Movado Group Inc (MOV) 2016 Q3 法說會逐字稿

Good day, everyone, and welcome to the Movado Group fiscal third-quarter 2016 earnings conference call. Today's call is being recorded and may not be reproduced in whole or in part without permission from the Company.

At this time, I would like to turn the call over to Rachel Schacter of ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call is Efraim Grinberg, Chairman and Chief Executive Officer; Ricardo Quintero, President; and Sallie DeMarsilis, Chief Financial Officer. Also in the room is Rick Cote, Vice Chairman and Chief Operating Officer, who will join us for questions and answers.

Before we get started, I would like to remind you of the Company's Safe Harbor language, which I am sure you are all familiar with. The statements contained in this conference call which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the Company's filings with the SEC, which includes today's press release.

If any non-GAAP financial measure is used on this call or presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure (sic) will be provided as supplemental financial information in our press release. Now I would like to turn the call over to Ricardo Quintero, President of Movado Group.

Thank you, Rachel. Good morning and welcome to our Q3 conference call for Movado Group. We are pleased with our Q3 results, as they continue to reflect strong execution of our strategic approach to growing our business and capturing the full potential of our brand portfolio despite a challenging global environment.

Sales for the quarter were up 2.1% on a constant currency basis and down 1.6% on a reported basis, with international sales increasing 5.7% on a constant currency basis and decreasing 2.8% on a reported basis. Operating income was also up 9.9% on a constant currency basis or 0.4% on a reported basis.

As a recurring theme for this year, during the third quarter the global market has continued to present challenges, giving us what many have referred to as a VUCA environment: that is, one filled with volatility, uncertainty, complexity, and ambiguity. At Movado Group, we have taken a proactive approach to navigate in this environment, taking actions that positively impact the short-term while at the same time leveraging our strengths for sustainable, profitable growth in an industry that still has growth potential.

As discussed on our previous call, foreign exchange and currency volatility is one of the big central themes affecting our business. But one of the proactive measures we took earlier in the year was a rollout of selective price increases, which we executed successfully.

We have also been strategic in managing the other levers of gross margin, focusing growth on a more profitable mix of product, channel, and sourcing improvements. To note: in the third quarter our gross margin expanded to 53.9% of net sales despite a 140 basis point overall unfavorable currency impact on gross margin.

One of our key strategic themes has been to put the consumer first in everything we do by leveraging our powerful brand portfolio and create an innovative, beautiful product at the right value proposition. We have seen strong sellthrough in some of our key markets as we continue to build market share.

In Q3 we were particularly pleased with Europe, our largest international region. On a constant currency basis our sales were up strong double-digits, with the strongest growth coming from Germany, the UK, and France. These positive results are partially driven by increases in traveling consumers, particularly Chinese, who are known to shift travel destinations in pursuit of attractive value from currency fluctuations.

Although our business in the Middle East continues to be impacted by the price of oil and regional issues, we continue to see positive results across our entire brand portfolio. Conversely, our shipment performance in Asia and Latin America were down, impacted by a number of well-documented external factors in Q3, including shifts in currency and tourism travel patterns.

Our shipments in the US declined 0.6% in Q3 versus last year. Although Movado is basically flat at 0.3%, and our licensed brands were up 3.7%, the wholesale number, which declined 1.2%, is affected by the absence of ESQ sales in the current period as compared to this period last year as the brand was being phased out. Excluding the ESQ impact, wholesale in the US would have been up 0.7%.

From a retail perspective, our Movado Company stores in the US grew to 2.8% in Q3. We are well-positioned in Q4 with compelling product assortment and attractive value propositions, while protecting our profitability metrics.

Consistent with what we have seen throughout the year, our sellthrough trends continue to outpace the market for most of our brands, led by our Movado brands. In the US, where we are able to effectively track market share through NPD, in the $300 to $3,000 price category where we compete, our Movado market share rose to over 21.8% for the latest three-month period available of July through September -- up 230 basis points versus prior year. In the same July-through-September period, Movado sales at retail grew 5% on a market that declined 6%.

Sellthrough results in the US for licensed brands were challenged by a difficult October for retail in our main channels of distribution, but still at or ahead of market trends for all of our brands. In international markets our licensed brands were experiencing strong sellthrough, with particular strength in the UK, Germany, France, Brazil, Mexico, and signs of recovery in Spain.

As discussed in previous calls, sellthrough continues to outpace sell-in globally, as retailers further rebalance their inventory and many are forced to apply more rigorous retail metrics. We expect this trend to continue in Q4.

