Victor Herrero - Chief Executive Officer Sandeep Reddy - Chief Financial Officer

John Kernan - Cowen and Company Omar Saad - Evercore ISI Dana Telsey - Telsey Advisory Bridget Weishaar - Morningstar

Good day, everyone. And welcome to the Guess? Third Quarter Fiscal 2018 Earnings Conference Call. On the call are Victor Herrero, Chief Executive Officer and Sandeep Reddy, Chief Financial Officer. During today’s call, the Company will be making forward-looking statements, including comments regarding future plans, strategic initiatives, capital allocation and short and long-term financial outlook. The Company’s actual results may differ materially from current expectations based on risk factors included in today’s press release and the Company’s quarterly and annual reports filed with the SEC. Now, I would like to turn the call over to Victor Herrero.

Good afternoon, everyone. As you saw in our earnings release today, we reported that adjusted earnings per share for the quarter finished above our guidance, while adjusted operating margin finished within the range of our guidance. I will discuss the progress that we have made in our initiatives, so you can better understand why we are raising our guidance for the year. Starting with Europe, revenues for the quarter grew 19% in U.S. dollar and 12% in constant currency, showing continued momentum from successful implementation of our strategic initiatives to elevate the quality of our sales and merchandising organization. The growth was driven by comps, including e-commerce, up 10% in U.S. dollars and 4% in constant currency, and by new store openings. This comp increase came despite an seasonally warm October that result in lower AUR due to reduced sales of outerwear and heavier all products. Our e-commerce business in Europe continues to grow rapidly powered by our own Web site, as well as our partnership with Auto and Zalando. During the quarter, we opened 22 directly operated stores in Europe on a net basis. 11 of which were in Russia and in turkey, our fastest growing markets. We also opened stores in Italy, Spain, Greece, UK, Germany, Poland and our first owned and operated store in Hungary. We are also drill with increasing strength of our European wholesale business. The Spring Summit 2018 order book closed at in the mid-teens in the constant currency, an acceleration from the Fall Winter 2017 order book increase of low double digits. This is now the second consecutive season of double digit growth in the European wholesale business, which reflects our progress on the strategic initiative I outlined more than two years ago to revitalize the wholesale channel. Following four consecutive quarters of margin expansion, the European segment margin contracted 320 basis points in the quarter. The main driver of margin contraction this quarter was the timing and magnitude of a startup cost related to our new distribution center in Venlo. The distribution center is expected to be fully operational by the first quarter of next year instead by the end of this year as initially planned. We fully expect margin expansion for Europe to resume once the transition to the new distribution center is behind us. Moving to Asia. Third quarter revenues were up 17% in U.S. dollar and 18% in constant currency. Revenue growth in the region was driven by comps, including e-commerce, that were up 3% in U.S. dollar and 5% in constant currency and by new store openings. During the quarter, we opened 10 directly operated stores in China on a net basis. We opened stores in Shanghai, Hangzhou and Suzhou in the east -- Harbin, Changchun and Xiangdong in the Northeast, [Xian] in the northwest, Wuhan in the center and Chongqing and Chan-chiang in the west. In addition to developing