Christina Cheng - IR Roger Rawlins - CEO Jared Poff - CFO.

Rick Patel - Needham and Company Paul Trussell - Deutsche Bank Richard Magnusen - B. Riley FBR Camilo Lyon - Canaccord Genuity Christopher Svezia - Wedbush Dana Telsey - Telsey Advisory Group Tom Nikic - Wells Fargo Sam Poser - Susquehanna.

Good morning, ladies and gentlemen. Thank you for standing by. At this time, all participants are in a listen-only mode. As a reminder, today’s conference is being recorded. Now, I would like to turn the conference over to Christina Cheng, Senior Director of Investor Relation. Please go ahead, ma’am..

Thank you. Good morning and welcome to DSW’s Third Quarter 2018 Conference Call. Earlier today, we issued a press release comparing results of operations for the 13-week period ending November 3, 2018 and October 28, 2017. Comparable sales are calculated for the same 13-week periods ending November 3, 2018 and November 4, 2017.

Please note that remarks made about the future expectations, plans and prospects of the company constitute forward-looking statements. Results may differ materially due to various factors listed in today’s press release and our public filings with the SEC. And we assume no obligation to update any forward-looking statement.

Joining us today are Roger Rawlins, Chief Executive Officer; and Jared Poff, Chief Financial Officer. Now, let me turn the call over to Roger..

Thanks, Christina. And good morning. For two years, we have been articulating our vision to position DSW Inc. for strong earnings growth. And today I am pleased to report our team’s result.

Our strong momentum has continued, as we delivered a 7% comp and 56% earnings per share growth this quarter, following our 10% comp and 66% earnings per share growth in the second quarter. On a 12-month rolling basis, we have driven a 5% comp, operating income grew to 35%, and earnings per share growth of 56%.

Gross profit and operating margins are leveraging, demonstrating the strength and discipline we have in our core business. As I compare our results for the retail landscape, I'm excited to see DSW Inc. at the top of the list both from a comp sales and profitability increase standpoint.

Fiscal 2018 will be one of the best earnings growth years in our history. I am confident that with the investments we made, the strategies we laid out, our team will continue to sustain our strong momentum. We've also completed two major acquisitions in the last 12 months, while delivering the outstanding performance in our core businesses.

This would not have been possible without the leadership talent upgrade we have made across the business over the last 3 years. As these leaders focus on running the business, this has allowed me and a few other key executives to pursue new growth opportunities.

As a leadership team, we are clear on our responsibilities and nothing will distract us from delivering on our mission to inspire self-expression. The strategies we have laid out to drive the business are the force behind our third quarter and year-to-date results.

The $833 million of revenue this quarter and the quarterly increase of $122 million are both company record, driven by substantial comp growth in our core US Retail segment.

Additionally, the Canadian Retail segment had an outstanding quarter and drove significant earnings into the business in just the second quarter since the acquisition was completed. At our US Retail segment, every category, women's, men's, athletic and accessories had positive comps in Q3.

We're committed to fueling this incredible momentum going forward with the right investments, and consequently, we are raising our 2018 earnings guidance.

On November 5th, we closed on our acquisition of the Camuto Group, transforming our organization into one of the North America's leading designers, producers and retailers of footwear and accessories. We are excited to welcome our new associates and wholesale partners to the family.

We are focusing on delivering on Founder Vince Camuto’s vision for his brand, its associates and its custom. We are also excited about the margin opportunities this acquisition creates for the DSW brand, as a new wholesale, direct-to-customer and licensing revenue streams it provides.

Let me turn the call to Jared to provide more details on our financial performance and updated guidance. .

One, while comps sales are expected to remain strong in Q4, DSW segment will be down to last year in Q4 as a result of losing the 53rd week and a calendar shift in which we lose a high volume week of October but pick up a low volume week of February.

The volume losses in our biggest business will cause substantial earnings decline and deleverage in the total P&L for Q4. Two, clearance markdown dollars will be up to last year in Q4, despite the decline in volume. The week that we pick up in February is a higher markdown week due to the clearing and [off-season] goods.

