Oxford Industries Inc (OXM) 2016 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Oxford Industries Incorporated second-quarter 2016 earnings conference call.

Today's conference is being recorded.

At this time I would like to turn the floor over to Ms. Anne Shoemaker for opening remarks and introductions.

Thank you Don, and good afternoon everyone.

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 meanings of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our fiscal 2015 Form 10-K. We undertake no duty to update any forward-looking statements.

During this call we will be discussing certain non-GAAP financial measures. You can find a reconciliation of GAAP financial measures to certain non-GAAP financial measures in our press release issued earlier today, which is posted under the investor relations tab of our website at oxfordinc.com. Please note that all financial results and outlook information discussed on this call, unless otherwise noted, are from continuing operations and all per-share amounts are on a diluted basis.

As a reminder, the results from the Ben Sherman business are reflected as discontinued operations for all periods presented. Also, on April 19, 2016 the Company acquired Southern Tide, which is presented as a separate operating group.

And now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO, and Scott Grassmyer, CFO. Thank you for your attention.

And now I'd like to turn the call over to Tom Chubb.

Good afternoon, and thank you for joining us.

Our consolidated results for the second quarter were very good, with a meaningful sales increase of 13% and earnings above the top end of our forecast. In a retail environment that is still not particularly strong, we are proud to have achieved these results with strong contributions from each of our lifestyle brands.

I will start with Tommy Bahama. We had a solid performance from Tommy Bahama, with an 11% increase in sales over last year and 7% comp store sales growth. While the Tommy Bahama second-quarter results were strong, we are not immune to some of macro challenges such as reduced mall traffic and lower spend by international tourists in key resort destinations. The Tommy Bahama team has taken specific actions to address the current retail environment.

First are Tommy's operating disciplines. At Tommy Bahama, inventory levels decreased 3% year over year as the team focused on more integrated inventory management between its retail, e-commerce and wholesale businesses, while maintaining a level of inventory adequate to support growth. In the current environment, we think this is a commendable achievement and demonstrates that Tommy Bahama is not only a great brand but also a business that can execute.

Second, Tommy Bahama continues to engage our customers in a multifaceted way through direct mail, email, and our beautiful stores and restaurants. This quarter several successful marketing events drove meaningful business. Our friends and family event, flipside awards, loyalty cards, and other promotional events held throughout the year have worked well.

While none of these are new events, the timing of the loyalty gift card shifted from the first quarter of last year to the second quarter of 2016. The success of these events demonstrates our ability to activate our very loyal Tommy Bahama customer base.

In addition to specific marketing events such as those outlined above, in an era where many retailers are struggling to remain relevant, our restaurants are a powerful point of differentiation for Tommy Bahama that provide an enhanced level of guest engagement. With an upscale but relaxed atmosphere and exceptional food and drinks, the experience at our 16 island inspired restaurants indelibly etches Tommy Bahama's lifestyle message in the heart and mind of our guests.

Last, but certainly not least, is the incredible product that the Tommy Bahama team continues to create. Make no mistake about it, our ability to deliver compelling, innovative and differentiated product is absolutely critical to our ongoing success.

Lilly Pulitzer's remarkable strength continued in the second quarter. The talented team at Lilly Pulitzer recognized that growing against the incredible second quarter of 2015, which included a 41% comp, was going to be a formidable task. The team rose to the challenge with a beautiful product offering and exciting marketing events. They were able to achieve top-line growth of 8% and an impressive 32% operating margin.

Lilly Pulitzer appears to have unlocked the ability to extend summer. While we were head-to-head with the impact of the Target collaboration, we stayed strong and returned to positive comps in June and July with fresh, new, buy now, wear now product. As always, Lilly's colorful original prints were important to the collection. But we also introduced a pop-up print event offering our customers a limited time only chance to buy new product in a favorite Lilly print from the past.

Lilly's marketing emphasizes that it is a year-round resort brand. In June Lilly hosted 120 fashion editors in New York to showcase the resort 2016 line. This was an important step in further establishing the brand as resort with the fashion crowd, and we are seeing great sell-through in August with the resort fall product.

I also want to give you an update on the after-party sale, Lilly's two-day clearance event held last week. With over 1 million visits to our site, this was our biggest event ever, with approximately $19 million in online sales. This online event, coupled with coordinated promotions in our stores and signature stores, is a fantastic clearance vehicle that generates a lot of excitement about Lilly and ensures our inventory levels are clean going into the back half of the year.

