G-III Apparel Group Ltd (GIII) 2009 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the G-III Apparel Group, Ltd., fourth quarter 2009 earnings call. Following the presentation, we'll conduct a question and answer session. (Operator Instructions). I would now like to turn the conference over to Mr. Neal Nackman, Chief Financial Officer of G-III Apparel Group. Please go ahead, sir.

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 as that term is defined under the Federal Securities laws. Forward-looking statements are subject to risks, uncertainties and factors which include, but are not limited to, reliance on license product, reliance on foreign manufacturers, risks related to the apparel industry, including changing customer demand in taste, customer concentration, seasonality, customer acceptance of new products, weakness in the retail sector, risks related to the operation of a retail chain, the impact of competitive products and pricing, dependence upon existing management, possible business disruptions from acquisitions, weak economic conditions, and the turmoil in the financial and credit markets, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission. The Company sees 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 us to review our year-end and fourth quarter results. With me, today, are Wayne Miller, our Chief Operating Officer, and Neal Nackman, our Chief Financial Officer.

Needless to say, we are all quite aware of the reduction in consumer spending and its effect on retail partners, as well as how challenging the outlook is for our industry in general. It is all too obvious that this retail environment has affected the equity value of nearly every consumer related company, including ours. While this economic environment will continue to confront us with numerous challenges, it is important to note that our business is fundamentally sound and well diversified, and that we have a solid balance sheet, extensive management expertise, and the operational flexibility to handle even a prolonged downturn in the consumer market. I would like you to keep this in mind as we report to you today. We will review the numbers for the fourth quarter and the full year in detail in a few moments.

I would just like to point out that we have seen over the past several years, record warm weather and more than one winter season, tough economic conditions and then this year, disastrous market environment. We performed relatively well during each of these periods, notwithstanding the adverse conditions, with this year being no exception. For the full fiscal year, we grew our revenues by 37.1%, and recorded $0.84 of adjusted, diluted earnings per share. As with many apparel companies, our market capitalization has declined below our book value, and this was the primary reason we were required to record impairment charges that resulted in our recording a net loss of $0.85. Our short term focal points for the fourth quarter were to clear inventory, reduce our seasonal borrowings, book spring business and reduce our cost structure. We accomplished each of these fourth quarter goals.

First, I want to address our inventory. Our core inventory position is up in line with our expected spring business. Our total inventories increased as of year-end compared to last year, most significantly because of the Andrew Marc and the Wilsons Outlet acquisitions. We have also built up inventory for our first shipment of Calvin Klein women's sportswear. Finally, our dress inventory was up in the fourth quarter in order to support expected growth in the first quarter. We're very comfortable with this inventory position and the strength of those businesses in particular.

Second, let's talk about our balance sheet. Our third quarter balance sheet reflected over $170 million of outstanding borrowings. In previous comments, we expected to end the year with $30 million in borrowing, and in fact, we achieved this paydown, ending the year with only $29 million outstanding. This is a normal pattern for us, given our seasonality. I would like to also say that we have a very supportive bank group, with whom we have a great relationship.

We expect dresses to be a good growth category for us this spring. The Calvin Klein dress business, which anchors this category for us, is planned out better than 30% this year. Our other dress businesses, which consist of Jessica Howard, Eliza J, Ellen Tracy, and Jessica Simpson, collectively are on target to have a very good spring season. We are creating a business model similar to what we have done in the outerwear business for the dress category, and we intend to also dominate this business.

Additionally, Calvin Klein women's sportswear division also booked well in its first season with us, and the early lead on sell through is very encouraging. We are outperforming the departments we're in and outperforming chief competitors. We've grown thorough penetration from 175, to 260, doors for this business. We continue to be very pleased with the strategic relationship we have developed with Phillips-Van Heusen and the Calvin Klein organization.

The last goal I mentioned was cost control. G-III has always had a pretty healthy dose of frugality as part of our culture. We generally run lean and watch costs closely. We have adjusted both head counts and compensation. Our keys of strong and lean have been streamlined, and we're satisfied that the costs, in general, are appropriate and balanced. Our results for the fourth quarter and the full fiscal year were primarily do to the result of Wilsons. I want to spend a little time discussing with you how we're improving this business.

We realized when we bought the Wilsons Outlet stores, that the merchandise plan for fall and holiday was already set, and we'd be able to make changes necessary to improve the economics of this store only in 2010. It was too late for 2009. While this is not ideal, we believe that we could operate them as is and realize an acceptable performance. As a result of the changes in the retail environment, these stores did not perform to plan. We believe that their performance can be improved by the following.

