EXPR - Earnings call transcript Q4 2017

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Operator

Greetings, and welcome to the Express, Inc. Fourth Quarter and Fiscal 2017 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Mark Rupe, Vice President, Investor Relations. you. Thank sir. ahead, go Please

Mark Rupe

conference number the statements of may differ you, materially those within Donna. due XXXX. update I’d the of to to information statements call. Securities forward-looking are Act Express company’s a to during today’s any and and Safe Actual facts, Reform in results future or containing to may release. Litigation except be which risks meaning Good to suggested open of morning, from no all deemed this SEC, made uncertainties like statements the of forward-looking in provisions. required obligation welcome except by as press law. forward-looking those assumes described filings Harbor including historical statements our with by constitute Any Thank call, the reminding company’s Private of you the

addition, SEC In diluted release, make which to measures these press Relations with non-GAAP are adjusted adjusted found Form filed call in available income, which to flow, reconcile the Investor non-GAAP net on share cash our will during to the can an has our this is be exhibit free necessary X-K as Information measures. per and website. reference earnings company’s we been and

has related accordingly, The included of Vice President its line Pericleous, retrospective COO; website. is statements David full Matt has made Our press in and Moellering, X-K them With that Vice note CEO; has the Senior provided information on statements Kornberg, on XXXX. recognition utilizing release Investor change revenue call President will I and the comments I SEC will the statement. also over today today’s new like turn the and will to timing income company are standard and supplement both available and the accounting its Form of recast and of XXXX, now presentation. and which David. as Executive and company also the in recast me adoption, to today the detailed XXXX XX.X, Relations the would Exhibit CFO. for the section method investor The items adopted classification the Perry filing with its income in President and to company certain the

David Kornberg

Thank and Mark. our us. on fourth you and Good will with highlight morning, merchandise then key you, a and performance thank results I accomplishments. update XXXX for results and quarter our begin brief joining

in drive our will operating the comparable improvement XX% earnings shared on in focus year. to E-commerce our however, decline, adjusted EPS in a on $X.XX. XX% January. of increased last the basis continued gross an key up basis performance quarter were relative challenging, sales, Finally, December, sales able the comparable and margins in be sales negative and slight represented we holiday were weeks during sales Performance continued of I key XXXX. weakness from in stores, with and early we place comp and last to experienced to expand XX% as initiatives our in net areas Despite we Fourth to discuss was increase sales year. have X%.

are addressing. dressy outerwear In average performance of dresses fourth fragrance. outerwear to comp suits, denim, and than terms woven and In assortment ahead we Sales the quarter, our better jackets, slightly below and men’s due saw actively which led casual in performed of tops, we of issues, women’s were denim, merchandise, by women’s, sweaters pants, in plan business pants, jackets.

on a For the year whole, as X%. adjusted was of $X.XX, basis an with sales negative EPS comparable

improvement our the encouraged initiatives year, by our below the were fact the traction. XXXX overall showed performance key as gain our plan, of While results over are that full course year we

year in and great and operational business dress solid casual the and in women’s performances Some of men’s during pants, shorts. included suits another highlights year pants the

Store. the progress the turning of million, business real woven basis made in and NEXT launch Expansion in A XX% card. for Next $XXX capabilities, of year-over-year Pick sign-ups in by and the corner outlets footprint and the improving with in with the closing Ship economics in Up for sales XXX customer to also credit another of of and continuing leases tops, in quarter XX Express stores Online, year-over-year stores, from record accounting the renewed program Buy into up with our of fourth sales from omnichannel with stores next year growth We and e-commerce during the dressy store Further retail spring In successful and year. net total sales, XX The on a XXXX. XX% our increasing loyalty of our pilot comparable Store the XX% retail relaunch optimization significant XXXX. converting of

to We on lastly, in in XXXX highlights these discuss year-end to balance with Proactive cash the through nearly look of in a increase during and openings. I of with which execution Continued outlet will strategy, now at our target in $XXX our sourcing savings more management and execution SG&A initiatives, XXXX, our achieving cost our store no build $XX sheet And our expense costs. conversions key of lower successful strengthening XX% expansion basis new through million in driven by million detail. of debt cost obligations. the base reduction

