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Presentation

Genesco Inc. misses on earnings expectations. Reported EPS is $0.57 EPS, expectations were $0.84.

Operator: Good day, everyone, and welcome to Genesco’s Third Quarter Fiscal 2024 Conference Call. Just a reminder, today’s call is being recorded. I will now turn the call over to Darryl MacQuarrie, Senior Director of FP&A. Please go ahead, sir.

Darryl MacQuarrie: Good morning, everyone, and thank you for joining us to discuss our third quarter fiscal ’24 results. Participants on the call expect to make forward-looking statements reflecting our expectations as of today, but actual results could be different. Genesco refers you to this morning’s earnings release and the company’s SEC filings, including it’s most recent 10-K and 10-Q filings or some of the factors that could cause differences from the expectations reflected in the forward-looking statements made today. Participants also expect to refer to certain adjusted financial measures during the call. All non-GAAP financial measures are reconciled to their GAAP counterparts in the attachments to this morning’s press release, and in the schedules available on the company’s website in the Quarterly Results section.

We have also posted a presentation summarizing our results here as well. With me on the call today is Mimi Vaughn, Board Chair, President and Chief Executive Officer; and Tom George, Chief Financial Officer. Now I’d like to turn the call over to Mimi.

Mimi Vaughn: Thanks, Darryl, good morning, everyone. And thank you for joining us. Before I discuss third quarter performance, earlier this week we announced the appointment of Andy Gray as Journeys New President. Andy is an exceptional and experienced leader who brings invaluable expertise in brand building, product innovation, and the other areas essential to building Journeys business for the future. Andy’s connection to youth culture and the strong brand relationships he’s built over his accomplished career make him the ideal person to lead the talented team we have in place at Journeys, as we work to elevate the business and unlock the great potential we see ahead. I look forward to his partnership, and I’m excited for him to join recently appointed COO, Mike Sypert to drive success going forward.

Welcome, Andy. Now moving to results. Following a later start to back-to-school, sales picked up early in the third quarter and were generally tracking to our expectations. However, we saw a market change in trend in October as the later change of seasons muted initial demand and delayed the start of the selling season for fall products. In addition, our branded businesses were impacted by disruption related to the implementation of a new ERP system, contributing to lower overall results than we anticipated for the quarter. Despite these headwinds, we were pleased that sales trends within our Journeys business continued to show sequential improvement, and Schuh and Johnston & Murphy delivered record third quarter sales. The operating environment remained challenging as ongoing inflationary pressures and economic uncertainty continued to impact discretionary spending.

As we’ve seen throughout this year, consumers continue to make tough choices on where to spend their dollars, often choosing other categories over discretionary purchases. And when they do shop, they’re doing so closer to need and are carefully discriminating in their purchase decisions. Against this backdrop, we continue to advance our strategies to drive consumer demand and make the business more productive and more profitable. Our Journeys store closure plans are on track, having closed 75% of the approximately 100 doors planned through the end of Q3, and the remainder targeted to close by year-end. We also remain on pace with efforts to realign our cost base and realize $40 million of annual cost savings by the end of fiscal ’25. Finally, we once again maintained strong inventory discipline in Q3, with total inventory down high single digits year-over-year.

Other key highlights from Q3 included growing our overall comparable digital business by 8% and expanding digital penetration to 21% versus 18% a year ago. We launched Buy Online Pick Up in Store at Journeys and J&M in October to quite promising early results, offering additional convenience and time for the holidays as we continue advancing our omnichannel experience. And finally, Journeys all access loyalty program is off to a strong start, performing well against our high expectations. Now discussing our individual businesses in more detail and starting with Journeys, the negative sales trend we experienced through the first half of the year continued to sequentially improve in Q3. Back-to-school trends we discussed in late August accelerated into September, and the changes our merchants were able to affect across the product mix resonated well, enabling Journeys to outpace our most recent expectations.

