollar impact, combined with some addition of new accounts. Jibbitz, I think is important. We see it as very, very important in our DTC channels, where we can see it dramatically changing the emotional connectivity that the consumer has to our product. It really changes a generic purchase into a completely personal purchase. And they get an awful lot more excited about it. They tweet about it, they Instagram about it. So it's a really important factor. We were able to land Jibbitz with a number of key large wholesale accounts this quarter. I can say it tested very well. It will get rolled out in those chains and we'll add new chains next year. Okay, that's helpful. And then maybe just going back to Asia, obviously that region is still collectively negative. Can you share a little bit more about what you're doing in China to reposition that market for growth? And then any insights on what how Japan trended in the quarter just given that that increase as we rounded into October? Yes. So maybe I'll comment on Asia generally then pick up China and Japan. So in terms of Asia in general, I would say Asia, it was flat for the quarter, but frankly met our expectations. That's where we were expecting it. And there were a few things going on. One was in the wholesale business, there's certainly some shifts from quarter to quarter and we're expecting a strong quarter from Asia next quarter in Q4. And in the retail business, we were impacted by a couple of things. 1 is frankly, we out of stock in our Korea shop in shops, We've now resolved that. So that was sort of faster sell through than we anticipated. And then obviously, we have a small number of stores in Hong Kong that were significantly impacted by everything that's going on there. E commerce was very strong in Asia and we think that will continue to be strong. So it was where we expected it, but we do see a stronger quarter from Asia next quarter. And obviously, as we talked about earlier in terms of 2020, we see Asia producing a solid growth. China, we talked last quarter about the board committee that we put in place and the strategic plans we've put in place to reignite the growth in that country. I would say those are all tracking to plan and we feel really good about those. And as we think about the future of China, definitely returning to growth next year, but the major acceleration in China will probably in 2021. And Japan, I think we had solid performance in Japan. And I don't think there's anything really significant to comment on that. Okay. And then just a question for Anne as I round out. 2 things, Anne. 1 on just the 2020 kind of algorithm. Obviously, you referenced and Andrew kind of gave some of the drivers for the 2020 revenue acceleration. But just based on that, is there any reason why you wouldn't see kind of the SG and A leverage, at least similar to the level you saw this year? Or are there reinvestments we're not thinking about we just need to be mindful as we're setting our models for next year? And then just a housekeeping, Anne, on the tax rate for Q4? Thanks. Yes. Hi, Erin. Good morning. So I'll actually start with the tax rate for the Q4. So we expect our tax rate for the full year to be 12%. So you can back into the Q4 of what that tax rate is. So our tax rate for Q3 was 6.4% and that'll take us to an overall tax rate of 12% and that's how we think about our underlying tax rate for this year. And then to answer your second question, as far as the mechanics for next year, again, we wanted to give an early revenue preview and we will provide more color on the call in Q4 the Q4 call. One thing I would say just around gross margins, the pieces we have given as you think through the P and L is that we will have, as we've talked about previously, have 100 basis points of improvement, all other things being neutral from our Americas DC that went live this quarter. And then we'll also and then on the other side of that, we'll continue to experience at these levels currency rates, we'll continue to experience currency headwinds that we've had all year. Got it. Thank you guys and happy Croctober. Thank you. Thank you. Your next question comes from Steve Marotta from CL King and Associates. Your line is open. Please go ahead. Good morning, Andrew, Anne and Marisa. I want to just follow-up on the first question that was asked regarding the order book. And I know that you don't give specifics on that, but could you tell me tell us how much of that springsummer order book is currently complete? In other words, if it's just 10% or if it's 90% or when will it be complete and you would have that clearer outlook of what wholesale sales will grow in the first half of next year? Yes. I mean, I don't really want to get into it in too much depth, but if you just on the cadence of our business, I would say the spring order book is probably north of 50% complete, probably close to 70% in that range. That's very helpful. And as far as the shifts, you mentioned that there was some wholesale shifts in Asia towards the Q4 from the Q3. Was there anything else material that would be impacting 4th quarter sales? Are there early deliveries that are expected, anything like that? No, nothing other material, Steve. As you know, in some of our warm weather regions, so Southeast Asia and places like that, we do deliver some of our springsummer 2021 product in the Q4. As you'd expect, I would say the proportion and the cadence of that is entirely consistent with prior years. Our next question comes from Jonathan Komp from Baird. Your line is open. Please go ahead. Yes. Hi. Thank you. Andrew, I wanted to ask a bigger picture question on the strength you're seeing for the brand and clearly a step up again in the second half and into 2020 in a number of different areas when you look at the reported metrics. So I'm just