Vince Holding Corp (VNCE) 2016 Q2 法說會逐字稿

Good afternoon. My name is Christine and I'll be your conference operator today. At this time I would like to welcome everyone to the Vince Holding Corp Q2 2016 earnings results conference call.

(Operator Instructions)

Thank you. Jean Fontana of ICR, you may begin your conference.

Thank you, and good afternoon everyone. Welcome to Vince Holding's second-quarter FY16 earnings conference call. Hosting the call today is Brendan Hoffman, Chief Executive Officer, and Dave Stefko, Chief Financial Officer.

Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements which are subject to risks and uncertainties that could cause actual results to differ from those that the Company expects. Those risks and uncertainties are described in today's press release and in the Company's SEC filings, which are available on the Company's website. Investors should not assume that the statements made during the call will remain operative at a later time. And the Company undertakes no obligation to update any information discussed on the call.

In addition in today's discussion the Company's presenting its financial results in conformity with GAAP and on an adjusted basis. The adjusted results that the Company presents today are non-GAAP measures. Discussions of these non-GAAP measures and reconciliations of them to their most comparable GAAP measures are included in today's press release and related schedules, which are available at the investor section of the Company's website at investors.vince.com. After the prepared remarks management will be available to take your questions for as long as time permits. Now I'll turn the call over to Brendan.

Thank you Jean, and thanks everyone for joining us today. Overall our second-quarter results came in as expected. We planned our wholesale business down, with reduced inventory levels in both the full-price and off-price channels. As we discussed in our last call, as part of our transition to our new product line, we planned a significant reduction in shipments of our pre-fall line as we reduced the size of this collection by approximately half. We did see an improved response among our wholesale partners despite lower inventory levels, which is evidenced by a sequential acceleration in sell-through. Importantly, we have maintained our leadership position in the department stores, which gives us further confidence heading into the back half of the year.

Similar to our wholesale channel, our retail comparable sales were impacted by the planned reduction in inventory. The elimination of one of the pre-fall deliveries resulted in a meaningful change in our store presentation. While this was not ideal, we believe it was absolutely the proper thing to do to reset the brand. We also took a more strategic approach to our promotional strategy, both in the wholesale and retail channels, which is having a short-term impact on our top line, but more importantly will help protect our brand.

So far this year we have opened six stores, including our two most recent locations which were opened last month in Fashion Valley and King of Prussia. In addition we are selectively identifying new locations to open in the first half of 2017. We remain excited about the potential for both our existing as well as our new stores.

We did very well during the Nordstrom Anniversary Sale in July, and were pleased with the strong response to both women's and men's. This is an encouraging sign, as this product was the first to incorporate the influence of Rea and Christopher. Over the last few weeks the women's and men's collections from our founders have been hitting the floors. While product was slightly delayed in shipping to our partners due to our distribution center migration, our floors are now set. And we are cautiously encouraged by the initial response. As we head into fall and cooler weather, we expect to get a much better sense of consumer reaction to the product. I also want to remind you that given the timing of Rea and Christopher's return, it will not be until our holiday delivery in the fourth quarter that you will see the on-floor assortment fully represent the look and feel of the brand.

To support the product launch we're working closely with our wholesale accounts. Christopher has been personally visiting our major partners around the country to educate the selling associates and help build excitement around the new line. This has been a true grassroots effort, as we work account by account to insure that the produce is optimally presented and marketed. Our largest partners have been very supportive in helping relaunch the brand, including showcasing us in their windows, on their e-commerce home pages, and double exposing us within stores. We are already analyzing what's working well and using these learnings as we go forward to improve our overall brand experience and identify growth opportunities. That said, our partners remain conservative with their initial buys given the current retail environment, which is what we expected. However, we are being more efficient with our supply chain and maintaining inventory levels that are enabling us to be more nimble and capture additional orders as we see strong sell-throughs.

We completed the transition of our e-commerce site to Demandware in July, and have continued to see strong performance in this business. The site looks fantastic. We now have added functionality which will further enhance our customer experience. We are incredibly pleased with the elevated look and feel on our website, as well as the way that it's translated to our social media outreach as we work to reconnect and re-engage customers with the Vince brand and recapture the DNA.

I would note that the product changeover for fall was delayed a few weeks by the migration to our distribution center, which was not entirely unexpected with a project of this nature. It is largely behind us now. Importantly our infrastructure, e-commerce site and POS system in our stores are now all live. We are still working on upgrading the systems for our wholesale business and back=office functions, and expect these transitions to be substantially completed by year end.

