Caleres Inc Q2 FY2023 Earnings Call

Good morning. And welcome to the Caleres Second Quarter 2023 Earnings Conference Call. My name is Daryl, and I will be your conference coordinator for today. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. As a reminder, this conference is being recorded. At this time, I would like to turn the call over to Logan Bonacorsi, Vice President of Investor Relations. Please go ahead.

Good morning. Thank you for joining our second quarter 2023 earnings call and webcast. A press release with detailed financial tables, as well as our quarterly slide presentation are available at caleres.com. Please be aware today’s discussion contains forward-looking statements, which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors, including, but not limited to, the factors disclosed in the company’s Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today’s press release and our SEC filings for more information on risk factors and other factors, which could impact forward-looking statements. Copies of these reports are available online. In discussing the results of our operations, we will be providing and referring to certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures, as well as other views in today’s earnings release and our presentation on the Investors section of our website. The company undertakes no obligation to update any information discussed on this call at any time. Joining me on the call today are Jay Schmidt, President and CEO; and Jack Calandra, Senior Vice President and CFO. We will begin this morning’s call with our prepared remarks, and thereafter, we will be happy to take your questions. I would now like to turn the call over to Jay.

Thank you, Logan, and good morning, everyone. Once again the Caleres team performed at a high level during the second quarter of 2023 delivering strong financial and operational results despite the challenging consumer demand environment. We leveraged our diversified structure, our powerful brands and our enhanced omni capabilities to drive earnings per share above the high end of our guidance range. This gain was achieved even with sales modestly below our initial expectations, because we prioritize profitability and generated strong consolidated operating margins. Our ability to deliver bottomline results in a choppy consumer market demonstrates the desirability of our brands and the success of our efforts to tighten inventory and reduce promotion across our businesses. We have also reduced expenses across the enterprise. These actions have yielded a fundamentally healthier Caleres. Indeed, we believe our diversified model and operational discipline sets us up to drive value in a variety of market conditions. The structural improvements we have implemented over the last several years coupled with our focus on cost control and commitment to our strategic initiatives positions us well for sustainable long-term growth. Now let’s turn to some key highlights in the second quarter. We delivered adjusted earnings per share of $0.98. We grew market share in our lead brands, Sam Edelman, Allen Edmonds, Naturalizer and Vionic. We increased Famous Footwear’s market share in shoe chains. We generated record second quarter gross margins in the Brand Portfolio. We achieved sequential improvement from the first quarter in the year-over-year sales trend at both Famous and Brand Portfolio. We maximized our inventory levels and managed them well, ending the period approximately 14% below 2022. We invested in consumer experience, analytics and marketing areas that are key to accelerate our strategic growth initiatives. We returned approximately $20 million to shareholders via share repurchases and the quarterly dividend. And we utilized our free cash flow to reduce the borrowings under our asset-based revolving credit facility by $48 million from first quarter of 2023. This also represents a $105 million year-over-year decline in our borrowings. In recent years, we have prioritized debt reduction after funding our dividend as the top priority for free cash flow. During the second quarter, we reached our leverage ratio target of 1 times debt to EBITDA. We anticipate strong levels of cash generation and Jack will cover our capital priorities in more detail in a few moments. Now let’s move to our second quarter operating results. Overall, consolidated sales declined 5.8%, falling short of our expectations. Famous Footwear sales were about in line with our expectations, while Brand Portfolio revenues were somewhat below