Steven Madden Ltd (SHOO) 2018 Q1 法說會逐字稿

Good day, and welcome to the Steve Madden First Quarter 2018 Earnings Conference Call.

Today's conference is being recorded.

And at this time, I would like to turn the call over to Jean Fontana of ICR.

Please go ahead.

Thank you.

Good morning, everyone.

Thank you for joining us today for the discussion of Steve Madden's First Quarter 2018 Earnings Results.

Before we begin, I'd like to remind you that statements made on this call that are not statements of historical facts constitute forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve risks and uncertainties and other unknown factors that could cause actual results to differ materially from historical facts or any future results expressed or implied in the forward looking statements.

These statements contained herein are also subject to the risks and uncertainties as described from time to time in the company's reports and registration statements filed with the SEC.

Please refer to the company's earnings release for information on the factors that could cause actual results to differ.

Finally, please note that any forward-looking statement used on today's call cannot be relied upon as current after today's date.

Hosting the call today are Ed Rosenfeld, the Chairman of -- and CEO of Steve Madden; and Danielle McCoy, Director of Corporate Development and Investor Relations.

With that, I will turn it over to Danielle.

Thanks, Jean, and good morning, everyone.

Before I turn the call over to Ed, I would like to note that the financial results presented below are on an adjusted basis unless otherwise noted.

Please refer to our press release for a reconciliation of GAAP to non-GAAP financial measures.

Ed?

Thanks, Danielle.

Good morning, everyone, and thank you for joining us to review Steve Madden's first quarter 2018 results.

We got off to a good start in 2018, with net sales growth of 6% and diluted EPS growth of 14% compared to the first quarter of 2017.

In light of the retail backdrop, which, while improved, remains challenging as well as tough comparisons from the prior year period, we were very pleased with these results.

Our wholesale footwear business recorded strong performance in the quarter, with net sales growing 5%, including increases in both our branded and private label businesses.

We remain pleased with the performance in our flagship Steve Madden brand, where Steve and his design team continue to create outstanding product assortments that are resonating with consumers and enabling us to outperform the competition.

In the first quarter, we saw strength across a range of categories, most notably sneakers and sandals.

We also saw outstanding performance in international markets, where we had strong growth across the board.

We saw increases in our directly owned subsidiaries in Canada and Mexico, in our SM Europe JV and in our distributor business.

Our private label footwear business also accelerated, increasing over 10% in the quarter compared to the prior year.

In wholesale accessories, net sales increased 8% compared to the year-ago period.

Steve Madden handbags and our Madden's own private label division were the standouts, each recording strong double-digit growth in the quarter.

Retail continues to be our most challenging segment.

Overall, retail sales were up 9%, but comparable store sales decreased 1.2%.

Much like last quarter, the boot category drove the decline.

Boots were down high teens on a same-store basis, resulting in a roughly 400 basis point drag on the overall comp.

Overall, we were pleased with our first quarter performance.

And as we look out to the balance of the year, we feel good about how we are positioned.

First, our core Steve Madden wholesale footwear business continues to outperform, and despite the tough comparisons from last year, it's on track to grow across the board in 2018, in Steve Madden Women's, Men's and Kids as well as in Madden Girl, Steven and Madden NYC.

Second, the balance of our wholesale footwear brand portfolio is on an upward trajectory.

Most notably, Blondo's momentum has continued into 2018.

The order file in that division is significantly ahead of where it was a year ago.

And Dolce Vita is also on the upswing.

Sell-through for Dolce Vita has been very strong so far in 2018, and our wholesale partners are beginning to react to the improved performance of retail.

We now expect the Dolce Vita brand to return to growth this quarter.

Third, our wholesale accessories business is poised for solid growth this year due to the strong momentum we have in our Steve Madden handbag division and in private label.

Fourth, our international business is really taking off.

International was the highlight of Q1, and we expect the strong trend to continue through the balance of 2018 as we see the benefits of our increased focus on and investment in this part of the business over the last couple years.

And finally, we are excited about the newest addition to our brand portfolio, Anne Klein.

As a reminder, in late January, we signed an agreement to become the licensee for Anne Klein footwear and handbags beginning with fall of 2018 shipments.

Anne Klein is a strong brand with a clearly defined point of view that is different from all the other brands in our stable, making it a great complement to our existing business.

We continue to believe we can do $80 million to $90 million in net sales under the Anne Klein brand in the first 12 months of shipping, which encompasses the back half of 2018 and the first half of 2019.

While we have assumed this business is breakeven in profit contribution for 2018, it should contribute to profitability in 2019.

Putting that all together, we are encouraged about what we are seeing in our business and the opportunities ahead of us.

And we remain confident that based on the power of our brands and the strength of our business model, we are well positioned to drive sales and earnings growth not only this year, but for years to come.

With that, I'll turn it over to Danielle to review our financial results in more detail.

Thanks, Ed.

We are pleased with the good start to the new fiscal year.

Our consolidated net sales increased 6.2% to $389 million compared to prior year net sales of $366.4 million.

Our wholesale segment saw strong growth despite tough comparisons in the prior year.