Also, we had a record low clearance markdown rate last year due to low inventory levels, which we will not anniversary this year. Three, the Camuto Group acquisition is estimated to be $0.05 to $0.10 dilutive in Q4.

And lastly, our Canadian Retail segment excluding the operating loss from the wind down of Town Shoes is expected to be earnings neutral in Q4. The fourth quarter is an anomaly this year and is not reflective of the outstanding business we have had year-to-date, nor the trajectory of the business into 2019.

This year will be one of the strongest earnings performances in company history and we look to improve upon that in 2019. With that, let me turn the call over to Roger to share his closing thoughts on the state of the business. .

Thanks, Jared. Our strategic objective to gain market share in 2018 is delivering better than expected results. I'm excited and proud that we will become a $3 billion retail business in 2018.

Next year, with a full year of the Canadian Retail segment and Camuto Group’s wholesale business in our sales, we will be well on our way to $4 billion in annual revenue, which includes approximately $500 million from Camuto Group’s businesses.

This wholesale and private label business represents approximately $1 billion in downstream retail sales, thus giving DSW Inc. the ability to participate in close to $5 billion of footwear market share.

From 2011 to 2018, we drove $1 billion of top-line growth with approximately $1 billion investment in over 200 store build-outs, operating costs and inventory. During this timeframe, we captured modest market share, as pure play e-commerce companies and brands who were going direct-to-consumers, made significant market share gain.

As we were making these investments, the footwear market changed significantly. So to stay relevant, we must change. We must look for new markets and play at different spots in the supply chain to remain an industry leader.

The acquisitions we made over the past 6 months have added more market share than the $1 billion investment we made over the past 6 years. And we'll transform our company into the most disruptive force in the industry, while enabling us to grow well into the future.

To conclude our prepared remarks, I want to summarize what I see as our key accomplishments now that we are 3 quarters into 2018. First, we continue to beat earnings and comps sales expectations driven by the outstanding execution against our core strategy.

In 2018, we will have our strongest comp performance since 2011 and highest earnings per share since 2013. This is the second quarter in a row where we have raised guidance, with our new guidance midpoint going up $0.10 from the previous guidance.

Second, we completed our Canadian Retail segment acquisition at the beginning of Q2 and it is already accretive to our annual earnings. The addition of Bill Jordan as President and Mary Turner as Chief Operating Officer have been crucial to the success we have seen as they have the team focus on driving profitable results.

Third, we completed the Camuto Group acquisition at the beginning of the fourth quarter immediately giving us world class design and sourcing capabilities that will generate access to new revenue streams, transform our business and accelerate future growth. And lastly, we continue to innovate.

We are expanding our W Nail Bar and footwear repair services to more locations. We will continue to test new fixture packages to drive better customer experience. DSW has long been an innovator and we will continue to test ideas that provide exceptional and differentiated customer experiences.

We must find ways to emotionally connect consumers with our brand and the brands of our retail partners. Our core businesses, along with our recent acquisitions, will work to create a force in the industry unlike anything that exists today, once again demonstrating DSW Inc.’s instability to disrupt and grab meaningful market share.

I want to thank our leaders and all our associates for driving these remarkable third quarter results. Your passion and energy to realize our vision is certainly an inspiration to me. We'll keep operating with focus, simple and disruption, as we transform our business for long-term sustainable growth.

With that, let me turn the call over to the operator for Q&A. .

Thank you Mr. Rawlin. We will now begin the question-and-answer session. [Operator instructions]. And the first question will be from Rick Patel of Needham and Company. Please go ahead..

Thank you. Good morning, everyone, and congrats on the very strong execution. Can you help us with the modeling of Camuto, as we think about the fourth quarter and 2019? Any context on that business’ standalone gross margin and SG&A versus DSW, would be helpful. And I was also hoping you could talk about the pathway for accretion.

It sounds like you need to make some additional investments before we can see that segment improve.

So just curious how we should be thinking about the overall sales growth for that segment versus expense growth over the next few quarters?.

Yes, I'll start with that. We are still really getting our hands around that, that business and how to put the financial disciplines in place around projections and modeling, things like that. I will tell you on an overall run rate, on a more normalized basis, they tend to be relatively similar to our own operating income margins.

