Children's Place Inc (PLCE) 2017 Q3 法說會逐字稿

Good morning, and welcome to the Children's Place Third Quarter 2017 Conference Call. (Operator Instructions)

At this time, I'll turn the call over to Mr. Bob Vill, Group Vice President, Finance.

Thank you for joining us this morning. With me here today are Jane Elfers, President and Chief Executive Officer; Mike Scarpa, Chief Operating Officer; and Anurup Pruthi, Chief Financial Officer. A copy of our press release can be found on our website.

Before we begin, I would like to remind participants that any forward-looking statements made today are subject to the Safe Harbor statement found in this morning's press release as well as in the company's SEC filings. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date hereof.

In addition, to find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found in our Investor Relations site. After the prepared remarks, we will open the call to questions. (Operator Instructions)

I will now turn the call over to Jane Elfers.

Thank you, Bob, and good morning, everybody.

The third quarter was another outstanding quarter for The Children's Place, with comparable retail sales, gross margins, operating margin and earnings per diluted share all exceeding last year, enabling us to beat the high end of our guidance range.

Let's review the highlights. First, our comp performance. We delivered a positive 5.1% consolidated comp. We delivered positive comps in both our brick-and-mortar and our digital channels. The U.S. delivered a positive 5.9% comp. Canada delivered a negative 1.2% comp, a significant improvement from Q2.

Moving on to key metrics. AUR increased versus last year. ADS increased versus last year. UPTs increased versus last year. Transactions increased versus last year. Conversion increased versus last year. Gross margin leveraged 30 basis points versus last year. Merchandise margin was up for the 11th consecutive quarter. And our store traffic has experienced sequential improvement for each of the past 6 quarters.

Now I want to cover several topics on everyone's minds and discuss their impact on our third quarter results. First, the impact from the 3 major hurricanes. We lost nearly $3 million in net sales in the third quarter due to hurricane-related closures in Houston, Florida and Puerto Rico. While we experienced significant store closures in both Houston and Florida during and in the aftermath of the hurricane, we were able to reopen all of our stores with the exception of 1 store in Houston, which is expected to reopen on Monday. In Puerto Rico, we have 11 stores. All of them are still closed. We expect to open 3 stores in November and 3 stores in December. We'll keep you posted on developments as they relate to the remaining 5 stores.

Second, the impact of the Gymboree bankruptcy and the subsequent liquidation of hundreds of their stores. The stores where we were colocated with Gymboree outperformed the balance of the fleet for the third quarter in spite of an aggressive closing store promotional cadence from Gymboree. Our due diligence suggests that at the end of Q3, approximately 228 of the 330 liquidating stores are now permanently closed, and the balance will close at the end of the fourth quarter. Of the 228 closed stores, we were colocated in 135 of them. It's still early in the quarter, but these 135 stores continued to outperform the fleet.

Third, the impact of our additional 3 million unit basic buy. Our rebuilt from the additional basic unit receipts were outstanding. We were better able to service our customer by being in stock in key styles and sizes during our very important back-to-school selling period. We are extremely pleased with these results, and we have already completed our deep dive into this year's missed opportunities and secured the additional units needed for back-to-school 2018. The 2018 back-to-school opportunity is approximately the same magnitude as 2017.

Fourth, the impact of the unseasonably warm weather in October. Weather negatively impacted our business starting at the tail end of September but clearly had the most negative impact during the first 2 weeks of October. Once the temperatures reverted to more seasonable levels during the latter half of the month, our business rebounded accordingly. And while we're only a couple weeks into the fourth quarter, our business is strong.

Fifth, the impact of improved category buy. We have not discussed product specifics for several quarters now, and we are going to continue with that practice. However, I will reiterate that our key item basic business was outstanding during the important back-to-school period, and the significant effort we put behind wear now fashion product really resonated with our customers. As for the cold-weather category, we were conservative with our buys, and our inventories are well positioned in these categories, allowing us to be significantly less promotional at this point in the season versus last year.

Our third quarter promotions were well planned, well controlled and well executed, and our store team did a fantastic job seamlessly navigating through the multiple headwinds we experienced during the quarter.

