Welcome to Carter's Second Quarter 2019 Earnings Conference Call. On the call today are Michael Casey, Chairman and Chief Executive Officer; Richard Westenberger, Executive Vice President and Chief Financial Officer; Brian Lynch, President; Sean McHugh, Vice President and Treasurer. After today’s prepared remarks, we will take questions as time allows. Carter's issued its second quarter 2019 earnings press release earlier this morning. A copy of the release and presentation material for today's call have been posted on the Investor Relations section of the company's website at ir.carters.com. Before we begin, let me remind you that statements made on this conference call and in the companies presentation materials about the company's outlook, plans and future performance are forward-looking statements. Actual results may differ materially from those projected. For a discussion of factors that could cause actual results to vary from those contained in the forward-looking statements, please refer to the company's most recent Annual Report filed with the Securities and Exchange Commission and the presentation materials posted on the company's website. On this call, the company will reference various non-GAAP financial measurements. A reconciliation of those non-GAAP financial measurements to the GAAP financial measurements is provided in the company's earnings release and presentation materials. Also, today's call is being recorded. And now I would like to turn the call over to Mr. Casey. Please go ahead, sir.

Thanks very much. Good morning, everyone. Thank you for joining us on the call. Before we walk you through the presentation on our website, I'd like to share some thoughts on our business with you. We exceeded the sales and earnings goals that we shared with you on our last call. Our growth in the quarter was driven by our Retail and Wholesale segments. International sales were a bit lower than last year and reflected change in our model for China. Our profitability in the second quarter reflects the strength of our product offerings, better price realization and good control over spending. The second quarter got off to a good start. We had the combined benefits of a late Easter holiday and transition to more spring-like weather in many parts of the country. We saw mid double-digit growth in sales in April with comparable retail sales up 17%. As we expected May was a tougher comparison to last year and we had good sales growth in June, the largest month of the quarter driven by comp store sales and the launch of our summer product offerings. July also got off to a good start with strong demand over the 4th of July holiday. In our Retail segment comparable sales growth in the second quarter was at the high end of our 3% to 4% forecast and reflects good demand for our new product launches including Little Baby Basics, the core component of our Carter's brand providing the everyday essentials for families with newborn children. The level of promotions in the quarter were bit higher than last year which we expected given the shift in the Easter holiday. We continue to see the strongest comparable sales growth in our co-branded source and mall-based stores. Given this positive multiyear trend in performance,…

Thank you, Mike. Good morning everyone. I'll begin on page 2 with our GAAP income statement for the second quarter. Our reported results in the second quarter and first half included some unusual items, which are detailed in our press release today. This morning we will mostly speak to our results on an adjusted basis, which excludes these unusual items for greater comparability. Today's presentation and earnings release provide reconciliations of our GAAP basis results to the adjusted basis of presentation. Please review this information as you evaluate our results. Moving to page 4 with some highlights for the second quarter. Consolidated net sales grew over 5% year-over-year driven by good growth in our U.S. Retail and U.S. Wholesale businesses. U.S. Retail comparable sales were strong with growth of nearly 4%. Profitability increased nicely in the quarter with adjusted operating income up 12% and adjusted earnings per share up over 20%. Turning to our adjusted P&L for the second quarter on page 5. Net sales were $734 million, up nearly 5.5% versus last year. Foreign currency exchange rate movements were a modest headwind in the quarter reducing our net sales by approximately $2 million. Our U.S. Retail and U.S. Wholesale segments both recorded solid top line growth. International segment sales declined modestly in part due to currency movements. I'll cover our individual segment results in more detail in a moment. Gross margin was 44%, down about 50 basis points compared to last year. Gross margin benefited from lower inventory provisions than last year, but was pressured because of our pricing actions in total did not fully cover the impact of higher product costs in the quarter. Gross margin also declined due to changes in customer mix within U.S. Wholesale and higher shipping costs within the e-commerce channel. Adjusted SG&A grew…

Thank you. [Operator Instructions] Our first question comes from Heather Balsky with Bank of America.

I guess to start, I was hoping if you just talk about the promotional environment right now, especially now that you're past the Gymboree closures and liquidations and how your competition, do you see more rational players I guess in this environment? Thank you.

