Perry Ellis 3Q16 Earnings Call Notes

Perry Ellis International’s (PERY) CEO Oscar Feldenkreis on Q3 2017 Results

Stretch is becoming important to mens apparel

“I think that we have a lot of new product technology performance fabrics a lot of the bottoms business has changed dramatically. Stretch has become such a strong component to the men’s business where you find it on most of garments today and it’s creating the necessity to go out and replenish your wardrobe as well as we are seeing the evolution of so many different fits available to a man today, which has allowed us to again force us to replenish our inventory.”

Retailers carrying short sleeve much longer than they have in the past

“We sold short sleeve product all the way through, I would say, the end of October, to be honest with you. And we are seeing more and more retailers are looking at carrying short sleeve product much longer than they have in the past.”

George Feldenkreis

Feel good about UK and Europe

“We continue to be very bullish in U.K. and Europe. We feel that as microeconomic conditions stabilize and there is a better view of how Brexit will develop, business in the U.K. will increase considerably. We feel that the Pound is reaching a steady level, which will restore profitability and growth. We expect the United Kingdom to generate higher revenues than last year during the fourth quarter and improve its gross profit.”

Seeing reduction of retail space in US which is a positive development

“We are starting to see the reduction of new retail space in America, which is a positive development as e-com continues to capture sales every year, more or less equivalent to what used to be the standard growth in the apparel industry. It is better to have fewer stores concentrate on your product and get the department store and retail buyers to focus on product and product delivery, which will be a better customer experience through less promotions and better service.”

Fossil 3Q16 Earnings Call Notes

Fossil Group (FOSL) Q3 2016 Results
Kostas Kartosis

There’s old world and new world merchandising companies

“So it’s really a process to reinvent the entire company, basically. And if you look at how the consumer market has changed and continues to change, I mean, it’s not going back. We want to make sure we adjust our model to the realities today. And we have a lot of opportunities do that. We have been – if you look at the market today, you could say there’s old world merchandising companies and new world. We are very quickly moving into the new world. We spent a lot of time over the last couple of years talking to our teams about thinking differently, reinventing, being a New World company, especially as it comes to technology both on bringing out technology products and wearables, et cetera, but also getting better at all things digital retailing, social media, omnichannel, e-commerce, et cetera. And as you know, we’ve made a number of investments in both of those.”

Our goal is to gain share in watch and it just happens that you have to do that with tech

“First of all, I’d just say remember that our overall mission is to gain share in the traditional watch business. It just so happens the way to do that is with innovation and differentiation with technology. So in the process of reducing SKU count in all our brands and all our distribution globally, we think we have a lot of opportunity to do that.

Because of complexity of tech have to have fewer SKUs

We actually – if you look at our wearables launches, we’ve launched – we’re going to launch over a 100 units, but our sales per unit are much higher than the rest of our company. So wearables because of the technology involved and the complexity of the apps and the execution is really kind of forcing us to have fewer SKUs that mean more, and that – we’re trying to the rest of the company learn from that.

Pleased to see increases in Asia

” as far as Asia goes, yes, we are very pleased to see us getting increases there. We’ve seen a – over the last couple years, as you know, I think the market has been somewhat dormant, especially in China. We have seen growth in India over the past couple years, and that’s continued, but we are gratified to see that we’re increasing spending and sell-through in the market. We do think that wearables can turbo-charge that to a certain degree, and we’re looking forward to seeing some results of that in the fourth quarter.”

Dennis Secor

Traffic challenging in retail channels

“Traffic continues to be challenging in our retail channels, as double-digit traffic declines continue to pressure performance.”

Margins have been declining, but expect those headwinds to narrow

“Sure. So the overall margins, the margins have been declining over this past year, more severely in the first part of the year, we’re expecting those headwinds to narrow somewhat. Currency should become less of a headwind as in the fourth quarter, certainly compared to where it was at the beginning of the year. We did go deeper on promotions and really turned those on last fourth quarter. So the fourth quarter comparisons should get easier assuming we don’t – aren’t compelled to drive even more.”

Under Armour 3Q16 Earnings Call Notes

Under Armour (UA) Q3 2016 Results

Our business is about more than athleisure

“Our industry of sport is different. Our industry’s growth opportunities are global with consumers around the world embracing athletic apparel and footwear at its historic levels. It’s not about what people are conveniently referring to as athleisure is the simple truth that consumers all over the world are raising expectations about what to expect from their apparel and footwear and it’s a shift that is not going to be reversed.”