our initial view. Despite this, we generated strong consolidated gross margins of more than 45%. This was driven by continued improvement in the Brand Portfolio’s gross margin, as well as rigorous cost management across both segments. Faced with softer demand, we chose to prioritize profitability over promotions. As a result of all of these efforts, we achieved solid second quarter operating earnings. Now let’s turn to our operating segments, starting with the Brand Portfolio, which remains on track to deliver an increased earnings contribution this year in both dollars and rate. During the quarter, we experienced some seasonal weakness in sandals as consumers prioritized casual flats and sneakers. We also saw conservative ordering patterns by our wholesale partners. As you may remember last year, consumer demand surged as restrictions were lifted and our wholesale partners built their inventories. As we move into the back half of 2023 though, these more difficult year-over-year comparisons ease and we are ready with strong inventory in loafer, flat and sneaker styles that our consumers desire. In contrast, our own channels performed well in the second quarter. Our own e-commerce sales were up 8% year-over-year with standout performances from lead brands, Allen Edmonds and Vionic. In addition, our brick-and-mortar business climbed more than 16% compared to the prior year. We continue to maximize top selling items and get the consumer what they want and faster by leaning into our Edit to Win initiative and utilizing our speed program that takes advantage of the fully recovered supply chain network. It’s worth noting here that our speed capabilities enable us to pivot quickly in this dynamic market environment and we are closing in on our goal of speed orders representing 20% of our inventory purchases. As a result, the Brand Portfolio delivered second quarter adjusted operating earnings of $28 million and achieved a 9% operating margin. This performance was driven by a 295-basis-point improvement in gross margins due to higher initial margins, lower freight costs and strong inventory management. We believe our inventory is aligned with our topline trends due to careful category planning, this benefits our wholesale partners as well, leading to a healthier business across all channels and this sets the stage for a stronger second half for this segment. Now to the performance of our lead brands. As we indicated last quarter, our lead brands have significant growth potential and we are strategically investing in these lead brands to power growth. We expect lead brands will represent a higher percent of our total Caleres revenue in 2023 with opportunities to increase that penetration further over the long-term via a number of different growth vectors. Starting with Allen Edmonds. The brand delivered its 10th consecutive quarter of growth. Improvement was broad-based across all channels with sales up mid-single digits compared to the second quarter last year. We saw strength in our direct channels with brick-and-mortar up 5% and e-commerce up 13%, driven by increased traffic and conversion. I am pleased to note that we have seen significant increases in the brand’s average unit retails compared to pre-pandemic levels. There’s a lot to be excited about at Allen Edmonds. Turning now to Vionic. Fresh off its new marketing campaign, emphasizing its Northern California roots, the brand saw a nice improvement in its e-commerce business during the second quarter. Early catalog performance helped deliver a 7%-plus year-over-year increase in e-commerce with newness, particularly loafers and white sneakers driving the uplift. One of their new styles, the Uptown Moc sold out during its spring launch and will be a top 10 style for fall. And Sam Edelman and Naturalizer continued to harness their significant brand strength to capture market share. For Sam Edelman, we saw strong consumer reaction to the brand’s new laceless sneaker, as well as an impressive performance at retail with their flats. Naturalizer capitalized on the Caleres speed-to-market capabilities I mentioned earlier to accelerate delivery of the Morrison 2.0 sneaker, a new evolution of its best-selling lace-up sports shoe. Launched in early spring, the sneaker had grown to the number two style in the Naturalizer brand. In addition, Naturalizer had standout gross margin and operating contribution during the quarter. Now we also had sales growth and profitability improvements from our Portfolio Brands, especially LifeStride, Franco Sarto and