I'd say the promotions in the second quarter were generally in line with what we had expected. Easter came later this year and so the promotions are typically higher when you're in a holiday event. I'd say May promotions were a bit higher, because May generally was a tough month for many retailers, a bit of a post-holiday lull and I think cooler weather returned in May. June for us was particularly good. Promotions for us in June were lower year-over-year, lower than the previous two months. And in the second half we expect our promotions will be comparable year-over-year. Still a lot of noise in the markets, but I would say inventories -- the promotions are largely a function of the quality of the inventory. Our inventories are in good shape. So we feel good heading into the second half of the year and we're expecting a level of promotions comparable year-over-year.

And just a follow-up in terms of I guess your wholesale partners. How do you feel about the health of that inventory right now?

Very good. It's very good. We're in good shape.

Okay. And one last follow-up, which is the SG&A shift, could you help quantify that?

Sure. It was probably around $4 million or $5 million, we believe it will shift into the second half from second quarter.

Great. Thank you very much.

You're welcome.

Thank you. Our next question comes from Paul Lejuez with Citi.

Hey guys. Curious if you can maybe quantify a little bit more the process changes that you saw by channel both retail and wholesale? And specifically, I'm wondering if you could talk about gross margin on a year-over-year basis by channel, retail versus retail, wholesale versus wholesale, curious about the -- what's going on behind the scenes on the gross margin line? Thanks.

So I don't know that I'll speak to it by business. Consolidated as we mentioned, it was down about 50 basis points there were a number of drivers to that. We continue to have an ongoing mix shift within the U.S. wholesale business that is in part due to just the strong demand we're seeing from the exclusive brands, which and collectively are a lower gross margin business. It's a terrific operating margin business for us, but it's a bit lower on the gross margin front. We had very good wholesale growth as we said 9% in the quarter. Retail margins also were strong. We continue to see growth coming from e-commerce, which is a very gross margin business for us. Probably had a bit more off-price channel activity in the second quarter than we've had year-to-date. That's more an issue of the timing of when that product gets liquidated in the market. I'd say the outlook for gross margin is good. We are planning for gross margin expansion in the second half. There's a number of things driving that. Mike went through a number of the second half drivers. We think our inventory position is very great shape. We bought inventory in the retail channel more conservatively to the second half. I think that will be important for us. We do think in the wholesale channel that will be less of that off-price channel, our clearance activity than we had a year ago. So, I think the outlook is good and we're planning for consolidated gross margin expansion in the second half.

Got you. And then you mentioned, I think both prices as you look out to spring of 2020. Any way you can quantify that for us?

Lower product cost. And low single-digit product cost decrease is expected for spring 2020.

That side you see as down low singles?

Correct.

Got you. Thank you. Good luck, guys.

Thanks very much.

Our next question comes from Susan Anderson with B. Riley FBR.

Hi. Good morning. Nice job on the quarter. I was wondering if you - so I think you said that pricing had rolled out in second quarter, I think it should be fully in place in third quarter. So, I'm assuming a better benefit on gross margin. Maybe if you could give your thoughts around that. And then, I think you said July is off to a good start. Did you say what your stores are comping quarter to date?

Two questions. On the pricing, yes. I think what we commented as we had -- we took some pricing action in the first half. We did not totally cover the cost increases, we had our realized pricing. The pricing actions are -- were more strategic in the second half more fulsome, and we expect those to more than cover the cost increases in the second half. We feel good about that.

And the comps -- third quarter date. The third quarter got off to a very strong start. We had high single-digit comps over the 4th of July holiday, and typically as you see a post-holiday lull that together with the heat-wave in important markets in recent weeks, we've given some of that back. But we're currently running positive comps for the third quarter.

Great. That's helpful. And then I guess another question on the Wholesale in second quarter, the upside there. I guess how much of that was due to the greater replenishment versus the timing shift? And then, I guess as we look out to third quarter and because of the timing, the negative growth there. I guess I was trying to factor in, you guys should be getting a benefit just from the Toys "R" Us pressure being gone. So I guess how much of a benefit should you get to offset that? Thanks.

I'll speak high level. I think we feel good about the Wholesale business. We're up low single-digits in the first half. We expect to be the same in second half. I would say the retailers have been playing their business more conservatively, particularly in the Carter's brand. Our replenishment businesses have been very strong. So we talked about the three exclusive brands that business has been surging. Our business with Amazon is growing very rapidly. Simple Joy sales are really strong. We had really good Prime Day success, 3 times the sales of last year on Prime Day. And all of our brands were up meaningfully. And I think it's noteworthy that most accounts and our own Retail business also saw demand surge during Prime Day. So, we're optimistic about the business, but I would say the upfront bookings have been more conservative and the businesses has been driven by our replenishment businesses in exclusive brands and with our Little Baby Basics business and with our Skip Hop business going forward.

