Caleres Inc (CAL) 2016 Q1 法說會逐字稿

Good afternoon.

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

At this time I'd like to welcome everyone to the first-quarter 2016 earnings conference call.

(Operator Instructions)

Thank you and I would like to turn the conference over to Peggy Reilly Tharp.

Thank you.

Good afternoon.

I am Peggy Reilly Tharp, Vice President of Investor Relations for Caleres, and I'd like to thank you for joining us on our first-quarter 2016 earnings call and webcast.

The press release with detailed financial tables and slides are both available at www.caleres.com.

Please be aware 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 which could impact forward looking statements.

Copies of these reports are available online.

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

Joining us on the call today are Diane Sullivan, CEO President and Chairman, Ken Hannah Chief Financial Officer and Rick Ausick, President of Famous Footwear.

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

Thank you Peggy and good afternoon everyone.

And thanks very much for joining us for a review of our first-quarter results as we delivered EPS of $0.41.

During the quarter we continued to invest for the long-term success and growth of our Company, including adding two new retail stores and the development of our two new contemporary fashion brands.

Excluding these strategic investments, it is important to note that EPS for the first quarter would have exceeded street expectations and last year's results.

In addition, we delivered continued improvement and gross margins of 111 basis points, while maintaining our solid balance sheet and reducing our inventory position by more than 2%.

Cash was up in the quarter, reflecting strong operating cash flow and solid inventory management.

We were able to deliver these results on top of a strong 2015 despite overall softness in retail.

Our first-quarter performance demonstrates the strength of our Company's proven ability to react to changing dynamics and drive bottom-line growth.

There are a number of factors at play right now in the marketplace, as we all know, including tailwinds in lifestyle athletic, lackluster brick and mortar traffic and a shift to non-store channels, all combined with an expansion of buy now and wear now consumer behavior.

In the first quarter, these challenging opportunities were compounded by an industry-wide inventory hangover from the fourth quarter and an unseasonably cold spring.

Thanks to our team's agility and their focus, we were able to deliver good performance, reduce inventory and gain market share in a difficult environment.

Let's turn first to Famous Footwear where same-store sales were up 1% in the quarter.

Not surprisingly, as weather declines, so did comp sales.

We saw a very strong February, followed by a flat March and a decline in April.

Predictably, sandal sales felt the biggest impact from the unseasonably cold weather.

But it is going to come as no surprise to hear that Lifestyle Athletic was up double digits as we continue to see the benefit of our focus on this product trend and to take share in the market.

Lifestyle Athletic is one of the key areas we are targeting for back to school and the receipts for these brands and products are up 25 to 30%.

We have a legacy position in this business that we've built over more than a decade, and we realize this landscape is getting more competitive.

But we have absolutely no plans to give up any well-earned market share that we've gained.

Our focus on serving our consumers goes beyond just beyond the products they buy, of course.

It is also about how they shop.

The expansion of our shift from store program last fall opened up more products to our consumers via a new channel.

Also during the quarter, our dedicated eCommerce team introduced a redesigned mobile commerce site and both of these efforts have helped to drive sales at www.Famous.com, which were up approximately 80% in the first quarter.

For brick-and-mortar, we are using our consumer targeting efforts to open up additional stores this year in locations where more of our high-value consumers live and shop.

Our improved real estate portfolio has resulted in revenue per square foot increasing to $217 (see press release) in the quarter.

Turning to our brand portfolio, where first-quarter sales were planned down; thanks to careful execution, we ended the quarter with inventory down 4.1%.

Our strong inventory management at brand portfolio and the exit some of our lower margin categories also helped drive up some gross margin to more than 40 -- 250 basis points (sic -- see press release, gross margin 42.4%, $247.8 million) in the quarter.

As planned we continue to invest in our brand portfolio with the addition of key retail stores at Sam Edelman.

We're also expanding our portfolio with investments in the development of our emerging DVF and George Brown brands, as we will throughout 2016.

For our Healthy Living brand, first quarter sales of $129.4 million were down 13%.

Excluding the expected declines at Naturalizer and Dr. Scholl's, Healthy Living sales were down 1.6%.

