Guess? Inc (GES) 2008 Q4 法說會逐字稿

Good day, and welcome to Guess fourth quarter fiscal 2008 conference call.

Before we get started, I would like to remind you of the company's Safe Harbor language.

The statements contained in this conference call which are not historical facts including statements regarding future plans and guidance for current and future periods may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results might differ materially from those suggested in such statements due to a number of risks and uncertainties as described in the company's most recent annual report on Form 10K and other filings with the SEC.

Now, for opening remarks and introductions, I would now like to turn the call over to Paul Marciano, Chief Executive Officer of the company.

Please go ahead.

Thank you.

Good afternoon, and thank you for joining us today to discuss Guess financial results for the first quarter and fiscal year 2008.

Also, joining me are Maurice Marciano, Carlos Alberini and Dennis Secor.

Carlos and Dennis will later review highlights and fiscal '09 outlook.

In fiscal year 2008 we achieved exceptional results for revenue increase of 40% and earning growth of over 42%.

I will discuss that further detail later.

Q4 delivered very strong financial result in a challenging economic environment.

We increased our revenue by 30% expended operating margin to 18.7% and increased operating income by 35%.

Once again, all our product categories, Guess apparel, foot wear, hand bags, watches, in every part of the world contributed to the top line growth and to the increase in earnings in a quarter.

International business was the key growth especially Europe which had the revenue increase of 75% on the top of an increase of 64% the year before.

Operating earnings for Europe increased 65% in first quarter.

Net earning reach $55.2 million representing an increase of over 20% last year and marking an 18th consecutive quarter of earning growth.

Earning per share reached $0.59 also a 20% increase from $0.49 last year.

International continued to exceed our expectation and we investing the expansion of this market, we've a strong infrastructure and a great team.

We are obsessed with execution as we are all about the quality of a product from unique washes for denim to our footwear styles to our Swiss watches.

To that, having the right team with the right attitude is vital for us.

Europe concluded another excellent quarter for revenues of $152 million and operating earning of $28 million.

This business alone contributed nearly 45% of earning growth for the company.

During the first quarter, we opened 42 new stores including 19 in Europe, 19 in Asia, and four in Mexico and South America.

Our wholesale segment which including Asian operation had another excellent quarter with 53% increase in revenues.

Our licensing business had a very strong quarter with increase by 22% for the quarter and 35% for the full year.

For retail in North America, we posted our 20th consecutive quarter of same store sale increase, delivering over 13% comp for the quarter and 14.6% comp for the year.

Let me now highlight some of the achievement for the fiscal year '08.

We reach $1.750 billion in total revenue.

This represent a 40% increase from the previous year and nearly 90% increase from two years ago.

We increased our profit by 50% to $309 million and improve operating margin by 130 basis point to 17.7%.

Even as we were making significant investments in open business, South Korea, China and two new in (inaudible).

We increase our net earnings by 42% to $186 million.

As a result, our earnings per share reached $1.99 which is more than three times the earning per share we reported just two years ago.

For the fiscal year we opened a record 184 free-standing stores outside U.S.

and Canada and we have now 579 free-standing stores including 302 in Asia, 241 in Europe and Middle East and [46] in Latin America.

During the last few years, we have achieved a very balanced diversification of our earnings across our business segments around the world.

Just as a reference this year, Europe, Asia and licensing businesses combined generated 69% of our growth and 74% of our growth in operating profits.

For the first time in company history, earnings from Europe and licensing business is 53% of our total operating profit, passing North America at 47%.

Now, key initiatives going forward, basically this objective will reinforce three hours of our existing business and place them on the top of agenda every day.

One will be international retail expansion in Europe.

Two retail and wholesale expansion in Asia, and three ecom business.

In Europe, we see a big opportunity to maximize a retail presence and visibility in Europe as we focus in key markets of France, Spain, England and Germany.

We feel these markets represent tremendous opportunity for us in all product category and all store concepts.

