Oxford Industries, Inc. (OXM)

Earnings Call: Q3 2017

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Dec 6, 2016

Good day, ladies and gentlemen, and welcome to the Oxford Third Quarter 2016 Earnings Conference Call. As a reminder, today's conference is being recorded. At this time, I'd like to turn the floor over to Treasurer, Ms. Ann Shoemaker. Please go ahead. Thank you, Lisa, 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 fiscal 2015 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 basis. 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, which is presented as a separate operating group. 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 now I'd like to turn the call over to Tom Chubb. Good afternoon, and thank you for joining us. I'll start today's call with a brief overview of our Q3 results. We were generally pleased with our Q3 financial performance with top line growth of 12% and improved operating results over last year. As in the past, Oxford's Q3 continues to be significantly smaller than our other quarters, driven by the seasonality of our lifestyle brands. Here's a little color by operating group. Lilly Pulitzer's positive momentum continued into the 3rd quarter with a 19% sales increase and comp store sales gains of 12%. Tommy Bahama's sales grew 2%, more modestly than we expected and comp store sales were negative 6%. Traffic at our Tommy's stores was 9% lower than last year. Southern Tide contributed $8,700,000 of revenue to the quarter. And last but not least, our Lanier Apparel Group had a sales increase of 17% primarily due to a shift in timing of several programs and some initial shipments on new programs. Importantly, our inventory position at the end of the third quarter is good. On a consolidated basis, inventory was higher, but that was almost entirely attributable to the Southern Tide acquisition. Tommy Bahama, our largest operating group, has done an exceptional job managing inventory. They are operating with greater efficiency at the store level, clearing goods more quickly through their outlets and flash sales and managing inventory buys conservatively. We believe that it was critical to enter the Q4 with a clean conservative inventory position and we achieved that goal. I'd now like to shift the discussion a bit and talk about what we are seeing right now with the changing retail environment and how we see that influencing our future in both the short and long term. Fundamental changes in the retail marketplace and customer spending patterns that have been picking up steam for several years are certainly apparent as we move through this year's holiday retailing season. Not that many years ago, the formula for successfully connecting with the consumer, while not necessarily easy to execute, was relatively straightforward. Have a great brand message represented by compelling differentiated product, place that product in the right department stores, build your own stores in the right malls and other venues and communicate the brand message through a handful of well established media channels. Today, bricks and mortar traffic at malls and other venues is declining. The relevance of department stores to the consumer is diminishing and the media ecosystem has rapidly transformed from being highly concentrated to highly fragmented. In the new world, consumers have unprecedented access to product as well as information about brands, products and pricing. Brands and consumers are also able to communicate directly with each other in ways that would have been hard to imagine only a few years ago. At the same time, the fragmented media ecosystem provides the consumer with the ability to shut out and ignore messages they don't want to hear in a way that was not really possible in the not so distant past. So the question is, in the new retail environment, how do brands win? As evidenced by the current market, many are attempting to compete almost exclusively based on price with promotions being an almost daily occurrence frequently resorting to across the board storewide or sitewide discounts. Ultimately, we believe excessive price promotion commoditizes the brand and destroys brand equity. In contrast, we believe the better way to win over the long term and drive sustained profitable growth is to emotionally connect our consumers to the happy times and the happy places evoked by our brands in ways that are adapted to the emerging new order of retail and communication. Let me give you a couple of examples. Tommy Bahama's brand message is all about the islands relaxing and making life one long weekend. For many years, one of the restaurant store locations, which we refer to as Islands. Any guest that has experienced the upscale but relaxed tropical vibe can't forget what this brand stands for. These Island locations island locations also generate roughly double the retail store sales per square foot, but not every location is right for a full scale Tommy Bahama Island. So the team at Tommy came up with an innovative and exciting concept called the Marlin Bar that leverages both Tommy Bahama's expertise in the relaxed island lifestyle as well as our expertise in food and beverage. The Marlin Bar is a distillation of our many years not only serving our guests but also understanding how they like to relax. The Marlin Bar is a place to gather and enjoy the simple pleasures of good food and quality products, a whole new way to enjoy the Tommy Bahama experience. A few weeks ago, we opened the first of these new concept locations at Coconut Point, a