Shifting to Contemporary Fashion, where first-quarter sales of $91.2 million were down 1.2%.

For both Healthy Living and Contemporary Fashion, performance was mixed while new products performed well, spring sandal sales were hampered by the unseasonably cold weather.

While our diverse portfolio brands have helped us to navigate through this retail uncertainty, and we will continue to do so, of course we are realistic about the forces that work in the marketplace.

Retailers are cautious.

They are looking for a lot of inventory productivity, managing carefully their open-to-buy and increasing their reliance on drop ship programs.

Therefore, we expect our performance by brand will continue to be varied as it was in the first quarter.

Based on this expectation and what we are seeing at retail, we now expect brand portfolio sales to be flat to down slightly in 2016, versus our original guidance of up mid-single digits.

However, we are maintaining our earnings per share guidance and Ken will review that with you in a few minutes.

We have absolutely no intention of taking a short term view of the current retail situation.

The work we began over the last few years is now more important than ever to our long-term growth, with investments including the things that you've heard about for some time now: our Company-wide omni-channel efforts; the consumer targeting work that we've been doing at Famous Footwear; our new stores at both Famous Footwear and Sam Edelman; our supply chain enhancements that we think are just going to be absolutely critical and essential to our brand portfolio business going forward as the demands of inventory productivity are increasing; the expansion and modernization of our distribution centers and our consumer fulfillment initiatives to make sure that we are competitive and servicing the customer in the way they want to be serviced; and the development of our two new Contemporary Fashion brands.

So for 2016, we will remain focused on the areas we can control: developing great differentiated products the consumer loves and delivering consistent, profitable and sustainable growth.

And as we move throughout the year, we'll update you with our progress against our expectations.

With that, I will turn the call over to Ken.

Thank you, Diane and good afternoon everyone.

Today we reported first quarter net sales of $584.7 million, down 2.9%, reflecting planned reductions in lower margin categories for some of our Healthy Living brands.

Consolidated gross margin for the first quarter was 42.4% of sales, up 111 basis points year-over-year as we exited those lower margin categories, improved our overall product cost and saw a reduction in our markdowns.

Total SG&A expense in the first-quarter was 37.5% of sales, and up less than $1 million, reflecting the timing of investments for long-term growth, partially offset by a reduction in corporate expense.

These investments in the quarter included five new retail stores for our Sam Edelman brand, bringing the total to 11.

And the continued development of our DVF and George Brown brands, we also opened ten new Famous Footwear stores in the quarter and operated three more stores year-over-year.

Depreciation and amortization was $13.1 million for the first quarter, up 4% on an increased store base.

Net interest expense for the first quarter was $3.4 million, down nearly 20% year-over-year as we benefited from the refinancing of our senior notes in the second quarter of last year.

For the quarter, our corporate tax rate was 29.6% versus 25.9% in the first quarter of last year.

As a reminder, last year's rate included a discrete tax benefit related to the conversion of one of our legal entities to an LLC.

Net earnings in the first quarter of this year, including the aforementioned investments in the business, were $17.8 million, versus $19.3 million in the first quarter of 2015 and earnings per share were $0.41 and $0.44 respectively.

Capital expenditures were $18.2 million for the first quarter, reflecting the continued investment associated with our consumer fulfillment initiative, which is on schedule and the opening of net new doors this year at both Famous Footwear and Sam Edelman.

Now turning to the balance sheet, we ended the quarter with cash and equivalents of hundred $50 million and had no borrowings against our revolving credit facility.

During the first quarter we returned cash to our shareholders via our share repurchase and dividend programs.

We repurchased 450,000 shares of common stock and also declared a quarterly dividend of $0.07 per share, our 373rd consecutive quarterly dividend.

Our consolidated inventory position at quarter end was $487.9 million, down 2.1% year-over-year.

At Famous Footwear we ended the quarter with inventory down 1.7% on an average store basis, and our brand portfolio inventory declined 4.1% year over year, as our teams continue to actively manage their inventory positions in a challenging retail environment.

Our return on invested capital for the trailing 12 months was 12.2%, and in line with the same period a year ago.

Before we begin Q&A, I would like to share our current view of our FY16 guidance.