a strong store footprint across the country, we see big potential for our digital presence in China. Our marketplace partnership with Tmall is growing at a rapid pace. We are also very excited about our new marketplace partnership with VIP.com. Both marketplaces connect our brand with very high number of consumers and all parts of the country who we also engage with through social media communication platforms, such as WeChat, and Weibo. Importantly, beginning this quarter, we began to directly operate our stores in Australia and we are now including the revenues from this market in our Asia segment. Australia is a market where we already have the strong brand recognition through our prior distribution there. We are especially pleased that the operating margins in the Asia segment improved 680 basis points in the quarter, making the fourth consecutive quarter where we have experienced margin expansion in Asia. As you can see, we are executing very well our strategic initiatives to build a major business in Asia. In Americas Retail, revenues for the quarter decreased 13% in U.S. Dollar and 14% in constant currency. Comp sales, including e-commerce for the quarter, were down 10% in U.S. dollar and 11% in constant currency. This includes approximately 1% of negative impact on comp sales and 3% -- 3 million impact on revenue from the hurricane disruptions in Texas, Florida and Puerto Rico. Importantly, we made a great progress this quarter on improving our profit in the Americas as a result of lower markdowns, better IMUs, negotiated rent reductions and store closures and we achieved 240 basis point improvement in operating margin despite the 10% decline in comp sales in the quarter. Meanwhile, we continued to be very focused on elevating our brand presence in the U.S. through celebrities' endorsements with Camila Cabello, ASAP Rocky and Joe Jonas, all of who partnered with us on branding activities during the past quarter. Going forward, we are very excited about the new partnership we just initiated with Jennifer Lopez, J'Lo. We're also building on the strength of our digital initiative. This past quarter we further improved our omnichannel capacity by rolling out our buy online pick up in store initiative. This is in addition to the already present ship from store and buy online in-store functionality where the store associate place order to be shipped directly to the customers' home. This is the first holiday season in which all benefit from Guess carrying the Amazon Prime batch, as well as having a presence on jed.com positioning us to gain access to incremental graphic through both digital platforms. Our partnerships with key digital influencers who have a strong presence on multiple social platforms, including Instagram, Facebook, Twitter and Snapchat, is also a core part of our digital strategy. Finally, earlier this month, we were really excited to participate in ComplexCon for the first time. ComplexCon is a melting pot for the expression of creative talent across art, music and pop culture, and was a great venue for us to showcase our brands. So as we peek into the future of the Company, this is what I see; there is a lot of runway left in Europe and Asia, so I expect a double digit revenue growth to continue into next year. The profitability of the Americas should continue to benefit from our cost reduction and margin improvement initiative. And we aim to achieve our long term goal of 7.5% overall company operating margin by a combination of revenue growth and disciplined cost control -- control of cost. One last point, I'm really excited and confident in the future of our Company and this is why we repurchased 435,000 shares for roughly $7 million in the recent concluded quarter, Sandeep.

