Earnings Call: Q3 2014

Oct 6, 2014

Good day, ladies and gentlemen, and welcome to the Levi Strauss and Company's Third Quarter 2014 Earnings Conference Call. All parties will be in a listen only mode until the question and answer session, at which time instructions will follow. 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 11, 2014 by calling 800-585-8367 in the United States and Canada and 404-537-3406 for all other locations. Please use conference ID 8,339,916. 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, vivestrauss.com. I would now like to turn the call over to Chris Ogle, Vice President, Investor Relations and Assistant Treasurer at Levi Strauss and Company. Thank you. 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 here today are Chip Berg, our President and CEO and Harmit Singh, our Executive Vice President and Chief Financial Officer. Before we begin, let me briefly remind you of a few items. Our discussion today may include forward looking statements 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. 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 will 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 2014 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 Burd. Thanks, Chris, and good afternoon, everyone. Thank you for joining us today. In the Q3, we grew revenues despite the continuation of well publicized industry pressures, including soft retail traffic, heavy promotions and declines in the women's denim category in the United States. Execution against our key strategic choices is making a difference. We grew our profitable core business while investing in our iconic products. Our international business, we are encouraged by the growth we saw in several key markets. We overcame the impact of lower traffic in our retail stores by driving higher conversion with compelling in store programs and a focus on customer service and product. And during the quarter, we unveiled 2 new major marketing initiatives, the new Livin' Levi's advertising campaign and the official opening of Levi's Stadium, which has garnered more than $40,000,000,000 impressions since the announcement last year. Although, we expect the continuation of the industry pressures into the fall and holiday seasons, we believe that by maintaining our strategic focus on the things that matter most, we will drive sustainable profitable growth long term. Harmit will now walk you through the financial results. Harmit? Thanks, Chip, and a warm welcome to everyone joining our call. My comments today will reference 3rd quarter comparisons on a year over year basis in U. S. Dollars unless I indicate otherwise. Total consolidated net revenues for the Q3 of 2014 of $1,200,000,000 grew 1% on both reported and constant currency basis. Higher revenues in Asia and Europe were partially offset by lower revenues in the Americas. Globally, wholesale revenues were down 2%, largely driven by declines in our women's business in the Americas. Company operated retail revenues grew 11% on a global basis, reflecting our expanding store network and growth from our existing stores, including double digit growth from e commerce. And the Levi's men's business continued to grow around the world. Levi's men's revenues were up 4% in total and sales grew in both the bottoms and tops categories. Gross profit for the quarter was $562,000,000 down 2% from last year as the lower gross margin offset the revenue growth. Our 3rd quarter gross margin of 49% was 150 basis points lower than last year. The margin decline resulted from higher product costs and increased discounted sales compared to last year, in part reflecting the promotional environment and in part our efforts to address high inventory levels. Currency was neutral in the quarter. SG and A expense of $455,000,000 was flat to prior year in dollars and 40 basis points lower as a percentage of revenues despite charges of $8,000,000 associated with the global productivity initiative. Excluding the charges, the SG and A rate would have declined by more than 100 basis points, reflecting savings from the initiative. Our SG and A rates improved even as we continued to expand our retail network and spent $11,000,000 more on advertising primarily behind the launch of our Lyft in Levi's campaign. 3rd quarter adjusted EBIT of $119,000,000 declined 2% as compared to last year driven by the lower gross margin. Adjusted EBIT as a percentage of net revenues was 10%, down 30 basis points from last year. A detailed reconciliation of adjusted EBIT is attached to our press release. 3rd quarter net income declined $6,000,000 to $51,000,000 essentially reflecting charges related to the global productivity initiative. Now I'll share more detail on the 3rd quarter results of our 3 regions. Net revenues in the Americas of $697,000,000 were down 2% from the prior year on both the reported and constant currency basis. Growth in retail and in our Levi's men's business was offset by declines in our women's business at wholesale. The women's denim category declined again. But towards the end of the quarter, Levi's introduced new products for women to begin to address the issues we have discussed previously and early results are encouraging. The Dockers brand declined in the Q3. Recall that our Dockers women business is down compared to last year as we prepare to transition to a licensed model in the coming year. Men's stock has declined modestly in the quarter as the overall category is down. The region's lower sales and gross margin more than offset a decline in SG and A, leading to a decline in adjusted EBIT, which for our regions is equal to operating income. In Europe, net revenues grew 4% on a reported basis and 