Rick Brooks - CEO Chris Work - CFO.

Dorothy Lakner - Topeka Capital Markets Sharon Zackfia - William Blair Tom Filandro - Susquehanna Paul Alexander - BB&T Capital Markets Richard Jaffe - Stifel Jonathan Komp - Robert Baird Pam Quintiliano - SunTrust Betty Chen - Mizuho Securities Jeff Van Sinderen - B. Riley Adrienne Yih - Wolfe Research.

Good afternoon, ladies and gentlemen, and welcome to Zumiez Incorporation’s Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. Before we begin, I would like to remind everyone of the company’s Safe Harbor language.

Today’s conference call includes comments concerning Zumiez Incorporation’s business outlook and contains forward-looking statements. These particular forward-looking statements and all other statements that may be made on this call that are not based on historical facts are subject to risks and uncertainties. Actual results may differ materially.

Additionally, information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available on Zumiez’s filings with the SEC. At this time, I will turn the call over to Rick Brooks, Chief Executive Officer. Please go ahead, sir..

Thank you, and welcome, everyone. Joining me today on the call is Chris Work, our Chief Financial Officer. I'll begin today with a few brief remarks regarding our third quarter and then touch on the start of the fourth quarter, including our November comps and Black Friday weekend performance.

I'll wrap up my remarks with discussion of our broader strategy, then I'll hand the call to Chris, who will take you through the numbers. After that, we'll open the call for your questions. Our third quarter sales performance was disappointing.

Net sales for the quarter came in within our guidance range of $204.3 million, down 4.2% from the same period a year ago, and included a negative 7.3% comp. In response to the top line headwinds we are experiencing, we pulled back on some of our discretionary spending.

These profit protection measures pushed our diluted earnings per share to $0.36 in the third quarter, ahead of the top end of our guidance, at $0.31 for the quarter. We, like many retailers in our space, continue to be negatively affected by several factors.

These include weak consumer traffic in absence of a clear fashion trend driver that we can capitalize on, the impact of foreign exchange, particularly in our border and more tourism oriented locations, a highly promotional retail environment, particularly over Thanksgiving weekend, and other broader shifts in consumer spending.

These pressures on consumer traffic impacted our November results, as well, and we posted a negative comp of 13.8% during the four weeks ended November 28, 2015. And while trends slightly improved over the Black Friday weekend, Thanksgiving through Sunday, we continue to see negative results.

While these results are certainly not what we would have hoped for, we also recognize that during periods when faced with headwinds our ability to capitalize when the environment turns around is predicated on the fundamental strength of our strategy, knowing and understanding our customer.

Our core lifestyle customer is one that seeks out highly differentiated products and an authentic brand experience.

To meet these expectations, we have to be nimble enough to offer on-trend product assortments that leverage the breadth of our relationships with emerging and growing brands and deliver a consistent brand experience, no matter how or when customers engage with Zumiez.

This approach to serving our customer is the foundation of our operating philosophy, and while we believe the investments we made and continue to make in our business will enable us to grow market share over the long-term. In a moment I will update you on the investments we are making to drive our long-term results.

But before I do, I went to reiterate our comments from our second quarter earnings call around some of the numerous tactical and short-term initiatives we are pushing to help drive the business.

These include, but are not limited to, continue to launch new brands and working closely with our product teams to highlight emerging brands that we believe will resonate with our customer, revisiting promotional strategies and the strategic use of off-price product, pushing forward trending items to a larger number of stores on an accelerated basis, continue to focus on development and recognition of our people, which we believe will be imperative for our long-term success, and adjusting our spending in the near term, where possible to protect profitability and overall shareholder return.

From a long-term results perspective, we continue to invest in initiatives that we believe will consistently deliver the merchandise and brand experience our customers expect from us and allow us to reach new customers. Let me take a moment to update you on the each of these.

During the third quarter, we opened 12 new stores in North America, bringing our year-to-date total to 45 out of the 51 new stores we projected opening during the 2015 fiscal year.

Our focus here consists of optimizing the long-term productivity our physical store base by strategically leveraging our omni channel capabilities to maximize our impact within each geographic area.

So while we continue to see opportunity for further physical expansion within North America, we remain strategic in our approach towards opening new stores and are diligent in our consideration of both short term trends and long-term potential. We ended the quarter with 629 stores in North America, including 42 in Canada.

In Europe, we have now opened all six stores we projected opening during 2015. Our business in this region continues to perform well, though it remains a small percentage of the overall business.

We're investing to build on our positive momentum in Europe, all the while being vigilant to ensure that our unique culture, brand, and approach to serving the customer remain consistent on both sides of the Atlantic.

From a technological perspective, we continue to invest in capabilities to promote a seamless brand experience between our physical and store presence in the digital space. These improvements are not only done in tandem with our physical expansion, but they're playing a key role in driving growth and identifying new growth opportunities.

This seamless omni channel approach further enables us to provide the convenience and consistency our customer seeks by providing unique, on-trend product assortments they desire.

In summary, with a backdrop of a clear fashion trend driver that we can capitalize on, the impact of foreign exchange, the promotional retail environment, and other broader shifts in consumer spending, we remain confident in our long-term business model.

With our strong culture, unique brand position and tact, we believe we are well positioned to capitalize on the many growth opportunities ahead, once these retail headwinds abate. With that, I'll hand the call over to Chris for his review of our financials.

Chris?.

Thank you, Rick. Good afternoon, everyone. Let me take a moment to briefly review our third quarter results. Then I'll outline how we're thinking about the balance of the year. Third quarter net sales declined $9 million year-over-year, to $204.3 million from $213.3 million a year ago.

From a regional perspective, North America sales decreased $10.5 million or 5.3%, to $188.1 million, while our European sales increased $1.5 million or 10%, to $16.2 million. Included in these numbers is the negative impact of foreign currency translation in the quarter of approximately $4.6 million.

Consolidated comparable sales, inclusive of our e-commerce business, declined 7.3% this quarter, driven primarily by lower transaction volume, partially offset by an increase in dollars per transaction.

Dollars per transaction in the period were impacted by an increase in average unit retail and to a lesser extent, an increase in units per transaction. In terms of category performance, men's, accessories, footwear, hard goods and juniors posted negative comps.

Our store count at the end of the quarter was 653, consisting of 587 stores in the US, 42 in Canada, and 24 in Europe. Third quarter gross profit was $70.1 million, a decrease of $7.8 million or 10%, compared to the third quarter of 2014.

Gross margin was 34.3% in the quarter, down 220 basis points compared to 36.5% a year ago, driven largely by deleveraging of our occupancy costs from negative comps.