Moving to Southern Tide, the second quarter of 2016 was the first full quarter where we have owned the operations of our newest brand. They contributed $9 million to the top line in the second quarter and are on a $30 million pace for the 41 weeks we will own them this year. The initial phase of integration is fundamentally complete. And we are working hard on some of the transitions that take a bit more time, such as product development and sourcing. We are very enthusiastic about Southern Tide and look forward to nurturing and growing this great addition to our portfolio.

To varying degrees, each of our businesses has been effected by the struggles of our wholesale customers, who are also contending with a tough retail environment. Because their business is entirely wholesale driven, the greatest proportional impact is to our Lanier Apparel group. In Lanier we saw reduced volume in both their private label and branded businesses in the second quarter. We have a strong management team and have taken appropriate actions to manage expenses and inventory. But we expect this business to remain challenged in the second half of the year.

That summarizes our results by operating group. So I would now like to take a few more minutes to talk about business -- the business by channel of distribution. Distribution is simply how we connect products with consumers.

If we are going to win the consumer, we need to be able to deliver product to her when and where she wants it. While not losing our focus on our important wholesale partners, our strategy has been to grow our direct business, which now represents approximately two-thirds of total Oxford revenue.

We have fantastic retail locations, with about 40% of our stores in A malls and the rest in lifestyle centers or street front locations. We are very selective about door openings, and operate only 146 full price stores in the US. New properties, such as Disney Springs in Orlando, appear to be absolute home runs for Tommy Bahama and Lilly Pulitzer. We are proud of our track record with stores. And we will continue to be prudent in making these investments.

The other arm of our direct business is e-commerce, representing 17% of Oxford's revenue. Success in e-commerce has been and will continue to be essential to Tommy, Lilly, and Southern Tide's future growth. We will continue to make significant investments in technology and talent to support our e-commerce initiatives.

Finally, our wholesale channel distribution represents about one-third of Oxford's revenue. And about half of that number is associated with mall-based department stores. Recent announcements made it clear that there are important structural changes happening with department stores. There is, and will continue to be, ongoing rationalization of store counts.

Retailers will also be using various tactics to manage inventory much more closely, including more conservative pre-bookings and reducing model stock levels for replenishment programs. While we believe these changes will ultimately be healthy for our industry, there is no doubt that they are having an impact on some parts of our business.

It is important, however, to consider how Oxford is positioned from a distribution point of view. We have a well-balanced multichannel distribution network. Oxford is not over-doored and we are not overly reliant on department stores. We believe this is one of our most strategic advantages that, combined with our powerful brands, will be critical to our continued success.

With that, I will now turn the call over to Scott Grassmyer to discuss our consolidated highlights and plans for the remainder of the year. Scott?

Thanks, Tom.

Please refer to our press release issued earlier today for complete results for the second quarter of 2016. I will now walk you through a selection of highlights from the second quarter, as well as our guidance for the third quarter and full fiscal 2016.

In the second quarter consolidated net sales increased 13% to $283 million compared to $251 million in the second quarter of 2015. As Tom mentioned, Tommy Bahama saw an 11% increase in sales with a comp sales increase of 7% for the quarter. Lilly Pulitzer was up against a very strong quarter last year, but delivered an impressive 8% top-line increase. And Southern Tide contributed $9 million of sales in the quarter.

On a consolidated basis gross margin in the second quarter was lower than the second quarter of 2015, primarily due to Tommy Bahama and Lanier Apparel. At Tommy Bahama we stayed focused on keeping inventory levels in check and offered deeper discounts, primarily in footwear and women's apparel, in our off-price channels of distribution.

As Tom mentioned, and we discussed in detail in June, we also shifted a key loyalty card program at Tommy Bahama into the second quarter. This gave us a sales lift, but also as suspected, impacted gross margins in Q2. Finally, our Lanier Apparel group's inventory markdowns were higher year over year.

SG&A increased primarily due to incremental costs associated with operating additional retail stores and restaurants, as well as SG&A associated with our newly acquired Southern Tide business. In the second quarter our consolidated operating income increased 11% to $39 million. Our earnings per share were $1.44 compared to $1.27 per share in the same period of the prior year. Adjusted EPS was $1.48, compared to $1.32 in the second quarter of 2015.

