卡洛馳 (CROX) 2011 Q4 法說會逐字稿

Welcome to be Crocs, Incorporated fiscal 2011 fourth-quarter and full-year earnings conference call.

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

Following the presentation we will conduct a question-and-answer session and instructions be provided at that time.

I would like to remind everyone that this conference is being recorded.

Earlier this afternoon, Crocs announced its fourth-quarter and full-year 2011 financial results.

A copy of the press release can be found on the Company's website at www.crocs.com.

The Company would like to remind everyone that some of the information provided on this call will be forward-looking, and accordingly are subject to the Safe Harbor provisions of the federal securities laws.

These statements include, but are not limited to, statements regarding future revenue and earnings, backlog and future orders, prospects and product pipeline.

Crocs cautions you that these statements are subject to a number of risks and uncertainties described in the Risk Factors section of the Company's 2010 annual report on Form 10-K filed on February 25, 2011 with the Securities and Exchange Commission.

Accordingly, results could differ materially from those described on this call.

Those listening to the call are advised to refer to Crocs' annual report on Form 10-K, as well as other documents filed with the SEC for additional discussion of these risk factors.

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

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

Now at this time I'd like to turn the call over to Mr.

John McCarvel, President and Chief Executive Officer of Crocs.

Please go ahead sir.

Thank you, and thanks for joining us today for Crocs' fourth-quarter conference call.

With me today is Jeff Lasher, our Chief Financial Officer.

In early January we announced that fourth-quarter sales would be towards the high end of the guidance range, putting our annual sales above $1 billion mark for the first time ever.

This is a tremendous milestone for Crocs and one that we take great pride in achieving, particularly given the fact that the Company is just 10 years old, and that we've only been selling shoes in a meaningful way for the past seven years.

I think what really stands out about the $1 billion in sales is how diverse the contributions were this year.

Amazingly, we had been on a similar path just a few years ago; however, back then our business was extremely concentrated in terms of products, namely our classics and core; regions, primarily the US; and channels, almost entirely wholesale.

Today we sell more than 300 different styles, and only two styles represent more than 5% of sales.

In 2011, approximately 65% of our sales came outside the United States.

And broken down by channel, wholesale represented 61%, retail 30% and Internet 9%.

Over the past few years we've made very good progress shedding the image that Crocs is a one-dimensional Company.

We have successfully transformed our global operations to develop what has been a very strong brand.

We've added strong leadership to several key areas of the business.

We've upgraded our systems and improved our processes to better support a global company of our size, and implemented sound long-term strategies that we believe can continue to drive growth forward at a solid pace off our strong $1 billion foundation.

We know there are still areas that need more work and that greater efficiencies can be driven throughout the entire organization in order to increase our profit margin.

We are focused on enhancing all aspects of the business and expect our efforts will yield positive results again in 2012 and over the years ahead.

Jeff will now go through a detailed financial from the fourth quarter and outline our guidance.

And then I will provide color on the key growth drivers for 2012, after which we will be happy to take questions.

Jeff?

Thank you, John.

Hello everyone and thanks for joining us.

This afternoon I'll be discussing fourth-quarter and full-year 2011 results.

Revenues for the quarter increased by $25 million or 14% to $204 million.

This is against a 32% topline increase from a year ago.

As John said, for the year we were able to exceed $1 billion in revenues, with strong growth in all four quarters.

We also executed on our eighth consecutive quarter of revenue growth in each of our geographic regions.

As we have discussed on prior calls, in the fourth quarter stronger growth in the Americas and Asia were tempered by slower growth out of Europe.

Sales in the Americas increased 10% to $104 million, Asia increased 22% to $76 million, and Europe increased 6% to $24 million.

For the year, sales in the Americas increased 19% to $448 million, Asia increased 34% to $382 million, and Europe increased 34% to $171 million.

Turning to the Americas region, our direct to consumer channel drove Q4 revenues, as our Internet sales grew 21% during Q4.

While sales from wholesale were relatively flat, retail sales in the Americas region increased 17%, while store count was flat at the end of quarter at 197 locations.

