Columbia Sportswear Co (COLM) 2013 Q4 法說會逐字稿

Greetings and welcome to the Columbia Sportswear fourth quarter and full year 2013 financial results conference call.

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

A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your speaker, Ron Parham, Senior Director of Investor Relations.

Thank you, Ron.

You may begin.

Thanks, Bob.

Good afternoon and thanks for joining us, everyone.

Earlier this afternoon, we announced fourth quarter and full year 2013 financial results and provided our initial financial outlook for 2014.

In keeping with our standard practice, shortly after the press release crossed the wire, we filed an 8-K, containing a detailed CFO commentary on the results and outlook, which can also be found on our investor relations website at www.investor.columbia.com/results.cfm.

With me today to discuss the results and answer your questions are President and CEO, Tim Boyle; Senior Vice President and Chief Financial Officer, Tom Cusick; Executive Vice President and Chief Operating Officer, Bryan Timm; and Senior Vice President and General Counsel, Peter Bragdon.

Columbia's Chairman, Gert Boyle, is traveling and unable to be on the call today so I will remind listeners that this conference call will contain forward-looking statements regarding Columbia's business opportunities and anticipated results of operations.

Forward-looking information is subject to many risks and uncertainties and actual results may differ materially from what is projected.

Many of these risks and uncertainties are described in Columbia's annual report on Form 10-K for the year ended December 31, 2012, and subsequent filings with the SEC.

Forward-looking statements in this conference call are based on our current expectations and beliefs and we do not undertake any duty to update any of the forward-looking statements after the date of this conference call to conform the forward looking statements to actual results or to changes in our expectations.

Now I will turn the call over to Tim.

Thanks, Ron.

Welcome everyone and thanks for joining us this afternoon.

Our fourth quarter and full year results were significantly stronger than we anticipated in our previous outlook last October.

At that time, we noted that we had begun to see positive signs of stabilization in our North American and European wholesale channels and solid momentum in our US direct-to-consumer channels.

Clearly, both of these dynamics strengthened further with the onset of winter weather.

Globally, fourth quarter direct-to-consumer sales grew 26% and were up 20% for the full year, accounting for approximately 34% of full-year consolidated net sales.

We are obviously very pleased with the results of our direct-to-consumer business during 2013.

However, the ultimate objective of our direct-to-consumer strategy is to strengthen our brands in key markets to enable our wholesale customers to grow their business with our brands.

After two challenging years in our North American wholesale markets due to a combination of weather and product positioning, channel inventories ended 2013 very clean, creating demand for a broad assortment of our fall 2014 products, which feature our newest technologies and our best styles at more accessible price points.

We're working closely with our wholesale customers to broaden their assortments and to encourage use of in-store merchandising and marketing assets to accelerate consumer demand for our brands.

As we have demonstrated at our branded stores and e-commerce sites, when those elements are brought together at point-of-sale, consumers embrace the innovation and enhanced design of our products.

Our North American wholesale customers are demonstrating renewed confidence, with advance orders for fall 2014 up double digits, reflecting strength across both the Columbia and the Sorel brands.

We expect 2014 sales and profitability growth to be affected by the following major factors: incremental sales and profits from the new China joint venture; continued growth of our global direct-to-consumer businesses; renewed growth in our wholesale channels, beginning in the second half of 2014; incremental costs related to our ERP implementation; and increased demand creation investments.

The initial full-year 2014 outlook we provided today anticipates global top-line growth of between 15% and 17% over 2013 and operating margin of approximately 8% of sales.

The 15% to 17% sales growth expectation calculates to between $250 million and $285 million in growth, which we expect to achieve through increases in each of our four geographic regions.

Slightly more than half of that increase is expected to come from the addition of our new China joint venture.

We expect the remaining organic growth of approximately 8% to come primarily from the US region, with smaller contributions from EMEA, Canada and the rest of the LAAP region outside of China.