SG&A expenses during the quarter of 2015 - during the third quarter of 2015 were $54.8 million or 26.8% of net sales, compared to $52.9 million or 24.8% of net sales in the third quarter of 2014, reflecting deleveraging of our store operating expenses in the year-over-year comparison.

SG&A for our 2015 third quarter did not include any Blue Tomato acquisition charges, compared to the charges of $0.6 million in the third quarter 2014. As a reminder, beginning this quarter, these charges will no longer have an impact on our financial results.

Third quarter 2015 operating profit was $15.2 million or 7.5% of net sales, down from $25 million or 11.7% of net sales in the year-ago third quarter.

However, as Rick mentioned earlier, we made a concerted effort to manage costs and reduce discretionary spending during the 2015 third quarter and as a result, we saw a 100 basis point improvement in operating margins when compared to our guidance laid out in the quarter.

These cost improvements were evident in both gross margins and SG&A, but were more impactful within SG&A. Net income for the 2015 third quarter was $9.7 million or $0.36 per diluted share.

This compares with net income of $15.7 million, or $0.54 per diluted share in the third quarter 2014, inclusive of $0.02 per diluted share of charges associated with the acquisition of Blue Tomato.

Turning to the balance sheet, we had cash and current marketable securities of $51.1 million as of October 31, 2015, down from $108.7 million as of November 1, 2014. This decline was driven primarily by stock repurchase activity and capital expenditures for new store growth and remodels, partially offset by cash flow from operations.

During the quarter, we repurchased 0.7 million shares on the open market for a total of $16.7 million, which completed the $50 million share repurchase authorization that the Board approved in June. Year-to-date through October, we have purchased 3.0 million shares on the open market for total of $77.7 million.

We are pleased to announce that today we announced authorization from the Board of Directors to repurchase an additional $70 million worth of our common stock. As of October 31, 2015, we had $133.6 million in inventory, in line with our 2014 third quarter inventory levels.

On a constant currency, inventory was up approximately 4% compared to the end of our 2014 third quarter, primarily as a result of our increased store footprint compared to this time last year. Now to our November sales results.

Total net sales for the four week period ended November 28, 2015 decreased 10.6%, to $62.8 million, compared to $70.3 million for the four week period ended November 29, 2014.

Our comparable sales decreased 13.8% during the four week period ended November 28, 2015, compared to a comparable sales increase of 6.3% for the four week period ended November 29, 2014. Similar to the third quarter, lower transaction volume drove these year-over-year declines, partially offset by an increase in dollars per transaction.

Dollars per transaction in the period were driven by an increase in average unit retail offset by a decline in units per transaction. During the four weeks ended November 28, 2015, accessories, men's, juniors, footwear and hard goods posted negative comps. Our comp over the Black Friday weekend, defined as Thursday through Sunday, decreased 12.6%.

Year-to-date, through November 28, 2015, comparable sales have decreased 4.5%. Turning to guidance for the fourth quarter.

I'll start off by reminding everyone that formerly in our guidance involved some inherent uncertainty and complexity in estimated sales, product margin and earnings growth, given the variety of internal and external factors that impact our performance.

With that in mind, we are currently planning fourth quarter comparable sales results in the range of negative14% to negative 16%, with total sales in the range of $226 million to $231 million.

We anticipate gross margins will decrease 320 basis points to 370 basis points compared to the fourth quarter of 2014, due primarily to deleveraging of our store occupancy costs and distribution costs on a lower sales comp and a decline in product margin of approximately 100 basis points.

Consolidated operating margins are expected to be between 7.5% and 8.5%, with diluted earnings perspective share between $0.40 and $0.46. This guidance contemplates no additional Blue Tomato acquisition charges in our 2015 fourth quarter, compared to $6.9 million or $0.20 per diluted share, in the fourth quarter of 2014.

A few other thoughts regarding the balance of the year. Through November 28, 2015, we have opened 57 new stores in the year, including 7 in Canada and 6 in Europe, and do not plan to open any additional stores during fiscal 2015.

We now anticipate capital expenditures for the full year will be between $35 million and $37 million, down from our previous estimates of $39 million to $41 million, with depreciation and amortization of approximately $31 million for the year. We are planning our annual effective tax rate at approximately 37.5%.

Lastly, our weighted average shares used in the calculation of diluted earnings perspective share for the full year 2015 is projected to be approximately 27.8 million shares, which includes the impact of share repurchases through October 31, 2015.

Our weighted average shares using the calculation of diluted earnings perspective share for the fourth quarter of 2015 is projected to be approximately 26.6 million shares, which includes the impact of shares repurchased through October 31, 2015.

The difference between these two amounts is related to the timing of share repurchases throughout the year. These share counts, as well as our Q4 earnings perspective share guidance, do not include any further share repurchases under our new program announced today. And with that, operator, we'd like to open up the call for questions..

[Operator Instructions] Our first question comes from Dorothy Lakner from Topeka Capital Markets..

Thanks and good afternoon or good evening, everyone. Rick, I wondered if you could, you know, you've been through tough periods before, you've talked about obviously the merchants are hard at work looking for trends.

But are you seeing anything, is anything working? And what more can you do on the, you know, sort of on the, I guess, off-price, as you called it, side. You've been through periods where you've offered more package deals and so forth, more value to get that kind of peripheral customer in the door.

So I just wondered what you're seeing and what you think you can do until you get back onto a trend that you can really capitalize on?.

Thanks, Dorothy. Let me take a shot at that. And you're right, we have been through tough periods in the past. But this is a new world we're all working in.

And I would have to just tell you that this is - we have to think about this new world relative to this really fundamental change in consumer behavior we've been all working our way through over the last few years.

So let me start maybe with that kind of context, with maybe giving you, Dorothy, maybe giving you a little bit more context around our current challenges..

Sure..

And then maybe a little bit more thoughts around what we're doing and then a little bit more color there. And then of course, you know me, I have to link it to some of the more longer-term thinking about how we're dealing with this new consumer world as we do this.

So first let me start maybe with some of the current challenges a bit more like in color about what we're doing and how we're thinking about these things. I'll harken back to a year ago, and we had a couple of really key sales drivers, large volume drivers for us last year.

In the fourth quarter, as you all know, we comped up 8, approximately 8% in the fourth quarter a year ago. And also, Q1, some of those drivers continued in Q1 of 2015, when we comped up 3%, approximately 3% for the quarter.

Now I will tell you, Dorothy, again by way of color here, that these tough category comparisons are going to start to ease as we move through Q1..

Yes..

We also, in Q4 of this year, are anniversarying a significant appreciation in the US dollar relative to the euro and the Canadian dollar.

And while we expect that the US dollar, that we're probably going to see further appreciation yet in the US dollar, we do not expect that it will be near the magnitude of what we experienced year-over-year last year in the fourth quarter.

In fact Chris, maybe you could add a little bit of color about the Q3 impact, as we think about tourism and border stores..

