Tapestry, Inc. (NYSE: TPR) Q3 2020 Earnings Call Transcript

Tapestry, Inc. (TPR) Q3 2020 earnings call dated Apr. 30, 2020

Corporate Participants:

Andrea Shaw Resnick — Global Head Of Investor Relations & Corporate Communications

Jide J. Zeitlin — Chairman And Chief Executive Officer

Joanne Crevoiserat — Chief Financial Officer

Todd Kahn — President, Chief Admin Officer And Company Secretary

Analysts:

Robert Scott Drbul — Guggenheim Securities — Analyst

Irwin Bernard Boruchow — Wells Fargo Securities — Analyst

Erinn Elisabeth Murphy — Piper Sandler & Co. — Analyst

Alexandra E. Walvis — Goldman Sachs Group — Analyst

Mark R. Altschwager — Robert W. Baird & Co. — Analyst

Jamie Susan Merriman — Sanford C. Bernstein & Co. — Analyst

Lorraine Corrine Maikis — BofA Merrill Lynch, — Analyst

Oliver Chen — Cowen and Company — Analyst

Paul Trussell — Deutsche Bank — Analyst

Simeon Avram Siegel — BMO Capital Markets — Analyst

Michael Charles Binetti — Credit Suisse — Analyst

Presentation:

Operator

Good day, and welcome to this Tapestry conference call. Today’s call is being recorded. [Operator Instructions]

At this time, for opening remarks and introductions, I would like to turn the call over to Andrea Resnick, Global Head of Investor Relations and Corporate Communications.

Andrea Shaw Resnick — Global Head Of Investor Relations & Corporate Communications

Good morning, and thank you for joining us. With me today to discuss our quarterly results are Jide Zeitlin, Tapestry’s Chairman and Chief Executive Officer; and Joanne Crevoiserat, Tapestry’s Chief Financial Officer.

Before we begin, we must point out that this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including projections for our business in the current or future quarters or fiscal years. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Please refer to our annual report on Form 10-K, the press release we issued this morning and our other filings with the Securities and Exchange Commission for a complete list of risks and important factors that could impact our future performance and results.

Non-GAAP financial measures are included in our comments today and in our presentation slides. You may find the corresponding GAAP financial information as well as the related reconciliations on our website www.tapestry.com/investors, and then viewing the earnings release and the presentation slides posted today.

Now let me outline the speakers and topics for this conference call. Jide will provide a recap of our fiscal third quarter results for Tapestry as well as a current update on our global business in light of the COVID-19 pandemic. Joanne will continue with high-level financial and operational results for the quarter in addition to the mitigating actions we are taking and our priorities going forward. Following that, we will hold a question-and-answer session where we will be joined by Todd Kahn, Tapestry’s President and Chief Administrative Officer; who is serving in an interim role as Chief Commercial Officer of the Coach brand, while the search for a permanent CEO is underway. Following Q&A, we will conclude with some brief summary remarks.

I’d now like to turn it over to Jide Zeitlin, Tapestry’s Chairman and CEO.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Good morning. Thank you, Andrea, and thank you, everyone, for joining our call. I hope this is the first and the last earnings call I’ll be taking from my home office in Brooklyn. Sadly, all of us are living through a true 100-year storm. No one is exempt from the daily realities of COVID-19. Our thanks go out to courageous individuals on the frontline of the fight against this pandemic. Our hearts or with those affected by its ravages. This crisis has profoundly impacted the way we live our lives and manage our business.

This morning, we reported our fiscal third quarter results. These are the first adjusted quarterly earnings loss in our nearly 20 years as a public company. We entered the calendar year with a strong underlying momentum, most notably for the Coach brand. As the novel coronavirus expanded across the globe, our results materially weakened. Initially, we hoped the pandemic’s damage would be limited to one country or a region, especially as Mainland China and South Korea began recovering. By mid-March, results deteriorated in North America, Europe and numerous countries across Asia Pacific. We never before experienced a time when 90% of our store fleet was either closed or on shortened operating hours. It’s clear that the crisis will have an impact lasting beyond a quarter or 2. We’re taking steps to mitigate the impact on a business that requires sales growth to leverage brick-and-mortar store expenses.

As we look ahead, we’re focusing our efforts on 4 key areas: protecting the health and well-being of our people, our consumers and our communities; driving digital revenue and revenue in China and South Korea, while preparing for store reopenings; accelerating key elements of our multiyear growth agenda; and preserving liquidity and enhancing financial flexibility, which Joanne will take you through shortly.

First, guided by our values, we have prioritized our community, our people, their families, and our customers. Nearly three months ago, we acted swiftly to close stores in Mainland China. We reopened where it was safe to do so. We’ve continued to provide pay and benefits to our retail associates while moving our corporate staff to a remote working environment, initially in China, today in North America and Europe. While our distribution centers remained operational, we’ve instituted enhanced health and safety precautions, and we’re supporting our local communities through philanthropic donations from our brand foundations and specific initiatives around PPE. I’m incredibly proud of our teams around the world. I want to express my gratitude for the spirit and dedication they show every day.

Second, here are the actions we’ve taken to drive revenues and reopen stores. We’ve seen green shoots and are confident we will weather the storm and emerge strong. During our last earnings call, I noted that the vast majority of our Mainland China stores were closed. By mid-March, 95% of our stores on the mainland were open, although traffic lagged year ago levels. Over the last six weeks, we’ve opened all remaining stores, and we’ve seen brick-and-mortar sales build, led by retail. We’ve also seen significant disparities within the country, impacted in part by domestic travel restrictions. Unlike some of our European counterparts, the preponderance of our sales to the Chinese consumer globally have historically occurred in China. While our sales are encouraging, we’re not experiencing outsized domestic growth driven by the repatriation of tourist spending.

In addition to these dynamics in China, revenues in South Korea are recovering. All our stores in South Korea are operating under normal hours. We learned important lessons from our Chinese business, which are informing our actions globally as we start to turn the lights back on in Europe, North America and the rest of the world. We are reopening stores based on federal, state, province or municipal requirements in the different countries where we operate. We’re making these decisions carefully on a location by location basis.

