威富公司 (VFC) 2002 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to VF Corporation's First Quarter Conference Call.

At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time.

If anyone should require assistance during the conference, please press star, then zero on your touch-tone telephone.

As a reminder, this conference call is being recorded. I would now like to introduce

your host for today's conference, Miss Vanessa Schwartz at FRB. You may begin, Miss Schwartz.

Thank you for participating in the first-quarter conference for VF Corporation.

You should have all received a copy of the press release issued earlier today. If you did not, please contact Thomas Walsh at FRB at 212-445-8459, and he will send one out to you and confirm your name on the fax or e-mail list.

Starting our call is Mr. Mackey Mcdonald's Chairman and Chief Executive Officer of VF Corporation.

Before we begin, I would like to remind everyone that certain statements included in today's remarks, and in the question-and-answer session may constitution forward-looking statements within the meaning of the Federal Securities laws.

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

Important factors that could cause the actual results of operations or financial conditions of the company to differ are discussed in the

documents filed by the company with the SEC. Now, I would like to turn the call over to Mackey. Mackey?

Thank you, Vanessa.

Good afternoon. With me today are Chief Financial Officer Bob Shearer, and John Schamberger, Eric Weisman, Terry Lay, and George Derhofer.

We're pleased with our balance sheet management, and with our year. Cash and cash flow were up strongly, while debt and inventories are down. We remain cautious about the outlook for apparel sales overall, but we're encouraged but performance in the quarter and have raised our earnings outlook accordingly.

We had a good quarter in many respects, although we recognize that the carry over of non-recurring charges coupled with an accounting change related to goodwill is adding a lot of complexity in the presentation of our financials this year.

We've done our best to break out these pieces for you, and give you a clear understanding of how business on an apples to apples basis looks.

Bob Shearer will review these numbers in a moment.

I would like to make a few comments about our businesses. Inventories of retail continue to be well controlled, even a little bit light in some cases. But we feel this is an appropriate response to what continues to be a very mixed-setting environment.

Inventory management continues to be an area of high focus with VF, and our inventories are in great shape across the board.

If consumer demand picks up, we may increase inventory in a response, and we're in a great position to take advantage of any increase in the market. Second in terms of channels of distribution, we're seeing the mass channel and the stronger players in the change continue to gain shares based on superior price value product offering and cautious spending by consumers. Mass channel represents about 40% of our total domestic sales.

I will spend a few minutes to talk about what we're seeing in each of our core businesses. Sales in our core businesses were flat or down, again, reflecting overall industry conditions. Industry unit sales of both jeans and intimates appear to be running down slightly. Intimate apparel, our data indicates that we continue to gain share in all channels of distribution. Those of you who heard our recent lunch with VF session on our intimate business received a good update on a new products initiative including the [INAUDIBLE] Bra, Special FX by Lily of France.

Tommy Hilfiger Oxford, and Envy by Vassarette. We plan to increase our marketing investment by winners as [INAUDIBLE] Illumination Bra, and Lily of France X-bra this year. A big addition is the consolidation of Best Form and [INAUDIBLE] Fair Intimates.

I am pleased to report that we're on track to complete this project by mid-year 2002. We expect to realize significant cost savings this year and next.

As you know, we have had difficulty obtaining accurate share information for jeans wear, but we believe we continue to hold share despite continued price and competition.

We've taken selective price reductions, a strategy which appears to be paying off. And, of course, we are continue to introduce new products into the channel and are significantly increasing our marketing investment. Our latest initiative is Wrangler Five-star Denim made of premium fabric which we're in the process of rolling out to [mass] customers.

Our primary thrust will be behind our Riders brand where ware's introducing a variety of New Fits.

This focus will be on maintaining the momentum behind Lee Dungarees which are targeted to young male and adult consumer.

Our Buddy Lee campaign has been very successful in creating consumer irregular [anything]. And we'll continue to invest behind this campaign in 2002. We'll continue to establish lee as a market leader in performance fabric, and feature innovation with the introduction of Lee Performance khakis which offer stain-resistant properties that won't wash out.

Our [INAUDIBLE] jeans business continues to do very well. In fact, if you exclude the effects of currency sales, we're up 8% in the quarter. Most markets are showing modest growth in the jeans category.

