儿童之家 (PLACE) 首席执行官 Jane Elfers 在 2019年 第二季度业绩 - 收益电话会议记录

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The Children’s Place, Inc. (NASDAQ:PLCE) Q2 2019 Earnings Conference Call August 21, 2019 8:00 AM ET

The Children's Place,Inc。(纳斯达克股票代码:[PLCE])2019年第二季度收益电话会议2019年8月21日美国东部时间上午8:00

公司参与者

Anthony Attardo – Director-Investor Relations
Jane Elfers – President and Chief Executive Officer
Mike Scarpa – Chief Operating Officer and Chief Financial Officer

  • Anthony Attardo - 投资者关系总监
  • Jane Elfers - 总裁兼首席执行官
  • Mike Scarpa - 首席运营官兼首席财务官

电话会议参与者

Dana Telsey – Telsey Advisory Group
Jen Redding – Wedbush Securities
Susan Anderson – B. Riley FBR
Tiffany Kanaga – Deutsche Bank
David Buckley – Bank of America, Merrill Lynch
John Morris – D.A. Davidson
Kelly Crago – Citi Research
James Chartier – Monness, Crespi, Hardt

  • 达纳特尔西 - 特尔西咨询集团
  • Jen Redding - Wedbush证券
  • Susan Anderson - B. Riley FBR
  • Tiffany Kanaga - 德意志银行
  • 大卫巴克利 - 美国银行,美林证券
  • 约翰莫里斯 - D.A.戴维森
  • 凯莉克拉戈 - 花旗研究
  • James Chartier - Monness,Crespi,Hardt

会议主持员

Ladies and gentlemen, thank you for standing by, and welcome to The Children’s Place Second Quarter 2019 Earnings Conference Call. This call is being recorded. If you object to our recording of this call, please disconnect at this time. [Operator Instructions] It is now my pleasure to turn the floor over to Anthony Attardo, Director of Investor Relations, to begin.

女士们,先生们,感谢您的支持,并欢迎参加2019年第二季度儿童会议收益电话会议。 正在录制此通话。 如果您反对我们录制此电话,请在此时断开连接。 [运营商指示]现在我很高兴开始向投资者关系总监Anthony Attardo发言。

Anthony Attardo

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 earlier 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-K for its most recent fiscal year. These forward-looking statements involve risk 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 Elfers.

早上好,欢迎参加The Children's Place电话会议。今天的电话会议是总裁兼首席执行官Jane Elfers;和首席运营官兼首席财务官Mike Scarpa。儿童之家今天上午早些时候发布了新闻稿,今天电话会议的发布和演示材料的副本已发布在公司网站的“投资者关系”部分。发言者发言后,将会有一个问答环节。

在我们开始之前,我想提醒参与者,今天发表的任何前瞻性陈述都受到今天上午新闻稿以及公司美国证券交易委员会文件中发现的安全港声明的约束,包括公司年度报告中的风险因素部分。在最近一个财政年度的10-K表格上。这些前瞻性陈述涉及风险和不确定性,可能导致实际结果出现重大差异。公司没有义务公开发布对这些前瞻性陈述的任何修订,以反映本新闻稿发布之后的事件或情况。在准备好的评论之后,我们将打开您的问题。我们要求你们每个人都限制自己一个问题,这样每个人都有机会。

有了这个,我想把这个电话转给Jane Elfers。

Jane Elfers

Thank you, Anthony, and good morning, everybody. Today, I’ll provide an update on three strategic areas of focus that uniquely position us to capture a greater share of the estimated $600 million of sales ceded each year by poorly positioned competitors. First, I’ll discuss our progress with respect to the Gymboree integration, and offer a deeper dive into our Gymboree brand strategy. Second, I’ll update the status of our digital transformation. And third, I’ll discuss our competitive pricing advantage.
So first, let’s start with Q2 results. Despite the adverse impact from weather comparisons and the likely pull-forward of demand into Q1’s liquidation of approximately 800 Gymboree and Crazy 8 stores, our EPS results were at the top end of our guided range. Amidst lingering pressure from the Q1 Gymboree liquidation, we delivered a 3.8% comp decrease in Q2 versus a 13.2% comp increase last year. Sales for the quarter met our expectations, however, traffic remained weaker than anticipated, which led to a late quarter increase in promotional activity across the sector. Although we exited the quarter with seasonal carryover inventory down double-digit, we believe it’s prudent to assume an elevated promotional environment for the back half of 2019.
Shifting to the Gymboree integration. A key component of our ongoing strategy to uniquely position ourselves to secure a greater portion of the estimated $600 million of annual sales, ceded by the group of children’s apparel market share donors, is our focus on relaunching the Gymboree brand in spring 2020. In late June, we relaunched the Gymboree website, which was immediately well received by the passionate Gymboree customer base. The loyal Gymboree moms instantaneously found their way to the site and traffic and engagements by meaningfully on social media with visits and commentary surging post-launch.
I’d encourage you to read the Gymboree customer commentary on our Gymboree social media site, some of which, we’ve included on our IR web page under our Q2 investor presentation. The overwhelmingly positive post illustrate just how emotionally attached the Gymboree mom is to the Gymboree brand name, and how much she values the Gymboree brand above all other kids brands in the market. In addition to relaunching the product, we’ve deployed a two pronged real estate strategy to help us gain the Gymboree market share.
First, we’ll be launching the Gymboree branded product within 200-plus existing TCP locations. These are many of our best TCP locations, which are located in centers that also housed the most productive former Gymboree stores. This provides us with another vehicle to penetrate deeper into the estimated $600 million of sales, ceded by market share donors, as we make our existing brick-and-mortar stores more productive. By bringing Gymboree traffic into our existing TCP stores and to our toddler area specifically, where we have historically been underpenetrated, we stand to gain another big advantage versus our competitors who may already have mature toddler businesses.

谢谢你,安东尼,大家早上好。今天,我将提供三个战略重点领域的最新信息,这些领域使我们能够在竞争力不强的竞争对手每年获得的6亿美元销售额中获得更大的份额。首先,我将讨论我们在金宝贝整合方面取得的进展,并深入探讨我们的金宝贝品牌战略。其次,我将更新数字化转型的现状。第三,我将讨论我们具有竞争力的价格优势。

首先,让我们从Q2结果开始。尽管天气比较产生了不利影响,并且需求可能会进入第一季度约800家金宝贝和疯狂8商店的清算,但我们的每股盈利结果仍处于我们引导范围的最高端。在Q1金宝贝清算所带来的压力持续存在的情况下,我们在第二季度下跌了3.8%,而去年同比增长了13.2%。本季度的销售额符合我们的预期,但流量仍然低于预期,导致整个行业的促销活动季末增长。虽然我们退出本季度季节性结转库存量下降两位数,但我们认为,假设2019年下半年的促销环境有所提升,这是谨慎的做法。

转移到金宝贝整合。我们的目标是,我们专注于在2020年春季重新启动金宝贝品牌,这是我们持续战略的一个关键组成部分,这一战略旨在确保我们在确定6亿美元的年销售额中占据更大比例,并被儿童服装市场份额捐赠者所取代。 6月,我们重新启动了金宝贝网站,该网站立刻受到了热情的金宝贝客户群的欢迎。忠诚的金宝贝妈妈们瞬间找到了通往网站的路,并通过有意义的社交媒体进行交通和参与,访问和评论在发布后飙升。

