Guess? Inc (GES) 2019 Q2 法說會逐字稿

Hello, and good day, everyone, and welcome to the Guess?

Second Quarter Fiscal 2019 Earnings Conference Call.

On the call is Victor Herrero, Chief Executive Officer; and Sandeep Reddy, Chief Financial Officer.

During today's call, the company will be making forward-looking statements, including comments regarding future plans, strategic initiatives, capital allocations and short- and long-term financial outlook.

The company's actual results may differ materially from the current expectations based on risk factors included in today's press release and the company's quarterly and annual reports filed with the SEC.

Now I would like to turn the call over to Mr. Victor Herrero.

Good afternoon, everyone.

This call marks my third anniversary as the CEO of Guess?.

The first 2 years of my tenure was a period of investing and repositioning Guess?

globally.

I will characterize the third year as the turnaround year for the company as we start reaping the benefits of our capital investment while staying laser-focused on executing our strategic initiatives.

I feel confident that the turnaround has only just begun.

We are well positioned to exit this fiscal year with every business segment profitable and the company firmly on the path of our 7.5% operating margin goal.

We will get there through continued revenue growth and operating cost improvement.

Today, we reported that our adjusted operating profit margin and our adjusted earning per share for the second quarter finished above the high-end of our guidance, driven by double-digit revenue growth.

And as Sandeep will detail later, we are increasing our full year guidance for the current fiscal year, again.

Let's start in Europe.

European revenues for the quarter grew 22% in U.S. dollar and 19% in constant currency continuing the momentum from the successful implementation of our strategic initiatives to elevate the quality of our sales and merchandising organization.

The growth was driven by new store openings and increase in wholesale revenues and positive comps, including e-commerce, up 5% in U.S. dollar and up 2% in constant currency.

The comp increase marked the 12th consecutive quarter of positive comps for the European region, every quarter since I joined the company.

During the quarter, we opened 33 directly-operated stores in Europe, including 16 stores that we acquired from our partners.

We opened stores in Switzerland, France, Belgium, Spain, Turkey, Cyprus, Austria, Germany, U.K., Czech Republic, Russia and Poland.

The stores in Cyprus and Czech Republic were our first directly-operated stores in those markets.

Our European wholesale business continues to be very strong.

After logging our third consecutive season of double-digit growth in Fall/Winter 2018, we are expecting the fourth consecutive season of double-digit growth in Spring/Summer 2019, extending our progress on the strategic initiatives to revitalize the wholesale channel.

European segment margin contracted by 200 basis points, primarily due to the expected pressure from the incremental distribution cost related to the move to our distribution center.

The pressure from this distribution cost on segment margin is expected to moderate in the back half of the year.

Moving to Asia.

The second quarter revenues were up 32% in U.S. dollar and 29% in constant currency.

Revenue growth in the region was driven by positive comps, including e-commerce, up 17% in U.S. dollar and up 14% in constant currency.

And by new store openings, performance in the quarter was particularly strong in Greater China and Japan, similar to the first quarter.

During the quarter, we opened 12 directly-operated stores in Asia on a net basis, including 7 stores in China.

Within China, we opened stores in Dalian in the Northeast, Wuhan in Southwest and Shanghai, Suzhou, Foshan, Shenzhen and Fuzhou in the Southeast.

Operating margins in the Asian segment contracted 190 basis points in the quarter, driven by the investments in Australia and Singapore.

The pressure on operating margin for the segment is expected to decrease in the back half of the year.

We are on track to expand margins for the year and have a clear path to our margin goal of low double digits in the region.

As you can see, we are executing very well on our strategic initiative to build a major business in Asia.

Turning to Americas Retail, we are really pleased with the turnaround in this business.

Revenues for the quarter decreased 2% in U.S. dollar and in constant currency.

Comp sales, including e-commerce for the quarter were up 3% in U.S. dollar and in constant currency.

