G-III Apparel Group Ltd (GIII) 2011 Q3 法說會逐字稿

Good morning, ladies and gentlemen and thank you for standing by. Welcome to the G-III Apparel Group, Ltd. third quarter 2011 earnings call. Today's call 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 for you to queue up for questions. I now would like to turn the conference over to Mr. Neal Nackman, Chief Financial Officer. Please go ahead.

Thank you. Before we begin, I would like to remind participants that certain statements made on today's call and the Q&A session may constitute forward-looking statements within the meaning of Federal Securities laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the Company to differ are discussed in the documents filed by the Company with the SEC. The Company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to EBITDA which is a non-GAAP number. We have provided a reconciliation of EBITDA to our net income according to GAAP in our press release and on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb.

Good morning and thank you for joining us to review our third quarter results. With me today are Sammy Aaron, our Vice Chairman, Wayne Miller, our Chief Operating Officer and Neal Nackman, our Chief Financial Officer. Our third quarter is a record for both sales and earnings for us. We delivered excellent increases in both net sales and net income per share for the quarter. Our shipping numbers were strong in outerwear and our non-outerwear categories. I'll start with a few of the financial highlights from the quarter. Net sales in the third quarter increased 24% to $450 million from $364 million a year ago. We had better than planned growth in outerwear, dresses, suits and sportswear, as well as in our Wilsons retail outlet stores. Net income for the third quarter increased 32% to $42.7 million from $32.3 million last year. Our net income per share for the third quarter increased 15.5% to $2.16 from $1.87 in the third quarter of last year. This increase in net income per share of over 15% was achieved even though we had approximately 2.5 million more shares outstanding.

This quarter, we again saw growth in nearly every product category and tier of retail distribution. Our Wilsons retail business is off to a strong start for the fall and holiday selling season. Wilsons sales comped up 9%. Comps continued to accelerate in the month of November, both for sales and margin, and have remained on track into the first week in December. We've added seven new stores in the last three months and are planning for at least an additional 10 new locations next year. Our wholesale outerwear business was up low double digits and remains strong. It now represents approximately 55% of our total wholesale business versus 54% last year.

Calvin Klein, Guess, Kenneth Cole, and Andrew Marc all are having good seasons. Our sports license business, led by Carl Banks, is retailing well and benefiting from expanded distribution. We're also excited by the continued growth in our dress and sportswear business during the third quarter. We saw a great reaction to Calvin Klein, Jessica Howard, Eliza J., and Jessica Simpson dresses even during the Fall and Holiday season, which is not typically the strongest season for this business. We see the strength of our dress business continuing into spring as we have a strong order book. We've also added Guess dresses to our licensed portfolio. We will be shipping Guess dresses for late spring and think that this will be a powerful and differentiated line that will complement our dress labels. With respect to sportswear, our Calvin Klein business continues to be good and sell-throughs are very strong.

Our retail partners have experienced double-digit comp increases for this fall season and are giving us the best real estate positioning in the store, as well as expanding our doors. The fall retail door count for our Calvin Klein sportswear product is just over 500 doors, up from 300 at this time last year. Our Andrew Marc brand now has eight licenses for both men's and women's Andrew Marc categories. The majority of these categories are rolling out in 2011. As our product line expands, we'll be looking to open up select Andrew Marc stores to properly showcase the brand. Marc Moto jeanswear, handled by Jones New York, has just arrived in stores and we're excited about its potential. This gives us another avenue of growth for the Andrew Marc brand. Our retail team is also very excited to be putting plans into place to launch the new Vince Camuto retail concept for footwear and accessories.

We expect the outlet store concept to be launched in 10 stores for next year. Our Calvin Klein handbag and luggage launch is doing very well. For this spring, we'll be in over 300 doors for handbags, with a wide range of product, and over 800 doors with a more limited SKU count for luggage. The Calvin Klein brand is very powerful with great product at compelling prices. Entering into these two new categories will serve to continue our diversification efforts, reduce our seasonality, and contribute to our profits in the years to come. I'd like to recognize the continued support and the importance of our strategic relationship with PVH and specifically, with their Calvin Klein brand. We now have eight licenses with Calvin Klein, which is one of the world's great brands. Each of these is performing well at retail and is capable of continued growth.