Sales of must-have items were strong, and we continue to chase into that product. Even though this wasn’t enough to offset the lack of newness and industry discounting in athletic or the unanticipated late start to fall selling, Journeys traffic and conversion nonetheless improved considerably versus Q2. In quarter-to-date, I’m pleased to say that Journeys comp has shifted into positive territory for the first time this year, driven in part by a strong Black Friday weekend. Although the environment remains volatile, consumers are responding well to the newness we and our brand partners have injected into the product assortment. We’re excited to amplify the Journeys story through our holiday campaigns, which among other things will feature more SMS campaign usage and increased investment in digital marketing, as well as new campaigns and rewards for all access members.

Now moving to the U.K., despite facing the consumer pullback in October, Schuh delivered the strongest constant currency in third quarter sales to date, reflecting our efforts to enhance its customer value proposition and access to top-tier products. Solid double-digit sales growth and a 5% comp were driven by a compelling back-to-school assortment led by the kids’ business, followed by women’s, adding to the outstanding performance Schuh has achieved this year. Schuh accomplished this through growth of casual products, aided by higher average selling prices and success in non-footwear categories like backpacks. The delay in change of seasons and resulting pressure on sales later in the quarter was most pronounced in stores, as Schuh’s digital business notched positive gains throughout Q3 and continues to account for nearly 40% of total sales.

Schuh’s growing strength and recognition as the leading fashion footwear destination for the youth consumer has been driving market share gains. As of mid-October, Schuh ranked number 10 in U.K. footwear market share according to Kantar maintaining its position after moving up three spots earlier in the year. Loyalty continues to bolster this effort tracking at about 30% of Schuh’s Q3 sales. Total Schuh club members now stand above 2 million and counting with members more highly engaged and purchasing more frequently. Schuh is running exciting holiday campaigns through the season to surprise and delight customers including bundle promotions and digital content tied to its loyalty program. Turning now to Johnston & Murphy, the brand added to its strong run this year posting positive sales growth and record third quarter sales despite a unique set of headwinds and a tough multi-year compare.

While the challenges J&M encountered from the new ERP system implementation led to some lost sales in Q3, this more robust modern platform provides greater agility to support J&M growth and the growth of our other branded business. J&M was also not immune to the broader consumer pullback that hit in October and stole sales of outerwear and other fall products. Casual continue to drive results accounting for over 75% of direct-to-consumer footwear sales. Apparel was a bright spot growing 7% and together with accessories now accounts for over 40% of J&M DTC sales. We’re benefiting from the all-encompassing changes we made coming out of the pandemic to reposition the business as a more casual multi-category lifestyle brand. Supporting this effort is J&M insiders affinity program.

Insiders now account for approximately 60% of J&M DTC revenue with over 60% of new customers joining the program. Looking ahead we remain very positive on J&M’s longer-term potential and are investing against it. As part of this next phase of growth, J&M has partnered with a new creative agency to unlock the significant opportunity to increase its brand awareness which currently stands at only 35% and educate consumers about the shift away from its heritage dress Schuh legacy. This new top-of-the-funnel marketing launches in it’s spring as we expand our marketing reach to broader range of customers. Now turning back to Journeys, we’re pressing forward with our Elevate Plan which leverages the elements of our footwear focus strategy and drives action to meaningfully accelerate Journeys improvement and top-line growth.

Journeys has a proven track record of managing through adverse cycles responding to changing consumer and fashion dynamics and coming out stronger on the other side. The fundamental tenets of Journeys value proposition to customers remain intact. With our focus on fashion footwear and compelling mix of and access to top brands no other retailer serves the team consumer quite the same as Journeys. While we have much more to unlock as we finish this year and get into fiscal ’25 the work we’ve done today is paying dividends. Today, I’ll highlight the key areas of our plan where we’re making good progress. Number one, strengthening customer engagement and expanding relationships with our target team customer. Initial results from the all-access loyalty program are very encouraging with roughly 1.5 million members signed up since launching in July.

