Caleres Inc (CAL) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen, my name is Mansra and I will be your conference Operator today.

At this time, I would like to welcome everyone to this fourth quarter 2012 earnings conference call.

All lines have been placed on mute to prevent any background noise.

Following the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

I would now like to turn this call over to your host, Ms. Peggy Reilly Tharp, Vice President of Investor Relations.

Ms. -- Peggy, the floor is yours.

Thank you.

Good morning, and thank you for participating in the Brown Shoe Company's fourth quarter 2012 earnings call, which is being made available to the public via webcast.

I am Peggy Reilly Tharp, Vice President of Investor Relations for Brown Shoe Company.

Earlier today, we distributed a press release with detailed financial tables which is available on our website at BrownShoe.com.

In addition, slides are available on our website for you to reference during today's call.

Please be aware that today's discussion contains forward-looking statements, which are subject to a number of risks and uncertainties.

Actual results may differ materially due to various risk factors including, but not limited to, the factors disclosed in the Company's Form 10-K and other filings with the US Securities and Exchange Commission.

Please refer to today's press release and our SEC filings for more information on risk factors, and other factors that could impact forward-looking statements.

Copies of these reports are available online.

The Company undertakes no obligation to update any information discussed in this call at any time.

Joining us on the call today are Diane Sullivan, President and Chief Executive Officer; Russ Hammer, Chief Financial Officer; and Rick Ausick, President of Famous Footwear.

Today we will begin with a strategy review from Diane, followed by a financial summary from Russ, before turning the call back over for Q&A.

And I would now like to turn the call over to Diane.

Thanks, Peggy, and good morning, everyone.

Well, 2012 has come to a close, and I am very happy to report full-year sales of $2.598 billion, an improvement of 0.6% versus sales of $2.583 billion in 2011.

Excluding sales in both years for brands exited, as part of our portfolio realignment efforts, consolidated sales were up 2.6% in 2012.

We also delivered on our earnings promise each quarter of this year, culminating in 2012 adjusted earnings per share of $1.13.

This was up more than 60%, as we followed through and delivered on our strategic initiative.

Today, we are a slightly smaller, but leaner and more profitable Company, with adjusted operating earnings of 45% over 2011.

Throughout the year, we worked hard to execute on our portfolio realignment efforts, at the infrastructure, retail, and brand levels.

We reduced our total SG&A by more than $18 million in 2012, while simultaneously investing in key wholesale brands and our Famous Footwear stores.

Importantly, we did all of this while strengthening our balance sheet, by reducing our short-term borrowing by nearly 50% to $105 million.

All-in, very solid results.

Let's take a deeper look into 2012 results, starting with Famous Footwear, which remains at the leading edge of our strategic efforts to build brand differentiation and brand equity.

At Famous Footwear, we had a record year in terms of sales, crossing the $1.5 billion mark, and also achieved gross profit of $666.1 million and record operating earnings of $94.1 million.

In addition, we reported record fourth-quarter sales at Famous, with same-store sales up 4.4% on a 52-week basis.

For 2013, we plan to continue to focus on three key areas for productivity growth at Famous -- real estate, inventory optimization and omni-channel engagement.

Our strong real estate strategy will continue to optimize selling square footage as we did in '12, when we achieved an overall improvement in revenue per square foot of 7%, or just shy of $200.

We also worked to enhance our visual store retailing in 2013 by continuing to upgrade signage and install victory fixtures across our store footprint.

As many of you know, in 2013, we are improving our inventory optimization by installing a new allocation tool.

This change will result in smarter replenishment and improved service levels, as we will be adding a key analytical component to our existing process.

This will enable us to more intelligently allocate inventory by item, size, width and store, and to maximize Famous Footwear margin.

We will also continue to integrate both real estate and inventory components into our omni-channel engagement, as we work to continuously upgrade the consumer experience, while improving speed of delivery of driving cost efficiencies.

I have said it, as many have many times before, that the consumer and the way they shop is changing.

In order to succeed in the future, everyone is going to need to be ready and willing to change, and to rapidly try new ways to reach your consumer.

We believe our omni-channel efforts are already paying off, with Famous.com up 22% in 2012.

We logged more than 60 million visits at Famous.com during the last year, with a quarter of those via mobile.