The level of cooperation between our two management teams has fueled our growth and the growth of the brand at retail. As we move into a four season business and gain the experience of running our own retail stores, our data collection and planning processes are much more sophisticated than they were just a few years ago. This is helping us maximize our business and helping our customers maximize their business with us. I'm very proud of the job that our team here at G-III continues to do. As we look ahead to next year, we believe we have great opportunities with continued growth in our core businesses, further expansion of the Andrew Marc brand, the launch of two new powerful categories in Calvin Klein, the improvement in our Wilson stores and the launch of our new Camuto stores. The future has never looked brighter. I'll reserve some additional comments for closing, but now I'll turn the call over to Neal Nackman to go through our financial results in detail. Neal?

First, for the quarterly review, net sales for the quarter ended October 31, 2010, were $450 million, up 24% compared to $363 million in the year ago third quarter. Net sales of wholesale license apparel in the quarter increased to $320 million from $253 million, primarily as a result of increased sales of Calvin Klein products, most notably in the dress and women's sportswear categories. In addition, we have increased shipments of Guess and Kenneth Cole men's and women's outerwear. Net sales of wholesale non-licensed apparel in the quarter increased to $107 million from $89.4 million in last year's third quarter due to increases in our Andrew Marc product lines and in net sales of our profit label outerwear. Net sales in our retail segment increased by 8.1% to $32 million in the current quarter and $29.7 million in the comparable period last year. Our net income for the quarter increased to $42.7 million, or $2.16 per diluted share, from $32.3 million, or $1.87 per diluted share in the same period last year. We had 19.8 million weighted shares outstanding in the current quarter, compared to 17.2 million in the same period last year.

Our gross margin percentage was 34.2% in the quarter, compared to 34.6% last year. Gross margin percentage in our wholesale licensed apparel segment was 32.2% this quarter, compared to 32.1% in the prior year period. The gross margin percentage in our wholesale non-licensed apparel segment was 33.3%, compared to 33.8% in last year's quarter. Lastly, the gross margin percentage in our retail segment was 48.6%, compared to 47.7% in the prior year. SG&A expenses increased $13.4 million to $80.1 million for the quarter, and $66.7 million in the prior year's third quarter. This increase is primarily attributable to increased payroll, shipping, and advertising costs associated with our increased sales and profitability. For the nine month period, we reported net sales of $793 million, up 31% compared to $607 million last year.

Net sales of wholesale licensed apparel increased to $542 million from $403 million, primarily as a result of increased sales of Calvin Klein product, again most notably in the dress and women's sportswear categories. In addition, we have increased sales of Guess and Kenneth Cole men's and women's outerwear. Net sales of wholesale non-licensed apparel increased to $189 million from $147 million in the prior year's period, attributable to increased sales in our proprietary Jessica Howard and Andrew Marc businesses and increases in sales of our private label outerwear product. Net sales in our retail segment were $84.4 million for the nine month period in the current year, compared to $77.8 million in the prior year's period. Net income nearly doubled at $44.3 million, or $2.26 per diluted share, for the first nine months of fiscal 2011, compared to net income of $22.7 million, or $1.33 per diluted share, from last year's comparable period. The gross margin percentage for the year-to-date nine month period increased to 33.2% from 32.6%. The gross margin percentage in our wholesale licensed apparel segment increased to 30.7% from 29.8% last year and our wholesale non-licensed apparel segment, increased to 30.7% from 29.6% in the prior year period.

The gross margin percentage in our retail segment increased to 46.5% from 43.2%. Gross margin percentages improved as a result of better sell-through in all segments and increased sales volume in our higher margin Calvin Klein dress line. Our balance sheet continues to be in good shape. Accounts receivable at October 31, were approximately $297 million compared to $236 million at the end of the comparable period last year. Our inventory increased to $209 million from $127 million last year. The makeup of our inventory leaves us well positioned for improving fourth quarter sales and increased selling into the first quarter of next year. In addition to anticipated sales increases, our inventory's up over last year as a result of advantageous early buying and as a result of new replenishment programs in sportswear and suits.