Wholesale footwear net sales increased 5.3% to $275.1 million, led by strong growth of our core Steve Madden brand in international markets as well as double-digit increase in our private label footwear business.

In wholesale accessories, net sales increased 8% to $56.1 million.

Steve Madden handbags and private label handbags were the growth drivers in the quarter.

In our retail segment, net sales increased 8.6% to $57.9 million.

Our same-store sales decreased 1.2%.

Excluding boots, which as Ed mentioned, declined significantly, same-store sales were up.

During the first quarter, we opened 1 full price store and 1 outlet store, while closing 3 full price stores and 2 outlet stores in the U.S. In addition, we opened 1 store in Mexico and 3 locations in China, including 1 full price store and 2 concessions; ended the quarter with 207 company-operated retail stores, including 59 outlets and 6 e-commerce sites as well as 40 company-operated concessions.

Turning to other income.

Our licensing royalty income net of expenses was $2.8 million in the quarter compared to $2.4 million in last year's first quarter, while First Cost commission was $0.9 million compared to $1.6 million last year.

Consolidated gross margin decreased 40 basis points to 36.2% compared to 36.6% in the prior year.

Wholesale gross margin decreased to 32.6% for the quarter compared to 32.8% in the prior year quarter.

The modest decline in wholesale gross margin compared to last year was the result of strong growth in the private label business, which carries a lower gross margin.

Excluding the mix shift to private label, wholesale gross margin was up, driven by strong margin performance in the Steve Madden brand.

Retail gross margin was 56.7% compared to 58.7% last year.

The majority of the decline was caused by deep discounting on slow-moving product in the boot category.

Operating expenses for the quarter increased to $104.7 million or 26.9% of net sales compared to operating expenses of $98.4 million or 26.8% of net sales in the same period last year.

Operating income for the quarter totaled $39.6 million or 10.2% of net sales compared to last year's first quarter operating income of $39.5 million or 10.8% of net sales.

Our effective tax rate for the quarter was 21.7% compared to 30.7% in the prior year as a result of the impact of the Tax Cuts and Jobs Act.

Finally, net income for the quarter was $31 million or $0.54 per diluted share compared to $27.5 million or $0.47 per diluted share in the first quarter of 2017.

Moving to the balance sheet.

Our financial foundation remains strong.

As of March 31, 2018, we had $200.6 million of cash and marketable securities and no debt.

Inventory totaled $94.4 million compared to $97 million in the prior year, a decline of 2.7%, driven by a sharp reduction in inventory at Schwartz & Benjamin, as we have implemented our stricter inventory control disciplines at that acquired business.

Our consolidated inventory turn for the last 12 months ended March 31 was 8.7x.

And our CapEx in the quarter was $2.9 million.

During the quarter, we repurchased approximately 567,000 shares for $25.7 million, which includes shares acquired through the net settlement of employee stock awards.

At the end of the first quarter, there was $156.9 million remaining on the share repurchase authorization.

Last, the company's Board of Directors declared a quarterly cash dividend of $0.20 per share.

The dividend will be payable on June 29, 2018, to stockholders of record as of the close of business on June 12, 2018.

Now turning to our guidance.

For the full year 2018, we continue to expect that net sales growth will be 5% to 7%.

Expect diluted EPS on a GAAP basis for fiscal year 2018 will range between $2.55 and $2.62 and adjusted diluted EPS will be in the range of $2.60 to $2.67.

Now I'd like to turn it over to the operator for questions.

Operator?

(Operator Instructions) And we'll go first to Erinn Murphy with Piper Jaffray.

I guess, my first question is around -- just around the gross margin.

Can you just help us think about on the wholesale side of the business, as you are starting to see some improvement in private label, does that change the trajectory of how you're planning gross margin in that segment?

And then, I guess, retail was more impacted just by the boot headwind, Q1 clearly still a little bit of a cold quarter.

But just curious if that is fully behind us and that margin should start to inflect?

Yes, sure.

On the wholesale side, I think that for the full year, we're still thinking about it pretty similarly to what we talked about in the last call, which is that it should be basically flat for the year.

And we were actually quite pleased with the gross margin performance in Q1 because this -- we had a strong increase, particularly in the Payless business on the private label side.

And that had a negative impact to wholesale gross margin of about 120 basis points.

So we actually, absent that impact, had a very nice improvement in the balance of the business, driven particularly by very strong gross margins in the Steve Madden brand.

So feel awfully good about the gross margin performance on the wholesale side.

And to your point, retail, we took a little bit of a hit as we went pretty deep in discounting some of the boots in Q1, but that really should be behind us now.

Okay.

And then, maybe just on the retail business, a little bit broader.

It's a really small contributor to your EBIT today, but it used to be a low double-digit margin.

Is there any way you guys can get back there?

Is it just with international blend or anything else?

Is it just structurally different?

Just help us think about the next 2 to 3 years of that margin potential.

Yes.

Certainly, the operating margin is well off the peak now.

There are a lot of things that make that a structurally more challenging model.

So I think we have to be cognizant of that fact.

If you look at -- while we're -- have some pretty slim operating margins, if you look at our competitors in the United States, most of them have now shut all their stores and were losing lots of money.

