G-III Apparel Group Ltd (GIII) 2010 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the G-III Apparel Group Limited third quarter 2010 earnings conference call. Want to note that today's call is being recorded. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for your questions.

I would like to turn the conference over to Mr. Neal Nackman, Chief Financial Officer of G-III Apparel Group. Please go ahead, sir.

Thank you. Before we begin I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial conditions of the Company to differ are discussed in the documents filed by the Company with the SEC. The Company undertakes no duty to update any forward-looking statements. In addition, during the call we will refer to EBITDA, a non-GAAP number. We have provided a reconciliation of our EBITDA numbers to our net income according to GAAP in our press release and on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Good morning and thank you for joining us to review our third quarter results. With me today are Wayne Miller, our Chief Operating Officer, and Neal Nackman, our Chief Financial Officer. We are very pleased with our third quarter. We performed well and delivered sales growth and increased profitability compared to the year ago period. We've worked really hard to design and deliver great product and position our business for continued success. Our results were a great team effort and we are pleased with contributions made at all levels of our Company and across all our businesses. I will start with a few of the financial highlights of our third quarter. Net sales in the third quarter increased to $364 million from $352 million last year. Double digit growth in dresses, sportswear and Wilsons offset an expected decline in private label outerwear. Gross profit was very strong, rising to $126 million from $113 million in the same period last year.

The 260 basis point increase in the gross profit percentage is the direct result of the better mix and performance at retail. Our net income per share for the third quarter increased 11% to $1.87 from $1.68 in the third quarter of last year. The increase was larger than we had anticipated and puts us in a position to have a very good, full fiscal year. Our wholesale outerwear business is strong and continues to take market share. We continue to have a dominant position in women's and men's outerwear. Our fashion brands, led by Calvin Klein, Kenneth Cole, Andrew Marc and Guess?, which are primarily shipped to department stores, all continue to be strong. We saw great retail selling in all of these brands in the third quarter, which helped kick off a good coat season. The introduction of the new Marc New York product was well timed. We believe that the Andrew Marc and Marc New York brands are positioned well for today's marketplace and the products continue to deliver great value.

The luxury care continues to show good demand for Andrew Marc and the Cole Haan side. We intend to add new licensees to give Andrew Marc a better life style presentation. Overtime we can build this into a well diversified multi-category life style brand. We are pursuing opportunities in Asia and in Europe. We recently launched Andrew Marc dresses this fall and will have placement this spring in both Lord & Taylor and Macy's. Once we expand the merchandise portfolio with sportswear -- with a sportswear collection, we will also create an Andrew Marc retail concept which should further aid the developments of the brand and the business. We recently extended our Ellen Tracy license, which now includes ladies and girls coats, dresses, and women's suits, as well as men's active wear and outerwear.

We believe Ellen Tracy is a good opportunity for growth, as Macy's will be launching an exclusive Ellen Tracy better sportswear line and is looking to expand other categories. We should benefit by Macy's new initiative, as well as our ability to sale other key retailers. Our sellthroughs at Nordstrom and Lord & Taylor with the Ellen Tracy brand are amongst the best in the lady's outerwear department. We are pleased that in the past quarter we were able to expand our rights with the NFL, particularly in the mass tier. We will also be introducing a NFL collection of sportswear next year to retailers across the country. We expect the expanded NFL license to spur growth next year in our T&M collegiate business. We continue to be excited about the growth opportunities in our dresses. The last two years have been very rewarding for us, due to strong top-line growth and enhanced margin.

Calvin Klein dresses, now in more than 1200 department store doors, is positioned as one of the dominant resources in the marketplace. We believe Calvin Klein dresses can continue to grow at a strong rate over the next few years. Our collection is quite broad, it is delivered monthly and generates newness and excitement on the selling floors. Calvin Klein Merchandise is employed by us to insure that our inventories are well maintained and properly displayed on a daily basis. We continue to have leading sellthroughs in this area with strong maintained margins both for us and our retail partners. Jessica Howard and Eliza J., which are our own brands, have grown over 10% in sales over last year with margin improvements over 500 basis points. The brands are shipped to department stores throughout the country.