In total, mobile revenue grew by more than 190% in 2012, and we'll be maximizing this channel in 2013 by debuting a rewards app and revamping our mobile optimized site.

So we had just an outstanding year at Famous Footwear, and there is more on tap for 2013.

Now let's turn to our 2012 wholesale operations, where sales were up 1.6%, including exited brands, and earnings were flat.

In healthy living, we saw continued sales strength at LifeStride, up 9.2%, and Ryka, up 10.6%.

At Dr. Scholl's, we over-achieved in terms of operating earnings, up more than 200%.

While we saw sales increases at mid-tier, online and in catalogs for Scholl's, overall 2012 sales were down slightly, as we continue to successfully shift this brand away from our reliance on the mass channels.

In total, healthy living sales declined 3.5% in 2012, as we saw some mixed results across the platform.

One of our challenges for '12 was Naturalizer.

All-in, sales were down 2.7%, as a difficult 2011 extended into '12 for this brand.

We continue to aggressively work to improve all aspects of Naturalizer in 2012, and the start to spring '13 we're seeing a consistent and gradual improvement in our overall sell-through percentages, resulting in an average gain of 1% to 1.5% on new spring product assortments versus last year.

And our new Fall 2013 Naturalizer Collection was well received by retailers at all of our recent shows.

So while there is still work to be done, we are seeing signs of strength.

Sales to Naturalizer e-commerce and independent retail partners were up 41% and 3%, respectively.

We expect continued growth in these channels for 2013, as our variety of sizes and width makes us a natural for consumers searching online for the perfect fit.

And in contemporary fashion, full-year sales were up 11%, with Franco Sarto reporting a strong year, up 19.6%, as it delivered against all metrics.

Sales at Fergie were also very strong, up 54.8%, and we expect to see continued good growth for both of our celebrity brands, just as we have since they moved into the contemporary fashion portfolio.

For our newest brand, Vance, we remain in investment mode, with our Fall 2012 soft launch behind us and Spring 2013 currently selling very well.

We see good potential for this brand, which is part of -- really one of the leading contemporary women's and men's lifestyle collections.

Finally, turning to our Sam Edelman brand, which was named Footwear News Brand of the Year, and I don't think I need to tell anyone why.

Sam has remained red-hot in 2012, with sales up 16.8%, as he continued to deliver results thanks to his great understanding of his consumer, and what is important to her in terms of fashion.

As I am sure some of you may have noticed, Sam recently announced that Kate Upton will be serving as the face of the Sam Edelman brand this year.

Everyone is excited to have Kate join the brand.

And we also opened our flagship Sam Edelman store in SoHo in late October 2012, and we are quickly ramping up to our sales target.

This is a store for -- we never actually even had a grand opening, thanks to Hurricane Sandy.

And this May, we're looking forward to watching Sam & LIbby at Target, as Sam continues to fire on all cylinders into 2013.

There is a lot going on at Sam.

At wholesale in general, we ended the year with a much cleaner inventory position, down 21.6%.

We are also in a significantly better place in terms of processes and systems, with greater visibility into inventory and inventory management.

We continue to focus on leveraging costs in wholesale and across the Company in 2012, and you should expect to see continued gradual improvement in this area in 2013.

Now, specifically at wholesale, we are putting all of the non-business-related moving parts behind us, as we focus on a few very important items in 2013.

Over the past several years, our wholesale teams have had to weather a lot of distractions, restructuring efforts and systems implementations, just to name a few.

So in 2013, we're going to be focused on the areas that are going to drive improvement -- managing inventory, growing margins, and frankly, just developing outstanding product that's on time and on quality.

In short, selling shoes and connecting with consumers.

So before I turn the call over to Russ, I just want to say that I am most proud of what are entire team has accomplished over the past year, and am also extremely appreciative of our shareholders' support as we work each quarter to deliver on expectations.

I remain confident that we are on the correct strategic path, and without question, we will continue to provide details of our strategies and plans as we develop them, and update you as we execute against them.

Now with that, Russ, I think I will turn the call over to you.

Thanks, Diane.

Thanks, everyone, for joining us on the call and webcast this morning.

We certainly appreciate it.

Although Diane briefly reviewed our consolidated sales, I'd like to add a little more color.

For the fourth quarter, we reported net sales of $640.2 million versus $628.9 million in the prior year.