我鼓励您阅读金宝贝社交媒体网站上的金宝贝客户评论,其中一些我们已经在我们的第二季度投资者演示文稿中包含在我们的IR网页上。绝对积极的帖子说明了金宝贝妈妈对金宝贝品牌名称的情感依附,以及她对金宝贝品牌的重视程度高于市场上所有其他儿童品牌。除了重新启动产品外,我们还采用了双管齐下的房地产策略来帮助我们获得金宝贝的市场份额。

首先,我们将在200多个现有TCP位置内推出金宝贝品牌产品。这些是我们最好的TCP位置,位于中心,也是最有生产力的前金宝贝商店。这为我们提供了另一种工具,可以深入渗透到由市场份额捐赠者割让的估计6亿美元的销售额,因为我们使现有的实体店更具生产力。通过将金宝贝的流量带入我们现有的TCP商店和我们的幼儿区,特别是我们历史上一直处于渗透状态的地方,与我们可能已经拥有成熟幼儿业务的竞争对手相比,我们将获得另一个巨大的优势。

Building our toddler business provides a white space growth opportunity in that ones the Gymboree shopper grows out of Gymboree, we believe she will migrate to TCP branded bigger kid sizes. Armed with the knowledge of what the Gymboree mom wants and with sales data from every former Gymboree location, we’ve put into motion the second prong of our Gymboree market share strategy. This is the high-return strategy to capture the displaced Gymboree market share with little risk of cannibalizing our existing sales.
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 to cannibalize and do not have another TCP location within a large radius. In addition, these centers are largely occupied by other kids retailers, who likely perform extremely well in these locations. We believe the new TCP stores in these locations will be nearly 100% incremental for TCP, and at the same time, allows to pick up share from key competitors as we bring the Gymboree brand back to these highly productive centers.
Our real estate team began to execute on this strategy in Q2 with three new TCP locations opened in the quarter as part of a planned 25 store openings over the next two years. Although they’ve only been open for a few weeks, the early results are exceeding expectations that were already set well above chain average productivity. We look forward to providing updates on these highly targeted, highly productive centers that are natural extensions of our site-selection process and don’t represent a pivot in our real estate strategy. The high incrementality of the Gymboree sales provides TCP the opportunity to penetrate much deeper into the estimated $600 million of annual sales ceded by market share donors each year without breaking from our long-standing growth strategies or cannibalizing ourselves to achieve a marginal piece of the pie.
Shifting to Crazy 8. Our engagement with the abandoned Crazy 8 customer remains strong. We continue to experience open and click-through rates meaningfully above the rates our legacy TCP e-mails, which is leading to earlier and stronger-than-expected conversion of those customers. Our TCP locations that are co-located in center with closed Crazy 8 locations count hundreds of basis points better than chain average in Q2, which suggest we’re gaining early traction in securing positive comp contribution from the abandoned Crazy 8 customers.
As a reminder, Crazy 8 was nearly 30% of the approximately $650 million of total sales for the combined businesses. Recall our Q2 guidance anticipated that our stores that are colocated in centers that experienced the Gymboree closure in Q1, would be adversely impacted by the high likelihood that sales were pulled forward into the liquidation. Although it’s difficult to precisely determine if a lost sale in Q2 came as a result of a customer stocking up at the Q1 liquidations events. TCP stores that are colocated in centers with closed Gymboree locations, as expected, underperform the chain average in the quarter. However, the declines at these locations improved in the second half of Q2, and for Q3 quarter-to-date, the gap has completely closed.

建立我们的幼儿业务提供了一个白色空间增长机会,金宝贝购物者从金宝贝长大,我们相信她将迁移到TCP品牌更大的孩子大小。凭借对金宝贝妈妈想要的知识以及每个前金宝贝所在地的销售数据,我们已经启动了金宝贝市场份额战略的第二个方面。这是一种高回报策略,可以捕捉移动的金宝贝市场份额,同时几乎不会蚕食我们现有的销售额。

我们之前讨论过已经确定了40个位置,这些位置对于金宝贝来说非常有效,而目前TCP还没有存在。这些中心没有现有儿童可以蚕食的地方,并且在大半径范围内没有其他TCP位置。此外,这些中心主要由其他儿童零售商占据,他们可能在这些地方表现极佳。我们相信,这些地区新的TCP商店将近90%增加TCP,同时,当我们将金宝贝品牌带回这些高效率的中心时,它们可以从主要竞争对手那里获得份额。

我们的房地产团队在第二季度开始实施这一战略,在本季度开设了三个新的技术合作计划地点,作为计划在未来两年内开设的25家商店的一部分。虽然它们只开放了几个星期,但早期的结果超出了已经远远高于链平均生产率的预期。我们期待为这些高度针对性,高效率的中心提供最新信息,这些中心是我们选址过程的自然延伸,并不代表我们房地产战略的支点。金宝贝销售的高增量性为TCP提供了机会,可以更深入地渗透到每年由市场份额捐赠者放弃的估计6亿美元的年销售额中,而不会违背我们长期的增长策略或者蚕食自己以获得一块边缘的馅饼。

转向疯狂8.我们与废弃的疯狂8客户的合作依然强劲。我们继续体验开放和点击率明显高于我们传统的TCP电子邮件的速率,这导致这些客户的早期转换和强于预期的转换。我们的TCP位置位于中心位置,封闭的Crazy 8位置比第二季度的链平均值高出数百个基点,这表明我们在获得废弃的Crazy 8客户的积极贡献方面获得了早期的牵引力。

提醒一下,Crazy 8占合并后业务总销售额约6.5亿美元的近30%。回想一下我们的Q2指导预计,我们在第一季度经历金宝贝关闭的中心的商店将受到销售被提前清算的可能性的不利影响。虽然很难准确判断第二季度的销售是否因第一季度清算事件中的客户库存而下降。正如预期的那样,在具有封闭的金宝贝位置的中心共存的TCP商店在本季度的表现低于连锁平均水平。然而,这些地区的下降在第二季度的下半年有所改善,而在季度至今的第三季度,差距已经完全结束。

Moving on to digital transformation. After building the foundational capabilities for personalization as part of our $50 million investment in accelerating digital transformation over the past 18 months, we launched the initial test phase of personalization in early May, focused on a limited number of identified behavioral segments across five channels of distribution. With only a modest portion of our personalization toolkit deployed to-date, the early results have been encouraging. Building upon the behavioral segments addressed in Q2, we expect to begin to deliver personalized content to additional segments in the back half of 2019.
We discussed that our digital transformation could be a $200 million revenue opportunity for the Children’s Place, and we continue to believe that the digital personalization initiative is the single largest contributor towards that opportunity. Omni-channel capabilities are an important part of our overall personalization strategy. Our store fulfillment capabilities continue to outperform expectations and drive enhanced options for moms. The response to the Q2 rollout of BOSS, our Buy Online, Ship to Store has been encouraging. As she picked up her online orders in stores, she was attaching at a low 20s rate, leading to a considerably higher-than-average ticket.
Later this year, we will roll out Save the Sale functionality, which will provide our moms with access to inventory from other stores location 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 sales that would’ve otherwise been lost absent the Save the Sale capability. E-comm penetration increased approximately 240 basis points to approximately 29% of net sales in Q2, and our outsized digital growth continues to increase penetration in our loyalty and private label credit card program, which are key to our digital transformation.
And it’s important to note that we are the only children’s apparel retailer to offer free shipping with no minimum purchase on all of our e-commerce orders. We don’t simply advertise free shipping for orders picked up in stores by a BOSS or BOPIS or with the use of a private label credit card. This has been the case for the last several years and is an important component of our omni-channel market share strategy.
Now discuss how our diversified sourcing model provides us with a valuable competitive advantage. We frequently discuss our diversified sourcing model and how it provides us with the unique competitive advantage. We have discussed that our lower AUC or product-cost advantage is the result of our decade-long strategy of strategically moving out of China and into a lower-cost countries. Today, many retailers find themselves under the strain of rising sourcing cost resulting from their overreliance on China and other higher-cost sourcing market.
The Children’s Place is a high unit volume retailer, we source and sell more units than most other competitors in the children’s apparel space, which provides us with a strategically advantage model. Due to our large unit buys, a modest 1% reduction in AUC or product cost per unit yields meaningful merchandise margin improvement. Therefore, the continued execution of our long-standing, diversified-sourcing initiative, coupled with disciplined buying can produce a meaningful portion of our anticipated margin improvement. As we continue to mix our cost lower through diversified sourcing, it provides us with the ability to continue to offer compelling price points as the millennial moms seeks value in apparel purchases to fund higher spend on experiences.