curious as you look at the strength today from a big picture standpoint, maybe any new thoughts on kind of what's driving the broader trend? Anything new or any new elements that you've seen? And then maybe just more specifically on some of the efforts that you're taking to sustain the duration as you look forward? Yes. I wouldn't say there's a lot of new elements. I think the one I'll talk about a little bit is personalization. But I would say, I think it's the combination. So it's the combination of very strong club growth and reigniting that core silhouette, which is at the heart of our brand and resonates with a lot of consumers. And I would say it resonates with a newer, younger consumer that's highlighted in the teen survey that we pointed to. But it also is incrementally resonating with our tried and tested core consumer. So we're seeing traction across the consumer platform, which allows, I think, the rate of acceleration we're seeing in clubs. On top of that, we continue to develop our sandal franchise with again a strong growth in that. And we're really excited about the sandal proposition that we're bringing to the market for 2020. I think we've got some really great products that are being well received. LiteRide, as we've talked about, so Visible Comfort Technology in its 2nd year in 2019, I think we also talked about that before, but that has essentially doubled over the prior year. So that visible comfort technology is certainly resonating with consumers. And then personalization, so Jibbit Charms have taken a big step forward in the Americas this year and we think the impact on clog business has been very meaningful. As you all know, that is also quite a profitable business. And we see that trend as a global trend. We see that desire for consumers to personalize as a key global mega trend and we are optimistic about the expansion of gibbet's around the world. So, I think it's each of the franchises really working. That's really accelerating the brand. So, I think that's really important. Great. And then presumably the strength you're seeing in the order book is based on everything you mentioned plus really the backward looking strength. But any of the new elements, whether it's kind of the new social channels like TikTok or the new global brand ambassadors that you're looking forward to as kind of potentially driving another leg going forward in terms of brand awareness and brand heat? Yes, I think our social team and our social strategy are incredible. We did highlight in our prepared remarks the TikTok launch just early this month and the incredible amount of views we had on the $1,000 hashtag $1,000 Crocs competition. So that was a huge amount of consumer engagement. Our ambassadors next year, I think are generally a step up over this year. I think we're really enthusiastic. I think Priyanka in particular is a global megastar. She resonates very strongly in the U. S, in Europe and frankly also in Asia. So we think she is really we're excited to be partnering with her and also excited to be doing some of the work we're doing with her outside of just representing our brand in terms of the donations that we'll do with UNICEF. And we have one more significant ambassador that we will talk about next year that will really key in on China. So I think that's a very important part of our program, but it all works together. I would say all of these components are integrated and work together and I wouldn't like to break out and separate any one. It's the combination that is having the impact. Okay, great. And then maybe just last one for 2020, understanding you're not putting out an operating margin target yet, but I just wanted to follow-up and ask about the pricing to product cost outlook, including kind of the current view on tariffs and the price hike you took on classic clogs and that will continue to flow through the channel. So any comments kind of broadly on those two pieces and what you see today? Yes, sure. So I think to close out the tariffs commentary, at this point in time, it's not material for this year. And it's really not material for next year either. What we see is that less than 10% of our product, our U. S. Product will be sourced from China. So we don't foresee at this level that tariffs will have an impact on our business. So that should be able to clear that up. I think overall just thinking through our dynamics of next year, we're really excited about our revenue growth and we will as we get closer to next year, obviously provide a full P and L and similar to what we've provided in years past. Okay, understood. All right, thank you. Your next question comes from Sam Poser from Susquehanna. Your line is open. Please go ahead. Good morning. Thank you for taking my questions. I have a couple, just some housekeeping and then into some other stuff. Can you tell us what the normalized tax rate, how we should think about normalized tax rate? Yes. Hi, Sam. So the way I would think about normalized tax rate for this year is 12%. I understand. But I mean like just longer term, you had some savings in Q3, which is non recurring. So if we think about it, it's like 15%, 16% annually, is that a good number to use? We haven't come out with a longer term tax rate. I would say that as we produce more profits in the U. S, we've been able to use previously accumulated tax benefits. So I wouldn't consider those to be one time in nature. And that's why we're seeing our underlying tax rate this year came from down from 15% to 12%. And we'll obviously we will give a tax rate guide when we guide full year for next year. Okay. And then thank you. And then within the guidance you provided on revenue both for the Q4 and next year, just in the general picture of things, how should we think by geography or by channel and geography? I mean, how are