So I don't see a great deal of accretion or dilution from a rate standpoint. As I mentioned in the call, they still have some headwinds facing them throughout ‘19. Many of those almost -- well over half of them went away with our acquisition. The liquidity freed up, the factories have all been brought current and capacity is starting to be restored.

But that is going to take more time to breed in just given the lead times, I mean spring orders have long been already started to be queued in the factories and so we've got some time to see that flow through.

But in general on a healthy operating basis you see them at a operating margin rate similar to ours where we do see some opportunities are really in the white space areas we talked about and those are retail areas.

So you can you can expect to see some different margin profiles related to growth in retail sales for them versus traditional wholesale channels. And I think you asked about CapEx, but overall we don't see a large amount of capital expenditures.

We think there's a little bit needed to bring their operating efficiency to their warehouse but overall they've made the investments that they need to. .

That's very helpful. And I was also hoping you could talk about the outlook for merchandise margins for the core DSW segment, when we exclude the impact of weekly shifts.

Your performance in 3Q was very strong and in contrast to some of the numbers we've seen out of the value space, so, can you provide a little bit more color on what you think drove the strength there and your outlook as you think about the fourth quarter excluding the shifts and into next year?.

Rick, I'll take that question. Rather than talk about Q4, what I would say is just general direction of where we believe our margins should be able to go.

I think a huge benefit we've had over the last roughly about nine months of due diligence around both Nine West and Camuto is our learning in that process is that in general we pay more for goods than others.

And I think the learning of what it actually cost to manufacture goods, how we can be better within the DSW brand around the sourcing side, around logistics, speed to market, it was huge learnings we're getting from this. So, our belief is that we're going to continue to press hard on the vendor community to make us comparable to like size retailers.

And I think that should create upside for us go forward in margins. And that's a huge benefit that I think of acquiring this kind of capability to just get line of sight to what it actually cost to manufacture good..

Thanks very much and happy holidays everyone. .

And the next question will be from Paul Trussell of Deutsche Bank. Please go ahead..

Hey, good morning. Congrats on strong results..

Thanks, Paul..

Just wanted to maybe touch a bit more on the VIP Rewards Program since the re-launch, obviously having some success there, just maybe go a little bit more in detail on what you're seeing in terms of customer acquisition, average kind of spending levels, would just be helpful to have a little bit more granular color on the success and potential kind of how we can think about the sustainability of the success with that program going forward?.

Thanks, Paul. I'm not going to give you specifics, but I would tell you that it's the ultimate win. It's the triple play kind of thing and that it's attracting more members. We have a higher retention and we're getting a higher spend which as you know in retail that's about as good as it can get.

And so Amy and our team that lead that marketing effort have just done a phenomenal job. Really, really proud of what they've done. And it's not just about the service and all the discounts, those kinds of benefits but it's about the connection I think it creates for the consumer.

I think our philanthropic efforts around Soles4Souls, which I think we're now close to 600,000 pair of shoes, something north of that, that we have been able to collect and put back into our communities and I mean those are kind of things, those are resonating with our customer and attracting new customer and creating more loyalty with our customers.

So all of the things we have set out to do with this re-launch, which if you recall, Paul, we had not touched this in a meaningful way in about 10 years. And so I think it was time for us to make some changes. But I think all of those elements combined is where we're seeing success.

And as you look out into the future to your question, I think when you merge into this elements of services, and other capabilities we can bring to bear with personalization, I think there's continued growth in that area..

Thank you. And you also mentioned I believe that kids and boots drove over 79% of the volume increase versus last year.

As we kind of break that down for the kids business, can you help us understand what did you see out of the stores that actually have had kids now for two back-to-school seasons as we kind of think about comps in the kids business versus just additional stores that have the assortment? And on the boot side, just curious of your view on the sustainability of that strength into 4Q?.

Great questions, Paul. We have seen real success with kids, not just in the fact that it's in more doors but it's close to double-digit comps in stores that have -- or warehouses that had it for multiple years.

