And just to reiterate also what Carlos just said, we feel very confident about our plan also to further reduce our inventories down roughly 10% at year-end.
Carlos Alberini: And if that happens, we are confident about the $160 million.
Markus Neubrand: Yes. You’ve seen, Corey, you may have seen that we raised the forecast our expectations for free cash flow to €160 million for the fiscal year ’24.
Operator: Thank you. One moment for our next question please. Next question come from the line of Dana Telsey with Telsey Advisory Group.
Dana Telsey: Carlos, as you’re thinking about the back half of the year and what you delivered in the first half, as you think about the guidance for the operating margin, how do you think about unpacking the growth in the SG&A? Is the first half beat? And now as you’re thinking about the third and fourth quarters, is it conservatism? Is there anything whether it’s shrink or marketing that we should be mindful of that wouldn’t allow you to potentially come in better than last year’s operating margin in the second half. And with that, how do you see the health of the consumer in the different regions?
Carlos Alberini: Okay. Dana, I’m going to start with the operating margin question. Just frankly, we have a very solid plan for the second half of the year. Of course, this is the most important half as everybody knows. Here, we make a lot of money in the second half of the year and here just as being successful means huge value creation. So we have a very specific plan for business. We feel that the product is right. We feel that we have everything that we need to really deliver excellent results, and that’s what we are going for. The team is highly charged. Obviously, there are some things here that make the second half this year, a little bit different like the extra week. But overall, we feel that we have a very strong plan and a lot of opportunity to deliver very great profitability, especially in the fourth quarter.
With respect to the health of the consumer, I think we have to look at it by region or by market because we are still seeing a very different behavior in the different markets where we operate. And as you know, we are truly global. So starting with Europe, we continue to see a healthy customer coming into our stores. We see that there are still differences among the different markets there, obviously with war and some of the issues that have been impacted just in Russia and some other places where we see significant inflation like in Turkey, just the consumer is behaving differently, but we have had very significant success in those markets. We are seeing that the business continues to be very strong, and it’s a reflection of that customer traffic flows that I was referring to.
So we continue to see that business very healthy in the second half going into the second half. And we feel that as we see the performance every single day in our stores is very reliable unless there are significant changes in behavior. But so far, I think the consumer is in a good place. And then looking at our wholesale business, every time that you see that we are able to ship early, I think it’s a very strong indicator that people like the product, our retail customers, and our wholesale customers are very happy with getting the product earlier because the product is selling well. So that should be a very strong indicator. When you look at Americas now, this has been a challenged environment for us. We have been seeing contraction now for a few quarters.
And frankly, we don’t think that it is related to our product. In fact, we think that we have been making some very good strides on product. Just when you look at our denim trends are very healthy. When you look at our accessories business, it’s very strong. We have been able to really go into a more casual assortment very quickly, which is something that we always like of our brand that it allows us to go from dresses to casual and vice versa very quickly, and we can adapt to where the consumer is going with relative ease. And we are seeing success. We’re talking about success with sweaters, success with denim, success — during the summer, we had strong success with shorts and tanks. So there are a lot of things that we think are working very well, but we continue to see that the consumer is a little bit more pressured and looking for a lot of value.
We have been very careful not to promote. And we have been able to really do well with that in spite of the environment being very promotional in general. We think that we have a great plan, especially second half, we’ll be looking at the sweater business and outerwear business. Those are two big businesses for us in both women and men and we think we have a great plan to go after those categories and create significant volume because some of these items, of course, drive a higher average unit retail. So we are excited about the second half. And then when you look at Asia, in Asia, the common is similar than what I said about Europe, this is more a combination of different markets. And some of the dynamics in each of those markets could be different.
So you have places like China who has been on its way to recover from pandemic and everything else, everybody knows, but they are — they have their own issues. And then you have a place like Korea that has been very strong for us, and we see that as a great opportunity to continue to really improve our operation in Asia as an overall region. So just — it’s a combination of multiple things. We feel that we have a great plan, and we think that the guidance that we shared with you today is very realistic based on what we have been able to see during the last few quarters and what we are seeing even now during this quarter, we have one month of the quarter in and everything that we have shared with you in terms of color is completely aligned with what we are seeing now.
So, you want to touch on…
Markus Neubrand: Hi, Dana, it’s Markus. Let me first address the shrink question that you had. We don’t see any major issues so far this year in terms of shrink. Obviously, this is an area we’re closely monitoring, and we have a very good team and loss prevention team in place. Let me then go to the operating margins and also the key drivers. If we look, first of all, we are very confident that we can, I think, can deliver the guidance, I think we’ve just given and it’s almost a realistic view on our business performance. If we look at the expected high end of our guidance, the expected adjusted operating profit is on the same level as last year. What are the key drivers? Let me start first with the negative ones with headwinds.
