Interparfums Inc (IPAR) 2017 Q4 法說會逐字稿

Greetings, and welcome to the Inter Parfums Fourth Quarter 2017 Conference Call and Webcast. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Russ Greenberg, Executive Vice President and Chief Financial Officer. Thank you. You may begin.

Well, thank you, operator. Good morning, and welcome to our 2017 fourth quarter and year-end conference call. Our format will be as usual. I will start the call with the financial overview, and then Jean Madar, our Chairman and CEO, will discuss our current business, recent developments and some of our upcoming plans. After that, we will take your questions.

Before proceeding further, I just 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 risks and uncertainties discussed under the heading 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.

In addition, Regulation G codifications for the use of non-GAAP financial measures prescribes the conditions for use of non-GAAP financial information in public disclosures. We believe that the presentation of the non-GAAP financial information that is included in this discussion is an important supplemental measures of operating performance to investors. The information required to be disclosed for the presentation of non-GAAP financial measures is disclosed in our December 31, 2017 annual report on Form 10-K, which has been filed with the Securities and Exchange Commission. The information is available on our website at www.interparfumsinc.com.

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

Moving on to comparable fourth quarter results. Net sales were $149.5 million, up 10.9% from $134.8 million. At comparable foreign currency exchange rates, net sales increased 6%. Net sales by European-based operations rose 15.5% to $115.4 million from $99.9 million. Net sales by U.S.-based operations were $34.1 million, down 2.2% compared to $34.9 million.

Gross profit margin was 66.1% compared to 63.7%. SG&A expenses as a percentage of net sales were 61.4% compared to 59%. Operating income was $4.8 million as compared to $5.4 million. And net income attributable to Inter Parfums increased 12% to $4.4 million compared to $3.9 million. And finally, net income attributable to Inter Parfums Inc. per diluted share rose 11.1% to $0.14 from $0.13.

Thus, for the year as a whole, net sales increased 13.5% to $591.3 million as compared to $521.1 million in 2016. At comparable foreign currency exchange rates, net sales increased 12.2%. Net income attributable to Inter Parfums increased 24.8% to $41.6 million or $1.33 per diluted share from 2016's $33.3 million or $1.07 per diluted share.

We covered sales information in our Q4 sales release last month, so I will focus first on operating profitability factors. First up is currency fluctuation. Despite the recent strengthening of the euro, exchange rates had only a minor effect on gross margins for 2017 as well as 2016. You will recall that a weaker dollar has a favorable impact on our net sales and a negative impact on gross margin, and this is because approximately 45% of net sales by our European operations are actually denominated in dollars, while all costs are incurred in euro.

For 2018, if the euro to dollar exchange rate strengthens further, we may see a greater impact on gross margin. The catalyst of our gross margin expansion has been increasing sales by our European-based operations made through our own distribution subsidiaries. For example, Inter Parfums luxury brands, which is responsible for the U.S. distribution, has been growing sales of our 2 largest brands, Montblanc and Jimmy Choo, as well as the very fast-growing Coach brand. Also of note, Rochas brand fragrances are concentrated in France, where we sell directly to retailers, and Spain, where we sell to retailers through our own distribution subsidiary.

For the year, our consolidated gross margin was 63.6%, up from 2016's 62.7%. For European operations, gross margin was 67.1%, up from 66.4% in 2016 while for United States operations, gross margin was 49.3% compared to 49.7% in 2016. And that slight decline was attributable to higher promotional product sales within the overall sales mix.

With the seasonal increase in advertising and promotion around the holidays, our SG&A expense is historically highest in the fourth quarter. And as we reported yesterday, 2017 was no exception. Promotion and advertising included in SG&A expense aggregated $123.7 million or 20.9% of net sales, essentially in line with our 21% projection. In 2016, that amount was $99 million or 19% of net sales.

For the year, operating income rose 17.9% to $78.6 million, and that's compared to $66.7 million in 2016. There were impairment loss taken in both years' fourth quarter. And in 2017, we set in motion a plan to discontinue several of our small mass market product lines over the next few years. In that regard, as of December 31, 2017, we recorded an impairment loss of $2.1 million and increased our inventory obsolescence reserves by $0.5 million relating to those mass market product lines.