Dr. Scholl's. As a reminder, these brands are growing assets within the portfolio that serve key consumer segments not currently served by our lead brands and benefit from our One Caleres capabilities. In each of these brands, the consumer responded to style, comfort and value, and we even had a viral success in the Dr. Scholl's brand with a time-off sneaker, which was a TikTok favorite, and I may add, sold 75,000 pairs at retail during the second quarter. Overall, the Brand Portfolio is performing well with the first half of 2023 providing a solid foundation on which to build. As year-over-year comparisons ease, we expect sales trends will improve, and more importantly, the Brand Portfolio will make a larger and more meaningful contribution to the total company’s operating performance this year. Turning now to Famous Footwear. During the second quarter, Famous continued to navigate difficult spending trends among its target consumer and the challenging economic backdrop overall. Even in this environment, Famous outperformed its competitive set and increased market share in shoe chains. We saw strengthening sales trends as we move through the quarter and we delivered an expected sequential quarterly improvement in Q2. Our kids business, a key differentiator for Famous, was a bright spot again this quarter, increasing 5% over last year. Kids is an essential and growing category for Famous and our focus paid off as families continue to prioritize purchases of kids footwear. This strength is particularly important heading now into the back-to-school season. In total, Famous generated nearly $41 million in adjusted operating earnings on net sales down 5%, resulting in a return of sales of nearly 10%. Famous sustained its gross margin rate of 46% from the first quarter as we continue to be strategic around our promotional approach. About 50% of our business is now excluded from buy-one-get-one promotions, up from about 30% pre-pandemic. As we are with the Brand Portfolio, we are prioritizing the health of our business at Famous Footwear over trying to capture lower quality sales. Looking more closely at back-to-school, we executed a number of strategies to capitalize on this important demand opportunity. First, we focused on amplifying newness to drive excitement, interest and relevance. Second, we approached inventory in a measured and agile manner. While we built up inventory behind key brands, styles and patterns, we tightly managed our overall inventory position, which declined 2% compared to last year in order to have the capacity to react aggressively to best sellers in season. Finally, we continue to enhance, energize and modernize the store experience through our new prototype stores. While we don’t anticipate comping last year’s record back-to-school period, we do believe Famous is uniquely positioned to maintain its leadership status in shoe chains and deliver a solid performance. Looking ahead, the Famous team is extremely focused on fueling what’s working from a product, marketing and digital perspective to maximize our earnings potential while managing inventory and expense levels. Overall, we believe in the power and agility of the brand and expect strong earnings in 2023 and beyond. In short, we continue to have great confidence in the long-term outlook for Famous and we believe we can leverage our competitive advantages to accelerate our growth in this segment. These include our leadership position with kids and the millennial family, our leading assortment of national brands, our nationwide and largely off-mall retail footprint and our elevated consumer experience in store and online. So in summary, I am extremely proud of our strong operational discipline and the financial performance we delivered in the second quarter. I believe the most recent quarter underscored yet again the advantages of our diversified structure and the One Caleres model. We remain confident in our ability to achieve our annual sales and earnings guidance for the year. Our brands are strong and enduring, our strategies are clear and actionable and our teams are dedicated to exceeding the expectations of our consumers in this dynamic marketplace. Moreover, we continue to believe the strong financial foundation we have built will enable us to consistently deliver our annual earnings baseline of more than $4 per share, while generating strong levels of free cash flow and creating long-term value for our shareholders. And with that, I will now hand it over to Jack for a more detailed view of our financials.

