Caleres Inc (CAL) 2014 Q1 法說會逐字稿

(Operator Instructions)

Welcome everyone, to the Brown Shoe Company first quarter 2014 earnings call.

(Operator Instructions)

I would now like to turn the conference over to Ms Peggy Reilly Tharp.

Ma'am, you may begin.

Thank you.

Good morning.

Thank you for participating in the Brown Shoe Company first quarter 2014 earnings call, which is being made available to the public via webcast.

I'm 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, CEO, President and Chairman; 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.

Now, I'd like to turn the call over to Diane Sullivan.

Good morning.

Thanks for joining us.

We're pleased to report this morning that first quarter earnings came in at $0.35 per share with good contribution from our Contemporary Fashion platform and thanks also to a strong finish in the month of April at Famous Footwear.

Gross margin for the quarter was 41%, up 20 basis points over last year due to a number of positive factors across the Company.

For operating margin, we saw a good progress, coming in at 4.9% for the first quarter with Wholesale showing marked improvement.

So all in, we were able to deliver a good quarter under challenging circumstances.

There were a lot of dynamics this spring, particularly at Famous Footwear, so that's where we'll begin.

With first quarter sales of $354.6 million, Famous Footwear was up 0.7% over last year.

Same store sales for the first quarter came in at 1.3% with strong April same-store sales up 5.5% which drove the quarter.

If you recall, last spring handed retailers what we thought was going to be a tough February and March.

Clearly, we were wrong.

For 2014, we lost approximately 3% of our potential selling days at Famous in the first two months of the quarter.

However, the first two weeks of April were particularly good.

While we wish we'd had the momentum all quarter, it really did propel us into May.

Just as a quick update on a month-to-date basis, right now, our comps are up about 1% at Famous.

Not surprisingly, Boots did well in the quarter, but more importantly Canvas continued its strong streak.

Three of our top selling styles were Canvas.

We see demand for these styles continuing through the second quarter and well into back-to-school.

We're already set to drive for back-to-school selling season.

The majority of our inventory increase falls into the Canvas category.

For the first quarter, Sandals were down by about 3% but up approximately 5% in April.

These overall trends give us confidence that we'll be able to maximize spring footwear demand in the second quarter.

During the first quarter, we continued to see Sandals and other spring styles perform well in our warm and hot markets.

Another sign that we have the right products and styles in store this season.

All in all, we ended the quarter at Famous Footwear in a good place as we have continued to build on our successful strategy over the past few years.

This includes omni-channel.

We're going to continue to invest in our omni-channel efforts so we can meet or beat consumer expectations.

We'll talk much more about our omni-channel strategy and opportunities during our Investor Day next week.

Turning to our Wholesale operations where first quarter sales of $191.8 million were up 5.6%, with our Contemporary Fashion platform driving the year over year increase.

Trends were key in Contemporary Fashion this quarter.

We delivered trend-right product across virtually this entire platform.

On the other hand, the weather provided somewhat of an offset at Healthy Living where Wholesale sales were up 0.7%.

While weather impacted all of our Wholesale brands to some extent, the delayed Sandal season hit Naturalizer the hardest as this is a key spring category for the brand.

Despite this headwind, Naturalizer Wholesale sales were flat for the quarter.

At Dr Scholl's, we saw very good improvement in operating margin with relatively flat sales.

This brand continues to diversify away from the reliance on our mass-channel and to gain traction at mid-tier and with other new doors.

LifeStride was also relatively flat for the quarter, while Ryka outperformed in the quarter versus both last year and our internal expectations.

We saw a good performance from our spring Ryka styles and are looking forward to getting fresh products into the stores this fall.

Turning to our Contemporary Fashion platform where sales were up 12.3%.

While there were lots of contributing factors, I'm most pleased with the nice turn around we saw at Via Spiga in the quarter.

This brand shows solid improvement both year over year and versus our internal expectations.