As a reminder, 2012 included a 53rd week, which increased our net sales by approximately $21 million and had an immaterial impact on earnings.

Results for both the fourth quarter 2012 and 2011 included sales of $2.8 million and $16.5 million, respectively, from brands and businesses we have exited.

If we exclude these sales from both periods, net sales for our ongoing businesses were up 4.8%.

For the fourth quarter we reported a GAAP net earnings of $4 million or $0.09 per diluted share, versus a loss of $8.2 million in the prior year or $0.21 per share.

Fourth quarter 2012 results included portfolio realignment costs of $2.9 million, while the fourth quarter 2011 included portfolio realignment integration-related costs of $18.5 million.

On an adjusted basis, net earnings in the fourth quarter improved 43% to $5.9 million or $0.14 per diluted share, compared to earnings of $4.1 million or $0.10 per diluted share in the fourth quarter of 2011.

For the full-year net sales were $2.598 billion versus $2.583 billion in 2011.

Excluding sales from exited businesses of $42.5 million and $92.5 million, respectively, resulted in sales improvement of 2.6% for 2012.

GAAP net earnings for the full-year were $27.5 million or $0.64 per diluted share, versus $24.6 million or $0.56 in 2011.

On adjusted basis, excluding all portfolio realignment, organization change and integration-related costs in both years, net earnings for 2012 were $48.6 million or $1.13 per share, up 60.4% when compared to 2011 earnings of $30.3 million or $0.70 per share.

I would now like to turn our individual businesses, beginning with Famous Footwear, which is part of our targeted family platform.

As Diane discussed, we reported record-setting fourth-quarter sales, with same-store sales of 4.4% on a 52-week basis.

We also saw our conversion rate improve by 3.4%, while footwear AURs were up 2.1% in the quarter.

These results were with 34 fewer stores year over year.

In the fourth quarter, we closed or relocated 18 stores and opened 12.

For the full-year, we closed or relocated 89 stores and opened 55 stores, right on the plan we had shared with you earlier.

During the quarter, all of our financial footwear regions saw reasonably significant sales increases as we improved our margin rate.

Boots continued to do well in the quarter, with women's boots up more than 15%, and with boot sales continuing to improve as the weather turned wintry across the country in February of 2013.

Our total inventory is as current as ever in recent memory, and on a per-store basis inventories were up at quarter-end, as we took early receipt of key (technical difficulty) product in January.

Conversely, we saw traffic counts weaken as we moved into February, which was more challenging in the fourth quarter.

Like our peers, we continue to monitor consumer activity in the wake of tax rate changes as we settle into the sequester.

Turning to our wholesale operations for our contemporary fashion portfolio, fourth-quarter sales were up slightly, with especially good sales growth from our Sam Edelman and Franco Sarto brands, up 13.8% and 37.2%, respectively.

For our healthy living brands, wholesale sales were up 1.8% in the fourth quarter.

LifeStride sales were up more than 9%, with strength in riding and wide [calf] boots, as well as a resurgence in dress pumps.

Ryka sales were also up more than 25% in the fourth quarter.

However, the strength that Ryka was not enough to offset continued weakness at Avia, which fell short of plan.

Dr. Scholl's shoes -- sales for the fourth quarter were up more than 5%, as new styles continued to drive interest in the brand.

All three of these growth brands, LifeStride, Ryka and Dr. Scholl's, made gains at mid-tier channels in the quarter.

All-in, Naturalizer sales were down slightly in the fourth quarter, while Naturalizer same-store sales were down 6.6% on a 52-week basis.

During the quarter, Naturalizer sales to wholesale e-commerce partners grew 12%.

For Brown Shoe Company overall, online sales remained a driver of both wholesale and retail in the fourth quarter.

For the full-year, wholesale sales via our external e-commerce partners were up 35%, while our Famous.com site was up 22%.

All told, our owned e-commerce sites accounted for more than 5% of total sales for the full-year.

Now let's turn to review of our financial metrics.

Overall, gross margin in the fourth quarter was 39.3%, which was up approximately 140 basis points.

SG&A as a share of our revenue was 37.3%, up approximately 70 basis points year over year, due to the addition of the 53rd week in 2012.

For the full-year, gross margin was 38.9%, up 30 basis points over 2011.

SG&A as a share of revenue was 35.4%, down 90 basis points year over year.