First off, allowing the merchandise and buying team to buy for the G-III a well balanced mix of select brands and private label products in advance of the upcoming season, rather than just an assortment of the year end season merchandise. We were able to provide new products to Wilson in the middle of December. While this was too late to have a serious impact on performance in terms of absolute dollars, the improvement in performance was immediate. We believe this provides support for our strategy this year.

Secondly, placing a stronger emphasis on store presentation of products, as well as improved training of sales associates, will improve our business. Third, providing the appropriate financial, operational and merchandising disciplines to the accessories buying team. Part of this improvement is to incorporate a much improved mix and presentation of private label and branded products. And lastly, reducing overhead costs in the distribution center in Brooklyn Park, Minnesota, by now leasing only one half of the existing building.

Wilsons is a core acquisition for us. Half of its business is in outerwear. We know this category as well, or better, than any company. This year, we will be focused on evaluating existing and potential retail real estate, intend to build a group of stores in a concept capable of supporting profitable growth over the long term. We believe there is a good value proposition for these stores that will get better by virtue of this comprehensive strategy. We are through the major integration work and now expect to begin to see the benefits of the well coordinated and increasingly vertical organization.

Andrew Marc was profitable for us this year. Although it did not make plan, it was accretive. We have improved the execution of design, merchandising and sourcing, and are making the changes this business needs to see better growth and margin. We have worked very hard on the design of Marc New York, and have created a broader range of price points to better serve the breadth of our distribution. We have also leveraged our expertise and relationships with G-III's global sourcing network to improve the value of the products for the consumer, and the margins for both us and our retail partners. We believe the Andrew Marc brand will support additional categories of product, and has the opportunity to be an important brand, both here in the United States and in the international marketplace. We signed two Andrew Marc licenses, and we are working on additional categories and overseas distribution agreements.

We are working to improve our sports licensing business. The difficult environment affected our sports specialty stores business this past year, especially in the men's area. One area of growth we had was in our women's initiative with Touch by Alyssa Milano. We were able to leverage Touch, and had growth with our overall women's sports business. We are working hard to obtain additional licenses from our existing league relationships and from new sports franchises as well. We have been able to achieve success in getting better prices from our vendors, which should relate to better value to our consumers and better margins for us.

Before I turn the call over to Neil, I want to provide you with some additional color in our distribution channel. We were very successful in the department store sector despite the challenging environment. We did an effective job of working with our customers to keep the business clean and the products moving. We had a diversified range of brands and products for this year. As in the past, the fashion components of various lines was good and prices were compelling, which gave consumers a reason to buy. There were no big surprises in terms of markdowns and the inventory position in the channel at the end of the season, and it was quite clean.

Calvin Klein has become the dominate brand in the outerwear category for the department stores. Guess had some of the single, best performing items for both men's and women's outerwear. And, Cole had a good performing year, and in general, our mix of brands has given us a dominant position in this tier of distribution.

The luxury tier was difficult for both retailers and suppliers. Luxury is the tier where we have the smallest degree of channel exposure. Despite the difficult retail environment, our Cole Haan line performed well and to plan. As you might expect, the message this year was strong businesses. The consumer is looking for value and shopping on price, and we were pleased to have the degree of business we had with the crunch of key mass retailers. At our high level of value, our mid tier business is also relatively good.

I would now like to turn the call over to Neal to go through the numbers in some detail.

Thank you, Morris. For the full year, we reported net sales of $711 million, an increase of 37% compared to last year's $519 million. Net sales of licensed apparel increased 18% to $430 million, and net sales of non-licensed apparel increased approximately 31% to $202 million. Net sales in our retail segment were approximately $78.5 million, almost all of which were from the Wilsons Retail Outlet stores that we acquired in July of 2008. Sales of our licensed apparel were most favorably impacted by an increase in sales of Calvin Klein licensed product, sales of Dockers and Levy's product, under licenses dated in February 2008, as part of our Andrew Marc acquisition, and an increase in sales of Guess outerwear. Calvin Klein product increases were stronger in the women's outerwear and dress categories, but also reflect sales of the new women's performance product.

The increase in net sales of non-licensed apparel was primarily attributal to incremental sales from the Andrew Marc and Jessica Howard acquisitions. Andrew Marc was acquired in February 2008, and accordingly, there are no sales of Andrew Marc product in the prior year. Sales of Jessica Howard product in the prior year were sales commencing after the May 2007 acquisition date. This increase was offset, in part, by a decrease in our other non-licensed outerwear programs.