The team's hard work has paid off.

Its consumers were attracted to the great spring product, which contributed to strong regular price selling, resulting in fewer close-outs and reduction in vendor allowances.

More progress will be seen in the coming quarters and in the June and August markets, as the sort of Stage 2 I'd say, of our refresh Via Spiga will be presented to the marketplace.

At Sam Edelman, sales were up low single-digits.

This follows a 25.4% increase in sales last year.

The comps don't get any easier for Sam as the year progresses.

We continue to invest in growing this brand and will open our second store this August in Beverly Hills.

There's a lot going on with Sam.

We just plan to discuss more of our strategy around this brand at our Investor Day next week as well.

Franco Sarto sales for the quarter were up low single-digits, despite some weather-related sluggishness at department stores, which was balanced by a strong mid-tier business.

We saw similar trends for our celebrity brands, Carlos and Fergie, with the mid-tier outperforming department stores.

Carlos sales were down in the first quarter but the brand looks to be back on track for the second.

Fergie sales were up in the first.

For both celebrity brands, we've seen good response to Gladiator styles.

Finally at Vince, we saw a phenomenal growth.

We delivered great product, which was appropriately timed and also spread across key categories including Modern Dress shoes, Up-Front Block Heel styles, Sneakers, Sports Sandal, and Espadrilles.

Men's footwear is going to be available in July.

You'll be seeing it in the same doors where you'd find Vince Women's shoes as the year progresses.

It's clear, in Contemporary Fashion, that as we've executed against our strategy, we've seen a nice response in terms of sales and profitability.

For total Wholesale, we reported a 50 basis point increase in gross margin, while our operating margin improved to 7.2% in the first quarter.

As you can see, we continue to make progress towards our long-term goals.

I'm really looking forward to sharing more details around our future plans at our Investor Day next Monday.

With that, I'd now like to turn the call over to Russ for a review of our overall financials and more details around our guidance.

Thank you, Diane.

Thank you everyone for joining us on both the call and the webcast.

We certainly appreciate it.

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

For the first quarter, we reported net sales of $591.2 million versus $588.7 million in the prior year.

Net earnings for the first quarter were $15.4 million or $0.35 per diluted share versus a loss of $10.8 million or $0.26 in 2013.

On an adjusted basis, earnings in the first quarter were up $0.03 over the $0.32 we reported last year.

At Famous Footwear, we improved our trailing 12-month revenue per square foot to $209, as we closed or relocated 21 stores and opened 11 this quarter.

Let's turn to a review of our financial metrics now.

Overall, gross margin in the first quarter was 41%, which was up 20 basis points year over year.

SG&A as a share of revenue was 36.1% down 20 basis points year over year.

Inventory at quarter-end was $512.8 million up 5.5% over last year's first quarter but down 6.3% from our fiscal year-end.

Wholesale inventory, driven by our growth brands, was 6.2% at quarter-end excluding discounted operations.

At Famous Footwear, inventory was up 5.8%, a number we expect will decrease each quarter throughout the remainder of this year.

Our corporate tax rate was 34.1% for the quarter.

Net interest expense of $5.2 million was down 7.5% in the quarter.

Cash and equivalents for the quarter were $36.7 million.

We ended the quarter with no borrowings against our revolving credit agreement, down $66 million year over year.

We also improved our debt-to-capital ratio to 28.8% from 39.1% last year.

Before we begin Q&A, I'd like to review our FY14 guidance.

To account for a better than anticipated first quarter, we are raising our annual guidance range to $1.47 to $1.57 as we're slightly more positive regarding our potential at Wholesale for the year.

We also expect: consolidated net sales of $2.58 billion to $2.6 billion; same-store sales at Famous Footwear up low single-digits; specialty retail sales down mid single-digits due to store closures; net sales at Wholesale operations up mid single-digits; Gross margin up approximately 10 basis points; SG&A of $920 million to $930 million with continued leverage; net interest expense of $20 million to $21 million; an effective tax rate of 33% to 35%; depreciation and amortization of $51 million to $54 million; and capital expenditures of $53 million to $57 million.

