Good morning ladies and gentlemen and welcome to Perry Ellis International's Fiscal Year 2016 Fourth Quarter and Year-End Earnings Results Conference Call. Today's conference is being recorded. Before we begin, I would like to remind you that some of the comments made on the call, either as part of the prepared remarks or in response to your questions, may contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such information is subject to risks and uncertainties as described in the press release and in documents that we have filed with the SEC.
Joining us today for this call from Perry Ellis are George Feldenkreis, Chairman and Chief Executive Officer; Oscar Feldenkreis, Vice Chairman, President and Chief Operating Officer and Anita Britt, Chief Financial Officer.
I would now like to turn the call over to Mr. George Feldenkreis. Please go ahead, sir.
George Feldenkreis: Chairman and Chief Executive Officer:
Good morning. We are happy to report a very good year for Perry Ellis. Despite the extraordinary challenges in the consumer business, we were able to increase organic sales compared to last year by about 4%. We ended the year with $900 million in revenues, which is approximately 1% over last year. But after deducting sales of C&C California and other exited brands as well as the impact of the devaluation of foreign currencies in some of the areas we trade overseas, our organic growth in constant currency basis was in excess of 3% compared to prior year.
Initiatives that we have implemented not only resulted in an increase in revenues for the year, but we were also able to increase our gross profit margin 170 basis points to 35.8%, a growth came across our co-brand including Perry Ellis, Original Penguin, Nike Swim and Golf brands. Our licensing business as well as our international business continues to grow in constant currency basis.
We have developed better, very diversified customer base and we have been able to achieve good results despite the fact that some of our retail business partners have experienced a weak year. There is no question that a warm winter climate and the devaluation of foreign currencies resulted in diminishing spending by tourists that affected all retail sales, in the areas like New York, Vegas, Orlando, Miami, Southern California, and Southern Texas.
We continue to experience the positive results of the restructuring efforts we started a couple of years ago. It has served us well and has positioned us to be a much stronger company in the future.
Licensing continues to perform well. Royalties for the year increased by 9% to $34.7 million. As important, last year we signed 26 new agreements, which bode well for the next few years. Licensing agreement usually carries smaller royalty payments in the first and second year, and it increases as the licenses become more mature while the sale, distribution and marketing organization become more knowledgeable and then their sales steadily increase.
Fiscal year '16 direct to consumer results from our e-commerce sites were positive, drastic increase by 33%. Especially strong results came from the increased e-commerce influenced social marketing and programmatic display efforts, resulting in new consumer direct channel traffic to our site. While traffic growth was 33% on revenue growth of over 20%, the latest e-commerce marketing and technology expenses decreased by 12% and 13% respectively.
Direct traffic to Perry Ellis that come during the recent Spring 16 Fashion Week Runway unveiling more than doubled compared to the same week the previous year. Email subscriber list grew 39%, nurturing our most efficient e-commerce marketing channels. We continue to make important investment across our digital infrastructure. We just finished building a new 5000 square feet state-of-the-art photography studio in our Miami headquarters. It will substantially improve our effectiveness in the digital frontier.
As digital becomes the key component of brand’s connection with consumer, we continue to develop new systems that will improve not only our own e-com sales, but our sales through our e-com business partners and brick and mortar like macys.com, kohls.com etc., also through all the direct e-com business customers like Amazon, Zappos, Asus, Zalando Orlando etc. We are extremely proud of the progress we continue to make towards achieving a near and long term objective. Our optimism is evidenced by the strength and future of our brands.
Our international business grew 9% during the year and today represent 13% of our company’s total business. This is in spite of the devaluation of the British pound, the euro and the Mexican peso. We have stabilized our pricing to reflect the necessary increases to compensate for the devaluation of the currencies, and we are happy to report that our current sales are continuously show an upward trend despite the price increases to consumers.
