Guess? Inc (GES) 2002 Q3 法說會逐字稿

Good day, and welcome to today's Guess? conference call.

Today's call, including the question and answer portion, is being recorded and is being made available to the public.

Statements made in this conference call, including, but not limited to those, related to the company's expected results and operations, plans to reduce costs and eliminate charges, proposed retail expansion, future success of products in e-commerce are forward-looking statements and are made pursuant to the Safe Harbor provisions of the Securities Litigation Reform Act of 1995.

Forward-looking statements are only expectations and involve known and unknown risks for the uncertainties which may cause results to differ materially from those discussed in this call.

You should refer to the company's most recent annual report on Form 10-K for the fiscal year ended December 31st, 2001, and its periodic and current reports on Form 10-Q and 8-K filed under the Securities Exchange Act of 1934 for additional information about certain factors that could affect actual results.

At this time, for opening remarks and introductions, I'd like to turn the conference over to Mr. Carlos Alberini, President and Chief Operating Officer for the company.

Please go ahead.

Thank you, and good morning.

Thank you for joining us today to discuss Guess? third quarter 2002 financial results.

Joining me is Fred Silny, Senior Vice President and Chief Financial Officer for the company.

I will first review with you the contents of the press release we issued today, and then we will open the call for your questions.

Today we announced our third quarter and year to date results.

Actions that we are taking in the fourth quarter, including cost savings initiatives and asset write-offs to continue to position the company in this challenging environment.

Our total retail sales and the fourth quarter outlook (inaudible) on our share repurchase activity.

Let me start with the third quarter.

We announced today that, for the third quarter ended September 28th, 2002, Guess? reported net earnings of $3.4 million or diluted earnings of 8 cents per share, in line with our previously announced expectations of diluted earnings of 5 cents to 8 cents per share.

These results compare to net earnings of $1.3 million of diluted earnings of 3 cents per share for last year's 3rd quarter, which ended on September 29th, 2001.

The 2002 third quarter results included proceeds from a litigation settlement of $4 million or 2.6 million after taxes.

Excluding the litigation settlement proceeds, net income for the third quarter of 2002 was $28 million-ph;, or diluted earnings of two cents per share.

The 2001 third quarter included restructuring impairment and severance charges totaling $4.4 million or $2.6 million net of taxes.

Excluding these charges, net earnings for the 2001 third quarter were $3.9 million or diluted earnings of 9 cents per share.

There's no question that the economic environment, particularly in retail, continues to be uncertain, and consumer confidence has been shaken by a series of developments, including job losses, budget deficits, and stock market volatility.

Within this environment we have maintained our profits-ph; and improving our financial performance by moving forward with initiatives that should contribute to long-term profitable growth.

We continue to strengthen our balance sheet and to aggressive manage costs at all levels to redirect resources where they will have the greatest impact on the business.

We have made progress on several fronts during the period.

Here are a few highlights.

First and very importantly, we're very happy that Nancy Shachtman-ph;, President of Wholesale, is back with the company.

Her return to Guess? reaffirms our commitment to improve the wholesale business segment performance.

Here experience, passion, leadership, and high energy level will prove critical in turning the business around.

Second, we entered into a new $85 million asset-based credit facility arranged by Wachovia Securities which replaced our previous facility with JP Morgan Chase.

The new facility offers more favorable terms as it relates to operating flexibility and pricing, and provides for a more efficient capital structure.

Our ability to secure such financing is a testament to the improvement in our balance sheet, our clean-ph; inventory position, and strong cash flows, even in this challenging environment.

Third, we have lowered our borrowing level to $85.9 million at the end of the third quarter compared to 122.3 million in the same period in 2001.

Fourth, we reduced inventories by $24.1 million or 18.5% to $106.3 million at quarter end compared to 130.4 million in the same year-ago period, in spite of an 8% increase in retail square footage by quarter end.

Six, we are investing in a state of the art supply chain system to improve our speed to market and operating efficiencies.