Overall we are where we expected to be as we head into the back half of the year. Our new fall collection is in stores, and we're even more excited for our holiday product which will fully embody the Vince DNA that Rea and Christopher created. We are working hard to support the launch, both in our wholesale business and our retail stores, and are pleased by the reaction from the associates as they have reset their floors with the new product over the last up couple of weeks.

Finally, we are making the necessary infrastructure, operational and strategic investments to support the business over the long term. As we look to the remainder of the year, we believe that we are well positioned to reach our sales and earnings goals. Now I will turn it over to Dave to review our financial performance. Dave?

Thank you, Brendan. The second-quarter net sales decreased 24.1% to $60.7 million versus $80 million in the prior-year period. Our wholesale channel sales were down 32.1% to $39.6 million, which reflected the planned reduction in full-price orders related to the transition of product under our new design team. As we have discussed over the last few quarters we have been selling through the excess inventory and aged product identified last year in the second quarter. This sell-off of product earmarked for the wholesale channel was completed in the second quarter of this year. As we move forward we expect that the flow of product through this channel will be more in line with our desired level of off-price sales mix.

Our direct-to-consumer segment sales decreased 2.8% to $21.1 million in the second quarter as a result of an 18.7% decrease in comparable sales including e-commerce partially offset by the addition of 10 new stores since the second quarter of last year. The decrease in comparable sales was primarily the result of a decline in the number of transactions, which reflected our planned decrease in inventory levels.

Gross profit in the second quarter was $27.4 million or 45.1% of net sales. This compares to $20.8 million, or 26% of net sales in the second quarter of last year, which includes a $14.4 million charge associated with the write-down of excess inventory and aged product to expected net realizable value. Excluding the inventory write-down, gross profit in the second quarter of 2015 was $35.2 million, or 44% of net sales. Excluding the write-down in the prior-year quarter, the increase in gross profit rate for the second quarter of 2016 reflected lower year-over-year inventory reserve adjustments which were partially offset by an increase in the rate of sales allowances p on lower net sales in the quarter.

Selling, general and administrative expenses in the quarter were $31.6 million, or 52.1% of sales. This compares to $27.3 million, or 34.2% of sales in the second quarter of last year, which included $2.9 million of net management transition costs related to executive severance and related costs. Excluding these costs, selling, general and administrative cost in the second quarter of 2015 were $24.5 million, or 30.6% of net sales. The increase in SG&A was largely driven by an increase in store labor and occupancy costs associated with 10 new store openings since the second quarter of FY15, increased incentive compensation costs, and costs for the consulting arrangement with our co-founders as well as other strategic investments.

The resulting operating loss for the quarter was $4.3 million. This compares to an operating loss of $6.5 million for the second quarter of last year. Excluding the inventory write-down and net management transition cost, operating income for the second quarter of FY15 was $10.8 million.

Our tax rate for the second quarter of FY16 was 62.8% compared to 41% in last year's second quarter. The increased tax rate for the second quarter of 2016 was due to the impact of certain nondeductible executive compensation costs. Under our current guidance, we anticipate our 2016 full year tax rate will approximate this level.

Net loss for the second quarter was $2 million, or a loss of $0.04 per share, compared to a net loss of $5 million, or $0.14 per share in the second quarter of last year. Excluding the inventory write-down and net management transition costs, net income for the second quarter of FY15 was $5.2 million, or $0.14 per diluted share.

Now moving onto the balance sheet. We ended the quarter with $21.3 million of cash and $55 million of borrowings under our debt agreements. Our debt-to-leverage ratio at the end of the second quarter of FY16 was 3.4 times on a reported basis. At the end of the second quarter we had $33.7 million of availability remaining under our revolving credit facility. Inventory at the end of the quarter was $34.7 million compared to $45.6 million at the end of last year's second quarter. The year-over-year decrease was primarily driven by more disciplined inventory management, partially offset by the addition of 10 new retail stores since the second quarter of last year. Capital expenditures for the quarter totaled $5.6 million, primarily attributable to new stores and IT migration cost. As of today, including our most recent 2 stores opened in August, the Company operates 54 stores in the US, including 40 full-price stores and 14 outlet stores.

