Caleres Inc (CAL) 2014 Q3 法說會逐字稿

Good morning.

My name is Jennifer and I will be your conference operator today.

At this time I would like to welcome everyone to the third-quarter 2014 earnings conference call.

(Operator Instructions)

Thank you.

And Ms. Peggy Reilly Tharp, you may begin your conference.

Thank you.

Good morning and thank you for participating in the Brown Shoe Company's third-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 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'll 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 Sullivan.

Thanks so much, Peggy.

Good morning, everyone, and thanks for joining us just two days before Thanksgiving.

Let me take this moment to wish you and your families and friends a really wonderful holiday.

But before we get too far ahead of ourselves for turkey and stuffing, let's take a look at our third-quarter performance, as we posted earnings per share of $0.75, up 19% over last year.

I'm very pleased with our results, especially considering what a mixed quarter we had in terms of weather, traffic patterns, and consumer sentiment.

Even with these industry-wide trends contributing to increase on certainty and markdown activity we maintained our planned promotional cadence.

And it's also really rewarding to see the work that we've done over the last few years help us to deliver another outstanding quarter, with solid contributions from both wholesale and retail as we continue to gain traction on both sides of our business.

The real estate work we completed in Famous Footwear and the elimination of underperforming brands at wholesale have enabled us to better navigate tough environments and deliver shareholder value each quarter.

Despite some softness at retail during the quarter, we delivered $729 million of sales, up 3.8%.

Famous Footwear and wholesale contributed to the quarter which also provided gross margin expansion of approximately 30 basis points.

Let's take a look at Famous Footwear where same-store sales were down 0.2% for the quarter but up 1.6% for back-to-school.

These results demonstrate a nice two-year trend up 4.7% for the third quarter and up 7.2% for back-to-school.

While August and September of this year were positive, the mild October was really difficult to overcome.

We've seen much better shopping patterns as the weather has turned and our November month-to-date same-store sales are up mid-single digits.

In terms of product our focus on big ideas continues to pay off as our investment in canvas drove 25% growth in this area.

Overall athletics was up low single digits on a same-store basis, and we saw a significant increase in athletics lifestyle product as consumers continue to shift away from more technical athletic footwear.

We also saw good performance in sandals, up 6.2% in total, with women's up just over 10%.

Boots were also up 2.5% in the quarter despite the mild start to fall, and this includes Shearling product which did very well and was up over 20%.

Consumers not surprisingly continue to join our rewards program and use our mobile app during back-to-school.

We had over 1 million downloads since our app was launched in September of 2013.

We added 1 million new members to our awards program during the quarter as part of our back-to-school effort and now we have close to 10 million rewards members.

We all know that these multi-channel consumers like these rewards members continue to be more valuable as the average annual shop is over 60% higher than consumers who shop using a single channel.

So although we only have a few weeks of the fourth quarter behind us, it looks like we'll be able to end 2014 on a positive note, barring a repeat of last year's weather.

As you likely recall Famous Footwear same-store sales were down 1.8% in the fourth quarter of last year as we lost nearly 4% of our store selling days due to weather-related closures.

While we certainly don't know what to expect of weather this winter, we do expect to take the same approach to the promotional holiday environment and despite what other retailers are doing, we plan to maintain our promotional cadence as we did last year.

We do not intend to sacrifice margin for sales and we expect to deliver a strong overall 2014 at Famous Footwear.

But before we wrap up the year, let's take a look at our third-quarter results in our wholesale operations.

Sales of $242.6 million were up 18.2%, with 8 of our 10 wholesale brands delivering solid growth, ranging from high single digit to mid-double digits for Naturalizer, Sam, Franco, Biff and Via Spiga all grew 20% or more, while Dr. Scholl's, LifeStride, and Carlos all grew at high single to low double-digit rates.

I'm really pleased with these results as well, especially after hearing so much about the impact of weather, caution at retail, and lack of trends.

We succeeded in the quarter because each of these brands did try to embrace their unique consumer and capitalize on the relevant trends in the market to drive their sales.