We are maintaining eps guidance of $2.00 to $2.10, and as Diane mentioned, we expect our brand portfolio sales to be flat to down low single digits.

As a result we now expect consolidated sales of between $2.6 billion to $2.63 billion.

However, we also expect to achieve a corresponding reduction in SG&A expense, with leverage improving 5 to 15 basis points.

We've also increased our gross margin expectations and are now guiding for improvement of 15 to 25 basis points, taking into account our strong gross margin expansion in the first quarter.

Based on what we see today, we are maintaining our other guidance metrics.

Despite the current environment, we're confident in our ability to deliver consistent, profitable and sustainable growth through the continued execution of our strategy and we will continue to invest for in long-term success of our business.

With that, I'd like to turn the call back over to the operator for questions.

(Operator Instructions)

Scott Krasik, Buckingham Research Group

Thank you.

This is Matt on for Scott.

I want to start off here -- really strong gross margins in wholesale.

Are there any dynamics in place to see similar growth in any other quarter this year?

Yes, Matt, it is Diane - I would certainly say so.

I think with teams have really managed our inventory position we think that's going to continue throughout the year.

We've exited some categories of businesses that were low margin for us and I think that certainly is going to continue going forward.

We have been really smart around how we've managed product costs, and its a little early, little to early to say too much yet, but that's the supply-chain work we started late last year we really think it is going to help maintain some of the momentum there.

So overall, very, very positive and as you know, Matt, in this kind of environment it is really all a balance of all those things to really make sure that we improve the profitability.

Okay and then another one for you is, how is Famous planning the boot business for fall?

And do you anticipate changing the receipt schedule at all?

I will let Rick talk about that.

Yes, the boot business is planned probably flat to low double-digit right now, and that can change based on quality of selling.

So if we sell it at higher prices our sales could be higher than that, if not, they might be lower.

But that's where the plan is based on what we know.

Pretty significant shift in content in the sense of less higher shaft boots, more booties, so that's part of the mix change.

I don't think at this point in time we have not seen anything that would tell us we should change our receipt flow as we know it.

Okay, and if I could just squeeze one more in.

The share buybacks, first time in a while you have done that.

Is that recognition of the unattractive M&A environment right now?

Is there anything we could expect going forward in terms of further share buybacks?

No, I think that's the Company realizing, with the current valuation, that its a pretty good buy, so we're in the market.

We bought 450,000 shares and would expect that to continue, just as part of our capital allocation policy.

Okay, great, thank you very much.

Steve Marotta, CL King & Associates.

Good morning, everybody.

Thank you for taking my question.

Hi Steve.

Diana or Rick, can you comment on quarter to date comps?

We could.

(laughter) Oh, you want us to -- okay.

Quarter to date, we're down mid-single digits but I put some warning in there.

That includes the calendar shift of Memorial Day so we are -- so we've got that behind us where we weren't promotional, we didn't have the activity that's coming up this week -- we don't have that in our mix yet.

Obviously we prefer not to be down mid single digits.

Business has gotten better every week through the quarter and the last seven, eight days as we've seen the weather more normal in particularly the Northeast and upper Midwest, our business has actually taken a nice turn.

So we actually believe that it won't have an impact on our second-quarter of low single-digit sales for the second quarter.

You are planning comps up low signal digits for the second quarter -- is that what I understand?

Yes, sir.

Okay.

Excellent.

That's great.

Diane, can you comment a little bit about the open-to-buy dollars in the wholesale channel for the second half?

We're hearing a lot of chatter of that.

Based on what's happening in the spring, that there's some constraint there.

Yes, and we had foreshadowed that during our last call, Steve, even when we talked about guidance for the year at $2.00 to $2.10 originally and what we've been hearing is pretty consistent.

The open- to-buy dollars in the initial receipt plans are down depending on the brand -- not down at all, to down maybe 10%.

And retailers want to make sure that they are driving inventory productivity and with is a shift of how the consumer's shopping there's much more reliance on dropship and they are looking to chase goods in season.

It really always comes back to making sure you've got great product that the customer loves.

When I think about the work that the teams have done the first quarter, and looking at the share gains that we've picked up and how we've managed inventory, we fully intend to be a winner in the back half of year and continue to move the business forward.

