CRI
#Let me kick it off in terms of international, that was the big challenge in our business and we saw pressure in all of 2015 with declining international tourism.
It became most evident to us in the third quarter last year and that is when exchange rates moved more significantly against us.
But we saw some pressure, we will see it still in the first half of this year.
By the time we got visibility in the second half of last year we had already made our spring buys.
So we are forecasting some continued pressure in the first half of this year, less pressure in the second half of this year.
So just for purposes, our view is we will have good solid positive comps for direct-to-consumer in the first half, second half and for the year.
We are planning that we will see some slightly negative store comps in the first half, better comps in the second half and hopefully flat comps, store comps for the year.
That is our modeling assumption.
We are working hard to make sure we have at least a flat comp going forward.
We will see more pressure in the first half this year, hopefully less pressure in the second half.
Just to follow up on the Kohl's playwear launch, again we don't normally comment on specific customers but we have talked about this because it is important for our Company.
The results I would say were very good in the fall.
We were pleased, Kohl's was pleased and we are off to a good start in spring there with that expansion.
We are going to continue to partner with Kohl's on the opportunity to increase the door count on that thing and we are optimistic that we can continue to have growth there and expand to others.
We are talking to other accounts about it.
I would say that the playwear expansion is a good opportunity for the Company.
I think I shared last call about 40% of our business in our stores is playwear and only about 25% of our business in wholesale is playwear oriented.
So it is a key part of our strategy to continue to grow the brand up through toddler and kid age segments.
We now have the number one share in toddler in the US which we are proud of and we are continuing to gain share in that 4 to 7 segment.
And on up to also share on the sizing, we have commented on size 8, we want to continue to grow in the brand so that is when to be a good opportunity for us this year.
We think we will do about double the business we did last year in size 8 between our stores and some of our accounts taking that in the Carter's brand and we are excited about launching size 14 in the OshKosh brand as well in the back half of the year.
Our comps have been positive quarter-to-date for both brands.
There is some amount that is reflected in our guidance for share repurchase in 2016, yes.
Good question.
I would think the impact was more on the stronger dollar.
We had assumed there would be some decrease in the level of demand from Chinese consumers on our US website after we launched in China.
But we had spoken with other retailers with similar businesses.
The demand from China generally on US websites was lower which we attribute to the stronger dollar.
I'm sure there is a consumer who prefers the broader scope.
We only launched with about 25% of the Carter's product offering on Tmall.
So there is no question.
We actually had fairly healthy level of demand.
My guess is this is directional but I think the level of demand on our US website from China went from about $16 million down closer to about $13 million.
So it dipped.
I wouldn't say it dipped significantly.
We will keep an eye on that going forward.
And we more than recovered what we lost on the US website on that Tmall website.
But I think generally speaking, we saw ---+ our estimates are over $40 million of a decrease in international demand on our business because of the stronger dollar last year.
It had a significant effect.
But we had very strong domestic demand so we are encouraged by what we are seeing from the demand from domestic consumers for our brands.
Sure.
The feedback I get, they love the brand, the national retailers love the brand.
They have given us good feedback on the strength of the product offering, they don't love the margin.
The margin is lower than Carter's, it is lower than private label.
So in this environment, in this tough retail environment, understandably they will allocate more floor space to the higher-margin brands which are Carter's and private label.
So they have been very supportive of the OshKosh brand but we understand the fact that as they plan their business going forward that they will buy less of OshKosh, they will focus on the things that are most predictable in terms of demand, the things they can earn an acceptable margin on.
The way forward with OshKosh is direct-to-consumer for us and international.
We are seeing good progress there.
I think it is important to keep OshKosh Wholesale in context, it is about 2% of our total business.
It is the smallest component of our business.
We will continue to do our best for the national retailers, strengthening the product offering that they are buying.
And as we grow OshKosh, we hope it grows from some portion of $535 million, closer to $700 million to $800 million by 2020 as we grow it, we will have greater scale, greater sourcing leverage, we will improve the cost structure, the margin structure and hopefully regain some of the space we have lost with the national retailers.
<UNK>, I would say that the effects on the operating margin in both the Carter's Retail segment on the OshKosh Retail segment were driven by very similar things.
First and foremost, it is the decline in international consumer traffic.
We had inventory that was procured and had to be cleared so a higher level of promotional activity to clear that.
