PVH Corp (PVH) 2013 Q3 法說會逐字稿

Good morning everyone and welcome to the PVH Corp third quarter 2013 earnings conference call.

This webcast and conference call is being recorded on behalf of PVH and consists of copyrighted material.

It may not be recorded, rebroadcast, or otherwise used without PVH's express written permission.

Your participation in the question-and-answer session constitutes your consent to having any comments or statements you make appear on any transcript or replay of this call.

The information being made available includes forward-looking statements that reflect PVH's view as of December 9, 2013 of future events and financial performance.

These statements are subject to risks and uncertainties indicated in the Company's SEC filings and Safe Harbor statements included in the third quarter press release.

These risks and uncertainties include PVH's right to change its strategies, objectives, expectations, and intentions and its need to use significant cash flow to service its debt obligations.

Therefore, the Company's future results of operations could differ materially from historical results or current expectations.

PVH does not undertake any obligation to update publicly any forward-looking statements, including without limitation any estimate regarding revenue or earnings.

Generally the financial information and guidance provided is on a non-GAAP basis as defined under SEC rules.

Reconciliations to GAAP are included in the third quarter earnings release, which can be found on www.PVH.com in the Company's current report on form 8-K furnished to the SEC in connection with the release.

At this time I am pleased to turn the conference over to Mr. Manny Chirico, Chairman and CEO of PVH.

Thank you, Heather.

Good morning everyone.

Joining me on the call this morning is Dana Perlman, our Treasurer and head of Investor Relations.

She'll be pinch hitting for Mike Shaffer this morning, who's on a business trip.

Ken Duane is also joining me, our CEO of our Heritage brands and responsible for all of our North American wholesale businesses.

We are quite pleased with our results for the third quarter.

We beat our third quarter revenue and earnings guidance.

We saw a strong outperformance against our in both our Calvin Klein and Tommy Hilfiger businesses despite the overall promotional environment that we experienced in the quarter.

Let me start with the Tommy Hilfiger businesses.

The Tommy business continued its strong performance during the quarter, posting a 10% revenue increase.

Revenues in North America were up about 10% driven by strong performance at both retail and wholesale.

Our retail business showed at 3% comp store increase while we grew square footage in the high field digit range.

Our wholesale businesses posted strong double-digit sales increases.

Internationally revenues were up 11% for the quarter.

Strong wholesale and retail revenue growth in Europe was partially offset by the continued weakness in our business in Japan.

Our retail comp store sales in Europe posted a 4% increase in the quarter.

While our European wholesale revenues recorded a double-digit revenue increase in the quarter.

Operating income for the Tommy Hilfiger business grew 6% in the quarter.

The sales outperformance in our North America and Europe businesses was partially offset by the continued weak performance in Japan, coupled with gross margin pressure caused by a higher promotional selling environment in order to drive traffic.

Moving to our Heritage businesses, sales and earnings for our wholesale Heritage businesses came in on plan for the third quarter.

The performance in our retail Heritage businesses for the third quarter was disappointing.

Comps store sales were minus 3% and were particularly weak in the Bass division, which we sold on the first day of the fourth quarter of this fiscal year.

Operating earnings were down in the quarter and were negatively impacted by increased markdowns and promotional markdowns in order to drive sales and keep inventories clean.

Moving to our Calvin Klein businesses, all of our Calvin Klein businesses exceeded our sales and earnings estimates in the quarter.

We posted strong sales gains and higher than estimated operating income.

By region we saw the strongest results in South America, Asia and North America while our European business continued to underperform.

In our South America business we had a very strong business, particularly in Brazil, where we continue to see sales growth of about 10% driven by the performance of the Calvin Klein jeans business.

Comp store sales were up about 5% in the third quarter.

Our order book for the fourth quarter is also running up about 10%.

So there continues to be good momentum in Latin America.

Asia: Overall comps in our Asia business were up about 1% for the quarter.

We saw strong sales in China and Southeast Asia where comp sales were up about 5%.

