Earnings Call: Q3 2015

Oct 13, 2015

This conference is being recorded and may not be reproduced in whole or in part without written permission from the company. A telephone replay will be available 2 hours after the completion of this call through October 19, 2015, by calling 800-585-8367 in the United States and Canada at 404-537-3406 for all other locations. Please use conference ID 4,700,5840. This conference call also is being broadcast over the Internet and a replay of the webcast will be accessible for 1 month on the company's website, leviestrauss.com. I'd now like to turn the call over to Chris Ogle, Vice President, Investor Relations and Assistant Treasurer at Levi Strauss and Company. Good afternoon, everyone, and welcome to our quarterly conference call. I'm pleased to introduce members of the Levi Strauss and Company management team. With us today are Chip Berg, our President and CEO and Harmit Singh, our Executive Vice President and Chief Financial Officer. Before we begin, I'll remind you of a few items. Our discussion today may include forward looking statements concerning matters such as our expected financial and operational performance, including our guidance for fiscal 2015, our strategic plans, our expectations for the economy and currency headwinds to our reported revenues and earnings, anticipated full year A and P spend, future investment in retail and e commerce operations, reduction of controllable costs and long term estimated savings from our global productivity initiative that are based on our current assumptions, expectations and projections about future events. Although these statements reflect the best judgments of our senior management, they involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the statements as more fully described in our annual report on Form 10 ks, our registration statements and other filings with the Securities and Exchange Commission, and we expressly disclaim any responsibility to update forward looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. We provide information on our website about how we compile various measures used to describe our business performance. Participants on today's call may discuss non GAAP financial measures. You'll find the appropriate reconciliations at the earnings webcast page in the Investors section of our website as well as in our earnings press release announcing the Q3 2015 financial results, which was furnished with the SEC today on Form 8 ks. Finally, today we filed our quarterly financial report on Form 10 Q with the SEC. You can link to our SEC filings from our website. Now I'll turn the call over to Chip Berg. Thanks, Chris, and good afternoon, everyone. Thanks for joining us today. At the start of the year, we noted 2015 would be a year consisting of 2 distinct halves as we staged key fall product launches and balanced our investments in marketing in the 1st and second quarters. In the Q3, we began to see the benefits associated with these efforts. On a constant currency basis, 3rd quarter net revenues grew 7% and adjusted EBIT increased 23%. We achieved broad based growth across regions, channels and brands despite ongoing traffic challenges by delivering an exciting slate of product offerings around the world, including our new women's line, driving double digit growth in our international regions, growing and investing in our global direct to consumer business and realizing product cost savings from the execution of the global productivity initiative. While we expect traffic at our brick and mortar stores to remain sluggish through holiday, we believe the strategies we put in place will help us achieve our goal of growing currency neutral revenue and adjusted EBIT this year as well as in the years to come. I'll discuss the execution of our key strategies after Harmit walks you through the financial details for the quarter. Harmit? Thanks, Ship. Welcome to everyone joining our call. My comments today will reference quarter comparisons on a year over year basis in U. S. Dollars unless I indicate otherwise. Net revenues of $1,100,000,000 declined 1% on a reported basis, but grew 7%, excluding unfavorable currency translation effects. Wholesale revenue grew 7% on a constant currency basis. The majority of the growth was in the United States and reflected setting flows for our Levi's women's and men's product initiatives. Direct to consumer revenues grew 8% on a constant currency basis, primarily driven by the ongoing expansion of our retail network internationally and the introduction of our new Levi's women's offering. Gross profit for the quarter grew 2% to $573,000,000 on a reported basis. Reported gross margin grew to 50.2%. Excluding unfavorable currency effects, gross margin expanded more than 200 basis points. The improvement primarily reflected lower negotiated sourcing costs and the savings from streamlining our supply chain. We also benefited again from growth in our higher margin international retail businesses and from price increases we took in key markets to help offset the currency effects. 