Interparfums Inc (IPAR) 2015 Q4 法說會逐字稿

Greetings, and welcome to the Inter Parfums fourth-quarter 2015 earnings results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded.

I will now turn the conference over to Mr. Russ Greenberg, Executive Vice President and Chief Financial Officer. Thank you, Mr. Greenberg. You may now begin.

Thank you, operator. Good morning, and welcome to our 2015 fourth-quarter and year-end conference call. As usual, I will first review our financial highlights. And then Jean Madar, Our chairman and CEO, will summarize recent developments and upcoming plans. After that, we will take your questions.

Before proceeding further, I want to remind listeners that this conference call may contain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. These factors include, but are not limited, to the risk and uncertainties discussed under the headings Forward-Looking Statements and Risk Factors in our annual report on Form 10-K and the reports we file from time to time with the Securities and Exchange Commission. We do not intend to, and undertake no duty to, update the information discussed.

When we refer to our European-based operations, we are primarily talking about sales of Prestige Fragrances conducted through our 73%-owned French subsidiary, Inter Parfums FA. When we discuss our United States-based operations, we are primarily referring to sales of Prestige Fragrances products conducted through our wholly owned domestic subsidiary.

Fourth-quarter results, like the first three quarters of 2015, were impacted by the continued stress of the US dollar versus the euro. As we have noted in previous filings and conference calls, a strong dollar negatively affects sales comparisons. And because almost 40% of net sales of our European operations are denominated in US dollars, while almost all costs of our European operations are incurred in Europe, a strong dollar favorably affects the profitability measures.

To summarize, fourth-quarter net sales declined 5.4% to $118.3 million from $125.1 million. At comparable foreign currency exchange sales rate, net sales increased 1%. European-based operations generated net sales of $86.6 million, down 5.3% from $93.6 million. Sales by US-based operations were $29.7 million, down 5.8% from $31.5.

Gross margin was 64% of net sales compared to 59.4%. SG&A expense as a percentage of net sales was 60.4% compared to 55.9%. Operating income was $4.3 million compared to $4.4 million, and represented 3.6% of net sales in both periods. Net income attributed to Inter Parfums, Inc. was $1.9 million, or $0.06 per diluted share, versus $3.3 million, or $0.11 per diluted share. And that decline was primarily due to an increase in the income taxes.

Keep in mind as I summarize the full year that the average dollar/euro exchange rate for 2015 was $1.11 as compared to $1.33 for 2014. So while reported 2015 net sales declined 6.2% to $468.5 million from $499.3 million, at comparable foreign currency exchange sales rates net sales actually increased 1.5%. In 2015 net income attributable to Inter Parfums, Inc. was $30.4 million, or $0.98 per diluted share, as compared to $29.4 million, or $0.95 per diluted share in 2014.

The increase in gross profit margin for the year as a whole was primarily attributable to the strength of the US dollar relative to the euro for European operations. And for US operations, it was due to a greater concentration of higher margin prestige brand sales as compared to lower margin specialty retail and mass market product sales. The gross profit margin for European-based sales, which reached 65% in 2015, is up from 60% in 2014. The 2015 gross margin for US-based operations was 50%, up from 48% in 2014.

Selling, general and administrative expenses as a percentage of sales was 49% in 2015 versus 47% in the prior year. For European operations, SG&A expenses increased 2% in 2015 and represented 52% of net sales compared to 50% in 2014. With European-based constant currency sales up only 1.8%, it is very difficult to gain leverage over fixed costs while still maintaining the operating platform that we need to support planned growth.

For US operations, SG&A expenses increased 9% in 2015 and represented 39% of sales as compared to 36% in 2014. This increase relates to growth from our newer prestige product licenses, such as Oscar de la Renta and Dunhill, which bear royalty and advertising expenses. In 2015 promotion and advertising included in SG&A expenses of $83.8 million were 17.9% of net sales, as compared to $86.7 million, or 17.4% of net sales in 2014.

As we regularly point out, a greater portion of our advertising spend is budgeted for the second half of the year, with the highest percentage in the fourth quarter. In fact, promotion and advertising expense included in Q4 2015 was about $32 million, or 27.4% of net sales, just a little higher than the 25% of net sales spent in the fourth quarter of 2015.

