Earnings Call: Q4 2018

Mar 28, 2018

Good day, ladies and gentlemen, and welcome to the Oxford Industries 4th Quarter and Fiscal 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the floor over to Ms. Anne Shoemaker for opening remarks and introductions. Thank you, Justin, and good afternoon, everyone. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q and A session may constitute forward looking statements within the meaning of the federal securities laws. Forward looking statements are not guarantees and actual results may differ materially from those expressed or implied in the forward looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10 ks. We undertake no duty to update any forward looking statements. During this call, we will be discussing certain non GAAP financial measures. You can find a reconciliation of non GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website atoxfordinc.com. Please note that all financial results and outlook information discussed on this call, unless otherwise noted, are from continuing operations and all per share amounts are on a diluted As a reminder, the results from the Ben Sherman business are reflected as discontinued operations for all periods presented. Also on April 19, 2016, the company acquired Southern Tide. Please note that fiscal 2017, which ended February 3, 2018 was a 53 week year with the extra week included in the Q4. Comparable store sales for fiscal 2017 and the 4th quarter are calculated on a 53 to 53 and 14 to 14 week basis respectively. And now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO and Scott Grassmeier, CFO. Thank you for your attention, and I'll now turn the call over to Tom Chepp. Good afternoon, and thank you for joining us. As we begin our new fiscal year, I'm pleased to begin by recapping the success we achieved with regard to operational objectives and financial performance over the course of 2017. As you know, it was a tough year for many companies in our industry, and I'm proud of our organization for setting us apart from the pack and demonstrating true industry leadership. I'll talk about our progress and performance on an enterprise level and give you some detail on the accomplishments of our individual brands, each of which did a great job this past year. Those comments should provide you with good context for the outlook we are communicating for 2018 and the way we intend to sustain our progress in the coming year and beyond. Oxford's 4th quarter and fiscal 2017 delivered a solid return for our shareholders. We achieved top line growth of 12% in the Q4 of fiscal 2017 and adjusted EPS of $0.93 per share compared to $0.63 in the Q4 of last year. These strong 4th quarter results contribute to a very successful year for Oxford. For the full year, net sales grew by 6% to 1,086,000,000 dollars including a 3% comp store sales increase. Adjusted operating income grew by 9% and adjusted EPS grew 11% to 3 point 6 six dollars per share. For the year, our direct to consumer business comprised of our bricks and mortar stores and restaurants as well as business done through our e commerce websites accounted for 2 thirds of our total revenue. During fiscal 2017, we were particularly focused on playing to our strength in e commerce and mobile, and our enterprise wide e commerce business grew 11% to $205,000,000 Our e commerce business now constitutes 19% of our total revenue. During the year, we made significant progress in improving the way that we interact with our customers, including enhancement to the mobile experience with our brands. We also developed plans to replatform the Lilly and Southern Tide the Lilly and Southern Tide e Commerce businesses, both of which will be executed in the first half of fiscal twenty eighteen. These and other initiatives should help us drive continued growth in our web businesses. Our plan for fiscal 2017 also included managing our department store exposure very carefully. Department stores continue to face significant strategic challenges and are operating in a highly promotional environment. We value our relationships and partnerships with our department store customers. These are some of the greatest retailers in the country, and we are continually looking for ways to build mutually profitable businesses with them. That said, where we can't find a way to build a win win business that is in the harmony with our standards for presenting and merchandising our brands, we are prepared to walk away from sales in order to protect the integrity of our brands. As a result, during fiscal 2017, sales to department stores declined to 14% from 16% of total sales in the prior year. We have cut back the number of doors we are selling at certain department store chains, and we expect additional decreases in the wholesale sales in fiscal 2018. In 2017, as we considered the challenges in the retail landscape, we continued our conservative stance on new store openings and renewals of leases on existing stores. Between Tommy Bahama and Lilly Pulitzer, we opened 10 new stores and closed 7. During fiscal 2017, we also purchased 12 existing Lilly Pulitzer Signature stores, which included stores in strategic markets such as Boston, Cape Cod, Martha's Vineyard and Nantucket. So as of year end, our total store count at Oxford was 223 stores. Going forward, we will continue a restrained opening pace given the changes ongoing in the marketplace. Moving on to some of the brand highlights, I'll start with our biggest brand, Tommy Bahama. At Tommy Bahama, addressing the profitability of this business was a top priority for fiscal 2017. We are pleased to report that we made good progress. During fiscal 2017, we grew