Great. That’s very helpful. Thanks so much. Good luck next quarter.

Thank you.

Our next question comes from Ike Boruchow with Wells Fargo.

Congrats on a good quarter. Just on sales, can you guys kind of discuss what you're expecting the rest of the third quarter? Obviously sounds like, July is off to a good start, but as we get into the back half, I think we're lapping a down 20% Labor Day week-end. And then on Wholesale, can you just quantify the timing shift impacting 3Q? And I have a quick follow-up on margins.

Well, we're forecasting, as we said, Wholesale sales in Q3 down low single-digit. We're forecasting Retail growth up low single-digit and comparable sales in International. I'd say most of the timing shift as it relates in Q3 relates to that off-price channel activity that normalizes a bit as we move through the second half. So, very good growth planned in the fourth quarter and that's what we're focused on delivering right now.

Okay. And then on margins, can you go into more detail on the cadence of gross margins off the back half? Should we be expecting similar levels of improvement in each quarter? And then, what the $4 million to $5 million SG&A shift into 3Q? Is that on marketing or what line item is that on for SG&A?

On SG&A, I'd say, it's a few items. Certainly, marketing we felt like it was an opportunity to move some of that spend into the second half. Other areas would be just some deferred hiring some technology projects which are shifting more from original planning in the first half now those will take place in the second half. In terms of gross margin, we are planning gross margin expansion in both Q3 and Q4 and I'd say it's roughly comparable in terms of basis points year-over-year.

Okay, that's helpful. Thanks guys.

Our next question comes from Omar Saad from Evercore ISI.

Thank you. Thanks for taking the question. Mike a couple of questions I wanted to get you to dive in a little bit deeper. Number one on real estate. Maybe you could expand upon the strategy. It sounds like you're closing outlets maybe deemphasizing that channel but also opening mall stores. What you're seeing in that channel especially post the Gymboree liquidation? And then I also wanted to ask about the BOPUS initiative that you mentioned. Maybe talk about how many stores you've rolled it out in how long it's been? What you're seeing is it kind of universal across the board the adoption rate? And then maybe if you have any thoughts on especially since you guys offer free shipping, why you think you're consumers are choosing to buy online and pickup in stores as opposed to get it in the mail? Thanks.

Yes. So, on the real estate strategy, again, this is probably a 20-year long strategy evolving out of the outlets. The outlet store is years ago like our history we're a wholesaler and like most wholesalers years ago, we had outlet stores. In those outlet stores, we used to refer to as ATM machines, highly profitable. Then we -- knowing that only about 5% of kids apparel is bought in outlet stores, we started to open that same model in strip centers because strip centers felt more like outlets to us. And we've had very good success in the strip centers. And always stayed away from malls only because of the economics of the strip centers were more attractive. But the market has changed with people exiting the malls, new opportunities have arisen. I think we shared with you earlier this year when Gymboree decided to close all their doors, our real estate team did a very good job evaluating 1,000 mall locations and they edited it out probably 90% of them for a variety of reasons either the economics weren't attractive or there was weak co-tenancy or the demographics were not attractive, meaning there weren't a lot of families with young children in the area of that mall. But they did identify some portion of about 100 mall centers that were worthy of consideration. So, we're leaning into it. And it's largely because the economics are more attractive. The mall owners have reached out to us they see that children's apparel is a traffic driver to the centers. And so Richard showed you a beautiful picture of the Houston Galleria this morning just co-branding an existing store has given that store a meaningful lift without cannibalizing a store located just outside -- a Carter's store located just outside that Houston Galleria. And so we probably open it up in 15 mall stores in the balance of this year. We already have about 50 mall stores today. They're our best-performing store actually better performing than our co-branded stores and strip centers. So, we've got a little bit of visibility to what is possible. We'll open up 15 more if those 15 are good we'll continue to go down this path of opening up some portion of 100 stores. And these stores do on average $1 million a year. So, that's a new $100 million opportunity in our Retail business that we did not envision did not plan on I would say earlier this year. But the Gymboree closures gave us a reason to think differently about the mall store opportunity. You open -- asked about BOPUS, Brian do you want to comment on that?