We're pleased with the results we reported in the first quarter and are optimistic about the remainder of the year.

We will provide additional insight into our strategies and opportunities at our investor conference next week.

As we move through the year, we will continue to update you with our progress against our expectations just as we did last year.

With that operator, we'd be happy to answer all questions.

(Operator Instructions)

Steve Marotta, CL King & Associates.

Congratulations on the quarter.

Just talking a little bit about the comp, which is 1% month-to-date.

Can you talk a little bit about what the gross margin drivers are for Famous Footwear in the near term as well as for the balance of the year?

Steve, it's Rick.

Gross margin drivers?

Well, I believe a couple of things.

The shift of the customer from Performance to Casual Athletic, that business -- the Casual Athletic business, however you want to define it, has higher margins than the Performance business.

I think we'll see that as continuing to happen in our assortments where the customer's leaning and buying that at higher levels.

So, there will be a mix conversation that will help our margins along the way.

We've been judicious in our promotional activity where we had less -- actually less days of couponing in the first quarter than we had a year ago.

We're looking at every single promotion and deciding whether we can either shorten them or change the percentages off, things like that, to make sure that we're offering value but also managing the profitability side of the business.

So I think those are the two things I would point to as being our biggest opportunity.

That's very helpful.

At the risk of saying the S word on the call, as it pertains to Wholesale and SAP.

Is that finally kicking in from a margin standpoint?

Or is it simply just the Contemporary brands that are primary drivers there?

Good question, Steve.

Thanks for the comments upfront.

First of all, I really think, again, it's always -- we've been building against this strategy for a couple of years now.

Our performance in Wholesale has not been good the last number of years.

We're really showing marked improvement now today.

It really has to do with the fact that I -- that we have brands that are hitting on all cylinders.

The product is great.

In particular, our Contemporary Fashion side of our business, with those kind of growth rates at higher than 10% is really starting to gain traction both at a sales -- at a top line sales and a bottom line perspective.

So, it really is a combination of all of those things together working.

Which lends to my last question as it pertains to Contemporary.

Are there potential acquisition opportunities that you could and wished to plug-in from a Contemporary standpoint on the Wholesale side?

Yes.

We're always, first of all, paying attention to the business that we have, as we've done these last couple of years.

Always doing that going forward.

If the right thing comes along and we identify it, we certainly think that we do have room in our portfolio to add, if the right thing came along.

Terrific.

Thank you.

Thanks, Steve.

Danielle McCoy, Brean Capital.

I'll add my congratulations on a solid quarter.

I guess as far as with Famous Footwear, I mean we're seeing majority of the landscape really competitive -- price competitive.

I guess where are the strengths in Famous Footwear that you think that you're really hitting on all cylinders there?

Again, I think the conversation around however you want to differentiate Casual Athletics, but the Canvas piece of the business, some of the things that Skechers are doing, those things in our assortments are very powerful right now, very impactful.

They're going to continue to be that way.

Those things are generating large increases for the first quarter.

We expect that to continue for the year.

So -- and again, those things are obviously also a little bit on the margin rich side for our total mix.

So as that grows, that's helping our profitability, but it's also really focusing on what the customer's looking for.

I think that's been part of what we've been doing.

We saw this coming about a year or so ago.

We've been making investments along the way for back-to-school last year.

Then once that was successful, we started ramping it up so we could capture some first quarter business and now looking at the second and into back-to-school 2014.

We think it's even going to be bigger than we might have thought.

Okay.

Great.

Then I guess talking about back-to-school, are there any plans for something to replace last year's sponsor of the summer concerts?

Well, we did this year.

It's actually running this last couple of weeks.

We ran national TV.