Our reopening playbook is focused on protecting the health and safety of our consumers and associates, including: the cleaning of stores and fitting rooms; signage that highlights social distancing requirements; the enforcement of maximum customer densities; the use of masks and gloves where appropriate; offering sanitizers and wipes at cash wraps; and the availability of contactless payment and other measures. In accordance with these guidelines, I’m pleased to announce that tomorrow, we will reopen approximately 40 stores in North America with only contactless curbside with Storefront pickup service. Customers will have the ability to place orders over the phone and for some retail stores online as well and have orders brought to them curbside or at the storefront, depending on mall configurations. We plan to offer this service in additional stores in the future. As of today, we’ve reopened five locations in Germany and Austria as well as a dozen in Australia.

Moving from brick-and-mortar to digital. Not surprisingly, e-commerce was a bright spot this quarter, and we leaned into it. We shifted our marketing investment and focus to strengthen our presence in consumer channels for our consumer shops today. Responding digitally is particularly important in a world where the majority of our physical stores are closed. Roughly 10% of Tapestry’s pre-COVID sales were generated online. Leaning into digital as this secular trend accelerates is a significant opportunity and a critical element of our customer-centric growth agenda. Our global distribution centers are operating with little interruption. This is key to servicing increasing e-commerce demand. We had no material China-related supply chain issues, we manufacture a limited product in China and have a geographically diversified manufacturing and sourcing base.

Subsequent to quarter end, there were more disruptions across Asia and Europe. However, we successfully worked with our raw material and service providers to actively balance changing levels of supply and demand. We are pleased that most of our partners in Europe have reopened, including tanneries in Italy and footwear makers in Spain. Our distribution and logistics operations, including shipping, trucking and air freight are in good order. Importantly, we’re acting decisively to fast track work already underway prior to the onset of COVID-19, and we’re focused on driving outsized growth in digital and creating a more streamlined and data-driven organization we do not know how long this pandemic will impact us, but the world will be different on the other side. Consumer behaviors are changing and secular trends are accelerating.

As mentioned earlier, one of the most important consumer trends is digital, with increasing online consumer exploration, engagement and purchasing. We are advancing our understanding of consumers’ digital experiences to respond to their needs and desires. We must be better able to meet consumers where they are traveling. The shift from brick-and-mortar to digital shopping is accelerating. Physical stores will always play a vital role in a consumer’s experience with our brands, but we expect their share versus digital will move towards greater parity. Growth in digital represents a consumer expressing where they prefer to shop, and we have to acknowledge this shift. For example, this means extending our partnership with Tmall in China. This also means carefully scrutinizing our distribution network as stores reopen and traffic levels normalize at what could be lower post-covidian brick-and-mortar levels. Successful business models for the future will make substantial investments in enabling platforms. We are also reimagining our operating model and culture. Being rigorous about leveraging data proactively to make forward decisions is critical. Listening to the consumer is job 1.

Before turning to Joanne, I’ll briefly describe strategies specific to each of our brands. Starting with Coach. Our focus is on three areas: digital engagement; accelerating growth in China; and operational excellence achieved through rightsizing our SG&A cost structure and improved balance sheet management. Digital, which as we’ve discussed, is more than a shopping platform. It’s about meeting with, engaging and empowering the consumer, and connecting with their values.

China represents Coach’s largest geographic growth opportunity. Chinese customers are proving resilient in their continued appetite for fashion and luxury. Our strong brand momentum and positioning will enable us to benefit from the rapid growth of the Chinese middle class. Already highly digitally engaged, Chinese consumers have increased their digital interaction with Coach through official social media sites as well as by engaging store associates on social media platforms such as WeChat. Coach conducted hundreds of live stream sessions that proved an important way to drive business.

Finally, we are focused on improving operational efficiencies in both the near and long term. First, we’re assessing our global store fleet and holding individual stores to a higher productivity threshold. Second, we’re materially reducing our SKU assortment with the objective of significantly improving supply chain efficiencies and inventory turns. Third, we’re substantially reducing our corporate payroll while maintaining best-in-class brand experience and service levels. At Kate Spade, Liz Fraser is fully engaged in every aspect of the business. With a mission to reconnect with the core culture and unique spirit of the brand, she is focused on brand strategy and customer centricity. On the product level, the important role of color and novelty remain central, while the team works to redefine the balance and healthy tension between playfulness and pragmatism, two of the brand’s defining values. The team is also putting great emphasis on community and customer, understanding the consumer more thoroughly in order to better serve and engage her.

As a result, in recent weeks, the effectiveness of digital marketing has driven major increases in the e-commerce business as well as in social media engagement. As those stores largely remain closed, the team is finding new approaches. Some retail customers have personally reached out, and so the brand has begun testing Zoom shopping parties with notable success.

Turning to Stuart Weitzman. While we are disappointed in the brand’s recent performance, and the related impairment charge, we remain confident in the brand’s long-term potential and are focused on returning it to sustainable, profitable growth. Our teams, led by Giorgio Sarne, are executing a number of key initiatives, including, first, creating a focused assortment that speaks to the brand’s fashion sensibility and leadership position in the boot, espadrille and sandal categories. As an example, we just recently launched our new espadrille family, once a key platform for the brand and a nod to our Spanish ties. We are pleased with the early online performance. Second, driving growth in China through strategic store openings and marketing investment. And third, expanding the brand’s digital capabilities. Examples include: buy online and pick up in store, a key omnichannel functionality; an innovative browsing experience to increase discovery and conversion; and more efficient customer segmenting and targeting capabilities that will enable us to increase customer personalization.

In summary, no one is immune to the effects of this 100-year storm. We’re taking aggressive actions to ensure that Tapestry emerges a strong company when conditions normalize. We have a strong balance sheet, we benefit from a multichannel international distribution model, our exposure to wholesale is modest and our supply chain is diversified. Most importantly, we have powerful brands with deep consumer connections and a long history of successfully navigating global challenges and macroeconomic shocks.

With that, let’s turn to Joanne for a brief financial review of the quarter and the actions we’ve taken to mitigate the impact of the COVID-19 crisis. Joanne?

Joanne Crevoiserat — Chief Financial Officer

Thanks, Jide, and good morning, everyone. I hope this finds you all safe and well. Before I begin, please keep in mind that my comments are based on non-GAAP results. Corresponding GAAP results and the related reconciliation can be found in the earnings release posted on our website today.