Thanks, Jay, and good morning, everyone. We maintained strong financial discipline across the company in the second quarter. This resulted in earnings per share that exceeded the upper end of our guidance and healthy cash flow, which enabled us to reduce debt, invest in our critical growth initiatives and return cash to shareholders. In today’s call, I will provide additional details on our second quarter performance, discuss the progress we have made on our cost reduction initiatives, update you on our capital allocation plan and priorities, and share our outlook for the third quarter and full year. My comments will be on an adjusted basis. Please see today’s press release for a reconciliation of adjusted results. Starting with Q2. Consolidated sales were $696 million, a 5.8% decrease versus last year. At Famous, sales were down 5.1% and comparable sales were down 4.3%. Sales declines versus last year improved each month of the quarter. Brand Portfolio sales were $301 million, down 7.2% to last year, due to softness in seasonal categories, namely sandals and cautious buying behavior in the wholesale channel. While sales were down, we were able to protect margin with fewer markdowns and allowances. Consolidated gross margin decreased 45 basis points to 45.2%, which reflected an increase in Brand Portfolio gross margin offset by a decrease in Famous gross margin. Brand Portfolio gross margin was 41.3%, a 295-basis-point increase versus last year. This gross margin was a record for the second quarter for the segment and was due to higher initial margins, lower ocean freight costs and disciplined inventory management. Famous gross margin was 46.2%, a 273-basis-point decline versus last year. This decline reflects lower initial margins and a more normalized level of clearance pricing and activity given last year’s clean inventory position. That said, clearance pricing and activity continue to compare favorably to 2019. SG&A expense was $263 million or 37.8% of sales. SG&A expense was $5.6 million lower than last year from lower variable expenses and incentive compensation costs. Operating earnings were $51 million and operating margin was 7.4%. Operating margin was 9.2% at Brand Portfolio and 9.9% at Famous. Net interest expense was $5.1 million, doubled versus last year, given a higher borrowing rate. The weighted average interest rate in Q2 was 6.7% versus 2.8% last year. Diluted earnings per share were $0.98 in excess of the high end of our guidance and EBITDA was $65 million or 9.4% of sales. Turning now to the balance sheet and cash flow. We ended the second quarter with $244 million in borrowings and no long-term debt. Inventory at the end of the second quarter was $661 million, down 14% versus last year, reflecting reductions in both in-transit and on-hand inventory due to both accelerated receipts last year in Brand Portfolio as supply chain challenges started to resolve and disciplined inventory management across the business. By segment, inventory at Famous was down 2% versus last year; at Brand Portfolio, inventory was down 26% versus last year. In general, we feel good about the amount and composition of inventory in both segments. Regarding cash flow from operations, we generated $88 million during the quarter and deployed cash for strategic investments in the business, paid our quarterly dividend, reduced borrowings on our asset-based revolver and repurchased shares. Specifically, we spent $10.3 million on capital expenditures, $2.5 million on our quarterly dividend, $17.4 million to buy back 763,000 shares at an average price of $22.86 and $47.5 million to reduce our borrowings. With the Q2 paydown, borrowings are approximately $105 million below Q2 last year and down $64 million year-to-date. As Jay mentioned, we reached our target leverage ratio of 1 times on a debt to trailing 12-month EBITDA basis. While we continue to evaluate our capital allocation options and maintain a flexible approach, we believe at this time, the best use of free cash flow is to continue to reduce our borrowings. This will allow us to reduce interest expense in this higher rate environment and maximize liquidity. That said, we view buybacks as an effective means of returning capital to shareholders and with our valuation metrics still well below historical levels, we view Caleres stock as an attractive investment. We have 5.6 million shares remaining under our current Board authorization and we will continue to consider share repurchases based on market conditions. Now turning to our outlook. Given our performance year-to-date and our forecast for the second half, we continue to expect full year earnings per share of $4.10 to $4.30. In addition, we still anticipate consolidated sales to be down 3% to 5%, including the impact of the 53rd week, consolidated operating margin of 7.3% to 7.5%. We still expect to generate $20 million of in-year savings and $30 million to $35 million on an annualized basis from our cost reduction actions. For the in-year savings, $3 million was realized in Q1, $7 million was realized in Q2 and the remaining $10 million will be realized in the second half. We continue to expect a one-time cash charge of about $4 million associated with this initiative. We took $1.6 million of that charge in the second quarter and expect to take the remaining charge in Q3. We still expect net interest expense of $17 million to $19 million, an effective tax rate of about 25% and shares outstanding of approximately 34.3 million, which assumes no additional share repurchases this year. In addition, we now expect capital expenditures of $50 million to $60 million versus our previous revised guidance of $55 million to $65 million. This decline reflects an adjustment of timing of certain projects, and we remain committed to investing in our strategic initiatives. Finally, we are providing the following guidance for the third quarter. We expect net sales to be down low-single digits and earnings per share of $1.30 to $1.35.