Last year, we opened 84 free-standing store in Europe and Middle East and we plan to open 86 more retail stores in Europe this year across all concepts.

That of course, will substantial increase on revenue not only from denim and line but for our foot wear and hand bag business as well.

Asia.

Asia was a key driver last year and we have developed a strong foundation for strong expansion especially in Korea where we perform very well for the year.

We just started there and we've more than doubled the revenue and ended the year with 46 free-standing stores.

We continue to believe our product will be more than $100 million business to work for us in the next two to three years, versus $24 million when we took over from licensing just a year ago.

In China, where we opened location in 2007, we are focusing half of this year on penetrating seven new markets and we better than ever now believe that the next largest expansion territory is Asia for all concept in all brands.

All together, we plan to open 185 new international stores this year and 60 new stores in North America which include 16 free-standing footwear store worldwide.

Again, I want to remind everybody about the size of our international stores is much smaller than our average stores in the U.S., but still this amount of stores have clearly demonstrated global enterprise and expansion of the Guess brand.

About ecom, further objective will be related to ecom business.

In the last 18 months we have experienced a strong increase in traffic and business on the website and we see that the customer is shopping on line as well as in our stores.

For fiscal '08 the ecom business has an increase of 34% and year-to-date, it is up 47%.

With that in mind, we are investing more heavily on online merchandise through major search engines such as Google or Yahoo as well as popular sites new ones as Facebook.

In conclusion, we have operated with clear vision and strategy all with one goal in mind: the globalization of the Guess brand.

We believe that the Guess business model is unique and strongly diversified in product categories as a complete lifestyle brand.

Now, Dennis and Carlos will take you through the numbers.

Thank you.

Thank you, Paul, and good afternoon.

Let me now take you through some of the key financial details for the quarter.

Total fourth quarter net revenues increased 29.9% to $514.6 million.

All of our segments contributed to this growth, led by Europe which accounted for more than half of the growth.

Strong comps in North America retail and our growing Asian business were the other strong contributors.

Total company gross profit increased 31.9% to $233.5 million we expanded gross margin by 70 basis points to 45.4%.

The greater mix of European business and Europe's 390 basis points gross margin improvement drove this expansion which was partially off-set by the impact on store occupancy of one last week in the NRF calendar.

During the quarter, the SG&A rate was flat to last year at 26.7%.

Total SG&A expenses increased 30% to $137.3 million.

The additional spending supported our new businesses and infrastructure investments as well as the increased sales volume in the quarter.

For the quarter, the company's operating profit increased by 34.7%, $96.2 million, which includes the $5.4 million currency translation benefit.

We expanded operating margin by 70 basis points to 18.7%.

Interest expense declined by $1.6 million mainly due to last year's early debt retirement costs.

Income increased $400,000.

This quarter includes charges of $2.1 million, mainly due to marking foreign currency contracts to market, while last year's quarter included gains of $1.5 million from nonoperating asset sales.

Our fourth quarter tax rate was 42.2% compared to last year's fourth quarter tax rate of 36.5% which benefited from loss carry forwards.

Greater profits and high tax jurisdictions, tax rate changes and start-up activities in new markets contributed to the higher tax rate this quarter.

Fourth quarter net income increased by 20.3% to $55.2 million and we increased diluted earnings per share by 20.4% to $0.59.

This includes the impact of several items that collectively affected the quarterly comparison negatively by about $0.08 per share.

Next I would like to quickly review our results by business segment.

North America retail sales increased 10 .4% to $270.9 million.

We accelerated our retail expansion during the quarter, which resulted in a net 8% increase in average square footage over last year.

Operating margin rose to 18.2%.

For the full fiscal year, we increased retail segment revenues by 16.4% and expanded operating margins 70 basis points to 14.9%.

Our full-year same-store sales growth was 14.6% and average square footage increased by 5.3% to the addition of 49 stores and the closure of 10.

Quarterly revenue for the Europe segment increased 75.4% to $152.2 million with each of our European businesses achieving solid growth led by our accessories business.