The expected sales increase from the China joint venture equates to single-digit growth on top of the revenue Swire generated in 2013 operating as our independent distributor.

It should come as no surprise that economic growth has slowed throughout China over the last 12 months.

In addition, a large influx of outdoor brands has resulted in excess inventory levels, triggering discounting and higher-than-normal promotional activity by some of our major competitors in that market.

Now it seems there has been some confusion among analysts about how to model the China joint venture into their 2014 financial projections so let me explain in general terms how we are including that business in our financial model.

Based on our revenue estimate for the joint venture, we expect it to contribute high single-digit operating margin and incremental EPS of approximately $0.13 per share after interest, taxes and minority interest to our consolidated 2014 results.

While these expectations are lower than we had originally planned for the first year of the joint venture, we continue to view China as a very large long-term opportunity.

We expect our North American direct-to-consumer sales to continue growing at a double-digit pace for 2014, including plans to open an additional 18 stores, comprising 12 outlets and six Columbia-branded stores.

The 12 new outlet stores will continue to help us manage excess inventories more profitably while protecting brand image and integrity in wholesale channels.

The six new branded stores we have planned for 2014 will be much smaller footprints than our current branded stores and designed to showcase various product assortments, including a few stores specifically focused on our performance fishing gear, or PFG products.

We expect high single-digit growth from our US and Canada wholesale channels over the course of 2014 on a constant dollar basis, highlighted by anticipated double-digit growth in the second half of the year.

In the EMEA region, our new Senior Vice President of Europe, Franco Fogliato, joined us in early November and has been working closely with our Europe direct team through the fall of 2014 advanced order-taking process.

The focus in our Europe-direct business is to strengthen relationships with key wholesale customers in targeted markets where we are focusing our efforts to grow the business.

These targeted customers will be instrumental in helping us revitalize our brands across the continent.

We expect continued growth in our EMEA distributor business and are optimistic for improved topline performance in our Europe-direct business.

Looking at our Latin America/Asia Pacific region, we expect the incremental sales from the China joint venture to more than offset the effects of the weakened Japanese yen and the geopolitical issues that have continued to strangle the markets of Argentina and Venezuela.

We are working very closely with our independent distributors in Argentina and Venezuela, watching for any signs that those markets are unlocking, but we have no way of predicting when that might happen.

A few small but positive notes elsewhere in the LAAP region.

We have successfully transitioned to a new distributor in Australia and New Zealand and we're working together to drive renewed growth in those markets.

Our distributor in Mexico is experiencing stronger sell through with the Columbia brand products in its multi-brand stores as compared to the two well-known global athletic brands that it carries.

Our new distributor in India opened its first mall brand Columbia store in New Delhi's upscale Citywalk Mall on December 24, marking the first of many stores that it plans to establish in similar upscale locations across that country over the coming years.

Before we shift to answering your questions, I want to remind everyone that our US ERP implementation remains targeted for early April, supported by an enormous effort by our employees around the world.

We will share more about the implementation when we announce our first quarter results on Tuesday, April 29.

This effort and our increased demand creation investments are muting operating leverage in 2014, but the strength we're seeing in our brands confirms that we are focused on the right strategic initiatives to grow our business and improve the profitability over the long term.

We enter 2014 with renewed momentum in key wholesale markets and a balance sheet that's stronger than ever, with more than $529 million in cash and investments.

Global inventory finished 15% lower than last December, excluding the $20.6 million of incremental inventory acquired by the China JV.

Our strong financial position and confidence in our growth prospects prompted our Board of Directors to authorize a 12% increase in the quarterly dividend to $0.28 per share.

We also enter 2014 with significant additions to our management team.

During this year, we welcomed a new Senior Vice President of North American and European Retail, a new Senior Vice President of North American Sales, and a New Senior Vice President of Europe.

We also promoted new Vice Presidents of Apparel Merchandising and of Apparel Innovation & Design.

