Good day, everyone, and welcome to Genesco's Second Quarter Fiscal 2024 Conference Call. Just a reminder, today's call is being recorded. I will now turn the call over to Darryl MacQuarrie, Senior Director of FP&A. Please go ahead, sir..

Good morning, everyone, and thank you for joining us to discuss our second quarter fiscal '24 results. Participants on the call expect to make forward-looking statements reflecting our expectations as of date, but actual results could be different.

Genesco refers you to this morning's earnings release and the company's SEC filings, including our most recent 10-K and 10-Q filings or some of the factors that could cause differences from the expectations reflected in the forward-looking statements made today. Participants also expect to refer to certain adjusted financial measures during the call.

All non-GAAP financial measures are reconciled to their GAAP counterparts in the attachments to this morning's press release, and in the schedules available on the company's website in the Quarterly Earnings Results section. We have also posted a presentation summarizing our results here as well.

With me on the call today is Mimi Vaughn, Board Chair, President and Chief Executive Officer; and Tom George, Chief Financial Officer. Now I'd like to turn the call over to Mimi..

number one, strengthening customer engagement and expanding relationships with our target team customer, which is key in challenging times and it is our first priority.

We launched a deep dive on consumer and market insights to build on our expansive knowledge of the teen to better understand purchase intent and how behavior has changed post- pandemic to shape future actions. As part of our engagement efforts and the lead up to back-to-school, we fully launched Journeys All Access loyalty program.

While it's early on, the initial reads are very promising with a program approaching 1 million members signed up since the full launch in stores two months ago. We're aiming to interact with customers more frequently, driving repeat purchases, inducing them to consolidate their branded purchases with Journeys to achieve higher loyalty tiers.

Moving forward, in Q3, we will expand all access to other rewards specific to some of our top brand partners. With even more first-party data coming in through loyalty sign-ups, we're further leveraging our investments in customer analytics and more targeted personalized marketing.

Number two, elevating product and strengthening brand relationships, including expanding and adding more differentiation to the assortment, increasing the number of exclusives for Journeys and testing new brands and styles. Here, we're aggressively working to reposition the Journeys product assortment to meet the customers' appetite for newness.

But beyond product, we're more fully leveraging the partnerships with our brands. Collaborating to tell key stories through social media, events and other activations to strengthen both the Journeys brand and the brands of our vendors.

While repositioning the assortment will take some time, we already had several top-to-top meetings with our brand partners and in the process, secured greater access to highly allocated in-demand styles that allow us to impact the assortment by the back part of this year. Number three, sharpening Journeys brand marketing.

We're heightening these efforts as our insight work told us that when our customers engaged, they have a great experience with Journeys, but we have an opportunity to build greater awareness with our target consumer.

The partnership with Thredup, (ph) we launched this past quarter unites our Journeys brand purpose messaging with activities to drive commerce. In addition, in efforts to boost traffic in the back half, we're increasing paid social and paid search spend both of which are delivering positive returns.

Number four, implementing incremental initiatives to drive digital and omnichannel growth. We have the opportunity to significantly grow our e-commerce business like we've done at Schuh and are building on the successful initiatives that have driven Journeys' digital business to double-digit growth.

These include increases in digital advertising and leveraging the new loyalty program. We are especially excited for the imminent launch of Buy Online Pick Up in Store, BOPUS will be phased in over the next few months beginning in September and rolled out before holiday.

This leverages our store fleet while providing consumers with an additional convenient pickup option just in time for the holidays.

Number five, optimizing our Journeys footprint and driving productivity and efficiency, while closing underperforming mall stores, driving e-commerce and piloting off-mall locations are in response to the changing shopping habits of our teen consumer. Our overall objective is to grow Journeys revenue and share of market.

Through improving customer data and analytics, when closing a store, we're better able to communicate with our customers and direct them to a nearby store or to online to maximize sales recapture.

It's important to note that given the fixed cost we eliminate by closing a weaker performing store, we need very little sales transfer to achieve a breakeven operating income.

