Earnings Call: Q3 2013

Dec 4, 2012

Earnings release

Good day, and welcome to the Oxford Industries Incorporated Third Quarter Fiscal 2012 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Anne Shoemaker, Treasurer. Please go ahead, ma'am. Thank you, Melissa, 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 documents filed by us with the SEC. We undertake no duty to update any forward looking statements. Also during this call, we will be discussing certain non GAAP financial measures. You can find a reconciliation of these non GAAP financial measures to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. And now I'd like to introduce today's call participants. With me today are Hicks Lanier, Chairman and CEO Tom Chubb, President Scott Grafmeier, CFO Terry Fillow, CEO of Tommy Bahama and Doug Wood, President of Tommy Bahama. Thank you for your attention. And now I'd like to turn the call over to Hicks Lanier. Good afternoon and thank you for joining us to discuss our results. Both Tommy Bahama and Lilly Pulitzer posted strong sales in the Q3. We continue to invest in the growth of these fantastic brands and we're very pleased with their contribution to our solid operating results. Our 3rd quarter adjusted earnings increased 19% over last year within our previously issued guidance range. In this quarter, which is by far our smallest of the year, Ben Sherman's disappointing performance muted our overall financial results. We have moderated our guidance for the year as the Ben Sherman struggles continue into the 4th quarter and we experienced delays in opening 3 key Tommy Bahama stores. Terry Pillow and Tom Chubb will provide more details on both of these items. That said, our expectation for the full year adjusted earnings reflects an earnings increase of 8% to 12% for the year even after our significant investments in Tommy Bahama this year. I will turn some closing comments before Q and A, but I'd like to now turn the call over to Terry Pillow to discuss Tommy Bahama's results for the quarter. Terry? Thank you, Bahamas sales grew by 12% in the 3rd quarter. We are particularly pleased with our direct to consumer performance. Through the 1st 9 months, our full price comp store sales have increased in the high single digits with low single digits reported in the Q3, our smallest quarter of the year. Our e commerce business has posted significant gains both in Q3 and for the 1st 9 months of the year. We are now up to 100 and 10 Tommy Bahama stores with 5 new stores opened in the Q3 and 3 more expected to open in the 4th. A very important store, the New York flagship store opened 2 weeks later than we planned on November 17. However, due to Hurricane Sandy, we experienced some delays in painting required permitting, which caused delays in opening the restaurant and bar. We plan to open the restaurant and bars on December 14, approximately 6 weeks later than planned. Even without the critical restaurant and bar components, we are pleased with the early results at the retail store. We have a long term lease in this Fifth Avenue location with a great rent deal and are very excited with what we have done there. I'd note, in addition to our New York location, 15 other Tommy Bahama stores were impacted to varying degrees by Sandy, with our 2 New Jersey stores still feeling some impact. Also affecting our forecast for the Q4 is the delay for our Chicago store on Michigan Avenue. We have been required to stop work on that location due to an unresolved dispute between our landlord and the developer. This opened previously planned for November has been pushed into fiscal 2013. Finally, our Hong Kong store, which also was planned for November is now expected to open towards the end of December. We have seen a positive reaction in both our retail stores and e commerce with our holiday loyalty cards that we sent out in mid November. Our holiday gift guide started hitting homes last week and the early read is very positive. We believe our product assortment in both men's and women's has never looked better and our inventory position is in great shape. As you know, as part of our international expansion strategy, we acquired our Australian business from our licensee in the Q2. We have made some enhancements there and are encouraged by the initial results we are seeing. We are well positioned on the Gold Coast market and are finalizing plans to expand into the Sydney market with a full price retail store. With all these elements in place, we are looking forward to a good holiday season to finish what has been another great year of development for the Tommy Bahama brand. Now I'll turn the call over to Tom Chubb to discuss results of the rest of our operating groups. Thanks, Terry. Good afternoon, everyone, and thank you for joining us. While the Q3 remains a small one for Lilly Pulitzer, by continuing to develop innovative products that the customer loves and deliver a brand message that truly resonates with her. Lilly was able to deliver $26,900,000 of sales, which represents an impressive 62% increase over last year with increases in all channels of distribution. The sales increase drove a swing from a small loss in the 3rd quarter last year to a 13% positive operating margin this quarter. In August, the customer once again showed her enthusiasm for the brand with Lilly's flash sale on its e commerce site exceeding our expectations. For the quarter, full