Sellthroughs have been very strong. Andrew Marc shipped to 80 doors this fall and has ordered for 210 doors for this upcoming spring. This is a good opportunity for us to further develop our brand in department stores. Ellen Tracy will have a new beginning in dresses next year. We believe Macy's will be supportive of the Ellen Tracy dresses. Our Calvin Klein sportswear initiative is performing well in terms of margin and sellthroughs. This business is also poised for a good spring and we are pleased with the sales and booking trends. We expect it to be a strong source of growth through the next few years and we are working hard to expand retail doors. The fall retail store count for our Calvin Klein sportswear product is up 35% from last year under the prior licensee. We are in the process of improving the in-store fixturing and the marketing presentation, which are expected to further enhance store selling.

Calvin Klein performance sales continue to increase from its initial launch last year. Our Calvin Klein suit business was flat to last year and, despite a soft market for suits, we have made investments in infrastructure and expect to gain market share in this category. We will sell both with increased penetration in Calvin Klein and through the introduction of new lines, including Ellen Tracy's suits. We are proud of the growth that we have been able to accomplish with the Calvin Klein brand. We have achieved market dominance in several categories due to the incredible strength of this brand. Wilsons performed much better in the third quarter this year than in last year's third quarter, which was just after we acquired it. We believe that we have done a good job of improving the merchandise assortment and positioning the business effectively.

We have increased the private label component, focused on leather, constructed the right mix of price points for the environment, and planned out our inventory levels very carefully. We think the remainder of the holiday season will play out pretty much in line with our plans for both sales and margin. While our retail segment will not show a profit for fiscal 2010, our Wilsons retail outlet stores are generating positive cash flow on a four wall basis and we see room for further improvement. We believe that Wilsons is now capable of showing positive contribution to our consolidated net income in fiscal 2011. As we look ahead to next year, we expect to continue on the path that we are on. We will look to expand our newer platforms of dresses and sportswear, generate continued improvements in our Wilsons retail outlet stores and grow our outerwear business. We will also look to take advantage of newer opportunities that maybe come available in the marketplace.

Our business model of great brands, well designed and (inaudible) kat compelling prices is benefiting us in a tough environment. In addition, we continue to watch and control our costs and plan inventory carefully. I will reserve some additional comments for closing, but now I will turn the call over to Neal Nackman to go through our financials. Neal.

Thanks, Morris. First for the quarterly review. Net sales for the quarter ended October 31, 2009 were $364 million, up 3.4% compared to $351 million in the year ago third quarter. Net sales of wholesale licensed apparel in the quarter increased to $252.9 million from $229.1 million, primarily due to an increase in sales of our Calvin Klein dress and performance products, as well as from sales of our Calvin Klein sportswear products that we first began selling earlier this year. Net sales of wholesale non-licensed apparel in the quarter decreased to $89.4 million from $98.1 million in last year's third quarter. Increases in our Jessica Howard dress business and Andrew Marc business were more than offset by lower net sales of private label product. Net sales in our retail segment increased by 21.5% to $29.7 million in the current quarter from $24.4 million in the comparable period last year.

Our net income for the quarter increased to $32.3 million or $1.87 per diluted share from $28.8 million or $1.68 per diluted share in the same period last year. Our gross margin percentage increased 260 basis points to 34.6% in the quarter compared to 32.0% last year. The gross margin percentage in our wholesale licensed apparel segment was 32.1% this quarter compared to 32% in the prior year period. Gross margin percentage in our wholesale non-licensed apparel segment increased to 33.8% from 29.2% in last year's quarter. This increase is primarily attributable to improved margins in our Jessica Howard and Andrew Marc businesses. Lastly, the gross margin percentage in our retail segment increased to 47.7% from 43.6% in the prior year's quarter, driven by increased margin for our outerwear product. SG&A expenses, exclusive of depreciation and amortization, increased $7.8 million to $66.7 million for the quarter from $58.9 million in the prior year's third quarter.

This expense increase is primarily attributable to personnel, warehousing and advertising costs. Personnel costs increased as a result of higher anticipated bonus payments associated with higher anticipated profitability. Warehouse and advertising costs are up due to higher sales in the period. Our balance sheet continues to improve. Accounts receivable were approximately $236 million as of October 31, 2009, compared to $218 million at the end of last October. Our debt and inventory levels as of October 31, 2009 are both down slightly from last year and our working capital has increased by over $16 million. Lastly, with respect to guidance, our full year revised guidance we are now forecasting approximately $790 million in net sales for the fiscal 2010 year that ended January 31, 2010 up from our prior guidance of $770 million.