Our recently completed time studies to optimize store selling efficiencies will ultimately yield positive results notably driving stronger conversion and higher productivity per hour as we eliminate excess work and focus more effective selling tactics on peak volume times.

Our new point-of-sale hardware and software, including in-store mobile devices, is facilitating further improvement as we deploy this and other technology towards these efforts.

Importantly, I want to underscore, again, the conviction I have in our ability to address Journeys' challenges and achieve success just as we have demonstrated with our other businesses.

With the great talent, creativity and dedication of the Journeys team, its unique strategic positioning as the leading destination for fashion footwear for teens and unparalleled strength of its brand relationships, I believe strongly in our future prospects.

I look forward to keeping you updated on our progress as we continue to refine and evolve this plan and its priorities. Now moving to our outlook. While we were encouraged to see some pickup in trend in Q2, we believe it's prudent to stay cautious given the lack of visibility into an acceleration in consumer demand or economic improvement.

Thus far in August, back-to-school sales for Journeys have improved a little further with consumers having a reason to shop and shopping much closer to need. Overall, though, we're not planning for a major change in trend for the balance of the year.

As I said, we have, however, moved quickly to inject the assortment with more freshness and into demand goods and expect to see some impact through the back half from these efforts, especially in Q4 during the holidays.

Before I pass the call to Tom, I would like to thank our employees for your resilience, tremendous efforts and dedication, which makes all the difference navigating challenging times like these. I'm proud to work with such an inspired group of people.

Our businesses are in strong and differentiated strategic positions and means something to the consumer. We have a track record of managing well through adverse cycles, and I'm confident that once again, we will succeed. And with that, I'll hand it over to Tom..

Thanks, Mimi. While the second quarter was challenging, and we were encouraged that our profitability came in ahead of expectations in the current climate.

We not only have a solid foundation in place to navigate the current consumer environment but also remain confident that our footwear-focused strategy can continue to drive strong results over time. Turning to our results for the quarter. Consolidated revenue was $523 million, down 2% compared to last year and down 3% on a constant currency basis.

With the stronger result relative to expectations driven primarily by Journeys and Schuh. While the Journeys consumer remained discerning when it came to spending, the magnitude of store channel traffic and sales decline improved versus Q1.

And our digital business saw a nice acceleration in year-over-year growth, increasing double digits with particular strength in July as back-to-school approached. Our total comps were down 2% as strong double-digit gains for Schuh and J&M were offset by the negative comp at Journeys.

By channel, total store comps were down 6% and while direct comps were up 14%. But business Schuh total comps increased 17%, J&M total comps increased 12%, and Journeys' total comps were down 11%. Overall gross margin was up 20 basis points as compared to last year.

Although Journeys' gross margin declined, the decrease was less than anticipated and was more than offset by improvements in all our other businesses. As compared to last year, our Journeys gross margin was primarily driven by incremental markdowns to clear product in the current environment.

Overall, we are pleased with the improvement in our other businesses as our initiatives to expand gross margin continue to gain traction.

By business, Journeys gross margin was down 100 basis points Schuh's gross margin was up 280 basis points as the division benefited from an elevated product mix and assortment and reduce duties as a result of adding an Ireland-based distribution center.

J&M's gross margin was up 60 basis points as airfreight tailwinds and better product mix more than offset higher markdowns and closeouts.

Finally, Genesco Brands Group's gross margin surpassed our expectations in the quarter, up 500 basis points, a stronger operating and supply chain efficiencies took hold and the division benefited from price increases and a product mix shift. Moving down the P&L. Adjusted SG&A expense was 49.6% of sales, an increase of 400 basis points over last year.

Given that we are at minimum levels of expenses at this lower volume time of year, it is difficult to drive them any lower in response to sales, particularly as it pertains to selling salaries. In addition, we are experiencing hourly wage pressures.

While our time studies have yielded valuable insights, converting them into store selling efficiencies is only beginning to take hold. As a result, we incurred higher-than-expected selling salaries. In addition, we recorded higher expenses to drive our technology initiatives as well as increased expenses in our divisions that are growing.