The 17% increase in retail sales in the Americas was from a combination of larger locations, product breadth and higher average footwear selling prices.

In the USA, revenue was up 10% for the quarter and represented 41% of total global sales.

For the year, revenues in the USA represented 35% of total global sales.

In 2012 we will be closing about half of our remaining 50 kiosk locations in the USA.

Some of these will be converted into stores within the same shopping center, but some centers will be exited altogether.

Moving forward, changes in our retail formats and portfolio of stores will periodically result in certain one-time expenses.

We expect this to impact Q1 EPS by $0.01 to $0.02, which is included in our guidance.

For the full year 2012 we anticipate opening about 25 to 50 stores in the Americas before the kiosk closings.

Sales from the Asia segment were strong across all channels.

For the fourth quarter Asia grew 22% from last year.

Japan grew 19% during the quarter closing out n a successful year as the nation continues its recovery efforts and the favorable direction of the yen.

For the year Japan represented about 15% of our global revenues, up from 14% in 2010.

Asia retail sales were up 37% during the quarter as we ended with 198 stores, up from 159 in the prior year.

In 2012, we plan on opening 25 to 50 stores in Asia.

In Europe, sales grew by 6% versus prior year despite the current macroeconomic environment.

During the quarter results were driven by growth in our retail business, while wholesale and Internet channels were about flat.

This was consistent with our expectations in prior comments on a moderation of Europe growth rates in the back half of 2011.

However, as we enter into 2012 the backlog for Europe is down versus the same time last year.

In the retail channel we experienced improved results with sales up 37% during the quarter, as store count finished 2011 at 35, up from 22 at the end of 2010.

Retail locations in Europe are expected to increase by 20 to 25 in the year.

Our focus in the 2012 retail expansion will be to expand stores in Northern Europe, where our stores are presently concentrated in countries such as Germany, the UK, France, Finland and the Netherlands.

In addition, we have 13 retail locations in Russia that continue to perform well.

Specific to the retail channel, fourth-quarter retail sales increased 24% to $74 million, while retail locations were up 14% as we ended the quarter with a total of 430 Company-owned retail locations, up from 378 last year at the end of last December, and up 20 locations from Q3 2011.

This includes 180 full-price stores, 101 store-in-stores, 92 factory direct stores, or outlets, and 57 kiosks.

Our percentage of revenue derived from our clog category fell from 55% to 48% in the quarter and from 54% to 48% for the year.

This shift, combined with channel mix and pure price changes, increased average selling price in Q4 to $21.09, up $2.80 or 15% compared to last year in the same period.

Global footwear unit sales in the quarter were 9.2 million units and 47.7 million units during the year.

Our new product introductions globally represented about 31% of our Q4 unit sales.

Gross profit for Q4 2011 was $100 million, up from $86 million in the fourth quarter of 2010.

Gross margin was 49% in Q4 versus 48.2% in the prior year.

For the year gross margin was 53.6% compared to 53.5% in 2010.

Fourth-quarter 2011 SG&A increased 17% to $95 million compared to $81 million in Q4 2010.

As a percentage of sales SG&A was 46.6%, up from 45.3%.

The majority of our SG&A increase was driven by operating additional retail locations in 2011.

As a percentage of sales SG&A for fiscal year 2011 decreased 310 basis points to 40.2%.

We invested $40 million in marketing for 2011 or about 4% of revenue, which compares to $44 million in fiscal year 2010 or about 5.5% of revenue.

We plan on generally maintaining marketing spend as a percentage of revenue in 2012.

Q4 operating profit was positively impacted by $1.6 million in FX gains from restatements of certain balance sheet items and timing of intercompany settlements.

For the year 2011 we benefited a total of $5.4 million from such currency gains.

Moving to the bottom line, net income for Q4 2011 improved to $5.6 million or $0.06 per diluted share on 90.9 million shares compared to $4.7 million or $0.05 per share in the prior year.

For the year diluted earnings per share improved from $0.76 to $1.24, representing a 63% increase.