I would like to turn the call over to the Operator for questions.

Hi. Good morning. Good morning. Afternoon. Everyone what a busy day so far. Can you talk a little bit about the puts and takes on the gross margin in the back half of the year across both businesses? How you are seeing it and planning as we go into the back half and what you are thinking about in terms of promo versus full price and is there any difference by category?

Thank you for your question, Dana. I will address it by business segment. For Famous, the positive factors impacting gross margin in the second half include our effective inventory management. We anticipate fewer days on promotion; however, we also face challenges from lower initial margins and a return to more typical clearance activity and pricing. For the Brand Portfolio, there are more positive factors than challenges. The positive factors here also stem from our effective inventory management. Additionally, we have higher initial margins, continued savings on ocean freight, and a greater share of sales from direct-to-consumer, which is a more profitable channel for us.

Got it. As you reflect on the back-to-school season, what insights can you share that might inform holiday merchandising? What did you observe in your portfolio, and what are your thoughts on the wholesale division of the Branded Portfolio, especially with some orders tightening? What do you anticipate for reopening and what are you noticing from the wholesale accounts?

Okay. So, hi, Dana. This is Jay. I will start with your Brand Portfolio question. Our ongoing disciplined approach to inventory management really helps us to chase these top selling items in season through our speed programs and we have been able to mitigate and navigate kind of some of the shifts in behavior. We saw a lot of positivity on the sneaker trend as we went into the second quarter and we are able to actually get enough inventory to make that a meaningful business as we walk into Q3. Our category business includes on flats and loafers as we are seeing really nice progress on that and really good sell-throughs on that, particularly with classic hardware and classics being so strong. And finally, there is some newness in the dress business with swing backs coming in and really particularly on low heels. So we are really focused on getting these right categories and then all the way down to the items to really help move this business back and we still do get reorders from people on these really strong items selling. The conversation is very similar over at Famous Footwear. When we think about it, some of our biggest brands that are working well that we are trying to get back into them. We saw really good strength with our Nike business continues to perform and continue to kids. Our Converse business is very strong, HeyDude is working well for the brand during this period and then some really nice progress with New Balance, which we are excited about and looking to really expand that through as we get into the third quarter. So there’s a lot of that going through that we are working on. Clearly, though, when you look at Famous, our kids have been a differentiator and we are seeing that, as we have continued to see outpaced the whole organization by almost 10 points, which is really excited on that delta there and that really is our competitive place. We outpace in the shoe chain channel in that category. We have done a lot of work on kids marketing and then also try-on in stores and really seeing some good reaction there as we focus on that business. So that’s really the biggest learning so far that we have seen.

Got it. And then, Jack, nice progress on the revolving credit, the debt paydown. What are you seeing for that going forward? And thank you.

Yeah. Yes. So, as I mentioned, Dana, we have hit that 1 times debt-to-EBITDA target that we have outlined. I think just given certainly the continued macro uncertainty and consumer demand uncertainty and also just the higher interest rates that we are paying. As I mentioned, the average interest rate we paid in Q2 this year versus last year, I would say our most recent borrowings now are closer to 7% and so I think those two reasons present a really compelling argument for continuing to pay that down. Obviously, we will get some nice EPS benefit from continuing to reduce that interest expense. As based on our guidance, we have somewhere between $0.34 and $0.38 of interest expense headwind to EPS and so we will continue to focus on that in the near-term. But again, as you know, we bought back shares in the second quarter and so we are always looking to be flexible and opportunistic there and I think the balance sheet that we now have gives us that ability.

Thank you.

Good morning. I have a follow-on question about the Brand Portfolio business. Can you comment on anything of note within the different channels that you sell to on the wholesale side and how you expect that to trend as we head into Q3? Maybe if you can comment on what you are seeing so far this quarter?

Hi, Laura. It’s Jay. Regarding the Brand Portfolio, we are observing that our leading brands are continuing to gain market share. Consumers are favoring new products, and that's where we are focusing our efforts. We engage with our key customers in a dynamic manner, selling both through traditional retail and direct-to-consumer online, along with a replenishment approach. Our strategy remains unchanged, and we are still seeing a strong demand for new offerings. Compared to last year, there has been a noticeable shift; previously, we were selling many ankle strap dress sandals, but now the trend is toward more versatile footwear such as flats and other styles, and our customers are responding positively to this change. We are operating in a very adaptive mode at the moment. Additionally, our direct-to-consumer business within the Brand Portfolio showed significant growth this quarter, and we are continually working towards that goal. Overall, we are maintaining a similar approach with our partners.

I was really asking about retail channels, specifically how your business is performing with off-pricers who are continuing to grow, and if there are noticeable differences in trends between department stores and specialty stores. That’s the direction I wanted to explore.

Okay. So just to refresh on that, our department store business for Q2 was down a little more than, I would say, other ones in the brick-and-mortar piece. Our shoe chain business was up in the quarter, which was nice and then our off-price business is really more of a closeout piece for us right now and so that has not been as big a piece for us. So that’s what I would say for the quarter right now; that’s where we saw in Q2 and we will continue to watch that as we go forward.

Yes. Thanks for taking my questions. My first question is on Famous and it does have a few parts. Jay, you mentioned that kids was up, I think, you said 5 points and that was 10 points better than the business as a whole. Can you tell us kind of how the rest of the Famous broke out, maybe casual versus dress versus athletic? And then also on Famous, maybe if you could just take that first.

Okay. So for sure, our casual business was better than our performance athletic business, the adult side. As we said, our kids business was up significantly and then the other businesses, which were smaller that we break out was down, but that was a small piece of the total. And athletics though our LifeStride business was particularly strong and then I think our lifestyle business, I should say, was particularly strong versus the performance piece of it right now. And then finally, Mitch, we did have, as I called out in the beginning, our sandal weakness was really similar across both channels and it was down 11% in Famous and in the Brand Portfolio was down a similar amount in our total shipments.

