Oxford Industries, Inc. (NYSE:OXM) Q3 2024 Earnings Call Transcript

Oxford Industries, Inc. (NYSE:OXM) Q3 2024 Earnings Call Transcript December 11, 2024

Oxford Industries, Inc. misses on earnings expectations. Reported EPS is $-0.11 EPS, expectations were $0.11.

Operator: Greetings, and welcome to the Oxford Industries Third Quarter Fiscal 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance, please press star zero on your telephone keypad. A reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Smith. Thank you. You may begin.

Brian Smith: Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today’s call and Q&A session constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees; actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements. During this call, we will be discussing certain non-GAAP financial measures.

You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com. Now, I would like to introduce today’s call participants. With me today are Tom Chubb, Chairman and CEO, and Scott Grassmyer, CFO and COO. Thank you for your attention, and I would like to turn the call over to Tom Chubb.

Tom Chubb: Good afternoon, and thank you for joining us. We are excited to be in the midst of our holiday season where the consumer appears to be regaining confidence and is more willing to make discretionary purchases. I am going to start with the summary of the third quarter, then move to our expectations and plans for the fourth quarter, and finally give you a bit of a sneak preview on our plans for 2025. But before jumping into the results of the third quarter, I want to acknowledge the multiple headwinds faced by our brands in the third quarter, including the conclusion of the most intense election cycle in recent memory and the impact of two major hurricanes that devastated parts of the southeastern United States. You will recall that during last quarter’s call, we anticipated a relatively soft third quarter primarily due to macro factors and set our guidance accordingly.

We were on track to finish within the forecast, but then the impact of the two hurricanes pushed us below the bottom of the range for both sales and earnings. The election, among other noteworthy world events, was a major distraction for our more mature, headline-sensitive consumer over the last several months, culminating with the election early in the fourth quarter. Also, during the third quarter, Hurricanes Helene and Milton impacted the southeastern United States within only a few weeks of each other. The Southeastern United States is our most important and significant region, with Florida alone representing approximately one-third of our direct-to-consumer business. All of these factors impacted our business during the quarter and were exacerbated by a consumer that already felt pinched by the cumulative effects of several years of high inflation.

We should also point out that we have a portfolio of premium brands that sell primarily at full price with very limited exposure to the off-price and outlet channels. These value-oriented channels have been thriving as cautious consumers seek special offers and clearance pricing. We believe our full-price premium strategy has been and will be a long-term competitive strength, but in the current environment, it is a headwind to our top line while acting as a tailwind for others in our space. Scott will provide more details in his section, but we ended the quarter with sales of $308 million and an adjusted net loss per share of $0.11 for the quarter, coming in below our guidance range. We estimate that as a result of the hurricanes, we lost at least $4 million of sales.

We also incurred significant incremental expenses for cleanup efforts and assistance to our employees in need, resulting in a cumulative $0.14 negative per share impact from the hurricanes.

Brian Smith: I am so proud and grateful for the generosity of our associates.

Tom Chubb: Our Prospan enterprise pitched in so many ways to help the people in communities that we serve and operate to recover from the devastation. This includes not only donations of money but of time and effort to collect and provide the goods and relief that was needed most. The resiliency of our people in Florida, Georgia, and the Carolinas and the generosity of our people throughout the country are among the characteristics that make Oxford such a great company. Moving to our results, the decline in sales reflects the continuation of the negative comp store sales trends that we experienced in the first half of the year, continuing throughout most of the third quarter. While there was some choppiness, the third quarter looked slightly worse than the first half of this year.

Continuing the trend from the first half of this year, our results in the third quarter were driven by reduced conversion while traffic has remained healthy, indicating that our consumer is interested in our brands but continues to be cautious when making purchase decisions. Consumers also continue to react strongly to fashion and new and differentiated products, while interest in core styles is more muted. We believe that we have corrected some of the missteps that we have previously discussed and are prepared well with fresh and new products for the holiday and upcoming resort travel season. Our consumer also responded to our value offering in the quarter, with a higher proportion of sales during the quarter occurring during promotional events and at our outlet stores compared to last year’s third quarter.