Members are already buying more often than non-members and spending more per average order. With considerable runway ahead of us we’re just beginning to maximize our CRM and loyalty data to more strategically target customers based on purchase history and brand preferences. During Q3 we ran integrated campaigns focused on key brand partners to elevate Journeys as the destination for these top brands. These included all access tie-ins in store presence home page — homepage presence and social call-outs. Number two, elevating product and strengthening our brand relationships. We’ve been working diligently with our brand partners to add more differentiation to the Journeys assortment increase our access to the most in-demand brands and styles expand the number of exclusives and test new brands which would add new dimension to the assortment.

But more than that we further focus the partnership conversation on a strategic view that reinforces Journeys value proposition and unique position in accessing the coveted team customer. While fully repositioning the assortment will take some time. We’ve made good progress that we will build upon for upcoming seasons. And number three, sharpening Journeys brand marketing. Our customer insight work also informed us that while Journeys is top of mind to consumers for certain brands we carry, we have the opportunity to increase mindshare for all the leading fashion brands we sell. We’re applying those learnings to drive stronger awareness and strengthen Journeys voice across social channels. We increase paid social investment for back to school and are doubling down our efforts for holiday.

Number four, implementing incremental initiatives to drive digital and omni-channel growth. We recently launched by online pickup in store across the Journeys fleet to a strong initial response. We’re encouraged by what we’re seeing at this early stage in terms of customer adoption and attachment rates when customers Pick-Up in store. Although small in total right now these add-on purchases are driving a meaningful lift in AOV. We’re excited to see how Bopus continues to evolve in our full-service environment. Beyond Bopus as part of our effort to grow Journeys digital business we’ve also raised product SKU counts on our website and expanded our dropship partners to more than 50. And number five, optimizing our Journeys footprint and driving productivity and efficiency.

We’ve implemented key learnings from our store time studies that are having a positive impact on conversion and productivity. These include shortening the time it takes to get Schuh from the stockroom and eliminating unproductive daily processes. Our new point-of-sale hardware and software are also generating additional operating efficiencies and contributing to higher average transaction size. Regarding the store closures I mentioned earlier, we expect to achieve annualized savings of about $25 million which is in addition to the $40 million of annualized cost savings we’re targeting. Given that we need very little sales transfer from those stores to achieve a break-even operating income we’re deploying customized communications to direct consumers to online or to nearby stores.

To sum it up, we’re pleased with the progress we’re making with the Journeys Elevate Plan and the ongoing improvement in comp sales. The team has worked hard this year to adapt to the dynamic shifts and challenges in the market. I have strong belief in our abilities to address these challenges and in a much stronger Journeys future. Now moving to our outlook. As we entered the fourth quarter, we saw an acceleration in all selling and positive store traffic with the arrival of more seasonable weather. And following a strong start to the holiday season I’m pleased to say our total company comps are currently running positive quarter to date. In addition to Journeys strength J&M experienced record online demand and its best thanksgiving weekend to date.

Leaving us more confident we are on the other side of the pullback of October. That said the environment remains choppy and footwear promotions were even more widespread than we anticipated over the holiday weekend. In response we’ve made the strategic decision to increase promotional activity going forward especially at Journeys over the holidays to drive sales in this competitive environment. The resulting margin impact is reflected in our revised guidance for which Tom will provide more details. We’re largely a non-promotional retailer and plan to stay that way but believe this is a moment in time and these actions are appropriate for this season. Before closing, I’d like to thank all our amazing people across our company for your hard work and dedication through this challenging environment.

I appreciate your efforts throughout the year but especially heading into the busy holiday season when I’m certain you’ll raise your game to an even higher level. As we look forward I’m very encouraged by the many initiatives that are driving meaningful progress the strength of our brands and retail concepts and the strategies were executing that will show the resilience of our business. And with that I’ll pass the call over to Tom.