However, the deleverage would not have been as steep had we not reversed approximately $5 million of incentive comp expense last year. Excluding the incentive comp comparison, Operating expenses deleveraged 310 basis points. When also adjusting for the incentive comp comparison, Journeys expenses were relatively flat on a dollar basis to last year.

Low-borrowing overall occupancy cost and reducing the amount of fixed expense and the store channel remains a key priority, and we continue to make good progress. In Q2, we achieved a 15% reduction in straight-line rent expense on 59 lease renewals across the company with an average term of approximately three years.

This brings our year-to-date renewals to 96. With over 50% of our fleet coming up for renewal in the next couple of years, we have a lot of opportunity to capture additional savings.

In summary, for the second quarter, we incurred a better-than-expected adjusted operating loss of $10 million compared to adjusted operating income of $10 million for Q2 last year. This all resulted in an adjusted diluted loss per share of $0.85 for the quarter, which compared to earnings per share of $0.59 last year.

Increased interest expense and a reduced share count also contributed to the decline in EPS. Turning now to capital allocation of the balance sheet. We ended the quarter as planned in a net borrowing position. We are pleased inventories were well controlled, down 3% to last year, achieving our goal to be below last year's levels.

With respect to Journeys specifically, we were able to adjust receipts and ended the quarter with inventories 15% lower than last year and better positioned to invest in the newest trends we need in the assortment. J&M and Schuh inventories grew compared to last year to support the higher levels of demand in their businesses.

We will continue to work with our brand partners to manage our inventory levels and adjust our product assortments to the back half of the year. Capital expenditures in Q2 were $18 million with investments primarily directed to our digital and omnichannel initiatives and new stores.

We opened 10 stores, which were primarily off-mall and in outlets and closed 31 to end the quarter with 1,375 total stores. Finally, we repurchased 1 million shares during the quarter or 8% of total outstanding shares for $23 million, leaving $52 million on our current authorization.

We continue to holistically review our cost structure, and we continue to anticipate achieving an annualized run rate of up to $40 million in cost savings in fiscal '25, approximately $20 million of which will be realized in fiscal '24.

We are also shifting more fixed cost to be variable, thereby decreasing our sensitivity to revenue swings during times of economic turbulence. These actions to shore up our cost structure are designed to maximize operating leverage and provide a meaningful lift in operating income and EPS growth with sales rebound.

Regarding store closures, we closed 54 Journeys stores to the end of Q2 or roughly 5% of the total fleet. These were largely mall-based locations.

To help you think about the positive impact to our P&L, the savings from 100 Journeys stores we've targeted to close eliminates roughly $25 million in cost from SG&A expense which will mainly benefit fiscal '25. This is in addition to the $40 million of annualized run rate cost savings.

And as Mimi mentioned, we only need to recapture the small portion of those lost sales digitally or via a nearby store to have a net neutral effect on operating income. Now turning to guidance. Although Q2 results were better than we initially expected, the consumer environment remains uncertain.

As such, we believe it's prudent to retain our cautious view for fiscal '24 and not assume a significant change in current sales trends through the balance of the year. We continue to expect the challenging Journeys consumer.

And while we expect Schuh and J&M to continue performing well, we are seeing some continued pressure in Q3 in the wholesale channel. On the expense side, even with our cost reduction initiatives, we anticipate some of the escalating cost pressures we experienced in Q2 to continue in the back half, particularly in Q3.

In addition, we shifted some marketing expense out of Q2 and into Q3. These factors are offsetting the better-than-expected earnings per share we realized in Q2 and leading us to maintain our full year outlook for adjusted earnings per share of $2 to $2.50 with expectations for earnings to be near the midpoint of this range.

For the full year, we now expect total sales to decrease 2% to 4% and were down 3% to 5%, excluding the 53rd week. This improvement versus our prior guidance primarily reflects our actual Q2 sales results but also factors in an improvement Schuh.