Our bank debt was $167 million compared to $168 million last year and our working capital has increased by over $93 million compared to last year. For the year-to-date, we have spent approximately $15 million on capital expenditures, which was principally for the expansion of our warehouse and showroom space. These investments will make us more efficient both on the front end and back end of our operations. Lastly, with respect to guidance -- our revised guidance, we are now forecasting net sales of approximately $1.05 billion for our fiscal 2011 that ends January 31, 2011, up from our prior guidance of $1.025 billion. We are now forecasting net income in the range of $54.3 million to $56.3 million, or between $2.73 and $2.83 per diluted share for fiscal 2011, compared to our prior guidance of net income in the range of $52 million to $54 million or between $2.60 and $2.70 per diluted share. EBITDA for fiscal 2010 is now forecast to range between $99 million and $102 million or an increase of between 61% and 66% for fiscal 2010.

I'd like to take a moment to talk about input costs. While we are not yet providing guidance on next year, clearly, costs are rising. We're working to offset the impact of higher costs on our gross margins. Price increases will be a part of this. The strength of our brand and the high quality of our products should serve us well in this respect. We are looking at alternate sources of supply in some cases and some savings based on switching materials in others. Additionally, we will be working, as always, to offset some of this impact through the advantages of scale and diversification by product category that continue to come with our growth. In total, it remains our goal to continue to increase our operating margins as we go forward. That concludes my comments and I will now turn the call back to Morris for closing remarks.

Thank you, Neal. As you can see from our financial results, we've continued to carry momentum into the latter part of the year. We've shipped well, the lines have been well executed and we expect to have a strong year financially. We have excellent opportunities set to further carry the momentum into next year. Our current portfolio of brands and product categories have good organic growth opportunities and we have the financial strength to continue to grow through acquisitions. We are an increasingly diversified and powerful Company in the apparel industry. We're excited to build on that reputation. As always, we will remain dedicated to continuing to grow value for our shareholders, business partners, customers, and consumers. Thank you very much for your attention today and we're now ready to take your questions.

Thank you. (Operator Instructions) We'll first go to Todd Slater with Lazard Capital Markets.

Thanks very much and congratulations, everybody.

Thanks, Todd.

I was wondering if you could just shed some light on the dress license with Guess. I'm wondering if it's going to be similar to the structure with coats. They have some wholesale, there's retail stores, just talk a little bit about how that is going to be structured and what maybe the opportunity is there? And also, if you could just touch on the Calvin Klein handbag opportunity when that starts to kick in and what that might look like and when that will start? Thanks.

The Guess dress license that we've recently signed is an initiative that will be carefully calculated and distributed to the better department stores in the United States, as well as an effort to service the Guess stores, both internationally and domestically. It is not a very, very aggressive roll-out of product. It's going to be well-calculated, well-designed and well-priced and it will be a piece of our business that should grow over the next few years. We're not anticipating the same type of volume that we get from Calvin Klein. That's not the effort in this one. The product will hang in a more contemporary space and we're excited by that effort. The product's been well-designed. We will be shipping in March and the team is quite excited by it.

As far as the handbag launch, the handbag launch is an aggressive effort into trying to build this new area of business for G-III. The department stores have bought into it. The product will be on the selling floor at the end of January or early February. Contractually, we weren't permitted to ship the product before January 1. We've worked hard at designing it. We've worked hard at producing it, and the initiative now is ship it, get it sold, and work on the reorders that we're traditionally known to be able to service.

When you look at that -- the size of the handbag world and the industry, what's your sense about the opportunity in the Calvin Klein handbag line?

We believe that this could be one of the leading brands in handbags. It will be priced affordably. It'll be distributed in the same doors that we distribute our sportswear, dresses, and it's one of our larger initiatives. It'll rank, we believe, that within the next couple of years, this will rank as one of our top initiatives with Calvin Klein.

Could it be larger than the Calvin Klein dress initiative for example?

It could be.

All right, that's quite a significant opportunity. Well, thanks very much and have a very good -- good luck in the fourth quarter.

Thank you, Todd.

We'll move next to Jeff Klinefelter with Piper Jaffray.

Yes, congratulations, everyone, on a great execution this year. Want to look at the CK Sportswear business. Significant growth in doors this year and clearly implied strong sell-throughs as well. Morris, what are you thinking about next year? I know you're not looking at specific 2011 guidance yet, but will this continue to be a meaningful door expansion category as well as a sell-through business in the department stores? And any direction on that would be helpful.