继续进行数字化转型。在建立个人化的基础能力之后,作为我们在过去18个月中加速数字化转型的5000万美元投资的一部分,我们在5月初启动了个性化的初始测试阶段,重点关注五个分销渠道中有限数量的已识别行为细分。由于迄今为止只部署了我们个性化工具包的适度部分,因此早期结果令人鼓舞。基于第二季度解决的行为细分,我们预计将在2019年下半年开始向其他细分市场提供个性化内容。

我们讨论过,我们的数字化转型可能为儿童广场提供2亿美元的收入机会,我们仍然认为数字个性化计划是实现这一机会的最大单一贡献者。全渠道功能是我们整体个性化战略的重要组成部分。我们的商店履行能力继续超越预期,并为妈妈提供更好的选择。对于第二季度推出BOSS,我们的在线购买,发货到商店的反应令人鼓舞。当她在商店里收到她的在线订单时,她的价格低于20美元,导致票价高于平均水平。

今年晚些时候,我们将推出Save the Sale功能,这将为我们的妈妈提供从其他商店位置或配送中心访问特定商店位置没有库存的产品的库存。我们将能够直接向她提供该产品,并获得在没有“销售促销”功能的情况下可能会丢失的增量销售额。电子通讯普及率增加约240个基点至第二季度净销售额的约29%,我们的超大数字增长继续增加我们的忠诚度和自有品牌信用卡计划的渗透率,这是我们数字化转型的关键。

值得注意的是,我们是唯一一家提供免费送货的儿童服装零售商,我们所有的电子商务订单都没有最低限度的购买。我们不会简单地为BOSS或BOPIS或使用私人标签信用卡在商店中提取的订单做广告。过去几年一直如此,这是我们全渠道市场份额战略的重要组成部分。

现在讨论我们的多元化采购模式如何为我们提供有价值的竞争优势。我们经常讨论我们的多元化采购模式以及它如何为我们提供独特的竞争优势。我们已经讨论过,我们较低的AUC或产品成本优势是我们战略性地迁出中国并进入低成本国家的长达十年战略的结果。如今,许多零售商发现自己处于由于过度依赖中国和其他成本较高的采购市场而导致采购成本上升的压力。

儿童之家是一个高单位量的零售商,我们在儿童服装领域采购和销售的产品比大多数其他竞争对手更多,这为我们提供了战略优势模型。由于我们的大单位购买量,AUC或每单位产品成本适度减少1%会带来有意义的商品利润率提升。因此,我们长期,多元化的采购计划的持续执行,加上纪律性的购买,可以产生我们预期的利润率改善的有意义部分。随着我们通过多元化采购继续降低成本,它使我们能够继续提供具有吸引力的价格点,因为千禧一代的妈妈们在购买服装时寻求更高的经验支出。

And lastly, with respect to current business. With the majority of back-to-school sales and tax-free events behind us, we’re off to a strong start. Our quarter-to-date consolidated comp is running positive 14%.
And now I’ll turn it over to Mike.

最后,关于当前的业务。 随着大部分返校销售和免税活动的落后,我们开始有了一个良好的开端。 我们的季度迄今合并报价为14%。

现在我将把它交给迈克。

Mike Scarpa

Thank you, Jane, and good morning, everyone. Today I will provide an update on our fleet optimization, and our international and wholesale businesses before reviewing our financial results in our outlook. First, an update on our fleet optimization. We closed 13 locations in the quarter, resulting in 226 overall closures toward our plan to close 300 locations by the end of 2020. Through the second quarter, we have closed 15 of the 40 to 45 planned store closures for 2019. We also opened three locations in the quarter as part of the 25 stores we plan to open in highly productive centers over the next two years based on our detailed analysis of Gymboree store sales.
It is important to note, we will continue to be a net closure of stores. Our real estate team continues to strategically limit our exposure to the troubled outlet channel, and we ended the quarter with outlet exposure that represents only 13% of our store base. Our fleet optimization strategy has resulted in a highly optimized outlet store base with nearly two-thirds of our outlets in better centers and only four stores located in what we classify as dying outlet centers. We strategically limited our outlet exposure and optimized to the most productive centers, knowing that the outlet channel was particularly at risk of cannibalization from digital growth. The outlet channel was born out of a need to give the consumer direct access to brands and providing her value in doing so.
Today, the consumer can easily find that access in those values online where we maintain a strong position. We believe that we – that by limiting the risk, by maintaining a full price to outlet store ratio at nearly seven to one, which is among the highest in our peer universe, with several of our competitors closer to two to one, which means that 30% to 40% of their store base remains in outlets. This provides us with a meaningful competitive advantage.
International and wholesale. In wholesale, we are soliciting interest among both existing and potential new wholesale partners in anticipation of the Gymboree brand relaunch, with the intent to possibly provide exclusive access to the Gymboree brand. We believe that the Gymboree brand will provide potential partners with a steady flow of highly coveted millennial traffic, which is difficult to find in today’s retail environment.
Additionally, Gymboree represents a highly attractive demographic with an average income of over $95,000 per year. We’re excited about the wholesale potential for the Gymboree brand and look forward to providing additional updates. We opened 18 new international points of distribution in the quarter, and had 225 international points of distribution in 19 countries, opened and operated by our eight franchise partners at quarter end.
Along with our strategic partner Semir, the number one children’s apparel retailer in the Chinese market, we have opened six of the approximately 15 locations we plan to open in China in the 2019.
I’ll now provide an update on Q2 results and discuss our forward outlook. Details for the second quarter are as follows. In the second quarter, we generated adjusted earnings per share of $0.19, which was at the high end of our guidance range of zero to $0.20 versus $0.70 last year.

