雷夫·羅倫馬球 (RL) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Ralph Lauren Fourth Quarter and Full Year Fiscal 2017 Earnings Call.

(Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mrs.

Evren Kopelman.

Please go ahead.

Good morning, and thank you for joining Ralph Lauren's Fourth Quarter and Full Year Fiscal 2017 Conference Call.

With me today is Jane Nielsen, Chief Financial Officer.

After prepared remarks, we will open up the call for your questions, which we ask that you limit to one per caller.

During today's call, we will be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook.

Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements.

Our expectations contain many risks and uncertainties.

The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings.

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 on our Investor Relations website.

And now I will turn the call over to Jane.

Thank you, Evren, and good morning, everyone.

I'm looking forward to reviewing our progress for the year in detail, but let me start with one of the most important developments, which I'm sure you all saw yesterday.

We have appointed a new President and Chief Executive Officer, Patrice Louvet.

Patrice is a highly seasoned and successful business leader.

He most recently served as the Group President of Global Beauty at Procter & Gamble and has a strong track record of leading global businesses during his 25-plus-year career at P&G.

He has a deep understanding of consumers and brands, a collaborative leadership style and a passion to win in the marketplace.

The team is ready to welcome him when he joins in July, and I am looking forward to partnering with him.

Now let me turn to a review of our performance and future outlook.

2017 was an important year as we strengthened the foundation of the company.

We created operational efficiencies by improving our cost structure, increased the productivity of our assortment and improved quality of sales.

Let me take you through some of the key achievements for the year.

Starting with product.

We improved the productivity and profitability level of our assortment by cutting the unproductive styles.

For both Spring and Fall 2017, we reduced the number of SKUs by 20% and focused our investments on our core iconic products.

Second, we reduced our lead times.

50% of our business is now on a 9-month lead time, and we are on track to get to 90% by the end of fiscal 2018.

Importantly, we are driving improvements beyond the 9-month mark.

For Spring 2018, approximately 35% of our business will be at lead times of 6 months or less.

Third, we have aligned inventory to demand.

Inventory is 30% below prior year, with improved turns.

This has been achieved through both restructuring actions and a more effective buying process.

In addition, since the start of our aggressive inventory management initiatives in Q2 '17, we reduced our warehouse space by 13%, with continued reductions planned for the first half of FY18.

Fourth, our distribution is healthier.

We closed 50 underperforming doors in our retail fleet, and we are well on track to close 20% to 25% of our U.S. wholesale points of distribution by the second half of FY18.

Fifth, our expense structure is more efficient.

We reduced SG&A by $240 million in fiscal 2017.

Our organization has reduced management layers from 9 to 6, with a 20% reduction in the executive population over the last 2 years.

Additionally, we consolidated regional operations under a single international group to streamline cost and processes.

This group will be led by Howard Smith, who recently served as President of the Asia Pacific region.

Howard has a track record of elevating the brand, driving sales growth and improving operations during his 15-year career at Ralph Lauren.

Lastly, we've recently added 2 key senior hires: Jonathan Bottomley, Chief Marketing Officer, who joins us from Vice Media; and Tom Mendenhall, Brand President for Menswear, who joins us from Tom Ford International.

Jonathan will report to Patrice, our new CEO, and Tom reports to Valerie Hermann, our President of Global Brands.

Now I'll turn to a quick review of our fourth quarter financials.

This quarter, we continued to deliver against our strategy and commitments.

As you saw in our press release, revenues declined 16%, in line with guidance.

Excluding the impact of foreign currency and on a 13 week-to-13 week basis, revenues were down 12% to last year.

Adjusted operating margin was 6.5%, 10 basis points above last year and in line with our guidance of 6% to 6.5%.

Adjusted operating margin was up 150 basis points, excluding the impact of the 53rd week and foreign currency.

Adjusted gross margin increased 90 basis points, driven by improved quality of sales, reduced promotional activity, lower product costs and favorable geographic and channel mix.