Despite short-term headwinds affecting our results, we have not backed off on investing in the business with new stores, Marlin bars, our new distribution center, and technology, among other strategic investments, all of which are adding expense at a time when the top line is weak. Hurting the bottom line in the near term but continuing to strengthen us for the long term. During the quarter, we opened twelve net new retail locations, bringing our total store count to 342 compared to 309 at the end of the third quarter of fiscal 2023. Our balance sheet and liquidity have remained strong, allowing us to continue investing in the future of our business, including our store pipeline and Lions, Georgia distribution center project, which Scott will detail shortly, and tax return directly to shareholders through our quarterly dividend.

Moving on to the fourth quarter, November started on a similar trajectory to the third quarter, but once we got past the election, business began to improve, and we had a strong finish to November with a very solid Thanksgiving weekend.

Brian Smith: As you are aware,

Tom Chubb: this year’s calendar provides the shortest possible selling period between Thanksgiving and Christmas compared to the longest possible period in the prior year. This obviously means that we have to get our holiday business done in a more compressed time period. Accordingly, we are delighted that we have what we believe are outstanding products and marketing plans for the holidays and are encouraged by the results we are seeing. We have been thrilled by the performance of Tommy Bahama’s Indigo Palms denim collection, particularly on the men’s side, the new men’s luxe sweater offering, and the new Tommy Bahama Palm Voyage women’s collection. Indigo Palms was the bright spot even during the tough third quarter and performed extremely well during November.

Denim is a category that works in all geographies year-round, but it is especially important in cooler geographies and during the cooler times of the year. We are excited about the impact Indigo Palms is currently having and the potential it has to help us grow our business in the years to come. We are equally excited about our new Luxe sweater offering this holiday season. Instable sweaters are always a big business driver during the fourth quarter. For the last several years, our go-to sweater has been the Tobago half-zip pullover at $118. This year, we are also having tremendous success with the new Marlin Luxe cotton silk cashmere blend half-zip at $178 and the Sunbreak half-zip at $158. The luxe sweaters are not only selling very well, but they are also helping push gross margins and average order value higher.

On the women’s side, Palm Voyage, which are elevated travel-ready separates, has performed very well in our own channels and also in our key wholesale accounts. We love to see this because on the wholesale floor, we are going head to head with our competitors, and we are winning. We have also seen great success in Lilly with whimsical new products like the Ellery sweater and seemingly anything with bows or sequins on it. The takeaway from all of this is that when we deliver innovation, newness, and excitement, our customers respond favorably. The reaction to our products and an apparent change in the trajectory of consumer sentiment is driving improving comp store sales post-election that have begun to reverse the disappointing trends experienced in the last several quarters.

Looking ahead to fiscal 2025, our number one priority is stabilizing and expanding our operating margin. As we plan for the year, we are encouraged by recent sales trends in our business. We are also encouraged by our forward wholesale bookings. While there is plenty of reason to be optimistic, we are going to be cautious about getting overly exuberant with our comp assumptions for the year and will be focused on improving operating margin through better expense control and leverage. We look forward to outlining our fiscal 2025 plans for you in more detail in March. While we are disappointed in our third quarter results, we are confident in the product our teams have developed and our business to date in the fourth quarter and plans for the remainder of the holiday and resort season.

We are very grateful to our team and wish all of them and all of you a very happy holiday season. I will now hand the call over to Scott, who will provide more details on the quarter and our outlook for the balance of the year. Scott?

Scott Grassmyer: Thank you, Tom. As Tom mentioned, we finished the quarter with top and bottom line results below our expectations. There were several macroeconomic headwinds across the marketplace that negatively affected our financial results during the quarter. We believe the continued challenging consumer environment, distractions due to the elections, and the hurricanes that impacted the Southeastern United States. In the third quarter of fiscal 2024, consolidated net sales of $308 million decreased compared to sales of $327 million in the third quarter of fiscal 2023 and below our guidance range of $310 million to $325 million. As Tom mentioned, we estimate that we lost approximately $4 million in sales from evacuation closures from many of our Southeastern locations and the temporary closure of several stores in Florida, including three stores and a restaurant location in St. Armands Circle outside of Sarasota that were heavily damaged.

Most of these St. Armands locations remain closed through the majority of the fourth quarter. Including the impact of the hurricanes, sales in our full-price brick-and-mortar locations were down 6%, driven by high single-digit negative comps partially offset by the addition of new store locations. E-commerce sales decreased 11%. Our food and beverage and outlet locations performed better, with a 4% and 3% sales increase, respectively, driven by new locations and partially offset by low single-digit negative comps. Our wholesale channel, which was particularly challenging in the first half of this year, had a challenging third quarter with sales down 2% compared to the third quarter of 2023. The specialty store business across our brands continues to struggle, partially offset by increased sales to major department stores.