For sure, as we all know, booties did well across the board, but each brand also saw success with products that were really targeted towards their customer base.

Naturalizer, for example, reinvented its top-selling riding boot from last year and some wear in wholesale again this year.

This brand also saw good strength in classic dress silhouettes, especially at mid-tier and e-commerce.

For all-in Naturalizer sales were up 3% as we operated 10 fewer retail stores year-over-year.

Franco Sarto was true to their career focus consumer and as a result casual flats, like menswear styles and oxfords and some lace-up booties did really well.

And Via Spiga hit booties from every direction and nailed this look from everything from up front open toed style to biker booties to short, casual, and ankle booties.

And Sam's core products continued to shine as consumers remained really interested in these iconic items.

During the quarter we opened Sam's second store in Beverly Hills and we also saw his apparel line ramp up at retail where it's really striking a chord with his target customer.

We expect the apparel door count to be up over 50% in the first quarter of next year as we enter the spring selling season with pretty good momentum given that it's our first season out there with the apparel line.

And then finally, the rapid expansion of the Vince brand continued in the third quarter, with casual flats and sneakers in addition to other styles really hitting the mark.

For spring we'll see this footwear in an additional 120 doors as the reach of this impactful brand really continues to spread in the marketplace.

So in total for the quarter wholesale operating margin improved to 11.5%, a 330 basis improvement.

It's really been an exciting 2014 so far at wholesale, but we are realistic about the promotional mindset in the marketplace.

The cold weather we've seen over the past few weeks has definitely aided boot sales, but there's no doubt that this has potential to be a very promotional holiday season.

So our team will continue to carefully manage their performance in the fourth quarter.

With that, I'd now like to turn the call over to Russ and he's going to give you a review of our financials and details around our guidance for the year.

Thanks, Diane, and thanks 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 third quarter we reported net sales of $729.3 million, up 3.8% versus $702.8 million in 2013.

Third-quarter net earnings of $33.1 million, or $0.75 per share, were up 21.2% over the $27.3 million, or $0.63 we reported last year.

At Famous Footwear we improved our trailing 12-month revenue per square foot to 213 as we closed or relocated six stores in the quarter and opened 12.

We're operating seven fewer stores versus this time last year, and we still expect to open approximately 50 stores in 2014 and close roughly 60.

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

Overall gross margin in the third quarter was 39.9%, which was up 30 basis points year-over-year.

SG&A as a shared revenue was 32.6%, which improved by 60 basis points year-over-year as we continue to leverage our expense base and see the benefit of our cost management actions.

Inventory at quarter end was $567.8 million, up 4.3% over last year's third quarter.

Famous Footwear inventory was down 1.2% and we also saw a year-over-year improvement in our aged inventory position.

We expect inventory levels at Famous Footwear to continue to decrease through the fourth quarter and enter 2015 with fresh inventory.

At wholesale inventory was up 31% at quarter end driven by our key growth frames.

Our corporate tax rate was 30.9% for the quarter.

Net interest expense was $5.1 million, down slightly in the quarter.

Cash and equivalents for the quarter were $39.1 million, and our improved operating earnings are building back cash powering the $65 million acquisition of Franco Sarto back in February.

We ended the quarter with $14 million in borrowings against our revolving credit payment due to increased working capital needs.

We also improved our debt-to-capital ratio to 28.3% from 30.6% last year.

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

To account for a better than anticipated third quarter at wholesale, we are raising our annual EPS guidance range to $1.65 to $1.69.

As a result we now expect consolidated net sales of $2.58 billion to $2.59 billion, same-store sales at Famous Footwear up low-single digits, specialty retail sales down high-single digits due to store closures and reflecting performance to-date, net sales at wholesale operations up mid- to high-single digits, and gross margin up approximately 10 basis points.

SG&A of $920 million to $925 million with continued leverage, net interest expense of $20 million to $21 million, an effective tax rate of 30% to 32%, and appreciation amortization of $51 million to $53 million with CapEx expenditures of $56 million to $59 million.

