Q3 2024 Genesco Inc Earnings Call

Participants

Mimi Vaughn; Board Chair, President and CFO; Genesco Ltd

Thomas George; SVP-Finance, CFO; Genesco Ltd

Dow Macquarie; Moderatror; FP&A

Mitch Kummetz; Analyst; Seaport Research

Corey Tarlowe; Analyst; Jefferies

Presentation

Operator

Good day, everyone, and welcome to the Genesco Third Quarter Fiscal 2024 conference call. Just a reminder, today's call is being recorded. I'll now turn the call over to Dow Macquarie, Senior Director of FP&A. Please go ahead, sir.

Dow Macquarie

Good morning, everyone, and thank you for joining us to discuss our third quarter fiscal 24 results. Participants on the call expect to make forward-looking statements reflecting our expectations as of today, but actual results could be different.
Genesco refers you to this morning's earnings release in the Company's SEC filings, including its most recent 10K and 10Q filings for 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 schedules available on the company's website in the Quarterly 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 Mi,

Mimi Vaughn

Thanks Dow good morning, everyone, and thank you for joining us. Before I discuss third quarter performance. Earlier this week, we announced the appointment of Andy Gray as Journeys, new President, Andy, as an exceptional experience later, who brings invaluable expertise in brand building, product innovation and the other areas essential to building journeys businesses for the future.
And is connection to yield culture and the strong brand relationships to build over his accomplished career, make him the ideal person to lead the talented team we have in place at Journeys as we work to elevate the business and unlock the great potential we see ahead, I look forward to his partnership and I'm excited for him to join recently appointed COO, Mike Fifer, to drive success going forward.
Welcome. Andy is now moving to results, following a later start to back-to-school. Sales picked up early in the third quarter and were generally tracking to our expectations. However, we saw a market change in trend in October as well. Later change of seasons need an initial demand and delayed the start of the selling season for fall product.
In addition, our branded businesses were impacted by implementation of an ERP system contributing to lower our overall results than we anticipated for the quarter. Despite these headwinds, we were pleased that sales trends within our Journeys business continued to show sequential improvement and shoe and Johnston & Murphy delivered record third quarter sales.
The operating environment remains challenging as ongoing inflationary pressures and economic certainty continued to impact discretionary spending as we've seen throughout this year consumers continue to make tough choices on where to spend their dollars often choosing other categories for teenagers against strategies, consumer demand and make the business more productive and more profitable Journeys store closure plans are on track, having closed 75% of the approximately 100 doors planned through the end of Q3 and the remainder targeted to close by year end.
We also remain on pace with efforts to realign our cost base and realized $40 million of annualized costs cost savings by the end of fiscal 25. Finally, we once again had strong inventory discipline in Q3 with total inventory down high single digits year over year.
Other key highlights from Q3 included growing our overall comparable digital business by 8% and expanding digital penetration to 21% versus 18% a year ago. We launched buy online takeover offers a variance.
And finally, during the All-Access loyalty program is off to a strong start performing well against our high expectations. Now discussing our individual businesses in more detail and starting with journey is the negative sales trend we expect to continually improve in Q3.
Back-to-school trends we discussed in late August, accelerated into September, and the changes are merchants were able to effect across the product mix resonated well enabling journeys to outpace our most recent expectations.
Sales of must-have items were strong and we can to continue to chase into that product. Even though this wasn't enough to offset the lack of newness and industry discounting in athletic already on anticipated, late start to fall, selling, Journeys traffic and conversion nonetheless improved considerably versus Q2 and quarter to date.
I'm pleased to say that Journeys comps has shifted into positive territory for the first time this year, driven in part by a strong Black Friday weekend. Although the environment remains volatile, consumers are responding well to the you know, we and our brand partners have injected into the product assortment.
We are excited to amplify the journey story to our holiday campaigns, which, among other things will feature more SMS campaign, uses an increase this investment in digital marketing as well as new campaigns and rewards for All Access members.
Now moving to the UK. Despite facing the consumer pull back in October to deliver the strongest constant currency in third quarter sales to date, reflecting our efforts to enhance customer value proposition and access to top tier product, solid double digit sales growth and a 5% comp for us driven by compelling back-to-school assortment led by the kids business, followed by women's.
Adding to the outstanding performance who has achieved this year to accomplish this through growth of casual product, aided by higher average selling prices and success and non-footwear categories like backpacks for July and change of seasons and resulting pressure on sales later in the quarter was most pronounced in stores to digital business notch PA positive gains throughout two three and continues to account for nearly 40% of total sales.
Choose growing strength and recognition as the leading fashion footwear destination for the UK days as of mid-October shoe ranked number 10 in UK footwear market share according to cure, maintaining its position after moving it up three spots earlier in the year.
Loyalty continues to bolster this effort tracking at about 30% of shoes. Q3 sales totals to club members now stand above $2 million and counting with members more highly engaged and purchasing more frequently. Steel is running exciting holiday campaign to surprise and delight customers, including bundled promotions and digital content tied to its loyalty program.
Turning now to Johnston & Murphy, the brand added to its strong run this year, posting positive sales growth and record third quarter sales despite a unique set of headwinds and a tough multiyear compare. While the challenges J&M encountered from the new ERP system implementation led to some lost sales in Q three.
More robust modern platform provides greater agility to support J&M growth and the growth of our other branded business. J&M was also not immune to the broader consumer pullback that hits in October, installed sales of outerwear and other fall products cash and will continue to drive results accounting for over 75% of direct to consumer footwear sales apparel as a bright spot growing 7% and together with accessories now accounts for over 40% of J & M's DTC. sales.