In Europe, we are now distributing five brands: Original Penguin, Farah, Callaway Golf, Ben Hogan and Nike Swim. First of all, I must mention that we are extremely proud and we congratulate our Danny Willett’s achievement at the Masters’ last Sunday, an amazing feet of courage and perseverance. We are proud that not only he used the best golf equipment in the world, but he was also wearing our shirts and pants.
First report on Nike Swim retail sales in our new area of business, which are the UK, Spain and Latin America are showing very promising results. We are sure that this will help tremendously the growth of our company. Having our European organization enables approach retailers with five strong brands, gives us a great opportunity to substantially increase our presence and our strength with many retailers in Europe.
Ben Hogan continues to penetrate a large segment of the market, not only the USA, but in the UK and Canada. We are focused on strengthening our software to make it state-of-the-art in the area of analytics, inventory control and production, as I have been planning on process execution. We are experiencing ongoing improvement in our in-stock reduction markdowns and overall margin percentage. As a consequence of our lean inventory policy, we were able to maintain a pricing and did not have to do heavy promotions of other brands at the end of last year.
This will also lead to increased conversion within our own stores. Strengthening the profitability of our direct to consumer division is a major goal of the company and a major focus of our activities in the months and years ahead.
On our retail direct to consumer full price and outlet business, we did not have a good year, especially the last two quarters. The strength of the dollar reduced the amount of tourists coming to the United States and impacted our revenues. We feel that things will return back to the normal around the summer and the second half of the year would be much better for our retail business than the first half of this current year.
In today's business, consumer get whatever merchandise they wish, whatever they have with deliveries whatever the preference is. More than ever, the customer is keen, as important as all our efforts are geared to achieve that goal. The associates have to make sure that each contact with the consumer is an experience that is satisfactory and appreciated by the consumer and will make each one willing to come back.
Our core-brand Perry Ellis, Original Penguin, Nike Swim and Golf brand has continued to grow, we have great expectations for this year. Our constant focus in making better products at reasonable prices is showing results by lower markdowns and improved sales and placement in the stores. We feel that we are in the right track and we continue building our company.
Financially, we have the strongest balance sheet we ever have and we are committed to make it stronger. Fair price, quality, innovation, great design are given for any successful apparel company. Without them we cannot stay in the business. But important differentiator going forward are management and technologies. Companies with management that have no change in its ability to adjust to the new realities and take the necessary steps to prepare for the future will not be able to succeed in this new environment. We are proud that we have taken that route early on and we continue to be headed in right direction.
I want to thank everyone at Perry Ellis for the strong efforts and also to all of our stockholders. Oscar?
Oscar Feldenkreis: President, Chief Operating Officer and Director:
Thank you, George, good morning everyone. Fiscal 2016 results reflect revenue growth and most importantly, significant growth in operating margin expansion and profitability. I am pleased to report the progress made across our company's key initiatives. First, our core branded business grew organically at a healthy rate of 4% excluding revenues from exited brands and foreign exchange impact.
Second, we continue to expand gross margin as we focus on higher margin branded international license sales while continuing to reduce and exit lower margin private label and special market sales. We finished the year with healthy inventory positions, entering spring with less carryover across all of our divisions. This enables us to continue driving solid gross margin expansions.
Third, we depend on our international presence through the 2016 launch of Perry Ellis America in Europe, Ben Hogan in the United Kingdom, and Nike in Latin America and Europe. Our brands are resonating well outside the US, giving us a larger footprint to drive revenues and profitability going forward.
Finally, we continue to invest in product innovation to drive newness and excitement into the marketplace. We are building even a stronger relationship with our core consumers. We are strengthening our operational capabilities and delivering appropriate financial performance while positioning Perry Ellis International for sustainable growth over the long term.
With that overview, I would like to take you through the individual business performance. Starting with Perry Ellis, the brand concluded fiscal 2016 with both increases in sales and profitability. In the fourth quarter, the Perry Ellis brand achieved growth at retail for the holiday season, driven by key sportswear category and less relying on the seasonal product categories such as sweaters and outerwear. This strategy served us as well as we've started the spring '16 season with less clearance.