And with that, operator, we'd be happy now to answer all questions.

(Operator Instructions)

Scott Krasik, Buckingham.

This is Kelly for Scott.

Congratulations on the great quarter.

Just want to dig in a little bit more into the wholesale business.

Obviously, margins were off this quarter, up 330 bps.

As you see contemporary brands growing into larger pieces of the total, could you just talk about the outlook for the margins in that business going forward?

And then I just have a follow-up with that one.

We expect to show continued improvement really on our wholesale margins going forward, I would say for the next two to three quarters for sure.

As we, Kelly as you know we've been working hard over the last couple of years to really recapture some of the margin rates that we had lost over the last number of years.

So I would say you should expect to see a continued tick up in the margin rates certainly over the next couple of quarters.

And then just on that same line given where the inventory that wholesale shook out at the end of the quarter up 31%, could you dig into that a little bit more?

And perhaps if there's any near-term pressure in that business given where you guided wholesale and more inventory through the end?

In general I would tell you, Kelly, that we're in great shape as it's related to inventory.

The growth in inventory at wholesale is all tied into the real growth drivers for the wholesale brand.

So for example Vince is a big piece of it, the Sam Edelman inventory is also a very large piece of it, along with really bits and pieces from each one of our other brands.

But the big driver is really Vince and Sam.

Okay.

And then just shifting gears just over to Famous, given you're coming off several years of pretty strong -- strength in some of the casual brands that you carry, and just looking out to next year, could you maybe talk about the drivers of that business going forward into next year?

I know you don't give any explicit guidance; talk higher level about that, please?

Kelly, it's Rick.

We would consider -- we would believe that the whole canvas thing is continuing, at least for the first half of the year.

We planned that out relatively aggressively, so we see that continuing to drive additional business.

I think on the casual side, I think we're being very selective on women's non-athletic when we talk about casual shoes, what we invest in.

There is life in some of those products.

But the assortment just had to be narrowed for us to make sure we're buying the right items.

That business is still probably waiting to find a trend, if you will, and something that we can offer the customer that would be different as what's in her closet.

Other than that on the casual side, I don't know how else to answer the question.

I'm sorry.

I was just talking about Famous in general in terms of athletic, but we can take the rest offline.

Thank you.

Jeff Stein, Northcoast Research.

Nice quarter.

Question first of all for Rick.

Wondering if you believe your inventories are properly aligned to take advantage of the strong selling trends in the categories that you are betting on for fourth quarter?

Yes, I do.

We think of boot inventory has allocated again.

There's different components to that business.

We think we really allocated it well for the things that are trending right now, and we continue to see that happen on a daily basis.

The canvas business, the historic iconic canvas business is a little more bullet-proof on weather than people think.

We really sell those shoes pretty much every day.

It's just relative volumes and levels of that, but we've seen continued growth in those businesses even as the weather was colder in the last two weeks.

Those businesses still held up very nicely.

So the categories we believe strongly in are producing very nicely right now, so we'd expect fourth quarter to turn out to be very good for us as well in those businesses.

Great.

And a question for Diane.

You're kind of guiding to mid- to high-single digit in wholesale, but if you -- it would seem to me that implies low single digit top-line growth in the fourth quarter.

So I'm wondering are you just been conservative?

Or is there something we should be considering when looking at fourth-quarter wholesale growth?

No.

I think you're exactly right.

We're really forecasting somewhere in the mid- to high-single digit growth.

I think we're trying to be as cautious as we possibly can with the promotional environment that's out there.

And if you think about the growth that we've had this year, we were up close to 6% in the first quarter, up close to 8% in the second, up to 18% in the third.

And so I think in the fourth quarter I think it's prudent to be planning where we're at.

That's a pretty good pace.

And it does swing a little bit, as you can see quarter to quarter too.

Sure.

And just final one for Russ.