Excluding non-recurring items, which I'll detail in a moment, the Company had adjusted net income per diluted share, in fiscal 2009, of $0.84, compared to adjusted net income per diluted share of $1.14 for fiscal 2008. Reconciliation of adjusted net income per diluted share to net income per diluted share in accordance with GAAP is included in the Company's financial statements in our earnings press release. We incurred a net loss under GAAP, for the year, of $14 million, compared to a net income of $17.5 million last year, and a net per share of $0.85 cents, compared to net income per diluted share of $1.05 in the prior year.

There were several non-recurring items that impacted both last year's and this year's financial performance. The current year was negatively impacted by an impairment charge for good will in our non-licensed segment, and an impairment charge in one of our trademarks, in the aggregate amount of $33.5 million on a pre-tax basis, or $1.69 per share on an after tax basis. The prior year's results were affected by three different, non-recurring items, the net effect of which was to decrease GAAP earnings per share by $0.09. Gross margin percentage for the year increased to 28.2%, from 26.9%. The increase was attributable to the higher gross margin achieved in the retail segment. The retail segment gross margins for the year were 37.9%. SG&A expenses, exclusive of depreciation, amortization and impairment charges, increased $63 million to $164 million, primarily as a result of the additional expenses associated with the acquired Andrew Marc and Wilsons Retail Outlet businesses.

In addition, to a must lesser extent, we incurred additional expenses this year as a result of the launch of Calvin Klein women's performance and sportswear product line. We expect our SG&A will continue to increase next year, primarily because we only operated Wilsons for about one half of fiscal 2009. Interest expense in fiscal 2009 increased by $2.4 million, to $5.6 million, primarily as a result of the higher average borrowings during the year, attributable to the two acquisitions we made.

Regarding our fourth quarter, net sales increased 32.6% to $107 million in the fourth quarter, compared to last year of $129 million. The sales increase was attributable to sales from our new retail segment. Also, sales were down slightly compared to the prior year. Adjusted net loss for the quarter was $3.7 million, or $0.23 per share, without taking into account the impairment charges previously discussed, compared to adjusted net income of $2.4 million, or $0.15 per diluted share, in the previous year, again without taking into account the three non-recurring items from last year.

We incurred a GAAP net loss for the quarter of $32.1 million, compared to net income of $1.1 million last year, and a net loss per share of $1.93, compared to net income per diluted share of $0.06 in the prior year. Our gross product margin percentage for the fourth quarter increased to 24.5%, compared to 23.3% last year. Similar to the full year, the increase was attributable to the higher gross margin achieved in the retail segment. The retail segment gross margin for the quarter was 34.4% and accounted for a 360 basis point list. Unlike the full year, the gross margin percentages were down in both the licensed and non-licensed segments in the quarter due to softness in the market at retail and the closeout channels.

SG&A expenses, exclusive of depreciation, amortization, and impairment charges, increased $19 million, to $45.5 million. As in the full year, this increase is primarily attributable to costs associated with the two acquisitions and the addition of the new Calvin Klein sidelines. Regarding our expense structure, we made infrastructure investments in new businesses that we expect to show significant growth.

So, while we anticipate expenses will be up in total, we have reviewed our operations and made significant personnel reductions in underperforming divisions, renegotiated many service contracts, and adjusted our organizational utilization, all resulting in cost reductions. We continue to strive to operate as lean and effective an organization as possible. Our balance sheet remains in good shape at the end of the year. As expected, accounts receivable collections allowed us to reduce borrowing by approximately $142 million, versus the third quarter. It left us with $29 million due on our revolving line at the close of the year. We're very comfortable with our liquidity position and expect working capital ease in the year ahead.

Inventory levels increased to $117 million from $60 million. Of the $57 million increase, $34 million is related to inventory from our two acquired businesses, which were not included in the year ago totals. Additionally, inventory also increased by $19 million for current orders and expected growth in dresses and the launch of the Calvin Klein women's sportswear program. The remaining increase of $4 million is attributable to our core inventory position.

Now, turning to guidance. With the outlook in the first quarter and April 30, 2009, the Company is forecasting net sales of approximately $105 million, compared to $75 million in last year's first fiscal quarter. We are also forecasting a net loss of $8 million to $8.8 million, or between $0.48 and $0.52 per share for the first quarter, compared to a net loss of $6.9 million, or $0.42 per share in last year's first fiscal quarter. The increased loss is primarily attributable to the infrastructure necessary to support the Wilsons Retail Outlet business, which experiences seasonality similar to our wholesale outerwear business. These were not costs incurred in the first quarter of last year.