you thinking about where this momentum is going to come from? Where do you see the biggest growth so on and so forth? Yes. But maybe, I think the way to think about it, Sam, is and as we've talked about, we think Americas will continue to grow very strongly, right? So that's obviously been a big driver this year and we see that continue into next year. And EMEA has also done well this year and we also see that continuing into next year. So maybe the difference is we see Asia strengthening into next year from a regional perspective. From a channel perspective, it's I think what we've talked about over a long period of time, which is number 1, digital, right? That digital is going to be our fastest growth environment, both on our own sites, both on the marketplaces that we've penetrated and also through e tailers, which gets booked in a wholesale number. Number 2, brick and mortar, and I would say the rest of wholesale, we have seen strong growth in brick and mortar in Americas and also in EMEA, border in Americas and also in EMEA, and distributors continue to be solid contributors to growth. So I would say the profile and the variance between the different components is broadly similar into 2020 with the addition of Asia strengthening. Just to clarify, likely the momentum in wholesale generally should continue nicely into at least the first half of next year because then you come in with the big compares out of the U. S. Or the Americas. And then digital just e commerce revenue just increased. You're expecting e commerce revenue to accelerate next year over this year. Is that a fair statement as far as the growth? I wouldn't say accelerate. I think it's growing extremely yes, it's growing very strongly this year. I think, I'm not we're not guiding to an acceleration of digital commerce, but it's growing extremely well this year. Okay. Got you. And then, can you talk about some of the collaborations that you've done this year? I just noticed a couple other ones came out. Can you talk about, if you want to be specific, love it, but I doubt you will, are you going to scale up some of them as part of your plans because a lot of them have been I think probably Vera Bradley was probably the largest? Yes. So, yes, as you indicated, we don't give specifics. A couple of things I would say, Sam. So we have at least 2 very significant collaborations planned for the remainder of this year. So we're really excited about those. So we've got 2 additional big collaborations for this year. I would say the calendar and the cadence of collaborations is basically full for next year, right? So we're working with and I would say it's a very broad variety of individuals, influencers, brands that we really feel very good about the variety and the impact that we'll have next year. Some of the quantity and the size of the collaborations has certainly increased. One thing that I could tell you is our crop day shoe that we did on October 23, which I don't know whether you saw it was a classic, but fully loaded with jibbitz and also glowed in the dark. So we're really thrilled by that Great item for Halloween. That was that sold 6 times the number of units that our Croc Day shoe sold last year. And did it sell out? It sold it achieved everything that we hoped it was going to achieve. So it's 6 times the number of units. So it's we're really thrilled with its performance. I think I got it. Thank you very much and continued to see. Okay. Thanks, Sam. Your next question comes from Jim Duffy from Stifel. Your line is open. Please go ahead. Thanks. Good morning. Congratulations to you all on the momentum in the business. Few questions for me, just trying to better understand some of the drivers. I believe you guys said clogs 63% of revenue in the quarter. I'm curious how much variance there is in that number by region? Yes. So I think we've definitely seen the strongest cloud growth in the Americas region. We've seen cloud growth overall, but particularly in the Americas region. Okay. And then Andrew, you'd mentioned some commentary about strength with younger consumers, but also with your core set. Do you have any data on the demographic mix of purchase volume, particularly in the Americas where the growth spend so strong? Yes. We don't break out kind of sales by cohort if you like. But I can say, as we look at our brand study, so we do a very comprehensive brand study every year that looks at across our 5 major markets. It looks at changes in brand relevance, consideration, desirability with different cohorts. We can see those key metrics, which we think are drivers of our underlying business, but we know are drivers of our underlying business. We can see those metrics accelerate either double digit rates with teens or with younger consumers, but we can also see them accelerate at pretty much similar rates with our core older consumer. So maybe a suburban mom. So we can see those changes across the board. So I think the new consumer that's come strongly into the brand over the last 12 months is that younger consumer, but it's really important to us that we see a balanced acceleration across the overall consumer set because I think that drives underlying strength in the brand. And we think the younger consumer is really important because they influence a lot of people, right? If you look at the average household, their brothers and sisters are influenced by that consumer, parents are influenced by that consumer and it's a very important pivot point for brands to attract that consumer, retain them and have them be a really vehicle for acceleration. Yes. And Jim, also just to add a little bit on to that, because we haven't really talked about this, but EMEA is actually really pleased with their results. They're up 16% year to date on a constant currency basis. So we talk a lot about the