We weren't able to replicate our value purchase of the Good Morning America show, so that was something --

(laughter) value purchase --

-- we had, we couldn't repeat.

So we did run it.

We have been running national TV advertising the last couple of weeks geared to our mobile app.

So we are pushing not only the brand -- Famous, the brand.

There's obviously the product in the ad as well.

But it's also talking about the convenience and the usability of our mobile app that we have almost 700,000 downloads now and starting to generate some real momentum there.

So, I think, we looked at that as being our opportunity to pre-sell in to back-to-school, so that the customer was aware of that, had the app on their phones and then could start using that.

We have an update coming in another couple of weeks to the app for additional features so that back-to-school will actually have additional features than it had a year ago.

We didn't have the app a year ago, back-to-school.

The app was -- didn't start until after -- end of September.

So we actually have -- that's all kind of a plus thing for us as we get into back-to-school.

So, I think, that's our answer to the GMA.

Actually, when we look at the impressions and all that kind of stuff, what we've done right now has a greater impression to our core customer than the GMA thing did, believe it or not.

Okay.

Great.

Then just the store opening and closing cadence of Famous Footwear for the remainder of the year?

Yes, we're going to do that.

(laughter) I think we have about 16 or 17 stores due in second quarter.

Then I think we only have, at that point, I think we maybe have another 15 in the back half, something like that.

Okay.

So we actually -- most of those openings are in July.

A lot of July openings as you get ready for back-to-school.

The closings are kind of spread -- the closings really come around to when our lease deals are expired because we do it around lease deals.

Most of those will happen closer to the back half of the year as we get closer to the end of the year.

So, most those things will happen late third into end of the year.

All right.

Great.

Thank you guys.

Good luck.

Thanks.

Appreciate it.

Jeff Stein, Northcoast Research.

First, question for Rick.

Rick, can you comment on the performance of the warm weather markets for Famous Footwear in the first quarter versus the colder weather markets?

Yes.

So, talking about the spread in comps between the two.

With the 1% comp increase you're seeing in May, has that spread now converged?

Are you seeing similar trends in both warm and previously cold weather markets?

It's gotten closer in May.

First quarter, we were about almost mid single-digits in our warmer markets; therefore, we were obviously down low single-digits in the cold markets.

That combined to our 1.3%.

So it was probably something like a 6 or 7 point spread, Jeff, between the warmer markets and the colder markets.

Depends -- If you actually got real specific about certain markets, it might even be bigger than that.

Because Chicago got hit particularly hard and some of those markets in that upper Midwest, where we have a lot of stores, have been particularly hard hit, particularly for the first three months or so.

Getting better now, but it was hard hit early on.

Got it.

Diane, can you talk a little bit about Sam Edelman and the slowdown in trend that you did see during the first quarter?

Is that anything to be concerned about?

Do you think there was some weather impact there?

Maybe talk about what kind of lies ahead for Sam Edelman from an anticipated growth perspective?

Yes.

No, I don't see anything in the first quarter that concerned me at all.

I mean, did weather impact all of the businesses to some degree?

Sure, that would be true.

Sandal sales for every brand was impacted.

But Sam's sell-throughs have continued to be outstanding.

Second quarter is running really nicely.

The -- we're thrilled with the sell-through of the product.

Honestly, Jeff, I can't think of a thing that I'm not comfortable with, with Sam.

Next week when we see you on Monday, we're going to do a little bit of a deep dive on the Sam Edelman strategy for the next couple of years, so you really get a good insight into what our plans are there.

Terrific, terrific.

One question for, I guess, for either you or Russ.

I mean, the specialty retail division continues to kind of struggle.

I know you're faced with store closings, but the loss continues to be higher than prior year.

Any thoughts in terms of the longer term view on what your plans are for that business?

The specialty retail business as you pointed out is down this quarter over last quarter from a profitability.

There were less stores as we indicated both in Canada and the US.

