G-III Apparel Group Ltd (GIII) 2009 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the G-III Apparel Group third quarter earnings call 2009. As a reminder, today's conference is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time. I would like to turn the conference over to Mr. Neal Nackman, Chief Financial Officer of G-III Apparel Group. Please go ahead.

Thank you. Good afternoon, everybody. Before we get started, I want to remind you of the Company's Safe Harbor language. Some statements made today on the call are forward-looking statements that are defined under the federal securities laws. Forward-looking statements are subject to risks, uncertainties, and may include but are not limited to reliance on license products, reliance on foreign manufactures, the nature of the apparel industry, including changing customers demands and tastes, customer concentration, seasonality, customer acceptance of new products, weakness in the retail sector, risks related to the operation of the retail chain, the impact is competitive products and pricing, dependence upon existing management, possible business disruption from acquisitions, weak economic conditions and the turmoil occurring in the financial markets as well as other risks detailed in the Company's filings with the Securities and Exchange Commission. The Company assumes no obligation to update information in this call. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Good afternoon. Thank you for joining to us review our third quarter. With me today are Wayne Miller, our Chief Operating Officer, Neal Nackman, our Chief Financial Officer, and Sammy Aaron, our Vice Chairman. Our results over the last nine months of this fiscal year illustrates that our business is strong and has performed well. Over that same time period, we have also completed two acquisitions that are enabling us to further diversify our business and to create new potential opportunities for growth. In general, we continue to be proud of what we're accomplishing and optimistic about the potential of the business opportunities in front of us. The third quarter is the most important to our annual financial results and I'm pleased to tell you that we executed well. Net sales for the third quarter were $351.6 million up 29.6% compared to the same period last year.

The increase was driven primarily by contributions from the Andrew Marc and Wilsons outlet retail businesses that we acquired during the past year as well as strong increases from our Calvin Klein, Guess? and Kenneth Cole businesses. Net income per share for the quarter was $1.68, up 19.1% compared to the $1.41 from the year ago quarter. Given that it is our both largest licensed business and the top performing brand in our mix, I'll start by updating you with respect to Calvin Klein. The business has been excellent across nearly every category. This certainly has something to do with the brand's position in the market. Calvin Klein is well suited to compete in this kind of environment. With strong fashion heritage of this brand combined with high quality and extremely competitive price points, we're going to work in our advantage across a number of categories. The level associated with this pure American brand is very high. Both our men's and women's Calvin outerwear businesses are healthy.

Calvin Klein dresses continue to be a significant area of growth for us and we're very excited to be pushing forward with that better women's sportswear initiative. We'll begin shipping in February and we expect to launch the Calvin Klein sportswear collection in approximately 200 stores. We've been very grateful for the level of support shown to this initiative from retailers and we expect rapid door growth. Across our Calvin Klein business portfolio, we're investing in our design capability and working closely with suppliers to improve our margins by sourcing opportunistically. Phillips-Van Heusen has proven to be an ideal partner for us. A big credit for our success is also clearly due to the organization and group of licensees that they've assembled. We're aware that the Calvin Klein related business has been evidence in strength at retail despite the highly challenging environment. In summary, I believe there is growth available for our Calvin Klein business in every category.

We've also been pleased with many of our other branded businesses. In the outerwear category, Guess? has produced excellent results for us with its net sales increasing about 50% year-to-date compared to last year. This is a clearly differentiated brand with a solid core customer base and it continuous to have significant growth opportunities for us. Our Kenneth Cole business is also strong once again this year. The line is well designed and we're pleased by the continued demand we're seeing for the product. Sean John has performed well given the tough market for this type of product. While the outerwear business is is up a little compared to last year, the urban market is in general has been exceptionally difficult, and yes, we've been able to diversify the business and continue to see good sell through. This performance is really validating our efforts. Our Cole Haan performance is another testament to our ability to manage the brand successfully in a difficult market. This brand, which is in the high hit luxury care distribution, has performed to our plan.

We executed this business well and it demonstrates that an appropriately designed and marketed line can transcend the trend at retail. This business continues to develop and we believe it'll grow in stature and importance to the luxury market. We're making adjustments to our consolidated business particularly from a process and infrastructure standpoint to offset the impact of the tough environment. Since the beginning of our third fiscal quarter, excluding our newly added retail operation, we've reduced our annual run rate for payroll by 10%. We're also in the process of creating a more efficient structure for our operations and will reduce our space requirements. We expect to derive further savings from this effort next year.