Innovation in terms of fabric, fit, and finish continue to be the primary driver with basics trending down. We're continuing the rollout of Lee 101, a premium-priced fashion product to additional 200 retailers bringing the total to 600. The media spin behind the Lee brand has increased significantly with [INAUDIBLE], MTV, and specific support in the UK and Italy markets. And our Wrangler brand there is extensive growth in our retro product initiative.

Wrangler remains the primary growth vehicle. We'll concentrate this year on adding women's jeans and tops. The outdoor business continues to build momentum for us. Spring season sale through the north-based brand has been strong in North America and in Europe. New product initiatives have driven fall pre-season orders up 15 to 20%.

In March we opened the first of our new prototype retail stores and plan to announce additional retail openings later this year.

In Jansport we're concentrating on new colors to drive more business outside of the Back to School period. This year will start the debut of Eastpak's new advertising campaign in the US. In Europe, Eastpak remains the brand of choice for teenage consumers.

We have a lot going on in our image wear coalition including the private label business and the integration of operations in the national [INAUDIBLE] which are proceeding on plan.

Our big idea in image ware is fully develop our capability as a one-stop shop for customers. Sales were ahead of plan in the first quarter, although below last year's levels due to business exits, and a sluggish job environment.

The active sports business is ahead of plan. We're encouraged about initial bookings, and the potential for a new exclusive agreement to produce and market apparel for the NFL. Our image wear business are generating higher margins, and will result in a substantial growth and return on capital.

Finally, the play ware area continues to be difficult. We're seeing good response to our launch of Kids-Proof by Healthtex.

That's a brief overview of our business. As we've stated, we continue to look for acquisition opportunities to add new brands, research new consumer segments, and expand into new geographic areas.

Our search remains focused in jeanswear, intimates, and outdoors where we have strong brands coupled with excellent returns on capital. I will turn it over to Bob who will review the quarters financial in more detail.

Thank you.

Good afternoon, everyone. I will start with the discussion of our earnings in the quarter in the various components affecting earnings. You will recall previously forecast, the 10% to 15% decline in earnings per share in the first quarter, compared to 67 cents reported last year.

That estimate excluded nonrecurring items related to previously-announced restructures, as well as the write-off of goodwill. It also included an eight-cents per share benefit from the absence of goodwill expense. Due to better than expected margins across most of our businesses about, adjusted earnings per share, excluding the nonrecurring items came in at 70 cents a share, or three cents above last year, and well ahead of estimates.

The net cost related to restructuring activity in the first quarter was considerably less than expected. In fact, on a net basis, the impact was only one-cent per share. The press release includes a summary of these actions,. In other words those pieces that nets a penny per share. The impact of the business exits was much less than expected, and, in fact, netted to a positive number, including earnings from the exited businesses. Because of these businesses that they'll ultimately be reported as operations, we felt it important to include earnings from these businesses and gains on any sales of assets from our adjusted earnings total.

Accordingly, especially because of better results at Jansen in the first quarter, the effect of the restructuring on a net basis was small.

In terms of looking forward, we previously indicated that it would cost us $15 million to exit our private label and jansen swim wear businesses.

Based on the first quarter result, the next effect of the exits should be less. Ing their as stated in the release, margins in almost all of our businesses met or exceeded our expectations. Sales were stronger than anticipated particularly in domestic jeans, image apparel, and imagewear businesses. Because improvements we've made in cost structure, we got great leverage from the higher sales. As you know, that's right in line with our guidance, and that we expect to see good profitability from any sales pickup because of the aggressive actions that we've taken looking further they P&L, the improvement of gross margins from 38.4% to 34.7%. Operating expenses increased from 23.2% to 21.1%.

It's important to keep in mind that these numbers include the results of those businesses being exited which despite the favorable results from expectations pull the overall comparison of profitability down.

They also include restructuring costs. That's why we provided in the release an apples to apples operating margin comparison [INAUDIBLE] that takes not only the restructuring and business structures, but the change in accounting for goodwill expense as well. Adjusting both years on that basis, operating margins increased from 11.3%, to 11.8%.

Again, once we've exited the knitwear, and swimwear.

Business completely, which is expected by the third quarter, we'll report them as discontinued operations and that should make our discussions easier. So then, we'll continue to provide a breakout of the nonrecurring item on both the dollar and per share basis. The change in other operating income reflects the absence of goodwill amortization expense. A change in the accounting wills for goodwill eliminates annual expense of $36 million. Benefiting earnings by 32 cents per share in 2002, compared to 2001. Lower interest expense reflects lower net borrowings, while the decrease in the tax rate is impacted by a number of factors, including the elimination of goodwill amortization which was not deductible, and a lower tax rate related to foreign earnings.