And sixth, the impact of the anniversarying our very successful private label credit card and loyalty program launches from last October. We are thrilled to report that we very successfully anniversaried last year's launch of our private label credit card and loyalty program. Our private label credit card business has been very strong since our relaunch last October. With a laser-like focus on these key programs, we were able to continue our positive trends in October. Sales penetration increased substantially, and program metrics continued to strengthen. As we entered Q4, we have sustained marketing campaigns planned to ensure we continue to move these programs ahead.

So in summary. Despite 3 major hurricanes, Gymboree's bankruptcy and clearance liquidations in several hundred of their stores, record-breaking October heat across most of the country and the anniversary of our very successful private label credit card and loyalty programs from last October, we still delivered an outstanding quarter, a 5.1% comp on top of a 4.6% comp from last year and an 80 basis point increase in adjusted operating margins.

Now let's focus on our third quarter accomplishments with respect to our accelerated digital transformation strategy. We're extremely fortunate; we have the dream customer for our digital transformation. She is a mobile millennial, tech-savvy mom who craves speed and ease. In addition, we have a built-in future Gen-Z customer who already shops with their parents in our stores and online. We accomplished a lot on the digital front during Q3. Steve Rado joined as Chief Digital Officer. Steve is responsible for the digital transformation of our company and is off to a great start. He sees a tremendous amount of both short- and long-term opportunity as we move towards one-to-one personalization. He and his new team have identified a lot of low-hanging fruit, and they are developing and implementing strategies to make sure we quickly harvest both the low-hanging fruit and set our foundation up for success as we move towards advanced personalization capabilities. We rolled out BOPIS to all stores during the third quarter, and attachment rates are already running at over 20%.

We launched our fourth digital release, which has expanded features and functionality, on all of our digital platforms. We staged the fourth quarter rollout of WiFi to our entire U.S. fleet. This will enable ship-from-store capabilities across the fleet and will set the stage for save-the-sale functionality that we'll launch in 2018. We tested ship from store in 10 locations with early success, and we will continue to roll these capabilities to more stores throughout Q4 and beyond. And our new app will be released in Q4, which will enable a host of new capabilities and features.

In closing, based on our outstanding results, we are revising our adjusted full year '17 EPS guidance upward to a range of $7.46 to $7.51 versus our previous guidance of $7.23 to $7.33. We are looking forward to delivering a strong Q4 and another exceptional year for our shareholders.

Now I'll turn it over to Mike.

Thank you, Jane. This morning, I will provide an update on other key elements of our strategy: our growing business with Amazon, our international expansion, our fleet optimization program and our connected store initiative.

Starting with Amazon. We continue to see strong growth in our business with Amazon. We see continued opportunity in the replenishment program that we launched with Amazon in the third quarter of 2016. This replenishment program is incremental to the fashion wholesale business that we launched with them in 2015. We have identified additional styles and categories to add to the program and now expect to have over 5,000 SKUs in the program with this holiday season.

Together with Amazon, we are leveraging new marketing programs to increase our exposure on their site and drive customers to our brand. We will also be providing more detailed product information, which we expect will increase customer conversion. We will launch with Amazon in Canada for holiday 2017 and are currently working with Amazon to pursue other international opportunities.

Moving on to our international business. In our international franchise markets, we opened 10 new points of distribution in the third quarter, and we now have 168 points of distribution in 19 countries. These include stores, shop-in-shops and e-commerce websites operated by our partners.

Our newest franchise partner, Guild Capital, will be opening 5 Children's Place stores in Indonesia on November 18. They expect to open 25 stores in that market over time.

We believe we have the opportunity to establish over 300 points of distribution by the end of 2020. We expect to accomplish this through growth with existing partners as well as expansion into new geographic regions with new partners.

Fleet optimization. Our fleet optimization program continues to generate significant financial benefits. We have closed 156 stores since we announced this initiative. We indicated previously that we are expanding our expected store closures to 300 doors by 2020. Key elements of this strategy have been: one, a sales transfer rate in excess of 20%; two, our ability to successfully negotiate rent reductions for a significant percentage of our expiring leases; and three, lease flexibility, with the majority of the lease renewals being short-term deals, resulting in reducing our average lease term to less than 3 years. This program will ultimately result in a decrease in total fleet square footage of over 1 million square feet or 20%, along with an expansion in operating margin of 200 basis points.