Below the operating income line, there was a $900,000 loss on foreign currency and only nominal net interest income in 2015, as compared to a $900,000 gain on foreign currency and a $2.4 million in net interest income in 2014. And finally, our 2015 tax rate was 35.6% versus 34.2% in 2014.

In 2015, we generated cash flows from operating activities of $50 million, further strengthening our already strong financial position. Long-term debt including current maturities aggregated $98.6 million, which financed our May 2015 acquisition of the Rochas brand. At year end we had working capital of $338 million, including approximately $260 million in cash, cash equivalents, and short-term investments, for a working capital ratio of 3.6 to 1.

The strength of our balance sheet, along with favorable near- and long-term outlook, were among the reasons why our Board of Directors authorized a 15% increase in the annual dividend to $0.60 per share. Our next quarterly cash dividend of $0.15 per share will be paid on April 15, 2016 to shareholders of record on March 31, 2016.

As we reported earlier today, assuming the dollar remains at current levels, 2016 net sales are expected to be in the range of $500 million to $510 million. And net income attributable to Inter Parfums, Inc. in the range of $1.05 to $1.10 per diluted share. Please keep in mind as we reported 2016 quarterly results that in addition to the typical seasonality associated with our business, which favors the second half over the first, our new product rollouts are heavily weighted toward the second half of the year.

Jean, please continue.

Thank you Russ, and good morning everyone.

he release that we issued in January covers fourth-quarter sales activity, so I will look back at the year as a whole before looking ahead. 2015 was really a highly productive year on many fronts, including market penetration, new product launches, and the addition of new names by way of acquisition and license agreements.

On the subject of European operations, we saw increased market penetration in our three largest markets: North America, Western Europe, and Asia, which saw, in local currency, sales growth north of 25% for the US, 10% for Europe and 3% for Asia respectively. And we also achieved top-line growth (technical difficulties) such as the Middle East and Eastern Europe.

Looking at our popular brands, Mont Blanc achieved almost $100 million in sales, $97.7 million to be precise, making it once again our largest-selling brand. In 2015 our [newest fragrance] was Lady Emblem, the first successful women's fragrance in Mont Blanc. For Jimmy Choo, we did $92.4 million in sales. And for (inaudible), our fastest growing brand, with sales up 18% in dollars but 41% in local currency. We launched for Jimmy Choo a fragrance called Illicit, which is our third women's scent under the brand last year.

In these two cases, Mont Blanc and Jimmy Choo, and for that matter our entire brand portfolio, the success of our fragrance brand relied on the continued sales of the traditional brand, not just new ones. Let me give you some highlights from our US operations, including the new fragrances, which has an extraordinary strong performance (inaudible). The new (inaudible) sales increased [37%], up to $2.3 million as compared to 2014, making the (inaudible) the largest brand within our US operations. Another US highlight is Oscar de la Renta, where 2015 brand sales increased 18% as compared to 2014, benefitting from the 2015 launch of Extraordinary by Oscar de la Renta.

In 2015, we inked three agreements that are very important [facts] to our long-term goals. We acquired the Rochas trademark in May. And with that transaction we became the brand owner for a fragrance, as well as the licensor for the [grand special] [I would like to repeat that]. One month earlier we signed a global licensing agreement with Coach. And most recently, our license with Mont Blanc was extended to 2025.

Let's now move the discussion to the future. One thing you should expect is the continued [progressive] rollout of Jimmy Choo Illicit, which debuted in 2015 and will continue in the first two quarters of 2016. Capitalizing upon the successful establishment of (inaudible) and flankers has always been a relying heavily winning strategy for the (inaudible). For (inaudible) agent will be joined by (inaudible) and spirit beginning this year. And similarly, we will launch the Jimmy Choo Illicit Flower line as an addition to Jimmy Choo Illicit. In 2016 we will introduce a new women's and a new men's fragrance for Van Cleef & Arpels.

The new women's global fragrance has, of course, our first-ever Coach fragrance for woman will debut in the fall. We will also have Rochas (inaudible) fragrance for the full year, along with royalty revenues from its fashion business. Finally, we are still on target to launch our first new women's scent for the Rochas brand in 2017 with a (technical difficulties) launch.