Well, what I indicated a little bit earlier, the cooperation that we're getting from our retailers and the way that we're able to measure our business, our business performance, our distribution of product is a major asset, specifically in the sportswear side of the business. We monitor sales on a daily basis by door. We look at the potential of door expansion as well as the breadth of product and the amount of space that we occupy in the doors that we're in. We're working closely with our retail partners. Historically, this Company, as most of you know, started as an outerwear Company and as an outerwear Company, the process was a little bit different. You design product, you got your orders, you ship product, you collected money and you were done and you started all over the following year. Being a 12 month-a-year business, we now have information on a daily basis to help the retailer manage the floor that we occupy.

The sportswear -- sportswear is a difficult business to manage. We've got our arms wrapped around it now. We have field merchandisers, we have the cooperation of Macy's, Bon Ton, Dillard's, Belk, there's not a retailer that's not giving us the information that we need to process to better their business and ours. So we get better every single day and we're really excited about the future of the sportswear collection that we're producing. It'd be interesting if you had the time to see what the product looks like today in some of our department store partners. We're very, very proud of it. We're fixturing right. The price points are right. The designs are the best in the industry. So we think we have something very large to work with.

Okay, so you see that going forward, continuing to be a space expansion, a comp door growth and a door growth category?

Yes, I do.

Okay, thank you. In terms of the dress business, you did note that, that had been strong through the -- even through this season and continuing into spring. There's been some discussion in different corners of the industry that perhaps some of the dress trends have been slowing. Could you put a little bit more color around the category going into spring? Any metrics around how bookings are looking year-over-year?

Bookings are stronger going into spring than they were last year. We're not seeing the slowing in our brands for maybe some unique reasons. We have one of the best brands in the world to work with as our central client. We do private label, we have a couple of moderate brands and we're launching several that also show excitement. We really don't see the slowdown that we're hearing a little bit about. We test marketed spring products just recently in Puerto Rico and the sell-throughs were amazing for the spring product that we're really yet to distribute. So we're quite excited about the future.

Okay. And one last thing. Inventory clearly, everyone's focused on that this time of year, understand yours is up higher than projected sales for a number of reasons. Could you maybe suggest where you'd like to see inventory come in at year-end or when it would "normalize" and come down to a level similar to sales trend?

I can give you some of the rationale of why the inventory is where it is, and from our vantage point, it's a good thing. We bought it in a timely fashion. We know that historically we incur delays in delivery because of Chinese New Year and we anticipated a greater delay this year. So we have a good deal of our late fourth quarter and early first quarter inventory in house already. We anticipated some increases in pricing and some commodity-based items, so we took a greater position than we have historically. And we believe that the inventory levels should normalize, they should come out basically where the Street's expectations should be in late first quarter, early second quarter. So we believe we're in really good shape with inventory. The picture that you have is an October ending. Our November shipping is quite strong and the first week of December is also excellent. And our bookings, for the last few days in some of our remaining outerwear is greater than anticipated, so we should come in at the end of first quarter with what we might call the normalized inventory level.

Great. Thank you. Very helpful, Morris.

Thank you, Jeff.

Our next question comes from Edward Yruma with KeyBanc.

Hi, thanks very much and congratulations on a very nice quarter. Can you talk a little bit about the performance at retail? You saw some nice gross margin improvement. How high can grosses get back to in this segment?

I'm sorry, in what segment? Are we talking about Wilsons?

Yes, at Wilsons.

Oh, our retail ventures. We believe that the margins should be somewhere 50% to 52% margins. They had been there historically the way that we're sourcing product. The uniqueness of some of the designs that are now being put into Wilsons, the added fixturing, the store enhancements that we're working on should get us there in short time. We're, again, I think it's evident that we're comfortable with where we are at retail because for the first time in three years, we've opened seven new stores and we've got a plan for 10 additional stores next year. So we believe that the model works, the margins should improve as time goes on and we're really comfortable with the management team overseeing all of this.

Great. And more of a housekeeping question, but I think you indicated that Wilsons comps were up 9%, yet retail sales growth was only up 8%. Was that due to the calculation with the new store openings or--?

Yes, that's a shift in the doors, Ed. Some doors flowing up from last year.

Got you. I found your commentary on cost helpful. Morris, when you've gone to some of these retailers, have you tried to pass price along and what has their receptivity been?

