卡洛馳 (CROX) 2007 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by.

Welcome to the Crocs, Incorporated second quarter fiscal 2007 earnings call.

(OPERATOR INSTRUCTIONS)

Before we begin, I would also like to remind everyone of the Company's Safe Harbor language.

Please note that some of the information provided in this call will be forward-looking statements within the meaning of the security laws.

These statements concern Crocs' plans, projections, expectations, and estimated objectives for future operation.

The Company cautions you that a number of risks and uncertainties could cause Crocs' actual results to differ materially from those described on this call.

Crocs has explained some of these risks and uncertainties in the Risk Factor section of its Annual Report on Form 10-K and its other documents filed with the SEC, and you are encouraged to read the section and all other disclosures appearing in our filings with the SEC.

Crocs intends that all of its forward-looking statements in this call will be protected by the Safe Harbor Provisions of the Securities Exchange Act of 1934.

Crocs is not obligated to update its forward-looking statements to reflect them at the future events.

I would now like to turn the conference over to the President and Chief Executive Officer, Ron Snyder.

Please go ahead.

Thank you.

Good afternoon, and thank you for joining us to discuss our second quarter results.

With me on the call today is Peter Case, our Chief Financial Officer.

During the second quarter we continued to build our positive momentum, both here in the U.S.

and internationally, and as a result, we were able to increase total sales by 162% to $224 million and increase earnings per share by 205% to $0.58 a share.

Clearly, the past several months have been a very busy period for us, filled with a number of important accomplishments and exciting announcements.

These include the commencement of production at our company-owned facility in Brazil, our recently signed licensing agreement with Major League Baseball, as well as our licensing agreement with Marvel Entertainment and our expanded agreement with Warner Bros.

The launch of our new fashion footwear line for women called YOU Buy Crocs at the FFANY show in New York, where the feedback from retailers and the media was very positive, and, finally, Crocs was named U.K.

Footwear Brand of the Year at the Drapers Footwear Awards.

We are very honored to have received this award and believe it is testament to the growing popularity and acceptance of the Crocs brand in Europe, which has been our strongest international market this year.

I will now go over our performance in more detail before turning the call over to Peter, who will discuss the financials.

Domestically, we increased our door count to 12,000 at the end of the second quarter, up from 10,500 at the end of the first quarter.

This included 400 additional Macys, which began shipping in May, taking our Macys door count to over 600.

We continue to see strong demand for our most popular and broadly distributed styles, such as the classics, Mary Janes, and Athens across all regions.

At the same time, our spring 2000 introductions continued to perform very well, including the Cleo, Capri, and Crocling for kids to name a few.

We now have over 40 Crocs models of footwear in the marketplace, and I can say all are performing above expectations in their respective channels.

This includes our licensed product, which is now becoming a meaningful contributor to our results, as well as a great vehicle for reaching new audiences.

As we discussed in our last call, the Disney by Crocs line is selling very well in our department store and independent store channels and at Disney theme parks, and we recently shipped new models with additional characters during the quarter.

With regard to other entertainment licensing programs, we have signed agreements over the past six months with companies like Nickelodeon, Warner Bros., DC Comics, and Marvel.

Products are already designed and will begin shipping this quarter under all of these licenses.

We are very excited about our prospects with these new properties.

This is also true for our sports licenses.

NFL product will begin shipping in early August, in time for preseason football, followed shortly thereafter by a full compliment of NHL team product here in the U.S.

and Canada.

NASCAR is currently being sold at races and select retail locations and continues to do well for us.

As you can see, we have created a very powerful and compelling portfolio of licenses for both Crocs and Jibbitz, featuring some of the top names in sports and entertainment, including NFL, NHL, MLB, NCAA, NASCAR, the PGA Tour, Disney, Warner Bros., Nickelodeon, Marvel, and DC Comics.

Importantly, these businesses not only provide the company with an additional revenue stream, they are a great way to further defend our brand's position against knockoffs in the marketplace.

We are also expanding our Crocs at Work segment with the recent introduction of three new styles, including the Bistro shoe, endorsed by world-class Chef Mario Batali, which is specifically designed for the restaurant and food-service industry.

