Earnings Call: Q2 2021

Jul 28, 2021

Quarterly report

Good day and thank you for standing by. Welcome to the Quarter 2, 2021 Steve Madden Limited Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer I would now like to hand the conference over to your speaker today, Danielle McCoy. Please go ahead. Thanks, Misty, and good morning, everyone. Thank you for joining our Q2 2021 earnings call on webcast. Before we begin, I'd like to remind you that During our call, we may make certain forward looking statements as defined in the federal securities laws regarding our expectations or predictions about the future. Generally, these statements relate to projections involving anticipated revenues, earnings or other aspects of the company's operating results. Such statements may also include discussions involving the ongoing COVID-nineteen pandemic, including its current and expected impact on our business operations and results as well as the company's plans to respond to such uncertain and dynamic events. Because these statements are based on current assumptions and expectations, they involve known and unknown risks, uncertainties and factors not within the company's control. And as such, our actual performance and results may differ materially from these statements. Our annual report and other reports filed with the SEC from time to time include detailed discussions of the risks the company faces, and we urge you to refer to these. Any forward looking statements represent our judgment as of the time of this call and cannot be relied upon as current after today's date. We disclaim any intent or obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required under applicable law. The financial results discussed are on an adjusted basis, unless otherwise noted. A reconciliation to the most directly comparable GAAP financial measure and other Data disclosures are contained in our earnings release. Joining the call today are Ed Rosenfeld, Chairman and CEO and Steve Mazzuzzi, CFO. With that, I'll turn the call over to Ed. Ed? Thanks, Danielle, and good morning, everyone, and thank you for joining us to review Steve Madden's Q2 2021 results. We're really excited about the strong and accelerated recovery we are seeing in our business. The outstanding trend right product assortments Created by Steve and our design teams are driving strong consumer demand for our brands. Our owned and operated e commerce business continues to have exceptional momentum. Our retail stores have rebounded sharply and are now comping well above pre pandemic levels. And while our wholesale shipments remained below pre pandemic levels Our sell through performance was robust, positioning us for strong improvement in that business going forward. Overall, our Q2 results significantly exceeded our expectations with earnings slightly ahead of pre COVID-nineteen Q2 2019. Turning to our performance by segment. Our retail business was the highlight in the quarter and the source of the outperformance versus our expectations. Overall, retail revenue increased 63% compared to the Q2 of 2019. Our digital commerce business was the primary driver As it accelerated once again with revenue increasing 105% on top of 86% growth in the prior year period, Including 119% growth in our Steve Madden global digital business on top of 85% growth last year. We continue to see strong returns on our increased investment in digital marketing, as well as tangible results from our ongoing efforts to add and optimize features Our brick and mortar business was also strong. On an open only basis, Our global brick and mortar comparable store sales were up 8% in the quarter compared to 2019. We achieved this revenue performance with Significantly reduced levels of promotional activity in both digital and brick and mortar channels, which in turn drove segment gross margin up over 500 basis points Compared to the comparable period in 2019 for the 2nd consecutive quarter. We also continue to benefit from the cost savings measures We implemented over the last year, including rent savings from restructured leases. For the 1st 6 months of 2021, Our Retail segment has contributed $31,400,000 in EBIT compared to an EBIT loss of $3,800,000 in the first half of twenty nineteen. In our wholesale business, revenue in the quarter was as expected down to the comparable period 2019. Our sell through performance, however, was strong across shoes, accessories and apparel. Our core Steve Madden women's footwear business had particularly outstanding sell throughs with success across a range of categories, including sandals, Dress Shoes and Sneakers. While the industry overall benefited from increased consumer demand and spending on fashion over this time period, Our performance at retail outpaced the competition and our wholesale customers are reacting with increased purchases for fall. We expect strong sequential improvement in the back half in our wholesale business, with Q3 down low