The Children’s Place - Earnings Call - Q3 2020

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by and welcome to The Children's Place Third Quarter twenty nineteen Earnings Conference Call. This call is being recorded. If you object to our recording of this call, please disconnect at this time. All participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. After the speakers' remarks, there will be a question and answer session.

It is now my pleasure to turn the floor over to Anthony Attardo, Director of Investor Relations to begin.

Speaker 1

Good morning, and welcome to The Children's Place conference call. On the call today are Jane Elfers, President and Chief Executive Officer and Mike Scarpa, Chief Operating Officer and Chief Financial Officer. The Children's Place issued press releases early this morning and copies of the releases and presentation materials for today's call have been posted on the Investor Relations section of the company's website. After the speakers' remarks, there will be a question and answer session. Before we begin, I would like to remind participants that any forward looking statements made today are subject to the Safe Harbor statement found in this morning's press release as well as in the company's SEC filings, including the Risk Factors section of the company's annual report on Form 10 ks for its most recent fiscal year.

These forward looking statements involve risks and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to publicly release any revisions to these forward looking statements to reflect events or circumstances after the date hereof. After the prepared remarks, we will open the call to your questions. We ask that each of you limit yourself to one question so that everyone will have an opportunity. And with that, I'd like to turn the call over to Jane Elfords.

Speaker 2

Thank you, Anthony, and good morning, everyone. After reviewing Q3 results, I'll provide you with an update on three key strategic areas of focus that support continued market share gains. First, I'll discuss recently announced Gymboree relaunch plans. Next, I'll update the status of our digital transformation. And last, I'll recap how the execution of our strategic initiatives, along with our superior product and low pricing model position us to continue to capture market share in various economic environments despite disruptive industry consolidation and persistent declines in U.

S. Birth rates. First, Q3 results. Our key product categories resonated strongly with mom in the back to school season, the second most important shopping period of the year. In fact, we believe we were one of the top destinations for key back to school categories this year, further solidifying our preeminent position in The U.

S. Kids specialty apparel market. Our e commerce business continued its stellar performance, delivering 23% growth and representing a record 35% penetration to total sales, a six fifty basis point increase versus last year. We also saw a return to higher AURs in our stores during Q3, primarily driven by less promotional activity. Driven by a strong back to school season, we delivered a positive 0.8% comp in Q3 on top of a positive 9.5% comp in Q3 a year ago despite multiple headwinds, including prolonged warmer weather into late October, which negatively impacted sales of colder weather product in key regions across the country.

Considering our belief that there were elevated inventory levels at a basket of our key competitors entering the quarter, our Q3 outlook provided on our Q2 conference call anticipated the high likelihood of increased promotional activity in the kids apparel space. We also called out a very unfavorable year on year weather compare in October, as colder weather arrived early in October and provided a significant sales benefit in the final month of Q3. However, our outlook didn't anticipate twenty nineteen to be second warmest September on record, followed by prolonged warm weather through the October, which hampered demand for our fall product throughout the quarter in our key regional markets. The extended warm temperatures, when coupled with inflated competitor inventories entering the quarter, resulted in elevated promotions in the kids apparel space, particularly towards the end of the quarter, which had a further adverse impact on our sales and margins. Inventory management continues to be a priority for us, and we exited the quarter with inventories up approximately 3% to last year, with seasonal carryover inventory down double digits.

And finally, despite the significant headwinds, we were able to deliver EPS results near the upper end of our guided range. Shifting to the Gymboree integration. On October 15, we formally announced the early twenty twenty relaunch of the iconic Gymboree brand, which marked the next phase of our exciting journey to bring the coveted brand back to its fiercely loyal customer base. Our team hosted a media event in New York City support the relaunch and showcase our spring twenty twenty Gymboree collection. The response to the product was overwhelmingly positive as attendees, including bloggers and key influencers, gave high praise to the product for capturing the core of what mom loved most about the Gymboree brand during its peak.

We encourage you to read the thousands of comments Gymboree moms continue to post on our Gymboree social media sites. The comments reinforce what we have discussed before. She remains fiercely loyal to the Gymboree brand and is not inclined to take her dollars elsewhere. Our plan is to reintroduce the Gymboree brand in early twenty twenty through a meaningfully improved digital experience on gymboree.com, complemented by shop in shop locations in over 200 TCP stores in The US and Canada. On many occasions, we have discussed that we have the dream customer, a millennial mom, and you can see it reflected in our quickly evolving omni profile.