2% without the benefit of currency. Retail revenues grew from the expansion and improved productivity of our store network. Our wholesale revenues were flat to prior year. The efforts we made to improve product availability continue to drive sales in both men's and women's and our focus on retail helped to drive margin gains. Europe's adjusted EBIT was up, driven by higher gross margin and sales. We have seen some encouraging signs across Europe, but are keeping our eye on the political unrest that currently exists in some pockets there. In Asia, revenues grew 10% on a reported basis and 11% without the effect of currency. Revenue grew at our company operated stores, franchisees and in traditional wholesale channels. Our Revel products for women continue to perform well. The key markets of China, India and Japan all grew and while it's early days it's encouraging to see these markets growing again. And we made progress managing inventory through price promotions, which resulted in margin pressure in the region and lower adjusted EBIT. The company's liquidity position remains solid as we continue on the path to build a stronger balance sheet. At quarter end, we had $367,000,000 in cash on hand and $606,000,000 available under our credit facility retaining total available liquidity of 1,000,000,000 dollars Net debt remained at year end levels of less than $1,100,000,000 Our leverage as defined by our gross debt to adjusted EBITDA ratio of 2.6 at quarter end was slightly higher than a year ago. 3rd quarter inventory balances was 16% higher than prior year, which represents a deceleration in the rate of growth from recent quarters. Inventory growth was primarily concentrated in Europe and Asia, where we've overcorrected this year in our attempts to restore reliable service internationally. Inventory growth was slightly elevated in the Americas due to lower than anticipated year to date sales. By the end of Q4, we expect inventory to be in line with prior year in our Americas and Asia regions and somewhat higher than prior year in Europe to maintain appropriate service levels, recognizing there is some downside risk to gross margins. Free cash flow for the 1st 9 months of the year was $4,000,000 including the cash consequences of the productivity initiative. Lower cash flow this year has also been driven by lower opening receivable balances, higher inventory purchases and our lower year to date revenues. We are pleased with the progress we're making on our global productivity initiative. Total charges related to this initiative for the Q3 were $10,000,000 comprised of $2,000,000 in restructuring charges and the $8,000,000 in SG and A that I mentioned earlier. This brings total restructuring and related charges for the 9 months to $103,000,000 The actions we have taken during the 1st 9 months of 2014 are expected to deliver annualized savings of $100,000,000 to $125,000,000 net of investments we're making to drive growth. This includes the benefit of closing our manufacturing plant in Turkey, which we announced in Europe last week. In the Q4, we expect additional productivity initiative charges. Although based on the timing of the underlying activities, we do not expect the related cash payments to occur in our fiscal 2014. We will share more detail on the developments as they unfold including related projected savings. As we move into the Q4, I want to remind you that our revenues and expenses will reflect that this fiscal year contains a 53rd week, which includes Black Friday. For gross margins, we previously estimated 50% for the full year. However, we're tracking at 49.6% year to date. And given the promotional pressures in the marketplace and our ongoing efforts to manage inventory levels, we recognize the downside risk. We continue to expect full year A and P at a similar run rate to 2013. And the 4th quarter will contain a non cash pension settlement charge as well as the additional productivity initiative charges I mentioned. We've also taken our full year capital expenditure estimate down to the range of $80,000,000 to $90,000,000 Chip, back to you. Thanks, Hamid. As I noted in my opening comments, we saw a continuation of several industry headwinds in the Q3. While there was a sequential moderation in the traffic declines across retail, footfall remains relatively weak, particularly in the United States. As a result of soft industry traffic, selling environment has remained very promotional. And as we have also discussed in recent quarters, we are working through some internal and external challenges in the U. S. Women's business. Here's what we're doing to address the issues. First, we've launched a new global marketing campaign called Live in Levi's. The campaign is based on the consumer insight that you wear other jeans, but you live in Levi's. Consumers have a have a deep emotional attachment to their Levi's and can tell stories about how they've lived their life in their jeans in their Levi's. It's one of the things which separates this brand from other brands. Relative to prior campaigns, Liv and Levi's is more product focused and far broader reaching. We are highlighting the iconic products by telling the stories of the people who wear them, young and old and around the world. In addition, in some of our largest markets, this is the first time in several years that we've aired television advertising. The multi platform campaign includes significant digital investments and is concentrated in key markets with meaningful revenue growth potential. The campaign launched in the United States in August and internationally in the Q4. Early indications are very encouraging. We believe that by connecting directly with consumers and highlighting our icons in ways relevant to their lifestyles, we will drive mindshare and ultimately sales. 