U. S. And the back to school business, but EMEA gets a little bit overlooked because of the currency piece. If you look at the underlying growth, it's very strong and it's a different demographic than we're seeing some of the growth in the U. S. So it's very balanced growth. Okay, interesting. My next question, I wanted to ask about pricing strategy. Can you give us an update there? Is there more room for pricing in North America? Do you have any expectations for pricing actions in other regions? And I guess as long as we're on that topic, what are what's kind of contemplated in that 2020 view that you guys provided as it relates to pricing? So in terms of pricing, I think, yes, we've taken some price action on core classic through the back end of this year in North America. I would also say that we've adjusted pricing in many other parts of the world in EMEA and in key Asian countries as well as we've gone through the year. As we look forward, we'll decide pricing on a style by style, region by region basis. And we really have 2 key guide points. 1, we want to continue to make sure we're giving incredible value to our consumers, which we even at these increased price levels, the consumers essentially telling us we're giving them great value, as well as making sure that we capture the right value for the brand and for our shareholders. So, we have those 2 and obviously looking at competition. So, we have those 2 guideposts in mind and we will continue to adjust on a kind of region by region, style by style basis as we look forward and as we see opportunities both up and down, frankly, to make sure that we're positioned in the way that we want to be positioned. And I would say, absolutely, the adjustments that we've made and the impact we think those adjustments will have are embedded in the indications we've given for growth in 2020. Great. Then last one for me is just on that 2020 view. A lot of companies have a hard time guiding a single quarter ahead. Why did you guys think it important to go out with a 2020 view this morning here in October? Yes. Jim, we've provided a revenue preview the last 2 years. So this will be our 3rd consecutive year of providing a revenue preview. So we're just being consistent with our prior practices and we want to give as much visibility as we have and we feel comfortable providing. Understood. Thanks so much. Thank you. Your next question comes from Erinn Murphy from Piper Jaffray. Your line is open. Please go ahead. Great. Hey, guys. Just a couple of follow ups for me. Just going back to the price increases that Duffy was talking about, you've taken the classic to $44.99 here in the North American market. Any feedback from consumers thus far on that? Have they even noticed that it's increased? And then how does this roll out into wholesale as we go into spring 2020? Are the wholesale order books that you're referencing that you have good visibility in? Are they at the $44.99 or just maybe help us think about the mechanics there? And then just my second follow-up is back on the Jibbitz business. Is it really predominantly teens that are buying Jibbitz from a personalization perspective? Or are there examples that you see in your business where you're seeing a kind of broader demographic adopting that? Thank you. All right, Aaron. A lot of questions there. So in terms of consumer acceptance of the price increase, we think that's gone well. We're pleased with how that's gone both on e com, in store and with wholesalers. So I think we feel pretty confident about that. In terms of how that rolls into next year, so sell in for springsummer '20 is at the new prices or at the wholesale price consistent with that adjusted MSRP. And if you look in the marketplace, there are some wholesale customers have already taken price to that new price, right? So they haven't all done that, but some have done that for sure. And then the 3rd piece around, divots. Yes, I would say the strong acceleration is with that younger consumer, yes, that teen customer that is looking to as you know, Jibbitz has already historically has been very kid focused. That continues. But the big acceleration has been more with a teen customer. I would say there continues to be some traction with the older customer, but the gibbet piece is definitely younger in terms of its demographic. Got it. Thank you, guys. Thank you. Your next question comes from Jim Chartier from Monness Crespi, Hardt. Your line is open. Please go ahead. Good morning. Thanks for taking my question and nice quarter. You guys have talked about kind of exporting the brand heat from the U. S. Overseas. Just curious, Asia e commerce of 55%, what are you seeing within that, that gives you confidence that the to spreading around spreading around the world. In fact, more than seeing where obviously that's a key part of what we're trying to do, right? I think you can see that in Europe. I think Anne highlighted 16% constant currency growth year to date in Europe. So certainly some of that is brand heat orientated. One of the metrics that we do look at as a real guidepost of brand heat is natural search to our e commerce sites. So not the paid search, but the natural search and the growth in that. And we can see natural search growing really across the globe on our own sites. I would say the very significant acceleration in Asia e commerce is probably lesser reflection. We certainly do see brand heat coming into Asia, but there was a lot of kind of blocking and tackling operational components that we improved or we have been improving through the year in Asia that I think came to fruition in Q3. So I think there is underlying growth in Asia plus we fixed some things that were not working very well and they've had a big impact in terms of e commerce. In terms of places where the brand heat would be