Three strategic initiatives going forward

“recently I pulled together the top leaders in the company and discussed the strategic growth and direction of Under Armour. We came away with three key areas of focus that I want to share with you today. First, getting big fast. Second, making retail a core competency. And third, getting more shoes on feet. ”

Growth gives us the ability to move up in weight class

“As I said earlier, we have succeeded over the past 20 years by consistently punching above our weight and that will not change. But our growth now gives us opportunities to move up in weight class and we find ourselves well-positioned at this moment in time to compete for long-term relationships with athletes, teams and league affiliations that we previously could not justify.”

Need to build a business as big as our brand

“we talked about building a business as big as our brand. We’ve had our eye on $10 billion, that’s the way that we see our company, I think it’s the way that people view and judge us with $7.5 billion being our next milestone to be hit by 2018. And again, we want to reiterate that we’re on track to hitting that goal.”

We still only have half as many points of distribution in the US as our two largest competitors

“I want to give some perspective here for a second just on where we are. I mean, Under Armour’s – we got dropped into the sporting brand pond about 20 years ago. And we jumped in and there were a lot of players, 20 players, 30 players or brands as many as you want. Today, we’re the third-largest brand in the world. We’re the second largest brand in North America. And our two largest competitors have more than 20,000 points of distribution each in North America alone compared to just our 11,000, which speaks to just some of the runway that we still have in front of us right here in our own backyard. They are also six times and four times our size respectively.

Chip Molloy – Under Armour, Inc.

Margin will come with scale

“As we start to get to $10 billion, there’s a couple things that will happen. One, the gross margins, we should start to get expansion on the gross margins and we’ll start to get that because we won’t be faced with as much of a mix shift that we’re faced with today and the improvements we’re seeing on the cost side of the house, we are seeing those today and they’ll continue; but over time, as we start to gain more and more scale, we’ll see that gross margin improvement. And on top of that as we get more into lifestyle, we’ll see more gross margin as well. So, once we start to get towards $10 billion we’ll see gross margin.”

Nike FY 1Q17 Earnings Call Notes

NIKE’s (NKE) CEO Mark Parker on Q1 2017 Results

Manufacturing revolution

“In Q1, we took major leaps toward those long-term goals, especially in the promise of personalized performance. Our connection to the consumer through Nike+ is core to that vision. But equally important is disrupting the business model that supports it or as we like to call it, our Manufacturing Revolution or Man Rev. Through our acceleration of Man Rev, we’re currently seeing the benefit to product cost optimizations. At the same time, we’re building capabilities for increased speed to market.”

Computational design

“Beyond that, one of the most exciting opportunities for Man Rev is within design. We’re continuing to scale our transition from cut and sow where precision is at the stitch level to digital design where precision is at the pixel level. We’re leveraging the power of computational design that uses algorithms to create highly tunable innovations very quickly. This summer in Rio, athletes such as Allyson Felix, Elaine Thompson and Mo Farah claimed gold wearing our latest track spikes. Each were developed using computational design, 3-D printing and Selective Laser Sintering, which allowed us to create and refine prototypes in hours instead of months and aligned with the athlete’s specific training programs and competitive needs.”

Sport and innovation have always been the two most powerful drivers of culture and style

” I’ll just back up and say though that sport in general and innovation have always been and I think always will be two of the most powerful drivers of culture and style. NIKE always – we’ve always started with the athlete. That’s how we create the insight to drive innovative product and then we amplify that across the portfolio, and sportswear is really important means of doing that. We see tremendous growth in all areas, specifically in both dimensions of performance and sportswear.”

The intersection between performance and style is stronger than ever

“That intersection between performance and style I think is stronger than ever. And by the way, innovation is a huge part of creating a new esthetic and lifestyle product does prioritize I think at this stage with the consumer comfort and lightweight and breathability. So performance is really an element of sportswear for NIKE and that’s what helps to separate and distinguish NIKE in the marketplace.”