2nd, to offset the impacts of lower store traffic, we're driving strong conversion. As we noted at the beginning of the year, achieving our 2014 objectives would be all about the execution of our strategies and our results in retail reflect that focus. The stronger conversion is a direct result of efforts to improve customer service by implementing formalized training and development for our store associates. As evidenced by higher conversion and units per transaction, the training has empowered our store associates to help shoppers find the looks and the product that they want. We're also leveraging our product and merchandising expertise to offer compelling in store experience. A good example of that work in action is the T shirt bar we've recently added to several U. S. Outlet stores, which is driving sales of tops and higher units per transaction. From a product perspective, our renewed focus on icons and essentials such as the 5.11 jean, trucker jacket and tees is also being met with notable success. The net effect of these efforts on 3rd quarter results was an increase in comparable direct to consumer sales across each of our regions in both brick and mortar and e commerce. 3rd, with respect to the Levi's women's business, late in Q3, we began shipping the first flows of new products to address consumers' desires for softer, stretchier denim and better fits at U. S. Wholesale accounts. While we're still in the initial phases of the Levi's women's product relaunch, we're encouraged by both the initial sell in and the sell through rates of these products. And outside the United States, our Levi's Women's business continued to grow, especially in our Breville line. Notably, this quarter was the first since the domestic category began to slide a year ago where total Levi's women's revenues grew on a global basis. Finally, as Harmit discussed, we also continue to make progress on the global productivity initiative we launched in the Q1 and we're confident we will achieve our goal of net annualized savings in the range of $175,000,000 to $200,000,000 As a result of these actions, our organization will be more agile and we will achieve significantly improved structural economics. We're in the midst of sizing up additional opportunities and we'll share updates on our progress on the initiative later this quarter. With that, operator, we can open the line and we'll take your questions. Thank you. The floor is now open for questions. Your first question comes from the line of Karru Martinson with Deutsche Bank. Go ahead with your question. Just to look at the women's business a little bit more. When we look at the weakness in wholesale, I mean, how does that compare to what you're seeing within your stores? I mean, were you seeing a better pickup on the women's side or was that trend similar? Kura, I would say the softness in the women's business is more pronounced in the U. S. Wholesale business than in our retail stores. The product line is a different line. We tend to sell more of the premium product in our retail stores here in the U. S. We've got Revel in our retail stores for example. You can't find that in wholesale. The wholesale business skews to a lower price point and it really is a totally different line and to some extent even a different consumer. So the wholesale business is more challenged than our retail business is kind of the short answer. I mean there's been a lot of talk that the women's business is kind of our women's bottoms are focused more on the athlete leisure wear, yoga pants and things of that nature. I mean is that kind of where you see those dollars going or is that customer just not shopping right now? So the answer is yes. And so athleisure is definitely a trend that's out there. The premium part of the women's denim business is what's in the steepest decline here in the United States. And it is tending to move to the $100 yoga pants if you will. And all you got to do is walk around the main street in any city and you see it, right? The other thing that's happening though is this trend towards softer stretchier denim and that kind of product is available below $35 So if you look at the denim category below $35 in the U. S, it's actually growing. And because of this soft stretchy denim that women are looking for, That's part of the product line, which we've now put into market here in U. S. Wholesale, which will address kind of what the consumer is looking for is that softer stretchier den. So our expectation is that by having the right product in the marketplace in wholesale that we will at least begin to stem the decline of the denim market here in the U. S. And over time hopefully rebuild share and get the category heading in the right direction. One other I guess sidebar kind of to remind everybody, we have said that the women's reset that what we're launching right now in the marketplace is not all. So we will have more coming over the next 12 months to address that changing consumer need. Okay. And just lastly, I mean from a big picture perspective in terms of trends there's also been a lot written that denim is having a comeback on the runways for next year that you are seeing it both in men's and women. I mean do you feel that that's an opportunity for you? Or is that just more hopeful headlines? I believe it's an opportunity. I also think the fact that we're back on air advertising on television with broad marketing reach, not just here in the U. S. But globally, that is certainly going to drive the category as well. And as we do that, I suspect our competitors will respond