Russ, it looks like you're going to be maybe within 50 basis points of 10% EBIT margin for the year in wholesale.

And I know that's kind of been your target.

So I'm wondering, is it too early to think about resetting the target, and is 10% the ceiling or could we go higher?

I think as we talked about at the investor day we certainly expect to go higher over time.

And that's definitely what we are planning.

And as you pointed out, Jeff, we do see the possibility to get there this year and get very close to it.

So we're cautiously optimistic as we go into the fourth quarter, as Diane said on our wholesale business.

I think we just had a great quarter here in the third quarter.

And you continue to see the power and the profitability of our wholesale portfolio growing, which we've been pointing out now for the fourth quarter in a row.

So we're very bullish on it.

Diane, did you make any comments on the Vince men's line?

If I missed it I'm sorry, but I didn't hear any comments.

I didn't.

It's small, so I want to say that, which is why I haven't mentioned it yet.

It's first season, it's just starting to pick up some momentum.

Fantastic sell out of all the styles, people are very excited.

Door growth for spring.

All positive.

But again, it's relatively small yet to really have a material impact on our overall results.

Got it.

Thank you very much.

Steve Marotta, CL King & Associates.

Good morning, everybody.

Russ, can you comment on the gross margin drivers at Famous during the third quarter?

Sure.

Most of the drivers -- our canvas business and our bootie business.

Both helped tremendously.

Rick, any other answers?

A lot of it was a mix of some slightly higher margin product versus some margin product.

There are some products that have a, run a lower margin.

Cleaner inventory, so we had less clearance that was going out the door at low margins.

Those are probably the two biggest drivers, Steve.

Great.

Thank you.

Diane you mentioned that promotions during the fourth quarter are going to be held in check very similar to last year.

Are there any deltas around black Friday, or you can you talk a little bit directionally about that holiday?

What you're expecting for the weekend?

I would say again that -- really repeat what I said.

That we're not planning a significant change around the amount of discounting or the cadence of what we're doing.

I know we have a special thing planned around our mobile app that is a little bit different than what we did last year, but other than that, Steve, we really think we're just going to continue to drive it the way we did last fourth quarter.

We think we're in a great position.

The merchandise is what Rick was saying earlier.

We got the right inventory against the right goods that are selling.

So we don't really think we need to take that posture at this time.

Terrific.

Russ, one last question.

Regarding the tax rate in the fourth quarter, is the implied rate in the mid to upper teens?

No.

For the fourth quarter?

Correct.

No.

If you take the annual guidance we gave you in the year to date you can back into the fourth quarter.

Okay.

Thank you.

Chris Svezia, Susquehanna Financial.

Good morning, everyone.

Nice job on the quarter.

I'm just curious, just so I understand the wholesale backdrop here.

It looks like you sold in extremely well.

You're probably not anticipating big reorders for the fourth quarter.

Potentially being promotional, so you're being somewhat conservative there.

But help me walk through on the inventory side up 31%.

Does that just imply as you think about spring, some of these brands like Sam, Vince, et cetera that the visibility there is pretty strong?

That's part of what that inventory is up to that too?

That's really a good portion of it, Chris, is against both of those two businesses.

And then the other thing with the port issues on the West Coast.

We also extended our ordering and will allow about seven days.

So there may be a little bit of it contributing to that too.

But overall it's really been demand for the current business trend.

Okay.

I know it's early, but any thoughts, visibility as you start to think about spring in terms of how retailers are thinking about orders, placing, hoping to buy, just any early thought process in terms of how you're thinking about spring?

I wouldn't say I have anything unusual to really report.

I would say right now that most retailers are really focused on this fourth quarter, that you go a couple days and business is really terrific, and you go another couple days and it's down.

It's a little bit hard to read.

So I think everybody is really trying to make sure that we stay focused on delivering the most profitable fourth quarter that everybody can.

And then as we do that turn the attention to next spring.

Okay.

Fair enough.

Just on Famous, from a margin perspective.