Yes, absolutely. As the foreign exchange has gone against our favor here domestically, we have been tracking our domestic stores that have a higher penetration of tourism like activities, either on the borders or in large cities or areas of the coast, where we see a big tourist inflection.

And so what we've seen here is approximately 10% of our stores are represented in this group and they represented about 22% of our comp loss during the third quarter..

So we are going to be anniversarying that, Dorothy, and so hopefully, we're going to see some relief in that regard. The other thing I'd call out that is kind of new, actually in November is the discount environment, and in particular, the discount environment over Thanksgiving weekend and Cyber Monday.

It was particularly aggressive in our retail niche. I have to tell you, I expect that to continue in the peak periods here through Q4. And I'll be clear that we have not participated in that broad level of discounting that's been taking place in our niche quarter-to-date….

I could see that..

Yes. It's pretty obvious..

It's pretty obvious..

And then I guess, the last thing I'd say about our current situation is and I think you're hearing this from a lot of retailers, there is just a lack of a fashion direction. And I think this is particularly difficult for us, because of the nature of our consumer. Because our consumer tends to lead fashion cycles, in many ways.

And I think that because of that, we're being disproportionately impacted by this lack of a clear fashion cycle. Of course, when you have a lack of a clear fashion cycle, consumers tend to revert to value, right. I think tends to be where they go. And as you know, we are not a value player. We're a lifestyle retailer.

So what are we doing? And I'll try to give a little bit more color here about the things we kind of highlighted in the script, Dorothy. So what are we doing in the short term? As I said in the script, we continue to feature and launch new brands.

And I will tell you that the ones we're doing with them, as we look at the launch of new brands and year-over-year gains in these brands as we continue to push them forward. We're having year-over-year growth in sales growth with them. We're seeing that it's working.

It's just not working at a large enough scale to offset the significant drivers we had a year ago. And we're also continuing our promotional, and I'd also add our incentive strategies and how we use the strategic use for our value offerings and in particular, private label.

And as I said a moment ago, we haven't participated in the level of discounting, at this point. This would hopefully be the way that we will do it, because we do not want to offer, if we can avoid it. We do not want to offer discounts on brands that have equity.

And I think that's an area that some of our competitors have gone, which I don't think is healthy for our industry or a sustainable retail business. We continue to push forward on trending items to a larger number of stores. You're going to see us continue to do that throughout in the fourth quarter. We have number of things we're working on.

But I would tell you same thing in third quarter, that we have been successful year-over-year at these items, but not at a scale that's been enough to offset the prior year trends.

And lastly, we're going to continue in the short term here, really looking at how we manage costs with - and I just have to add, without sacrificing our commitment to our training and recognition programs, because those are really all about our long-term people development objectives and that we can't relent from.

So that gives you a little bit more color, Dorothy. But now let me to connect it back to the long-term nature of what we're trying to do here.

And I have to tell you that, you're so used to probably hearing this, but I'm going to tell you, I'm going to say it again, because it's just so important, that I continue to believe that our cultural strength and brand positioning have never been stronger.

Those are the two things, unique culture, unique brand, that are required for long-term success. I continue to feel very, very good, Dorothy, about where we're at on those two fronts.

We are going - next, in the long-term perspective, we are going to continue to invest in building this seamless, channel less retail brand experience for our customers, the omni channel experience. And we believe we're leading the way in these efforts, that we're one of the leading retailers in doing this. This is really critical.

As consumer technology has been and will continue to drive these fundamental changes in consumer behavior, shifting more shopping behaviors to the digital channels and reducing mall visits.

Now again, I would tell you that we're seeing that even in the third quarter and in the first part of November, we continue to see shift towards the digital channels. We are just being overwhelmed by these negative trend cycles in that regard.

And then I guess lastly, I'd say that, we believe that long-term, the unique culture and brand positioning combined with building this new omni channel or channel-less retail model, is going to be what allows us to win our retail niche. And the reality, I'd have to say, that in this new consumer world, there is still way too much physical retail.

And so that's why I think we see the high level of discounting that takes place on a niche-by-niche basis in the marketplace. And really this is we've been working through this capacity issue. We've seen some players go out, some people, some players really struggle, a lot of stores being closed.

But we still have a long ways to go here, I guess in this, as we think about the long-term view here. But I'm convinced, and at least for our niche, that we're going to win our piece of this retail segment. We're going to win the share consolidation game.

So again wrapping all that up, Dorothy, I'd just say that despite all the challenges, despite what we're trying to do to fix it, we believe we're still doing the right things. And we're not going to compromise short-term tactical strategies that are going to be in conflict with long-term brand positioning, long-term cultural strength.

We're not going to do things tactically in the short term that compromise either of those. And we think that with patience, we're doing the right things, we're going to win the omni channel battle in our niche..

Great. Thanks. That's helpful..

Thank you..

Next question comes from Sharon Zackfia from William Blair..

Hi. Good afternoon. I guess a couple of questions.

Rick or Chris, I'm not sure which of you mentioned it, as I've seen the development pace going forward or the way you think about bricks and mortar Can you kind of expand on that and maybe contrast if you can what you're seeing in the US versus Canada and Europe and how you think about the growth potential in those three regions at this point?.

Sure, Sharon. I'll take the question. From a growth perspective, we continue to stay on what we've said in the past regarding the number of units. Geographically, our Canadian business and European business are trending ahead of the consolidated trend lines.

So we feel really good about what we’re doing their and more of our challenges here domestically. So we continue to evaluate as we mentioned on the call. We've opened our 57 stores that we have planned to open as of the end of November and we'll continue to review our opening cadence for 2016 and we'll provide more color on that in March.

But as Rick mentioned, this is an omni channel focus that we're using here to capture the capacity in each trade area. We believe that these work together with both the stores and the web. So we're going to continue to monitor that and as we push forward through this challenging time..

And I guess, I'd just add Sharon that obviously when we're struggling like we are everything's on the table. So we're not going to - our practice is not to discuss what is the next year’s plan here is on our third quarter call.

I would just tell you that we'll revisit everything that we need to revisit to make sure we're doing the right things in the right time for the current situation..

I guess just and maybe adding onto that, in Europe you've doubled the number of stores over the last few years. I don't know how you feel at this point about kind of your foundation there to accelerate the growth even further.

And it’s not - nothing come up a lot, but you've been doing well in Europe, so I don't know how to kind of think about that as a potential growth driver to help offset some of the sluggishness in the US?.

Yes. And let me respond to that and then again Chris can add on as he thinks he needs to here.

But you know, Europe is - I mean, again as Chris said, we are really pleased with how things are going in Europe and again I just say thanks to our European team because we have put them through tough few years and bringing them up to speed with our requirements as a public company and getting them up to speed in everything.