Our [gift] plan includes growing our existing brand while (inaudible) the new (inaudible). Our first (inaudible) internationally in August. Our first [ranker] for is [Extraordinary Fatale] (inaudible). As I mentioned in our last conference call, we are reintroducing the 1977 signature women's (inaudible) with two brand extensions, one we call (inaudible) Noir, which targets (inaudible) in the Middle East and UK, which (inaudible) Roche later in the spring. Then in August, [returning to] the US and Canada and Latin America, we'll begin (inaudible), the second brand extension for Oscar. (Inaudible) we are adding another branch to the Icon 73, the Icon Elite, and this will be launched in the third quarter of this year. Also coming to the market in the second half of the year are two new agent (inaudible) called Aphrodisiac and (inaudible) Aphrodisiac.

Throughout the year, we have new scents and flankers for Ana Sui. (inaudible). Media will be launching [du jour] scents for guys and girls under the (inaudible) brands internationally. And for Abercrombie & Fitch, we launched a new men's scent. And it is scheduled to roll out internationally in July, with the women's version debuting in the early 2017. These are both very, very positive developments for the US division for (inaudible) and Abercrombie.

We have every reason to be confident in our Company structure. The confidence comes from the breadth of our established brand portfolio. It comes also from opportunities arising from new relationships, our global distribution (inaudible), the highly positive and creative talent pools, and let's not forget the very strong financial position, as Russ mentioned before, and the track record of success. (Inaudible) it is for good reason.

Thank you for your patience. Operator, we can open the floor for questions, please.

(Operator Instructions)

Our first question is from Linda Bolton Weiser of B. Riley. Please go ahead.

Hi. I didn't quite catch. Can you just repeat, I know you were speaking about it, Jean, the major -- I think you mentioned there are a launch for Jimmy Choo Flower or something? And also, can you mention if there's any new launches for Mont Blanc in 2016? And what the timing of those for each of those two brands would be?

Actually there's Jimmy Choo Illicit Flower, which is an extension, if you will, off of the Jimmy Choo Illicit brand. It's like a flanker. And for Mont Blanc there's also a flanker. It's called Legend [Street]. And that is also launching early in 2016. Again, that's also a flanker brand. And usually what flankers are, are we tweak the scents a little bit so -- for distribution in certain parts of the world where they like a (technical difficulties) stronger or a lighter type of scent.

(Inaudible) As we said before, Mont Blanc will (inaudible) $100 million, Jimmy Choo is not far from there. We have two very, very successful franchise. Thank you, Linda. Any other questions?

Yes, yes. Actually, can you talk about -- well, just specifically, I guess I'm thinking that constant currency sales and EPS would actually be down in the first quarter, down year over year. Am I thinking correctly on that?

I can't comment.

We do not disclose sales by quarter.

I mean, clearly we are stressing the fact that a lot of the new product launches are geared for the second half of the year. So if that's where your model is coming out to, then I have no reason to think that you're wrong or right. I really cannot comment. We only issue our guidance for the full year. But knowing we specifically stress the fact that our new product launches are geared for the second half of the year.

Okay. And then can I ask about gross margin? It was actually even stronger than I would have expected. And I know the currency situation is one of the reasons. But it just seemed very, very strong. And you mentioned mix, I think.

But are you still thinking gross margin can be flattish in 2016? I think you had sort of indicated that a while ago.

Yes, I certainly don't think it's going to expand further than it has. The gross margin, what we said on our remarks and what I have indicated in our filings, clearly the European operations is influenced significantly by the fact of the strong dollar throughout the entire year of 2015.

The dollar, if it weakens, you could see a decline in the margin. If it maintains where it is, I certainly don't expect it to expand. I expect it to be kind of flat.

On the US side of our business, we've seen a consistent gain of 2% over the last two years. We went from 46% to 48% to 50%. And I think that has an opportunity to expand a little bit more as we move even more so into the prestige-type of fragrance business, moving away from specialty retail, if you will.

Yes.