product that is everything we do. central to First,

consistently the on compelling with product focused customer. across our assortment delivering resonates We’re that

start, season. casual will across product the for we key important One Express optimistic spring spring build the month assortment This to reorders initiative of our a is and we niche as Eleven, line within and off this a the on implement Last some best-selling are our business of and units good deliver range items. broader fits. we featuring trend initiatives Our is relaunched key

we as in and the We’re for to what as a approximately stores, extend well to offer and our extra in Atlanta, XXX online supporting In women our both in online. will offer it in and we extra stores. large will include doing XX-inch offerings some large Chicago double of and In been waist XX and will will we of men to extra most time, both our XX-inch sizes. we top small This May, markets. size men’s, locations additional XXX XX double for retail to to extra small stores women’s. have Similar Dallas,

are well advertising additional the messaging to opportunity will represents excited engagements to and target of significant be This able We support reach initiative extending to Express customer more in this it and customer serve markets. offering, enhancing with through experience. Express as we online, as in-store three a brand for capture share, the and the and targeted customers the overall

to the will our and momentum men’s for wares us. drive shop In improved recent progressed to strength dressy well success focus we is we and suit tops, both and in are which in and we place trends and and NBA saw XXXX. on in a suiting, performance fall built our women’s, Work men’s we To supported online capitalizing jackets. pants Wear on the be are and addition, in growth continues build in have shirts about our performing And on out plans will partnership. through by a season we’ve excited women’s, In as In

expand continue Second, our our we E-commerce and will omni-channel business to accelerate capabilities.

functionality, our online achieve goal, and grow e-commerce for In exceptional in platforms. well across This as we and penetration. assortment XXXX, billion are will I continues the in we on Having and incredible sales. E-commerce $XXX associates last achieving mobile e-commerce with now and of in towards to would sales our a expand Our grow in to invest like team year, terms is on improving XXXX. time to sales now delivered business path Mobile accelerating in million rapidly. laser-focused over continues in target personalization thank effort $X this to in shared you our performance as billion that we e-commerce $X.X speed, milestone. e-commerce continue their to our

media integrated capabilities, ease our enhanced resulted launched the have of We frequency all and and social new sales loyalty usage. with in have program shopping, which higher of of NEXT app

of of further further In impact start company apply rollout have learnings, our Up to retail as At we we broader Store a a the significant the margin a this XXXX, our our progress to we plan and our to and expect Pick to market to Ship roll can it omni-channel including From on sales, out productivity. business, test to more stores Online, inventory quarter, majority terms overall the Buy Store of first we year. so in Chicago the expanded throughout In

in we Third, and continue engagement. marketing. focused through acquisition, optimization awareness overall and retention brand In are growing we social on brand of digital XXXX, invest search, to driving will customer

to and fashion We with social will of work influencers. also media range broad a continue influencers

and to and annual members, NEXT As program, loyalty it more the engagement, shopping driving relates frequency purpose we our improve the of with personalization services will spend. to add

customer will engagement We loyalty greater of degree our within capitalize base the social to also strength through program. on NEXT a our

We by loyalty footprint have also sign-ups impact by through we conversions our renewals. closures, proactively significant to manage aggressively XXXX, our our overall store expect favorable retail and XX% store to retail-to-outlet Fourth, Outlets reduced opportunity we and last to more business stores. to in lease customer in year. represent responded continue with grew than Since XXXX. expect rapidly-changing a minimal and highly-productive sales in full-price base environment for outlet NEXT expanding store in year’s the base. base XX%, growth positively have over to trade-off store generate this We our brand continue a significant from by incremental our significantly XX% XXXX our the while format grow to outlet nearly

stores positive continue plan to retail XX and to results to convert XXXX, we see another outlet. conversions We in from past

a period. sales the fashion and XXXX. are long earnings ability our We shareholder savings from a base our with $XX outlet increase of the cost value stores deliver end the to and annualized million And of on are outlets expect to over XXXX–XXXX Express rapidly remain e-commerce also total year to we is brand, deliver highly-relevant $XX managing open we plan and strategy as a lastly, business. confident new large growth our In term. summary, over and cost along track XX to by in with growing XXX evidenced and effectively to in million up XXX

in e-commerce, We for IT, omnichannel years, strategy have laying invested recent the foundation our and outlet in growth. significantly future

opportunities result, transformation. As a positioned retail presented by to the believe industry Express uniquely capture ongoing we that is

to Our e-commerce nearly our is rapidly. sales grow continues of now business and total XX% net

response diverse customers. our to capabilities expanding our the We in shopping further of patterns omni-channel are