This was a sequential improvement from the first quarter and against sequentially tougher comps from last year in the second quarter.

We are significantly less promotional than last year with higher AURs driving the comp.

Operating margins in the quarter expanded 460 basis points, marking our fourth consecutive quarter of operating margin expansion.

This was achieved through lower markdowns, better IMUs, negotiated rent reductions and store closures.

As I told you on previous calls, we are focused on elevating our brand presence through collaboration with influencers and celebrities.

We expected this partnership to have a powerful impact on our existing customer demographic as well as attract new customers to the brand going forward.

Aligned with our digital-first initiative, we are further building brand engagement through our investment in social media.

For example, we are investing in video and live video, the preferred method of communication for the millennial and Gen Z demographics.

And we are delivering that content through key social media platform like YouTube and Instagram.

Our engagement strategies are gaining real traction as evidenced by the significant 1.2 million Instagram follower increase Guess?

has experienced thus far this year, reaching 4 million followers globally.

I am also very excited with our new partnership with TikTok, the video sharing application with 500 million users, as we will be the first brand to partner with them.

As you can see, we remain very active on the digital front and constantly innovate.

So in summary, we just reported our eighth consecutive quarter for revenue growth.

Europe and Asia revenues are both expected to grow in double digits this year.

We are expecting American Retail comps for the year to be positive for the first time in 8 years.

We are expecting the -- all business segments this year to be profitable.

We are raising the adjusted guidance for the current fiscal year.

We expect to continue growing our revenue next year and beyond by tapping into available global white space and executing our strategic initiative to elevate the quality of our sales and merchandising organization.

We are on track to achieve our operating margin goal of 7.5% for the company.

This is an exciting time for Guess?

and for me, as I start my 4th year with the company.

A year ago our turnaround had started, powered by growth in sales and profit in Europe and in Asia.

But today, I see Americas Retail joining the turnaround and expected to return to profitability this year after 2 consecutive years of losses.

This serves to accelerate the turnaround and shorten the path to our 7.5% margin goal.

Sandeep?

Thank you, Victor, and good afternoon.

During this conference call, our comments reference certain non-GAAP or adjusted measures.

Please refer to today's earnings release for GAAP reconciliations or descriptions of such measures.

Second quarter revenues were $646 million, up 14% in U.S. dollars and 12% in constant currency versus the prior year quarter.

I would like to highlight that this was our eighth consecutive quarter of revenue growth.

More importantly, this was the first time in 7 years that we grew sales by double digits in the second quarter.

Total company gross margin increased 230 basis points to 37.1%, driven by higher IMUs, less markdowns and lower rents, partially offset by the negative impact of occupancy deleverage from higher European logistics costs related to the startup of our new distribution center.

This was our fifth consecutive quarter of gross margin expansion for the company.

Adjusted SG&A as a percentage of sales increased by 100 basis points, mainly driven by investments in advertising and pressure from distribution expenses in Europe.

Adjusted operating earnings for the second quarter was $37 million, an improvement of 47% versus adjusted operating earnings last year, primarily driven by sales growth and gross margin expansion offset by the aforementioned increase in SG&A.

Adjusted operating margin finished 130 basis points better than last year at 5.7%, including the favorable impact of foreign currency of roughly 10 basis points.

This marks the third consecutive quarter where we've expanded the adjusted operating margins for the company.

Please refer to our press release from today for additional information on operating margins by segment.

Our second quarter adjusted tax rate was 23%, down from 29% last year.

Adjusted diluted earnings per share finished better than the high-end of our guidance at $0.36.

This represents an 89% improvement compared to adjusted diluted earnings per share of $0.19 in last year's second quarter.

The favorable impact of currency on earnings per share in the quarter was roughly $0.05.

Moving on to the balance sheet.

Accounts receivable was $283 million, up 21% in U.S. dollars and 24% in constant currency, including the impact from the adoption of ASC 606 revenue recognition standard.