Okay. Can you just explain, I was a little confused by the minority interest line. It usually detracts from net income but it actually added to net income. And then your tax was unusually high. Can you explain those factors?

The minority interest is always right about 27% of European profit. So you're going to have to look at the details as to where the profitability came from. The US operations was more profitable than the European operations in the fourth quarter, which makes it appear to have that kind of a [swing].

The tax rate is a completely different story. Certainly the quarterly tax rate includes a true-up, if you will, because no way is our rate effective somewhere around 60%-some odd. But the overall annual tax rate did increase from the prior year. And it mainly has to do with where the profitability is with respect to taxable jurisdictions.

We continue to benefit from the favorable tax rates in Switzerland and in Singapore. But a big piece of our European operations business also comes through its US distribution subsidiary, which had an increase in its effective tax rate as a result of state and local taxes here in the United States.

What do you think we should use for 2016 for the tax rate? About 34%?

Well, we came in this year at around 35.5%. I think 35% is probably the same number that I pretty much said for several different conference calls. I'm sticking somewhere right around 35%.

Okay. Thanks.

Okay.

Thank you.

Thank you, Linda.

Thank you. The next question is from Joe Altobello of Raymond James. Please go ahead.

Hi, good morning. This is Christina on for Joe.

Hi, Christina.

I was just wondering, I don't know if I missed this, but what were 4Q constant currency sales up for European-based operations?

I didn't -- it's difficult to calculate on a quarterly basis because we are -- we did not come up with exactly what it was for the fourth quarter, and that was not disclosed in our remarks. European-based operation sales for the quarter was $88.6 million. It was down 5.3%. If I took a guess, I would say it was probably up maybe 1%, very similar to what we had for the year.

Okay, great. And then in terms of China, Russia and Brazil, what are your expectations for those regions next year?

In our (inaudible) forecast, of course Brazil we'll be down a lot. And this will have an impact on the Americas. We are looking at sales being down 20% to 30% in Brazil.

In Russia, the latest estimate that we have is not as bad as we thought. The largest selling season is really the first quarter of -- in the first quarter. So February and March, we have quite good at -- from the sales (inaudible) point of view. So we are maintaining a level forecast for Russia.

And China continues to be weak, even though we see some increase in sales in Korea and in Japan from Chinese tourists buying products when they travel to Korea or when they travel to Japan. We still see a (technical difficulties) in sales, and we do not expect this to improve this year. We are expecting also some sales weakness in Hong Kong on the top of Mainland China. So -- but all of this is in our numbers in our guidance. Okay?

Okay. Thank you so much.

Thank you. Another question?

The next question is from Samantha Berger of Citi. Please go ahead.

Good morning. I'm filling in for Wendy today.

Good morning.

Good morning.

You've said before that you're agnostic between licensing brands versus acquiring them. Does that continue to be the case? And are you committed to pursuing those relationships or are brands coming to you?

Just -- I'm just going to repeat your question because I know that Jean didn't hear it, and if he wants to answer, I'd let him. What she is asking about, is it our preference to do brand acquisitions versus licensing opportunities, all right? And when we do these types of deals, are we going in search of those opportunities or is it -- or are we sitting back, waiting for them to come to us?

That's a good question. Brand acquisition is definitely better than licenses because we have the cash to pay. And if we don't have the cash, we can, if we need to, borrow. So if and when (inaudible) buy than to rent. If they come to us (inaudible) we own the trademark so we do not pay a royalty. We (inaudible) now to a washout. We also own the trademark and we do not pay royalty. We actually receive a royalty for [fashion].

Going forward, I think if a brand is right for our portfolio, we will be absolutely fine to expend our (inaudible) possible to acquire. We don't have any real conflict (inaudible). We are quite opportunistic. We think that with concentration of (inaudible) having (inaudible) we think that we could find some opportunities going forward in the (inaudible).

But we are -- very often we we receive the proposals every month. But we are very selective. It has to make sense. The brands have to make sense with what we have today.

We are very happy to (inaudible) of eclectic and fashion brands. Some have worldwide appeal. Some have only regional appeal, but they are all growing. So we look at brands big or small with the same (inaudible) vision.