Approximately 40% of our customer file is comprised of online and omnichannel customers, and this group increased approximately 14% in Q3 and now represents nearly 60% of our identifiable U. S. Sales as we continue to make significant progress driving more of our customers to join our omnichannel ranks and to spend more year on year as they make this transition. This is a strong indicator that we have the ability to to provide the millennial Gymboree mom with the same type of omni experiences that we are providing to our core TCP millennial customers, and we expect our enhanced offering for Gymboree will be well received at launch. The enhanced, personalized online shopping experience at gymboree.com will offer a customer centric and vibrant online experience that the prior owner simply wasn't able or willing to provide.

The Gymboree brand did not have a robust loyalty program and did not have a notable private label credit card initiative, which presents The Children's Place with a meaningful opportunity when considering approximately 80% of TCP brand sales come from our My Place Rewards and our private label credit card loyalty members. Importantly, our loyalty members spend nearly three times our non loyalty customers. Additionally, the Gymboree mom will benefit from The Children's Place transformational investments made behind omnichannel digital fulfillment capabilities. Following a carefully controlled relaunch of the Gymboree brand at retail in early twenty twenty, we will provide additional insight into our future plans to address additional opportunities for the Gymboree brand. Our real estate team continues to execute on the strategy of opening new TCP locations in select centers that were highly productive for Gymboree, with six new TCP locations opened in Q3 that are each forecasted to post annualized sales volumes well in excess of $1,000,000 The openings are part of our high return strategy to capture the displaced Gymboree market share with what we believe to be little risk of cannibalizing our existing retail sales or sales of potential wholesale partners.

We previously discussed having identified 40 locations that were extremely productive for Gymboree where TCP does not currently have a presence. These are centers which have no existing Children's Place location to cannibalize, cannibalize, and do not have another TCP location within a large radius. In addition, these centers are largely occupied by other kids' retailers, who, based on the relative productivity of the center, likely perform extremely well in these locations. We believe the new TCP store sales in these locations will be nearly 100% incremental for TCP, allowing us to pick up share from key competitors as we bring the Gymboree brand back to these highly productive centers. In the TCP locations that were co located in centers with closed Crazy eight and Gymboree locations, we comped several 100 basis points better than in centers with no co located stores.

Stores. So we believe we're continuing to gain traction in securing market share from the abandoned Crazy eight and Gymboree customers. So as the customer excitement around the return of Gymboree continues to build into the early twenty twenty relaunch, we believe we are very well positioned to capture an outsized portion of the sales left behind by Gymboree. Moving transformation. Continuing to build off the foundational capabilities for personalization as part of our accelerated $50,000,000 digital transformation investment, we launched the initial test phase of personalization in early May, which was focused on a limited number of identified behavioral segments across five channels of distribution.

Building upon the initial results in Q2, we began to expand into additional segments in Q3, extending personalized content to approximately 10 of our customer file. We continue to see encouraging lifts in open rates, orders per customer, net revenue and net margin per customer with continued strong migration of store customers to higher spending omni channel tiers. Our goal is to extend personalized content to approximately 80% of our customer file during the 2020. The impact of digital personalization can be meaningful as we estimate that each point of conversion of our e commerce traffic represents an incremental $80,000,000 revenue. Shifting to our enhanced omnichannel capabilities.

Our store fulfillment capabilities are another meaningful contributor towards the $200,000,000 digital opportunity, and they continue to outperform expectations as they drive enhanced options for Ma. BOSS and BOPIS continue to outperform expectations with customer online orders picked up in the stores in the mid teens and attaching at a nearly 20% rate, leading to a considerably higher than average ticket. In a few weeks, we plan to begin piloting Save a Sale functionality, which will provide our moms with access to inventory from other store locations or the distribution center for products that are not in stock at a specific store location. We'll be able to deliver that product directly to her and capture incremental incremental sales that would have otherwise been lost absent the Save As Sale capability. As discussed, our online and omnichannel customers increased by approximately 14% and now represent approximately 40% of our total customers,

Speaker 3

which is a nearly 600 basis point increase from a year ago. In only a few short years, we have gone from 80% of our customers choosing to shop only in our brick and mortar stores to approximately 60% choosing to shop only in our stores. We expect that our online will continue to increase as we ramp up our omnichannel capabilities and execute upon our fleet optimization plan to ensure that we're serving our millennial customers' preference for the convenience and ease of an online shopping experience.

