Jeff Lick: Great. So if I just look at your Q4 guidance as relative to the implied Q4 guidance you went into this quarter with, it looks like sales are down — you took sales down 2%, operating margin down 9%. I’m just curious if you might want to highlight, where is the place where you are seeing that variance come from the most? And then maybe this is for Markus. I’m just curious, given that you reversed bonus accruals, is there a level now where you could actually reverse it back, meaning that it would be difficult not to hit your Q4 operating guidance, because there’s almost like a shock absorber with performance accruals?
Carlos Alberini: So, Jeff, let me just start and then Markus can address your question on the bonus. But I want to say that what we have done for the fourth quarter is primarily just mirroring some of the trends that we saw in the third quarter that were not in line what — with what we had originally expected when we provided guidance for the third quarter and the year. So — and it’s primarily the impact that we saw in some of the business didn’t perform as well, and it’s primarily Europe. And within Europe just our wholesale business did pretty much — had a performance that was pretty much consistent with what we had anticipated. But our direct-to-consumer business was the one that slowed down. And this has two parts, our stores that were impacted by customer traffic deceleration and also our e-commerce business, which was also impacted by traffic.
And as a result, we ended up with a lower number than what we had anticipated on topline, which drove bottom line just a reduction as well. We — that’s all we have done. Just we took a look at that. We looked at how the month of November has been going, and we are seeing a similar type of behavior. And as a result of that, we brought that — those new expectations into the guidance. And of course, in the fourth quarter, additional volume has a major impact on profitability. So, when you take some volume away, it’s very difficult to really protect the flow-through, because all that additional volume normally is very profitable compared to the base. So — and that’s why you see what may seem as a more significant drop in operating margin or in operating profit than the drop in sales.
Markus Neubrand: Regarding your question — regarding the — let me start a bit broader with the SG&A development for the third quarter. Overall, we’ve been up 10% or $22 million in the third quarter compared to last year. If you look at, there are two, I think, distinctive impacts that I also called out in the prepared remarks. One is the performance-based compensation, that is $9 million higher compared to last year, as well as currency, I think is a tailwind on the revenues, but a headwind on the expenses. Those two effects account for 70% of the expense decrease in the third quarter. If you look at the third quarter, and I was sharing this, we were lapping a reversal of the performance-based compensation adjustment from last year as we were trending in the third quarter of last year, we are trending below, I think, then also the targets also for the full year.
There was a reversal in those performance-based compensation adjustments that we are now lapping. So — and I think that’s where now in comparison, I think, with Q3 of this year compared to last year, that’s $9 million as well.
Carlos Alberini: Yes. But — so your question is, can you reverse that? The key issue here is that the company is performing in line with expectations and target plan. So, as a result we’re doing for the accounting what needs to be done just assuming that we deliver on the numbers that we have shared with you. That would mean that the company would meet its financial targets. And as a result, the bonus will be paid.
Jeff Lick: Yes. The point of the question was, if for some reason, revenue was well below what you guided, it would seem like it would — it would — operating income would not go down at least for the first tranche of that miss maybe as much.
Carlos Alberini: Yes, no, no. [Multiple Speakers] Yes. I mean, all this works together. Just — so to your point, if the company is less profitable, obviously, that will have an impact on variable compensation, for sure.
Jeff Lick: And then another question, just — I’m just curious if you could maybe highlight or speak to any lessons or observations with the Georgina Rodriguez partnership. If there’s anything that you’ve learned that you would apply, maybe even with the Guess? Jeans US, doing social influencing there with someone in the US. I think you did make reference to celebrity marketing. I’m just kind of curious what you’re learning there, given your heritage of successfully using collaborators and spokes models.
Carlos Alberini: Yes. Well, let me start by saying we are thrilled with the performance of that collaboration and relationship, I mean, to the point that I think I mentioned in my prepared remarks that just we are — just doing another campaign with Georgina. I mean, all the products that she modeled had a great sell-throughs and we saw a lot of opportunity even for the future with the type of activities that we engaged in with her. She has been terrific ambassador of the brand. Now, what I mentioned is that when you look at Guess? Jeans this is a brand that is targeting a much younger consumer, you know, just that Gen Z consumer primarily, but also millennials. And we are building the plan, the strategy to launch this brand to the market with a very strong, robust marketing campaign that involves celebrities and a lot of, you know, just meaningful, effective collaborations that that consumer will be, you know, open to.
So, we are in the process of working on that. But definitely, we feel that this type of marketing can be very powerful for us. And you’re right, Jeff. We do have a long legacy, you know, just with this type of collaborations. And I think that we’re going to the opportunity to really invest on this again.
Jeff Lick: Great. Well, congrats on the quarter, and look forward to chatting with you soon.
Carlos Alberini: All right. Thank you, Jeff.
Jeff Lick: Thank you.
Operator: Thank you. That does conclude our questions for today. I’d like to turn the call back over to Carlos for any closing remarks.