We expect to benefit as a result of the implementation of the system in the second half of next year, 2003, and beyond.

Lastly, we have settled litigation in the third quarter resulting in a pretax gain of $4 million, and currently the company has no significant litigation pending or outstanding.

We're very pleased with the fact that we reached a profitable settlement for the company in this matter.

In spite of this accomplishment, our third quarter results were disappointing.

They continue to reflect the weakness in the retail marketplace in winning consumer confidence as I mentioned earlier.

Total net revenue for the period declined 8.5% to $167.8 million from $132.4 million in last year's third quarter.

Our retail stores, including full price retail, kids, factory outlet, Canada, and e-commerce generated net sales of $94.8 million during the third quarter, a decrease of .7% from 95.5 million in the prior year third quarter.

Same-store sales declined 5.4% during the period.

The decrease in comp store sales more than offset the revenue benefit of the largest store base, which represented an 8.3% increase in square footage.

One bright spot in our performance was Canada, where stores continued to perform well during the quarter, with profited-ph; comparable store sales in the mid-single digit range.

In the overall women's retail business, our young contemporary line, which is our principle line, showed improved performance in the third quarter.

Bottoms sold well.

Woven tops and fashion knit tops also performed well.

So at the end of the third quarter, we started to see improvement in sale of basic products, which had been a challenging category.

Women's accessories continue to perform very well.

Fashion items drove the men's retail business during the quarter.

Woven tops were also successful.

This fashion category should continue to perform well through the end of the (inaudible) holiday season as the male customer also wants (inaudible) as a novelty.

Looking ahead, we continue to improve our strategy by realigning our top to bottom ratio and to introduce a new marketing approach in the retail stores to clearly separate our three main-ph; (inaudible) for men to enable the customer to better understand our product guidance.

In our wholesale operations, third quarter 2002 revenue declined by 24% to $50.7 million from $66.7 million in the same 2001 period.

The prior year included approximately $6.6 million of kids business that we now license out.

Excluding the kids business from the prior year revenue results, wholesale revenues declined by 16.5%.

Although this current environment resulted in U.S. department store buyers remaining cautious in purchasing, our international wholesale markets, particularly in Europe, performed very well during the quarter.

Improvements in the international wholesale markets resulted in a slightly higher overall gross margin rate, which was partially upset by higher allowances in domestic wholesales and lower margins on offsite sales.

Returns were lower than in the prior quarter - in the prior year quarter, excuse me -- reflecting cleaner-ph; department store inventory.

Our wholesale backlog as of October 20, 2002, was $49.1 million compared to 77.5 million as of October 21, 2001.

Included in the 2001 amount is $2.9 million of kids business orders.

Excluding the effect of the kid's business, the current backlog would be down about 34% from the year ago level.

In wholesale, women's bottoms sold well during the quarter.

Men's fashion wovens were well received.

Sales of basic products continued to be weak.

Looking forward, in line with our overall merchandising efforts, we're making further changes in our wholesale product offerings in both the men's and women's line to enhance the appeal and the price value proposition of the assortment and to generate positive-ph; differentiation on the selling floor.

We'll introduce several new fabrications-ph; and washes-ph; at attractive price points, and have already been well received on a test basis, and which should bolster sales for the remainder of the year.

Regarding our licensing business, our third quarter revenues increased to $12.3 million from 10.2 million in 2001.

The increase is attributable to improved sales from our international licensees.

The third quarter also entered royal adjustments from licensees-ph; of approximately $1 million.

Gross profit for the third quarter decreased 3.9% to $56.8 million from $59.1 million in the third quarter of 2001.

However, as a percentage of net revenue, gross profit margins improved to 36% from 34.3% in the same period of 2001.

The improvement is due to higher licensing revenue and improved gross margins in our retail business, partially offset by higher occupancy costs due to lower sales floor activity and a lower wholesale margin.

SG&A expenses for the third quarter were $51.7 million, an increase of 5.1% from last year.