Now, let's move to the cumulative effect adjustment related to the accounting change. As you know, this adjustment relates to FAS Number 142 that requires all companies to change the way goodwill is accounted for.

The amount recorded is the cumulative effect, or the catchup adjustment of adopting the rules.

The amount reported is within our previous guidance. This is a one-time, non-cash charge. As we said in the release, it has no effect on our ongoing operations.

Moving to our balance sheet, our inventories are down by 305 million from a year ago, which represents a reduction of 27%. Debt is down $400 million, and we still added more than 125 million in cash over last year's balance. Cash flow from operations for the first quarter reached 131 million, which is the highest level recorded in any previous first quarter.

We've been highlighting since last November our focus on return on capital, and our goal of 17%. We believe our progress towards this goal is on track, and we should see considerable improvement in a return this year.

A return on capital should improve to about the 15% level this year, again, excluding nonrecurring items.

Finally, in terms of our share repurchase program, we repurchased 1 million shares during the quarter, and expect to continue that rate throughout the year absent any significant acquisitions that might require an adjustment to the rate of buy-back.

In terms of our guidance for the year, we're obviously very encouraged by the first-quarter results. Using $2.68 as a base for 2001 earnings, which excludes restructuring charges, we noted that we expect earnings per share for 2002, again, excluding nonrecurring items, to be up approximately 15%. And if you exclude the benefit from the elimination of goodwill amortization from the comparison, earnings would increase by 5% in 2002.

This compares to our prior guidance of being flat to up slightly. In the second quarter, earnings per share excluding the nonrecurring items are expected to increase by 5% over prior year levels. And now I will turn it back to Mackey.

Thank you, Bob. That concludes our prepared remarks. We now would like to open it up for questioning.

Thank you, Mr. Macky McDonald.

If you have a question at this time, please press the 1 key on your touch-tone telephone. If your question has been answered, or you wish to remove yourself from the cue, please press the pound key.

If you are using a speaker phone, please lift the handset before asking your question. One moment please for the

first question. The first question comes from Noelle Grainger of JP Morgan. Please proceed with your question.

Hi, good afternoon.

Hi there.

On the margins, you indicated that they ran ahead of plan for most segments. Was there any segment that really lagged your expectations, and were they -- how did they compare to a year ago?

No, there were no segments that lagged expectations significantly at all.

And compared to a year ago, I mean, other than what's

reported, I am not quite sure what you are getting at there.

Well, from a trend perspective, obviously overall on a consolidated basis your growth margins were up quite nicely, better than I had expected, and I am just curious were they up year-over-year in all segments? And, you know, what is your outlook had you look at the gross margin expansion opportunity for the year?

Yeah, generally they were up year-over-year in almost all segments.

That's correct. And relative to the outlook for the year, again, we're not, as you know, what we're saying is we're in essence holding on to the improvement in the first quarter.

We're still expecting the last three quarters to be on our initial guidance. So that would imply a slightly

improved -- a slightly improved margin from the original expectations.

I think your original -- just to make sure I am on the right base here. You had given operating margin and expectations of 100 basis points expansion; is that right?

That's correct.

And is that -- do you see that [INAUDIBLE] is that kind of equally contributed to? Is it contributed to by gross margin and operated efficiencies?

It is. I would say a little bit more on the gross margin side. That's where a significant piece of the improvement was in the first quarter.

Okay.

Great. That's helpful. You did a really -- you continue to do a nice job on inventories.

I am curious -- obviously dependent upon what the consumer environment does -- but I am curious how you are looking at where you plan to take your inventories over the next couple of quarters as we move through the year, and at year-end?

To speak to the next quarter, in the second quarter, we would expect right now to see a similar type of decline as we saw in the first quarter.

In other words, it's around $300 million reduction. But I should say that, again, depending on overall business conditions, if we see some strengthening in the top line, those inventories could move up a bit.

In other words, we may not see the full $300 million of

reduction.

We're still in great shape in inventories at this point.

We've got the right kind of inventory. If we should see retail sales pick up, then obviously we will respond by increasing our inventories in order to take advantage of it and move the top lineup.

