ASNA
#<UNK>, the inventory ---+ there are two components of inventory.
One is the actual merchandise that's in the store that is included in our adjusted EPS number.
The second is an inventory liability that was taken ---+ it wasn't finished product ---+ that was taken that we wrote off.
The first item, I think, is around $2 million is related to an inventory liability and a bit of severance related to Justice.
The second was related to write offs in the stores in terms of deflagging, taking the Brothers signage off and hard asset retirements related to the exit of the brand.
No.
I'm sorry for the confusion there.
The mark downs related to that are in our adjusted EPS number.
What I was suggesting in my prepared comments is that gross margin rate for Justice, as reported, was down.
If you exclude the impact of the Brothers hard marks that were taken in the third quarter, the rate would have been up 100 basis points.
So again, just reinforcing the strategy that we are backing off the level of promotions.
We are seeing gross margin rate improvement.
It's being masked by the exit of Brothers and the significant hard marks that we took this quarter.
Yes.
It was $8 million in total, $6 million incremental to last year, <UNK>.
<UNK>.
Operator, we'll take the next one and get <UNK> back in when she's back.
Thanks, <UNK>.
It's <UNK>.
As we think about the weather impact, the Northeast and the Mid-Atlantic regions were down about 5%, and that represents about 40% of our volume.
So I'd estimate high level about two percentage points in comps related to weather.
On the port side, probably about another one point of comps.
So I think in estimate around three points of the four would have been weather/port-related.
Talking about May, interestingly enough, we started to see some challenges in the West versus the Northeast and the Mid-Atlantic.
And we saw it in the West across several of our brands.
Again, the Northeast and the Mid-Atlantic popped back very nicely in May, with a drag a bit from the West.
So we're seeing encouraging performance in terms of that the most important regions coming out of those challenging weather periods.
We haven't yet hit the level that we're expecting to be at as we're coming through May, because of the aforementioned challenges out of the West.
But we're optimistic that we're going to see some things as we move forward.
Let me see if I can answer that in two pieces.
AUC is coming down.
Think of mix as an important driver of that.
And I personally don't like to use the word basics.
Everything that we will be presenting is fashion.
But we are moving out of the overly embellished, over-the-top fashion that, frankly, we got lots of feedback on, and we're adjusting that.
Clearly, that's an important element of our overall mix, but it didn't need to be penetrating at such a high degree as it was historically.
And we're moving that into more versatile, every day fashion that our girl can wear any time in her lifestyle.
We think we're putting it in the right place and, frankly, we'll be a lot more productive with the inventory.
Thank you.
So Kate, just in terms of the gross margin rate, if you look at the, over a two-year period ---+ and we've referenced this before ---+ the gross margin rate is going to be down, call it, 400 to 450 basis points.
So you obviously have the operating margin rate deleverage from the top line.
And <UNK>'s got plans and strategies to go drive that back.
But the nearer term opportunity is with that gross margin rate, which we've really gotten hit hard on because of the inventory overhang and all the mark downs we've had.
So I think that as you think about recovery plans, the gross margin rate is going to come first.
And again, you're looking at a 2LY number that was about 58%.
And that's the real opportunity for us.
And keep in mind, two years ago we still had a significant amount of this 40-off activity.
So there's an opportunity to really increment that.
We will get more into that as we have specific guidance for FY16.
But that's the near term opportunity, the additional leverage top line on the better merchandising aesthetic and all the strategies <UNK> is putting in to talk to the new client, grow the top line, that will help, as well.
But that will take a little bit more time.
So the way to think of it is we're essentially going to remain flat with marketing expense, but we have done quite a lot of work to make sure that we are talking to our customer the right way.
And I believe you'll see, after we launch on July 19, a great deal of pretty aggressive efficiency in terms of how we talk to her and how we get our message out.
But the overall expense will remain flat.
<UNK>, it's <UNK>.
I'll address the last question first, which is I feel really comfortable that we've made significant change on the cost of fashion pyramid and how we've shifted into every day fashion.
Feel really strongly that we made a lot of really good, quality improvements there.
And I would make a subtle correction on promotional activity.
We will always have some kind of promotional activity.
What we are eliminating is the erosive, across-the-board, all company sales.
So there will be category promotions, there will be style buys, there will be lots going on in the Justice store.
It's just that we're going to do it differently.
I think that change up there, I believe, actually will be more exciting for our clients overall, and really helps our messaging.
<UNK>, it's <UNK>.
I'm going to take a shot.
You asked a couple of questions.
I'm going to try and hit those, just to make sure I got them.
You said the trend for the brands in the fourth quarter look in good shape for most of the brands we talked about; every one except for Justice will be up low to mid-single digits.
Justice down double.
So you're right on the trend issue.
Justice, in particular, there's a lot of things going on in the fourth quarter.
We've got the base trend.
We've got a higher penetration of private selling days, which will act to pressure the trend a bit.
We've got better product coming in in June, which will help a bit.