The only difficult market in Asia continues to be Korea, where comp store sales trends have improved somewhat running down minus 5% in the quarter.

As I said, our European Calvin Klein business continued to be under pressure, particularly jeans component of that business.

Comp store sales came in at minus 5% in Europe and margins were impacted by markdowns in order to move through goods and position the business properly for the new spring deliveries that we have a lot of optimism about as we go forward.

In North America our Calvin business continued to perform strongly across all product categories with the exception of jeans.

We have seen very strong performance in our wholesale men's sportswear and our men's and women's underwear businesses.

in addition, our North American retail business posted a 3% comp store sales increase and higher operating margins due to better sell-throughs and higher average unit retails.

The Calvin Klein jeans business in North America, as well as Europe, continues to be the only difficult business within the Calvin Klein franchise.

We have planned these businesses down mid-single digits and are anticipating continued pressure on margin in order to move through goods.

In the licensing area, ongoing royalty revenues were up 15% in the quarter due to the strength in our global handbags and accessory businesses and our women's apparel businesses, which are operated by G-III in North America and Club 21 in Asia.

Let me speak a little bit about fourth quarter holiday sales trends.

In the fourth quarter our sales to date are on plan globally.

In North America we continue to see low single digit comp store increases with Tommy and Calvin, while our Heritage business continues to post mid-single digit negative comps.

Internationally our Calvin businesses in Asia and Latin America continue the strong sales trends we saw in the third quarter, while our CK Europe business continues to underperform.

The Tommy Hilfiger Europe comp store sales trends also continue at positive mid-single digit rates.

As we previously mentioned to you, our Tommy Hilfiger European spring order book is projected to be up 1% for the spring 2014 season.

The spring wholesale season begins to ship in December and that is all anticipated in our fourth quarter guidance.

From a margin perspective, the global environment has been more promotional to date than last year's fourth quarter.

We have been cautious with our projections and are planning for the promotional environment to continue throughout the fourth quarter.

Just to give you a quick update on the integration of the Warnaco businesses into PVH, we continue to review our plans and are on track with all our processes and conversions.

Although last three months we have successfully converted a number of systems in North America as well as Europe, we also have made strong strides in our merchandise planning systems throughout Asia.

There have been no surprises in this area since the last time we updated you and we are very comfortable with our integration timeline.

We are also comfortable with our projected expense synergies and they continue to be on track.

From a people perspective, we have our senior management teams in place across the globe and have had some key hirings across the globe with the announcement of the new Calvin Klein President in both Europe and Asia.

And with that I'm going to turn it over to Dana to quantify some of the fourth quarter trends.

Thanks Manny.

The comments I'm about to make are based on non-GAAP results and are reconciled in our press release.

Revenues for the third quarter were $2.259 billion, a 38% increase or $616 million increase over the prior year.

Driving our revenue increase over the prior year was the Warnaco acquisition, which accounted for approximately $503 million, our Tommy Hilfiger business which increased $87 million or 10% and the pre-acquisition Calvin Klein businesses which increased $55 million, or 19%.

Overall, our pre-acquisition Heritage business was down to the prior year, as our ongoing wholesale businesses performed well for the quarter, but was offset by continued disappointing performance in our Bass and Izod retail businesses in addition to the loss of sales from exiting the Izod women's wholesale business.

As a reminder we sold the Bass business the first day of the fourth quarter.

Versus our guidance, revenues were up as a result of strong performance in Calvin Klein North America, China and Brazil businesses coupled with strong revenue growth in our Tommy Hilfiger North American and European wholesale businesses.

Our earnings per share for the third quarter was $2.30 as compared to our previous guidance of $2.25.

Driving the earnings per share beat was our revenue increase, which was slightly better than plan.

Our revenues for 2013 are projected at $8.24 billion.

Calvin Klein revenues are planned at approximately $2.79 billion.

Tommy Hilfiger revenues are planned at approximately $3.44 billion, up around 7% to the prior year.