But it is not easy, as you know.

It is a dogfight every day to make sure that we are getting our fair share.

The other thing that's probably worth mentioning on, and tacking on to your question is -- if you think about our brands and where they sit in the market.

And right now with the tailwinds against the Lifestyle Athletic piece, then the unseasonably cold weather in spring and so much of our business being in sandals, we really think again as that opens up, all of this will normalize a little bit more and we would expect that our business would continue to progressively improve throughout the year.

That's helpful and if I could squeeze one more in?

When did the revamped mobile site launch?

Just wondering when you will anniversary that and can you talk little bit about the capabilities it brought you and how it has driven sales?

Thank you.

Just to clarify, Steve, what we did is we designed the mobile commerce site.

So this is when you go into your phone and type in FamousFootwear.com.

That's what we redesigned.

We've always had it, it is been there for years.

What we've done in the last nine months is go back and make sure we were able to have better functionality, better navigation, better search, better change to card process and have made that easier and the checkout easier.

All that has been progress over time, over the last nine months different stages of it.

Last week we finished the last piece of it.

Today we believe we have a highly functional, highly easily used, mobile commerce site.

We have a mobile app -- that's a different conversation.

A mobile app obviously uses the mobile commerce site for the transactional piece of business.

But its really there for our rewards buyers, rewards customers to use in concert with their rewards points and things like that.

Its really about the mobile commerce site.

Back to the conversation, you know that more than half of the traffic coming into our entire Company is coming through the mobile phone, through smartphones.

That piece of it, we need to make sure is functioning at a high-level.

Terrific.

Thank you.

Jeff Stein, Northcoast Research.

How are you doing guys and Diane?

A question with regard to the wholesale business.

It would seem to me that you need to be up mid single-digit the rest of the way and given the scenario you described with very weak open-to-buy, how do you get to 5% for the balance of year?

Hi, Jeff, how are you?

What we said for the year was that we're going to be flat to down low single digits was what we had forecasted as part of the guidance.

And one thing to know, if you take out those planned exits, in Healthy Living we were only down 1.6% in the first quarter.

And down 1.2% on the Contemporary Fashion side, so we expect to continue to see steady improvement throughout, consecutive really, throughout the next couple of quarters.

With Contemporary Fashion really being the one, Jeff, that's it is going to be the outperformer, not unlike what its really done over the last couple years.

You could almost think about it as Contemporary Fashion being up mid single digits for the year, and the Healthy Living business as being down low to mid, and all in it really comes to flat.

That's kind of how you probably should think about it.

Okay, how did Sam Edelman - what were the best performing brands in Contemporary during the first quarter?

It was interesting, first of all, the one, as you would expect, that was very good was the Vince brand.

And not surprisingly, with Lifestyle Athletic being so important, the way a very, very successful sneaker business within the Vince business and that took off to the point that it almost represented 50% of our total retail business during the first quarter for that business.

So that was significantly up, our Via business was up, Franco was up, Ryka was up and so overall we think pretty good.

Our Sam business had terrific retail performance.

We really saw him gaining market share in the quarter and he opened four stores.

We are going to have 11 open by -- now I think by the end of the year.

He's not immune to what's going on in the environment, particularly with sandal sales being tough, but he's really managing the balance of his core and his new items in this business.

We are seeing the consumer really responding very well to new items.

All in, Jeff, you're never ever completely happy with things, but given the first quarter and the environment and everything that was going on, I think the team has managed quite well.

Okay, so Sam Edelman, we should assume that was down for the quarter?

Yes.

What about your wholesale mix to the off-price channel?

I presume with just the flood of inventory out there that guys like TJ Maxx and Ross Stores and probably even DSW are chomping at the bit right now and in a great place.

Did that distort your mix appreciably during the first quarter?

And how do you see your sell-in to that channel over the balance of the years?

That kind of fallback plan to help you make your top line numbers?

Because our inventories are lean, we are down 4%, 4.1%, Jeff, that actually that's really not going to be the case.

For sure, in the first quarter, they were that channel and they will continue to look for off-price product.

But for some of our brands it was a positive because we did have some inventory and resold them for others, we didn't.