We are particularly excited about our innovation pipeline for our flagship Movado brand, where we have recently introduced two major new product introductions. First, we launched Movado Edge, an exciting new collection that is a modern, fresh interpretation of our museum dials, raising it to the pinnacle of today's designer setting. Movado Edge was designed in collaboration with one of the world's most inspiring and respected industrial designers, Yves Behar, who joined us to introduce this collection at Vanity Fair's New Establishment Summit in San Francisco this past October. We are very pleased with the positive response from participants, and the reviews from the press have been outstanding. We only began shipping Movado Edge in the second half of October, and the initial sellthrough results indicate that consumers feel the same way we do. Some of our marketing efforts have initiated, and there will be more, including print and TV in the US, during the holiday season.

Our second big innovation story relates to connected technology, where we have announced two important collaborations in creating two different collections in the Movado brand. Our approach has been to create beautiful timepieces first and foremost, while also providing new desired connected features -- such as step count, notifications, and sleep monitoring. We have learned from the consumer through quantitative and qualitative research, and we know that our new introductions are well aligned around the consumer's preferences.

Simply Intelligent, our Movado Motion collection, merges Swiss-made elegance with the wearable technology segment for men and women, on sale on movado.com since November 16, and now starting to appear in select retailers across the US. Powered by MotionX innovative technology platform, Movado Motion features two striking Swiss-made designs: Museum Sport for him, and Bellina for her.

These iconic Movado watch designs deliver 24/7 motion activity monitoring and offer new functions, like steps activity tracking, sleep monitoring, sleep cycle alarms, get active alerts, dynamic coaching, two-year battery life, and automatic world clock with time and date setting through synchronization with a paired device. There are six timepieces in the collection, with an opening price point of $995.

Our second introduction is Movado Bold Motion, powered by HP. Infused with Movado's modern design aesthetic and harnessing HP performance technology, Movado Bold Motion notifies users of incoming phone calls and texts, manages time and priorities, monitors daily steps, and tracks progress through app-enabled functionality.

Movado Bold Motion is offered in two unisex styles for $695. This illuminating design for the modern world maintains up to a full week of smart module battery life. It will be available for sale in time for holiday shopping.

We are excited about the possibilities wearable technology offers Movado Group, and we have every intention to capitalize upon this market catalyzer across our entire portfolio and on a global basis. Our approach has been to collaborate and partner with best-in-class technology companies versus building our own. We believe our approach creates the greatest value for our consumers.

We are starting to see the benefits of the strategic decisions we've been making over the past year. We have invested and will continue to invest in innovation to deliver beautiful, compelling product, partnering with top talent and technology. We believe that despite difficult retail environments, great brands with great product and great execution could attract consumers to purchase.

Although there are many unknowns in the fourth quarter, given our innovation pipeline and given the continued momentum of our brands in key markets, we are maintaining our net sales and operating income guidance for the full year, with net sales in the range of $590 million and $600 million and operating income to increase to approximately $72 million to $75 million, assuming no further worsening in the global economic and retail environment, significant fluctuations in exchange rates, or other unusual events.

I will now turn the call over to Sallie.

Thank you, Ricardo, and good morning, everyone. For today's call I will begin with a review of our financial results for the third quarter and first nine months of fiscal 2016 and close with our outlook. Before I begin, I would like to point out the special item included in our year-to-date results for fiscal 2016. Please refer to our press release for a description of this item as well as a table of GAAP to non-GAAP measures.

Our GAAP results for the first nine months of fiscal 2016 include a $2.7 million pretax charge, which equates to a $2.5 million after-tax, or $0.10 per diluted share, in connection with our operating efficiency initiative and other items. The balance of my remarks will exclude the special item, which was recorded in the first quarter.

Beginning with a review of our income statement, sales for the third quarter were $185.6 million, a decrease in the same period of the prior year of approximately $2.9 million or 1.6%, as currency unfavorably impacted our sales by $6.9 million. In constant dollars, sales increased 2.1%, primarily driven by our licensed brand business.

Sales were down by 0.6% in the US and in constant dollars increased 5.7% internationally. Sales in our wholesale segment were $169.4 million, a decrease of 1.9% from $172.8 million for the same period of last year. In constant dollars wholesale sales increased [2%].

By geography, our US wholesale business decreased 1.2% to $90.2 million compared to $91.3 million last year. Our international wholesale business decreased 2.8% to $79.3 million compared to $81.5 million in the prior year. In constant dollars, international sales increased 5.7%, led by a strong performance in Europe.