However, you have to remember the total Naturalizer business, where we have the profit and the margin on the Wholesale side of the sell end of the stores, when you look at it in total is quite profitable for us.

So we are looking at -- due to the store closures, the down that you see there on just the retail segment.

But all in, we're still quite profitable.

The other thing on Naturalizer, Jeff, just to add to what Russ was saying, you're right on the stores.

As you just look at it on a pure profitability basis.

The tough thing in Naturalizer, about 60% of their business in the spring season is in Sandals, so that really hit them particularly hard.

Then, even more so when you're a mono brand store like they are too.

So we expect that to recover and get better as the year progresses and as Sandal sell-through continues to pick up.

We really could see that in our at-once replenishment in the first quarter.

So I don't think there's anything new -- news there.

Just, again, the same impact that everybody's been feeling in the first quarter.

Okay.

Do you guys feel pretty good about Famous Footwear in terms of aging of inventory and content heading into second quarter?

It looks like inventories are a little bit high there.

Yes, they are.

We feel really good about it, but I'll let Rick, here, comment on it.

Yes, actually our actual dollars of aged inventory is less than last year.

So, on a percentage basis, it's much better.

Secondly, the investment, again, has been primarily placed in our two key Canvas vendors and into the Skechers business.

So when you think about what the customer is buying, I feel really good about where that's at.

Jeff, just to be clear about the comps in the current month.

Every geology -- every category, warm, hot, and cold, everybody's up.

Everybody's on a positive trend.

The gap has narrowed quite a bit from the first quarter.

Great.

Thanks a lot.

Thanks, Jeff.

Thanks, Jeff.

Sam Poser, Sterne Agee.

Just to follow up on the inventory, I mean, given that -- I mean, your comp -- had your good comp, decent comp.

You're coming out of the gate slow.

But the -- up slightly, but the inventory's still up a little bit more than that.

I mean, are there heavy spaces, let's say in Sandals and other categories, that while you're not chasing them, you might have to be a little more aggressive than you thought you would have to be previously?

Yes.

I think it remains to be seen about what it's going to take to move through the Sandals.

We don't feel our Sandal inventory is overly heavy at this point in time.

I think the teams have done a really nice job of managing that early on to either cancel backups or whatever we needed to do to keep -- to read the early selling and not get over bought in that particular category.

But, again you still have some -- eight, nine weeks of prime selling coming up.

We'll see.

Always part of this is the competitive environment, although I'd like to look at how we run our business a little bit more about us than it is about everybody else.

I think the environment's, what everybody's talking about, sounds like they think they have to get aggressive to move the goods.

We may have to have some of that ourselves.

But right now, we're not anticipating the needs based on how we're selling items.

What the remainder of the season is and how much time we have to sell it.

We feel like we'll come out pretty clean, but we'll see.

Other than that, the inventory again is made up of those key Canvas vendors, the increase in the inventory is really in those key Canvas vendors and Skechers.

Just to beat the dead horse a bit here.

The -- you had a very nice increase in your gross margin at Famous, up almost 60 BIPs.

Given the late Easter and everything, did that move some markdowns, let's say, in general did that move markdowns from Q1 to Q2 as compared to last year with the earlier Easter?

I would expect, we're not -- you're not expecting to see another big bump in your gross margin the way you did in the first quarter in Q2?

Is that -- would that be an appropriate --

I think we've planned it basically flat for the year, Sam, so you're probably right.

I don't think we probably expect a 60 basis point increase, but, again, some of it will depend on -- then this mix conversation I had earlier around how much Canvas business we actually really do.

Because that has a higher margin than some of the other categories that people are moving from and buying the Canvas piece, so it could be a little better, but I don't expect it to be 60 basis points better, put it that way.

I don't know that we actually changed our markdown strategy, or markdowns around Easter.