beautiful lifestyle center north of Naples, Florida. Smaller and less capital intensive than our island locations, the Marlin Bar welcomes guests to its walk up bar, communal tables, dining area and retail store. The bar serves cocktails, craft beer and a curated wine list while also offering bowls, sandwiches and salads featuring local seafood and regional produce. We are extremely pleased with the early results and very importantly, the Marlin Bar is driving higher levels of traffic at and around this new location. The experience of the Marlin Bar simply can't be replicated while sitting on your couch with your iPad in the hand. Lilly Pulitzer like Tommy also has a very distinctive brand message. It is resort, resort, resort. Everything Lilly does is focused through the very clear lens of being the best at resort chic apparel and accessories inspired by Lilly Pulitzer's optimistic Palm Beach lifestyle. So what better way to remember Lilly Pulitzer, the person, than by celebrating her birthday in a big way. On November 10, Lilly's birthday, we teamed up with Southwest Airlines and sponsored a flight from DC to where else Palm Beach. Festivities included an on-site artist painting lily prints, beach ready music and lots of free goodies. This single event had a fantastic impact on the 200 or so folks on the flight. But then as you might guess, social media kicks in and the marketing buzz literally exploded with bloggers, tweeters and even Town and Country Magazine. Not just any brand can generate that kind of on brand experience and communicate it very effectively through modern media channels and not just any organization can execute this kind of out of the box marketing campaign. Strong lifestyle brands like Tommy Bahama, Lilly Pulitzer and Southern Tide are our foundation. A responsive and flexible operating platform builds upon that foundation. A clear customer orientation and a deep level of engagement with our customers makes what we are building very special and valuable. We believe we are creating and leveraging competitive advantages that will set us apart, enable growth and put us in a position to deliver long term shareholder value. With that, I'll now turn the call over to Scott Grassmeier to discuss our consolidated highlights and plans for the remainder of the year. Scott? Thanks, Tom. Please refer to our press release issued earlier today for complete results for the Q3 of 2016. I'll now walk you through a selection of highlights from the Q3 as well as our guidance for the rest of the year. Briefly, consolidated net sales increased 12 percent to $222,000,000 compared to $199,000,000 last year. Consolidated gross profit increased 10% in the quarter to $118,000,000 dollars Gross margin was 111 basis points lower than last year as Lanier Apparel's lower gross margin private label business represented a greater proportion of consolidated sales. SG and A as a percent of sales improved by 2 0 1 basis points, primarily due to leverage on higher sales. Our 3rd quarter operating results improved over the same period last year. On an adjusted basis, consolidated operating income was $200,000 and on a GAAP basis, a loss of $300,000 This compares to a loss of $1,200,000 on both a GAAP and adjusted basis in Q3 of fiscal 2015. Interest expense for the Q3 of fiscal 2016 was $700,000 compared to $400,000 in the Q3 of fiscal 2015. For the full year, interest expense is expected to be approximately $3,400,000 Lower earnings create volatility in our Q3 effective tax rate. For the Q3 of fiscal 2016, effective tax rate was a negative 53% compared to 14% in the Q3 of fiscal 2015. For the whole fiscal 2016, the effective tax rate is expected to be approximately 36% compared to 38.4 percent in fiscal 2015. Our loss per share for the Q3 was 0 point 0 $7 on an adjusted basis and $0.10 on a GAAP basis compared to a loss of $0.08 per share on both an adjusted GAAP basis last year. Turning to our balance sheet, as Tom mentioned, we have taken what we believe to be a prudent and disciplined approach to inventory management and believe our inventory levels are appropriate for our Q4 sales plans. The increase in year over year inventory is primarily due to the addition of Southern Tide. Time Bahamas inventory is lower than last year. We ended the quarter with over $125,000,000 of availability under our $325,000,000 revolving credit agreement. Our balance sheet and capital structure give us adequate financial flexibility to fund investments necessarily for growth in our existing businesses and it also affords us the capability to expand through acquisition. Looking ahead, for the full fiscal year 2016, we are moderating our outlook. As Tom discussed a few minutes ago, our November results were below our expectations and traffic has remained soft to date. As a result, for the full year, we now expect net sales in the 1,020,000,000 dollars to $1,035,000,000 range and adjusted earnings per share in a range of $3.50 to $3.65 and GAAP earnings per share of $3.31 to $3.46 This compares with fiscal 2015 net sales of $969,000,000 and earnings per share of $3.64 on an adjusted basis and $3.54 on a GAAP basis. Our capital expenditures for 2016 are expected to be approximately $55,000,000 primarily related to information technology initiatives, including additional omni channel capabilities, new retail stores and the relocation and remodeling of certain retail locations, including the recently completed remodel of Tom Bahama's store and restaurant in Scottsdale, Arizona. Before we take questions, I also want to