Product margins improved across all of our European business.

We continue to invest in Europe and delivered an operating margin of 18.3% in the quarter in line with our expectations.

For the full year, European revenues increased 84.5% and operating margin 22.4%.

Licensing revenues increased 22.4% to $26.5 million for the quarter.

For the full year, licensing revenues increased 35%.

Also sale segment revenues increased 53.1% to $65.1 million during the quarter with 3/4 of the increase coming from Asia.

North America wholesale delivered a double digit revenue increase and strong margin improvement .

Operating margin for the wholesale segment for the quarter was flat at 18%.

Margins expanded in North America which were offset by lower margins in Asia, where we continue to invest.

For the full fiscal year, wholesale segment revenues increased 69% and operating margin expanded 280 basis points to 19.3%.

And now we'll turn our attention to the balance sheet.

We ended the quarter with $275.6 million in cash compared to $207.6 million a year ago.

Accounts receivable increased by $111.7 million to $254.4 million compared to the prior year.

Over 80% of the increase supported the substantial growth in Europe as well as in Asia.

Receivables also increased by about $24.3 million due to the strong EURO and Canadian dollar.

Overall days sales outstanding from comparable businesses improved slightly with the most significant DSO improvement coming from our existing European business.

Inventory reached $232.2 million an increase of $58.5 million or 33.7% within our expectations.

This includes the acquisition of our European kids business.

We are very pleased with our inventory position which we feel is clean and well aligned with our sales plan.

About half of the increase supports new businesses including focus, G by Guess, kids, Korea and China.

The other half will support our existing European and North America businesses.

Currency translation increased our ending inventory by $15.7 million.

Finally we continue to invest in the retail and in infrastructure.

Full-year capital expenditures net of [tenant's] allowances was $89 million lower than our previous guidance due to the catch payments.

Our Board of Directors improved a quarterly cash dividend of $0.08 per share payable on April 18th, 2008, to shareholders of record at the close of business on April 2nd, 2008.

Also today we announced that our Board of Directors has authorized a new $200 million share repurchase program.

This share repurchase does not have an expiration date and allows the company to repurchase from time to time in the open market or in private transactions including structure transactions.

And now I will turn the call

Thank you, Dennis, and good afternoon.

Let me now update you on our outlook for fiscal 2009 and provide our expectations for the first quarter as well.

We are very pleased with the results that we just reported.

These results demonstrate the power of our brand and the strength of our diversified and global business model.

For the current 2009 fiscal year, we continue to plan net revenues in the range of $1.970 billion and $2.050 billion.

Our European business performed extremely well in the fourth quarter and order activity for the current season has been strong.

We also expect to continue to benefit in the year from a stronger Euro than we originally planned.

All of this should translate into higher European revenues from the initial guidance we provided for 2009.

Regarding our North America retail business, given the state of the consumer in the U.S.

and economic we are now planning this more conservatively.

For the total company we are now planning to use operating margin at 17.7%, which is flat to the year that we just closed.

We expect our effective tax rate to be 36%.

All considered, we continue to expect diluted earnings per share in the range of $2.35 to $2.45 for the current year, and we are very comfortable with this guidance.

For the first quarter of 2009, we are planning for consolidated revenues to be in the range of $445 million and $460 million, and operating margin to be about 15%.

We expect first quarter diluted earnings per share in the range of $0.44 to $0.46.

Let me now address our capital expenditures plan for the year and our outlook for each of our businesses.

In fiscal 2009 we plan to make significant investments in retail expansions across the globe.

We continue to plan capital expenditures of about $126 million net of allowances for the year.

For North American retail as you know we posted double digit comps in November and December last year.

In January our comps were in the high single digits and in February they were in the mid single digits.

For the full fiscal year we are still planning our business assuming low single digit comps consistent with our previous guidance.

If this comp performance materializes, full year revenue would grow in the low teens.

This assumes square footage growth of about 12%, as we plan to open 68 new stores in North America in the year.