We've got the new marketing strategy and we've also got a softer comp versus Q3, which we're not banking on anything, but there's a lot of pieces that are going on.
So again, it makes it difficult to have conviction on it, but we have it modeled down double digits.
Your question on the back half of the year, I think the best thing way for me to frame this ---+ and <UNK> can chime in if he has additional context ---+
Yes.
The first half of FY16, this promotional cadence no longer exists.
There is no more public-private cadence.
So this is really transitional.
And since <UNK> and I had a caretaker plan in place, <UNK>'s got the forward strategy.
There is no more public-private days.
So this is a short-lived transition that's moving to the strategies he talked about on July 19.
No.
Nowhere close, <UNK>.
So Fall 2015 was one of the most challenging quarters we've had, from a mark down standpoint.
So we are going to be going in with a very, very reduced level of promotional activity against a very, very high level of promotional activity last year.
So it's not going to look anything comp in terms of the sales or a gross margin rate, at this point.
Sales will be down.
Gross margin rate will likely be up significantly.
So that's the stuff that we will talk more about.
I think the way to think about this, <UNK>, is that <UNK> and his team are completely rearchitecting the business model.
So all the comparisons really go out the window, because all the tools that we used to use, the 40-offs, the 40-plus-20, the 50-off really are not going to be used.
And if they are, very, very sparingly, as <UNK> alluded to in his comment.
So I really want to make sure you're thinking about it the right way.
It's not like you can say, okay, you're going to be 10% less.
No, the whole model changes.
And I think the result is that, as <UNK> said in his comments, we're offering every day value, both in terms of very attractive opening price points, as well as in terms of the fashion mix, which is now much more heavily weighted towards every day styles and not over-the- top fashion.
Does that help.
Say that again, <UNK>.
Talk about the ---+
Thanks, <UNK>.
Okay.
Absolutely.
We believe AUC is going to come down.
Part of it, as <UNK> said earlier, <UNK>, is that it's a mix issue.
So your over-the-top fashions, your more expensive fashion, more expensive product, so by taking that down from over 40% to 20%, just by math, you're going to be bringing your AUC down significantly.
I think they're certainly headed in the right direction.
But I don't think it's easy sailing from here on out.
We're already strategizing a fall campaign to leverage off of the spring I'm No Angel campaign.
And I think we see ourselves as the leader and we want to continue the conversation about plus size and fashion, and then use that publicity and use that as a way to engage our customer, not just in the conversation, but in our store and our offerings.
And it worked well in the spring.
And if we continue to do a good job, both on the message, as well as on the product, I think we'll see continued good results.
And <UNK>, one thing I would add to that, we are, as <UNK> mentioned, there's still a lot of work and the brand's doing great work in growing.
The one thing I'd point out is they made a really nice improvement in margin rate driven by the way they are being planful about delayering promotional activity.
One example I can give you, the Mother's Day weekend, they ran a BOGO 50 off this year against a 50-off all store last year, and we saw sales down 1%, gross margin dollars up 16%.
That's the sort of stuff that the brand is working on continuously that really we're excited about when we talk to you about how do we get to that high single digit,10% operating margin.
Those are the initiatives that the brand is going to continue to drive and work on.
That's a very high priority for them, and we're very happy with some of the progress we're seeing there.
Thanks, <UNK>.
I'll start off with the port delays and let <UNK> take pick up on some of the other numbers.
We're seeing port congestion way, way down.
So that's the good news.
The other part of that story, <UNK>, as you may recall, is that we shifted the vast majority of our receipts to the East Coast.
I mean, the West Coast is much, much better and the product that we've got going in there, delays are down almost to zero.
But I think that we're derisking the situation by moving the receipts to the East Coast.
And we factor all those dates and the lead times are already into our calendar.
So we don't foresee going forward any significant challenges like we had earlier in the year.
Okay.
<UNK>, I'm going to take a shot at your questions here.
In terms of the public event/private event, yes, it generally performed as we expected.
So total comps were down 13%.
If you think about Q1, it was down 7%.
Q2 was down 6%, but significantly supported by high level of promos.
We estimate that the base trend for Q2 without the hard marks related to the inventory backup was probably closer to high single digits, or 10% down.
So, yes, we are down probably three points beyond that.
That's primarily the impact of the private sale, which we said would be probably around 5% drop in the top line.
So relatively consistent with what we were expecting.
And again, a very short-lived strategy, at this point.
It's only going to be with us until July 19, at this point.
Your last question on operating income.
So I had mentioned earlier in prepared remarks, the incremental impact of the Brothers hard marks were about $6 million.
So if you take that $6 million on the volume for the year, you're talking probably, call it, 50 basis points.
There might be a little bit more related to the lower MMU rate as we're selling through in general, as it's exiting and breaking, but that's a reasonable estimate for you to use.
<UNK>, did we lose you.
All right.
Operator, any more questions.
Excellent.
I appreciate everybody's attention and interest in the Ascena story and we look forward to speaking to you in September on our year-end call.
Thanks and have a good day.