So I don't think it is going to have a material impact for us as we move throughout the year.

I think is going to be pretty much a similar balance and total.

Data and one more real quick, Diane, and this one would be for Rick.

The impact of the dot com business on Famous Footwear's gross margins in the quarter?

Maybe Rick, you could tell us what percent of sales dot com accounted for in the first quarter compared to prior-year?

Yes, it was about 5% of our total business.

It has historically been in the 3% to 3.5% range.

I think last year it was probably about 3.5%.

It grew significantly: obviously 80%.

The margin impact, our total margins were off basically forty-something basis points.

That's pretty much all attributable to the impact of the business at the dot com.

Mix of two things: shipping is in that, because that would be gross margin we are talking about.

And then there was also a slight deterioration on the merchandise margins as we've been able to now move more sale and clearance products out of our stores because we have the ability to ship from store to satisfy that customer.

And we look at that as being somewhat of a positive in the sense it won't be goods that will sit in the store and not sell.

It will turn our clearance faster.

So about 40 basis points or so, Jeff, basically the entire decline was because of that, that's the two components.

Perfect.

Thank you very much.

Laurent Vasilescu, Macquarie.

Good afternoon.

Thanks for taking my question.

I want to follow-up on the quarter-to-date comps theme.

I think you have easier year-over-year comparisons over 2Q?

Last year Famous was flat, can you remind us how the comps did last year in May, June and July?

Yes I can.

Give me one second.

Last year, 2015, May was up low single digits.

June was flat and July was down low single digits.

So yes, they got progressively worse through the quarter and we just went through the hardest part, the first three weeks of May.

Okay, that's good to hear.

Can you talk about the impacts of the Memorial Day shift for the quarter to date?

Quarter to date it was probably -- I would have to -- probably half of what we are down would be relatable to the quarter to date, the shift.

Some of those sales are actually going to fall into June because our quarter ends on Saturday.

So we'll have Sunday, Monday, which are part of the event, which last year weren't in May, will fall into June.

But I think when we get the whole thing done, I think its going to be about half of where we're at, so we'll be down, call it, low single digits as we go into the first week of June against a down month and against the rest of the quarter being basically down on a comp basis.

So that's why we're all pretty confident we can still hit our low single digit comp number for the quarter.

Great, then I think there were some comments about weather -- could we, are you seeing any positive comps in other parts of the country where weather is not an issue?

Yes, very much so.

The weather, it was really odd, okay, because if you looked at first quarter our business in the Northeast, upper midwest was very good in February and early March and really poor end of April into the first part of May.

Our first part of May, I'm referencing in our current comp trend, is being driven down greatly by the weather in the Northeast this year versus last year.

And so that's gotten better as New York, Boston, Philly, Washington have gotten better weather in the last five to ten days.

The trend has reversed enormously.

We showed a first quarter increase in the northeast because the weather.

Business was so strong in February and March when they really had some poor weather a year ago, and it was better this year.

It is this kind of significance in timing of sales that we have to relate to because, I think it did shift the business quite a bit first quarter and early May.

And we expect to get a lot of that business back, we're getting a lot of that business back and we expect that to continue for the next several weeks.

Okay great, and lastly, on the Contemporary Fashion side, you remember performance year over year last year, it was kind of lumpy by quarter?

How should we think about the second quarter for Contemporary Fashion?

I think we're talking about it being up high single digits, Laurent, for the second quarter.

Okay, great, thank you very much.

Best of luck.

Thank you.

Jill Nelson, Johnson Rice.

Good afternoon.

A follow up on the last question.

I see you talked about overall branded portfolio revenues?

Are there any big swings in quarter by quarter?

How are you looking out on future orders and things of that nature?

Hi, Jill, its Diane, how are you?

It was really all over the board, the mix in terms of the performance in the quarter.

There was some brands that were up substantially, there were businesses like Dr. Scholl's and Naturalizer that we knew that they were going to be planned down.

It was kind of all in, as you heard - Contemporary Fashion down 1.2% and without those exits 1.6% on Healthy Living.

You have to balance all of that because you can't always look at it just on a quarterly basis, right?