Now turning to our outlook for FY16. We continue to expect total sales for the year to be between $290 million and $305 million including revenues from the six new retail stores already opened this year and comparable sales growth inclusive of e-commerce sales in the flat to low single digit range. Total sales guidance continues to reflect a flat to positive mid-single-digit sales increase in the second half of the year. As Brendan discussed, the full impact of the changes made to our collection by our returning founders will not be reflected until our holiday deliveries, which we believe will therefore have a greater benefit for our comparable sales in the fourth quarter than in the third. We now expect gross margin to be approximately 46.2% for the year due to additional strategic investments, both already made and expected during the second half to support our long-term objectives, the higher rate of sales allowances for the first half, and the lower mix of full-price sales in the first half resulting from lower inventory levels. As a reminder, all of these factors are part of resetting the brand.

We now expect SG&A to be between $128 million and $133 million. As one would expect, SG&A will be impacted by the level of annual incentive compensation costs realized based on our financial results. With this, we continue to expect diluted EPS to be flat to $0.06 per share. Capital expenditures are now expected to be between $12.5 million and $14.5 million due to continued branding investments and the cost associated with our IT migration investment.

This concludes my comments regarding our second-quarter financial performance and outlook for 2016. We will now take your questions. Operator?

(Operator Instructions)

Your first question comes from the line of Erinn Murphy from Piper Jaffray. Your line is open.

Great. Thanks. Good afternoon. I guess the first question on the guidance. From a full-year perspective it does seem like you have a pretty significant acceleration in the direct-to-consumer side of the business in the second half to get to that flat plus guidance. Could you maybe walk through some of your you assumptions, and maybe kind of weave in what you're seeing in terms of the current reads that are giving you that confidence?

Hey, Erinn. It's Brendan. We always knew that the back half of the year was when we needed to see and expected to see the direct-to-consumer improvement. Last year we were tremendous reduction in inventory levels, which carried through the spring season. So just now we're starting to build back up the inventories closer to last year levels. And we'll see the inventory levels finally start to have an increase over last year as we get later into the quarter and back half of the year. And as we've been out-trending our inventory levels all year, that gives us a lot of confidence that with this new product we'll be able to hit those numbers in the back half of the year.

Okay. That's helpful. And then maybe just in terms of the wholesale, you talked about being better aligned with your off-price. Can you talk about where you're at right now as a percent of the total sales, and where do you think you'll be at the end of the year?

Dave can try to calculate those numbers, or we'll get back to you. But I will say that our inventories are much cleaner than they've ever been. It's something that Rea and Christopher, along with developing great product, they've really brought a lot of discipline back to the Company. And inventory management is really top of mind. So we've flushed out at the beginning of the year in Q1 a lot of the old inventory that we were saddled with and that we've talked about. And we've just done a much better job about making sure that we keep the inventories clean. And we started to communicate that to our off-price customers, that we're still going to have merchandise. It's part of the business. But at least in the short term while we reset the brand, it's going to be a less important part of our go-forward business.

Yes, Erinn. It's not -- the mix of off-price business wasn't as -- in the second quarter wasn't as steep as it was in the first quarter, but it's obviously influenced by the amount of that [15 empire] product that we continue to move through and completed moving through in the second half of -- the second quarter. Then if you look at the fact in the second quarter that we pulled back on one delivery, that just drove full-price sales in the quarter lower. So off-price is a higher percentage due to both of those two factors. You get back on that fact that we've talked about in the past, that business being in that 20% to 25% range, or lower from that standpoint. That's kind of the area where we have it projected in our guidance.

Okay. And then just last question from me. On the fall deliveries it sounds like you're seeing a good response at wholesale. I think you said that the sequential rate of it, sell-through has also accelerated in the second quarter. Could you speak to what you're seeing more from a granular perspective from Saks, Nordstrom, Nieman and some of your key accounts as that merchandise has hit the floor? Thank you.

Well, in the second quarter, as I mentioned in my remarks, we did see better sell-through performance with our wholesale partners. This was on a big reduction in inventory. In part as Dave mentioned, we had one less delivery, but we were really pleased with how the trend improved. Still certainly a negative trend, but far outpacing the inventory reduction. Now as we're into Q3, we've just delivered the first couple of deliveries of our new product with fall. It's just really got on the floor last week. And so we're anxious to start to see the customer's reaction. The sales associate reaction has been phenomenal. Just walking some stores again today. Now that we're past Labor Day, and up until today in New York we had a little bit of chill in the air. We're, as we said, we're cautiously optimistic that the customer's going to respond really well to this product.