Thank you, Victor and good afternoon. During this conference call, our comments reference certain non-GAAP or adjusted metrics. Please refer to today's earnings release for GAAP reconciliations on descriptions of such measures. Third quarter revenues were $554 million, up 3% in U.S. dollars and 1% in constant currency versus prior year. I would like to highlight that this was our fifth consecutive quarter of revenue growth. Total Company gross margin increased 90 basis points to 34.5%, mainly driven by higher IMUs, partially offset with the negative impact of occupancy deleverage from higher European logistics costs related to the start-up of our new distribution center in Venlo. SG&A, as a percentage of sales, increased by 160 basis points mainly driven by reset of performance based compensation. During the third quarter of fiscal 2018, we recorded non-cash asset impairment charges of $2 million related to store impairments. Additionally, as part of our efforts to improve our profit in North America; during the quarter, we rerecorded $12 million of cash lease termination charges; primarily driven by an agreement for the landlord in North America to restructure our 26th lease agreements with them, as well as $10 million advanced on future rent. As discussed on our last call, we expect the cash and cash payback on this $22 million outlay in less than three years. Adjusted operating profit for the third quarter was $13 million and declined 21% versus adjusted operating profit last year, primarily driven by the aforementioned reset of performance based compensation. Adjusted operating margin finished down 70 basis points at 2.3% for the minimal impact from currency. Please refer to our press release from today for additional information on operating margins by segment. Our third quarter adjusted tax rate was 25%, down from 38% last year, as we experienced higher earnings in lower in tax countries. Adjusted diluted earnings per share finished above the high end of our guidance at $0.12. This represents 9% increase compared to adjusted diluted earnings per share of $0.11 in last year’s third quarter. The impact of currency and earnings per share in the quarter was minimum. Moving on to the balance sheet. Accounts receivable was $237 million, up 8% in U.S. dollars and 5% in constant currency, primarily driven by the growth in European wholesale revenues. Inventories were $477 million, up 11% in U.S. dollars and 8% in constant currency versus last year. This marked another sequential improvement in constant currency versus the prior quarter. The increase in inventory is driven by Europe and Asia to support their revenue growth plans and is partially offset by decline in inventory in the Americas, where our inventory position is significantly healthier than last year at the same time. We have made good progress throughout the year to better align receipts with forward sales expectations, and we are well positioned entering the holiday quarter. Adjusted free cash flow was negative $100 million, $2 million versus prior year. Keep in mind that this year’s free cash flow includes the $22 million in cash payments during the quarter, primarily to a key North American landlord as previously discussed. We ended the quarter with cash and cash equivalents of $233 million compared to last year’s $349 million. Cash less debt at the end of the third quarter was $192 million compared to $325 million last year. This is after having returned $76 million in dividends and $28 million in share repurchases to shareholders since the third quarter of last year. Through the end of the quarter, we still had $423 million available of the $500 million share repurchase plan previously approved by our board. Moving on to the guidance. I should point out that our outlook for the fourth quarter of fiscal 2018 does not assume any asset impairment charges. Also, guidance for the revenues and comp sales for the total company and by segment is included in the supplemental table attached to our earnings release. Based on our results in the first nine months of the year and the visibility we have so far into the fourth quarter, we are raising our guidance for the year from a range of $0.52 to $0.60 in adjusted EPS to an updated range of $0.56 to $0.63 in adjusted EPS. Excluding currency impacts, the top end of our guidance for the year reflects 39% adjusted EPS growth and adjusted operating margin improvement of 40 basis points as strength in the Europe and Asia business is expected to more than offset the weakness in the Americas Retail business. For the fourth quarter of fiscal 2018, we expect revenues for the quarter to be up 5% to 7% in constant currency, driven by expected strong growth in the Europe and Asia, partially offset by an expected decline in the Americas Retail business. At prevailing exchange rates, we expect the currency will be roughly a 5 percentage point tailwind on consolidated revenue growth for the quarter. Our gross margin is expected to be up due to the IMU improvement from our supply chain initiatives, partially offset by temporary pressure from distribution cost related to our move to the new distribution center in Europe. The SG&A rate is expected to be up compared to last year, primarily due to a reset of performance based compensation. We are planning an operating margin for the quarter between 8% and 9% with an 80 basis point tailwind from currency. Earnings per share is planned in the range of $0.48 per share to $0.55 per share and does not assume any further share buybacks. Excluding currency, the top end of our guidance for the quarter reflects 22% increase in adjusted EPS and 30 basis points increase in adjusted operating margin for the quarter. Our adjusted tax rate for the fourth quarter is estimated to be 31%. We expect consolidated revenues for the year to be up between 4% and 4.5% in constant currency. It should be noted that we expected increase in revenues even after closing many stores in the Americas. At prevailing exchange rates, we estimate that currency will be roughly 2 percentage point tailwind on consolidated revenue growth for the year. For the full year, we expect gross margins to be up due to improved IMUs in both the Americas and Europe. The improvement in IMU for the year is updated to $30 million from the $24 million we announced previously. But this improvement is partially offset by temporary increase in distribution cost related to the move to the new distribution center in Europe. The SG&A rate is expected to be up for the year due to a reset of performance based incentive compensation. Our adjusted tax rate for the year is estimated to be 36%. We are planning an adjusted operating margin between 3.2% and 3.5%, including the impact of the currency tailwind of roughly 20 basis points and our guidance assumes foreign currencies to remain roughly estimating rates. Adjusted earnings per share is planned in the range of $0.56 and $0.63 per share. The earnings per share guidance includes the currency tailwind of roughly $0.02 per share. CapEx for the year is expected to range from $85 million to $95 million as we continue to invest in our retail expansion in Europe and Asia, and our technology infrastructure to support that long term growth. The Board of Directors has approved a quarterly dividend of $0.225 per share payable to shareholders of record at the close of business on December 13, 2017. With that, I will conclude the Company's remarks and open the call up for your questions.