This was partially offset by unfavorable foreign currency effects of approximately 90 basis points.

This quarter, operating expenses, excluding restructuring and other charges, were down 12% to last year on a like-for-like basis.

Expense initiatives drove the decrease.

These included streamlining the organization to reduce headcount, changing product development processes to reduce costs and closing unprofitable stores to improve the profitability of our fleet.

The tax rate for the fourth quarter was 27% on an adjusted basis, lower than our guidance for 30%.

This was due to a geographic shift in expense mix, driven by changes in our e-commerce platform development.

Moving on to review by geography.

As we highlighted in our earnings release this morning, we are changing our reportable segments from wholesale, retail and licensing to North America, Europe and Asia, driven by significant organizational and operational changes we've implemented over the past 12 months.

We will provide segment information under the new reportable segments for the past 8 quarters in an 8-K that will be filed later today.

We will also continue to give visibility to wholesale and retail sales trends going forward.

All our comments today will be consistent with the change in our reportable segments.

In North America, revenue was down 21% in the fourth quarter as we executed important quality-of-sales initiatives as a part of our work to come back to high performance.

Operating margin was down 200 basis points.

In North America wholesale, we continued to strengthen our foundation by strategically reducing shipments to better align with underlying demand and to reduce inventory levels at our wholesale partners, all targeted to improve full-price selling.

We continued to reduce our sales in the off-price channel as we look to scale back this channel across our geographies.

These deliberate actions -- pulling back on excess inventories, lowering sales to the off-price channel, executing door closures and exiting brands, coupled with challenging trends -- resulted in wholesale revenue down 23% in the quarter.

In our directly operated e-commerce business in North America, we took further actions to harmonize pricing and reduce promotions.

Comps were down 20% in the fourth quarter, reflecting lower inventory units, reduced SKU count and fewer promotional periods.

While these initiatives created significant pressure on e-commerce revenue, they drove healthy gross margin expansion and, importantly, created greater price coherence in the region.

These are important first steps.

However, more work remains through fiscal 2018 as we aggressively address our high level of promotion in this channel.

This is an important component of a multifaceted program to both ensure promotional consistency across our channels and to enhance the overall brand and shopping experience in our most important door.

Moving on to Europe.

Revenue was down 3% in constant currency in the fourth quarter, primarily due to the 53rd week impact and calendar shift that negatively impacted retail comps.

Operating margin in Europe improved approximately 500 basis points in constant currency, excluding restructuring charges.

In Asia, revenue was down 11% in constant currency in the fourth quarter, primarily due to the 53rd week impact and store closures.

Operating margin in Asia improved approximately 800 basis points versus prior year in constant currency, excluding restructuring charges.

This was driven by an improved gross margin through lower discount rates and expense reduction initiatives.

Across our international groups, we have focused throughout the year on improving quality of distribution and quality of sales.

The majority of this work is behind us, and we have a solid foundation in our international markets.

We are also laying important groundwork for growth, including building on our relationships with digital pure-play partners, like ZOZOTOWN in Japan; and Zalando, ASOS and MyTheresa in Europe.

In the fourth quarter, we successfully launched an exclusive collection with Zalando with a dedicated marketing campaign, and we've seen strong sell-through so far.

In Asia, we launched with Shinsegae and Hyundai online in the fourth quarter.

Moving on to comparable store sales.

In constant currency and on a like-for-like basis, comps were down 11%.

Excluding calendar shifts related to both Christmas and Easter holidays, the underlying comp trend was down 8% in the fourth quarter, similar to the underlying trend of down 7% in the third quarter.

Global e-commerce comps declined 16% in constant currency in the fourth quarter, impacted by the previously mentioned initiatives in North America.

As these actions continue through fiscal '18, we are forecasting a mid-teens decline in global e-commerce comps, with lower discount rates and higher gross margins.

As you saw in our announcement last month, we are moving to a more flexible platform for our directly operated e-commerce business to renew collaboration with Salesforce Commerce Cloud.

