a.k.a. Brands Holding Corp. (NYSE:AKA) Q2 2023 Earnings Call Transcript

a.k.a. Brands Holding Corp. (NYSE:AKA) Q2 2023 Earnings Call Transcript August 11, 2023

Operator: Greetings and welcome to a.k.a. Brands Holding Corp. Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Emily Schwartz, Head of Investor Relations and Corporate Communications. Thank you, Ms. Schwartz. You may begin.

Emily Schwartz: Good afternoon. Thank you for joining a.k.a. Brands’ second quarter 2023 conference call to discuss the results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call today is Ciaran Long, Interim Chief Executive Officer and Chief Financial Officer. Before we get started, I’d like to remind you of the company’s Safe Harbor language. Management may make forward-looking statements, which refer to expectations, projections, and other characterizations of future events including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC.

Please note we assume no obligation to update any forward-looking statements. This call will contain non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release furnished to the SEC and available on our website. With that, I’ll turn the call over to Ciaran.

Ciaran Long: Thanks Emily. Good afternoon everyone and thanks for joining our call to discuss the second quarter. We continued to execute against our strategic initiatives and have made significant improvements in our operating efficiencies, which enabled us to deliver on our EBITDA and cash flow expectations for the quarter. We also continued to strengthen our balance sheet by way of strategically reducing our inventory and paying down our debt. And importantly, we are increasing our addressable market, particularly in the US by introducing our brand to new customers through our direct-to-consumer and omnichannel initiatives. Net sales for the second quarter were $136 million. The US delivered $80 million of net sales, which was in line with our expectations and represented a 12% increase on a two-year basis.

The US continues to be our largest and most robust region and we remain keenly focused on expanding our brand’s presence and increasing awareness in this market and we are very pleased with the ongoing progress. The in-line performance in the US was dampened by continued macro pressures and consumer challenges that we’re facing in the Australia region. In addition to the macro environment, we have identified opportunities that we are aggressively addressing, which I’ll provide further color on in a few minutes. Despite the softer than anticipated net sales in Australia, there are a lot of green shoots and highlights to take away from the quarter. I’m very pleased that we delivered $5.6 million of adjusted EBITDA and $10 million in operating cash flow, in line with expectations.

Importantly, despite our net sales declined from the second quarter last year, we were able to deliver the same level of EBITDA, which is a testament to the discipline and incredible work the teams have done to build structural efficiencies across our operating model, while controlling expenses. As I mentioned, we continue to strategically reduce our inventory, which is down 26% year-over-year and down 16% from the year-end of 2022. We also further reduced our debt with a $12.5 million payment in the second quarter or a 16% reduction from the end of 2022. And we’re incredibly pleased with our omnichannel initiatives as we’re attracting new customers and creating buzz around our brands particularly in the US. As we move through the back half of the year, we have three key priorities; first, we will continue to chase demand and build brand awareness through increasing fashion newness, attracting new customers through our next-generation marketing tactics, and expanding our omnichannel initiatives.

Second, we will continue to improve our operations by driving greater efficiencies and bringing inventory down further. And third, we will continue to strengthen our balance sheet by paying down additional debt through the remainder of the year. I’m very proud of the team’s focus and execution across our initiatives and I want to thank them for their continued commitment and drive. Now, I’ll share a few highlights from our brands and then I will walk you through the financials. Starting with our women’s brands. Princess Polly remains our largest brand and continues to appeal to customers with on-trend fashion and next-generation marketing activations. As mentioned last quarter, we are refining our marketing spend and increasing fashion newness across our brands.

These efforts are aimed at both attracting new customers and fostering loyalty among existing customers. Given the fast and efficient test and reorder merchandising approach, Princess Polly released 100 new styles per week in the second quarter and saw a very strong sell-through rate particularly in dresses. They launched their Princess Polly branded merchandise in the beginning of the year, which supports strong brand affinity and loyalty. Based on the success and positive customer reception, they will be expanding this collection and will release 20 new logo-branded styles in the back half of the year. On the marketing front, as we approach the fall Princess Polly targets its merchandise drops and marketing events to coincide with key moments for their customers; back-to- school, sorority rush and homecoming.