And I think the learnings we have from our Canadian operations were when we see kids penetrate up to 10%, 15%, 20% during certain periods of time and we're nowhere near that here in the US. We think there's continued upside to the kids business.

From a boots perspective, I can't speak to Q4, but I think just in general an investment in boots is a good investment for us.

And I was just looking at this last night, if you get back and look at history, our penetration even as good as we've been in Q3 is still well below where it was, if you go back to sort of our heyday and this comes back to us focusing our efforts on our best of in that categories, putting our inventory behind it, putting this great marketing machine we have behind it and then elevating that boot assortment into warehouses so that the consumer can see it and I think there's more upside to that.

So those are things this comes back to, so we've had just done a ton of work around our mission and our vision and our strategies and these things are playing out exactly like we had penciled them. And we're using data to make those decisions. .

I would add to that that Paul, that the learnings that we're getting from our Canadian company where kids is much heavier especially during the third quarter, I think that we're able to kind of reverse import back here into the United States and really has informed the way we're approaching going to market here and dealing with this opportunity that Roger talked about.

.

Thanks for the color. Best of luck. .

And the next question will be from Richard Magnusen for Jeff Van Sinderen of B’ Riley FBR. Please go ahead. .

Good morning. Congratulations on the strong quarter and thank you for taking our call.

Regarding Camuto acquisition, can you provide any details regarding growing the brand internationally versus domestically and what intentions you may have regarding the longer term international target of growing that brand?.

I think with the Camuto brand right now our focus is how do we strengthen it here in the US. That's what I would tell you for us. How we can do a better job of bringing that brand to life in a more meaningful way within our partners at Macy's, Nordstrom, Dillard’s, other locations. Those are all opportunities.

And then the international play will be more with ABG and relationship we built there and leveraging their expertise because what we've seen from them and the brands that they have acquired and grown, a large chunk of that has come internationally and so we'll be working with ABG to make that happen. .

Okay.

And then what more can you tell us about expectations to leverage the Camuto operations and along with any digital capabilities to strengthen and then further develop your own private label portfolio?.

So I would describe it as -- it's a significant opportunity and I'll start first with the private brand side. I think if you guys go and I know you do this research and look at other retailers and where they are growing their business and where their focus is, a lot of it is around private brand.

And when I compare our performance to others, we are under penetrated there. So I think our expectation is that over the next 12 months we would love to have our portfolio of private brands to be manufactured, I should say designed and sourced by our Camuto enterprise. So I think that has significant upside.

Our vision of trying to get that to be closer to 25%, 30% of what you would see in the non-athletic space, that's where we would like to get to. But still have roughly 800 labels that we would carry. But you would see a much higher penetration of key items provided by Camuto to us. I think that's the biggest opportunity.

And then on the other side, the direct-to-consumers, Jared had mentioned in his comments and we have significant upside here.

I think our team here at Designer Shoe Warehouse does a fantastic job with our website, I think our experiences we've created in omni-channel which has been recognized are second to none and how do we bring those things to life at Camuto, across all of the brands that, that we manage now in that portfolio as well as brands that ABG is going to give us access to.

So I think if you look at the competitive landscape, the 2 largest players that have grown in our space has been Amazon and it's been brands going direct-to-consumer. And the area where I'd say the biggest opportunity within the Camuto enterprise itself is to find ways for that brand to be able to go direct-to-consumer..

Okay. And then one last one.

As you've managed the inventory somewhat in [chase mode], could you describe more how it enabled you to be able to maintain really improved margins versus giving up some sales? And then how you feel inventory is positioned as you approach the last 2 final weeks and 2 final weekends before Christmas?.

We can't speak to the inventories for Christmas.

But what I’d tell you -- what I think our merchants -- what Debbie and the team have done just a fantastic job of doing is again they've invested in key items and they’ve put depths behind those key items which have put our in-stocks in the best position -- I've been here for long time, it feels like at times and a short time and other times.

But I think it's the best we've had our inventory position business consumer facing. And that's because they made investments in key items, they went behind it or get behind it with lots of inventory and I'm really, really proud of that. And I think we can do even better at that as we head into future period..