price sales on our site also continued to have excellent year over year increases and we achieved comp growth in brick and mortar stores in the low double digits for the quarter the year so far. We continue to be very pleased with the performances of our new stores in Charlotte, Atlanta and Baltimore and our 19th store at Tysons Galleria outside of Washington DC opens this week. We have also signed leases for 3 new Lilly stores. The shops at Riverside in New Jersey and Kenwood Town Center in New Jersey and Kenwood Town Center in Cincinnati are expected to open in the Q1 of 2013 and Streets at Southpoint in Durham, North Carolina in the second quarter. We continuing to evaluate other sites as new stores are demonstrating that they are an excellent growth vehicle for Lilly. Lilly is off to a very good start in the 4th quarter with success in some new sportswear items and holiday gift items. Needless to say, we are very enthusiastic about Lilly's performance this year. Ben Sherman's results for the Q3 were disappointing both in absolute terms and relative to our expectations. Ben Sherman reported net sales of 19,800,000 dollars for the Q3 of fiscal 2012, down sharply compared to $25,200,000 in the Q3 of fiscal 2011. Sales in the Q3 were impacted by a misstep in Ben Sherman's merchandise mix, which resulted in too much of the product offering in styles at the high end of the price range. This coupled with the difficult economic conditions in the UK and Europe as well as Ben Sherman's exit from certain moderate tier wholesale accounts in the UK resulted in the sales decrease. Ben Sherman reported an operating loss of $2,100,000 in the Q3 of fiscal 2012 compared to operating income of $300,000 in the Q3 of fiscal 2011, primarily due to the decreased sales, partially offset by lower SG and A. Following the end of the third quarter, we had a change in leadership at Ben Sherman with the departure of the CEO who had been in place for the last couple of years. We are moving quickly to examine every facet of this business. We are focusing on Ben's core businesses, exiting unprofitable or low potential businesses and improving our execution, including having a better balance of these initiatives will help put Ben Sherman on firmer footing. Net sales for Lanier close were $27,200,000 in the Q3 of fiscal 2012, down from last year's $33,100,000 Last year, Lanier benefited from initial shipments related to a new product launch. This year, the business was impacted by a slow down in the intake rate on replenishment programs by a key customer. Operating income decreased to $2,400,000 in the quarter, primarily due to lower sales and gross margins, partially offset by lower SG and A. We expect Lanier's 4th quarter sales to be above last year. For the year, we expect sales to be slightly below last year and operating margins approaching double digits. Corporate and other reported an operating loss of $1,200,000 for the Q3 of fiscal 2012 20 12 compared to an operating loss of $2,100,000 in the Q3 of fiscal 2011. The improved results reflect the net impact of LIFO accounting. I'll now hand the call over to Scott Grassmeier to comment on our consolidated financial results. Thanks, Tom. I'll now walk through the consolidated results. Consolidated net sales increased 7% to 100 and $81,400,000 in the Q3 of fiscal 2012. On an adjusted basis, earnings per share increased 19% to $0.19 compared to $0.16 in the Q3 of fiscal 20 11. On a U. S. GAAP basis, earnings per share increased to $0.18 in the Q3 of fiscal 2012 compared to $0.10 in the same period of the prior year. Consolidated gross margins for the 3rd quarter increased to 53.4 compared to 52.1% in the Q3 of fiscal 2011. Increase in gross margins was primarily sales mix continuing to shift towards our higher gross margin Tommy Bahama and Lilly Pulitzer businesses, the increased percentage of direct to consumer sales and the net favorable impact of LIFO accounting adjustments. SG and A for the Q3 of fiscal 2012 was $94,100,000 or 51.9 percent of net sales compared to $85,200,000 or 50 percent of net sales in the Q3 of fiscal 2019. In the quarter, the company incurred approximately $5,100,000 of SG and A as we continue to make investments in Tommy Bahama's international expansion and incurred preopening expenses for the New York store. Last year SG and A related to these investments was $1,200,000 in the Q3. SG and A also increased in the quarter due to the cost of operating additional retail and other expenses to the support of growing Tommy Bahama and Lilly Pulitzer businesses, partially offset by decreases in SG and A in Zinn Sherman and Linear Close. Royalties and other operating income for the quarter. Royalties and other operating income for the Q3 of fiscal 2012 were $3,800,000 approximately flat with last year. As a result of the improvements we made in our capital structure in the Q2, interest expense for the Q3 of fiscal 2012 20 12 was 74% lower than the same period last year or $1,000,000 compared to $3,700,000 Income tax expense for the Q3 of fiscal 2012 increased to $2,000,000 from $700,000 in 20.11. The increase was primarily due to higher pre tax earnings and an increase in the effective tax rate from 31.2% to 39.3%. The current year tax rates were unfavorably impacted an inability to fully recognize benefits from losses in foreign jurisdictions as well as a greater proportion of our earnings occurring