Net interest expense of $5.9 million was up 0.4% in the quarter.

For the full-year, net interest was $23.1 million, down 13% as we continued to reduce our borrowings.

Our corporate tax rate was 13.7% for the quarter and 29.4% for the full-year.

Operating cash flow at the end of 2012 came in at $197.9 million, up $149.9 million versus a year ago.

Cash and cash equivalents were $68.2 million.

Cash used for financing activity was higher by $118.7 million, primarily due to repayments of borrowings under our revolving credit agreement for both 2012 and 2011.

Inventory at year-end was $533.3 million, down 5.1% when compared to $561.8 million in 2011.

At Famous Footwear, total inventory was up 2.3%.

At wholesale inventory was down 21.6%, due to strong inventory management in exited brands.

Thanks to a continued focus on this area of our business, we are operating from a much cleaner inventory position versus a year ago, and are in a much better place in terms of process and systems when it comes to buying and managing our inventories.

Our aggressive balance sheet management has resulted in significant improvement in our borrowing position versus 2011.

We ended the quarter with $105 million of borrowings under our revolving credit agreement, a reduction of $96 million from the end of last year.

At year-end our revolving credit agreement had approximately $380 million of additional availability.

Depreciation and amortization was $54.8 million for the year, while capital expenditures were $63.7 million.

Our debt-to-capital ratio declined to 41.6% from 49.1% in 2011, while working capital as a percent of sales was 11.7% versus 11.2% in the prior year.

And, I'm proud to report, yesterday we reported our 361st consecutive quarterly dividend payable April 1st to shareholders of record as of March 25.

Now before we begin Q&A, I would like to review our fiscal 2013 guidance.

And we report an outstanding 2012, but it would be easy to get carried away with the enthusiasm.

We feel compelled to maintain our realistic stance for future results, especially since we're seeing many of the same issues our footwear peers and other retailers have been calling out.

So in terms of guidance, we expect adjusted earnings per diluted share of $1.18 to a $1.25.

Consolidated net sales of $2.55 billion to $2.58 billion.

Same-store sales at Famous Footwear up low single-digits.

Net sales at wholesale operations down low to mid-single-digits, reflecting the exited brands.

Gross profit margin up 10 to 40 basis points.

SG&A of $900 million to $910 million.

Minimal expected nonrecurring costs of $1 million to $2 million, which are related to the 2012 portfolio realignment efforts that shifted in 2013, resulting in GAAP earnings per diluted share guidance of $1.16 to $1.23.

And net interest expense of $21 million to $23 million.

We expect an effective tax rate of between 33% and 35%, and depreciation and amortization of $54 million to $56 million, and capital expenditures of $50 million to $55 million.

All in all, we're making conservative assumptions on the top line for 2013, and targeting margin growth, while keeping expenses tight as possible to provide us with maximum flexibility.

With that, Operator, we would now be happy to answer all the questions.

(Operator Instructions)

Steve Marotta, CL King & Associates.

Good morning, everybody, and congrats on a great fourth quarter.

Just talk a little bit about first quarter, you mentioned it started a little late.

Can you tell us where you are now?

And also, how your assumptions change for the balance of the year?

Does the consumer need to just stabilize?

Is there acceleration that's assumed?

Can you talk a little bit about the assumptions from quarter-to-date through the balance of the year standpoint?

Yes.

Steve, I think as we look at the quarter, we are seeing, as we mentioned on the call, the same consumer softness, whether it's from the consumer -- from the tax hit that they are seeing, or other financial impacts, or the extremely cold weather that has been sweeping across the country, we have seen the slower first quarter.

We do expect our back-to-school season in the third quarter to still be one of our strongest, and we do see some shift into the second quarter from third quarter on the back-to-school season as well that will occur this year.

All right, that's great.

Just a little bit more on that.

We are actually seeing, so far in the first quarter, really lower traffic counts in general, and across certainly Famous Footwear, and as we talk to other retailers similar challenges.

But at Famous, we are seeing higher conversion rates with the consumers that are coming in.

When we take a look at our warmer markets, those warmer markets look very good, so it really is the colder ones that are the ones that aren't performing as well.

So a lot of moving parts also in the first quarter here with earlier Easter, all the stuff around the tax issues, and I hate to say it, but a little bit of weather stuff that's creating a little more confusion in terms of how we read the cadence of our business right now.