to mid single digits to 2019 and Q4 returning to growth versus 2019. As we drive this accelerated recovery in our business results, We also continue to focus on advancing our diversity, equity and inclusion and corporate social responsibility initiatives. In Q2, we expanded our partnership with the Fearless Fund, a venture fund which seeks to bridge the gap in venture capital funding for women of color founders. We established a new partnership with Howard University, in which we'll work with the business school to reimagine its retail curriculum starting this fall. We launched our first collection of Steve Madden Kids Adaptive Footwear, fashion forward styles, which were developed in partnership with children with disabilities and their families. In the coming weeks, we will be putting out our 2nd annual sustainability report. I encourage all of you to check it out, You can see the progress we have made on our sustainability goals as well as our targets and roadmap for the future. Overall, we are very pleased with the progress we are making and the trends we are seeing in the business. The outstanding results in our retail segment and robust sell through performance in wholesale demonstrate the health of our brands, the strength of our product assortments and the momentum we have in digital channels. While we still face challenges due to COVID-nineteen, including but not limited to continued supply chain disruption across the globe, We are confident that based on the strength of our brands, our business model and our people, we are well positioned to drive sustainable revenue and earnings growth And create value for our stakeholders over the long term. With that, I'll turn it over to Zim to review our Q2 2021 financial results in more detail and provide our fiscal year guidance. Thanks, Ed, and good morning, everyone. Our consolidated revenue in the second Quarter was $397,900,000 a 178.6% increase compared to 2020 And an 11.5% decrease versus 2019. Our wholesale revenue was $262,100,000 Up 162.2 percent compared to the prior year and down 27.9% compared to 2019. Wholesale footwear revenue was $198,100,000 a 154.1 percent increase from 2020 and a 30.8 percent decline from 2019. Wholesale Accessories and Apparel revenue was $64,000,000 Up 190.7 percent to last year and down 17.2% versus 2019. In our Retail segment, revenue was $132,700,000 a 220.6% increase compared to 2020 And a 62.8% increase compared to 2019. E commerce drove the growth versus 2019. E commerce revenue grew 105.2% compared to 2020 and 282.2% versus 2019. Ecom accounted for 54% of our total Retail segment sales in the quarter compared to 23% in 2019. We ended the quarter with 2 16 company operated retail stores, including 66 outlets, at 6ecommerce sites, as well as 15 company operated concessions in international markets. As of June 30, when the last 10 stores in Canada reopened, we now have 100% of our stores open worldwide. Turning to our licensing and 1st cost segments. Our licensing royalty income was $2,800,000 in the quarter Compared to $1,200,000 last year $3,100,000 in 2019. First cost commission income was 300,000 Flat to the prior year and down from $1,600,000 in 20 19. Consolidated gross margin was 42.7% in the quarter, up from 39.1% in the prior year and 37.8% in 2019. Wholesale gross margin was 30.6% compared to 26.6% last year and 32.1% in 20 The decline compared to 2019 was the result of increased freight rates and the non renewal of GSP. Retail gross margin was 65.4% compared to 67.4% last year And 59.7 percent in 2019. Compared to 2019, we saw strong margin improvement in both e commerce And stores due to less promotional activity, which more than offset the higher freight rates. Operating expenses We're $119,100,000 in the quarter compared to $76,900,000 last year and $120,900,000 in 20 19. Operating income for the quarter totaled $51,000,000 or 12.8 percent of revenue, Up from last year's operating loss of $21,000,000 and 20 nineteen's operating income of $49,100,000 or 10.9 percent of revenue. Our effective tax rate for the quarter was 20.7% compared to 26.9% in 2020 and 22.4 percent in 2019. Finally, net income attributable to Steve Madden Limited for the quarter was 39,700,000 or $0.48 per diluted share, up from last year's net loss of $14,700,000 or $0.19 per diluted share and 2019 net income of $39,500,000 or $0.47 per diluted share. Moving to the balance sheet. Our financial foundation remains very strong. And as of June 30, 2021, We had $302,700,000 of cash, cash equivalents and short term investments and no debt. Inventory totaled $125,500,000 up 21.5% compared to last year, but down 14.1% to 2019. Our CapEx in the quarter was $1,200,000 During the quarter, we repurchased approximately 876,000 shares for $37,200,000 which includes shares acquired through the net settlement of employee stock awards. There is approximately $81,000,000 remaining on the share repurchase authorization. The company's Board