As previously announced the new President of our joint, China joint venture brings experience and continuity from the many years of working for our joint venture partner, Swire Resources.

This management team, together with our employees around the world, is energized by the prospect of renewed growth in 2014 and aligned around our strategic initiatives to drive sustainable profitable growth in the years ahead.

The successful introduction of TurboDown for fall 2014 builds on our powerful Omni-Heat technology platform, which has become a $200 million global business for us since its launch three years ago.

In closing, I want to recognize the outstanding performances by the US, Canadian and Russian Freestyle Ski teams while wearing Columbia uniforms featuring Omni-Heat technology and a new patent-pending waterproof zipper design, along with other innovations.

We are proud to have played a part in helping these great athletes perform to their highest abilities and wish them much continued success in future competitions.

Equally important, the enthusiastic positive feedback we received from these world-class athletes about the design and performance of our products is gratifying confirmation of our future as a leading innovator in the active outdoor space.

That concludes my remarks.

I would like to open it to questions.

Operator, can you help us?

Thank you.

We will now be conducting a question-and-answer session.

(Operator Instructions)

One moment while we poll for questions.

Bob Drbul, Nomura Securities International.

Tim, I just have a couple of questions.

I think the first one is in the fourth quarter in your direct-to-consumer, can you give us an estimate on how your own stores, full-price stores and your outlet stores comped?

Bob, we emphasize that we're not a retail operation.

In fact, the retail stores are really designed not only to help us manage our inventory levels, but also to really showcase the brand for other -- for consumers and other wholesale partners.

So we don't release that comp store data, but I can tell you we would be proud to do so if we decided to do so.

All right.

And I just have two questions on the 2014 outlook.

The first one is, I think you talked about double-digit increases for fall 2014.

How much of the order book visibility do you have done at this point, and is it still the March 31 deadline that you typically have?

Bob, we have a very significant order book at this time and enough to give us comfort to be able to give the kind of guidance we gave today.

We're confident in our ability to hit those numbers that we talked about.

We're gratified to be able to have enough information about, really, all the geographic regions to be able to provide that kind of guidance.

So it's good and we expect more orders for sure, but we have enough to be able to give us that comfort.

Okay, and then I guess the last question that I have is, on the -- I guess if you look at fall 2013 versus your expectation for fall 2014, can you put any numbers on average price point of your outerwear?

What's really happening with your more -- this more accessible price point strategy?

How big is the change that you're undertaking here?

The change is not dramatically different.

It's really where we're focusing our time and effort.

So if we go back to the more strategic big, better, best approach to merchandising, we've emphasized the better components much more than the best, and that's really where our customers expect us to be.

We had one significant customer who told us that we were always the best at better and that's really where we want to maintain our position and focus our merchandising.

So as an example, TurboDown, which we expect to be a very significant contributor over the years, is a product that has high performance, in fact, industry-leading performance, but has a very moderate price point.

So true to other Columbia examples of really significant products, we have great performance at really reasonable prices.

So that's -- that would be an example of how we're approaching the merchandising strategy.

Thanks very much.

Good luck with everything.

Camilo Lyon, Canaccord Genuity.

Great, thanks, and congratulations on a great quarter.

I wanted just to follow-up on Bob's question about the order book for 2014.

So just to make sure I'm understanding it correctly, the 15% to 17%, even though you don't have the full order book in, that's what you projected to be, given the strong build in orders to date, right?

Am I understanding that correctly, or is there opportunity for that number to increase as the final orders trickle in?

Well, we -- as you may guess, we spend a tremendous amount of time and effort on analyzing the order book and the future plans for the business.

So we've become pretty good at analyzing it.

We don't have the full order book; we'll get orders all the way through the season as we did in 2013, all the way through to the end of the year.

But based on what we know, we have got a good handle on the order book and we're far enough along in the order taking (technical difficulties) where we'll likely end up.