Tommy Bahama total sales by 4% and gross margin expanded 100 basis points. Adjusted operating profit grew by 24% and our adjusted operating margin at Tommy Bahama expanded to 8.2% compared to 6.9% in fiscal 2016. We achieved 7% growth in Tommy Bahama's e commerce business during the year, and e commerce now comprises 16% of our total Tommy Bahama business. Our Tommy Bahama women's direct business grew nicely and now represents 30% of our total Tommy Bahama full price direct business. In addition, we made terrific progress in cleaning up and improving the performance of our outlet stores with a meaningful year over year decrease in inventory and gross margin expansion. One of the highlights of the year in Tommy Bahama was the success of some of our marketing initiatives, including the beautiful Live the Island Life Spring catalog and the Give the Island Life Holiday catalog. We finished the year strong with a 6% comp for the 4th quarter. This represents the 4th consecutive quarter of mid single digit positive comps at Tommy Bahama. We are proud of the improvements that the Tommy Bahama team was able to make during fiscal 2017. Lilly Pulitzer also finished the year with a strong 4th quarter, posting a 6% comp. The momentum really began with the after party sale in August. Then by being nimble and agile and coming up with a variety of creative initiatives, the team at Lilly was able to maintain that momentum through the 3rd and 4th quarters and into 2018. So as we now turn our focus to 2018, we believe that we have excellent plans to drive the profitable growth that will help us continue to deliver long term shareholder value. Scott will provide more detail on guidance in a minute, but here are some of the top level highlights. We expect total sales growth in the mid single digits driven by our direct to consumer businesses, particularly e commerce, which we expect to grow in the low double digits. In addition, we will be opening some new stores in 2018, particularly in locations that we believe are strategically appropriate and important, including our Tommy Bahama Marlin Bar and Grill in Palm Springs, a Lilly Pulitzer store on Worth Avenue in Palm Beach and our 1st Lilly Pulitzer store in Hawaii at Whalers Village on Maui. For the full year, we expect direct to consumer sales to once again increase as a percentage of total revenue. Growth in direct will be partially offset by further reductions in the wholesale, particularly in the Q1. We expect EPS to grow by more than 20% driven by sales growth, improved margins and of course, a reduced tax rate. To deliver this top and bottom line growth amid the continued disruption in the consumer marketplace, we have developed additional strategies, particularly in the area of marketing. A couple of key changes in our marketplace are combining top end marketing in our space. Until recently, some of the best tools for marketing brands like those in our portfolio were placement in the right department stores and owning your own stores in the right malls. Both of these virtually ensured that qualified customers would be exposed to your brand. Placement in select department stores and mall based company owned stores still play a role in our overall strategy. However, due to declining traffic in physical stores and malls as well as the struggles of the department store channel in general, they are not the potent customer acquisition tools that they once were. As a result, we are increasingly focusing our physical store site selection on iconic locations in resorts and resort towns such as the aforementioned locations in Palm Beach, Maui and Palm Springs. In addition to rethinking physical locations, we are rethinking brand marketing and communications. On the media front, the world has also changed dramatically. Digital and social media have moved to the forefront of modern marketing. In theory, digital media makes it easier and cheaper to reach consumers. While this is true to some extent, the digital media ecosystem also makes it easier than ever for consumers to tune out in a way that was not possible when the majority of consumers were watching the same three networks and reading the same group of newspapers and magazines. Consumers have greater control than ever over which messages actually reach them. Acquiring and retaining customers has always been a priority for our business, but these changes in media and the diminished marketing value of many physical distribution channels have combined to make customer acquisition and retention one of the most pressing challenges of our time. Accordingly, across Oxford, marketing to acquire and retain customers will be a top priority in fiscal 20 18. This will include the addition of staff, increased spending levels and using a variety of marketing techniques, some of them new and some of them innovations on tried and true methods. Examples so far in 2018 include Lilly Pulitzer's return to the swimwear business, which we successfully treated not only as a product launch, but as a marketing event to activate both existing and new customers. Other examples include Lilly's participation as a sponsor in the Honda Classic Golf Tournament and their collaboration with Pottery Barn, both of which were great customer activation events. And in Tommy Bahama, where we will be leveraging our recently launched Long Live the Island Life marketing campaign in a variety of ways throughout the year as we celebrate Tommy Bahama's 25th anniversary. Using marketing to drive customer acquisition and retention throughout the year will be a priority, and we expect to increase our marketing spend in 2018 by approximately $12,000,000 enterprise wide to over 