Yes. On the omni-channel initiatives we'll talk about BOPUS and same-day pickup. BOPUS has been popular. We've got about 13% of our online orders in the second quarter were shipped to our stores where the customer chose to swing by and pick those up. I think she looks at that as another item of convenience when she's out running errands not unlike when she's doing target runs and other things. The good news is of those folks that picked up in the store about a quarter of those actually chose to purchase something else when they were in the store, so we think it's a win for the consumers and for us. That is chain-wide. And then we also just rolled out same-day pickup and that was a nationwide rollout at the end of Q2. The customer response has been above the plan and really that's about speed. The order is available in as little as two hours to be picked up after she puts the order -- after she places the order online. So, I think a number of different things some folks want it shipped to the house and some want it shipped to the store. We've still got two-thirds of our customers that shop only in stores. So, I think really the totality of the omni-channel initiatives within our retail experiences is what we expect to deliver good results going forward.

Yeah. Good question why opt to pick it up if you can just get it shipped to your home. People like -- people love our stores and they like the instant gratification. Within a couple of hours after ordering, you have the convenience of shopping at home. And then you also have the convenience if you could swing by within a couple of hours and pick up what you need. So, our stores are the best looking stores in children's apparel, so people like to go to those stores.

Perfect. Thanks, Mike.

Thanks, Omar.

Our next question comes from Jim Chartier with Monness Crespi Hardt.

Good morning, guys. Thanks for taking my questions. So, first, I just wanted to kind of circle back to Labor Day last year. I think you said weather and kind of marketing were the two biggest impacts. So, on the weather front, anything you guys have done to the product assortment to make it more aware now to limit the impact? And then on the marketing, have you done anything differently year-to-date that gives you confidence that the changes you'll make for Labor Day this year will work? Thanks.

Yeah. So, with respect to Labor Day, as I recall, we got clobbered over Labor Day last year. And Labor Day 2017 cool weather broke. So, we had an unusual surge in demand for our brands over Labor Day 2017. By comparison, weather was unusually warm over Labor Day 2018 and so our business was tougher. So that was the biggest weakness in our third quarter last year. And it's hard to predict the weather, it's never ideal. But to your question there is -- our merchants, our designers have done a first-class job, making sure that our product offering is more responsive to weather patterns in that early fall period. So, we have many more wear-now choices, short pant, short sleeve and so highly responsive to what consumers are looking for earlier in the season. Seasonal transitions are always difficult to forecast. But I think our teams have done a first-class job, making adjustments both the product offering and the marketing, so that we're expecting a meaningfully better Labor Day holiday season this year. And I think we shared with you Labor Day for us is the second-largest holiday. Second only to the Christmas holiday. So, it's a meaningful -- by the time we update you again in October, we'll have a very good read on what kind of year 2019 is shaping up to be.

Okay. And then on the fulfilled by store, what percentage of e-comm sales do you expect will ultimately be fulfilled by stores? And then on the stores were -- they're shipping as time is the biggest driver. What's the current ship time on those orders? And then how -- what do you think you can reduce that to?

Yeah. So, the high view here with all these wonderful omni-channel capabilities that have been put in place, significant investments in technology. We're forecasting next year some portion of 30% of our e-commerce customers will be taken advantage of one of either buy online and shipment to store or buy online pick it up within a couple of hours, or the capability of what we call endless aisle. So that if you're in the store and you see something beautiful and we don't have the size you need, we'll ring you up in the store, we'll ship it to your home for free. And then new capability fulfilled from store. So we envision probably some portion of about 30% of our e-commerce orders will take advantage of those new capabilities.

Great. And then just the last question. You mentioned that your mall-based stores are the best-performing. Is that in terms of best comping stores or profitability as well? Thanks.

The comps, but the profits are rich as well. The four-wall contribution is not dissimilar from the other stores, but the comps have been the richest.

Great. Thank you and best of luck.

Thanks very much.

Our next question comes from Steve Marotta with C L King & Associates.

Good morning, everybody. Most of my questions have been asked and answered. Talk a little bit about that royalty income line and why it was down year-over-year? And when you think that the China business model will change, will begin to have a positive permanent impact on that line?