Now turning to our balance sheets, we hit the Q4 with a record $258 million in cash, a 77% improvement from 2010 levels of $146 million.

We ended the quarter with inventory of $130 million, down $21 million from Q3 2011.

On a year-over-year comparison inventories increased 7%.

Please keep in mind that about 91% of cash reported on our balance sheet is held in international locations and is subject to certain restrictions that constrain our ability to move cash back to the USA without tax expenses and payments.

In 2011, total capital spending was $42 million compared to depreciation and amortization expense of $37 million.

Moving onto bookings.

We ended the quarter with backlog of $307 million, which represents about a 19% growth rate over last year.

The 19% increase is on top of a 57% increase from a year ago.

Of the backlog, orders for Q1 deliveries are up about 18% to $190 million.

Orders for Q2 deliveries are up about 21% to $117 million.

ASPs in our backlog are up -- are about $18.71 compared to about $16.50 last year.

For the first quarter of 2012 we expect to generate revenues in the range of $263 million to $268 million, with EPS estimated in the $0.24 to $0.26 per share range.

We expect gross margins to be consistent with last year, and foresee an increase in our effective tax rate to 24%.

Currency estimates used for the quarter are $1.32 US dollars to the euro, and JPY77 to the US dollar.

Now I'll turn the call back to John.

Thank you very much.

Thanks, Jeff.

Our plan for growing the business remains consistent, introducing new products that appeal to existing and new consumers, attracting new consumers through more effective marketing and advertising programs, and making our products more accessible through the expansion of our global multichannel distribution strategy.

Let's talk about new products first, which has really been the catalyst for improved performance over the past couple of years.

There has never been a question about the comfort provided by Crocs shoes; however, there was much debate initially about the look of our products.

And I'll have to admit that this did limit the size of our selling audience.

So what we've done is maintain the comfort factor on the inside while refining the silhouette in order to introduce more commercially viable footwear that appeals to a wider consumer audience.

At the same time we have incorporated new technologies into our product that brings fun and excitement to the market, such as our Translucent and Chameleon collections we introduced in 2011.

We now have a great base of products, over 300 plus, that we can build on going forward.

In 2012 you'll see some of the new great items that are updated versions of our successful products, as well as entirely new offerings that continue to push the brand in new directions.

For spring/summer this includes new women's flats, our Springi line, and new additions to our popular Translucent collection, and our Duet Sport.

The Duet Sport brings dual density technology, a durable outer with a super-soft insole, a new way to market our products.

And the development of a new breathable material led to the collaboration with Hank Haney on a new golf line that was recently awarded one of the best new products at the PGA merchandise show.

For fall/winter we have a wider range of products for back-to-school.

Innovative new boots, as seen on the recent cover of the Footwear News magazine, and wider range of seasonal appropriate lifestyle products.

Early feedback on the range has been very encouraging.

We have developed a Crocs footwear perspective for the season like never before.

One of the more effective initiatives in 2011 was making better use of our marketing spend.

On a similar budget to 2010 we were able to connect with more consumers in a much more meaningful way through social and digital media, and less traditional forms of advertising, combined with additional investments in visual merchandising and point-of-sale materials.

We were really focused on highlighting specific new product introductions and the results were very encouraging.

With regard to how our premier destination channels, wholesale, retail and Internet will grow this year, I think it's best to speak to each of these by region.

In the Americas, which is primarily the US, our business is evenly divided between wholesale and consumer direct.

But please remember this varies quarter to quarter during the calendar year.

After adding a fair amount of new wholesale doors in 2011, mainly in the family channel, we are concentrating on growing the depth and assortment of our collections with existing accounts.

Our door count is up modestly in 2012, with expansion to all Kohl's locations for men's and kids products.

We're building a stronger presence to increase shelf space for higher SKU counts, which consumers will definitely notice when they shop the family channel, department stores, sporting goods, retailers, specialty shops and key independents this year.

In addition, we are rolling out Green Grass shops, our new Crocs line of golf shoes.