6% of total company revenue. Now more than ever, the marketplace requires brand Thanks to mobile devices and the Internet, consumers have unprecedented access to information about brands, products and pricing as well as the ability to communicate directly with brands and other consumers. It is easy for consumers to find the lowest prices on products from brands they love and find substitutes for products from brands they are not emotionally committed to. The transparent and globally accessible marketplace created by the digital mobile environment means that brands are effectively competing for consumer attention and affection with most of the other brands in the world. To stand out in this virtual sea of brands, a brand must be very distinctive, unique and consistent in its positioning, product and messaging. Consumers are looking for brands that seem to be designed just for me. In this setting, it is more important than ever that brands be the first choice of a few rather than the second choice of many. With brands like Tommy Bahama, Lilly Pulitzer and Southern Tide, Oxford is well positioned to take advantage of this environment. We also today announced a meaningful increase in our dividend. We believe this 26% increase represents an appropriate distribution to our shareholders and reinforces our commitment to delivering long term shareholder value. For that, we should thank our people. Everything we do and everything we achieve flows from an incredible group of men and women who come to work every day focused on making our customers happy and coming back for more. With that, I'll now turn the call over to Scott Grassmeier for more details on fiscal 2017 and plans for 2018. Scott? Thanks, Tom. Tom covered the high points of our financial results for 2017, but I'll just touch for a moment on our balance sheet and capital Our balance sheet remains strong and we have a capital structure well positioned to support growth. Improved inventory turns at Taimuahama, Southern Tide and Lanier Apparel resulted in inventory reductions year over year. Inventories decreased to $127,000,000 at the end of fiscal 2017 compared to $142,000,000 at the end of fiscal 2016. At February 3, 2018, we had $1,000,000 of borrowings outstanding and $220,000,000 of availability under our revolving credit agreement. Cash flow from operations continued to be strong at $119,000,000 and free cash flow was 80 $1,000,000 I'd now like to walk you through our projections for 2018. For the full 2018 fiscal year, adjusted earnings per share is expected to be between $4.40 $4.60 on sales in the range of $1,120,000,000 to $1,140,000,000 In fiscal 2017, which was a 53 week year, sales were 1 point $86,000,000,000 and adjusted EPS from continuing operations was $3.66 Our interest expense is expected to be approximately $3,000,000 and our effective tax rate is expected to be approximately 26%. For the Q1 of fiscal 2018, we currently expect net sales between $265,000,000 to 2.75 $1,000,000 Adjusted earnings per share from continuing operations are expected to be between $1.15 $1.25 On a comparable basis, sales were $272,000,000 in the Q1 of fiscal 2017 and adjusted EPS from continuing operations was $1.12 As we look at how the year lays out, our first quarter operating income will be negatively impacted by the combination of wholesale sales reductions and increased marketing spend. The reduction in wholesale sales for fiscal 2018 falls disproportionately in the Q1. Our capital expenditures in 2018 are expected to primarily consist of cost associated with information technology initiatives, including e commerce capabilities, opening and remodeling restaurants and full price retail stores and facilities enhancements for distribution centers and offices. In 2017, capital expenditures were $39,000,000 and due to a shift in timing of some of our projects, we expect capital expenditures to approach $60,000,000 in 2018. The blend of the 2 years represents a more normalized run rate. In fiscal 2018, we expect cash flow from operations to significantly exceed our capital expenditures and dividend requirements. Here are some additional details of our plans for each of our operating groups in 2018. With healthy sales increases in our direct to consumer business materially offset by reductions in wholesale sales as the number of doors is reduced, we expect the top line at Tommy Bahama to grow very modestly. Tommy Bahama is planning to open its Palm Springs Marlin Bar in the first half of fiscal 2018. We expect to have a handful of additional doors open in 2018, including a new location near Melbourne, Australia and one in Napa, California. These openings will likely be offset by some closures at lease expiration. We expect to drive gross margin expansion of approximately 100 basis points and operating margin expansion of approximately 50 basis points in fiscal 2018. For fiscal 2018, Lilly Pulitzer is expecting a high single digit sales increase compared to fiscal 2017 with the benefit of operating additional stores and increased comps in the mid single digits. Wholesale sales are expected to be lower year over year due to a reduction in door count and the conversion of 12 signature stores to company owned stores in 2017. We expect to open 3 to 4 new stores in 20 18. Operating margin is expected to be comparable to 2017. For Lanier Apparel, we're expecting a mid single digit percentage increase in sales with operating income flat with 2017. Southern Tide's plan for fiscal 2018 includes low double digit increases on both the top and bottom line. Finally, the operating loss in our corporate and other segment is expected to increase by approximately $1,000,000 Overall, we