and it should the water level should rise and float more boats. I think it will be good for the category overall. Thank you very much guys. Appreciate it. Welcome. Your next question comes from the line of Carla Casella with JPMorgan Asset Management. Go ahead with your question. Hi. It's actually just JPMorgan Securities. My question is related to wholesale business. Can you just talk about, I mean, now that we've anniversaried almost more than a year now, the denim bars at J. C. Penney and the new management strategies there, how are you seeing that business trending? And then how are your kind of new presentations in the other wholesalers as well? Okay. So I'll take a first shot at this. We try not to talk specifically about our business results on a customer by customer basis. We continue to think that the denim bar and the way we present the brand at PennEast has been a breakthrough for us. I will tell you that recently we've seen a significant deceleration of our business there as they have shifted their strategy to begin putting more focus back again on their private label business, which is out there kind of publicly. And it has impacted our business a little bit here over the last 1 or 2 quarters. But we do think that the step change in the consumer presentation kind of bringing to life the Levi's equity in store, which we first executed in J. C. Penney and then have now started kind of replicating in a very customer specific way at other customers has been a step in the right direction from an equity building standpoint. Okay. That's great. And then on this can you just talk about your outlook for sourcing costs? We've heard a lot from different apparel companies in terms of cotton versus labor versus shipping. Can you give us your outlook? Yes. So our perspective is that and if your question is specific to cotton, we've all seen a decline in cotton. We expect that decline to impact us favorably in the second half of next year. In terms of inflationary pressures, we're seeing a little. But given the scale of our operations, we think over time we can offset that and more through supply chain efficiencies. Okay. And then just one more. On the Asia business, any impacts from the Hong Kong protests? It's been marginal so far. We're keeping a close eye for it. The Hong Kong as a percentage of total Asia business is small. Okay. And then just any you mentioned that you can continue to see industry pressures through fall and holiday. We heard a lot on back to school that it kind of started out strong August and tempered off in September. Can you give us any color in just terms of back to school views? Well, the back to school for us falls predominantly in the Q4. So all I can really comment on is through the end of August. And I would say that our business pretty much tracked and mirrored what you just said that back to school started off strong. I really because we're in the Q4 and we'll report Q4 in February, can't really comment on what's happened after we got into this quarter. Understood. Thank you. Welcome. Thank you. Your next question comes from the line of William Rotor with Bank of America Merrill Lynch. Please go ahead with your question. Hi. This is Janine in for William. So my first question is, what are you hearing about sell through at retail? Retail or retail in general? In general. It's tough out there. Traffic continues to be As Chip reflected in his comments, we're offsetting negative traffic declines through positive sales largely driven by conversion and higher UPD. So from our perspective, things are a lot more positive than market realities are. Okay, great. Thank you. And then my next question is, do you consider any of your inventory to be in excess because it is up year over year? Yes. We do have some excess inventory and we're managing through that. As I said in our in my script that our intent is that by the end of the year inventory levels would come down to levels flat to last year. And if you look at it geographically, the inventories in Americas and Asia, we think will be flat. Europe will be slightly higher. Inventories overall are up largely because of two reasons. 1 internationally, we have increased our service levels and that's largely driven by high inventory domestically. Our sales have been soft in the U. S. And that's caused a bit of a inventory buildup. We are watering that down through by aggressively managing inventory and that are it's impacting our margins as you as have been reflected. Okay, great. Thanks so much. Your next question comes from the line of Jenna Gianloli with Citigroup. Please go ahead with your question. Hi, good afternoon. So just I have a question about how we should really be thinking about the Q4. I think you said in the press release that you're still expecting to manage to grow sales and adjusted EBIT this year. But as we think about maybe a more pressured gross margin heading into the Q4, is that going to be a function of your confidence on maybe some of the sales growth or the new women's line for 4Q? Or is it going to be coming through more so on the SG and A side? Thanks. I think the way to think about our 4th quarter, we have a positive outlook on revenue largely driven by timing. As we reflected, we have an extra week and that's Black Friday. So that should help us anywhere in the range of 2 to 3 percentage points for the quarter. Margins will be under pressure as we manage through inventory and we are in a fairly promotional environment. SG and A costs, we expect it to be down largely because of the productivity initiative we're talking about. So, exit rates on SG and A should be better than where they are today. And that should reflect our Q4. The