Now to the balance sheet, we continue to carefully manage our inventory levels. The increase in our inventory balance at the end of the quarter reflects the addition of Southern Tide and inventory to support anticipated sales growth in our other businesses in the third quarter 2016. We ended the quarter with $106 million of borrowings outstanding and $157 million of availability under our revolving credit facility. On May 24, 2016 we amended and restated the facility, increasing its size to $325 million, extending the maturity to 2021, and other favorable modifications.

Looking forward, I would like to walk you through our guidance for the third quarter and full year. We have initiated our guidance for the third quarter of fiscal 2016, which ends on October 29. As in prior years, we expect the third quarter to be the smallest sales and earnings quarter of the fiscal year, which reflects the normal seasonality of the Tommy Bahama and Lilly Pulitzer businesses.

For the third quarter we expect net sales in a range of $220 million to $230 million and a loss per share in a range of $0.12 to $0.02. Adjusted earnings per share is expected to be in a range from a loss per share of $0.05 to earnings per share of $0.05. This compares with third-quarter fiscal 2015 sales of $199 million and a loss per share of $0.08 on both a GAAP and adjusted basis.

For the full year we have affirmed our guidance of net sales in the $1.03 billion to $1.05 billion range and adjusted earnings per share in a range of $3.65 to $3.80. Due to LIFO accounting income recognized in the second quarter of 2016, we increased our GAAP earnings per share guidance to a range of $3.43 to $3.58. This compares with fiscal 2015 net sales of $969 million and earnings per share of $3.54, and on an adjusted basis $3.64.

For the full year interest expense is expected to be approximately $3.5 million. And our effective tax rate is expected to be around 36%. Our capital expenditures for 2016 are expected to be approximately $55 million, primarily related to information technology initiatives including additional omnichannel capabilities, new retail stores, and the relocation and remodeling of certain retail locations, including a significant remodel of Tommy Bahama stores and restaurant in Scottsdale, Arizona.

Before we take questions, I also want to mention that our Board has declared a cash dividend of $0.27 per share. Don, we are now ready for questions.

Thank you.

(Operator Instructions)

We will take our first question from Ed Yruma with KeyBanc Capital Markets.

Hi. Good afternoon, and thanks for taking my question. I guess first on Tommy Bahama comp, obviously impressive performance. Would the business have comped positively if you didn't have that gift card promotion? And then I guess second, you kept your adjusted guidance consistent. Have you baked in a more conservative assumption around wholesale, which I know you called that out during the call? Thank you.

Ed, with respect to your first question, I'm not quite sure how to answer it because the loyalty gift card event is a huge part of the second quarter. And if you take it away, there is no way we're going to comp positively. Scott, I don't know if you --

Yes. It certainly had an influence on the 7% comp. It's really hard to tell without it if we would have comped positively since last year it was in the first -- primarily in the first quarter. Business did certainly pick up. And I think business would have certainly picked up without that. But whether we had been positive comp or negative comp, it is really hard to dissect. Certainly, we would not have been at a comp as high as 7% without the event.

And then the wholesale piece?

I'm sorry. Will you repeat the question on the wholesale piece? I did not follow you the first time.

Sure. You maintained your guidance for the year on an adjusted basis. You had some cautious commentary around wholesale. I guess, have you incorporated that view into your guidance, considering that you did beat for the second quarter? Thank you.

Thank you, Ed. And, yes.100%, the reason that we're maintaining guidance instead of raising guidance is really because our view on wholesale for the back half of the year is lower than it would have been a quarter ago. So the whole erosion, if you will, is in the wholesale business. And it has really nothing to do with the way that we are performing in those accounts and has everything to do with the way that they are approaching the market and their inventory planning. It is like we said, we think it is probably a pretty smart move for them and hopefully a healthy thing for the industry. But, we cannot escape the fact that we are feeling some impact from it right now.

Great. Thanks so much.

Okay. Thanks, Ed.

We will take our next question from Pam Quintiliano with SunTrust.

Thanks so much for taking my question guys, and congratulations on such great execution in a really challenging environment.

Thank you.

I have a few for you. Starting with Tommy, you mentioned, Scott, on that gross margin commentary performance in women's and shoes. Could we go a little bit deeper about what was going on there, specifically as it relates to the women's business given the relaunch that just happened not too long ago, and just how we should be thinking about that? And, then also related to Tommy, Hawaii and Waikiki, and how that was doing, as well as Japan?