Speaker 2

Now I'll address how our cost and pricing model provides us with a valuable competitive advantage. As we continue to mix our product costs lower through continuing to migrate our sourcing activities to lower cost regions of the world, we are able to provide the value price points that we believe millennial moms are looking for as they continue to seek value in apparel purchases to fund their higher spend on experiences. In fact, our AUC for 2020 is projected projected down low single digits, and importantly, that is on top of an AUC decrease in 2019. Over time, we believe that this pricing model has and will continue to allow us to create a meaningful pricing spread to the competitive set, which in turn will allow us to capture a greater share of the estimated 600,000,000 of sales donated each year by poorly positioned competitors. Historically, our cost and pricing advantage has proven to be a benefit in good markets while also positioning us well economic years, as evidenced by our low single digit comp growth in the most recent recessionary period.

The ability to competitively maintain lower especially important in a shrinking children's apparel market, driven by approximately 2,200,000 fewer births over the last ten years versus the recessionary period, which represents an average decline of 1.1% a year over the last ten years. We believe that as the millennials pay down debt, marry, and purchase homes later than prior generations, growth in the children's apparel space will continue to be realized through market share gains for the foreseeable future. That is why we believe that our ability to provide quality children's apparel at a value price, while also having the capacity and foresight to invest in digital transformation, uniquely positions us for continued market share gains. So as the industry continues its consolidation and news of Gymboree's bankruptcy fades in favor of closings from other ill position retailers,

Speaker 0

advantages continue to widen,

Speaker 2

providing us the opportunity to capture a greater share of abandoned revenue each year. Position The revenue and margins driven from share gains support necessary digital investments, which further solidifies our strong positioning. And lastly, with respect to current business, our digital penetration continues to increase and our AURs are strengthening as we focus on disciplined inventory management in a promotional environment. However, due to meaningfully weaker than planned mall traffic quarter to date, we are lowering our outlook for Q4. Now I'll turn it over to Mike.

Speaker 4

Thank you, Jane, and good morning, everyone. Today, I will provide an update on our fleet optimization initiatives and our wholesale and international businesses before reviewing our financial results and our outlook. First, an update on fleet optimization. We opened six locations in Q3, bringing our year to date openings to 10 as part of the 25 stores we plan to open over the next two years in centers that were highly productive for Gymboree based on our detailed analysis of Gymboree store sales. We closed 12 locations in Q3, bringing the year to date closures to 20 locations.

We now plan to close approximately 60 locations in 2019 versus our prior plan to close 40 to 45 locations, which would bring our total store closure number to two seventy one towards our plan to close 300 locations by the 2020. Within malls, we continue to maintain a very high percentage locations in productive a and b centers. Our real estate team continues to strategically limit our exposure to the troubled outlet channel with only one of our stores located in what we've classified as a dying outlet center. We're armed with meaningful flexibility in our real estate portfolio with an average lease term of two point five years and with approximately a thousand lease events pending in the next few years, which leaves us nimble and well equipped to close additional doors in response to the outsized growth we're seeing in our digital business. International.

Our Wholesale business saw double digit growth again this quarter with growth accelerating at each of our key wholesale partners. We continued expansion of our international distribution in Q3. We opened up 34 net new international points of distribution in the quarter and now have two sixty international points of distribution in 19 countries open and operated by our eight franchise partners at quarter end. Through our strategic partner Samir, the number one children's apparel retailer in the China market, we now have 14 points of distribution open in China. Following the two new Q3 openings, the TCB brand has established presence in six of the top 10 cities in China.

We're beginning to anniversary a group of initial openings in China, and we're encouraged by the double digit comp growth we're seeing at the handful of locations open over a year. I'll now provide an update on Q3 results and discuss our forward outlook. Details for the quarter are as follows. In the third quarter, we generated adjusted EPS of $3.03 which was at the high end of our guidance range of $2.9 to $3.05 versus $3.07 last year. Net sales were $525,000,000 which was below our guidance range of $530,000,000 to $535,000,000 and up $2,000,000 or 0.4% versus last year's $523,000,000 We returned to positive comparable sales growth in the quarter by recording an increase of 0.8%, which was below our initial guidance of a 3% to 4% increase.

U. S. Comps increased 1.2% and Canada comps decreased 2.8%. E commerce increased a stellar 23% with penetration increasing approximately six fifty basis points to 35%. Following a strong back to school season, sales were impacted by warmer than anticipated weather that extended well into the quarter in key regions of the country.