For the full year we are now planning business with an operating margin of about [14.9%] (corrected by Company following the call).

We are planning our retail business prudently and conservatively.

We will manage inventory levels very tightly, investing in key categories where we see opportunities.

We feel that we have the ability to react quickly to opportunities as they materialize.

We will manage our costs carefully and continue to look for opportunities to gain leverage over our cost structure.

For the first quarter we are also planning this business with low single digit comps and revenue growth in the low teens.

For the wholesale segment for both the first quarter and the full year, we are planning revenue growth in the low teens driven by our Asian expansion.

Operating margin for this segment should reach 17% for the year, as a result of our infrastructure investments in Asia to support its expansion.

We expect licensing revenue for the first quarter and for the full year to increase in low single digits and operating margins to be flat to last year.

In Europe for the full year, we plan revenue growth between 25% and 30%, which includes our newly acquired kid's business, and for the first quarter we are planning to increase revenues in the 40% to 45% range.

Operating margin for this business should, again, exceed 22% this year.

The spirit and excitement in the company with the opportunity that we have in any side of the business we look at is tremendous.

We need to continue to execute according to our beliefs and our principles at Guess, and we will.

Thank you very much, and with that we are ready for questions.

Operator?

(OPERATOR INSTRUCTIONS) We request that everyone limits themselves to just one question, so that we can accommodate as many people as possible.

If time permits, we will be happy to take follow-up questions.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Christine Chen with Needham & Company.

Please proceed.

Thank you.

Congratulations on a fabulous quarter, again.

Thank you, Christine.

Wondering if you could share with us a little bit about category -- merchandise category performance so far in the first quarter.

What were some of the missed opportunities last year, what is doing well right now?

And then if you could talk a little bit about Marciano and G by Guess.

Thank you.

Okay.

You are talking about the fourth quarter?

First quarter so far,.

First quarter of this year.

We are not reporting on the first quarter.

I know, but you talked about February comp, so I was just wondering in February what category so far have done well, and what were some of the missed opportunities in spring last year.

Yes, no.

We we're prepared to discuss first quarter results at the proper time.

We can tell you that, some of the categories that we are trending pretty well out of the fourth quarter, continue to be trending such as dresses, denim is very strong.

We had a great churn with outer wear, sweaters in the women's business.

You also asked about Marciano, Marciano is also training very well.

The product is out standing and I am sure if you have had a chance to really visit our stores you would see.

We have very, very excited about the opportunities there, and the same thing is true for G by Guess which we have made significant changes to the assortment over time.

The floor space has being reallocated to those categories that were outperforming the rest of the store, and many of the changes that were done to the store itself and the concept have been very successful, so we are very excited about that as well.

Great.

Thank you.

Thank you.

Your next question comes from the line of Eric Beder with Brean Murray.

Please proceed.

Good afternoon, congratulations.

Thank you.

Hi, Eric.

Thank you.

Excuse me.

Could you talk a little, I guess I want to talk about the shoe business.

Can you talk a little about how your shoe business is doing well, and why you think you are different?

The shoe business is very the tough domestically.

Could you talk about how it's working internationally and a little more in general depth on how the shoes are doing and the expectations for the new stores coming in?

Well, this is Paul.

Hi, Eric.

The shoe business if you have a little bit of history of it, at the stage where we are it is kind of new because it is only two and a half years.

We had the license for many years and then we stopped and then we start all fresh with [Mark Fisher].

And a business across every continent right now is doing well especially in Europe where we plan to pass the landmark for the million day pairs of shoes this year after just starting two years ago.

We are very, very pleased with that.

And you ask definitely in our stores I am sure that you you visit quite a few stores in California or Las Vegas or anywhere, you see that the footwear is representing a bigger and bigger space in our presentation, because the customer acceptance not only about the style but mainly what you cannot see from outside is the comfort.

These shoes are the tremendous acceptance percentage by consumers who come back and ask for the same type of shoes.

So, we are very pleased about that.

In general, I think the footwear outside our doors I think has been a little bit challenging.