Connected store initiative. The connected store is a major initiative to enable and scale our personalization and omni-channel strategies at the store level, where over 85% of our total customer base experiences and interacts with our brand today. We are installing wireless networks and deploying mobile point of sale in the entire U.S. fleet. The benefits from the additional bandwidth and speed of these networks will enable us to: first, significantly enhance our digital capabilities such as ease of enrollment in our loyalty and PLCC programs, push notifications with our new mobile app utilizing guest WiFi and deployment of personalized offers at the point of sale. Second, these upgraded networks will enable us to utilize mobile point-of-sale devices, which will allow for faster and more convenient on-floor checkout, significantly enhance the speed and convenience of BOPIS, enable us to scale ship-from-store capabilities and set the stage for save-the-sale functionality that will launch in 2018. As Jane mentioned, we have rolled out BOPIS to all U.S. stores and begun the pilot of ship from sore in Q3. While we are at the very early stages of full deployment, the ship-from-store initiative will drive greater sales and margin by leveraging store inventory for online orders, along with reducing delivery times to our customers.

Third, it will improve associate productivity and accuracy when processing inventory shipments and price changes.

And fourth, this new network will enable voice over Internet connectivity and enable us to significantly reduce the cost of fixed line telephone expense in our stores. We will continue to provide you with updates on this exciting initiative.

And now, I'll turn it over to Anurup.

Thank you, Mike. Good morning, everyone. In the third quarter, we delivered adjusted EPS of $2.58 compared to adjusted EPS of $2.29 last year, a 13% increase. This resulted in a $0.12 beat versus the high end of our guidance range of $2.46. These results include a $0.03 tax benefit due to the new accounting rules for the income tax impact on share-based compensation. For the first 9 months of 2017, we delivered adjusted EPS of $5.39 compared to adjusted EPS of $3.57 last year, a 51% increase. This increase in adjusted EPS includes a $0.90 benefit resulting from the new accounting rules for the income tax impact on share-based compensation. Excluding this benefit, adjusted EPS increased 26%.

Details for the third quarter are as follows: Net sales increased 3.4% to $490 million. Comparable retail sales increased 5.1% on top of a positive 4.6% comp in the third quarter of 2016. U.S. comp sales increased 5.9%. Canada comp sales decreased 1.2%. We achieved positive comps in our brick-and-mortar stores and continued to see a significant increase in the penetration of our e-commerce sales.

Adjusted gross margin leveraged 30 basis points to 41.3% of sales. This was driven by our 11th consecutive quarter of merchandise margin expansion and the leverage of fixed expenses, partially offset by the increased penetration of our e-commerce business, which operates at a lower gross margin rate due to higher fulfillment cost.

Adjusted SG&A leveraged 50 basis points to 23.9%. The leverage was primarily a result of the positive comparable retail sales, a decrease in store expenses driven by lower credit card fees and lower incentive compensation accruals, partially offset by the investment in our transformation initiatives.

Depreciation was $16.8 million for the quarter. Adjusted operating income was $68.4 million, an increase of 9.5% compared to last year, leveraging 80 basis points to 14% of net sales.

Moving on to the balance sheet. Our cash and short-term investments at the end of the quarter were $273 million compared to $267 million last year. We ended the quarter with $56 million outstanding on our revolver compared to $66 million last year.

Inventory was up 11.8% at the end of the quarter as a result of higher in-transit inventory compared to last year. Excluding in transit, inventory was up low single digits. We believe our inventories are well positioned as we enter the fourth quarter.

Our strong cash and liquidity profile provides us with the financial flexibility to continue to fund our strategic initiatives and repurchase shares and pay dividends to shareholders. We generated $130 million in cash flow from operating activities in the first 9 months of 2017 compared to $126 million in the first 9 months last year. We repurchased $85 million in stock in the first 9 months of 2017 or over 766,000 shares. This includes shares repurchased and shares surrendered to cover tax withholdings associated with divesting of equity awards.

We also made dividend payments of $21 million as we doubled our quarterly dividend rate to $0.40 per share in fiscal 2017 from $0.20 per share in fiscal 2016. Since 2009, the company has returned over $863 million to its investors through the repurchase of 15.2 million shares and quarterly dividend payments.

Now let me take you through our Q4 and full year guidance. This guidance excludes certain costs or events that are set forth in our non-GAAP adjustments included in this morning's press release.