Great. Thanks for that, and all the best.

Thanks, Erinn.

Your next question comes from the line of Matthew Boss from JPMorgan. Your line is open.

Thanks. So your gross margin guidance was lowered, I think around 80 basis points. Can you just elaborate on the additional strategic investments that you mentioned in the release? And then speak to the overall promotional environment that you're seeing out there, and more particularly, when do you fully lap the change in promotional -- the change in your promotional cadence, and how should we think about that?

So from the strategic investment side, two factors. One, things we've been working on which we talked about, the transition of our warehouse to our independent third-party provider away from Calwood. And then there's some factors of headcount that we've added. And then when we look at the back half of the year, we're looking at things, just from a delivery standpoint, being more efficient in our supply chain, how quick we can get product from when it hits the port onto the shelf, investments in that. Some of looking at supply chain is causing us to look at some investments in leadership which we may make. And then also exit packaging, looking at how we deliver to the customer when you look at our direct-to-consumer channel.

So those are some of the strategic investments. And I think the second part of your question, Matt, we, in our own retail stores, we're up this month against the buy more/save more tier promotion that we had last year that we eliminated in the spring. We're up against the last bit of that this month. After that we have a little bit of a headwind against our own friends and family later in the quarter. But then we've really cleaned up our own DTC channel. So we're thrilled about that.

And likewise, with our retail partners, I mean, they have been terrific about understanding what we're all trying to do with the brand and committed to reducing the amount of promotions we're in. It's very strategic, now that we all know ahead of time where it's going to be and where it's not going to be. And I think we all feel good about the things we've done to support the brand so that it can sell at regular price and doesn't get caught up in all this promotional activity that is, as you know you now, when one retailer's doing it, some others do it as well. So it's a chain reaction that we just needed to end. We feel starting this season you're going to see that clean-up happening.

Great. And then just a follow-up. What's the best way to think about wholesale as we move into next year? Are we back to an even playing field so that we can consider a potential return to sales growth in wholesale? Or is there still consolidation of doors and receipts that we need to think about in the front half?

Well, I certainly hope there's the opportunity to grow again. I think we shrunk it quite a bit and cleaned up the business and -- but that will really be dependent on the performance over the next 6 or 8 weeks as they start to think about 2017. Certainly there are headwinds at a macro level from the department store industry that you all know better than me. But as I've said before, they've all been cleared. There are brands that are winning. A lot of them are taking a bet on Vince right now. So as we can validate that confidence, I think there will be upside opportunity as we get to 2017. But we'll have to give more clarity on that when we speak in the future.

Great. Good luck.

Thanks.

Your next question comes from the line of Ed Yruma from KeyBanc Capital Markets. Your line is open.

Hi. This is Noah Zatzkin on for Ed. Thanks for taking my question. First, as we're seeing increasingly tighter buying in the wholesale channel, has anything changed with how you're thinking about the back half? And I know you mentioned being nimble. How are you planning for potentially chasing if the new product works?

Yes, Noah. I think as we just discussed, we're all aware that department stores are reigning in their receipts. We have pretty good visibility into what the receipts are supposed to be in the back half of the year. So short of performance not being where it's supposed to, we have good confidence and clarity into what the receipt flow is going to look like. We're already -- Rea and Christopher are terrific at being very proactive and are already trying to get reads on the early selling to start to position ourselves to be able to take advantage on chasing goods and doing reorders. And Rea, a part of what she does so well is as she's producing a line she's thinking about where she wants to have some excess fabric and have production flexibility so that she can go and be nimble and chase merchandise. It goes back to what we talked about a few minutes ago, why we feel it's so important to be lean and not be saddled with so much inventory is so we have the flexibility to go after the high margin product that's working.

Okay, great. Maybe just one more. Given the aggressive clearing during the first half in the off-price channel, has anything changed with how you're thinking about full-price selling in the second of half? And I guess what gives you the maintained confidence with your ability to do that? Thanks.

Well, yes. I mean, I think that this is the reset of the brand. The product that's hitting the floor now at full price is Rea and Christopher's first collection of -- since they returned. And going back to the fabrics we used to use and the factories we used to use, and the attention to detail and fit and sizing. So that's what gives us the confidence that what's in the off-price channel won't impact the opportunity to sell to a different customer at regular price and to recapture that customer we used to have that recognized the intrinsic value of Vince at full price. Clearly over the last few years that's gotten away from us as the product has changed.