For us it is a new business, so we are in progress every single quarter, every single season.

And the other great thing that we have is as you remember, we introduced a footwear from Marciano, it's a new category in the middle of the year.

So we are experiencing significant growth because of that, just annualizing the introduction.

So some of the plans that we have for this year in terms of growth in the retail business is around shoes.

Okay.

Thank you.

Thank you, Eric.

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

Please proceed.

Yes, congratulations, everyone, on another fantastic year.

Thank you.

Thank you.

Just kind of sneak in one and a half questions if I could.

Just book -- a little housekeeping wise, could you comment on, since everyone seems to be focused on these cash balances, any, Dennis, any exposure to ARSs?

Is it pure cash, anything that you can point us to there?

And then also on that inventory you gave us, the currency impact of $15.7 million, what would that impact have been last year so we have an apples to apples comparison?

And then I have a follow up for Paul.

Okay.

So it sounds like three questions, but -- so with respect to the cash we are primarily invested in municipal tax exempt money market funds, same day liquidity and within that most the investments are in municipal bonds with interest rates at reset to an index.

So we are not invested in any auction rate securities.

With respect to the inventory question, the $15.7 million change is the result of applying last year's rate to this year's balance.

-- I may not understand your question.

You were saying this year's inventory were positively impacted by $15.7 million as a result of the impact of the Euro, correct?

No.

He is saying that the inventory is increased as a result of the stronger Euro in U.S.

dollars, relative to last year, if you had assumed the same kind over exchange rate that was prevailing at the time at the end of last year.

I got it.

Okay.

Thank you for that clarification.

And then just in general on the European business is tracking well and obviously very important part of your business.

You comment on France, Spain, England, Germany has great potentials.

I know those are relatively underpenetrated.

Overall there's some concerns about European trends, some consumer spinning trends like there are in the U.S.

It would appear that those are not impacting you at this point.

Could you comment further on Italy specifically, and then in Europe overall you just don't seem to be seeing that same sort of traffic slow down at this point?

This is Paul.

In Italy, as you know, this is the most penetrated country we have for Guess, we are currently 63 free-standing stores, so we have a pretty much a good view of what the consumers are.

And we are not experiencing anywhere, any negative comp stores in any that we have.

So, business has been stronger, again because very few, very few companies if any in Europe have the assortment of products that are as complete as we are from the denim side to the hand bag side to the footwear side to the watches side to eye wear, very few have this combination.

We have the tag of being an American brand in Europe.

So, we have not been -- and we are pretty new in the scene there.

So we have not been affected by that, and when you realize that we only have four stores in England, only five stores in Spain, only zero in Germany and 15 in France, it is absolutely virgin territory for us.

We have such a strong demand by the department stores, of [Gary Lafayette] and [Pantone] in Spain and House of (inaudible) England, we are new.

So we don't have 10 years or 15 years history to say well business is slowing down because we are the opposite.

I mean compounding positive on positive because the demand is so strong for new brand basically in Europe.

Okay.

Thank you very much.

Thank you.

Your next question comes from the line of Holly Guthrie with Janney Montgomery Scott.

Please proceed.

Thank you, and congratulations.

Thank you, Holly.

I wanted to get some more color on inventory.

Hate to go back there, but could you just talk about you said half of it has to do with the new businesses and half of it with the existing businesses.

Could you just talk about the new business part of it?

Is that the -- are you talking about the business, the stores that opened in Q4 and are planning to open in Q1?

I guess just kind of categorize which -- what segments new business and what time frame you are looking at.

The business that we are defining as new would be focused, they would include Korea and China, G by Guess.

I think those are all of them.

So -- and that is just to segregate for you, and help you understand, that also includes our European kids business.

So those are the new businesses and that represents about half of the additional investment that we have made.

So, Holly, we are -- this is Carlos, we are very, very pleased with how we were able to manage our inventory position because we have the inventory where we need it.

As you know, the -- our European business is primarily wholesale business, and we have orders for that business.

