The Children's Place, Inc. (PLCE) Q3 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to The Children's Place Third Quarter 2019 Earnings Conference Call. This call is being recorded. If you object to our recording of this call, please disconnect at this time. All participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] It is now my pleasure to turn the floor over to Anthony Attardo, Director of Investor Relations to begin.

Good morning, and welcome to The Children's Place conference call. On the call today are Jane Elfers, President and Chief Executive Officer; Mike Scarpa, Chief Operating Officer and Chief Financial Officer. The Children's Place issued press releases early this morning and copies of the releases and presentation materials for today's call have been posted on the Investor Relations section of the company's website. After the speaker's remarks, there will be a question-and-answer session. Before we begin, I would like to remind participants that any forward-looking statements made today are subject to the Safe Harbor statement found in this morning's press release as well as in the company's SEC filings, including the Risk Factors section of the company's Annual Report on Form 10-K for its most recent fiscal year. These forward-looking statements involve risk and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof. After the prepared remarks, we will open the call to your questions. We ask that each of you limit yourself to one question so that everyone will have an opportunity. And with that, I'd like to turn the call over to Jane Elfers.

Thank you, Anthony, and good morning, everyone. After reviewing Q3 results, I'll provide you with an update on three key strategic areas of focus that support continued market share gains. First, I'll discuss our recently announced Gymboree relaunch plans; next, I'll update the status of our digital transformation; and last, I'll recap how the execution of our strategic initiatives along with our superior product and low-pricing model position us to continue to capture market share in various economic environments despite disruptive industry consolidation and persistent declines in U.S. birth rates. First, Q3 results, our key product categories resonated strongly with mom in the back-to-school season, the second most important shopping period of the year. In fact, we believe we were one of the top destinations for key back-to-school categories this year further solidifying our preeminent position in the U.S. kids specialty apparel market. Our e-commerce business continued its stellar performance delivering 23% growth and representing a record 35% penetration to total sales a 650 basis point increase versus last year. We also saw a return to higher AURs in our stores during Q3 primarily driven by less promotional activity. Driven by a strong back-to-school season, we delivered a positive 0.8% comp in Q3 on top of a positive 9.5% comp in Q3 a year ago despite multiple headwinds including prolonged warmer weather into late October, which negatively impacted sales of colder weather products in key regions across the country. Considering our belief that there were elevated inventory levels at a basket of our key competitors entering the quarter, our Q3 outlook provided on our Q2 conference call, anticipated the high likelihood of increased promotional activity in the kids' apparel space. We also called out a very unfavorable year-on-year weather compare in October as colder weather arrived early in October last year and provided a significant sales benefit in the final month of Q3. However, our outlook didn't anticipate 2019 to be the second warmest September on record followed by prolonged warm weather through the end of October, which hampered demand for our fall product throughout the quarter in our key regional markets. The extended warm temperatures when coupled with inflated competitor inventories entering the quarter resulted in elevated promotions in the kids' apparel space, particularly towards the end of the quarter which had a further adverse impact on our sales and margins. Inventory management continues to be a priority for us, and we exited the quarter with inventories up approximately 3% to last year with seasonal carryover inventory down double-digits and finally, despite the significant headwinds, we were able to deliver EPS results near the upper-end of our guided range. Shifting to the Gymboree integration, on October 15, we formally announced the early 2020 relaunch of the iconic Gymboree brand, which marked the next phase of our exciting journey to bring the coveted brand back to its fiercely loyal customer base. Our team hosted a media event in New York City to support the relaunch and showcase our spring 2020 Gymboree collection. The response to the product was overwhelmingly positive as attendees including bloggers and key influencers gave high freight to the product for capturing the core of what mom loved most about the Gymboree brand during its peak. We encourage you to read the thousands of comments Gymboree moms continue to post on our Gymboree social media sites. The comments reinforce what we have discussed before she remains fiercely loyal to the Gymboree brand and is not inclined to take her dollars elsewhere. Our plan is to reintroduce the Gymboree brand in early 2020, through a meaningfully improved digital experience on gymboree.com, complemented by shop-in-shop locations in over 200 TCP stores in the U.S. and Canada. On many occasions, we have discussed that we have the dream customer, a millennial mom, and you can see it reflected in our quickly evolving omni profile. Approximately 40% of our customer file is comprised of online and omni-channel customers and this group increased approximately 14% in Q3, and now represents nearly 60% of our identifiable U.S. sales as we continue to make significant progress driving more of our customers to join our omni-channel rank and to spend more year-on-year as they make this transition. This is a strong indicator that we have the ability to provide the millennial Gymboree mom with the same type of omni experiences that we are providing to our core TCP millennial customers. And we expect our enhanced offering for Gymboree will be well received at launch. The enhanced, personalized online shopping experience at gymboree.com, will offer a customer-centric and vibrant online experience that the prior owner simply wasn't able or willing to provide. The Gymboree brand did not have a robust loyalty program. And did not have a notable private label credit card initiative, which presents, The Children's Place with a meaningful opportunity when considering, approximately 80% of TCP brand sales, come from our MyPLACE Rewards and our private label credit card loyalty members. Importantly, our loyalty members, spend nearly three times are non-loyalty customers. Additionally, the Gymboree mom will benefit from the children's place, transformational investments, made behind omni-channel, digital fulfillment capabilities. Following