Very helpful. Thank you. So would you continue to want to keep cash on hand, even after your recent dividend increase, versus using some of that cash for more share repurchases?

At this point in time what we would really like to use this cash for is to be opportunistic. You never know when any of these types of deals come across your desk.

Our ability to get a brand like Rochas was our ability to act very quickly. So having the cash on hand gives us the opportunity to be that type of opportunistic. So the plan today is really to keep the cash and to be opportunistic. We are not looking at special dividends or stock buybacks [for that] at this time.

Thank you. And then finally switching gears a little bit, in terms of the travel retail channel, could you remind us what percent of sales comes from that? And then what trends you see there?

Yes, we can. Russ, you want to answer that?

Yes, travel retail today represents between 15% and 20% of our sales. The trend is up. We have more brands that we're getting into travel retail, and the business at travel retail has been relatively strong.

I don't see anything stopping that, at least at this point in time. So I think those trends are going to continue. Travel retail is a very, very important part of the business for us. It's a very profitable part of the business. So we're happy to see that is moving in the right direction.

Excellent. Thank you very much.

Thank you. The next question is from Jason Gere of KeyBanc Capital Markets. Please go ahead.

Good morning. Wanted to follow up on some of the questions asked already. But in terms of from an acquisition standpoint, you talk about the success of Rochas. Would you think about anything that might be a little bit more transformative to the portfolio?

Something larger scale that might give you more global presence? I just wanted to get a bit more color on kind of, I would, say tuck-in and it fits the portfolio versus something that might pop up that is a little bit more transformative?

Well, (inaudible) transformative acquisition. (Inaudible) be absolutely (inaudible) We are doing $500 million of sales. We have around $260 million of cash. If we see something -- if something big, and something that we can grow can be added to our Company, even if it means transforming the Company, or transforming (inaudible), it's okay (inaudible).

So as we, as we said before, we are very open-minded. We don't have a certain limit in size or in penetration in certain regions or not. We are very open.

And we're not afraid to leverage to the extent that we need to in order to achieve that goal.

Okay. That's good. I'm fine with that.

The other question I was going to ask, is maybe as we think about the launches for 2016. Can you go back and think about the launches in 2015 that you thought were successful, maybe less successful and part of that could have been the retail environment. But how you're kind of adjusting in your thinking for (technical difficulties) for the back half, where the launches come out is obviously the best it can be? And thanks for the questions.

You broke up a little bit in the middle of your question. So I'm going to answer it the way I think, and please if I didn't answer your question or Jean doesn't answer your question, feel free to ask it again.

But the major launches for 2015, on the European side of our business was clearly Jimmy Choo. Jimmy Choo Illicit was launched in the third quarter. We continue its rollout throughout 2015. It's going to continue in 2016 until it gets full global penetration. Very, very successful launch. And Jimmy Choo is a very important brand within our portfolio.

Another very successful launch of 2015 was Icon by Dunhill. It's a men's fragrance. It's globally sold. The reception has been tremendous from the numbers that we've seen. We are looking 2016 to do some flankers. Jean, do you want to talk about Dunhill?

No, I want to talk -- you mentioned the 2015 launches. I think that we are happy. We didn't make any mistakes. We didn't have any issues impact Europe.

To put it in perspective, the launches that we are going to see in 2016 this year are, for me, could be actually bigger than what we've seen in 2015 because Coach, for instance, is a trademark which is known in the US and in Asia. We have two major market where Coach has a very strong presence.

And Abercrombie & Fitch is a worldwide today trademark. And even though the fashion had some, how should I say, not issues but some difficulties or some repositioning, some soul-searching issue, from a fragrance point of view it's very clear it represents a spirit of America for international market. And the first reception that we got from retailers in UK, in Germany, in France, in the Middle East are quite exceptional.

So again, as you know, we are prudent because we are in a difficult environment. But I will say this year that Coach, Abercrombie and Hollister are great franchise.

Okay. Thank you. Yes, you got the majority of the question. And I guess the last one is a housekeeping. And I apologize because of my phone, but did you actually specify the top-line impact from currency for 2016? I know it was about 7.5% in 2015. Are we looking at something like 2% to 3% on a full year?

For 2016?