Adjusted gross margin contracted 100 basis points to 63%, driven primarily by a higher proportion of net sales occurring during promotional events in Tommy Bahama, Lilly Pulitzer, and Johnny Was. Across our three major brands, we continue to see strong responses from consumers to our promotional and end-of-season clearance events. We were able to partially offset this decrease in Lilly Pulitzer through lower discounts and markdowns in our emerging brands group through our continued efforts to improve our inventory position and reduce the need for off-price wholesale and promotional DTC sales. Adjusted SG&A expenses increased 5% to $201 million compared to $191 million last year. During the third quarter of fiscal 2024, we incurred higher expenses related to recent and ongoing investments in our business, primarily from the addition of 33 net new brick-and-mortar locations opened since the third quarter of last year, including four new Tommy Bahama Marlin Bar locations.

Costs related to some of the approximately five net new brick-and-mortar locations and two additional Tommy Bahama Marlin Bar locations that we expect to open in the fourth quarter or early in the first quarter of fiscal 2025. The addition of the Jack Rogers brand acquired in the fourth quarter of fiscal 2023, and approximately $1 million in incremental hurricane-related costs, including salaries, wages, and additional assistance paid to employees who were affected by the hurricanes, as well as cleanup costs. The result of this is a $3 million adjusted operating loss or negative 1.1% operating margin compared to a $21 million operating profit or 6.6% in the prior year. The decrease in adjusted operating income reflects SG&A investments and lower gross margins.

Moving beyond operating income, our effective tax rate was impacted by certain discrete events that were amplified by our operating loss. Interest expense was $1 million lower compared to the third quarter of fiscal 2023, resulting from lower average debt levels. With all this, we ended with $0.11 of adjusted net operating loss per share, which includes approximately $0.14 negative impact associated with lost revenue and additional expenses related to the hurricanes. I will now move on to our balance sheet. Beginning with inventory, during the third quarter of fiscal 2024, inventory decreased slightly on a LIFO basis. On a FIFO basis, inventory increased slightly by $2 million or 1%, but inventory remained relatively flat in all of our operating groups.

We ended the quarter with outstanding long-term debt of $58 million as our $104 million of cash flow from operations in the first nine months of fiscal 2024 were outpaced by our elevated level of capital expenditure of $92 million, primarily related to the Lyons, Georgia distribution center project and the addition of new brick-and-mortar locations. $33 million of dividends and changes in working capital needs since the third quarter is historically our lowest operating cash flow quarter. I will now spend some time on our outlook for 2024. We finished the third quarter of fiscal 2024 with negative comps of 10%, which was lower than our previous forecast of low to mid-single-digit negative comps for the quarter. Despite a negative 10% comp in the third quarter, comp sales figures in the fourth quarter to date have improved and are slightly negative.

We believe this improvement in the fourth quarter will continue and result in slightly negative comps in the low single-digit range in the fourth quarter. These assumptions are consistent with our previous expectations from September that assumed low to mid-single-digit negative comps for the remainder of the year. However, as a result of the miss in the third quarter, the impact of the hurricanes, and continued weakness in the wholesale channel, we have revised our sales forecast accordingly. Our revised sales forecast includes a $3 million reduction in sales in the fourth quarter from store and restaurant closures resulting from the hurricanes. We now expect net sales to be between $1.5 billion to $1.52 billion, a decline of 3% to 4% compared to sales of $1.57 billion in the 53-week fiscal 2023.

The updated sales plan for the full year of 2024 now includes low to mid-single-digit sales declines in Tommy Bahama, Lilly Pulitzer, and Johnny Was, partially offset by sales growth in the low single-digit range for the emerging brands group. By channel, we expect low to mid-single-digit sales decreases in e-commerce and full-price retail channels. We expect wholesale sales, which were down $22 million in the first nine months of the year, to be down another $4 million in the fourth quarter of 2024. We expect growth in our outlets as those locations continue to perform better than our full-price locations in the current environment and in our food and beverage locations that will benefit from the addition of four new Marlin Bar locations during the year.