We are and market and on broadening expanding building. our also are customer opportunity acquisition, laser-focused brand retention our assortment by

our like $XX we share underscores repurchase value. coupled million $XXX year the of progress Express our confident XXXX plans over to our shareholder turn I will million program, dedication positioning executed and against work initiatives, to improved the hard their executing initiatives performance. lead now made have We to our I continued last year’s for in which success. want and XXXX for commitment call to everyone with that driving Perry. the for thank would our ended to at We strategy

Perry Pericleous

discussing Thank of to our you, going review results, start legislation everyone. accounting XXXX discussion new David. to followed revenue and morning, quarter fiscal the briefly Good then recognition. tax quarter and will by outlook. the new standard and I fourth by first XXXX related our I’m

As the to like new relates expect legislation. many from we, reform benefit tax it to companies,

the With than corporate rate estimate rate approximately is forward we our lower be This our XX%, tax significantly federal that from will XX%. rate operating tax XX% approximately XX%. lowered going prior of to

our to this change, the new rate. re-measurement of deferred one-time due have using lower addition, a In taxes we

related included of deferred net a to During exit which recognized and a related $XXX,XXX the the XXXX, re-measurement to tax we fourth of benefit our a taxes million impact the one-time Canada. of of gain $X.X million quarter $X.X

earnings, adjusted our this For been items have excluded. one-time tax

from As in into resulting flow a and returning manner business the shareholders. cash taxes, of relates to to which it lower intend it capital utilize cash reinvesting back we use our to to existing similar include priorities the increase

We to growth various also opportunities. evaluate continue future

the the year to relates of adopted at recognition fiscal it standard we revenue XXXX, As a beginning new new standard. accounting

impact items classification standard While line on will and a income not our of adoption the on of our the new overall have change timing will statement. certain it material results,

and basis now that full net shipped and credit changes million, including card. as it X%, initiatives. last including review growth e-commerce quarter a will $XX XXrd versus basis year, by contributed week, important I Fourth XX% results. to by Comparable for private expenses is negative related label our to of recognition X. X% the driven It of comps approximately points, revenue week. year Merchandise increased million. treatment quarter increase which Specifically, on of negative impact margin and based were leveraged XX occupancy first sales by were and and guidance when our sales sourcing cost e-commerce benefiting XXXX $XXX our is accounting from mainly its a is this XXrd loyalty XXX sales fourth quarter sales note store program timing the merchandise our points savings new percentage Buying standard. the

result, rate XXX by margin a gross to year. quarter basis XX%, As from XX.X% up expanded fourth points last

expenses We effectively. manage our to continue

expenses due increased primarily SG&A was to X% While year, the week. year XXrd over it

percentage of a X.X% sales. investments. tax $X.XX. $X.XX week for deleveraged SG&A income sales, sales, per adjusted earnings year’s due or of last share, or basis EPS Operating an per quarter As of to benefit Adjusting share. Fourth per was diluted million The XX net of was $XX.X $X.XX. technology-related $X.XX contributed share by improvement XXrd X.X% points the was approximately $XX.X million from

overall share declined decrease diluted sales margin our note a For sales per including the structure, XXXX, with which $X.XX improved X%. the net X.X% week. of relative adjusted declining the It the X% The year. our to full to year week. XXrd pressured over totaled of Comparable included XX margin operating to decline contracting $X.X the is billion, $X.XX, important sales performance and that earnings from course

our sheet to $XXX equivalents, cash turning cash of the year $XXX with balance We remains ended flow, healthy. year’s million our cash last Now million. sheet and balance from up and

from year-end ADS label reminder, flow which the and cash benefited agreement our $XX disclosed million. a private cash amended As credit added operating balance card with previously

last significant include, year-end the million. were year, expansion the base, XXXX higher of dispersed X over year-over-year past the million this cash at inventory inventory was Components to increase Thus, points in which related to X just flow of of fourth month offset $XXX was million. timing from of driven extra fiscal more year. by interested in retail capital sales factory due number than X an $XX our the our growth the However, $XXX of year-end points fiscal approximately the was cash $XX versus $XXX XXXX by February and percentage of million, outlet million from percentage flow XX% the made the to was stores worth flow Inventories to cash $XX X in being operating support sourcing inventory and percentage quarter. points expenditures were over Fiscal free million. due