Fourth quarter guidance. For Q4, we are guiding to adjusted EPS in the range of $2.07 to $2.12. We expect our comparable retail sales will increase low single digits. We expect adjusted gross margin to leverage 20 to 30 basis points as a percentage of net sales. We expect adjusted SG&A to leverage 50 to 60 basis points as a percentage of net sales. Our fourth quarter guidance assumes that depreciation will be approximately $19 million. We would project adjusted operating margin as a percentage of net sales to leverage 40 to 50 basis points compared to last year. We are guiding inventory to increase high single digits at the end of the fourth quarter compared to last year.

Moving on to full-year guidance. We are increasing our full-year adjusted EPS guidance to $7.46 to $7.51 per share compared to our previous guidance of $7.23 to $7.33. We expect a $0.91 benefit due to the new accounting rules related to the income tax impact on share-based compensation compared to our previous guidance of an $0.89 benefit.

Let me provide you with details of our full-year guidance. We expect total net sales for the year to be in the range of $1.835 billion to $1.845 billion inclusive of the impact of the 53rd week. We project adjusted operating margin to be approximately 9.6%, an increase of 110 basis points compared to 2016. We expect our adjusted tax rate to be approximately 23% for the year inclusive of the impact of the new accounting rules for share-based compensation. Our CapEx is expected to be approximately $65 million for the year. We expect to open 2 stores and close approximately 25 to 30 stores in 2017.

At this point, we'll open the call to your questions.

(Operator Instructions) Our first question comes from Susan Anderson with B. Riley.

Very nice job on the quarter, very impressive quarter especially in this environment. I was wondering if you could talk a little bit more about AUR? I think you mentioned all of the comp metrics really improved in the quarter. On the AUR front, maybe, kind of if you could parcel out the big driver there. Is it mainly more full-priced selling, lower promotions, pricing or even maybe a mix shift to higher-ticket items? Because I feel like I have seen, especially on the girls side, to more fashion products that potentially could have higher tickets? And then, kind of, as we look out to next year, how should we think of the drivers there?

Susan, it's Anurup. I'll take the AUR question in general. So at the outset, it certainly reflects less clearance and a better mix of full-priced selling. As you know, strong product acceptance has been a common theme and been one of the key factors in driving our consolidated comps this year. So I think, along with those factors, our inventory management tools, our better in stock position and basics, as Jane talked about the success we had with the back-to-school test in 2017, which we continue to pursue. All of those factors are driving a healthier AUR. It's more mix managed. We're certainly not in the -- with our core customer and value proposition. It's not about raising prices, but it's more about in-stock position, better mix of basics versus fashion, continued very, very strong product acceptance.

Our next question comes from Adrienne Yih with Wolfe Research.

Jane, I'm going to start with a question for you. Can you just explain to us the changes that you have made to make the business less weather-sensitive? Obviously, historically the kids' space has been most levered to these weather, kind of, anomalies. And based on what we've heard from other retailers so far, you actually have kind of come out the most robust, I guess, I'll say. And then can you also just talk about the digital focus? Have you started to see the payback yet in this quarter? And how many 12-month active customers do you have?

Sure. As far as the cold-weather categories are concerned or the wear-now categories are concerned, we really did make a fundamental change in the third quarter. We really put a stake in the ground and said we were going to own the big items so we needed to own during back-to-school, which are the denim, and the graphics and the uniform, and that we were going to push the cold-weather categories later into the year, at some point into October and some of the categories even to November and December. So we focused on Wear Now. We stayed in things like short sleeves longer and pushed things like outerwear cold-weather accessories, microfleece, blanket sleepers, those types of things much later in the quarter and that really paid off for us. As we move into Q4, we also have a much better, I think, category mix of not really heavy -- as I mentioned in my call, the outerwear, the cold-weather categories, they were bought conservatively. So the ability for us to make a lot more money on those and get out of them and not have carryover as we get into later December into January is really where we're at with that right now. As far as the digital transformation, as we mentioned on the call, Steve has started. He's brought some key players into his team, and he's really starting to look at some low-hanging fruit and also really set us up for the future, which is really personalization. A lot of work going on, on a lot of fronts there. There's a lot of architectural work going on as it relates to like our digital platforms and upgrading functionality for mom. Conversion is really, as we discussed on the last call, is a big play here. And I think that, that what's going to come through, when we get a little bit more sophisticated on predictive analytics through personalized marketing, and that's really the longer work into '18 that we look to benefit from in '19. The loyalty program is one of the things that we believe has really helped our business. We have very, very strong anniversary of last year's loyalty program and private label credit card launch. We are very excited that we were able to anniversary such a strong launch. And so we think that's helping us, certainly, on the marketing front. Also, rolling out BOPIS, we think, is helping us with traffic in our store and also with the attachment rate as we talked about. And then certainly, the other omni capabilities that Mike covered in his speech as far as save-the-sale functionality coming up, ship-from-store functionality. There's just -- there's a lot going on here that relates to personalization, digital transformation, as we've been talking about. So lots of lots of engines and firing on a lot of cylinders there. And as far as what our 12-month active customers file is, I think we're going to pass on that one.