The increase is primarily attributable to the cost of operating 18 net new stores and higher advertising costs necessary to invigorate the business and maintain the Guess? brand awareness.

Part of this increase in advertising is related to the timing of spending between the third and fourth quarters.

Accordingly, we expect fourth quarter advertising expenses to be substantially below last year's levels.

Interest expense for the third quarter was $2.2 million compared to $3.1 million for the 2001 third quarter.

This improvement reflects lower borrowings as a result of the lower inventory.

As I mentioned, our total outstanding debt was $86 million at the end of the 2002 third quarter compared to 132 million at the same 2001 period.

We plan to have no borrowings outstanding against our new credit facility at the end of the 2002 fiscal year.

We're also pursuing financing on (inaudible) for the $80 million senior subordinated notes due in 2003.

We expect to have a refinancing solution in place by the first quarter of 2003.

We ended the third quarter with a total of 222 stores, including those in Canada, of which 175 were full price retail and kids stores, and 67 were factory outlet stores.

During the quarter, we opened 10 retail stores and one factory store and we closed one factory store.

For the nine months ended September 28th, 2002, the company reported a net growth of $6.7 million or a diluted loss per share of 15 cents versus net earnings of $4.9 million or diluted earnings per share of 11 cents in the comparable 2001 period.

The 2002 results include the previously mentioned litigation settlement, but excluding that litigation settlement, the net loss for the 2002 9-month period was 9.2 million, or a diluted loss of 21 cents per share.

The 2001 9-month result, including restructuring, impairment, and severance charges of $5 million, so it's $2.9 million net of tax.

Excluding these charges, net earnings for the 2001 9-month period were $7.8 million or diluted earnings of 18 cents per share.

Total revenues for the period declined by 16.9% to $416.8 million compared to 494.2 million in the same prior year period.

We also announced today that we'll take additional actions to lower operating costs and increase efficiency.

This (inaudible) include the closure of certain corporate facilities and several underperforming retail locations, certain asset write-offs, and the elimination of certain administrative and support positions.

In connection with these actions, the company will record a pretax charge of between $10 million and $12 million, or between $6 million and $8 million after tax during the 2002 fourth quarter.

We expect this test-ph; to generate annual pretax cost savings of approximately $7 million-ph; beginning in 2003.

Due to the continued pressure on both sales and gross margins resulting from the current-ph; retail climate, we now anticipate total revenues for the fourth quarter of 2002 to decline in the high single digits from 2001 levels.

Total retail store revenue is forecasted to increase in the mid single digits in the fourth quarter from sales of new stores, partially offset by a comparable store sales decline in the low single digits.

Based on current trends, comparable store sales for the fiscal month of October 2002, which ends on November 2, should decline in the low single digits.

We will announce October sales on November 6th of 2002.

We anticipate overall wholesale revenues to be down by approximately 40% in the last quarter of the year.

Licensee revenues for the fourth quarter of 2002 are projected to increase in the low single digits range year-over-year.

Overall gross margins are expected to increase due to our improving positions compared to the prior year, which should result in lower markdowns and fewer sales through the off-price channel.

The selling, general, and administrative expense rate is expected to be in the low 30% range for the quarter.

Interest expense for the year is expected to be about $9 million.

We anticipate that our overall tax rate will be approximately 36% for 2002.

Inventory levels are expected to be between $95 million and $115 million through most of the balance of the year, peaking in the early fourth quarter in anticipation of holiday shipments-ph;.

Capital expenditures for 2002 are planned at approximately $25 million, which includes costs to open approximately 25 new stores and to complete 8 to 10 remodels and relocations.

Based on the above parameters, we now expect to report diluted earnings per share in the range of 10 cents to 13 cents for the 2002 fourth year, and a diluted-ph; loss per share in the 2 cents to 5 cents for 2002 fiscal year.

This (inaudible) excludes the impact of the previously-discussed fourth quarter charge.

The company is also in the process of developing its 2003 financial plan, and when that process is completed, we will provide 2003 guidance.