X.X during X.X $XX of our $X.XX. As quarter of which million quarter year-end, it relates fourth to to additional to first date XXXX, shares have address for million topic and average for final repurchased $XX year. our reflects shares we an share I the million for an want repurchase repurchased subsequent and the shares price million, for repurchased X.X million is $X program, million. full The guidance to We

$X.XX the negative in which impact of XX week added guidance the Our from includes $XX and EPS sales of XXXX. loss million approximately diluted of the

We margin increase occupancy expect merchandise to gross XXXX driven cost leverage. margin in by expansion and

$XX approximately costs. sourcing margin merchandise to lower million majority in realize expect initiatives, savings We benefiting with through the cost

and to costs handling expense and shipping e-commerce-related From SG&A higher penetration. expect due XXXX. increased deleverage anticipate perspective, to an sales expense in we we addition, e-commerce In to higher rates

in compensation. investments related Our and higher continued costs investments in guidance and to marketing, technology e-commerce, wage assumes depreciation inflationary incentive

new terms revenue that full now provide shares our guidance With date is recognition guidance occurred on repurchases I a share and In as but details. And quarter have that guidance not first of based lastly, activity. contemplate year reminder, overview, incorporates any the outstanding, our future will does XXXX repurchase standard. the to

new on This a margin slightly to guidance, by EPS recast offset operating comparable loss $X.XX deleverage. the year’s expansion quarter earnings recognition standard. to income range under share we breakeven. loss X%, in the margin currently net a quarter and adjusted of of first midpoint of XXXX, first of the $X.XX last loss revenue range breakeven, X% in our compares to the to of expense Based the partially by gross driven of range $X in we the negative to of expand and SG&A of per For our a diluted of expect million sales positive expect

In expense interest to approximately addition, $XXX,XXX. we net be expect

given it near considered $X.X pretax totaling expected quarter first projected from rate, negative items certain relates impact discrete tax million. approximately income meaningful As breakeven to not tax our is it our and

assuming an million. $XX.X we’re Lastly, of average count share

XXXX we range negative X to range it XXXX in guidance of full recognition of of margin revenue earnings to includes to approximately as to from by expect year’s in our of in under $XX Net Turning X. to $X.XX year adjusted the comparable year our compares our full million XXrd million points. share and currently and This guidance, sales EPS $X.XX the standard the operating diluted contract midpoint income positive the we XX on range $XX new last basis $X.XX. week. per recast the expect Based of the $X.XX

We the due to expect expansion gross margin offset more than SG&A deleverage aforementioned by items. be to

year’s As week basis points. XX benefit a XX the margin reminder, includes worth operating last from the which was

We and expect net of XX%. expense an interest effective tax rate approximately million of $X

approximately higher impact tax Our the expected effective quarter. XX% tax due rate first tax full than our operating rate the is to of discrete year in

expect also for full the outstanding XX.X We shares million year.

of new year, to close which conversions and store for stores. we XX the of activity retail plan are terms In to stores, XX outlet open outlets XX

retail end to at XXX and XXX consisting outlet compared XXX stores. XXXX XXX fiscal XXX outlet of stores. This the XXXX stores retail consisting We expect and in with of stores XXX

in spend $XX In terms to we of million to XXXX. compared $XX $XX expenditures, in million capital million plan XXXX to

our summary, generating outlook Our free and and strategy generation. our strong opportunity. in implies solid operating cash In we’re continued confident delivering for business long-term history of our XXXX has and flow flow a cash

and debt position we’re cash million more financial remains driving sound no committed with $XXX value. shareholder Our in and than

shares updating to million forward X% We of to we current our have over look to we under in now have question-and-answer would portion to I operator on begin our you continue like repurchased available. the reminder outstanding call. the call to of and a total turn progress approximately authorization XXXX. our As the the $XXX