Consistent with our previous guidance, we still anticipate gross margin to decline by approximately 50 to 100 basis points compared to the prior year as expected increased activity during promotional events across our brands will more than offset the gross margin benefit from proportionally lower wholesale sales. For the year, we expect SG&A to grow in the mid-single-digit range due to the investments in our business, including expanding our store count at a net of approximately 30 locations, with four new Tommy Bahama Marlin Bars, continued IT investments, and the addition of Jack Rogers. Additionally, as discussed during the last call, we expect the Jack Rogers brand acquired in the fourth quarter of fiscal 2023 to generate an operating loss of approximately $2.5 million in 2024 as we reset and refocus the business.

We also anticipate lower interest expense of $3 million for the year compared to $6 million in 2023 and higher royalty income and other income, primarily from a full year of the Tommy Bahama Miramonte Resort. Additionally, we now expect a flat adjusted effective tax rate of approximately 23%, consistent with 2023, with both periods including an estimated $0.11 per share from the hurricanes in the fourth quarter, on top of the $0.14 from the third quarter. We expect fiscal 2024 adjusted EPS to be between $6.50 and $6.70 versus adjusted EPS of $10.15 last year, with decreases in all of our businesses, partially offset by the lower interest expense and higher adjusted royalty and other income. In the 13-week fourth quarter of 2024, we expect sales of $375 to $395 million compared to sales of $404 million in the 14-week fourth quarter of 2023.

This reflects our low single-digit negative comp assumption, lower wholesale sales, and one week less of sales that resulted in $17 million of sales in Q4 of 2023, partially offset by the addition of non-comp stores. We also expect gross margin to be flat, SG&A to grow in the low single-digit range, flat interest expense, and increased royalty and other income. We expect this to result in fourth-quarter adjusted EPS between $1.18 and $1.38 compared to $1.90 in the fourth quarter of 2023. Spending on the investments we are making in 2024, I would like to briefly discuss our CapEx outlook for the fourth quarter. Consistent with our prior quarter guidance, we expect capital expenditures to be approximately $150 million, including $92 million incurred during the first nine months of the year, compared to $74 million in fiscal 2023, with approximately $75 million related to the significant multiyear project to build a new distribution center in Lyons, Georgia, that will enhance the direct-to-consumer throughput capabilities of our brand.

Remaining capital expenditures relate to the execution on our pipeline of Marlin Bars, increases in store count across Tommy Bahama and Lilly Pulitzer, Johnny Was, Southern Tide, and the Beaufort Bonnet Company, and increased investments in our various direct-to-consumer technology systems initiatives. We expect this elevated capital expenditure level to moderate in 2025 and further moderate in 2026 and beyond after the completion of the Lyons, Georgia project. We also have a positive outlook on our cash and liquidity position as well. Cash flows from operations are expected to be very strong, giving us ample room to fund the previously mentioned investments, our quarterly dividend, and limit the need to borrow on a revolver. Although, we do expect a modest debt position for the remainder of the year due to our elevated capital expenditures.

Thank you for your time today.

Operator: We will now turn the call over to the operator for questions. Matt?

Q&A Session

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, a confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. It may be necessary to pick up your handset before pressing the star key. One moment, please, while I poll for questions. The first question is from Ashley Owens from KeyBanc Capital Markets. Go ahead.

Ashley Owens: Hi. Good afternoon. So you mentioned some improvements to store comps so far in the fourth quarter and holiday being off to a better start. I know you mentioned that outlet continues to track better than full price, but could you just parse that out what you are seeing from a brand perspective in terms of store comps?

Scott Grassmyer: Yeah. From a brand perspective, all our brands started the quarter in pretty severe negative territory, and then it seemed, about the weekend after the election, we started seeing, you know, recovery. So all the brands, I think, are slightly negative. Lilly might be slightly positive right now. But they all are improving. And so the negative comp, which started the first week or so, we are in double digits negative. We are now in the, you know, lower single-digit negative range.

Tom Chubb: And to amplify what Scott said, I think the important point is that they are all improving sequentially versus where we were in the third quarter, really in the first week of November. Which is great, with Lilly being the strongest, I think, at this point.

Ashley Owens: Okay. Gotcha. That’s helpful. Then just any color on the wholesale order book for the resort season, what you are hearing from your specialty and department store partners, and then just as a comparison, can you maybe talk about the magnitude of newness you are anticipating relative to last year and how much you plan to lean into that aspect of the business seeing as it has been working really well?

