But in spite of that, we have been able to really lock in a very attractive initial market as a result of the sourcing of this product. So just I — when you think about even the new ideas and the new initiatives we think that we can continue to protect a great margin for our business. And then when you think about some of the growth that we are experiencing, like licensing, as that licensing business generates an operating margin in excess of 90%. So, the more we grow that — the more margin expansion we can see for the overall company.
Corey Tarlowe: Great. Thank you so much for all the color, and best of luck.
Carlos Alberini: Thank you.
Markus Neubrand: Thank you.
Operator: Thank you. [Operator Instructions] One moment please. One moment for our next question. Our next question comes from the line of Mauricio Serna of UBS. Your line is open.
Mauricio Serna: Great. Thanks for taking my questions. I guess, just wanted to elaborate a little bit — ask if you could elaborate a little bit more on what you were seeing in Europe. I guess, is it fair to assume that the kind of growth you saw in Q3 continues in Q4? Maybe we just add the benefit of the additional week on the retail business? And kind of curious, overall, like in Europe and Americas, what are you hearing from the wholesale partners? Especially, just interested in hearing more about the sequential improvement in Americas. And then lastly, on the Q4 margin guidance, I think it implies 100 basis points, roughly 100 basis points to 130 basis points margin expansion. Just wondering, like, if I look at what happened in Q3 and try to think about Q4, is it — is that margin expansion more related to, like, stronger gross margin expansion or, like, moderation in the SG&A dollar growth? Just a bit of a more help bridging that will be very helpful. Thank you.
Carlos Alberini: Okay. So, let me start and then I’m going to ask Markus to jump in here. But just you talked about Europe. Just we have a huge business in Europe, as you all know, and we have had a great record of good performance there. As I mentioned before just that consumer and the customer traffic was pretty solid and we were seeing very nice, positive comp traffic for many, many months — many quarters, actually. And now, what we saw in the third quarter is that things decelerated. We don’t know exactly to which degree this is a more significant or permanent change. But what we are doing now is looking at the fourth quarter and reducing our expectations for customer traffic, which in turn reduces expectation for sales.
We see that AURs are still seeing a tailwind, and we saw that in the third quarter in a significant way. But we see that this tailwind is somewhat tempered from the first half of the year in terms of the trends that we’re seeing. We think that Europe is still healthy for the brand. We don’t know exactly what’s happening with other brands. We see that our customers at wholesale continue to be very interested in the brand. And if anything, they are buying more, those customers that are investing in it. And we think that that is a very healthy move. We have been shipping pretty much in line with the schedule. So, we are not seeing that those customers are canceling any of the orders. Just the attitude has been very, very healthy and strong. With respect to the Americas, just with — in wholesale, we had some strength coming from some of the other pieces that contribute to the Americas Wholesale business, and that is primarily Mexico.
That is also being helped by currency trends. So, the business there has been very strong for us and across the board, I think that the brand is having a very strong momentum. And that is impacting how we do business, both direct-to-consumer, but also at wholesale. And we have some very strong partners there. And with respect to what we see here in the US, the business has been pretty much in line with what we saw before, consistent department stores, especially our customers at wholesale have been very careful with the way we are — they are ordering inventory and buying and receiving those products. And as a result, just we are trying to be very careful in the way we manage our side of that equation to make sure that we are not left with excess inventory.
The good thing is that I think our supply chain has become more dynamic. So, in some cases, even if we don’t have concrete orders from those customers, we have the opportunity to really reposition inventory or orders to be able to respond to their demand if that demand has not been preplanned. And we have been doing good business using this type of business model. And then, just our business in Canada is relatively small at wholesale, but we’re doing okay there. And we feel that just we can continue to deliver a very nice margin. You saw the operating margin of that business this quarter was really extraordinary. And we think that we have a margin structure that can allow us to continue to deliver that kind of return. So, we are very happy with that.
So Markus, do you want to [Multiple Speakers]
Markus Neubrand: Mauricio, question regarding the operating margin in the fourth quarter, we expect 14.1% to 14.4%, roughly up 100 basis points compared to last year. The main drivers for the improvement are the initial markup. I think as we expect to continue from lower inbound freights. I think with your assumption, you were right. Clearly, the impact of the 53rd week, I think, is another positive on the fourth quarter. Expense growth, I think, will moderate. I think that’s also — and in addition, the currency will still be a negative impact on the fourth quarter operating margin.
Mauricio Serna: Great. Thanks so much, and good luck.
Carlos Alberini: Thank you, Mauricio.
Operator: Thank you. One moment please. Our next question comes from the line of Jeff Lick of B. Riley. Your line is open.
Jeff Lick: Good morning, gentlemen — or good afternoon, gentlemen. How are you?
Carlos Alberini: Very well. Thank you. How are you, Jeff?