a carefully controlled re-launch of the Gymboree brand at retail in early 2020, we will provide additional insight into our future plans to address additional opportunities, for the Gymboree brand. Our real estate team continues to execute on the strategy of opening new TCP locations in select centers, that were highly productive for Gymboree ,with six new TCP locations opened in Q3, that are each forecasted to post annualized sales volumes, well in excess of $1 million. The openings are part of our high-return strategy, to capture the displaced Gymboree market share, with what we believe to be little risk of cannibalizing our existing retail sales or sales of potential wholesale partners. We previously discussed having identified 40 locations that were extremely productive for Gymboree, where TCP does not currently have a presence. These are centers which have no existing Children's Place location to cannibalize. And do not have another TCP location within a large radius. In addition, these centers are largely occupied by other kids retailers, who based on the relative productivity of the center, likely perform extremely well in these locations. We believe the new TCP store sales in these locations will be nearly 100% incremental for TCP, allowing us to pick up share from key competitors, as we bring the Gymboree brand back, to these highly productive centers. In the TCP locations that were collocated in centers, with closed Crazy 8 and Gymboree locations, we comped several hundred basis points better, than in centers with no collocated stores. So we believe we're continuing to gain traction, in securing market share, from the abandoned Crazy 8 and Gymboree customers. So as the customer excitement around the return of Gymboree continues to build into the early 2020 re-launch, we believe, we are very well positioned to capture an outsized portion of the sales left behind by Gymboree. Moving on to digital transformation, continuing to build off the foundational capabilities for personalization, as part of our accelerated $50 million digital transformation investment, we launched the initial test phase of personalization in early May, which was focused on a limited number of identified behavioral segments across five channels of distribution. Building upon the initial results in Q2, we began to expand into additional segments in Q3 extending personalized content to approximately 10% of our customer file. We continue to see encouraging lift in open rates, orders per customer, net revenue and net margin per customer with continued strong migration of store customers to higher spending omni-channel tiers. Our goal is to extend personalized content to approximately 80% of our customer file during the first half of 2020. The impact of digital personalization can be meaningful as we estimate that each point of conversion of our e-commerce traffic represents an incremental $80 million in digital revenue. Shifting to our enhanced omni-channel capabilities. Our store fulfillment capabilities are another meaningful contributor towards the $200 million digital opportunity and they continue to outperform expectations as they drive enhanced options for mom. BOSS and BOPIS continued to outperform expectations with customer online orders picked up in the stores in the mid-teens and attaching at a nearly 20% rate leading to a considerably higher-than-average ticket. In a few weeks, we plan to begin piloting Save the Sale functionality, which will provide our moms with access to inventory from other store locations or the distribution center for products that are not in stock at a specific store location. We'll be able to deliver that product directly to her and capture incremental sales that would have otherwise been lost absent the Save the Sale capability. As discussed our online and omni-channel customers increased by approximately 14% and now represent approximately 40% of our total customers, which is a nearly 600 basis point increase from a year ago. In only a few short years, we have gone from 80% of our customers choosing to shop only in our brick-and-mortar stores to approximately 60% choosing to shop only in our stores. We expect that our online and omni-channel customer penetration will continue to increase as we ramp up our omni-channel capabilities and execute upon our fleet optimization plan to ensure that we're serving our millennial customers preference for the convenience and ease of an online shopping experience. Now I'll address how our cost and pricing model provides us with a valuable competitive advantage. As we continue to mix our product costs lower through continuing to migrate our sourcing activities to lower cost regions of the world, we are able to provide the value price points that we believe millennial moms are looking for as they continue to seek value and apparel purchases to fund their higher spend on experiences. In fact, our AUC for 2020 is projected down low single-digits and importantly that is on top of an AUC decrease in 2019. Over time, we believe that this pricing model has and will continue to allow us to create a meaningful pricing spread to the competitive set, which in turn will allow us to capture a greater share of the estimated $600 million of sales donated each year by poorly positioned competitors. Historically, our cost and pricing advantage has proven to be a benefit in good markets while also positioning us well in difficult economic years as evidenced by our low-single-digit comp growth in the most recent recessionary period. The ability to competitively maintain lower AUCs is especially important in a shrinking children's apparel market driven by approximately 2.2 million fewer births over the last 10 years versus the pre-recessionary period, which represents an average decline of 1.1% a year over the last 10 years. We believe that as the millennials pay down debt marry and purchase homes later than prior generations, growth in the children's apparel space will continue to be realized through market share gains for the foreseeable future. That is why we believe that our ability to provide quality children's apparel at a value price, while also having the capacity and foresight to invest in digital transformation uniquely positions us for continued market share gains. So as the industry continues its consolidation and news of Gymboree's bankruptcy phase in favor of closings from other opposition retailers, our competitive advantages continue to widen providing us the opportunity to capture a greater share of abandoned revenue each year. The revenue and margins driven from share gains support necessary digital investment which further solidifies our strong positioning. And lastly, with respect to current business. Our digital penetration continues to increase and our AURs are strengthening as we focus on disciplined inventory management in a promotional environment. However, due to meaningfully weaker than planned mall traffic quarter-to-date, we are lowering our outlook for Q4. Now, I'll turn it over to Mike.