Operator

Our of Instructions] Pamela SunTrust [Operator coming first from go Quintiliano question ahead. Robinson Humphrey. is Please

Pamela Quintiliano

few a just quick So questions.

for there years? in actively XXXX about that Just you sweaters. and change can bucket and mentioned you’re priorities maybe spend First, then, prepared the dresses comments there’s you CapEx? talk recent for us also, And fiscal addressing if any from

guys much. issues we are in that for the Thanks timing confident what you’ve look should identified improvement? So there? terms of you for And so

David Kornberg

XXXX for estate same from standpoint From from a and IT. standpoint a spend will, the expected to if spending CapEx we’re you real split,

invest estate outlet spend in real of some standpoint as overall technology. the and e-commerce and well some new conversions. continuing some in is to of our continuing to terms in We’re the that of stores, an remodel discussed IT of from then we’ve locations And as

Matt Moellering

From a and process early POS improve is reduce in are which reductions. going to a new markdown system technology installing fall, we standpoint, timing late spring,

improve We target also in on mobile online new are customer tool, the money versus customers investing in to able better be planning investing we and experience And web what to do finally, we're investing a personalization investments and mobile devices. additional today. to assortment into

David Kornberg

Pam, discussed we of timing your this in the the of improvement, terms our In on sweaters, dresses and question, January update. in

improvement reads, so there. We’re business, progress already we’ve and to good see and initial starting we’re seeing our very some terms the of sequential Dress in got starting

much, fall the that Sweater tests for in of business it is smaller terms spring, but In we’re we seeing. have good much initial us some got business, for a

the sweaters for into fall as should it’s the we of is a expectation of that and beginning a essentially out getting gate year new season new strong come the sweaters. my season on So

see we And into in the to we’re be improvements, overall, of dresses, as going now. sweaters, terms really of starting it’s timing get fall. to progress So,

Pamela Quintiliano

have any do for you update the then, on Merchant? search And Chief

David Kornberg

ongoing. is search the Yes,

strong Vice place, is women’s we to that the will. think Senior And important message men’s in update ongoing. that we news currently have very here Presidents who you search but the we have of are two and I when with,

Operator

from coming JJK Research. of Please is go question next Our Janet Kloppenburg ahead.

Janet Kloppenburg

in maybe know coming this well, savings I’m gross seems any you if could seeing And maybe work like then, in or got year, in SG&A some knits you’re part important wondering the It of since line you you’ve just the a on the but on - improvement margin bottoms And ask could cost overall about comment on could pressure. through you that but David, are the Eleven what to SG&A wanted winter you. your if comp of I through any an point well. they able cost I talk is this One there’s the year. a good, couple business you know little bit that flowing denim just to be outlook Thank as leverage would Perry, about spring and category, savings general business? comment for also I questions. at

David Kornberg

in Your improvement first question about One Eleven. the

we’re knit by I and bigger real into, key And, knits driven through think in that shape. there of we obviously, much is particularly that in business. being the progress becomes a that good making tops, have diversity of items seeing in depths The there. we’re the we’ve knits reactions is progress some actually really dressy bought part that seen

as we that we bottoms strength line a bigger we Perfect, in are successful that that in a category, to the into denim a continue that And denim, much category, we’re share February chasing to of good in the introduction of we as get had a have on the Pants which know, encouraged about start and business, a and a you we market a shapes, was On we introduced, but, leader in QX. Denim see business Dressy encouraged in way. Denim new it. about spring I’m and into of off and early of category QX selection lot seeing end pants that Shorts back I’m sizable is progress, in across-the-board got broad of very across so a Short

Janet Kloppenburg

after Perry follow have on a answers the side. I Thanks. SG&A on

Perry Pericleous

all million, hidden. of merchandise them savings From expecting XXXX, of some it that Most an occupancy. SG&A are and margin is that is standpoint, mentioned we’ve for we’re of $XX the that

creation, marketing from have an SG&A mid-to-high forth. standpoint, through this generation, that benefit so all it for So and that we technology the customer to margin. need acquisition, brands we’re all of we’re demand investments in that a adding on leverage the making From mentioned expecting gross the some then, year a SG&A been is expenses Matt And driven we incremental in content comp investments earlier. expense that of so and and standpoint, by

merit. So to wage these of cost And inflationary the minimum - both states related announced at wage adding the beginning year, the plans. plan, on maintenance, and the we based the et assuming increases to based to incentive high-single are That’s it and cut obviously as level that That And points. a impact certain compensation digit SG&A. then a of pressure depreciation, on in then and is mid- holding costs the achieving on cetera. have some relates then we’re of is of that number that expect it’s we the is why leverage -