mention that our Board has declared a cash dividend of $0.27 per share. Lisa, we are now ready for questions. And we'll take our first question now from Edward Ijorma from KeyBanc. Hi, good afternoon guys and thanks for taking my question. I guess first, you guys have talked about a lot of innovation in these physical stores, things like Marlin Bar. How do we think about your traditional mall store in terms of its performance? And longer term, do you contemplate exiting any number of these kind of more traditional mall doors without some of these dining experiences? Well, first of all, I'd say that the Marlin Bar gives us an opportunity to take our food and beverage expertise and that island lifestyle as fully represented in a location where we're able to offer food and beverage to a wider array of locations than we could with the full blown restaurant concept. That said, there will be plenty of mall locations that aren't right for either a restaurant or a Marlin Bar. And I think the reality, Ed, is you're seeing this all over the marketplace is that there is a downward trend in traffic and that's been the case for a couple of years now. I don't know that we see anything that's likely to reverse that. So some mall locations will start to become a little more challenging from an economic standpoint. And I think what that means is that as renewals come up, we will look at them very hard to make sure that we think they're going to make sense not only at the time of renewal, but a couple of years out from renewal. And then as we evaluate new store locations, we're going to want to be extra diligent about making sure that there's a compelling case. All that means that I think you will see or likely to see a, at a minimum, a slowdown in the growth in store count in Tommy Bahama and possibly even a net reduction over time. Got it. And one follow-up, if I may. I know you indicated that you were pleased with where you landed in terms of final inventory level for the quarter. I also also recall that you had some inventory that was stranded on water as a result of the Hanjin bankruptcy. I think it related to Lilly Pulitzer. So I guess is that inventory flowed into stores? And did you see any negative impact from a margin perspective given that some of that product was late? Thanks so much. Yes. So we were very pleased with the way that inventories ended up for the Q3. There was 2 container loads of Lilly pellets or merchandise that didn't get in during the Q3. We have received it now. It is on the store. I believe one of the dresses that was in those containers has actually turned into a best seller for us. I don't think we're going to have any real margin impact from that. We probably lost a little bit of sales in the Q3, but at the end of the day that probably cost us a bit in the third quarter, but no major permanent damage sustained there. Great. Thanks so much, guys. Okay. Thanks, Ed. And we'll go next to Rick Patel with CLSA. Thank you and good afternoon everyone. Hi, Rick. Hey, Tom. Just a follow-up on Ed's question about some of the stuff you talked about at the Investor Day. For Tommy, can you talk about the impact that Hurricane Matthew may have had during the quarter? Any way to give numbers around how many stores were closed for how long and the drag it created to same store sales? I'll let Scott comment on that. It's hard to really quantify exactly what it had to do with same store sales. We had 25 Tommy stores closed for some period of time. Luckily, no physical damage and closures were not a long point in time. I think it did delay and interrupted some tourist travel to those areas and certainly some of the areas were harder hit. So it's kind of hard to quantify exactly what it did, but we did have 25 stores at Tommy and I believe it was 13 at Lilly, I believe. We were closed at least for a day and some longer, but again no physical damage and I think it was more interruption of travel patterns to those markets. Which also impacted some of our wholesale accounts in those areas. And so probably impacted reorder activity a bit, very difficult to know how much of that there may have been. Great. And can you also talk about the levers you can pull to get Tommy Bahama going during the holiday season? I think in the past you've successfully been able to use promotions, things like gift card events and perhaps some rewards to get people interested in visiting the stores. Is that an option for the Q4 to be a positive catalyst? Yes. We have very similar and most identical programs to what we've had in the past. So the 2 big things are the loyalty gift card program, where we send a $50 gift card and typically that has a hurdle with it. So you spend certain amount of money and then you get the $50 And then we have our flip side promotion where you spend $175 during the holiday period and you get $50 gift card back that you can use in January. Like last year, we lowered that hurdle during the Thanksgiving 5 day period to $150 So the programs are really quite similar. They've been very effective in the past. Obviously, what we've seen so far in the Q4 has caused us to lower guidance for the quarter, but we're still optimistic that those programs are going to kick in and that in the 8 weeks left, we're going to end up doing an awful lot of business and recover a lot of the shortfall that we had in the earlier part of the quarter. But the one other thing that I'd love to throw out, Rick, is that the shopping calendar is significantly different this year. And we think that has some to do with what's