Okay.

Great. In the press release, you alluded to in the domestic

jeanswear business inventory adjustments, and reduction by customers. I am hoping you could elaborate a little bit on that.

I think, this is John -- this is John Schamberger.

We had inventory reduction in jeans to put in capri and shorts.

And we've seen that with a number of accounts especially in the middle tier. Probably the hottest single item in the area to date.

And we're actually the jean inventory is coming down, and the capri inventory is going up. And we participated in that both in Lee and the Rider, and Wranglers in the mass.

But we should see a pickup in inventory at retail about the latter part of the second

quarter. The inventories will be more in line.

Now, with that adjustment did it happen toward the end of the quarter, or did you see it start to materialize earlier in the spring?

I would say earlier in the spring, the end of January or so.

And are you able to participate in -- I assume you are saying non-denim capri?

Denim capri, and we're participating in all of that especially in the Lee line and the Riders line.

Okay.

And, Bob, I was hoping you might be able to give us an initial comment on your North

Faced store and how that's performing. I know it's early.

It is early.

It's been only opened for a month-and-a-half. So far so good. In a quick summary, it's performing at expectations.

But a little early to draw strong conclusions. All along as we said, we want to get these stores opened, evaluate their performance, and move forward from there.

Okay. Thanks. I will let someone else jump in. Thanks very much.

Thank you. The next question comes from Jeffrey Edleman of UBS Warburg. Please proceed with your question.

Thank you. Mackey, I think it's impressive the way that you've improved the liquidity raise cash, brought the inventories down, and you are on the lookout for making acquisitions.

But I was wondering, you've got a lot of strong brands. We've seen very little attempt of recent looking to extend

those brands to other categories. Is there a potential to do that, or are you land-locked with the existing categories you've got now?

Well, thank you for those comments, Jeff. And we certainly feel like the best investment, the best return we can get on an investment is to extend existing brands in new consumer segments, and new product categories. And we focused heavily on extending our brands in the new consumer segments. So an example of that is, the lee brand moving into the dungaree programs, targeted to young men.

It's been a good growth initiative for Lee, the Buddy Lee advertising program has supported that.

We've seen the same in Riders moving into the mass Missy category, which is a weak category.

We're seeing that in intimate apparel brand as we target the large-sized consumers. We have specific initiatives there, and also the young consumers. So weave a lot of initiatives in our existing brands against new consumer segments. We also have targets in the if you product categories, I can list examples from just about everyone of our brands, a few would be Jansport moving into the luggage, North Face expanding into the footwear category, and more into the sports wear category, and we'll continue those as well. I would say that that's been an increase instance for us, and it's one of the reason why we're increasing our marketing investment against our core brands, is to allow us to communicate these new initiatives against new consumer segments and new product categories.

If I could carry this one step further, maybe John could answer this. Can the Lee and Wrangler brands go beyond bottoms? Or is that really their strength and niche?

Well, for example, in Wrangler in our western wear business, we have the number one brand in western shirts with the wrangler name in that particular segment of business.

Every time we have some other areas, the brand can't carry as much as of a premium as the bottoms.

But we keep continually work

on what we can do for the shirts and the sports wear category.

Okay. Great. Thank you.

Thank you. The next question comes from Tom Lewis of [INAUDIBLE] and Associates.

My questions were already answered.

But are you planning anymore of those Lunch with VT meetings? I would be particularly interested in hearing about your outdoor segment?

Yes, Tom, we are.

We haven't published the schedule yet. The next one we'll be doing is our international jeans business. We should have a date set for

that in the next couple of weeks, and probably follow up that with outdoor.

Okay. Thank you.

Thank you. The next question comes from Dennis Rosenberg of Credit Swiss First Boston.

Hi, guys.

Hey Dennis.

In the press release, you talk about U.S. jeans comparisons expected to improve as the year progresses.

Could you quantify how you see the second, third, and fourth

quarter comparisons versus a year ago?

If you look at it, the comparisons obviously last year versus -- we did great last year in the first quarter.

And we see the comparisons in getting easier in the second, third, and fourth quarter of this year.

We're planning conservatively, like the whole corporation is doing. We're saying flattened down slightly for the rest of the year.

Again, it's a retail picks up, we'll take advantage of that.

Would you expect it to be down slightly in the fourth quarter, or do you think that will turn up?