Thank you [Operator Instructions]. And it looks like our first question comes from John Kernan from Cowen and Company. Please go ahead.

I am going to just start in Europe, it looks like your guidance showed pretty significant acceleration there versus where you were on a constant currency basis, in the third quarter. Is there any shift there? And I believe you're guiding to high teens growth for the third quarter in Europe, on a constant currency basis and it came in a little below that. So I'm just wondering if there was anything moving around? And then how we should think about the European operating margin for the fourth quarter given the moving cost and distribution? Thank you.

John, I think from a European margin perspective, first of all, one of the key drivers that Victor called out in his prepared remarks was October was a particularly tough month because it was unseasonably hot in Europe. So as a result we saw a significant downturn in the sale of outerwear and Fall Winter product, which carry a higher AUR and that impacted our comp. So sales were impacted during the quarter, specifically for that reason. But really when we look at the full year and where things were at, it was really weather related. Temperatures have actually cooled quite significantly since the end of October. And so we don't feel that there's much trouble from that perspective, it's more like a timing impact. And I think specifically if you look at the quarter and what happened to our margins in the quarter there're a couple of things; one is of course there is retail sales impact we just talked about; and the other is the move to our new distribution center in Venlo, where we have startup costs that we were expecting to incur maybe there was a bit of timing from Q4 into Q3 that also impacted us. But overall, when we look at where margins ended up, we feel pretty confident going forward once we get past the distribution center transition that we're going to go through the Q1 of next year, we should be getting back to margin expansion again in Europe. And we're super confident because you look at the wholesale book we just covered that during the prepared remarks. We've got double digit growth for two consecutive seasons now, and if anything is accelerating into Spring Summer '18. And Spring Summer '18, just to remind you, is a book that ships starting in Q4. And so that's going to help our Q4. And the acceleration in revenues that you have in Q4 relative to Q3 include some of that acceleration from the wholesale book. It includes a little bit of timing on the retail business and it also includes a 53rd week, because that’s a pretty material impact to the quarter in Europe as well; so all things put together, we feel like the expectations for the fourth quarter are very reflective of where we think our long term trajectory is.

I want to add to this is that I'm very optimistic about our performance in the future in the European market, assuming now we're in 25 markets at this moment. And I mean lease on the third quarter, they all comes where more or less in line in other market. There was not market that they were doing or performing worse than the others. So has been quite consistent the performance in other markets. As well, I think we have a good marketplace there with Zalando and Auto that they’ve been performing very well. Our e-commerce channel also has been performing significantly well. And also we open -- we are going to open during this year 70 stores in Europe. And out of those 70 stores for us will be around five new markets. So I’m extremely optimistic of how it's going to build our performance in the European markets in the next year.

Clearly, there is a lot of momentum in Asia and Europe. Just shifting to North America. It’s good to see the store count came down it’s good to see the losses in the North American retail business decrease year-over-year, despite the fact, you were down town on comp. Just wondering how should we think about store closures into next year? Obviously, it’s pretty powerful for the overall Company’s profitability to control these losses little bit more and close more stores. I’m just wondering, how should we think about overall magnitude of door closures into fiscal ’19?