Okay. And then on the comp, your minus 4.3%, you said that sales declines improved each month. Can you say where you ended the quarter, like, what was comp in July and have you seen continued improvement into August? And then, I guess, lastly, in terms of that improvement both Q2 versus Q1 or even over the course of Q2, what would you attribute that to? Is some of it an improving macro or is it just more a function of more newness in the product?

So, Mitch, our comps did improve as we move through the quarter. May was our worst month; we improved in June and then July significantly improved, too. But when we look ahead so far, based on what we know, our guidance Famous really reflects really more of this historic trend of where we have been and we do think we will deliver against that trend that we put out there and we have kind of sold everything against that for the certainly as we go into third quarter.

Yeah. I would just…

Okay.

Just to add to Jay’s comments. As a reminder, our back-to-school performance last year was a record performance and so some of that comp were up against some decent comps in the Famous business for back-to-school.

Okay. And maybe with that being said, Jack, on the 3Q guide, you said sales down low single digits. Can you provide any color on how you think about that between Famous and BP and is there any change to your kind of overall outlook for the year between those two businesses? It didn’t sound like BP was a little slower than you expected in 2Q and I don’t know if that changed how you are thinking about that business as a whole for the year?

Our guidance for Famous aligns with what we observed in Q2, which is a decline of around 5%. The guidance includes a range, meaning if Famous performs slightly better, we anticipate being at the higher end of that range, and if it performs slightly worse, we would be at the lower end. Overall, Famous has shown consistent performance, reflecting a similar 5% decline in Q1 when excluding March. For the Brand Portfolio, we are facing tougher comparisons from the first half of the year. In the first half of 2022, our Brand Portfolio business experienced a 41% increase, but only a 7% increase in the latter half of 2022. Our confidence stems from the fact that we will be navigating easier comparisons in the back half of this year for the Brand Portfolio.

Great. All right. Thank you.

Great. Thanks so much for taking my question. So just on the inventory, like, how should we be thinking about inventory levels for the balance of the year and then how are you thinking about managing bringing in the newness that’s driving demand versus keeping controlled inventory levels given the uncertain macro?

So, Abbie, hi. It’s Jay. We are establishing a new normal for managing inventory and are focusing on improving our inventory turnover. We are continuously introducing new products because we believe there's strong consumer demand, and we're increasing our product supply to our speed program, which aims for about 20% of our receipts. Currently, we don’t see this shift as a setback. Additionally, in our Brand Portfolio, we experienced an earlier influx of products last year than anticipated, especially in the second quarter. As a result, we expect a more balanced flow moving forward through our structured management approach. We will continue to deliver new products and react quickly to inventory levels, enabling us to be more responsive. Jack, you can share some of the numbers as well.

Yeah. Abbie, thanks for the question. Just to add to Jay’s comments, for the back half, we expect to have lower inventory this year versus last year in both the third quarter and the fourth quarter. Now they won’t be down as much as they were in the first half when they were down low-teens, but we expect continued improvement year-over-year in that metric. We are always focused on both the quantity and the quality of inventory and certainly appreciate the importance of maintaining that healthy inventory to sales relationship.

Got it. And then just one more on the Brand Portfolio. I guess, like, in this environment, I would assume that your wholesale partners are like that you have a good capability for drop ship. Can you just talk about what you are doing in drop ship and if that increase as a percentage of the business as wholesale orders have tightened? Thanks.

We are fully funding our drop ship, which remains a crucial part of our business. Our wholesale partners continue to seek new products promptly so they can respond effectively. While they are being more cautious, they are still focusing on the products that perform well. Our model remains dynamic, with both drop ship and replenishment playing significant roles. I anticipate our operations will be consistent with how we conducted ourselves in the second and first quarters, and I do not expect any significant changes as we move into the third quarter.

Got it. Thank you.

Thank you.

Okay. Well, I’d like to thank everyone for joining us this morning. Before we close today, I’d like to thank the talented Caleres team for their hard work and dedication. We remain confident in our ability to create exceptional products to exceed our consumers’ expectations and drive value for our shareholders. We also look forward to providing you with some additional detail around our long-term growth strategies at our upcoming Investor Day in October. So, with that, I’d just like to say have a great holiday and we will talk soon. Thank you.

Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.