Janet Kloppenburg

in is question comps just as contemplate last along, get your minus the you. if in the remind quarter, for the us X% can And to if Does April? improved you challenging my that on comps trend? the first X%. quarter Thank current went And guidance comparisons the more

Perry Pericleous

quarter-to-date what have right have now obviously what So our we place. for believe the our month and on on February have seen we that obviously and we in place based initiatives QX historical achieve in we reflects and builds in of that based guidance can we

relates year, the month-to-month not did last comp we comp it from specifically year. last the As trends changes to disclose

Operator

Our Please Anderson Susan coming go of next from question is ahead. FBR.

Susan Anderson

expect you just Do for the could expectations the about sequentially, quarter. the expectations about talk your year-over-year? quarter? your quarter, talk environment also, traffic if wondering you if first was in it how to also and And you did then promotional I the same for then improve stay or it for could first

Perry Pericleous

seen in the business is we Christmas. in what From at down. the traffic have the up stores in as we seen had a in early had that said to QX conference was reminder, in was And standpoint, softness what January leading traffic we a weeks a

So we did basis see month-to-month a quarter. fluctuation within from a the

do place, so will that’s As QX, we’re positive continue us, comp, double-digit continue that challenges guidance that it from for at post up to have strong standpoint, very have it And see we From at our in midpoint and comps that standpoint, of set a be X% guidance the expect have saying to expect in in we right? current the continues and the to we we guidance year. comps to the we traffic e-commerce a obviously traffic we’re stores e-commerce that QX. and going a to for QX relates how

David Kornberg

And out as you it’s regards with Look, here. still there David - the look mall. Susan, it’s to at promotions competitive

continually and is we goal with to think intention environment shown that them on in on of those the are that to up and if when pulling And promotions. promotions to operating we opportunities assess we evaluate Our trying and have we’re back pull the pick on I back arising. see that

Susan Anderson

about And additional just one in factors quarter. some talk first the health going follow just driving be of million. clearing if could there’s need It inventory the for sounds there’s maybe your $XX you like up on and help the inventory, but your up that, to if in core stores

Perry Pericleous

the basis some overall. I but because inventory we’re some the outlets, to on this the I us going is majority inventory front think low-cost what’s and this strong is in BOM only we as it continues levels is double-digit increase that’s the from in the ship is with are there because coming of to the keep into to e-commerce of there or an on optimize our the continue the to us by and early inventory of of really contemplates obviously. a inventory in is level, to countries of you provided growth. composition the important the shifted driven question within And some initiatives basis. our today. the stages comfortable to QX What level, and more to as have on again, we want was sales. QX we the for in an and we we maintain feel very for inventory again, delivered be of inventory of of it from remind vast standpoint, stated levels. inventory we’re again, our not e-commerce is from the is have to QX, are miss it One and elevated what parts increases So level, product managing store. that impact for some to store. mind the contemplated on the But we’ve that, That’s allow we’re And seeing And the guidance inventory two within therefore the further of in this why we the to on - FOB some outlets going in also guided store then And the in-transit QX it’s going as the need though

Operator

next Yih go is Wolfe question Please Our ahead. from Adrienne coming Research. of

Adrienne Yih

whether details it’s Any a leverage a You to Men’s? spring the so then we’ve pull Perry, little whether that a that this is I’m that That's done [ROD] has for single-digit February. I with Janet. on you the seeing wondering and bit had Women’s on there? try on rent to a work to promos you have on point. back you so can color little was occupancy. more now comping was good month much would if start improved, in high on but And on on follow-on SG&A give pace said of or off confused been mid

much. to that mid high assume on like we should digit that ROD So very you the leverage? similar, Thank single is