John, I think when we really talked about the door count and future sale where we expected to get to, we’ve talked about 300 door count if trajectory doesn’t inflect. So I don’t think there is a change to that number. So where we are, given the expectations that we have this year, we should end up south of 400 stores because we ended the quarter in the U.S. and Canada with 411 stores and we’ve only closed 45 so far this year. And so we have a lot of optionality in the store closer plan that we have, because not all leases are coming up and we will have optionality next year just like this year. And so, it’s a bit too early to call exactly how many stores we’ll close next year because part of the process John is the negotiations we’re having with the landlords. We’ve actually have been negotiating very hard for the last year and half with them. And that’s where you see it playing out in the operating margins that you saw in the most recent quarter. We’ve got pretty good rent reductions in number of different stores where if we hadn’t gotten those rent reductions, we’d have closed those stores. But it’s little bit of a moving target from that perspective on store closures. But what’s really the North Star is profitability. We’re going to go for the profitability and make sure that we improve no matter what and whether store closures and rental negotiations along with the other two drivers, which is IMU improvements that we’ve been actually seeing all the year and we’ve been talking about but most importantly, we’ve gotten ourselves into a position, where our inventories are very clean in the Americas. So this past quarter and a lot of the margin expansion or improvement that you saw came from a lot lower markdowns, because we’re so much clean-up. And this is a position we find ourselves in as we exit the quarter and move into Q4, which is the holiday season. And we are really confident that markdowns continue to be a tailwind as we end of the year.

If I can just sneak in one more question as it relates to Asia sector. You obviously have a lot of unique knowledge as it relates to that market given your experience. So I’m just wondering the acceleration you’re seeing, both in the top-line and the improved profitability. What inning are we in here and how confident are you, and what you’re seeing in Asia and how the Guess brand is being positioned in that Asian market as we head into next year?

Yes, same attitude in Europe. Now, I'm very optimistic about our performance for the next coming year in Asia. Going more specifically, as you may know and we've been seeing a lot. Korea is a mature market and we don't think that -- we don't oversee any surprises and we'll be quite stable. So let me concentrate a little bit on China. Basically, as I told you in my call -- proving you that I'm fluent in Chinese, I mean, we are going to open 10 stores -- we opened 10 stores during the quarter. And basically, those stores are not only in Shanghai or in Beijing, actually we have right now our representation in more than 20 or 30 cities in Mainland China. And they are not only first tier cities that will be considered Beijing or Shanghai, those cities are considered third tier cities, second tier cities and even four tier cities; but taking into consideration that all those cities are above 8 million people. So all this is are very important things in order to have a strong footprint in the market and to achieve more brand relevance. In addition to that, we have the e-commerce channel. And e-commerce channel we've been in partnership with Tmall for the last two years and half. I think we have a great partnership with them. This quarter we have the 1111, and it was very good experience for us and for them. And I think that the partnership is very strong and I think we will continue partnership with them for the next coming future. As well VIP.com is another marketplace that we have in China and actually we are quite happy with them. But imagine this partnership is helping us as well to elevate the exposure of the brand in China and this is an important thing. Another thing that I want to say about China is that we are building a very strong infrastructure over there. As I mentioned in my pervious call and this is a very important thing, because I mean the talent in China or in order to develop the Chinese market, you really need to have the right people to develop. And I think that we are in the right place. As well I want to tell you that we are doing a big portion digital strategies and also we are really working with Weibo, we are working with WeChat, we are trying to also some celebrity endorsement or local celebrity endorsement. So basically I think the reason why we are successful at this moment in China is because we are following several initiatives and we've been very consistent on following those initiatives. And basically I foreseeing as I mentioned before a great story for us in China.

Our next question comes from Omar Saad from Evercore ISI. Please go ahead.

Can I start with a question for Sandeep on the U.S. retail segment margin, looks like still negative territory but looks like an improved 200-300 basis points. Sandeep, how do we think about what the underlying dynamic is there, inventory control versus rent reductions versus closing unprofitable stores? Is there big chunk there we can identify as we think about the progression of the U.S. margin opportunity? And then I have a couple of follow ups. Thanks.