Inventories were $465 million, up 7% in U.S. dollars and 9% in constant currency versus last year, including the impact from the adoption of the ASC 606 revenue recognition standard.

We are very pleased with the quality of our inventory as we enter the back half of the year.

Free cash flow was negative $68 million, a reduction of $19 million versus negative $49 million in the prior year, driven by changes in working capital and increase in capital expenditures.

We ended the quarter with cash and cash equivalents of $219 million compared to last year's $317 million.

Cash less debt at the end of the second quarter was $179 million compared to $275 million last year.

This is after having returned $75 million in dividends and $56 million in cash paid for share repurchases to shareholders in the last 12 months.

Since the start of our dividend program in 2007, we have returned $1.5 billion to our shareholders in the form of dividends and share buybacks.

Moving into the guidance.

I should point out that our outlook for the third quarter and full year of fiscal 2019 does not assume any asset impairment charges.

The outlook includes the adoption of ASC 606 revenue recognition standard, which became effective in the first quarter.

Also, guidance for revenues and comp sales for the total company and by segment is included in the supplemental table attached to our earnings release.

For the third quarter of fiscal 2019, we expect revenues for the quarter to be up 10.5% to 11.5% in constant currency, driven by expected strong growth in Europe and Asia.

At prevailing exchange rates, we estimate that currency will be roughly a 1.5 percentage point headwind from consolidated revenue growth for the quarter.

Our gross margin is expected to be up due to IMU improvement from our supply chain initiatives, lower markdowns, and lower rents.

The SG&A rate is expected to be up compared to last year, primarily due to an increased investment in digital marketing and advertising.

We are planning an operating margin for the quarter between 2.5% and 3%, with a 30 basis point tailwind from currency.

Earnings per share is planned in the range of $0.12 per share to $0.15 per share and does not assume any further share buybacks.

Excluding currency, this represents an 8% increase in adjusted EPS and a 30 basis point improvement in adjusted operating margin for the quarter at the high-end of guidance.

Our tax rate for the third quarter is estimated to be 25%.

We expect consolidated revenues for the year to be up between 8% and 8.5% in constant currency.

It should be noted that we expect an increase in revenues even after closing stores in the Americas and after taking into account the comparative negative impact from the 53rd week in the prior year.

At prevailing exchange rates, we estimate that currency will be a 100 basis points tailwind on consolidated revenue growth for the year.

For the full year, we expect gross margins to be up due to improved IMUs in both the Americas and Europe, lower markdowns, and lower rents.

The SG&A rate is expected to be up for the year due to increase in investment of digital marketing and advertising as well as European distribution costs.

Our tax rate for the year is estimated to be 25%.

This includes the benefits to our effective tax rate resulting from the tax reform.

We are planning an adjusted operating margin between 4.4% and 4.7%, with a minimal currency impact on operating margin, and our guidance assumes foreign currencies remain roughly at prevailing rates.

We are raising our adjusted earnings per share guidance for the year to a range of $0.94 to $1.03 per share.

The earnings per share guidance includes a currency tailwind of roughly $0.06 per share.

This compares to our prior guidance of $0.88 to $0.99, which included $0.10 currency tailwind.

In other words, we have effectively increased our guidance by $0.08 at the top-end, excluding the impact of currency.

The high-end of our new guidance represents a 47% increase over last year's adjusted EPS.

Excluding currency impacts, the high-end of our guidance represents a 39% increase in adjusted EPS and represents an adjusted operating margin improvement of 100 basis points.

CapEx for the year is expected to range from $90 million to $95 million, as we continue to invest in our retail expansion in Europe and Asia and in our technology infrastructure to support that long-term growth.

The Board of Directors has approved a quarterly dividend of $0.0225 per share payable to shareholders of record at the close of business on September 12, 2018.

With that, I will conclude the company's remarks and open the call up for your questions.

(Operator Instructions) The first question in the queue comes from Susan Anderson.