Excluding the gain from a buyout of the Balmain license in 2016 and the impairment losses in both 2017 and '16 as well as the additional inventory reserve, income from operations would have aggregated $81.2 million in 2017, which is an increase of 20% as compared to 2016. And in 2016, income from operations would have aggregated $67.7 million. Operating margins would have aggregated 13.7% and 13% in 2017 and 2016, respectively. We are, therefore, getting closer to our operating margin goal of at least 14%.

We gave the subject of taxes a great deal of space in our 2017 10-K, none of which is complex, but all of it makes for a complex comparison. Our effective income tax rate was 29.2% and 35.5% in 2017 and 2016, respectively. In 2016, and as we reported in SEC filings and releases, there was a $1.4 million non-recurring tax settlement attributable to Interparfums SA.

For 2017, on the plus side, we filed for a refund claim of $3.6 million for taxes paid on dividends, which was deemed unconstitutional by the French courts. With 2017 on the minus side, after making reasonable estimates of the effects of the Tax Act and arriving at our initial analysis in the fourth quarter of 2017, we recorded a $1.1 million tax expense relating to the revaluation of deferred tax assets and liabilities that was caused by the new lower U.S. corporate tax rate. We'll save you the time of calculating a normalized rate by reporting that excluding the effects of the Tax Act and the claim for refund and the 2016 settlement, our actual tax effective rate was 32.4%, 32.7% and 35.6% in 2017, 2016 and 2015, respectively.

One last thing, just to clarify in 2017, after considering the non-recurring items, including the impairment charge, the inventory reserve as well as the tax adjustments, all net of taxes and any applicable minority interest, there was really no effect on our diluted EPS. These plus and minus factors, in essence, cancel each other out, and the details of those calculations are included in the MD&A section of our 2017 10-K, which we filed yesterday.

Lastly, we closed the year with a working capital of $382 million, including approximately $278 million in cash, cash equivalents and short-term investments. Our working capital ratio of nearly 3.3:1 and only $60.6 million of long-term debt, including current maturities, which was incurred in connection with the acquisition of the Rochas brand. Based upon a full-time staff of 355 worldwide, we generated nearly $1.7 million in net sales per employee in 2017, and our CapEx was only $3 million.

Jean, please continue.

Well, thank you, Russ, and good morning, everyone. The big news, for us, is landing the GUESS? license. Last month, we signed a 15-year exclusive worldwide license with this iconic fashion company. GUESS? was established in 1981, and they began as a jeans company and has since successfully grown into a global lifestyle brand. Over the past 35 years, GUESS? has gained global recognition with presence in wholesale, e-commerce and over 1,700 retail locations worldwide with amazing ambassadors to promote the brand.

The GUESS? customer has a personal fashion identity, smart, confident, glamorous, strong and adventurous. This is the ideal plan to -- for the magic we do when we develop fragrance. We intend to fine tune as well as build upon the existing GUESS? fragrance portfolio of men's and women's scent and plan to launch our first new product under the GUESS? brand in early 2020.

As we typically do, when new products are launched, we plan to make a major investment in A&P to ensure the initial success and longevity of the new scent and collections. That said, we don't -- we do not envision a significant change in our SG&A as a percent of sales with the addition of GUESS?.

Both companies have agreed not to disclose the specifics of our agreement, but I can assure you the terms are in line with brands that have a strong legacy fragrance business, which is nearly 30 years old. We are purchasing existing inventory from the prior licensee during the first week of April, and we will continue to sell existing lines of GUESS? fragrance. As stated in our news release yesterday, once we purchase the GUESS? inventory from the brand's former licensee and determine how long it will take to build new inventory, we'll plan to increase our 2018 guidance to factor in the GUESS? contribution, which we anticipate will begin as early as the second quarter of this year.

Our target date for announcing the expected increase in our sales and earnings guidance to include GUESS? is when we announce our 2018 first quarter results in May. Thus, for the time being, we are maintaining our previously disclosed 2018 guidance, which calls for net sales of approximately $620 million and net income attributable to Inter Parfums Inc. of approximately $1.44 per diluted share. Guidance for 2018 assumes the dollar remains at current levels.

You are probably wondering if further licensing agreement are in our plan, and the answer is yes. We are always on the lookout for growth opportunities in terms of new license and acquisitions that fit our business model and makes sense.