Our Travel Luxe product which incorporates iron-free stretch fabrics and washable wall components continue to be quite successful. The performance properties backed by powerful marketing campaigns as well as compelling point of sales visually across e-retail stores has made this key a retail driver for the brand. Perry Ellis 360, our active component launched in December at Dillards, their performance has been strong and we continue to see the male consumers’ interest in that leisure product as we see this trend continuing as the importance of comfort becomes the new norm in the men's fashion world.
Investments made across our shop-in-shop continues to drive performance. Our new Herald Square shop ended the fall season with strong and an increase to sales plan and we have started off the spring season with double-digit increases to last year’s. 23 shops including Herald Square added in 2015 plus 40 planned for this year. Spring has stated off strongly and we entered the season with significantly less carryover.
Weather has boded well for Perry Ellis spring collection led my linen as a key components to their collection. The recently concluded holiday season market and the reaction to the line was one of the strongest I have seen in years since retailer remain cautious with inventory build ups, we are vigilant on our buys and looking to optimize e-commerce opportunities as well as merchandising assortment by climate zone as we continue to see a weather pattern of inconsistence.
We will continue to follow our strategy of reducing seasonal categories such as sweaters and outerwears and shifting into more proven categories, wear-now items such as woven suiting and layering knits.
Finally, we are excited for the official launch of the Perry Ellis America in Europe. Product shift at the end of the fourth quarter and early reads have been encouraging as we launched with House of Fraser in London, Galeries Lafayette in France, and COIN in Milan, which will have full shops. We will continue to refine the assortment based on the performance as we move through the next season.
I am also pleased with the Perry Ellis licensing business which grew 10% for the quarter and 9% for the year. The strength of our licensed product categories across all aspects of our customers lifestyles speaks to the power of the Perry Ellis brand worldwide.
Moving on to Original Penguin, in the US, total retail sales for our key retail partners grew 10% relative to last year. Our strength at retail along with a close partnership with key retail accounts has led to our expended presence. During the fourth quarter, we rolled out additional shops, five at Hudson Bay in Canada and we saw expansions in both Stocks and Bloomingdale's will begin to carry our full range of Original Penguin products from strictly swim and Ts last year. Blue Label has also hit sacks and we are rolling out another exclusive capsule with Bloomingdale's as we strive to bring newness to the consumer.
Finally, licensing income for Original Penguin grew over 23% for the fourth quarter and 25% for the year. Additionally, the total year included 15 new deals for the Original Penguin brand, which will further the momentum and licensing income in the future.
Moving on to golf, congratulations to Danny Willett, a Callaway Golf Ambassador for winning the Masters. In contrast to the overall chandelled market, golf revenues grew 4% in the fourth quarter and concluded fiscal year up 5%. A notable success in the fourth quarter was the doubt-digit growth achieved across our key two retailers Grand Slam Kohl’s and Ben Hogan at Wal-Mart. Due to the seasonal warm weather, the fall holiday season, golf was a star performance at retail throughout the 2015 year and the momentum has continued into spring 2016. Golf apparel is active and at leisure, on the course as well as off the course dressing. It's all about the comfort and the performance.
Callaway Europe grew over 30% and we have been seeing a solid growth across all distribution markets in Europe as we continue to focus on expanding the Callaway outside of the pure green grass distribution across the continent.
Looking ahead as we move in to the prime golf season, whether is very favorable for our golf business relative to last year in a sense. The golf season has started earlier with business tracking ahead of the department stores average across all brands.
Turning to the women’s, Rafaella’s Q4 retail sales grew double digits, plus 18%. We were specifically pleased with the brand’s performance given that the overall women’s sportswear zone struggled in the fourth quarter. Furthermore, Rafaella sales grew over 30% in Q4, driven by both big key holiday items that were great key items at great value. Sales were robust across department stores, specialty and e-commerce. As we have mentioned, we have busy expanding the brand’s shop-in-shop presence which currently stands at 187 shops. As a result of the shop-in-shops increased sales productivity, we plan to install an additional 160 shops in the second half of this year across key department stores.