Sales from the Company's retail business increased to approximately $16.2 million compared to $15.7 million last year. At the end of the quarter, the Company operated 39 outlet stores.

Gross profit was $100.1 million or 53.9% of sales compared to $99.8 million or 53% in the third quarter of last year. The increase in gross margin was primarily driven by a 210 basis point favorable impact of channel and product mix, which includes selective price increases and sourcing improvement opportunities, partially offset by a 140 basis point unfavorable change due to foreign currency exchange rates.

Operating expenses were $66.6 million, above the prior-year period by 0.2%. The increase as compared to the prior year was primarily the result of a $2.5 million increase in compensation and benefits, including higher performance-based compensation. This increase was partially offset by a decrease of $800,000 resulting from the favorable impact of foreign currency exchange rates, an $800,000 decrease in the timing of marketing expense, and the remainder is due to reductions in other selling expenses.

Operating income increased 0.4% to $33.5 million or 18% of sales compared to $33.3 million or 17.7% of sales in the year-ago period. Due to the global nature of our business, fluctuations in currency impacts all aspects of our P&L. On a constant dollar basis, our operating profit would have increased approximately 9.9% as compared to last year's third-quarter results.

Income tax expense in the third quarter of fiscal 2016 was $11.2 million or a 33.9% effective tax rate, which was higher than the 30% effective tax rate planned due to the global mix of our earnings. This compares to an income tax expense of $10.9 million or a 32.7% effective tax rate reported in the third quarter of the prior year.

Net income in the third quarter was $21.5 million or $0.92 per diluted share versus net income of $22.2 million or $0.87 per diluted share in the year-ago period. Currently headwinds negatively impacted our earnings per share for the third quarter by approximately $0.10. The favorable impact of our share repurchase program was partially offset by our higher effective tax rate.

Looking at the nine-month period ended October 31, 2015, sales were $451.7 million, a decrease of 0.3% from fiscal 2015. On a constant dollar basis, sales increased 4.1% as currency unfavorably impacted our sales by approximately $20 million.

Gross profit was $242.3 million or 53.6% of sales as compared to $242.6 million or 53.5% of sales last year. The increase in the current-year gross margin percent was driven by a 200 basis point favorable impact of channel and product mix, which includes price increases and sourcing improvement opportunities, partially offset by a 190 basis point unfavorable change due to foreign currency exchange rates.

Operating income was $61.2 million compared to $61.4 million in fiscal 2015. On a constant dollar basis our operating profit would have increased approximately 14% as compared to the last year's results for the same period. Net income was $39.7 million or $1.65 per diluted share as compared to net income of $41.7 million or $1.63 per diluted share in the year-ago period.

Now, turning to our balance sheet, our cash at the end of the third quarter of fiscal 2016 was $181.2 million versus $157.9 million at the end of the same period of fiscal 2015. At the end of the third quarter of fiscal 2016, we had $40 million outstanding on our revolver.

Accounts receivable were down $4.2 million as compared to the same period of last year. While sales were down 1.6% in the quarter, inventory was down approximately $3.7 million as compared to the same period of last year. Capital expenditures for the nine months were $5.8 million, and depreciation and amortization expense was $9.4 million combined. We project capital expenditures of approximately $10 million for fiscal 2016.

Now onto our guidance for the full-year: we continue to believe there is uncertainty in the global economic environment. Our guidance for the remainder of the current fiscal year does not take into account a potential worsening in the global economy or retail environment and assumes no further significant fluctuations in foreign currency exchange rates.

For fiscal 2016 we anticipate our sales will increase to a range of $590 million to $600 million. Gross margin rate is expected to be approximately 53.5%.

Operating income is projected to be in a range of $72 million to $75 million, and net income is now planned to be in a range of approximately $47.5 million to $50 million on a higher estimated effective tax rate. We continue to expect diluted earnings per share in fiscal 2016 to be in a range of approximately $2 to $2.10, reflecting the higher estimated effective tax rate of 32%, offset by a lower estimated share count resulting from our share repurchase program.

The guidance we have provided assumes no additional unusual items for fiscal 2016. Now I would like to turn the call over to Efraim.

Thank you, Sallie. We are pleased with our results for the quarter and the nine months, especially given the retail environment in North America, Asia, and Latin America, and the currency headwinds that we have faced. We went into this year taking a proactive approach by passing well thought-out, selective price increases, focusing on supply chain costing opportunities and continuing to drive demand for our brands through strong marketing efforts and continued product innovation.