Given the comfortable nature of Crocs, we see a tremendous opportunity going forward to design workplace-specific footwear for professionals who spend the majority of the day on their feet.

Now to our international business.

Sales were up 294% in the second quarter and represented 49% of our overall business, versus 42% in the first quarter.

These results were achieved by both door expansion and additional shelf space at retail as we have introduced several new styles into our overseas markets.

We are now in 15,000 doors outside the U.S., up from 13,500 approximately three months ago.

While we continue to see nice gains in all regions of the world, Europe and Japan were certainly the standouts.

Sales in Europe increased over 900% year over year, led by the U.K., where, as I mentioned, we recently won Footwear Brand of the Year.

At the same time, regions in countries such as the Benelux, Scandinavia, and Germany are also delivering standout performances.

In Asia, Japan reported a blowout quarter with sales increasing over 260% compared with the first quarter of 2007.

We also continue to make key investments in our sales and marketing efforts throughout the Asian continent in preparation for a much broader rollout of product next year.

I think one of the key differences in our business versus a year ago is the level of diversification we have created, not only in terms of our footwear offerings, but also in terms of category extensions and new brands.

This has been accomplished both organically and through acquisitions.

Beginning with Jibbitz, which has been a tremendous addition to our operations, we currently offer over 1,100 unique designs, and we have significantly expanded the brand's distribution to over 12,000 doors worldwide with 7,500 here in the U.S.

and 4,500 internationally.

Ocean Minded has also been a great complement to our company, albeit on a smaller scale.

Over the past several months, we have made meaningful progress, increasing the brand's retail presence, particularly outside of California, where it has historically done a majority of its business.

In fact, sales in Q2 equaled the brand's total volume for all of 2006.

An important part of our recent success and something that will continue to drive our long-term growth and increase profitability has been our ongoing commitment to investing in our infrastructure.

In a relatively short period of time, we have constructed a global organization by attracting top-flight professionals in all regions of the world.

We now have nearly 5,000 total company employees, less than 10% of which are located in our headquarters in Colorado.

We have also put together a highly flexible, highly scalable manufacturing base that affords our company numerous benefits, such as shorter manufacturing lead times, the ability to maximize tariffs and profits, and realizing meaningful economies of scale.

We now have the capacity to produce nearly six million pairs per month and anticipate that that number will increase by year-end with our growing global demand.

As I mentioned earlier, we began manufacturing footwear at our company-owned facility in Brazil during the quarter, while another upcoming highlight will be the opening of a new $10 million Crocs-dedicated plant on the campus of one of our third-party manufacturers in China this quarter.

Peter will now review the financials, and then I will come back for some closing comments.

Thank you, Ron.

Sales for the second quarter were $224.3 million compared to sales of $85.6 million in the second quarter of 2006, an increase of 162%.

For the quarter, domestic sales rose 99% to $115.4 million from $58 million a year ago, and international sales increased 294% to $108.9 million from $27.6 million a year ago.

With regard to our international results, sales in North America, not including the U.S., increased 106% to $20.2 million, sales in Europe rose 920% to $49.9 million, and sales in Asia were up 211% to $37.2 million.

Sales in all other regions were up 59% to $1.6 million.

Gross profit for the second quarter fiscal 2007 was $131.9 million, or 58.8% of sales, compared to $47.0 million, or 54.8% of sales in the second quarter of 2006.

Increase in gross margin was primarily driven by less-than-expected air-freight during the quarter, as well as a greater mix of international sales, which carry slightly higher margins.

SG&A for the second quarter was $63.5 million, or 28.3% of sales, compared to $23.3 million, or 27.2% of sales in the corresponding period last year.

Income from operations for the quarter was $68.5 million, or 30.5% of sales, versus income from operations of $23.7 million, or 27.6% of sales last year.

Net earnings were $48.5 million compared to $15.7 million a year ago, and diluted earnings per share were $0.58 versus $0.19 in the second quarter of 2006.

Please note that diluted earnings per share amounts for the second quarters of 2007 and 2006 take into account the two-for-one stock split that took effect in June 2007.