As a result, store traffic, transactions and conversions all declined in the quarter with AURs higher year on year. On percent in Q3 twenty eighteen, driven by increased penetration of our e commerce business, which operates at a lower gross margin rate. As discussed last quarter, we had anticipated a gross margin decline similar to Q2's 150 basis points. Adjusted SG and A. Adjusted SG and A was $117,000,000 versus $122,000,000 last year and leveraged 110 basis points to 22.2% of sales, primarily as a result of a reduction in expenses associated with our transformation initiatives along with lower incentive compensation.

Adjusted depreciation and amortization was approximately $18,000,000 in the quarter. Adjusted operating income for the quarter was approximately $2,000,000 or 40 basis points to $63,000,000 or 12.1% of sales. Our adjusted tax rate of 23% was approximately 100 basis points higher than the 22% tax rate reported in last year's comp quarter. Moving on to the balance sheet. Our cash and short term investments for the quarter were $66,000,000 as compared to $93,000,000 last year.

We ended the quarter with $184,000,000 outstanding on our revolver compared to $65,000,000 last year. The increase reflects funding to support the $76,000,000 Gymboree acquisition and our shareholder capital return program. We ended the quarter with inventories increasing approximately 3% versus 2018. Our seasonal carryover inventory continues to be down double digits to last year. Moving generated $101,000,000 of operating cash flow in the first nine months of the year versus $83,000,000 of operating cash flow for the comparable period a year ago.

Capital expenditures in the quarter were approximately $21,000,000 We repurchased approximately $33,000,000 in the quarter and paid out approximately $9,000,000 in dividends. Now let me take you through our updated outlook for fiscal Q4 twenty nineteen and fiscal twenty nineteen. Q4 twenty nineteen outlook. The company expects sales for the fourth quarter to be in the range of $5.00 $4,000,000 to $5.00 $9,000,000 based on a mid single digit decrease in comparable retail sales versus Q4 twenty eighteen. Adjusted operating income is expected to be in the range of 6.1% to 6.8% of sales as compared to 4.1% in adjusted operating income in 2018, primarily driven by stronger gross margins.

We anticipate fourth quarter adjusted net income per diluted share in the range of $1.48 to $1.68 as compared to adjusted net income per diluted share of $1.1 in Q4 twenty eighteen. Our total inventories at the end of Q4 twenty nineteen are anticipated to be up high single digits versus Q4 twenty eighteen, primarily due to the impact of our full spring delivery of Gymboree product and strategically higher levels of basics merchandise associated with new marketing initiatives. We successfully integrated Radial, a third party logistic provider, into our logistics network to assist with fulfillment of e commerce demand beginning in Q4, which has dramatically improved our shipping times to mom. Outlook for 2019. For fiscal twenty nineteen, the company expects sales to be in the range of $1,862,000,000 to $1,867,000,000 based approximately 3% comparable sales decrease versus fiscal twenty eighteen.

We project e commerce penetration will increase to approximately 31% of net sales. Adjusted operating income is expected to be in the range of 5.7% to 5.9% of sales as compared to 6.6% in adjusted operating income in 2018. We anticipate fiscal twenty nineteen adjusted net income per diluted share will be in the range of $5 to $5.2 inclusive of $0.13 of adverse impact from the tariffs announced to date versus our prior guidance of $5.4 to $5.75 which included $08 of adverse impact from tariffs. This compares to adjusted net income per diluted share of $6.75 in 2018. Project a tax rate in the low 20s.

We expect to generate strong cash flow from operations in 2019, which will help fund our shareholder return program and capital expenditures. We expect CapEx to be approximately $60,000,000 to $65,000,000 in 2019. We ended Q3 with approximately $146,000,000 remaining on our share repurchases authorization and remain firmly committed to returning cash to shareholders. At this point, we will open your call to questions.

Speaker 0

Thank you. At this Our first question comes from the line of John Morris of D. A. Davidson.

Speaker 4

Thanks. Good morning, everybody. Jane, I hear you on the weakness that we've seen in September and October thwarting the third quarter. But now with the Q4 guide on comp being as weak as it is, to what reasons would you see it persisting? Just trying to kind of understand why we're continuing to get those kinds of headwinds so far if it's ostensibly not so much weather in the current quarter.

That's my first question. Thanks.

Speaker 2

Sure. When we look at our Q4 business quarter to date, there's a significant delta between our performance in our U. S. Malls versus our performance in our U. S.