Based on the success of the spring break and summer Jeep tours, they’re launching a Jeep tour in college campuses across California to meet customers face-to-face and build relationships. As next-generation marketing experts, Princess Polly remains laser-focused on reaching their customers across multiple platforms and they continue to grow their TikTok presence and fine-tune the efficiency. Based on successful community engagement to customer content on TikTok and refreshed organic and paid strategies, they increased their reach and TikTok views by over 300% sequentially compared to the first quarter. Equally as exciting, as Princess Polly’s direct-to-consumer initiatives is the success of their omnichannel initiatives. I’m excited to announce that Princess Polly and PacSun have expanded their wholesale relationship and beginning tomorrow Princess Polly will go live in 100 PacSun stores across the US up from 15 stores in the initial test.

The early success with the PacSun partnership gives us great confidence in Princess Polly’s ability to expand its market reach and significantly grow the business over time in both the US and internationally. We’re also looking forward to the opening of Princess Polly’s first store in the Century City Mall in Los Angeles next month. As a reminder, we believe this location is the perfect strategic fit for Princess Polly’s first store given the high volume of Gen Z and Millennium shoppers in the open air mall daily. We continue to evaluate more retail locations for Princess Polly and we’ll use the learnings from the Century City store to develop our plans for future stores. Petal & Pup is also making impressive progress on both their direct-to-consumer initiatives and their omnichannel tests.

They launched 26% more new styles in the second quarter versus the first quarter and continued to see strong sell-through in their newness. Similar to Princess Poly and additional to their social media and brand marketing, Petal & Pup is also using events and sponsorships to reach new and existing customers, sales for in-person events in the second quarter, engaging both influencers and customers and building broader awareness including a large-scale activation at the Country Music Awards Festival in Nashville in June. We’re also excited that as Petal & Pup continues to gain traction in the US they are launching their first influencer capsule collection designed and curated by Nena Evans, a popular US-based content creator in August. Petal & Pup’s omnichannel initiatives are also exceeding our expectations.

As announced last quarter, the brand is currently live and performing well on Target marketplace, demonstrating the demand for Petal & Pup is strong. We continue to pursue opportunities to attract new customers to the brand and boost awareness through marketplaces and select wholesale engagements. We’re very encouraged by Petal & Pup’s initial success with marketplaces and we’re leveraging the learnings to inform marketplace tests across the other brands in our portfolio. Shifting to our streetwear brands. We remain pleased with the momentum that Culture Kings is gaining in the US where it continues to disrupt the US streetwear industry. The Las Vegas store is performing ahead of our expectations and we are equally pleased with the positive impact it has had on our online sales.

Culture Kings embodies the collision of music, fashion and culture and they’re bringing this to life in the US through unique marketing activations, partnerships and their signature retail ethos in stores. The second quarter is a great testament to the power of the Culture Kings brand beyond just the in-store events. As momentum builds, Culture Kings began marching across the US with their first partnership beyond the West Coast with the Lyrical Lemonade Summer Smash Music Festival in Chicago in June. As sponsors of an official stage, they curated an exclusive merchandising collection and the iconic Culture Kings basketball court activation further enhancing their impact and presence at the event. Additionally, based on the success of the Rolling Loud sponsorship in L.A. earlier in the year, they expanded the partnership and were named the official streetwear brand for the Rolling Loud Music Festival in Miami in July.

Culture Kings sponsored a branded stage and full-sized basketball court which was open to the more than 250,000 festival goers over the event. The brand also designed an exclusive Rolling Loud capsule collection which was available to shop at a pop-up store on festival grounds and on the Culture Kings website. In the second quarter, Culture Kings also deepened their sports partnerships and furthered their collaboration with UFC. Culture Kings showcased and was the top selling boot at UFC X, a fully immersive UFC fan experience in Las Vegas during International fight week in June. Their merchandise sold out in a few hours and the team quickly leveraged our in-house design and print facility to print overnight more inventory showcasing both the incredible demand for Culture Kings as well as the brand’s flexibility and speed to chase and replenish in under 24 hours.

The Las Vegas flagship is an incredible marketing machine where the brand can host exciting one-of-a-kind events and activations. In the second quarter, popular mixed marshall arts fighters Charles Oliveira and Chito Vera held the most attended in-store event to date featuring a 22-foot MMA flight page with over 1000 fans showing up for the in-store event. Additionally, as Culture Kings deepened its relationship in sports in the US, they collaborated with New Era and WNBA stars Arike Ogunbowale, DiJonai Carrington who hosted a live shopping and Q&A event in the store during the All-Star weekend. On the print and licensing side, Culture Kings extended its collaboration with Greenville, with an exclusive collaboration and an in-store event with J.I.D. and Hip hop duo EarthGang.