In May 2001, the company's board of directors authorized the company to repurchase shares of its own stock in the amount of up to $50 million from time to time in open market transactions.

During the third quarter of 2002, the company purchased 606,000 shares at an aggregated cost of $3.2 million or an average of $5.21 cents per share.

Since the inception of the share repurchase program in May of 2001, the company has purchased 1,137,100 shares at an aggregated cost of $7.1 million or an average of $6.26 cents per share.

In closing, I would like to say that, while we expect business to remain challenging for the remainder of the year, we're confident we're taking the right steps to revitalize performance and increase shareholder value over the longer term.

We continue to focus on improving sales while carefully managing costs and inventory.

We're optimistic that these steps will result in improved performance in the near-term future.

As always, we thank you for your interest in Guess?, and we will now be happy to open the lines for questions.

Today's question and answer session will be conducted electronically.

If you'd like to ask a question, you may signal by pressing star 1 on your touch-tone telephone.

Again, it is star 1 for questions.

If you are using equipment with a mute function, please disengage it.

We will pause for a moment to assemble our roster.

We'll go first to Margaret Whitfield with Brean Murray.

Good afternoon.

I was wondering what your store plans are for next year; that's one question.

If you could break down the quarter-ending inventories between the retail and the wholesale business, and discuss the Guess? collection business, which I don't think you mentioned, and also, would that backlog be indicative of what we might expect in terms of early '03 wholesale sales?

Okay.

Let me start with the issue of stores for next year.

We have several deals that have already been assigned, and we expect to come into the year with a full plate for store openings, and that number should be anywhere between 12 to 15 stores.

We may add more as business progresses and as we feel that they are deserving.

Where would these stores be -- domestic, Canada, outlets, full price?

There are only a couple of deals that we are looking at for Canada, but for the most part they're domestic and they're full-priced retail stores.

We are not-ph; opening kids stores, and we have a couple of factory outlet stores that are also in the works.

Thank you.

Resell inventory was down about 15% for the average-ph; of the period.

I think we have seen-ph; that the company did a much better job in allocating inventory out as sales took place.

As a result of that, we have been able to manage inventories lower and minimize returns from retail stores to the warehouse.

In terms of the wholesale inventory, it's down about the same percentage that the business is down.

So we have been following the same type of trend of finished goods inventory for wholesale.

We're not carrying the kind of (inaudible) that we were carrying a year ago, forcing the outlet stores to take a lot of that excess inventory.

Debt collection slowed a little bit during the third quarter.

The good news here is that young contemporary picked up some of that slowness.

So we saw an inverse trend between the two lines.

But we still think we have significant opportunity in debt collection.

And lastly, backlog.

We are planning next year to be more in line with the kind of volumes that we shift this year, which would imply that we do not anticipate that the backlog will continue to suffer the way the fourth quarter number-ph; would imply.

You're planning volume and wholesale to be kind of flattish year over year.

Yes.

Could you talk about any retail store closings as a part of your write-off that you discussed, and whether or not your door-counted-ph; wholesale is likely to fall?

Yes.

We have some visibility on store closures, and again, you know, in spite of all that, we are trying to build a business that is pretty much in line with the volumes that we ship this year.

And we have strategies to do that.

That's exactly what - one of the (inaudible) Nancy-ph; is working on.

With respect to your other question on our own (inaudible), yes, we do have a few stores we're closing, that are less than a handful.

You know, a lot of the charge relates to asset write-offs for stores that are not performing in line with expectations.

Okay.

Thank you.

You're welcome.

We go next to Andrew Ebersol-ph; with KDP Investment Values.

I have several questions.

First, I was hoping you could discuss what your peak borrowings are expected to be this year during the peak and what the availability will be at that time after considering any borrowing base restrictions or LSCs.

Yes.

We don't disclose peak borrowings.

But we have plenty of experience-ph;, capacity with the new facility in place with the (inaudible) availability is very significant.