Turning to our third quarter financial results, which reflect the significant negative impact of the coronavirus. Total sales declined 19% on both a reported and constant currency basis for the quarter. We entered the quarter with strong momentum. However, as we moved into February, trends in Greater China deteriorated sharply due to the coronavirus outbreak, declining over 80% versus prior year for the month while top line trends elsewhere remained positive. To this end, on a quarter-to-date basis through February, total sales increased double digits in Europe, mid-single digits in North America and low single digits in Japan. In March, although revenue trends began to gradually and steadily improve in certain areas first impacted, notably in China, we experienced widespread global disruption. Accordingly, Tapestry’s global sales fell over 40% in March from the prior year, reflecting the added pressure from store closures in North America and Europe, which began mid-month.

Importantly, throughout the quarter, we experienced strong double-digit growth in our global e-commerce business. However, this was not enough to offset the loss of business due to our store closures. Gross margin decreased 210 basis points compared to prior year in the third quarter, primarily due to the lower penetration of higher-margin international businesses. SG&A declined 3% year-over-year, driven by variable savings on the lower revenue base as well as the realization of fixed cost savings in light of the current environment. I will touch on some of these actions momentarily. The operating loss for the quarter totaled $32 million, and earnings per diluted share was a loss of $0.27. The EPS result included a negative impact of approximately $0.10 from an unfavorable tax rate as compared to our original projections. Due to the lack of visibility and potential variability in results through the end of our fiscal year, the Q3 tax rate was determined based on year-to-date actual results only, which included geographic mix headwinds in the quarter. This is in contrast to our historical method of calculation based on full annual forecasted results.

On the balance sheet, we ended the quarter in a strong liquidity position, with just under $900 million in cash and cash equivalents and $900 million available on our revolver. Total borrowings outstanding at the end of the quarter were $1.6 billion. Total inventory ended the quarter up 5%, reflecting actions taken in the quarter and the recognition of incremental obsolescence reserves in light of the current environment.

As you saw today in our press release, we took a number of charges in the quarter, in part related to the COVID-19 crisis. First, we recorded $478 million in brand intangible and goodwill impairment charges associated with Stuart Weitzman. These charges were a result of a decline in both current and future expected cash flows, which was exacerbated by the COVID-19 pandemic. Clearly, we have been disappointed with the brand’s performance and recognize the need to get back to its core proposition, as Jide mentioned. We have done a substantial amount of work to understand the consumer and believe there is a significant opportunity given its unique fusion of fashion and fit. We are also committed to improving profitability at Stuart Weitzman, which will be an element of Tapestry’s multiyear growth agenda. In addition, as mentioned, we recorded $104 million in charges related to an increase in inventory reserves, and we incurred $66 million in-store impairment charges due to COVID 19.

Now moving to mitigating actions that we have and will be taking to effectively navigate the COVID-19 pandemic and reinforce our financial flexibility while positioning the company for long-term growth. We’ve identified or implemented over $1.3 billion in cash preservation actions. First, we are tightly managing inventories by reflowing late spring and early summer product introductions. These are goods that were in production at the start of the coronavirus outbreak. We are also canceling deliveries scheduled for late summer and early fall 2020. Taken together, these actions are expected to result in over $500 million of working capital savings beginning in Q4 and continuing through the first half of fiscal year ’21. We are also targeting a capex reduction of at least $100 million in fiscal ’21 as compared to our run rate spend of approximately $275 million as we delay or cancel new store openings while prioritizing investment in high-return projects, notably in digital. In addition, we have canceled or deferred projects previously scheduled for our fiscal fourth quarter and now expect capex of approximately $225 million for fiscal year ’20, $75 million lower than our original plan for the year. Subsequent to quarter end, we drew down $700 million of our $900 million revolving credit facility to enhance our cash balances, bringing our total borrowings outstanding to $2.3 billion.

In addition to these measures, we are also aggressively controlling our SG&A spend. We are rightsizing marketing expenses, reducing fixed costs such as rent and driving procurement savings, including reducing external third-party services. We’ve also announced steps to minimize corporate costs, including temporary compensation reductions for our Board, management team and employees. And while we are pleased that we were in a position to extend salary and benefits to the vast majority of our North America retail team through May 30 despite store closures, we will furlough most assistant store managers and sales associates should stores not reopen at that time.

Beyond these near-term defensive actions, we’ve also accelerated part of our multiyear growth agenda to create a more streamlined organization, as Jide previously mentioned. We began these actions in Q4 and expect to be complete by the end of fiscal year ’21. We believe these steps will allow Tapestry to emerge as a global consumer-centric company with a more agile organizational structure that will be more responsive to the rapidly changing retail environment. And finally, we made the decision to suspend our quarterly cash dividend and share repurchase programs, saving approximately $700 million on an annualized basis as compared to fiscal 2020. In the near term, our priority is to preserve our cash on hand in light of the environment. Longer term, our strategic intent is to return to sustainable top and bottom line growth and strong free cash flow generation, which we intend to utilize for debt paydown as well as capital return to shareholders through dividends and share repurchases.

In closing, as noted in our release, while we are not providing guidance at this time due to the lack of visibility, we do still intend to hold an Analyst and Investor Day this summer to discuss our long-term strategies. We believe in the benefits of Tapestry’s multi-brand model and the power of each of our brands. This is particularly true during challenging times when the advantages of scale as well as shared best practices and systems come to bear. Our objective is to successfully navigate this crisis through the identification and execution of mitigating actions that ensure we emerge a stronger, more agile company. This will require us to make both bold and difficult decisions. It has also created the opportunity and the need to accelerate key elements of our multiyear growth agenda. Importantly, our view of the long-term opportunities for our brands is unchanged, and our strategic intent to drive organic growth and profitability is unwavering.

And now I’d like to open it up to Q&A.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Bob Drbul of Guggenheim Securities.

Robert Scott Drbul — Guggenheim Securities — Analyst

Hi, guys. Good morning.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Good morning. Rob.

Robert Scott Drbul — Guggenheim Securities — Analyst

Hope you guys are doing well. I guess, two questions. I think the first one is just more category. Do you think the market for handbags and accessories will be disproportionately impacted in the economic downturn? Do you think consumers are going to be shopping for handbags? Can you talk about that maybe generally?

And then I think the second part of it would be, can you just talk about your confidence level in maybe Kate Spade and Stuart Weitzman? Can these brands weather the storm that we’re in right now?