going on in our business and that today we're 12 days out from Thanksgiving. If you look at 12 days out from Thanksgiving last year, you had 16 shopping days left and Christmas Eve fell on a Saturday excuse me, a Thursday. This year, you've got 18 shopping days left with Christmas Eve falling on a Saturday. So there's a lot of room to do a lot of business still. And I think some reason to think and perhaps hope that the run up to Christmas will be quite strong. Great. And then last one for me is, I was hoping to get your thoughts on any changes that you're seeing in tourist trends. I know there's been a lot of foreign currencies that have moved since the election. So I'm curious if you've seen any changes in the patterns of tourists visiting stores versus what you saw earlier this year? Thank you. I don't think there's been a marked change since the election per se. I think the patterns are what you would expect those with the weaker currencies like the Canadian dollar are staying at home and those where the currency has strengthened a bit like Japan have they're starting to travel more again. But I don't know that we could say that there's been a marked change in that pattern since the election. Thank you, and all the best this holiday. Okay. Thank you, Rick. You too. And we'll go next to Jeff Van Sinderen with B. Riley. All right. Hi, everyone. I've got kind of a multipart question here that I'll throw at you. Maybe you can speak a little bit more about what you think are the underlying drivers for the negative Tommy comp? And I guess maybe if you could just share a little bit more about what you've seen in terms of the comp progression running from October through November? Just curious to see kind of what you saw in early November and then around Black Friday weekend? And then do you think that there's a product content issue at Tommy or do you think it's just really broader traffic? And maybe you can just also touch on the unseasonably warm weather, how you think that played in? And I know versus last year, it's been warmer until the last few weeks. And then if you could just touch on Tommy Women's, how that's been doing? And then anything you could tell us about e comm for each of the brands would be great? Thanks. Okay. I'll try to cover all that, maybe let Scott swoop in behind me to clean up whatever I missed on that. But Jeff, I would tell you that the number one issue, the number 2 and number 3 issue in terms of what's driving the comp is traffic. And I think there are a variety of things that are going on with traffic, but in some of those are related just to this year. So yes, the warmer fall probably keep people from shopping as much as they might have in October and the early part of November? Certainly, I think it could have probably did. The hurricane was a bit of an issue, I think in the first half of November for sure, but really back into October, the whole spectacle of the election this year was keeping people out of the stores, not necessarily because they were part of that may have been they were worried about what was going to happen, but I think part of it was literally the spectacle of what was going on was keeping people very focused on that. But then I also think there's this underlying issue of just declining traffic in malls which are about 40% of our Tommy Bahama locations and but other retail venues as well. And so the key for us is to take the demand that we have for the Tommy Bahama lifestyle and dream and make sure we're capturing that by doing things like we're doing and leveraging our food and beverage expertise, which is a traffic driver itself. And then also making sure that we're capturing as much demand as we can through digital means and digital channels. And then on women's, I would tell you that during the course of the year, we've made a lot of good progress, I think, in terms of how we're looking at women's and some of the products we've developed and I think we've got a lot of good learnings. All that said outside of swim our women's performance has lagged our men's this year and is not the performance while we're pleased with the direction we're headed, the performance is not yet where we would like to see it. Swim is terrific. And to answer your question about product, I do not believe we have a product issue in men's at all. Got to that. I think on the traffic, it's been pretty consistent between high single and low double digits down and that's continued into the early part of Q4. And but there is a lot of holiday, as Tom mentioned, there's a lot of holiday. We have a shift in the calendar. So, we're certainly hoping for a little bit of a tick as we get closer to Christmas. Okay. That's all really helpful. And then just one quick follow-up if I could. Just wondering how we should think about comps for Q4, what's baked into your guidance for comps? Pretty similar to Q3, Tommy. Tommy was minus 6 in Q3 and we baked in we are seeing a similar pattern now and that's what we baked in for the Q4, something pretty similar to that. Okay. Thanks very much and best of luck for the rest of holiday. Thank you, Jeff. And we'll go next to Corina VanderHints with Citi Research. Hi, good afternoon, everyone. Thank you for taking my question. Hi, Cory. Hi. I was wondering first if we could just follow-up on your guidance. It looks like you took your top line down around 1% and EPS down around 4% for Q4 or for the year, I suppose. Can you talk a little bit more about what your updated outlook assumes on the margin line since it sounds like you've gotten