We're benefiting from the all-encompassing changes we made coming out of the pandemic to reposition the business as a more casual multi-category lifestyle brand. Supporting this effort is J & M's insiders affinity program.
Insiders now account for approximately 60% of JNMDTC. revenue was over 60% of new customers joining the program. Looking ahead, we remain very positive on J & M's longer-term potential and are investing against it as part of this next phase of growth, Jan and his partner to the new creative agency to unlock the significant opportunity to increase brand awareness, which currently stands at only 35% and educate consumers about the shift away from its heritage dress shoe legacy.
This new top of that funnel marketing launches of spring as we expand our marketing reach to broader range of customers were forward, but our Elevate plan, which leverages the elements of our footwear focused strategy and drive action to meaningfully accelerate journeys improvement and top line growth.
Journeys has a proven track record of managing through adverse cycles, responding to changing consumer and fashion dynamics and coming out stronger. On the other side, the fundamental tenants absurd journeys value proposition to customers remain intact. With our focus on fashion footwear and compelling mix of and access to top brands.
No other retailer serves the team consumer quite the same as journeys. While we have much more to unlock as we finish this year and get into fiscal 25, the work we've done to date is paying dividends. Today, I'll highlight the key areas of our plan where we're making good progress.
Number one, strengthening customer engagement and expanding relationships with our target team customer. Initial results from the All Access loyalty program are very encouraging. With roughly 1.5 million members signed up since launching in July.
Members are already buying more often than nonmembers and spending more per average order with considerable runway ahead of us were just beginning to maximize our CRM and loyalty data to more strategically targeted customers based on purchase history and brand preferences.
During Q3, we ran integrated campaigns focused on key brand partners to elevate journeys as the destination for these top brands. These included all access tie-ins, in-store presence, campaign, homepage presence and social callouts, number two, elevating product and strengthening our brand relationships.
We've been working diligently with our brand partners to add more differentiation to the Journeys assortment, increase. Our access to the most in-demand brands and styles, expand the number of exclusive and test new brands, which would add new dimensions of the resource.
But more than that, we further focus the partners of conversation on a strategic view that reinforces journey value proposition and unique position in accessing the coveted teen customer. While fully repositioning the assortment will take some time. We've made good progress that we will build upon for upcoming seasons.
Number three, sharpening journeys brand marketing, our customer insight work also into the U.S. that while Journeys is top of mind to consumers for certain brands we carry, we have the opportunity and brands we sell. We are applying those learnings to drive stronger awareness and strengthened journeys voice across social channels.
We incur Kris paid social investment for back-to-school and are doubling down our efforts for holiday number four, implementing incremental initiatives to drive digital and omnichannel growth. We recently launched buy online pickup in-store across the Journeys fleet to a strong initial response. We are encouraged by what we're seeing at this early stage in terms of customer adoption and attachment rates.
When customers pickup in store, although small in total right now, these add-on purchases are driving a meaningful lift in AOV. We're excited to see how focus continues to evolve in our full service environment.
Beyond Vocus as part of our effort to grow journeys digital business, we've also raised product SKU counts on our website and expanded our drop-ship partners to more than 50 and number five, optimizing our juries footprint and driving productivity and efficiency.
We did implement a key learnings from our store time studies that are having a positive impact on conversion and productivity. These include shortening the time it takes to get shoes from the stockroom and eliminating unproductive daily processes.
Our new point-of-sale hardware and software are also generating additional operating efficiencies and contributing to higher average transaction size.
Regarding the store closures I mentioned earlier, we expect to achieve annualized savings of about $25 million, which is in addition to the $40 million of annualized cost savings we're targeting, given that we need very little sales transfer from those stores to achieve a breakeven.
Operating income were deploying customized communications to direct consumers to online Fortune nearby stores. To sum it up, we're pleased with the progress we're making with the Journeys elevate plan and the ongoing improvement in comp sales. The team has worked hard this year to adapt to the dynamic shifts and challenges in the market.
I have strong belief in our abilities to address these challenges and in a much stronger journeys future. Now moving to our outlook.
As we entered the fourth quarter, we saw an acceleration in all selling and positive store traffic with the following a strong start to the holiday season. I'm pleased to say our total company comps are currently running positive quarter to date.
In addition to journey strength, J & M's experienced record online demand and especially Thanksgiving weekend to date leading us more confident we are on the other side of the pullback of October. That said, the environment remains choppy and footwear promotions or even more widespread than we anticipated over the holiday weekend.
In response, we've made the strategic decision to increased promotional activity going forward, especially at Journeys over the holidays to drive sales in this competitive environment. The resulting margin impact is reflected in our revised guidance, for which Tom will provide more details.
We're largely a non-promotional retailer and plan to stay that way, but I believe this is a moment in time and these actions are appropriate for this season. Before closing, I'd like to thank all our amazing people across our company for your hard work and dedication through this challenging environment.
I appreciate your efforts throughout the year, but especially heading into the busy holiday season. When I'm certain, you'll raise your game to an even higher level as we look forward, I'm very encouraged by the many initiatives that are driving meaningful progress.
The strength of our brands and retail concepts and the strategies we're executing that will show the resilience of our business. And with that, I'll pass the call over to Tom.

