Deckers Outdoor Corp (DECK) 2009 Q4 法說會逐字稿

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

Welcome to the Deckers Outdoor Corporation fourth-quarter and fiscal 2009 year-end earnings conference call.

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

Following the presentation we'll conduct a question-and-answer session.

(Operator Instructions).

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

Before we begin, I'd 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 securities laws.

These statements concern Deckers plans, expectations, and objectives for future operations.

The Company cautions you a number of risks and uncertainties, some of which are beyond its control, could cause Decker's actual results to differ materially from those described on this call.

Decker's has explained some of these risks and uncertainties in its earnings press release and in its SEC filings, including the risk factors section of its annual report on Form 10-K and its other documents filed with the SEC.

Among these risks is the fact that the Company's sales are highly sensitive to consumer preference, general economic conditions, the weather, and the choice of its retailers to carry and promote its products.

Decker's intends all of its forward-looking statements and this call will be protected by the Safe Harbor provisions of the Securities Exchange Act of 1934, as amended, and the Securities Act of 1933, as amended.

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

Thank you.

Ladies and gentlemen, it is my pleasure to introduce Mr.

Martinez, President, Chairman and Chief Executive Officer.

Sir, you may begin.

Thank you, operator, and welcome to everyone joining us on the call today and listening via the webcast.

With me are Zohar Ziv, our Chief Operating Officer, and Tom George, our Chief Financial Officer.

Well, today we recorded the strongest quarter in our Company's history.

Sales were higher than we anticipated, as demand for the UGG brand accelerated during the holiday selling season, with several new styles and newer collections out-performing initial projections.

Our wholesale business remained solid.

However, it was the performance of our global retail and e-commerce businesses that drove the sales upside and allowed us to achieve record gross margin of 49.8% and record quarterly diluted earnings per share of $5.22.

These results represent a strong ending to another very successful year for the Company.

Revenue for fiscal-year 2009 was $813 million, an increase of 18% over 2008; gross margins were 45.6%, 130-basis points improvement from the prior year; and non-GAAP diluted earnings per share increased 23% to $8.94 versus the non-GAAP $7.27 we reported in 2008.

Equally important, we ended 2009 with more than $340 million in cash, cash equivalents, and short-term investments, an increase of 76% or $147.2 million from the end of 2008.

Our 2009 performance clearly demonstrates our ability to consistently grow sales and earnings and strengthen our balance sheet despite the challenging economic conditions.

In addition to our record financial results, we also announced today that we will assume control of distributing the UGG, Teva and Simple brands in the UK, as well as the UGG and Simple brands in the Benelux region beginning in 2011.

In 2009 we established a regional office in London to further support our distributor network, as well as our retail stores and e-commerce business in the UK and over the next 12 months we'll be making additional investments to build out an infrastructure to support direct wholesale distribution in the UK, Benelux and France.

The international markets represent a major growth opportunity for us, and we're very excited about the sales and earnings potential that switching to a wholesale model will provide for us in the future.

Now, before I turn the call over to Tom, I think it's important to highlight that Teva was recently awarded the 2009 vendor partner of the year by REI.

This was a great honor, as we beat out the North Face, Patagonia and Merrell for one of the most prestigious awards in the outdoor industry.

REI's recognition represents more than just validation of our refocused product and marketing direction, it reinforces our belief that Teva has definitely turned the corner and regained its position as one of a handful of core brands in the outdoor space.

Tom is now going to walk you through the numbers in more detail and outline our 2010 guidance.

including the impact from our conversion to foreign subsidiaries.

I'll then return to review our growth plans for 2010, discuss some long-term benefits from our international strategy, and provide some color on the potential use of our cash.

Tom?

Thanks, Angel.

All right, great quarter.

For the fourth quarter of 2009 net sales increased 14.7% to $348 million versus $303.5 million for the fourth quarter last year.

Including the sales from the wholesale division.

as well as the international retail and consumer direct businesses, net sales of UGG products increased 15.7% to $333.3 million versus $288.0 million for the fourth quarter last year.

Q4 was the highest volume quarter in the history of the UGG brand.

Fourth-quarter UGG sales have nearly doubled in the last two years from $178 million in Q4 2007.

Net sales of Teva products decreased 14.8% to $10.5 million in the fourth quarter compared to $12.4 million in the same period of 2008.

And Simple brands net sales increased 17.9% to $2.7 million for the quarter versus $2.3 million in the same period last year.

Combined net sales of the Company's other brands, which were acquired in 2008 and 2009, were $1.5 million for the fourth quarter of 2009.

Included in these numbers are global UGG retail store sales of $46.6 million, up from $24.7 million in the fourth quarter of 2008, driven by five new UGG stores and a same-store sales increase of 29.7%.

Sales for our e-commerce business, which are included in the brand sales numbers, as well, increased 27% to $45.9 million for the fourth quarter compared to $36.1 million for the same period a year ago.

The increase in e-commerce sales resulted primarily from increased demands for all UGG products, including the Bailey Button, Cardy, slippers, kids, and cold weather.

Also included in the brand sales numbers, domestic sales for all brands increased 8.9% to $308.6 million compared to $283.4 million in the fourth quarter of last year, and international sales increased 96% to $39.3 million compared to $20 million in 2008.

International sales were 11.3% of total sales, up from 6.6% in 2008.

Our gross margin for the current quarter improved 450-basis points to 49.8% compared to 45.3% in the fourth quarter of last year.

This increase was primarily attributable to the higher sales from our global retail and e-commerce businesses, which carry higher gross margins than our wholesale business.

Total SG&A expense for the quarter was $67.8 million, or 19.5% of sales compared to $52.8 million, or 17.4% of net sales a year ago.

The planned increase in SG&A and absolute dollars resulted primarily from an increase in payroll, marketing, and other selling expenses, as well as five new retail stores that were not open in the fourth quarter of last year.

Operating income for the quarter was $105.6 million, or 30.4% of sales compared to non-GAAP operating income of $84.7 million, or 28% of sales last year.

The improved operating margin was mainly attributable to the aforementioned gross margin increase.

Interest income was approximately $37,000 in the fourth quarter compared to fourth-quarter interest income of $683,000.

This decrease was a result of our decision to shift a greater percent of our cash balances in short-term investments to safer, more liquid, and lower-yielding investments in government securities, as well as significantly lower market interest rates compared to the same period a year ago.