In addition to essentially going from what really was three stores to where we're at today with….

24..

24 doors. So they have achieved a tremendous amount Sharon and at this point we are really optimistic about what we're seeing. We still have to - we still want to see the maturation process take place in the stores, so we can really understand it. We still need to see ourselves working - we want to try a new country.

So far we've been focused on Germanic speaking countries and growing stores in those markets. And I'll remind you Gerfried's and the Blue Tomato team their website is doing business in many languages across the continent. So we have good roadmap for where to go and how to open stores based upon the quality of their web business.

But I think we need - there are a few things we need to do here, but there are no red flags I would say at all in our European business. We feel very good about where we're at. Now, that being said, I'm not going to probably suggest to you that we're going to ramp up growth outside of a rate.

We asked them to basically essentially double and double stores over the last few years. We want to get to a more normalized growth rate because as you know, cultural - controlling the cultural strength of an organization is very, very important and we need to grow at a rate that we can do that.

Now that we've established a baseline I think you're going to see us really focus on those training development efforts within the country, growing our own talent or within the company with growing our own talent to fund that new store growth. We need to be disciplined about what we're doing here.

So while we may - you may see marginal increases in unit count, you're not going to see substantially large increases because to build with good quality, we have to go at a measured pace..

Okay. And then the last question. I mean, you've obviously curtailed SG&A growth a lot this year and even more so in recent quarters. You don't have kind of a very fat organization to begin with. It runs pretty lean at least that's my perspective.

Can you talk about I guess, SG&A and the cadence of growth and how much further that could possibly be curtailed from what you've already done?.

Yes. I'll take the question, Sharon and obviously you're right. We have cut this quite a bit.

I mean, you can factor in our fourth quarter guidance with the actual three months and we are well below the levels that we laid out in March of this year when we were trying to get some color for all of 2015 in which we said we thought SG&A would grow consistent with our 2014 growth.

So I'm pretty proud of the team for their efforts they made in controlling costs here. Obviously some of this does come in the form of variable cost around our store network. But there's really meaningful cost here we've taken out of the model, from managing through this tough time.

So I think that going forward, we're really trying to continue to balance what's right for the long-term with the short term results. And that is kind of the tight rope that we walk here.

We're continuing to work on areas where they are flexible, whether it store management around payroll and how we manage those hours through these tough times, looking at our home office spending, while being real cognizant of the importance of the long-term growth initiatives that we are continuing to work on, looking at all areas within the business, via be a marketing or IT or other areas where we think there's opportunities.

And then lastly, you know as well as anyone that this is a performance based group here. And so when we perform well, we all share in that, and when we have more challenging times, there's a reduction there. So you're seeing that today.

You're seeing it in the 2015 results and also our Q4 guidance here with pretty significant amounts Q4 will benefit by about $1.4 million, as compared to the prior year and overall looking at those discretionary programs, it's closer to about $2 million.

So we are cutting back as we look into 2016, we're going to continue to balance the results with what we see today..

Next question comes from Tom Filandro from Susquehanna..

Hi, thanks. Rick, I mean, given what you said, like the nature of the business is clearly shifting to these peak selling periods. We know it’s promotional during these periods. I thought maybe you were suggesting that you're going to try to maybe utilize private label goods to participate during these periods more aggressively.

And I really have a question, why not participate in a different way like GWPs or PWPs, I mean, how could you give the kids an energy drink to just walk to the threshold. I just wanted get your perspective on why you wouldn't think about other ways of participating that would not necessarily hurt your brand positioning? Thank you..

Sure, Tom. I appreciate that and you know of course know that we are experimenting with all sorts of things all the time on these fronts. But here is what so tough about the modern world, when someone dirty off everything in the world, the gift for purchase those kind of things they don't resonate very well with customers and that type of world.

So, we will, as you would guess experiment with all sorts of things package deals, I think someone mentioned that earlier. We are trying all sorts of things.

We're going to try new types of incentive arrangements for our teams, because you're right, the peaks are what matters in this game now, because everything particularly in the physical world is focused around a few days of high volume.

So now - so don't get me wrong, we're trying these things, Tom, and many more things right in terms of new ways of thinking, like I said around incentive programs here for ourselves. But when everyone else is in the markets is doing something far more radical in terms of delivering value.

I have to tell you don't believe it sustainable, particularly in our business model where we selling brand of products. It's just not as sustainable strategy. Those I link it to the longer term - longer term issues of share consolidation. You need to take place in the market.

And to some extent, the longer-term view is just about rationalizing this retail world for a new kind of consumer experience. So, I think we'll find these trend cycles are going to be particularly for each unique retailers position, we have unique retailer position.

I think we're going to see the speed of this world, the speed of trend cycles expose more retailers relative to the trend cycles and then again this is about how do you not compromise your brand positioning and still compete. And so a lot of the things you suggested we have tried.

But it's very difficult to overcome someone who is essentially operating at very, very low margin or no margin, no profitable margin..

I wish you guys the best of luck and happy holidays..

Thanks, Tom..

Next question comes from Paul Alexander of BB&T Capital Markets..

Hi, guys. Thank you. Rick, could you talk a little bit about what you're seeing out in the marketplace. You talked about taking share from independents and seeing market consolidation.

With the dynamics in the marketplace you're seeing right now, are you seeing like a wave of bankruptcies? Are the independence being burden to the same degree as you buy what you're seeing? And then outside of that, are you seeing any other sources of disruption, whether it be brands going direct to consumer are going to other channels like Amazon?.

Yes. Sure, Paul. Let me picked take a shot at that for you and I'll try to put this in a bit of historical perspective. Yes, small shops have tremendous difficulty competing in this world. And they continue to - there can't be closures, but that's nothing new, right. That's been going on for a long time.

And I think it's accelerated since the great recession. And there - that is part of the share consolidations taking place in the world. We've also seen it in our niche of lifestyle retailing with some of the pure play guys who have either gone through bankruptcy or been shut down.

And now they've been re-launch, but their re-launch form is not nearly as robust or aggressive as their previous incarnations.

And I think they're going to have a tough time in this world because I think in lifestyle retail, the omni channel retailer with a high-quality brand and cultural experience is going to be in the power that you need, a scale to invest in customers is going to be the winning format.

So we have seen a lot of consolidation, but again, what we're really dealing with is a rapidly moving consumer changes in consumer behavior and I don't think we're done with that evolution. And this is why the investments in the omni channel world are so important.

And these are going to be - it will continue to consumers, it’s a consumer’s behavior that’s driving the share consolidation. So we are going to really, really push forward, Paul, on this omni channel means for ours. And I'd be happy to talk more about that if you'd like about what it means from our perspective, but that's my answer to your question.