only other thing we said is as you think about the year, we've taken CapEx down a notch from where we had it earlier. Does that address your question on the call? Yes, absolutely. Thank you very much. Actually and it just it leads into my kind of second question. On the CapEx reduction, I mean, I know it is kind of a small amount, but what's kind of that related to? Is it on maybe fewer new store rollouts? Or if you could give any clarity there? Yes. It's not fewer store new stores. In fact, our new store build program is spanning us as we thought it would at the beginning of the year. It's largely driven by the fact that we've just over the last quarter or 2 we have hired a new CIO and we've brought in a new e commerce leader. And as they reflect on their strategies going forward, we've taken a bit of a we've held back on some CapEx just to make sure that it lines up with the long term strategic thinking. So that's the reason for the pullback marginal pullback I would say. Okay. Great. And then just one final question if I may. This is kind of to dovetail off of Carlo's question. But in terms of the 150 bp gross margin contraction year over year, can you quantify a bit or break out how much really was related to higher product costs? And then how much of that was promotional? Thanks. Yes. It's difficult for me to quantify with absolute precision, but I'd say the sustainable piece of it over the next couple of quarters is going to be the margin impact because of discounts and managing inventory down. The product costs are, I would say, they are made up of a whole bunch of separate drivers, none of which are material and none of which in our view would sustain longer term. Okay, great. Thanks a lot. Your next question comes from the line of Grant Jordan with Wells Fargo. Please go ahead with your question. Good afternoon. Just maybe get a little more detail on the cost savings. Can you clarify how much cost savings you realized this year? And then kind of how much incremental we should expect to see going forward? Hey, what I said about cost saving is our run rate and SG and A continues to decrease. We are in the process of taking another look at our productivity initiative. And it's our intent that when we report quarter 4 earnings, we'll clarify for you exactly what the run rate on SG and A should be in 2015 and beyond. The good news for us is that we're making this is making a difference in improving the structural economics of our business. And I just ask you to be patient for another quarter before we get into a lot more detail. Okay. In terms of what you've actually done this year, have you given how much of that $100,000,000 $125,000,000 that you've recognized? Yes. No, we haven't disclosed that. It's a little difficult to quantify largely because we've got charges etcetera associated with it. So what we thought we'll do is when we report quarter 4, we will provide a perspective on the impact in 2015, which gives you a better perspective of the annualized number is. Okay. All right. Thank you. Your next question comes from the line of Todd Barker with UBS. Please go ahead with your question. Yes. Congratulations on a good quarter. Can you talk about how the strong U. S. Dollar, how that should impact your results over the next 6 to 9 months? And typically, you like to be conservative and push short data maturities out while advancing maturity date. Does the stronger U. S. Dollar change your view at all when you should address the Japanese and the euro bond? Thanks. Not really. It is something we're looking at. Having said that, the way we look at our borrowings and the debt we have, we're looking at it more from should we take advantage of the capital markets or not. Our bonds are callable. It comes at a cost. So again, we look at the economic equation and that's one way we're looking at it. The second is just cash flow needs of the company. So I'd say stay tuned. It's something we're taking a look at, but more to come over the next couple of quarters. Okay. Sounds good. Then your 10 Q under the business segment breakout, it shows your corporate costs going up 6,000,000 dollars year over year. But then when you go to the detailed SG and A breakout, it shows your admin costs going down by $7,000,000 And then on when you back out the charges, it was down $15,000,000 Can you help us understand the delta there? Or am I looking at kind of apples and oranges in that comparison? Yes. No, I'm not very sure on the specifics. So why don't we take that the question on point and we'll get back to you. Okay. I appreciate it. Thank you. Again, good luck with the holiday. Thank you. Thanks. Your next question comes from the line of Hale Holden with Barclays. Please go ahead with your question. Thanks for taking the call. I had a few. On the Q4 margin or the margin the gross margin outlook for the year, I was wondering if you could sort of scale how much of that was due to working your inventory down and increased discounts versus just the promotional environment at large? So trying to figure out how much is under your control and not under your control. Are you asking about quarter 3 or quarter 4? Because you're not guided on quarter 4. You haven't guided on quarter 4, but you did say that we'd be down on a little lower than the prior gross margin expectation for the year related to getting your inventory down and then the promotional environment that's outstanding in the U. S. I'd say it's a combination, difficult to quantify with precision, but I'd say both factors are contributing to it. And both are within our control. Even if the market's fairly promotional, we can take the decision not to, but then you outcompete yourself