And the next question will be found Camilo Lyon of Canaccord Genuity. Please go ahead. .

Good morning, everyone. Just thinking about what's going on in the marketplace with respect to China tariffs and those escalating, potentially expanding different categories, the risk of associated with that as well as the moves that other manufacturers and brand are taking to diversify their exposure to China.

How do you view -- does it alter your view on Camuto sourcing arm capabilities and strengths that you view from that production perspective because that, that capability is mainland-driven? Is there a way that you start to mitigate any potential risks around Camuto's manufacturing exposure?.

It's not -- I think as I mentioned earlier one of the big benefits that, that we have through the acquisition is just line of sight into cost of goods for DSW, the brands, ABG -- our ABG, affiliated business group and a recognition that we're paying too much for product.

And when we look at where we have opportunities to mitigate tariffs, I think it's a combination of things. It would be to go get dollars back from the vendor community where we can see that we are paying too much for product. And we think that is a way in which we can mitigate a large portion of that risk.

What I like about our team at Camuto and the work that they were doing well before we got involved is they've been looking for other ways to move outside of China. We also have manufacturing in Brazil when they're looking at other countries.

So I think the combination of going back to the vendor community to be able to deal with some of the tariff challenges, going larger on some of our key items so that you get the benefits of having depth behind inventory which means you also get better cost in.

And then obviously there would be some areas where I think you would pass it on to the consumer. I think we have a pretty good game plan for how we'll deal with it. Our preference would be not to have to do that. But in the event that it does happen, I think I do feel like we have a plan to address it. .

Got it, thanks for that Roger. Jared, you talked about spring orders being up for Camuto.

Is that an overall Camuto comment or does that also apply to the private label piece of the business?.

Go ahead. .

And then my second question around private label.

If you can just articulate on the DSW business, how private label performed in women's versus branded, performance in women, and if there was any delta in the comps to get there?.

Sure, on your first question, what I was referring to specifically was the health of their underlying wholesale business. So it was specifically around their major existing customers. And when we look at the spring orders versus spring of last year, they are trending to be greater than what they were last year.

So it was in context to primarily their wholesale business. We, as I mentioned, are still getting our hands around how we are going to report out and talk about their overall business. And to be perfectly honest I have not landed on how much visibility we give into the private label business.

That tends to be a little more help for the best with some of the customers there. From a DSW standpoint, our private label performance in women's was I think slightly better than the branded performance, but there's still significant opportunity for growth in our overall private label business.

As Roger mentioned, we think that, that business is something well north of where it's at. And our Camuto acquisition gives us the infrastructure to be able to handle that. .

Got it. And then just finally, clearly the VIP Rewards refresh if you will is having the intended benefits, right? It’s helping those comps.

If there is a component of marketing around it as they talked about? How should we think about kind of the SG&A profile of the business over the next year and the run rate of SG&A dollar growth as it relates to these investments around marketing? Are these investments they will continue to be making or are they more kind of one-time in nature, do we reacclimate the consumers to this new revamped reformatted VIP membership program?.

One, we don't want to give too much color yet around ‘19 or beyond Q4 because that's something that we have not put out there publicly. What I will say is we've seen great results from our investment in marketing, unlike with anything there are some things that resonate very, very well, some things that don't resonate quite as well as you thought.

And so I think that there will be an opportunity to look at maximizing those dollars or optimizing those dollars and making sure that we're getting the most spend for it. without that, I don't want to give too much color on to ‘19 yet. .

And the next question will be from Christopher Svezia of Wedbush. Please go ahead. .

Good morning, everyone. And thank you for taking my question and nice job in the quarter.

I guess just on the guidance for $1.70, $1.85 and earnings just want to clear, it includes the $0.05 to $0.10 loss related to Camuto but also it excludes the $0.07 related to the non-go-forward businesses which within your 9 months so far, but you don't have a kind of pro forma to kind of break that out from a P&L perspective.

So I guess the way we're looking at it on the annualized basis just is more like a $1.53, $1.78 kind of understand where I'm going with this, is that -- am I thinking about that right?.