Okay. So let me start and I'm going to flip it over to Scott. I will go in reverse order. In our Asia business, the bottom line is that we are performing according to plan. I think we are actually a bit ahead of our plan for the year. So as you know, the goal was to reduce some of the infrastructure cost, reduce the operating loss over there, grow the businesses, focus on Japan and Australia, and look for opportunities where we could perhaps go with the distributorship model in certain markets. What I will tell you is that we are tracking according to plan. Japan is actually comping really nicely and our losses there are reducing. Australia continues to grow and be a small but a nice market for us. Overall I think we are going to achieve our goals of loss reduction for the year there.

With regard to Waikiki and Hawaii, as you have heard from us, we referred to it a bit in our prepared comments when we talked about the international tourist and we talked about it on the first quarter call and probably at some other points that we have spoken with you. Hawaii has been a challenging market for us for the last year or so. The international tourists are spending a lot less money there. We think a lot of that has to do with exchange rates. But overall it has been a challenging market.

Within that context, though, we are very pleased with the way that the Waikiki location has ramped up. They have been in business since late last calendar year. And this summer in particular they have trended very nicely. And we believe that is going to be a very successful location for us, both as a profitable store but also as a good brand builder, particularly with regard to a lot of international tourists. And now on the women's inventory question, I'm going to that over to Scott and let him give you a little more detail on that.

Yes, Pam. We had some excess women's and excess footwear inventory that we needed to clear. We did a special flash sale during the quarter, just women's and footwear-centric. There was no men's in that flash sale back in the second quarter. We also got more promotion in our outlet stores to move those categories. A lot of that, of the women's, was pre-spring, maybe a little bit of early spring, but most of it was pre-spring. We just needed to keep pace and keep our inventories clean.

As then as we mentioned, our inventories at Tommy are down even though we have seven additional new stores and have growth planned. So we are really pleased with the fact that they are focused on the inventory reduction. But it did eat into the margin a little bit this quarter. We did comp up nicely at Tommy, and that was in men's and women's in the second quarter. So we were pleased to see that.

So just to follow up on women's -- thank you, that was very helpful. The newer women's product, is that resonating with the tweaks that you've been making? Are you pleased with the progress there, given the challenging environment we're in?

Keep in mind, Pam, that it takes us more than a year to really make any adjustments between when you see retail selling on the floor and when you get to anniversary that and put those learnings into use. That said, we were pleased with what we saw in the second quarter. Women's sort of pulled its weight and contributed positively to that comp that we had. So it had a year-over-year increase in comp stores and e-comm, which was good to see.

Overall, as you know, in the first quarter it was a little more hit and miss. And overall I think what we have learned in the first half of the year is that we continue to be very strong in women's swim and in dresses, which have always been strong categories for Tommy in women's. And we have learned an awful lot in regards to sportswear that we will incorporate into next spring. So a good solid second quarter. And for the total first half, I think we have learned a lot that will help us next year.

Great. Then one last follow-up on -- or I should say question on Southern Tide, because you guys have historically done such a great job scaling your new acquisition. So, how many points of distribution are there currently with Southern Tide? And just how are you are approaching it? I know personally out in the New York area, I am seeing a lot more people wearing it now, but it is still very subtle. Just any thoughts on how you are scaling that business? I understand it is very early stages. I guess just think of (multiple speakers).

It is very early stages. And to be very direct about it, our initial focus, this brand was much more earlier stage than other acquisitions we've made. And as we outlined in our first-quarter call, we thought there was a much greater opportunity here than, say, when we bought Tommy Bahama to really help them by providing a lot of infrastructure and back-office type functionality, fulfillment through an existing distribution center where you have -- and things like production and sourcing, product development. We have been very focused on bringing them onto our platform in the first couple of months. And that has gone extremely well. We think that sets them up well for growth.

As you know, currently their business is about 80% wholesale, and that is primarily specialty stores. And I think they are in about 700 doors or so, specialty store doors. Then they have a very small department store business with two of the better department stores. And in total that would be probably 5% of their business, or something like that. So growth opportunities going forward, we definitely think e-comm is one. Wholesale is an opportunity. They've just gotten into doing a couple of license stores, similar to the Lilly Pulitzer license stores. And then a couple of years out we anticipate that they will open Company-owned stores as well.