Good to see the improved performance in the Americas, and great performance across all the regions, really.

I guess, I wanted to dig in a little bit on Europe, nice to see that getting a little bit better on the op margin front.

How should we think about that pressure abating there from the D.C. as we go into the back half?

And then potentially shutting down the old D.C., if you have any thoughts around the timing there, that would be helpful?

Hi, Susan, this is Sandeep.

So I think, as you noted, I think compared to Q1, where we had a 910 basis point, I think, contraction in op margins.

Sequentially, we actually did a lot better in the second quarter and margins were contained to a 200 basis point decline.

But as we said in the prepared remarks, we expect this pressure to really moderate even further in the back half.

And we expect that as time goes on, we should be able to get much more productivity and efficiencies that actually drive that improvement in operating margin.

We remain committed to our double-digit margin goal for the European regions.

And I think when we think about it, I want to go back to something we said on the last call, where essentially the volumes that have been coming out of the European distribution center are significantly ahead of initial plans.

And so we started making some investments to actually adapt our capacity to the growing needs of our business.

And it's actually a good problem to have from our perspective.

We just needed some extra investments.

Those have been happening, and we are beginning to see that the profitability impact of that is beginning to moderate already and we expect that to actually continue to moderate as we move through the back half of the year.

Great.

That sounds good.

And just one follow up on the Americas Retail.

Nice to see that comp momentum continue, it sounds, into third quarter, and it sounds like now you felt pretty confident about being profitable in Americas Retail.

And so maybe if you could just talk a little bit about the momentum that you have there and the expectation as we kind of go out into the back half?

So I think we're thrilled about the Americas Retail comp performance.

And I think, if you look at our performance, we are plus 1 in constant currency in Q1.

It's accelerated to plus 3. And the really good thing about this, Susan, is it's coming with really high-quality sales.

There's significantly less promotional.

We're in a very good position from an inventory standpoint.

The product's resonating.

And so we're actually seeing a lot of traction from the consumers.

We've seen the consistency in execution of our strategic initiatives over multiple seasons and that's beginning to roll through.

And more importantly, I think all the work that we've been doing in the last 2, 3 years from a profitability improvement perspective is now beginning to show through.

And I think whatever it was, I mean, whether it was IMU improvement, which was what was started right from the beginning.

Then we've really taken a lot of work on the rent renegotiations and have been very aggressive to bring those rents down to make stores more profitable or close them if it didn't work out.

And then, I think, from an inventory standpoint, we're in a very good position right now because we have been very disciplined about driving that.

So all that put together is getting us to a place where we seem like we are on track for profitability in the current year.

And I think not only that, we feel confident enough with the acceleration and stabilization of trend to see that from a further out perspective, we see a margin goal for the Americas Retail segment of low singles to mid-single digits.

And I think that brings the entire portfolio to profitability.

Like we said, this year, we already expect to be there, but if we take the 3 segments, the 3 big segments together, the European segment, we expect to be in low double digits, the Asian segment, we expect to be in low double digits, the Americas Retail segment we expect to be in mid-single digits -- low-single digits to mid-single digits.

And then you have the icing on the cake from the Americas wholesale business and the licensing businesses, which are both very profitable businesses.

And that's why we feel really comfortable that we are on the path to that 7.5% margin goal.

Hi, Susan.

This is Victor.

And I would like to add something to Sandeep is that, we are very pleased because, I've been 3 years in the company and I've been waiting for this moment for a long time.

And basically what we were seeing a big improvement mainly in Asia and Europe from almost the beginning of my tenure here at Guess?.

I think right now, we are seeing in America and basically with the same -- with all the actions that Sandeep just explained.

So we are very pleased and hopefully, we can maintain this trend for several quarters.

The next question in the queue comes from Omar Saad from Evercore ISI.

This is actually [Francesco] speaking in for Omar.