Moving along to other topics. As mentioned in our news release yesterday, we had year-over-year sales gain in all of our markets in 2017, the year in which North America emerged as our largest market. Having spent then 20.9% of sales on advertising and promotion, we have one overriding goal in mind, growing market share. We did just that last year and in past years.

Earlier this month, Citi Research published another view of the fragrance industry. From Citi Research we see that globally our $49.5 billion industry grew at the rate of 6.5% in 2017, our sales rose 13.5%. The 5-year compounded annual growth rate for the industry was 5.2%, while ours was 10.9%.

We have talked about European brand sales in our releases, but I want to emphasize 2 special winners. One is Jimmy Choo, which had a 20% increase in fragrance sales in 2017, surpassing the $100 million mark in sales. Sharing the spotlight with Jimmy Choo is Montblanc, which continues to exceed our expectation. While I am on the subject of our Jimmy Choo, on the previous call, a subject of our license came up because the brand was sold to Michael Kors. As we announced in December 2017, our license agreement was amended and 10 more years were added, so we are the fragrant licensee for the Jimmy Choo brand at least through 2031.

Well, I was also extremely pleased with Coach brand sales, which had year-over-year growth of 149%, quickly making it our fourth-largest brand. This was achieved in less than 2 years and without the benefit of a legacy fragrance business. Some of the new entries of 2018 have already debuted, including Dance with Repetto, Coach Floral and just last week, we introduced Modern Princess Eau Sensuelle by Lanvin. Additionally, for European operations, we have extensions of Jimmy Choo's women's signature scent in the pipeline. Along with our new interpretation of our super Éclat d’Arpège by Lanvin and the Coach signature scent for men, which also welcomed a new family member this year.

Moving on to U.S. operations. With the recent introduction of Bella Blanca by Oscar de la Renta, our 2018 launch schedule is on track with new products for Abercrombie, Hollister, Dunhill and Anna Sui coming to market throughout the year. Others in the pipeline are Dunhill Century, the new fragrance family debuting in the summer.

For the first quarter of 2018, we are scheduled 2 brand extensions for Abercrombie & Fitch, First Instinct for men. In the second half of 2018, we have planned an Abercrombie & Fitch First Instinct extension for men.

In the second half of 2018, we will introduce an entirely new fragrance family for Hollister. Lastly, we have Fantasia Mermaid, a brand extension for Anna Sui Fantasia debuting in the summer.

I want to share some happy news with you. Last month, our company celebrated our 30 years as a public company by ringing the closing bell of NASDAQ on February 14. The NASDAQ representative reminded us that at the time of our IPO, our market cap was $7 million -- $7.5 million and we had total sales of $4.5 million. We've come a long way. There is a photo of the event on the homepage of our website.

In closing, we have what it takes to build on, on our success: a diverse portfolio of brand; a distribution network encompassing 100 countries; an industry-wide reputation for growing fragrance franchises that enhance each brand and enrich brand owners; a very strong balance sheet; and (inaudible) organization.

Now, operator, please open the lines for questions.

(Operator Instructions) Our first question comes from the line of Linda Bolton-Weiser with D.A. Davidson.

So congratulations on the GUESS? license. So we were able to find some information just a little bit about the sales level back -- way back when Parlux used to market it, and we saw that there was a level of at least $46 million of sales. Do you have a good historical knowledge of was that the actual peak sales for GUESS? Or where there points where it was actually higher? And your comments about it being the biggest in your U.S.-based operations, it does indicate that it's over $20 million is what you're thinking in terms of annualized run rate revenue. So can you give a little more color on is my thinking correct here that it could be $20 million, $30 million, even $35 million of annualized run rate, right off the bat?

So as I said in my comments, we'll give you more information on GUESS? when we release our first quarter. But we -- I'm confirming the information about the historical figures that you mentioned, Linda. And then we've seen that in the next 24 months when the mix is normalized in terms of inventory and distribution, which would be around $50 million for GUESS?. Russ, you have a comment?

Yes, I really can't talk. Parlux was a public company, so I'm sure that those numbers that they disclosed, those are correct. With respect to other sales data, we don't -- we're not sure of the accuracy of any of the data that we had heard. But as Jean said, in a -- in 2 years from now, we think that this business can be built so that it should approximate somewhere close to that overall $50 million number.

Okay. And then, I know in the past, sometimes, when you've acquired something where there's an existing line, you feel like sometimes you want to clean out some of the product line or the SKUs or something. And I see that there are very low-priced SKUs that are being sold under the GUESS? brand, $13 to $15 at the retail price. That seems quite a bit lower than the Prestige price point you're used to.