Of more immediate impact was our decision towards the close of first quarter to reduce our buys for selling business in the fourth quarter. We reacted quickly once the depth of the problems in the marketplace became apparent. While we decided to give up some top line opportunities this was clearly the right move and we believe this has reduced our inventory risk. I want to be clear, at the same time as we're seeking efficiencies and protecting our business we're continuing to invest in growth. We have built a significant infrastructure for Calvin Klein sportswear initiatives that include the designer sales people and merchandising staff. We've been carrying these expenses with no associated revenues but expect the business to justify this ramp up as we begin to see net sales in the first quarter of our next fiscal year.

Similar to Calvin Klein sportswear, Jessica Simpson dresses are an investment for us right now. This will begin to ship next year as well. We're pushing forward with the Ellen Tracy dress line. Ellen Tracy is a great and trusted brand that's positioned well for providing value to our customers. Clearly, we expect that the retail environment will be difficult and in the fourth quarter we'll probably evidence that. The fourth quarter traditionally has a much larger percentage of reorder business which will be challenged. Additionally we expect our recently acquired Wilsons outlet retail business and Andrew Marc business to reflect market conditions. Given the timing of these acquisitions, we've not yet had the opportunity to implement the additional efficiencies and improvements that each business requires. Andrew Marc will have a tough holiday as the luxury segment is under particularly pressure and we were not able to significantly affect the design or merchandising of this business for the holiday season. We're reacting with markdowns and trying to keep our inventory clean.

Going forward, we expect to expand our product mix, remerchandise the lines to better address key price points, look to generate licensing income and expand the profile of the brand with new partners. We remain confident that this acquisition will generate considerable long-term value for our business and for our shareholders. For our first holiday season with the Wilsons outlet stores, this'll be difficult as well. As we stated, improving the performance of this concept is largely about improving an assortment and incorporating the right brands into the mix. Again, due to timing, we were not able to achieve these improvements this year, although comparable store sales at Wilsons outlets are lower that be we planned, conversion rates have been stable. We think that the liquidation of the Wilsons mall stores that were not purchased by us confuse the customer for the concept this holiday season. These will not be issues that affect us again and we believe that next year we will see significantly better performance from our stores. Additionally, we believe we can leverage the retail infrastructure we now have to further develop the Andrew Marc brand and business. Although, we would be watching capital expenditures carefully and we will declare capital only with clear return objectives with continuing plans to test an Andrew Marc outlet concept.

One of our greatest strengths as an organization is how well we manage the diverse portfolio businesses. Even in the marketplace like the one we have today, which I think all of us agree is the worst we've seen in our lifetimes, we have an ability to seek out and take advantage of pockets of strengths to drive our business forward. The very short-term, we're planning to be aggressive with respect to assuring that we end the season with as clean an inventory as possible. We expect our fourth quarter margin to reflect this, and we expect to be in a relatively good inventory position by year end. We have an excellent portfolio of brands and businesses, we know how to reduce business risk and plan efficiently and we're increasingly diversified. We have a very talented team of employees and they're an important partner to retail at every tier of distribution. We will remain vigilant and focus on driving and protecting our profitability. Thank you. I will now turn the call over to Neal Nackman, our Chief Financial Officer, to review the financial results for the quarter in great detail.

Thank you, Morris. First for the quarter review. Net sales for the quarter were $351.6 million up approximately 29.6% compared to $271.2 million last year. Net sales of licensed apparel in the quarter increased to $229.1 million from $193 million. Net sales of nonlicensed apparel in the quarter increased to $98 million from $78.2 million in the prior year. Net sales from our retail segment are approximately $24.4 million primarily from the Wilsons outlet stores which we acquired in July 2008. The increase in our net sales of licensed apparel in the quarter was primarily attributable to sales of Dockers and Levi's products, under the new licenses acquired with the purchase of Andrew Marc in February 2008 and a liberal increase in our Calvin Klein product, including the CK performance division, which began shipping in the fourth quarter last year and an increase in Guess? outerwear.

The increase in net sales of nonlicensed apparel is primarily attributable to the Andrew Marc division acquired in February 2008 and accordingly there were no sales of Andrew Marc product in the prior year. This increase was offset in part by a decrease in our other nonlicense outerwear program. Our net income for the quarter increased to $28.8 million or $1.68 per diluted share, compare to net income of $23.8 million or $1.41 per diluted share in the same period last year. Our gross margin percentage increased to 32% in the quarter compared to 29.6% last year. Gross margins percentage in our license segment increased slightly to 32% this year or compared to 31.5% in the prior year.