Our Q2 earnings also reflect our improved tax rate of 29.6% versus 34.5% in Q2 of 2006, which is due to our sophisticated tax structure we have been implementing.

With regard to our balance sheet, at June 30, 2007, we increased our cash and short-term investment position 73% to $89.4 million from $51.6 million at March 31, 2007.

Accounts receivable increased $19.5 million, or 20%, to $117.3 million at June 30, from $97.8 million at March 31st, which is significantly below the growth of our sales, and our DSOs are now down to 48 days, our lowest ever.

We ended the second quarter with inventories of $118.6 million, an increase of $24 million, or 25%, compared to inventories of $94.4 million at the same time -- at the end of Q1.

The increase in our inventory is largely due to the buildup of product to meet our growing international demand, along with the launch of our new fall line.

Now turning to guidance.

The third quarter ending September 30, 2007, we currently project net sales to range from $240 to $250 million and net income per diluted common share be between $0.58 and $0.62.

Based on our better-than-expected second-quarter results and increased outlook for the remainder of the year, we are raising 2007 guidance growth targets.

We now expect fiscal 2007 revenues to be in the range of $810 million to $820 million and earnings per share to be in the range of $1.89 to $1.93.

I will now turn the call back over to Ron for some closing remarks.

Thanks, Peter.

As you can see from our updated guidance, we are very excited about our prospects for the remainder of 2007.

During the third quarter we will be shipping a lot of new product, including several of our sports and entertainment license models, such as Dora the Explorer, SpongeBob SquarePants, Spider-Man, Pixar Cars, and the NFL and MLB.

We are beginning to ship our new fall line, which features many new and exciting styles that we believe will help reduce any potential seasonality in our business.

They include the Mammoth, our fleece-lined version of the Beach; and the Venture and Celeste, a casual offering of men's and women's footwear that will be available in both canvas and leather and feature a foot bed made of Croslite for maximum comfort.

This fall will also mark the debut of YOU by Crocs, a new shoe collection for women that utilizes the expertise of our Italian design team to create a fashionable, yet comfortable, line of stylish footwear.

We believe all these new products will be a great compliment to our existing models, while at the same time further diversifying our business, opening up new channels of distribution and attracting a broader market to the brand.

As we head into the back half of the year and look into 2008 and beyond, we are confident that our recent efforts to further evolve the lifestyle nature of the Crocs brand, first in the U.S.

and now overseas, combined with the multiple and ongoing investments in our global operating platform, have us well positioned to capitalize on our near-term opportunities, while delivering long-term growth and increased profitability in the years ahead.

So after that pretty good quarter, we are going to turn it over to questions.

Thank you.

(OPERATOR INSTRUCTIONS) Our first question comes from the line of Robert Samuels with JP Morgan.

Please go ahead.

Hey, good afternoon, guys.

Great quarter.

Thank you.

Where does classics now stand as a percent of the quarter, both domestic and international?

They're just below 30%, and we see even in our store that we opened up in Third Street Promenade, they are running just a touch above 20%.

So when given all the product, we see that as coming on and -- around there 20%.

We see about 25% on the Internet.

Okay.

And then how about unit sales in the quarter and average price per pair?

Unit sales were [$12.52] million, and the average selling price was $16.75, about a 9% increase over last year.

Okay, great.

And then can you give us some sense of -- some sense as to the size and opportunity of the Jibbitz business?

I know you don't sort of breakout the revenue contribution, but can you sort of talk around it and what new doors you will be going into with Jibbitz for the remainder of the year?

Yes.

We're -- it will definitely be over time a significant contributor to the company.

We're continuing to open new doors around the world.

We feel that most stores would carry Jibbitz that carry Crocs over time.

We're also coming up with some additional products for Jibbitz.

We already have wristbands, ankle bands, cell-phone charms, belts, a number of other products, like bags and backpacks and things that would also carry Jibbitz.

So over time I think it would become more significant, but as I have alluded to before, we're not going to break it out separately right now.

Okay.

And then finally can you just talk a little bit about the many, I guess, sort of blatant knockoffs that you see in the marketplace?