Our revised full year sales guidance equates to approximately an 11% increase over net sales for fiscal 2009. We are now forecasting net income in the range of $23 million to $23.7 million or between $1.31 and $1.35 per diluted share for fiscal 2010, compared to our prior guidance of net income in the range of $16.6 million to $18.4 million or between $0.95 and $1.05 per diluted share. EBITDA for fiscal 2010 is now forecast to range between $49.8 million and $51.3 million or an increase of between 36% and 40% from fiscal 2009. And with that I will turn the call back over to Morris.

Thanks, Neal. As you can see from our financial results, we are having a really good year. I am proud of our team here at G-III for doing an outstanding job. We are executing well and continuing to grow. We are focused on accelerating growth. We have diversified our Company into dresses, suits and sportswear. We now are a brand owner with Andrew Marc. Our retail channels of distribution are well balanced from mass to luxury. Our sourcing design is the best in the industry and our management team is strong and well qualified. We will look to add new licenses and expand existing relationships with new categories. We will continue to follow the successful practices and strategies we developed over a long period of time. These are exciting times for our Company and we are grateful for your continued attention and support. It remains our mission to grow the business, serve our customers and create value for our shareholders. Thank you. And now we are ready to take some of your questions.

(Operator Instructions). We will go first to Todd Slater with Lazard Capital.

Thanks very much. Morning.

Morning.

First congratulations on such solid numbers in one of the most challenging periods, I think, looking back in history. So, very well done. My first question is about the just the outerwear complex generally and the impact of sort of let's say warm weather in the start of the fourth quarter. How important is the weather on the ability to end the coat season as strongly as it started in achieving your fourth quarter outlook. That's my first question. And then secondly, I am interested in just flushing out the commentary on the luxury tier, because I think you talked about good demand for Andrew Marc and Cole Haan. And I am just curious if that is because the luxury customer is strengthening or is it more sort of brand specific or product specific or maybe they are priced right at the low end of that tier. Those are my first two questions. Thanks.

Thank you, Todd. In response to weather as it relates to coats, it is clearly one of the driving factors. We saw a major improvement in our business and maybe the kick off of our coat year in early October when the weather turned unseasonably cold. Our inventory levels pretty much depleted in a two week period and we were very excited about the prospect of an amazing year. The weeks after were clearly not the same and there has been some negative impact. As far as G-III is concerned we have clean inventory. Our sellthroughs in all our brands lead the industry and we don't foresee any problems at all. Our quality of sales this year for third quarter and fourth quarter are far better than last year. Last year the marching orders from management were to clear inventory and make sure that there was virtually no carry-over coat inventory in anticipation of a real tough economy. So this year our margins are better. In light of even tough weather patterns for a coat business, our margins are going to end up much better for Q4 than they did last year.

So even if we have an Indian summer for the rest of the period, I mean, if you look at your -- you feel comfortable with your guidance and earning, let's say, a profit for fourth quarter for the Company no matter what .

Historically we have been fairly conservative on our guidance. So I'd have to respond with yes, we are comfortable with it.

Okay. And then in terms of the luxury tier and Andrew Marc and Cole Haan.

I don't want to confuse you. The luxury tier still remains to be -- remains the toughest at retail and we are finding the higher the retail, the tougher the business. But in light of the type of business we are in with both Andrew Marc and Cole Haan, they're both performing well at the luxury tier. They are both relatively small businesses. They're positioned well, the sellthroughs are good, very little inventory liability, and they send the luxury message for both brands the way we need them to. It is a calculated business with very little risk at the luxury tier.

Okay. And then real quick on Wilsons you said you expect that they contribute to profit, I guess, in I think you said fiscal year '11. I am assuming that's calendar 2010, so the upcoming year. My question is what revenue do you need to generate at a minimum to breakeven in the retail segment next year?

The -- I am going to take you a little bit off your question. The Wilsons business we had actually planned for breakeven or slightly profitable this year and the impact of November sales and November weather patterns has really brought that down. So we are looking at a marginal loss, nothing that will impact the Company in a major way. And as far as what we need in retail volume for the coming year, let's say calendar 2010 or our fiscal 2011, I would tell you we need approximately $135 million to $140 million in top-line revenue to achieve profitability. Now, we are aligning our talent pools. We are measuring our expense structure and we are attempting to continue to renegotiate with our landlords and we believe we will have a good year. Our product gets better every single day and today I would be proud for anybody to walk into those stores. A year ago I could not have made that statement.