And we expect that to be the case for the remainder of the year.

How come you guys are unwilling to disclose that number?

I mean, that's pretty typically disclosed by any other retailer I talk with.

Well, we have our own policies and requirements.

But really, I think that these numbers I'm giving you should be very sufficient.

I'm telling you, we have plenty of excess capacity under the new facility.

And really, another thing that I can tell is that the borrowings are going to be below the levels that they were for the fourth quarter of last year.

In addition, Andrew, by year end we've already said we won't be borrowing at all under our line.

Yes, I did hear that.

It's just nice -- I would suspect that you guys would have substantial excess availability under that revolver, but it's just nice to put a number on it.

I don't know why you wouldn't want to do that if it's to your benefit.

But anyway, also, I'd like to get a little more specifics on the doors-ph; and Shop-N-Shops-ph;, if you could maybe talk about what the number of doors-ph; were at the beginning of the year and Shop-N-Shops-ph; at the beginning of the year, and where they stand now, and kind of what expectations are for those numbers going forward?

Yes.

The -- we don't (inaudible) stores.

The total number of stores, you know, is down about half from the beginning of the year, so - currently-ph;, and the -- half of that drop is in Shop-N-Shop-ph;; the other half is just in doors-ph; that are not represented by Shop-N-Shop.

We do anticipate that we will see some further reduction in doors-ph;, but they shouldn't be in this kind of dimensions at all.

In your K, if I look at the numbers that you guys disclosed in your K for doors-ph;, I think you do that in Shop-N-Shops-ph;, and I can use that for the baseline for what you just mentioned.

I can give you some numbers.

At the beginning of the year, we were in, like, 2,700 doors.

This includes men's and women's and includes kids.

That would probably not be the right number to compare.

For men's and women's, we were in 1,600 doors-ph; and now we're looking at 1,300.

So, you know, the big chunk of the drop of that half of the doors-ph; was because of kids that we don't account for right now but, you know, they are with the licensee.

And I don't know exactly how many doors, if any have been dropped in the kids business.

I know that their business is very healthy.

I'm just a little confused on those numbers.

Initially you said you had 2,700 doors-ph;.

That included the kids.

I gave you a wrong number.

That included kids.

There were like 1,200 doors that we had at the beginning of the year that were represented by kids Shop-N-Shops-ph; or doors-ph;.

I see.

Okay.

So the right number to compare apples-to-apples is 1,600 at the beginning of the year, to 1,285 at the end of the third quarter.

And then, how do I reconcile the Shop-N-Shop change with those ...

Shop-N-Shop-ph;, again, for men and women alone, we had 945 at the beginning of the year, and we currently have 826.

Thank you.

Also, I was hoping to get a better feel for -- with respect to your wholesale business, when -- what level of revenues do you think you need to achieve to make that business profitable again, or are there things that you guys are doing that are going to better align your costs with your lower revenues, maybe with some of the recent cost reductions that you mention?

Is that related to the wholesale business?

It's related to the overall environment.

Obviously, we have been putting a lot of additional resources into our retail business because we are opening stores, and that has continued to increase in our cost structure.

But that being said, we are looking at every area of the company to reduce costs.

We are not excluding any in that respect.

With -- as it relates to wholesale, we definitely need to increase revenues.

That would be, you know, a great answer to the profitability issue.

But that being said, we see opportunity to increase margins as well.

Is it safe to say that there's not much you can do on the cost side, that in order to get those -- to reverse or to get that a positive number in terms of operating income, that it's ...

No.

No.

You will never hear me say that.

No.

There's a lot we can do in the quarter-ph;.

We are going after those issues.

And I guess that's it for now.

Thank you.

You're welcome.

Once again, for questions, that is star 1 on your touch-tone telephone.

We'll take our next question from Glen Kreblin-ph; with Glenhill Capital.

It's been answered.

Thank you.

You're welcome.

How are you, Glen-ph;?

We'll take the next question from Roxanne Meyer-ph; with CIBC.