And as you also know, this operates with two big seasons, spring, summer, the one we will be shipping right now and the six month type of cycle.

So you would expect, especially in the growing business we are guiding to a pretty significant growth in Europe that you would have a lot of inventory to be able to support those orders.

If you look at the North America business, our inventories were remarkably low relative to the sales trend we are experiencing.

So we are very happy with the absolute dollar amount of the inventory and we are extremely happy with the composition and mix of it.

Great.

Thank you.

You're welcome.

Your next question comes from the line of Betty Chen with Wedbush Morgan Securities.

Please proceed.

Thank you, good afternoon, everyone.

Hi, Betty.

Hi.

I was wondering if you can talk a little bit about the North America retail business.

Obviously, I think you talked about the macro environment and that's not a surprise to anyone.

But if you can talk about are you seeing that kind of pressure across all of the different business concepts.

Which part of the region for example in California where there may be some difficulty giving the housing market, and maybe talk a little bit about G by Guess and again, what additional learnings you have gained during the holiday quarter.

Thank you.

Yes.

We are, our retail business has performed remarkably well, and of course we are aware of all of the macro issues that everybody reads about everyday.

But we have seen that an increased conversion rate which has helped us in continue to drive the kind of comp performance that we have seen.

Now, that being said, you are right, there are some regional differences.

I think we are very privileged with the kind of store base that we have, over 80% of our stores, and that really capitalized on tourism and on the big cities and the country.

And obviously we have experienced a significant in flow of customers coming from other parts of the world with a very strong currency.

And because we are a global brand and one that is recognized by those international customers, we benefit from that in a pretty significant way.

So, areas like Florida that for others I believe are under pressure, for us have been and continue to be a driving force of our retail business.

That being said we do have some slowness in California that we have experienced and of course in areas such as the midwest because things are more difficult than in the other areas that I mentioned, such as the city of New York or Florida overall as I said, even Vegas continues to drive very strong numbers.

So -- and I didn't mention Canada, but Canada continues to do very well.

And then could you talk a little bit about G by Guess, Carlos?

Yes.

As I mentioned, we have, I believe a very realistic expectations for G by Guess, and I think we share some of those expectations the last time we talked.

G by Guess is we continue to believe is a very strong opportunity for the company, and I think that with the changes that the merchandising team and the general management that is driving that business, I think that it will continue to improve our opportunities there.

We think that there is definitely a strong customer base for that concept and it -- the concept allows us to reach a customer that we couldn't reach with our existing concept.

So we are very excited about that.

Thank you.

Good luck.

Thank you.

Thank you, Betty.

Your next question comes from the line of Erin Moloney with Merriman Curhan Ford.

Please proceed.

Just a question following up on your North America retail business, it looks like your guidance for the year now is -- it looks like you are maintaining your revenue guidance, but operating margin guidance quite a bit lower than last quarter.

So I am just curious where the change is coming from, is it on the margin line, just exactly where that change is?

Yes, Erin, you are right.

The guidance that we had provided before was a [16.5%] operating margin and we closed the year with 14.9%.

We are guiding to a flat operating margin and the -- there are a couple of reasons for that.

I am sure you are aware, there is more pressure on IMU at this stage with some increasing cost across the board.

We have been able to offset those, but at the time that we were talking, we had an expectation to significantly improve IMU, and we are very more conservative on that expectation.

And then there is a little bit of a lower expectation on the cost structure leveraging, because we feel that we have to continue to invest in this business, and we feel that providing strong customer service is going to be critical in this environment.

So, those are the two main reasons.

We have adjusted now the store openings programs and remodelings and that has a small impact on occupancy, but the biggest drivers of the change in our expectations were the two that I mentioned.

Okay.

Great.

Thanks.

And then I was hoping we can just get the store breakout by a concept in North America for the fourth quarter.

Sure.

So, we ended with in retail 187.

In factory, 97, Marciano, 38, accessories, 17 and G by Guess, 34.

