David Swartz

David Swartz from Morningstar, Inc. asked about the strategy to elevate the international business's profitability to levels closer to US operations and the rationale for making S&S Activewear an exclusive printwear distributor.

Answer

CFO M. Scott Lewis stated that broad-based cost-saving initiatives apply globally, but the international segment has a heavier retail component with more fixed costs. CEO Stephen Bratspies added that international margins fluctuate with seasonality, expecting improvement in Q4. Regarding S&S, Bratspies declined to share specifics but described it as a beneficial partnership for a business they expect to grow.

David Swartz asked about the weakness in the women's intimates business, questioning if it was due to market conditions or market share loss, and how quickly the category has historically recovered from economic downturns.

Answer

CEO Stephen Bratspies clarified the weakness is in the intimate apparel category, not the broader women's business. He attributed the pressure to its typical sensitivity in difficult economies and exposure to the challenged mid-tier department store channel. While acknowledging the Bali and Playtex brands are performing well, he admitted the Maidenform business needs improvement and outlined a pivot to focus on T-shirt bras to address a larger part of the market.

David Swartz asked for the basis of the company's expectation for improving sales trends, questioning whether it was driven by point-of-sale (POS) data, discussions with wholesale partners, or a combination of factors.

Answer

CEO Stephen Bratspies explained that the expected sales improvement and Q4 pivot to growth are based on several factors, including incremental holiday programs, retail space gains, a rebound in the Australian wholesale business, and effective brand investments. He noted that while the consumer environment remains challenging, POS trends are starting to improve slightly, and these dynamics are factored into the company's guidance.

David Swartz of Morningstar questioned what menu or operational changes are planned for the Good Times brand to offset rising costs and also asked about the company's decision to stop pre-announcing comparable sales figures.

Answer

CEO Ryan Zink stated the strategy for Good Times is to drive sales through improved product quality and menu rationalization to better leverage fixed costs, rather than engaging in heavy discounting. Regarding the reporting change, Zink explained the decision was based on observing that most industry peers had stopped the practice, but he acknowledged the feedback and would take it under consideration for the future.