Down slightly in the fourth quarter. But we have a number of marketing initiatives in place with our pricing of Wrangler and Lee that we really feel good about the third and fourth quarter, if the consumer confidence comes back, and retail comes back, we'll be prepared to take advantage of that.

Okay. On the North Face, your margin fully recovered, or is there still more upside?

There is still additional upside, Dennis, in the numbers. They have recovered significantly, but there is still some upside.

Where do you see that upside from here?

Where?

Yeah. What are the remaining issues?

Well, to some extent, they are volume-related. We still believe we have the capacity to produce more sales, and we're still putting investment into product development, and those kinds of areas, and expect to see the payoff looking forward.

Okay.

Maybe this reflects conservativism, but, again, in the press release the statement is that you are more optimistic about prospects for

the rest of the year. If that is the case, why would you leave riders unchanged for the rest of the year?

The fact is that it's just early in the year.

That's what it comes down to. We have a good quarter behind us, and, you know, in terms of our plan for the business, just as John just said, we're just going to continue to take

a fairly cautious approach relative to what we see at retail and other factors.

We show on the first improvement internal generated improvements from the actions we've taken.

We're still looking at a retail climate that's, I would say, somewhat cloudy.

There is good sign of the times, but there is continually shakeout in some other areas. That's the reason, Dennis, we continue to be conservative in our estimates for the year.

Okay.

And just evaluate the overall retail environment.

Final question.

Maybe I am getting the arithmetic wrong, but you talk about a 15% gain from prior year 11.

So 268 times 115 is 3.0$8. But a 5% gain if you add back goodwill, and $3 plus 5% is 315. So which is the right number?

Use the 5%. We're aware of that. The math isn't exact. Again, the annual look is just a longer-term view. But, yeah, take the 5% view is fine.

Right. That's right. And that's what's really implied by the first quarter. And that's why I am saying that. The first quarter pickup over estimates, we implied a number about in the range of the 315.

Okay. Great. Thank you.

Thank you.

Again, ladies and gentlemen, if you have a question at this time, please press the 1 key on your touch-tone telephone.

One moment please. The next question comes from Margaret Major of Goldman Sachs. Please proceed with your question.

Hi.

Just a quick question. I wanted to inquire a little purr they are about the North Face. Did I hear correctly that you are seeing double-digit order

increases for the fall season?

We have, that's correct.

Can you just talk a little bit about how the brand has achieved that especially in light of the fact that we just came out of a very mild winter season, and sort of what we've been hearing from outdoor folks is that there is a reluctance to step up orders in light of that.

That is absolutely true.

The North Face, however, has been performing better than overall industry averages. So I think what we're seeing is that performance being reflected in the order patterns. The other side, Margaret, is that there is gaining confidence from the retailer side relative to the North base, our ability to shift, also newness of product, all of the factors are entering into the increases we're seeing.

Is there anything going on with price-tiering, or are you sticking to the high end of the outdoor market? Or has there been any addition of customers or anything of that nature?

No, no, we haven't changed distribution at all.

You know, in terms of the high end, we're still at the high end. So, no, no significant differences. The only thing I would add there is that for spring, spring, for example, we had a few more products that are at a bit more moderate level. And that's because of just different products, more than anything else. So a few more products, more accessible price points, but in terms of the higher-priced point product, the overall comparisons are pretty much where we've been.

Okay. Thank you very much, Bob. We'll talk to you soon.

Thank you, Margaret.

Thank you. We have a follow-up question from Noelle Grainger of JP Morgan.

Hi. To follow up on the North face, Bob, you just mentioned some more moderately-priced products. Can you give us any sense of kind of what -- is that the sports wear product, or is it outerwear as well?

Really, what it is is it's product that's more geared to the spring. What we've done in the past is we've generally used our fall product in spring, in terms of outerwear, as an example. What we've done is developed new product that are more of a spring wake outerwear. In other words, it's product that could be used for spring skiing, backpacking, hiking, and a little bit different product than you might see in the fall. And that's really what I am referring to.

Right.

Okay. Thanks. And, John, on the jeans business, hoping that you could give us a little bit of an update on kind of the pricing environment, what's going on with the consumer, and the retailers on the value equation, using private labels gaining ground there.

Has that gotten tougher as, you know, in the first quarter? Is it not changed materially?

I would say that it's still pretty tough.