Inflection in manufacturing revolution is about taking this to scale

“Well, we’re actually starting to take some of this innovation to scale. I think that’s the short answer. For us, this is about getting product to the consumer faster, it’s about lowering our product cost as we talked about, really trying to drive greater labor productivity, less waste in the system, new design capabilities. These are all parts of Man Rev. I think though the difference, the inflection point that you mentioned, is really more about taking it to scale.”

Trevor Edwards

China has become largest market

“Just recently, the China retail market became the world’s largest market eclipse than the United States. And with our impressive growth there, we continue to feel confident about the successful strategies we are executing. We are leading with digital where we’re seeing incredible growth in our business, as we continue to innovate with a focus on mobile. And we are leveraging the best practices from China across our global portfolio.”

Ascena Retail FY 4Q16 Earnings Call Notes

Ascena Retail Group’s (ASNA) CEO David Jaffe on Q4 2016 Results

The world is a different place than it was when we made our comp assumptions

” let me just, at a high level to say that, when we made that assumption or that guidance or those goals, I think the world is a little bit of a different place. I think what we are seeing specifically [indiscernible] is a very cautious consumer, with respect to apparel spending. And all of you are smart guys and read all the same articles and the reports that I do. It’s tough out there. There is no question that the female apparel shopper has pulled back. We have all seen the reports and so we can’t really put our finger on what it is that has brought her back from where she was, in terms of her spending. And as we look out, we keep [indiscernible] and saying are these trends secular or cyclical, and I wanted to think that they were simply timing issues. It was very cyclical, and it would come back. And what we saw this season is, maybe some of it is a little secular. And so we are trying to rebalance our business model to understand and incorporate those changes that we are seeing from our customer.”

Not clear that stores don’t still have a role

“So I will go first on the second question, and that’s a really tough one, because as we develop our omnichannel model, Dana, we think that our stores still have a role. So the easy answer is, oh shut all your stores and move everything online. I don’t know if that’s the right answer. So we are developing better systems, better analysis that will enable us to understand the impact that a store has in a market on omnichannel sales, online sales and vice versa. So just to give you a quick kneejerk, when we open up a new store, we find that our online sales in that market go up. So that’s important information. So what happens is when we close a store in the market, do they go down, can we transfer some of those store sales online. So that’s the analysis that we are working through, and we will use that to help us determine how many stores we need in a particular market, and by inference in the fleet.”

Robb Giammatteo

Don’t think we should be materially impacted by Hanjin

“And Dana, your question on Hanjin; we have no direct relationship with Hanjin for our Ascena Global Sourcing Network; so pretty modest exposure. There are some relationships Hanjin has with other operators with alliances. But we think our direct source business is relatively isolated, and not going to be impacted materially.”

PVH 2Q16 Earnings Call Notes

PVH’s (PVH) CEO Manny Chirico on Q2 2016 Results

US market most volatile

“In the second quarter, the US market continued to be our most volatile market that we operate in. Similar to the first quarter, our US wholesale business continued to grow and show improvement. For the first half, we are running well ahead of our wholesale plans and our prior year actual results.

However, our US retail businesses have not seen much improvement in trend from the first quarter and continued to experience soft traffic and higher promotional trends. Specifically, our international tourist traffic and spending continues to weigh on our US retail business. And as we began August, these sales trends have not improved.”

UK business continues to show strong momentum despite short lived slowdown

“Moving to our European business, we saw solid performance in all major European markets, demonstrated by an 8% comp store increase in Europe for our retail business, with strength across all major markets. I think it’s important to comment that our UK business continues to show strong momentum despite a short-lived slow down around the Brexit vote. We continue to be encouraged by the healthy comp trends we have experienced so far in the third quarter, which continue to run up high single-digits throughout Europe.”

No material improvement in US retail business

“Turning to our US retail business, unfortunately, we have not seen a material improvement in this business year to date with comps running down year to date about 8%. The business continues to be under pressure driven by weakness in traffic and consumer spending in the international tourist stores. As a reminder, we’re taking a prudent approach and are not forecasting for the first half trends to improve for the balance of this year.”

Macy’s store closures shouldn’t be too big of an impact

“So I think what’s critical, I guess, first, let’s start with the Macy’s 100-door closure. I think Macy’s spoke to it as a net impact of about $1 billion. I think it’ll be relatively immaterial to our top line as we move forward as that happens over a period of time. I think it may put a little bit of pressure on top line, but from a profitability point of view, these obviously weren’t Macy’s most profitable stores and they weren’t our most profitable margin stores. So I think the opportunity is to have a healthier presentation and healthier profitability in the brick-and-mortar side of the business.”