3rd quarter SG and A expense of $455,000,000 was flat on a reported basis, but grew $30,000,000 excluding favorable currency effects. The majority of this increase comprised 150 basis points of our constant currency SG and A rate and related to direct to consumer investments, including the addition of about 80 brick and mortar stores on a net basis since a year ago, as well as spending towards growing our e commerce business. As a percentage of revenues, constant currency SG and A remained flat at 40%. Adjusted EBIT of $128,000,000 grew $9,000,000 from the prior year on a reported basis and grew $24,000,000 without unfavorable currency effects. As a percentage of net revenues, adjusted EBIT improved to 11% as compared to 10% last year as our improved gross margin more than offset our higher direct to consumer channel investments. 3rd quarter net income of $58,000,000 was up from $51,000,000 last year. Our higher adjusted EBIT was complemented by lower interest expense, reflecting our refinancing activities of last year. Our consolidated tax rate increased compared to last year as a higher proportion of our income was derived from the United States, which has a higher tax rate. Now I'll share more detail on the 3rd quarter results of our 3 regions. Net revenues in the Americas grew 5% in constant currency and 2% on a reported basis. The growth reflected higher wholesale revenues, including the introduction of the Levi's women denim collection. New product introduction in Levi's and Dockers men's also contributed to growth. Direct to consumer in the region was down slightly as traffic continued to be challenging. Conversion remained strong, but the environment was highly promotional. Adjusted EBIT for the Americas grew 18% on a reported basis, reflecting a higher gross margin driven by supply chain savings. In Europe, net revenues grew 12% without the impact of currency, but fell 10% on a reported basis as the stronger dollar continues to significantly impact our results in the region. On a constant currency basis, revenue growth was again driven by strong retail performance as the introduction of our new Levi's women's offering was well received. Growth was strongest in the U. K. And Russia. Adjusted EBIT in Europe grew 2%, inclusive of the negative impact of currency, but grew 32% on a constant currency basis, reflecting the higher net revenues and improved gross margin. In Asia, net revenues were up 9% without the effect of currencies, but flat on a reported basis. The environment remains promotional with revenue growth coming from our direct to consumer and franchise network. Growth was strongest in India and China. Adjusted EBIT in Asia grew $8,000,000 reflecting the higher net revenues and an improved gross margin. Year to date, constant currency net revenues grew 2%, driven by the Q3 product introduction and continued strong direct to consumer performance. Gross margin at 50.2% was 60 basis points ahead of last year despite currency pressures. Adjusted EBIT, however, declined 5% on a constant currency basis, primarily reflecting investments in e commerce and new stores and increased advertising and promotion spending in the first half of twenty fifteen. Turning to the balance sheet and cash flows. Compared to a year ago, inventory dollars declined due to foreign currency translation and lower average costs, while units increased modestly, reflecting our new product initiatives for fall. Free cash flow for the 1st 9 months of 2015 was 0, as a $29,000,000 increase in cash flow from operations was offset by higher capital expenditure and an increase in our dividend payment. Cash from operations in 2015 includes $25,000,000 we paid to refinance our debt in the Q2 as compared to $8,000,000 last year when we redeemed the Eurobonds. Overall, liquidity remains strong. Total available liquidity at quarter end was $822,000,000 comprised of cash of $273,000,000 $549,000,000 available under our credit facility. Net debt of $924,000,000 was flat to year end and our leverage declined to 2.2 compared to 2.6 a year ago. As we move into the Q4, we remain confident about the full year currency neutral objectives we established at the beginning of 2015, specifically revenue and adjusted EBIT growth, gross margin of 50% or better and advertising and promotion expenses in the range of last year's 6% of revenue. We also plan to end fiscal 2015 with nearly 100 additional company operated stores, including new brick and mortar locations as well as stores we acquired from former franchisee partners. However, given favorability in FX and lower spending in non retail categories, we are lowering our outlook for capital expenditures. We now believe CapEx for the full year will be within the range of $100,000,000 to $110,000,000 With that, I'll turn it back over to Chip. Thanks, Harmit. We knew going into this year that delivering strong second half results would be critical to achieving our 2015 growth objective, and we made progress toward this goal in the Q3. Product has been a major focus this year and our fall launches will be especially important performance drivers for 2015 and next year. Our