Great.

Thank you very much.

Thank you, Erin.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Margaret Whitfield with Sterne, Agee & Leach.

Please proceed.

Good afternoon, and congratulations.

Thank you.

How are you, Margaret.

Good.

You mentioned the direct business was a priority.

You mentioned a percentage change, but I wondered if you could size the business, and tell us what your goals are down the road for building this business.

The business for us is very small.

We see big opportunities, just looking at what others have been able to accomplish and this is becoming a new priority for us.

Obviously the business is highly profitable and highly leveragable.

So we see a big opportunity, we're going to invest in the business, and we have new management, and so we are excited about the opportunity.

We have never disclosed the size of this business.

I can you tell you that it is probably -- it is higher than any one of our stores in terms of volume.

But it is not a very significant business.

So initially it will be North American focused or will it be global?

No.

Initially it is North America, yes, U.S.

focused.

In terms of Q1, the guidance range was below the consensus.

My numbers sort of parallel the revenue and the operating margin.

I wondered if there's a bump in the tax rate in Q1 as there was in Q4, or is it going to be like the year, which you said was 36%?

Yes.

When we guide tax rate we expect that that is the rate that you are going to use for every one of the periods --

Okay.

-- until we see things differently, but right now that's what we expect, a 36% tax rate across the board.

And in terms of the yearly guidance, any thoughts on how to model gross margins and SG&A to get the margin -- operating margin in line with your guidance?

Yes, Margaret, we do not want to get into that.

We don't think it is productive, because our business model is so complex.

You have so many segments, I think giving you operating margin by segment is plenty for you to really come up with the right answers.

Okay.

And in terms of any directional changes in fashion and denim or elsewhere, if Paul and Maurice could speak to that to learn what we might be looking at this year?

I am sorry.

I didn't --

The fashion changes which could stimulate demand or interest within the Guess stores.

Well, we -- Margaret, I think you are one of the most familiar analysts around since Guess exists, and I think you are going to see a great emphasize and push again for denim business for Guess, not on the year but in Europe, in Asia, in Middle East, in South America, denim is going to take especially back to school front and central for our focus for the business.

Accessories, need to tell you about across the board, we have been doing incredible season after season, and year after year, and -- but that doesn't mean we're going to get comfortable with that, because a lot of people are trying to focus on accessories and we keep our eyes open, and definitely we are working on that every day.

Thank you.

Thank you.

Your next question is a follow-up from the line of Holly Guthrie with Janney Montgomery Scott.

Please proceed.

Thank you.

I was hoping to get just a little bit of directional comments on SG&A.

Last year you invested a lot in SG&A, G by Guess, footwear, international, I guess in all parts of your business.

And SG&A grew I guess around the same rate that sales did.

I was wondering if you can just talk about what we can look for SG&A growth, particularly any that has to do with any SG&A expenses this year.

Yes.

Holly, with respect to the fourth quarter, keep in mind that a lot of those initiatives you mentioned were not annualized.

So, like, we talk about the new headquarters in Europe, that is -- that was an initiative that was put in place in the middle of the year.

So of course the fourth quarter is going to have the same kind of impact that we saw before in the previous quarter, meaning the third quarter.

Same thing is true for G by Guess, which was a completely new initiative that wasn't put in place until the second quarter last year.

I think if we go through Korea, the same story, the whole investment in China is the same story.

Many of these initiatives do not annualize until later on this year.

So you are going to continue to see that kind of impact on the SG&A line.

We have a plan that would protect the operating margin performance of the company and still allow us to continue to invest heavily in all of these initiatives that we believe are the future of Guess.

And that is what we are planning to do.

Great.

Thank you.

Thank you.

You're welcome.

At this time, there are no further questions in the queue.

All right.

Well, thank you very much, and we will -- we are looking forward to reporting to you on first quarter.

Thank you very much.

Thank you.

Bye.

Thank you for your participation in today's conference, ladies and gentlemen.

All parties may now disconnect.

Have a great day.