This new solution will deliver a more brand-enhancing and consistent experience for our consumers, with a lower total operating cost than the platform we were internally developing.

In concert with our actions in our directly operated e-commerce business, we continue to evolve our digital strategy to move with the consumer and drive growth through our online partners.

Last year, global sales of our products across both our pure-play and department-store customers' websites were approximately $500 million at retail, comparable to the sales volume of our directly operated e-commerce business.

We expect continued growth with our digital partners in FY18.

Turning to our store fleet.

We achieved our goal and closed 54 underperforming doors in fiscal 2017, ending the year with 466 stand-alone stores and 619 concessions on a global basis.

For fiscal 2018, we plan to open approximately 5 net new stores and 35 net new concessions, driven by growth in Asia.

Moving on to the balance sheet.

Our progress with our plan is reflected in our inventory position.

At the end of the fourth quarter, inventory declined 30% to $792 million versus last year.

This inventory reduction is driven by both restructuring actions and an improvement in our operating processes, including a proactive pullback in receipts and moving toward a demand-driven supply chain.

We ended the fourth quarter with approximately $1.4 billion in cash and short-term investments, up from $1.1 billion at the end of last year.

Total debt at the end of the quarter was $588 million, down from $713 million last year.

Capital expenditures for fiscal '17 were $284 million compared with $418 million in the prior year period.

This was lower than guidance of $325 million, primarily due to a shift in several retail projects into FY18 and an increased focus on return on investment.

The year-over-year reduction is driven by lower IT and infrastructure investment.

Regarding share repurchases in the fourth quarter, we repurchased $100 million of our stock, bringing full year '17 repurchases to $200 million, consistent with our communication in June.

Now let me review our restructuring activities.

We are on track with our total savings targets from the initiatives we announced last June related to the Way Forward Plan.

In addition, we recently announced a new restructuring plan with estimated charges of $370 million throughout fiscal '18, an associated savings of approximately $140 million.

We've made good progress on these actions and are on track to deliver those savings by the end of fiscal '19.

In the fourth quarter, we recognized $216 million of charges from this new plan.

Total charges for the quarter were $370 million, of which about $120 million was cash.

Now I'd like to turn to guidance for fiscal '18.

As a reminder, this guidance excludes restructuring and other charges.

Our work to strengthen the foundation of the business will continue in fiscal 2018 as we set the stage to bring demand back to the business.

We expect revenue to decline 8% to 9% for the year, excluding the impact of foreign currency.

Based on current exchange rates, foreign currency is expected to have approximately 150 basis points of negative impact on revenue growth in fiscal 2018.

Brand and distribution exits in both wholesale and retail account for approximately half the decline, with quality-of-sales initiatives and challenging traffic trends representing the remainder.

We expect the sales trend to improve as we move through the year.

We expect operating margin for fiscal 2018 to be 9% to 10.5%, excluding the impact of foreign currency.

Based on current exchange rates, foreign currency is expected to pressure operating margin for fiscal 2018 by 50 to 75 basis points.

Clearly, there are many variables in play as we enter FY18.

This guidance is grounded in that reality and reflects our decision to accelerate quality-of-sales initiatives while providing some flexibility to roll out products, marketing and store concepts that demonstrate high potential for growth and returns.

We believe this is the right decision for the long term as we balance near-term margin pressure with setting up the company to return to growth.

For the first quarter, we expect revenues to be down low double digits, excluding the impact of foreign currency.

Based on currency exchange rates, foreign currency is expected to pressure revenue growth by about 225 basis points in the first quarter.

Operating margin for the first quarter of fiscal 2018 is expected to be about 9.5% to 10%, excluding currency impacts.

Foreign currency is expected to pressure operating margin by about 75 basis points.

Regarding tax rates.

As noted in our press release this morning, we are adopting the new accounting standard, ASU 2016-09, for the accounting of employee share-based payments.

This will affect our effective tax rate and increase its variability, with one of the key variables being the price of our stock.