Our Heritage revenues are planned at about $2.01 billion.

Year-over-year comparisons for our Calvin Klein and Heritage Brand revenue are significantly impacted by both the Warnaco acquisition as well as the sale of Bass.

I wanted to put some color around our 2013 operating margin for the Company and our individual businesses.

Operating margin for the year is expected to be approximately 11.8%, a 60 basis point reduction to 2012.

Driving this overall reduction is the switch from running a licensing model to direct operations for our Calvin Klein jeans and underwear businesses combined with our expenses associated with rebuilding and investing in our acquired Warnaco businesses.

For the year we're projecting our Calvin Klein operating margin to be approximately 15%.

Tommy Hilfiger operating margins are planned at approximately 14% and our Heritage Brands operating margin will be approximately 8%.

We'll plan for the full-year tax rate at approximately 26% and full-year interest expense at approximately $190 million.

For the fourth quarter we're projecting revenues at approximately $2.08 billion, with earnings before interest and taxes in dollars plan to increase in excess of 15%.

And earnings per share for the quarter of $1.40.

When comparing to the prior year, earnings per share for the fourth quarter is impacted negatively by approximately $0.10 due to the loss of the 53rd week and the calendar shift associated with this lost week, coupled with a $0.10 decline due to an increase in the tax rate over the prior year.

Lastly, we have raised our debt pay down estimate by approximately $50 million from our previous guidance to $450 million for the year.

And with that I will turn it over for questions.

Operator?

(Operator Instructions)

David Glick, Buckingham.

Yes, thank you.

Manny, just a follow-up on the Warnaco acquisition and the potential shareholder value creation from that deal.

It sounds like it's very much on track, from a systems and a people perspective and making some progress on the product.

Obviously when you guys gave the 15% to 20% forward-looking growth goals in terms of EPS, the environment was different than it is today.

You made some references in your press release about investments in 2014 which you certainly had already planned to make.

I don't know if there are any incremental investments, but I'm just wondering how you're thinking about 2014 relative to 2013 as a transition year?

Is there a point next year where you can start to make some progress and grow within that range perhaps in the second half of the year?

I just want to know how you're thinking about it today and whether that's changed at all.

Sure.

Thanks, David.

I think you have to think about it in a couple of ways.

On the investment spending side, or rebuilding the jeans and the underwear business, the infrastructure and people point of view, a lot of those expenses are going into the third -- those investment spending and hiring of people is happening in the third and fourth quarter of this year and will continue into next year.

We're going to have to deal with, particularly in the first half of next year, with some of the annualization of that expense.

We're also making investments from a shop and a presentation at retail point of view.

The plan to do that is in coordination with the new product that's being shipped in into 2014.

Some of that expense starting a little bit in the fourth quarter this year, really gearing up into the first half of next year and then annualizing as we go forward.

Really trying to make those investments at retail.

At the same time we're going as we feel very good about the kind of sales reception that we've gotten with our wholesale customers, both in North America and Europe with our regular counts in department stores, we're also cleaning up and rationalizing the off-price distribution that we talked about that was just overweighted in both jeans and underwear.

Bringing balance to that in North America, the United States, Canada and Mexico, doing the same in Europe to get that right while we are growing the regular priced business.

We're not seeing -- we're seeing some really strong increases in sales from a regular price point of view, but at the same time we're reducing pretty profitable sales that are going into the off-price channel or the warehouse club channel.

And then just to continue with some of the issues that 2014 is dealing with, we're dealing with the dilution impact of Bass which will happen next year.

It's worth about $0.15 a share.

And that the Tommy Hilfiger European spring order book, as I mentioned in my comments, is up about 1%.

We expect the full book to be stronger as the second half of the wholesale business in 2013 has shown some strength.

All that put into balance, I think to amplify your question is we're really seeing next year being a tale of two halves.