in jurisdictions with higher tax rates. Both periods benefited from certain favorable discrete items. Total inventories at the close of the Q3 were $102,200,000 compared to $91,000,000 at the close of the Q3 of fiscal 2011. Our inventory levels are higher to reflect our anticipated sales growth and the operation of additional retail stores by Tommy Bahama and Lilly Pulitzer. Our borrowings under our U. S. And U. K. Revolving credit facilities are higher than last year due to the redemption of our senior secured notes last quarter and higher capital expenditures. As of October 27, 2012, we had $130,300,000 of borrowings outstanding and good liquidity with approximately $91,400,000 of unused availability. As we continue to make investments in our As we continue to make investments in our brand, capital expenditures for fiscal 2012, including $47,700,000 incurred during the 1st 9 months of fiscal 2012 are expected to approach $60,000,000 These expenditures consist primarily of costs associated with opening new retail stores, information technology investments, retail store remodeling and distribution center enhancements. Although we haven't finalized our forecast for 2013, we expect this 13, we expect this pace of expenditures to be lower next year. As Hicks mentioned, we have moderated our near term earnings guidance predominantly as a result of the ongoing challenges of Ben Sherman. To a lesser extent, the store opening delays at Tommy Bahama and the impact of Hurricane Sandy on our business also affecting earnings. For the fiscal year 2012 ending on February 2, 2013, we now expect adjusted earnings from continuing operations per per share in a range of $2.60 to $2.70 and net sales of $845,000,000 to $855,000,000 This compares to adjusted earnings from continuing operations per share of $2.41 and net sales of $759,000,000 in fiscal 2011. On a U. S. GAAP basis, earnings per diluted share are expected to be between $2.19 2 $0.29 for fiscal 2012 compared to $1.77 in fiscal 2011. For the Q4 of fiscal 2012, we anticipate net sales in the range of $225,000,000 to 2 $35,000,000 and adjusted earnings per share of $0.64 to $0.74 This compares to adjusted earnings per share of $0.61 and net sales of $200,000,000 in the Q4 of fiscal 2011. On U. S. GAAP basis, earnings per share for the Q4 of fiscal 2012 are expected to be between $0.62 $0.72 compared to $0.43 in the Q4 of fiscal 20 11. Finally, I'd like to walk you through the impact of our investments in Tommy Bahama's international expansion and New York store are having on operating income. In fiscal 2012, we expect these investments to reduce operating income by approximately $15,000,000 slightly higher than our earlier estimate due to the store opening delays in New York and Hong Kong. In the 1st 9 months of this year, we have incurred $11,600,000 of SG and A, offset by $1,700,000 of gross margin and royalty income, netting to $9,800,000 of negative impact. In fiscal 2011, we incurred $3,500,000 of comparable negative impact, of which $1,900,000 was incurred in the 1st 9 months of 2011. I'll now turn the call over to Hicks Lanier. Thank you, Scott. Let me just pick up on Scott's last comments. If you recall, starting with the beginning of this year, we made the communication that this was going to be an investment year for Tommy Bahama. And that $15,000,000 figure that Scott just mentioned of the impact on operating earnings net of the gross margin that we achieved from those two ventures is the magnitude of the annual investment we've made there. And at this juncture, we feel very good about it. You can see that in the Q4, that figure is going to be $5,200,000 but up to $9,800,000 from $15,000,000 So it's a significant investment for us. But I think every one of us feel very strongly that we've done the right thing and that we'll get a meaningful award for years to come this investment. Secondly, on the Ben Sherman front, there's no question that we have run into some issues in the Q3. And from my vantage point, this is sort of good news because we were under the assumption going back 3 or 4 months ago that most of our problems were macroeconomic issues in Europe and the U. K. And we pinpointed that we had some correctable and the Ben Sherman team is highly focused on getting about correcting those. There will be an impact in the 4th quarter, but hopefully when we talk to you next, we'll have a much better story to tell there. Melissa, we are ready to take any questions now. Thank you. And first question will come from Edward Yruma from KeyBanc Capital Markets. Hi, great. Thanks for taking my question. Wanted to drill on a little bit more on Ben Sherman. I know that there's been a deliberate attempt with Plectrum to elevate the business. And I'm just trying to understand the sequencing of some of these operational issues that you've uncovered. I mean, were they more pronounced than you would have expected? And I guess, Tom, now that you've kind of gotten your hands more involved there, how quickly can you influence the trajectory of the business? Ed, as to the question about how quickly we can influence, there are some issues here that really will carry from the Q3 to the Q4. If you remember, we talked about it being attributable to the merchandise mix being skewed too far towards the upper end of the price range. Because Ben Sherman basically works on 2 big seasons a year, autumnwinterand