And with that, I'll now turn the call back over to Morris.

I think we performed well despite the challenges during our peak season. We are a great, well managed, disciplined operating Company, and that will enable us to compete and to win, regardless of the environment. We've not changed our strategy, though we are operating with a sharper pencil and an extra level of prudence. Over the next two years, we believe that we have a fundamental opportunity for growth and for enhanced levels of profitability with the breadth portfolio of brands that we offer in multiple channels of retail distribution.

The long-term picture for us has not changed. I believe we are the best outerwear company in the world. I think we are on track to becoming one of the strongest dress and sportswear companies in the market. We are on the path to fulfilling our strategic goal of becoming a well diversified, four season men's and women's apparel company. While these are tough times, we have a great team, a strong balance sheet, a lot of competitive strengths, and the organizational will to succeed. We have the right mindset to deliver value to our shareholders, and the track record to back it up.

For the time being, the world has changed, but when the dust settles, I believe that we will have increased our market share, further diversified our business, and done a better job of creating value than the vast majority of our industry. Thank you, and now, I'd like to open the call for questions.

(Operator Instructions). We'll go first to Eric Beder with Brean Murray.

Good afternoon, guys.

Hi, Eric.

I have just a few questions. What was the Wilsons letter of sales in Q4?

Q4 sales were approximately $49 million, Eric.

Okay, you did last year in Q1, you did about $75 million in sales. Could you take us through how that goes? Just conceptually, where we can think about Wilsons in terms of Q1, because obviously last year was not part of the mix here?

I'm sorry, could you repeat that question.

Okay, last year your sales of $75 million in Q1. This you're you're looking for about $105 million. I'm just trying to figure out where the delta is there and how much of that is Wilsons Leather?

A good portion of that is Wilsons Leather, the increase. A good portion of the increase from $75 million to $105 million is Wilsons.

Okay, and could you tell me a little bit more about the strategy with Andrew Marc, setting up the pricing to give it a little wider breadth?

What we have done Eric is we have taken the price points down in Marc New York and made them an acceptable price point for reasonable value of at the Macy's level, and it's worked. We have fairly good distribution going forward. Our order book for calendar 2009 really reflects the acceptance by this sector or the new price point. And, we are insulting Andrew Marc from any promotional activity, quite honestly. It is not a large business. It is a very special business and we have the ability of protecting the brand, and the licensing categories because we're protecting the brand.

And could you talk a little bit about what kind of response you're getting to Calvin Klein sportswear and to the Jessica Simpson rollout?

The Calvin Klein sportswear collection was shipped a little later than we expected. Quite honestly, we thought we might get a little bit of the business in fourth quarter. We got very little in. Our deliveries to ourselves, not as far as the retailer was concerned, were a little bit late. We had received an entire collection before we shipped it. So, it really reflects more of the first quarter shipping. We're outperforming the department, and as I said earlier, we're outperforming the key competitors in this sector.

As far as Jessica Simpson, it is not a huge rollout. We got good distribution at Dillards and Belk, and that has worked. We've gotten some reorders, but that is not planned to move the needle. The important piece is the sportswear piece, that's Calvin Klein, and it is performing to expectation.

Great, thank you.

Thank you for year question, Eric.

And we'll take our next question from Jim Duffy with Thomas Weisel Partners.

Thanks, hello. I recognize that it is early in the process here, but as you do your business planning for fiscal 2010, what is the expectation for outerwear orders?

The expectation for this time period has been met. Our bookings are very strong in outerwear. Calvin Klein, their bookings are ahead. Kenneth Cole is ahead. Guess is way ahead, in both genders. So, outerwear business seems to be looking ahead of our expectations for the year. And coupled with the fact that all of Macy's is not in, because of the management changes there, I believe we'll have a very good outerwear year.

You say ahead of your expectations. What were your expectations?

They were planned ahead of last year's business.

Okay, very good. And then, with regards to the Wilsons stores, you previously talked about a 10% lift in the comp to make it accretive in fiscal 2010. Clearly, the performance has been disappointing late in the year. What type of comps do you think you need to see now at this juncture to make it accretive in fiscal 2010?

The comps we're looking for are similar type of comps sale increase, but the real story for us is to get margin improvement in that business. The retail segment closed at 38% gross margin, and that is well short of what we would expect to be operating at normally.