your inventory pretty clean already? Yes. I think when you're the sales drop is primarily direct to consumer sales, which are high margin sales. So they can have a pretty significant impact on the bottom line versus being linear sales, which are low gross margin, you've got high gross margin direct to consumer sales is where the shortfall in the guidance reduction is coming from. So that's what's causing the bigger EPS impact. And I think that it's not really a degradation in margin. No. Yes. It's just a leverage that happens on direct to consumer sales. Okay. So nothing additional in terms of what you're expecting on promotional expectations and elsewhere? Correct. We're anticipating the similar type promotions that Tom walked through earlier, Tommy and Lily does more gift with purchase at times and Tommy does the gift cards in the flip side. So we had them baked in our original and still have those baked into our. Okay, perfect. And then you had outlined some of the key challenges facing the U. S. Retail environment right now, but Lilly still seems to be bucking a lot of these trends. Could you just maybe walk us through a little more what drove the strength in the comps and the revenues this quarter? And as the year over year compares to easier, how are you thinking about Lilly retail comps in the 4th quarter? Yes. So in the Q3, Corey, it's a great question. I think that Lilly was impacted by the trends in the marketplace, but they were obviously strong enough to overcome it. And I would say that as a general statement, they continue to sort of hit on all cylinders of having great product, distribution, great communication, but then more specifically to the Q3, I think there were 2 main things that helped them out a lot. And one was that in August during what we call the resort fall season, so it's not really fall product, it's really resort product during the fall time and where other people were delivering fall product in the summer, we were delivering things that were buy now, wear now product and that really worked well for us. And that was our strategy in that front was much more pronounced than it would have been in the prior year. The second thing was the incredible buzz that we created with our e commerce flash sale during August. And while the sale itself we actually exclude from our comp, It creates enormous buzz and publicity and excitement about the brand itself and actually ends up being a marketing event in a way that we think actually helped drive business. And then going forward for the Q4, Scott commented on the Tommy comp, which I think we've got plans similar to what we saw in the Q3. Obviously, we're going to try to do better than that, but based on what we've seen, we think that's the best projection. And then in Lilly, I think we've got it coming down from where it was in the Q3 to a modestly positive comp for the Q4. Okay, great. And then just my last question, aside from just the softer retail environment out there quarter to date, are you seeing any changes so far as you get into resort and your initial spring wholesale shipments in terms of any order adjustments, delays, cancellations, etcetera, by your retail customers? No, not really. I think we still feel pretty good about shipping our spring book of inventory. I do think that a lot of the major retailers, Corey, I do believe their inventories are still in better shape probably than they were a year ago, which should help in terms of them not having a big inventory overhang as they come out of the year in terms of their willingness to go ahead and take spring product. Okay, great. Thank you so much. Have a great day. Okay. Thank you, Corey. We'll now go to Eric Beder with Wunderlich Securities. Good afternoon. Hi, Eric. Hi. Could we get an update on how the Asian business is going? Yes. It's actually we're posting really nice comps in the Asian business and we're going to, I think, meet or exceed the plan that we laid out for the year. And as you know, our focus there has been on reducing the overhead and the sort of operating loss that goes along with it, focusing on growing Australia, which is it's not a huge market, it's $10,000,000 or $12,000,000 but it's profitable and we're growing that and seeing good performance there. Then Hong Kong and China, we're or Hong Kong, we're sort of trying to clean that one up and that's going to become part of a license that we're going to have that covers Greater China. And then in Japan, we're actually seeing quite strong comp performance there. We're still losing money, but we're also seeing a good connection between the Japanese market and our Hawaiian market, particularly Waikiki that we like a lot. So we got a lot of things that we're trying to do to improve the situation in Japan and change the business model without walking away from all the positives that we've actually developed over there. Great. And then when you look at store growth for next year at Lilly and Tommy, what should we be thinking about in terms of store expansion? Well, with Lilly, with their smaller store footprint, I think you'll still see something that's similar to what you've seen over the last several years there. So I don't know how many leases we got signed. I don't remember at this point, but we should have what I would call sort of a normal store flow in Lilly. In Tommy, I think it will be less for sure for the reasons I outlined earlier, looking at new locations a lot harder and also examining renewals a lot more closely. So I don't know that you're going to see a lot of net