Thomas George: Thanks Mimi. Our third quarter financial performance not only reflects the challenges and hurdles we faced but also the progress we continued to make. As we now round out the fiscal year and begin to look to fiscal ’25 we believe our solid foundation and increased efforts around financial discipline will position us to drive stronger results. Turning to our results for the quarter consolidated revenue was 579 million down 4% compared to last year and down 5% on a constant currency basis, mainly driven by the sales to client Journeys. Relative to our expectations better sales transit Journeys were offset by lower than expected sales and associated deleverage on expenses in our branded businesses and Schuh. Total comps were down 4%.

Although still negative we were pleased to see another sequential improvement in the trend Journeys. Meanwhile comps at Schuh and J&M remained positive despite the later seasonal transition and our branded businesses dealing with its ERP conversion challenges. By channel total store comps were down 7% while direct comps were up 8%, by business Schuh total comps increased 5%, J&M total comps increased 1% and Journeys total comps were down 8%. Overall gross margin was in line with our expectations, down 60 basis points as compared to last year. By business Journeys gross margin was down 110 basis points mostly due to the expected increase in promotional activity including introductory coupons for Journeys loyalty program along with some next shift.

Schuh gross margin was up 100 basis points as the division benefited from reduced duties from its new Ireland based distribution center as well as a more elevated product assortment mix. J&M’s gross margin was down 210 basis points due to a more normalized markdown and closeout cadence versus last year. J&M had much more inventory available to sell this year versus last as much of last year’s product was caught in transit. Finally Genesco brands group gross margin was up 270 basis points as we continue to benefit from lower freight and logistics cost and price increases. Adjusted SG&A expense was 46.2% of sales an increase of 190 basis points over last year with most of the deleverage driven by the lower Journeys sales. In absolute dollars SG&A expenses were flat to last year.

In line with our strategic pillar to reshape the cost base to reinvest for future growth we have gained traction with our cost savings initiatives while at the same time increasing the variability of our expense base. This resulted in reduced occupancy, selling salaries and other store costs and enable us to invest in marketing which drove increased sales. In addition we invested in systems and people to drive our business forward which resulted in increased appreciation in IT compensation for new technology initiatives. Lowering overall occupancy costs and reducing the amount of fixed expense in the store channel remains a key priority. In Q3, we achieved a 16% reduction in straight-line rent expense on 59 lease renewals across the company.

With an average term of approximately 3 years. This brings our year-to-date renewals to 155 with over 50% of our fleet still coming up for renewal in the next couple years, we have a lot of runway to capture additional savings. While we have been making nice headway on rent savings and savings on selling salaries increasing wages continued to be an area of challenge. All told in an environment where these and other cost pressures have been prevalent and ubiquitous we were pleased to hold our SG&A dollars flat to last year. In summary for the third quarter we realized adjusted operating income of $11 million compared to adjusted operating income of 26.3 million for Q3 last year. This all resulted in adjusted diluted earnings per share of $0.57 for the quarter versus earnings per share of a $65 last year.

Relative to our internal expectations the extent of the ERP disruption coupled with a higher than expected tax rate had a large impact on this lower EPS result. Turning out a capital allocation in the balance sheet as expected we ended the quarter in a net borrowing position. Regarding inventory we were very pleased to keep our inventory levels well controlled down 8% year-over-year with respect to Journeys specifically we continue to work with our brand partners to adjust receipts enabling us to end the quarter with inventories 14% lower than last year and more fully positioned with the newness we’ve needed in the assortment. Schuh inventories increased compared to last year to support the higher levels of demand in the business now although J&M’s inventories were down versus a year ago as I mentioned a significant amount of last year’s inventory was in transit and unavailable for sale.

Overall we expect to end this year with inventory down high single digits versus last year as we continue to thoughtfully manage our assortments and keep our inventory position clean entering fiscal ’25. Capital expenditures in Q3 were $15 million with the investments primarily directed to retail stores in our digital and omni-channel initiatives. We opened five stores which were primarily off mall and in outlets and closed 20 ending the quarter with 1360 total stores. Lastly, we didn’t repurchase any shares during the quarter and our current authorization remains at $52 million. Over the past 5 years we repurchased almost 50% of our outstanding shares. Regarding our cost savings initiatives we are working diligently to deliver the annualized run rate of up to $40 million in cost savings by the end of fiscal ’25.