Okay, then a lot of retailers have had success taking SG&A out of the mall. You see similar opportunity with the Wilsons stores or are you pretty much at bare bones level?

Well, we're looking at it. We are not in the malls. We're in the outlet centers only. And, we're talking to our developers. It's a hard push. We are looking at underachieving stores and seeing what we can do about those. We shrunk the size of our warehouse facility in Brooklyn Park, so that saves us quite a deal of money. We operated out of twice the space this past year. And, our executives have taken the salary cut at the retail level as well.

So, we are not at bare bones. We are looking to improve the business, and that really requires a little tender loving care. We need to build the appropriate model that we can prosper with, and we're not there yet. There is a lot of hard work to be done. But I believe it is a wonderful acquisition for the future, and unfortunately, we acquired it in tough economic times, and the retail numbers support that.

And then, Morris, did I hear you plan to open additional handful of Wilsons stores? Is that to define a new concept? Is that the idea behind that?

No, I don't think I said that. If I did, I didn't mean to. What we're looking at is building the appropriate model with the stores that we have. And more than likely, that would mean strengthened door count as leases expire. And maybe, simultaneously opening one or two stores. But the net net I would tell you for the short term is shrinking the door count, not increasing the door count, and improving a couple of our concepts. The airport needs work, and they are showcases for the product. We only have two airport stores left, one in Tampa and one in Minneapolis. We're going to work hard at making them profitable. It is a little bit different than the outlet concept, but we have management in place that can handle that, and that will really be the message of the brand. There is so much traffic that goes through Minneapolis and Tampa that we use that as a marketing vehicle as well. So, I guess the short answer to your question is, no we are not opening up additional stores.

Okay, great. And then final question, a house keeping question. What was the receivable number at the end of the quarter?

About $67 million at the end of the quarter.

Thank you so much, and good luck.

Thank you.

We'll take our next question from Todd Slater with Lazard Capital Markets.

Thank you. Hello, everybody.

Hi, Todd.

Just a follow-up on Wilsons, if I may, with respect to the outlet division, what is the biggest opportunity, you think, this year and what do you see as the biggest challenge? And then, what do you think Joel will be the most focused on?

I guess we're all focused on getting the right product in the stores. Part of the problem was our belief that if you put the appropriate brands in, and you priced them competitively, we would generate the volume necessary to prosper. What we forgot about was really presentation. We put a lot of inventory in the stores, both in outerwear, as well as handbags and accessories, and we didn't send a good message to the consumer. When the consumer walked in the door, it was a confusing door. In the past, the legacy and the heritage of Wilsons has been leather, and you would be hard-pressed to find a few racks of leather garments in the Wilsons stores. We shipped the pleasure of the day, which was wool. The second most important category was down, and we kind of let leather sit in the background.

On the accessory side, what we did is, we bought 500 stores worth of closeout as Wilsons' mall operation was going out of business. We thought we made a great deal, and we brought the existing inventory that was in the warehouse, and very little it was in the stores. We thought it was clean, we thought it was marketable at a premium, and quite honestly, in our box it didn't work quite as well. So, we had 500 stores worth of inventory plugged into 120 stores, and it was an ugly scene.

So quite honestly, it was over assortment, not a clear message. And I think management, I know management, both on the wholesale and the retail side, agree that this is not the future, and we're working hard at sending a clear message, which you will see, probably, within the next three or four weeks. You will see a different Wilsons in the centers.

Okay, great, and then as sort of a follow-up. That is helpful. Thank you. What do you see as the right mix right now between clothing, be it cloth, or leather or down, or any other types of apparel, and any accessory thought? Also, do you think there is any value and can you do it with the leases and transitioning, any of the outlet stores, to let's say the Andrew Marc outlet?

The right mix. I'll answer both of those questions. The right mix for retail is different than the right mix for wholesale. Our retail concept is going to be significantly more leather. There is leather demand. There is not enough product in the centers to support that demand. And Wilsons will be that provider. We'll get great leather products out there. We'll go back to the message that Wilsons really stands for.

We'll have some more products. We'll have a handful of brands, most of them being ours. And we'll do about 35% to 40% of our outerwear business in private label, that we neglected last year. The private label will insulate us from the competition. It's hard to compete with somebody like Saks that's setting up at a given time with a brand that 's the same in the outlet centers. So, we believe that the offset will be important by having private label. As far as being able to transition, some of of the Wilsons stores into Andrew Marc, that is a long term goal. It is nothing we plan on doing this year. We might choose one location and build that model, but this is not the year that we're going to be CapEx intensive. It would cost quite a bit of money to build the Andrew Marc concept in the appropriate box and we're not willing to do that today.