Great. Thanks so much for all of the detail. And congratulations again.

Okay. Thanks, Pam.

We'll take the next question from Jeff Van Sinderen with B. Riley.

Yes, good afternoon. Let me add my congratulations on the improvement in Q2.

Thank you.

Maybe you can touch a little bit on how we should think about gross margin in Q3? I now it is your smallest quarter of the year. But anything we should be considering for gross margin?

You do have the Lilly flash sale in Q3. So that tends to pull down gross margins. Also it is a very weak direct quarter. We also -- Lanier, who has lower gross margins actually will have third quarter, will be a decent quarter for them -- fourth quarter being a little more challenging for them. All of that will weigh margins down year over year, probably a couple hundred basis points year over year, with the bigger flash sale and Lanier being a little bigger piece of the pie weighing into that.

Okay. Then your Lilly comps in Q2 were considerably better than I think -- certainly better than what we expected. So I am just wondering how we should think about the Lilly business for Q3. And then maybe you can also just touch on the progression of business that you saw in Q2 at Lilly, and maybe speak to the comparisons at Lilly? I know they get easier in second half.

Yes. There is no question about it, at the back half of the first quarter and early in the second quarter we really felt the year-to-year difference with the Target collaboration that happened on April 19 of last year. So in May we comped down in the upper teens. And then in June and July we sort of roared back and had very strong comps to finish the quarter at a minus 1% comp in Lilly, which we thought stacked up against the plus 41% last year, and I think a plus 19% a year --

Two years. Both years before that.

Yes, both years before that. So plus 19%, plus 19% plus 41%, and then to be at minus 1% this year with a very strong June and July, we just couldn't be a whole lot happier with that result. So hopefully that helps. I think that to be fair, I think even this time last year we were still getting some kick from the whole Target collaboration. But we have shown, I think, in the back half of the second quarter that we can more than overcome that. So in terms of comp assumptions for Q3 and Q4, I will let Scott --

Yes, and we had strong comps last year in both quarters but we still think we can comp positive. And we think it will be a more modest rate as we are going against strong comps. But we would expect Lilly to comp positive in Q3 and Q4. But again, more modestly.

Great. That is helpful. Maybe you can just touch -- one more if I can throw it in there. On inventory, obviously in wholesale, we are hearing this everywhere, that some of the major retailers, as I think you pointed to, they are ordering less upfront and they're chasing more at season. I'm wondering how that is impacting your planning for second-half inventory, how much you are keeping sort of on hand to chase, that sort of thing?

We generally try to avoid being in that business of having a lot on hand to support chase. There are some areas in some specific pockets of business where we do that. But, for example, in Tommy Bahama that is part of why their inventories year to year are lower, is that the orders came in a little light and we're trying to keep our inventories a little bit light as well.

Okay. That is helpful. Thanks very much.

To reiterate what Scott said a minute ago. We feel really good about where our inventories are. And we think that Tommy in particular has done a terrific job. And with the flash sale at Lilly, which is a Q3 event, they came out of Q2 a little bit heavier than last year, because last year they did a warehouse sale in Q2 and then the flash sale in Q3. This year we did away with the warehouse sale, which I think was about $4 million last year. So, Lilly, we're in really good shape on inventories.

Okay. Good to hear. Thanks very much. And best of luck for the rest of the quarter.

Okay. Thanks a lot, Jeff.

We'll take our next question from Eric Beder with Wunderlich Securities.

Good afternoon. This is Bryan Caronia on for Eric. Thank you for taking our question. And I would also like to offer our congratulations for a great result.

Thank you.

The first question we had, circling back to Lilly Pulitzer, which obviously had a once again very successful quarter. We were interested in if you could give your thoughts on the expansion efforts or the cadence or expectations for expanding Lilly Pulitzer away from the core East Coast region? Specifically, how have the stores and business been doing in more of your most westernmost markets, whether that is in Texas or the Midwest? Any sort of commentary on how we look at Lilly going forward would be great.

Yes. That is a great question and very timely. We just opened a new store in the NorthPark Mall in Dallas about 10 days ago. And that is sort of the A-plus mall in the Dallas market. It is off to a great start. We are very excited about it and we think it is going to be a very successful store. We had our Lilly Pulitzer CEO and key members of a retail team been out in Texas this week. It has never been a huge market for us. We have had a couple of stores out there. But we really believe that we can build that.