So this is what Vince is all about. This is the beginning of the reset of the brand. We think it will only get better, as we've discussed on our last calls. The full impact won't be until the fourth quarter when the pre-spring or holiday delivery follows the current fall delivery. Then we will truly have all of the founders' product on the floor. And pre-spring/holiday will give them the full complement of time, luxury of time, to have produced and developed these goods, where fall was a little bit rushed and compressed based on when they came back. And quite candidly is kind of miraculous what they were able to achieve, and the whole team was able to produce that as I said, you're able to see on the floor for yourself now.

Thanks so much.

Your next question comes from the line of Mark Altschwager from Robert W. Baird. Your line is open.

Good afternoon. Thanks for taking the question. Just as we build our models for the back half of the year, obviously a lot of timing shifts year to date with the delivery timing. But can you just help us with the cadence on wholesale, retail and margin trends that are embedded in your outlook, just any big callouts as we look at Q3 versus Q4?

From a standpoint of Q3 versus Q4, I mean, again, we look at Q4 to be the stronger quarter due to waiting for the full collections of Rea and Chris' product to be on the floor.

To follow up on what Dave said, and kind of what I just implied earlier, we did what we needed to do to deliver a great collection for fall (technical difficulties) now. Having more time for pre-spring, we found we were able to negotiate better prices, get better upfront margin, which we're excited about that being the more go-forward pro forma to run our business on. In the back half of the year that gets a little more blended. A lot of these things as we clean up the business, as was asked earlier, is exciting for us because it's more indicative of the go-forward opportunity the brand has, even though it's still a little muddied as we continue to clean up from the last few quarters.

Thank you. That's --

And just obviously as DTC grows with the additional stores and the out-size growth that somebody mentioned -- that Erinn mentioned earlier, that's obviously a higher internal margin. That should help the overall mix as well.

That's helpful. Thank you. And then can you give us some initial views on how you're thinking about SG&A dollar growth beyond FY16? Should we see a moderation in that growth rate, given some of the big projects this year? What are some of the key drivers moving forward?

The key driver's been the opening of these stores, and the SG&A that goes along with opening up all those stores. So we certainly are going to be opening stores in the future, although it will be tough to match how many we just opened. In terms -- when you strip away those expenses, it's our expectation that we'll get efficiencies out of the business. And especially as we get beyond this kind of relaunch of the brand, we'll be able to look for -- to make sure we're allocating our resources appropriately. And also keep in mind in this year's SG&A is an incentive comp number that we haven't -- we didn't pay out last year that we are hoping to be able to pay out this year and have included in our pro forma.

Great. Thank you, and good luck.

Thanks, Mark.

Your next question comes from the line of Jeff Van Sinderen from B. Riley & Company. Your line is opened.

This is Richard Magnusen in for Jeff Van Sinderen. Can you speak more about what you are seeing in terms of early sell-throughs of the fall line, maybe give us a little more regarding what we should expect to see in terms of product content in the holiday season? And maybe more on how that differs from last year's fall or holiday merchandise assortment?

There's not much more I can say on the current selling. As I said, it just got on the floor the last week or so. So it's very anecdotal. Encouraging signs, but far too early to make any overall predictions, other than the fact that everyone seems to be excited about what they're seeing. And the product looks like it's perfectly geared for the fall season as we get a little taste of cold weather. As you go into pre-spring, you just see a continuation of what you're seeing in fall in terms of what Vince is known for. Bringing Vince back to its roots of great knitwear, great pants. A lot of T-shirts in pre-spring that that was a category that the Company kind of let fall off a little bit over the last few years, and Rea was very excited when she came back to get us back in that business. Weren't able to do it for fall, but is a big part for pre-spring. When we say T-shirts we don't just mean basic Ts, although we have those. We mean T-shirts that could be out of great fabrics at $195 that we call T-shirts but are really shirting fabrics that people will wear.