The gross margin percentage in the nonlicense segment increased to 29.2% from 25% last year's quarter. The increase in the gross profit percentage in our nonlicensed apparel was primarily attributable to the margins in our Andrew Marc division. Gross margin in new retail segment was 43.6%. SG&A expenses increased $22.4 million to $58.9 million for the quarter from $36.5 million in the the prior year's third quarter. The quarter expense increases are primarily attributable to SG&A expenses, associated with the companies we acquired. We did not (inaudible) Wilsons outlet business or Andrew Marc last year. For the nine-month period, for the first nine months fiscal 2009, we reported net sales of $540.5 million up 38.5% compared to $390.2 million last year. Net sales of licensed apparel increased to $338.7 million, from $274.9 million. Net sales of our nonlicensed apparel increased from $169.8 million from $115.3 million in the prior year's period. Net sales in our retail segment were approximately $32 million for the nine-month period this year. Increased license sales with are most favorably impacted by our increase in sales of Calvin Klein licensed products. Sales from our Dockers and Levi's license acquired in February 2008 and increasing net sales of Guess? outerwear.

Calvin Klein product increased strongly in women's outerwear and dress category, but also reflecting increases from the performance product. Nonlicensed sales increased primarily due to our newly acquired businesses. Sales from the Andrew Marc, which was acquired during this year and incremental sales from the Jessica Howard division, which were only reflected in last year's results after the acquisition in May 2007. Net income increased to $18.1 million or $1.07 per diluted share of fiscal 2009. Compared to net income of $16.4 million or $0.99 per diluted share last year's comparable period. Gross margin percentages for the year to date nine month period increased 29.4% from 28.1%, in the same period last year or impacted by the same factors previously mentioned in the quarter. SG&A for the nine months include $43.6 million to $118.6 million and $75 million in the prior year. This increase is attributable primarily to expenses associated with the (inaudible) business we acquired in 2008. We expect that our SG&A will continue to increase the remainder of the year as a result of the Andrew Marc and and Wilsons acquisitions. We have a strong balance sheet, solid availability and a supportive of bank group. We're comfortable with our inventory position which reflects a 5% increase over the prior year after excluding acquired retail and Andrew Marc inventory.

Lastly, with respect to our full-year revised guidance. We are expecting to achieve approximately $715 million of net sales from the prior guidance of $730 million. Our revised sales guidance equates to 37.8% increase over the prior year. EBITDA forecasted a range between $40.5 million to $43.5 million or an increase of 7% to 15% from the prior year. This is down from our prior guidance of $54 million to $55.5 million. We are currently forecasting net income per diluted share of $0.95 to $1.05, down from our prior guidance of $1.35 to $1.40 for the current fiscal year ending January 31, 2009. Our reduced guidance is attributable primarily to weakness in the consumer environment. A drop in consumer demand and increased promotional activity in both the luxury and outlet business will lead to lower sales and margin than we originally anticipated. In addition, lower sales activities at retail have caused the (inaudible) and reorder business across some of our divisions. A reconciliation of EBITDA to our GAAP net income included in our press release which is posted on our website. I will now turn the call back over to Morris for some closing comments.

Thank you, Neal. Now we all can appreciate that in some ways these are unprecedented times with a great deal of uncertainty. However, we believe that lasting longer organizational improvement can result from a strong response to market challenges. We are a proactive and forward-thinking organization with a great deal of talent and opportunity. We expect that our high level of diversification will help protect our business and provide for growth opportunities regardless of the character of the market in general. It is important to recognize that this kind of market environment can promise significant changes in the competitive landscape. We believe there will be consolidation by retailers, competitors and suppliers. We believe that we will ultimately benefit from this consolidation in the form of increased market share and a wide availability of business opportunities. This is a time when strong companies distinguish themselves. We are one of those and we intend to demonstrate it. Thank you for being with us today. And we will now open for questions.

Thank you. (OPERATOR INSTRUCTIONS) And we'll pause for just one moment. We'll hear first from Eric Beder with Brean Murray.

Good afternoon.

Hi, Eric.

Could you talk about where we are with the other big rollouts for 2009, the Calvin Klein active wear and the Jessica Simpson rollout?