Expanding digital growth on partner sites like AMZN

“From a positioning point of view, for the last 24 to 36 months, we’ve been really trying to drive our digital growth, both our only site, but also our partner sites, Macy’, our key players there, and also couple – a number of the pure plays globally, be it Amazon, Zalando, Alibaba, Tmall.”

Margin is strong in everything e-commerce except for our own e-commerce

“Sure, I’m not going to speak to specific customer, but I will just say that our e-commerce wholesale business where we are selling to our pure plays and all – where we are selling to our pure plays and to our department store partners is a very profitable business, consistent with all of our other businesses. The only business that is a challenge for us from a profitably point of view is our own e-commerce businesses, which we’re truly running as flagship sites. We don’t over promote on those sites. It’s very event-driven. We don’t do flash sites and flash selling on our own sites. We don’t drive excess product through our sites. We really view that as flagship sites where the consumer comes to our sites, be it Tommy or Calvin. They investigate the brand, better understand the brand. They can buy on our sites or we will drive them to our retail partner’s sites, or they’ll use that investigation to shop in department stores as we move forward. So we see it as a very cohesive strategy that works together.”

E-commerce just lacks scale right now

“And I think from a pure profitability point of view, the only issue we’re dealing with on our own e-commerce sites is scale. As that business continues to grow, we’ve talked about the kind of growth rates we’re seeing, we’re 12 months away from going from a loss position on those businesses to a profit position on those businesses. And each incremental sale that we make online is as profitable as an incremental sale in wholesale on our own retail stores. So from that perspective, we truly are becoming agnostic about where the customer shops.”

Europe is healthy

“Europe seems much healthier as a market to us. I know all the headlines about Europe and what you see. But as far as the consumers being – spending discretionary money, it’s very healthy there. I think the fact that the dollar has strengthened has only made our – the pressure that puts on our US business, I’ve talked about, the flip side of that is it really significantly helps our international businesses as people travel or people stay closer to home in Europe, within Europe and buy when they’re on vacation or on holiday that’s really been a big win for us as well. “

Ross Stores (ROST) Q2 2016 Earnings Call

Ross Stores (ROST) CEO Barbara Rentler called out specific geographies as areas of strength

“During the quarter, California and the Midwest were the strongest regions, while shoes and home were the best-performing merchandise categories at Ross. We also made some progress improving the assortments in our ladies’ apparel businesses, where we struggled during the spring season.”

Ross Stores (ROST) CFO Michael Hartshorn said the company’s costs are increasing due to higher wages

“Selling, general and administrative expenses during the period increased by 10 basis points due mainly to higher wages.”

Ross Stores (ROST) CFO Michael Hartshorn cited the retail environment as promotional 

“As we look at the back half, we think we continue to face an increasingly uncertain macroeconomic, political and retail environment. And I would say that the retail environment we’re expecting is likely going to be promotional, given relatively poor performance levels that been reported recently and also some store closure announcements that have been made.”


Perry Ellis FY 2Q17 Earnings Call Notes

Perry Ellis International’s (PERY) CEO Oscar Feldenkreis on Q2 2017 Results

George Feldenkreis

Things have changed

“On another issue, the fact that some of our great banners like Macy’s and Kohl’s have announced substantial decreases in brick-and-mortar stores validate the fact that things have changed. We’ve to understand that retail manager are finally adopted a new policy of reducing the total number of stores.”

Overstoring of America is a problem

“In my last conference call I mentioned that overstoring of America is a problem that is affecting retailer in a very negative way. At a time when income continues to capture sales every year, more or less equivalent to what used to be the standard growth in the apparel industry, it is better to have less stores concentrate on new products, produce a better customer experience through less promotion and better service to customers. We feel that these are the key to the future.”‘

Very confident that the world is not coming to an end

“we feel very strongly that the world is not coming to an end and there is a strong appetite for American brands overseas, which we continue to see and you see all the e-com businesses that are developing overseas around American brands growing very fast. So we’re very confident that internationally as you know the United States has 5x as much store space as Europe. So there is still a lot of opportunity.”