And we’re excited for the upcoming licensed merchandise colabs with fan favorite, and 90s revival Pokemon and Looney Tunes. We remain pleased with the performance of Culture Kings’ in-house brands, which come at higher gross margins including MNML, which remains the top 10 brand at Culture Kings’ online and in-store. We also continued to be encouraged that Culture Kings is bringing new customers to MNML and integrating MNML products into Culture Kings’ marketing and activations. In the second quarter, MNML launched a gifting strategy for the WNBA and Las Vegas Player, Aisha Sheppard, received her WNBA championship ring in full MNML outfit and over 20 WNBA players have been spotted wearing MNML across social media since. Before I provide more detail on the P&L, I want to give you more color on our three regions.

As I mentioned, the US continues to be our strongest region and will be the most significant driver of growth. In the first half of the year, the US accounted for 59% of total revenues, up from 52% from the comparable period last year and the region continues to be an increasingly more important part of our portfolio growth and profitability. Second quarter net sales in the US were $80 million, which was down 3% compared to last year but up 12% on a two-year stack. Beginning this quarter and going forward, we’re slightly adjusting our financial reporting structure to include New Zealand in the Australia region, given the proximity and interconnectedness of the two countries. You can now find historical financial information for the updated region in our filing.

In the Australia region, net sales for the second quarter were $48 million, down 28% compared to last year and down 24% on a constant currency basis. In the first half of the year, the Australia region accounted for 35% of total company revenues, down from 42% in the first half of 2022. Similar to the US, the Australian consumer has been challenged post-pandemic. However, the environment there has remained more challenging than we anticipated. They’ve had 12 interest rate increases over the last 12 months, which is particularly impactful, as the majority of the country have variable rate mortgages leading to increased consumer pressure as we’ve gone through 2023. In addition to the macro challenges, we have also identified areas of opportunities across our brands in the region.

Our teams are keenly aligned with our philosophy to manage inventories below our forward demand expectations. We are building further operational efficiencies and we’re honing in on demand creation initiatives. We have completed holistic SKU streamline initiatives to focus on faster selling SKUs, which will improve overall operating effectiveness and allow for stronger and fresher merchandise season after season. Importantly, Culture Kings is also adding productive third-party footwear brands such as SALOMON and Clarks. While we feel good about the quality and quantity of our women’s brands inventory as we head into their strong spring and summer seasons. We’re also evaluating partnerships with select off-price retailers in Australia to move through aged inventory faster, while remaining focused on our newness and overall profitability.

While we anticipate that the consumer will remain challenged for the remainder of 2023 and into 2024 we’re confident that these actions will benefit the Australia region over the longer-term, while enabling us to manage the business appropriately in the current demand environment. The rest of the world delivered $8 million in net sales, which was down 12% from the second quarter in the prior year. As our focus is on the US in the short-term, our strategic decisions to shift marketing dollars from the UK and Europe in the third quarter of last year continues to impact trends in these regions. Now I’ll give you more detail on the P&L before taking your questions. For the second quarter, net sales were $136 million, a decline of 14% compared to the second quarter last year.

On a constant currency basis, net sales were down 11% compared to last year. Total orders for the second quarter were $1.7 million or flat on a two-year stack and down 11% to last year. Order volume was impacted by overall lower demand in the Australia region and lower conversion across regions. As we ramped up marketing efforts and the flow of newness normalized, we saw improvements in traffic. However, conversion rates continued to lag prior year trends, as customers remain somewhat more selective in their purchasing behavior. We serve 3.6 million active customers on a trailing 12-month basis, which is flat sequentially to the first quarter of 2023. Average order value of $82 decreased 4% compared to the second quarter last year on a reported basis and was flat in constant currency.