I think you'll just -- the accounts that saw the line are major partners. We're thrilled with the way it evolved from fall, and love the colors and love the seasonality of the product. And we go into market for spring next week. And I think they will continue to be -- have their expectations exceeded, especially also by the value. I think that was a real takeaway as we -- I think I mentioned the last time we started taking the product to selling associates to preview. And there were gasps at the pricing, $695 for an unbelievable outerwear piece or $350 for an unbelievable cashmere sweater. That's what Vince was always known for. It was a -- the intrinsic value was there without the discounting. Those that were big Vince customers in years past really recognized that and applauded that in the line that's being delivered now. And you'll continue to see that expanded on going forward.

Would you be able to provide more detail on your wholesale order book trends and when you think we will see bookings become positive in the full-price wholesale business (inaudible) begin to grow again within this current environment of tight open to buys? And maybe how you're positioning inventory for second half?

Some of that we've touched on. The inventory will continue to be lean, which gives us great flexibility and allows us to be nimble as we start to see what's working. I think I touched on the whole -- our hope for wholesale as we get into next year in terms of being one of the brands that are winning, even in this tight environment, and getting the increases that come with that. But this is all -- as I said, they're seeing -- the customers are seeing spring next week. So that's the stuff that delivers end of January, really into early February. So we'll start to get a better read over the next few weeks on what they're thinking. Again, probably have a better indication once they get some real performance on the stuff that's on the floor now. But hopefully even by next week they'll have another week of early reads that will give them confidence.

Okay. And would you be able to give us a little more color on what you're seeing in your own retail stores in terms of traffic, conversion, AUR, UPT, any other metrics that you could tell us?

As I mentioned earlier, spring, we had a lot less inventory in the stores in spring. At one point it was down about 40% late in the quarter. And the stores -- partially because we reduced that one delivery. And the stores were struggling to -- we were struggling to fill the stores. So now just in the last 1.5 weeks the inventory's hit to get them closer to last year levels. And we're excited to see what -- how that performance is going to increase. And we have some -- we're doing a first-view event and reaching out to our customers over the next couple weeks, do some in-store marketing and excited to get that customer that used to shop with Vince back in the store. So a lot of phone calls by our associates, really going after more social media. If you've seen our Instagram and some of the other ways we're out there investing in outreach to the customer so that she can come rediscover the brand.

I will say, patting ourselves on the back a little bit, our website looks phenomenal right now. We've morphed over to Demandware. Timed it with the new creative assets as we Brought in Tomoko, our new Brand Director. And the website just looks fantastic. So that's all we think, re-energizing and reinforcing the brand that we're moving forward with.

All right. Thank you very much. That's helpful.

Sure.

Your next question comes from the line of Richard Jaffe from Stifel. Your line is open.

Thanks very much. And guys, I'm wondering how you're planning inventory, both in your stores and in your retail partners? Obviously you've been running the inventory down quite leanly and defensively. And wondering how much you've planned to ramp it up and how much -- how do you plan to keep dry, as you mentioned, to chase the key successful style?

In our own stores we'll start to have positive levels of inventory as we get later in the quarter and then really peak them as we get closer to holiday. We think there's a big opportunity there, as we discussed earlier, in part because we were so lean last year and in part because we just think the product looks fantastic. In terms of our wholesale partners, we've talked about they are -- we were -- as I said last time, we were very pleased with the orders that they gave us for fall and holiday. We understand the cautiousness everybody has right now. We think they placed orders that allow the line to -- the customer to rediscover us, and we are certainly prepared and already working with them as they start to see some things working to maximize opportunity.

I guess inventories in your stores will be back to 2014 levels? Is that a reasonable thing to anticipate in the fourth quarter?

Well, we have so many new -- they will be above 2015 levels by the time we get to holiday, and significantly so because they were so far under. So they're probably closer to 2014 levels by the time we get to start fourth quarter, although the composition's a little different because we got so broad, we had so many SKUs we couldn't even get them all on the floor. So we really gone -- I think we talked about last time, gone through SKU rationalization. We are reconstructing replenishment, which ate up a lot of SKUs. And so we've pulled that back. And we'll see what categories and products earn their way to future replenishment. But we have more depth so that we can stay in stock longer. We also reduced the breadth of our size assortment. So that allows us to stay in stock on key sizes. So we think we've made all the right moves to better stock our own stores. And now we'll see how the customer votes.

Look forward to it. Thanks very much.

Thanks, Richard.

There are no further questions at this time. Mr. Brendan Hoffman, I turn the call back over to you.

Okay. Well, thank you everyone for joining us today. We look forward to giving you an update on how Q3 goes and the new product when we speak to you in December.

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.