谢谢你,简,大家早上好。今天我将在审查我们的展望中的财务业绩之前,提供有关我们的车队优化以及我们的国际和批发业务的最新信息。首先,我们的车队优化更新。我们在本季度关闭了13个地点,截至2020年底,我们计划关闭了300个地点,共计关闭了226个地点。到第二季度,我们关闭了2019年40到45个计划商店关闭中的15个。我们还开了三个根据我们对金宝贝商店销售的详细分析,我们计划在未来两年内在高效生产中心开设的25家商店中占一席之地。

值得注意的是,我们将继续关闭商店。我们的房地产团队继续战略性地限制我们对陷入困境的出口渠道的曝光,我们在季度结束时的出口曝光率仅占我们店铺基数的13%。我们的车队优化策略已经形成了一个高度优化的直销店基地,其中近三分之二的商店位于更好的中心,只有四家商店位于我们归类为濒临死亡的出口中心。我们策略性地限制我们的出口曝光并优化到最具生产力的中心,因为他们知道出口渠道特别容易受到数字增长的影响。出口渠道源于需要让消费者直接接触品牌并提供她的价值。

今天,消费者可以轻松地在网上找到那些我们保持强势地位的价值。我们相信我们 - 通过限制风险,通过维持全价至出口商店比率接近七比一,这是我们同行中最高的,我们的几个竞争对手接近二比一,这意味着其商店基数的30%至40%仍然在商店中。这为我们提供了有意义的竞争优势。

国际和批发。在批发方面,我们正在征求现有和潜在的新批发合作伙伴的兴趣,以期对金宝贝品牌的重新启动,旨在提供对金宝贝品牌的独家使用权。我们相信,金宝贝品牌将为潜在合作伙伴提供源源不断的令人垂涎的千禧年交通,这在当今的零售环境中很难找到。

此外,金宝贝代表了一个极具吸引力的人群,平均每年收入超过95,000美元。我们对金宝贝品牌的批发潜力感到兴奋,并期待提供更多更新。我们在本季度开设了18个新的国际分销点,并在19个国家拥有225个国际分销点,由我们的八个特许经营合作伙伴在季度末开设和运营。

与我们的战略合作伙伴Semir(中国市场上排名第一的儿童服装零售商)一起,我们在2019年打算在中国开设的约15个地点中的6个开业。

我现在将提供第二季度业绩的最新情况,并讨论我们的前瞻性展望。第二季度的详情如下。在第二季度,我们调整后的每股收益为0.19美元,处于我们的指导范围的高端,从零到0.20美元,而去年为0.70美元。

Net sales were $420 million, which was at the high end of our guidance range of $415 million to $420 million, but down $29 million or 6.3% versus last year’s $449 million. We recorded a decline in comp retail sales of 3.8%, which was better than our initial guidance of a negative 5% to a negative 4% decline.
U.S. comps declined 4.2% and Canada comps were slightly positive. E-commerce penetration increased approximately 240 basis points to 29%. Sales were impacted by Q1’s Gymboree and Crazy 8 liquidation events, the adverse impact of strong weather-driven demand in early Q2 a year ago and difficult store traffic.
Store traffic transactions and conversions were all down in the quarter, with AUR slightly lower due to increased promotional activity across the sector.
Adjusted gross margin. Adjusted gross margin decreased 150 basis points to 33% of sales from 34.5% in Q2 of 2018, driven by the deleverage of fixed expenses resulting from a decline in comp retail sales and the adverse impact of increased penetration of our e-commerce business, along with a modest decline in merchandise margin as a result of difficult traffic, which led to an increase in promotional activity across the sector.
Adjusted SG&A. Adjusted SG&A was $115 million versus $122 million last year, and deleverage 20 basis points to 27.5% of sales as a result of the negative comp sales. We were able to manage expenses across the organization in response to difficult traffic in the quarter. Our incentive compensation expense in the quarter was relatively flat as higher bonus accruals were offset by a one-time decrease in our approval for our long-term incentive plan. Adjusted depreciation and amortization was approximately $18 million in the quarter.
Adjusted operating income. Adjusted operating income for the quarter was $5.8 million or 1.4% of sales versus $15.7 million or 3.5% of sales in Q1 of 2018, down $9.9 million or 210 basis points primarily as a result of the lingering impact of the Gymboree liquidation, adverse weather comparisons early in the quarter along with difficult store traffic, which led to increased promotion across the sector.
Tax rate. Our adjusted tax rate of 15.9% was below the 21% tax rate in last year’s comparable quarter.
Moving on to the balance sheet. Our cash and short-term investments for the quarter were $65 million as compared to $106 million last year. We ended the quarter with $196 million outstanding on our revolver compared to $89 million last year. The increase reflects funding to support the $76 million Gymboree acquisition and our shareholder capital return program.
We ended the quarter with inventories up approximately 5.4% including the result of accelerated shipments of China merchandise as we reacted to the tariff situation. Our seasonal carryover inventory continues to be down double-digits to last year.
Moving on to cash flow. We generated $23 million of operating cash flow in the first six months of the year versus $11 million of operating cash flow for the comparable period a year ago.

净销售额为4.2亿美元,处于4.15亿美元至4.2亿美元的指导范围的高端,但与去年的4.49亿美元相比下降了2900万美元或6.3%。我们的零售销售额下降3.8%,好于我们的初步指导,负5%为负4%的下降。

美国股票下跌4.2%,加拿大股票小幅上涨。电子商务渗透率增加约240个基点至29%。第一季度的金宝贝和疯狂8清算事件影响了销售,一年前Q2强劲的天气驱动需求和商店交通困难对其产生了负面影响。

本季度商店流量交易和转化次数均有所下降,由于整个行业的促销活动增加,AUR略有下降。

调整后的毛利率。调整后毛利率从2018年第二季度的34.5%下降150个基点至销售额的33%,原因是因零售销售下降导致固定费用减少以及电子商务业务渗透率增加的不利影响由于交通困难,商品保证金略有下降,导致整个行业的促销活动增加。

调整后的SG&A。调整后的SG&A为1.15亿美元,去年为1.22亿美元,由于负面销售额下降,销售额下降20个基点至27.5%。我们能够管理整个组织的费用,以应对本季度的困难流量。由于我们对长期激励计划的批准一次性减少,我们在本季度的激励薪酬支出相对持平,因为较高的奖金应计被抵消。本季度调整后的折旧和摊销约为1,800万美元。

调整后的营业收入。本季度调整后的营业收入为580万美元,占销售额的1.4%,而2018年第一季度的销售额为1570万美元,占销售额的3.5%,下降990万美元或210个基点,这主要是由于金宝贝清算的持续影响,恶劣的天气比较本季度初,随着商店流量的增加,这导致整个行业的促销活动增加。

税率。我们调整后的税率为15.9%,低于去年可比季度的21%税率。

转到资产负债表。我们本季度的现金和短期投资为6500万美元,而去年为1.06亿美元。我们的左轮手枪在本季度结束时的支出为1.96亿美元,而去年为8900万美元。这一增长反映了资金支持7600万美元的金宝贝收购和我们的股东资本回报计划。