Our goal is to maintain the shelf space that we've captured for spring/summer as we get deeper into the second half of the year so the brand is equally distributed at retail in all seasons.

We think we are developing seasonally appropriate products, including a broader line of sneakers and boots, that will allow us to stay relevant.

Early feedback on the line, coupled with early pre-books, indicate we're making good progress against this objective in 2012.

Building a fall/winter business remains a key priority for the Company, and we are making solid and steady progress.

Turning to retail, we have accelerated our kiosks conversion strategy this year as we look to bring more full-price stores online in order to support the increased SKU counts and better educate our consumers on the evolution of the brand.

The plan is to close roughly half of the remaining kiosks in the US throughout the year.

We are confident the long-term benefits, both financial and strategic, of converting kiosks and stores will be well worth the short-term investment.

We'll continue to provide more insights and metrics on our retail operations starting with the Q1 earnings call in April.

Now to Asia, where we compared with US business is more weighted towards wholesale, which is partly due to the use of distributors in certain countries.

We aren't looking to achieve parity between wholesale and retail.

The plan is to continue to expand both channels simultaneously.

Overall, new products continue to resonate very well throughout the region.

Our business in Japan rebounded better than expected following the earthquake and tsunami in the first quarter of 2011 and is stronger than ever.

We ended 2011 with 24 stores and have plans to open 11 more stores in 2012.

At the same time, our key wholesale and distribution partners are diversifying the Crocs product portfolio in the Japanese domestic market.

Our game plan for China is similar, increase the number of styles we are selling through the expansion and development of wholesale and retail doors.

Currently we have 32 Crocs retail stores in major cities like Shanghai and Beijing, and utilize our distributor partners to build additional retail stores in the nearly 100 tier 2, tier 3 and tier 4 cities in China, with populations over 1 million.

We continue to see China as a very key opportunity for growth going forward.

Elsewhere, we are excited about the growth and development of the brand in Korea, Hong Kong, Taiwan, Southeast Asia.

We are also very pleased with the new relationships we've developed in the Middle East, from which -- from a climate standpoint provides access to a market that is ideal for much of the traditional Crocs line.

In Europe, the current market provides some obvious challenges.

In spite of the market challenges we have completed management changes in our European operations that will provide the ability for us to more effectively grow and develop our three-channel strategy in this diverse market.

With the majority of our markets now under direct control, we are in a much better position to build a sustainable business in Europe for the long-term through a more balanced mix of wholesale and consumer direct.

We will be transitioning the Benelux market from a distribution model to a direct model by the end of 2012.

We have made steady progress successfully introducing new warm weather products, led by the Crocband 2 collection, various women's flats and wedges, but the mix is still more weighted to clog styles than in our other regions.

Likewise the gap between spring/summer and fall/winter is wider in Europe, so bridging that is a key area of focus to help further smooth out the seasonality of our sales and provide better leverage of fixed expenses in the second half of the year.

To accomplish all these things and create a business that is more akin to Asia and the US, we are partnering with more of the key retailers in the UK, Germany and France.

You have to remember there are very few retailers that effectively cover the entire European Union like you have in the US today.

Therefore, the development cycle has been much more localized.

It takes more time for brands to achieve product placement and gain market share.

The retail landscape in Europe continues to change given the current market situation.

This is providing greater availability of affordable real estate.

For example, we are opening new stores in the first quarter in Nice, Hamburg, Frankfurt, and Moscow.

We have identified and will open additional sites in the UK, France and Germany in the second quarter with plans to open 20 to 25 new stores, bringing our total count to 55 to 60 by the end of 2012.

In total, we anticipate opening between 80 and 100 net new stores globally in 2012.

We are pleased with the results of our new store format launched in Minneapolis, Austin and Raleigh Durham in the fourth quarter.

At the same time, we expect that the significant investments we've made in our Internet platform over the past 24 months will continue to deliver levels of growth similar to 2011.

We believe our sales and marketing strategies are clear and straightforward.

They are designed to deliver 15% to 20% topline growth over the mid-term while we simultaneously diversify our business and enhance our longer-term growth prospects.