Finally, we recently completed a very strong fall market accounts, we’re excited about the Rafaella key initiatives including comfort denim, easy jackets and dresses, categories which carry a higher retail prices.
Turing to Lingerie, the Lingerie brand consistently turned faster than the average of many of our retail partners dress zones. E-commerce continues to be Lingerie’s fastest turning channel in both day and evening dress zones. We are working closely with retail partners to support the initiatives across this channel. We are seeing a shift in the consumer behavior, less purchases, moving more and more online versus brick and mortar.
As we look at the landscape, we believe that there is space is wide open for us to gain market share. As we move into spring 2016, we will showcase day dresses with more competitive price points to better align with how our consumers are shopping.
Moving on to Nike Swim, net sales grew over 20% in the fourth quarter and the momentum has continued throughout the first quarter of this year as we experienced a warmer fall holyday season. Performance has been strong across all key distributions channels. With the strong spring ’16 season across all genders and accessories, we are very encouraged. We also made progress on the international front in Nike Swim with 15% of the fourth quarter sales generated from Canada and Mexico.
Nike Swim's geographic diversification will continue to expand our global contract expansions with Nike becomes effective this June across Europe, Central America and South America. We have made investments in people and processes to ensure that the platform supports future growth of the Nike Swim business.
During the fourth quarter we delivered small test orders to key retailers across the expanded territories such as ASOS and Next in UK, El Corte Ingles in Spain, Sports Line in Central America. The response from the retailers across our pending market entry has been extremely strong and we have in place dedicated and experienced executives to manage the strong appetite for the brand. Overall, the domestic and global future of the Nike Swim business is very promising and we are excited to be part of this great brand.
In closing, we expect the global retail environment to remain challenging in fiscal 2017, especially in the first half. As retailers focus on inventory churns the strength of product will become even more important. Nonetheless we believe and are optimistic that the strength of our brands and the disciplined execution of our strategy will enable us to further drive sales, margin and profit for this year. We have a strong business model and a passionate team that is focused on maximizing the power of our brands with innovative products, strong retail partners and a heightened focus on inventory management.
As I have said repeatedly, product is king. That is our focal point at Perry Ellis International. Our products’ strength and discipline sets us up well to win at retail and e-commerce and deliver our guidance which we expect to result in increased value for our shareholders. As we all are acutely aware of the growing importance of the digital e-commerce, we have made the infrastructure investments to aggressively pursue this distribution channel. George spoke about our new photo studio. We have also broad on a CMO Lisa Kauffman who hails from the consumer segment with great experience in digital.
Our direct and third party e-commerce represents 7% of total sales this year. We see this climbing to 15% over the next three years. Also important, our expansions in social media across our core brands continue to expand two and a third fold across all our follower base. We are positioned as leaders in this space and I am extremely proud of the work our team is doing and I am excited above what lies ahead.
I will turn it to call over to Anita for the financials.
Anita Britt: Chief Financial Officer:
Thank you, Oscar, good morning all. As you know, we’ve reported adjusted net earnings per share of $0.35 on revenues of $214 million for the fourth quarter. Our results for the full year were $1.81 on revenues of $900 million, and as you know, this performance was in line with our previous announcement.
Before I move into the detail, I wanted to highlight some items that I thought were important and impacted our quarter and year and I think it's important to reiterate to what Oscar spoke to them. But I think they are very critical. First, foreign exchange rate impacted our overall revenues negatively by 1% for both the quarter and the year. We estimate that foreign exchange had a negative impact on earnings per share of $0.04 for the fourth quarter and $0.09 for the year.
Second, exited businesses impacted both the quarter and the year. For the quarter there was an $8 million headwind and for the year it was $20.5 million. The exits included the sale of C&C California during the first quarter as well the migration of non-core brand international or licensed brands. Adjusting our revenue for these items, we still were able to realize an increase in revenues for the year. More importantly, we were pleased with the quality of the revenues which was evident in our very strong gross margins for the quarter and the year and those were record gross margins for Perry Ellis.