So I think what we talked about is basically there's probably four drivers, and I think I mentioned that in my answer to John earlier on the Americas retail margin for the quarter. And I think the big one, that's actually been in process for a while is definitely IMU and that starts with the supply chain strategy that Victor outlined couple of years ago. And that's really paying out in terms of IMU improvement as we go through this year. So that's one piece. Then I think the other piece is what we've been talking about as part of the profitable the improvement plan since last year; we've been very aggressively renegotiating rents with landlords and lot of those negotiations are paying back right now; and we're beginning to see improvements in rents from a number of landlords that we're working with; the third bucket is clearly store closures where we couldn’t get rents that made sense, we just closed the stores; and the fourth, which I think is really critical is good operational management. We've really tightened up on our inventory as much as possible; so we could go into a situation where we're going to be much less promotional; this was a conscious decision; we think it’s the right thing for the brand; and we got to that point where we were in a healthy position by the end of Q2; and so in the past quarter, markdowns has been a big tailwind. So all four of these are levers will be drivers of margin improvement, going forward. The key though is how much they're going to get offset by the negative comp. And I think that's really where we're working on both fronts. The profit improvement plan is always ongoing but we spoke extensively and Victor talked a lot about what we're doing with celebrity endorsements, the digital initiatives, all of the different revenue enhancement initiatives that we're working on. So we're working on both sides of it to ensure that over time, we actually get to a place where a sustainable profit improvement from the Americas.

And then question on product and fashion, we're hearing some encouraging early days with some encouraging data points from some of the retailers and department stores around women's apparel. There seems to be more of a fashion -- some new fashion trends that are emerging, more interest in the category. Is that something you guys are seeing in the marketplace or seeing in your business? And do you think there's a change there after years of the skinny jeans straightforward trend that might be more fashion for you to leverage in your product flow?

Actually this a good news, because I consider ourselves a truly fashion company. And at the same time, with a strong DNA values, so called values, which is sexy and independent. But definitely we are seeing a lot of logo driven fashion. We have seen as well our fashion weighs more lifestyle which we've been operating for the last two years and a half. So it means that it's not only about the categories or the product categories that you were saying, it’s more about the total outlook. And definitely very encouraging, because it's basically what we've been working how we are trying to improve our product portfolio for the last two years.

One last question J'Lo, Camila, can you talk about some of the influencers you're using. How you're thinking about the partnership with the J'Lo social media, how you’re going to activate these assets for marketing perspective any kind of early reads on how that's resonating?

We are very excited about all the celebrity endorsement because I mean, it’s not only right now the biggest one will be J'Lo for this quarter and for next quarter. But at the same time, I think for this particular quarter, third quarter, we’ve been in partnership with Camila Carvalho with Joe Jonas and also A$AP Rocky, in different type of activity. And regarding influences, definitely we are really working with new influencers, with fashion influencers with bloggers as well. So I mean all these kind of things in order to try to improve the way that we interact with our customers, trying to have new customers that we’ve been talking for the last year or year and half about the millennials trying to attract new millennials, Gen Z. Also, what is very important is we are doing a big portion in social media through Instagram, through Facebook, through it’s not chat or through YouTube. So I mean, basically it’s all kind of -- it’s not only one thing that we are doing, there are plenty of activities that we are really working also on e-commerce with this Amazon Prime batch, or also working on marketplace with Jet.com. All this is kind of huge push in order to be more relevant and to be really on trend in a way because I think in the product that I was saying to you we are becoming more and more lifestyle. I think our product offering is improving by every, on a daily basis. And now basically, we’ll have to have a big push on digital initiatives and also on celebrity endorsements and social media.

Our next question comes from Dana Telsey from Telsey Advisory. Please go ahead.

As you see the performance in Europe, Asia, what you have in the Americas. Do you see anything different online versus what you see in the stores? And as you think of profitability metrics and omni-channel initiatives, how is that evolving whether it’s free shipping and it’s the other omni-channel initiatives? How do you think the impact of that on margins is progressing? Thank you.