The sportswear collection at Calvin Klein is being received very, very well. As most of you know, this was in the hands of Kellwood last year and what we've done is we believe we've corrected the design, corrected the pricing and have a wide response from retailers. It's actually quite good. There are retailers that have been sitting on the sidelines for several seasons that are back with us buying the line. We have approximately 200 doors that we're launching with. And our booking's are ahead of plan.

The Jessica Simpson piece of business is definitely okay. It's not as -- quite honestly it's not anticipated to be as exciting as Calvin Klein. It's a niche business and it integrated quite well with some of our other pieces. It's not costing us an incredible amount of business or amount of money to be in this business, and this is an example of how we're levering our labor pool and real estate as well as outsourcing capabilities. We'll be shipping Jessica Simpson in February, and it's been pretty well received. We think we'll be happy with it. It's not going to change the course of the world for us, not the same impact as Calvin Klein, but we're in approximately 125 doors to start, which is more than acceptable.

Okay. In terms of Wilsons Leather, how has response been to some of the brand you put in and where do you expect to further penetrate that going forward?

Well, the problem that we've incurred with Wilsons is, number one, it's lost its identity, partly to due to the fact that as we were building the outlet for the last few months, they unanticipated they shut down all their mall locations, so there's some confusion as to whether the outlets are the same as the mall. We never acquired the mall locations. Our intent was to build outlets and have it as an independent retail on the G-III. The product that is currently in the Wilsons outlet is not planned product. We had no time to manufacture and distribute product as we finally consummated our deal in, I guess, late July and scrambled to get inventory in. So it is, at best, a patchwork job that is in the process of being collected. Part of the problem at Wilsons is the consumer has known Wilsons forever and is accustomed to walking in and finding an affordable leather jacket, a handbag, an accessory. We've confused them for the short term. There's a breadth of product that is not as focused as it needs to be, and we're conscious of it. We're working on it, and we believe even in a tough environment that we're likely to face next year that our Wilsons business will improve significantly.

Okay. Thank you.

Thank you, Eric.

We next have Jody Kane with Sidoti & Company.

Hi, thanks. Neal, if you can just talk about the gross margins for the quarter, about 32%. Can you just break out what that was and how you see it going forward?

I think that what I indicated before, Jody, is that the margin at one point in the quarter was (inaudible ) the retail is 43.6%. The nonlicense segment was 29.2% and the licensed business was 31.9%, and we really expect that perspectively, we're going to continue to see lift in the gross margin from the Wilsons business. I previously said (inaudible) quarter is 200 basis points probably down to about 150 basis points, then the rest of the year look forward to a pretty steady license steady to flat and licensed margin and an uptick in the license sector.

As you start to work through the Wilsons business, should that gross margin grow higher or is that 43% about as good as it gets?

I think perspectively we certainly planned for that to be higher this year and prospectively we expect that that margin will be higher in that business segment.

Can you talk a bit about the D&A for the end of the year, where you expect them to be?

We have -- we are proposing that it will be about $7.1 million for the full year.

On the balance sheet, the debt significantly higher, the short-term debts or revolving debt is significantly higher this time than last time. Are we going to see the same decline, the same level of decline as the end of the year using this quarter to pay down some debt?

The debt is up from last year about $170 million against last year’s $70 million. The debt is up because of the two acquisitions. In addition to that, our business has grown. We will and do expect that seasonal debt, it grows with the growth of our receivables and inventories. Similarly to what happened last year, we will have to pay down the net debt at year end. Then I expect that paydown will be greater as we move from Q3 to Q4. That will be greater reduction in debt going into Q4 than what we saw last year. We will reduce that debt significantly by year end.

And just finally, would you be prepared to give us sort of a range of where you expect the inventory to be at the end of the year?

I would tell you that our inventory level with a slight increase to last year and that would be an anticipation of the increasing business that we expect to have in Q1 of next year.

Thanks.

(OPERATOR INSTRUCTIONS) We'll hear next from Jim Duffy with Thomas Weisel.

Thank you. Neal, a couple of questions for you on the balance sheet. Can you give us the receivables and the payables?

Sure. The accounts receivable on October 31 was about $218 million. And the accounts payable and they include expenses of about $87 million.

Okay. And then did you say inventories x the acquisitions were up 5%?

That's right.

That's the right number? Okay. Then in terms of the revolver balance at year end, you said you expect to pay it down from where it is now. What level should we expect to see it at?

The -- we expect that to be down at least $140 million from this period of time.