key initiative for the year is the global launch of the new Levi's women's denim collection. While it's still early days, we are encouraged by the initial consumer response to the product. The new fits, styles and marketing are driving strong sales in our retail network. In August, the 1st full month the product was in our global store fleet, direct to consumer revenues from sales of women's bottoms grew double digits. At wholesale, initial selling has been strong during the transition. We believe the building momentum of this key initiative will better position us for growth in women's going forward. We also added newness to our men's assortment with the introduction of the Levi's 5 14 Motion with stretch and added new washes and finishes for the Levi's 501CT we launched earlier this year. Our focus on styles such as the Levi's 5.11 slim fit and the Levi's 5.41 athletic fit continue to drive results in the Q3. And Dockers introduced new men's product in the quarter with an emphasis on stretch as well. Our global direct to consumer business achieved strong growth again this quarter, up 8% in constant currency despite well publicized traffic pressures and the very promotional environment globally. While the majority of growth reflects expansion of our store network, we also grew revenues by improving conversion and units per transaction. We accomplished this through better in store service and expanded product offering. For example, tops were up driven by the graphic tees at our t shirt bars, and we continue to invest in key omnichannel capabilities in order to provide an improved consumer experience. In summary, we're pleased with the progress we've made in executing our strategic business plans. Heading into the Q4, we are cautiously optimistic given the momentum we are building. However, we expect that soft traffic at retail and a broadly promotional environment will likely make for a challenging holiday period. Additionally, as a reminder, our Q4 this year will have one fewer week than in 2014. We anticipate that the last week will constitute approximately 2 points of 4th quarter revenues. Nonetheless, we believe our growth strategies will continue to drive the top and bottom line for 2015 and beyond. With that, we can open the line operator to take questions. Thank you. You. Your first question will come from the line of William Reuter with Bank of America. Good afternoon, guys. Hey, Bill. Hey, Bill. I was wondering if you could talk a little bit about the women's launch and either how much this contributed to the 5% constant currency growth in the U. S. Or if there's any other way that you might be able to quantify the impact to the quarter? Well, as we said in the prepared remarks, in the Americas, the results were largely driven by the sell in effect of women's into department stores as we basically filled the pipeline. I'm not sure if I can break down, I'm trying to do the math in my head right now, break down what percent of the 5% that represented, but it was a pretty good chunk. And then in our own stores, as we said in the prepared remarks, we did set the floors kind of late July early August globally, And we're already seeing kind of a double digit uplift on a sell out basis of our women's business versus a year ago. And that obviously also played a part in our results for the quarter. Okay. That's helpful. On your last quarterly call, you guys had been talking as well about challenging traffic. I guess, I'm curious and you also highlighted tourist locations last quarter. I'm curious whether you guys saw a noticeable change in trend, whether things had actually gotten worse or whether kind of sequentially from the 2nd or third quarter, they were pretty similar? Bill, the quarter 3 is the quarter, at least in the U. S, where the inflow of tourist traffic is higher. So the trends were actually worsened relative to what we saw coming into the quarter between in terms of traffic between tourist oriented stores and non tourist oriented stores. As I've mentioned in the prepared remarks, our direct to consumer business in the U. S. Was actually down year over year. So going back to the earlier question you asked and what Chip referenced, most of our growth in the U. S. In quarter 3 largely was driven by wholesale. Okay. And then just Let me just I mean one other thing that I would point, I mean most of our stores about half to 2 thirds of our stores are located in kind of heavy tourist population locations. So Metro New York, Florida, so we are very susceptible to swings in tourism because of the amount of our volume that's concentrated in those locations. So we did see an acceleration or a widening of the gap between tourist areas and non tourist areas in part because we're so exposed to it. Okay. And then I guess just lastly for me, you guys talked about price increases, and it seems like these were definitely in the U. S. They may have been elsewhere as well, which I'm not sure about. But I guess, can you just comment on what percentage of your products you guys increased prices and what types of price increases you saw? That's all for