We've seen actually a lot of share consolidation to date, in both the pure play as well as the physical world and I think we have a lot more to come over the next few years..

And any comment on brands going direct to consumer or finding other channels?.

Yes. I mean, I think - again this is part of the nature, I think the markets somewhat, brand, brands must be direct consumer. I don’t think they have a choice, I think if they're not they are making a mistake. I think consumers effect to find that as part of their omni channel experience.

Now am I worried much about our brands going direct and selling directly on their own sites? I'm not too worried about that, in fact I think it's been proven in our niche that brands don't make very good retailers. I think there is some pretty good evidence of that over the last few years.

And it's because they have to be about their brand and they have to be about brand first where retailers are about sales first. And a good sales experience first, fundamental differences. So I think brands have to be direct. If you were to, you know, talk to me 10 years ago, I'd be telling you how that upsets me so much, right, that brands direct.

In the modern world I know they have to be there, I know that's where consumers go, but I am really comfortable that they come to us to buy. Because again, the scale and reach that we have to serve better brands just in the omni channel world that - never be able to replicate.

So this is where brands and retail partners have to be closer and tighter together than ever before. And I talk a lot with our brand partners about fewer the better partnerships.

Because this is the nature of the modern world that we have to be linked more closely between what their job is as a brand and what our job is as a premier retail partners for them. Now Amazon is a different case.

I think, Amazon is obviously a great retailers, but they have a very big strong position around the biggest selection, probably the best technology in retail and low prices. So I think brands have determined whether or not they should be in the Amazon world direct. That's a determination brands they have to make on their own..

Next question comes from Richard Jaffe from Stifel..

Thanks very much. And if you could spend a little time on Europe and what's happening there. Obviously pretty rapid expansion and it sounds like some good numbers coming out of there.

Could you apply any additional color on how their performing, I guess on a comp basis, on a per square foot basis, relative to the US and what you think the outlook there could be? How optimistic should we get about Europe?.

Yes. Thank you, Richard for the question. Obviously I'll ask Chris to add here. Again, as I said a moment ago, I am really optimistic about where we're at in Europe and I tell you the foundation are great, transactions acquisitions always comes down to cultural alignment.

And we have, we are so - if you talk to the Blue Tomato team, it's like you're walking around the Zumiez building about cultural alignment.

These guys are - they see the world the way we do and they might put a little different spin on a relative to European culture, but the values that we share are fully in evidence in Blue Tomato and its widely been successful over the years.

Now we've really push them hard and again, I'll say how much I appreciate what they've achieved and what they've done and we added a lot of units. I can tell you the Blue Tomato team believes in the omni channel model.

That's why the selected to partner with us because they thought we were a good partner to help them in this regard of executing against the strategy. Why they gone from 3 to 24 stores really in a about two and half year window of time.

And so as we think about the future in Europe, Chris has already said in his comments, that it's clearly outperforming our numbers here in the US in terms of on a relative comp basis. It's just a small relative to the US.

As we think about the future, we're really encouraged now, I'm not ready to quantify what that opportunity is, yet I will be I think here in the next 12 to 18 months, we'll have the opportunity to sit down with analysts and really talk about what the scale of Europe can be.

The reason I want to wait Richard is I really want to be able to show you when we do that, what the maturation of the unit economics of stores are in Europe.

And as you know it’s a little bit more comped in the US because there is going to be different mix on a country by country basis, as to what's mall-based and what street based and each country like I said will have this different assortment of types of stores.

And we have been experimenting with that in their Idea [ph] flagship stores, of street stores, in their malls stores and what those three kind of things look like to try to understand the right unit economics, to try to set up for the right growth profile and then apply that appropriately as you learn about each country, because each country will have a different mix of those.

So as we get more comfortable with what those new economics look like, as we can really quantify for you the omni channel impact of adding stores to their digital world, that's when we want to sit down with you and the rest of the analyst community and say this is what it looks like for us and this is how the sizing and scaling of we believe.

All that being said I think it could be really big in terms of where we're at and just to give you a sense of where that that is. But I want to be able to deliver facts when we sit down and talk about what we mean and how we get to the number..

The only thing I would add their Rick is when we talk about the comp it is meaningfully better and well in the positive range, I mean, but to think about scale, this is still less than 10% of our business in relation to the third quarter.

As you know Richard, it does increase from the penetration perspective in the fourth quarter, as they still have a higher penetration of their business focused on the snow good.

So here as we really moved into October and now November, December, January and even into February, they over index on their percentage of the business as compared to the rest of the year and from unit economics perspective, just to add a little bit to Rick's comments, I mean, this is telling market that’s not as heavily mauled, as we are here in the US.

So we do expect them to be slightly higher top line performance, but with a higher cost structure that comes with doing business there and we are seeing that. We're seeing that in the business model, but were also, we've invested a lot behind this business.

We continue to have investments there ahead of us, but we're also looking to really grow our operating profits here as we continue into the coming years. And we're starting to see that today and we will continue to push that. So while small, we think as you know, good potential both for the top line and bottom line..

And just a follow-on, how many countries do you have the omni channel or the e-commerce site established?.

We have again, Gerfried's team in Europe and the Blue Tomato team, they've been one of the leaders in Europe for a long time and internationalizing their website. So their website is Pan-European and actually does business in 14 languages and has done that for quite a long time as a matter of fact.

And the omni channel aspect, this is the reason as we focus on building markets, that's another unique right about Europe, we need to turn omni channel on a country by country basis.

So that's what you see us really focus store growth on their home market of Austria and then a new market in for physical store growth in Germany and we need to build those markets. And then as we do that Richard, we can then turn on omni channel functions.

So you have to build some scale in the physical world to be able to turn on the omni channel capabilities..

Got it. Thanks very much..

Thank you..

Next question comes from Jonathan Komp from Robert Baird..

Hi. Thanks, guys. Maybe the first question if I could ask about the category performance. I know all or most of the categories have been negative for the last five or six months now.

So and with overall comps running down in the low teens, I was hoping you could give little more color on the magnitude and the declines you're seeing in recent months across to some of the categories?.

Again, you've got the headline already Jonathan, which is when you run these kind of losses you are negative everywhere, because there is - again for me it seasons back at least on department basis, right. We have categories. What we've given you is departments that are running negative. We have categories that are running up within those departments.

They are just not looking up enough to offset the big negative down trends in the business versus a year ago.

So I'm not going to get into detail category performance on a department by department basis because there is stuff, there's always stuff were running gains in and in this case there's just not enough to offset the bigger categories within those departments running declines in..

And Jonathan I would add, when we do talk about them both on a monthly basis adequately basis as you know, we do order them for most significant to least significant, just so you did get some color on how they're trending within the bucket..