Our new campaign for 2012 targets changing the consumer's opinion of who Crocs is.

Too many consumers still think Crocs only equals clogs.

We recently announced partnerships with various licensing partners globally.

We believe the licensing space provides Crocs an opportunity to expand our brand presence and awareness with apparel and accessories.

Products will be sold globally in various channels.

Limited product is available on our website and in select Crocs retail locations.

We believe this will generate $0.01 to $0.02 of EPS in 2012.

With a strong balance sheet, highlighted by more than $250 million in cash and no debt, we have the financial flexibility to invest in our brand and the inventory necessary to achieve our goals.

Before I take questions, I want to thank everyone who contributed to the Company's success this past year, beginning with our consumers, our customers and our employees.

Without your support and efforts none of this would've been possible.

Thanks to our retail partners, our vendors and stakeholders for our continued support as well.

With that I would now like to turn this back over to the operator, and Jeff and I will now take your questions.

(Operator Instructions).

Jeff Klinefelter Piper Jaffray.

Thanks, John and Jeff, for the detail today.

I wanted to ask a question and just get some more color around the bookings number and the relationship between bookings and wholesale growth, since there are a lot of questions on that this afternoon.

Given, John, that you are up low 30s and now up 19, and just looking back at the relationship of bookings versus wholesale growth, could you provide a little bit more color on why the change in the last 90 days from 30 to 19, how that is expected to translate to wholesale growth, maybe also how that ties in to the fact that you are running inventory a lot tighter at up kind of single digits?

Sure, Jeff.

When we reported at the end of Q3 -- just keep in mind that does also include a backlog for Q4.

When we look at the first half of the year backlog is up overall about 20%.

And on average we are seeing some weaknesses in the European market that is negative backlog growth year-over-year.

However this is offset by more than favorable growth of 25% in Asia and 32% in our Americas business.

So when we look at this on aggregate, I think what we see is the down draft of the current European situation kind of causing that number to be a little bit less than before.

Just maybe just a little bit further, John.

I mean, watching the inventory levels, and recognizing that they are up only 7% at this point, and knowing that you have been working in the last couple of years on kind of migrating this more to a balanced pre-book versus in season, is there something that we should read into that as well?

Are we getting to sort of to a point of normalization where there won't be as much shifting forward to pre-book on a year-over-year comparable basis, and it will be more normalized going forward?

Or said another way, will the bookings growth be more closely translating into actual wholesale growth than it would have been the last couple of years?

Yes.

So what I think Jeff tried to say in his comments earlier is when you are comparing the backlog growth this year versus was a shifting year in 2011 where we really saw pre-books and backlog becoming more industry-standard, and I think you saw the bigger shift.

What we believe now is that as we go into the first half of the year there will be some at-once business, and it will continue to be a little bit more at-once in the second quarter, but I think you're going to see a much more predictive model through our business going forward.

Just to clarify in the bookings split there, you said about 20% kind of on balance for the first half of the year.

You said America is up 32; Europe -- I'm sorry, Asia up 25.

Is that correct?

Yes.

What we say is that if you think about growth 18% is growth for the first quarter, 21% is growth in backlog on the second quarter.

But then splitting into the regions again.

I mean because that it would -- for Europe is down pretty significantly, if America was up 32 and (multiple speakers).

Well, what we said was that Europe was down about 9%, just a little bit short of 9%.

America was up 32% and Asia was up 25%.

Okay thank you.

And then just a couple of other things.

One on the quarter, on the first quarter, you're guiding to a 24% tax rate higher than prior years.

I would imagine that has a lot to do with the mix of Europe being lower versus the Americas.

Also, did I hear that correctly, Jeff, that there is a -- you said $0.01 to $0.02 charge, so incremental SG&A hit from the closing charges for the kiosks?

Yes.

Jeff.

So I think the key message here is on the tax rate.

Our tax rate shifts throughout the year and as we go through time, as we make more money in certain taxing jurisdictions our tax rate will go up, most notably in the US.

Also remember that last year we benefited in Q2 from the big tax -- the one-time tax income in Q2 that's not affected in Q1.