I think we took -- remember Easter -- we still had a couple of weeks in April after Easter so thing like some of the Dress shoe kind of business that you might want to start thinking about liquidating after Easter, I think most of those fell into the first quarter, at least the first mark.

Then we'll just manage it -- after we go to the first market it's a matter of managing it through the sell-through.

So I don't know that we missed anything there.

Okay.

Then, just moving over to the Wholesale businesses, a little bit, I mean it was discussed earlier, but a little bit weaker than we expected on a couple of the lines there.

How aggressive are -- I mean, how aggressive is everything going on there at retail with your customers?

Are they asking for a lot now from you, more than in prior years?

No.

I would say, Sam, our performance against their internal expectations is certainly -- we've really beaten our internal expectations on most of our brands.

Our sell-throughs at retail are good.

In fact, there's been less vendor allowance and markdowns so far this spring than last year.

So all in, it's -- we feel like we're performing solidly.

We feel good about it.

Okay.

Thank you very much.

Good luck.

Thanks a lot, Sam.

Thanks, Sam.

Jill Nelson, Johnson Rice.

If you could just talk about the strength you've seen in conversion rates.

I think it's almost up 5% at Famous.

That's been a strong metric for you.

Maybe some of the systems initiatives you're doing to continue to aid that growth?

Well, I think, again, some of this, in my view, it comes to the issue of what we spent on our omni-channel investments so far where as we believe the customers coming in more informed about what there is to buy.

Whether it's they've gone online and shopped the store where they can look and see exactly what inventory and sizes and colors are available, if they're looking for something specifically.

Now with the mobile app, they can do that if they're out with their kids at a soccer game and they realize they need something for the next day at school, mom can look at that.

She can shop.

She can pull up and find what stores and how far away they are that have what she's looking for and come in for a very purposeful shop.

So we think there's some of that.

Again, validating our investment in those things along the way that say that's how the customer wants to shop.

Other than that, I think we've done, again, a better job of assortment planning, of making sure that they were a little narrower but deeper on the things we believed in.

So I think all of that is a combination of that.

Our percentage of our businesses come through our rewards customer has been increasing over the last two years.

We're up to over 70% now.

So, again, those are people who know us, like us and understand.

So, again, I think there's just that whole more purposeful shop for the customer in general and our driving the rewards customer to another level has been helpful.

All right.

Then just, Russ, you had mentioned, you're slightly more optimistic on the Wholesale division.

Could you maybe call out, is it on a particular brand?

Is it just kind of across the board where that increased optimism is?

Well, it's definitely, as Diane said on the call, in the Contemporary Fashion space.

We're especially pleased with Via Spiga.

Then the rest of the brands are all doing great.

So we're feeling very bullish there.

All right.

Thank you so much.

Thanks, Jill.

(Operator Instructions)

Chris Svezia, Susquehanna Financial.

Nice job.

You did this well.

I'm really curious to see what you guys are going to have to say next week (laughter) It should be really entertaining.

Thanks Chris.

Monday, 3 o'clock.

We'll be there.

So I guess for -- I got on a little late.

So I apologize if this is repetitive.

But just I guess we'll start with you Rick.

Just maybe walk through at Famous -- Sandals, Boots, just Athletic, how do they perform relative to that comp.

I just missed that.

If you could add some color around that?

Yes.

Good news and bad news.

We had a good Boot quarter, but we really didn't want to have that good a Boot quarter.

But it was good on a small basis.

So we don't really count that as of any great value.

Sandals were down about 3% in total.

Our Athletic business was up a little bit and driven greatly by our Canvas business to a degree.

So if we -- when you put all the Canvas parts together -- so whether they're Junior Casuals or Men's Casuals or the true Canvas -- big Canvas guys, that whole Canvas business was up double-digits for first quarter.

We expect that to continue to drive that way.

So in a nutshell, that's kind of where the business came from, Chris.

Okay.

Then when you went in to May, the comment about being up about 1%, I mean, what happened with that Sandal business as you transitioned through the quarter?