springsummer, That merchandise mix is basically the mix that we're stuck with through the Q4. So I think it's going to be continue to present some challenges to us through the Q4. For spring and beyond, which basically corresponds to our Q1, I think we were better assorted from the beginning and we've also had some ability to influence that assortment here in the last month or so. So I do think while we will have some real challenges through the Q4 and those are obviously built in to the guidance now. We can begin to influence some meaningful things for the spring summer season and then for subsequent seasons even more. Sure. And one follow-up to that point. I think you said before that you weren't unwilling to consider a more strategic thought process around midshore Sherman should either macro not improve or the business not improve? I guess, where are you on evaluating the business from that perspective? Well, I think that we have immediate problems in Ben Sherman that require immediate attention and that's really been our focus is dealing with the very near term issues. We had the exit of the CEO about a month ago. That has enabled us to get much closer to the business and really get a much more detailed understanding of the business. As I mentioned, while we do have some of these issues in the merchandise mix that are going to carry through the Q4, that's not to say there's nothing that we can even in the very near term in anything that we can do or identify that we think might improve trading results. We're acting on it immediately. We're also, as I mentioned in the prepared part of our remarks, exiting certain unprofitable or low potential activities. There were some things that were going on in Penn Sherman that I think were distracting from the core mission and we've moved already to shut some of those down. And then we've also initiated a very aggressive reduction program to bring the overhead structure in line with the size of the business. And these are all things that some of them have already happened, some of them can happen in the coming weeks months and some of them will take a little longer to happen. Got you. And my final question, I know you don't provide specific comp data points for your direct owned businesses, but you have from time to time provided some directional colors to the trajectory of comps. What are comps looking like at the Tommy Bahama stores? And how much was the moderation from Sandy? Thank you. Ed, this is Terry. We as we said, our comps in Q3 were in the low single digits for Q3, but it's our e comm business was terrific and experienced great growth. We saw a little bit of a spreading around of the sales, but Q3 obviously, we were pleased with the way the business formed. That's our smallest quarter. As we look into as we moved into November, we saw mid single digit comps in November. So we're still getting very healthy comps and the e comm business is still a very explosive business for us. So we got a lot of business to do the rest of December and for the holiday seasons, but we've been experiencing good comp store growth. Great. Thanks so much. We'll now go to our next question from Danielle McCoy from Breen Capital. Hi, guys. First, I just wanted to say the Fifth Avenue store looks amazing. Thanks, Danielle. This is Terry. I appreciate that. It's a I appreciate some taking notice of it because we spent a lot of time on it and it's doing quite well. As we said in the remarks, the early results have been very, very promising. Can't wait to show you the bar and the restaurant. Yes, I'm definitely looking forward to that. So I guess just one little follow-up on Ben Sherman. Was there any cotton impact with that? Not really. Cotton prices have sort of become a non issue in Ben Sherman. I'd love to be able to blame the problems there on cotton prices, but I don't think that would be fair. Okay. It's really it was an issue for us a year or so ago and it's really not now. Okay. And then I guess, just a little bit more color on the non dress Lilly Pulitzer look, how they're doing a little bit color on the new Lilly stores and any more detailed expansion plans or roundabout how many stores for next year? Well, on the sportswear looks and what's worked during the Q3, which basically neatly corresponds to Lilly's fall season, sportswear actually exceeded dresses in the Q3 sportswear actually exceeded dresses. And then in the Q4 so far sportswear is again performing very nicely. None of that says that dresses still are and always will be a very important category for Lilly and at the end of that day probably always be the most important category. But it's nice to see that Lilly is having some good success in sportswear as well. Then for store openings, we laid out in the prepared remarks, there's a store that's opening this week in Tyson's Galleria outside of Washington, D. C. Then we've got 3 stores that we've signed leases on that are opening, 2 in the Q1 and 1 in the Q2 of next year. At present, those are the only leases that we've got signed, but we're looking at lots of opportunities. We're very interested in opening more. For modeling purposes, I think somewhere around 3 to 5 stores is still the right number, but we'll keep you posted as our plans there evolve. As you know, we're very, very happy with the way the retail stores are performing and are anxious to identify good opportunities for expansion