Jide J. Zeitlin — Chairman And Chief Executive Officer

Absolutely. Thank you, Bob, and I hope you’re well also. With respect to the category, we’re confident in terms of our ability to both weather the storm, but as importantly, to come out the other end strong. If you look at kind of previous downturns, whether those are macroeconomic or whether those are natural disasters around the world, in our experience coming out of those periods, we’ve seen continued strong demand for our product and have no reason to believe that this will be any different, particularly when we look at the real-world experience that we’re getting in parallel today. We clearly have seen what is happening to our business in China and in South Korea. And we, on an everyday basis, globally, are seeing the demand for our product digitally. And so there’s nothing we’ve seen that would suggest to us that we’re not going to come out in this period with genuine, authentic, real demand for our products.

With respect to your question on Kate Spade and Stuart Weitzman. I guess the way I think about it is that it is actually, one, in times such as this, the power of a well-capitalized portfolio company is most evident. Smaller brands in our world, that’s Kate Spade and Stuart Weitzman, benefit from having greater leverage with landlords and supply chain partners and from having a stronger balance sheet. At the same time, larger brands, in our case, Coach, benefit from innovation that we see at Kate and at Stuart that as that migrates across the brands, and there are a couple of great examples of that, which perhaps we’ll get into later in the call.

But I — fundamentally, to come back to each of Kate Spade and Stuart Weitzman have got unique brand propositions that have deep emotional connections to their customers. And one of the benefits of a lot of the work that we’ve done over the last eight or so months is that our brand work has shown significant opportunities for both these brands, particularly at Kate Spade, where if there’s ever a moment in terms of where consumer behavior is, and is evolving and where we believe it’s going to evolve coming through this COVID-19 period, where there’s a brand that connects with — where it connects with where consumer behavior is going, the Kate Spade core culture and unique spirit is tailor-made for that. And then particularly, as we continue to reposition the important role of color and novelty in that brand, as we continue to work with the balance between playfulness and pragmatism of that brand, we think that there is real upside there. And so we’re — we believe as deeply in Kate Spade, and Kate Spade coming through this period as ever.

And Stuart Weitzman, differently but similarly, it’s clearly a unique brand. It’s got that balance, as we’ve talked about, between fashion sensibility with a remarkable fit. We’re taking, as I mentioned or alluded to in my opening comments, very disciplined steps to narrow its assortment to focus much more clearly on boots, on espadrilles and on sandals, and to focus geographically very much on China, North America. And digitally, from a channel perspective. Stuart Weitzman is going to be a survivor. And particularly, in a category that’s quite fragmented where others who are smaller and who don’t have the benefit of being on a broader platform are not going to survive. And so we think that there’s going to be a real market share opportunity for Stuart Weitzman.

And then I guess, lastly, I’d just say that I couldn’t be more pleased, our Executive committee couldn’t be more pleased with Liz and Giorgio who have hit the ground running and are having a huge impact in each of their businesses. And as odd as it may sound to say, this moment has really proven catalytic for them and for their leadership, parenthetically as well as for the broader leadership team across Tapestry. So long way to say that we — you don’t want to go through a period such as this. But having gone through it as we all continue to go through it, we feel very confident about both Kate Spade and Stuart Weitzman. So thank you, again, Bob.

Robert Scott Drbul — Guggenheim Securities — Analyst

Thank you. Good luck.

Operator

[Operator Instructions] Your next question comes from the line of Ike Boruchow of Wells Fargo.

Joanne Crevoiserat — Chief Financial Officer

Hey, Irwin. How are you?

Irwin Bernard Boruchow — Wells Fargo Securities — Analyst

I hope everyone is hanging in there. So I actually have 2, but they’re very quick. Just the comment, Joanne, I think you gave for March was global sales down 40%, I believe. I understand visibility is really, really low right now. But is there any chance you could help us out with April just on how global sales have trended?

And then just very quickly, follow-up on the cost side. I understand the pandemic hit late quarter. It was very sudden. So you couldn’t really adjust the cost structure for 3Q. But can you maybe give some color on opex expectations for 4Q? Maybe just to help give us some perspective on what all these initiatives you’re talking about on the cost side should mean to the P&L. Just anything would be helpful as we’re trying to think about flow-through rates.

Joanne Crevoiserat — Chief Financial Officer

Yes, thanks for your question. We have seen, as we move through March, more widespread store closures with the spread of the pandemic globally, which contributed to the March results. And given lack of visibility to store reopenings and traffic trends and consumer behavior post-COVID-19, it’s really hard, as you can imagine, difficult to provide guidance. And to give you a false sense of precision — or give us a false sense of precision on that number, we have seen with the stores reopening in China, very nice, steady progress in terms of those traffic trends in consumer demand coming back into the market. As we think about Q4, while we’re not providing guidance, I guess I could provide some data points as you think about how Q4 can shape up. In Q3, as you noted, our sales were down about $260 million versus last year. And that was only with 2.5 weeks of store closures in North America and Europe during the quarter. So as extrapolating from that data point and given the widespread global closures and expected slower pace of recovery, we expect the Q4 impact could be three to four x those levels. And just to make a fulsome, as we think about gross margin, as you saw in Q3, gross margin was lower, impacted by mix. And the margin mix was impacted by the lower relative penetration of the high-margin international businesses, particularly China in the third quarter. As we move into the fourth quarter, the lower relative penetration of North America could benefit gross margin.

And then to your question on SG&A, as we’re taking very aggressive and significant actions to reduce spending, not as much of that impacted Q3 based on timing. We do expect more to impact Q4. And we’ve talked about a number of those actions, mitigating actions that we’re taking. However, those actions won’t be enough to offset the top line decline. So we would still expect significant deleverage on the lower sales in Q4. So that’s how we’re thinking about or how you can think about our Q4, how that’s shaping up. Overall, we are planning conservatively and taking aggressive actions to drive mitigating actions and position us to not only weather the storm but come out stronger at the end.

Irwin Bernard Boruchow — Wells Fargo Securities — Analyst

Thanks so much. It’s very helpful.

Operator

Your next question comes from the line of Erinn Murphy of Piper Sandler.