Tom Chubb: Yeah. Well, what I will tell you about the resort, you know, it is sort of a current wholesale selling is that it is very strong. We are performing well on the floor, which is great. In some cases, we even have wholesale customers trying to reorder product for at-once delivery. I am not sure we are going to be able to satisfy that demand, but it is good to have that, for sure. And in terms of what we actually had booked for this time period, we do expect to be down, as Scott mentioned in his section, a bit year over year in the wholesale for the fourth quarter. But remember that those were, you know, bookings and reorders that were up happened some time ago. Then with respect to the bookings that are for next year, you know, it is early, and we do not have anything like the full order book, and we are very encouraged, I would say, by what we are seeing there.

And it all goes back to performance on the wholesale floor. And as I mentioned in my section, what we love about performing well in the wholesale is that on those floors with the great retail partners that we have, you are going head to head with a lot of other great brands, and we are holding up and showing up really, really well in that context, often being the top of the department and if not, the very top, close to it.

Ashley Owens: Great. Super helpful, caller. Thanks so much.

Tom Chubb: Thank you, Ashley.

Operator: Next question is from Janine Stichter from BTIG. Please go ahead.

Janine Stichter: Hi, everyone. You got Ethan Saggy on for Janine. First question, just with all the tariff uncertainty out there, would be helpful to get your thoughts on how the company is currently positioned in terms of sourcing and, you know, what plans you may have in place to mitigate some of the potential headwinds from increased tariffs next year?

Tom Chubb: Sure. We will answer that. The, you know, the first thing I would say is, you know, who knows what is actually going to happen. There have been quite a few different versions of proposals talked about, and it is a little hard to know exactly what might happen. I would say, like all or almost all of our peers, we do have exposure to China. We have really no exposure to Mexico, so those would not impact us if those were isolated. Of course, a global tariff would impact everything, and then a China tariff would impact that business. And our mitigation strategy, if it is a China-specific tariff, would be like we did during the first Trump administration, and, basically, it is a combination of moving production out of China.

We would not be able to move everything, but there are things that we could move out, and we would do that. Secondly, we would seek to have our vendors in China bear some of the cost of those tariffs, and let’s call it, you know, for argument’s sake, a fifty-fifty split. We had a lot of success with that last time around. And then in some cases, we might do some, you know, what would amount to very small price increases to help offset the tariff impact. But if you look back on when this happened before, it was a lot of work, but we were able to navigate through it without, you know, what I would call any major damage. And we would expect the same this time as well.

Janine Stichter: Got it. That’s really helpful. And then just, you know, follow-up. How is the so far through the holiday season, how is the promotional activity been, you know, across your brands and just in the industry in general, you know, compared to your prior expectations?

Tom Chubb: Well, as we commented on in our prepared comments, I mean, we have done more business, you know, sort of during our promotional events. And in some cases, maybe we have extended the time period for those, and I think in the case of Lilly, we offered a little bit slightly more discount than in terms of the market, but, you know, that is all baked into the numbers that you saw in the forward guidance. And then in terms of the market, I would say it is, you know, it is very promotional out there. I think it is, you know, that has been a staple of holiday seasons for quite a while now. If there was any difference this year, I would just say that I think it started maybe earlier this year than it has in past years. Like a lot of people, I went out shopping Thanksgiving week, and I actually ahead of the Thanksgiving holiday, and it seemed like almost every retailer you went in was, you know, in full promotional mode already.

They were not even waiting for Black Friday. They were already there. And as you know, they have a lot of them went a lot earlier than that.

Janine Stichter: Yep. Got it. Thanks so much. I’ll pass it on.

Operator: As a reminder, if you would like to ask a question, press star one. Next question here is from Mauricio Serna from UBS. Please go ahead.

Mauricio Serna: Great. Good afternoon. Thanks for taking my questions. First, you know, to start, you mentioned one of your focuses is to improve operating margins in 2025. Maybe could you provide any initial guidepost for margins and, you know, also any color on sales, you know, and also another follow-up on could you provide, like, any math on, you know, the Tommy Bahama Marlin Bars in terms of, like, their contribution to sales so far this year or expectations for this year and going into 2025 given what you know, the openings that you have made over the last twelve months or so. Thank you.