Net income for the fourth quarter of 2009 increased 26.7% to $67.7 million from non-GAAP 28.9 -- from non-GAAP net income $653.5 million and fourth quarter diluted earnings per share increased 28.9% to $5.22 from non-GAAP EPS of $4.05 in the fourth quarter of last year.

For the full year net sales increased 17.9% to $813.2 million versus $689.4 million in 2008.

Including sales from the wholesale division, as well as the consumer direct business, our net sales of UGG products increased 22.3% to $711.8 million versus $582 million last year.

2009 marked the twelfth straight year of double-digit increases for the UGG brand.

Net sales of Teva products decreased 10.2% to $77.7 million compared to $86.5 million in the same period in 2008.

In Simple brands net sales decreased 17.7% to $14.1 million for the year versus $17.2 million in 2008.

Combined net sales of the Company's other brands, which were acquired in 2008 and 2009, were $9.6 million in 2009.

Included in these numbers are global retail sales for all brands of $79 million, up 105.3% from $38.5 million in 2008, driven by five new stores and a same-store sales increase of 27.6%.

Sales for our e-commerce business, which are included in the brand sales numbers, as well, increased 10% to $75.7 million compared to $68.8 million for the same period a year ago.

Also included in the brands sales numbers, domestic sales for all brands increased 11.1% to $646 million compared to $581.5 million in 2008 and international sales increased 54.9% to $167.2 million compared to $107.9 million in 2008.

International sales were 20.6% of total 2009 sales, up from 15.7% in 2008.

Our gross margin for the year increased 130-basis points to 45.6% compared to 44.3% in the same period last year.

This increase was primarily attributable to the higher percentage of retail sales in 2009 versus 2008 and increased margins for our UGG wholesale business.

Total SG&A expense for the year was $188.8 million, or 23.2% of net sales compared to $152.6 million, or 22.1% of net sales a year ago.

The planned increase in SG&A resulted primarily from an increase in payroll expenses and costs associated with five new retail stores that were not open in 2008.

Operating income was $182.2 million, or 22.4% of sales compared to $152.7 million, or 22.2% of sales last year, excluding the impact of impairment charges.

Interest income was approximately $1 million in 2009 compared to last year's interest income of $3.2 million.

Our effective income tax rate for 2009 was 36.2% versus an effective income tax rate of 38.7% in 2008, with the decrease in effective tax rate being due primarily to an increase in international profit as a percentage of total worldwide profits.

For 2009 non-GAAP net income increased 22.4% to $117.4 million, or $8.94 per diluted share, compared to $95.9 million, or $7.27 per diluted share in the same period last year.

Turning to the balance sheet, at December 31, 2009, our overall inventories decreased 8% to $85.4 million versus $92.7 million a year ago.

By division UGG inventory increased 3% to $69.9 million, Teva inventory decreased 47% to $9.3 million, and Simple inventory decreased 30.9% to $3.7 million.

Other brands inventory increased by $0.5 million.

The largest decrease was in Teva brand inventories, as we cleaned out a lot of older inventory, providing a much healthier Teva inventory position.

In addition, at 12/31/09 we had cash, cash equivalents, and short-term investments totaling $342 million, up 76% compared to $194.8 million at December 31, 2008, and accounts receivable were $76.4 million, down 29% compared to $108.1 million at December 31, 2008.

During 2009 we repurchased approximately 300,000 shares of our common stock for a total purchase price of approximately $20 million under the $50 million stock repurchase program the board authorized in June of 2009.

Now moving to our outlook.

Based on current visibility, we expect 2010 revenues to increase approximately 11% over 2009 levels.

For the full year we expect UGG sales to increase by approximately 9%, Teva sales to increase approximately in the low 20s range, and Simple and our other brands combine to increase approximately 20%.

We currently expect diluted earnings per share to increase approximately 5% over 2009 non-GAAP diluted earnings per share of $8.94.

Our forecast is based on a full-year gross profit margin of approximately 47%, and SG&A as a percentage of sales of approximately 25%.

As part of our preparation for assuming distribution control to UGG, Teva and Simple brands in the UK and UGG and Simple distribution in the Benelux region in 2011, as well as the Teva Benelux and France transition this year, we will incur additional expenses in 2010, as well as expenses to establish an infrastructure necessary to support broader wholesale operations beginning in 2011.

Also because of the transition, sales of approximately $10 million will shift to 2011 that would have be recognized as international sales in November and December of 2010 under a distributor model.

In total these incremental expenses and profit shift of $8 million will have an estimated diluted earnings per share impact of $0.38, of which approximately 65% is a one-time impact.

Furthermore, due to the impact on our international income from the aforementioned expenses in 2010, our tax rate is expected to increase to approximately 37% from 36.2% in 2009.

Excluding the impact of these additional international operating expenses, the profit shift and the increase in our tax rate, 2010 diluted earnings per share would be projected to grow approximately 11%, in line with our forecasted sales growth.

Our capital expenditures for 2010 are expected to total approximately $25 million to $30 million, a $10 million to $15 million increase from our 2009 level of $15 million, and that's driven mainly by the buildout in new retail stores and new IT e-commerce platforms and PLM software.

For the first quarter of 2010 we currently expect revenues to increase approximately 7% and diluted earnings per share to decrease approximately 6% compared to first quarter of 2009.

First quarter guidance includes approximately $2 million, or $0.10 per diluted share of incremental investments associated with the distribution transitions, as well as higher levels of fixed overhead for new retail stores, international infrastructure, and other general administrative costs.

This is being partially offset by improved gross margins due to a higher retail mix and improved brand margins compared to the first quarter of 2009.

So in summary, on the first quarter when the international infrastructure investments are excluded, we would expect Q1 2010 earnings per share to be higher than the Q1 2009 earnings per share.

As a reminder, a significant amount of our operating expenses are fixed and spread evenly on an absolute dollar basis throughout each quarter.

This includes the costs associated with the five new stores open at year end a year ago.

Therefore, due to the aforementioned increases in SG&A, we expect modest declines in our earnings for the first half of 2010, which typically includes our lowest volume sales quarters, and then increases in the back half of the year.

I'll now turn the call back over to Angel.

Well, thanks, Tom.

So as you just heard, we're expecting sales to increase approximately 11%, or roughly $90 million in 2010.

Let me now walk you through our growth strategies for each brand.

Beginning with the UGG brand, and more specifically our domestic wholesale business, the plan remains consistent with past years.

We will selectively open new doors in 2010, but our primary focus remains on increasing productivity within our existing accounts.