Well, we first start with being as competitive as we can be on the buy. I spent some time in China two weeks ago, Sammy Aaron just came back on Tuesday. We're busy negotiating, making deals, providing incentives for our product providers, either through helping them finance if they need it or just unique ways of being as competitive as possible. And we believe that we tracked ahead of the field that we're in. There are price increases that we're anticipating. Clearly, labor is up. Cotton commodities are up. There's hardly an area of business that doesn't have an increase attached to it. But we believe we have it covered with a reasonable increase in price for the retailer and ultimately, the consumer. And yes, the retailer will raise their price to some degree, but I'm not seeing an increase that is really out of control. I think it'll temper itself as the next six or eight weeks go on and the production level for the Chinese domestic market slows down. I think we're fine.

Great.

I think the consumer will accept the price points that'll be out there for next year.

Great. Thank you very much and best of luck for the remainder of the holiday season.

Thank you, Ed.

We'll move next to Eric Beder with Brean Murray, Carret.

Brean Murray, Carret, good morning. Hello?

Hello. Hi, Eric.

Could you clarify something? You mentioned opening 10 Wilsons stores and 10 Camutos. Is that 20 in total or is it double counting? What is the -- how are you looking at that?

We're looking at it as 10 Wilson stores and 10 Camuto, a total of 20 stores. The Camuto stores are a joint venture between the Camuto Group and G-III, and the Wilsons stores are growing at their own volition. They're -- the Wilsons team will oversee Camuto, but we're on plan to open an additional 10 new Wilsons for next year and are negotiating additionally 10 new leases for the Camuto stores.

Okay and just for accounting-wise, the Camuto stores will be -- where will they be? Will they be fully on your income statement with a minority interest? How are they going to be accounted for?

It will be equity-like accounting so it will not be fully consolidated. It will be a one line reflection in the income statement.

Okay, you mentioned with Guess International expansion. I know international has not been a key focus. What is your thoughts now on the international and what are you planning on doing with that?

Well, what I did mention with Guess is our distribution of dresses to the Guess stores both domestically, as well as internationally. Paul Marciano has aggressively attempted to expand our business into the European market and he's been a great ally in that initiative. Corporately, G-III has taken a fairly aggressive position in trying to market products to the European market by way of designing and being the adjunct producer for the European market through China. So we've expanded our office, we've added staff, and we have a plan that seems that it'll be reality of more than doubling our international business, which sounds like a big deal. But from where we are today, the number will probably be around $30 million of international business that we will grow to this year. It's a really good start for us.

Great. And in terms of Calvin Klein sportswear, you've talked previously that it's going to be like a $200 million plus business. Do you see that growth pattern continuing with Calvin Klein sportswear? Its been a real winner for you guys.

It is a winner. It should continue to be a winner. We see no signs of slowing down and we feel better about our competency every single day and so does the retailer. So I don't think that the growth should slow down at all.

Great.

We're in a good position today.

Great. Thank you and congratulations on a great quarter.

Thank you, Eric.

We'll move next to Jim Duffy with Stifel Nicolaus.

Thank you, good morning. A couple questions. First, on the guidance, can you speak to the extra revenue relative to the previous guidance? What are the parts of the business that are specifically driving that?

Jim, it's growth in outerwear sales as well as in the non-outerwear business. We still continue to see increases in both of those general categories going into the fourth quarter.

Okay, great. Then speaking specific to the SG&A line, as you look forward Neal, are there any major SG&A initiatives that are on the horizon? Or are we in a situation where you think the business can scale without a lot of incremental investment on the SG&A line?

Jim, I think we're always looking back at all of the expenses that we run into on the divisions and always doing improvements, there was no major initiative Company-wide, but certainly we look at every division and how each division is performing. And we do believe that with the growth that's in the portfolio, that we'll continue to see G&A leverage on the existing infrastructure.

Jim, I'd like to add the fact that in our SG&A number this year, we have several new initiatives that we've not shipped a button on. And we've prepared product, we've hired staff, and there's a good deal, made samples, done a lot of traveling, so I'd say we derive the benefit of that next year. We have a bag business, we have a luggage business, we have a Guess dress business, we have Ellen Tracy, we have Vince Camuto. So there are several initiatives that all involve aggressive headcount and development that's all in our numbers this year versus the benefit that we derive next year.