We continue to expect the third 53rd week to add approximately $25 million of sales and have a small negative effect on earnings per share. Some color on the total year-end sales by business compared to last year. For Journeys, we now expect a high single-digit decline. For Schuh, we now expect growth in the low double-digit range.

reflecting the strong trends in the business. For J&M, we continue to expect a low double-digit growth rate. And for Genesco Brands modest growth in the back half with a slight decline in Q3 offset growth in Q4.

We now expect gross margin rates to be flat to down 20 basis points compared to our prior view for fiscal year '24 gross margins to be down 30 to 40 basis points. The change in our guidance is being driven by our Q2 actual results and some improvement in Journeys in the fourth quarter as more newness flows into the assortment.

We now expect adjusted SG&A as a percentage of sales to deleverage 220 basis points to 240 basis points compared to our prior expectation of 170 basis points to 200 basis points of deleverage. This is largely driven by increased wages and other cost pressures.

Despite this pressure, Journeys expenses are expected to decline in the back half of fiscal year '24 as cost savings measures and store closures to take hold. Our guidance assumes no additional share repurchases, which results in fiscal '24 average shares outstanding of 11.4 million, and we expect the tax rate to be approximately 24%.

I'd like to now provide some color around Q3. Starting with the top line. We expect Q3 sales to be down low single digits or a similar percentage as the second quarter.

With respect to Q3 gross margins, we expect an overall gross margin decrease of 50 basis points to 70 basis points, given incremental markdowns we have built in a Journeys to ensure clean inventory as well as lower margins at J&M due to product mix shift and higher markdowns against last year's extremely lean inventories.

Regarding expenses with additional pressure on selling salaries and other cost inflation, we expect roughly 130 basis points to 170 basis points of overall SG&A deleverage in Q3. Finally, for Q3, we expect approximately $2 million of interest expense, a 24% tax rate and a share count of 11 million.

In summary, we continue to position ourselves to weather the current consumer headwinds, while simultaneously creating a leaner and more nimble organization that is better equipped to capitalize and deliver even greater shareholder value once the tide turns. Operator, we are now ready to open the call for questions..

Thank you. [Operator Instructions] Our first question is from Mitch Kummetz with Seaport Global Securities. Please proceed..

Yeah. Thanks for taking my question. I guess I have several I'll ask few now and then jump back into the queue. Maybe on the Journeys business, you referenced sequential improvement both in the press release and on the call today. Is there any way you can -- and I guess that's continued into August.

Can you quantify that? I mean, are we like -- I mean, did you get to like down mid-single by August or kind of just maybe go through that..

Mitch, thank you for your question. And we were pleased to see improvement overall in the Journeys business. And I'll just remind you that the Journeys comp in the first quarter was down 14%. In the second quarter, we saw that improvement to down 11%.

And really, as I said on our last call, when we got into May, the comp for May was pretty much reflective of what we were seeing in the first quarter. The summer was off to a very slow start.

And we didn't see comps pick up until June, but they picked up, fly in June and really picked up in July to being down in the high single digits, running down around 9%. And that really carried through into August. And so we've seen that movement from down 14 to down 11% to down 9%..

Okay. And then it sounds like from a product standpoint, I know last call, you talked about, I think, the last couple of calls, you've talked about kind of the shift away from casual more towards athletic. And I think last call, you talked about strength in clogs.

Can you just give us an update in terms of what you're seeing there?.

There's been some bouncing around, Mitch, in terms of product. But in general, what we saw and what I described coming out of the pandemic is that our customers, our teen customers gravitated toward what we call the casual side versus fashion athletic. And our teen always has a huge complement of fashion athletic in their closet.

It's what they were on a day-to-day basis. But fashion swung much more to casual driven by the purchases of more sandals, more boots, more shoes versus what we call fashion athletic. And in ups and downs, we're still seeing the strength within the casual side in terms of what customers are buying.

And I've described before is that if you go back to winter, we saw a lot of trading down from tall boots into shorter boots what our teams are liking is slipper like product but a little bit more structured. So clogs I've talked about as well. There are a number of different brands that are representing the clog style.