Our return rate for the second quarter was 20.5%, which remains one of the lowest among our peers. Moving to profitability. Gross margin in the second quarter was 56.9% compared to 55.2% in the same period last year or up 170 basis points above our expectations of roughly flat to last year. This gross margin upside was driven by improved full price sell-through due to the increased newness particularly in the US and lower freight expenses. The teams have been hard at work improving our operational efficiencies over the last 12 months. And I’m very pleased with the incredible progress we’ve made. Selling expenses declined 21% to $36 million, compared to $45 million in the second quarter of 2022. Selling expenses were 26.4% of net sales and leveraged 220 basis points compared to the second quarter last year.

I’m really proud of the incredible work the team has done, on shipping carrier optimization finding labor efficiencies and improving our cost throughout the supply chain. Marketing expenses in the quarter were $18.4 million, compared to $19.1 million in the second quarter of 2022. On a rate basis, marketing expenses were 13.5% of net sales compared to 12% of net sales in the second quarter of 2022, driven by lower effectiveness in the Australia region. Throughout the second quarter, we continued to ramp up our marketing investments in line with the increased newness in the assortment to drive top line improvements across brands. General and administrative expenses, declined by 6% to $24.2 million in the, compared to $25.7 million in the second quarter of 2022.

On a rate basis, G&A expenses were 17.8% of net sales, compared to 16.2% of net sales in the second quarter of 2022. The change on rate basis was primarily driven by lower sales volume, compared to the prior year. It is important to note that our expense base is largely fixed, and improvement in sales will require nominal incremental G&A expenses supporting opportunities to leverage this line in the future. Adjusted EBITDA was $5.6 million in line with our guidance, despite slightly lower-than-expected net sales. This compares to $5.9 million in the second quarter last year. Adjusted EBITDA margin for the second quarter of 2023 expanded to 4.1%, compared to 3.7% in the same period last year. Net loss was $5 million or $0.04 per share in the second quarter of 2023, compared to net loss of $4.2 million or $0.03 per share in the same period last year.

Turning to the balance sheet, I want to reiterate that strengthening our balance sheet is a top priority for us and I’m very proud of the actions we took over the last few quarters to lower debt levels and improve inventory levels and working capital. We ended the quarter with $26 million in cash and cash equivalents and $120 million in debt. At the end of the second quarter we had total liquidity of approximately $57 million. In the quarter we continued to make additional debt repayments bringing our total debt paydown to $24 million year-to-date. Additionally, in June our Board of Directors authorized a share repurchase program to repurchase up to $2 million of shares of the company’s common stock. In the second quarter, we repurchased 673,000 shares for a total cost of approximately $300,000.

As mentioned, I’m really pleased with our inventory levels, which at the end of the quarter totaled $106 million, compared to $144 million at the end of the second quarter of 2022. Total inventory dollars were down 26% and units were down 22%, compared to last year. We feel confident in the overall composition, newness and quality of our inventory and expect to see continued decline in inventory dollars and units in fiscal 2023 on a constant currency basis. Going forward, we expect to run the business with inventory growth below sales growth and I’m encouraged that we returned to this dynamic in the quarter. Along with maintaining a healthy balance sheet, generating strong cash flows is another key priority for us. In the second quarter we generated $10.3 million of operating cash which, compared to cash used of $8.7 million in the second quarter of 2022.

This $19 million year-over-year increase in operating cash flow was primarily driven by positive EBITDA and inventory improvements. In the quarter we generated free cash flow of $8.5 million. As we look at the remainder of 2023 and beyond, we’re excited by our brand’s strategic initiatives and the channel expansion opportunities to drive heightened brand awareness. However, based on the trends we’re seeing with the consumer primarily the continued pressure on the consumer in the Australia region, we’re lowering our back half expectations to reflect the current environment. We now expect to deliver between $555 million and $565 million in net sales and between $21 million and $25 million of EBITDA for the year. For the third quarter we expect to deliver net sales of between $138 million and $143 million and adjusted EBITDA in the range of $6 million to $8 million.

To give more color in the middle of the P&L, we expect gross margin selling expenses and marketing rates in the third quarter to be similar to the rates in the second quarter of this year. Before I take your questions, I want to let you know that Jill continues to work through her medical issues, but she’s doing well and appreciate everyone’s regards. Our priorities for the remainder of the year are clear. We are creating demand opportunities and reaching new customers through our direct-to-consumer growth initiatives and omni-channel expansion plans. We’re diligently focused on improving and finding even more operating efficiencies by reducing our inventory and managing our expenses. And we’re taking the necessary steps to strengthen our balance sheet and pay down even more debt.