No slowdown in the UK from Brexit

“On the U.K question, frankly on a field currency our sales did not go down. We’ve the loss because of the conversion. Our sales in pound have been the same or what we projected. So there have not been a slowdown. In fact our Penguin retail stores, we have six stores in the U.K. turned positive this year, we were losing money. The U.K has also very high rental charges and we were losing money in a couple of stores. We got off them finally. This year it turn positive. So in that sense we’re very encouraged by the trends in local.”

Tech is needed to be successful

“y. I think the price, quality, innovation and great design are given for success for the apparel company. But I feel very strongly that going forward management capabilities, technology is what to be successful. We are pushing full steam ahead for the future. ”

Anita Britt

Inventories in excellent shape

Turning to the balance sheet, inventories are extremely tight and in amazing shape. “

Urban Outfitters 2Q17 Earnings Call Notes

Urban Outfitters’ (URBN) CEO Richard Hayne on Q2 2017 Results

Little impact from the Brexit vote

“Urban’s European business also experienced strong comp gains with seemingly little impact on the business from the Brexit vote”

There’s an abundance of exciting fashion happening

“Over the past several years, the complaint lack of fashion has become common in the marketplace. I spoke to the subject on our conference call in March of this year. I actually said, I’m not predicting exactly want to change in fashion will occur, but that I saw more fashion excitement in spring than I’ve seen in quite a few years. I’ll repeat those comments again as we move into fall. Except I believe the change is now upon us and our customers are adapting to new looks and silhouettes as we speak. As in all such cycles some customers and brands adopt newness faster than others. But the fact is, there is currently an abundant of exciting fashion happening and this is very good for our brands for URBN and for our industry as a whole.”

Once a fashion trend starts not much changes it

“some brands and some customers adopt at different rate, but I think it’s particularly — the fashion changes particularly kind of Urban, but I think that the other brands have lots of fashion as well and to the degree they maybe a little slower and adopting it. I think that they well adopted, I mean this is the fashion change that’s happening and my experience is once it starts to happen, there is not much that stops it.”

Shouldn’t get too negative on stores, there are just too many

“I do believe that we shouldn’t get too negative on stores I think that there is no question, there are too many stores in North American and we start to see some of those stores going away, our competitors are closing stores at a reasonable rate and of course they were just the Macy’s announcement of closing stores. So I think that you will continue to see a lot of stores close and go away and I think that’s a positive thing for the industry and a positive thing for all the people including the ones that are closing the stores. But I don’t think it’s a problem with stores per say, I think the stores concepts are still valid, what I see happening overtime is just fewer stores but probably the store is larger and delivering more of a unique experience and which complements their direct consumer business and I think that that will be the winning combination.”

August relatively consistent to Q2

“Hey Simeon, I think from a macro level, from URBN level we think that the sales are going to relatively consistent or are relatively consistent August to date with the total Q2 results”

Trish Donnelly

Quoting social media growth trends

” Another area where we’re seeing tremendous customer growth and audience engagement is in social medial. Our Instagram followers exceeded the 5 million mark during the quarter, increasing 65% over the prior year and we’re now capturing over 200,000 new followers a month. In addition to our national Instagram accounts, our stores manage their local accounts, which accrued almost 700,000 followers and over 19 million likes in the quarter. Snapchat is important in our consumers’ life and we’re also seeing fast growth here with viewership increasing 25% month over month.”

David McCreight

inventory opportunities by being faster to market, using more predictive tools

“it’s true throughout the quarter there were opportunities for us to have different inventory levels that may have had impacted some of our apparel demand but mostly the inventory level opportunity was in how we distorted the products and the opportunities in learning and where the customers are moving more forward. As Dick alluded to earlier all of URBN will be focusing on how to be faster speed to market, use more predictive tools or resources and overtime lower inventories in total for the organization.”

We’re seeing some interesting movement in Denim

“Dick alluded to we had double-digit success in dresses. We too are excited about the fashion changes and think Anthropologie’s customer will adapt the fashion moves, in a different way and at a different pace than the other two brand customer sets, but we’re seeing some really interesting movement in Denim, woven continue to show some nice highlights and we’re seeing just a lot of interesting reads. That being said we’re expecting and anticipate it to continue to lag the performance of [indiscernible] categories for fall, holiday’s time period. But continue to learn each season.”