How you're looking at it as you go into the second quarter?

Yes.

It's gotten a little bit better.

I think we're still not as -- it's not as robust as we would like.

Again, I think we still seem to have some issues in parts of the country where they haven't really decided they want to come out and buy Sandals.

But as we look at our warm markets again, those businesses are still pretty good.

They're still selling the category pretty well.

So we don't think it's an assortment issue.

We think it's just a timing issue and whether or not we have now -- do we have enough time to sell-through?

We think we do.

We don't think we're in a lot of jeopardy on the inventory side, but we watch it every week.

We make adjustments as we need to.

So, if you feel like me and others are calling out that needing to probably get aggressive in Sandals and kind of a fire sale going on.

You don't feel like you need to or will have to be that aggressive in the Sandal category to move it?

You feel pretty comfortable where you are?

We might have to but we're not planning on it.

I think our -- the strategy has always been to kind of wait this out a little bit.

I think when the customer's ready buy, we have convenience on our side because we have stores everywhere.

We have sizes.

We have integrity on the product.

So we've proven over and over to ourself that she will buy it from us when the time's right.

Now, that can't go on until August, obviously, but we're talking about over the next couple of weeks, I'm not too worried about that accelerating.

We're starting to see acceleration on a week to week basis that we're selling more Sandals than last week.

Then we're selling more sandals than the week before.

If we can continue to see that, there will be a point in time where it should accelerate relatively rapidly.

That's what we're waiting to see.

If it doesn't, then we'll adjust.

I don't see it being terrible.

I don't see it being, for lack of a better term, a blood bath.

Okay.

Then the Traditional Athletic business, the technical piece, this kind of continued transition.

You called out Skechers and you talk about the Canvas piece of the business.

I mean is -- what's going on in the Traditional Athletic component, the Running, the Training business.

Yes, we still had a 1% increase in Running in the first quarter.

It's still the biggest part of our Athletic business.

So don't misunderstand, we still think it's important.

We still pay attention to it.

I think what we're saying there is, we don't expect it to do much better than that the balance of the year.

We're looking at it to be basically flat.

We have newness coming in.

We have a couple of new shoes that are delivering as we speak for back-to-school, that we really -- we are high on as far as the opportunity for them to be key drivers for back-to-school.

But I think we're just trying to be cautious on our assortment and our breadth and also on how much we're purchasing.

So our inventory levels there will start coming down a little bit to support the inventory levels getting bigger in other parts of our business.

But I don't think -- I don't see it being, we're going to go down double-digits in Running.

I think that business, we think, will be stable.

Hopefully, we can make a little more money at it.

That will be our next goal.

Okay.

Then last question for you, Rick.

It's just on that comp progression second quarter of last year, what -- I don't -- just remind me what it was.

You obviously had a good comp second quarter last year.

Just what --

So you want progression?

Yes.

Got it.

One second.

Second quarter.

Second quarter was [8%, 7.2% and 5.4%].

Okay.

All right.

Thank you.

It was a good quarter.

(laughter)

On the Wholesale side, I'm just -- Naturalizer, could you comment how that grew in the quarter?

Just kind of what happened?

Yes, it was our -- yes, our Wholesale business was basically flat in the quarter.

Okay.

For Naturalizer.

For Naturalizer?

For Naturalizer, right.

Any thoughts about after what you had seen so far in that business?

What maybe happened in the first quarter?

Or just kind of your thoughts as you would go forward in that business for what you see for fall and that type of thing?

Because Naturalizer is still a good business.

Great.

Good question.

I just -- I really haven't changed my perspective on Naturalizer.

We're going to see growth in the low single-digits for the year, that we had a tough start to the year because of Sandals.

Sandals represent about 60% of their business in their spring season.

That's a lot.

So obviously, first quarter off to a slower start.

I think the team's been doing terrific work about continuing to move that brand forward and sort of get it to recover with really some terrific new products.