me. Thanks. Yes. See, it's I won't get into specific on what products, etcetera, Bill, but I'd say we took a little bit of pricing in the U. S. Prior to the currency impact, which is normal course of business. And it was in some of our products that are doing relatively well with the end consumer. Price increases specifically that I referred to were increases that were taken in response to the appreciation of U. S. Dollar in some currencies, largely in Europe, some markets like Russia, but some Western economies in Europe and in markets like Mexico and Latin America. Now we are you could see the impact the strong dollar is having on our reported results. We are trying to offset that to maintain the structural economics of the business through pricing, cost curtailment, negotiation with our vendors. So broadly speaking, I'd say pricing and cost curtailment is probably mitigating about 50% of currency impact globally. And we place looking at currencies on a daily basis because the currencies in the emerging markets, for example, in quarter 3, depreciated a lot more than one had anticipated. Great. That's all for me. Thank you. Thank you. Thanks. Your next question will come from the line of Carla Casella with JPMorgan. Hi. My question is around the cadence of the quarter, both retail as well as wholesale, because from what we're hearing from a lot of retailers, it sounds like there's been mixed comments about back to school. And just wondering what you've seen there? Well, you got to remember, I mean, the calendar is a little bit different this year than last year, right, Carlos? So you had Labor Day a week later. We definitely saw a continuation. I think it happened last year where back to school seems to no longer be a single event or concentrated in a single or a couple of weeks period of time. It seems to be pretty extended. We saw the quarter heavily influenced by the sell in of the women's product launch, which happened fundamentally in July early August. And that kind of reflects the way we had planned out the quarter. Okay. So then when you look at if you look at same store sales, how much of that would have been driven by the women's the load in for the women's versus sell through? Kyle, it's important to remember that the full launch of the women's product really started getting effectuated in the month of August, which is the last month of the quarter. And that's where I think in the prepared remarks, Chip referred to August our sell through for across our retail stores being up double digits. So we've so it's early days yet in terms of reflecting how the women's product is doing, but the early signs are encouraging. The other point to note, our international businesses had a fairly good quarter. Again, it's a continuing trend that you've seen as we have put the teams on the ground over the last 12 to 18 months. Our international businesses are doing well. Europe, for example, had a real another real good quarter despite the currency on a constant currency basis. As well as structurally, because they're more retail oriented, these businesses outside the U. S, our margins are being helped by U. S, our margins are being helped by protracted growth in these businesses. So that's the other thing to consider as you think about the quarter. Yes. I was actually going to ask about this. The European, that was such a strong number, the 11.5%. Can you give us a sense for how much of that was from new stores versus underlying or kind of organic or same store sales? Yes. Again, at the outset, we don't disclose same store sales, but I'd say it's a very good balance. Comm sales in Europe were up, and we've had expansion in our retail network. In Europe, as against the U. S, the business is more fifty-fifty between wholesale and retail. Okay. And the 2 countries to call out, Russia has been on a steady trajectory of growth for us, but the U. K. Is having another good year. I think it's just worth pointing out that one of the reasons we're seeing the results that we're seeing has been an continuation over a couple of quarters now in Europe is we're just executing really well in Europe. And we saw really balanced growth between retail and wholesale. And the teams just despite all of the external and environmental challenges in Europe, they just keep delivering. Yes. At what point do you think you might disclose same store sales? How big does retail need to be? Stay tuned. As retail takes off and retail becomes a bigger piece of our business, we will start articulating KPIs that help everybody understand the strength of our direct to consumer business. Okay, great. Thanks a lot. Welcome. Your next question will come from the line of Grant Jordan with Wells Fargo. Hey, good afternoon. Thanks for taking the questions. It looks like there's a pretty big increase in the number of retail stores. I think you said most of those were international. Can you provide if there's a specific area you're targeting as you open those stores and kind of how that might look over the next couple of years? Yes. The Grant, in terms of the number of stores, I think at the