Okay. Then looking at your senior leverage ratio, have you guys had conversations with the lending group to try to restructure? It looks like some of the covenants may even be antiquated relative to what your business model is now relative to when you signed up to the revolver?

We haven't had any conversations like that. The two covenants that we have really there are some consistent with the way the Company's always operated. There's a senior debt to EBITDA coverage which was similar to what we used to have which is clean up the cash coverage. That's total debt, that's just when we've always had. We don't anticipate any problem with that. The secondary, the second covenant is a fixed charge ratio that continue (inaudible) EBITDA covering the interest taxes and our capital expenditures at an appropriate level and we've had no problem at all with that covenant either.

Okay. Then are we getting to a point in fiscal 2010 where you may be likely to break out Calvin Klein as a percent of your overall business?

We're not up there yet. It's something that we'll probably evaluate when we get to our year-end reporting with our 10-K, but we're not there at this point.

And then with regards to licensed agreements, given some of the pressure that we're seeing from the economic environment, are there a number of licensed agreements that aren't hitting the minimums?

No. Quite honestly, all I know is more than coverage, price is comfortable. The troubled pieces of our business I think we described earlier, the Andrew Marc business as well as the Wilson business. Other than that, we're pretty much operating on all burners in a very, very tough environment.

Okay. Then final question, what channels do you likely use for the liquidation of inventory in the fourth quarter?

When it comes to licensed product, there are strict guidelines as to how we can move that inventory and it's your usual candidate, TJ Maxx, depending on the brand, nothing has changed.

Okay. Thank you. Good luck.

Thank you.

We're hear next from Mimi Bartow from Telsey Advisory Group.

Hi. Thank you. Could you just talk a little bit, is the coat business still 70% to 75% of the business and is the goal still to reach that 50/50?

Our coat business is approximately 70% of our overall business because it's strong piece of our business. But depending on where the market really takes us, we have an opportunity to build the Calvin Klein sportswear business into a very, very large business. And that all by itself can take down the percentages business relative as a whole. Our dress business is doing exceptionally well. So that also is bringing down the percentage but outerwear business is the on growth mode. I don't believe you give up any volume. Our brands are all doing well. Our private label is doing well in the coat area. It's still a nice growth area. That's a growing piece of our business, that will be sportswear, dresses, so it's a healthier business than it's ever been. Our seasonality is that we're very, very satisfied as to the progress we're making.

Okay, great. On the Wilsons business, obviously, everybody is struggling from a traffic perspective. We're starting to hear about pushing back on realtors, mall developers. Have you guys had an opportunity to sit down and talk about think about rent expense or think about that in terms of the outlook there?

All of our locations are outlet locations. They're not traditional regional malls, and our real estate department is aggressive in trying to renegotiate situations and better the terms that we currently have. I believe in the end, our terms become a little bit better.

Okay. Great. Thank you.

Thank you for your question.

We'll take a follow-up question from Eric Beder with Brean Murray.

Could you talk a little bit about the changes that we're going to see in Andrew Marc in '09 and how it's going to affect the business?

When we acquired Andrew Marc, it was very clear to us that from the design point of view, a price point of view and an organizational point of view, they were on the wrong path. So what we did is we -- I guess, we altered the organization to a major extent and what we were in the process of doing was rebuilding the collection. It's impossible to go back to accounts that had written the collection on a go-forward basis and tell them, guess what, we were wrong. We want to readjust it and want you to rewrite orders in different fashion. So the season was really cooked. We did the best we could do to adjust the factories that the product was being produced in. We offered some of the things that we felt was inappropriate. The basic fashion was what we inherited. So we've been aggressive in trying to reformat the business. Price points at block New York are changing. The business at Andrew Marc is marquee for us. It’s going to stay consistent with the original DNA, which was their prior to the ownership that we bought it from.

We try to keep it pure. We're in the middle of negotiations for another licensing agreement. So hopefully in the next 30 to 60 days we'll announce another license. We are changing our sourcing structure. We believe there are some benefits in margins that are quite significant, and we hopefully will either launch Andrew Marc outlet store in a new location or convert one of the Wilsons locations into Andrew Marc stores to test the concept. We're still very aggressive with that brand. We believe there's a feature for G-III, only a brand that is built with good integrity and there's a long-term benefit for it. This was a difficult year for the luxury tier. The stores that are most important for Andrew Marc are Neiman-Marcus, Bloomingdale's and if there's a sector that we all know it is the most, that's if. So all said I think we proved that we can even address that sector with this product with good price points and make it work, we do it with Cole Haan and clearly we believe that we can do it with Andrew Marc.