Just one follow up and, I guess, again on the U.S. It's great to see trends improving and you guys sound more upbeat on the region.

I wanted to know how do you see the brand perception evolving?

And broadly speaking, how do you see your customer base in the U.S. evolving?

And then related to that beyond your own retail channel, I was wondering if you could give us an idea of how is your -- how the relationship with the wholesale partners are evolving in the region?

I'm going to answer the beginning of your, the relevancy at the beginning of your question, [Francesco].

I think the relevancy of the brand has been always there and will be always there.

I think at this moment, all these strategies that we put in place several or a couple of years ago about the endorsement of celebrities, also all the things that all the digital efforts that we are doing basically as well the social media effort that we've been doing for the last couple of years are really paying off.

And I think that right now, our customer is a -- is more a, I mean, we have several type of customer.

We have Gen Z. We have millennials.

We have all the people that believe that, I mean, we are a fashion option for them.

All people that they want to be sexy and cool.

And I think is very good news for us, because whenever we go and visit the stores, whenever we go and see the people that are really visiting our e-commerce, is everywhere, is everyone.

I mean, we cannot say that we have only one particular generation shopping in our stores, or on our e-commerce or any other distribution center like wholesale.

So I think everyone is really appealing with our product.

I think one important thing that help us this a lot has been the product consistency that we've been having for the last few years and I think this is going to continue this way.

And just to follow up on your question about the wholesale partners in the U.S. And I think I'm just going to step back a little bit to the Americas wholesale segment, because that's something that we're really pleased with.

I think the front half itself was a pretty good result in the mid-single digits for -- of growth in the top line.

But I think if you look into of our guidance for the third quarter, you see that we're guiding in the high-teens on the top line.

And there is a bit of timing there, but overall for the year, we are expected to be up in the high single-digits.

And I can tell you that what's driving this outperformance relative to what we started the year at is our U.S. wholesale business.

We are extremely pleased with the progress we're making over there with our partners across the board.

And I think we are finding that exactly what Victor was talking about from a brand perspective and the product consistency perspective, that's showing through in all channels, including the wholesale channels.

And our partners are actually seeing that sell-through and therefore, placing incremental orders with us and that's why our sales projections are going up based on the orders that we have in-house.

So we're really thrilled about the improvements that we are seeing in the U.S. after a pretty tough time last year.

I think we're coming back quite well for all the reasons we just talked about.

Okay.

That's great.

And if I may, just one follow up -- quick follow up on China.

And continuing your very important strategic partnership with Tmall.

I was wondering if you could give us some color around the upcoming Single Day and broadly speaking how that partnership is growing?

Well, it's still very -- for us, it's very important our partnership with Tmall.

We still having or we are trying to have a strong partnership with them.

I think we are building already the assortment for the 11/11 because it's an important date.

I think that we continue experiencing solid growth in that particular channel.

And as I mentioned before, I think China is basically an omnichannel market, no?

We have a very strong e-commerce presence and right now we are starting to have as well a retail presence, which is an important thing for us.

I think China, we are building a very strong relevancy, and we will continue hopefully, over the next coming years doing so.

Our next question in the queue comes from John Kernan from Cowen.

Sandeep, just wondering what your -- it looks like the gross margin guidance is fairly conservative that's implied in the back half given how clean inventories are and how confident you are in the direction of sell-throughs in a lot of the key regions.

So just wondering is there anything we should be thinking about from a gross margin perspective that would -- maybe can restrict some of the momentum that you had from a gross margin perspective in the first half?

And then I have a follow up.

Well, I think, first off, let's just put it this way, we're guiding for gross margins to be up both in the quarter as well as the year.

We're not really necessarily implying that gross margins are not going to expand.

But what I would say is we should keep in mind that, we started our profit improvement initiatives early in the year last year and we generated significant rent reductions as we got into the back half of the year last year.

So we're beginning to come up against that in the back half of the year.

So there are still enough things that are -- they basically are fueling our gross margin improvement.