But to answer your specific tax question, yes, we think it's going to be about 24% in Q1 and range about 22% to 24% for the whole of 2012.

Okay maybe just lastly, two things, John, you said 15% to 20%.

I think that was a comment in reference to kind of medium term annual topline growth.

Is that correct?

Is that kind of over the next few years that would be the average topline growth you would expect?

That is what we said.

That is correct.

And then lastly on leverage, I think, Jeff, you have talked about this -- and John -- in the past.

The expense leverage potential now that we have color on your marketing dollars and what you're attempting to do, or planning to do there, what is sort of the leverage inherent in your model for both the retail side and the wholesale corporate side, what sort of pass-throughs should you get from your topline growth?

Thanks for asking, Jeff.

I think when we look at it we think that the leverage that we can get on the indirect SG&A runs about two-thirds of the growth rate of our revenue increase.

On the retail side, just like any other retailer, our SG&A goes up in correlation with our new stores.

And we do get some leverage off the same-store sales we see in the marketplace.

And that's kind of how we think about the SG&A as we go into 2012.

Jim Chartier, Monness, Crespi, Hardt.

The first question, on the first-quarter guidance, Jeff, I think you said the gross margins would be flat to last year.

Yes, in general around flat to the gross margin line.

So just kind of running through the model quickly, it looks like about 100 basis points of deleverage on SG&A on 17% or so sales growth in the first quarter?

So like we said in the script, Jim, we will see some expenses associated with closing the kiosks and that will be about $0.01 to $0.02 per share, and that has a down draft impact on our EPS.

And then also on the tax line, going up on a year-over-year basis, last year our first-quarter tax rate was 23% and this year we are at 24%.

Yes, even after accounting for those items -- I am just doing my model.

I am looking at about 100 basis points of deleverage on SG&A.

So I'm just wondering if there are any other items in there that we should be thinking about?

Yes, and Jim, it is also important to remember that we have opened a lot of stores on a year-over-year basis, so we are -- our portfolio stores is higher.

And as you'll see, hopefully, in the second quarter as we look out that leverage will be a little bit better as we have our seasonal high points in Q2.

And then on Europe, I think on the last call you kind of talked about the actual end-user takeaways in Europe not being as bad as what the bookings indicated.

Is that still the case?

And if it is, would you be willing to maybe spec on a little bit of inventory thinking that the out ones could be a little bit better there?

Jim, I think, yes, there is going to be a little bit more inventory in channel for Europe, given some of the indications that we see.

With a weak fall/winter season for products there we are seeing because our deliveries in the Europe hit 115 and 215 into retailers we are seeing more product hitting windows and display in retail sort of a little bit earlier than what has been in prior seasons.

We will just kind of wait and see what the weather situation turns out to be there in February and March but, yes, we are prepared to be a little bit more at-once this year with inventory than we had in previous years.

(Operator Instructions).

Reed Anderson with Northland.

A question on pricing.

What is kind of baked into your thoughts right now in terms of either the first-quarter or really the year in terms of ASPs?

I think you said it was up 15% in the fourth quarter, and I'm just curious what that looks like over the near term?

You know, we haven't really seen any kind of cost increases from our suppliers.

In fact, in 2012 we expect to move between 10% and 14% of our production from China down to Vietnam with our same key core suppliers.

So we think our cost base is fairly stable, Reed, and therefore our pricing has been fairly stable.

Year-over-year we do get a few products where we have increased price on, but generally from a pricing standpoint we are not seeing any need to increase prices for inflation 2012.

Now we haven't made final pricing decisions on all of our products for fall/winter, some of which are only sold in our retail stores.

We will make that final determination here in the next about two months.

But most of the ASP growth that you're seeing is coming from new products, higher-priced products.

Mix.

So would that start to then probably normalize more as we get into the year or --?

Yes, I think, Jim -- I'm sorry, Reed, we see a 13% increase in our ASP in our backlog, so that's really kind of the leading indicator for you.

Perfect.

That is great, thank you.