I think last fourth quarter EBIT margins were down something like 80 basis points or something like that.

If you keep the same sort of promotional cadence, inventories are down, you get back some of those selling days, hopefully weather cooperates a little bit here, is it fair to say you recoup what you had lost?

Is that the thought process how we think about that?

Because I assume most of the EBIT margin pressure is related to (technical difficulties -- background noise) on the negative comp.

Basically the EBIT loss is due to lack of sales on top line.

A lot of that was driven by the weather, Chris.

So I would think we would gain much of that.

Whether we gain 100% or not, I don't -- I'd have to go look, pull the book out and deal with all the math.

But that would be the idea; we believe that the fourth quarter, again with modest weather, or weather that would be more typical or less damaging to traffic in stores, we would think we'd be able to recoup most of that.

Okay.

And on the athletic trend.

There's definitely a push towards more fashion and casualization on athletic versus technical to a degree.

How does that play into your thoughts in thinking about the business as you head into spring?

How do you think about the running business versus casual and lifestyle, canvas, et cetera?

Just thoughts around that?

Our plan would be to have our running business be relatively flat.

That would be where our hopes if we could maintain that business.

We think there are some new things coming in the pipeline that we're delivering probably over the next 30 or 45 days and early into first quarter that we think, again, will hopefully energize the business a little bit.

But we're not expecting it to run its 15%, 20% like it did for two or three years in a row.

So we're trying to maintain that business.

Our investment has been into the more lifestyle driven businesses, primarily canvas where the customer seems to be not able to get enough.

So our assortments are broadening.

Our depth is getting more powerful on size and things like that.

They continue to buy at a very, very fast rate.

So again we -- that's how we planned the early part of first quarter.

We're still working on back-to-school so we've seen the shoes, we're just now going through final assortment plans for that.

So I really can't talk much about second quarter into back-to-school, but we saw plenty of product we think will drive our second and third quarter business, as well.

So we feel pretty good about that business.

We think there is a shift though.

It is something different than we've seen before.

Okay, fair enough.

That's all I got.

All the best to you.

Thank you.

Danielle McCoy, Wunderlich Securities.

Congratulations on a great quarter.

Thanks, Danielle.

How are you?

Good, hanging in there.

Getting ready for Thanksgiving.

Just quickly wanted to ask about Sam Edelman; if you can go a little bit further into the performance of the Soho and Beverly Hills stores.

Any planned store openings?

And if you could talk a little bit about the rollout into Macy's, the number of doors you're in, and if they are all table doors?

Yes.

Couple of things.

First of all, Soho and Beverly Hills, again, performance there is terrific.

We're beating our plans and beating pro forma.

At Beverly Hills and even with the -- interesting it's really the first time we've had a broader apparel assortment in there.

We're learning a lot about how the consumer is responding to the mix and how we really need to balance that going forward.

So far so good.

We've got a number of stores in the pipeline for next year.

Looks like we'll be adding anywhere between 5 to 8 in the next 12 to 15 months or so.

And being very thoughtful about making sure that they're in locations that we feel terrific about.

We need to not just hurry up and open stores, but we want to make sure that they're stores that we feel terrific about.

As an example we'll be down at the World Trade Center, that's going to be opening up next year.

We think that's going to be a fantastic location.

Very high profile.

So overall I think we're taking -- making nice progress with Sam as it relates to both the store piece of it and the expansion into new licensing categories.

Because we, again, believe that it's going to help productivity at the stores as we continue to go forward.

And then there was another part of the question I think you asked me, I'm sorry.

Did I miss it or did I answer it all, Danielle?

Just in terms of the expansion into Macy's.

The number of doors and if they were tables?

I think we are in probably a little over -- somewhere between 40 and 50 doors at Macy's.

And it's really their best stores, where Sam is always assessing how many doors are the right doors.

They are fundamentally shop in shop, so we'll see.

So far so good.

Great.

And then just switching gears to Famous Footwear.

Could you just touch base on the Canadian business?

Of course.