And then we opened a store in Chicago, I guess, that was a year ago now. And we have been really pleased with the way that that one has worked. So as we build into these markets, we want to be careful and make sure that we are building very carefully and supporting these stores well with marketing and other support in markets where we are not as well known. We believe that we can be successful and we will continue to build into those markets.

Great. If I could just circle back to the maintenance of guidance for the full year. Obviously (multiple speakers) certainly this is something we've been hearing from many of your peers in the space that the majority of the wholesale driven retail customers have been paring back their initial shipments or orders of inventory buildup, and having a higher cadence of replenishment inventory in the back half of the year.

Could you, perhaps in terms of obviously with -- or you may have seen the third quarter guidance being a bit higher than what us and most of the market has been expecting in terms of bridging that distinction between seemingly perhaps a little bit wider than what many may have been expecting in the fourth quarter and what we have seen in terms of the cadence of department stores and wholesale retailers driving their cadence of inventory build?

It is really wholesale driven, the fourth quarter, maybe nothing is having quite the year-over-year growth that some would expect. As mentioned earlier, Lanier, we're expecting a fairly weak fourth quarter. Third quarter we're expecting to hold okay. But fourth quarter we are seeing a little lower order patterns. And we are seeing holiday bookings, people booking more conservatively. Sure, there will be -- hopefully there'll be some chasing going on. Hopefully there will be an opportunity to capture some of it. But as Tom mentioned, we're not going to have a ton of inventory to support a ton of that, but it is wholesale driven is the maybe the lightness you might feel in the fourth quarter, is wholesale driven.

Great. Once again, congratulations on a great result and best of luck for the rest of the year.

Thank you.

(Operator Instructions)

We'll go now to our next question with Rick Patel with CLSA.

Good afternoon, everyone. And thanks for taking my question, and I will add my congrats as well.

Thanks, Rick.

Just a question on your promotional cadence for Tommy. Did your loyalty gift card event have the same duration and level of discount this year as it did last year? And given how successful it was in terms of driving the comp, how should we think about the back half in terms of promotional events compared to last year? We're curious if there's anything new or incremental to highlight in order to drive traffic.

On the loyalty gift card event, we are very pleased with the way it works. I think it was maybe a few more cards than last year, but roughly comparable to last year. It worked extremely well, as did the other two second-quarter events. We actually had an additional event last year, the Polo'ha Polo promotion that you may remember that we actually dropped this year. So on a combined first- and second-quarter basis, we actually had one less event not one more -- or not the same amount.

Actually, the event sales themselves, we actually drove a little bit higher gross margin year over year. But we had a little more concentrated volume within the event. The event, people responded more to the event but we were able to drive a little higher gross margin in the event. We went with 175 hurdle on the flipside, which worked well. And we tend to get a little higher average ticket during that event.

Can you also talk about the outlook for your Tommy outlet stores? Clearly it has been a challenged area of industry, so I am curious. If you can provide some more color there. And any signs of a rebound in tourism in that channel?

In outlet stores, that world is changing a bit. And I think it has everything to do with the amount of off-price that is available all over the place. So as you will have noticed, we have not opened an outlet store in a while. And we're really revamping the way that we merchandise those stores. We have tested it in a couple of markets and have been very pleased with what we have seen so far, and anticipate that we will probably do that more broadly within our 30-some-odd outlet stores that we have at this point.

As you know, there is a number of aspirational luxury brands out there that are deemphasizing the wholesale channel, pulling back on inventories across various categories. So despite the near-term challenges that department stores pose this year in terms of less upfront buys, do you see the vacating of these other brands as a growth opportunity for either Tommy or Lilly as you think about 2017?

I think not so much for the Lilly, because of their strategy which is really not -- they are not into the department stores much at all. In Tommy Bahama, I do think it possibly creates some opportunity to do some more business.

Thanks very much, and all the best in the back half.

Thank you.

That concludes today's question-and-answer session. At this time, I'll return the conference back to Mr. Tom Chubb for any additional remarks.

Thank you again for your time this afternoon. We very much appreciate your interest, and look forward to speaking to you again next quarter.

This does conclude today's conference. Thank you for your participation. You may now disconnect.