of Directors approved a quarterly cash dividend of $0.15 per share. The dividend will be payable on September 27, 2021 to stockholders of record as of the close of business on September 17, 2021. Turning to our guidance. For fiscal 2021, we expect revenue to increase 43% to 47% compared to 2020 And we expect diluted EPS to be in the range of $2 to $2.10 When comparing to 2019, We expect revenue and diluted EPS to increase mid single digits on a percentage basis in Q3 and then to accelerate in Q4. Now I would like to turn the call over to the operator for questions. Operator? Curious if maybe you could talk about the comp drivers behind that 8% open only comp When you compare that to the Q2 of 2019 and Ed, maybe just a supply chain outlook, just any Timing of delivery issues that you might be seeing, how you guys are mitigating, any pressures that you're seeing in the supply chain It might impact flow for the second half. Thanks, guys. Sure. Well, good morning, Paul. Thanks for your question. So in terms of The comp drivers, look, we're seeing traffic improve, but it still remains Negative to 2019 and double digit negative to 2019, but we've seen improved conversion and significant increase in AUR. We've raised some prices selectively in terms of our initial prices, but the bigger driver there is Much reduced promotional activity. So that's really driving the big increase in AUR, which is contributing to that We're a big driver of the comp store increase that we're seeing in bricks and mortar. In terms of the supply chain, look, there's a lot of We could talk about this all day. There are challenges throughout the globe. There's port congestion Both in the U. S. And in China, there are COVID outbreaks at factories, there are Challenges getting containers, we could go on and on. So we are seeing a pretty significant increase in the lead time still And the supply chain disruption remains a significant challenge. We've To build that into the guidance that we've provided and we've planned for it, and we've taken what steps we can to mitigate it. I think I believe we've talked to you about how we've moved about half of the Steve Madden women's production to Mexico and Brazil for fall. So a big move out of China that has helped, although there are challenges in both Brazil and Mexico as well. Brazil has had some COVID outbreaks. There's been challenges getting space on airplanes, if we want to fly the goods. In China excuse me, Mexico, some of the components come from China and there's been delays. So it's helped moving to Mexico and Brazil, but still remains a challenge. Got it. Thanks. And did were you limited it at all in the Q2? Do you feel like you're missing sales, maybe missing some deliveries Within the wholesale business as a result of some of these supply chain pressures? Yes. There was a very significant impact In Q2, particularly in the wholesale business from the supply chain challenges, In a normal year, if we had the types of sell throughs that we had this spring, we would have chased into a lot more business In Q2, a lot more reorders in Q2, but we were not able to do that due to the supply chain disruption. Got it. Thank you. Good luck. Thanks, Paul. Your next question is from Kamilo Lyon with BTIG. Thanks. Good morning, everyone. Ed, we are excited to hear that you're excited about the trends that you're seeing in your business. I wanted to focus on 2 topics. The first is the C com strength that you talked about, triple digit strength, even as stores are now starting to get traffic back. As you think about your customer and the fact that she is now or she is predominantly an online shopper, How are you guys thinking about what e comm can ultimately be and as a part of the retail mix and how does that influence Any sort of product assortments that might lean towards retail and ecom first? And then I have a second question on channel. Yes. Well, look, we're already at this point a majority digital company in our retail segment. So It's now been, I think, 5 quarters in a row where e commerce has made up more than 50% of our retail segment revenue and we expect that to continue and that's going to continue to be a major focus for us and I think a growth driver. In terms of products, are there products that perform better on e commerce than in stores? Yes, there are some differences. But generally speaking, we're trying to make great shoes that resonate with our consumer and we're not necessarily designing into e commerce versus stores. I was more talking about timing of the drops that would favor your direct channel over some of the wholesale In terms of trying to create more segmentation that would lean more towards, the direct channels over time? Yes. Well, certainly given growth in that channel and frankly the improved profitability that we've seen in that channel, We are really prioritizing our owned and operated e commerce in a way that we never have before. Got it. And the follow-up