We just opened our fifth and sixth stores this past month in Montreal.

And we are very pleased with how they've opened so far.

The six stores are doing well.

Obviously probably a variance of performance versus our plan, but we've opened some very strong stores.

We have one more signed lease that will open outside of Toronto in March, I believe.

That will give us our seven stores, and that's what we've committed to at this point, Danielle.

We're looking at additional real estate, deciding how far we could take it.

But the early results have been very promising.

We're very happy with that business so far.

All right, great.

And then just lastly just touching on the tax rate again.

How should we look at the tax rate for next year?

In the low 30%s, in that 32% range is going to be about the range to use for next year.

All right.

Great.

Thanks, and happy Thanksgiving.

Thank you.

Jill Nelson, Johnson Rice.

Good morning.

If you could talk about the Naturalizer brand, just dig a bit deeper on the wholesale side, as well as your specialty retail.

While it's a smaller part it did have -- take a bite.

Yes, sure, no problem.

Happy too.

Naturalizer in total, as we mentioned, all-in sales were up 3%.

We really struggled a bit at retail this quarter, no doubt about it.

Not unlike a lot of people did in the women's dress and casual categories.

But it was interesting, when we did have the traffic conversion rates were up and pairs per transaction were up.

But still overall a disappointing quarter for us for the retail side of it.

But on the wholesale side a very strong quarter overall.

We were up into the high single, low double digits on the Naturalizer wholesale side.

They seem to hit the mark in terms of booties and some shorter boot silhouettes.

Their classic dress styles were doing pretty well.

And the inventory for them is also very good.

It's clean and it's really down year over year.

Overall a little bit of a mixed bag in total goods.

Retail not so much.

Wholesale very good, and our international business, as well, was up significantly.

So all-in continuing to make progress, Jill, the way we need to.

We've got to do a little bit more though on that specialty retail side, which we're working on.

And more to come in the next couple of quarters on that.

Okay.

And then just thinking a bit deeper on the Famous Footwear side with the boots.

You talked about good performance third quarter despite no real cool weather.

And if you could talk about maybe if that category was the main help with the rebound in November?

Yes, Jill.

Couple of things.

Our riding boot, tall shaft boot business however people describe it, but basically the casual tall shaft boot business has been pretty consistent.

I know there's different versions of that commentary in the marketplace.

Ours has been pretty good.

And so those boots continue to perform for us.

The bootie business, just like everybody else, is where we have it.

We didn't buy it tremendously in-depth or broad, but what we have is selling very well.

So that's been a key factor.

And for us our shearling business has been a pleasant surprise.

We had a strong early part back-to-school with shearling, which was a little bit of a surprise for us.

And then it has obviously continued to be very strong as the weather got cooler around the country.

So looking for that to be pretty a significant increase.

The only place where we probably had some, what I would say, less demand than we had hoped for would be in more junior driven, laced up boots.

That seems to be a category that's leveled off a little bit more than we had anticipated.

We don't have -- we're not concerned about our inventory levels, but we are getting some lesser sell-throughs than we have seen historically over the last couple of years on that category.

Okay.

And then just last one.

Famous Footwear sales per square foot has continued to increase consistently.

Could you talk about maybe how your new stores are performing on that number and also some maybe relocations, as well?

They are doing better.

We can pull the number, but I want to say it's probably in the $225 range or something like that on our new store basis.

So we, again, as part of our plan going forward, it's more in-depth review of real estate using some new technologies we have at our disposal to make sure we continue to find opportunities that will get us to higher productivity in our stores.

And we've been on this march for four or five years now, and I think as that real estate comes online we continue to find that it does prove that.

So we would think we can continue to find places that will perform at higher levels than our current sales per square foot.

And therefore over time would drive that opportunity, not only on our organic growth, but also our new store growth should help us drive to better sales per square foot.

Thank you so much.

Jay Sole, Morgan Stanley.

Diane, I just want to follow up on a comment you made on Naturalizer.

You mentioned international was strong.