Good morning.

I was wondering if you can give us a little more detail as to which assets you intend to take the impairment on and how that's going to have an impact longer-term, as well as give us an update on men's and what improvements and changes you're seeing for holiday.

Okay.

Half of the charge that we expect to take in the fourth quarter is related to asset write-off, and the closure of those underperforming stores that I mentioned.

So it is a big number.

It relates to some stores that are not performing, and we have -- and they're currently new stores.

So we have a lot of undepreciated-ph; assets that we are writing off.

The other half is split between severance charges for any, you know, positions that we are eliminating, plus the -- deal with excess capacity at the administrative level.

We have a couple of buildings that we plan to dispose of or to move into or concentrate into other buildings.

And some of those charges will relate to those moves or changes.

Okay.

Your other question was related to the men's business.

And we are very pleased, actually, with the trends in our men's business.

The line has been completely repositioned.

And this happened over a period of last maybe three quarters, and very successfully, I think.

It represents our brand, it is much more consistent with our image and with the women's line, and we are having a lot of successes with some of our -- the new product that is presented in the line.

We think that the trends that we are seeing now could be improved even further.

We are seeing positive comps in our retail stores for the men's line.

But we think that the use of the inventory and the volume that we can generate with the men's line can be increased further.

So we are very pleased with the repositioning.

Okay.

Great.

You're welcome.

We'll take our next question from Lasai Alibahi-ph; with Financial Management Advisors.

Hi, Carlos.

This is Fisal-ph;.

I want to ask you a bit more about the cash - or I guess I should say the charges of 10 million to 12 million.

Can you tell us exactly how much of that, or roughly how much of that, is in cash?

There is not that much in cash.

I would say probably one-third of the charge will be cash, between severance and rent commitments and things that we will have to deal with for the one-time charges we will experience.

Is that immediately paid out in the fourth quarter, or is it paid out over the course of the year in 2000?

It's paid out later on.

Some of it is going to be paid out in the fourth quarter.

I would say probably two-thirds would be paid out in the next year.

Okay.

Thanks.

You're welcome.

We'll take our next question from Glen Kreblin-ph; with Glenhill Capital.

The last question was what I wanted to focus on.

Carlos, how many stores are you closing as part of this?

Less than a handful.

And you indicated most of these stores are less than three years old.

I didn't say it was less than three years old, but I would say they're relatively new.

That was my definition.

That's okay.

That's pretty good.

And secondly, what are you seeing in terms of real estate deals, opportunities for '03?

Well, I'm not sure -- you know, I talked a little bit about our plans for '03 before, but if you're talking about what the environment looks like, it's great.

There are a lot of great deals being presented to us with pretty healthy (inaudible) allowances and good levels of rent.

So, you know, we see a good opportunity for a company that is willing to control growth and do it right and pursue, you know, the right locations.

We are not -- we are not here, you know, going at a very wild pace to open new stores.

We are taking each deal in a very careful way, and if it is not a great deal, we pass on it.

I think that that is the right approach.

You know, the great thing we have is that there's only one company that can open a Guess? store.

It's not that we have to jump into any locations; we can always come back.

Did I hear correctly you're planning wholesales flat for year-over-year next year?

We're building a plan.

I said before that we are working on our financial plans.

As soon as we're done, we will give some guidance.

But we are attempting to keep the volume that we have this year, in spite of those closings or Shop-N-Shop-ph; closings.

Great.

Thank you.

You're welcome.

Our next question is a follow-up from Andrew Ebersol-ph; with KDP Investment Values.

I was hoping you could provide a little more detail or clarity on the performance of your various apparel offerings; maybe if you kind of break it down into men's versus women's and then, within those segments, what percentage of some of the mixes is doing well, and what percent is not doing well?

You've given some good color, but I don't -- I'm having a hard time getting a handle on the degree of any positive performance of any particular category versus the degree of any negative performance of any particular category.

Let me give you -- in a nutshell we know what's happening.