from that perspective. So we look at the size of our discount putting on a commercial hat and saying, okay, does this drive good revenue or bad revenue from that perspective. I think on the inventory side, it will have an impact. And that's again a week by week decision as again something we can predict with exact precision for the quarter. Okay. And the second question was on the production cost increases that you noted in the Q3. Was there something specific that was driving that or just a bunch of small things? It's just a bunch of small things. Again, nothing material. For example, there was a few products that we were trying to get to our customers or consumers as we reset some of our things like on the women's side. So there was cost associated with that air freight for example. So there are small insignificant things that has added up and we decided to call it out. Okay. And then last question. Chip you had talked last quarter kind of around demand generation from the new advertising campaign that both you and some of the other larger jeanswear companies in the U. S. Were doing this fall. And I was wondering if that was turning out the way you thought it was and you were seeing the ROI associated with the advertising you hoped? Yes. It's still early days. I mean, we have I think 2 or 3 weeks of copy on air in the U. S. Through the end of Q3 and way too early to really call it. We are running some tests. What I can say is that we quantitatively tested the advertising before it went on air, qualified it in quantitative testing. So we feel bullish about it, but it's really too early to call the ball on it. Great. Thank you very much. Appreciate it. Sure. Your next question comes from the line of Kevin Quine with Goldman Sachs. Please go ahead with your question. Hi, good afternoon. Thanks for taking the questions. Most of mine have been asked and answered. But I was just wondering bigger picture since where I sit, I don't have a good sense as to how long the athletic trend can continue. I was just wondering, do you comp this to any other trend you've seen in the past? And secondly, are you doing any type of let's say research or development in terms of something that you could introduce to compete or comp with that? Or would you just potentially consider ever acquiring a business to add that on? I guess probably the it's going to sound like a quip, but we've been selling BlueJeans for 141 years and I think we've probably seen it all in terms of trends and fads that have come and gone. And I would put this into that category. I mean, there's no question there's a trend as I said earlier, just walk down the street, right, and you see it. I suspect it too will have its passing time. The one thing that is happening in denim, which I referred to earlier is consumers really are looking for that especially women's super soft, super stretchy material. As jeans go slimmer and tighter fitting that stretch and that comfort from the softer denim material is something that they're looking for. And we're now responding to that with the right kind of products to address that. And hopefully that will stem the tide and slow the decline in the category and we'll begin to see it stabilize and then we'll be able to grow it with further innovation. Is there anything you're hearing from those let's say reviews of your soft denim relative to someone who also wears the athletic line that what can be improved or what they like better? And is that a potential improvement down the road? Well, yes, I mean, we're clearly moving in the right direction. I mean, the response from customers as we've sold that new product in has been very, very positive from our customers, if you will. And the sell through, as we mentioned in the prepared remarks, the sell through has been encouraging. It's still again early. But clearly staying in touch with what the consumers are looking for and responding to what they want from a product standpoint will help get this category growing again. And clearly where the puck is going in part driven by athleisure that tight super stretchy material that's what we're responding with. Okay, great. Thank you. Sure. Your final question comes from the line of Carla Casella with JPMorgan. Hi. I just had one follow-up. You mentioned the e commerce business was up solidly. When you talk about e commerce, are you including yours and third party or is that just from your own site? No, it's only our site. Can you say how you're selling through your wholesale customers online businesses? Yes. We don't specifically disclose that, but the business is up. Okay. Just to build on that though too Carla. As we build our own internal capabilities in e commerce and digital assets and everything, we're working with our largest wholesale customers. I'm kind of ambivalent to where the consumer buys Levi's. I just want them Levi's or Dockers, I just want them buying our stuff. And if they buy it off of macys.comorpennys.com, that's okay with me. So we're sharing our digital assets and working closely with their e commerce teams as well to kind of work together to drive the Levi's and the Dockers brands. Okay, great. Makes sense. Thanks. At this time, I'd like to turn the floor back over to the company for any closing remarks. I just want to thank everyone again for calling in. It's going to be a while before we talk again as we kind of round the corner heading towards home and closing the fiscal year on the final Sunday of November right after Black Friday. And our next call won't be until February. So I wish you all happy holidays and we'll talk to you again in a few months. Thank you. Thank you. This concludes today's conference call. Please disconnect