growth in Tommy for next year. With respect to both of them though, Eric, I would just underscore this point. It's not about store growth, it's about total growth in direct to consumer. And while we may slow down store growth, it doesn't mean that we're not going to try to continue to grow. Obviously, that means e comm is going to grow and we think that can happen and we're going to be working hard to make that happen. So again, I can't underscore enough how important I think it is to look at the total direct business, not just store count and then e comm is kind of an appendage to that business. Sure. And last question, the Marlin bar, when you look at your current fleet of stores, do you how many do you think is this a concept you think that can work with most of them, a few of them? What do you kind of think is the potential for something like this? No, I wouldn't say most of them, but I'd tell you 2 things. I think it's too early for us to know for sure, but it could certainly work on a much broader basis than the restaurant concept. I don't think it's anything like most of the stores, but we'll know a lot more when we get to March. We've only been open a couple of weeks. As we said in the prepared remarks, we're really happy with what we've seen so far. It's a great model that enables us to offer food and beverage experience and the island lifestyle that that encapsulates. But when you think of the downsides of our restaurant business, it's really the rent, the capital and the labor involved and the Marlin Bar concept actually hits all 3 of those and it's better from a rent perspective, significantly better on the capital front. It actually is a pretty light labor model. You end up only having a handful of people working that concept, which is really attractive. Okay. Good luck in the holiday season, guys. Okay. Thanks a lot, Eric. We'll now go to Pam Quintigliano with SunTrust. Thanks so much for taking the question, guys. Hi. So a few questions for you. Traffic, when you're on mall for Tommy and Lily and in the same mall, how's the traffic diversion been for the Tommy stores versus the Lily stores? And is that is the spread consistent or did it expand? Well, actually during the Q3, I think the Lily traffic was actually a little bit worse. I will say though that that's a comparison to 2015 and throughout 2015, I believe the traffic numbers are somewhat distorted by the target scenario. So that would be most pronounced sort of in March, April, May, June. But I think even in September October, you still sort of had the afterglow of the Target scenario that was getting a lot of people who may not have even really been qualified traffic going in the Lilly stores last year. So I think even without that, you'd still be seeing a meaningful traffic decline in Lilly, but it's probably somewhat overstated because of that. But as a result of that, it is it actually has been a little worse than Tommy's. Now both of them are converting a bit better. And that was actually my next question. The conversion for both of those stores because the product seems to have I mean, Lilly's always right, they seem to look even better in Tommy, obviously, on the women's side and some of that more upscale men's product that we were seeing. Yes, without getting too granular is in general pretty broadly the other KPIs other than traffic look pretty good. We're pretty happy with the rest of the KPIs. So does that mean when you're looking critically and you're always so creative with these events that you do with Lilly and I know your customer loves the flip side then Tommy, but do you how do you draw that customer? Obviously, you have some of these longer term leases. So how do you think about drawing that customer in, especially during potentially non peak periods? Or should we be seeing anything different in stores? You mean in terms of what we're doing? In terms of future plans to combat what seems to be more of a secular traffic trend out there in the marketplace? Well, I think it's all about driving the experience in store and we do believe that not only do we have better product in stores, but we have a better experience and that's a combination of the physical environment as well as the staff, the people that we have in there. So we want visiting our stores to be a pleasurable experience where people believe that their needs and wants are being addressed in a thoughtful and careful way. And then we also want it to be fun. So we'll be trying to think of lots of different ways to create a dynamic and fun atmosphere in the store. And as you know, we do all over the place on a pretty frequent basis, there are localized store events happening and we think those are obviously going to be an important part of the equation. And then one more on the Marlin bar, if I could. I know it's early days, but do you have plans right now to open any more to test and see testing on mall versus off mall versus lifestyle and just kind of see how it how where it resonates the best? Or are you just sticking with this one for now? Well, we don't have any specific plans in that we don't have any leases signed, but yes, we will be testing more. I think that's a pretty safe assumption based on what we've seen so far. I think we're going to want to try some more of these. We're going to be want to be careful and try to think through why this one is working and make sure that we're picking the right locations. I think this particular location is probably a little bit underserved with food. So that's obviously a good place to try one. I