And I think that should get us to improved gross margins.

But we are up against tougher compares in the back half than we were in the first half.

Okay.

That makes sense.

My follow up is just on Asia.

Obviously, the top line momentum is very impressive on a comp store basis and total top line.

Victor, what do you think the catalyst is for margin improvement?

I know you're spending a lot to grow the store base.

But what do you think the catalyst ultimately is to start moving towards that double-digit operating margin?

Well, basically this quarter is a quarter where we are on the process of having investment in Australia and Singapore, because we took over the stores from our partners.

And this is basically what is a little bit hurting our margins at this moment.

But I mean, definitely we are on the path to have the low double-digit margins, as I mentioned in my call.

And we will continue -- I mean, as you saw the comps are very healthy, are double digits.

I mean, especially I think that we are performing very well in China and in Japan and I think we will continue doing this.

I think what is very important in Asia is that we are perceived as a company which is Guess?

and I think we have the right product in every single part of Asia.

And on the same -- I mean, we project a similar image everywhere in Asia.

And this is something that I think we were not having in the past and we are achieving step-by-step in Asia, and we will continue trying to give or deliver the same product consistency that we are doing in other parts of the world like Europe and Americas.

And John, just to add one thing on the operating margin trajectory.

Asia is like a collection of markets and we've actually been through different investment phases.

And the path is going to be a little bit uneven because each market has got its own characteristics.

So we saw that in the case of Japan then we had it in the case of China.

And now we're doing Australia and Singapore.

So we've demonstrated that when we make investments maybe initially there is a bit of pressure on margins, but then it comes back very nicely after that.

So that's a cycle I would actually keep in mind.

It's going to be a little bit uneven because it's multiple markets, but we are very comfortable with the double-digit opportunity that we have.

And we said in the prepared remarks also that we expect the pressure to basically ease in the back half anyway compared to what you saw in Q2.

And we are on track to expand margins for the year.

So it's a little bit of, I would say, noise in the quarter, relative to where we expect to be for the year.

Got it.

And I just -- final question, bit of a follow up to a prior question and a longer-term thematic question.

Victor, you've made a lot of positive changes in terms of merchandising, in-store execution.

Certainly, marketing has been a big change.

Do you feel like with the marketing message you're bringing now that you're acquiring new customers?

I mean, you talked about generations in the prior question.

But do you feel like you're bringing in new customers to the brand and that part of the comp store sales increases you're seeing in North America are from new customers?

Very good question.

I think also, I think all the marketing activities that we are doing at this moment, also the empowerment of the field -- of the people in the retail, in our field organization.

We are getting really a lot of customer feedback from them.

What type of things do they want?

What type of -- what are their motivation in fashion?

What type of things?

So all these kind of things are helping us as well to attract new people like, for example, the collaboration we did with Generation.

We did Farmers Market this year as well.

So I mean, there are plenty of things that we are right now with TikTok.

All these kind of things is in order to attract more and more the millennials, the Gen Z and I think we are seeing, I mean, I'm going a lot to the stores.

And I mean, every time I go to the store I really look at what type of customer do we have and definitely, I mean, we have Gen Zs, we have the millennials, we have -- and majority of those people, but particularly in young areas, or young demographics are really people these people, are really the new generation that are really interested on our brand.

Whatever we are going in terms of marketing activities, all the celebrity endorsements that are kind of, I mean, we had Jennifer Lopez, but also we had A$AP Rocky.

So all these kind of things are helping us as well to attract new people, but not only those generations, as well elder generations.

And so we are very happy on the way that we are performing in terms of attracting new customers to our stores or to over different distribution channel.

And the next question in the queue comes from Janine Stichter from Jefferies.

Just want to dive into Europe a little bit.

You had some nice performance there in the second quarter and it looks like you're actually looking for an acceleration in the comp trend in the third quarter.

Can you comment just how you're feeling about the environment?