Got it. Okay. And maybe a broader question then. I understand you don't want to give 2016 guidance for unit growth or anything like that.

But maybe just a broader question about how you're thinking about managing the business and I guess the context I'm coming at is clearly the comps declines have been deeper and longer lasting than I think any of us or even you would've thought even a few months ago.

So is there any thought to managing the cash flow in the business more conservatively until you have a better read on the sales trends and of thinking about does it make sense to be putting any new bricks and mortar in the ground in North America or to be spending cash on some of the share repurchases which have been more aggressive at the last three quarters.

But any thoughts more broadly on how you're managing the business?.

Yes. I mean, we obviously - we're managing it very tightly, right? In relation to what we've seen here recently, but we also want to make the right investments. So in relation to the unit count, I mean, you've seen us even here in 2015 Paul our CapEx down as we announced today and talked about where we’re at.

We’re thinking about what the right investments are, the declines in our CapEx in 2015, are primarily tied to remodels and to a lesser extent some of our home office capital expenditure projects that were out there. So we're trying to be smart about those in light of where we’re at.

I'm not going to you color into 2016, but these are active discussions we're having with our board about the right use of cash and as we announced today with the buyback certainly the capital maintaining the capital structure is an important component of our structure and has always been a big piece of our balance sheet and how we manage.

But at the same point, these are really low trading levels for us and we believe as we look at the capital that's on the balance sheet and as we've sat with the board and discussed this amongst the team, that this is a really good opportunity for us to bring value to our shareholders and bring confidence into how we feel about the business long-term.

So the strategy here has really not changed. But we are thinking about the capital allocation really closely and will factor that in as we start to plan for 2016..

And I would add Jonathan, that we are of course going to take a look at everything, as I mentioned earlier relative to capital expenditures expense management. This is kind of the environment where we will scrub everything. So you should expect some changes to be clear.

As we will look into 2016 as Chris said we are not prepared today to say exactly what those are but you will see us do some different things relative to capital structure and how we're spending dollars.

I guess the last thing I would to add on this topic is, there is this macro shift of consumer behavior toward digital shopping experiences and digital experience in its whole. As I said earlier we are still seeing that, receiving Q3, receiving Q4.

It just been overpowered by trend cycles and the one thing I know about being in retail for a long time and I can tell you our team here we've spent a lot of time on this feels comfortable is that, trend cycles are just that, they're trend cycles, they will move, they will adjust.

The question is over what time period and how far will they go and will they move in our favor? And is where look at a year ago in Q4 and we had a great Q4 and the speed of those changes in trend cycles haven't moved in our direction but they will. And that's the nature of good retail.

So that's of the other overlay I think that we have to have out there is, we have to as Chris said it make the right continue long-term investments to live in this new consumer empowered world and we have I think up to this point.

We need to continue to be selective and a perfect by a managing the other capital expenditures that may not be quite as important at this point time..

Next question comes from Pam Quintiliano from SunTrust..

Hey, thanks so much for taking my questions. I just had a few for you. You didn't mention whether specifically even though a lot of talk surrounding mall traffic, so, how are you thinking about the weather impacts and then if you could remind us obviously it's come down over the years, specifically the hard goods.

But what percentage of goods do you have domestically that are colder weather related? And then on we think about omni channel and we spent a lot of time talking about this on the call today, but is there any way to quantify the performance or any way to frame the performance of online versus in-store for 3Q and November? And then the last question, very commendable not to be reactive to the height and promotional to the out there, especially because it seldom leads to a good longer-term path.

But that said, as we think about the remainder of this year and the heightened competitive environment, should we expect you may flexes more promos are not asking what you're doing but do something different other than the BOGO 50 or what the consumer is more used to seeing to get them in the stores? Thank you..

Great. Thank you Pam. Let me start again in our last Chris to add. So let me just say first on the inventory positioning and the offering.

You know that’s well enough to know that we're not going to - we're going to do our absolute best to make sure that we come out of this cycle with clean inventory positions and we've been really good at that in the past and I have confidence in our team here of merchants that we'll continue to perform at a high level in that regard.

Now, we're not going to do blanket promotions. I have to tell you that, it’s just such a dumb thing because we have things in our business that are working well. We're not going to markdown the things that are working well. In fact were going to buy more of the things that are working well. So we have them to sell at full price.

Whether that the fashion, trend categories or that be brand driven or item driven. So, those things that are working, we're going to be targeted our markdowns. We'll be aggressive in our markdowns and will clear through them and we will do whatever the promotional strategies are that we need do to clear through them.

And were constantly as you would guess testing with the strategies all around the country all the time in small ways to determine what the best way is going to be to approach that by type of product. But they are targeted focused. We are item when we mark things down, we are marking down things because they're not working and living through.

We are not doing blanket markdowns. So you're going to see no change in our position from that regard other than we're going to do our best to come out of this cycle this quarter with as clean and inventory position as possible.

As it relates to mall traffic and weather considerations, we don't like to talk about weather because it's always a weather issue somewhere. We have seen though as you would've guessed where the weather has been colder and we've seen some snow.

We are doing much, much better in our winter categories, whether that be the hard goods, maybe Chris talked about that, in terms of magnitude that be hard goods on our weather or the outerwear jacket side or even hoodies of our winter business.

So and as you know in large parts of the country particularly in the middle part of the country in the eastern part it's been much warmer than normal particularly relative to a year ago. So California has been disproportionately a strong performer for us through third quarter and here in November.

It's had a pretty relative for them to winter and snow in the mountains. So that's part of it is that weather related factor there. But again I could call out as we already have the currency factors, there's oil and gas factors in parts of the country, there's also some issues we could talk about.

We just have to find a trend drivers Pam to have a bigger impact for us having today. And then lastly on the online performance, calling out the web business.

I'll let Chris talk about that, but I don't want to go there because I can tell you that the consumers don't see the channels of the way we used to and as we spend our time it's almost like we get trapped in thinking about these channels and in the don't see them at all.

And again, I want to really type go back to this idea that everything is integrated. When we rundown we run down online particularly when is trending like this just like we are in stores, maybe not as much online, but there's overriding trend factor that drives all of it. And yes direct channels are getting.

They're going to -they're going to continue to gain of the next number of years, it's about building this world in which we don't see channels because the customer doesn't see channels.

We can work with them in all new ways that's what omni channel is about and again I'd be happy to spend a bit more time that if you'd like me to but that's what it's about. Chris if you can add any color you like..

Just wrap up on the omni channel piece of it I just echo what Rick says and when you think about this it's all as one and one inventory pull and available to everyone through every channel in every way, it is hard to separate these channels from what is web and what is stores because they are working in tandem together but we do try.