We have a high degree of confidence in the number we gave you.

Great.

Okay, so then secondly, just moving on to inventory.

In the release, you said that that momentum from the fourth quarter has continued into the first quarter.

You also talked about your inventory numbers being down 15%.

How are you able to meet that continued demand?

It sounds like you've done a really good job of clearing some of that excess carryover inventory from last year.

Do you have enough, and where do you think that you're really going to focus on, building out some of that inventory for the back half of 2014?

Is it going to be more on the Sorel brand or on the Columbia brand, and I would assume it's going to be more on the fore, as adverse to Sorel.

Is that the right way of thinking about the dynamics?

Well, as you remember, we had two really tough winter years prior to fall 2013 and so we, as well as our customers, were conservative in terms of how we approached the future.

As the weather played out, certainly in North America, our customers liquidated inventories at a high margin level, and as we tell investors all the time, our fourth quarter is really driven by not necessarily a topline so much as the ability to convert inventory at closer to full price versus off price.

So that's where we ended up -- what ended up happening for us for this, for 2013.

Now as we approach 2014, when we get closer to the end of our booking season, which would be end of March, beginning of April, we'll make a decision on how much speculative inventory we want to keep, which I would argue unless things change dramatically, we're going to see something along the lines of what we've guided here to today in terms of a rather conservative approach to residual inventories.

I think Tom might have some more information.

Camilo, this is Tom.

As it relates to inventory turns, our turns were at about 2.5 times exiting 2013, and what we're -- continue to focus on improving that metric so our intent would be to grow our inventory in 2014 at a slower pace than revenue growth.

Great.

And then if I could just squeeze in one more, the commentary on the China JV accretion of $0.13, something about that being a little bit lower than what we had initially planned.

Could you just talk a little bit more about the driver of that accretion coming in a little bit below planned?

Is it more the macro or is it something that you newly discovered with selling in that market?

I would say it's predominantly the macro effects of the China market and just the level of revenue that we originally planned for 2014 versus what we're currently planned.

That is really the promotional environment across the landscape that's --

That's the major driver, yes.

(multiple speakers) -- looking for that?

Yes, yes.

Okay, Great.

Thanks a lot and good luck with the balance of the year.

Kate McShane, Citi.

I was hoping if we could hear a little bit more detail behind the opening of the six new branded stores?

And can you repeat how many will be focused on PFG?

And just as a tack-on to that, it seems like some of the outdoor retailers, Field & Stream, by Dick's, and Cabela's and Bass Pro seem to be expanding more aggressively.

Is there further opportunities for these retailers and how do you think about merchandising in shop-in-shop with them?

Certainly.

Well, so we have a solid group of brand -- we call branded stores as opposed to outlet stores, were we have a display of our products and that have done well.

Generally, they are too large and so this is an approach to get ourselves a branded position in major markets in North America at a size that's, frankly, more profitable -- more profitable, period.

As it relates to the quantity of those stores that might be PFG, we have our best-performing PFG products are in the southern part of the United States, so we are looking at a few different markets, and it really depends on where the right locations come up as to where how many are PFG and how many are more standard Columbia stores.

As it relates to the wholesale customers, the Dick's Sporting Goods, Field & Stream, Cabela's, Bass Pro, those are all great customers for us and we have continuing in-store investments in all of those operations.

We would expect it -- that we would have continuing and perhaps even a larger presentation in those stores over time.

So as I said in my comments, the Company really considers itself to be a wholesale company providing products that retailers do well with.

And it's helpful for us to have these branded stores to allow us to really experiment with presentations that can enhance the visibility of the Company's products and sales, that really is designed to focus on our wholesale partners and helping them.

Okay, and if I could just ask a second question, on the supply chain, if you could highlight maybe where you're seeing some pressure in the supply chain this year, what your anticipation is with regards to higher labor costs or higher raw materials in your guidance for 2014?