Okay. Great. Thank you.

And we'll take another follow-up with Jody Kane with Sidoti & Company.

Thanks. Morris, did you say you're incurring the expense design merchandise expense for some of the Calvin Klein business, the Jessica Simpson business and the Ellen Tracy business and you will only see revenues start to flow through next year?

Yes. Since our signing of Andrew Marc's -- oh, I'm sorry, not Andrew Marc, the Calvin Klein sportswear business, we've been very busy traveling, designing, hiring, allocating space and reviewing space, and there's a possibility that we get a little bit of product in for fourth quarter. That's doubtful. The benefits should start to come in first quarter, but we're incurring the costs in fiscal 2009 of building the collection and all the associated expenses with that. With Jessica Simpson very much the same way to a lesser economic strain, and Ellen Tracy is something we've been shipping all year. That wouldn't attribute any great expense to that at all.

Just on the -- now did you say you were going to pay down debt by $140 million or it's going to be $140 million?

We're going to pay it down by $140 million.

Jody, I'm sorry, our current debt is well below $140 million.

Oh, okay.

So you had the -- within $170 million and our current debt is south of $120 million. So we shouldn't have difficulty in getting to --

$140 million paydown.

$140 million paydown from the $170 million.

Perfect. Thank you very much.

We'll hear next from Todd Slater with Lazard Capital Markets.

Thank you very much. Morris, recognizing that none of us have ever seen this type of environment before, I'm just wondering what you anticipate will be your biggest challenges for 2009?

That's a real hard one to anticipate. I can tell you I'm happy with where we are. When you go to battle on this environment and you've got the best soldiers in the industry, I think you're good. I can't forecast what consumer buying habits will change to. What I can tell you is that we will be there, we'll be there in force. We described all of the reasons for it. We have the financial viability to sustain good business. We have great brands. These great brands are proving themselves out in this environment. The debt we really have are almost predictable. They're newly acquired properties that we did not have the time to turn around and bring into the G-III fold. The Andrew Marc piece will be a hurt for the end of the year as well as the Wilsons, and both for different reasons.

There's not been an acquisition that we've made that has not turned good, and I feel comfortable that most of these acquisitions are great for the future of our Company. Again, for different reasons. So we're positioned with retail outlet. We're positioned with great brands. We're positioned as the go-to resource for private label development. We seem to be a wonderful partner to the retailers for all of these reasons. It's going to be a reduction in factories overseas. The important ones are aligning themselves with us. They also see weakness in our world and they want to be assured that companies like ourselves support them in the way they need to be supported. We've made more trips than you can imagine to the Orient in the last three months to ensure the fact that our vendor base stays at our side and does what's required for the long-term benefit of business in the apparel sector. So I can't really tell you that what we're in control of concerns me. We've got it.

What I can't control, I guess I don't know and therefore it doesn't concern me. So we're reducing our head count. We are conscious of what the world is like today. We're all great operators. The leadership of this company does invest in the Company. They invest financially. They invest their blood and they all come from [acquisitions], they all come I guess self-led operations. And know what it's like to make payroll. They know what it's like to cut back, and they know what it's like to survive. And we've proved it out. I've gone through difficult times in my career. This is my 37th anniversary in this Company, and I've gone through many different cycles, betting on somebody that knows it, somebody that understands it, and yet I can't predict what the environment is going to do.

Okay. Fair enough. And just speaking of Asia since you mentioned having been there recently several times --

Not me. Our Company has been there to make sure that their sector of business is protected.

Sure. Okay. So is there an opportunity for lower sourcing costs given what's going on with raw material costs so on and so forth?

We are taking advantage of some of those situations. It's a wonderful thing that there is, despite the damage, but it's hard to take advantage when you're trying to insulate yourself from severe markdowns in inventory. There are several areas that have a confidence level. We as a group, we feel that they should buy early and take advantage of it. There's another segment is more reactionary and therefore I guess will get the benefits.

Okay. Great. Fair enough and all the best.

Thank you.

And we have no further questions from the phone audience at this time. I'll turn the conference back over to our speakers for any additional or closing remarks.

I thank you for being with us this afternoon, and we look forward to a different year. We'll talk to you at the end of next quarter.

That does conclude today's conference call. We'd like to thank you all for your participation. Have a great day.