And then maybe any regional variances that you're seeing?

And then on the North America business, or the Americas business more broadly, understanding that the biggest driver of comps has been AUR.

Can you comment on what you're seeing with traffic?

And just if there's been any progress in getting some of that traffic back towards positive?

Yes.

So Janine, I think, when -- on Europe you are right, I think we're pleased at sequential progress that we are seeing in the European business and things are looking pretty good in the third quarter just like I think we're pleased with the second quarter.

And clearly, I think the environment is still a pretty good one in Europe and that's why it's broad-based strength that we are seeing.

And we are very encouraged by that.

And the thing about Europe is, yes, great, fine, the comps are expected to be up in the mid-single digits, which is reflective of underlying health, but I think the wholesale business has also been doing extremely well.

And I think it's really about the strategic initiative that we outlined 3 years ago being executed very consistently between the retail and wholesale channels.

And our wholesale customers are beginning to see the kinds of sell-through that they were looking for.

And therefore, the same-door buys have been going up, which is the equivalent of comps.

So all channels really are driving in a very healthy direction in Europe.

So super pleased about where things are going on that.

And then turning to the Americas, I think you mentioned AUR being a driver of the comp.

Yes, it is.

I think traffic has actually sequentially improved over the last 4 quarters.

And I think it's much less of a headwind than probably early part of last year.

But it's still a little bit of a drag.

But all the things that Victor just talked about in terms of the marketing message and making sure that we're getting partnerships going with celebrities and with influencers and really the digital-first approach that we are taking are all things that are expected to contribute towards our traffic improvement.

We are seeing an improvement as I said.

But in addition, I think all the initiatives from a visual merchandising perspective that you see outside and on the windows and the stores and even inside.

Once people come in, I think, the appeal of the product is much less cluttered potentially than what it was about 3 years ago.

Anybody going into of our stores, and I invite all of you to go into of our stores, you can just get into the store and then you can see all the way to the back, and I think that's the whole idea.

We just want it to be a simple, seamless, shopping experience for the consumer and that's what is beginning to make incrementally more and more of an impact and the snowball is the comp trend that you're seeing.

And we expect the first positive comp in 8 years and that's really taken a long time to come, but it took a couple of years of hard work to make it get to this point.

The last question in the queue comes from Dana Telsey with Telsey Advisory Group.

As you think of product in terms of what's driving the business, can you take us through in the different regions whether what's happening on the bottom side with denim and also the license product categories?

And any plans for the back half of the year that we should look to in continuing to drive sale?

In terms of product trends, I think that the [print] mixing is very important.

Bold and bright colors are important.

The feminine dressing is still continuing very strong, '90s influence in prints and silhouettes also very important.

We continue with the importance of the logos as well.

And regarding denim, still the destroyed denim is very important, also the embellishment in the denim.

Also what is important in denim is a kind of special washes.

I think we are working a lot in terms of what type of washes are appealing to our customer, to new customers.

I think is very important as well, a new fabric wash on denim like, for example, a eco-friendly fabric that we are going to develop for this season.

So I mean, there are plenty of things right now.

And I think one important thing as well that I think I should mention is denim is important, but active wear as well is also an important part of a -- the trends at this moment.

And on the license side, anything to note there?

Well, the license, as you know from the last 3 years, we've been doing the total outfit where basically versus [shoe] categories.

And I think this is working very well because at the end of the day, what we want is that the people shopping in our stores or any of our distribution channel that they don't buy only apparel or they buy -- I mean, so we are trying to locate everything on a very kind of a thoughtful way like this every thing people are attracted to watches and are attracted to handbags.

I think handbags is performing very, very well in terms of sales.

And also important is for us all the licenses are very important.

And all across the board, they are performing better than in the past.

(Operator Instructions) Okay.

We have no further questions.

Thank you, ladies and gentlemen.

This concludes today's teleconference.

Thank you for participating.

You may now disconnect.