But I would say that it's upper. If you look at price in some of the jean products coming from the Far East, actually the pricing for Back to School and holidays has gone up a little bit.

So we don't expect to see private labels going down anymore. So we see a leveling out of private-label pricing. And we've taken selected price decreases in some of our products and some of our programs overall, you know, anywhere between it could be 25 cents, 50 cents, up to 75 cents depending on the program.

Overall it would be between 1 and 2% of our business. So, you know, we think we opposition well now.

In the fourth quarter of last year, that's proving to be successful. February of this year we've taken some price decreases in our Riders and Wrangler female plans, and that seems to have had nice increases there.

So going forward, we think we're well positioned from a private standpoint versus private label or any other competitor out there. We do think we have great marketing programs like Mackey mentioned like Lee Dungarees, and the Missy products and Missy consumer.

In Wrangler that Five-Star Denim will be premium fabric at low prices.

Back to School will be gangbusters. Western wear business, we've got that 20-X program, and that continues to grow both in

jeans, and in shirts. We really feel good in terms of our pricing going forward, and also on marketing programs going forward.

Thanks, that was helpful.

George, maybe you could weigh in on the image wear business, and specifically how you are seeing trends currently in

kind of the corporate side of the business. It seems to remain pretty weak. Have you seen any turn there at all?

Yeah.

I would say that the -- as best we can say is that we're seeing that it's bottoming out. And what we're seeing in our business on that side is run rate of sales dollars per month to be relatively stable for the last six months or so.

Still running negative comparisons to the prior year, but our expectation is that those dollar sale also remain relatively constant for the rest of the year, but get increasingly better on a comparable basis.

So what we're seeing is the economy I think is everybody reading is somewhat mixed. It's not being led, however, by jobs. We think we're in a great

position to take advantage of that when that turns, and then hopefully see an uptick in our business when that occurs.

Thank you.

Thank you. The next question comes from Jennifer Eagan of Solomon Smith Barney.

Do you have any market share numbers you could share with us?

You know, we've had issues with the market share numbers over the years.

I can tell you we just got some information, for the January/February period of this year.

It does say the total market in units and markets is down between 2 and 4%. It does show, though, that our VF brand have actually gained in share from 20.1% to 21.1%, and it's basically those gains are concentrated in Lee and Wrangler.

And, again, there's only two months of data. You have to use it as a direction, and not exact.

Okay. My second question is, in 2002, which segments do you expect to have operating margin improvement in?

Actually, the -- for 2002, we expect to see improvement in just about across the board. In all segments.

Okay. Thank you.

Thank you. We have a follow-up question from Dennis Rosenberg of Credit Swiss First Boston.

What were the sales of the businesses being discontinued in this quarter?

Hold on just a minute, Dennis. The sales in the first quarter were 61 million. They were down 25 million from last year.

61 versus what?

61 versus 86.

And what are you anticipating in the second quarter?

I don't have that in front of me.

But what I can tell you is that the the difference will be greater. In other words, those

businesses will continue to decline at a faster pace.

Yeah. Go ahead.

The question is, is 25 cents still the right number, or should that be a lower number?

I would say there is a bit of upside to the 25 cents.

And are you going to provide quarterly segment information like you used to do on introducing a new segment?

We do provide -- right. We do provide quarterly segment breakdowns in the 10q, of course.

We won't get that today?

Nope.

Okay. Great. Thank you.

Thank you. The next question comes from [Sailor] Wallace Of Solomon Smith Barney.

Good afternoon.

Just one question. In terms of the impact from the K-mart closing, because I think the last time we spoke K-mart hadn't actually disclosed how many stores they planned to close.

Now that that's been announced, I am wondering what is assumed in terms of your K-mart

business in your current guidance?

Well, we feel like we've built in an impact of those closings into our plan, and actually with fewer closings than we anticipate.

So we may have been a little conservative. We felt like we added the actions that they've taken into our plans.

Okay. Thanks very much.

Thank you. At this time, Mr. Macky Mcdonald, we're showing no further questions. I am going to turn the program back to you.

Well thank you for joining us.

As you can see we're highly -- we've taken aggressive actions. We're making the investments to get the top line moving. And when retail shows lines of

five life, we remain cautious in our planning. But very optimistic about our results for this year. Thanks for being with us.

Ladies and gentlemen, thank you for you for your participation in today's conference.

This concludes the program. You may now disconnect.