Yes.

So can you comment on what your thoughts are and what you might want to do initially with it?

Yes. Well, you're right. We're going to have to basically here, have a look at the portfolio. We're going to have to clean up some of the distribution. That's why we have a very long-term license. We have a 15-year license, so we'll take the time. And I want to use the next 12 months to clean up. We've got to come up with a new fragrance, with a new line of fragrance in, I would say, around 18 months from now. The goal will be definitely to put back GUESS? in the, I will say, the affordable luxury segment. We want to be the, maybe the first price, the first level of a selective distribution. We think the price could be higher than what they are today.

Okay. And then is there any way that you could comment -- did the Coach Floral launch occur here in the first quarter? And how significant is that? Is that a minor flanker? Or is that kind of more major than maybe what I'm thinking? And how is the trend of the business? We're almost done with the first quarter. Is there anything you can say how things are trending after a very good holiday that you had?

No, we are not going to comment on the first quarter yet. Coach is doing great; not only the flanker, but we are rolling out worldwide, and Coach will do -- Coach is doing already better than our actual projections.

Okay. And then just one final one, I noticed that your year-end inventory was up about 40% or so year-over-year. Why would that be? Is that just in anticipation of the launches here in the first half? Or what's going on with that?

Yes. Our inventory levels are always a function of when new product is being launched into the marketplace. When you look overall at where we are from a business standpoint, turnover and things of that sort, we're very, very consistent, not only for inventory but also for receivables. So it's really a function of what is needed to cover the anticipated sales of the next 3 to 6 months.

Our next question comes from Joe Altobello with Raymond James.

First question on the gross margin, I think that was the biggest surprise for us since the dollar has been weaker, as you noted. And I think you had mentioned in your last earnings call that you didn't see a ton of upside on the gross margin numbers. So if you could just tell us, I guess, first, what percent of your sales today are through your own distribution subsidiaries versus where that was, let's say, a year ago?

That's information that we haven't disclosed, so I can't just throw that out here. But needless to say, there is a little bit of anomaly because one would have ordinarily expected the gross margin to decline a little bit because of the strength of the euro against the dollar. But it is being mitigated to a great extent because some of the biggest markets that are growing, as Jean mentioned, North America is now one of the -- is now the largest market that we have. And in addition, the brands that are growing, as I mentioned, Rochas and Coach. These are brands that the distribution is -- the growth of the distribution is significant and within our distribution subsidiaries. So that is what's causing this anomaly. Again, as we grow different brands in different markets around the world, this trend, I'm not really expecting it to continue. This was a consolidation year. There was not a major launch from some of the major brands. Therefore, the impact actually showed a little bit more than we originally expected, but I do not expect significant growth margin -- gross margin expansion as a result of product mix going into the future.

And let's not forget that fourth quarter we do not have gift sets. Even if the gift sets are switched in the third quarter. So this could explain also why the fourth quarter was higher than anticipated.

Now that's -- this is also a good point. In terms of the mass brands you guys are discontinuing, could you quantify how much sales they represent? And maybe if that was anticipated in your original guidance of $620 million?

The sales are... go ahead.

Yes, the sales are less than $10 million. Today, the sales are less than $10 million. And it's -- historically, the company always kept this mass or semi-mass products. So we think that in the next 2 or 3 years, there is no reason for the company to continue saving these products. It is less than $10 million, so we wanted to start cleaning the inventory and also the trade markets associated with this segment.

Okay. And that's in your guidance for this year, the $620 million?

It is. Russ?

Yes.

And one last one, the expected tax rate for 2018, Russ?

I think, off the top of my head -- I don't remember if it was disclosed or not. And I think when we changed our guidance, we might have come up with an effective tax rate. I don't have that information right at -- in my fingertips right now, but I would imagine it's going to be somewhere around 14 points below the 30 -- I'm sorry, it's not. I don't have that information in front of me. I will try to put it together and give it to you.

Our next question comes from Jason Gere with KeyBanc Capital Markets.