there. Okay. And then just lastly, uses of free cash flow going forward? Well, we have a high capital expenditure rate this year that we've indicated that we'll probably moderate next year. So we think next year is setting up to be a very strong free cash flow year. In the short term, we'll pay revolver debt down with it. But we've continued to have great investment opportunities in Tommy Bahama and Lilly Pulitzer. So that's our number one. The near in the near term, it will be investments in Tommy and Lilly and reducing debt levels. All right, great. Thanks guys. Good luck. All right. And now we'll go to Susan Sainsbury from Miller Payback. Yes. Hi. I got lost a little bit in the prepared remarks. Scott, can you explain to me why the tax rate went up? A couple of reasons. First, we're getting closer to a normalized but we've had a couple of things that have swung us. A higher part is some of our foreign losses, both at VIN Sherman and Asian expansion during jurisdictions income in the future, we're going to get a recognized benefit by the way the accounting rules work, we're building up those losses. We're not able to recognize those benefits from a GAAP accounting basis right now. So hopefully we get those ventures profitable and then we have a carry forward opportunity. So that's really the main thing. The other thing is as Lilly Pulitzer and Pine Bahama grow, some of the tax jurisdictions are higher. So they're getting closer to more normal statutory rates that you would expect for U. S. Earnings. And 39% is when you build in a 35% federal and you build in some state tax on top, you're getting pretty close to statutory rates. So I think really our rate is normalizing where maybe it was way down for some foreign benefits we had and we had lower domestic earnings at the same time. Okay. Second question for Tom Chubb, I guess. With respect to Ben Sherman, I know you don't want to be specific in the short term or whatnot. But should we expect losses operating losses of this losses to continue in the 4th quarter? Yes. Okay. Yes. That's implied in our guidance is a 3rd quarter operating loss or excuse me, 4th quarter operating loss for Penn and Sherman. Okay. And so order of magnitude is going to be bigger than it was in the Q3? Probably roughly comparable to maybe a bit smaller. It will be in the same neighborhood generally. Okay. And extending through the Q1 of next year. In other words, we've got 3 consecutive quarters of losses for Ben Sherman. Is that the way to think about it? Too early to know how the quarters for next year lay out, Susan, to be honest. I think there's a very good chance that then Sherman can improve significantly for the total year next year, but how that may lay out by quarter, it's just too early for us to know. Okay. Terry, I was also in the I've been in the New York City flagship store. It's only a block and a half away from me twice now. And actually I was amazed to see the number of people in the store given the fact that you haven't advertised it. So I concur with you that it's doing quite well. And yes, please get that bar and restaurant opened. I need a drink. Did you buy anything, Susan? I hope you bought something. No. I channel checked like mad and talked to customers as well as associates. So we as you know, Susan, when we have the bar restaurant component working with the store, it definitely increases it. And we've been happy with the traffic that we've had in there even without it. So we think with the restaurant that we'll clearly make a better response. The I with the amount of merchandise my only comment is the amount of merchandise that you're trying to put into that small space makes it a little cramped every now and then. But I think you're off to a marvelous start. So hurry up and get it. Let's have the grand opening and hurry up and Thank you. Thanks, Susan. So we can make it a hotspot in town. Have a great holiday season in vessel. Thank you. Thanks very much. Sure. And our next question will come from Mike Richardson from Sidoti. Yes. Good afternoon, everyone. Just a couple of quick questions for you. Is there any timetable on when that Chicago store might be opening? Mike, as we said, we were hoping to get it opened this year, but everything it's really depending on how these landlords can stop their issue. We don't know as soon as we got halfway finished with it before we were required to stop work on it, but everything is ready to go. If we get back in there and start working, we can open it pretty quick. It's just a matter of when the dispute is going to be settled and we can get back in there. But it's clearly on Michigan Avenue, the premier location on Michigan Avenue and one that we want to open it premier location on Michigan Avenue and one that we want to open because we think it's clearly it's not with the restaurant and the bar, but it's clearly a flagship for us as well. So we're hoping to get it as soon as possible just kind of out of our hands in the hands of the courts at this point. Okay. Thanks. I'm just wondering if you could just give us a little bit more color on the release you mentioned that 24 stores were impacted by Sandy. And I guess you called out a couple or one at least one in New Jersey that was still hadn't quite got back to where it was before. But I'm just wondering the other stores are all sort of back to where they were. And I'm wondering if sales trends sort of improved