What we are trying to do as much as possible, Dana, is basically trying to add capabilities to our Web site like for example, the omni-channelizing buy online and pick-up in the store, is kind of a very interesting feature that we are going to add to our e-commerce capability. I think very important is that we have to adapt to whatever is coming. And I think that in the development of e-commerce, I mean either if we have to do free shipment or we have to do a particular promotion has to be very consistent of what all the activities that we are implementing on the retail channel, on the wholesale channel and also any type of push on the Italy initiative, social media. So everything has to been combined. And I mean, we cannot develop one particular thing and not doing another thing. I think all the basically any promotional activity that we are going to do, we are going to do in the free channels where we are represented in the U.S. and not only in the U.S. or in America, also in Europe and in Asia. And then this is basically to be very consistent in every distribution channel is very important. Having said that, what is very important as well is that to be one of the first to have this pick up buy online and pickup in the store, trying to be one of the first to use as a marketplace, Jet.com. I think we should continue developing and not to be a little bit trying to be not the first one on this first. Let's be aggressive, let's try to try. We make a mistake let's try to correct it.

And just following up on the profitability piece that you asked about Dana, I think, this is something that we’re continuously focused on. I think the important thing is we need to offer the consumer options to buy wherever they want to buy. And so the world is migrating more and more to online and omnichannel. So as a company, we’re just ensuring that we meet the consumer wherever they want to shop. That done operationally we're doing everything we can do drive down the cost of serving those customers, and a big part of the e-commerce business is going to be freight. And there are significant disciplines inside our company where we continuously look to manage freight to drive the cost of operation down so that the profitability of that business improves.

More and more Dana, for example, whenever we go to the stores and we interacting with the customers, the customers they check is, for example, the price that you in the store, you will have it as well on e-commerce. So it's very important to align pricing, not only in Americas, I think the price alignment has to be worldwide.

Our next question comes from Bridget Weishaar from Morningstar. Please go ahead.

Two questions, so first it looks like there is seems to be a large discrepancy between American wholesale and retail performance. Could you discuss this disparity? And then second looking little bit bigger picture, it looks like you're making great strides to build the lifestyle brands through these partnerships and your social media presence. Can you talk a little bit about what research you've done and what the next generation is looking for in Lifestyle? Is it more of a healthy lifestyle, is it more socially conscious? What's the message that's resonating with the consumer? Thanks.

Bridget, maybe I'll take the first one and then Victor and I can probably tag team on the next one. But the first one was really about the Americas’ wholesale versus retail. And the one thing we've said probably on previous calls, which I'll repeat again is, the weight of different countries within Americas Retail is very different from the weight of different countries within Americas’ Wholesale. And so I think Americas Retail is driven primarily by U.S. and Canada. But if you go into Americas’ Wholesale, there is a significant business from Mexico, as well as Canada -- in addition to the United States. And so you can't really look at the Americas Wholesale as a whole, I think, it's very comparable directly to Americas Retail. And so you see a mixed impact that's playing through because we are doing very well by the way in the Canada and Mexico versus the wholesale business. And I think we've talked about that previously. The place which is challenging is definitely the United States. There is different pressures over there and the market trends that we’re hearing about and reading about affect us too. And so we're managing the situation very carefully with our partners and making sure we don't get into position, which is unhealthy inventory levels, which drive markdowns.

And I think regarding your second question, the lifestyle product strategy that we've been implementing for the last two years and a half, I think is very appealing to this new customer, not a millennial identity. And also regarding the way that we are interacting with the customers through social media or even through our celebrity endorsements, I think also it’s appealing to them, particularly because I mean we have a person like Camila Cabello, which is the new star and it’s a rising star. And we have right now Jennifer Lopez, which is kind of a very well established artist. So I think this type of balance or combination between both also is very appealing to our customer; also the push that we are doing on all these new digital initiatives are paying back.

[Operator Instructions] And I'm showing no further questions at this time. This concludes the question-and-answer session. I will now turn it back over to Victor for closing remarks.

Thank you.

Thank you, ladies and gentlemen. This concludes today's call. Thank you for participating. You may now disconnect.