We think the first half will continue to be an investment and transition point of view, integrating the Warnaco business, and we'll start to really see some more improvement in the second half of the year, particularly with the new fall product in jeans and in underwear that is being presented to the market as we speak and goes on sale now into January and February.

We'll have a better sense of how that order book shapes up when we discuss year-end results in March.

I think we are well-positioned, the integration continues to move well, we still feel very strongly about how the growth will come together in the Calvin business long-term into the second half of 2014 and beyond.

But the first half of the year I think will put pressure on our earnings as we continue to make these investments to right size the business from a distribution point of view and also make the appropriate investments in the business.

Great.

Thank you very much.

Good luck.

(Operator Instructions)

Omar Saad, ISI Group.

Good morning, Manny.

How are you?

Very good, Omar.

There's been some management changes since the last time we -- your last conference call.

Fred Gehring is stepping into a little bit of a new role.

Can you talk about where the management stands today?

It sounds like you feel like you're in pretty good shape.

The roles of the key different leaders and maybe also if you could extrapolate and talk a little bit more about Fred's new role?

Thanks.

Sure.

Thanks, Omar.

Just to clarify first and foremost the Fred role, and then I'll talk about some of the other positions.

Fred will be working full time throughout 2014.

His transition from CEO of the Tommy business and our European business and our international PVH business will really take place in the second half of next year, end of the third quarter, beginning of the fourth quarter is the kind of plan that we've talked about.

But even when that occurs he will still be working full time through 2014.

The plan is that in beginning of 2015 he'll transition to a 50% role, become Chairman, really be available from a strategic planning point of view from the business, both Tommy and the overall PVH business, will continue to be a director of the Company and become Vice Chairman of PVH.

Still a very active role, still very much involved in the business and in developing the strategy and as we go forward.

In the Tommy business, Daniel Grieder, who's been with us for over ten years, has been with the Tommy Hilfiger brand and has been the CEO in Europe operating the business for Tommy, both for Calvin and Tommy, will now move into the global role for Tommy Hilfiger worldwide.

And I think that's just a natural transition that's been planned for a number of years.

We've just tried to be as transparent about that transition as possible, but it's really been something that is been on the table for the last three years.

And it was discussed as part of our acquisition plan that after three or four years that Fred would transitioned into more of a role as we go forward -- more of a strategic role and Daniel would step into the CEO role.

I don't think a transition could be better orchestrated than we've had there.

We also announced that Tom Murray will be staying through the next three fiscal years, this year and the next two, as CEO of Calvin Klein.

And then he will during that period of time provide a transition as we go forward and will step into a chairmanship role for a period of time as Chairman of Calvin Klein.

I think we have that key position covered as we go forward from a succession planning point of view.

And then the two key positions that we filled over the last couple of months have been the President of the Calvin Klein Europe business, which is Iris Epple which is an internal promotion from the Tommy business.

Iris has been with us for over ten years.

She's been a key player throughout the Tommy development, so we think she's a natural to step into the presidency role in Europe.

And then Frank Cancellloni comes to us from the Lacoste group with 20 years of expense in Asia as the President of the Calvin Klein Asia group.

So we think that positions us very well.

We feel really good about how we're positioned now, some of the key hires that are in place and I think it is very much on plan and we think it's really going to help our execution going forward.

That's really helpful explanation, Manny.

If I could ask quickly on the -- your commentary about the tale of two halves for next year and the investments necessary to continue to position the Calvin Klein brand and the Warnaco integration.

How much of this is functions and processes that were never in place and then how much of this would you say is you mentioned rightsizing the distribution.

Are there a lot of Calvin Klein stores that Warnaco opened that you need to get out of?

Things of that nature.

Thanks.

Let me take the second one first.

The first part is about distribution.

We've talked about it.

In Europe and in North America, in those two markets for jeans and underwear, the distribution was skewed above 50% into the off-price and club channel.

And that just has to change.

None of our other Calvin businesses are anywhere near those percentages, usually half at most in some of those markets.