Seeing a lot of brands coming to us wanting to partner because they see credibility

“What we do see Neely is a lot of brands now coming to us and wanting to partner because they see the credibility that it has given some of our partners, so I think that yes we’ll continue to do this, we’ll continue to expand it. But we’ll extremely selective in who we’re doing with.”

Michael Kors FY 1Q17 Earnings Call Notes

Michael Kors Holdings (KORS) John D. Idol on Q1 2017 Results

7.4% comp decrease in retail

“In our Retail segment, comparable store sales decreased 7.4%, due to a high single-digit comp decrease in North America and a low double-digit decline in Europe. This was partially offset by a high single-digit comp increase in Asia.”

Decrease in traffic

“In the Americas, retail stores’ conversions increased at a double-digit rate once again. However, this was more than offset by the decrease in traffic.”

Mentioned smartwatch but interestingly didn’t mention Fossil

“we are excited to be entering the growing smartwatch category with the September launch of our Michael Kors ACCESS collection. We are pleased to be teaming up with Google and utilizing their Android Wear operating system to run this truly unique accessory. The smartwatch will be available in two styles, each with thousands of different display options. The touchscreen device allows you to see your social media updates, texts, emails and call alerts, use voice controls to access services via Ok Google, track your fitness and much more. Our smartwatches will be priced between $350 and $395. ”

Department store promotionality isn’t right for our brand

” we will be removing ourselves from all of the department store friends and family sales as well. We think that this is critical for us to really do three things; number one, to protect our brand image. As you know, that channel has become very promotional and, in fact, is causing us difficulties in our own retail channel, which is why you see our gross margins declining because we’re really trying to meet certain pricing that’s happening to be competitive. And we don’t think that’s the right thing to do for our brand going forward.”

Watches are the main driver of the comp decline

“Now, those aren’t yet enough to offset what we’ve lost in – really remember, the number one decline of our comp store sales is watches. It’s the number one area that’s really hurting us the most when we look at our comp store declines. So we need to get some of these other categories to deliver at a higher rate than they’ve been in the past. We see digital marketing as being one of the critical ways to do that, and then really arming our jet set selling associates with the right tools to engage with the customer, both in-store and out of store.”

You’re seeing impact from currency

” as I think some of our other competitors have reported, factory traffic is down versus its historic level, although not really that significantly. So it’s not an area that we see as volatile as the full price side. And really the full price side, for us, the volatility, as we’ve talked about many times, is happening in major markets, whether it’s New York, South Florida, certain parts of Southern California and you see this all with currency. ”

It’s the tourist markets that are hurting most

“So those are big markets for us and they’re meaningful markets for us. And as we look across our fleet of stores, where we’re suffering the greatest is really in the tourist markets. Where we’re not heavily penetrated by tourists, actually those markets are relatively healthy, with the local customers inside there. So that’s kind of the state of what we see in that area”

Consumer wants a fashion wearable

” the watch part of our ACCESS launch we’re extremely excited about and, as you know, we think we’ve got one of the best products in the marketplace. So we’re competing in a different arena. We’re competing against some very significant competitors, being Apple and Samsung and et cetera. But we think with our partnership with Google and the fact that we believe that we’ve got a product that’s better looking from a fashion standpoint, and the consumer research that we’ve done, in particular with the female customer, is bearing out that absolutely she wants something that’s exciting looking and not quite as just tech looking, so more fashion in its nature.”

Department stores are getting inventories in check

“Lastly, in terms of the inventories, we’ve already started to wind down the inventories in the wholesale channel. Additionally, as you saw, the promotional activities, the retailers are getting their inventories in line. We do not expect there to be any inventory issues in our own channels, with the retailers for the fall seasons. That doesn’t mean they’re not going to be promotional. I can’t tell you what they’re going to do and not do, given the traffic situations. But in terms of inventory, there will be a significant amount of less inventory in the retail channel of Michael Kors’ product. And we think that’s a good thing, and will hopefully improve the health and image of our brand with the consumer as it relates to price.”

Joseph B. Parsons – Executive Vice President, Chief Financial Officer, Chief Operating Officer & Treasurer

Wholesale business down 7%

“In our Wholesale segment, net sales declined 7.0%, due to lower sales in our accessories and womenswear line, partially offset by increases in our men’s and footwear businesses”