And that's a nice trend that we are seeing. We are actually getting some early reads on fall product interestingly. It's still it's still quite hot in many parts of the United States. And -- but we are seeing that there is some more interest and more appetite in product for the fall.

And so I think in general, the consumer has been sitting on the sidelines. They've been picking and choosing what they want to buy, but they -- and I talked a lot about the appetite for newness, which is driving what our consumer purchase behavior is responding to more than anything else.

And so that appetite for newness, we have seen translate into appetite for more fall and winter type product despite the fact that it's still summer time..

And then on Schuh, obviously, that business is trending very well. You referenced some market share gain there. I guess I'm curious how much of this is -- anything you talked about kind of a better assortment. How much of this is the assortment is that much better? Maybe the consumer in the UK is stronger.

The competitive landscape has changed more there than here.

Can you maybe parse that out a little bit more?.

Yeah. There are lots of dynamics within the U.K. market. Schuh business has performed just remarkably well in the face of pretty extreme headwinds. There was a lot of change in the consumer in the retail landscape.

There were a lot of retail store closures and the like, but that's largely behind us, and we're measuring against a market that has stabilized from the point of retail store closures.

And so against the backdrop of a consumer environment in terms of inflation being high in terms of just overall spending power on the part of the consumer being competed away, Schuh is outshining competition and truly taking market share.

And so the measurement of market share is that the compelling assortments that Schuh's offering the great service within stores, the terrific abilities on the website is the amplified marketing and the specific marketing to the Schuh consumer is resonating and working really well.

So it's a combination of lots of factors in addition to access to more and better of our allocated product that's what's working well, and that's been a pretty remarkable move up to number 10 in the overall market. And that's a movement of three places overall.

So it is a gaining of market share because of how well that team has created strategies to go after the market and how effectively they've executed..

Okay. And then one more, and I'll get into it back in the queue. You mentioned some of the challenges around wholesale. I think you referenced some weakness for J&M in the quarter. And then also, have you changed in your outlook for the back half.

Can you say what J&M wholesale was in the quarter? And then can you maybe just again add a little bit more color in terms of how you're thinking about wholesale, whether it's for J&M or the other brands for the back half?.

The way to think about that, Mitch, is that the one way you can get to it because we didn't break it out specifically, is that J&M's comps and that's really retail stores and e-commerce were plus 12%, and the growth in sales overall for the business was up 4%. So you can get a measure of the overall wholesale headwinds there.

And with what we're seeing, and I think what many in the industry are talking about is that given the consumer environment, the -- our wholesale customers, that is our retail partners are just being very conservative. And right now, the number one thing is to keep inventories clean.

And even when -- and to keep them low, and even when product is selling through nicely as it is evidenced by the great sell-through in our direct channels. Our partners are being cautious. And I think that they just are coming off of a huge bulge of inventory and want to make sure that they are able to keep inventories in line.

And so there's tended to be really pronouncements across the board, again, in spite of sell-throughs, great sell-throughs within particular brands. And so we have seen that, in general, on the branded side of our business and have reflected that into our overall guidance for the back part of the year..

Okay. Thanks. I’ll get back in the queue..

Thank you..

Our next question is from Corey Tarlowe with Jefferies. Please proceed..

Great. Thanks. I was wondering, if you could talk about some of the momentum that you've seen at Johnston & Murphy. You mentioned that comps were up fairly strongly. So it would be great if you could just double-click into what's driving that momentum and what you expect to head at the division..

Corey, thank you for that question. We're very excited about our prospects for J&M. It's one of the most exciting opportunities for growth within our company and very much aligned with our strategy to grow the branded side of our business.

What we did, what that team did in being really hard hit during the pandemic was to pivot much harder into casual and into comfort. And it's great product with great styling, but also with special technical features with proprietary chassis systems.

It's waterproofing features, it's smart moisture wicking technology, and we've been investing a lot in the product. And so it's a comfortable product. It's a product that's really filled with great features, and it's much more casual.