Thomas George

Thanks, Mimi. Our third quarter financial performance not only reflects the challenges and hurdles we faced, but also the progress we've continued to make as we now round out the fiscal year and begin to look to fiscal 25, we believe our solid foundation and increased efforts through financial discipline will position us to drive stronger results.
Turning to our results for the quarter, consolidated revenue was $579 million, down 4% compared to last year and down 5% on a constant currency basis. But mainly driven by the sales decline in Germany relative to our expectations on loan expected sales and associated deleverage on expenses in our branded businesses and shoe, total comps were down 4%.
Although still negative, we were pleased to see another sequential improvement in the trend or journeys. Meanwhile, Cox shoe and J&M remained positive despite the later seasonal transition in our branded businesses.
Dealing with this ERP conversion challenges by channel, total store comps were down 7%, while direct comps were up 8%. Business choose total comps increased 5%, J&M total comps increased 1% and Journeys total comps were down 8%.
Overall gross margin was in line with our expectations down 60 basis points compared to last year. By business. Journeys' gross margin was down 110 basis points, mostly due to the expected increase in promotional activities, including introductory coupons for Journeys loyalty program, along with some mix shift choose gross margin was up 100 basis points as the divisions fitted from reduced through these from us through Ireland boost distribution center as well as a more elevated product assortment mix.
James gross margin was down 210 basis points due to a more normalized markdown and close out cadence versus last year.
J&M had much more inventory available to school this year versus last because much of last year's product was cotton transit. Finally, Genesco brands group gross margin was up 270 basis points as we continue to benefit from lower freight and logistics cost and price increases.
Adjusted SG&A expense was 46.2% of sales, an increase of 190 basis points over last year, with most of the de-leverage driven by the lower journeys sales in absolute dollars, SG&A expenses were flat to last year, in line with our strategic pillar to reshape the cost base to reinvest for future growth.
We have gained traction with our cost-savings initiatives will help the same time increasing the variability of our expense base. This resulted in reduced occupancy, selling salaries and other store costs and enable us to invest.
This year we invested in systems and people to drive our business forward, which resulted in increased depreciation in Q2. Compensation for new technology initiatives, lowering overall occupancy costs and reducing the amount of fixed expense in the store channel remains a key priority.
In Q3, we achieved a 16% 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 155 with over 50% of our fleet still coming up for renewal in the next couple of years.
We have a long runway to capture additional savings. While we have been making nice headway on rent savings and savings on selling salaries, increase in wages continue to be an area of challenge. All told in an environment where these and other cost pressures have been probably Pro prevalent and ubiquitous.
We were pleased to hold our SG&A dollars flat two last year. In summary, for the third quarter, we realized adjusted operating income of $11 million compared to adjusted operating income of $26.3 million for Q3 last year.
This all resulted in adjusted diluted earnings per share of $0.57 for the quarter. Versus earnings per share of $1.65 last year. Relative to our internal expectations. The extent of the ERP disruption, coupled with a higher than expected tax rate, had a large impact on this lower EPS result.
Turning now to capital allocation and the balance sheet. As expected, we ended the quarter and a net borrowing physicians regarding inventory. We were very pleased to keep our inventory levels well controlled, down 8% year over year.
With respect to Journeys specifically, we continue to work with our brand partners to just receipts, enabling us to in the quarter with inventories 14% lower than last year and more fully positioned with the new business was needed.
The assortment choose inventories increased compared to last year to support the higher levels of demand in the business. Novel J&M's inventories were down versus a year ago.