question I had on channel was just if you could provide any commentary on demand within your different channel partners, if there's any difference And then lastly, if you could just provide an update on the early days sell through of what you're seeing at the anniversary sale, the Nordstrom anniversary sale, that would be helpful. Sure. Look, there's nothing really to call out in terms of the difference by channel. Obviously, some retailers are performing better than others, etcetera. But generally speaking, we're seeing strong Consumer demand in all the channels in which we play. And we're really pleased with the performance and the sell through In all the channels in which we distribute our products. And then in terms of anniversary, Can't get into too many of the details other than to say we're very, very pleased with our performance so far, particularly in the SeaMadden brand. Sounds like you might be even excited about the early performance of it. Yes, we are. Okay. I'll turn it over to the queue. Thanks a lot and good luck with the balance of the year. Thanks Camilo. Your next question is from Susan Anderson with B. Riley. Hi, good morning. Nice job on the quarter. I guess just a follow-up on the wholesale channel. So it sounds like the demand is there. So I'm wondering if you were able to plan more inventory for that channel for the back half To meet that demand, I guess, should we expect the spread between wholesale and retail performance to narrow a bit in the back half? And then really quick on the gross margin by the channel. I think retail was down a bit while wholesale was up. So just curious what the divergence of the 2 were there? Thanks. Sure. Yes. You will see that gap between wholesale and retail narrow in the back half. And as we indicated in the prepared remarks, we think Wholesale, when comparing to 2019, wholesale will improve to down low to mid singles in Q3 and then be back to positive versus 'nineteen in Q4. So you asked about the gross margin. I think you were comparing it To Q2 of last year, I think really the better comparison is to Q2 of 'nineteen. There were so many Unusual things happening in Q2 of 2020. So I think if you look at Q2 of 2019, it's actually the inverse Of what you said, which is that wholesale was down to 2019 and that was All driven by the increased freight rates and the impact of the non renewal of GSP. So if you back those two things out, we were positive Where we had gross margin improvement relative to Q2, twenty nineteen. And then in the retail segment, we had a very substantial increase in gross margin Compared to Q2 of 2019 and as Zeen pointed out, it was we had strong improvement in both stores and in e com Due to the reduced promotional activity. Okay, great. That's helpful. And then how are you thinking about the puts and takes of gross margin in The Q3 and the back half, I guess, should those benefits seen in second quarter continue into third quarter? And then the impact of the higher freight, should that be a similar impact as in second quarter, or is it more or less, as you may be air freight a lot of products still. Yes, you're still going to see the same impact From freight and GSP or a similar impact, that's going to continue to be a headwind. Obviously, we hope that GSP gets renewed at some point and that goes away. But We have built in an impact from GSP throughout the year. In terms of the overall gross margin, Look, it should be a little bit lower than I don't think we're going to see the 42.7% that we saw in Q2 just because wholesale We'll make up a bigger percentage of the mix in the back half than it did in Q2, which obviously carries a lower gross margin, but we still do expect To see gross margins that start with a 4 in the back half. Great. That's really helpful. Thanks so much. Good luck the rest of the year. Thank you. Your next question is from Jay Sole with UBS. Great. Thanks so much. So just to follow-up on the last question. If we just think about SG and A dollars in Q3 and Q4, Are there any incremental drivers, maybe investments or more e commerce marketing or anything that could be an impact on that? And maybe you give us a little bit of guidance on how you're thinking about SG and A for the back half? Thank you. Sure. Yes. We have taken up Our forecasted SG and A in line with our increased expectations Around revenue for the year. So I think previously for the full year, we had said that we thought SG and A would be lower than 2019. I think at least at the high end of our guidance, we'll now see SG and A above 2019 for the full year. And of course, that means Above in the back half as well. And the change there is really incremental investment in marketing, particularly digital marketing to support The very strong trends we're seeing in the owned and operated e commerce business as well as other variable expenses. And then to a less those are the 2 big buckets to a lesser extent, we have started to add back