if you compare versus a year ago, we're probably on a net basis up 80 stores. The 80 stores actually do include about a 4th of the 80 stores are coming from franchisee buybacks. As we grow our retail network across the world and consolidate some of the franchise stores that does get incorporated into these numbers. Okay. The rest of the stores primarily are have been opened in Europe and Asia. In Asia, for example, predominantly China and India are where the areas of focus are. Russia and Europe, for example, we continue to open stores, etcetera. So we are focused on growing the retail our retail presence across key markets outside the U. S. Okay. And then on those countries where you do have licensees, are there agreements in place where you can buy those licensees out? Or is it more just a negotiation? Specifically, if you're asking about licensees, the license agreements like with some of our competitors have a finite term largely. So at the end of the finite term, we can decide whether we need to take back those licenses. If you have specific questions about franchise stores, the same stands true. It's truly based on the term, the performance of the franchisee stores and the franchisee in general. And as we organize around some of these markets, taking a holistic view on which stores we should run and operate versus operate to our franchisee partners is an important strategic question that we discuss and align on as part of our strat plan. Okay, great. That's helpful. Thanks, guys. Welcome. Your next question will come from the line of Karru Martinson with Deutsche Bank. Good afternoon. When you guys talk about sluggish traffic for the Q4, I mean, how do you guys square that against most of the forecast for the holidays kind of looking for low to mid single digit holiday sales growth? I think the simple answer is the best way to predict the future is to take a look at the recent And we've been talking about traffic declines now for probably 2 years. And I don't see anything that's going to fundamentally reverse the traffic declines that we've been seeing over an extended period of time. It is possible to eke out some sales growth despite declining traffic in our retail stores through a combination of online e commerce and doing focusing on the things that are within our direct control like conversion and units per transaction. So I do think it's possible to grow in an environment where traffic is down. We can't use traffic as an excuse not to grow, but we're going to focus on the things that are within our control and expect that kind of plan for the worst and hope for the best if traffic reverses and it actually grows and we continue to focus on conversion and everything that will be a great thing. But I would say a realistic way to look at what to expect in the coming future is what we've been seeing here recently. Okay. And then when we look at the lower negotiated sourcing costs, I mean, is that a benefit that should continue to build on itself? Or how should we think about that going forward? A couple of things, and let me talk about gross margin in general. So gross margin basically impacted by a couple of things. 1 is supply chain, and I'll come to your specific question in a minute. The second is just the ongoing change in the structure of our business, more retail driving the growth, etcetera, so and more international, both of which are higher margin businesses. And then product offerings, so for example, our women's introduction, the margin on our women's new women's line is higher than what we had originally. So that makes a difference in terms of gross margin. And then the price increases that we're taking, which help offset some of the transaction impacts we're seeing on currency. Going to a specific question on supply chain, there are a couple of aspects of that are helping us drive supply chain efficiencies. 1, as part of our global productivity initiatives, we have tried to simplify our fabric platforms, our PC-9s, etcetera, as well as the infrastructure that we had. So that's that impact largely will happen or we felt this year and reduce over time. We've also taken some decisions on optimizing our network, largely the factories we own and we shut 2 factories down also that to our 3rd party vendors, that's going to have an impact. That's probably going to be seen more in 2016 2017 than you see it today. And the third and more importantly is better negotiation and sourcing as the business grows. And I think that you will see ongoing over time. So it's difficult to break it up, but I'd say it's a combination of an impact you see this year, some of which you're going to see on an ongoing basis. Okay. And just lastly, on Asia, for a long time, it was kind of the area we called out for room for improvement, but it seems that, that business has stabilized and growing nicely. What's changed on the ground there? And do you feel that those improvements are sustainable? So, I mean, first of all, I do believe that it's sustainable. 