Yes.

I can't predict currency yet for 2016.

You'll notice we gave the guidance assumes the dollar stays at this level, which is around $1.10, I guess, against the euro.

It's almost the same level that it was pretty much for the full year of 2015. So for 2015, although sales were down 5.4%, they were actually up by 1.5%.

Okay. That sounds good. Thank you very much for answering the questions.

Thank you.

Thank you. Any other questions?

Yes, the next question is from Frank Camma of Sidoti. Please go ahead.

Good morning, guys.

Hello.

Good morning, Frank.

Could you just talk a little bit about Abercrombie & Fitch and when you would know, or when you would be able to sell in their stores? Is that an option? Or how does that work? I'm just trying to figure that out.

It is an option. It is an option we are still discussing. We've (inaudible)

In our agreement, the main concept behind our license agreement with both Abercrombie and Hollister is for international distribution, meaning distribution outside of their stores on an international basis. The agreement does call, and certainly gives Abercrombie and for Hollister, the right to buy the product that we've created for international markets and sell it in their stores.

Jean and I and the rest of the Company are very hopeful that Abercrombie will take our product and sell it in their stores. We can't commit until we know -- we can't say anything definitively until they make the decision. Jean?

Okay.

I think they will. They will -- they will [take] it for sure in some of their flagship stores before they roll out to (inaudible) stores. But again, like Russ said, the agreement is really to put this product outside of their store.

And I can't talk more about the distribution factor for Abercrombie. We will launch exclusively (inaudible) in four or five countries in Europe. We will launch also with (inaudible) Germany as exclusive. So because of desire and the appetite for the brands, we have been able to (inaudible) some very interesting partnership with retailers. We are very optimistic for (inaudible) which can be sold at very democratic price in the (inaudible) distribution, but really affordable price.

And Coach will be, of course, sold in department store. The product will be -- the product has been presented to the trade. And again the first response is very good.

Okay. Other question, just on your recent, or your -- in the K you mentioned the French Connection. I was just wondering if you care to talk anything about that. And also just what's your capacity to kind of add these small -- obviously, I think it's smaller license, but do you -- you have a lot of capacity to fold these in without incremental SG&A?

We have capacity, of course. When we signed an agreement with the French Connection to produce fragrance for their 300 stores (inaudible) they manage. But the Company definitely has the capacity to do more. We constantly, we permanently look for newer agreements for fragrances.

Okay. Great. Thanks, guys.

Thank you.

Thank you. The next question is from Steph Wissink of Piper Jaffray. Please go ahead.

Thanks. Good morning, everyone. Just a couple of questions. Russ, if you could (technical difficulties) a little bit about the house of the retail channel. I'm curious if you're seeing any shifts in demand from your legacy channels into new channels like specialty or online?

Your phone broke up, Stephanie. I'm not sure I heard your question.

Just curious about the new shifts in the retail channels. Are you seeing any movement of demand from some of your legacy channels to some new channels, including online or specialty beauty?

Certainly if you're talking mostly US. There is a pick-up in our line. That is something that is moving, kind of growing at a faster clip, certainly than the brick-and-mortar department stores. But nothing -- we're not seeing anything with our brands that is really demonstrative of any sort of a trend one way or another.

Okay. And I'm curious, Russ, I think you mentioned that just on the sales decline that you had in 2015, it was hard to leverage. But looking at your guidance, it looks like in the back half you might start to see some leverage. Are you getting to the point in the model where we should see some incremental margin starting to flow through the back half of this year, maybe into the following year?

Yes, I definitely think we could see some expansion on the margin. The key really is, it starts with the top-line growth. When you have a year that even in constant dollars you grow at a 1% rate, it's almost impossible to gain any kind of leverage on your SG&A expenses. I mean, just inflation is going to eat that up.

As we move into next year, our guide -- sorry, 2016, this year, our guidance is implying a high end of almost 10%, 12%, all right? And a 12% growth rate, we definitely should be able to see some leverage from that SG&A expense line.

Great. And then just final one for us is with respect to the license pipeline. If you can just talk a little bit about the opportunities that are out there, any licenses that you have your eye on that you might be intriguing in terms of size, any displacement that you're seeing out there in terms of brands or opportunities? Thanks.