You guys going after any of these guys?

We continue to go after anyone that infringes on our IP, and we've remained fairly aggressive with that activity.

So anybody that infringes on any of the IP we have, we take a pretty strong stance, and we've been successful in a number of cases.

Great.

Thanks very much.

Thank you.

Our next question comes from the line of Mitch Kummetz with Robert W.

Baird.

Please go ahead.

Thank you.

This is actually Kevin Kim calling for Mitch.

Guys, I was wondering if you guys could talk a little bit more about how the Brazil launch went, how much it contributed in the quarter?

And I have a couple quick follow-ups.

The launch is going as expected on plan; however, it was very, very small for this first quarter.

We just started manufacturing product there at the very last few weeks of the quarter.

So we would now -- we're now moving into the season down there, and we would expect to see some better results over Q3 and Q4.

Okay.

And then the -- for the total company, what door count do you expect to be at year-end?

I've said that we probably would add another close to 1,000 doors domestically.

We might add some additional doors for some spot products for our licensing programs.

And then internationally we would expect to add at least a couple thousand more doors between now and year end.

Okay, a couple thousand.

And it looks like the tax rate was a little low this quarter.

What's your expected tax rate for the quarter, guys -- or for the year, I'm sorry?

For the year we still think it will be in around 30%.

Okay.

And I'm done.

Thank you so much.

Thank you.

Our next question comes from the line of Jeff Klinefelter with Piper Jaffray.

Please go ahead.

Yes, well, certainly congratulations on another outstanding quarter to everyone.

Thank you.

Thank you.

First of all, on licensing, Ron, obviously you have a significant increase in the number of licensed properties that you're shipping out.

Could you just remind everyone again last year as -- and now as we're going into the second half of the year -- what was actually shipping in Q3 and then Q4 for licensed product last year?

And then, with this significant increase, is there any way you want to guide us towards sort of what percent of sales licensing has become or is expected to become now with all these new properties?

For the first part of your question, we began shipping our sports-licensed properties really towards the end of Q3 of last year.

So we were late to the market with NCAA last year and didn't get the NFL until the Super Bowl.

We only did a couple teams.

We, let's see, through the fourth quarter we had -- we'd shipped quite a bit of sports licensed -- of NCAA, which was much higher than what we expected.

I think we said we shipped around 300,000 pairs for the quarter or something like that.

With entertainment licenses, we didn't begin shipping the Disney product until late in November so we had some input into Q4, but it was only half of a quarter, and we've now been shipping that through Q1 and Q2, and the Disney product, which is really the only product we recognized any revenue from so far has done very well.

I don't think we're going to guide yet because let's see how well the new -- all these new licenses do.

If they do as well as the Disney, we're probably going to have to start giving a little bit more information because it's a -- could be a significant part of the business, but let's just see how these new products do this quarter and into Q4 when we get into the gift season, and we'll give you more information.

Okay.

And then in terms of new fall product, number of new items, hearing good things from the retailers about booking these products.

Any sense at this point for new styles in the second half, kind of, what would that represent as, again, sort of a percent of total bookings, or any way to gauge sort of the success so far of bookings of these new items?

Our bookings of our fall product have been quite good going into this quarter -- this fourth quarter, this what would typically be a down season for Crocs.

The prebooks are much higher than they were last year even on a relative basis.

Some of the standouts are the Mammoth, which is the slipper that we've got that the bookings have been very, very good, and most of our retailers have picked them up, and most of them say they'll take them all the way through into the spring, which is nice.

A few of other products have also prebooked quite well, but remember our model that we don't really require huge prebooks on these.

We say we'll make more during the season, and that's the plan here.

We don't really have a percentage of what we expect.

It's probably in the 15% range of what the -- our fall products represent as a total, but it's kind of hard to say because, if we get additional demand for any of the products, we'll make more of them, and it could be more than that.

Okay.

In terms of your manufacturing capacity up to about six million pairs now, obviously with the opportunity to go higher at year end, now, as you look out across all of these new styles and products and then licensed properties, is there an ultimate level that you could reach if you had to by the end of the year, or do you just maintain enough flexibility that it can go any direction demand takes it?