2nd, we have a team on the ground that now I guess the whole team has been there for about 2 years. We've got some continuity there. We've got great leadership and things have really we've got a strong strategy. We're committed to Asia. We're investing in the key markets in Asia and the team has really come together and they're starting to execute. It's the classic recipe for success, have a good strategy and have good people on the ground to execute and then execute brilliantly and that's we're seeing the result of that right now. Thank you very much guys. Appreciate it. The next question will come from the line of Hale Holden with Barclays. Thanks for taking the call. I had a couple of quick ones. You called out declining traffic and higher intensity of promotions a couple of times on the call and in various different geographies. So I was wondering if you could just rank it or tell us which geography was feeling it the most or that you were most concerned about? I'd say traffic wise because of the tourism impact, the U. S. Is leading the geographies from that perspective. Having said that, we've seen traffic declines across the globe and being offset through increasing traffic on our e commerce business. But structurally, it's a different business. So that's hopefully answers your question. Now we're doing what we can to offset the traffic declines and we're doing that through a couple of things. 1, introducing the right product. So for example, the product the women product line that was introduced will bring in more consumers as well as new product introduction on the men's side that we've introduced over the last couple of quarters is helping bring in new consumers. And the second is better execution, and that is really driven by higher conversion and higher units per transaction, both of which are global trends in terms of better execution that we're seeing across our stores. And as the traffic declines, are they kind of even through your own stores, your wholesale partners and then your outlet stores? Or is there a mix between the three that's different? It's slightly different. I'd say more on our mainline stores, which is really stores that are on high streets and malls and less in outlet stores because the consumer is value conscious and that's a global trend. Okay. And then last question is, it's been a while since you called out Dockers Men as an improvement category. So I was just wondering, I hadn't been paying attention to some of the trend changes you've made there. Is there anything noticeable that's different or any color you can give us on that? Yes. I mean Dockers, as we said at the outset, part of the broad based, every brand grew. Dockers grew in the 3rd quarter, including in our international markets. The big driver was the selling of some of the new men's product. So Stretch is a big trend. We've talked about it on women's. We've introduced product with Stretch on both the men's Levi's bottoms business as well as on the Dockers bottoms business. And that product has started to sell really nicely. We're seeing real positive sell out there. So I continue to see really strong potential of this brand longer term. We're focused on growing it and we're encouraged by the early results of the selling of this new product. Great. Thank you for the time. I appreciate it. Yes. Thanks, Dave. Your next question will come from the line of Kevin Coinc with Goldman Sachs. Hi, good afternoon. Thanks for taking the questions. Hey, Kevin. Just had a couple. Hi. Just what you called out women's and it's nice to see the launch going well. But I was wondering if you could share with us a few of the attributes as to why you think it's resonating so well. I don't know if it's fashion, fit or fabric, if you could just maybe expand on why you think perhaps you're taking share in that category? So it's a really good question. I mean, I think a big part of the early success that we're seeing, the team really went to school on this and I've talked about it in the past. I mean, we've been talking about the women's relaunch for about a year, I guess. But they were around the world a couple of times testing and refining the product. So the whole trend towards softer, stretchier fabrics, it's built into this line and into the lineup, the 711 and the 710, which are the skinny and super skinny with super stretch. I mean, we've got up to 90% stretch in some of the items. It's just resonating with women. And you add to that, the denim seems to be on trend. We kind of have covered the base in terms of fashion and style. And add to that, we've got a pretty compelling piece of advertising that seems to be resonating and working around the world. And we've launched it on about the same timing everywhere in the world within a couple of weeks. And it's still early days. I'm far from ready to declare a big success, but we're certainly encouraged with the early response that we've seen. It's exciting standing in store and watching women try it on and seeing their reaction after they've tried on the product. It definitely is working. That's great to hear. Yes, it'll be interesting from our end to see how if it's ultimately bucking that athleisure trend. So we'll