On royalty income, it was down modestly, Steve, in the quarter, largely consistent with our forecast. A couple of things. We mentioned the introduction of Oshkosh at Target, that is replacing a legacy program with Target that was more of a royalty arrangement. We've also in-sourced some categories in the last year, so which are detrimental to the royalty income line, but they are accretive from a sales and margin point of view. I'd say those are the two biggest drivers.

Yeah. And on China, I don't -- we don't expect that the royalties from China will be meaningful over the next couple of few years. It's early days, time will tell. We're thrilled with the new partner. They are thrilled with the opportunity. They're doing a first-class job, stabilizing and improving the Tmall business. They just launched Carter's on vip.com. They're working with Costco. They're ready to launch the Carter's brand with Costco China next month. They're pursuing opportunities with Walmart China as they're presenting our brands at a trade show to appeal to other wholesalers. And so the focus this year, I would say is on e-commerce and on wholesale. And then stores may come as early as next year. But it's early days. As it becomes more meaningful in terms of activity and contribution we'll share that with you.

Very helpful Thank you.

You’re welcome.

Our next question comes from Laurent Vasilescu with Macquarie Research.

Good morning. Thanks for taking my question. Sorry to beat a dead horse here, but can you remind us how July, August and September performed last year so we can factor this in to our 3Q comp estimates? And then with July called out as a strong start with 4th of July and then some pullback or given back for the remainder. So we think that July was more like a mid single-digit comp?

Well, it's too early to say what July is going to be, but we're expecting a 2% to 3% comp for the quarter. And based on what we know today we'll -- we think that's possible.

And last year to answer your question we had a slightly negative comp in July we had a 1.9% in August and our comparable business in September. So we finished last year for the quarter at a 0.5% comp.

Very helpful. Thank you very much for that. And then to follow-up on prior question can you parse out the dollar amount in the wholesale shift between quarters? And then great job on the exclusive initiative, can you remind us how much of your Wholesale business is tied to exclusives? Any percent contribution rate would be appreciated.

We've -- we don't disclose the exclusive brands. We don't talk about individual customer relationships. So Laurent don't think we can help you with that. And in terms of quantifying further probably not appropriate given our segment disclosures.

Okay. Fair enough. And then the one key presentation called out 45 store openings and with closure of 25 for 2019. Is that still the plan? And how should we think about the cadence between 3Q and 4Q?

Yes. Roughly that is the plan for the full year. And most of the closures have taken place. Today they'll be a handful in the balance of the year. And as Mike said we're going to open about 15 of these new format mall stores in the second half.

Okay. Very helpful. Thank you very much and best of luck.

Thank you.

Thank you.

Our next question is from Jay Sole with UBS.

Great. Thanks so much. You know, this question is on credit card program. Can you give us an idea just how fast you think you can ramp the credit card program up especially with the rewarding moments loyalty club members? And what impact it might have on sales and margin or reducing credit card fees?

Hey, Jay we're -- we just launched this thing. We've had a positive early response from our customers. We're really encouraged by the applications and the approvals and the spend for customer. And I would just say too early to put our numbers on it. Our goal over the next few years is to have a meaningful amount of our retail sales on the card. And it's a win for our customers because it's available credit for them. They get free shipping, loyalty points, special offers. And of course it's a win for us because we got lower credit card fees what we hope to be incremental sales and really can establish a closer relationship with the customer. So we know that families come to us first when they have a baby, new families when they have that first child and we think that the Carter's card can really drive lifetime value for us with those consumers. So -- but too early to put a number on it. We think it's meaningful but it's very early days.

Okay. I guess -- and then maybe on the OshKosh at Target. Can you just talk about when to sell in for that product began? Was that a 2Q event and then we'll see it ramp through 3Q and 4Q before we lap it next year or did it really start in 1Q?

It launched in April.

It launched in April.

It launched in April to ramp up. So we launched with over 600 doors and expect to expand over 1000 doors for spring 2020.

Got it. Okay. Thank you. And then my last question is you -- it's such a choppy year. You know, July four weekend very strong and then it slows down and I think the whole year has been like that. How are you benchmarking yourself versus other retailers of children's apparel because the whole environment has been choppy? Because we're talking about a 2% to 3% comp rate that's kind of been the growth rate. First half of the year was a little bit slower than that. How do you sort of tell in this environment how you're really performing and how you're market share is changing versus everybody else out there?