In capacity we could easily take capacity up to seven million pairs by year-end.

Okay.

Lastly, in terms of the international business, Europe has been exceptionally strong, we understand.

We've done a lot of visits ourselves and channel checks, and the same sort of discussion of knockoffs is coming up in those -- in many of those European markets.

Any sort of update or differing thoughts on how you deal with knockoffs in those markets, how you deal with patent enforcement?

Does it matter at this point?

It doesn't appear to be with the revenue growth, but any sort of perspective on that?

Like I said, we're continuing to battle knockoffs that infringe on any of our IP.

That said, there's a discernable difference at the consumer level between our product and the knockoff product.

They're different materials; ours uses Croslite.

Ours are much, much higher quality in general.

We've got our manufacturing processes down to a science, our sizing down, I mean, we've improved over the last two or three years very, very much.

So any new startup knockoff companies that come around aren't really impacting us.

So like I said, we're going to continue to be aggressive for knockoffs of Crocs or Jibbitz or any of our products; however, I think we'll bea them on the football field.

Okay.

All right.

I'll let someone else jump on.

Congratulations again.

Thank you.

Thanks, Jeff.

Thank you.

Our next question comes from the line of Jim Duffy with Thomas Weisel Partners.

Please go ahead.

Thanks.

Another great quarter.

Peter, question for you.

Can you provide a little more detail about what happened with the tax rate in this quarter?

Was it some catch-up work there, and where do you see things playing -- you said 30% for the year, but how do you see this playing out in future years?

Well, we've moved a lot of IP offshore, and we continue to do that, and the larger the sales grow internationally, the lower our tax rate will become.

So that's really the basis of it.

And we continue to see it going lower in the years to come as we move more and more of our operations to take advantage of this.

So -- but we'd see it about 30% coming in at year-end.

Okay.

And then international as a percent of revenue, your near 50% right now, which is ahead of your goal by the end of the year.

What would you see it by the end of the year?

Ron, do you have any thoughts on that?

Yes, it will continue to rise.

We would probably see it to be, just conservatively, probably 50% -- between 50% and 55% by year end and then continue to rise into -- that percentage will continue to rise into the spring of next year when we're already starting to get indication of nice prebooks from international markets for next spring.

Good.

And I realize we haven't reached a steady state yet, but question for you on the seasonality.

Would you typically expect your 3's to be bigger than your Q2?

Probably a little bit bigger.

I mean, it was last year.

We've guided it to be larger this year.

We're in an expansive mode, and we're continuing to grow the business internationally, but we're always going to be coming up with new products, and we'll be laying in acquisitions into the fold so I would anticipate that Q3 would always be a bit bigger.

And then we'd -- while we're continuing to do everything we can to minimize any seasonality in Q4, we'd still expect a little bit; however, we'll be ready if the demand's there to do what we did last Q4.

When should we start to see the fall styles in stores?

The fall styles will begin showing up, I would say, in September.

There'll be a little bit of back-to-school with a couple of our styles that will roll all the way into the fall.

So some will be there mid-July, but really the majority of the product will be in September and October.

Okay.

And couple more if I may.

As the skew count increases, there's more complexity here.

Can you speak to the components of the inventory, kind of classics versus other styles?

You're typically not as aggressive with your newer style from an inventory standpoint.

Does your balance of inventory reflect the balance of sales, or is there a difference during the between the sales?

Our balance of inventory would be more skewed to classics, to the stuff that sells everywhere in the world, our Caymans, our Beaches, our Mary Janes, obviously the Athens during the season where flip-flops are popular, and then we'd bleed off the rest of that inventory into the southern hemisphere -- into now Brazil and South Africa and Australia and all throughout the Southeast Asia, of course, buys the product all year long, Hawaii, Puerto Rico.

So we would typically -- our model would be to have more of that inventory that sells everywhere.

There's really no risk in having excess inventory of our high-volume products, where the new products we want to have excess capacity in place where, when a given style takes off in a season, we can quickly ramp up and take advantage of that new style.