由于我们对关税状况作出反应,我们在本季度结束时库存增加约5.4%,包括中国商品出货加速的结果。我们的季节性结转库存继续比去年下降两位数。

继续现金流。我们在今年的前六个月产生了2300万美元的运营现金流,而一年前的可比期间的运营现金流为1100万美元。

Capital expenditures in the quarter were approximately $11 million. We repurchased approximately $27 million of stock in the quarter and paid out approximately $9 million in dividends.
Now let me take you through our updated outlook for 2019. The company now expects sales for fiscal 2019 to be in the range of $1.91 billion to $1.925 billion. A comparable retail sales growth of approximately flat versus fiscal 2018. We project e-commerce penetration will increase to approximately 30% of net sales.
We now anticipate fiscal 2019 adjusted net income per diluted share to be in the range of $5.40 to $5.75 inclusive of $0.08 of adverse impact from incremental tariffs versus our prior guidance of $5.75 to $6.25. This compares to adjusted net income per diluted share of $6.75 in 2018. Although we exited the quarter with seasonal carryover down double-digits, our outlook assumes elevated promotional activity will continue for the balance of the year.
Adjusted operating income is expected to range between 6.1% to 6.4% of sales as compared to 6.6% in adjusted operating income in 2018. We are projecting a tax rate in the low 20%. We expect to generate strong cash flow from operations in 2019, which will help fund our shareholder return program and capital expenditures. We expect capital expenditures to be approximately $65 million to $70 million in 2019.
We ended Q2 with approximately $179 million remaining on our share repurchase authorization and remain firmly committed to return in cash to shareholders.
Q3 2019 outlook. The company expects sales for the third quarter to be in the range of $530 million to $535 million based on a comparable retail sales increase of 3% to 4% versus 9.5% comparison a year earlier.
As a reminder, in earlier break to colder temperatures grow strong sales of seasonal product into October last year, which resulted in a strong monthly comp increase. We’ve considered this difficult comparison in our outlook.
Adjusted operating income is expected to be in the range of 11.5% to 12% of sales as compared to 12.5% in adjusted operating income in Q3 of 2018. We anticipate third quarter adjusted net income per diluted share in the range of $2.90 to $3.05 as compared to adjusted net income per diluted share of $3.07 in Q3 of 2018. Inventories at the end of Q3 2019 are anticipated to be flat to up low single digits versus last year.
Looking ahead, there’s been a lot of commentary about back-to-school shipping, so I’d like to briefly address it. We experienced a significant increase in the number of orders this back-to-school season. Our shipping policy states that orders placed with standard free shipping may take up to 10 business days for delivery. Our records reflect that over 98% of our orders will be delivered within this window to the back-to-school season.
As we previously said, we plan to utilize a third-party logistics provider to assist with the fulfillment of holiday 2019, e-commerce demand, which should help minimize the impact of peak season shipping bottlenecks going forward.

本季度的资本支出约为1,100万美元。我们在本季度回购了大约2700万美元的股票,并支付了大约900万美元的股息。

现在让我带您了解2019年的最新展望。该公司现在预计2019财年的销售额将在19.1亿美元至19.25亿美元之间。与2018财年相比,零售额的可比销售额大致持平。我们预计电子商务渗透率将增加至净销售额的约30%。

我们现在预计2019财年调整后的每股摊薄净收益将在5.40美元至5.75美元之间,包括0.08美元的增量关税产生的不利影响,而我们之前的预测为5.75美元至6.25美元。相比之下,2018年调整后的每股摊薄净收益为6.75美元。虽然我们退出本季度的季节性结转比例下降了两位数,但我们的展望假设促销活动将在今年的余额中继续提升。

调整后的营业收入预计在销售额的6.1%至6.4%之间,而2018年的调整后营业收入为6.6%。我们预计税率将在20%左右。我们预计2019年的运营将产生强劲的现金流,这将有助于我们的股东回报计划和资本支出。我们预计2019年的资本支出约为6500万美元至7000万美元。

我们在第二季度结束时,我们的股票回购授权剩余约1.79亿美元,并坚定地致力于向股东返还现金。

2019年第3季度展望。该公司预计第三季度的销售额将在5.3亿美元至5.35亿美元之间,而可比零售额增长3%至4%,而去年同期为9.5%。

提醒一下,在早些时候从较冷的气温中恢复到去年10月的季节性产品销售强劲,这导致每月的强劲增长。我们在前景中考虑过这种困难的比较。

调整后的营业收入预计在销售额的11.5%至12%之间,相比之下,2018年第三季度的调整后营业收入为12.5%。我们预计第三季度每股摊薄净收益在2.90美元至3.05美元之间。与2018年第三季度的每股摊薄后调整后净收益3.07美元相比。预计2019年第三季度末的库存量将持平至较低的个位数。

展望未来,有很多关于返校运输的评论,所以我想简要介绍一下。我们在返校季节的订单数量大幅增加。我们的运输政策规定,使用标准免费送货的订单最多可能需要10个工作日才能完成交付。我们的记录显示,超过98%的订单将在此窗口内交付给返校季节。

正如我们之前所说,我们计划利用第三方物流供应商来协助实现2019年假期电子商务需求,这有助于最大限度地减少未来旺季航运瓶颈的影响。

We currently anticipate a Q4 2019 comp increase of approximately 4%. We also know that we estimate that the holiday selling season in Q4 of 2019 could be adversely impacted by approximately $5 million or 1% of sales from six less shopping days between Thanksgiving and Christmas in 2019.
Including Gymboree, our exposure to Chinese imports across all categories will be limited to an estimated mid-to high single-digit percent in 2020, which we believe will help lower our AUC again in 2020 on top of the 2019 reduction.
At this point, we will open the call to your questions.

我们目前预计2019年第四季度补偿增加约4%。 我们也知道,我们估计2019年第四季度假日销售季节可能受到2019年感恩节和圣诞节之间六个购物日减少约500万美元或1%的销售额的不利影响。

包括金宝贝在内,我们对所有类别的中国进口产品的敞口将限制在2020年的中高个位数百分比,我们相信这将有助于在2019年减产之后再次降低2020年的AUC。

此时,我们将打开您的问题的电话。

问答环节

Thank you. [Operator Instructions] Our first question comes from the line of Dana Telsey of Telsey Advisory Group.

谢谢。 [操作员说明]我们的第一个问题来自Telsey咨询集团的Dana Telsey。

Dana Telsey

Good morning, everyone. As you think about the integration of the Gymboree and you think about the gross margin in the upcoming third quarter, how are you thinking about gross margin go forward and the opportunity for market share gains that you see? And then just lastly, on the logistics issues, on that – where you just talked, Mike, about the shipping times. What are you seeing in terms of incremental supply chain and logistics costs and that impact on the margin? Thank you.

大家,早安。 当您考虑金宝贝的整合并考虑即将到来的第三季度的毛利率时,您如何看待未来的毛利率以及您看到的市场份额增长的机会? 最后,关于物流问题,就是你刚刚谈到的地方,迈克,关于运输时间。 您对增量供应链和物流成本以及对保证金的影响有何看法? 谢谢。

Mike Scarpa

Sure. Dana, though we don’t specifically guide to gross margins. We expect margins to continue to be under pressure in Q3 as inventories remain elevated in the sector, which is resulting in a promotional environment that – we’re anticipating it’s going to continue through year end. The environment remains a competitive as retailers continue to battle for market share in a sector that is not growing. Though we expect improvement in margins in Q4 versus last year, we’re still forecasting continued pressure from those elevated inventories and store closures.
As far as the distribution issues are – and supply chain costs, we had indicated last quarter that we did a pretty comprehensive network analysis and made the decision to utilize the 3PL to assist us beginning in holiday of 2019. We thought that this was the most cost-efficient and effective alternative available. We’re utilizing currently our ship-from-store BOPIS and the BOSS omni-channel fulfillment capabilities to supplement our DC capacity as we get ready to transition over to the holiday time frame.
Our sense is that 98% of our orders from the back-to-school will season will be delivered within our 10-day shipping – 10-day business shipping window. We expect that supply chain cost could be on the average of about $1.5 million higher in Q3 based on some of the expedited shipping that we are doing. And then there’s just – I also want to indicate that from a systems perspective our systems are running fine, and we have not encountered any system snafu’s as a result of high demand.