Back to the margin question.

Again, I think you said kind of flattish.

I assume inferring that you meant kind of for the year as well.

But are there meaningful puts and takes in there?

It sounds like from John's comments just a second ago the cost side is pretty stable.

Are there -- is mix a bit of a headwind?

Just any thoughts if there are puts and takes to the margin expectation essentially would go up?

I think, Reed, as we look at it and try to look at it into the year, as John mentioned, we haven't really seen any significant manufacturing increases.

We have shifted some of our products into Vietnam.

About 14% of our production in 2012 will come out of Vietnam.

We continue to try to optimize our supply chain store.

So we are working really hard to drive our gross margin and offset any increases that we would see from our higher content products.

In addition 13% increase in ASP allows us to leverage our fixed supply costs.

So we kind of look out into 2012 and feel like we've got a pretty good game plan to address those cost increases that we had seen around -- in 2011 and tried to drive cost reductions in 2012.

I jumped on the call just a little bit late, but did you say what the impact of currency was in the fourth quarter?

So, Reed, we did say that for the quarter we saw a benefit from FX on our balance sheet of about $1.6 million.

And that's from restatements of certain balance sheet items and the timing of the intercompany settlements.

As far as the updraft associated with currency for the quarter it was relatively minor.

Typically we do talk about that on these calls, but in the Q4 period because of the weakness in the euro and the relative strength in the yen on a year-to-year basis it was basically a push.

That make sense.

And then lastly just on the store growth, you have got the new store prototypes now, and I'm sure that's always an evolving process.

But as you think about this big block of stores you are going to open in 2012 are those going to evolve towards that or is -- what are your thoughts on the format of a lot of these new stores you are coming out with now?

It will evolve, Reed.

So I think we have built three stores.

We've learned a lot about what we think works and doesn't work.

It's much warmer.

The merchandising in the stores is much more consumer friendly.

Some box products, some hang product.

But there's learnings so the course always goes on when you launch a new format.

So we will continue to refine that over 2012.

So most of the new stores that come online in Q4 will have some elements -- sorry, Q1 -- that came out of the three (inaudible) will have some elements of the new design, but I think you'll see that evolve until we get to the end of 2012.

Great, thanks, that's it for me.

Good luck.

Scott Krasik, BB&T Capital Markets.

Hi, thank you.

This is Kelly for Scott.

I just wanted to talk a little bit more about Europe, and specifically in the wholesale piece.

I know after a tough fall -- I just wanted to talk -- how do we think about European wholesales in terms of the product penetration?

Is it going to be something that you could see results once we get through this difficult time and start to see a turnaround in the back half of the year, or is this going to be something that we are ere going to have to wait and see retail stores open and really kind of win over your wholesale customers?

While you know, Kelly, I think we have got a fairly strong business in Europe for a period of time now.

If you think about when we first opened, this is about our seventh year in operation.

And in Europe last year we did $170 million.

And we do expect overall growth in the European market this year for 2012.

It is just how that comes about, what through the direct channel, what comes through wholesale.

So when we talk about wholesale growth there, I think most of the wholesale accounts are still a little bit unsure what Q1, what Q2 sales are going to look like.

I think the earlier question that we had from Jim on inventory positioning is consistent with what a lot of other brands are being asked to do by major retailers in Europe.

We are opening this year in the first quarter, Decathlon in France, which has not been a retailer that we have been in the kind of sporting goods arena.

We have been primarily in department stores, in Printemps and Galleries Lafayette.

And so we have a fairly good presence there.

I think that there is just a certain amount of reluctance by major wholesalers with respect to placing orders for the first half of the year because our brand isn't as strong as some of the other brands in the back half of the year, more the fall/winter brands.

I don't know.

We're going to wait and see what the uptake is on what our new line of fall/winter products are for 2012.

But I think for us retail stores did well in 2011.

We have taken the head of our retail group from the United States, and she runs our global retail.

She has relocated to Europe in January -- will spend a year working with them to develop our direct to consumer business.