think we have to be careful about rushing in and trying to put 1 in a heavily restaranted area. So we'll be thinking about why, what's been successful about this one and then trying to test others for sure, but none signed up today. Great. And just one, I promise, one last. The outlet to Tommy Bahama, if we could just talk about if those are clean now and how do you feel about that there was a time where there seemed to be a little bit of excess product there and it was heavier, just the outlet channel there and update? It's certainly better than it was. There's still outlets you're constantly you need to stay on top of clearing what you need to clear out and with some of the women's line hasn't sold through quite at the rate we would have hoped, so there will be some women's that has to clear through them. So, but they certainly are better now than they were early in the year. We did some pretty good cleanup early in the year. Great. Thank you so much for taking my questions, guys. Best of luck. Okay. Thank you, Pam. And we'll go next to Danielle McCoy with Telsey Advisory Group. Hi, everyone. Thanks for taking my question. Of course. I was just wondering if you could give us an update of where you are in Phase 2 of the Southern Comfort integration on the product and sourcing side and any learnings from the brand that you want to share? Yes. Well, Southern Comfort is the bourbon, so we're going to wait till after the call ends to have to say that. Oh my God, that's where my head's at. Southern Tide is the wonderful brand that we acquired earlier this year and the integration is gone, just couldn't have gone better in my mind and hats off to the leadership and the whole team at Southern Tide. I mean, they just it's not an easy or fun process to be integrated by a larger company and they just were terrific. And I think our corporate team here in Atlanta did a terrific job too. So what I would tell you is that integration is fundamentally complete. There's one area and we're starting to reap the benefits of that in areas like distribution, shipping, IT, finance, HR, legal, a wide variety, payroll, I think I said HR already, but those areas we're getting a lot of benefit already and that'll start to really impact the business as we go forward. And then the one area that we that's well underway, but because of the lead times for product, it won't start to show up for a while is in the sourcing arena where we're going to be doing a lot of the product through our Hong Kong office that we've had since 1974 and we think we can add a lot of value there. But just because of the lead times and the amount of time it takes to move production, I think we'll get a little benefit of that maybe late in 'seventeen, but probably more of an 'eighteen benefit there. So a really good story. Southern Tide's business has been impacted by the same issues that the other businesses have been impacted. They don't have their own stores, but their wholesale accounts have had a soft fall as well. So their business is good, but frankly, Q3 was a little less than what we would have hoped for, but we're very happy with the brand and the team and the direction that it's headed. Great. Thanks. And then could you just talk a little bit about the e commerce performance during the quarter for both Tommy and Lilly and anything you guys are doing from a digital standpoint to kind of increase that channel penetration? E com was stronger than brick and mortar in both businesses in the Q3. So it continues to grow and gain share and we would expect that in the future. And in terms of what we're doing to try to drive that business, we're I think a lot of it, Danielle, has to do with digital communication and we're already strong in that. As you know, we're a leader in Lilly Pulitzer and social media. We've gotten a lot of mileage recently out of user generated content in particular, But we're always looking at the results that we're getting from those efforts, analyzing the results, studying them and trying to improve upon our ability to reach consumers and increasingly are looking that in terms of a mobile first sort of mentality. As you know, more and more people's primary method of sort of accessing the outside world is really through their phone. And so as we think about how we communicate the brand, it's important for us to have in the back of our mind that this is probably coming at her through her phone. So those are probably some of the things that we're working on there. And I'll tell you, Danielle, the one other thing I would say is we are very proud of the e commerce businesses that we have. I think this year we're going to finish at about 18% of our total revenue is going to be e commerce and unlike a lot of people that we hear talking about how their e commerce business is not profitable, ours is highly profitable. We love our e com business and we're excited about it growing and we've built a large and successful business already and are going to continue to fuel that growth. Great. Thank you, guys. Best of luck and happy holidays. Thank you. You too. It appears there are no further questions at this time. I'll now turn the call back to Tom Chubb for any additional or closing remarks. Okay. Thank you, Lisa, and thanks again to all of you for your time this afternoon. We very much appreciate your interest and look forward to speaking to you again in March when we'll report on our Q4 and also our outlook for fiscal 2017. And that concludes today's conference call. Thank you for your participation.

• Earnings release