In prior times, we have been focused on a shift into casual might mean trading down average selling prices for our footwear. But because we have built in technology, we're actually able to achieve pretty similar overall pricing for casual products.

And in addition to that, the team has done quite a tremendous job of proliferating categories and building these technical features into the apparel and the accessories. And so I talked about our overall apparel and accessory sales being up 20%. They now comprise overall 40% of our direct-to-consumer sales.

And so in general, our customer really likes what they're seeing. They're seeing an opportunity to buy product that doesn't -- that they doesn't have in their closets right now, and it's just fantastic when you put on the shoes, you put on the parable it is so comfortable. It is so good looking.

And so there's opportunities for further expansion into other categories, expansion into blazers, we've been doing really well this season. We have expanded into a boys business as well. And we think right now the opportunity is to build brand awareness. Our customers like what they're seeing.

Some of our more recent research has said that we have opportunities to drive further awareness, and that's what we're intending to do..

Great. Thanks. That's very helpful. And then just secondly, on inventory. It seems like you've made some really nice progress there. Could you maybe talk about how you expect inventories to trend throughout the rest of this year? And maybe the associated impact on margin.

It seems like your inventories maybe even be in a better place than the industry more broadly. So curious just to get a sense for where you're at on that journey..

Yeah, Corey. This is Tom. Good question. We're really pleased with what we've been able to do with our inventories. The Journeys Group continues to have strong relationships with all its key vendors and those vendors work and the merchandising team works very closely with those key vendors.

Making sure we have the right product at the right time and the appropriate inventory balance, so we can mitigate month balance (ph). So for terms of trends going forward, you saw the overall inventory was down 2% to 3% at the end of the second quarter. We expect to even continue to improve on that for the third quarter and the fourth quarter.

And Journeys specifically, you saw it was down at the end of the second quarter, 15%, and we expect similar kind of results in the third quarter and the fourth quarter. So I'm really pleased with that.

And I think in terms of how that impacts margins going forward, we feel a little bit more bullish in the fourth quarter on Journeys margin as a result of that. Because we're going to end the year with an inventory position of -- with much more of their current relevant product that's selling well vis-a-vis a year ago.

So really good what we've done with inventory. We've got continued processes in place and the business is driving to continue to watch inventories going forward and help -- which will help with the margins as well..

Yeah. As Tom said, our merchants have done a great job of managing inventory. But what's so good about this is it gives us lots of flexibility to chase into the newness that I've been talking about. We, in fact, have been able to do that. And so we've got ultimate flexibility to be able to bring in the product we need to be able to drive that business..

Great. Thank you so much for all the color and best of luck..

Thank you..

And we now have some follow-up question from Mitch Kummetz with Seaport Global. Please proceed..

Yeah. Thank you. I've got another handful, so I hope you'll indulge me. On the Journeys guide for the year. It looks like it's improved from down low doubles to down high singles. So can you kind of walk through sort of what's implied for the back half of the year.

I mean, are you looking at like sort of down high singles in 3Q down mid-singles in Q4? Is that kind of the trajectory that you think that business is on?.

Let me talk generally about that and let Tom be able to weigh in. But specifically, the approach that we have taken is that we believe it's prudent to just keep extrapolating the current trend, Mitch. So there's been a little bit of pickup in the current trend. And so we're incorporating that into our overall thinking.

But we're not anticipating that there's going to be a big pickup in the consumer market. We're not expecting that any major economic improvement or decline in the back part of the year, we're just extrapolating out the trend.

What we are doing though is we are building in this newness that I keep talking about and the product that is resonating with our consumer. And that's what is driving our overall pickup. It is product driven by gaining access to products that we have a good degree of confidence that we'll sell through.

And so that's the general approach that we've taken. And I'll turn it over to Tom to give you any more color..

Yeah, Mitch. In the third quarter, we're really same expectations as we had three months ago for the third quarter. Sort of down relative to the prior year, high-single digits to low double-digits. And in the fourth quarter, pretty similar expectations as well.