Our plan is over a couple year period to right size that.

A combination of shrinking some of that distribution and, more importantly, growing the regular distribution of jeans throughout Europe and North America.

And I think both of those are underway that I'm very satisfied what's going on.

We've also in Europe in particular have targeted to close 15 to 20 stores.

15 will close by the end of 2013 and another five to seven closing in 2014.

Those are unprofitable doors that are closing the end of this year into next year.

So I think that will also be a positive as we go forward.

As far as -- some of these investments are by our choice to do what's right for the business.

And I would just say is -- I guess I would describe it as in the zeal to deliver earnings growth, there were areas that just were underinvested from when Warnaco operated the businesses, marketing being a key place and people the other place.

We just feel so strongly that these are the two largest apparel categories that we operate, jeans and underwear.

And that the growth prospects are so strong here that to continue to starve them for talent and marketing dollars is a major mistake.

So there we're clearly making those investments.

And when I say marketing dollars, this is not advertising in glossy magazines.

This is at point of sale, this is investments in shops and presentation, this is investments in signage at point of sale that were put up once a year when all of our competitors are doing it at least four times a year.

It's about making the investments in people at the store level, merchandise coordinators and sales support.

Those programs are eliminated for jeans and underwear where we have significant programs in all of our sportswear businesses throughout Tommy and Calvin businesses that we operated directly.

Reinstating those were critical we feel for the right presentation of the brand and in order to meet the competition head-on and to take back our market leadership position in jeans and to grow our market leadership position in underwear.

That's great, Manny, thank you.

Christian Buss, Credit Suisse.

Yes, hello.

I was wondering if you could talk a little bit about where you are from a systems integration standpoint in the former Warnaco business?

And any timeline for any major changeovers would be helpful.

Sure.

North America will be completed in the -- Calvin Klein will be completed at the end of the fourth quarter of this year.

The rest of the Heritage North American businesses will be completed by the first quarter of 2014.

The European business is completely converted systemically and all of the processes and integrations will be completely consolidated by the end of the fourth quarter.

The plan for Asia is to begin the transition country by country, beginning in 2014.

That should be completed by the first quarter of 2015.

And then Latin America will follow second half of 2014, first half of 2015.

We feel pretty good about how all of that is moving and don't see any major issues.

The warehouse distributions in North America will be completed by for Calvin in the fourth quarter and the first quarter of 2014 for 2014 for Heritage in North America.

And Europe is already complete.

That's very helpful.

How are we feeling about the $100 million cost-savings target or synergies target?

We are on track to what we said back six months and there's been no change to that.

Great.

Thank you very much and best of luck, Manny.

Thank you.

Erinn Murphy, Piper Jaffray.

Great.

Thanks.

Good morning.

I just -- two questions for you, Manny.

One, how are you feeling about inventory and the channel in Europe?

It clearly is very promotional there, but it sounds like you guys having been actually converting with your European wholesale business up double digits.

Can you speak a little bit more about what you're seeing there in the channel?

And then just secondly, structurally is there any reason if you think about Tommy Hilfiger's international business by the margins over time shouldn't be higher than North America?

Could you help us think through some of the different puts and takes there?

Thank you.

Let me take the last part first.

On the margin question, European margins are slightly higher than the US margins.

What you see is the international margins and that's being taken down probably almost 200 basis points or more, slightly more than that, by the business in Japan which is just marginally profitable.

So $250 million, $270 million business in Japan.

Margin of popular is showing that the international segment of Tommy is I think 50 basis points below.

Don't hold me to that number, but obviously I've been in front if you ask a question.

So I think that's what's really driving the change.

I think the international business should operate at a level that's comparable to the North America business.

We've really just -- we've surprised ourselves to some degree how strong North America has been and feel strongly that Europe will continue to be at that level as well.

And moving the Japan business forward is key for us from that point of view.

And I think the -- on the other -- inventory in the channel at in Europe, let me take our inventory first.