Has March been a little bit better than February?

Not really.

We are actually, this week -- last year, for instance, Chicago was 45 degrees warmer than it was yesterday in Chicago.

So, no.

Okay.

Also, can you talk a little bit about your marketing spend in total for 2012 versus 2011, the expectations for 2013, and is there any significant cadence differential in '13 versus '12?

I think we are actually pretty close to the percentage rate '12 to '11, if my memory serves me correct.

As far as '13, there will be some adjustments and shifts, depending on timing for third quarter, second quarter, when the calendar falls a little differently that might adjust some things, but our expected spend will be very similar as a percentage of sales as we were in 2012.

And I think the focus, as we had shared with you guys earlier, between our Victory campaign, the rebranding of our stores, the rewards customer base, the mobile focus, is continuing.

That is not changing.

Great.

Thank you very much.

Thanks, Steve.

Jeff Stein with Northcoast Research.

Good morning, everyone.

A couple of questions here.

First of all, on the Wholesale side, I'm trying to understand the various moving parts in terms of where you see things going.

I guess if I back out the sales of exited brands, which was about $42.5 million, and if you assume that you are expecting down low- to mid-single-digits, that would suggest that in the aggregate, on a like-for-like basis, you're probably looking for somewhere between a 1% and 2% increase, if my math is correct.

So I am wondering with Sam & Libby being a new brand that you rolling our the target, with -- I think, if I recall, you were working on a refresh of the Avia brand, wondering what is going on with that?

With Sam Edelman continuing to do well, and I guess the contemporary fashion brands seemingly continuing to do well, something -- I guess, something seems to be planned down for the new year, and I'm trying to understand what that is?

Yes.

Great question, Jeff, and your calculation, all the numbers, is absolutely correct.

If you think about it this way, there's two challenging pieces, as we mentioned.

The first one is Naturalizer and the second one is Avia.

Those are the two of the businesses that we need to get corrected in 2013, and feel that on Naturalizer, we're headed in the right direction, as I said, and spring so far looks good.

Avia, we have to see how it plays out over the spring season and 2012.

Then the rest of our brands, like you highlighted, Sam Edelman, Franco Sarto, or LifeStride, or Dr. Scholl's, are all performing well.

So it really is a question of those two businesses, that we need to accelerate the momentum on them.

I would just add we are, again, taking a very conservative top-line assumption, being more aggressive on our margin expansion, conservative on expenses across the Company to drive, really, the quality of earnings up.

Okay.

Question I guess for Rick, the comp store inventory at Famous Footwear at fiscal year end, Russ, I know you mentioned it was up, but can you tell us up how much?

And then I have a question on store growth at Famous Footwear, net additions, openings and closings.

Yes, the comp store for -- at the end of February was up about 5.5%, Jeff.

You have to remember, we also had an extra week in there.

So it is actually as if we delivered the first week of February last year in January, so you have to factor that in a little bit, but that is what the number was at the end of February -- end of January, I'm sorry.

Okay, and store growth?

Store growth for 2013?

Yes.

I think we planned to open about 55 stores, and I think we're looking to close around 60.

So it will probably be a net minus five or flat, somewhere in that range.

Okay.

And you guys set out a plan at your analyst meeting last spring when you were looking at 2012 to 2014, the ability through store openings and closings to see about a $20 million pre-tax improvement with that real estate strategy.

Can you share with us how much of that $20 million improvement you realized in 2012, and how much you would expect to realize in 2013?

Yes.

I think when you look at the three-year projection that we showed, and then the fact that Famous has reported record sales and profits this year, we are ahead of plan at the end of 2012 on that $20 million.

So we were able to accelerate some of our openings and closings, and stayed on that plan, but the results actually came in a little better.

Our sales per square foot came in a little better than what we thought on the stores that we're opening, so it is improving.

So I would say that we will stay on that plan for the three years.

Rick, any other comments on that?

No?

No.

Russ, what I'm trying to get at here is, in terms of modeling, I'm trying to understand the increment.

In other words, what is the path to get to $20 million?

How much of the $20 million did you realize last year?

How much in '13 and how much in '14 to get to $20 million?

I think maybe the way to think about it is that $20 million is more back-end loaded, because that's when you have more stores opened for full years that are contributing at the higher rate.

So I would more back-end load that as you model from '12, '13, and '14.

Probably got further down the road in '12 than we expected, so as we looked at it, it is probably not quite as back-end loaded as we had that -- we accelerated some of that in '12.

But to Russ's point, more of that will show up in '14 -- '12, '13, '14, because of all of the stores being fully operational and having -- getting towards, closer to the maturity level.

Exactly.

Got it.

Okay, thank you very much.

Thanks, Jeff.

Jill Caruthers, Johnson Rice.

Good morning.

Good morning, Jill.

A question on 2013 gross margin expansion guidance.

A little lighter than I was expecting, and just could you talk about your plans there?

I assumed greater benefit as your Wholesale portfolio was restructured into some higher margin brands, and you are going up against somewhat of easy comparisons, given the system issues you dealt with.

Yes, I think when you look at the margin mix, it is impacted by the sales growth.

When you look at our -- at the businesses, we're growing our Famous business at market growth rates, and our Wholesale business on the Healthy Living side is also growing at about market rates.

So those are both growing at approximately a 3%-type rate next year.

But our contemporary fashion is growing faster, and that is where the margin improvement, and Diane talked about the challenges that we had in a couple brands, have more of an impact.

So we see that improving more in the back half of the year.

Diane talked about Naturalizer, and we see that improving more in the back half of '13 versus the front half.

Yes.

I think in the fourth quarter, too, Russ, on Wholesale in total we were up on our margin 70 basis points or 80 basis points, I think it was.

Q4, right.

And so we are really driving hard in '13 to continue to improve the margin rate in Wholesale.

Okay.

And then the inventory allocation system you're talking about upgrading at Famous, I guess the timing of that, is there any risk to implementation?

And then when do you expect to see some benefits materialize?

Yes, at this point in time, Jill, we don't see any risk, yet.

We're basically through the science of it.

We actually, I believe, start going into parallel mode testing next month, so in about three weeks.

Our intention would be to have some categories, maybe not the entire store, on the program in June or July.

We don't see any -- at this point, we don't see any issue with that implementation.

And we have put -- we put additional sales in our plan in the back half of the year, to mitigate the cost of -- or to capitalize the cost of the expense of the system.

So we have factored in -- and the numbers we're quoting you is -- are full-year.

There's a number in there that is part of that sales plan that would be generated by the implementation of this system.

We don't see anything today that would tell us that is not going to happen.

Okay, thank you.

Chris Svezia, Susquehanna Financial.

Good morning, everyone.

Good morning, Chris.

So I am just curious, when you guys talk about the trends that you are seeing currently in the business, can you just maybe answer the question, are you from a same-store sales perspective, given what's happened on traffic, is the conversion enough to give you a positive comp in terms of what you're seeing in the first quarter or not?

Well, right now it's not.

We expect it will get warmer someday.

(Laughter) So with that ever optimistic view, we would still expect our first quarter to be flat or up a little bit, or down a little bit, right around flat for argument's sake, which is a little less than we had hoped.

But again, the beauty of what -- the product we're talking about, Chris, as you know, we have a long life to sell the shoes, right?

Right.

This isn't November 15 and boots, and it is still 70 degrees outside.

We have more opportunity, we think, to sell things in the second quarter than we would have -- than we normally would.

Frankly, if you go back over the last few years, this has happened over time where we have had warmer early springs, February and March.

As retailers, we all get aggressive about that, we keep pushing more and more product into February and March that we'll sell, and then we have a period of time like this where it is not conducive, and all of a sudden it goes back to normal, because we used to sell more of our shoes in the second quarter that are sandals an open footwear than we sold in first quarter in historic times.

But it just shifted, because of the way the customer was buying, and their wants and needs.

So it feels a little more like that.

Again, we --

We're [doing] it, and looking at warm markets.

Yes, and so we've done that whole thing about, basically, even though Seattle is not a warm market, if you look at the Seattle weather pattern over the last few weeks, it has been very much normal or little bit warmer than normal.

Our business in Seattle is up double-digits.

So it tell us me, again, the economic issues and the gas prices, and the taxes, and all of that stuff, I believe is relatively equal in every part of the country.

And the only thing we can see as a difference between all those places is the weather and the urgency for consumers to change their wardrobe or want to buy different products.

So again, that gives us the confidence that we will get it.

How it comes may be a little different than we thought.

But we are taking -- we are spending our time and energy making sure that our inventories are right, so things that aren't selling well now, we are doing some adjustments.

And if there are things that are selling really well, we're buying more of them, too, so it is a little bit of all that.

And I think, Chris, as we mentioned earlier, we also took early receipt of key spring product in January, so we are well-positioned when that weather does change.

Okay.

And, Rick, how are you thinking about from an athletic perspective, your running assortment looks really good, and continues to get upgraded.

What are you doing in, I guess in basketball, if anything?

What are you doing in skate?

And outside of athletic, what are you doing in the boat shoe business?

You hit it on the head.

Our running business is still very healthy, as obviously our biggest category, it has been our biggest category for several years, and is bigger than it was two years ago.

I think we've had a 25% to 30% compounded growth in running the last several years.

So we have grown it well.

Basketball, Chris, this whole conversation about that trend, the reality is we have never really participated in the basketball trend, because we never have the access to the product that the customer really wants for basketball.

Not only today, but in the last 25 years we haven't had it, so it really is not part of what our -- we worry about or think about too much.

We just -- we have product, and our basketball business is okay, but it is a relatively small category, so it really won't make that big a difference in our mix.

You talked about skate.

I would refer to it as alternative athletic, or alternative sports, if you want, and canvas-based shoes, our Chuck Taylor business is excellent, some of our other canvas product business is excellent.

Those are huge businesses for us.

Those, far and away, are bigger businesses for us than basketball.

So again, we have basketball shoes, we service that customer the best we can with what we think we can have assortment-wise, but our focus is on making sure our running assortment looks good, and we will get increases in running this year.

I don't believe it will be 25% or 30%, it will be probably mid- to upper-single-digits, but that's on a much bigger base.

And then we have the alternative business, which is really driven a lot now by our canvas piece of that business.

I think those are the things that are driving our business right now, in addition to when we get to warm weather, sandals, et cetera.

Maybe just to add to Rick's point there, fourth quarter, running was up almost 7%.

Okay.

And Rick, in the boat shoe business, just sort of how you are thinking about that for spring?

Yes, the boat shoe business is actually -- we thought that we might see, because we had basically doubled that business last year, we thought it might be a little -- come back a little bit.

We actually saw much better selling of that product in January and early February than we expected.

We've gone back and tried to acquire more goods.

It hasn't slowed down from our year-ago business right now.

We have changed it a little bit.

There is more canvas-based boat shoes in there, and I think that's part of why we're seeing it on the men's side, particularly.

On women's, I think we're offering a little more broader assortment of fashion products, so prints, whether they be animal, or sequins, or glitter product, and customers seem to be responding to that.

So I think that business still looks like it has plenty of legs through back-to-school for sure.

Okay.

Thank you.

Then just on the Wholesale business, I guess the $845 million that you did in Wholesale, that includes brands that you've exited, or it takes a hit because of brands you exited, correct?

Correct, so we had approximately $38 million of exited brands in that $845 million.

Okay, so then when I -- going back to a prior question, when you think about declines of low- to mid-single-digit, there is some exited brand impact in that but it is very, very small, I would assume relative to 2012 in terms of the actual impact, correct?

Actually, if you look at '12 over '11, just to give you context on that, in 2011 exited brands represented about $96 million -- I'm sorry, 2011.

2012 is, like I said, about $38 million.

What would it be in -- what is your estimate?

What impact, if you just strip out -- what is your organic growth rate in Wholesale go forward brands for --?

So I think one of the earlier questions mentioned that.

It's 2%.

Yes.

Low single-digits, Chris.

Low single-digit growth?

Yes.

Okay, and then when you think about margins in this brand, I mean I guess Famous Footwear, the opportunity to expand margin is comp and productivity, but at Wholesale, that's really the big opportunity?

I mean, is it pretty broad-based across all the platforms?

Is one stronger than the other?

Do you look at the Sam Edelman business and say, hey, if they continue to expand and grow, therefore, the margin profile there reflects investment?

Maybe just parcel out where specifically is that opportunity to expand margin?

Because at the end of the day at 4% EBIT margin, ballpark, for Wholesale, I mean it's not the greatest, but there's big opportunity.

So I just more specifically want to understand where that opportunity is?

Sure.

So when you look at the businesses, a lot of moving parts, two very different businesses within our continuing brands in Wholesale.

The Healthy Living side, as Diane mentioned earlier, our Naturalizer was down, is recovering.

We do expect that to continue to recover, so we will see improvement there.

And in the Avia brand, that is down.

Those did impact our margin, and we are improving.

We are seeing nice margin growth in the Sam Edelman brand, our Fergie, Franco, and Via, as Diane mentioned, are all doing well.

So a lot of pieces there, but our intention is to continue to improve our margins in contemporary and in Healthy Living in 2013, and you will see more of that impact in the back half of the year.

Okay.

All right, thank you very much, and all the best to you guys.

Sam Poser, Sterne Agee.

Thank you for taking my question.

Good morning.

Good morning, Sam.

Just -- this is more technical regarding the effect -- how that -- on a comp basis how that 53rd week behaved?

And number two, how the shift of the weeks affect the sales relative to the comps by quarter.

So in other words, of the value of week ending February 9, that you are starting a week later so your comp will be on a week-over-week basis, but your fiscal is still your fiscal number.

So what that variance is by quarter, because you should have a big variance in Q2 and Q3, given that you gain a week of back-to-school in Q2 and then lose it in the third quarter?

We can take all day to answer that question, Sam.

(laughter)

Well, I mean, it is important because if you're going to model this -- what is going to end up happening is that people will put in a 3% comp for second quarter and understate the revenue, because you are losing a small week at the beginning of May and picking up a big week going into back-to-school.

So there is a percentage that is just there, regardless of what the comp is, on the variance.

Yes, there is.

Again, I think you are right.

There is one that we have, I think a week of back-to-school moves into July, obviously that replaced -- gets replaced by -- the whatever, it replaces a smaller week.

But I would get -- I think the number's probably in the neighbourhood of $7 million, $8 million worth of sales, would be my guess cost, Sam, on the -- without looking specifically at it.

Because we get -- in our head, it's about the customer, right, when they are shopping.

So we just worry about making sure we have the product, and plan our business around that.

Because they don't know anything about our calendar, so --

No.

I'm not saying that.

What I'm just saying is, for the sake of modeling --?

We look at it, but we don't necessarily -- we're not focused on it so much because we just want to make sure we have our flows and our product right.

I understand that.

I'm not -- I completely get that.

What I'm saying, though, is that if we model a 2% comp in Q2, for argument's sake, just the relative sales, if you did not open or close any sales, might look like a 5%-plus in total revenue for your business, and in Q3 if you model a 2%-plus, it could look negative, just because of the losing -- the gaining and loss of those two weeks.

It's a big -- regardless of -- (multiple speakers)

As we look at the quarter, Sam, and what the quarter looks like, I would probably tell you it's maybe worth 1% or something like that, 1% or 1.5%, or something on that range, of a difference from what we would have had a year ago.

All right.

Thank you.

Then lastly, how much do you think the shift of the tax refunds impacted the business, I would say from the middle of week three probably through whenever?

I mean, how do you look at that?

We have never felt as much an impact on any of those issues as some people have.

The only thing I have to -- can I give you a relative measure against is, we had somebody who came out and talked about what their last two weeks of January were, and ours weren't anywhere near as bad as that.

So ours were down like mid- to upper-single-digits, that was our loss.

So if you want to tie that to the impact of tax returns or tax refunds being the problem, it had a much lesser impact on us than them.

But that is about the only way -- only relative way I can look at it.

Yes, I think Sam, it's --

Why do you think that is?

Well, I think our customer is a little higher income.

I think our customer is in different parts of the country, we are a much more suburban business than we are an urban business.

I think those are all parts of it.

That the -- that seems to be the businesses that live and die with some of that stuff, so Wal-Mart is always talking about those things, Carnival talks about those things, even some of the sports specialty guys talk about it, because it's the mall kid, right?

We've never been able to draw huge distinctions around it.

We see some -- there's not no impact, but it's not the impact that you see other places.

Thank you.

You're welcome.

Thanks, Sam.

There are no further questions.

I would now like to hand the call to Ms. Diane Sullivan.

Thank you, everybody, for joining us for our 2012 year-end call, and we look forward to seeing you at the end of the first quarter.

Take care.

Ladies and gentlemen, with this, we conclude today's presentation.

We thank you for joining.

You may now disconnect.