Our next question comes from Stephen Albert with Bank of America Merrill Lynch.

Question is twofold. Number one, I was curious if you could parse out what your e-commerce sales growth was during the quarter? And then I wanted to, on the back of that, drill into the GMs a little bit. Because my understanding is your fixed cost leverage plan on your fixed COGS is a slightly positive comp. So driving a 5 comp and getting 30 bps of GM expansion with merch-margin expansion as well, I'm just, kind of, curious -- I'm assuming that's online shipping is the reason for the somewhat muted GM expansion? So I was curious if you could maybe give us sense for what your leverage point is on the fixed portion of your COGS given atypical, call it a 3- to 5-point sales mix shift to digital each quarter?

Steve, it's Anurup. So as we noted, merchandise margins, which obviously is the apex from a margin perspective, expanded for the 11th consecutive quarters, so very healthy comp driven by merchandise margin expansion for the consolidated business. As you noted, e-commerce had a very strong quarter. We don't typically break this out because we really look at the business as a consolidated business. Our comp for the quarter was 5.1%, 4.8% year-to-date. If we hit our guidance for the year, we would have expanded our operating margin to 9.6% versus 8.5% and 400 basis points over just the last -- since 2014. That being said, our e-commerce business has -- in terms of its penetration to the total, has increased by about 370 basis points in Q3, almost 400 basis points year-to-date. And as you would recall, it was 20% -- almost 20% of our sales in 2016 and 17% year prior. So very strong, robust e-com growth in spite of not having all of the capabilities and tools that Jane described fully functional yet, but still to come. So we're very excited about that. But at the outset, I would just say again, as far as our P&L's geography is concerned, as e-com continues to penetrate and grow, we would see a lower rate of expansion in gross margin rate. What we are really focused on is continued operating margin expansion. If we hit our guidance again for this year, EPS would grow about 21%, excluding the benefit of the tax based -- excess tax share-based compensation. So very, very healthy metrics. And our e-commerce business, given high basket size and low returns, is accretive from an operating perspective. So very pleased with the business so far and -- as we continue to drive our digital efforts.

Our next question will come from Janet Kloppenburg with JJK Research.

I just wanted to ask first a question about Canada. Do you see a road to that channel turning positive in the fourth quarter and going forward? And maybe just to elaborate there on the improvement in the comp trend? And then just, Mike, on the Amazon business, you said you're going to 5,000 SKUs. Maybe you could remind us where you were and somehow quantify for us the impact this is having on margins in the third quarter and going forward?

Sure, Janet. As far as Canada is concerned, as I mentioned on our second quarter call, we've been cutting back receipts in Canada for several quarters due to FX issues, economic issues, et cetera, and we just cut too far in Q2. And as we said on the Q2 call, we would be in a much better inventory position heading into Q3. And you saw that by our results today with the significant improvement in trend from the Q2 trend. While still negative, the improvement, I think, was due to the same type of philosophy we did in the United States, which was to buy into the basics then to really own the items during the key back-to-school period. And yes, we do think Canada will turn positive. Embedded in our Q4 guidance is a positive comp in Canada.