Outlets versus our performance online versus our performance in Canada. So if we break it down, clearly online is a star, continues to outperform and digital penetration continues each quarter to exceed our expectations. But as far as the difference between our mall stores and our outlet stores, we're seeing a significant delta in traffic trends between these two brick and mortar channels versus what we've seen through the first three quarters of the year. So our mall based traffic is trending significantly below outlet traffic quarter to date, which is leading to a pretty big disparity in top line trend in our mall stores versus outlet stores. If you look at Canada, we're seeing a slightly positive comp trend quarter to date.

So really, what we're thinking of is during the November time frame, it looks like our consumer shifted to off mall value retailers, in a more pronounced way this year in order to take advantage of what has been widely reported as more of a month long Black Friday promotion, Black November, if you will, really moving off mall to take advantage of higher ticket promotions. And we think that the uptick, if you will, in outlet traffic and the big disparity from the first three quarters of the year and seeing these outlet channels turn on from traffic and sales point of view is probably benefiting from the traffic that the larger off mall players are driving through their promotional activity through the month of November. And also, like we said, their strong focus on higher ticket seasonal categories. What we've heard so far in red quarter to date is the mall based department store anchors are not driving nearly the same levels of traffic to traditional malls, through November as the big box retailers have been able to do. And also, as we said on our last call, later than normal Thanksgiving, we thought would impact November traffic and sales to the degree of about 5,000,000.

So when you look at ecom and you look at Canada and you see those channels performing significantly different, I think that supports the theory that we're seeing the traffic through November to really be heavily weighted towards off mall. And so as we get closer to the holiday season, it's possible that the consumer shifts their attention back to lower ticket value oriented categories. We'll know shortly.

Speaker 0

Your next question comes from the line of Susan Anderson of B. Riley FBR.

Speaker 5

Hi, good morning. Thanks for taking my question. I was wondering if you could talk about the puts takes of gross margin in the quarter. I guess how much of the decline was promotions versus shipping? I guess just curious to see what the offset is to the lower AUC you've been getting.

And then on the delivery front, I know there were issues last year. Just curious if that's still happening and how the 3PL is going so far for fourth quarter and if you're planning on getting any of those costs back from last year. Thanks.

Speaker 4

Susan, from a gross margin perspective, we were down 130 basis points in the quarter to 37.8%, really driven by the increase in penetration of our eCommerce business. We discussed last quarter that we had anticipated that margins would decline pretty similar to the margin decline that we had in Q2, which was 150 basis points. Overall, we saw merchandise margins were relatively flat in the quarter, with store merchandise margins slightly higher than last year, driven by higher AURs and the lower AUCs we've been speaking about. So the dilution really in the quarter was driven really by the costs associated with e comm fulfillment really as a result of that increased penetration to 35% of sales. That, along with additional fulfillment costs associated with expedited shipping that we incurred at the beginning of the quarter for our back to school season, were the main drivers behind the overall dilution.

From a 3PL perspective, really pleased to report that the radial integration has been well executed. They're hitting their planned output, which is enabling us to really significantly reduce days that the orders are in the DC. We'll plan to ship, over 4,000,000 units with with radial during this quarter. So all is well on the distribution front.

Speaker 0

Your next question comes from the line of Tiffany Kanaga of Deutsche Bank.

Speaker 6

Hi. Thanks for taking our questions. I know there's still a big quarter ahead with the holiday season left to go. But can you help us start to frame the 2020 conversation with a better idea for how much comp reacceleration and margin recapture is possible in your view, especially in light of your guide down today with comp stack trends decelerating so sharply in the fourth quarter?

Speaker 4

Our thought is we're going to wait and see how this holiday season plays out. Obviously, there's a lot of puts and takes associated with the quarter. Obviously, November as a compare to last year is our toughest compare, and compares get easier as we move on. So we're going to just we'll be providing twenty twenty outlooks in our fourth quarter earnings call. At this point, we're really not going speak about it.

Speaker 0

Your next question comes from the line of Paul Lejuez of Citi Research.

Speaker 3

Hey. Thanks, guys. Can you maybe talk high level about how to think about, managing the sales gross margin equation? It seems like currently you're focused on higher despite calling out a promotional environment. Should we think of of that as the strategy go forward and and can it continue if the competition remains promotional?

And then just second, I'm curious what, GAAP EPS would be for 4Q and your expectations for free cash flow this year? Thanks.

Speaker 4

We look at sales and gross margin, and we try to balance both components. Obviously, we continue to focus on our inventory management, which will bode well for us in Q4 of this year. If you remember last year, we diluted margins almost 300 basis points based on the Gymboree bankruptcy and our decision to accelerate sale of seasonal carryover inventory. Good news is coming into Q4, we actually owned significantly less goods than we did a year ago in terms of our holiday and fall seasonal basics, roughly over 3,000,000 units less than we did a year ago. So that bulk of units that we had to liquidate in the fourth quarter last year, we don't anticipate that we'll have any of those goods like that.