We expect savings from reduced store rents lower corporate shared services and Journeys central expenses selling salary productivity gains, reduce warehouse and logistics cost and reduce freight costs from omni-channel inventory location optimization initiatives. When you combine our efforts to increase the variability of our cost structure along with progress on our cost savings plan we are on pace to achieve approximately $20 million of cost reductions in fiscal ’24. With respect to store closures we closed 74 Journeys stores to the end of Q3 or roughly 7% of a total fleet since the beginning of this year. These were primarily mall based locations. As Mimi mentioned the savings from the hundred Journeys stores we aim to close by the end of the year eliminates roughly an additional $25 million in costs from SG&A expense which on an annualized basis will begin to benefit us in fiscal ’25.

The goal of these cost savings and store closure programs is to achieve expense leverage and drive operating margin expansion on more modest increases in sales growth. Now turning to guidance. Overall sales trends have accelerated nicely thus far into Q4 in part due to positive adjustments we made several months ago to the product assortment that given product lead times are having impact now at Journeys. However, the variability and consumer demand we see week-to-week coupled with the heightened promotional activity at the start of the holiday season has led us to take a more promotional stance going forward. Especially to drive demand at Journeys and remain competitive in this environment. While we expect this to positively impact sales, it will also result in some additional gross margin pressure.

We now also expect growth at Schuh to be somewhat more muted than our prior expectations given the softer consumer trends of late. And we expect the ongoing lack of visibility in the wholesale channel to put some pressure on J&M and our other branded business. Combining all these factors we now expect full year total sales to decrease 1% to 2% versus our prior expectations of down 2% to 4% excluding the 53rd week, which we expect to add approximately $25 million of sales and have a small negative effect on earnings per share. We expect sales to decrease 2% to 3%. Some color by division on the total year-end sales compared to last year, for Journeys we continue to expect a high single-digit decline. For Schuh we continue to expect low double-digit growth.

For J&M We now expect high single-digit growth and for Genesco brands a low double-digit decline. We now expect gross margin to be down 40 to 50 basis points compared to our prior view for fiscal ’24 gross margin to be flat to down 20 basis points. The change in our guidance is driven primarily by increased promotional activities and Journeys going forward in the fourth quarter as well as products product makes shift. We now expect adjusted SG&A as a percentage of sales to do leverage 200 to 220 basis points compared to our prior view of 220 to 240 basis points of deleverage. Given our key three actual results and revised assumptions for Q4 we now expect full year adjusted earnings per share of $1.50 to $2 compared to our prior range of $2 to $2.50.

Our expectation is that we will be near the midpoint of this range. Our guidance assumes no additional share repurchases which results in fiscal ’24 average shares outstanding of approximately 11.4 million and we expect the tax rate to be approximately 24%. To close we continue to take the necessary measures to navigate the current consumer environment while also proactively evolving our company towards a leaner and more agile state to better meet the needs of our consumer, drive stronger profitability and ultimately deliver greater returns to our shareholders. Operator, we are now ready to open the call for questions.

Operator: [Operator Instructions] Thank you. Our first question is from the line of Mitchel Kummetz with Seaport Research. Please proceed with your question.

Mitchel Kummetz: Yes, thanks for taking my questions. I guess I’ve got a few. Maybe when you guys reported 2Q, you raised your gross margin outlook and part of that was because of you were expecting improvement in the Journeys for key gross margin with more newness kind of flowing into the assortment. I think you also made a comment at the time that like the consumers looking for two things must have product or good deals and I’m wondering, what’s changed from three months ago is the newness, not performing as well or is what I would maybe call sort of non-newness in the assortment. Is that just requiring? You know deeper discounts to move the product. Can you just maybe sort of elaborate on that?