We're moving through it very quickly as you can see from our comp store performance and our own stores, both regular price, the internet as well as our outlook business, we're moving through good so there will be no inventory hangover at the end of the year at the Tommy Hilfiger business or the Calvin Klein business.

Any issues in Calvin are clearly being moved out and Tommy is just naturally selling through it as planned.

In the channel I think it's really a country-by-country story and I guess I'll just fall back on I think the channel is very clean in northern central Europe for most part and continues to be a challenge in southern Europe, particularly Italy.

We're starting to see some leveling off in Spain and we are even hopeful that as we get into the second half of next year that we can even -- that we will see our wholesale business in Spain actually up positively.

But the real challenge will continue to be Italy, which we don't see any real change in that consumer pattern.

We continue to be very rigorous on our accounts and our payment terms so we've been rationalizing down some of our account base.

At some of the smaller retailers we're just concerned about getting paid.

So that's put more pressure on the Italian business.

So Italy continues to be a major problem for us and I think everyone going forward.

The rest of Europe, I think relatively speaking I think moving through units, but probably at with margin pressure as people have hit the sales button this year I think as much this quarter six weeks earlier than they have last year.

I hope that's helpful.

No, that is.

And then just to follow up on that.

I mean I think you alluded to this in the text, but if the sell through rates are pretty strong in Europe right now your inventory, specifically yours, will be lean by the end of this year.

That should be very favorable for building back into a stronger back log as we think of fall for next year.

Is that -- are we thinking about that correct?

Absolutely, I think that's really true.

We pride ourselves in getting whatever inventory issues are behind us.

And I think that's clearly the case here.

And we really tried to move very quickly in Calvin to try and get that inventory position and work through some significant amount of aged inventory that was there.

The Tommy business really hasn't experienced when I would call an inventory issue.

It's just been a promotional environment that competitively been required to break price a little quicker than we had hoped and that's put some pressure on margins.

I really don't think its going to be a unit issue at all as we get through spring.

I think if selling continues the way we're seeing it now, I think we'll be very well-positioned coming out of this fiscal year and as we transition into spring.

Great, that's very helpful.

Best of luck.

(Operator Instructions)

Kate McShane, Citi.

Hi, thanks.

Good morning.

I just wanted to ask a little bit more about the promotional environment domestically, especially around the holiday season.

Are you seeing categories that are more promotional than others?

And with the markdowns being greater year-over-year, how do you view the full price sales to the consumer going forward after such a highly promotional season?

I guess I would characterize -- I talked about the promotional environment by category.

Specifically where we play I would say the jeans category in general has been and continues to be one of the most promotional categories that we see, both in North America, I would even say that in Asia and in Europe as well.

I just think that category from a fashion point of view has had its pressures.

I think we've talked about that in Asia, particularly in China, denim inventories have built up and everyone is moving through them.

I think some of our competitors have spoke about that.

And I think it's -- that's the category that we see the most pressure in where we are.

I think sportswear men's generally is pretty good.

I think where most retailers are talking about their businesses the men's sportswear category is one that, both from a sales and a margin point of view, continues to perform.

And we've seen it, particularly in the Calvin businesses and the Tommy business, that that continues to be the shape.

Dress furnishings, the margin pressure there has been less given the type of category it's in to replenishment.

The sales trends have been good, I wouldn't say great, they've been good.

But nothing that's been at all of an issue.

Obviously outerwear has been very strong, both as a category and as part of the collection sportswear business.

Given the weather patterns versus last year, that's been very positive.

So just to put a little color on it.

I think the real challenge with the holiday season is been the calendar, to a degree, it's been the consumer patterns and just the choppiness.

And in order to just to drive sales at a level, I think everyone has had to be more promotional than originally planned.

It doesn't make it a disaster at all, it's just putting more pressure on it.

And the calendar, to be very honest, it's hard to read.

Here we are a week and a half past Thanksgiving but closer to Christmas with less shopping days and we're expecting it to really build and to build late.