That's helpful. Thanks. And then, Morris, I'm very interested your commentary about increased ability to collect and analyze data. Can you talk about some of the data that you now have access to and what you're learning from taking a close look at that?

Well, we have a very close alliance with Macy's and their new My Macy's concept. We meet monthly with the management team at Macy's. We go over current state of affairs in all our brands. We're one of Macy's Top 20 vendors regardless of classification or commodity. So their initiative is to grow their best partners and provide them with the best information that they could possibly do. So we're taking what's available from Macy's in the similar form we get it from Bon Ton, we get it from Dillard's, we get it from all our key retailers, and we keep it close to the vest, yet we circulate it internally. Calvin, being the premier piece of our portfolio, has access to an amazing amount of information from our retailers. So, what we collate in Calvin, we trickle down to our other areas of business and we instruct them, we instruct our managers how to better manage their piece with information that historically has not been available to the like of the secondary brand.

So it's working in helping maintain a higher gross margin plan. It's working in processing inventory that we have that doesn't have EDI attached to it and explaining to the buyer why the product needs to be distributed to key doors. So the entire process of what we do has moved forward by 10 generations in this last year and it's due to our strength in the industry and dominance in several classifications. So it's working. For me, this is information that I never even knew was available. I come out of the coat market, so the talent pool that we've put on has been amazing in instructing everybody how to operate their business.

That's great. Thanks for that perspective.

We'll move next to (inaudible) with Telsey Advisory Group.

Hi, good morning. Thanks for taking my question. Just wanted to -- you mentioned in the -- when you're talking about inventory that you'd implemented some new replenishment programs. Is that something that you haven't participated in before or is it just because these businesses are relatively new? And then, going forward, what percent of these businesses do you think will be on replenishment?

Well, we were never really in the, we were in the key item business in the coat area. But because it was so seasonal, you really couldn't carry inventory for a long period of time. You had, what we would classify as outdates, where you needed to really liquidate that inventory. You didn't want to carry it over. But there are key items in sportswear and dresses and boots, and we anticipate the same thing occurring in handbags, where we can drive business for the retailer. We believe that there are safe inventory situations for us and for the retailer and that's how we've managed to build a little bit differently than our predecessors that had the sportswear piece of the business under Calvin Klein. So it's a risk that the financially sound Company can take and it's a risk that a retailer takes advantage of and can build beyond their plan in the form of business.

How big do you think it will be going forward?

We believe that it could be about 30% of our overall business and classifications that I stated.

Okay, and then also, just given the warm start to the fall, did you see any shift in outerwear sales?

Yes. September and October could have been much better. But we really had a really good September and October. We had inventory to support a better business. The weather really opened up after our third quarter closed. The November weather cycle is much better for us than September and October. What we've got were several delays and receipts at the end of October that probably would have enhanced our business a little bit more had the weather been cold.

Okay, thank you.

Thank you. Thank you for your question.

We'll move next to Mike Richardson with Sidoti & Company.

Yes, congratulations, guys. Just a couple of quick questions. Just want to circle back regarding the price increases and when you thought those might hit. Is that going to be more of like a back half issue next year? And what size you might be looking at? Like mid- to high single digits or whatnot?

Mike, you're right. It is the back end of the year. We don't have a problem right now. We don't have 100% validity to what we're going to tell you, but we believe that we're in mid- to high single digit increases for the back end of the year. And we're quite comfortable with that and I think as I said earlier, it'll be accepted by the consumer.

Okay, one more for you. Obviously, gross margins have been strong the last year or so. Can you give us any idea going forward of how we should be looking about gross margins?

It really comes right back to the question in terms of cost and what price increases will be accepted and what we said earlier about the kinds of things that we're doing to try to minimize the impact of rising costs. So I think clearly, we're going to be under some pressure as far as gross margins go for next year. And we also feel that we'll be able to continue to maintain increasing operating margins with the SG&A leverage that we see in the business.

Okay, and I guess the push towards the higher margin, the dress businesses, the new Calvin Klein licenses that are coming on and continued success at Wilsons should help offset some of that -- any potential margin issues?

We hope so.

Okay, thanks, guys. Appreciate it.

Thank you, Mike.

And at this time, there appears to be no further questions.

Thank you very much and everybody, please have a good day.

And that does conclude today's conference call. We'd like to thank you for your participation.