And I think we see a number of stores opening in the first quarter and the first half of the year in markets where we feel we just don't have the distribution today, but we do have consumer demand.

We learned that in a lot of different ways from Internet purchases and prior experience.

So I think that's kind of our feeling on the European market.

Okay thank you, that is helpful.

And just shifting to more geographically speaking, it seems like you are going to grow a lot in your existing markets.

Can you talk about any opportunities with new markets in Europe?

Again, when you think about how long we have been there, major markets that were once distributor markets still offer the largest area of growth for us.

The UK, France and Germany are still markets that have significant upside.

I think the Southern European markets are a bit challenged right now.

And so we think we'll see what that's going to look like over time.

Eastern Bloc countries -- Poland, a lot of the Balkan countries is a market that has been slowly and methodically growing.

Especially Balkan countries a little bit warmer weather, a little bit more seasonal for us where we have done better.

And then this year we go back into a market that was very good for us three or four years ago that was exited by our distributor partner, and that is in Sweden.

We open our first store in Stockholm here in the second quarter.

And we also reentered Ireland, which was once a good market for us, but again had a kind of void created by the distributor exiting that market.

All right, great, thank you for taking my questions.

Sam Poser, Sterne Agee.

I was just wondering if you could break -- I don't know if you did this already because I got on late.

But could you out the backlog by quarter -- how Q1 looks versus Q2 and so on?

And then can you give us more details as to why you're going to deliver the SG&A in the quarter?

And I have got one other quarter question as well.

Okay, Sam, in the script just to answer your first question about bookings, we said that we ended the quarter with backlog of $307 million.

It represents about 19% growth.

In that $190 million would be delivered in Q1.

That's up about 18% year over year.

And $117 million would be delivered in Q2, and that's up about 21% versus prior year.

And I don't know if you were on for the conversation that we had with Mr.

Klinefelter, but we did talk about the geographic look at where those backlogs are coming from.

And in general Europe is down about 9% on a year-over-year basis; Asia is up about 25%; and the Americas region is up 32%.

Then in a separate Q&A question we had later someone asked about SG&A, the deleverage that we're seeing.

And in the prepared remarks we did talk about the impact of closing the kiosks and other retail portfolio shifts and changes throughout 2012 as we manage the 400 stores.

We think that will provide a little bit of EPS downdraft in Q1, about $0.01 to $0.02 per share.

And then as far as the leverage in the organization going forward we think about -- on the indirect SG&A line we think we can get about two-thirds of the revenue growth increase in SG&A.

But then on the retail side we believe that our SG&A increases will be relatively in line with the retail store expansion on a year-over-year basis.

In addition to that we talked about in the Q1 impact of management (multiple speakers).

If you want to do this -- I can do this off-line with you because you already said it to everybody and everybody is probably bored out of their minds listening to what you already.

Is that fair?

Okay, okay.

I have another question though.

Do you have -- with your smaller accounts and so on, do you have any incremental allowances in place now for doubtful accounts?

Does that affect anything, are you planning things differently, especially maybe with your smaller accounts in Europe, given the weakness over there?

Nothing material on a year-to-year basis.

We do talk about that in the K, which will be filed shortly as well, so there's a lot of detail but nothing material, Sam.

I'll catch you off-line on the rest of that.

Thank you very much and good luck.

We have no questions remaining at this time.

(Operator Instructions).

At this time we have no questions.

I will turn the call back to management for any closing comments.

Thank you.

You know, in closing I would like to reiterate a couple of items.

We're really proud of you the accomplishments within Crocs during the past year.

I think achieving the $1 billion mark in virtually seven years; $1.24 EPS; diversification of our product portfolio.

To run a global development of a business across three channels is not easy.

Evolution and development of a world-class management team, I think these are significant accomplishments for any company, let alone one of seven years or 10 years old.

And so I think we feel like we are in a very good position entering the year.

And hopefully the European market will move in the right direction for all of us.

We look forward to 2012 and speaking to you all again on April Q1 earnings call.

Thank you for joining us today.

Ladies and gentlemen, that does conclude today's conference call.

We thank you for your participation.