We remain confident in the future of our brands and the long-term potential and are committed to driving shareholder value through delivering both growth and profit. Now we’ll open it up for questions.

Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] First question comes from the line of Oliver Chen with TD Cowen. Please go ahead.

Oliver Chen : Hi, Ciaran. Thanks a lot. Regarding inventory, how would you contrast the inventory relative to sales as you think about Australia versus the U.S,.? And as we think about the Australia as well what factors could be within your control? It sounds like it’s a dynamic cautious environment. And then second question on the gross margins. You had impressive full price selling, although we’re in a pretty mixed consumer environment. Could you elaborate on how you achieve that? And what does the guidance assume going forward in terms of full price selling and promotion? Thanks a lot, Ciaran.

Ciaran Long : Thanks, Oliver. Yes, I think, it’s really good to see the progress, we’ve made on inventory. It was certainly something we’ve been very focused on. We’re down $37 million since Q2 last year. And I think look that’s going to be a continued focus for us, as we go through the back half of the year. We do want to see inventory dollars come down sequentially. I think as we think about the composition of the inventory, I think, overall, we feel good about it. We feel good about the quantity of the inventory that we have. I think in Australia, I think, the women’s brands are fully on test and repeat and with that able to adjust inventory really quickly. Culture Kings isn’t there. And we still have work to do to get them on test and repeat.

I think because of that we’re seeing that their inventory and the newness isn’t there like we have with the other brands. That is impacting their comps. And I think we’re seeing that — we’re seeing that even more so for Culture Kings in Australia, where the comps there aren’t as good as the brands that are fully on test and repeat. I think look we are aggressively taking actions in Australia, as we think about the — as we look to the peer set there. We also see them negative comping, but we expect to be doing better. And so there’s a lot that we’re doing on newness in product, but also just operational efficiencies that we want to make. We are removing on productive SKUs. We expect that to help with gross margins, marketing productivity and just actions really across all the brands and all of the areas.

Then as it relates to gross margins, yes, it’s great to see gross margins up nearly 170 basis points year-over-year. And I think really that is a testament to the test and repeat model that we have now fully implemented at three of the brands and bringing newness — well kind of that newness has allowed us to be better at full price selling. We do see the customers really reacting positively to that newness. As it relates to the back half of the year, we expect that we will be similar gross margins in Q3 to where we were in Q2. In Q4, we would expect them to be seasonally lower as we’ve kind of seen for the last number of years. We expect it to be more promotional in Q4, and for us that’s all contemplated in our guidance.

Oliver Chen : Thank you. Best regards.

Operator: Thank you. Next question comes from the line of Edward Yruma with Piper Sandler. Please go ahead.

Edward Yruma: Hey, good afternoon. Thanks for taking the question. I guess, just first to follow-up on Oliver’s question. Given the trends in Australia, are you able to kind of shift inventory around or at least some of the orders and buys and put them in the U.S. versus Australia? And then a broader question. You guys mentioned a litany of alternative distribution model test right the marketplace at Target stores and some select wholesale. I guess kind of what’s the biggest needle mover in the medium-term? And what could the potential impact to the P&L be? Thank you.

Ciaran Long: Thanks Ed. Yes. As it relates to inventory, I think — look, we do feel really good about the overall composition. We’ve made a lot of progress bringing it down across all the brands and all the regions. I think for us it’s just not at the same pace at Culture Kings than we’ve been able to do on the other three brands. With it being men’s and the streetwear sector that Culture Kings is in there’s certainly a longer life there to the inventory and less of the fashion risk that we see on the other three brands. So overall, I think we feel good about it. As there is opportunities, we are moving the pacing of some of the inventory and putting it in the US rather than Australia. So I think we’ll be good there overall.

And then as it relates to the omnichannel opportunities, I think as we’ve talked about focused in three areas: wholesale, some marketplaces and then looking forward to opening our first store with Princess Polly in Q3. I think shorter term, obviously, I think the packs on progress is just really nice to see for Princess Polly going from a test in 15 doors to now being in 100 stores tomorrow, it’s just really nice to see that over the last four or five months. I think as it relates to the kind of short, medium-term, those wholesale opportunities are probably more impactful. But look, we are — we’ve had really good progress across all of the tests, right? We’ve learned a lot and we learned a lot that we can apply in each of the brands in those omnichannel opportunities.