some of the payroll that we had cut From the reduction in force last year as we see the strong recovery in the business. Got it. Understood. And if I could ask one more. And how would you characterize some of the gross margin improvement in the retail business? Is the increased full price selling really a byproduct of having just really on trend product? Or is it more of a factor that there's just low inventory across the channel, demand is better than supply generally speaking and that's what's driving it. Because the idea is how do we think about next year and how sustainable are the gross margin gains that you're seeing in that retail business? I think it's really both of the things that you mentioned. So I think that we have to acknowledge that Inventory levels across the industry are low and the levels of Promotional activity, not only it's not just us that's reduced promotional activity, many of our peers and competitors have done the same. And so you're seeing gross margins, I think, increase across the space. We also believe that we have particularly strong product That's really resonating with the consumer. And so that's another reason we've been able to, I think, pull back on promotions Even incrementally compared to some others, but it's definitely a combination of those two factors. Got it. Thank you so much. Thank you. Your next question is from Jeanine Stitcher with Jefferies. Hi, good morning. I want to dig a bit more into the Acceleration in performance that you're expecting between 3Q and 4Q. Is that just reflective of how long it takes you to meet the demand that's out there right now? Or is there any assumption around underlying improvements in wholesale demand. And then also curious on 4Q, what your expectation is right now about reorders and your ability to meet them just given what's going on with the supply chain. Thank you. Sure. Yes. Well, in terms of the sequential improvement from Q3 to Q4, I think we're just seeing ongoing sequential improvement in the business As we recover from the impact of COVID-nineteen and as our wholesale customers Increased orders. I think the other there is also an impact here from the supply chain disruption And there is some product that's I think that's moving out from the end of Q3 into the in the early part of Q4 in our forecast. But generally speaking, we just feel the momentum building. In terms of reorders, of course, we've got A plan for reorder in Q4. We've tried to bake in to our assumption there All the challenges around the supply chain disruption, and we feel comfortable with where that's sitting. Okay, great. And then just wanted to follow-up. I think you had said dressy is Very strong. I'm curious if you're seeing any of your competitors able to get into that category at this point or if you still feel like you have the much broader assortment? Yes, I think that was a big advantage for us in spring. I think we had really, really strong dress shoes And many of our competitors had really deemphasized that category and we took a lot of share in that category As that category demand in that category started coming back, I think it's safe to assume that our competitors I've seen that and there's going to be more competition in that category in fall, but we feel very good about our positioning With the consumer in that category and about our product assortment. So I think it's still going to be a nice driver for us. All right, great. Thanks very much. Your next question is from Erinn Murphy with Piper Sandler. Great. Thanks. Good morning. Two questions for me as well. First, Ed, For just your wholesale business overall given the strength of sell through, can you just speak to where your market share gains are currently in that channel? And then Do you expect this to translate to further shelf space as we move through the back half of this year and into next year? And then secondly, could you just speak to the performance of the business outside of the U. S. We'd love to hear how Europe and Canada are starting to track into recovery. Thanks. Sure. Yes. Well, in terms of the market share, Yes. Certainly, in the spring season, our sell throughs exceeded those of our Key competitors in our largest wholesale customers and our wholesale customers are reacting to that. So At least certainly in our core businesses, Steve Madden women's at the top of the list. The plans That we have from our customers and for fall exceed What they're planning for their overall department and what they're planning for our competitors. So we are taking shelf space and we're excited about that. In terms of some of the markets outside the U. S, Europe continues to be a real highlight for us. That business was actually up over 100% in Q2 compared to Q2 of 2019. So tremendous momentum there. Again, continues to be driven by digital channels, Both are owned and operated, but also what we do in the wholesale channel with folks like Zalando and ASOS. So really excited