By segment, revenue in our men’s sportswear and swim segment totaled $641 million as compared to $635 million in prior year. We realized increases in Perry Ellis, Original Penguin and Golf Apparel, and these were slightly offset by reductions in our non-core brands and private brands which are being converted to national global brands or licensed brands. These exits totaled $10 million for the year. In addition, a negative foreign currency impact for the year created an additional headwind for this segment. Excluding these factors, the segment grew by 4% for the year.
Moving on to the women’s sportswear segment, this totaled $128 million as compared to $131 million in prior year. Increases in lingerie and Rafaella Sportswear were offset by exits of $10 million, reflecting the sale of C&C California as well as private brand exits. Excluding these exits, this segment grew by 5% for the year.
Direct to consumer totaled $97 million as compared to $92 million in the prior year. Comparable store sales rose 3.4% for the quarter and 3.7% for the year, driven by solid growth in e-commerce as well as increases in our outlet locations. While tropic was down for the quarter we did increase conversion rate in our Perry outlet stores which helped to drive the positive comp.
Licensing revenues totaled $34.7 million, an increase of 9% for the year. Growth was driven by both new licenses signed over the last 18 months as well as healthy increases across our existing core brand licenses, most notably, Perry Ellis and Original Penguin which Oscar spoke to those increases, further validating that our brands are resonating strongly across these lifestyles.
Moving on to the our total company results, we continue to make solid progress on our initiatives to grow gross margins, reduce SG&A and manage our inventories. Beginning with gross margins, we continue to benefit from our focused and emphasis on higher margin channels and geographies. This strategy drove a 290 basis point increase in gross margin to 37.2% for the quarter.
For the year, we saw a full 170 basis point expansion to 35.8%. Expansion for the quarter was driven by stronger product margins and reduced markdowns in our men’s collection and Golf Apparel businesses. In addition, favorable mix of international and direct to consumer also benefited this margin expansion.
For the full year, major expansion across our domestic product margins coupled with reduced markdown along with favorable mix driven by licensing and direct to consumer aided annual margin. Our domestic margins were also aided by favorable freight costs, driven by our logistics group. Finally we saw a positive increases in the product margins driven by merchandising mix as well as materials consolidations across many of our core fabrication.
Turning to adjusted S&G, this totaled $66.9 million for the quarter and $266.9 million for the year. This is compared to 66.3% and 263.9% in prior year’s quarter and full year. Non-recurring costs totaled $6.2 million for the quarter comprised of $1.8 million associated with the warehouse exit and legal costs as well as $4.4 million related to pension termination costs associated with lump sum pay up as we finalized the termination of our defined benefit plans targeted to be completed before the end of fiscal 2017.
We also realized $26.6 million in costs that included $2.4 million in lethal breakdowns for stores which we plan to exit over the next 18 months, a $6 million write down of goodwill largely attributable to private label business we exited in our women’s sportswear segment, and finally an $18 million write down associated with specific brands that are considered non-core and are being transitioned.
Our overall expense structure for the year grew by 1% over prior year, very good expense control, reflecting bonus accruals based on performance of the company as well as investments in expanding our international platform. We were able to offset increases across the businesses with tighter control over discretionary spend as well as our exit businesses.
For the year and for the quarter, we were able to realize $7.8 million and $1.6 million respectively in cost savings in cost of goods as well SG&A as a result of the initiatives implemented during fiscal ’15 and expanded during fiscal ’16.
Now turning to the balance sheet, As George mentioned, our balance sheet is in terrific condition. Our net debt position totaled $92 million at year-end, reflecting a net debt to total capitalization of 24%, a very comfortable level as compared to 27% in prior year.
Our interest coverage expanded to six times and our debt to adjusted EBITDA was 1.7 times, very nice improvements over prior year as well. Inventories totaled 183 at the end of the year as compared to 184 in the prior year. Our composition is very clean and current and our churns accelerated to just under four times and I would like to point out that we have one of the fastest churn rates within our peer group in the industry.
Turning to our outlook and guidance for fiscal '17, as we look at fiscal ’17, we are anticipating that foreign currency will again impact our top line. We don’t think it will be quite as impactful of the full 1% in fiscal ’16, but just under that. We also estimate that final exits from C&C which remains from the first quarter of last year, as well as other exited brands we spoke to will impact our top line growth for the year by 2% of revenues.
Exited brands, we believe, will impact us most heavily in Q1, about 50% of that and to a lesser degree in Q2 and the remainder of the year. With these considerations we see revenues expanding 1% to 2% for the full year. Our guidance also includes an expectation that retailers will continue to be cautious and manage inventory very tightly. As Oscar mentioned, we also see a lot of goods available in the special or off price markets.
Our stance is to plan conservatively and purchase inventory to fill upfront orders. While this may reduce our ability to sell in-season orders, we believe this strategy will position us to drive more profitable revenue growth. This cautious stance is expected to impact revenues by approximately 1% for the year, mostly in Q1 as well as Q2 as we anniversaried our prior year positions of reducing those in second half of last year. Again, we embrace this view and are focused on driving our profitability.
We see initial gross margins expanding to a range of 36.1% to 36.2%. We do believe that there is incremental product margin opportunity beginning towards the end of the second quarter driven by softer pricing in raw materials within currency. We think this can assist our overall gross margins on go forward basis.
Looking at expense spend, we expect revenue to increase in the 1% to 2% range. Increased spend and investment in new businesses including Nike expansion in Europe and Latin America coupled by inflationary increases are being controlled through our continued vigilance and focus on reducing spend in other areas. So, we expect expenses overall to be about 29.5% of revenues for the full year. This reflects the cost reductions that we have outlined and we continue to focus on our cost rationalization program on a go forward basis.
From an interest perspective, we expect to approximate about $8 million for the full year and I would like to point out that this does not reflect further redemptions of any of our senior notes outstanding. Tax rate for the year should be an effective rate of approximately 22% and we see adjusted earnings per share in a range of $1.92 and $1.95. We feel really confident on our business model and we'll be continued to focusing on margin expansion and our profitable businesses as we move forward.
As we completed fiscal '16, we continue to evaluate the return on each of our businesses. We will continue to focus expanding our profit margins as well as driving our return on invested capital. We realized expansion in our returns of close to 400 basis points and we are acutely focused on achieving our long-term goal of 10% EBITDA margin. We are confident that our strategic growth and profitability plan will continue to deliver the results necessary to create stakeholder value.
We are confident in our ability to achieve the target that we set forth and drive greater profitability this year and into the future.
With those comments I'll turn the call over to Aron to open it up for Q&A.
Question & Answer
Operator:
Thank you very much. Ladies and gentlemen if you would like to ask a question please single by pressing star, one on your telephone keypad. If you are using a speaker phone please make sure your mute function is turned off to allow your signal to reach our equipment. Again that's star, one and we will pause for just a moment and we will go first to Eric Beder at Wunderlich Securities.
Eric Beder: Wunderlich Securities:
Good morning. Congratulations on the solid start to the year.
Oscar Feldenkreis:
Thank you, Eric.
Eric Beder:
Yes. Could you talk a little bit about Perry Ellis as a brand you've been expanding a Perry Ellis America 360 and the travel business. How do you see those kind of incremental collections adding to the business in terms of both growth opportunities and in terms of potential maybe for higher margins to.
George Feldenkreis:
Well we will, we feel that the 360 product which is definitely a big departure from the churn sportswear collection that we have that the Perry Ellis brand has been known for. Definitely gives us an entry into a different -- through the differences or maybe the same consumer, that is able expand this wardrobe into at leisure or more active inspired product and all the properties that the 360 product offers. On top of that the expansions overseas not only creates a an opportunity for the brand to expand beyond the Americas and Western Hemisphere, but also expanding into Europe and expanding the brand not only from a retail standpoint, but also from a licensing opportunity standpoint. Many years ago Perry Ellis America used to have a very strong shoe license in Europe and we have had a very successful licensee that delivered a lot of great products and we feel that the brand has a lot of opportunities in Europe as well from a wholesale perspective and as well as from a licensing.
Eric Beder:
Okay and you've at the international business some of the licensees you have been very aggressive in expanding the license business is there some set percentage you would like to see licensing revenue be as total or how do should we think about the overall growth that you going to see in the licensing business and definitely has been a big focus for you guys?
Oscar Feldenkreis:
4% to 5% on the licensing side as we would like to see, but and licensing also you look at franchising which also plays into that same bucket and there are might be territories on the retail side that's or distribution channel that we might now want to go into and certain markets and certain continents. So, licensing partnership and distribution franchising is definitely a big part of our initiative and we will continue to see that. For example, we are not in the -- there could be additional opportunities as we expand the brand in Europe and other parts of the continent in we expand specific licensees that we currently do not our current licensees in the United States don't go that far. So that creates an additional opportunity and our Latin America licensees are doing excellent as well on the Perry Ellis side.
They continue to opened up retail stores, our business in Mexico is sensational our spring receipts have been extremely important and we continue to see growth in Mexico and even though you had the devaluation issue in Mexico with the Mexican peso our Mexican business continues to be very strong.
Eric Beder:
Great and finally, so you the balance sheet is in great shape what do you think that where do acquisitions fit into the world here and kind of where do you kind of see the acquisition model if there is one for you going.
Oscar Feldenkreis:
We want to, we will look at we still look at today at licensing opportunities and -- we feel that we have developed and our business model today were 90% of our core business is generated with our core bands, and we feel that if there is an opportunity to continue expanding and leveraging our infrastructure by adding additional brand or product category that we are not specialist in we will definitely look at it, and we have been active looking at and we will, we enjoyed doing acquisitions.
Eric Beder:
Great.
George Feldenkreis:
Eric I wanted to add that although the rest of the work seems to be in a slowdown I think the -- announced this morning that there is going to be a less growth that they focuses. The reality is that there is an appetite for American brands in foreign countries. Because, when we look at it that shows a lot of innovation and newness for them. The retailers when they bringing new brand and that's what they want, that what every retailer want to do.
So we have a number of brand are not represented in Europe and in Asia. So in that sense we have a tremendous opportunity, besides of the one that we have in companies like Canada and Mexico where we have established that will allows to really going forward increase substantially our presence.
Eric Beder:
Great. Good luck in 2016.
Operator:
We’ll go next to Ronald Bookbinder with Bookbinder and Associates.
Ronald Bookbinder: Bookbinder and Associates:
Good morning and yes nice start to the year. You talked about the non-core brands that markdown on the balance sheet and that are being transitioned. Exactly what brands are you talking about is it the women's division?
Anita Britt:
Yes. Ron I'll take that. The brand that the we are moving through and exiting this past year moving fiscal '17 our brands that are considered to non-core that are not the brands that we were focusing from global growth prospective. Because there are currently out in the marketplace I wouldn't mentioned, but they are again not considered for global brands that we spoke to.
Ronald Bookbinder:
Okay. What do you consider selling the women's division?
Anita Britt:
Well Ron as we said in the past everything the offer price and with that statements I don't want to get a hundred calls from investment bankers and we are trying to sell the company or sale --. We are pretty pleased right now with the go forward business what we've seen in our men's also core brands in our women's business as well as the strength of our licensing businesses. When you look at the growth in Perry, Original Penguin and some of our licensed down the businesses that's been our a really nice diversified strategy. With that said as a public company we have to entertaining from any good offer, and look at it and see if its strategically make sense for the company and for the shareholders to deliver greater value.
Ronald Bookbinder:
Okay, but where is the possibility of something being transitioned with the capital that might be ranged from that and strength of your balance sheet currently would further purchasing of debt be the highest priority of our acquisitions and if you bought back that when do you that what happened is there any timing on that.
Anita Britt:
I mean our number one is a capital as we move forward is executing on our strategic plan. So we are investing in our global brand. With that said we generated about $2 in operating cash flow this year we will generate about expanding next year was about half of that going to capital expenditures. So that certainly did available cash to their bring down some of the senior notes share repurchase or do a combination, we still have as you know outstanding money and credit facility as well.
We certainly consider all of that and we are working not only to deleverage but also bringing down our overall interest expense as well.
Ronald Bookbinder:
Okay. Thank you, and good and new year.
Anita Britt:
Thank you, Ron.
Operator:
We will go next to Ed Yruma with KenBanc Capital Markets. Mr. Yruma please check your mute function. Hearing no response. We will go next to Jessica Schmidt with KeyBanc Capital Markets.
Operator:
Mr. Schmidt you are live.
Oscar Feldenkreis:
Well take another question.
Operator:
Ladies and gentlemen, again that is star, one for questions. We will go next to Raghav Nayar with Sidoti.
Raghav Nayar: Sidoti & Company:
Great, thanks. My question is one the men's sportswear businesses in the US. Sounds like you are making good progress at retail like I guess both sell through maintain margin. I was wondering if some of this performance is translating order growth for those programs that are doing well at retail or is the retail partners just overall being cautious with their buyers in this.
Oscar Feldenkreis:
It's both I think that it’s basically driven by product performance and we are seeing increases in the product category that are performing as I mentioned last year we the emphasize outwear and sweater and focused on more wear now buy now products and its paid off for us as we go into fall season. Actually have less clearance available today, and as well as we are seeing in the future better returns on the margin by delivering better product and more product that is more fashionable because today the consumers looking for newness anything that's new out there anything that's performance oriented anything that has a different detail on the garment is which really exiting the consumer. We are seeing in prince as a category in both needs and we've Nikes and wovens even at bottoms is doing extremely well and that market continues or that trend continues to search even more importantly in this spring season than last year.
Raghav Nayar:
All right. Thanks.
Oscar Feldenkreis:
Thank you.
Operator:
We’ll go next to Jess Schmidt with Key Bank Capital Markets.
Analyst:
Hi guys. Thank you for taking my question. This is Matt to go on for Jessica. First how is inventory in the channel look have you seen any department stores partners do I seats and second can you talk a bit about Amazon as a channel for distribution.
How large is it and what's the growth you're moving forward. Thank you.
Oscar Feldenkreis:
The retailers are planning there receipts more effectively towards when they actually sell the product and that's why turned as become a strong in so much of the strong initiative for all retailers. That you probably see a shift and how receipts will flow in the future more properly to ensuring that they are turning that inventory much more quicker and specifically on Amazon we see Amazon as a growth customer. Today you're represents plus or minus 2% within our core businesses we continue to look always to grow our total e-commerce business and we see them as a as a strong partner going forward and the lot of time in Seattle.
Analyst:
Thank you, and given you've eliminate almost on the private label how big is a remaining business, and how should we think this business in 2017?
Anita Britt:
The private label for us I don't want to give the perspective that we are walking away from all private label. We have four types of each private label program that will continue to focus on across our men's businesses. So today it represents roughly 7% of our overall business. I would say that and it will be about that for fiscal '17.
But as we are growing our branded businesses going forward it will be coming smaller team probably in line down close to achieve 5% overtime. But we certainly still consider some of those larger programs that we do with some of our key retailers very important.
Analyst:
Thank you.
Anita Britt:
Aron. I think we will answers now more questions, we will ramp up.
Operator:
At this time there are no further questions.
George Feldenkreis:
Thank you very much to everybody. We had a good year and we look forward to having a stronger year this year. Thank you.
Operator:
This does conclude today's conference. We thank you for your participation. You may now disconnect.
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