Thank you, Jane, and good morning, everyone. Today I will provide an update on our fleet optimization initiatives in our wholesale and international businesses before reviewing our financial results and our outlook. First, an update on fleet optimization. We opened six locations in Q3 bringing our year-to-date openings to 10 as part of the 25 stores we plan to open over the next two years in centers that were highly productive for Gymboree based on our detailed analysis of Gymboree store sales. We closed 12 locations in Q3, bringing the year-to-date closures to 27 locations. We now plan to close approximately 60 locations in 2019 versus our prior plan to close 40 to 45 locations, which would bring our total store closure number to 271 towards our plan to close 300 locations by the end of 2020. Within malls, we continue to maintain a very high percentage of our locations in productive A and B centers. Our real estate team continues to strategically limit our exposure to the troubled outlet channel with only one of our stores located in what we've classified, as a dying outlet center. We're armed with meaningful flexibility in our real estate portfolio, with an average lease term of 2.5 years. And with approximately 1,000 lease events pending in the next few years, which leaves us nimble and well equipped to close additional doors, in response to the outsized growth we're seeing in our digital business. Wholesale and international, our wholesale business saw a double-digit growth again this quarter, with growth accelerating at each of our key wholesale partners. We continued expansion of our international distribution in Q3. We opened up, 34 net new international points of distribution in the quarter. And now have 260 international points of distribution, in 19 countries, opened and operated by our eight franchise partners, at quarter end. Through our strategic partner Semir, the number one children's apparel retailer in the China market. We now have 14 points of distribution opened in China. Following the two new Q3 openings, the TCP brand has established presence in six of the top 10 cities, in China. We're beginning to anniversary a group of initial openings in China. And we're encouraged by the double-digit comp growth we're seeing at a handful of locations, open over a year. I'll now provide an update on Q3 results. And discuss our forward outlook. Details for the quarter are as follows. In the third quarter, we generated adjusted EPS of $3.03, which was at the high end of our guidance range of $2.90 to $3.05, versus $3.07 last year. Net sales were $525 million, which was below our guidance range of $530 million to $535 million and up $2 million, or 0.4% versus last year's $523 million. We returned to positive comparable sales growth in the quarter, by recording an increase of 0.8%, which was below our initial guidance, of a 3% to 4% increase. U.S. comps increased 1.2%. And Canada comps decreased, 2.8%. E-commerce increased a stellar 23%, with penetration increasing approximately 650 basis points to 35%. Following a strong back-to-school season, sales were impacted by warmer-than-anticipated weather that extended well into the quarter, in key regions of the country. As a result, store traffic, transactions and conversions, all declined in the quarter, with AURs higher year-on-year. Adjusted gross margin, adjusted gross margin decreased 130 basis points to 37.8% of sales, from 39.1%, in Q3 2018, driven by increased penetration of our e-commerce business, which operates at a lower gross margin rate. As discussed last quarter, we had anticipated a gross margin decline, similar to Q2's 150 basis points. Adjusted SG&A. Adjusted SG&A was $117 million, versus $122 million last year. And leveraged 110 basis points to 22.2% of sales, primarily as a result of a reduction in expenses, associated with our transformation initiatives, along with lower incentive compensation. Adjusted depreciation and amortization was approximately $18 million in the quarter. Adjusted operating income for the quarter was down approximately $2 million or 40 basis points to $63 million or 12.1% of sales. Our adjusted tax rate of 23% was approximately 100 basis points higher than the 22% tax rate reported in last year's comped quarter. Moving on to the balance sheet. Our cash and short-term investments for the quarter were $66 million as compared to $93 million last year. We ended the quarter with $184 million outstanding on our revolver compared to $65 million last year. The increase reflects funding to support the $76 million Gymboree acquisition and our shareholder capital return program. We ended the quarter with inventories increasing approximately 3% versus Q3 of 2018. Our seasonal carryover inventory continues to be down double-digits to last year. Moving on to cash flow; we generated $101 million of operating cash flow in the first nine months of the year versus $83 million of operating cash flow for the comparable period a year ago. Capital expenditures in the quarter were approximately $21 million. We repurchased approximately $33 million in the quarter and paid out approximately $9 million in dividends. Now let me take you through our updated outlook for fiscal Q4 2019 and fiscal 2019. Q4 2019 outlook. The company expects sales for the fourth quarter to be in the range of $504 million to $509 million based on a mid single-digit decrease in comparable retail sales versus Q4 2018. Adjusted operating income is expected to be in the range of 6.1% to 6.8% of sales as compared to 4.1% in adjusted operating income in Q4 of 2018 primarily driven by stronger gross margins. We anticipate fourth quarter adjusted net income per diluted share in the range of $1.48 to $1.68 as compared to adjusted net income per diluted share of $1.10 in Q4 2018. Our total inventories at the end of Q4 2019 are anticipated to be up high single-digits versus Q4 2018 primarily due to the impact of our full spring delivery of Gymboree product and strategically higher levels of basics merchandise associated with new marketing initiatives. We successfully integrated Radial, a third-party logistics provider into our logistics network to assist with fulfillment of e-commerce demand beginning in Q4, which has dramatically improved our shipping times to mom. Outlook for 2019. For fiscal 2019, the company expects sales to be in the range of $1.862 billion to $1.867 billion based on an approximately 3% comparable sales decrease versus fiscal 2018. We project e-commerce penetration will increase to approximately 31% of net sales. Adjusted operating income is expected to be in the range of 5.7% to 5.9% of sales as compared to 6.6% in adjusted operating income in 2018. We anticipate fiscal 2019 adjusted net income per diluted share will be in the range of $5 to $5.20, inclusive of $0.13 of adverse impact from the tariffs announced to date versus our prior guidance of $5.40 to $5.75, which included $0.08 of adverse impact from tariffs. This compares to adjusted net income per diluted share of $6.75 in 2018. We project a tax rate in the low 20s. We expect to generate strong cash flow from operations in 2019, which will help fund our shareholder return program and capital expenditures. We expect the CapEx to be approximately $60 million to $65 million in 2019. We ended Q3 with approximately $146 million remaining on our share repurchases authorization and remain firmly committed to returning cash to shareholders. At this point, we will open your call to questions.

Thank you. [Operator Instructions] Our first question comes from the line of John Morris of D.A. Davidson.

Thanks. Good morning, everybody. So Jane, I hear you on the weakness that we've seen in September and October thwarting the third quarter, but now with the Q4 guide on comp being as weak as it is to what reasons would you see it persisting? Just trying to kind of understand why we're continuing to get those kinds of headwinds so far if it's ostensibly not so much weather in the current quarter? That's my first question. Thanks.

Sure. When we look at our Q4 business quarter-to-date, there is a significant delta between our performance and our U.S. malls versus our performance in our U.S. outlets versus our performance online versus our performance in Canada. So if we break it down, clearly online is the star continues to outperform and digital penetration continues each quarter to exceed our expectations. But as far as the difference between our mall stores and our outlet stores, we're seeing a significant delta in traffic trends between these two brick-and-mortar channels versus what we've seen through the first three quarters of the year. So, our mall-based traffic is trending significantly below outlet traffic quarter-to-date, which is leading to a pretty big disparity in top line trend in our mall stores over our outlet stores. If you look at Canada, we're seeing a slightly positive comp trend quarter-to-date. So, really what we're thinking of is during the November timeframe, it looks like our consumer shifted to off-mall value retailers in a more pronounced way this year in order to take advantage of what has been widely reported as more of a month-long Black Friday promotion, Black November, if you will, really moving off-mall to take advantage of higher ticket promotions. And we think that the uptick, if you will, in outlet traffic and the big disparity from the first three quarters of the year, and seeing these outlet channels turn on from a traffic and sales point of view, is probably benefiting from the traffic, that the larger off-mall players are driving through their promotional activity, through the month of November. And also like we said, there's a strong focus on higher ticket and seasonal categories. What we've heard so far and read in quarter-to-date, is the mall-based department store anchors, they're not driving nearly the same levels of traffic to traditional malls, through November as the big-box retailers have been able to do. Then also as we said on our last call, later than normal Thanksgiving, we thought it would impact November traffic and sales, to the degree of about $5 million. So when you look at e-comm and you look at Canada. And you see those channels performing significantly different I think that supports the theory that, we're seeing the traffic through November to really be heavily weighted towards off mall. And so as we get closer to the holiday season, it's possible that the consumer shift their attention back to lower ticket value-oriented categories, we'll know shortly.

Your next question comes from the line of Susan Anderson of B. Riley FBR.

Hi. Good morning. Thanks for taking my question. I was wondering if you could talk about the puts and takes of growth margin, in the quarter. I guess, how much of the decline was promotions, versus shipping? I guess just curious to see what the offset is to the lower AUC you've been getting? And then, on the delivery front, I know there were issues last year, just curious if that happening. And how the 3PL is going so far for fourth quarter? And if you're planning on, getting any of those costs back from last year? Thanks.

Susan, from a gross margin perspective, we were down $130 million basis points in the quarter to 37.8, really driven by the increase in penetration of our e-commerce business. We discussed last quarter that, we had anticipated that margins would in pretty similar to the margin decline that we had in Q2, which was 150 basis points. Overall, we saw merchandise margins were relatively flat in the quarter, with store merchandise margins slightly higher than last year, driven by higher AURs and the lower AUCs we've been speaking about. So the dilution really in the quarter was driven, really by the costs associated with e-com fulfillment, really as a result of that increased penetration to 35% of sales. That along with additional fulfillment costs associated with expedited shipping that we incurred at the beginning of the quarter, for our back-to-school season were the main drivers behind the overall dilution. From a 3PL perspective, really pleased to report that, the Radial integration has been well executed. They're hitting their planned output, which is enabling us to really significantly reduce days that the orders are in the D.C. We'll plan to ship over four million units with Radial during this quarter, so, well on the distribution front.

Your next question comes from the line of Tiffany Kanaga of Deutsche Bank.

Hi. Thanks for taking our questions. I know there's still a big quarter ahead with the holiday season left to go. But can you help us start to frame the 2020 conversation with a better idea for how much comp reacceleration and margin recapture if possible in your view, especially, in light of your guide down today with comp stock trends decelerating so sharply in the fourth quarter?

Our thought is we're going to wait and see how this holiday season plays out. Obviously, there's a lot of puts and takes associated with the quarter. Obviously, November as it compared to last year is our toughest compare and compares get easier as we move on. So we're going to just -- we'll be providing 2020 outlooks in our fourth quarter earnings call. At this point, we're really not going to speak about it.

Your next question comes from the line of Paul Lejuez of Citi Research.

Hey, thanks guys. Can you maybe talk high level about how to think about managing the sales gross margin equation? It seems like currently you're focused on higher AURs despite calling out a promotional environment should we think of that as the strategy go forward? And can it continue if the competition remains promotional? And then just second, I'm curious what GAAP EPS would be for 4Q and your expectations for free cash flow this year? Thanks.

We look at sales and gross margin and we try to balance both components. Obviously, we are -- continue to focus on our inventory management, which will bode well for us in Q4 of this year. If you remember last year, we diluted margins almost 300 basis points based on the Gymboree bankruptcy and our decision to accelerate sale of seasonal carryover inventory. Good news is coming into Q4. We actually owned significantly less goods than we did a year ago in terms of our holiday and full seasonal basics roughly over three million units less than we did a year ago. So that bulk of units that we had to liquidate in the fourth quarter last year. We don't anticipate that we'll have any of those goods like that. So it's really a balance overall in terms of sales and margin. And the good news is we do expect margins to increase in the fourth quarter. As far as SG&A goes we've been down in absolute dollars each of the last two quarters and we're anticipating that decline will continue in Q4 of this year.

Your next question comes from the line of David Buckley of Bank of America.

Good morning. Thanks for taking our questions. Jane, in the past you discussed how there's not a lot of loyalty from a customer in this industry. Just building on the prior question, how do you balance raising prices while also driving traffic? And then just looking out to your -- the inventory guide at the end of the fourth quarter are you planning first quarter comps next year at a similar rate as inventories expect to end the year?

Thanks. I don't think we're going to talk about Q1 of next year. As far as the loyalty/ -- my price rewards -- private label credit card. We continue to see good growth in those programs. So I think from a loyalty perspective, we've done a pretty good job over the past years having our product and our offerings resonate with mom. If you just come up a little bit from the conversation. We've been share takers for almost a decade now, while remaining net store closures, and when you look back at Q3 that was really no different. We're one of the few kids' retailers to comp positive and we picked up share in the third quarter. And most of the kids retailers we've read about have reported anywhere from negative low-single-digit comps to negative mid-single-digit negative comps for Q3. And for the most part are providing similar Q4 outlook. I think when you think about the fact that our mall-based business is in the high-30s right now after a lot of work on fleet optimization. When you throw in e-com, our mall-based business is in the high 30s and when you think about what Mike said with 1,000 lease activities in the next few years coming up and a digital business that continues to exceed its plan every quarter, there's a lot of flexibility within our hands and to look at those percentages and continue to drive that e-commerce percentage up continue to drive that off-mall percentage up and continue to drive that mall percentage down. We've said that there's $12 billion of apparel sales from poorly positioned kids retailers that are rapidly consolidating and closing, and that implies the $600 million per year is redistributed. And as I said at the beginning, we've been able to take good advantage of that redistribution for almost a decade, and we see really no change to that. We're seeing a change in Q4 to date. We're seeing that they off-mall players are able to drive a significant amount of traffic to their locations in the month of November through their promotions. People are out there, and they're buying hard goods, and they're buying electronics, and they're buying televisions, and they're not visiting them all yet right now. And so, if that's what we have to do and we have to look at that for next year and we have to make some adjustments or more adjustments than we were thinking of making to our mall-based locations and drive our e-comm business up even further than those are the decisions we'll make. But from a market share point of view, we have no intention of not continuing to gain market share and continue to focus on getting that profitability back and continue to get those margin levels back where they were pre-Gymboree.

[Operator Instructions] Your final question will come from the line of Jim Chartier of Monness, Crespi, Hardt.

Thanks for taking my question. Mike last quarter you addressed some social media complaints about back-to-school shipping, how are you doing now? We've continued to see some complaints online, but can you just talk about how your e-commerce shipping has been post back-to-school? And then have the use of Radial might help that? Thanks.

Sure. Obviously, we integrated with Radial in the third quarter for holiday shipping in the fourth quarter. It's been a very smooth integration. It's been well-executed by both teams. We're shipping our planned output from Radial during this peak holiday period, and as I mentioned before we'll ship over four million units from the Radial facility during the quarter. We have seen a significant decrease in days backlog. Last year, it was as high as seven days after Black Friday. I'm happy to report right now we're trending about 1.5 day of backlog in our DC. So surprised to hear that you're seeing complete on social media, because we haven't seen it. We did have the back-to-school pickup. We did accelerate expedited shipping during it to meet our SLAs, which we think we did about 99% of our SLAs delivered our SLAs delivered within the 10-day period. But we believe that's all behind us now. We have a facility that's still ramping up that has plenty of capacity left. And in the meantime, we're also utilizing some of our omnichannel fulfillment capabilities, such as, ship from store, though to a much less of an extent than we did the prior year. We have BOPIS, which is buy online pick up in-store. And BOSS for those individuals that don't need rush shipments. So, all in all, we're very pleased with the fourth quarter distribution situation.

Thank you for joining us today. If you have further questions, please call Investor Relations, at 201-453-6693. You may now disconnect your lines and have a wonderful day.