As I mentioned, a significant amount of last year's inventory was in transit and unavailable for sale. Overall, we expect to end this year with inventory down high single digits versus last year as we continue to thoughtfully manage our assortments and keep our inventory position claim entering fiscal 25 capital expenses, which primarily directed to retail stores in our digital and omnichannel initiatives, we opened five stores, which were primarily of malls and outlets and close 20 ending the quarter was 1,360 total stores.
Lastly, we didn't repurchase any shares during the quarter and our current authorization remains at $52 million. Over the past five years, we repurchased almost 50% of our outstanding shares. Regarding our cost-savings initiatives, we are working diligently to deliver the annualized run rate of up to $40 million in cost savings by the end of fiscal 25.
We expect savings from reduced store rents, lower corporate shared services and Journeys central expenses. So showing solid productivity gains, reduce warehouse and logistics costs and reduce freight costs from Omni channel inventory location optimization initiatives.
When you combine our efforts to increase the variability of our cost structure of progress on our cost savings plan, we are on pace to achieve approximately $20 million of cost reductions in fiscal 24, which perspective store closures.
We closed 74 Journeys stores to the end of Q3 or roughly 7% for the total fleet since the beginning of this year. These were primarily mall-based locations. As Mary mentioned, the savings from the 100 Journeys stores we aim to close by the end of the year eliminates roughly an additional $25 million in costs from SG&A expense, which on an annualized basis will begin to benefit us in fiscal 25.
The goal of these cost savings and store closure program is to achieve expense leverage and drive operating margin expansion on more modest increases in sales growth. Now turning to guidance.
Overall sales trends have accelerated nicely first for into Q4, in part due to positive adjustments we made several months ago to the product assortment that given product lead times are having an impact now at Journeys.
However, the variability in consumer demand we see week-to-week, coupled with a heightened promotional activity at the start of the holiday season, has led us to take a more promotional stance going forward, especially to drive demand and Journeys and remain competitive in this environment axles.
It will also result in some additional gross margin pressure. We now also expect growth. It should be somewhat more muted than our prior expectations, given the softer consumer trends of late, and we expect the ongoing lack of visibility in the wholesale channel to put some pressure on J and in our other branded business.
Combining all these factors, we now expect full year total sales to decrease 1% to 2% versus our prior expectations of down 2% to 4% excluding the 53rd week, which we expect to add approximately $25 million of sales and have a small negative effect on earnings per share.
We expect sales to decrease 2% to 3%, some color by division on the total year-end sales compared to last year. For journeys, we continue to expect a high single digit decline for Sue will continue to expect low double-digit growth for J&M. We now expect high single digit growth for Genesco brands, a low double-digit decline.
We now expect gross margins will be down 40 to 50 basis points compared to our prior view for fiscal 24, gross margin to be flat to down 20 basis points or change in our guidance is driven primarily by increased promotional activities at Journeys going forward, the fourth quarter as well as products product mix shift.
We now expect adjusted SG&A as a percentage of sales to deleverage 200 to 220 basis points compared to our prior view, 220 to 240 basis points of deleverage. Given our Q. three extra results and revised assumptions for Q4, we now expect full year adjusted earnings per share or $1.50 to $2 compared to our prior range of $2 to $2.50.
Our expectation is that we will be near the midpoint of this range. Our guidance assumes no additional share repurchases, which results in fiscal 24 average shares outstanding of approximately $11.4 million, and we expect the tax rate to be approximately 24% to close.
We continue to take the necessary measures to navigate the current consumer environment while also proactively evolving our company towards a leaner and more agile state to better meet the needs of our consumer, drive stronger profitability and ultimately deliver greater return to our shareholders. Operator will now ready to open the call for questions. Thank you.