about that business. Canada has obviously had more of a or a slower recovery From COVID-nineteen. And so that business has been tougher, although we're starting to see some improved results over the last couple of weeks. Great. And then if I could just add one more. On Dolce Vita, can you just speak to how that brand is performing currently? We're seeing it a lot more, just in social media and influencers who would love an update on how that brand is performing overall? Thanks so much. Yes, I really appreciate the question because Dolce Vita is doing great. I think they had a really incredible spring season, the best I think that they've had in a long time, Really strong selling across a number of products and categories, but also one sort of home run item that's probably the best Item they've had since we've owned them, I think. It's got to be up there. So great momentum in the wholesale channel, also on dolcevita.com. And that's one also where without if not for the supply chain disruption, they would have really been able to capture a lot more business. And that is the one area of caution with Dolce Vita going forward is that we make the majority of our Dolce Vita products, Pretty much all of our first tier products in Vietnam, which is obviously dealing with a lot of challenges with COVID Right now and in fact a number of their Dolce Vita's factories are shut down. So we have factored that into our guidance, but generally speaking consumer demand for the brand Your next question comes from Sam Poser with Williams Trading. Good morning. Thank you for taking my questions, Ed and Company. I have a few. One, what is the wholesale appetite early in the year didn't appear to be that Great. And then your business came up, the appetite got better and you couldn't ship as much good because of the supply chain. But when we look at the wholesale appetite Now both for the balance of the year and into next spring, what are you starting to see? Yes. Well, it's improved dramatically. And that's why we've guided to this very significant improvement In our wholesale revenue in the back half, again, that's down low to mid singles in Q3 versus 2019 and then positive in Q4 versus Thanks. And then, you mentioned that the gross margin, you expected it to start with 4 The back half of the year, is that in both quarters? You think it's going to start with a 4% or Would it be likely better in Q3 because the from the penetration, It will move around a little more in Q4. How should we think about that? I was speaking about the back half in total. And in fact, it will be better in Q4 because of the higher penetration of retail in Q4. Okay. And then lastly, just actually 2 more. 1, what's the story with Anne Klein and other licenses Now, what is going how are you handling that? I know it's small business, but you acquired it and then it Sort of probably dried up a bit. Yes. So Anne Klein, along with, I would say men's is probably the businesses that took the biggest hit from COVID, just based on their positioning. And good news about Anne Klein is that we have seen a pretty strong improvement in sell through Over the last couple of months, so we're seeing some nice signs of life there. We're going to see a nice improvement in the back half from where we've been, but we'll still be below That's a business where we will still be below pre pandemic levels in the back half. So encouraging signs, but we still have some work to do there. Thanks. And then just real quick lastly, the tax rate for the full year, what are you guys thinking? It should be right around where it was last year. I think last year, we were 20.6%, I think right around there. Okay, great. Thanks. Continued success. Thanks, Tim. Your next question is from Lonnie Shapiro with Retail Tracker. Hey, guys, congratulations. Gosh, your stores have been so busy. You need inventory. Can we just talk a little bit about the back half of the year? We know we heard all about the deliveries and delays and things like that. I guess, how are you planning promotions for the back half of the year and for Christmas? And I know they've been Much lower now. There's a lot of demand, not a lot of inventory out there. But as the consumer comes into the holiday season, Is there that assumption that she'll still be looking for some kind of promotion? So how are you working with your wholesale partners for holiday promotions? And how are you guys thinking about it? Yes. Thanks, Maureen, for the question. And yes, we do inventory. Definitely. I can give you a list of stores. We're working on it as fast as we can. In terms of promos, look, I think We and our key wholesale customers are all operating With the plan to continue with this lower level of promotional activity. Inventories are very well controlled In the channels, as you point out, probably too well controlled, probably too low, not only for us, but for our key wholesale customers. And so I do anticipate that levels of