The negative store comps indicate that we did not leverage the store expenses.
Certainly that was a factor in the lower operating margin.
The comparison to the extra week in 2014 certainly was a factor as well.
So I would say those are the primary issues within Carter's Retail.
We have allocated a bit more towards marketing.
We think that had a good effect actually in driving late Q4 traffic and in the month of December as well but that burden the operating margin of that business.
I would say the outlook for OshKosh's margins going forward continues to be positive.
As Mike indicated, we have a lot of good initiatives around sourcing and other things that we think will- as the business gets bigger and has greater scale, that should drive efficiencies to the profitability of the brand and we are seeing continued good results from the side-by-side format.
So I think the long-term prospects for improving that OshKosh operating margin are excellent.
I would say we still feel really good about building stores.
We have strong domestic demand for our brands.
The stores have good returns and we've got a really nice opportunity versus our competitors in the door counts that we have today.
So improving that footprint and moving the stores closer to the consumer is a major strategy of ours.
Currently we've got somewhere around 33% of the Carter's stores and two-thirds of the OshKosh stores in outlets.
So over the five-year plan, we plan to improve upon that, those numbers could be 25% of Carter's and 33% of OshKosh stores closer to mom in the brand store.
Side-by-side, we just opened our 100th as Mike said.
We are really pleased with those results.
We are going to continue to evolve that model.
We will look at making sure the stores are productive and what the right sizes of them are and how we represent those two wonderful brands in the retail boxes.
We had good consumer feedback, we've got almost half of the purchasers now buying both brands when they walk into the store so we feel really good about the model overall and we will continue to build stores as it makes sense for our shareholders.
We feel good about it.
We did not.
I think we quoted the comp itself, <UNK>, but not the absolute contribution.
Two things.
On the loyalty program, I think Mike had covered before, we feel really good about it.
Launched it the first week, we had 1 million folks sign up.
So far we've got over 5 million folks that we have signed up.
It is a cross-channel, cross-brand promotion.
Mom loves it.
She can use it in our store, she can use it online and our goal is to increase the frequency of transactions and improve our customer retention.
So it is early in the program but to date it is exceeding our expectations.
The percent of earned rewards redeemed and the amount they spend per redeemed reward are both higher than we planned.
So we feel good about that and is one of the many omnichannel initiatives we have to appeal to our millennial moms and overall shoppers.
As far as Easter, Easter is about a week earlier this year.
It is in Q1, it was in Q1 last year.
That was a big shift last year.
However, Easter Sunday does fall into Q1 this year, it did not last year.
So that is the way that should shape up.
I would say this is a topic that we continually discuss and reevaluate.
It is a constant topic of discussion with our Board as it should be.
So it wasn't that it was any kind of a dramatic decision that we reached.
It was just part of the ongoing normal evaluation of where we stand.
I think the way we thought about it is that our best and first use of cash is to put it back to work in the business and I think we are doing that.
So we have a great organization, very energetic and passionate organization that brings us business cases to accelerate and to grow our business.
And I think we are pretty fully funding everything that is brought forward that has a good business case attached to it.
The cash that has accumulated on the balance sheet has gotten to the point where it is probably at a point of inefficiency.
We think it is appropriate to be a bit more aggressive in distributing that to the shareholders.
We took a nice step forward I think a couple of years ago in resetting our capital structure, we added some leverage, we didn't have any immediate needs for the proceeds from that additional debt so we returned that to shareholders.
And so this is part of the ongoing evolution and us trying to be attentive to these matters and be good stewards of the capital.
The balance sheet clearly is in great shape.
We have a lot of liquidity, we define that as both the cash we have on hand as well as the capacity that we have to borrow.
We have a new credit facility that we put in place this year that provides the Company with a lot of capacity should we need to tap it.
So we will go through this review as expeditiously as we can.
The balance sheet has the capacity to add some additional amount of leverage and that is what we would like to determine.
But hopefully the message that is being sent today is that we are committed to returning capital and look forward to doing so.
I think you can imagine that we will move with some alacrity in this evaluation.
I don't think we are talking years and years of further thought on it.
Thank you all for joining us on the call this morning.
We appreciate your thoughtful questions, your interest in our business.
We look forward to updating again with our progress in April.
Goodbye.