Question and Answer Session

Operator

Thank you. (Operator Instructions)
Mitch Kummetz, Seaport Research.

Mitch Kummetz

Yes, thanks for taking my questions. I guess I've got to do, maybe what you guys reported 2Q. You raised your gross margin outlook, in part of that was because of you are expecting improvement in the journeys for Q2 gross margin with more newness kind of flowing into the store.
But I think you also made a comment at the time that like the consumer's looking for two things, must-have product or good deals. And I'm wondering what's changed from three months ago?
Is the numerous not performing as well or well, I would maybe call sort of non-newness, the new assortment is that this requiring, you know, deeper discounts to move the product. Can you just maybe sort of elaborate on that?

Mimi Vaughn

Thanks for your question match. And there really has been quite a lot going on and we've seen a lot of up and up than down in the consumer environment over the last few months. And absolutely, the newness is working.
Our merchants have done a phenomenal job chasing into product that is resonating with the consumer and that is selling through quite nicely. What we saw. And I'm going to take you through, I'm going to take into October and then bring you into November and bring into Black Friday just to give you a sense of where we are.
But starting in October, traffic was out there, but conversion was tough. And I think we and anybody else who sells fall product and sell boots really saw that the consumer was not motivated to spend in October like they were looking, but you know, for US Foods represent 40% to 50% of our mix in the fourth quarter for them than that.
That's what made for October. We saw a market change in November where with colder weather, there was a lot of good positive traffic in all of our retail concepts over by expanding into malls and tightening for shopping.
But what we also saw is that our brands in particular or really promotional, we were as promotional as we thought we would be over by Friday and really in the third quarter. But we also saw that some of the inventory buildup from center to slow our sales and footwear over the course of the year.
That some of our brands to say that they were going to deviate from that pricing and get more promotional now that promotional activity worked well, it drove it drove sales. And so with traffic and some of the progression on the right product, there is a bifurcation in the market here match where the must-have items are flying off at full price, but anything else needs some encouragement in order to in order to move.
And so as we have evaluated that and it's a bit of a have and I have not world these days within our brand world, the footwear category is lining up to be a more promotional this holiday. And what you'll see in our guidance is that we that we are driving more sales and is that we are going to be taking a few more markdowns to be able to get there.
But we are anticipating and what we're hopeful for is that this will be there the final push through the year. It is clear through the inventory overhang in the market. And that would be all We for sure we'll be able that, that we all as an industry will be able to start next airplane.

Mitch Kummetz

That's helpful. And then you talked about on some of the some of the strategy, a journey. I think all of them, you said repositioning reassortment kind of got the impression that this is more significant than kind of a typical tweaks that you guys are always making in terms of the assortment, merchandising.
Um, can you maybe speak more to that is what exactly are you looking to do in terms of repositioning of assortment there with the aim to that strategy?

Mimi Vaughn

Yes. So Mitch, we were the destination for where teams go to buy their fashion footwear. And we always have done a great supply as the best items that people are that our teams are looking for and that our customer and they're being very discerning when it comes to retail spend and the choices of what they're spending on.
I think that all of the comments, and I don't know that were deviating from our merchandising trends. But what we did see at the beginning of this year is that our consumer had a huge appetite for newness and fashion what we're chasing into and that's why we've chased into for the back part of the year.
And that's what is driving our sales. And the improvement were quite pleased at the improvement from where we started at the beginning of the year in journeys to the point we are right now where we're having the best results of the year and a big, big pickup.
So it really is that we're chasing into this newness. We're working with our brands in order to further differentiate our assortment to have more of a must-have product to have more exclusive and add to continue to get in front of the consumer, the destination of choice.