I think what Jean was touching on, the concentration within our industry that recently occurred with Procter & Gamble. We think would create opportunities of brands that may fall out, if you will, from that merger. Other than that, there are some other brands that just are looking to change for one reason or another.

As Jean mentioned, quite a few things just come across our desk on a monthly basis. But we're not going to change our selective behavior. We've always been very selective on the types of brands, on the brand names that we really want to put into our portfolio. So we're going to continue that selective behavior. But we definitely are in the market. We are definitely looking at opportunities. And we hope they keep coming.

Thank you. Best of luck, guys.

Thank you.

Thank you, Stephanie.

One more question?

The next question is from Hamed Khorsand of BWS Financial. Please go ahead.

Hi. Just one topic for me is on the inventory line. There was a reduction in Q4. Was that mainly just from your end, or was that actual sell-through in the channel as far as inventory goes?

And how are you really adjusting for that, given that there's going to be more sell-through from Jimmy Choo as you're extending it in the first half of this year and the transitions you're seeing in online sales in the US?

Yes, you're right. Inventories in absolute dollars declined about $4 million from last year at this time. That number is very much a function of what's coming up and the timing of new product launches.

It's very difficult to pinpoint where you're going to be at a particular point in time or at the end of any particular month or quarter. We build our inventory to make sure that we have enough product that we can launch our brands. Each brand is different from the standpoint of the amount of geographic penetration, and therefore the inventory levels can fluctuate very, very significantly.

I think overall the number at the end of 2015 is very reasonable. When I look at the timing of new product launches, as we move into the first and second quarter I can guarantee we're going to see a buildup of inventories. And this typically happens every year.

And then back at the end of the year, we're going to see it decline and reach the kind of levels that we're seeing today, or even at the end of last year. We keep following.

(Multiple speakers) we have in our books, but what is important (inaudible) we monitor very carefully the inventory (inaudible) we have in the store. And the sell-through for most of our (inaudible) has been quite good and also the inventory (inaudible) is quite reasonable. So we think that in the first and second quarter for existing line, we [absolutely] continue (inaudible)

You're not--

Yes?

So you're not seeing any pricing pressure out of normalcy, are you?

No, nothing of any significance. There's always a little bit of backlash, if you will, when the dollar gets very strong in certain geographic markets around the world. But we've now been dealing with a strong dollar for almost a full year. So we're not currently seeing any significant pricing pressure.

But we have made some adjustments during the year in terms of retail price or in terms of margin because of the dollar being so strong. We are not contemplating more price adjustments.

Okay. Thank you.

Thank you.

All right. So if there is not -- maybe the last question, and then we will conclude, or if there are no other questions, we will conclude. Operator?

Yes, we do have another question from the line of Linda Bolton Weiser of B. Reilly. Please go ahead.

Yes, Linda.

Yes, hi. I haven't really looked through the whole cash flow statement. But I'm just curious here. Your short-term investments I guess went down significantly even though your cash flow was quite good and your cash balance went up. But the short-term investments went down. Is there some explanation for that?

That's typically a function of where we've invested the dollars, Linda. If there is a certificate of deposit that is more than three months in maturity, then we're required to classify it as a short-term investment. If we move it into something that is under three months, then it moves back to cash. So you really need to look at short-term investments in connection with the cash dollars because they are almost exactly the same.

Okay. Thanks a lot.

Okay. No problem.

All right. So thank you for participating to this conference. Excuse me?

The operator will --

Operator?

Any other questions, operator?

No, we have no further questions.

Okay. Closing remarks will come from Russ.

Just one thing, just to clarify before we close. I will be presenting on May 25 at the B. Riley Annual Investor Conference in Hollywood, California. The following month I will be speaking at two New York conferences, Citi's 2016 Small and Mid-Cap Conference, which runs from June 9 to June 10 and the Piper Jaffray Consumer Conference, which runs from June 14 to June 15. And I hope to see some of you at these events.

Thank you for participating on this call, whether live or listening via webcast. If you have any additional questions, I'm usually always available by phone. Thank you very much. And have a great day.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation.