Good day, and welcome to the PVH Third Quarter 2019 Earnings Call. Today’s call is being recorded. At this time, I would like to turn the conference over to Dana Perlman. Please go ahead ma’am.

Thank you, operator. Good morning everyone and welcome to the PVH Corp. third quarter 2019 earnings conference call. This webcast and conference call is being recorded on behalf of PVH and consists of copyrighted material. It may not be recorded, rebroadcast or otherwise transmitted without PVH's written permission. Your participation in the question-and-answer session constitutes your consent to having anything you say appear on any transcript or replay of this call. The information being made available includes forward-looking statements that reflect PVH's view as of November 25, 2019 of future events and financial performance. These statements are subject to risks and uncertainties indicated in the Company's SEC filings and the Safe Harbor statement included in the press release that is the subject of this call. These risks and uncertainties include PVH's right to change its strategies, objectives, expectations and intentions and its need to use significant cash flow to service its debt obligations. Therefore, the Company's future results of operations could differ materially from historical results or current expectations. PVH does not undertake any obligation to update publicly any forward-looking statement including, without limitation, any estimate regarding revenue or earnings. Generally, the financial information and guidance is provided is on a non-GAAP basis as defined under SEC rules. Reconciliations to GAAP amounts are included in PVH's third quarter 2019 earnings release, which can be found on www.pvh.com and in the Company's current report on Form 8-K furnished to the SEC in connection with the release. At this time, I am pleased to turn the conference over to Mr. Manny Chirico, Chairman and CEO of PVH Corp.

Thank you, Dana. Good morning. Joining me on the call is Mike Shaffer, our Chief Operating Officer and Chief Financial Officer; Dana Perlman, our Treasurer and Senior Vice President of Business Development and Investor Relationship. Our President, Stefan Larsson is traveling and visiting some of our international locations and will be joining us on our fourth quarter call. I am pleased to report that PVH posted strong third quarter results, especially in light of the challenging and volatile global backdrop. We reported earnings per share of $3.10, which exceeded the high-end of our previous guidance by $0.10, despite the higher than planned interest and taxes of approximately $0.10 per share. This outperformance was principally driven by our European businesses and better than planned performance in our Asia Pacific businesses. Revenues rose 4% on a constant currency basis, which also exceeded our previous guidance. Although we are raising our annual earnings guidance for the year, we continue to take a conservative approach to planning the fourth quarter holiday season. Our sales and earnings guidance assumes a competitive and promotional macro holiday environment. And we expect continued headwinds from uncertainties surrounding trade and tariffs. Before I go into the specific brand details, I would like to provide a few key things from the quarter. First, beginning with our performance by region. Our European businesses continue to post strong results, despite the macro situation and uncertainty around Brexit. Tommy Hilfiger and Calvin Klein are outperforming their competition, demonstrating strong performance across the vast majority of markets in Europe. Both brands are resonating with consumers and our fall holiday product is experiencing strong sell-throughs. We believe this favorable trend should continue as we move through the fourth quarter. Moving on to the ex-U.S business. As many of our peers and key customers have indicated…

Thanks, Manny. The comments I'm about to make are based on Non-GAAP results and are reconciled in our press release. Our non-GAAP earnings per share for the quarter was $3.10. It was $0.10 better than the top end of our previous guidance. The beat was driven by strong Tommy Hilfiger performance in Europe and Asia-Pacific. The actual beat from the business was about $0.20 with interest also better than guided by $0.02, partially offset by tax expense, which was higher than guided for $0.12 as a result of timing. Part of the business beat was due to the acceleration of $20 million of Tommy Hilfiger international shipments and a shift in the timing of marketing expenses, which both benefited Tommy Hilfiger in the third quarter. These shifts will negatively impact the fourth quarter earnings projections by about $10 million. Moving on to guidance. We are still planning revenue and earnings conservatively for the fourth quarter. Pressure continues in the channels we operate in North America as we look at the balance of the year. We continue to see heavier industry-wide inventories in the channel than last year along with the decrease in traffic. Our international consumers who shop in our tourist outlet stores are not in the USA at the same levels as last year. In Asia, our businesses continued to be impacted by Hong Kong protest, along with overall weaker traffic trends across China. In our European businesses, we see Tommy Hilfiger outperforming plans and Calvin Klein slightly better to plan. With significant amounts of business to be done in the upcoming holiday period and with our earnings release earlier than prior years, we've not reflected our current trends and instead have reflected trends more in line with third quarter into the fourth quarter. Our current trends are somewhat…

Thank you. [Operator Instructions] And we will take our first question from Bob Drbul with Guggenheim.

Hey, good morning. Manny and Mike, when you guys talk about the promotional levels in the third quarter and your expectations around promotions in the fourth quarter, can you just talk through a little bit the assumptions around markdown support, the assumptions around just the absolute risk that you have in the environment versus just how conservative you are planning the fourth quarter, especially around gross margins?

Sure. Look I think we -- I mean you've seen the results especially some of our key accounts department store sector, the off mall sector. The third quarter has been somewhat disappointing when we look at the comp trends and margins and we're expecting that that -- from a projection point of view, we are projecting that trend to continue. I really believe there's very little risk in our guidance and projections for the third quarter. I think we built in conservative estimates when it comes to margin support and what would be necessary as well as our own growth margin markdown activity. If you see some health in the environment, I think we're in very good position to capture that as we go forward. So I think we will react to how the consumer and how the holiday trends have come in, it's given the calendar shift with shorter time between Thanksgiving and Christmas, which gives the hard season to project at this point. We really have our arms on it. But given our systems, we’re able to see things on a deal basis and react very quickly. So we will stay on top of this, but I feel I feel good about our guidance and projections for the fourth quarter and feel that really, really good shape to outperform against that guidance.

Got it. And, Manny, I was just wondering if you could spend a little bit more time on China and Hong Kong. And I guess my questions are, are you seeing the impact from the China U.S. trade relations impacting sort of the brands of Tommy Hilfiger or Calvin Klein when you think about the results there? And can you just talk generally around the total exposure that you have at this point on Hong Kong? Thanks.

Sure. Let me take the last part first. Hong Kong is just -- its about -- just a little bit over 1% of our business, $100 million volume for that market. And when we look at that specifically, it's a big -- it's -- relatively speaking, as our competitive set. It's a big business for us and highly profitable. So that's putting pressure on the region. I think we've done very -- during the third quarter, we did some brand work in China around the issue you just talked about. And we did not see from talking to consumers, panels and talking to consumers leaving off stores, probably over a thousand consumers, we didn't see any deterioration in the strength of our brand or the receptivity to buy both the Calvin Klein and Tommy Hilfiger brand. So we haven't seen -- I know some people are concerned about this potential negative reactions with American brands. We haven't seen that in any significant way in China. What we’ve seen is -- and putting it into context, we have -- Calvin in particular was a first mover into the China market. We have a large and probably larger than most of our competitors positioned in China with the business and we see the pressure in the brick-and-mortar stores through the third quarter. And I think that's really just an -- we're positioned as a premium brand not a luxury brand, but a premium brand, I think that particular segment of the market is feeling the pressure is that the consumer is feeling in purchasing and we're seeing negative comp store trends in our brick-and-mortar. And despite really strong growth on the digital platform given the size of our brick-and-mortar business, it's not enough to offset that negative trend. Some of our other competitors have relatively small store base and are growing similar to us online, but they don't have the pressure that we have in our stores. I think as we turned into the fourth quarter, we've seen a bit of its sales improvement, I mentioned in my comments. It's three weeks old. We will see if that continues, but that gives us some way as we move into the important fourth quarter in China. So we will see how that all progresses as we move forward.

Thanks, Manny. Happy Thanksgiving.

Happy Thanksgiving, Bob.

Our next question comes from Erinn Murphy with Piper Jaffray.

Great. Thanks. Good morning. Manny, I was hoping you could talk a little bit more about your view on the current logo cycle, particularly as it relates to the Tommy Hilfiger brand. It seems like some of your peers you're starting to see pockets of slowdown in that trend. So just curious how you feel the Tommy brand is positioned as we go into 2020 and just your views on the overall kind of where we sit with a logo cycle?

Look, I think it's a good call out. The logo cycle, I think -- there's still a key portion of the business that's done there. I think as we move into spring, in the United States region, you will really see a shift as to back to more of our core sportswear categories key items core driven products and you will see more -- you'll see less logo products. Still appropriately, the brand has -- always has an important component in logo, but we're not counting on that as we go forward. Both in the performance area, or in denim area, logo continues to be key part of that business and we're seeing strong trends in the Tommy jeans business overall. Internationally, I think we moved even quicker to move away from the logo trends, particularly in Europe and Asia. I think we're benefiting with that shift. We are seeing strong growth, particularly in our jeans business throughout Europe and Asia. And I think that trend should continue as well. But it's clear both for Calvin and Tommy, logo is continues to be an important part of the product offering, but it just reduce the exposure to it as we move forward.

Okay. That's helpful. And then I guess just my second question is on the -- excuse me, Calvin Klein margins in North America. They’re up nicely as you lapped last year, but just curious if you can unpack a little bit more on the drivers there and just the sustainability of recapturing that market here in North America for the Calvin brand? Thank you.

Look, I think -- look, you started to see -- you're seeing it in the third quarter. I think that you'll see gross margin improvement continue into the fourth quarter. I think when you look at operating margins, depending on the shift in marketing and whatever, I think you really need to look at the six months season. So I think if you look at third and fourth quarter, gross margins will be up in both quarter and operating margins for that period of time should be up as well as we've really been focusing on that product execution moving forward. And I think as we go into 2020, that's a key part of the story as we are really focusing on our product offerings and the enhancements that we see coming forward. So I think that's going to be a key issue for us. We're starting to see it now. We're starting to see improved operating income performance and gross margin performance and that trend should continue into the third -- sorry, into the fourth quarter.

Got it. Thank you and happy holidays to you all.

Thank you. Same to you.

Your next question comes from Michael Binetti with Credit Suisse.

Hi, guys. Thanks for taking all my questions here. Manny, I know you don't want to get over your skis here, but as we look out past 2019, I know there's some fairly real intangible puts and takes in the business next year that we can see coming with pretty good visibility this year. I remember on this call a year-ago you and I talked about there being some translational FX coming in 2019. But you said there was no transactional FX, it's all been translational. So far, as you've reported, in the past, transactional has tacked on an impact in the following year. Is it fair to assume we should already expect that to show up next year a little bit? And then who knows on tariffs obviously, but all else equal the $0.20 headwind this year was largely in the second half if there's no change. We probably get the other half of that in the first half of next year. Are there any other broad brush strokes puts or takes we should think about as we think higher level about the low double-digit longer term earnings algorithm for the business as we try to look at 2019?

Look, I will -- I think you've hit the two key headwinds. I think you hit the two headwinds that we are looking at for next year. Foreign currency transaction will be a headwind depending where the dollar won. Well, sometimes they’ve been [indiscernible] since we’ve hedged out 9 to 12 months. And as we look at it so no past this prologue, that you'll see that piece come in. On the tariffs, it's really hard to understand what’s going on because we're not sure exactly what's going to be in place given the protests [ph] that are going on in Hong Kong. But you said it correctly, and it was worth about $0.20 this year. A bigger tranche comes into next year. Our exposure overall goes the other way as we reduced our exposure to China. But I think you said it well and that you could expect that what it was this year, you should see a similar impact next year on top of that. So that's how we're looking at it. Those two key components are what we are trying to manage that. I don't think it really -- I think we think about our long-term earnings algorithms. I don't think it changes anything on a constant currency. I think we're comfortable that we can grow our sales in the 3% to 5% kind of range and we can grow our bottom line double digits moving forward. So that algorithm continues. And we’ve to deal with the vagaries of currency favorable or unfavorable, but the business model I think the underlying strength of the brand continues to be in place and we are confident in it.

Got you. And let me ask you I guess a longer-term question, Manny, I’ve to ask. As you think about you reflect back on this year and last year, I guess you think about the next several years in the business, how do you feel about your U.S. distribution footprint today?

I think -- look, I think our brand -- look, when you think about Calvin and Tommy brands, we’ve significant strength with those brands and we will -- we have consistently found the right channels of distribution to sell off on the [indiscernible]. Department stores will continue to be a critical portion of our growth. For those two brands, Macy's will continue to be a key customer for us. Nordstrom will continue to be a key customer for us as we move forward. And we also have a direct-to-consumer business here in North America. And I think we can manage that business as we go forward as those customers go through it as well. You know, no surprise when you talk about it, there's too much retail real estate. In the United States, I think we're going to continue to see that shift down. For us, we've always managed the U.S market as a slow growth market and we'll continue to manage it that way. The online -- our online presence in North America continues to grow both that we operate directly and through a number of our pure-play retailers as well as our key department store retailers here. So I'm confident that that will continue to grow. But the real growth for us with those -- our two brands should continue to be internationally in those markets and that's how we're looking at it as we go forward.

Okay. Thanks a lot for all the detail, Manny.

Thank you.

Our next question comes from Jay Sole with UBS.

Great. Thanks so much. Maybe I just follow-up on the tariff question. It seems like for this third quarter and fourth quarter prices were sort of locked in and that sort of put the burden of absorbing the tariff costs more on brands and maybe other parties. Just looking back over the last three months as negotiations have gone on, do you see more of a sharing of the cost burden, or an ability to pass it on, or can you just give us any color about how that dynamic is changing about who absorbs the tariff as we look into fiscal '20?

You know it is -- it continues to be a volatile environment. They are because the uncertainty just continues and the talks go on and you hear one source telling you, there is a Phase 1 agreement commenting that there will be no new tariffs. And so it's very hard to plan. We are partnering with all of our key factories. And our key factories are working with us as we go into spring. It really is going to determine what happens post spring as we move forward. If these long-lasting tariffs, are these short-term in nature. If they continue to be short-term in nature, I think our factories are going to partner with us to work through it as we go forward. At the same time, we're reducing our exposure. We should be around 10% to 12% exposed. U.S sourcing out of China will be about 10% of our overall sourcing mix and I think that compares to three or four years ago we were close to 35% to 40%. So I think we're moving strategically as we plan. That should be somewhat of an offset. We will look at targeted price increases as we go forward. So we have to be also cognizant of the consumer and not going too hard too fast. They're working with our retail partners. So that's an ongoing discussion. And I think they're all leveraged to pull. And we will pull those revenues as we go forward. So that -- it's a challenge and the uncertainty it's making it more of a challenge.

Got it. And then I apologize in advance for asking a short-term question, but just on the calendar this year for the six fewer days between Thanksgiving and Christmas. I'm sure as many retailers look at their comps over the last week, it looks significantly down year-over-year. And is the assumption that look over the next week you know everything gets make backup and everybody is back to square would expect to be and then sort of just the rest of the season is the rest of the season, or at what point because you said at the top of the call that it's sort of hard to kind of figure out where the businesses is at given the shifts? At what point do you say just the average retail out there decided, okay things are trending as planned at what point is maybe the retail environment get concerned that there's calendar shifts having a negative impact as we get through Cyber Monday and things aren't good, then there's only a handful of weeks left before Christmas and then maybe people start to incrementally promote maybe more than they expected. How does it play out in terms of how retailers are going to think about their decision-making process, because of the shorter calendar.

Okay. That's a -- it's a bit of a load of questions, but let me start with by saying our assumption in our guidance is going to be promotional. And Christmas is going to come late. It's been coming later every -- throughout the last five-years, they've been coming later. And this compressed calendar I think is only going to put more pressure on it. That's why we're trying to be as conservative as we are about fourth quarter margins and fourth quarter sales trends. I think we're going to get a really good picture at the end of this, as we get through Cyber Monday into the early part of next week. And is there -- there will be a catch up there obviously, but how big a catch up. And then how much of -- even if you're somewhat behind, which I would expect to be because you have your six less shopping days at that point, there's an assumption that the next two or three weeks is going to be positive comps during that period of time year-over-year because of the compression of the calendar. And that's what everybody will be watching. I have to be honest, our assumption is it's going to be more promotional. We feel that way because, let's be honest, the third quarter was not a strong quarter. The seasonal weather patterns weren’t great for early sell in the spring. We are also bouncing business early November, so some really good sell in early November. As the weather turns cold, this is a good sign. So now we're looking to see where it all plays itself out and it's -- nobody loves that this calendar is setting up the way it is. This is what we are trying to deal with and we're trying to be as prudent as we can about projecting out the fourth quarter.

Got it. Super helpful. Thank you so much.

Your next question comes from Ike Boruchow with Wells Fargo.

Hey. Good morning, everyone. I guess, Manny, just a question I want to focus on Tommy Hilfiger profitability. So we saw the margins in Q3 and when you gave the guidance for Q4, I guess my question is what exactly is driving the margin degradation? Is it the promotions and the deleverage in the North America retail fleet? And then the follow-up to that is, assuming that there's no improvement in tourism and the dynamics that are basically causing that, should we assume that that continues into the first half of next year because you really didn't start to see that pressure build until this quarter. So I guess that's my way of kind of asking on the margin performance into next fiscal year, while I know you're not giving guidance, is it safe to assume there's probably more upside or more earnings growth in the back half of next year relative to the first half? Just kind of curious how you would answer all that stuff.

Okay. Look, we're not giving guidance for next year, but let me put some color on what you said, because I think some of what you said is not -- I will -- let me just say, we have to put things into context. Tommy Hilfiger, 2018 is coming off -- North America comps were up between 6% and 7% for the year. Strong trends coming in. And given that trend of the business, we bought into a portion of that sales growth. We started to see in the first quarter of last year, starting in February, we started to see a real pull back in international tourism trends into the U.S and we started to see negative comps. That intensify the second and third quarter. So we start to lap these negative comp store trend beginning in the first quarter, but really going into the second quarter of 2019, 1SO that comparison. Also, since we bought into those sales trends six months out, we had clearance inventory that needs to be moved and we moved aggressively to get to move through that inventory. And that's the pressure you saw the sell-off at spring/summer bids in the second -- and the second quarter and into third quarter this year. We're assuming it's going to continue to be promotional, so margins will be under pressure in the fourth quarter. That should ease a bit into the first quarter. And then you should really start to cycle that as we go into the second quarter of 2020. So I think that's the way you have to look at it. And keep in mind, Tommy Hilfiger North America business is coming off of three years of significant comp store growth into this 2019 year. 2018 was a record year for the brand in the United States. So it's lapping that has been challenging for us as we've gone forward. I think it starts to level out as we get into 2020.

Thanks, Manny. That's helpful. And just a quick follow-up. I mean, we've had some consolidation in the luxury space announced this week. Maybe your state of the union on the industry is challenged. Would you expect more M&A in the space? And then kind of how are you thinking about that as it pertains to your company?

Sure. I think, look, over the next 12 to 24 months, I think the retail sector and the retail apparel sector is going to have consolidation. It's -- I think it's -- given the dynamics of the industry, it's -- to me it's almost a given. The challenge, I think from a pure M&A point of view, at this point financial -- financing markets are very strong. Credit is available. We have a very strong balance sheet, which can give us the ability to do a transaction. We'll be looking -- we will really be looking forward to doing that. One of the challenges you always face as the sector has gone through a multiple compression is people are looking at the stock price or evaluation and they're comparing to where it was 12 to 15 months ago. And that leads to sell in a bit, in people's minds to get a sense of what current valuations actually are as we move forward and deal with all this uncertainty. But my general feeling is there will be consolidation and then they will be a key part of PVH as well and we'll continue to look for opportunities.

Great. Thanks happy holidays to everyone.

Thank you.

Your next question comes from Dana Telsey with Telsey Advisory Group.

Good morning, everyone. Manny, just following up on the M&A acquisition, you've done small acquisitions and large acquisitions. You’ve done acquisitions with online and data and then you've also done brand acquisitions. What do you think is most appealing to you that helps to move the needle in enhancing the platform of the entire business going forward? Thank you.

Sure. Look, Dana, the acquisition -- principally the acquisitions we've done has been recapturing our Calvin Klein and Tommy Hilfiger business, international businesses around the world. Australia, the South Asia, Southeast Asia, looking at Brazil, a number of the transactions that the China transaction a few years ago. That's been the focus in the last three to five years. I think that that consolidation is a few things still to do, but relatively speaking nothing that dramatically moves the needle. I think we're really thinking about it along the branded side. And we will think about continue -- looking to add another brand to the portfolio or collection of brands depending on the acquisitions. I think scale is becoming more and more important. I think the investments that you need to make in order to be competitive, the digital journey that we're all on, the shifting channels of distribution moving online, more so the investments, in order to compete there that you need to know, I think scale becomes even more important as you go forward. I think we have a demonstrated track record of knowing how to do acquisition, how to integrate them to get the benefits out of it, how to manage that from a portfolio company, which I think people underestimate the awareness to keep what's critical to operate the brands and keep those separate from the design product, aesthetic point of view and being able to leverage the back office, all of the systems, the capabilities and the strategies in order to take advantage of that and make the investments for each of the brands. I think we understand how that's done and that’s -- we are aggressively looking to move in that direction.

Thank you.

We'll take our next question from Heather Balsky with Bank of America.

Hi. Thank you for taking my question. Can you dig a little bit more into the Calvin business and your first -- just your thoughts on your expectations for operating margin? A couple of quarters ago, you’ve been talking about 200 basis points improvement, but the environment has clearly changed. Also, it sounds like the new denim products is resonating. Can you just talk about the trends you’re seeing especially in U.S. channel. And is there more opportunity into next year on the product side. Thanks.

Okay. So I think on the Calvin business for the year, we're looking at some -- we are looking at operating margins up about 50 basis points. I think we were looking for slightly higher than that at the beginning of the year, but some of the pressures that's going on particularly in Asia, in the Hong Kong and China businesses, has played an impact on that. I think over the next three years, there's the opportunity to expand margins to another 200 basis points. I think if we're -- again, we're not giving guidance, but I think if we were looking at next year, we'd be looking for something between 40 and 70 basis points improvement in operating margins going forward. And hopefully, we can outperform that, but that’s how we’re thinking about the business. I think the second part of your question was on denim, because you broke up a little bit. So I apologize. I think we are seeing really -- we are seeing good results, specifically in core denim products. On the -- on jeans and bottoms, here in the United States, that's been the driver is the bottom side of our men's business. G-III just launched the women's products here in North America. The receptivity of that product has been outstanding. We are seeing really strong sell-throughs there and they’re starting -- and they've gotten strong placements. And I think you -- if you've just got to Herald Square, you see outstanding presentation they have there with the Calvin Klein Jeans product. Internationally, I think we are probably six months ahead of where we are in North America. The international product I think has really taken an upgrade to see very strong sell-throughs of all tops and bottoms throughout Europe and in all regions with the exception of China, given the dynamics that are going on there. We've seen this sell-throughs of products. So I think we're seeing good receptivity of products from the consumer and the retailers. The order books in Europe, which is our best indications are continued to be very strong for the Calvin Klein jeans product in the spring and the initial offering of product [indiscernible]. So I think we are on the right track with that product back to the brand DNA. And I think the receptivity of our products that we've seen particularly internationally gives us confidence in the turnaround on that business.

Great. Thank you very much [indiscernible] my questions. So thank you.

Next question?

Next question comes from Jamie Merriman with Bernstein.

Thanks very much. Just picking up on the M&A topic, do you have a view on -- with the brands that you acquire, whether you have a preference for wholesale exposure given what you know with Calvin Klein and Tommy Hilfiger. Are you -- would you be more interested in brands that have more of a direct-to-consumer go-to-market strategy? Thanks.

Look, I think it's two things. I think if you look at our balance of wholesale to retail, we're probably on a dollar basis we're 55-45 when you think about where we break out. And as you move internationally, we're even more direct-to-consumer, particularly throughout Asia, for the most part is probably 80% retail direct-to-consumer. And our Europe business is probably in that 55%, 45% range. I also think when you think about wholesale versus retail, strength of the market is different when you are in Europe and when you are -- versus the United States or when you’re in South America and Asia. So our wholesale businesses continue to be our most profitable businesses overall. Our retail business is highly profitable as well, but our wholesale businesses are even more profitable [ph] as we go forward. And the department store channel internationally continues to be very healthy for us. I think we are comfortable running both a direct-to-consumer model, which we do with both Calvin and Tommy, and we're comfortable understanding how to manage that wholesale channel distribution and even more importantly how to manage both at the same time. And we have always been multi-channel retailers. We understand that you have to speak to the consumer where they want to buy the product and I think we understand how to really go after both of those market. So it would depend on the brand and where the brand is currently positioned.

Thank you.

Operator, this will be our last question. It's kind of long. Thank you.

We will take our last question from John Kernan with Cowen.

Hey, good morning. Thanks for taking my question. Manny, can you talk about the theme of speed and the ability to flow inventory faster, control markdowns better throughout the entire retail ecosystem. It feels like there's a long-term opportunity here. I know you're using data. You've made a lot of investments in digital. CapEx has stepped up quite a bit in the last several years. I was just wondering when you think PVH and the industry in general is going to reach a point where the working capital and the lead times get improved across the entire ecosystem?

Okay. So I don't want to speak for the whole industry because I find the apparel industry to be an undisciplined industry. There always seems to be excess product. There always seems to be -- it's advertised to create more. And then, yes, it's crazy [ph]. So the industry I think is an undisciplined industry in many respects. I think we've made tremendous investments and continuing to make investments in 3D design, in shortening our core replenishment businesses with reduce lead times overall. And I think you'll see that continuing. I think over the next two years, in particular, you will see more and more of that in the business environment. I think the challenge that's going on, we have to at least be intellectually [ph] honest, is as of the fourth quarter of 2018, just to put things in perspective, the industry was coming off of a very strong fourth quarter. Everyone bought into that and business [indiscernible] department store business in North America, in particular, and our business in China and mostly in Chinese real estate feel the pressure of that business. The lead times people [indiscernible] the positive comp store sales trends. Most of the sales trends in North America, in particular, were low single-digit negative minus 2, 3. That got worse in the third quarter. I think when we're trying to really get ahead of that trend, cycles -- lead times have improved from nine months to six months, but they are not six days. So those cycles are -- and buying [indiscernible] is really what's causing the challenges. The drop of overall retail from private label programs in department stores in oversaturation of certain brands is putting pressure on business. The fact that we had the towers that everybody is dealing with and people were…

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