This is Bryan, Kate.

As we look to this year, both for spring and fall, I would say prices were moderating.

And we did see some increases as it relates to fall in our down prices and whatnot, but all of that would have been priced accordingly and baked into the guidance that you get -- got today.

Okay, thank you.

Andrew Burns, DA Davidson.

Thanks and congratulations on great results.

I was hoping we could spend a little more time on Swire in the Chinese market; it sounded like there was some inventory in that channel.

We've seen this in other categories, but just wondering your view on the amount of time it will take for normal secular growth trend to reemerge in China?

Is it a one-season or perhaps two-season phenomenon?

Well, I would just emphasize that our joint venture partner, the Swire Group, has been doing business in China since the 1700s, so they're -- so we're with a very experienced partner there.

Our expectation is that this inventory overhang, which is prevalent on a macro scale across China, not necessarily in our business specifically, has just dampened the results that we would have otherwise expected from the JV.

I think we're looking at probably a one season to maybe, at the very most, two-season overhang with this kind of enthusiastic expansion so it's, really, I think, going to be more short term.

Frankly, with our balance sheet and the Swire Company's balance sheet and experience levels, our expectation is we'll be one of the firms that's able to take advantage of these kinds of tumultuous markets.

Great, thanks.

With the second half guidance or commentary taking shape, it certainly seems like you're gaining some share in the marketplace.

How do you view the competitive landscape?

Could you speak to maybe some particular areas of strength, whether by category or by channel?

Thanks.

Sure.

Categorically, we've had really good growth in outerwear.

If you remember the -- we haven't spent a lot of time on this, perhaps with the investor community, but our TurboDown product is really a hybrid garment that contains both down and synthetics.

So it allows us to be competitive with a high-quality product containing down that's not as impacted as other down jackets just because of the leverage of the synthetics.

So that's been good for the outerwear category.

It's new; it's different; it's exciting and it's got a lot of features, including Omni-Heat, that support it.

We also had great growth and we expect further growth of Sorel, where, as you know, it's well known as a winter boot but the growth of that brand and its products in the fall season has really been rewarding.

So we expect a good growth from the Columbia brand, specifically related to outerwear and the Sorel branded footwear and also the Columbia winter footwear brand has also been strong.

Thanks and good luck.

Lindsay Drucker Mann, Goldman Sachs.

I was hoping you could give a little bit more detail.

I know you have some of the numbers spelled out in the CFO commentary but just on the incremental investments in 2014, maybe just starting on the marketing side, the demand creation expense?

It sounds like -- I just want to make sure that if you talk about 10% of the Swire JV sales being reinvested in marketing, is that substantively all of the operating profit from that entity that you're going to be reinvesting back in marketing, and if that's the case, how do you think about when you'll be able to deliver incremental sales on that?

Lindsay, this is Tom.

As it relates to China, the $0.13 contribution to Columbia is after all costs, including marketing, including interest, including income tax so that's a net-net number.

So we expect the China JV to generate high single-digit operating income.

So it's not that we're investing all the profit from that business back into that market in the form of advertising.

Maybe then could you clarify the big bucket, because it is a pretty significant, the 5.1% of sales is a pretty significant step-up, especially considering how much revenue growth you're looking for in 2014.

So where are the big areas where you're looking to deploy that?

The marketing spend itself, or the SG&A taken as a whole, or the marketing specifically?

The demand creation expense that you called out in the release, the 5.1% of net sales versus 4.6%.

Okay, well, we're going to nominal increase across every market.

But where we'll spend it in North America and Europe primarily will be a combination of TV, radio, out-of-home and digital, so that's where the bulk of the marketing spend will be.

The magnitude of the increase, the large magnitude of increase, is that a function of feeling really great about the products you have to invest behind, or maybe a catch up of some underinvestment as sales have slowed in recent years?

Well, I think we've -- and we've been clear that we haven't spent enough on marketing for the Company.