I guess, the first question, you were talking about, I think, when you factor in GUESS?, you were saying the SG&A would be pretty steady going forward. A&P spending, we've seen a step-up last year in some of the big launches, 21%. So I guess I'm just trying to think about how we should think the next couple of years of A&P spending, the ROI you're getting on that obviously has been pretty good. I probably wouldn't anticipate a big step-up this year, but maybe '19 with some of the bigger launches. So I'm just trying to think about the trade-off between core SG&A that you talked about with GUESS? in there and then maybe the A&P spending with some new bigger launches coming on the GUESS? line and other launches that you have in the docket.

I think that A&P at 21% is what we can expect going forward. I don't -- it's already a high level. As you can notice, we have increased the percentage year-after-year. We are comfortable with this number. Now we spent more than 100 and something -- $120 million in A&P this year. And that's why we're able to grow our sales faster than the market, but we think that -- I'm comfortable with this number going forward.

Okay. Okay, now that's fair. And then I guess the other question, at the last question, you talked about direct-to-consumer, more on e-commerce. So I was just wondering if you could talk about what you're seeing in beauty in general in terms of where customers are buying their fragrances between online, brick-and-mortar. And I know you have to support both channels there, but maybe if you could talk about the mix of the 2 and how you see that progressing in the next couple of years and maybe what's changing in consumer behaviors in terms of where they're buying their fragrances.

The Internet sales are growing at a faster pace, but we start from the smaller number. We have 2 types of Internet sales. We have the websites of our retailers, so our retailers manage also a website, and people buy from macys.com or sephora.com. And this is a big part of the business, and they are also some sales done by websites that specialize in fragrance. We -- this business is still, for us, less than 10% of our total sales, Either we sell it directly or we sell it through distributors. But definitely, it's growing at a faster pace. It's sort of what I can tell you for now.

Our next question comes from Wendy Nicholson with Citi Research.

My question goes back to, Russ, your comment on -- in your remarks that you are now closing in on the long-term margin target that you've been talking about for a long time. So congratulations on that. That's awesome. But I guess the question is where do we go from here? I think you've -- you made the point several times that advertising and promotions is probably going to stay in that 20-ish percent range. But if I look at the other SG&A as a percentage of sales, you closed in at almost 23% last year, and that's a bit higher than you were, 4 or 5 years ago. And so I'm wondering do you think that given your larger sales base, is there room for operating leverage. Do you think you can get your operating margin up kind of 14%, 15%? Or the reinvestment opportunity is so significant, you kind of want to stay in the 13%, 14% range? Does that make sense?

No, I understand the question exactly. And you're 100% right, there's no reason to stay now that we've reached what was an additional target. There's no reason why we can't exceed it if, in fact, we can continue to grow the top line. As Jean just mentioned, we think that 21%, which is up significantly from the a little over 19% last year and only a little less than 18% the year before. 21% is a decent amount of funds that is being used to reinvest and to build market share. So if we can, grow the top line sales and the numbers or enter into more license agreements, like we have with GUESS?, there's no reason that, that operating margin can't -- the next target is going to be 15%. I think you can max out somewhere, maybe it's around 15%, maybe even 16%. I think that's probably the highest we've ever had historically for a couple -- for a year or so where we might have just touched at that particular level. But clearly, we're expecting to gain additional operating leverage as we continue to grow the top line.

Got it. And then, just broader congratulations on GUESS?! It sounds like it's going to be a terrific addition. But you still got a ton of cash in the balance sheet, and I assume there are no changes in terms of your capital allocation plans. You still want to keep the powder dry. But still, do you think you've got the management bandwidth internally to continue to look for even more acquisitions above and beyond GUESS? Do you think you need to hit a pause at some point? Or kind of just what you're thinking about your ability to take on brands above and beyond GUESS?

We do not want to pause at all to accelerate because we think -- we said for a long time, we can manage in our portfolio Montblanc and what we have. We have the organization set in place. So GUESS? is a perfect example. We're going to be able to absorb GUESS? in a very short amount of time. The teams have started to work in the last, what, month or so. And we will be able to have some sales starting as early as next month even though in order to take percentage of a brand, it's going to take 6 months to 12 months. But we will not pause. We have other plans or deals, somewhere close to sign them, what we're working on. And the cash that we have, we have not -- we are not going to use a lot of this cash for GUESS?, but I think it's always very important to have it in our book because opportunities will be available for us. Russ, you want to complete?

