Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Kate McShane – Citigroup
Kate McShane – Citigroup
Could you help quantify your reduction in the margin guidance for the rest of the year, how much is coming from higher product costs and deleveraging and how much is coming from potential markdowns?
John Crimmins
I don’t know how specific we really want to get on our guidance. We try and keep that at a pretty high level. I think we’ve used the same language all year. I think that the news for this quarter is we’re seeing a very difficult retail environment and I think overall that puts pressure on both the wholesale and retail businesses and so with the update on outlook is a response to our view of the latest economic conditions, consumer confidence and how we expect that will impact our business in the fourth quarter.
Kate McShane – Citigroup
I assume the higher product costs you experienced in the third quarter, is there a chance that will be alleviated somewhat from the lower oil prices?
John Crimmins
That’s a really good question, we certainly expect that there’s an opportunity if oil prices were to stabilize that the pressures may not be as great going into next year as we might have thought two or three months ago but I think there’s still a lot of water to go under the bridge on that one. I think its an extremely volatile market right now. We’ve said before that, we’ve said throughout this year that we’ve seen pressure on product costs this year and we see continued pressure next year. There is a bit of light of hope there that with current oil prices that maybe the pressures won’t be as significant as we have been anticipating.
Jeffrey Swartz
The oil price point as you know, isn’t going to alleviate the labor question which is a big driver in Southeast Asia of some of the product cost pressures that brands like ours continue to face.
Operator
Your next question comes from the line of Mitch Kummetz – Robert W. Baird
Mitch Kummetz – Robert W. Baird
On international, particularly FX impact, I’m a little surprised that your full year sales outlook hasn’t come down just given what’s happened in Europe with currency there, is there something elsewhere within the business that you would expect to offset the negative impact of that that’s allowing you to keep the top line outlook where it was?
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