当然。德纳,虽然我们没有专门指导毛利率。我们预计第三季度利润率将继续承压,因为该行业的库存仍然较高,这导致了一个促销环境 - 我们预计它将持续到年底。随着零售商继续争夺不增长的行业的市场份额,环境依然具有竞争力。虽然我们预计第四季度的利润率与去年相比有所改善,但我们仍然预测库存增加和商店关闭的持续压力。

至于分销问题 - 和供应链成本,我们上个季度表示我们做了一个非常全面的网络分析,并决定利用第三方物流协助我们从2019年假期开始。我们认为这是最多的具有成本效益和有效的替代方案。我们目前正在利用我们的实体店BOPIS和BOSS全渠道履约能力来补充我们的DC容量,因为我们准备过渡到假期时间框架。

我们的感觉是,98%的返校季节订单将在我们的10天发货 - 10天商业发货窗口内交付。根据我们正在进行的部分快速运输,我们预计第三季度供应链成本可能会平均高出约150万美元。然后就是 - 我还想表明从系统的角度来看,我们的系统运行正常,而且由于需求量大,我们没有遇到任何系统故障。

会议主持员

Our next question comes from the line of Jen Redding of Wedbush Securities.

我们的下一个问题来自Wedbush Securities的Jen Redding。

Jen Redding

Hey guys. I was just wondering if you can give some color quarter-to-date 14% comp, increase – is that then less promotional or is that then promotional driven, or – I’m trying to figure out if you just – cause it look to us like promotion’s kind of pullback. So maybe they have and do you think they’re just going to get more promotional if you could speak to that. And also, if you could tell us, if you’re able to say who the third-party shipping partner is? Thanks.

大家好。 我只是想知道你是否可以提供一些颜色的季度迄今为止14%的补偿,增加 - 然后减少促销或者那是促销驱动,或者 - 我想弄清楚你是否只是 - 因为它看起来 我们喜欢促销的那种回调。 所以也许他们已经并且你认为如果你能说出来的话他们会得到更多的促销。 而且,如果您能告诉我们,您是否能够说出第三方运输合作伙伴是谁? 谢谢。

Jane Elfers

Sure, Jenn. It’s Jane. As far as quarter-to-date comps, we said on the call in our prepared remarks that we are running up 14% quarter-to-date. I think it’s a result of our several factors. Number one, our inventories are very clean entering the quarter as we said our carryover inventories are down double digits. We have extremely strong back-to-school assortments that are focused on two key things, basics and Wear Now.
If you look at our assortments on the floor, we pretty significantly pulled back on the longer sleeves product versus where we were last year. And we’re very, very much into Wear Now shorter sleeve product that’s more appropriate for the time frame and mom is clearly, responding to that. We have a strong marketing strategy in place, which is clearly working. And I think, overall, we can pretty clearly say that mom is choosing us for her back-to-school needs. I think it’s also important to recall that the 14% quarter-to-date consolidated comp that we’re running, the lion share of back-to-school and almost all of tax rate is behind us.
We’re also up against a similar double-digit positive comp for the same period last year. So I think it’s even more impressive when you look it in on a two-year stack. I think from a promotional environment, what we’ve seen is – we were out early with our projections when we were looking at Q2. Post our call, lot of people came on talking about their inventories, which were kind of out-of-whack versus where their sales were.
We still see from some of the people that we’ve heard from and anticipate we’ll hear from in the next couple of weeks that inventory growth is running ahead of expected sales growth in the sector. So I think for us, really the posture we’re taking is that it’s realistic and prudent to expect increase promos beyond Q2 based on the inventory levels of the competitive set and kids. And just honestly, I think we’d rather guide to an elevated promotional environment and be wrong. That’s really where we’re at right now.

当然,詹恩。这是简。至于迄今为止的季度报告,我们在准备好的评论中表示,我们的季度发布量目前为14%。我认为这是我们几个因素的结果。排名第一,我们的库存非常干净进入本季度,因为我们说我们的结转库存下降了两位数。我们有非常强大的返校分类,主要关注两个关键事项,基础知识和立即穿着。

如果你看看我们在地板上的各种各样的产品,我们相比去年我们的长袖产品相当大。而且我们非常非常非常非常关注现在穿着更短的袖子产品,它更适合时间框架,妈妈显然是对此做出反应。我们制定了强有力的营销策略,这显然是有效的。我认为,总的来说,我们可以非常明确地说妈妈正在选择我们来满足她的返校需求。我认为同样重要的是要记住,我们正在运行的14%的季度至今综合项目,返校的几乎所有税率以及几乎所有税率都落后于我们。

我们也反对去年同期的类似两位数的正数。所以当你在两年的筹码中看到它时,我认为它更令人印象深刻。我认为,从宣传环境来看,我们看到的是 - 当我们看到第二季度时,我们的预测很早。发布我们的电话,很多人开始谈论他们的库存,这与他们的销售情况有点不合时宜。

我们仍然从一些人那里听到,我们已经听到并预计我们会在接下来的几周内听到库存增长超过该行业预期的销售增长。所以我认为对我们而言,我们所采取的态度实际上是根据竞争对手和孩子们的库存水平来预期增加超过Q2的促销是现实和谨慎的。老实说,我认为我们宁愿引导一个升级的促销环境而且是错的。这就是我们现在所处的位置。

Mike Scarpa

And as far as our third-party logistics provider, we use – we’re utilizing Radial, who is also our third-party logistics provider in Canada, pretty well-established company with roughly 12 million square feet of warehouse and logistics capabilities. So we’re pretty pleased so far with the integration and looking forward to the holiday 2019 season.

就我们的第三方物流供应商而言,我们使用 - 我们正在利用Radial,他也是我们在加拿大的第三方物流供应商,这是一家拥有大约1200万平方英尺仓库和物流能力的公司。 所以到目前为止,我们非常高兴整合并期待2019年的假期。

会议主持员

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

我们的下一个问题来自B. Riley FBR的Susan Anderson。

苏珊安德森

Hi, good morning. Thanks for taking my question. I guess just a follow up on the promotional environment. I was curious where you’re seeing the most competition from? Is it within the mall, I guess from the department store, which I would suspect has elevated inventory or other specialty retailers? Or are you also seeing kind of the mass players get very aggressive in the kids business? And then also, I was curious, what your expectations are from merch margin in third quarter?

早上好。 谢谢你提出我的问题。 我想只是跟进宣传环境。 我很好奇你在哪里看到最激烈的竞争? 它是否在商场内,我想从百货商店,我怀疑库存增加或其他专业零售商? 或者你是否也看到大众玩家在儿童生意中变得非常积极? 然后,我很好奇,你对第三季度的商业利润的期望是什么?