David Kornberg

within of Adrienne, things terms a about we’re of that say, But the gender - business within we side the question, the quarter in by seeing. I'm we’re seeing. the break I’d on don’t performance your lot Women’s that quarter first out of excited current the

Perry Pericleous

negative apples, digit. standpoint, to negative rent single we that a apples negative again, leverage. expecting to B&O a work reason that at single be concessions standpoint, an because terms earlier, XX-week When important look you I especially we IT from SG&A to is standpoint, in we’ve mind of leverage will From expect of low behind high we at when in B&O mentioned expect B&O the we’re done very that an look keep the as at to a have low basis we all B&O able in end which again, - the work to based single that, it, digits. though, because the of low done mid all of digits from is And

Adrienne Yih

get op for And how slightly the the year? that’s you to up margin

Perry Pericleous

down when at line we the at for slightly improve the expect year, margin, basis points item we the look look year. merchandise operating to by margin how the is it’s you but For

slightly expect have in And in the points we deleverage, leading XX B&O basis for a year. to cut contraction to also for We year. obviously, approximately then guidance SG&A at the improve of the

Adrienne Yih

were And in happen? Or just in That’s the an guidance? that is AUR assumption down. if to it the a is very quickly, higher the that promotions guidance. AUC of AUR and be Is would on in to flat pullback be upside expected

Perry Pericleous

to when improvement - at look million $XX $XX XX margin million part look of expected have the of it the basis the we in which expectation merchandise So for that points, billion is assumes about you $XX our year of million. $X at when you as

not So beyond markdowns. have, we do of this, expectation reduced level for a

So if back to should pull this continue we’re successful throughout to further promotions, margin. our on the expand merchandise year

Operator

Please MKM Partners. coming Our Roxanne ahead. next question Meyer go is of from

Roxanne Meyer

you are of What pressure question. previous markdowns? terms the from from XQ follow-on a in just assuming for One questions. Two

Perry Pericleous

a contemplated I behind standpoint. will merchandise guidance. tell the expecting inventory our improve to The pressure. QX approximately markdown already sourcing in points margin the incorporates and to from we’re the pressure of that QX is the you’re in a and think a So production merchandise margin What reason improvement XXX you, basis savings in markdowns, referring levels, I from is QX standpoint,

million we and back half in million half XXXX. to previously, million million, is approximately As merchandise mentioned then the of of that that $XX of on of the $XX less first via million other less have $XX less $XX XXXX that margin. half, was is the $XX coming

to basis XXX $X about of driving points. in we’re less So the QX million see improvement that’s expecting

contemplated merchandise the inventory fully the levels. is with again, margin So,

Roxanne Meyer

seeing that business, conversions And an obviously in you’re addition been then them. this share the strongly new traditional any and you’ve wondering of versus you’re the if and area of your I’m to point business that’s performance outlet outlet continue on outlet centers of between stores. differences number this to distribution at do to outlets in quite a malls rather by you able growing year traditional

David Kornberg

terms it were that look with When overall, we out that stores of in XX stores the pretty of we XXXX. the conversions consistent. we XXX year What of you did ended in last did total conversion is we’re the seeing performance year, that at number

And we’re XX of an we doing XXXX, an you conversions really as top that on that. indication. about gives So additional talk looking at

based been that gives stores. really would’ve that And our XXXX. view the view that it you fact the conversions of in So in done of percentage the a on bulk a we’ve you gives of total terms the

Matt Moellering

we outlet year impact, we we outlets in on performing impact positive your immediate as immediate a an they retail topline in to question they a do we’ve performance, - line start improvement see sales. convert then with we to the later, relate stores as previously, outlets, but after that see the lap said convert the themselves an business, And on… As

Roxanne Meyer

how within stores, you’re existing guess you portfolio full-price your conversions? for I of about, eyeing maybe potential thinking outlet percentage the that And are

Matt Moellering

on we’ve I results think done conversions seen date. that the opportunistically, from that based to we’re looking the that we’ve at it

number. So I it’s difficult to very you think exact give an

at are clearly is have in the with stores. overlap the that think what a little been has is retail And conversions we there very existing seen terms stores. places doing of trade-off where what conversions those looking minimal in I we’re we’ve done that full-price we’re where they retail

opportunistic. way we’re the it in at is looking So very which

Operator

is Our next Instructions] Trussell Deutsche Please of ahead. [Operator Paul Bank. from question go coming