So nothing really new there, Chris.

We just continue -- we'll continue to see good, steady progress, nothing explosive, just good, steady progress in that brand.

Via Spiga, just kind of surprised.

I guess some of the changes you've made, the response to the fall product, is that what really gives you that encouragement about that returning to growth again?

Yes.

Well, honestly, even against our own internal expectations, we outperformed on Via Spiga in the first quarter significantly.

It looks like our forecast and our plans, our expectations around second quarter look equally good.

That was really just what Jay and the team had done from kind of Phase 1 of our work on Via Spiga.

Phase 2 really comes in at June and August market with all the new designs from Paul Andrew, plus an entirely new kind of positioning.

So we're feeling, yes, quite good about the turnaround there.

Obviously, as you know from us, we won't say that unless we really can see sort of the whites of their eyes, so to speak.

We feel very confident about the year on Via Spiga.

They've done a great job of turning it around.

Okay.

Good to hear.

That's all I have.

Talk to you guys soon.

See you next week.

See you next week, Chris.

Thanks.

Steve Marotta, CL King & Associates.

Just a quick question, as it pertains to fashion.

This is really a little bit more of from a 40,000 foot view.

Given your perch, given the retail operations as well as Wholesale operations, one of the things that I've heard is that there isn't a lot of newness.

There is not a lot of fashion drivers.

There is not a must have look.

Do you see anything percolating either at Famous or within the Wholesale lines to lead you to believe that there could be a mass unit driver for footwear in the back half of this year?

Well, I'll let Rick kind of weigh in on this, too.

But I guess, Steve, what I'd sort of say from what we see is this -- however, you want to define this Sport, Casual category and it manifests itself in different ways depending on the brands.

In our Fashion brands, it's the slip-on Canvas and other material kind of footwear that Sam is doing well with, Vince is doing extraordinarily well with, and even Naturalizer to a lesser degree some other sports styling they have.

So, any place we have that kind of look it's been working really well.

So I think that's been pretty much a big driver.

I think the other thing that we see is foot bed Sandals in the Fashion side as being a driver of some business that has been pretty good for us.

Then anything that has more, I would say, of a modern kind of edge to it from a dress perspective is kind of what's working.

But it's -- there isn't, other than the sport, kind of category that Rick referred to, the Canvas, that's really driving our Famous business.

There isn't anything really big other than that one that I can see.

There's other pockets of good performance but that's the big driver across both Fashion and Athletic kinds of businesses.

That's really helpful.

Go ahead.

Diane's pretty much hit it.

I think the Sport Casual business -- when you think about the Skechers product that's selling so well and the things that we sell from our Canvas partners.

It's really about a Casual lifestyle.

It's really about how I want to -- and we frankly believe that's coming from a Junior Casual business or a Missy Casual business.

By the way, it could be trading out some Sandal business as well, at least early on where the customer has Sandals in their closet and actually maybe it wasn't conducive outside so they bought a Canvas shoe that they thought was a new color, new silhouette, whatever it might be and putting that in their wardrobe.

So we think there's some -- there could be some trade off there.

So that seems to be the thing.

I know we all talk about, well, that's not new.

Well, it is when they decide they want to wear them.

We sell a lot of those shoes every year.

We're going to sell a lot more shoes this year than we've ever sold.

So it's going to be one of those kind of things when it comes into trend that really -- the customer really goes at it.

We try to find -- we expand our assortments between colors and patterns and differentiate it.

I think that's where you kind of start winning a little bit, when you start seeing how that sells.

Terrific.

Thank you.

Okay.

Thanks Steve.

I will now turn the conference back over to management for any closing remarks.

Thanks everyone for joining us this morning.

We look forward to seeing you next Monday at our investor conference.

Thanks again.

Ladies and gentlemen, this does conclude today's conference.

Thank you all for joining.

You may now disconnect.