Erinn Elisabeth Murphy — Piper Sandler & Co. — Analyst

Great. Thanks. Good morning. I hope you all are well. My question is around inventory. I was hoping if you could speak to where you see, at least over the next 4 quarters, inventory potentially peaking. And then as you think about the planned promotional activity, can you just talk about some of your strategies around liquidating products and then particularly within outlets? I’m just curious if you’re rethinking maybe at least the near term, how you think about made for product versus using it as a vehicle, more so to liquidate full-priced product?

Joanne Crevoiserat — Chief Financial Officer

Yes. Inventory is another area that aggressively actioned as we moved into the crisis. So we’re addressing the supply to align with unfolding trends in demand. We took action, very strong action and reflowed. We’re reflowing the late spring and early summer production. These were goods that were in production at the beginning of the crisis. And we’ve canceled all of our late summer and early fall deliveries, which allows us — our inventory is less seasonal by nature, and it provides us with tremendous flexibility to reflow our product as we see demand change across the next few quarters. So by reflowing product and canceling on the back end, we’re able to save over $500 million in working capital.

Our product is also globally shippable. So it allows us to move the product around to where we’re seeing demand. In recent examples, in our case to date, both China and digital are places where we’re seeing demand growing. So we’re able to move inventory into those channels. We feel good about our position with inventory. And as we think about and manage where we see demand matching supply, the teams are working very quickly to move inventory through our network. At this point, we’d not expect significant changes in the product availability by channel. And with our reflowing, we do expect to flow newness and have newness dropping in over the course of the next few quarters.

As we look out, we — as you know, we just reported inventory at the close of Q3, were up 5%. We would expect, as we close our fiscal year in Q4, inventories to be up in the mid-single-digit range based on the actions that we’ve taken. And then as we move through our fiscal year ’21, we continue to have a strong focus on this inventory management. And would expect to end our fiscal year ’21 with inventories down year-over-year. So this is a very strong focus within the organization. I would say the teams are laser-focused on this, and we’re monitoring it very closely as we watch the demand trends change.

Erinn Elisabeth Murphy — Piper Sandler & Co. — Analyst

That’s helpful. The thoughts around outlet? Are you changing kind of how you’re thinking about the near-term there in terms of liquidation strategies?

Joanne Crevoiserat — Chief Financial Officer

No. I would say we’re leaning into the areas where we see demand, but don’t expect a significant need to liquidate full-priced product through outlet to a much larger degree than we have in the past. One thing we are monitoring is the promotional activity and the outlook across the industry. We have seen an intensification in the promo environment in North America and Europe, particularly as retailers are moving through excess inventory. But again, we remain focused on the controllables, and the aggressive actions that we’ve taken to manage our inventory put us in a better position in the months ahead, so we expect that we’ll be able to continue to drive — meet demand with the right supply by channel, between outlet and retail. And also to manage through the promotional environment in — with a healthy inventory position.

Erinn Elisabeth Murphy — Piper Sandler & Co. — Analyst

Very helpful Thank you all.

Joanne Crevoiserat — Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Alexandra Walvis of Goldman Sachs.

Alexandra E. Walvis — Goldman Sachs Group — Analyst

Good morning. Thanks very much for taking the question here. Firstly, a quick follow-up to Erinn’s question. How are you guys thinking about balancing the need for cash preservation as a result of these order cancellations with also the considerations around relationships with your manufacturers, and making sure that those are preserved for the long term? And then I had a second question on rent, you mentioned that you were looking at rent reductions. I wonder if you could comment more broadly on how you’re thinking about how the fleet might emerge from this versus where it was before?

Jide J. Zeitlin — Chairman And Chief Executive Officer

Absolutely. So perhaps, Todd, you may want to start on the rents and on the fleet, and then I’ll pick up on the SPs.

Todd Kahn — President, Chief Admin Officer And Company Secretary

Great. Thank you. As you look at the fleet, one of the things we’re recognizing more and more is the omnichannel nature of our consumer. She shops online, she shops in our stores and their — and she shops in both locations. We are going to, in the upcoming year and through our LRP period, we’re going to be holding ourselves to a much higher level of profitability in the fleet itself.

So when we look out in the future, the criteria to renew a lease and/or to build a new store is going to be quite high. And if it doesn’t meet our criteria, we will exit the store. One of the things we’ve seen recently is as stores close, if a store closes in a catchment area, we end up transferring about 20% of the volume to an existing store. So that’s a very positive outcome.

In terms of the immediacy of our rent negotiations, we are actually having — we’re engaged in constructive dialogue with all of our major landlords in the U.S. We had very good dialogue and resolutions in Asia in the past when the coronavirus hit Asia. And in fact, there was rent accommodations made, and we anticipate achieving some rent reductions in North America through this period.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Great. And Alex, with respect to the SPs, I would — I know you know, we began as a manufacturer, right? With a factory on 34th Street, and I think that gives us a real sensibility in terms of understanding the SPs on top of what is a really strong supply chain team that we have, that engages with them every day. And so we have tried to be very thoughtful in our engagement with them as we cut forward deliveries in finding that right balance between clearly protecting our balance sheet, managing our inventory and cash levels, and making sure that we did it in a way that our SPs can manage. And so — and Joanne has talked about the financing facility that we put into place for the benefit of SPs. And so we’ve tried to take steps such as that and others to make sure that they’re able to weather this storm so that we have a robust ecosystem of suppliers coming out the other end. But at the same time, recognizing clearly, we’ve got to be strong, we’ve got to come through it well to be in a position to benefit from that on the other end.

Operator

Your next question comes from the line of Mark Altschwager of Baird.

Mark R. Altschwager — Robert W. Baird & Co. — Analyst

Good morning. Thank you.Question on stores, just with respect to reopening plans. Can you talk about any notable differences between retail and outlet? And as curbside pickup becomes a bigger picture in retail models, I’m wondering if that changes the way you think about digital within the outlet business. And then broadly on the stores, with respect to the changes in the retail workforce. Beyond the near-term furloughs and actions related to COVID, how do you envision the store operating model changing?

Jide J. Zeitlin — Chairman And Chief Executive Officer

That’s quite a mouthful. Why don’t you start, Todd? And then I’ll add.