From an Amazon perspective, we started the replenishment program with them approximately a year ago and roughly had about 300 SKUs on the site. We increased that to about 2,000 in the first quarter of this year. Last call, we talked about having up to 4,000 SKUs. And now they continue to add items on and will be over 5,000 as we enter the holiday season. Also -- we've also expanded into Canada for holiday 2017, so positive there also. From an overall margin perspective, we said all along that the wholesale and the international franchise gross margins are dilutive to the company, given the lean SG&A structure that the overall operating margins are accretive to our bottom line. And we've been saying that since 2012, when we've been able to increase our overall margins from a guidance perspective now up to 400 basis points for this year. We can still make the statement that they're overall accretive to our operating margin.

Our next question will come from Marni Shapiro with The Retail Tracker.

Can you talk a little bit, actually, about the mix in your stores? Physically, the girls dominate the space. And I'm curious if that's actually true in sales, and I'm curious about the mix online. Is it more heavily weighted towards girls for fashion? And then, sort of, follow up would be if that is the case, is there an opportunity in boy or do boys' parents just not buy as much?

Marni, it's Jane. To answer your question, the girls' product does look amazing, thank you. But overall, when you look at the trend and you look at the comp, the comps are very consistent across all categories from toddler to big, to boy, to girl, to accessories, to shoes. So I would not say that the girls business is driving our outsized comp and making us the outlier that we are in retail. As far as online is concerned, there's a much heavier penetration in line on a couple of things. The shoe business penetrates a lot heavier online and a couple of the categories embedded within fashion and some of the seasonal categories trend higher online. But overall, you could say the same thing; that the business online is very well balanced.

Our next question will come from Jim Cartier with Monness, Crespi and Hardt.

Two questions. First, last quarter you mentioned, you had some digital tools that would help you better target displaced Gymboree customers. So curious how those are working for you: Are you seeing a greater lift from the store closings that maybe you had seen in previous years? And then second, I know you probably don't want to talk about next year, but how should we think about the tax rate for next year? And specifically, do you expect to see a similar benefit from the income tax impact on share-based compensation next year?

Sure, I'll take the Gymboree part. We have been able to use some tools to target displaced customers there. And we have seen through the third quarter a stronger comp in the stores we were closing up against Gymboree than the balance of the fleet. And then, as I said on the call, even though we're only a couple weeks into the quarter, the trend in the stores that they have closed, the 135 stores that we mentioned they've closed -- has been stronger than the balance of the fleet. So we are very helpful/confident that going forward we will continue to see a nice market share gain from Gymboree as they close the stores that have been closed and then as they continue to close stores through the fourth quarter.

Jim, on the tax rate for '18, more on that to come when we actually have our next call and talk about 2018 in more detail. As far as the tax rate on stock comp, I think it's all subject to legislation at this point given what's happening in Washington. So we will obviously update you once we have our 2018 -- our first view into 2018, so let's just stay tuned until then, please.

Our last question this morning will come from Anna Andreeva with Oppenheimer.

A couple of questions. On inventories, I guess curious what is driving their high single digit increase at the end of the fourth quarter? And overall, inventories have been managed so tightly all these years. Just as we look into '18, should we expect to see increases now as the new tools are in place? And then secondly, on SG&A, I think you guided for deleverage during the quarter. Just curious if there were any timing shift in the digital expenses?

It's Anurup, Anna. From our expenses -- I'll take the SG&A piece first. Overall, SG&A leverage, as you noted versus our guidance of deleverage, primarily driven by the very, very strong comp. We also indicated that store expenses would turn down, driven by credit card fees. And what's driving that is the continued penetration of our private label credit card business. So overall expenses were pretty much -- aside from, obviously, getting leverage on the comp and the favorability on credit card fees, a slight timing issue on incentive comp -- but overall, the leverage was primarily attributed to those first 2 factors. There was no significant timing issues in the quarter. And we continue to, obviously, manage expenses as prudently as possible while we continue to invest in our transformation efforts. As we noted on the Q3 inventory position, inventories x in transit were up low single digits. As we look into Q4, we are asserting the opportunity in terms of what we have learned in back-to-school 2017. And as we chased and sold those basic units, gave us very, very strong results. So we continue to chase that opportunity into Q4. We've also have an extra week of receipts with the 53rd week this year. But overall with the tools that we have deployed and the tools that we will deploy and continue to deploy, we expect to have -- we do expect over the longer term to continue to see inventories inflect downwards and drive inventory productivity in the future.

Thank you for joining us today. If you have further questions, please call Bob Vill at (201) 453-6693. You may now disconnect your lines, and have a wonderful day.