So we’re just going to continue to lean into each of them across the brands. And I think overall it will certainly be beneficial both to the comp and to our EBITDA dollars.

Edward Yruma: Thank you.

Operator: Thank you. Next question comes from the line of Alice Xiao with Bank of America. Please go ahead.

Alice Xiao: Hi. Thanks for taking my question. Can you elaborate on the monthly cadence of performance in the quarter, and also how trends have been quarter-to-date, both generally and by region or by category? Anything you can share quarter-to-date. Thank you.

Ciaran Long: Sure, Alice. Yes, I think as we went through the quarter, we saw — overall in the business we saw slight improvements as we went through Q2. I would say they were — we saw more improvements in Q2 in the US and that really coming from obviously kind of lapping a tough June for us all last year but also just from some of the omnichannel initiatives we saw helpful as well. We saw pretty consistent pressure in the Australia region. And then as it relates to this quarter, what we’re seeing in July is continued improvements in comps in the US and we expect to be — and our guidance contemplates positive growth in the US in Q3 and Q4. We’re seeing the same declines in Q3 quarter-to-date as we saw in Q2 for the Australia region.

Alice Xiao: Thank you.

Operator: Thank you. Next question comes from the line of Ike Boruchow with Wells Fargo. Please go ahead.

Ike Boruchow: Hey, thanks. Hey Ciaran. A couple of quick questions I guess just to the point of the last question. In Australia, so are you baking in similar declines in the back half as you’re seeing so like kind of roughly down 30 in the back half? And then you had made a comment in your prepared remarks around that macro pressure lasting even into the first half of next year. I guess, first question is what’s embedded in the back half? And then, based on the pressure you’re seeing in Australia, at what point do you believe is reasonable for the overall business to return to total top line growth?

Ciaran Long: Sure. Thanks, Ike. As we think about the back half, I think you’ll see kind of from the guidance, we’re expecting the same of nearly think about it first kind of same volume of dollars by region in Q3 that we saw in Q2. A small uplift on the top end of the guidance and that coming from the US region, rather than the Australia region. I think, we expect comps in Q4 — obviously, in Q4 to be better in both regions. Now, look that’s very much as well related to the actions we took in Q4 last year, where we pulled pretty hard back on newness of inventory across the brand, but also very much on the marketing dollar spend across the brands last year, right? So, in Q4 this year, we expect the marketing dollars up a little bit on a rate basis year-over-year, but from a volume perspective, it will be up in the high 20s year-over-year.

So I think, with that level of marketing dollar increase, we would expect comps to be better in Q4 this year. And then I think, as we think about next year, I think certainly as we kind of get into — I would say kind of for me like it’s going to pass Q1 into Q2, I would expect us to be back positive comping in the overall business. We certainly see the US back to positive comping in Q3. And look, it continues to be a larger and larger part of our business. It’s certainly the biggest opportunity for us from a growth perspective. We’re very focused on this and seeing a lot of benefits from the omnichannel initiatives. And I think leaning into all of those can get us back to positive growth.

Ike Boruchow: Got it. And I’m sorry, if I missed it, but I think I heard you say similar gross margin rate in the third quarter as that you saw in the second quarter. I don’t — sorry I might have missed that. I didn’t think I heard you comment on the full year gross margin. You had said up 100 bps three months ago? I mean, I imagine it’s higher right now. I missed that, or can you give some color on the full year gross margin?

Ciaran Long: Yes, sure. So, yes, I talked about kind of Q3 being similar to Q2. I think from an overall perspective, yes, we would expect to be kind of — I think be up around 100 basis points as we think about the overall year. Obviously, we’re kind of — we’ve been running higher than that so far year-to-date. I think, I am expecting us to just have a little bit of room as we think about promotional activity in Q4 and particularly in the Australia region.

Ike Boruchow: Okay. So just reiterating the up 100 bps that you had already given?

Ciaran Long: Yes.

Ike Boruchow: All right. Thank you.

Operator: Thank you. [Operator Instructions] There are no further questions at this time. I would like to turn the floor back over to Ciaran Long for closing comments.

Ciaran Long: Thanks, everybody. I appreciate your call and your questions and looking forward to talking to you soon.

Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.