The basic business has been very very difficult, and this affected not just women's, which affected it in a big way, but also men's.

So - and I think that the company really realized that that category was going to be under a lot of pressure, so we migrated into more of fashion.

Now, fashion is doing better, but not enough to compensate for the drop in basics.

And in addition to that, you know, when you are left with some excess inventory, even if you plan your business well, in fashion, it costs much more to get rid of it, and on top of that, margins are under a lot of pressure.

We don't have the returns-ph; that we have on a business like fashion, which was much more predictable, and where margins were much more sustainable.

So that is the overall picture.

Now, when you look at men's versus women's, we find-ph; in the third quarter funded the men's business much more aggressively than we had in the first half of the year because, you know, we were repositioning the line, and we came into 2002 with a very conservative view of where inventories should be until we knew more about how the men's direction was going to work for us.

When we saw that -- in the first half, we saw a lot of good positive trends in the men's business, then we decided to fund the second half of the year more aggressively, which we did, and fortunately we are getting the return for that.

So as a result of that, in the third quarter, for the first time we saw the men's business turning positive comps.

And with respect to women, we were funding Guess? collections aggressively, and also young and contemporary in the fashion areas, because we knew that the basics business was not going to perform.

And we did get some of that basics business back, but not enough to compensate-ph; with fashion.

As a result of that, we ended with a performance in same-store sales of down about 5.5%, with -- primarily coming from women.

And we did have some incremental selling in young contemporary, toward the end of the quarter especially, but we did see the deceleration in Guess? collection at that time.

So we were not able to offset that drop.

And lastly, in terms of merchandise categories, I think I said it, the accessories business continues to perform very well.

I think -- we have a terrific group of licensees that are supporting that business well.

And the customer has reacted very positively to the line.

Okay.

That's all very helpful.

Could you just follow up and let me know what the current mix of fashion versus basic is, and what the current mix of men's versus women's is, what the current mix of accessories is versus ...

I'm sorry.

I hope I don't get you upset with this.

We don't disclose those kind of percentages.

I'm sorry.

Haven't you -- I thought you guys in the past have talked about what the percent of basic is.

That's kind of been the changing thing because sometimes you have basic, then you have fashion basic, I'm just trying to get a ...

No.

... positioning here your mix.

I have been with the company for almost two years; we have never disclosed that kind of mix.

Okay.

Thank you.

You're welcome.

Again, star 1 for questions.

We'll take another follow-up from Glen Kreblin-ph; with Glenhill Capital.

Sorry.

I hit it by mistake.

We go next to Elliot Lee-ph; with CIT Group Commercial Securities-ph;.

Hi, Carlos, how are you?

Good.

How are you?

Okay.

I was just wondering, the senior subordinated notes that come due October 15th.

You talked about alternatives to refinance.

What type of alternatives?

I don't know if you had a chance to look at the -- our current agreement, the one that was filed;

I'm sure you did.

You know, we talk about a potential transaction there, a secularization.

And we are pursuing that, but we have other options.

You know, we will inform you to the progress when the time is right.

We are very excited about that potential transaction because it will be in more favorable terms than what we currently have in place, meaning a lower cost type of instrument.

And it would give us plenty of capacity to fund the business, and it will give us the right use of our capital structure, meaning using some of our -- the strength of our cash flow to fund some of our needs, and as a result of that, lowering the cost.

And we already have in place something that capitalizes on our asset base, so it will be a very efficient use of our capital structure.

Okay.

Thank you.

You're welcome.

At this time, there are no further questions.

I'd like to turn the call back over to you, sir, for any additional or closing comments.

Thank you very much.

Again, thank you for your interest in Guess?

In spite of the difficult conditions that grip the industry, we're very well positioned for the future.

We're dedicated to reinvigorating the business.

We have no doubt that we can accomplish this.

We hope you have a safe and happy Halloween today.

Thank you very much.

Thank you for joining us for today's Guess? conference call.

You may disconnect at this time.