So that leads to the question of your six-million-pair capacity.

What's the split of that between classics and new styles, or how easy is it to shift from one to the other?

It's pretty easy to shift between one and the other.

We have excess capacity of all of our high-volume stuff, certainly more so than we would of new styles, but even when we're coming up with new styles, we put in the capacity for both machines, as well as molds, gluing lines, sewing lines, whatever's required for a given new model.

We'll put in excess capacity in anticipation that that particular line would take off.

If that one doesn't, then another one that uses those same machines and equipment would pick up that excess capacity we put in place.

Very good.

Thanks very much.

Keep up the good work.

Okay.

Thank you.

Thank you.

Our next question comes from the line of Elizabeth Montgomery with Cowen.

Please go ahead.

Hi.

Congrats on the good quarter.

This is Tamisha calling in for Beth.

We were wondering how much of your product you are shipping direct these days versus taking into your own distribution centers?

And could you also discuss any structural differences in margins between direct shipping, or are you taking hold of inventory and shipping from your distribution center?

We shipped about 30% in the U.S.

direct this quarter.

And there's a little bit of a margin difference on that.

We'd like to get that on up a little bit, and we think we can going forward.

Okay.

Just one more question.

What rough percentage of your sales is now coming through your own stores, kiosks, and website combined versus wholesale distribution?

Yes, we don't release that.

It's less than 10%.

Okay.

Thank you.

Thank you.

(OPERATOR INSTRUCTIONS) Our next question does come from the line of Jay [Tobin] with Morgan Stanley.

Please go ahead.

Hi.

Thanks for taking my call.

Just had a question about your customers.

Originally, the Crocs seemed to be doing better in the Midwest part of the United States.

Is it doing better now in the coastal areas?

And, also, as you've grown internationally, who have you found to be the customer who's buying Crocs internationally?

The -- we continue to actually see nice sell through -- continued sell through in the middle states and down through the South, where we pretty much started.

We have seen nice growth on both the coasts here this year with our initial products and then certainly the new products are becoming very well accepted in the California market and up in the warmer climates in the East Coast and all the way down through Florida.

In the international markets, it's been the same thing we saw in the U.S.

Probably more acceptance across the board because it's now a brand that people have heard of and it's a brand that's popular in the U.S.

I think kids like them, and we're seeing a similar percentage of men, women, and kids, as we did in the U.S.

Maybe skewed a little bit more to kids, but it's kind of hard to tell right now.

Okay.

Thanks so much.

Thank you.

Our next question comes from the line of Angelique Dab with Nollenberger Capital Partners.

Please go ahead.

Good afternoon.

I missed the question on the average pair price?

Surely.

It's $16.75.

$16.75.

Thank you.

And then would you mind breaking out the U.S., Canada, and other international for me?

Surely.

Asia was $37.2 million, Europe was $49.9 million, all other countries was $1.6 million, and Canada and Mexico were $21.1 million.

Any updates on some of the other initiatives, like the apparel initiative?

Yes.

We've -- it's a small offering this year.

Our apparel line has -- for men and boys and girls has turned out very, very well.

I mean, people we've shown it to are very excited about this first launch.

It's unique; it's colorful.

It is different.

Much of the line has Croslite woven into the fabric so it's got some uniqueness.

We -- I wouldn't model it big this year because it's just not going to be a big event, but what we're going to do is get the customer feedback, see how well -- which pieces go well, and continue to expand on that.

You can look at it very similarly to the way we built the Crocs business.

We went out, and we figured out what sold well, we put in operations and structure to do it, and we did it pretty fast.

So it's the same thing that we plan on doing with apparel, with bags.

The bag -- our bag business is already doing much, much better than what we had anticipated so that actually could be somewhat meaningful by year end and certainly as we move into next year.

And, lastly, any reactions to the YOU product?

Well, it hasn't started shipping yet.

We've had great reviews from style editors and any of the major stores that we've taken the line to.

We didn't plan on making all that many, being somewhat conservative as we moved into a bit of a new market, but we've, for the most part, sold through all of our initial builds, and actually we've increased our production for this first season, but like I said before, it's just not a meaningful number yet relative to the numbers Crocs is putting up.