We do recognize sales on a demand basis so where the customer originated the transaction which can get murky but as we look at it for Q3 the web was about 12.5% of our penetration compared to 11.3% last year and four November the web was about 17.9% compared to 15.7% last year.

So we would expect that as we move into Q4 especially in the weeks leading up to Christmas that the web will over penetrates and then in the stores turn on as we get closer to the holiday. For your other question around hard goods spend. As you know, we've had a few winters here that have been pretty challenging.

Over the last three years we've seen this percentage come down and I don't have - we will talk about what the forecast is for the fourth-quarter but as I look at last year our true hard goods as far as the boards and bindings and boots and things of that nature was about 6% of our overall sales, in the quarter, in the fourth quarter.

So if you included the outerwear and the coats and some of the accessories that go along with it, it's about twice that but some of those things are not just for up on the mountain. They're related to whether and some of the trends of that Rick talked about..

Okay. Thank you very much. Best of luck..

Thank you..

Next question comes from Betty Chen from Mizuho Securities.

Thank you and good afternoon. I know Ricky mentioned that you'll be providing a more comprehensive strategy for 2016 in the later call. But I was curious if you could remind us because I think you and the team have been very nimble in terms of looking at store leases. I think pursuing shorter-term leases one possible.

Can you just remind us what percent of the fleet may have leases up for renewal in the next few years? Or what percent of those store based has the shorter-term more flexible leases?.

Yes. I'd be happy to address that for you Betty. And you're right, we have given some color around that over the last year or so in terms of thinking about what we’re doing.

As Chris said in our prepared comments, our goal here is really about thinking about again a channel-less world and thinking about business within trade areas and again we could have a long discussion about how you define what a trade area is and looking at what total volume takes place in how we interact with customers across multiple touch points in each trade area.

So this gets back to when we pick about the physical again this integration of the digital and physical touch points. This idea that while were trying to do is optimize our portfolio stores to maximize volume in a trade area.

Again, we're thinking about all new ways of measuring what that is and how we think about year-over-year gains in a trade area and so you're going to see us. We've been closing a set of stores every year. We’re trying to evaluate and test some things as we do that.

Understanding impacts on trade areas and so rather than talk about what leases will come up in what time frame we think about this a little bit differently. We're looking at a group of stores that tend to be the stores where more concerned about their long-term role in a trade area and most of really function around volume sales at those stores.

So what we're trying to do is drive those stores that are most concerned about, those locations where most concerned about into very short renewal periods.

Anywhere from one year to two years basically and were keeping a significant portion of our store portfolio that were concerned about their long-term position relative to the trade area demand within that short-term realm of giving us the ability to look at what we need to do within markets.

Now in new stores as you would guess we also in our lease negotiations we're also giving ourselves positions in our likewise and very cases landlord mutual option to reevaluate where were at in terms of volume and locations within a certain number of years of post-opening of location.

Which is addition to this group of the stores were trying to risk peonage in terms of our ability to exit should we see over the next five years trade area the way we're adapting as a volume is into the digital realms that we need fewer physical stores to maximize volume trade area. So it's really about us evaluating in a market.

Where is each center at, each location at in determining whether or not what our comfort level is on the long-term sustainability of that location. If or not of trouble with it then were keeping it in the shorter-term group of stores..

Okay. That's very helpful. I was also curious, I know in omni channel weren't there is also in quite a bit of discussion regarding the shift between mobile and desktop, in the digital world.

Can you talk to us and anything that you may see differently, specifically we been hearing about mobile traffic is increasing even more rapidly but then there are some concerns in some occasions on the conversion for mobile traffic.

Any sort of insight you can help us in terms of what you're seeing and where do you also expect that case of change to occur going forward?.

Great. I will give that a shot that Betty. So let me - I would tell you first off that we are no different than pretty much every company out there. The mobile traffic is growing vastly faster. In fact desktop traffic is declining. What you see is mobile traffic to find primarily as phones, secondarily as tablets but primarily phones.

Now let's talk about why that is in phones it's because in omni channel world, what's the one device we talk about digital content points that lives with all of us every day. It's our mobile device. We have down all time usually in her hand it all time, I don't right now I'm actually payer conversation to this.

Hope you're paying attention to me now Betty and not on your mobile device but it is about the centering in on the mobile device. I can tell you this is a lens we use forever they were doing. What is our consumer doing in the mobile world and what are their actions and this is one of the reasons conversion is low in the mobile world.

There will be different ways that they can engage with a mobile devices than they would on a desktop your particular for our consumer who are the un-graded our range were they don't have a credit card.

This is where particular for us mobile conversion rates look low because they might do the shopping or do the surfing or social network media networking with us on the mobile device which will tie them back into our general web business but then it might be mom that who come back later to make a purchase, whether it's on a mobile device or a desktop.

One of the recent conversion look low is that a mobile device is because it's an integrated shopping experience again across multiple devices including the physical store.

And we know that for a fact through we can see the connecting points for what we’re doing in how we drive activity out there that stores close a lot of the sales because they're very targeted in what they do. So you have to think about this not only relative to the digital world there relative to the physical world to.

Our goal is where consumers what are our consumers using the mobile devices for and how do we attuned what we're doing for their specific needs in our mobile world? And so jerk there will be lots of evolution around this we have like everyone else a lot to learn in this area but the mobile traffic is growing at amazing rates..

Okay. Great. Thank you. Best of luck for the holidays..

Thank you..

Next question comes from Jeff Van Sinderen from B. Riley..

Hi.

Just a follow up since we've been talking about lot about Omni and digital and I'm wondering how you're thinking about what the key incremental things are that you'd need to put into place to moved our Omni digital position further forward and then sort of as another thing, is there anything you're seeing as you look at spring that makes you more optimistic about fashion trends emerging in your favor? Thanks..

Thank you, Jeff. I'd be happy to spend a few minutes with you on omni channel here and let me back up a little bit further and we'll talk little bit about what we're doing in Omni and I'm going to be very specific I think this is a competitive advantage for us. I think are one of the leaders in omni channel retail and a specialty retail world.

So let me back up a little bit and then I'll talk a bit more about some of the things we've done but for me, omni channel retail I just want to be clear about this it's not just about picked up technology it's about people and a fundamentally different way of thinking about your relationship with your customer.

It gets back to what we were just talking but a few months ago about picking about wielding about stores or digital channels we think about a trade area and all the engagement touched was we might have a with a customer in the areas of that they live.

That's a whole fundamental mind shift that has to affect everything for example incentives, how we think about and sending teams in this world. So omni channel again. It isn't about technology this is as much about people both customers and our own internal people as this but a middle mind shift in how you think about engaging with your consumer.

And the consumer is driving this experience and I think the best retailers have been including ourselves have really spent the past six years running as fast as we possibly can is trying to keep up with consumer behavior and I'll tell you this is the one area that I feel commit is pressure I always feel it were never going fast enough, because the consumer is still evolving at such an amazing pace here.