are optimistic about our plans for 2018 and expect to deliver another solid year. And Justin, with that, we're ready for Our first question will come from Edward Yruma with KeyBanc Capital Markets. Hi, good afternoon guys and thanks for taking my questions. I guess first on the e commerce replatforming, I know you talked about IT investment in the Q1. I guess how should we think about how to model in any potential disruption? When does the go live happen? And perhaps more importantly, what is your objective in replatforming? And how will importantly, what is your objective in replatforming? And how will that enable kind of stronger growth in the e commerce business? First of all, with respect to any disruption in the business, obviously, our plan is to try to avoid disruption in the business, partially by timing the transition to a period that's maybe slightly slower than some other times during the year. And then secondly, just by very, very careful planning and execution. So hopefully, we won't see a lot of disruption there. Then in terms of what we're trying to accomplish there, the sort of catchall phrase of it is that we're trying to enhance the consumer experience. There are things that we're doing that are designed really to make the website easier for us to use and to merchandise to deliver that experience to the consumer. And then on the consumer side, there are things that hopefully will make it more usable and shoppable for them. They're both good websites already. So it's not like we're going from dysfunctional to functional. It's just trying to enhance the functionality of those websites. We replatformed Tommy Bahama's a couple of years ago and it was a very smooth transition. We didn't have interruptions and we think the same will be for Lilly and Southern Tide. Great. And one follow-up, if I may. I know you've been very strategic in lowering department store exposure across the enterprise and it does sound like you're going to continue to reduce store count, particularly at Tommy Bahama. How should we think about the doors that you're exiting at this point? Is it kind of still one off? Are you exiting specific chains? And then I guess kind of the offset, is there an opportunity to grow in specialty doors or in resort locations? Thanks a lot. Yes. I think, Ed, I would characterize it as being more one off and door specific as opposed to wholesale exits of entire chains. So really just looking at all the doors that we're in and evaluating whether it's performing whether the business is performing well for them and where it's not pulling back. As we said, we want to have fine situations and we're always looking for them where we can be successful and the department store can be successful and we can present the brand in a way that's consistent with our standards for presenting and merchandising the brand. In terms of growth opportunities, we do think there are some opportunities in some parts of the specialty world as well as the resort world. Those are probably not quite as big as some of the department store businesses. So the net ends up being some reduction in the wholesale. Moving on to Susan Anderson with B. Riley FBR. Hi, Susan. Hi, thanks for taking my question. Nice job on the quarter you guys. Thank you. I guess just a follow-up on the wholesale question. Where do you guys think we're kind of at in the cycle of rationalization there? Would you guys expect more pressure over the next 2 to 3 years? Do you think that we've kind of we're starting to hit a bottom there? Or do you think there's kind of more to come? It's hard to say. And look, Susan, we're not looking to exit businesses. It's just that we want to be prepared to do it if we need it. I think there are some signs that maybe that world is beginning to stabilize a bit. And we certainly would love to see that be the case, but I think we've got to be prepared for sort of either eventuality. And for 2018, it's there's still a little bit of downward pressure there. Got it. Okay. That's helpful. And then just one last one really quick on the Tommy outlook. I think you guys had said modest sales growth. Maybe I missed it. Did you guys talk about the comp growth or is the modest growth more coming from some of the closed stores that you guys are expecting? Our opening will have a pretty modest opening store pace, but we should we expect to have positive comps at Tommy. We've got a fairly moderate comp increase plan there and then we'll have some wholesale decrease. So I think the we'll open a few doors, we'll get some positive comp. Our e commerce business has been very strong and we should expect it to continue to grow and that's a big focus. But we will have some wholesale decrease also. And we also decrease also. And we also remember 2017 was 53 week year and we got a 52 week year next year. Yes. And next will be Rick Patel with Needham and Company. Thank you. Good afternoon, everyone, and congrats on capping the year in a strong way. Thank you, Rick. As we think about the outlook for Tommy in DTC, how much of your revenue growth in 2018 will come from the flow through of initiatives in 2017, meaning whether it's price increases or gift card events, etcetera, versus new initiatives that are look it looks like it's going to be focused more on new customer acquisition this year. Just wondering how they balance out? I think they're going to I think the new customer acquisitions can be more important. We'll get a little bit out of some of the price increases, but we kind of the 53rd week kind of neutralizing that to a certain degree. But I think it's the new initiatives we're hoping to gain customers. We are spending more marketing and we