Well, thanks very much, and congratulations.

Thank you.

Thank you.

Our next question comes from the line of Shawn Boyd with Westcliff Capital Management.

Please go ahead.

Hi.

Thanks for taking a question.

Just one quick follow up.

Early in the call you mentioned gross margins down partially due to air freight.

Was there something else in addition to that?

Any mix shift on the international side?

No.

We said, yes, it's higher than last year, and it's just a little bit lower than Q1.

Typically, it's just based on air freight, right, and with the higher international sales, international sales typically have a slightly higher margin.

Have a slightly higher margin?

Yes.

Okay.

Because that's where I'm struggling in that the higher international sales quarter to quarter, seems like that would overwhelm the air freight?

Air freight can be very important to us.

It's a big swing.

Okay.

But we had to ship -- we obviously had to ship some of that international business because it was much higher than what we had expected.

We had to ship some of it by air.

Got it.

Got it.

Going forward, I guess for the first half now we've run just a little over 59%.

Is that kind of a fair number to think about going forward?

We're -- what I've said all along is we will have short-term up ticks right now, for example, in margin potential, but you should still model in the mid-50's.

We've got other products coming in that would be in the low 50's.

We've got new products in the high 50's and 60.

So short-term any given quarter now there could have a bit of an up tick, but longer term let's keep it at 55.

Okay.

We're investing in a lot of stuff to continue to grow the business next year and beyond.

Okay.

And the -- all the licensed product, would that be at similar margins to the current product?

Yes.

Okay.

Thanks, guys.

Thank you.

Thank you.

Our next question is a follow-up question from Jeff Klinefelter with Piper Jaffray.

Please go ahead.

Yes, just a couple of quick follow-ups.

First of all, on the Jibbitz business, Ron, I mean, obviously going very, very well, and, again, in a lot of checks you'll find retailers in the U.S.

and Europe completely sold out of product, which obviously is a good problem to have, but I was just curious on a manufacturing sort of capacity and your approach to inventory management.

Is it kind of manage to create some scarcity for demand, or is it just keeping up with demand?

What is your strategy going forward or having in-stocks on that product?

Yes, it's not to create any scarcity.

We've -- the demand for Jibbitz, as you've seen with Crocs, has been -- has overwhelmed us a bit, and we've taken up capacities quite significantly with our Jibbitz line now, and as you've seen before, we can do it pretty quickly.

So we'll be -- we'll have increased capacities quite a bit this quarter for Jibbitz, and then as we move into what we hope to be a nice holiday season for the Jibbitz brand, we'll have plenty of capacity to meet the demand.

Okay.

And then also the stores-within-store concept, I know you've been testing it with Dick's Sporting Goods and a few others.

Any updates there on how they're going, future numbers?

We have store-in-stores now in retailers all around the world.

I mean, we're in Dick's, we've got some going into Dillard's, and we have a number of other stores in the U.S., in Corta Ingles in Spain, in a number of retailers in China, so, Japan.

So we've got stores-in-stores really going everywhere, and I can say that all of them sell much better than a normal Crocs display would at a retailer.

When they have more of a product, and there's a bigger sampling, and you can see the bright colors, and the number of our -- and Jibbitz involved, bags, everything, they tend to do much, much better than a normal retailer would do.

Okay.

So no guidance on number of stores --?

Not yet.

Okay.

We're rolling them out now so it's not -- it's not overly significant.

There's, I think, we'll probably have close to 100 by year-end.

But when we look at now close to 29,000 doors, that's not a big number.

Okay.

And do you want to get in at all into what your capacity of Jibbitz actually is right now?

No, not yet.

Okay.

Thank you.

Thank you.

That does conclude our question-and-answer session for today.

Please continue with your closing remarks.

All right.

Well, thank you very much.

As you can see, we're very happy with our quarter.

Our employees all worked extremely hard to get here, and we've got some tremendous things going forward.

So thanks again for being on the call today.

Thank you, ladies and gentlemen.

That does conclude our conference for today.

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