You've really got to continue to view through the entire season.

You've got to look at the retail performance and sell-throughs and the inventory at retail.

And when we look at the performance of our brands at retail, and you run through them, its clear that]we've gained market share as a total company out there in the first quarter through [FPD] and the POS channels that we monitor.

So it was really -- I wish I could draw a line for you and say that its going to be exactly the same going forward - it isn't.

But we're confident.

As I said a little earlier, that towards the end of the year is the best way to describe it, that we really see Contemporary Fashion really ending up in up mid single digits and our Healthy Living business being down somewhat in low to mid single digits.

So all in, back to the guidance of flat to down low singles.

Okay, and then if you could just refresh us on the product excess?

I believe you started to call them out in the fourth quarter of last year?

Yes, we did.

It was -- no problem, happy to do it.

It was at Wal-Mart, a fairly sizable category at Wal-Mart that we were getting out of.

They were transitioning to lower price points and was really not a place where we wanted to play, so that was the big one.

Then, in our Naturalizer business, we had some old school, old margin border stitch sandal business that we really needed to evolve and we exited that business too.

Those are really the two big ones.

And again, all in, if you came back we would have been down just 1.6% on Healthy Living without those.

We should begin to lap those fourth quarter?

Yes, no problem.

Thank you.

Christopher Svezia, Susquehanna.

Hi everyone, its John Elias on for Chris, thank you for taking my question.

With respect to the brands, are you seeing any incremental pressure from any specific channels?

Is it department stores?

I would say I think the pressure is everywhere, John, really, when you think about it.

Doesn't matter really what channel it is, I think everyone is looking for inventory productivity.

Period, over and out, the consumer shifting in terms of how they're buying -- from brick and mortar, online.

So everybody's trying to figure out how they get the most inventory productivity possible.

Everybody's goal is the same and in terms of the pressure, I see it across the board.

It really depends on the brand, and the channel, but there's no particular one area that is concerning.

Okay, makes sense.

Can you just update us on how Canvas is performing and what your expectations are for back-to-school?

Yes.

Canvas, as of itself is doing fine.

We're actually now spanning that category to talk about Lifestyle Athletic, because I think its gone beyond canvas to a degree.

The canvas business is performing at low double digits for the quarter and we think that will continue.

But that whole Lifestyle business is more robust than that and will actually be a bigger part of our assortment going forward too.

Okay, thank you Rick, that's all I had.

You're welcome.

Thank you.

Eddie Plank, Jefferies

Good afternoon, thank you for taking the question.

Hi Eddie.

Ken, a nice pickup in the gross margin.

I think someone called that earlier.

I'm guessing, why might not the outlook be more robust than 15 to 25 basis points?

Sounds like the brand portfolio gross margin is improving nicely.

Is there an offset of Famous?

How should we think about that?

If you look at it in context, one thing to keep in mind is, in the 111-basis point improvement, 90 of that comes from Famous, even though Famous was down 50 basis points.

Just because of the mix.

Their overall margins are higher than the Company average, where the branded is lower.

As we said here today, the mix impact, and we believe we're going to be able to see similar trends across the business for the rest of the year.

I think it really comes down to the mix piece and how much growth do we get on the branded business and what is that overall impact?

So we took the total up and I think as we get further into the year, we'll be looking to adjust that accordingly.

We're very happy with the team's ability to really manage product costs, manage inventory, really manage the markdowns and allowances as we've seen initial orders come down.

We have seen the associated benefit and reduced allowances and things like that.

So I think we're very encouraged based on what we've seen today, and we reflected that in an overall increase in the guidance.

The current retail environment would suggest that we don't want to get too far ahead of ourself here.

Understood.

Could you just talk a little bit about what's happening with the SG&A and the brand portfolio?

I don't think first quarter is your highest operating margin quarter, but it looked like the SG&A went up meaningfully there?

Any thoughts?

Well, we did open four new stores of Sam, there was five open year to date.

Those carry some big SG&A increases ahead of the sales and consumers that flow to that business.

As Diane mentioned earlier, Sam at retail, his same store sales on the few stores that he had open was very positive, high single digits.

So we believe that these are investments that are part of securing the long-term growth.