in the back half of November just generally? Yes. Mike, Atlantic City, we've had a store there for a number of years. It got slammed pretty hard. That's the one that we're referring to that still a bit recovering. But all of those stores up and down that coast got hurt. We're pretty much back to normal now, but we did see I was in New York during that whole time and it was even though in some parts of New York we didn't feel it, but up and down that coast was pretty of New York we didn't feel it, but up and down that coast was pretty severe. So happy that things are pretty much back to normal every store, but Garden Plaza, Garden State and Atlantic City. Okay. Just last one. Just any general comments on the sourcing environment and what you guys are seeing just directionally in prices and pricing? Nothing as Tom mentioned in regard to Ben Sherman on cotton. We haven't seen we've got a be is very solid at this point. Okay. Thanks guys. Best of luck. And our next And our next question will come from Jim Ragan from Crowe, Wieton. Yes, thank you. I wonder if you could just talk a little bit about the merchandise mix in Q3 and maybe early Q4 in Tommy Bahama specifically. I know there's been a push to increase the Tommy Bahama women's line. Can you just talk about how that's going? Yes. Ken, we're very happy with the progress we're making in women's right now. As we sit here, I was just reviewing it the other day. Our women's is just past 30% around 30% of the business total. However, we always talk about it's hard to grow that when men's keeps growing as well. Right now with the you mentioned the merchandise mix we have, we're seeing some key items that we didn't think could get any bigger for us, just keep getting bigger this year, both e comm and the retail stores. Unfortunately, I mentioned in my prepared remarks, we're our inventory levels going into the last these next 3 weeks before Christmas, which traditionally our biggest 3 weeks of the year. We've never the reason I called that out on the we were looking at it last week just to make sure that where we were on inventory and I couldn't be happier where we are positioned on inventory going on inventory and I couldn't be happier where we are positioned on inventory going into this critical time period. So women's is working well. However, it's hard to grow that percentage when men's is continuing to grow and it's coming from fashion and key items. But I can tell you right now the key item piece of the business is really on fire both the common and full price retail. Okay, great. And then I had I also had a question regarding the just the retail store expansion. This has been a year of, I'd say, a few flagship stores between New York City, Chicago and then some of your international stores, I think, would be considered flagships. I mean, what's the outlook for that going forward? Are you going to do some more ambitious store projects as you open new stores next year or will you pull that back a little bit? We're looking at in the next year domestically open between 6 8 stores, majority of those being full price stores, probably an outlet in there. We have 4 international stores next year, 2 in Japan. 1 of those being an aggressive project also an island in Tokyo with a restaurant and a bar. And then we're opening the 2nd store in a mall about an hour and a half or an hour outside of Tokyo just to get an idea of both of those kind of what's an island look like and then what's a freestanding store without a restaurant look like. So we think we'll get a pretty good read on the Japanese market we're opening. And as I mentioned in the prepared remarks, we've got a lease on a store in Sydney that we're very happy with. It's on the high street, high visibility, I'd say as high as New York or Michigan Avenue in comparison to Australia. However, we're not because of the size of the space, we're not going to open an island there. We're just going to open about a 3,000 square foot retail store. And then the store we're opening in Hong Kong, I would say even though that location it's a freestanding building, even though we're not having a full restaurant, we are having a hospitality component where we will offer guests drinks and such that that's a high profile location for us and we'll probably open another store in Singapore. So we're not backing off. We're learning with each of these stores internationally. We're seeing great increases in Macao and Singapore where we've got stores open right now. So we're encouraged and we're learning every day about this market. So that's sort of our cadence going into next year. Okay. Thank you. That's helpful. That's it. And that does conclude our question and answer session at this time. I'd like to turn the call back over to Hicks Lanier for closing remarks. Thanks, Melissa. As I think you can gather, we believe both Tommy Bahama and Lillie Poolers represent to represent excellent vehicles for driving sustainable profitable long term growth. We are addressing the issues with Ben Sherman and we'll continue to take corrective action. Our management teams dedicated and motivated to executing Optima's strategy and as always are focusing on delivering outstanding shareholder value. Thanks for your attention today and we'll look forward to the next call. So that does conclude our conference at this time. We thank you for your participation. You may now disconnect.