Our continued efforts to broaden and diversify the product line and extend the seasonality of the brand are resulting in more floor and shelf space across our distribution channels, including department stores, specialty stores, and key independents.

This year we'll be introducing more spring styles, growing our cold weather collection, expanding our kids business, which was especially strong in the back half of 2009, further evolving our men's business, and growing the outerwear collection.

We also recently announced our collaboration with Jimmie Chu on a limited- edition sheepskin boot line.

This capsule collection will retail in Jimmy Chu and UGG Australia stores.

as well as UGGAustralia.com and select retailers.

To accommodate the growth of the product lines at retail we'll be expanding and updating our global shop-n-shop program.

We'll have an additional 40 shop-n-shops in the US for a total of 110, while we estimate in excess of 100 new shop-n-shops will be installed internationally during 2010 for a total of about 170.

As for our marketing plans, they also remain consistent.

We'll continue to utilize compelling lifestyle imagery to highlight our new product introductions in print and outdoor campaigns, a strategy that has proven to be very successful in driving consumer awareness and demand the past several years.

The early feedback on spring 2010 has been positive.

This year's line features a new assortment of bright colors in our classic and knit collections, updated versions of the popular Bailey Button, new fabric boots including the Lo Pro Button in denim and our first ever sneaker collection, led by the AVEra sneaker.

We remain bullish about the long-term opportunity to grow spring into a much more meaningful contributor to our annual performance.

Fall 2010 will be the largest collection to date, with growth in several categories, including cold weather, sneakers, slippers, and expanded collections for kids and men's.

While the prebook process is still ongoing, we've been encouraged by the reaction from our accounts to date, and based on current trends we expect domestic wholesale sales to be up mid single digits this year.

Now looking farther out, we are validating our beliefs about the long-term growth prospects that still lie ahead for the UGG brand in the US market.

Recently, through an independent research firm, we interviewed more than 800 females ages 13 to 54 throughout the country in all regions and the data revealed some very compelling statistics.

We learned that the UGG brand has one of the highest purchase interest scores of all footwear brands tested and was the highest premium brand by the large margin.

This was consistent across all age groups.

We also found that of the consumers that have bought UGG footwear, 70% purchased at least one pair during the past 12 months.

No other brand tested scored higher on this question, underscoring how well the UGG brand continues to perform despite the tough economy.

We also scored very well in terms of brand loyalty, with 63% of all UGG buyers indicating that the brand is what they wear most often.

This kind of loyalty is very hard to come by in footwear or fashion and this should bode well for future purchases.

Finally, the study confirmed that we are under penetrated in certain regions of the US, particularly the south, providing us with additional distribution opportunities as we continue to evolve the product line.

Now as we highlighted earlier, our Company-owned retail stores are performing very well.

Same-store sales were up 29.7% in Q4 and up 27.6% for fiscal 2009.

Beginning in 2010 we'll be accelerating our UGG retail expansion, with a target of opening five to six new stores in the US as appropriate locations become available.

Potential US metropolitan locations for 2010 include Los Angeles and an additional New York City location.

Overseas planning to open two to three new stores in Asia, with Japan and China being our primary focus in the region.

All of our current stores have been profitable and we capture full retail margins.

Related to our e-commerce business, in 2010 we plan to launch new e-commerce sites for several brands in new areas, such as the UK.

We are also developing additional capabilities to capitalize on our expanding customer base, such as an UGG history and heritage section.

Internationally 2010 will be about increasing the UGG brand's presence in each of our markets and preparing for our transition to wholesale distribution in the UK, Benelux and France.

We believe we have only just begun to scratch the surface of the vast untapped potential for the UGG brand outside the US and we feel confident that we can successfully capture important market share in the years ahead.

We have a strong network of distributors around the world, and we work very closely with each of them to ensure the brand is suitably positioned and sold through the appropriate channels.

We've been very pleased by the recent success of the UGG brand in several countries throughout Europe while, the same time, the brand is starting to gain traction in newer markets.

Our international sales have increased double digits in each of the past three years and we expect this trend to continue, driven by new product introductions, first-class marketing execution, and additional doors, as appropriate, within our current markets.

Now turning to Teva, 2010 will be a growth year for Teva, something we haven't been able to say for some time.

Our plan for sales to be up in the low 20% range is a testament to our team's success and repositioning the brand at retail and re-establishing Teva as a key player in the outdoor industry, all signs indicate that Teva has turned a corner.

The days when our strategy was focused on "stopping the bleeding" are behind us and we can now focus on more positive goals, like building market share, becoming a leading innovator in the closed-toe, multi-sport category and expanding our Mush franchise, as well as exciting our consumers with fresh innovative designs for a wide variety of outdoor adventures.

2009 was highlighted by very good full-priced selling across all distribution channels combined with much better inventory management.

This allowed us to reduce closeout sales considerably over 2008 and created a much healthier Teva inventory balance at the end of 2009.

Our momentum at retail and the renewed excitement surrounding the brand carried over into 2010, evidenced by a record spring prebook.

After successful seasons of solid sell through at retail, we now have a much stronger foundation to build off as we enter 2010.

Our spring line consists of a broader core assortment that extends over several categories, with multiple price points including tiles like Itunda, Tirra and Tanza.

This base will be infused annually with new product introductions that further strengthen Teva's position as a leader in outdoor performance, while at the same time provide consumers with compelling value that reflects the current economic environment.

Our improved spring performance is translating into great acceptance of our recently-introduced fall collection.

While the 2008 debut of our first true fall line was marked by solid sell in, weaker-than-expected sell through exposed a lack of direction in development of the product line, so this past fall we took a more focused approach in order to establish Teva's presence in the back half of the year.

We went after the higher end of the market with a tight collection of technical product and consumers responded positively.

This coming fall we'll begin to roll out the collection with more casual every day products and a greater variety of opening price points.

Overseas there is a renewed excitement about the future of the Teva brand.

Starting January 1st we assume control of the brand for the Benelux region and France and we are optimistic that this transition will create new growth prospects.

Benelux has long been one of Teva's best performing markets, with the brand maintaining its premium status in the outdoor marketplace since its initial introduction almost 20 years ago.

We have retained a very talented sales, marketing and operations team from the brand's former distributor and we feel confident that their leadership and the local knowledge, combined with our financial resources and infrastructure will result in greater penetration of existing accounts, as well as open up new distribution opportunities, not only in Belgium, the Netherlands, Luxembourg and France, but throughout Europe, as well.