So would you need to have positive comps for that to be, that $135 million, $140 million number.

We do, but not significant because the give back at Wilsons was really in the first half of the year, which has been corrected. The first half of this year entails a good deal of clearance that was a carryover off of last year. So we don't anticipate anniversarying the loss that we had for the first half of the year. So that should right itself and bring us into profitability without very much top-line growth.

Great. Thanks, all the best this quarter.

Thank you, Todd.

Next from KeyBanc, we will move onto Edward Yruma.

Hi, thanks very much. Congratulations on a great quarter. To kind of dovetail on Todd's question about Wilsons. I know that you had pointed to comps being pretty strong when you reported at the end of last quarter and I know you had already pointed to the impact of weather in November. But could you give us a little bit more clarity about the sales trends intraquarter.

Sales trends in Q4?

Right.

Well, clearly it's our biggest quarter and sale -- the sale trend is better. It is up comp to last year, but it is missing plan. We -- weather clearly impacted. As we saw it get cold in the midwest this week, we saw a bump-up in business, a significant bump up. There are regions of the country that perform for this year at 25% up comp to last year and it is clearly about weather. So we gave back some of the anticipated growth in the month of November and those numbers are a little bit hard to -- a little bit difficult to buy back. We believe that it is going to be tougher than we originally had planned and the good part of it is our margins are significantly stronger. We are tracking at about 52% private label, which is bringing up our margin. The sellthroughs on some of the brands that we carry are much better with better margin. There's less pressure that surrounds us and discounts from retailers than there were a year ago, and we are excited about the retail business, quite honestly. We had a hiccup for the month of November and that is the piece that we are disappointed in.

Got you. And say what is that on retail you had indicated in your comments that you were contemplating an Andrew Marc retail concept,. Can you give some timing on that and kind of maybe initial ideas on scope.

Well, we are planning on launching an Andrew Marc concept to showcase the product that we are now producing. The breadth of product that we are now producing or licensing to other companies. We need to showcase. If you heard me say rollout of a retail concept, I apologize, that's not the intent. The intent is to build a couple of stores to showcase the product. That's all.

Got you. And finally, you had indicated, I think, on the last conference call, that you'd expected your private label business to be down and in fact I think it was during the quarter, was it down in line with your expectations and has that business stabilized. Thank you.

That business is down with our expectations of a year ago, nothing has changed. It was primarily one account that reduced their buy significantly and that was the miss. It was really all about one account that took a different direction.

Great. Thank you very much.

Thank you. Thanks for your questions, Ed.

And our next question comes from Eric Beder with Brean Murray.

Good morning and let me just add my congratulations. Could you talk a little bit about the NFL package. Now, you are expanding who you can sell that to and you added another category. Is that correct?.

Yes, Eric. It is Wayne. We expanded on two fronts. One is we recaptured the mass tier of the business, which we had several years ago, which is a much more profitable business for us as it is in big box. It is a lot easier than some of the heavy lifting we do with some of the smaller specialty stores. And secondly we are excited about the new component that we have got now, which we have put together a collection of NFL sportswear, which you will see in department stores and also in stadium shops across the country and also online. NFL relationship with us has never been stronger. We are really excited about these new opportunities.

When are these going to start to roll out.

We are already on sale with both of them. So I would expect to see the bigger presentation out in stores for fall.

In talking about -- where -- what strength are you seeing in dresses? You have this Calvin Klein and Ellen Tracy, where is the -- is the dress strength throughout all the brands or/and where are we seeing some of the secondary brands for dresses.

Our dress business is exceptional. We've (inaudible) plan and our important dress business is (inaudible) Those two businesses are Calvin Klein and Jessica Howard. We had double digit increases over plan and the plans were fairly aggressive in Calvin Klein with good margin and we have done an amazing job. Our management team seems to be leading the charge in the sector. Our designers are doing an amazing job bringing new product to the stores on a monthly basis. Our sourcing people are on time with the product and our sales people are maintaining relationships and assuring G-III and the customer a good margin. The sellthroughs are amazing.