Tom Chubb: Yeah. So nice to hear from you, Mauricio. And I would say with respect to 2025, at this point, I do not think we can really go a whole lot beyond what we said in the prepared remarks. We are encouraged by what we have seen in the wholesale bookings. We are encouraged by what we are seeing in our own direct channels at present. But all that said, I think we are going to be pretty cautious about not planning the top line too aggressively. And our focus is really going to be on improving the operating margin through better expense management in some cases with and thereby achieving greater operating leverage.

Scott Grassmyer: And then your second question about the economics of the Marlin Bar. Scott, do you want to?

Scott Grassmyer: Yeah. Yeah. I know. On that. Yeah. So on the Marlin Bars, we talked some in the past about, you know, some of these are conversions within existing centers. So we tend to get a very nice lift in the retail side and tend to have a solid food and beverage location. These units cost, you know, three to four million dollars, you know, to build. But the nice thing is the patio area is rent-free, which is where a lot of the seating is. So it is very efficient from a rent standpoint, very efficient from a labor standpoint. And it is pushing, you know, the traffic to the store. So the combined model, but we tend to see, you know, market improvement on profitability from the standalone retail store. Our food and beverage locations tend to average about twice the sales per square foot that a standalone store does on average. So it really is a, you know, not only a profitable venture, but it also is a great customer acquisition tool and brand awareness tool.

Mauricio Serna: Got it. And then if I may just on the Q4 gross margin guidance, I think you mentioned you expected flat year over year, and I guess that is like improvement relative to what you have for the full year. Fifty to a hundred basis points contraction. Just wanted to get a better sense of what is driving that sequential growth rate.

Scott Grassmyer: A little bit more mix with direct-to-consumer being a higher percent of the mix. So yeah, that is certainly helping there. And we have got a lot of new locations coming in. And our inventory is going in, or we believe are in very good shape. So yeah, the level of exiting end-of-season type merchandise should not be too severe a markdown.

Tom Chubb: Thank you, Mauricio.

Operator: And the last question is from Paul Lejuez from Citigroup. Go ahead.

Paul Lejuez: Hey. Thanks, guys. Curious if you could talk about what percent of your sales occur at full price currently. Like, if you look back over this year versus what you might have seen historically and curious if you see that percentage changing given the consumer environment that you described. And then second, you mentioned outperformance of the outlets. Is that driven by stronger traffic or stronger conversion or both? Maybe if you could just talk about the different comp metrics of full price versus factory sourcing.

Tom Chubb: Well, I would say, Paul, on the first part of your question, we definitely, and we have talked about this for each of the last several quarters, we definitely sold more during the promotional events proportionately than we have in prior years, and that is as we have talked about. That is where some of the pressure on our margin came in, like we were down on an adjusted basis, a hundred basis points for the third quarter, and that is a lot of where that came from.

Scott Grassmyer: And as far as outlets, you know, then the Lilly, you know, true flash sale, and the all-price channel, it is probably around twenty percent of the business. That does not include just the other promotional type activities, like when we do a flip side of that. You are more of our normal promotional activities in a full-price of the true all-price channel. So, yeah, we do not have a huge number of outlet stores, you know, compared to some in the industry. And we are using those. The primary goal is to clear. We do make a little bit for, but not a lot.

Paul Lejuez: Got it. And then I guess just to follow-up on the higher percentage of sales happened during promotional periods. Is it that business performed better than you thought during those promotional events, or is it just a higher mix of sales because sales were weaker during the non-promotional periods?

Tom Chubb: I would say a little of both. I mean, in some cases, we did outperform the expectations. There is no question that full-price sales have been, you know, lower than we anticipated. And that alone would, you know, would change the ratio towards the promotional events. But in at least in some cases, we did it more during the promo than we thought. And part of that is when you have less full-price selling, there is more inventory available during those promotional times.

Paul Lejuez: Got it. Okay. Great. Thank you. Good luck.

Tom Chubb: Thank you.

Operator: This concludes the question and answer session. I would like to turn the floor back to Tom Chubb for any closing comments.

Tom Chubb: Okay. Thank you all very much for your interest. We look forward to talking to you again in March, at which time we will lay out 2025 for you. And until then, we wish you a very happy holiday season and New Year.

Operator: You may disconnect your lines at this time. Thank you again for your participation.