The introduction of Movado Edge during the end of the third quarter solidifies Movado as a true design leader within the watch category. We are very proud of our collaboration with one of the world's leading industrial designers, Yves Behar.

We are also pleased to have recently announced two collaborations in the wearable category, with Fullpower/MMT on the Swiss-made front and engineered by HP for our Movado Bold collection. Although it is in its infancy, we believe that connected watches will have an important role across our brand portfolio.

As we enter the important holiday season, we have strong marketing plans in place in each of our brands to help drive traffic and sellthrough. We are proud of how our teams have executed during the first nine months of the year, and recognize that we need to continue to execute in a strong manner to be successful in an increasingly volatile retail environment.

I would now like to open up the call to questions.

(Operator Instructions) Oliver Chen, Cowen and Company.

We just had a question regarding wholesale and this dynamic that has been happening. What do you think is the catalyst and the timing from which sell-ins will start to re-accelerate? And are you seeing a fair degree of volatility within your wholesale channel as you look at reads to the customer?

Well, I think -- as I think Ricardo mentioned in the call, our brands have been outperforming the watch category and retail sellthrough. So we are very pleased with that. But as everybody has witnessed over the last quarter, the retail environment went through a very challenging time in the third quarter.

One of the important things is that there's always Christmas in the fourth quarter, so I think that is going to be an important catalyst to how the retailers end the year. But I think given the continued volatility in the environment, you are going to see a continued focus on inventory levels -- not only in watches, across retailers overall.

Okay, and Efraim, on the long-term picture for connected watches, how are you feeling about your distribution footprint and how that might be different from traditional? And also, over time, what percentage of your portfolio do you think will end up being within this connected discipline? And related to this question, we wanted to know about new versus existing customers on the connected watch front and your thoughts there?

I think our approach to the category -- and I said, it's very early on in the development cycle. So I think there's going to be a lot of evolution in this category. But we are giving you beautiful wristwatches that are watches first. And whether they are connected or not, they are beautiful watches. I think that's what's important for us.

And the current type of offering that we have is being offered through our current distribution channels. So I think it would be way too early to predict how big a percentage of our business this will be in the future. I don't know. Ricardo, would you like to add anything?

No, no. I agree with you. The other important point here is that these are the early days, as Efraim mentioned. And there is a big runway in front of this category when you think about the international market.

So we are starting in the US. We have a pipeline of innovation with connected technology for next year that we are very excited about. And as we get traction with this, we see opportunity in international markets as well. And our retailers around the globe are saying, you know, we are ready for this. So that's the exciting part of this.

Got it. And Efraim and Ricardo, the price increases were impressive in terms of achieving some. Which part of your portfolio did you have the most opportunity in? Do you feel like you made the right decisions in terms of where you went with prices as you have kind of post-gain elasticity?

So we are very pleased. And as we have discussed previously, we were very thoughtful on how we did this. I would say that in the vast majority of all the increases, we saw the expected results. I will tell you there were a few here and there that we didn't see the result. But in general, this was the right decision for us.

The consumer accepted these price increases very well. And now we are recalibrating some price points here and there. But generally speaking, this is a very positive decision -- not only for the consumer, but our retailers also, of course, benefited from expanded margins from this decision as well.

Okay. And just our final question is -- it's a little hard to ignore all the volatility and the things happening with tourism flow and the European crisis. Could you comment on your thoughts on how it will impact your business, and any factors we should think about when we model the traffic flows globally?

Well, I think you just saw what occurred -- unfortunately, the tragedy in France last week or 10 days ago now. And I think it is very early to see what the traffic patterns will be. It will obviously affect tourism to a certain level, but you don't know if also people will be shopping at home versus shopping overseas. So I think it's very early to see what effect on the overall business that will have and when travel patterns will resume to normal levels.

Great results in a tough environment. And happy holidays. Thank you.

Ed Yruma, KeyBanc Capital Markets.

I guess on the Edge, obviously great press you're receiving. Can you talk about the sell-in for that? And kind of what -- are you getting incremental slotting? Are you displacing any existing SKU?

So basically, in all the -- we have very limited distribution for Edge. We are launching it very similar to how we launched Bold about four years ago. And at every retailer that we are operating in, we are obtaining incremental space for Edge.

It is -- the whole collection today is 14 SKUs. It will grow. But we are very pleased with the initial results and have gotten great reviews from our retail partners; the press; and, even very early on, also from consumers. So we are pleased with that.