Lastly, as you know, we spent the past few years reengineering Teva's product line to appeal to a more youthful, active consumer.

During this time we've also retooled our marketing efforts as part of the strategy to "young up" the brand.

In 2010 we'll be dedicating the majority of our marketing and advertising budget to new social media programs, which we believe is the most effective way to reach our target audience.

Simple experienced strong sell through in 2009 with the men's and women's ecoSNEAKS product line, but suffered from the reluctance of buyers to make significant inventory commitments in a volatile economic environment.

While sales were down 17.7% from 2008, we ended the year with inventory levels 31% lower and a much stronger, healthier mix of product.

In 2010 Simple's leadership has joined forces with Teva's brand management team to refine the product line, help clarify Simple's market position, and grow and enhance distribution.

We have increased our emphasis on style and design in order to broaden our consumer base and enhance the brand's market position.

No longer will consumers have to opt for sustainability over style when choosing Simple.

The initial reaction to the 2010 product line has been very favorable and is leading to increased distribution.

With Nordstrom, for example, we're expanding our women's assortment and adding more doors.

We're also gaining traction in Journeys for men's and women's, and other key wins for this year include Adelia's catalog, which will feature Hero women's sneaker styles, and Atessa, the toddler collection, at select Dillard's doors this fall.

In 2010 we'll continue to focus on growing the business with our current brand partners through expanding assortments and adding genders with women's, men's and kids.

We will also strategically increase distribution with those retailers who are committed to supporting and growing the brand.

Now with regard to our other brands, we've dramatically improved the quality and consistency of Ahnu's product line during the past year and this has led to better distribution and improved placement at retail for 2010.

At the same time TSUBO is benefiting from our decision to combine TSUBO and Ahnu under one management team.

Both brands remain an integral part of our long-term growth strategy.

Now to the news regarding the expansion of our wholesale model in Europe.

We have discussed over the past several years that as part of our long-term international strategy we will evaluate distribution agreements as they expire and determine if it makes financial sense to transition to a wholesale model or continue using a third-party distributor.

We made the transition with the UGG brand in Japan at the start of 2009 and just recently assumed control of the Teva brand in 2010 in the Benelux region and France.

We're very excited to announce we'll be making the switch over to wholesale distribution in two of our strongest markets; the United Kingdom and Benelux.

For the UGG brand both markets carry a broad assortment of styles, which has allowed the brand to establish a very strong lifestyle position and loyal consumer following, much like the US.

Directly managing the Teva and Simple brands in those markets will also help to ensure we develop close relationships with both retailers and consumers alike.

Based on current performance we believe the time is right to assume control of our distribution in the UK and Benelux.

Building off the success of our partners we feel confident we can increase market share and begin driving significantly-higher earnings power in -- beginning in 2011.

As part of this process there are some additional investments that we must make in order to solidify our international infrastructure.

Also, as we convert to this model sales that in the past have been recorded upon shipment from the factory to the distributor will now be recorded upon sale to the wholesale customer, a one-time deferral of revenue that will impact revenue and profits in 2010.

There will also be higher operating expenses on an annual basis.

However, we feel confident that the benefits from the -- from converting to a wholesale model will outweigh the cost increases starting next year.

Let me review.

The most obvious benefit, or biggest opportunity is on sales and gross margins.

Under the existing model we sell product to our distributors who then resell it to their retailers.

By dealing directly with the retailers in the UK and Benelux we'll capture the additional sales and then margin previously realized by our distributors, which when combined with our current international margin will exceed the US wholesale model.

As a result of our conversion the wholesale sales in the UK and Benelux we expect to capture approximately $40 million of additional sales in 2011.

While our tax rate will go up in 2010 due to the transition, we expect it will return close to 2009 levels next year and continue to decline thereafter as international operations become a greater percentage of our overall business.

While we're very proud of our recent performance, especially in light of what has proven to be a challenging retail environment, our focus is firmly on the future and we're excited about the prospects that is lie ahead for each of our brands.

We recently raised our long-term sales goal for the Company to $1.1 billion by 1012 and we're confident that we have the right people and the right strategies in place to organically grow our business to this level.

This includes UGG sales of $900 million, Teva sales of $120 million and $80 million in sales from our other brands.

At the same time we think the opportunity exists to surpass $1.1 million mark sooner than the 2012 goal through a potential acquisition or acquisitions.

With more than $340 million in cash, cash equivalents, and short-term investments at year end, we have the financial flexibility to add a sizable brand, something with annual sales in the $75 million to $150 million range to our existing portfolio, while maintaining ample liquidity for working capital purposes.

To close, I'd like to thank each of our brand management teams and the heads of our consumer direct and international divisions for their strong leadership, for all of our -- and to all of our employees for their many contributions this past year.

Thanks also goes out to our stockholders for their continued support.

We are extremely proud of our success to date, and we know that it's based on the commitment and passion of our employees around the world.

I'll now be happy to answer questions.

Thank you, gentlemen.

(Operator Instructions).

Our first question is coming from Todd Slater of Lazard Capital Markets.

Your line is live.

Thanks very much and congratulations to everybody.

Thank you, Todd.

And especially Tom, you've had a really big impact.

He certainly has.

(LAUGHTER)

Thanks, Todd.

Way to go.

I was-- I guess just starting with the cash, I was wondering why you didn't execute any -- doesn't look like you executed any of your buyback in the fourth quarter and I think you could probably make acquisitions and buyback, I don't know, a quarter of your market cap.

I am just wondering what your thinking is.

Maybe we could start with what your thinking is on -- other than acquisitions what you might be considering to do with your cash?

Well, we still -- Todd, that's a good question.

We still do have $30 million available in our board-authorized stock repurchase, so that is one -- definitely the first thing other than acquisitions that comes to mind.

At the same time, I guess the good news and the bad news, there seems to be some indication that maybe the interest rates for the types of safe, shorter-term government-secured investments may be improving a little bit here in the short term, so hopefully we'll even start getting some better returns on our cash.

But other than the acquisitions, at this point in time most of the time discussion surrounds share repurchase and what's available there.

Okay.

And I want to ask about Teva because you said it's -- your planning sales up in the low 20% range, and I am wondering what you're thinking in terms of the profit margins there?

Is it a big recovery, as well, on the earnings side of that equation?

We see, in general, improvement primarily as a result of the better inventory mix.