expect to get some new customers out of it. We don't know how quickly that will happen because the increased marketing spend is more around customer acquisitions more so than communicating with our existing customer. We'll still do that part, but some of the additional spend is on customer acquisition. So that is a focus for sure in 2018. So on that point, one of the big themes this earnings season has been the need for a lot of companies to invest in data analytics and CRM capabilities. How do you feel about the capabilities you have across each of your brands to leverage analytics in order to be the most impactful that you can be from a marketing perspective? Well, that's absolutely a focus of a lot of the IT investment that we're doing is trying to improve our capabilities in those areas. I mean, there's certainly a lot that we can do now and that we do now, but we want to be able to do more. So that area of CRM in particular and data analytics are both a big part of what that overall IT investment is. And that's really sort of across the And as we look for double digit revenue growth, how much of that will be organic, so to speak, versus your new retail strategy? Well, it's not really a new retail strategy. I mean, they had one signature store, I believe, when we bought them. They opened 2 more within 2016 and then, what, 4 or 5 last year. And then as you know, you've read about they've got plans for more this year. So that idea of having the licensed signature stores has been that's been part of their strategic plan since before we bought them in terms of how much of the growth is coming directly from the signature stores versus other avenues. It's going to be a meaningful portion, but not the majority. Right, right. Yes. Less than half. That's very helpful. Thank you very much. Okay. Thank you. Our next question comes from Michael Kawamoto with D. A. Davidson. Hey, guys. I'm on for Andrew today. Thanks for taking my question. Just on the Little Pulitzer Pottery Barn collaboration, are you expecting an increase in traffic and comps at Lilly's stores similar to what you saw with the Target collaboration, maybe not to that scale, but has traffic picked up at all in the Signature stores or is it too early to tell? Yes, we definitely got a list in activity as a result of that collaboration and some of that's still going on. Officially, I guess, it went live about 2 weeks ago now, I think. Some of the catalogs continue to dribble out and sometimes people don't actually get to their mailbox when the catalog first hits. And so we're continuing to see benefits from that to this day. And it is I think the way you characterized it, Michael, was perfect. It's similar to the target effect that we saw, not the same scale, but still a just a terrific win win sort of marketing event for us. And I think it's been good for Pottery Barn as well, which is important to us. We want them as our partner to be successful as well. And from everything we're hearing from them, it's been quite good for them as well. Awesome. Thanks. And then just on the outlet business for Tommy, you spent a lot of time improving merchandising and it sounds like it's resonating pretty well. What are your expectations for the outlets in 2018? Continued gross margin expansion and even if the comps aren't up significantly, we think the gross margin expansion will make those more profitable than they were. And we're keeping balance with moving the inventory we need to move, where in the past we weren't quite moving what we need to move. We now are able to keep up. Awesome. Thanks, guys. Thanks a lot, Michael. And next will be Pam Quintilliano with SunTrust. Hi, Pam. Thanks so much. Hi. Thanks so much for taking my questions. And let me add my congratulations on execution, not only in the quarter, but the year as well. So first question, can you just give us an update on how Hawaii and Asia are doing for Tommy Bahama? Yes. Hawaii is good right now. Strong. I think the tourism stats are good there and we're seeing it in our business. We're pleased with the way that Hawaii is going right now as we talked about. Of course, Tommy is already there in a big way and we're going to be opening a Lilly Pulitzer store there in Whalers Village on Maui where Tommy has had a great store for a long time and that will be Lilly's 1st store in Hawaii. So very excited about Hawaii right now. And with regard to Asia, it's sort of more of the same story that you've been hearing from us over the last couple of years. We're very focused on growing and running well the business that we have in Australia and continue to be pleased with that. And then in the China and Hong Kong market, that's now licensed and that's licensed business is slowly growing and moving forward, not material to the enterprise at all, but it is moving forward. And then in the remaining Asia business, we're continuing to cut the loss and look for opportunities to maybe find a partner to help us out in some of that business. And I think Scott, what's our the loss will come down? Yes, it will come down. We should come down by at least $2,000,000 in 2018 and we did some similar in 2017. So the loss is whittling down. There's still a loss there, but it's certainly coming down. Great. And then if I could just ask on, I know you mentioned the Marlin Bar in 1Q opening a location, but how should we think about annual plans Marlin Bar and are there going to be any restaurant retail combo locations opening this year? Well, that Palm Springs Marlin Bar will have a retail store with it as well. And it will be it's maybe sort of halfway between a regular restaurant and the Marlin Bar that's in Coconut Point, Florida, which