Based on a stock price of $75 per share, the adoption of this standard is expected to raise the fiscal 2018 tax rate to approximately 28% and the first quarter rate to 33%.

Without this impact, the effective tax rate would be approximately 25% for the year.

This impact is most significant in the first and second quarters due to the timing of vesting and exercise of certain stock compensation.

Let me now review our priorities for cash and capital structure.

We are committed to maintaining our strong balance sheet and investment-grade credit rating to provide strategic flexibility, liquidity and access to capital markets.

Within that context, our first priority for cash is to invest in our business and to lay the foundation for future profitable growth.

Our second priority is to return capital to shareholders with a commitment to maintaining our dividend.

Excess cash flow beyond current and future investment and dividend needs will be considered for future potential share repurchases.

Currently, we are planning no share repurchases in fiscal 2018 as we evaluate the cash needs of our business, sector dynamics and the uncertain environment around U.S. tax reform.

We expect capital expenditures for fiscal '18 to be $300 million to $320 million, driven by new store openings, renovation of our retail environment and infrastructure investment.

In closing, we are moving in the right direction.

We are creating a strong foundation to evolve this iconic brand and our business in a challenging environment.

We remain intensely focused on our execution as we build a pathway to sustainable growth.

Ralph, the board and I are thrilled to welcome Patrice to the company, where he joins a passionate, committed team of over 23,000 Ralph Lauren employees around the globe.

With that, let's open it up for your questions.

(Operator Instructions) The first question comes from Omar Saad with Evercore ISI.

Wanted to see if you guys could talk a little bit more about Patrice's hiring and the thought process behind it and maybe dive in a little bit more detail around why he's the right person for the job.

Sure.

Well, as you saw in the announcement yesterday, Patrice has a proven track record of leading major global consumer brands.

And he's really an operator who has had a career that's focused on efficiency and effectiveness in the organizations he's run.

He has transformed and grown brands like Olay and Pantene, with a real focus on leveraging consumer insights.

He's a global citizen and has a diverse experience across distribution channels, from e-commerce to wholesalers to retail.

So he really has had a breadth of experience.

And probably most importantly, he really has a collaborative leadership style who can work in partnership with Ralph and the senior team to ensure that we can move forward on the front-facing part of our plan to get demand back to our business.

And so we're all excited to welcome him.

I think Patrice knows well and appreciates the steps that we've taken over the last year as a part of the plan to improve our business.

And he's fully supportive in continuing that work to create an effective business, to continue to focus on our value-creating engines and to pivot to the consumer-facing side of our business, in partnership with Ralph.

The next question comes from Kate McShane with Citi Research.

It's actually Corinna Van der Ghinst on for Kate.

Jane, I was just hoping you could talk a little bit more about your -- the quality-of-sale initiatives that you guys have talked about in the past.

I know you've discussed moving away from a more promotional model.

I was just wondering how you see kind of the gross margin expectations for the year.

And also qualitatively, where have some of your bigger challenges been in getting back to that kind of fuller-priced selling model?

Sure.

So as I step back and look at FY17, I think one of the things that we are very proud of is the work that we've done on quality of sales.

It's shown up in our gross margin every quarter, and it's shown up in our results in FY17.

Just looking at this quarter, about half of our sales -- I'm sorry, about half of our gross margin improvement was a result of reduced promotions and better sell-through on higher-margin product.

The other half was balanced between favorable geographic and challenged -- and channel mix and better product costs.

As we look at our efforts in quality of sales, we've been very effective, particularly in the second half of the year, of really pulling back softly in partnership with our wholesale partners on receipts to ensure that our plan and our receipt flow was designed to flow in and reflect higher margin sell-through.

So we purposely planned, pulled back, looked at the percentage of our business that was selling at a discount that we viewed as too heavy, pulled back on those receipts so that we can move in, in wholesale into higher-margin sell-through.

That's starting to happen.