Mitch Kummetz

And then Lastly, just in terms of the uptick in promotional activity, I mean you did mention that of boots are a large percentage of your mix in 4Q and that the season got off to a slow start. Looks like the Journeys' inventory is actually a good state.
But in terms of its content from, are you guys and sitting Motional energy are the kind of worked through maybe some excess inventory? There's about a month?

Mimi Vaughn

Yes, I would say that we want to make sure that we have enough dry powder niche to be able to move on whatever items that we need to move on for the holiday unfolds. And certainly, you know, I think that they were in the third quarter and certainly over the course of November, we saw good sales and journeys.
And so in spite of some of the lower boot sales, we were selling other products that the consumer was interested in buying. When we'd have these hold spurred simply E&O here. And as much of the rest of the country, we had coal spurts, and it has gotten warm and cold person has gotten warm again.
And in those coal spurts, we do see that the sell through of boots and we see a pickup in the US. And so, we are we know that it will be called. We know that consumer, we believe the consumer is going to be out shopping around holiday and I will move the boot inventory that we have, and then we'll take them whatever marks we need to at the end of the season.

Mitch Kummetz

Thank you.

Operator

[Corey Tarlowe], Jefferies.

Corey Tarlowe

Hi. Thank you for taking our call. I just wanted to see if you could describe the differences between the US and UK consumers. Are there any trends really worth calling out between those two and two? We expect those trends to continue into next year.

Mimi Vaughn

Thank you for your questions.
And so interestingly, the US market and the UK market have tracked and you know it from an economic point of view. Similarly, in terms of high inflation and they are having to make choices. Our shoe business has had an exceptional year has outperformed the market, has that moved out three places in terms of ranking in overall market share. And so we have been out I'll punching the competition.
Most recently and so I think if you have process that the consumer wants and if you have product that resonates with the consumer than among other items that they're spending on, you can motivate that that purchase.
What we've seen most recently is that across the board there was a slowdown with a start of the fall selling season, and we have seen a turnaround there in the US with a really robust Black Friday sales. Our store traffic was up stores where the great highlight of the Black Friday weekend.
But all together, this consumer in the United States was out to shop. We had a very strong Black Friday weekend in the UK last year. Right now, we think that the UK consumer is waiting holding out. Typically the UK market goes on sale before Christmas.
We think there may be some holdback in the UK market and that's the difference right now is that the US showed a lot the pickup in traffic over the Black Friday weekend and the UK, we think that there will be the season has to unfold further. Altogether, the way that consumers acting is that they'll pay up for the must-have product. But other than that, they really they are seeking the value that I talked about.

Corey Tarlowe

Thank you and a quick follow-up. Are there any supply chain or material costs that are headwinds at the moment? And if there are any that we'll turn to tailwinds like here. Thank you.

Thomas George

Yeah, I would say at this point, we feel really good about the supply chain in the costs that we're going to expect going forward for this year. We're getting a lot of relief fund freight logistics cost in our in our branded business. And that was the big headwind last year as well as air freight product.
And so we're starting to see improvements in our gross margins in our branded business as a result of the reduced freight logistics cost and really not a headwind at all as all the efforts we're making in our branded business from a sourcing perspective and a design and development, perspective and a cost estimating perspective, we expect good gross margin expansion going forward from that perspective.
And then on the retail business that we are, we in our in our we really think we're in a good position with all our branded partners. And we don't see any headwinds there are going forward.

Mimi Vaughn

The cost pressure that we've been facing has been around wages. And so a lot of the initiatives that we are talking about is to be able to make on our use of labor, more efficient and so in our distribution center that help to bend the curve on just overall wage increases.
In our stores we have spent a lot of time on store time studies where we are looking to get much more efficient within our stores, take out the nonproductive out ores and shift the labor into selling. And we're seeing that pay some dividends.
They've started on that work in Journeys and ensure we are doubling down on our efforts there. But that's where we're seeing a lot of the of the overall cost pressure for this year that with a with the work we're doing, we anticipate that we will we'll make progress in this area for the coming year.

Corey Tarlowe

Thank you and best of luck. I mean what's the quarter?

Mimi Vaughn

Thank you.

Operator

Thank you. At this time, I'll turn the floor back to Mimi for any closing remarks.

Mimi Vaughn

Thank you for joining us today and wish everybody the best of the holiday season and look forward to talking with you in the new year.

Operator

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