Can you maybe talk about that in a little bit more detail?

And for the wholesale business in total, I'm not sure if you mentioned it before, but was international a strong contributor to the wholesale growth in the quarter?

No.

It was a good contributer overall to the Naturalizer brands.

It's a fairly sizable piece.

Probably in total it runs maybe about 10% to 15% growing of the total size of the business.

It was up very strongly in this quarter.

We continue to open up stores around the world.

We have close to 200 that are open now with a number of distributors.

Again, in total for the total wholesale business, Jay, it's not a huge piece of it.

But it's a growing and important piece for Naturalizer, and it certainly will be for Sam Edelman too as we continue to work on that over the next couple of years.

And then our wholesale business, again, here domestically was super strong.

And a little bit new to the story, we really had a couple of tough years with Naturalizer a number of years ago when we had fled to some systems changes, they were hurt particularly hard.

So we are in the process and have been for the last 24 months really rebounding and getting ourselves back to where we really needed to be with Naturalizer.

So it's a combination of the relevance against where we had been, good and getting better performance overall in wholesale, and growing international base, and a specialty retail business that we are going to need to make sure starts to pop a little bit better as we go forward in the next year or so.

Got it.

And then if I could just ask you one more thing on M&A?

Have you seen -- have you been involved looking at your stuff, how would you feel the environment is right now for opportunities to make some sort of deal (multiple speakers).

We get calls all the time about opportunities in the marketplace, and I've said on an ongoing basis that if there is a great consumer demand brand out there that we're certainly going to take a look at, because we've given our performance over the last couple of years and our aspirations of where we're going to be taking this Company to add another demand brand to the portfolio would be a terrific thing.

So it always comes back to issues though to right time, right place, right valuation and all that.

But for sure, yes, we're always looking.

Great.

Thanks, Diane, good quarter and have a great Thanksgiving and good luck through the holiday season.

Sam Poser, Sterne Agee.

It's Ben Shamsian for Sam.

How are you?

Thanks.

Good, how are you, Ben?

Good.

Couple questions on Famous.

Your kid's business there, how was that trending for the quarter?

For the third quarter?

Correct.

Third quarter?

Yes.

You're making me look, because I can't remember actually.

Down to low single digits.

Again, driven pretty much by the athletic piece of it being softer than we had anticipated.

Got it.

Okay.

I'm looking at canvas up 25%, athletic still positive, although not as much as we had anticipated, sandals up 6%.

What was the -- what led to the flattish comp?

What did you comp negative in, or what was really disappointing?

I think I commented earlier that our running business didn't perform to the level we expected.

So that's our biggest category.

That would be number one.

The other thing is on the women's non-athletic side, the dress and casual footwear business is difficult.

We basically planned those businesses to be difficult so our inventories were in line, but we're obviously off -- the top line is off, as well.

So that would be the three places where we probably underperformed in total versus last year for sure.

Got it, okay.

And then traffic?

What was the traffic for the stores?

Down mid-single digits.

And it's in line -- I think there's actually an article in the Wall Street Journal today talking about this, that that number seems to be in general what the world is seeing in their store traffic.

Got it, okay.

And it terms of store growth for next year, real estate and all that, how can we think about it?

Have you seen -- is the focus more on relocations or can we see some new store opening up?

I think our plans right now are 55 openings and about 50 closings.

We're not -- it's not overweighted to relocations versus new stores.

It's pretty much in the ballpark.

I think it typically runs about 20% or so of our openings are relocations.

Something along those lines.

I don't think we're planning it to be more aggressive than that, but that all comes down to the real estate itself.

Sometimes we have opportunities to get to a better spot or a better location in a center and we'll take it.

But right now we don't anticipate forcing them.

Got it.

Thank you so much.

Thanks, Ben.

There are no further questions in queue at this time.

I would like to turn the conference back over to Diane.

Thanks, everybody for joining us and have a very happy Thanksgiving.

Thank you.

This does conclude today's conference call and you may now disconnect.