Well, the high view we're competing in a $27 billion market. That market's probably down some portion of $1 billion over the past year. So call that some portion of about 4%. And our business is growing. So, we -- there's no company that has a broader presence of children's apparel in the United States. So wherever you're shopping for kid's apparel, you'll likely see a very strong presentation of our brands. So we're uniquely positioned to capture the consumer wherever she is shopping. If she likes to shop in outlets, we're there whether we have the number one and number two market share for children's apparel in the outlets. If you're shopping at Kohl's, Macy's, Walmart, Target, Costco, CMs, wherever you're shopping, you're going to see a nice presentation of our brand. So, I think that's why we've done so well. Over the years, there's been good economies, tough economies, there's been strong birthrates, weak birthrates, but this will be our 31st consecutive year of growth because, we're everywhere. We appeal to the masses from Macy's to Walmart and everywhere in between. So I think that's why we've done as well as we've done. Despite the market challenges, we have a way to manage and deliver growth.

Got it. Okay. Thank you so much.

You’re welcome.

Our next question comes from Tiffany Kanaga with Deutsche Bank.

Hi, thanks so much for taking our questions. In launching the Oshkosh brand at Target, do you have a sense for the source of that floor space? Can you confirm? Is it as the category is growing and taking more space? Or are you rebalancing a bit versus your Carter's exclusive product? And also, how do you think about, it's positioning and price points versus CAT & JACK and versus Oshkosh in your own stores? Thanks.

Yes. I'll talk a little bit about Oshkosh. We're -- the Oshkosh brand overall, we do about $600 million in sales as a company and we're planning the sales and profits of year. So, we're happy to launch this in Target this April. We consider them one of the key apparel retailers in the United States. And as Mike said, we had strong selling in 600 doors and we're going to expand over 1000. I would say overall, I don't know that I want to parse out Target's individual strategy. I will tell you in terms of our strategy with Target, we continue to have very strong business with all of our brands, with our Carter's branded Target, with Oshkosh selling is very good and also with our Skip Hop brand. So we are not necessarily losing space in the Carter's brands whatsoever or Skip Hop to support this launch. We feel good about our performance. We've met with the target teams recently and they've been very complimentary of the performance. They do a great job with their brands. They've launched several brands and a new one even in the last few weeks. They're some of the best retailers our there. They do an excellent job. But I would say over the last few years, the way I would benchmark is our sales to Target continue to grow in an environment where they have put additional emphasis on their private brands and done a really good job of it we have grown as well. So, the rising tide has lifted all ships and we feel good about our business there. And we're excited about this new launch with Oshkosh.

All right. Thank you so much.

Our final question comes from John Morris with D.A. Davidson.

Congratulations on a great quarter let me add that. I want to check -- just check my thought process here directionally about the shift in the revenue growth which I guess looks like it's out of Q3 and into Q2, maybe about two point’s worth of revenue growth because of the timing of these shipments. Am I right in thinking that most of that is off-price? And am I right in thinking about that directionally or were there other shifts going on their on the revenue line? And then a couple of quick follow-ups.

Yes. I would say within the Wholesale business they are always between quarter-end dates and that's why looking at the full year is probably the best benchmark that we can give you. And we're planning low single-digit growth in Wholesale. Revenues will be down slightly in that segment in Q3 and then they rebound pretty strongly in the fourth quarter, but for the full year, planning good solid low single-digit growth in that segment. That's how I would think about it. Off-price is a component of that and fortunately this year, we're forecasting less off-price channel activity given our inventory position, given that we're comparing against the Toys "R" Us, Babies"R"Us liquidation a year ago and we're well past that. So that's how we think about it.

Okay. That's helpful. And then just to clarify earlier because on the SG&A shifting into the back half those additional expenses, is that going to be -- can you give us kind of a feel by quarter because I think implied by one of the earlier questions was that that $4 million to $5 million was going into Q3, but I don't think you guys had said that. I think you were saying it's going to fall into both quarters. Is that correct? And how should we think about that allocation?

I would say it's going to fall into the second half. I don't think I'll parse it out between Q3 and Q4. We're planning for low single-digit SG&A growth in the second half and planning for some modest rate leverage as well. That's how we're thinking about the expense line.

All right. Thanks. Good luck for fall.

Thank you, very much.

This concludes today's question-and-answer session. I will now turn the conference back over to Mr. Casey.

Okay. Thank you. Thank you all for joining us on the call. We look forward to updating you again on our progress in October. Goodbye.

Thank you everyone. This concludes today's teleconference. You may now disconnect.