But they do happen ahead of the sales.

We also, as we've talked about in the last couple quarters, we're developing two new brands - George Brown, the men's business and also DVF.

So those teams and the ramp up of product development, come ahead of seeing the revenue.

When you go through and look at the SG&A excluding those investments, the team's done a great job of really managing their overall expense.

The revenue really leverages those expenses in that business.

You're seeing directly the impact of decisions we've made to invest in that area.

Okay, that's helpful.

Last one for Diane - can you share anything on what you're seeing in the DVF line?

I know its still fairly early days, but any early reads there?

You know, Eddie, its been so far so good.

Not a lot of business out there right now yet.

So we're in about 200 doors, growing as we move into the back half of the year.

But so far the sell-throughs have been very good.

We're actually quite excited about a new appointment they made, because they've had a little bit of turnover at the design level.

They have a new gentleman coming in, Jonathan Saunders, who has a fantastic track record and along with the new president they hired, we really think as that all stabilizes, too, it is really helpful in terms of generating even more momentum in our footwear business.

But so far, so good -- pretty small and really not material to the total yet.

Great, that's helpful.

All the best.

Thank you, appreciate it.

Thank you.

Jeff Stein, Northcoast Research.

Yes, a couple of follow ups.

First of all, Diane, I'm wondering -- currency was not mentioned and I know that was a factor that hurt the fourth quarter by about $4 million.

Was there any impact in Q1?

Very small, not too much, Jeff.

Tiny -- a million, something like that.

Okay.

I know you don't talk about quarterly results specifically, but it sounds to me like we're probably looking at a similar type of pattern for the second quarter?

Maybe just a tad better?

With most of the improvements coming in the back half of the year?

I think that's fair to say.

Okay.

Final question is on supply chain.

Given the fact that everybody, all the retailers want the product on demand: immediately, now, and they don't want to hold inventory, it seems to me that speed and agility are just becoming so much more important to your business?

And I'm wondering where you are at in terms of being able to deliver product to your customers more quickly?

And whether or not that part of your supply chain investment is in a position to pay off in the back half of the year?

Or is that more 2017, 2018?

Fantastic question.

And you're so right.

With this current environment, and with the initial orders down, speed is really going to be very critical.

And I'm happy to say that we started this project, I would say the middle of last year, so it's about a year.

And we piloted a speed-to-market program in the first quarter of this year, Jeff, with our Sam and Lifestride businesses and then we've kind of tested it with a number of our other businesses.

And basically if we have a shoe that has been in the market, we can reorder that and have it at retail in about 45 days.

Well, I should say 45 to 50 days, let me make sure I get the right range there.

We're looking at -- and that assumes that you have all the materials, there's no changes to the shoe and all of that.

We think speeding up that supply chain is going to be a critical part of the future.

Its almost going to be a necessary capability that we need to have and I think you should expect to see it be a more material - its very early yet, but a more material part of our business in 2017.

But it is a very important part of what we're focused on right now.

Where would you have been a year ago at this time, Diane, in terms of your ability to deliver, in terms of days out?

Well we weren't doing that kind of rapid replenishment a year ago.

A normal shoe that might have been in the market, was probably 120 days out.

And we're talking about cutting that in half.

Okay, and so you're doing it on Sam and Lifestride; when will you be in a position to deliver on other brands?

We piloted this first quarter, started it with Sam and Lifestride.

We did test it on a few of our other brands.

I think we're going to be -- its also about our factory partnerships, and working all of that through too, so this is not just because we want to do it.

It happens, we've got to really work with some of our strategic partners in the Far East.

So we're working our way through all of that as well.

I would say 2017.

I couldn't tell you any more than that today, until we really work our way through in getting a better understanding of what the total impact is going to be.

The spirit of what you're talking about, we feel we're totally (inaudible) on that and we think that's a critical part of our future.

Perfect, thank you.

We have no further questions in queue at this time.

I would like to turn the conference back over to our presenters.

Thank you very much for joining us this afternoon.

We wish everybody a wonderful Memorial Day weekend, and we look forward to seeing those of you that we can during Market Week in a couple weeks.

Take care.

Thank you for your participation.

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