Those are areas where we think we can continue to increase our spend and frankly, with TurboDown, we think we really have a potential product that when marketed properly, can be a significant growth channel for the Company.

So we've got an opportunity today to have something unique and different to talk about and so we're going to take advantage of that.

Got it, and then on the ERP side, the $20 million of incremental expenses, can you just talk specifically about what that initiative will cover and how we should think about the opportunity to generate returns on those investments timing-wise and magnitude?

Sure, this is Bryan.

So, in terms of what it covers, it covers our ERP system and then a host of other ancillary systems to help us communicate better with our vendors from a status perspective, our customers, etc.

So it is a pretty good sized project that, as Tim mentioned, we continue to believe that April will be our US go live.

In terms of returns to the business, we foresee those being really around inventory utilization and affecting the gross margins of the business.

As far as the timeline to generating those benefits, is that as soon as you go live?

I guess what I'm asking is, does your guidance contemplate any reward from those investments as you go live and have a more efficient supply chain?

Yes, when -- this is Tom, I would say that we begin to see leverage from those investments, so return on that investments much more in 2015 than we've contemplated here in 2014.

Okay.

Thanks very much.

Laurent Vasilescu, Macquarie Capital.

Sure, good afternoon.

Thank you very much for taking my questions.

Congratulations on the quarter.

As mentioned in your prepared remarks, direct-to-consumer represented about 34% of total 2013 revenues.

How should we think about DTC's percent contribution for 2014 revenues?

And if you could provide some color on the operating margin structures to both wholesale and DTC, that would be great.

Yes, so we're expecting a small increase, perhaps up to 36% contribution from DTC in 2014.

And when we look at the net returns from the business today in 2013 and plan for 2014, I would say that the DTC business is slightly above the average, in terms of operating income for the Company on a standalone basis.

Okay, great.

Thank you and if I may on Swire last quarter, it was mentioned that China did about $150 million in 2012.

I'm assuming 2013 was essentially the same and 2014 is up $155 million.

Can you provide some color on how China revenues look like by quarter?

Yes, so maybe just one point of clarification.

So, Swire did about $152 million in 2012; in 2013, the increase was low single digits, and in 2014, that $155 million of growth is on top of what we, Columbia, recognized in selling into the distributor in 2013.

So the revenue for China is more in the mid-$160 million range for 2014; the $155 million is the incremental component.

Okay, great, and then by quarter, if you could give some color on that?

I would say that the China business follows largely the same seasonal pattern as the consolidated Columbia business, a little over one-third, first half; two-thirds, back half.

Okay, great.

Thank you very much.

(Operator Instructions)

Chris Svezia, Susquehanna Financial Group.

Good afternoon, everyone, and nice job on the quarter.

Couple questions.

First, I'm just curious on the backlog comment, up double digits.

I guess the JV from China is in that.

And if so, is there any way to maybe extrapolate what the North America or the European wholesale or distributor business is in terms of backlog growth, or was, or what it was doing?

I think you made a reference that US, you expect on the wholesale side to be up high single, so I'm just trying to extrapolate the backlog by region, if possible.

So Chris, the double digit comment, it includes or excludes China; it really doesn't have an impact as it relates to fall 2014, so we're planning the fall business up double digits whether or not you include or exclude China, just to be clear on that.

Then, as it relates to the by region, I think we gave a fair amount of color in the CFO commentary and in Tim's script.

I think we're talking double digits in most regions globally with -- and local currency terms with the exception of the European Direct business and the LAAP Distributor business.

And currency is negatively affecting our Canadian and Japanese businesses in 2014 in US dollar terms.

Okay, that's helpful.

On gross margins, just -- you did a great job, obviously, in the fourth quarter.

Inventories are clean, including the inventory management; just curious why DTC is growing, why not -- what's the opportunity for that to be potentially stronger?