It had to be done planfully because of the long lead times on inventory, but you're starting to see that.

Equally, e-commerce, the fourth quarter, I think, shows our lean in to quality of sales in e-commerce.

We worked through the inventory that we had ordered almost a year ago, but we really pulled back on promotion frequency and promotion depth on some key icon styles, notably in our women's and children's business.

You're going to see that continue as we move forward.

We've planned our receipts to move into higher-margin sell-through and to move forward on a reduced promotional cadence.

So what I'm -- what we're starting to see is real harmony across the market, notably in North America, and a real planful pullback that continues quality of sales.

The next question comes from Lindsay Drucker Mann with Goldman Sachs.

This is Rosalie Frazier on behalf of Lindsay Drucker Mann.

We had a question on FX impact to margins.

As a follow-up on that, are you taking any pricing to offset FX headwinds?

So as we look at FX headwinds, most of our -- we think about pricing specifically in market.

Most of our customers internationally are local customers.

So we move into currency headwinds by taking pricing largely on innovation and new styles.

So we will address some of those headwinds largely on innovation and moving into pricing on innovation and on new style.

So it's not -- we don't move pricing with FX.

We do step back in the marketplace in which we operate.

We look at the value of our product, we look at the competition in the marketplace, and then we look at some of the macro factors and price accordingly.

The next question comes from Erinn Murphy with Piper Jaffray.

You talked about sales guidance throughout the year as showing some steady improvement.

Can you just speak a little bit more about what you see are the drivers of that improvement in the back half of your fiscal year?

And then just clarifying, Jane, I think you also said in the guide, half of the sales declines are from brand and distribution exits.

Can you just refresh the thoughts on what percentage was Denim & Supply off-price pullback versus wholesale pullback?

Sure.

Let me just -- let me step back from the components of your question.

As we move through the year, I expect sequential improvement in both our wholesale business as we start to overlap some of the quality-of-sales initiatives that we started and move into full-price selling.

So I expect that to improve pretty much sequentially through the year.

I do expect the fourth quarter in our businesses, and largely in North America, to be better as we'll benefit from Easter in the fourth quarter of FY18.

And equally expect our retail comps and overall sales to move to be sequentially better as we move through the year.

As I mentioned, most of our work in international, we've gone through the majority of our work, and I expect international overall to move -- to be moving into positive sales growth territory as they -- as we move through to the back of the year.

E-commerce, where we really did the bulk of our work in the fourth quarter, and we have a significant amount of quality-of-sales work left to do in FY18, will be a pressure point as we move through the year.

And then just in terms of the comment on Denim & Supply, we are exiting Denim & Supply through the -- through all 4 quarters of the year.

As we announced, Denim & Supply, we did execute spring shipments in FY17.

So that pressure will be through the 4 quarters of the year, and it is about 200 basis points of pressure overall for FY18.

The next question comes from Laurent Vasilescu with Macquarie.

I wanted to follow up on the wholesale channel.

Jane, last quarter, you provided some very helpful metrics to quantify the decline in wholesale revenues, particularly around the Way Forward Plan and the reductions in the value channel.

Can you provide those metrics for the fourth quarter 15% decline?

And then secondly, with the new reporting structure, how should we think about the changes year-over-year for North America, Europe and Asia revenues in FY18?

Laurent, could you repeat the second part of your question about Europe and Asia?

Sure, yes.

With the new reporting structure, how should we think about those changes year-over-year for -- in revenues for North America, Europe and Asia in FY18?

Sure, got it.

Thank you.

So in terms of our overall wholesale business, what we saw as we moved into the fourth quarter is we continued with about a 20% pullback in the sales of our off-price channel.

And as I mentioned, that is work that we'll continue to do and will continue throughout FY18.

Our objective is to reduce the percentage of sale that off-price wholesale represents to our total wholesale business.

And then as I think about the new -- as we think about the new reporting segments, Europe and Asia, as we move through FY18, Asia in particular, should have -- will be moving through store closures in the first half but moving into growth in the second half.