Mimi Vaughn: Thanks for your question Mitch. And there really has been quite a lot going on and we’ve seen a lot of ups and downs in the consumer environment over the last few months and absolutely, the newness is working. Our merchants have done a phenomenal job chasing into product that is resonating with the consumer and that is selling through quite nicely. What we saw and I’m going to take you through I’m going to take you to October and then bring you into November and bring you to into Black Friday just to give you a sense of where we are. But starting in October, traffic was out there but conversion was tough and I think we and anybody else who sells fall products and sells boots, really saw that the consumer was not motivated to spend in October.

They were looking but you know for us boots represent 40% to 50% of our mixed in the fourth quarter and so if your boot sales aren’t coming through then that’s what made for October. We saw a market change in November where with colder weather there was a lot of good positive traffic in all of our retail concepts and if you were out over Black Friday, it was a joyful experience I mean people were out, people were shopping in the malls. There was seem to just be pent-up excitement for shopping but what we also saw is that our brands in particular were really promotional. We were as promotional as we thought we would be over Black Friday and really in the third quarter, but we saw that, the inventory buildup from some of the slower sales and footwear over the course of the year caused some of our brands to say that they were going to deviate from that pricing and get more promotional.

Now that promotional activity worked well. It drove sales and so with traffic and some of the promotion on the right product, there’s a bifurcation in the market here Mitch where the must-have items are flying off at full price. But anything else needs some encouragement in order to move. And so as we have evaluated that and it’s a bit of a have and a have-not world these days within our brand world. The footwear category is lining up to be more promotional this holiday and what you’ll see in our guidance is that we are driving more sales and that we are going to be taking a few more markdowns to be able to get there. What we’re anticipating and what we’re hopeful for is that this will be the final push through the year to clear through the inventory overhang in the market and that we all – we for sure will be able that we all as an industry will be able to start next year clean.

Mitchel Kummetz: That’s helpful. And then Mimi you talked about some of the some of the strategies at Journey’s, I think one of them you said repositioning the assortment kind of got the impression that this was more maybe significant than kind of the typical tweaks that you guys are always making in terms of the assortment the merchandising. Again, can you maybe speak more to that? Is this what exactly are you looking to do in terms of repositioning the assortment there? What’s the aim to that strategy?

Mimi Vaughn: Yes, so Mitch we, we’re the destination for where teens go to buy their fashion footwear and we always have a great supply of the best items that people are – that our teens are looking for and that our customer is looking for. Our customers hanging in there. They’re being very discerning when it comes to retail spend and the choices of what they’re spending on. I think that all of the comments and I don’t know that we’re deviating from our merchandising trends but what we did see at the beginning of this year is that our consumer had a huge appetite for newness and that’s what we’re chasing into and that’s what we’ve chased into for the back part of the year and that’s what is driving our sales and the improvement.

We’re quite pleased at the improvement from where we started at the beginning of the year in Journeys to the point we are right now where you know, we’re having the best results of the year and a big pickup. So it really is that we’re chasing into this newness. We’re working with our brands in order to further differentiate our assortment to have more of the must-have product to have more exclusives and to continue to get in front of the consumer as the destination of choice.

Mitchel Kummetz: And then lastly just in terms of the uptick in promotional activity, I mean you did mention that boots are a large percentage of your mix in for Q and that the season got off to a slow start. It looks like the Journeys inventory is actually in good shape. But in terms of its content, are you guys sitting on a few too many boots and as part of the promotional strategy in order to kind of work through maybe some excess inventory there is not that – that not the case.