Just walk through some of the offsets in the CFO commentary, but I'm just curious what's your thoughts about the opportunities there?

So on the gross margin, we're planning it up 50 basis points for the year and there's a reclassification component as we move the China former licensing income that was recorded in 2013 and prior years, up into gross margin as we operate the JV.

We expect a slightly higher proportion of direct-to-consumer and full price versus off-price sales.

Those are really the drivers of the expansion.

And then obviously, our hedge rates, given the weakness in the Canadian dollar and the Japanese yen are a headwind for us in 2014.

And then we had a little bit of a tough comparison where, when we look at our sales and inventory provisions in 2013, they were actually a benefit, as we had very nice sell-through and those reserves actually declined in 2013, creating gross margin expansion.

And we don't expect that to repeat in 2014.

So that's about 40 basis points to 50 basis points going against us, as well.

Okay, that's helpful.

And then just lastly, just on SG&A, the $100 million increase, is that -- I assume that's off of GAAP $625 million you did in 2013.

And any color, I know you don't want to give quarter but I'm just curious, first half, second half, that would prevent you from growing earnings in the first half.

Is it just really all the growth is really more second half versus first half?

Is it just seasonality of the business?

Yes, as it relates to SG&A, we would expect SG&A to grow at a faster rate in the first half than in the second half as we comp against the impairment charge and higher incentive comp in the second half of 2013.

As it relates to Q2, specifically this year, we anticipate a higher operating loss this year compared to 2013, as we'll begin to see the higher operating cost from the ERP implementation come online beginning in Q2.

Okay, okay, thanks very much.

Appreciate it, and all the best.

Thanks.

Molly Iarocci, Stifel.

This is Molly in for Jim.

Just wondering if you could speak to the trends that you're seeing in the EMEA region, direct versus distributor?

And what makes you optimistic about your direct growth in FY14?

Certainly, well, I have -- over the last 18 months, I've spent a tremendous amount of time in Europe, working directly with customers and analyzing their requirements and expectations from us as a brand.

So it's taken us a bit of time to get that merchandise the way they want it, and our positioning in this place that they want it.

That plus the new leadership that we have; we talked about Franco Fogliato joining the Company.

His extensive experience and financial acumen is going to help us, over time, to get to our positioning there in the right spot.

We've also seen what we expect to be growth in that market from the direct basis and the expectation is that built into the guidance we've given you today that we'll have a solidly growing business there for 2014.

So on the direct basis, it's all about focusing on a small, very narrow band of customers that can specifically give us the kind of growth that we need as well as a more narrow band of geographic customer base.

So it's all about focus in the direct business.

In our distributor business, we've just had a tremendous growth and adoption from, especially our Russian business, together with the exposure we received there during the games and it's been really rewarding.

Additionally, our footwear business seems to be really leading the growth area for Russia, especially in this coming year.

Great, thank you.

And then curious on the Mountain Hardwear brand, noted decline in the fourth quarter.

What's going on there?

And any color that you could provide going into FY14 would be helpful.

Certainly, well, again, the expectations for Hardwear have been built into the guidance we've given you today.

It's a focus, a product focus for the Company.

We need to be having -- the Mountain Hardwear product needs to be closer to what consumers expect from that brand.

We probably got ourselves in the position of lofty expectations for the adoption of very expensive product, and the focus there is to getting ourselves compelling, high-quality, high-end product as well as what we're calling gateway price points to allow consumers to enter that brand at a more reasonable price.

So the focus there is, again, on product and the expectation is that we'll have good growth on that brand, but in 2015, beginning in 2015.

Great.

Thanks, guys.

Good luck in the next quarter.

(Operator Instructions)

One moment while we poll for questions.

There are no further questions at this time.

I'd like to turn the floor back to management for closing comments.

All right, well, thank you all for listening in today.

We're obviously thrilled with the results and we appreciate your continued support.

We look forward to talking to you in April.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.