Yes, and I'd be happy to go over more specific modeling questions on the one-on-ones. So we can dig into that. I think if you look at the $1.72 year-to-date adjusted earnings that includes that $0.07 of business exits. So if you're looking at the business excluding that you'd have to add those two together.

But that, that $1.72 run rate is where we're at..

Okay. On Camuto, we’ve made the observation that we’ve lost -- or roughly the run rate of ‘18 is roughly $10 million loss of which $9 million is interest expense related and you expect it to be sort of probably dilutive to accretive for next year.

There's also a lot of other separate moving parts, the licensing fee income or fee that you are going to be giving to Authentic Brands and the 40% you’re going to get back, fully loaded margin on Jessica Simpson and I think the Lucky Brand, is that all embedded into that -- into that thought process or any color about how to think about those moving parts? I assume that $10 million losses include that -- obviously that licensing fee that you're paying to ABG Group obviously.

.

It does for only the fourth quarter obviously, that’s the only part that was applicable. But yes, so that slightly dilutive to slightly accretive for '19 does include the whole segment Camuto if you will.

And to give you just a little bit of color, of the royalty payments that we expect to be paying to ABG for the joint venture I should make it clear, to the joint venture that we own with ABG, over -- well over half of that ends up coming back to us, coming back to that joint venture and then our 40% from recouping our own royalties because we're 40% owner.

There's also apparel that is being sold, that is paying royalties into that and there is licensing outside of the footwear and apparel space around the other lifestyle type of products. So you take all that and you're left with something that is less than half of the royalties that are going out.

And then you look at the margin enhancements that we get from these products already sold to DSW today, that's the Lucky and Jessica type of products. That's profit margin now stays in the family as well as us converting over our private label makes that piece of the puzzle really an accretive story as opposed to one being dilutive..

Okay. Thank you.

And then just finally, you've done a nice job obviously this year, as you start to think about I know you’re not giving outlook for next year, but just comping the comp given how you've outperformed in the comp and being able to put up positive comp against some of these numbers Q2, Q3, just maybe if you could or any level, what’s the confidence do you have to be able to do that? Just if you maybe add some color about that that will be helpful..

I think the -- there's still lots of runway I believe in opportunity to continue to grow this business and if we follow the same approach that we've taken this year which is where we are investing in products, where we need to differentiate ourselves, an example would be going after boots in season of our sandals, all those seasonal categories in a big way, we believe there's still lots of headroom there.

We believe in the kids business in a meaningful way and as happy as we are with the results we've had. We still are well under the penetration that we think we should be based on the information we can see from NPD as well as our Canadian operations. So I think there's still lots of white space within this assortment.

I think the work we've done around marketing with the VIP launch, there are other elements of that we're going to bring to life which I don't want to share, there’s some competitive stuff to that. I prefer not to share at this point. But personalization is a huge opportunity for us.

And having 26 million, 27 million numbers of your rewards program and making that experience more personalized, it will drive conversion -- drive traffic and will drive conversion. So those I think are a big play.

And then the third is the three leg of the stool, it's the people and I think we've acquired the level of talent that we're looking at drive for 5 and that's sort of our model. That's what we're going after day-in and day-out. That is the expectation that we have to have as a brand.

And those are the three things that I think we approached this year and we think we still have opportunities as we head into 2019 and beyond for the DSW brand, specifically is what I'm speaking to..

The next question will be from Dana Telsey of Telsey Advisory Group. Please go ahead. .

Good morning, everyone. And nice to see the progress. Given the comps that you delivered this quarter and what you’ve talked about in some of the categories, what did you see on men’s and women’s, what is working for you, did seasonal make the difference this year and how are price points changing? Thank you. .

For us, we don't really give a color other than the key things we have in our script. But again it's about boots, it's about kids. The things where we are focusing our efforts again both with product and marketing I think those are where the real opportunities lie.

And then the other element that we haven’t spoken to in a big way today is the opportunity around services.

And when you think about the success we've had here in Columbus with our W Nail Bar, repairs, Orthotics, other kind of services creating an emotional connection with our consumer, bringing those things to life in a much larger way, following models that have been created by a brand like Best Buy on how they've elevated services in a meaningful way while still selling products.