And traffic's been up and down across the board.

So it's been erratic and that's been the hardest part of trying to plan the business.

Howard Tubin, RBC Capital Market.

Manny, maybe just a follow-up on inventory, your comment.

Does that apply to North America and the US as well?

Do you feel equally as good about your inventories that you incur in the channel in North America?

Yes, very much so.

I hope I was clear.

Yes, very much the inventory's are clean.

We've been very aggressive across the board in moving through good.

And we've been aggressive on even -- from a promotion point of view and keeping moving.

February 1, as we turn will be very clear coming out of the year.

That's perfect, thanks.

Dave Weiner, Deutsche Bank.

Hi, good morning.

Thanks for taking my call.

Just two quick questions.

One, Manny, a follow-up to a point you made earlier about a tale of two halves, incremental investments particularly in the first half.

I think you made a comment that that will drive incremental or relative earnings pressure.

I guess I want to just clarify when you said earnings pressure were you just saying relative to some positive run rate?

Look, we're not giving guidance.

I'm saying is the first half will be under pressure.

I'm not saying at this point whether it'll be plus or minus from where we were last year, but clearly it'll be a second-half story not a first-half story.

I just think it's premature to start getting into 2014 when we just can't get through to -- when we're still fighting our way through the holiday season in 2013.

But I think is clearly the first half of the year has got significant pressure ahead of us.

Given the kind of investments we're making and the kind of pressure we're seeing in Europe on the wholesale channel.

I think that's where we are.

That covers both my questions, thanks.

(Operator Instructions)

Kimberly Greenberger, Morgan Stanley.

Good morning.

This is Jay Sole on for Kimberly.

The North American comps looks solid in what's obviously you know has been a very tough environment.

Can you talk about what categories and styles are working best for Tommy Hilfiger and Calvin Klein?

Sure.

If I could just categorize this.

I'm not at all down playing our strong comps.

Our comps in the third quarter which were up 3% and 4% were relatively good from the outside performance.

But if you compare that to where we were in the first half of the year, we were writing much more in the high single-digit range, 8%, 9%.

As much as we've been on plan, it's still been a deceleration from what we saw early on in fiscal 2013 and it's come with more promotion than we would have liked, putting some pressure on margins.

Again I think I really touched on it.

I would say to you the categories that are really working well for us are men's sportswear across the board, both Tommy and Calvin, our outerwear businesses or anything that's really cold weather very strong, in some ways we wish we had more.

And the most difficult businesses we really are struggling with is our denim category, which is 15% to 20% of our business.

With all of those positives are offsetting a pretty large negative comp in our denim business.

Got it.

And then obviously -- not obviously, but accessories in our own stores does very, very strong as we go forward.

Handbags particularly in Calvin continue to put up double digit comp store increases.

Okay.

Great.

And then if I could just ask one other.

What's driving the continued Calvin Klein strength in Asia and Brazil?

I think there is the brand is just very, very well-positioned in the market.

It's always been a growth channel for us.

Brazil is just, I think the brand is very -- it resonates with that consumer.

We're starting to expand the jean categories in 2014 to include more sportswear, and I think that's been a real positive in Latin America.

In Asia, the growth vehicle has been really China and as happy as we are with the business that we are comping positive, it's still a deceleration from where it was at the beginning of the year and where was last year.

So from that point of view I think we feel good about it, but we would like to get back on to that higher growth rate, which instead of comping 4% or 5% was comping closer to 9% or 10%.

Again, we see the deceleration of the business as everyone has from that point of view.

Thanks so much.

Good luck the rest of the holiday season.

Thank you.

Operator, I think we'll take one more.

(Operator Instructions)

Okay, I guess that'll wrap it up for the call.

We appreciate you joining us.

We wish you a very happy and healthy new year and Christmas as you go forward.

And we look forward to speaking to you in March of 2014.

Happy new year and healthy to everyone.

Thank you.

This concludes today's conference.

Thank you for your participation.