So it's really a balance overall in terms of sales and margin. And the good news is we do expect margins to increase in the fourth quarter. As far as SG and A goes, we've been down in absolute dollars each of the last two quarters, and we're anticipating that decline will continue in Q4 of this year.

Speaker 0

Your next question comes from the line of David Buckley of Bank of America.

Speaker 3

Morning. Thanks for taking our questions. Jane, in the past, you discussed how there's not a lot of loyalty from the customer in this industry. Just building on the prior question, how do you balance raising prices while also driving traffic? And then just looking out to your the inventory guide at the end of the fourth quarter, are you planning first quarter comps next year at a similar rate, as inventory is expected to end the year?

Speaker 2

Thanks. I don't think we're going to talk about, Q1 of next year. As far as the loyalty, slash My Price Rewards private label credit card, we continue to see good growth in those programs. So I think from a loyalty perspective, we've done a pretty good job over the past years having our product and our offerings resonate with mom. If you just come up a little bit from the conversation, we've been share takers for almost a decade now while remaining net store closers.

And when you look back at Q3, that was really no different. We're one of the few kids retailers to comp positive, and we picked up share in the third quarter. And most of the kids retailers we've read about have reported anywhere from negative low single digit comps to negative mid single digit negative comps for Q3 and for the most part are providing similar Q4 outlook. I think when you think about the fact that our mall based business is the high 30s right now after a lot of work on fleet optimization, when you throw in ecom, our mall based business is in the high 30s. And when you think about what Mike said with 1,000 lease activities in the next few years coming up and a digital business that continues to exceed its plan every quarter, there's a lot of flexibility within our hands and to look at those percentages and continue to drive that e commerce percentage up, continue to drive that off mall percentage up and continue to drive that mall percentage down.

We've said that there's $12,000,000,000 of apparel sales from poorly positioned kids retailers that are rapidly consolidating and closing. And that implies the $600,000,000 per year is redistributed. And as I said at the beginning, we've been able to take good advantage of that redistribution for almost a decade, and we see really no change to that. We're seeing a change in Q4 to date. We're seeing that the off mall players are able to drive a significant amount of traffic to their locations in the month of November through their promotions.

People are out there and they're buying hard goods and they're buying electronics and they're buying televisions and they're not visiting the mall yet right now. And so if that's what we have to do and we have to look at that for next year and we have to make some adjustments or more adjustments than we were thinking of making to our mall based locations and drive our e com business up even further, then those are the decisions we'll make. But from a market share point of view, we have no intention of not continuing market share and continue to focus on getting that profitability back and continue to get those margin levels back where they were pre Gymboree.

Speaker 0

We have time for one more final question will come from the line of Jim Chartier of Monness Crespi Hardt.

Speaker 3

Thanks for taking my question. Know, Mike, last quarter, you you addressed some social media complaints about your back to school shipping. You know, how are you doing now? We've continued to see some complaints online. But can you just talk about how your e commerce shipping has been post back to school and then how the use of radial might help that?

Sure.

Speaker 4

Obviously, we integrated with radial in the third quarter for holiday shipping in the fourth quarter. It's been a very smooth integration. It's been well executed by both teams. We're shipping our planned output from Radial during this peak holiday period. And as I mentioned before, we'll ship over 4,000,000 units from the radio facility during the quarter.

We have seen a significant decrease in days backlog. Last year, it was as high as seven days after Black Black Friday. I'm happy to report right now we're we're trending about a day and a half of of backlog in our DC. So surprised to hear that you're seeing, you know, complaints on social media because we haven't seen it. You know, we did have the back to school hiccup.

We did accelerated expedited shipping during it to to meet our SLAs, which we think we did about 99% of our SLAs delivered within the ten day period. So we believe that's all behind us now. We have a facility that's still ramping up that has plenty of capacity left. And in the meantime, we're also utilizing some of our omnichannel fulfillment capabilities such as ship from store, though to a much less of an extent than we did the prior year. We have BOPIS, which is buy online, pickup in store, and BOSS for those individuals that don't need rush shipments.

So all in all, we're very pleased with the fourth quarter distribution situation.

Speaker 0

Thank you for joining us today. If you have further questions, please call investor relations at (201) 453-6693. You may now disconnect your lines, and have a wonderful day.