Todd Kahn — President, Chief Admin Officer And Company Secretary

Thank you. In terms of the curbside concept, we are actually testing starting tomorrow in about 40 locations in North America, both across full price and outlet stores, and we’ll see how the consumer responds to that, we’re optimistic. But again, it still won’t fully replicate the experience that particularly the Coach, Kate Spade and all of our brands give in terms of the service levels. So it will be hard to fully mitigate the sales through a curbside experience. In terms of outlet, we are putting in, and we have very significant and well detailed protocols in opening all of our stores. So we’ll obviously be following the regional state government guidelines on safety. But in addition to that, we’re going to be doing things in North America, like temperature checks for all our employees when they start — when they begin their workday. There will be significant protocols on cleaning, there will be enforcement of social distancing. So there will be, for some period of time, a new normal in that. And our workforce is typically, particularly in our larger stores, flexible. So it will respond to the needs of the customer. And if the volume isn’t there, we’ll obviously pivot to a smaller workforce in those stores.

Jide J. Zeitlin — Chairman And Chief Executive Officer

And the one thing I would add just on the broader theme of reopening is, clearly, as we reopen location by location, we do so into a world where the shift from brick-and-mortar to digital shopping is clearly accelerating, has been accelerated. It’s a secular trend, but COVID-19 has clearly accelerated that trend. And as such, the line between physical and digital worlds is increasingly, and will increasingly be blurred. That said, stores will always play a vital role for us and our consumers’ experience with our brand. And so even though we think that the world will move to a place where there’s greater parity between brick-and-mortar and digital, and this is not a short-term phenomenon, we continue clearly to be very, very invested in our brick-and-mortar stores.

Mark R. Altschwager — Robert W. Baird & Co. — Analyst

Thank you.

Operator

Your next question comes from the line of Jamie Merriman of Bernstein.

Jamie Susan Merriman — Sanford C. Bernstein & Co. — Analyst

Thanks very much. Just a Just a quick one on China. Joanne, I think you mentioned that China was down about 80% in February, and then it’s picked up since then. But I was wondering if you could give us a sense of what you’ve seen from traffic levels maybe in March, just so we can understand what that progression has looked like as things have started to reopen.

And then just on the supply chain disruptions, it sounds like those were maybe primarily in Europe. But I was wondering if you could give a little bit more detail. And then was that disruption isolated than in a particular brand like Stuart Weitzman or was it more widespread?

Joanne Crevoiserat — Chief Financial Officer

Yes. On the China business, it’s — we’ve been pleased that all of our stores on Mainland China are now open. And to your point, we have seen very nice and very steady improvement in the business through March and also through April. So the business is responding. In fact, in some locations, we have seen positive comps, more in locations that are not impacted by domestic tourists; business, where those have been lagging a little bit more based on just travel restrictions within the country.

But overall, I’m pleased with the progress we are seeing in China and the steady improvement. Your question — I apologize, I lost the second part of your question.

Jamie Susan Merriman — Sanford C. Bernstein & Co. — Analyst

It was about the pricing and the disruptions that you talked about, were they specific to a particular brand? Or…

Joanne Crevoiserat — Chief Financial Officer

Yes. Thank you. The supply chain disruptions that we felt we’re very minimal and not material, particularly in China as we have migrated most of our finished goods production away from China over many years. So as disruptions were progressing through the country, we were much less impacted. So from a supply chain standpoint, our business was less affected. As the pandemic spread through Europe and other parts of the globe, we were impacted with raw material suppliers in Italy and some finished goods production in Spain, particularly with Stuart Weitzman. However, those facilities are back online.

So again, overall, from a supply chain perspective, our diversified sourcing base has worked well for us, and we have been much less impacted from a supply standpoint.

Operator

Your next question comes from the line of Lorraine Hutchinson of Bank of America.

Lorraine Corrine Maikis — BofA Merrill Lynch, — Analyst

Just wanted to follow-up on some of the questions around the outlet business. Is there a plan to develop more of a presence online to address the post-COVID shift toward e-commerce?

Jide J. Zeitlin — Chairman And Chief Executive Officer

Short answer is yes. Todd, do you want to add a little bit?

Todd Kahn — President, Chief Admin Officer And Company Secretary

Yes. That is definitively the short answer. The more fulsome answer is that we recognize that just like our retail customer, the outlet customer is an omnichannel customer. And I’ll speak specifically to coachoutlet.com. It is a robust channel that we are using, we’re learning. And that customer, particularly a millennial or a younger customer is going to embrace and is shopping.

Lorraine Corrine Maikis — BofA Merrill Lynch, — Analyst

Thank you.

Todd Kahn — President, Chief Admin Officer And Company Secretary

You’re welcome.

Operator

Your next question comes from the line of Oliver Chen of Cowen.

Oliver Chen — Cowen and Company — Analyst

Hi good morning.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Hello, Oliver. How are you?

Oliver Chen — Cowen and Company — Analyst

The China momentum has been encouraging. That market has had a coordinated shutdown as well as reopening. What are your thoughts on the key lessons there in terms of what may be applicable to the U.S.? And some of the difficulty in the U.S. is different areas opening at different times. I would love your thoughts on what that may mean and what you’re considering as well as some things you mentioned on the call, including live streaming and using Zoom, how you see retail evolving with new opportunities to pursue at-home engagement.

And Joanne, on the debt covenant, I was just curious about how we should think about that 4x covenant as we approach next quarter and what’s on your mind for managing that.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Why don’t I start, Joanne, and then have you pick up. But on China, we — I often smile because we’ve got a great benefit, clearly, of being global and being direct-to-consumer. And so in some ways, every day for us is Groundhog Day. We get to see something play out in China. And we get to learn from it and think about what implications that may have for us and the rest of the world, and to adapt our businesses globally. So there are aspects of China that are certainly idiosyncratic to China, and we listen very carefully. And we try to understand that but I would say, though, that when we look across other regions of our business, we think — we believe that there are — that there’s also a lot that is relevant in the China experience. So for example, South Korea, which has a different policy framework than China does, has gone through a curve that is actually not that dissimilar to China. And that in many ways, gives us some confidence in terms of as we think about what reopening may look like in the west. And even — and as we look at our digital business in the west and we look at some of the underlying consumer behaviors, that would also suggest that there is real consumer demand coming through this period. And that, that, again, is not totally idiosyncratic to one region or one political system.