Got it, okay. Well, thanks, and all the best.

Thank you Todd.

We'll take our next question from Larry Leeds with Buckingham Capital.

I'm going to defer and pass it over to my colleague, Lee Backus here. Congratulations, Morris, on what you're building here.

A couple more questions, Morris. First, on the extra inventory you bought with Wilsons. Have all the markdowns been taken last year so the inventories are now in pretty good shape for Wilsons?

Markdowns were taken last year and first quarter of this year. We're in the middle of liquidating all that inventory.

Embedded in your guidance for Q1, what kind of losses for Wilsons are included in that?

I'd say most of the incremental loss is attributable to the Wilsons operation.

The incremental loss, so on the business other than Wilsons for Q1, what does it look like? Is it up over last year?

It is up over last. We're doing better than last year. The dress business is as we described, it is strong. The sportswear business has been launched. The piece that we're not talking about is the Andrew Marc piece that we bought this past year. And we had very little of Q1 in the Andrew Marc business last year. So, we'll take a little additional loss for Andrew Marc in Q1.

Okay.

Between Wilson's and Andrew Marc, I think that is basically the difference.

Okay. You said bookings for fall are up. Any additional quantification other than just up?

The quality of the orders are pretty big. You know the concern that one might have in this industry is the quality of the retailer that you're shipping and whether you'll ultimately be able to ship all that you booked. And in reviewing our order book, we have got some very solid orders. The biggest percentage of our orders we're comfortable with on a credit check for the future.

What percentage of your business is now outerwear?

We're down to about 74%, from 80% last year.

74% you're projecting this year from 80% last year? Is that the figures?

Yes, that is the percentage of our wholesale figure.

Yes, and those bookings for that 74% are up?

I prefer to say they're about flat.

About flat?

Yes, we made some adjustments that are a little bit hard to monitor. But, I would be comfortable in telling you those pieces are flat. And, I might add that our margins are better. We bought better. We have no problem on the buy side, and we have been able to pass some of the savings on to the retailer, and preserve some of it for ourselves.

Okay, so your IMUs are up?

Yes.

Great, thank you.

(Operator Instructions). We'll go next with Mimi Bartow with Kelsey Advisory Group.

Hi guys, thanks for taking my question. I was just wondering if you would highlight some of the changes we're going to see in 2009 at Andrew Marc and how you're thinking about the opportunity for that brand in 2009, given some of the relative softness that you saw in 2008?

Well, as I said earlier, you will see pretty consistent product within the luxury tier, and no major changes, and that would be with the Andrew Marc brand, both mens and ladies. A little bit of handbag business that we are producing right now. And maybe toward the tail end of the year, you will see men's accessories and small leather goods that would be supportive of what we're creating at the luxury tier. And the change, the significant change really will be in the Marc New York piece of our business. You know we brought down the price points. The retailer has accepted those price points and the fashion that we have created for those price points. So you will see two tiers of Marc New York, and again, the consistent tier of quality, fashion and price point that's at Andrew Marc.

And we are testing, I might add, a dress collection. We put together a small group of dresses that we intend to bring to market, and utilize our own brand for some of the products that we're now being known for. Dresses are a perfect category. We do it well, and the category is high, so we believe we can get a little bit of placement on the dress side of the business. And when I spoke earlier about our sourcing, we're buying the product better, our margins are going to be better, and we expect Andrew Marc to improve this year. And as I said earlier, in a tough year, a very difficult year, with liquidating some of the inventory that we would have preferred not to have bought, we still have accretive acquisition. This year, the inventory is all our choice, and we believe it is much better quality than we had last year at this time.

Sounds great. And, just one other. How are you thinking about inventory levels at the end of the first quarter, just for core inventory?

The core inventory should be comparable to last year. The first quarter, last year, we didn't have the Wilsons business, so you'll see a large increase for that. And again, we didn't have the sportswear business at the same time also, so you'll see increases related to that as well.

Okay, great. Thank you.

Thank you for your question.

And ladies and gentlemen, that is all the questions we have in the queue at this time. I would like to turn the call back over to management for any closing remarks.

Thank you, very much, for your questions and have a great afternoon.

This does conclude today's conference call. We appreciate your participation. You may disconnect at this time.