Jane Elfers

Yes. I think from a competitive environment, it’s really coming from all three that you said. We’ve certainly heard specialty inventories were elevated, particularly people on their Q1 calls, forecasting into Q2. So we’ve seen inventory growth outpace sales growth from almost every one of our specialty competitors. We’ve certainly seen in the department stores but they don’t specifically call out kids.
And from a promotional environment, the mass guides are obviously going after back-to-school in the big way as well. It’s a very important time period for everybody so promotionally out there, it’s aggressive. But I really just think the inventory spread is really what we’re looking at, and we just want to be realistic and prudent if not conservative into the back half of the year and just make sure that we’re really feeling good about our guidance and what we anticipate could be an elevated environment. Mike also spoke to Q4.
There’s been some specialty stores that have announced significant amount of closures that will happen at the end of 2019, so we’ve taken that into account. And also as Mike said in October, we had an extremely strong October last year based on the pull up of cold weather. And we’re not anticipating in our guidance that, that weather pattern is going to mirror last year. So we really try to take everything into account.

是。我认为在竞争激烈的环境中,它真的来自你所说的三个。我们当然听说专业库存增加了,特别是第一季度的人们预测到第二季度。因此,我们看到库存增长超过了我们几乎所有专业竞争对手的销售增长。我们肯定在百货公司看到过,但他们没有特别打电话给孩子们。

从宣传环境来看,群众指南显然也是在重返校园之后。对于每个人来说,这是一个非常重要的时间段,因此它具有攻击性。但我真的只是认为库存价差实际上是我们所关注的,而且我们只想在今年下半年保持现实和谨慎,只要确保我们对我们的指导感到满意而我们所期望的可能是一个高高的环境。迈克还对Q4发表了讲话。

已经有一些专卖店宣布将在2019年底发生大量关闭,所以我们已经考虑到了这一点。而迈克在10月份表示,由于寒冷天气的影响,去年10月我们的表现非常强劲。在我们的指导中,我们没有预料到,去年的天气模式将会反映出来。所以我们真的试图把所有事情考虑在内。

Mike Scarpa

And from a Q3 perspective on merch margin, I’ll just point you to our Q2 merch – overall margins. We’ve indicated that our merch margin was down modestly. So the increase of the e-comm penetration and something leverage around fixed expenses drove the majority of the deleverage of gross margins on Q2. We would expect some other situation in Q3.

从第三季度的商业利润率来看,我只会指出我们的第二季度利润 - 整体利润率。 我们已经表明我们的商品利润率适度下降。 因此,电子通讯普及率的提高以及固定费用的杠杆作用推动了第二季度毛利率的大部分去杠杆化。 我们期待第三季度的其他情况。

会议主持员

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

我们的下一个问题来自德意志银行的Tiffany Kanaga。

Tiffany Kanaga

Hi, thanks for taking our questions. Considering that August is the toughest comparison of the quarter. Can you help us bridge the GAAP between the implied deceleration to your 3% to 4% full quarter comp guidance? And additionally, can you provide a quarter-to-date breakdown between stores and online, considering the social media posts about the heavier e-commerce sort of volume? And how are you working to address the negative customer reaction to longer shipping times to keep her loyalty?

嗨,谢谢你回答我们的问题。 考虑到8月份是本季最艰难的比较。 您能否帮助我们在隐含减速与3%至4%完整四分之一补偿指导之间架起GAAP? 此外,考虑到社交媒体关于较重的电子商务数量的社交媒体帖子,您能否在商店和在线之间提供季度最新细分? 您是如何努力解决客户对更长的运输时间的负面反应以保持其忠诚度?

Mike Scarpa

So from a overall perspective on Q3 and comps, we’ve seen increases in comps in both stores and e-comm from the run rate from Q2 and obviously, the metrics have improved also. We’re constantly reaching out to our customer base and reminding them of the shipping window. We’ve gotten some nice responses back, indicating that packages are being received on a timely basis.
And as I indicated, we expect over 98% to be delivered within that window. We are incurring additional costs to expedite some of these shipments. It’s a situation that we’re dealing with and we think it’ll be solved once we get into our third-party in the holiday 2019. I will correct your first question around the toughest comparison being August; October actually was our toughest comparison where we saw double-digit comp increases in October versus what we saw in August and September, which were – while they were positive, they weren’t to that extent.

因此,从Q3和comps的整体角度来看,我们已经看到来自第二季度的运行速度增加了商店和电子通讯中的补偿,显然,指标也有所改善。 我们不断联系我们的客户群并提醒他们发货窗口。 我们收到了一些不错的回复,表明正在及时收到包裹。

正如我所说,我们预计在该窗口内交付超过98%。 我们为加快部分货运而产生额外费用。 这是我们正在处理的情况,我们认为一旦我们在2019年假期进入我们的第三方,它就会得到解决。我将纠正你在8月最艰难的比较中的第一个问题; 10月实际上是我们最艰难的比较,我们看到10月份的两位数增长比我们在8月和9月看到的那样 - 虽然他们是积极的,但他们并没有那么大。

会议主持员

Our next question comes from the line of David Buckley of Bank of America, Merrill Lynch.

我们的下一个问题来自美林银行美林证券的David Buckley。

大卫巴克利

Good morning. Thanks for taking my question. Few questions. First on Tiny Collections; any information you can share on the performance on the quarter?
Second, how much of your inventory increase is related to earlier shipments – related to tariffs?
And then last, the implied fourth quarter guide has a significant amount of margin recapture baked in. Now what gives you the confidence in the guide, given the increased promotional environment you’re seeing now? Thank you.

早上好。 谢谢你提出我的问题。 几个问题。 首先是Tiny Collections; 您可以分享关于本季度表现的任何信息?

其次,您的库存增加多少与早期的出货量有关 - 与关税有关?

最后,隐含的第四季度指南中有大量的保证金回收。现在,鉴于您现在看到的促销环境有所增加,是什么让您对指南有信心? 谢谢。

Jane Elfers

Sure. As far as Tiny Collections is concerned, we sold through the summer delivery well. We were happy with the results and probably saw an approximate 20% AUR increase versus where the TCP branded goods are running. We just delivered this past week our back-to-school assortment, so it just hit online and it’s just hit in stores. So we’re excited to see what happens with that. We think it looks great. And now I’ll pass it over to Mike to talk about the inventory increase due to the tariffs and the margin recapture in Q4.

当然。 就Tiny Collections而言,我们通过夏季交货畅销。 我们对结果感到满意,并且与TCP品牌商品的运行情况相比,可能增加了大约20%的AUR增幅。 我们刚刚在上周交付了我们回到学校的分类,所以它刚刚上线,而且它只是在商店里出现。 所以我们很高兴看到会发生什么。 我们认为它看起来很棒。 现在我将把它转交给迈克,讨论由于关税和第四季度的利润率重新获得而导致的库存增加。

Mike Scarpa

Sure. David, as we said, inventories were up about 5.4% at the end of the second quarter, including the accelerated shipments of the Chinese goods, which accounted for approximately 20% of the increase. We had also made the decision to accelerate shipments of certain basic products to ensure that we were well positioned for back-to-school, and that was the majority of the increase. As we indicated, carryover goods were down double digits compared to the prior year.
As you look at to Q4, we had a couple of things going on last year. Our gross margins overall were down roughly 550 basis points, and a big part of that was the liquidation, the advance liquidation that we did on certain holiday goods as we anticipated and then heard of the Gymboree and Crazy 8 bankruptcies. So our sense is based on the way bought units for holiday and where we expect our inventory positions to be at the end of the year that we should get to see a chunk of that comeback. So we’re confident in where we’re guiding to at this point, though we never really specifically, guided the gross margin.