Yes, no. No, I think you hit it. We're definitely not pausing at all. There are several different other initiatives that we're looking at. GUESS? is a great addition for the U.S.-side of our operations. We clearly have room to grow additional brands either in the U.S. or even through Interparfums SA or our European subsidiaries.

Our next question comes from Ashley Helgans with Jefferies.

This is Ashley on for Steph Wissink. In regards to the GUESS? license, how should we think about distribution of the brand? And then also, as you guys pull back from the mass fragrance, is there something in the mass fragrance business that's distressed that's maybe in a long-term state of underperformance?

Jean, you want to take the first part about GUESS?, and then I could address the mass?

Yes. Well for GUESS?, the brand has a great recognition outside of the U.S. We have -- I was just, last week, in Russia checking the potential for our GUESS? business, and GUESS? is opening a lot of stores in Russia. And I think we can expect a lot of business coming from this part of the world. We will position GUESS? as a luxury brand outside of the U.S. In the U.S., it's a little of the different story because GUESS? is not sold in the department store, so we're going to really put a big emphasis on the sales in GUESS? stores. We would have a very large presence from a merchandising point of view in GUESS? stores. And -- but outside of the U.S., GUESS? is definitely considered as a very important American brand. So the same as other brands that we manage internationally, such as Abercrombie or other brands that we have in our portfolio. Russ, you want to answer the second part of the question regarding the mass market?

Yes. The mass market business that we -- that is remaining is really a legacy business for the company that goes back to the 1990s. This is not a business that we've really been concentrating significantly on over the last, at least 15 to 16 years. So it has been in a somewhat of a steady decline. It's just at a point now that, as we mentioned, the sales data is under $10 million on a -- for a company that's doing almost $600 million. It clearly -- it doesn't make sense for us to concentrate on that. So we've just made the cognitive decision that certain lines that are not really generating the profitability that they should, should easily be discontinued. It also enables us to reallocate warehouse space and things of that sort to be more efficient, if you will. And that's kind of where the mass market business has been for quite some time now.

Our next question comes from the line of Hamed Khorsand with BWS Financial.

Just a couple of questions here. I didn't hear in your comments earlier. Is there a new Montblanc coming out? Is that still on time for this year?

No, a new family fragrance for Montblanc is not going to come out until 2019, maybe even early 2020. What we've launched over last year and this year are, well, I call them flankers, but Montblanc is such a strong brand that these flankers have actually significantly been outperforming even our own expectations. Montblanc Legend Spirit, which was last year, and Montblanc Legend Night, this year, clearly have exceeded all expectations. Jean, anything to add there?

Yes, yes, yes. Montblanc Legend Night is a fragrance that we're launching, but it's what we call a flanker. The next -- the new franchise, the new pillar for Montblanc will happen next year, beginning of next year. It will be the third pillar for Montblanc.

And then my other question was going to be, any changes to the marketing plan, just what you've learned from last year: one, for your existing business; and two, if there's any change to that plan now that GUESS? will be part of the lineup?

No, no. There is no changes. We continue to -- we will support all the existing brands in our portfolio, either from our French subsidiaries: Montblanc, Lanvin and Jimmy Choo, of course, Rochas and Coach or in the U.S., Dunhill, Oscar de la Renta, Anna Sui and Abercrombie and Hollister. So absolutely no changes. GUESS? will strengthen our presence in stores internationally and domestic but no particular changes to our strategy.

Okay. And then as far as the marketing goes and the ad spend, last year, it felt like you were generating more sales per ad dollar spent. Is that because the mix as far as going direct with your distribution or changing up how you were doing advertising versus the retailers doing advertising? Any details you could give on that?

No. I don't think that we generated more wholesale per advertising spend last year. I think that's been quite the same set for a long time. We need to reinvest some of our profit into advertising in order to maintain the growth for each of our brands. Russ, you have something to add?

No. I think that you're exactly right. I really don't see a change at all. The investment level today is the level we intended it to get to because of the importance of reinvesting in our brands.

There are no further questions. I'd like to turn the call back over to Russ Greenberg for any closing remarks.

All right, thank you. And just a quick note, I will be a presenter at the D. A. Davidson Brands and Experience Forum in Chicago on June 14. And I will also present at the Jefferies Consumer Conference in Nantucket on June 20. I want to take this opportunity to thank you all for tuning in to our call. And if you have any further questions, please just, as usual, contact my office. And have a great day. Thank you very much.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.