The other comment I’d make to your WeChat and live streaming and at home is that, that’s part of the comment I made a moment ago about the blurring of the line between physical and digital. And increasingly, as we think about a real omnichannel world, where we see great opportunity going forward. And I loved what happened within our system, and this speaks to the power of the portfolio because the live streaming actually began at Stuart Weitzman in China. Our Coach team in China watched that, saw the potential — not just potential, the actual impact it was having in terms of driving business. So they ended up taking it and reinterpreting it for Coach to real success. And then independently, all the way across the Pacific, we had different teams in California, in other parts of the U.S. and in North Carolina at Kate Spade, who took Zoom and brought people into their — literally, store associates, bringing people into their personal closets. And saw that it both created real brand heat, created real connectivity and then has translated into very strong digital results at Kate Spade.

So we do think — we don’t view these as kind of aberrant data points. We believe that they’re part of a secular trend and are working extraordinarily hard to make sure we learn the most from it.

Joanne Crevoiserat — Chief Financial Officer

And Oliver, I’ll jump in on your questions regarding our credit facility. And I’ll start by saying our priority right now is to protect our liquidity through this crisis, and we entered the crisis really, at the beginning of the calendar year and a very strong liquidity position. And we ended the third quarter with just under $900 million in cash and cash equivalents on hand. As we entered the fourth quarter, we did draw $700 million of our $900 million revolver, really, to further bolster our cash balances and have the flexibility and liquidity. Our covenant is an adjusted debt-to-EBITDA covenant, and we are closely monitoring our leverage and in close communications with our credit facility banks on any adjustments we need as we move forward for a short period of time to see us through the crisis.

Oliver Chen — Cowen and Company — Analyst

That’s great. Thank you. Best regards. Thank you, both.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Thank you, Oliver.

Operator

Your next question comes from the line of Paul Trussell with Deutsche Bank.

Paul Trussell — Deutsche Bank — Analyst

Earlier, you mentioned some of the dynamics that we should keep in mind on gross margin, especially with some of the geographic mix changes going on. Was hoping you could dig into a little bit more detail on other puts and takes around gross margin as we think about, not just geographic mix, but the channel mix and just what’s transpiring in terms of the rate of recovery, how you’re managing inventory, anything else to note.

Joanne Crevoiserat — Chief Financial Officer

Yes, I can take that. In terms of gross margin, I would say that generally speaking, the margin performance within each brand is shaping up the way we had expected. However, the impact of the disruption in our business with stores closed have had a significant and material impact on the outcome on overall margins. So the real driver is — has been the geographic mix, most prominently. And that, as I mentioned, worked against us in Q3 with the international business, and namely China, having a much lower penetration to our average and that business is a high-margin business. As we move into Q4 and as we’ve seen more stores closed more broadly across the business, we see that impact actually reversing a bit with the North America business underpenetrated as we move into Q4. Relatively underpenetrated, I should say.

By channel, I would say, that we feel really good about our ability to drive the digital business globally and have seen really nice response from our customers in terms of demand trends there. But have not seen a material impact on margin. As we think about managing margin through the rest of this fiscal year and into fiscal year ’21, one of the biggest controllable items is how we manage our inventory. And as I mentioned earlier, we’ve taken aggressive actions to align our inventory with how we see the demand trends unfolding. And that includes the over $500 million of adjustments that we have taken. Not only does that preserve cash flow, but it also puts us in a better position as we move through the year to manage the promotional activity.

So the other factor in gross margin that we’re monitoring is really, that promotional activity. We expect that the environment and promotional environment will intensify as we move through, and we’re very focused on making sure that we’re controlling the elements that we can control, again, with aggressive inventory actions. And there are a few data points that give us confidence in our ability to positively manage margins and AUR. And to date, we’ve seen success in driving higher margins on digital as we’ve managed through this part of the crisis, particularly in North America. And as China has reopened, we’ve been generating higher margins versus last year across channels.

We have stated increasing AUR and driving margin — healthy margins as a priority in the past, and our focus continues to be there. And longer term, we expect to continue to drive higher AURs based on being closer to the customer and driving innovation in our product. I think short to medium term, it’s really about managing our inventories and responding appropriately to the environment.

Paul Trussell — Deutsche Bank — Analyst

Thank you for the color. Best of luck.

Joanne Crevoiserat — Chief Financial Officer

Thank you.

Paul Trussell — Deutsche Bank — Analyst

Thank you.

Operator

Your next question comes from the line of Simeon Siegel of BMO Capital.

Simeon Avram Siegel — BMO Capital Markets — Analyst

I hope everyone is doing okay through all this. Just given the economic landscape, can you remind us what percent of domestic store sales and locations are within maybe enclosed malls versus off-mall?

And then Jide, this might just be the wrong time for this question, but you did mention the benefits of being a well-capitalized brand throughout all of this. Can you just talk about — recognizing defense is important. Talk about the offense the opportunities you mentioned to grab share, whether it’s the existing brands, but maybe any other color you see if you’re looking at other brands within that, that are not as well capitalized.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Todd, you know the response on the malls.

Todd Kahn — President, Chief Admin Officer And Company Secretary

Directionally, you can think about half the malls being outdoor malls and about half the malls being enclosed malls, when you look at the total North America fleet.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Great. Thanks, Todd. So I’ll take a slightly more expansive kind of response to your question about where we find ourselves and how we take advantage of being in a relatively strong position. And I’ll go back to some comments that Joanne made earlier. But there really are three phases to both weathering the storm and then emerging strong. And really, the first is to — there’s an expression that they use in India that I’m fond of. It’s “do the needful”, right? So to rightsize our costs and make sure that our costs are really in line with the current scale of our business. And we’re clearly doing that, have been doing that for some time. We’ll continue to stay focused on that.

Second is to rebuild, rethink core aspects of our operating model. And so is — and we have the benefit, and we didn’t know it at the time, of having begun rethinking our growth model six, eight months before COVID-19 hit. And so our ability to really be very thoughtful and deliberate about increasing our focus on the consumer, investing in systems to better connect with that consumer to understand where she is traveling, to really, as we’ve talked a lot about on this call about the — about digital and being on the front end of that. Using data or knowledge to really drive, proactively drive decisions and having an organization that’s much more agile in terms of how it makes decisions and in terms of the culture.