Great. And in regards to that, following up on Oliver's question on the wholesale: you guys are one of the first to identify the destocking that has been occurring. Do you at least feel like the incremental pressure year-over-year is beginning to abate? Or is it still too volatile of an environment to predict accurately?

I think it is still too volatile an environment. What we have seen is -- and we've been talking about this, as you mentioned, for quite a while now -- we have been working with our retail partners, and they've been great partners to us. In some cases, we are where we need to be; other cases, given slow retail that they faced in Q3, they are making other adjustments. So this is a work in progress.

And obviously Q4 -- sig sales for all of us. This will affect what the number ends up being. But like we have said before, we are very confident in our innovation pipeline. Our product offering for this holiday season is really very strong -- not just because we are saying it, but our retail partners are also commenting on the strength of our product offering across our portfolio.

And we believe that innovation and beautiful product will attract consumers to purchase. That is the thesis behind our success, and that is something we are focusing on for great execution in the fourth quarter.

Great. Thanks a lot. Best of luck for the holidays.

(Operator Instructions) Kristine Koerber, Barrington Research Associates.

A couple of questions; first, can you just give us a little more color on Europe and the brands that are driving the strong growth that you're seeing in Europe?

So in Europe it's mostly our licensed brands that are having great performance. And obviously, it is our bigger brands that are driving it. Hugo Boss has had spectacular results in Europe, and we are particularly pleased because this is happening in big markets. So the UK, France, and Germany, as I mentioned, are having spectacular results.

We are also seeing this on Tommy Hilfiger. And there is different pockets growth for the rest of the brands. But overall, we are very happy. We are also very pleased with the results of the Movado brand in the UK, which is one of our focus markets -- still very small, but the sellthrough results have really accelerated. So we are very pleased with that.

Okay. That's helpful. And then, just given the environment and all the uncertainty in what's expected to be a highly promotional holiday season, do you have any concerns about the promotional cadence that people are talking about for the holiday season and impact on, possibly, your business?

Well, we don't operate in a promotional environment, but obviously our retailers do.

Right.

It's been quite promotional over the last several holiday seasons. I think there is possibilities you will see a scaling back of that in the future. I don't think you'll see that this holiday season.

Okay. And then, lastly, can you just give us some details on your marketing plan for the Movado Motion watches -- how you are going to be marketing those -- the new collection?

You will see a very strong newspaper campaign as well as a digital campaign on Movado Motion. In fact, this weekend there was a full-page ad in the New York Times. There is a full-page ad today in the New York Post on Movado Museum's forward motion. And most of that will be in newspaper and digital this fall.

Thank you.

Rick Patel, Stephens Inc.

Sorry if I missed this, but a question on your domestic performance. Can you talk about how much of the growth was driven organically in terms of the sales through existing points of distribution, as opposed to how much was driven by an increase in the distribution points themselves through new brands like Ferrari?

So we can't give you the breakdown. But what I will tell you is that our like-for-like growth was there for most of our brands, and certainly for the Movado brand, which is our flagship.

But our performance basically in the US -- and I will add to Ricardo's point -- is 100% in existing stores. We really did not open up any new distribution this fall. You know, might be selected few doors for certain products, but not any large distribution growth.

And then, also, a question on pricing: so you took up prices earlier this year, and just given what FX is doing right now and some of the headwinds that they are exerting on some competitors, do you see an opportunity to take prices even higher as we think about the next few quarters in order to continue some top-line momentum?

I think the opportunity now comes really more in newness, where you focus on making sure that you are able to protect your gross margins versus price increases. There may be some opportunities in Europe down the road, but it's not built into our plans right now.

I just want to build on that. We are very committed to expanding gross margin; and there are other initiatives, as I mentioned in my prepared remarks, of managing other levers of gross margin in terms of product mix, channel mix.

And we have this thing internally called the magic quadrant, where we are focusing on these categories and these products. And the entire organization has embraced this, and we are going to continue to see results coming from these initiatives -- along with, of course, supply chain improvements to this.

Great. And then just one more, if I may; have you noticed a difference in how department stores and jewelry stores are buying inventory versus the prior quarters? We seem to be going through a big shift in the watch industry -- somewhat away from traditional watches, more towards smart watches -- with, obviously, some of your new lines as well as those of some competitors. So how are you approaching that shelf space opportunity? And have you noticed a big change in how they are planning for inventory versus prior quarters?

The reality is we are fortunate to have -- I will speak to Movado first. This is a very powerful brand, and many of our retailers benefit by having Movado in their stores. So I think they understand this very well, and they have been supportive along those lines.