And about a similar shape for Europe, with more pressure in the first half but moving into growth year-over-year in sales in the second half.

The next question comes from Mr. Brian Tunick with RBC.

I wanted to -- curious on how we should be measuring inventory as we move through the year, particularly in the wholesale channel.

Maybe just give us some idea of the metrics we should expect.

Obviously, inventory is down sharply right now, but how should we be thinking about that the couple of quarters?

And then any update on the number of remodels of shop-in-shops planned for this year inside your wholesale partners?

Certainly.

So as you think about inventory as we move through the year, we are continuing our work on overall inventory.

And you will see inventory in the first half declining about -- in the 20% range.

As we pivot into inventory orders that are more oriented to FY19 demand, you'll see inventory down in the low double digits in Q3 and then starting to align with overall sales in Q4.

So again, inventory first half in the 20% range, second half should average out to -- down in the high single-digit range.

And then in terms of...

Shop-in-shops.

Overall shop-in-shop remodels, we're still working through the plan on remodels.

You will see us targeting some high-profile, high-traffic doors in wholesale for overall remodels.

And then in Asia, you will see us doing some -- and Europe, you'll see us doing some of the corner refreshes in our wholesale business.

The next question comes from Michael Binetti with UBS.

Just 2 quick ones, and I apologize if I might have missed it.

But the guidance for first quarter, I'm just trying to -- it seems like you gave a pretty clear picture on the revenues, but the -- but it seems like the implied guidance is for the gross margins should be up pretty significantly.

And I know there's some noise from adjustments in the prior year.

If you wouldn't mind helping us just to fine-tune approximately where you think the gross margin versus the SG&A lands in our guidance, and I apologize again if I did miss that.

And then secondly, you've spoken a little bit about the off-price channel and continuing to pull back on it.

But as you kind of just step back and say, there aren't many clear channels of transaction growth in the U.S. right now.

One of them is obviously the Amazons of the world and the e-tail -- native e-tailers.

But also, off-price is going to continue to be building stores here.

I mean, you've given us a lot of detail about how you're pulling back kind of because you thought you were over what would be an equilibrium point.

But how do you think, I guess, strategically about what the right amount of product is to have in that channel going forward versus having too little exposure there to growth that a lot of consumers consider to be a primary channel of retail?

I guess that would be my questions.

Yes.

Let me answer the last part of your question first, and then I'll give you some clarity on Q1.

We do view value wholesale as a channel that is -- that serves a certain segment of consumers that they're excited about the treasure hunt aspect of that channel, and we recognize that.

We haven't said we're exiting that channel, but we are rebalancing it.

And we're rebalancing it both in terms of the amount of product that we sell through that channel and the types of product that we sell through that channel.

So you will see a decline as a percentage of our total wholesale business throughout FY18.

Going forward -- and then moving forward, you'll see a slightly different mix of product, but you'll still see us serving that consumer base but on a less penetrated basis.

And then your question in terms of overall gross profit.

We do expect margin expansion -- gross margin expansion in FY18 in the first quarter.

We haven't given specific guidance, but I would expect that the overall margin expansion should be about similar to what you saw as we exited the fourth quarter, similar to slightly better.

The next question comes from Matthew Boss with JPMorgan.

Great.

So your 9% to 10.5% EBIT margin guidance implies contraction at the midpoint versus I think in the past, you talked about constant-currency expansion in the forecast.

I guess any changes you're seeing in the apparel backdrop, larger picture?

And can you just lay out the variables that drive that 150 basis point range between -- just between the top and the bottom of that EBIT margin guide for this year?

Absolutely.

So as we look -- as you look into FY18, there are a lot of factors in play next year.

Clearly, we've got a rapidly changing consumer environment, and we have some significant change internally.

So we've chosen, number one, to continue to work on building the foundation and rightsizing our business to a healthier base, notably in e-commerce.

We need to have a coherent price strategy across the region.