They lead the dress department in most cases. Jessica Howard, a little bit more moderate in pricing and maybe in fashion as well, is doing a great job in a different area of distribution. They also have had double digit increases over plan, not over LY's. Significantly better than LY and double digit increases over plan. We have initiatives going forward in both brands that look very promising. We are forecasting internally growth patterns that are similar to this year. So we don't see the dress business slowing down at all. It is not throughout our Company. The good news is we really didn't have a good year with Ellen Tracy this year. We missed on fashion, we missed on the sales initiative and we get the opportunity to start all over with that brand. The brand is now positioned as a Macy's brand and we believe we have great support from Macy's.

We don't really have to add any new infrastructure to it. So all we get out of Ellen Tracy going forward is upside. Jessica Simpson is a small business for us, doing a good business, percentage growth this year over the little bit that we shipped last year is amazing. The product sellthroughs on the last delivery are very good and we see -- if I told you that we see a 50% growth pattern in the brand for next year, I would probably be right but don't let that excite you. It is not a very big business. And then we have Eliza J., maybe similar to Jessica Simpson, a little bit better. We have a relatively small business and a percentage growth there will be north of 20%. The other promising piece of our dress business, we recently launched Marc New York. We shipped Marc New York to approximately 80 stores. So performance was very good. We are shipping -- currently our next shipment -- we missed a delivery intentionally.

We are now shipping November product to approximately 140 doors and we have orders for spring to approximately 210 doors. So the growth in Andrew Marc/Marc of New York is also going to be significant, although not large. We are talking about 210 carefully selected doors for Andrew Marc or Marc New York versus approximately 1200 department store doors for Calvin Klein. So the scale is clearly going to be different. And performance at retail is not the same for all brands. I believe we do a wonderful job of creating the product, pricing the product, fitting the product and we are getting what we deserve for it. We are getting great sellthroughs and good recognition for it.

Okay. Go ahead. I'm sorry, Eric. That's okay. In terms of you talked a little bit about looking for new licenses and maybe acquisitions, what are you looking to add to your mix to fill in or to go into new areas. What are you looking for in the next round of kind of deals or licenses.

Well, we are looking for licenses as well as licensees. We added a new word to our vocabulary this year, it is called licensee. In Andrew Mark we have signed several over the last 18 months. We have a small leather goods licensee. We have cold weather licensee. We have a hand bag licensee. I guess the cold weather and the hand bag is the same, same party. And we have a footwear licensee. We believe we are close to a men's sportswear/denim licensee, as well as some other opportunities. So for the first time in our history we will be collecting checks rather than just writing checks for royalties. That will be a wonderful thing. The brand has been very well protected over the years and we believe that we have good future with that brand. The licenses that we might look to sign might be another dress license. We have recently signed Tommy Hilfiger, men's outerwear, which originally all we had was men's leather.

This gives us added growth and as most of you know, Tommy Hilfiger is predominately a Macy's brand. Macy's is supporting it. We had great sellthroughs through black Friday for Tommy Hilfiger and we believe we have a good future with them there. The acquisition piece of our business is fairly wide open. We would love to acquire a brand that we could afford. Something that would address the tier of distribution that we are comfortable with and we would tell you that it would probably be moderate or better. We wouldn't -- I don't think today I would look to buy our luxury brand. It is not really our core competency. It is where we like to shop. I'm not sure it is where we want to produce for. So I am not sure I answered all your questions, but the reason I am not clear is quite honestly I don't have a lot of clarity in exactly what we would like to do, other than we know that we can integrate companies into G-III. we do a good job of it. We know we can finance them and we are fairly wide open as to the type of acquisitions we that could handle.

Great. Thank you.

Thank you, Eric.

And from Thomas Weisel Partners, Jim Duffy.

Thanks. Very impressive numbers. I have a number of questions. Some of the follow up question on the outerwear. So inventories are lean, sellthroughs early were very strong. Neal, is there a potential opportunity for reversal for reserves on mark-downs? And if so when would that flow through the numbers. Is that a fourth quarter thing or something that would not happen until next year?

Yes, I think that that's the fourth quarter thing, Jim. We have got some reversals for reserves and then of course there's really always some variability to how we perform in Q4 and that would play out in -- do revising in the fourth quarter.

Okay. Is the reversal for reserves in the current guidance?

No. We try to provide -- as we go along, we try to provide for what we think is going to be appropriate. We don't really provide for reversals or incremental amounts. We take our best shot at what history has brought us and how we are performing at retail.

Great. Morris, can I ask you to provide a little commentary about the spring backlog with regard to private label and license. Are you seeing any kind of discernible trend in merchandising efforts by the retailers between private label and branded?