stay tuned. Stay tuned. Just to touch on the back half of the year, you've kind of given us certainly a type of cautious tone. Would you say it's safe to say that I know you don't have a dividend policy, but certainly we wouldn't expect a dividend in the remaining calendar year? As you rightly said, no dividend policy. Dividends are decisions that the Board takes based on the cash flows of the company. Our history has said once a year other than 1 year because tax reasons we did it in the same calendar year. And just talking a little bit about our thinking about capital, the way we're thinking about capital is we did increase the amount of capital deployment in the company towards growth initiatives, largely technology, commerce and retail, reduce the pay down of debt. So as we think about capital, I think our first point of call is going to be towards growth ideas that will return incrementally relative to cost of capital back to the company. And then based on what's left, having a discussion with the Board in terms of returning capital back to the shareholders. Okay. Thank you for that detail. Just one final housekeeping one. Would you happen to have the latest run rate of rent expense with the store expansion? Not off the top of my head, no. Okay. I'll follow-up. Thank you. Sure. Thank you. Your next question will come from the line of Todd Harkrider with UBS. Yes, I appreciate it. Congratulations on a good quarter. Thank you. With some of the mixed data coming from other apparel firms recently, can you talk about if you think you'll have to give higher markdown money in the Q4? And with A and P at 6% for the year, at least guiding towards that imply a meaningful decline year over year. Is that A and P, is it highly visible at this point? Or if you see increased sluggishness in apparel, you could actually see higher A and P? Yes. In terms of sorry, can you repeat your first question, Todd? Markdown money? Yes. In terms of markdown money, I think it's difficult to globalize that. It is we try and be relevant to the market and the consumer dynamics on a market by market basis and follow a fairly prudent markdown policy, which is seasonals have a different markdown, core products have a different markdown. I think just reacting to some tourist traffic and the things in those areas, just making sure we don't we are competitively as we price products is important. So I think and we've done a decent job so far. So we'll stay true to that cause. In terms of advertising, the on a year to date basis, I think advertising is our advertising spend is probably a little under 6%, it's 5.7%. Quarter 3 was 6.1%. So we still believe that for the year, we'll end around 6%, which means that quarter 4 will be slightly north of the 6% to average 6% on a full year basis. But that is, as you rightfully point out, below a year ago, we intentionally have talked about this as well. I've tried to smooth our A and P spending through the year to kind of even the spending quarter to quarter more or less. So that does imply lower spending in the Q4 than a year ago and that is the way we've planned the year. Sounds good. And then on the e commerce side, can you talk about what you're seeing when it comes to the find in store functionality if you're seeing people actually use that? And then I know you're promoting free shipping on all online orders in the U. S. Right now. Is that benefiting you right now? I'm not sure if you actually offered that last year. And at minimum, are you seeing it drive new individuals to the website? So I'll answer the second question first. On free shipping, we do it off and on and we do it promotionally as a way to drive closure and to drive sales. And we may be doing it right now as we speak. It obviously comes at a cost, but it's also kind of what you need to be in the game occasionally here in this market here in the U. S. On the Find in Store, this is a relatively new feature, which we launched last quarter. We've started to expand it to some of the other markets around the world. We also are one of the first to have a find in store feature with one of our key wholesale partners. And we are seeing that consumers are starting to use it. And we will continue to build on this functionality. We don't yet have the ability to find in store and reserve in store. That's something that's coming down the pike soon. So we're going to continue to build out our kind of omni channel capabilities to enhance the overall consumer experience and to drive more revenue. So we're making steps. There are steps in the right direction. Pretty pleased with the progress that we've made, but we still have ways to go. At this time, I'd like to turn the floor back over to the company for any closing remarks. So I want to thank everyone for calling in. Our next call, believe it or not, won't be until next year in February, after Super Bowl 50 at Levi's Stadium and after the holidays. So I want to wish everyone a happy holiday and we'll talk to you again in the new calendar year. Thank you. This concludes today's conference call. Please disconnect your lines at this time.