is the first one that we did, but there will be a retail store there. And then we continue to look for additional locations that would build upon that Marlin Bar concept. I don't think we'd have anything to announce. Nothing to announce yet, but we are looking at several than if you could just talk about holiday overall for retail seem to be better than a lot anticipated. How do you think your consumers feeling right now? Do you think that they're more optimistic? Do you think within the realm of the shopping experience that you're talking about and maybe department stores are not as intriguing as they once were for the consumer, but do you think they're, when you look at your own store traffic coming to the store more often and more engaged, you could just give us a little bit more information on that? Thank you. Well, I think overall, and this is reflected in the holiday sales for us and others, I think the consumer is extremely strong right now. I think that they're feeling whatever their thoughts may be about a variety of world events, they feel quite good about the economy right now and their ability to come out and spend. And our challenge, like every other business, consumer business in the world is to make sure that we're getting them to us. And as the retail landscape changes, there is continues to be a decline in mall traffic. People are more focused on buying when they get there. We continue to see conversion rates going up. So they're they may be there less, but they're more intent on actually buying when they're there. And our job is to not fight the trends in the market, but to figure out how to play to them to our advantage. And I think we did that successfully in 2017, particularly in the Q4. That's why we were able to generate the results that we did. And we think our plans for 2018, including the enhanced marketing spend, which is a pretty big deal for us, dollars 12,000,000 additional is a lot. And we think we're focused on the right things to continue to drive profitable growth. And just the quarter to date, any commentary on momentum? Yes. We're pleased with what we've seen quarter to date. Overall, we've got positive comps. It's a bit stronger in Lilly than in Tommy right now, but we're expecting a big month in April in Tommy. And we feel good about our plan there. April is a big month for Tommy typically. Excellent. Well, best of luck. Congratulations again. Thank you. And next will be Dana Telsey with Telsey Advisory Group. Good afternoon, everyone. As you think about the $12,000,000 of additional marketing spend, is this a steady state going forward? And which businesses overall with the marketing do you expect to have the earliest reception to the marketing? And then also as you think about your gross margin and the buckets of gross margin for each brand, how should we think of 2018, whether it's product costs, whether it's markdowns, clearance, how do you think it derives? Thank you. Okay. That was a lot of questions in one question. But we'll start at the top and try to pick them off. I think the increased marketing spend, I would so this year, I think we're at projected at 6.2% of sales for the total company, which would be up from about 5.4% for 'seventeen. So I would expect us to continue to spend at a higher level than we did in 'seventeen in future years, whether it will be quite as high as a percentage of sales as it is this year, I don't know. It may come down a little bit next year. And the reason is, Dana, is that a lot of that additional spending is in Tommy Bahama. And frankly, we're doing a bit of testing and experimenting. We're trying some things. Some of them are going to work better than others, and that's going to inform our sort of future plans and spending. Some of those things that Tommy is doing, I think, are going to take a little longer to seed. Some of the things that Lilly's got going, for example, the Pottery Barn initiative, that's not a great example because we actually get paid for that one. It doesn't cost us anything, but it still has almost an immediate effect. The Honda Classic Golf Tournament is maybe a better example because we did spend some money on it, but there's we had sales actually at the tournament. And so there's sort of an immediate payback, hopefully some longer term burn on that as well. But hopefully, that helps explain what we're trying to do here. And again, the big picture, Dana, is that as the marketplace is changing, we want to make sure that we're doing the right things to get the consumers' attention because we know that if they're looking at our brands, they will love what they see and they'll buy it, but we need to make sure we're getting them looking at our brands. On the gross margin, we expect gross margin expansion at Tommy Bahama really in all their channels of distribution and they'll have the impact of direct to consumer being a higher percent of the mix. But we've had some of the initiatives that we started last year on input cost reductions and some price increases that should help. We also have our outlet stores that we were cleaning up last year that are going to have healthier margins. In Lilly, their margin should hold. They've always had good gross margins, and we think they'll hold well. Did you miss anything? No, you got it. Okay. And that does conclude the question and answer session. I'll now turn the conference back over to Tom Chubb for any closing or additional remarks. Okay, Justin. Thank you again for your time this afternoon. We appreciate your interest and look forward to speaking to you again in June. Well, thank you. That does conclude today's conference. We do thank you for your participation today.