And our sense is that our relative strength allows us to hold two thoughts in our minds at the same time. One is to take the immediate, really firm steps that need to get taken on the cost side in terms of our business. But two, is to really be thinking going forward and to be making very surgical investments in areas going forward.

And that then allows you to get into a third phase, which ultimately is what I’ll call the flywheel, right, where you really have this exceptional business model. And as we’ve said internally and really looked at where we’re likely to go, our sense is that coming out of this extraordinary period, having taken the steps that we’ve already taken and positioning ourselves to continue to work forward, particularly on our growth agenda, we’ll be in a position where we’ve got really healthy margins. And margins in many ways, frankly, that look more like the historical Coach business did in its best years and real operating leverage in the business going forward. And that’s part of the luxury that our position affords us as opposed to some of our peers who may only be able to focus on the first part of that, on just rightsizing their costs and not thinking as much forward. Both because they may not have had the benefit of beginning to think through some of those issues six, eigth months ago. But also because they may not have the wherewithal to make those investments going forward or those, clearly in a very surgical way.

Simeon Avram Siegel — BMO Capital Markets — Analyst

Great. Thanks a lot. Good luck. Stay safe everyone.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Thank you.

Joanne Crevoiserat — Chief Financial Officer

Thank you very much, you too.

Operator

Your final question today will come from the line of Michael Binetti of Credit Suisse.

Michael Charles Binetti — Credit Suisse — Analyst

Hey, guys. Good morning. Thanks for taking my questions here now. I’ll add my hope that everybody is doing well. Joanne, just a couple of modeling questions. Real quickly, the gross margin, all told was fairly stable in the quarter, just some mix that you pointed to. I’m wondering if you think it’s bottomed in the third quarter given the abrupt nature of the start of the shutdown. You said fourth quarter, the mix shifts back in your favor from North America being lower. Maybe some thoughts on how markdowns will start to phase in. I’m guessing that’s a bigger drag in 4Q. So I don’t know if that’s bottomed.

And then same question on the SG&A, you mentioned, I’m wondering if the deleverage gets worse before it gets better or not because you have more ability to proactively

Manage costs in the fourth quarter.

Joanne Crevoiserat — Chief Financial Officer

Yes. Thanks, Michael. From a modeling perspective, as I mentioned, the most significant impact to the gross margin rate is the store closures and the relative penetration of our geographic regions to our total. And as I mentioned in the third quarter, that worked against us with the international and China penetration being so much lower. The North America stores being closed has the opposite impact on the margin rate, obviously, not an aspirational outcome. But it does have the impact of relative lower penetration in North America driving a benefit to the margin rate. And that’s what we would expect.

To your point, the other aspects of margin management were — have been in line with our expectations, and we expect that to continue. There is an expectation as we move into — later into the year — calendar year, into the first part of our fiscal ’21, that we will be navigating more headwinds from a promotional environment. But as I mentioned, we’re taking significant actions on inventory management to ensure we’re best positioned to navigate through that. So the way we see margin shaping up outside of the significant geographic mix issues is mainly in line with our original projections.

From an SG&A management, we have been — we are taking a rigorous approach on SG&A. And frankly, everything is on the table. I think we covered in our notes, some actions that we have taken, some of which start in the fourth quarter, some actions will start July one at the beginning of our fiscal year. I think we’ve talked about the previously — we’ve mentioned previously, the temporary reductions across our salaries and compensation across our Board, management team and employees. We, on the other side of that, have been in the fortunate position to be able to extend salary and benefits to our retail associates through May 30. So those expenses and if that SG&A continues in Q4, should our stores be closed longer, at that point, we would furlough — we would be furloughing our retail associates.

Beyond that, we’re addressing all aspects of SG&A. And as I mentioned, everything is on the table. We expect to have lower overall SG&A, but it will not be enough to offset what we expect to be the top line reductions in Q4. So we do expect significant deleverage in Q4.

Michael Charles Binetti — Credit Suisse — Analyst

Okay. And then, I know you guys have been generous of your time here. Jide, can I ask you one higher-level question? I guess as we all take a breath and be thankful that we see a path to the stores reopening at this point, I do have to ask, you and others will be reopening back into a recession. A lot of our economists suggesting unemployment will be well into the double digits. Can you talk to anything specifically that you’re going to do to prepare to sell into that environment and into that consumer mindset related to the budget as we do get reopened here?

Jide J. Zeitlin — Chairman And Chief Executive Officer

Sure. And one is to acknowledge that, clearly. And so as we think about the return, it’s a slower rebound than perhaps one has seen, post other downturns. But that said, clearly a rebound and part of what we’ve seen — and sorry to mention it yet again, but what we’ve seen through our digital channels in recent weeks and months is that there does continue, despite what is clearly a severe economic downturn in the west. What we see is continued demand and continued desire for our product. And so it really is a little bit of a repeat of some of what Joanne has said. We’ve planned accordingly. So we’re not planning for a quick rebound, both in terms of how we think about our long-term cost structure and how we think about where we make our investments.

But let’s also recognize two things. Our experience in prior downturns is that our accessible luxury positioning positions us extraordinarily well relative to the traditional European luxury players. So we think there’s a market share opportunity for us in the type of environment that you’ve just talked to.

And then we also believe, if you think about the balance in our business between retail and outlet, the outlet business — we think we provide extraordinary value across both of our businesses. However, the outlet business is particularly value — a value business. And so we think in many ways, yes, it will be a subdued environment in all likelihood. But if there’s a business, a set of brands that are well positioned for that, we believe that our brands are exactly that.

Michael Charles Binetti — Credit Suisse — Analyst

Thank you so much.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Thank you.

Operator

That was our final question. I will now return the call to management for any additional or closing comments.

Jide J. Zeitlin — Chairman And Chief Executive Officer

Absolutely. So I’ll close this call by remembering a colleague that we at Tapestry, lost this month to COVID-19. He was a true craftsman who created beautiful product in our Coach leather goods workshop here in New York City. He was described to me by one of his fellow craftsmen as a hard-working humble man. He was our edge paint expert and very good at his job, always smiling and never any drama. And so for me, that description is as honorable a way to live one’s life as one could live: hard-working, humble, expert. I’m proud to have been his colleague.

And so I thank each of you, our fellow stockholders for entrusting us with your company during these extraordinary and uncertain times. Thank you very much. Stay well, stay safe.

Operator

[Operator Closing Remarks]