most visible in Asia, Absolutely, I think Korea is important, but Japan is also important. Those countries do tend to lead in terms of leveraging maybe Western or U. S. Trends, understanding what those trends are and then accepting and accelerating those trends. Great. And so one other piece to add in Asia from an e commerce standpoint is we had we have now 13 marketplaces globally. A lot of those are in Asia and we've done a lot of expansion there and we feel really good about that and you can see that in the difference between the comp growth in Asia and the year over year growth in Asia and e commerce. So we're really excited about that momentum. It's still early days, but it's been really great. And so it looks like you start to lap some really easy e commerce comparisons in Asia the next three quarters. I mean, is it reasonable to expect 50% kind of top e commerce growth in Asia as the blocking and tackling continues to drive the business? I think we feel confident in overall e commerce being our fastest growing channel. I don't think we're willing to give color on individual markets. Great. Thanks and best of luck. Thank you. Our next question comes from Sam Poser from Susquehanna. Your line is open. Please go ahead. Thank you. Just a quick follow-up on the price increase. How much of that price increase is that to what degree is that price increase both in the Q1 and into next year going to offset the FX headwinds or the I mean, when we think about that because that's a fairly large increase, How much do you foresee that offsetting the FX headwinds? Yes, let me start with a little bit of dynamic, Sam, on our Q3. So if you think about our Q3, we had 130 basis points of FX. And then also we had channel mix. So as we shift more to wholesale, we see a channel mix impact as wholesale is overall accretive on the bottom line, but from a gross margin standpoint, it's lower. And we saw that impact Q3 by 80 basis points, which was obviously offset by underlying strength and overall margins. When you think about that for Q4, you can see FX mitigate a little bit. We're expecting about 100 basis points of FX in Q4 and then we do have some channel mix again. So we expect those same dynamics to continue to next year. As Andrew mentioned, we took price increases in August on ecomps. So we did have some price increases in this quarter and then retail will be in Q4 and is anticipated in our guidance. I understand that. But I mean just like when we think into next year and so on, I mean like when you think about the headwind of currency that you talked about next year on the margin, I know you're not guiding, but are you thinking that this price increase could offset I mean just take those two elements, the price increase if it's in wholesale or retail, could offset the impact of currency. Could that be just those two things be awash with each other? I think it's too early to say, which is why we're not guiding for next year from a full P and L standpoint. Obviously, pricing is one of the dynamics that will help support margins next year. Right. And thank you very much. Thank you, Sam. Thanks, Sam. Your next question is from Mitch Kummetz from Pivotal Research Group. Your line is open. Please go ahead. Yes. Just a couple of quick follow ups. So Andrew, I know you guys given some decent color on Asia by country. I'm wondering on Europe, you talked about growing brand heat. Has that been pretty consistent across countries? And if not, could you maybe drill down a little bit on where you've seen more strength versus less strength? And then my second question is on clogs. If I recall correctly, you had some supply constraints on clogs in the first half of this year. Is there any way to quantify the impact of that? I mean, was it did it take down your sales by $10,000,000 $20,000,000 more or less? I don't know if there's any way you can sort of put a number around that just in terms of kind of what that supply constraint impact was on this year that I would assume is it likely next year? Yes. So EMEA excuse me, EMEA first, I would say the strength in our business is relatively consistent across EMEA. So EMEA is obviously Western Europe, Eastern Europe, but also the Middle East and a little bit in North Africa, Middle East and North Africa being distributors, Eastern Europe being distributors. So I would say direct countries have grown strongly as well as our distributor business. So I think it's pretty consistent. I wouldn't really call out any highlights. Obviously, we do break out by channel and you can see that digital commerce, e commerce has performed well throughout the year. That's been a really good driver. But that actually is across the whole business. So I wouldn't I don't think there's really highlights or lowlights in EMEA. It's pretty solid and obviously impacted by the euro pretty significantly the currency compression. In terms of the second piece, really what was I'm sorry, what was your second question again? On the clogs, the supply constraint. I didn't write it down. Supply constraints, yes, I think we've solved those in North America. You can see our inventory was up nicely, which was important to us and gives us some of our We haven't really gone back and quantified. We haven't really gone back and quantified, but I'm sure it's helped in our order book, right. So I'm sure if you're a major wholesale account and you felt like you were not getting all the supply you wanted this year, you've ordered more strongly for next year. Great. Thanks again. There are no further questions at this time. I turn the call back over to the presenters. Thank you. Thank you. Appreciate everybody's questions today and their continued interest in the company. So we look forward to talking to you again at the end of Q4. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.