As you know, there are inherently better margins in sandalized product than closed toe product, so as the mix shifts to a more of a balance between closed toe and sandals, we'll probably see a bit of an erosion in the historic Teva margin structure, given that the brand was so heavily dominated by sandalized product.

It'll slide toward a more normal margin mix.

However, that said, we work very hard at establishing new construction methods, new ideas to keep pursuing margin improvement across every new style.

Okay.

So maybe not historic profit margins but higher profit margins in 2010?

Todd, for Teva not only do we have some profit margin improvement associated with the better inventory positions so therefore lower closeouts, so i.e., better brand margins, but we also have a lift in 2010 relative to picking up the -- being direct now in the Benelux and France with Teva.

So net-net we've some improved margins for Teva driven by a couple of factors for 2010.

Okay, great.

And just quickly moving to the cost of goods line, wondering what headwinds or tailwinds you're expecting for the first half and second half of 2010, if any, on the sourcing side?

On the sourcing side we are seeing cost structure from China has not increased for 2010, and so that's going to be reflected in the gross profit margin.

Part of the improvement is a combination, as Tom was saying, both of better management and a less markdown and close outs, stabilized cost pric -- increases and the getting the benefit from some of the taking over the international operations.

Okay.

Lastly, shop-n-shop you said you're adding a bunch in the US but also another -- did I get it right, 100 internationally?

That's correct.

What kind of lift are you seeing internationally with the shop-n-shops?

Do they compare I think to the 30% to 50% level that you said you see in the the US?

That is consistent.

We see a much better return on investment by the retailer, which is why we're having success in opening that many shop-n-shops, not to mention the average selling price being what it is, it's a very lucrative opportunity for retailers who are committed to the brand.

Okay.

Well, thank you very much, and very good luck this year.

Thanks, Todd.

Thanks.

Thank you.

Our next question is coming from Chris Svezia of Susquehanna Financial Group.

Your line is live.

Good afternoon, everyone, and great job.

My first question here is, first, just on the inventories being down 8%, great job there, but as you look at growth in 2010, just how should we think about that inventory level being down 8%?

Are you just doing a better job being more efficient with the inventory that you have?

I know you've made a lot of reductions in the Teva business, but I guess more specifically on the UGG business just how we should look at inventory relative to sales as we move forward based on your outlook?

On the inventory, the older inventory reduction is clearly due to a greater management, specifically in Teva and the Simple reduction, but also on the UGG we are bringing the inventory closer to market.

We have been working with our factories to time the arrival of the inventory closer to market, so I think you should probably be seeing continued strength for 2010.

Okay.

So does inventory -- it's so hard to -- does that start to increase as we move forward throughout the year, so we shouldn't plan on seeing reductions in overall inventories as we move forward, is that fair?

Well, what you would probably be seeing is -- there'll be some increase, but probably at a lower percentage than we had in the prior year.

Now, one other thing that will be impacting it as we are opening more stores.

Right.

So the offset to the improvement in the wholesale inventory you will have some increase on the retail inventory.

Okay.

All right, fair.

And then on the Teva business the improvement that you're seeing there, how much, when you talk about and look at your outlook, is related to just taking over the distribution rights and how much is just related to growth in domestic wholesale business and just in wholesale in general?

Can you just give us color on the mix?

Yes, I can give you a little bit of color on that.

In terms of what of the in the low 20s kind of guidance we gave roughly one quarter of that is related to taking over the distribution in the Benelux.

Okay.

Okay, helpful, thank you.

And then when you -- just on the one-time on costs as you guys integrate the distribution -- or start to layout the subsidiary businesses, I guess my question is first -- there are two parts to this.

One, you mentioned there's roughly a $0.10 impact in the first quarter, roughly $2 million, I think, pretax.

Is it fair to assume it's roughly equal in each subsequent quarter because I think it is $0.38 for the year.

Is that how we should look at that?

Not really.

The first quarter is a combina -- there's three different things going on.

There is infrastructure that we're putting in place for -- to have in place for the 2011 transitions, and then there's some cost relative to the January 1, 2010, and then there's also more towards the tail end of the year fourth-quarter item really relative to a shift in profit, so there's some lumpiness to it all in total, with more impact in the first quarter and the third quarter and the fourth quarter and less in the second quarter.

Okay.

And how should we look at -- when you mentioned, I think, roughly a $10 million impact on the revenues in the fourth quarter that gets deferred, is there anything else we're missing in terms of the timing of what you start to ship to the subsidiaries -- or start shipping to retailers and taking over that business?

Is there anything else we're missing from a timing perspective in the fourth quarter as to when you start to see the integration of subsidiary business and the fall off distributorship, or is that just net to the $10 million?

No, the $10 million is purely a deferral of a normal distributor sale and then effective January 1, 2011, we're live dealing with a direct subsidiary and that's when we'd be able to recognize a sales number relative to that same inventory.

And as we mentioned it's obviously going to be a higher sale because now we're dealing directly on a wholesale basis.

Okay.

So it directly impacts you the first quarter of 2011?

Right.

Correct?

Correct.

Okay.

All right, thank you very much.

I appreciate it and best of luck.

Thank you.

Thank you.

Our next question is coming from Mitch Kummetz of Robert Baird & Co.

Your line is live.

Hey, guys, this is actually Kevin Kim calling in.

Angel, I think you mentioned that domestic sales should be up about mid single digits or there's some kind of indication there, can you give us backlog at year end and how that breaks down across brands?

Are you speci -- you're talking about UGG or all brands?

All brands.

We haven't broken it out by all the brands.

Generally speaking we're seeing great sales trends in the prebook across the board.

The changes we've made to the Teva brand have been very positively received.

The UGG brand continues to evolve very nicely around the spring assortment.

We now have four core collections a year that we'll be introducing in 2010, which is creating a lot of energy in the marketplace.

In addition, we also saw some pretty good success last year with our cold weather collection, and that is bringing a lot of new consumers into the franchise given that those are fairly technical products, event waterproof membranes and (inaudible) bottoms and it's also bringing men into the franchise.

So generally speaking the trend across all brands is very positive driven by, I think, excellent product evolution.

Okay, that's helpful.

And then as far as your plans for Teva, I know you said up about low 20s in the full-year 2010.

February's been unseasonably cold.

What's that mean for the rebook -- or reorder outlook for the brand?

Well, the great thing about what we've been doing is we've been trying very hard at minimize our reliance on strictly open-toed product, so as we move into the spring season, for the first time, we've got a fairly evolved collection of closed-toe shoes that are now part of the Teva mix and that's certainly going to be helping.