The -- we kind of have an anomaly this year. This is the first year that I would say we are fairly well balanced on all apparel. Generally I would speak to the backlog of orders primarily as they related to coats and that was not a very big number. We could speak to comp percentages, but they were never exciting. I could tell you today that our backlog of orders is very impressive as a percentage of growth, because we have matured in the classifications that we just spoke about. So our order book is very, very strong. It happens to be strong primarily on the branded side not on the private label, because we do not do a good deal of private label in sportswear or dresses. Most of our private label is done in coats and the coat season is really not spring season. So we begin to build our order book December, January for fall and that would be more skewed toward the private label.

Okay. And given the success you have seen with these new classifications, is the phone ringing more often. Can you comment about kind of the pace and tone of conversation with potential partners about adding new dress and sportswear programs? And what is the competitive landscape like in these opportunity.

The competitive land for selling is always there. You can never assume that you are the only shell in town. There's always somebody trying to build a better mouse trap. And we go ahead with what we know best. We try to simplify the business for both ourselves and the retailer. We are into the same cliche tones we have given you over the years. We are into great quality, great pricing, great delivery, we do what the retailer needs as a viable partner. I don't believe there's an appropriate competitor for challenging where we are with our retail partners. We partner well.

We are flexible as this environment [deems] our vendor to be and we have our own solutions that are not the norm when it comes to moving product, whether it is through our outlet stores or the off-price channel or just being creative on how we market some of the issues that arise during the current year or during any year. And I don't believe there's a competitor that could challenge us in that venue. Is there another resource that Ralph Lauren might go to if he wanted to license coats, dresses or suits, yes, that's always possible. But selfishly speaking, I guess maybe patting ourselves on the back and knowing the group that runs this Company, I would say they would wind up with second best.

Very good. And then, Neal, a question on the SG&A. It was a little higher than I might have expected in the quarter. I am wondering if given the momentum you have in some of these categories you are making some investments ahead of opportunities that maybe haven't yet been announced to us?

No, Jim, it is really not a lot of investment spend, it is more tracking the profitability and the volumes of our performance.

Okay. And then final question, as you contemplate momentum in these new classifications, some of the new income streams from licence fees, where would you see outerwear as a percentage of gross profit contribution in fiscal '11, seemingly continuing to get diluted?

Yes, I think that that's what we have spoken to, that we anticipate that the outerwear business, which is about two thirds of our wholesale business now, will continue to decline into about a 50% -- until some point it becomes 50% of the business. And the gross margin is -- it will follow the sales trends.

So, are you getting close to that 50% in fiscal '11 or not quite there.

No, we are not out with guidance in next year, so it is hard for me to give you a specific number on that. We will probably still certainly move in the direction that I mentioned.

Jim, the early indicators that I have, this is Morris. The early indicators that I have for the coat business for next year would lead me to believe that our coat business will be very strong and I don't believe the -- we go to 50% this coming year at all.

Very helpful. Thanks, guys. I will maybe some follow-up questions off line.

Thanks, Jim.

(Operator Instructions). And we will go back to Edward Yruma.

Hi, one other quick question. I know your tax rate has been up year-over-year for the past two quarters, should we think about an increase in tax rate again for the fourth quarter or are there onetime issues that were affecting it.

No, Ed, I think we have been using 42% this year. I think that that's pretty steady for Q4 as well.

Got you. And one longer term question. I think you had previously spoken of the Calvin Klein opportunity being a $200 million business. Given the relative strength you have seen over the past couple of quarters, where do you think that business could be longer term? Thank you.

Ed, a little clarification that's going to help me. The Calvin Klein business and what classification or were you referring to the total brand for us.

I thought it was total brand, but -- .

But we have surpassed that number as total brand.

Got you.

The -- I think our goal, and we believe it is achievable, is the sportswear future of our business.

Got you.

The relatively small business we just entered into it, that's the acquisition we made from Calwood, we are succeeding with it. The store count is expanding everyday. Our product gets better every time we look at it. The retailer agrees with us and it seems like the consumer is also agreeing. So we look at that as the $200 million potential all along.

Got you. Thank you very much.

Thank you, Ed.

And there are no further questions at this time. Management, I will turn the conference back over to you for any additional or closing comments.

I thank you and we wish you a good day.

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation today. You may now disconnect.