当然。大卫,正如我们所说,第二季度末库存增加了约5.4%,其中包括中国商品的加速出货量,占增幅的约20%。我们还决定加快某些基本产品的出货量,以确保我们能够很好地回到学校,这是增加的主要原因。正如我们所指出的那样,结转货物与去年相比减少了两位数。

当你看到第四季度时,我们去年有几件事情要做。我们的毛利率总体上下降了大约550个基点,其中很大一部分是清算,我们对某些假日商品的提前清算,正如我们预期的那样,然后听说金宝贝和疯狂8破产。所以我们的感觉是基于购买度假单位的方式,以及我们期望我们的库存位置在年底,我们应该看到一大块的回归。所以我们对我们在这一点上的指导有信心,尽管我们从来没有真正具体地指导毛利率。

会议主持员

Our next question comes from the line of John Morris of D.A. Davidson.

我们的下一个问题来自D.A.的John Morris。戴维森。

约翰莫里斯

Thanks. Jane, I want you to know, going back to your outlook and anticipation, which is probably pretty prudent that competitors around you are pretty high in inventory. I’m wondering; help us try to understand what you might be seeing or some hypotheticals on why it’s so high competitively out there? And they’re bent towards promotions at this point. Is it more of a delta than usual? Just wondering if you can kind of shed some light given your sector experience, what you think is going on there.

谢谢。 简,我想让你知道,回到你的前景和期待,这可能是非常谨慎的,你周围的竞争对手的库存相当高。 我在想; 帮助我们尝试了解您可能会看到什么或者为什么它在竞争中具有如此高的竞争力? 而且他们现在倾向于晋升。 这是一个比平时更多的三角洲吗? 只是想知道你是否可以根据你的行业经验,你认为在那里发生了什么。

Jane Elfers

Yes. What I think it is and what we talk about internally is that we think there is some euphoria by some of our competitive said about one-year ago in 2018, when they started to see some positive trends in the business. And as you know, kids has brought so much further out than other categories based on the lower AUC and the markets that we source from. So we think that this inventory that needs to be worked through, through the balance of the year.
And I think inventories – retailers usually learn by looking in the rearview mirror. And I think by the time we get into the end of Q4 and into the early part of 2020, you’re going to see retailers pulling back in our sectors significantly on inventories. But I think, right now, as we said, it’s prudent to consider them to be elevated for the back half of the year. And we’re just kind of set on making sure that our guidance is covered for what we anticipate will continue to be elevated inventories.

是。 我认为这是什么以及我们内部谈论的是,我们认为一年前在2018年,当他们开始看到业务的一些积极趋势时,我们的一些竞争对手有一些兴奋。 如你所知,基于较低的AUC和我们采购的市场,孩子们比其他类别带来了更多的进步。 所以我们认为这个库存需要通过一年中的平衡来完成。

我认为库存 - 零售商通常会通过查看后视镜来学习。 我认为,当我们进入第四季度末到2020年初时,您将看到零售商在库存方面大幅削减库存。 但我认为,正如我们所说,现在考虑将它们提升到今年下半年是明智的。 而且我们只是确保我们的指导能够涵盖我们预期将继续提升的库存量。

会议主持员

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

我们的下一个问题来自花旗研究的Paul Lejuez。

Kelly Crago

凯莉克拉戈

Hi, this is Kelly on for Paul. I just want to clarify, so you talked pretty positively around the quarter-to-date trends and the 14% comp is obviously very strong. But – is that been driven by higher promotions or are you just anticipating that as we get to the low period post back-to-school that we’ll see an uptick in promotions across-the-board?

嗨,这是保利的凯莉。 我只想澄清一下,所以你非常积极地谈论季度迄今的趋势,14%的比赛显然非常强劲。 但是 - 这是由更高的促销活动推动的还是你只是期待我们回到学校后的低阶段,我们会看到全面促销活动的增加?

Jane Elfers

Yes. I mean we’re – like we said, we have 14% comp up against the similar comp from last year. So pretty impressive on the two years stack, driven by back-to-school forward product. As we said, our inventories are clean. So we’re driving this on back-to-school assortment that are focused on basics and Wear Now.
Business is really, really strong right now. We are just going to be, as we said on our prepared remarks and during this Q&A session, we want to be very prudent. As far as the balance of the year is concerned, we’re up against a big October with the cold weather. We feel very good about where our inventories are positioned in Q3 and coming out of Q4. And we just want to make sure that the guidance covers what could continue to be an elevated promotional environment.

是。 我的意思是我们 - 就像我们说的那样,我们有14%的成绩与去年的同类比赛相比。 两年的筹码令人印象深刻,由回到学校的前锋产品推动。 正如我们所说,我们的库存很干净。 因此,我们将重点放在基础知识和立即穿着的返校分类上。

现在商业真的非常强大。 正如我们在准备好的评论中所说的那样,在本次问答环节中,我们要非常谨慎。 就全年的平衡而言,在寒冷的天气下,我们迎来了一个大的十月。 我们对第三季度和第四季度的库存位置感到非常满意。 我们只是想确保指导涵盖可能继续成为一个升级的促销环境。

会议主持员

And ladies and gentlemen, we have time for one more question. Our final question will come from the line of James Chartier of Monness, Crespi, Hardt.

女士们,先生们,我们还有时间再问一个问题。 我们的最后一个问题将来自Monness,Crespi,Hardt的James Chartier。

James Chartier

James Chartier

Good morning. Thanks for taking my question. Could you just talk about the omni-channel fulfillment. What percentage of sales for back-to-school are being fulfilled from ship, from store? And then just overall, what the omni-channel fulfillment is for you guys? And then where do you want ship from store to be for holiday and back-to-school going forward? Thanks.

早上好。 谢谢你提出我的问题。 你能谈谈全渠道的实现吗? 从船上到商店的返校销售百分比是多少? 然后总的来说,全渠道的实现对你们来说是什么? 那么你想从商店出货去度假和返校? 谢谢。

Mike Scarpa

Yes. So on a go-forward basis; we’re looking at holiday 2019 for ship for stores would be roughly in the, call it, the 2% to 4% range of overall orders. We’re using it slightly higher today based on our order quantities that we have. But our sense is that we’ll have a third-party logistics provider in place in holiday of 2019 to avoid utilizing ship from store to any great extent. So were we – there is split shipments and what it does to the stores associate during the key selling period. Currently, it’s being indicated earlier, really pleased with BOSS and the results of BOSS and the attachment sales and how that’s driving store traffic and business. So we’ve seen it is high as – over 20% in some cases, it’s probably down to about 15% basis right now. So we’re pretty pleased with that, overall.

是。 所以在前进的基础上; 我们正在考虑2019年的假期,因为商店的船舶将大致在,称之为整体订单的2%至4%范围。 根据我们的订单数量,我们今天略高一些。 但我们的感觉是,我们将在2019年假期安排第三方物流供应商,以避免在很大程度上利用商店中的船舶。 我们也是如此 - 在关键销售期间,有分拆的货物以及它对商店的联系。 目前,它已被提前表示,对BOSS以及BOSS和附件销售的结果以及如何推动商店流量和业务非常满意。 所以我们已经看到它很高 - 在某些情况下超过20%,现在可能下降到大约15%。 总的来说,我们对此非常满意。

会议主持员

And thank you for joining us today. If you have further questions, please call Investor Relations at 201-453-6693.

谢谢你今天加入我们。 如果您还有其他问题,请致电投资者关系部,电话:201-453-6693。

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