So for me omni channel is really about this idea of bringing your brand alive at every consumer touch point. Digital physical it doesn't matter every touch point.

And if you have a strong band position than what omni channel's ability doing and other we're seeing it is omni channel is really doing is amplifying that Randy experience for you across all these touch points. Again physical and digital. Our present our huge part of the. I'd like to make that clear.

That's one of our historical strengths is the quality of our sales team. On the channel is another way of unleashing the power of our great sales team that we have out in our stores. The majority of contacts are still taking place in our physical stores.

And it's also about leveraging what's been a 30 year investment for us in the training and development and recognition programs we have in place it as you can believe we are evolving this programs for this new world. So let me tell you a little bit about our chasing of omni channel over the last few years.

For me this really started in the fall of 20 a little bit about our chasing of omni channel over the last few years. For me this really started in the fall of 22,008 from Troy who want our omni channel platform here and lease our web team we showed me his first Google Nexus phone. And with the shopping app I remember the so vividly.

We scanned a UPC code on a jacket we had in the office on one of our brands and of course we did some shopping in it shows you who got it digitally who hasn't physically and what the price is an unattended basis and that moment we pretty much knew that the whole world had just changed.

We spent 2009 planning and really think about omni channel strategy, 2010 begin our execution points, Jeff for saying okay we need to go now we have a lot of work to do and in 2010 through 2015, that work included a lot of new system to process is for example.

And you heard me talk about this for years but the importance of micro sorting planning tools. Of thinking about planning an all new ways and the investments we had here and from a technological point of view have been hugely important and I think we have some of the best micro assortment tools in a specialty retail today.

They've been finely attuned to essentially custom development at this point for our business because we are very unique and how in the number brands we handle and how we micro assort literally location by location for what we do. So a new web platform as part of that. A new management system is part of that.

We of course have all new sales programs and we refer to them. We have acronym we refer to them it's affected by unleashing the power of our sales team and so we are through our version of those incremental sales programs in omni channel in the omni channel world. We have many more to come and as we laid out our road map going forward.

Again about how does omni channel unleash the power of our sales teams. We also have completely revisiting our training for internally stored to make sure our training our sales training reflects the need for a new kind of integrated digital physical experience for our customer. We're in the process of doing that right now.

Last few years we've also had a major product in the way of reevaluating our brand positioning and making sure that our brand definition was aligned with this new consumer empowered world where working in. And I have to tell you we feel really good about that process. We deeply socialized to throughout the whole company.

So those are a lot of big things we done over the last four and five years. We have really clear road back to Jeff going forward for omni channel. Very clear discrete objectives that we need to achieve.

The efforts in front of us include more sales opportunity through more sales programs that we believe we can rollout in the omni channel world to serve our customers better. We intend to be faster and more locally aligned in terms of absolutely every aspect of our business for our consumer.

We talk about everything we need to do that needs to be same-day and Xa [ph] product availability or for experienced driven for our customers. So as I said were better aligning the brand experience through training and in the omni channel world.

I mentioned earlier were rethinking all of our incentive programs to live in this new kind of world and you're going to see us more technology. I mentioned the importance of assortment planning and investment we made there.

New water mentioned systems, our new plant forms was his again incrementally more technology and support of this omni channel world. It will include things like enhancing our solar planning tools, continuing to be able to plan in different ways with this customer, we will plan for all sorts of new types of inventory buckets.

We’re going to have some additional views of them interpret we are a lot today, you're going to see us have a lot more and to be able to serve the needs of the customer. And again under the premise were going to do same-day next day on everything we own.

All new process improvements, you're going to see a lot along those lines I can guarantee working of the delay and a lot of this. A lot of things were doing in as I said moment ago in talking to Betty, we view mobile as a lens that we must see everything through.

We’re coming up with new lenses like a mobile lines that were going to see our business through that will be applied in this omni channel world.

So, I'm not going to get into specifics of what we’re doing the biggest to be competitive advantage for us at this point and I can tell you we've driven millions and millions and millions of dollars’ worth of business over the last five and six years in omni channel efforts. We will drive a lot more over the next five and six years we do this.

I'm very comfortable we're leading the way and as we think about omni channel here within the specialty retail world, and again it's this idea of how omni channel is unleashing the power of great branded great culture.

Does that help?.

Yes. That helps a lot..

Regarding spring. I'm not going to get into what we’re going to thing about spring at this point. Other than I will harken back to the comments made earlier about how work be fully anniversary some of the trends that have been really big drivers for us.

Maybe what I can offer you Jeff is maybe we will find the bottom as we anniversaried these really big trends from a year ago and we comped up really strong. But that is not were at to be the. That's not the goal is to find the bottom.

The goal is to move forward on things that we can drive more volume with and when we find them, this is where the omni channel model will allow us to maximize every trend item that we can drive..

Okay. Great. Thanks very much and good luck for the rest of the quarter..

Thanks, Jeff..

Final question comes from Adrienne Yih from Wolfe Research..

Good afternoon. Most of my questions have been asked and answered but I did have a question on the inventory. I know you historically been exceptionally good about keeping that inventory nice and tight in clean especially entering the New Year.

So when you think about end of the fourth quarter, how should we think about that inventory on a first quarter for corporate per score and then can you was processing to recall you didn't have much issue with the port last year but could you remind us if you do have any year over year impact from the port that we should model in and considering Q1? Thank you..

Yes. Thanks. From inventory perspective you know our historical practice has been to be very clean with inventory and not to hold onto it longer than we need to.

So as you saw another quarter results, even with our challenging sales results, the team did a really nice job of managing inventory and was basically flat overall on a GAAP basis and up about 4% on a constant currency showing the growth was store growth but even managing it beyond that.

So as winter the fourth quarter, we are being very cognizant of our inventory levels. Today we are more current than we were a year ago but we've got some work to do with the November results to continue to move through that inventory over the rest of the cycle.

So our goal has always been to grow inventory or to grow sales faster than we grow inventory, and were going to work really hard to do that as we move to the quarter, from a Q1 perspective in the port? I would tell you our brand that we work with did a great job of managing through that last year but we were not immune.

We did have slowdowns in the port that definitely impacted sales and in certain parts of the first quarter so we will be anniversarying that as we go into this year and as we go into this in Q1 of 2016 and as we get more clarity around that March we will be happy talk about that in what we think that means..

Thank you. Great. Thank you very much. Best of luck..

Thank you, Adrienne..

I will like to turn the call back over for closing remarks..

Thank you, everyone for joining us today on the call and we appreciate as always your support and the good quality of your questions today. We look forward to talking to you in March when we report our fourth-quarter results. Have a happy holiday..