Now, certainly if we have a weird year where it is still snowing in June in the Midwest, that's going to play havoc with everybody, but assuming a fairly normalized weather pattern I think we're a lot more prepared from a product assortment prospective to meet the consumer and the retailer's needs.

And then last question, I think you've been direct in Japan for a few quarters now and I think you mentioned in prepared remarks that you're planning on opening one or two stores in Japan.

How big is this business and what specific things have you done in the past few quarters to set up for growth going forward?

Well, Japan is a wonderful market for the UGG brand, particularly.

The consumer is very sophisticated, it's still the number one luxury market in the world.

Our advantage is that we are -- what we like to see ourselves as is an accessible luxury.

It's been fairly clear now that consumers may put off buying the big screen or the new car, but an item that provides instant gratification and comfort like UGG stays high on their list.

The Japanese market with brands like Coach have proven to be a very, very significant global market.

When you look at our position there, we're just scratching the surface.

We know from our experience with our UGG store in the [Almawana] Mall we have a great many number of Japanese consumers who clamor for the brand and stand in line to get in the store, so the brand is well known there and has great potential.

We have some excellent sell-throughs on key styles in Japan, and we're looking forward to a pretty significant business there over the next few years.

All right, and that's it for me.

Thanks a lot, guys.

Thank you.

The next question is coming from Steph Wissink of Piper Jaffray.

Your line it live.

Thank you, good afternoon, gentlemen.

We have three questions.

The first is just regarding UGG growth international versus the US, I think you guided full year rates at 9% level, if you could just give us some sense of how that breaks down between the US and international respective of the fourth quarter shift?

And then secondly, you indicate, Tom, that some of the expenses related to the international initiative are one time, if you could just help us understand what kind of expenses those are you are classifying as one time?

And then lastly, related specifically to the UGG business, if you could give us some sense of the size of the kids and men's business today and what it would be as a target of -- as a percentage of mix over time?

Thanks so much, guys.

Okay, on the UGG, the first question relative to the growth domestic versus international, on the domestic side there is a couple of factors.

There's the wholesale side of the business and there's -- plus the direct business, i.e., the retail business, so -- and then on the international side we do have the normal international business.

So on balance they're fairly comparable when you group all of the channels together on the domestic side and pretty close to being comparable when you look -- group all the channels on the domestic versus the international side.

Then the second question related to the one-time costs, those are more really the costs associated with the profit shift, i.e., that's one-time thing that then benefits 2011.

And then the other thing is -- the other thing more in the first quarter -- a good portion of the first quarter is more of a one-off, one-time cost, as well, in connection with the transaction.

As far as men's and kids, we really haven't broken it out in any specific terms, but I can say that long term I can anticipate the men's business being anywhere from 15% to, say, 20% of our UGG business, especially continue to evolve cold weather and our slipper business.

The kids business is probably no more than 5% long term, primarily because of the price points.

Sheepskin's not an inexpensive fabrication and we really don't want to compromise a material story in order to sell a youth product.

So I think that's a good ballpark to understand the potential of those businesses.

Thank you.

Our next question is coming from Sam Poser of Sterne, Agee.

Good afternoon.

Just a few things.

Can you break out -- because it was such a big part of the business, can you give us the retail at e-commerce by each group.

Yes, Sam, this is Tom.

The retail really is -- those are UGG retail stores, so really it's virtually all the business to retail stores is UGG and on the e-commerce they're -- again, predominantly most of the e-commerce business -- just give me a minute here -- and most of the time e-commerce business is also -- I think that looks about, right -- most of it e-commerce business, as well.

Can you give me a per -- do you have a ==?

In terms of -- the retail side we've that covered off, right, that's virtually all UGG, and on the e-commerce side it's mostly all UGG, as well.

There's a -- the majority of the business on e-commerce is UGG.

Like 95% would do it?

I think that's too high -- just a minute here.

A good 80% to 85% probably, maybe 75% of it, just to give you a little range is UGG, the e-commerce business.

Okay, great.

And then with that $8 million that you're going to -- I believe 65% of that $8 million is a one-time charge, if I was correct in hearing that.

Is that correct?

That's right.

And pretty much that $2 million in the first -- that addition -- that incremental $2 million in the first quarter is part of that 65%?

Yes.

And the other parts of that 65% will primarily fall in Q2 -- Q3, and Q4, not Q2?

Correct.

So -- okay, great.

And then what's the timing of the store openings?

How are you looking at the timing of the store opening this is year?

Usually we open the stores toward Q3 and Q4.

Right.

So that'll stay the same?

Yes.

And when will you have the US count?

You mentioned the two cities, but can you mention any of other cities you're looking at?

No.

There are quite a few cities in the mix, and it's really -- we're being as opportunistic as we can be given the commercial real estate market, so we're not prepared to disclose just yet which other cities.

And are you looking at any -- you didn't mention Europe for new stores, are there any -- is there anything in the pipe there?

No, we just currently -- we recently opened a new store in Manchester --

Right.

-- in the UK and an outlet store in the UK, and given everything else we have going on with the transition of subsidiary in the UK and Benelux our team there has pretty much has their hands full, so we're trying not to overload them.

So that could be a good opportunity for next year then, probably?

Most definitely.

and then lastly, you authori -- you raised your share count authorization to 50 million shares, is there -- where are you thinking about using that for a stock split or something?

ou're right, we did -- we have increased that authorization.

I think that was towards the middle of 2009 I think is when that occurred, and that is -- we've -- you're not the first person obviously, Sam, that's brought that up.

There's been discussion from other investors and analysts.

as well.

about the concept of a stock split.

So we'll continue to keep that on the table to have some discussions about that, and that's pretty much.

I think.

all I can say about that at this point in time.

What's keeping it on the table?

What's preventing you from making a move there?

What is the -- why have you chosen not to use it, I guess?

At this point in time there's other things to consider, as well.

The stock has obviously performed well over the last six months.

There's pros and cons relative to stock splits.

In theory a stock split doesn't do anything, really, to the value of the stock.

I think we're just continue to evaluate it and continues to stay on the table and we'll see how things progress over the next couple of months in terms of that topic.

Thank you.

Our next question is coming from Elizabeth Montgomery of Longbow.

Your line is live.

Hi, guys.

Congratulations on a really good year.

Thank you.

I guess my question is just about the US wholesale business.

At this point it is not the largest growth opportunity going forward, but I wondered if you could give any color about any differences in terms of sell through that you were seeing, either by account or by region, other than what you had already said about a lot of growth opportunity in the south?

Well, as we've always said, the market in which we're most mature is California where we've been selling product for 30 years and i you speak to consumers in California, they'll tell you that they love UGG., it's going to be a permanent part of their closet, and as we continue to evolve the product line and give them more reasons to buy UGG, they continue to add more UGG to their closet.

And this study we just did where we said that we scored very well in terms of brand loyalty -- as I mentioned 63% of all UGG buyers indicated that UGG is the brand they wear most often.

That underscores that loyalty is such an important factor in this brand adoption curve that we are seeing happening in the rest of the country.

Consumers will often purchase footwear brand, but they won't fully adopt it into their normal routine.

In the case of UGG, 63% of buyers are telling us they wear our brand most often, which is -- that's just a phenomenal level of loyalty, and it's consistent with the demonstrated love for the brand, which is driven by comfort, fit, the lifestyle, image of the brand.

So I think it's a really important component of what this brand offers for the long term and that's why retailers are committing floor space to it in stop-n-shops.

That's why we continue to have such excellent performance in our retail stores, and that's why we have such a broad cross section of a demographic profile, particularly among women 13 to 54, across all age groups.

We've got strong interest from 18 to 34, from 35 to 54.

it almost parallels exactly what we're seeing in the younger consumers, So it just bodes well, it just says the brand can continue to evolve with great product and great innovation and be one of those brands that's here for a long time.

Great.

And is there any way that -- you can give us any color about how large the youth component of the UGG business is now relative to maybe the older, the post 30?

Well, we really don't break it out that way, we don't have that data.

We're just starting to access consumer attitudes and preferences across a cross section of ages, but we don't know from a selling perspective how many pair leave the door destined for 35-year-old foot versus a 15-year-old foot.

Just anecdotally, if you walk around a lot of key markets and malls you'll see a daughter, say in her early teens, you'll see mom in her mid-40s and you'll see grandma in her 60s all wearing some type of UGG product.

I've seen that many, many times, so it's appeal to a broad cross section.

No, agreed.

All right, thanks, guys, and good luck for next year.

Thank you.

Thank you our next question is coming from Howard Tubin of RBC Capital Markets.

Hey, guys, great quarter.

Just a question for you any more detail you can give us on your marketing plans for the three big brands in 2010?

Well, generally -- I'm going say this, and it might come as a shock coming from a marketing guy, but I would say that we have not to this point been a marketing-driven company.

We have been -- we've had so much foundation to lay to being an extraordinarily good product creation company, and the exciting opportunity for a marketing guy like me is that we now finally get to get close to our consumer.

We finally get to have insight that a study like this -- and more that we're doing around the world.

We're doing a study in the UK, we're doing one in Asia -- are indicating, A, what the attitudes are about the brand, what opportunity the brand has, what type of expectations consumers have.

We're tieing in across all the brands, social networking.

For example UGG has over 300,000 fans on Facebook that we don't talk to.

We just haven't gotten organized to do that.

Part of what's very exciting is the evolution of our Company as a marketing-driven enterprise, one that is creating product with insights from consumers such that the product is timely, it's appropriate for the consumer expectations, and relevant to them, and that's a big break through in how we see ourselves evolving in the future.

And I would say that a brand like Nike, for example, is a marketing-driven company.

They up front were a tremendous product company, and continue -- were also innovating a lot of great new ideas but they crossed -- they made that transition to being a tremendous marketing organization and created an emotional relationship with their consumers worldwide that they dominate, that they control, and they articulate, and it's fantastic.

So we have a similar opportunity, and we're staffing up accordingly to do that and have that kind of insight.

And when I say staffing up I mean that we are bringing talent on board who understands how to operate in that environment and then our product teams are understanding how those data points are hugely important for them going forward in the evolution of the product alliance across all brands.

That is great.

Thanks very much.

Thank you.

Thank you.

Our next question is coming from Chi Lee of Morgan Stanley.

Your line is live.

Good afternoon, guys, just a follow-up question on marketing.

Can you specifically tell us what the marketing spend actually ended up to be for the full year of 2009 and what you expect that budget to be come 2010?

Well, Tom will fish that out in a minute.

I can just tell you the general rule of thumb, right, that we've always said that roughly about 7% of sales would be a goal.

If we don't have to spend that money, we won't spend that money, and it also -- a lot of has to do with how you define marketing.

Some people call the retail stores that they open as marketing, we certainly don't do that.

What's the specific number there?

For 2009.

Yes.

Roughly $28 million, $29 million.

So you can see we're very efficient when it comes to that.

Right.

I really believe that the new media opportunities that are out there in terms of -- as I said social networking and a variety of other closer-to-consumer opportunities have made the marketing effort very efficient, and it allows to you have a dialog with consumers that you really couldn't have before.

So rather than just buying a bunch of ads, putting them in magazines and hoping that some of them stick, you can now be very, very selective in your targeted messages around the world and where the consumer invites you in as one of their preferred brands, you can start to develop a tremendous dialog.

It's a lot more efficient way of doing it, but it requires different skill sets.

(inaudible) For 2010 will you be able to hold that marketing budget flat then, or potentially see opportunity to take that down?

Yes, we think as a percentage of sales it will stay consistent.

Okay, got it.

Then just on e-commerce, just the dramatic change in the trends that we've seen relative to the prior two quarters, can you just talk about what you've seen, particularly when it comes to the conversion rates across it is brands, which I think were an issue?

I don't have the specific conversion rates in front of me, but they certainly kicked up in the third and fourth quarter.

I think we -- a combination of things.

I think consumers were postponing purchasing until they started to feel a little bit better about their situation.

I think, in addition, we did a better job of talking to consumer, merchandising product on our websites, we became, I think, a lot more e-commerce driven versus just simply order fulfillment driven, which was what we were doing in the past.

So we've become more sophisticated about that and it drove up the conversion rates, so we're happy with that.

We're back to some pretty histo -- good historic levels across all brands in the last quarter of the year.

Great, thank you very much.

Thank you.

Our next question is coming from Omar Saad of Credit Suisse Group.

Thanks, good afternoon.

Good afternoon.

I want to clarify one thing.

I thought I heard you -- I think I interpret this correctly, it sounds like you took acquisitions off the table a little bit, or it sounds like it's a little less of a focus than maybe in the past.

Did I read that correctly?

No, not at all, the opposite is true.

I think we're more focused on that than we've been.

I think our cash position allows us to go fishing for bigger fish, and really allows us the opportunity to look at lifestyle brands that make sense for us, whether they be apparel driven or footwear driven.

So, no, we are probably more focused on that than we've been.

Okay, got it.

Sorry, thanks for that.

And then in terms of taking over the distributorships in the UK and Benelux and that whole transition what's the catalyst -- or what's the inflection now?

Is it your cash position, is it your -- you're reaching a point of scale in those markets?

How does that decision process go when you take over a market?

Well, we've always said the real driving factor there is the expiration of the distribution agreement.

We felt that the most efficient way -- and by the way, a few years back we did modify our distribution agreements.

We really didn't have any distribution agreements that went beyond five years, so as these agreements are beginning to expire, that's the most efficient time to make the transition versus in midstream making the acquisition, which would be a lot more expensive.

Got it.

So this is -- so we should expect more of these in coming years as these agreements expire?

It depends on the market.

If a significant market with great market potential comes up and we feel that direct ownership can make a big impact.

Because, A, maybe the distributor is not as strong from a cash perspective, doesn't have the operating capabilities, maybe doesn't have the infrastructure, and is unwilling to invest in that, then we would take a hard look at that market.

We have a lot of distributors historically that were, say, avid surfers and decided in the very beginning that UGG was a great brand to enhance their lifestyle and they could actually make a living from surfing and they started selling UGG.

Maybe that's how a lot of the guys started and their business grew and they evolved and developed over time and some of them are getting close to retirement age, others are looking at the investment of shop-n-shops and marketing and retail stores and may not have the stomach for it, so in those cases we'll have conversations.

Okay.

So it sounds like the decision inflection is the strength of the distributor, their interest and focus on the business, and whether you take it back or not, upon expiration?

Yes, I think it's a -- the big part of the calculus is understanding that we don't want to lose momentum in the large markets, and we want to use our resources to continue to drive the market potential in that area.

Understood, okay.

And then last question for me.

Direct and international now both over 20% of sales, it looks like, for total sales for the year.

Versus a couple years ago it's actually quite different, and you made a lot of progress on both fronts.

Any long-term strategy or targets out there for the mix of business towards those two growth areas?

Yes,, in terms of international we've said that -- and we've been saying now for a while that we expect it to be 30% of revenues by 2012.

We are comfortable that we're tracking in the -- obviously in the right direction.

We made some great progress in the last year and the acquisition of the UK and Benelux is going to help accelerate that.

In terms of retail, I think one of the most important things to understand, we're not going to become a retail-driven company.

We are still a wholesale brand-building enterprise.

Our retailers are hugely important parts of our business strategy.

They provide energy in the marketplace, creativity in the marketplace, and they provide very loyal consumers that they bring to the franchise.

Our job is to keep our retailers profitable over the long term.

So we'll have enough stores to really feel that we've got a connection in each market and that we're driving the image of the brand, the spread and assortment of product to its property level, but you won't see us opening 50 stores in the UK or anything like that.

It's really more to showcase the brand of to the consumer and create the kind of energy in a market that excites the right retailers about the opportunity long term for the brand, and I think we've been doing that pretty successfully, so we'll keep going in that direction.

Okay.

Is most of most of the retail in the US or what kind of -- of total consumer direct?

Yes, I'd say two-thirds is US currently.

Yes.

Okay, great.

Thank you.

Thank you.

Thank you.

Ladies and gentlemen, we have time for one last question.

The question is coming from Andrew Burns of Thomas Weisel.

Him this is Andrew Burns for Jim Duffy.

Congratulations on the quarter.

Just a couple of questions.

How do you think about the potential for UGG outerwear and accessory business?

Obviously big categories, how big of a piece of the mix do you think that can grow to overtime?

Well, we think -- first of all let me say the UGG outerwear and accessories have performed very well at retail in the last season, especially seeing great momentum on both of those collections.

The outerwear is something we're doing ourselves.

It is a test mar -- we're still considering it a test market.

We are pretty confident that there's a significant business there.

If I were to say to you that long term it could be 20%, 25% of UGG revenues worldwide, I think I'd be being conservative.

Great brands like this, as evidenced by other examples in the market, are often 50% of revenue in apparel, so it is more than just the outerwear.

But I think we have very initially modest expectations because we want to make sure we get the product right, we want to make sure we get the mix right.

And that is the big advantage of having these retail stores is that you can test product, you can dial it in, you can make sure you have the seasonality correct, and you can make sure that you know how to present product at retail from a merchandising story perspective.

So that and the shop-n-shops are giving us the foundation to learn everything we can know about those opportunities.

So, so far so good.

Great.

By the way, I've also -- let me add this, too, that on the acquisition front one of the things we might be looking at would be, say, an apparel brand that can help us short circuit the often long and torturous process of building an apparel division, so that's one -- that's an opportunity in looking at acquisition that could present itself.

Great.

And what has the initial retailer response been to the new sneaker line and how big could that category be?

What are your plans to introduce new products in that category in 2010 and 2011?

The response has been terrific.

It has been, actually to us, a little bit of a surprise only because we introduced it as we thought a very cool thing to do.

I don't think we went out with over-the-top expectations but the sell-throughs have been great and the response and requests for more of that kind of product has been very strong, and it's been strong worldwide, it's not just the US.

So I would expect good things for that going forward.

Okay, great.

One quick one just in terms of the $0.38 impact from direct distribution this year, 65% being one-time in nature, I'm just trying to clarify.

So the other 35% I guess should be considered ongoing SG&A required to support direct sales for UGG in the UK and Benelux, is that how we should think about that?

Yes, that's how you should look at that, yes.

That's just -- you've got it.

Got you.

Okay, thanks for your time.

Thank you.

Well, I want to thank everyone for participating in the call today.

Once again, I would just like to extend my appreciation and congratulations to our team worldwide across all brands, especially Connie Rishwain, the President of Australia, Pete Worley, President of Teva and Simple.

I'd like to also throw a shout out to Collin Clark on the international side and George Troy, who runs our retail division, and John Kalinich, who heads up our e-commerce group.

It is truly a pleasure to be on this team and we look forward to ongoing success in years to come.

Thank you.

Thank you, gentlemen, and thank you, ladies and gentlemen, for your participation.

This does conclude today's teleconference, you may disconnect your line at this time.

Please get rid of this.

Thanks.