promo activity will be less than they were in 'nineteen. It doesn't mean there's not going to be any. We all know that at a holiday time, Customers expect some level of promotional activity, but I think it should be well controlled. And then can I just ask a follow-up to some of the sell out questions that we've been talking about because you've had some really killer items that are coming in and you watch them come in and go out the door? I guess how Quickly, can you get back into some of them? Or are these fashion items that it doesn't make sense? Like I look at I don't know how to pronounce it, I'm guessing it's the Kenley, Which is just a hot, hot, hot item. Does it make sense to chase that item or by the time you get it back in, the customers moved On to the next thing. How are you guys balancing that? I know you've always had to do it in the past, but I feel like right now things are moving exponentially faster. Yes. Look, it's a different answer depending on the item, but it has been a big challenge. We're not Able to get back into things as quickly as we normally do. As you know, that's one of the hallmarks of our company, how quickly we can chase and our speed to market capability. And we're not as fast as we normally are. I think we're still faster than our peers. But our lead times are 3, 4 weeks longer than normal in many cases. And so that's made a challenge. There are some things that we're going We'll continue to go after and then there are some opportunities, more seasonal products that we've had to just kind of walk away from maximizing And we move on to the next season. Thanks so much. Best of luck for the fall season. Thanks, Marty. Your next question is from Dana Telsey with Telsey Advisory Group. Good morning and congratulations on the nice progress. Can you give us an update on how the private label business is doing with the discounters and what you're seeing there? And then also the margin impact of freight and how you're planning that go forward. Sure. Yes, the performance of private label with the mass merchants is very good. In Q2, it was down and I think we've called out some of the like a big one time program that we did not anniversary from 2019 I'm talking about down to 2019 because of not anniversarying a big one time program that happened in the wake of the Payless bankruptcy. But generally speaking, our sell through is good with the mass merchants and we feel good about our performance there. Zim, do you want to address the freight? Sure. So Therefore, freight for Q1, if you recall, we told you the impact was about 110 basis points. For Q2, the impact was 270 Basis points. And as far as Q3 is concerned and Q4, I think we're looking at fall right now around 260 basis points With Q3 similar to Q2 and then maybe a little relief towards the end of Q4. Got it. And then Any update on accessories and apparel and what you're seeing in those categories and how they're planned for the back half? Yes. So in terms of the wholesale, if you're asking about the wholesale segment revenue plan, really in line with what we said for overall wholesale Versus 'nineteen, meaning the down low to mid singles to 'nineteen in Q3 and then improving in Q4. But in terms of what we're seeing in the business, I'm really happy about that. And the first thing I want to highlight is what we're seeing in apparel, because that BB Dakota Steve Madden business Is really seeing strong traction. Again, very strong sell throughs there. The dress category in particular has been great for us, A great performance with our big customers, bricks and mortar or omni channel guys like Nordstrom and Bloomingdale's, but also Our e com our pure play e com retailers like Revolve and a really strong Performance in the Nordstrom anniversary sales so far. So really excited about the trends there and the momentum that we have in apparel. And then on the handbag side, also feeling very good. Steve Madden handbags, I think, are stronger than they've ever been And having a lot of success, a lot of product categories, cross bodies are phenomenal for us, but also doing well with our weekenders, our satchels. And it's not only in wholesale, we've seen a big improvement in that business in our direct to consumer segment And seeing the penetration go up significantly there. So excited about the non footwear categories. Great. And just lastly, How are sneakers doing given the improvement that we've been seeing in dressy? Yes. Sneakers are still performing very well. I think the number one product in the company is a fashion sneaker with rhinestones. So that continues to be a very important category Thank you. Thanks, Dan. There are no further questions. I will now turn the call back over to Ed Rosenfield. Great. Well, thanks so much for joining us on today's call. Enjoy the rest of the summer. We look forward to speaking with you on the Q3 call. Have a great day. This concludes today's conference call. You may now disconnect.