Of course, there are -- some of them have thought about connected technology and made initial forays into creating either new sections or awarding more inventory there. And we will see what the result is. For the time being, they have been supportive of our connected technology initiatives.

And like I said my prepared remarks, we are very confident that what we are offering is what consumers want for the Movado brand. So we will see at the end of the quarter how we perform. But we are very confident, both in the design of the watch; the functionality; and the app is really fabulous. So we are very confident.

Thank you very much. Good luck this holiday.

Jeremy Hamblin, Dougherty and Company.

Wanted to ask, just in terms of the guidance for the fourth quarter -- I think if you look where currencies are, it implies that constant currency growth is going to be somewhere in the -- let's call it 6% to 12% range. First, do I have that about right?

And the second part would be: in terms of where you are going to see that acceleration in constant currency growth, is that going to be driven by just the new product, whether it's the Edge or the two smart watch collections? Can you just provide a little bit more color around where you are getting that confidence to guide to improved results in the fourth quarter versus what you've seen the previous three quarters?

I will take the first part of that, and then I will hand -- I will turn the currency part over to Sallie. I think we are excited, as Ricardo mentioned, and I mentioned in my prepared remarks, about the innovation pipeline that we have introduced in Q4 for this holiday season.

And both the connected initiatives as well as major product introductions like Edge. But, also, new products and innovation across all of our brands -- things like a men's assortment in our Coach brands that is performing very well. So I think there's a -- it's really driven by newness and marketing initiatives across our brand portfolio. And I will turn the currency part over to Sallie.

Yes, so Jeremy, just a quick one on the currency. Obviously we don't guide to a constant currency number. We guide to an as-reported number.

But this year to date, we've had $20 million already on our top line related to currency. And if you recall, last year during the fourth quarter is really when we had the big change in currency. So we will continue to have a few months where there is definitely a difference between this year and last, and take it through the end of the year -- obviously, 2 1/2 months of three being somewhat different on our constant currency comparison. But even on an as-reported basis, you could do the math with your models, and you will see that there will be -- we are counting on some growth, based on the initiatives that we have talked about the fourth quarter.

Okay. And then just a follow-up on that: in terms of the wearables in distribution for the holiday season, is that purely going to be available online? Or are there going to be doors -- I'm assuming your traditional doors that it is going to be sold through during the holiday season specifically?

You will find that today in major department stores as well, and on their website as well as in major chain jewelers and fine jewelry independents. So it will be available in-store as well as online.

Okay. And then one other --. (multiple speakers)

We are rolling it out. We are doing a lot of training in-store. We have special visuals for the product that highlight the technology and highlight the app on the phone that is available for Android and iOS. And it is a well-tested app, so we are really excited about that.

Thanks. And then just wanted to ask a follow-up on operating expenses. You mentioned opportunities that you had on gross margin moving forward. What about as we look at SG&A moving forward? I think you mentioned that there was a slight benefit from currency in the third quarter, but I think SG&A is likely to be up year-over-year.

How should we look at that? How should we think about that moving forward? Do you see additional opportunities to lever operating expenses moving forward? Or do you feel like this year has been somewhat of a lean year, where it has been contained, and to expect maybe less opportunity to lever that moving forward?

I will address a few things, and then I will see if anyone else wants to jump in, Jeremy. So, obviously, we are talking just about fiscal 2016 at this moment. We haven't gone out with anything further going into next fiscal year and beyond.

We've had the benefit this year in SG&A, where currency has taken our numbers down. So we have continued to invest this year in people, in marketing, in all the things that we need to do to support the brand.

And this year, we have performance-based compensation in our number, where a year ago we didn't. So we are very happy with the way that we invest -- although, as you know, we are very good here at running things lean and really watching how we spend our money.

So it's a combination of the two. But we are not giving anything up. We are definitely supporting what we need to as far as the growth and the health of this business.

Sallie, could you quantify what the cumulative benefit has been to SG&A from foreign currency this year?

The Q will be out later today, Jeremy. A lot of that detail will be in there. And if you have any further questions after that, I am sure we can help you.

Okay, great. Thanks for taking my questions, and best of luck this holiday season.

That will conclude our question-and-answer session. I would like to turn the conference back over to management for any additional or closing remarks.

I would like to thank all of you for participating today on our call. I wish everybody a fabulous Thanksgiving and a great holiday season. Thank you again for being with us.

That does conclude today's conference. We thank you for your participation.