Maybe a slight improvement based on some improvement in newness, but really nothing of significance relative essentially pretty much in line with the prior expectations in both the third quarter and the fourth quarter..

Good. And then Mimi, just to clarify something you said earlier, and reconcile that with your prepared remarks. I think you said that July Journeys comp was minus 9%. And I thought you said in your prepared remarks that August was better than July in Journeys.

Is that the case? Was August better than a minus 9%?.

Yeah. I think what I was referencing in my prepared remarks, Mitch was the pickup from the second quarter into the third quarter. And so really it was going from the down 11% in the second quarter, which, of course, had sequential improvement into overall improvement into August..

Okay. And then you mentioned the confidence that you have in the newness. In your prepared remarks, you also talked about some of the challenges around the athletic inventory overhang.

Have you seen any improvement there? Or are you anticipating less of a drag from that on Journeys as we go through the balance of the year?.

We have been talking for several quarters at this point about the athletic overhang really within the industry, not within the product that we are selling. And initially, I think everybody was anticipating that this overhang would be cleared up by back-to-school. And then the goalposts shifted out until the end of the year.

And what we are seeing out in the marketplace, and what we're hearing from other competitors and the like, is that the overhang is still out there, and it will linger certainly through the back part of the year. And that's incorporated within our overall thinking.

And we are anticipating that by the end of the year, we hopefully that the industry can really move past some of this, but it's still existing today. And markdowns are still being taken pretty significantly. You're not seeing that degree of markdown within. That's not a specific factor that is affecting our business.

But what it is doing is suppressing demand for some of the athletic product that we're selling because the deals that are out there on really very good product is pretty attractive..

Okay. And then just a couple of last one. Tom, on the Journeys stores, I know you're closing a bunch of stores.

Do you have a store count for Journeys at year-end?.

I do..

I've got kind of a separate one for you, Tom. On the $40 million in cost savings, it sounds like $20 million of that is being realized this year.

Can you maybe just kind of walk us through the phasing of that by quarter? Have we already started to see some of that in the first half or the second quarter? And how does that kind of play out over the next couple of quarters? And that's it for me..

So answer to the first question. The projected Journeys store count is 1,057 at the end of the year..

Okay. Thank you..

And then -- on the cost savings. Yes. In terms of cost savings, Mitch, most of the costs will still be in the fourth quarter. There will be some, some in the third quarter, but most of it is still driven in the fourth quarter. And we're still confident -- still feel confident about what we're doing from that perspective.

In addition to -- we did -- as we talked about, we are -- have a lot of initiatives in place relative to selling salaries, and we're losing a lot fewer hours relative to the prior year in selling salaries.

At the same time, some of the traction we're getting in terms of reducing those salaries is not what we originally expected, but we'll continue to work on that. We still -- we also still continue to yield some selling salary savings.

We also still have some good initiatives in place outside of selling salaries or we'll continue to double down on our occupancy cost going forward. We've got some initiatives in the branded group as well in terms of what we can do to reduce our expenses there.

And we also have some procurement initiatives in place relative to outside spend that will continue to work on that. And then we've also have some good visibility and line of sight on what additional cost savings we'll look for next year as well. Pretty similar categories for next year as well.

So good line of sight on that, good confidence that we'll achieve that again to the original question. There's more of it in the fourth quarter. I think another thing just to point out in the fourth quarter that in this year, the Journey's fourth quarter or expenses absorbed a 53rd week of expenses as well.

So when you adjust for that and you adjust for a full year of the OpEx impact for store closings in the next year, you really start seeing the opportunity we have here with a reset cost base and you start thinking about sort of modest expectations for the other parts of the business from a sales growth and a margin perspective relative to the success we've seen there.

So modest expectations on the other divisions. Even a modest comp improvement with Journeys going forward into next year. And with what we've done over the last 12 months, we bought back 13% our share. As you can see, a lot of earnings per share leverage next year..

This does conclude the question-and-answer session. I would like to hand it back to management for closing comments..

Thank you for joining us today. We look forward to talking to you on our next quarterly call..

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation..