Caleres Inc (CAL) 2003 Q1 法說會逐字稿

Welcome to the Brown Shoe Company's First Quarter 2003 Financial Results Conference Call.

This call is being made accessible to the public via webcast in accordance with the SEC's regulation FD.

At this time, all participants are in a listen-only mode.

After the presentation, we will hold a question-and-answer session and instructions will follow at that time.

For assistance during the call, please press "*" "0" on your touch-tone telephone.

Before we begin, I would like to remind you the company's Safe-Harbor language.

During this conference call, the company will make certain forward-looking statements to help you better understand its financial results and competitive outlook.

Discussion of the company's future plans and other statements in this call that are not current or historical facts are forward-looking statements.

These involve known and unknown risks and uncertainties that could cause the actual results to materially differ from historical results or from any future results expressed or implied by any forward-looking statements.

Factors that could actual results to differ materially include the following; general economic conditions and the consumer's preferences and purchasing pattern.

These may be influenced by consumer's disposable income, intense competition within the footwear industry, the uncertainties of pending litigation and other matters as described in the company's report, and political and economic conditions or other threats to continued and uninterrupted flow of inventories from Brazil and China for the company relies heavily on third-party manufacturing facilities for a significant amount of its inventory, and other risk factors listed from time-to-time in the company's SEC report.

Copies of the company's reports are available online and from the company's Investor Relations department.

As a reminder, ladies and gentlemen, this call is being recorded, and any reproduction of this call in whole or in part is not permitted without the prior expressed written authorization of Brown Shoe Company.

I'll now turn the call over to Brown Shoe Company's Chairman of the Board, President, and CEO, Mr. Ronald Fromm.

Please go ahead, sir.

Good afternoon.

Thank you for joining us to discuss our first quarter fiscal 2003 results.

With me today is Andy Rosen, our CFO.

Joe Wood who typically speaks with us on our quarterly conference call is meeting with vendors at the National Sporting Goods Convention and will not be with us today.

Following my opening remarks, I will turn the call over to Andy Rosen who will provide operating and financial highlights.

Then I will provide some closing comments and turn the call over to the operator for any questions you may have.

Our operating model continued to reward shareholders in the first quarter.

While the retail environment remained tenuous due to the uncertainties created by the war and continued economic stress.

We were able to benefit from the implementation of several strategic initiatives aimed at improving first, the positioning of our wholesale brands; second, strengthening our Famous Footwear gross margin rates as we continue to add fresher products; and third, the efficiencies throughout our organization.

These initiatives enabled us to maintain our market share and increase gross margin by 110 basis points, while we lowered our cost of capital.

Our results included sales of approximately $446m and diluted earnings per share of 49 cents.

First quarter diluted earnings per share compared favorably to last year's earnings of 43 cents.

And also exceeded the First Call Consensus Estimate of 47 cents per share.

We attribute the consistency in earnings generation to the benefit inherent to our operating model namely, the strong position we hold stemming from operating, retail and wholesale division.

The diversity in our business model and the synergy that have been created combined with our strengthening operating platform position us well even as the current environment remains extremely challenging.

Let me further explained is, first diversity through our varied footwear brands, we distribute to most distribution channels and meet more of consumers need than any other footwear companies.

At wholesale, we offer a portfolio of well-known brands and licenses to women of all ages as well as strong private label business in numerous license brands for kids.

Each of our offerings is targeted to a different market segment thus maximizing our expansion potential.

Simply put, we sell more stores and distribution channels from the mass market to prestige stores, and we have the brands that the consumers desire.

At retail with Famous Footwear, we have broadened our customer base to the entire family with a complete offering on the most popular brands in several classifications, including athletic, fashion, dress, casual, and kids.

A typical Famous Footwear store carries more than 100 brands and 15,000-20,000 pairs of shoes.

And at over $1b in revenues, we are a large force in the industry with considerable purchasing leverage.

Our Famous footwear chain is also strong retail partner to our wholesale brands.

This diversity lessens our risk from a downturn in any one footwear's price point or distribution channel.

Second and more importantly, we also benefit from a number of synergies created from the sharing of information between our designers, sales people, and retail management.

Powered with this timely information, we have become better students of the market, which has translated into stronger selling deliveries of our brand at retail as well as more compelling offerings within our Famous Footwear stores and our Naturalizer stores.

This to a large degree is the key differentiator of Brown Shoe Company; we possess a breadth of market information that results from sourcing nearly 80m pairs of shoes annually.

Selling to approximately 23,000 wholesale dealers of distribution and analyzing consumer preferences in the 1,300 retail doors, which we own and manage.

Going forward, we expect our leading position to strengthen further as evidenced via many opportunities that we have identified for continued growth.

Clearly our wholesale divisions led the quarter from the growth standpoint.

We continue to point to a number of drivers for expected growth.

Let me briefly highlight just a few.

First, our wholesale operations are gaining market share through our consistent ability to deliver trend-right value-priced offerings.

We are particularly pleased to report that in the most recent report from NPD for the month of March, Brown garnered five of the top eight women shoe styles sold in department stores across America.

We clearly dominated the top linking with our Naturalizer, LifeStride, and Dr. Scholl's brand.

Second, Famous Footwear is positioned for increasing levels of profitability supported by improving metrics, a strong product offering, and high impact marketing campaigns.

At Famous, we are encouraged by our in-store improvements.

However our optimism remains tempered as consumer traffic continues to be sluggish, and we have yet to realize the superior operating margins we desire.

Nevertheless a slight improvement in sales should result in considerable leverage in earnings for Famous Footwear.

Third, our introduction of junior brands such as Hot Kiss and the original Dr. Scholl's sandals are going well creating another new growth vehicle.

Fourth, we are also seeing continued growth in our children's business with exciting new licenses that are coming on board such as with Warner Brothers or Superman, Supergirl, and Looney tunes and with Dr. Suess for cat in the hat.

Lastly we have strengthened our capital structure reflected by a $40m reduction in total debt over the past year and inventories that are well-controlled and representative of in-season goods.

To sum up, we are forward with a strong portfolio of brands that are positioned for sustained long-term growth.

This coupled with improvements we are making at Famous Footwear gives us confidence that we will achieve our goals.

Now I would like to turn the call over to Andrew Rosen to highlight some of the drivers of our first quarter performance.

Thank you Ron.

Good afternoon everyone.

Starting with Famous Footwear, first quarter sales were $261.1m, a 2.4% decrease from last year's first quarter sales of $267.6m.

Comps were disappointing, down 5.4% for the quarter but less than the decline we experienced in traffic count.

This was due in part to our ability to convert more shoppers into buyers with improved product assortments and a more compelling store environment.

While our relative performance at Famous continues to improve, erratic weather trends and concerns about the economy continue to affect traffic.

In terms of category performance, our women's business driven by slides, clogs, and junior-styled sandals continue to pose substantial increases.

Athletic shoes, which gradually improved over the quarter to a positive position in April, were down for the 3 months versus last year.

Operating income for Famous for the first quarter was $10.6m, down slightly from the same period last year.

We continue to realize better margins on new spring footwear and pursue the strategy not to become promotional during a quarter of depressed consumer activity.

Instead, to drive sales, our increased advertising with product and spring theme focus, which proved effective as our margins grew.

And again, we made improvements in two key performance measures as both our conversion rates and pairs per transaction increased.

Importantly, we believe we added to the brand equity we are building at Famous Footwear.

Overall -- and as we have previously stated -- our investments in marketing and stores are creating a stronger base from which to grow but have limited our near-term ability to generate incremental operating increases, especially in this environment.

During the first quarter we opened 20 stores and closed 25.

At the end of the first quarter Famous Footwear operated 913 stores.

Turning to wholesale for the first quarter, sales rose 9.4% to $141m versus $128.8m last year.

While wholesale sales of the Naturalizer brand were even with last year, the brand gained market share in department stores at a time when sales in this channel were down.

Our LifeStride brand hosted a wholesale sales gain of 32% year-over-year.

The Dr. Scholl's business, specifically in the men and athletic categories sold to mass merchants also posted strong increases over last year.

Total wholesale operating income increased 8.8% to $12.9m from $11.9m last year.

At Naturalizer retail, sales decreased 13.1% to $42.8m in the first quarter, primarily due to the smaller store base.

We operated 387 stores at the end of the quarter compared to 440 stores at the same time last year.

Same-store sales decreased 2.5% in the United States in the first quarter while the 173 Canadian stores posted a same-store sales decrease of 8.1% for the quarter.

The colder weather in April depressed sales of opened-up footwear, a key part of the spring Naturalizer collection.

Naturalizer Retail posted an operating loss of $1.4m even with last year.

Brown Shoe Company consolidated first quarter sales of $446.4m were flat with last year's first quarter of $446.7m.

Total operating income increased to $15.6m from $15.4m last year.

The improvement in operating income stems from gains in our wholesale division.

As I stated earlier, this was partially offset by investments spending to drive future growth at Famous Footwear.

Gross margin during the first quarter of 2003 improved by 110 basis points to 41.5% from 40.4% last year.

This was due to improved gross margins at Famous Footwear and our key wholesale division.

SG&A as a percentage of sales quarter for 2003 was 38% versus 37.1% last year.

While we continue to realize the benefits of our Shared Services platform, the expense-based improvement was offset by investment spending in both marketing and in our stores.

Interest expense during the quarter declined to $2.9m versus $3.6m.

The decreases reflect lower average borrowings.

Our tax rate during the quarter declined slightly to 28.1% versus 31.4% last year.

This reflects a greater mix of offshore wholesale earning, which carries a lower tax rate.

Overall, this resulted in first quarter net income of $9m compared to $7.6m last year and earnings per share of 49 cents versus 43 cents in the year ago quarter.

Now for some balance sheet items, accounts receivable increased just over 5% to $64.8m versus the end of the first quarter of fiscal 2002 reflecting higher wholesale revenue, up 9%.

Total company inventory levels at the end of the first quarter were 369.2m representing an increase of about 2% from the same period of last year.

We are comfortable with our current inventory levels, which remain tightly controlled and represented of current in season goods.

Ageings continue to reflect marked improvement over the prior period.

As to our forward guidance, for the second quarter of fiscal 2003, we estimate earnings per share to range between 50 and 55 cents versus 40 cents for the second quarter of last year.

Implicit in this estimate is our expectation that traffic will continue to be sluggish, projecting a same-store sales decline of between 1 and 2% at Famous Footwear.

While we are also forecasting wholesale sales growth conservatively in the second quarter, we do expect our wholesale sales to rise above our current backlog level which is basically flat with the same time last year.

We are, however, encouraged that our third quarter forward order position, particularly for branded product is strengthening.

At this time we remain steadfast in our ability to manage our business well in spite of depressed consumer buying behavior.

While it is too early to gauge the back-to-school and fall selling seasons, we continue to believe our fiscal 2003 guidance of $2.75 per share is reasonable.

This guidance is predicated on modest store-for-store sales increases in the second half compared to the negative mid single-digit declines experienced in the first quarter.

Before I turn the call back over to Ron, I would like to address the current state of the environmental litigation we have going on in Denver.

I am sure you can understand at this point of the legal proceedings.

We cannot answer questions on this conference call about the lawsuit.

I also realized that there has been a lot of press about it and I would like to briefly explain the complaint against us and why we believe the lawsuit is without merit.

We are vigorously defending against a class action lawsuit filed in March 2000 in Colorado State Court arising from its ownership of former Redfield Rifle Scopes factory.

At issue alleged reduced property values stemming from environmental issues affecting parts of neighborhood adjacent to the property we operated some 20 plus years ago.

We believe the real estate sales data and our action and remediating the site will prove that the suit is without merit.

While we only operated at the site for five of its 41 years as a manufacturing location.

We have stepped up and proactively addressed the situation in an open, safe, and effective manner and acted properly throughout this process.

Equally important, we have remediated every single affected home where we have been allowed access.

Also, we have been praised by the state and many neighborhood residents for our handling of the issue.

Although we cannot be certain as to the ultimate outcome.

We believe the data and the science support our position.

Accordingly, we do not believe the final resolution of this matter.

We will have a material adverse affect on the company's financial position.

Based on our current assessment of the suite and anticipated recoveries from third parties.

And now I would like to turn the call back to Ron for concluding comments.

Thanks Andy.

In conclusion, today Brown Shoe is a more efficient company with several opportunities for growth.

Our portfolio brand are gaining momentum at retail and we eagerly await the start of the back school selling season where we believe our retail operations especially Famous Footwear will be a dominant force in the market.

We are focused and excited to implement the main initiatives we have identified to support future growth throughout the enterprise.

This is expected to reward our shareholders in the current year and beyond.

I would now like to turn the call over to the operator to begin the question and answer session.

Thank you Mr. Fromm.

Today's question and answer session will be conducted electronically.

If you would like to ask a question please do so by pressing the "*" key followed by the digit "1" on your touch-tone telephone.

If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Once again please press "*" "1" to ask a question.

We will take our first question from Adam Comora with EnTrust Capital.

Actually this is -- this is more of two comments rather question.

First is congratulations on you know just a terrific job management business and the balance sheet.

And the second is also to congratulate you guys on being exemplary corporate citizens with what's gone out on in Colorado.

And it a shame that some of the publications that have written stories on this don't seem to have been doing all the homework, talking to the department of health out in Colorado and other community resident.

If they had I don't think that article is -- nearly bit is one sided.

Thanks Adam.

We certainly appreciate the comments.

Our next question comes from John Shanley with Wells Fargo.

Good afternoon guys and let me add my congratulations to that of Adams in terms of the quarter.

Nice job in a tough retail environment.

Andy or Ron, one of you could just take us a little bit through the Naturalizer portion of the business flat year-over-year comps performance rather in terms of sales.

Is there something in terms of a product or is there is something just in terms of the channel distribution primarily through department stores that's making that a little bit less robust than your LifeStride business?

Sure John.

Certainly Naturalizer was up against some tough comparisons to last year.

And while sales were flat, the brand couldn't gain considerable market share in department stores this quarter.

I know that you have accessed ANPD data.

Our market share was up for February and March versus the channel, and I believe we were up -- we were up for the first couple of months and we never...

Yes John, department store footwear and total for March and April -- excuse me February and March was down 8%, Naturalizer sales in the department stores were up 6%, so counter to the trend.

And so I think that on a wholesales basis, we feel pretty good.

Clearly, you know, department stores didn't sell as many shoes as they had hoped to sell, but we have managed our inventories well and we're just not seeing the, you know, replacement business or the outward business as they continue to manage the total inventory position.

So, I think that on a wholesale side, that's the story.

I think on retail, we really had a pretty strong business in the outward centers for the first quarter.

And I think that we probably - believed that we faired as well as anyone else in the specialty store environment as just a lot of pressure and distress on the consumer in the traffic patterns there.

Quite frankly, where we track skew data and style data and particularly styles that we had in our Naturalizer retail stores, we were pretty pleased when we look at the sell through and what we are planning as we move forward.

I think that we also believe that as we move forward, we still can do better.

We think that we will continue to work hard to focus our products region-to-region, particularly East and West coast as Naturalizer continues to get more robustness across the nation.

We've seen some terrific results with our brands in the middle of the country where we have more new distribution and growth.

But with all that said, it was a difficult quarter for Naturalizer.

I think the way we like to look at -- I think it's you know probably -- we had about 12 straight quarters of real solid improvement and this one is a little flat.

But, we see our order flow moving in the right direction and I guess, I'd wrap it up John by saying, we have significant energy going into make sure the third quarter is -- bounces back to where we think it should be.

Great.

And the LifeStride, is that just somewhat more modest comps or modest performance last year that you are up against that really drove the, you know, pre-sensational numbers, which you just posted in the first quarter of this year?

Yes, we are really excited about LifeStride.

You know, I think we have worked hard for about the last 18 months with a team.

Sort of using those same principles that we used to turn Naturalizer on, focus on the customer.

Focus on making sure we got right product in LifeStride case; that means bringing in more casual looks for the vendor and really worked hard with the department store partners to show them what LifeStride can mean to them in that opening price point range.

And that combination drove a lot of increase in distribution.

As the fall season was good last year, the spring season has certainly been good a lot of [inaudible] business and our forward order position with LifeStride is very solid as we go in to the year.

Great.

Let's turn to frame this for a minute if we can.

Can you give us an update on where we stand on terms of the store modernization program that are expected this year and is there any change in terms of your game plan for either increasing or pulling back of 70 degree in terms of upgrading the famous stores.

Let's talk about -- talk about that.

I think we probably have 3 questions there.

So we'll try to address each one.

First, we really are pleased with the progress we're making on the -- what was the consumers reactions of those stores are.

And we completed the first set of retro fits by spring time here and we have -- in a very tough environment we have some positive statistical increases going on there.

But with the total downturn in the traffic counts etcetera, you know, it is hard to jump up and down and get excited till we get more consumers in the stores.

But it is statistically positive, and we are feeling good about that.

We have remodeled -- we are right on plan for our remodel program for the year, and we continue to have that plan rolling out throughout to make sure we are ready for back-to-school.

And so, we are changing the dynamics of what we are doing on the remodel program for remaining of the year, although we continue to watch as -- and wait to see how the consumer responds as we move into back-to-school.

And that probably is saying that we are being very thoughtful about how we plan moving forward into '04.

We certainly have the planning process well underway to, as I think we have mentioned before, roll out the last of the 200 store remodels in '04 there.

But I think we are working with real estate and working with what's going to happen with the consumers before we commit to far out in the program.

Okay, good enough.

Also sticking with the same, has there been any changes, Ron, in terms of the merchandise direction?

A couple of your competitors recently announced that they were making some pretty significant shifts in terms of product mix, becoming much more aggressive for example in athletic footwear, particularly in classic and retro and pulling back on some other merchandizing categories.

Is Famous doing likewise or you are pretty much going to -- you and Joe are going to stick with the intended game plan in terms of the individual product classifications?

As I think we mentioned earlier, Joe and Rick are out in the National Sporting Good Show right now, and so anything I would say is probably going to change from the -- from those sessions.

But I, you know, we -- as you would expect, back-to-school is our biggest season, and as well as I could say it's our Christmas.

So I could assure you that we have reviewed back-to-school with rigor including what's going -- we think is going to happen as we move into the, you know, fall period of back-to-school and after that.

And I think the initiatives and the emphasis continues to first be on junior brands.

Our business continues to be robust there, you know that's the -- certainly the Hot Kiss from ourselves and [inaudible] programs and most merchandise statements focused around that.

We also have influences in that same area that are -- what we'd like to call military influences -- its amazing how that influence from the war picks right back up into what that junior customer is looking like.

So buckles, laces, heavy bottoms, those types of things.

And then as you said, our words are athletic inspired casuals, and I think we got -- that includes the retros, looks there, and really pretty well.

Basketball from Nike we think is going to show some improvement, and fashion athletics with -- we have a brand we talked about a lot, John, K-Swiss, Converse and stronger impact on even on the urban brands which again that whole junior influenced.

So you know, some movement for us, and brands like Fila and Phatfarm are probably there.

And John, as you know, Joe and Rick would be much better to drive more conversation in that but that's what Andy and I've conversed with them over the last few days.

That's fine, that's understandable, but that's very helpful in terms of the insights you gave us.

As far as open a buy for back-to-school, is it pretty much on plan or at this short notice, are you going to make any adjustments in it as far as you can determine, either Ron or Andy?

Is it pretty much as go with Famous?

I think that's the right way to answer that.

I think we've laid our plans and marketing programs.

You know, we do a lot of rigor around that, and I think that we are more focused on making sure we have the right shoes than we are unnecessarily chasing discounters or distressed product that might be out there.

Although, you know, with our outlet center portion of business, we certainly take advantage of those things.

And you know, clearly anytime there is over inventory position, we certainly see a little bit of opportunity to both work our margins and work on making sure we got great buys to drive the customer end.

And there is more activity right now than maybe there was a year ago or so.

So there is a little more activity, but our programs are really set and bought, and we are concentrated on flow.

Great.

Thank you very much.

It's very helpful.

Okay.

Thanks a lot.

Michael Ryan with Sidoti & Company has our next question.

Hi, guys, congratulations on the quarter.

Thanks, Michael.

I guess, I just -- do you have -- can you comment on any -- the responses that you've been getting from the marketing initiatives you've put forth so far at Famous Footwear?

Andy, you want to take a stab -- I think that first of all, let's take that in three bites.

One is, we have done a lot of research, as you know, it's been a very research driven marketing program, and we continue that research.

And as we continue those research programs, we continue to be very excited about what we are learning about the customer and how we can apply that in store.

And again, I think probably the best thing is our purchase ratios continue to go up with [inaudible] that she likes what she is seeing and she is buying.

And we think attribute that not just the product but clearly the wider isles, wider stores, easier to shop [inaudible].

You know, are some of the sort of anecdotal research that -- from the details I'll get goofed up a little bit, but the ability for her to get to her product quicker in the store.

And therefore be able to spend more time shopping and maybe buying a second pair is one of those things that a research that's real exciting to us.

So, I think from a research side, we're pretty happy.

I think from a data driven side from the first quarter, I just -- I don't think we have the details back in yet to really comment real great on that I think in a couple of the control test environments, you know, we certainly saw increases.

But I think it's difficult to get real solid read in a tough environment.

When you are down 5% store-per-store for the quarter.

You know, you are not looking at positives, so then you start to get into those reads where we are looking at, you know, how much better in the control group did we do in another group, and I just don't think that data is meaningful enough to share.

Okay.

And, I guess, maybe just for Andy, you guys posted a nice gross margin number, do you think -- is this kind of number we should be expecting throughout the rest of the year?

Michael, I think that we are looking towards continued healthy performance of gross margin.

I say that but then I would also offer -- I know there is some inventory builds in the market certainly not at Famous where I think we've worked hard to maintain the quality of the asset level when -- and the velocity, the goals that we set for ourselves.

But short of the real promotional and distressed environment, I would continue to look for nice gains from us based on what we can control.

Okay.

But I suspect the second quarter maybe a little promotional out there.

So we'll have to see Michael.

Okay.

Alright guys.

Thanks a lot.

Thanks, Mike.

Thanks, Mike.

And as a reminder, if you do have a question, or a comment, please press "*" "1".

Our next question comes from [Sam Poser] with Pozaic Research.

Good afternoon.

Congratulations on a very nice quarter.

I have two questions for you, are you there?

Yes, hi, Sam.

Hi, the first question is about, on the Naturalizer side, do you see -- I realized that you penetrated better, but do you see any competition coming in on the horizon going into next year, any new competition that you might be facing there?

I think Naturalizer has raised its awareness in the competitive structure.

And so therefore, when you start putting up the type of market gains we have clearly, the rest of the industry has noted the styles that are selling well.

And so our challenge is how do we stay out fresh and stay out in front and I would tell you that we believe that the performance improvement in Naturalizer is by intention.

We have developed programs to make sure that we have better early reads and better programs for us to stay on top of this business.

And we think that is what is going to take to continue to win market share.

I think that this is a competitive industry and we have been very successful going on as we said 12 quarters in a row and so we are not bullish or we do not put our heads in the stand.

We know that that competition is watching everything we do and so we expect continued push from them.

And the other side, I think that our retail partners are experiencing significant increase in the sales of margin dollars that they are receiving from our products and they are very supportive and work very close with us.

So I think the ball is in our court.

We like it there.

We think we win when the ball is in our court and I think the competition is going to come on strong and try to be more competitive.

Yes.

I would just add to that Sam.

Clearly the standard is set higher, and it is hard to predict what is in the future, but I look at spring business and department stores and of the top 10 brands in department stores, three of them had gains overall why one was Naturalizer and one was LifeStride.

Nice community to be in there.

A lot of the gains that you read is that is mostly through your retail?

It is a longer answer and I do not -- we have and continue to work hard at working at how do we become better than the other guys.

And we started the conference call with talking a little bit about how we benefit from having a broad base of business.

That is not just from our retail side, what we have is broader distribution from the mass to the mid-tier to the athletic to the better grade side, we spent more time making sure that we understand what is happening in the marketplace.

We would like to call it -- we have a great opportunity to be better students of the business.

And so we try to continue to learn and gain knowledge from that effort and be able to utilize that in whichever categories whether it is kids athletics shoes or is LifeStride products.

So I -- think we try to gain from across the enterprise.

And we think that the unique strength of Brown Shoe Company.

Just one other follow-up on I'll get out of it.

Can you just me an idea of where your productions comes or the percentage of production coming from what regions of the worlds for LifeStride and for Naturalizer?

Yes, if you check the K if I gave good details there but I think the way I'll say in a broad sense.

In Naturalizer I say its 55 to 60 percentage is from the Far East and 40% or so is from Brazil, which we think give us a real advantage on quick ship products.

LifeStride is primarily source in the Far East.

We have a number of products that are source for us and inevitably the Dr. Scholl's product is a particularly strong product that source in Europe, but I do not know the next numbers, but it is a couple of percent at most.

It is not a big number in the total.

Do you see the 40% going higher with Naturalizer to continue to improve the turn around time?

I don't -- think that way.

I think that it probably stays either flat or sort of moves around the little bit with a couple of seasonal shoes.

I think we real hard to use the [inaudible] reprograms to be able to build a much as of the product lines as we can in the most cost advantageous way.

But we do take certain shoes and produce those in Brazil and in the Far East, so that we can make sure we take advantage of quick turn around and so where we can and where we think it is opportunistically due.

And there's just certain styles we are just clearly advantageous to produce in Brazil.

Right, how is [inaudible] going so far.

Can you talk about that?

You I don't mean there is a cut by, Andy you can probably answer a little bit.

It's slow and my general statement would be it's slow but it's sort of unremarkable.

It's probably all I would say.

And we haven't released anything, but generally I would say retail opened slow, but the last -- the most recent periods have been more promising.

Weather has gotten better and business has responded so we'll see.

And the one last question about the Colorado case, which is not about the case, it's about being -- you had mentioned that you were going to -- basically if there was going to be any damages that you possibly could get them from other people or other company.

How is the -- can you give me some details on the insurance debt on this?

Insurance is a complicated matter.

We've had these discussions.

We are right in the middle of this litigation as you know.

And I am not trying to be evasive, but by the same token.

Right now we just can't take the questions and I would direct this answer to the website.

I would direct it to our annual report, and as further developments takes place and we can share them with you, we will; nothing really further has developed at this point and we just can't talk about it at this point.

Okay.

Well, thank you very much and keep it going.

Thanks [inaudible].

And as a reminder, if you do have a question or would like to make a comment, please press "*" "1".

We'll pause for a moment to give everyone the opportunity to signal.

And Mr. Fromm, it appears there are no further questions at this time.

I would like to turn the conference back over to you for any additional or closing remarks.

Thank you everyone.

We appreciate you joining us this afternoon.

While we all wait for the consumer to start spending and the key part of our strategy not wait to invest in our businesses, we believe that we have the right platform, the right teams, and the right assets.

Our investments in our business are designed to deliver sustainable growth in the future.

We need to drive sustainable top and bottom line growth.

I think it's always good to have momentum and momentum is especially on the wholesale side, robust at this time.

In fact, I can't remember a time when the wholesale side of the business was as strong as it is today.

We are delivering winning shoe after winning shoe to our retail partners and as I think Andy commented, we really believe that our cycle of managing early wind, early worm programs, quick ship programs; all of those things are adding to our ability to retain and maintain that momentum.

On the retail side of our business, we are just doing terrific work there with our new store formats.

You know in that the Famous team has done the research, they have sized the opportunity.

They have committed to maximizing our growth and increasingly build our market share there, and therefore, the combination of good wholesale and improving retail puts building shareholder value right at the forefront of what we're doing.

Hopefully, we will see you at the second quarter and be able to report as good a results, so thank you very much and we'll talk to you in August.

That concludes today's conference call.

Thank you for your participation.