Mimi Vaughn: Yes, I would say that we want to make sure that we have enough dry powder Mitch to be able to move on whatever items that we need to move on for as the holiday unfolds and certainly, you know, I think that we were in the third quarter and certainly over the course of November. We saw good sales in Journeys and so in spite of some of the lower boot sales, we were selling other products that the consumer was interested in buying. When we’ve had these cold spurts at least, here and as in much of the rest of the country, we’ve had cold spurts and has gotten warm and cold spurts and it’s gotten warm again and in those cold spurts, we do see sell through of boots and we see a pickup in boots. And so we know that it will be cold. We know the consumer we believe the consumer is going to be out shopping around holiday and we’ll move the boot inventory that we have and then we’ll take them whatever marks we need to at the end of the season.

Operator: Thank you. Our next question are from the line of Mantero Moreno-Cheek with Jefferies. Please proceed with your questions.

Mantero Moreno-Cheek: Hi, thank you for taking our call. I just wanted to see if you could describe the differences between the U.S. and U.K. consumers. There any trends really worth calling out between those two and can we expect those trends to continue in the next year?

Mimi Vaughn: Thank you for your question. And so interestingly the U.S. market and the U.K. market have tracked it from an economic point of view similarly in terms of high inflation. And the consumer having to make choices. Our shoe business has had an exceptional year has outperformed the market has moved up three places in terms of ranking in overall market share and so we’ve been out punching the competition. Most recently and so I think if you have product that the consumer wants and if you have product that resonates with the consumer, then consumers who are making choices among items that they’re spending on, you can motivate – you can motivate that that that purchase. What we’ve seen most recently is that across the board there was a slowdown with the start of the fall selling season and we have seen a turnaround there in the U.S. with really robust Black Friday sales.

Our store traffic was up, stores were the great highlight of the Black Friday weekend. But altogether this consumer in the United States was out to shop. We had a very strong Black Friday weekend in the U.K. last year. Right now we think that the U.K. consumer is waiting holding out typically the U.K. market goes – goes on sale before Christmas. We think there may be some hold back in the U.K. market and that’s the difference right now is that the U.S. showed a lot of pick up in traffic over the Black Friday weekend and the U.K. we think that there will be, the season has to unfold further. Altogether the way the consumers acting is that they’ll pay up for the must-have product, but other than that, they really are seeking the value that I talked about.

Mantero Moreno-Cheek: Thank you. And then another follow – or a quick follow-up. Are there any supply chain or material costs that are headwinds at the moment and if they are, are there any that will turn to tailwinds next year? Thank you.

Thomas George: Yes, I would say at this point in time we feel really good about the supply chain in the cost that we’re going to expect going forward. This year we’re getting a lot of relief on freight logistics cost in our branded business. And that was the big headwind last year, as well as air freight to get it product in. So we’re starting to see improvement in our gross margins in our branded business as a result of the reduced rate logistics cost and really not a headwind at all is all the efforts we’re making in our branded business from a sourcing perspective and a design and development perspective and a cost estimating perspective. We expect good gross margin expansion going forward from that perspective. And then on the retail business that – we in our – we really think that we’re in a good position with all our branded partners and we don’t see any headwinds they’re going forward.

Mimi Vaughn: The cost pressure that we’ve been facing has been around wages. And so a lot of the initiatives that we are talking about is to be able to make our use of labor more efficient. And so in our distribution centers, we’ve been adding automation and that has helped to bend the curve on just overall wage increases. In our stores, we have spent a lot of time on store time studies where we are looking to get much more efficient within our stores take out the non-productive hours and shift the labor into selling, and we’re seeing that pay some dividends. We’ve started on that work in Journeys and in Schuh we are doubling down on our efforts there but that’s where we’re seeing a lot of the of the overall cost pressure for this year that with work we’re doing we anticipate that we will make progress in this area for the coming year.

Mantero Moreno-Cheek: Thank you and best of luck in the rest of quarter.

Mimi Vaughn: Thank you.

Operator: Thank you. At this time, I’ll turn the floor back to Mimi for any closing remarks.

Mimi Vaughn: Thank you for joining us today. Wishing everybody the best of the holiday season and look forward to talking with you in the New Year.

Operator: This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.