Those are all opportunities I think as we head into ‘19 and beyond. .

[Operator instructions]. And the next question will be from Tom Nikic of Wells Fargo. Please go ahead. .

Hey. Good morning, everyone. Thanks for taking my question.

I just want to ask, now that you’ve got Camuto in-house and you're going to have this sort of hybrid operating model with bunch of brick-and-mortar stores, while also running a wholesale business that’s selling to other partners, can you just talk a little bit about the balancing the 2 channels and how you don't run into any sort of channel conflict there and anything that you can sort of do help us -- or explain to help us understand the way that you balance the 2 channels which you will be operating in would be really helpful? Thanks..

Tom, I think the best example I'd give you is the relationship we have with Stein Mart.

And we've been doing footwear with Stein Mart for many years and we have -- I think if Hunt were on this call, he would tell you that that we are a key driver for their business because footwear is something that attracts the consumer into their doors day-in and day-out and that has been a great relationship that we've had with them and we've had the balance status, we've managed the DSW brand, even though in many cases we have a DSW that's right next to the Stein Mart.

So I think we have a history of managing that way. What I would tell you is that as we shared with our retail partners, we do not see them as competitors. And frankly over the last several years we have not.

Our primary competitors that we see are Amazon and the brands going direct-to-consumer and we shared that with our partners at the other retail segments and we want to work with them to provide an insight to what we see within our customer file at the DSW brand, the success we've had with our rewards program, how we can help share insights.

We want to help them grow their business. And we think we're all fighting the same fight. And I think that's how you manage that conflict. You see one another's partners and you provide good and great insight, so that the both of you win. And that's the approach that we are -- we have been taking and that we will take.

And frankly I think that's different than anyone else in our space. The insights I think we can share compared to others that might want to provide that service, I think that puts us in a unique position..

And the question will be from Sam Poser of Susquehanna. Please go ahead. .

Thank you for taking my question.

Just -- Jared, just one quick one on interest expense, if you give us some idea of how you're seeing that?.

Yes, so we actually are expeced to see an interest expense -- net interest expense in Q4 as opposed to our traditional interest income and that's primarily because we’ve decided to take out a slug of debt. Although as you noted on the -- you may have noted on the press release, we still also have cash investments.

We've decided from a liquidity prudent standpoint that we will keep a turn of working capital and cash and cash investments, and then fund what we needed to on the revolver. So that's what we've modeled out. .

Sam, you got to at least throw us a bone and say good quarter, dude, come on..

All right. Thank you.

Well you guys have had a very good quarter and my question though really is and you brought up -- a second ago to follow-up from Tom's question, you brought up your relationship with Stein Mart, but Stein Mart is arguably a more moderate retailer that you are and a lot of the consumers that are at -- a lot of the customers of Camuto Group are much higher at.

So that's a very -- when you're offering higher-end insights to more moderate retailers, that's one thing. But when you have retailers, Nordstrom, Dillard’s, and so on, they’d arguably sell higher ticket items, have a slightly maybe more affluent consumer, that moves in a different direction.

Can you explain how that all works, even though you have this great -- as you have this great relationship with Stein Mart and so?.

I think as I shared about the information we have within our Rewards Program where we have roughly 26 million members with a household income that ranges from $75,000 to a $100,000 which is a pretty strong household income I think you would agree in the competitive landscape.

I think there's insights that we can share based on our learnings and I think those are all things we can share and you take into account the fact that the Camuto Group is staying as it is today and those relationships that they have spent years -- that Vince spent years and Alex spent years building with our retail partners, there are not changes that we're making there.

And I think again that positions us differently than anyone else that would have acquired this enterprise..

And ladies and gentlemen this will conclude our question-and-answer session. I would like to hand the conference back to Roger Rawlins for his closing remarks. .

I just want to say thanks to all of our associates on the call, all of our partners as well. Thanks for a great third quarter and looking forward to getting through the holidays. Happy holidays to you and your family. Have a great day. .

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today's presentation. You may now disconnect your lines..