Gabriella Carbone

two-year Gabriella trajectory you positive if color on year, on basis. a for acceleration the Paul. is full-year through a and under This wondering provide Was could some comp guidance Carbone and

the much. wondering just in that, was I Thanks back of discuss can the So drivers you half. if particularly so

David Kornberg

the the be also throughout QX beyond plus the we’re do at where X when but of the course, and part, comps most stacks. QX. X of monthly level. expect on the going one-year based the in negative you provided that expectation - we but two-year we only haven’t same comp But comp, look based to flat to annual for we looked not is we guidance do at When So at guidance our on expect coming guidance is

is you terms in an when we’re feel expecting gives acceleration us expecting we We we’re not as two-year stack, look in it or confidence a guidance expect similar performance what on QX. So that we’re at in performance. the And of the seeing of level place, NEXT what business the the plus back and sequential year have program the half the of seen, perform perform in we us. that the our improvements and for seen to initiatives have well continues really how the that we fact then we in have

Gabriella Carbone

just quick a And up. follow

year. wages kind tax - Thanks. if to in this of SG&A wages are you from a much doing, any you’re reinvestments mentioned this other break mentioned are helpful. can that’d down And headwind you you investing how savings Kind of year? You SG&A be

David Kornberg

because that So that from are normalized driven a costs impact. the seeing merit increases standpoint by wage wage increases just of inflationary we’re minimum the we’re seeing and

As the it monitor accordingly. we mall by overall wages, we’ll then constantly and relates by competition to react the state,

anything baked monitor year already and in and what we’ve we So have beyond we’re throughout to the discussed, then react going accordingly.

Operator

is Marni Our next Please of from The go question Retail ahead. coming Shapiro Tracker.

Marni Shapiro

your I looked love looks it the denim and shorts, your way fantastic.

increase she Are in said want start more you units when and was down So, she’s coming traffic quick on Perry, one into store? if seeing nice the buying coming - have marketing. David. stores. I in the a you just the to you or follow-up I is Perry, she’s But, conversion with

Perry Pericleous

we’re and similar We to conversion in continuing a and increase have a thus seen slight see QX, increase conversion far. overall performance

Marni Shapiro

could talk the events, function like costs Or done And little you? and very and for Is that in social function or talk about a have you marketing things more things, about of is job media? rising little social influencers with a Can bit with XXXX? media increase it you because a marketing, you’ve David, layering costs what of marketing and a in good more that? then, influencers bit also a

David Kornberg

awareness, improving the that are the increasing women. all think ensuring familiarity we about I it’s our of and presence, building

we awareness. we to to X.X% for I the in is, which marketing. search, that call, with total, the around and up much I we’re - invest in percentage do past digital, be it’s optimization way brand years in And mentioned but through the growing pretty as on say expect mark. the we’ll a which to So where is marketing line continue slightly, would couple been X%, of spend have it the going of social as

Marni Shapiro

cost do money, more you increases see marketing not allocating, So any that doing side? It’s you’re the putting really on more? more

David Kornberg

It’s fact we’re doing about that more. the

I being effective. be saw be it drive what but terms and think of be and have is to are obviously in holiday we was there, in need paid to able what expensive, we we have we to over we the where - be of we and search, it more to terms we seen, have

Marni Shapiro

Fantastic. guys. Best spring, of luck for

Perry Pericleous

because is Marni, you Under that the in new the of see of ADS standard, standard the one absolutely X.X% X% the treating clarification old under the revenue we’re revenue restated more X%. to financials, reclassifications X.X% correct. some how to it’s and can

to are it So I used treat we forward. the want going be as to make we to versus distinction to how it going treating how

Operator

Thank closing you. floor At the Mr. Kornberg back this time, I’d for comments. turn over like to to

David Kornberg

joining all forward us to morning. this We look with again, you soon. you, you, of Thank talking for

Operator

Ladies and participation for you conference. on gentlemen, thank today’s your

and time, your disconnect at wonderful lines have this may You a day.

Express (EXPRQ) 14 Mar 182017 Q4 Earnings call transcript