We can't lead -- be leading pricing down, and so we are leaning in to that price coherency in our e-commerce business, notably in North America.

With that said, we still have a consumer-facing strategy that's still evolving.

And we've left ourselves some flexibility to roll out product, marketing and store concepts, notably in the second half, which would imply a wider range of guidance on overall SG&A growth, notably in the second half.

Also, in the second half, we begin to lap some of the aggressive SG&A cuts that we took in FY17, and that's part of that variability as you look through the year.

So I'd say, we've got -- overall, we are leaning in to some of the pullback in e-commerce; that's causing some sales volatility relative to our previous guidance, and we are leaving ourselves the flexibility on the SG&A line to plant important investment seeds for growth.

Those are the 2 areas that give us a guidance range for FY18.

The next question comes from Ike Boruchow with Wells Fargo.

Just real quick, so the $370 million in charges, I'm just curious, how much of that is cash?

And then for -- embedded in your fiscal year top line guide, can you just give us a little bit more color in terms of what's embedded on comp?

I'm sorry if I missed it.

And then within that, your digital expectation as well as the store comp expectation.

Sure.

Okay, so why don't I start with our expectations in terms of guidance?

The -- we expect mid to high single-digits global retail sales and comp decline.

We expect wholesale to decline in the mid-teens globally, and we expect e-comm comps to decline in the mid-teens globally.

Cash.

And then -- oh sorry, yes.

In restructuring, of the $370 million of Q4 restructuring charges, approximately $120 million was cash.

The next question comes from Jay Sole with Morgan Stanley.

Jane, you talked about why Patrice is the right person for the job.

Can you just talk about how the decision-making process will take place at the company going forward between Mr. Lauren, Patrice and yourself?

Sure.

So first of all, I'd step back and say that we have a very capable and seasoned senior team.

So it's not just Ralph, Patrice and I. It's an operating committee of seasoned executives that we all play a role from the regions to the functions, and we have operating committee meetings weekly where we address the performance of the business and develop strategy.

We also work in concert -- Patrice will work closely as will the operating team in concert with Ralph as we put in place the strategy for the consumer-facing part of our transformation.

And that would be specific to marketing, to products and to store design.

Our final question comes from John Kernan with Cowen and Company.

Just want -- Jane, you talked a lot about efforts with some of the pure plays internationally: Zalando, ASOS.

Just wondering what your strategy is with Amazon; the brand's distributed fairly heavy through third-party distributors right now on Amazon.

Just wondering if there's an opportunity to take it more direct.

And then my follow-up question is -- there's obviously a lot of pressure on all the global apparel brands from a margin perspective.

I'm just wondering if you're still comfortable with the mid -- long-term mid-teens operating margin target for the company.

Yes.

Let me start with your -- the last part of your question.

Clearly, improving operating margin and getting to a mid-teens operating margin is still our goal, and we are working tirelessly on that.

I think given the change that we have in the environment and the changes that are occurring internally, the big question for us is timing.

I think it's a question for everyone.

But certainly, getting back to higher operating margin and doing that as quickly as possible is Patrice's goal, it's my goal, and it's the goal of the company.

And so we'll give you more visibility in timing as we move through and as we look through these initiatives and see their performance.

And then the first part of your question in terms of Amazon and other pure players, this is a dynamic marketplace.

The consumer is changing.

The digital ecosystem is changing.

And as you've seen with our efforts that have been very successful on sites like Zalando, we're looking at all opportunities.

And that'll be a big part of what Patrice will do when he comes in, in concert with the senior team.

So we're open, we're looking, but these are big strategic issues, and we'll want to do them in partnership with our new Chief Executive Officer.

So with that, I want to thank you for joining our call today.

I look forward to speaking to you -- with many of you later on today and throughout this quarter.

And I especially look forward to talking with you next quarter when Patrice will join me on this call.

So thank you.

Ladies and gentlemen, that does conclude your conference for today.

Thank you for your participation.

You may now disconnect.