So it is a difficult model.

And so we have to be clear-eyed about that.

I think there are some opportunities to improve the operating margin over time.

We think that we can improve our operating margin on the e-commerce side, and we've got a lot of initiatives in place to try to drive improved profitability there.

I think over time, international can help us increase the operating margin as we grow the international store footprint and e-commerce business.

I think that, that can be higher margin than what we see in the U.S. But I think the 10% is pretty aspirational at this point.

Okay.

And then, just my last question.

Now that we have the Bon-Ton news out there and kind of store liquidation, I guess, that coming at some point.

Is there any, I guess, first, additional impact to your numbers?

And then secondly, are you concerned about some of the other wholesale partners you sell into where there could be some disruption as these doors start to shutter?

So with respect to Bon-Ton specifically, we built that into the guidance.

So there is no additional impact from the Bon-Ton closures.

As a reminder, we think that's about a $0.05 impact -- negative impact to us on an annual basis in terms of profitability.

And then, we don't see a major impact to the other retailers that we sell to based on the Bon-Ton closures.

And specifically, if you look at our own stores, we don't have any Steve Madden stores in Bon-Ton malls.

So we don't think that there is going to be a lot of collateral damage there.

We'll go next to Camilo Lyon with Canaccord Genuity.

Ed, so you talked about being pretty pleased with your sneakers business and sandals.

If we could just take both of those separately, sneakers have been very good for quite some time now.

It's clear that, that trend is becoming a year-round trend.

What's been kind of the incremental bump in the category that you're now calling out again, that makes you excited about that how that product is performing in the market?

Yes.

I mean, we just -- we continue to see sneakers just reach new highs in terms of percentage of sales for us, and we've got a lot of different things working in that category.

Slip-ons are good.

Oxfords are good.

We've got wedge sneakers that are working.

The dad sneakers is a new trend we talked about in the last call that we continue to see nice hits on.

So just a lot of different things and a lot of excitement in that category.

We hit 30% in the Steve Madden Women's wholesale business in Q1.

It's the first time we've ever gotten that high and we expect to be even higher than that in Q2.

So that's just a category that shows no signs of slowing down.

Is there a price component that's helping that too as well as the unit velocity?

Because it seems like there has been a shift in terms of who's driving the fashion sneaker trend, where it had gone from athletic to now more of the luxury fashion houses taking the lead role on that.

And that, from our perspective, seems to add an incremental pricing opportunity for you.

Is that -- are you seeing the same thing?

Yes.

I mean, one of the things, I think, that we are seeing is, like other categories, when you have sort of newness and you have very fashion-forward looks that are in their first season, those command a higher AUR.

And so for instance, we've got some of these dad sneakers, as we call them that are north of $100 and really getting no price resistance from the fashion-forward customer, who just wants the latest and greatest fashion.

Great.

And then, I guess, the second part of that question was the sandals piece.

And maybe if you can tie that into just kind of the general view of the inventory in the channel, given certainly much colder weather that we've had here in the Northeast for a lot longer than I think anybody has wanted or expected.

Sure.

Yes, I mean, we feel very good about what we're seeing in the sandal category.

Like sneakers, there's a few different things that are working there.

Flat sandals are performing for us.

Flatforms are good.

We have got some stacked heels that are very strong.

And to your point, there has been some -- quite a bit of cool weather, particularly in the Northeast.

And while that is not beneficial for early sandals sales, we have been able to get, when there was good weather, some very good reads on sandals, and we do feel good about that category going forward.

With respect to inventory levels in the channel, generally speaking, I think inventory is in a pretty good place in most of our key retailers.

March was a little bit of a choppy month.

And so that might have -- inventory may have backed up a little bit.

But overall, we feel like the channel is pretty healthy.

Right.

And then, just my final question.

Just on competition, it seems like there has been more -- on the branded side, more competitors weakening, filing for bankruptcy.

Do you -- does that provide greater opportunities for you, either via share gains or perhaps even acquisitions?

What's your view on that?

Yes.

Certainly, we're doing quite a bit better than many of the competitors in the space right now.

And as others struggle, we'll obviously look to capitalize on that and continue to take share.

From an acquisition perspective, can't really comment on anything there.

Obviously, you know that we're active in looking at things all the time.

And if we see something that makes sense, we're prepared to act on it.

But we're also pretty disciplined about that and want to make sure that we get assets that we think we can really grow and grow profitably.

We'll go next to Ed Yruma with KeyBanc Capital Markets.

I guess, first on private label.

How should we think about the upside opportunity in private label for the balance of the year?

Can you bring on other retailers under the platform?

And are you participating in Amazon's private label program?

Yes.

The growth that we're seeing in private label right now is really with our existing private label customers.

We're always looking for new partners on the private label side.

But if you think about what's driving the growth for the balance of the year, it's really not new customers.

It's growing with our existing partners.

And we are not participating in Amazon private label right now.

Got it.

And a second one, if I may.

The boot business, obviously, was very weak this past winter season.

I guess, are you starting to see signs that either there's innovation or trends that are changing that should allow you to comp that favorably?

Yes.

I mean, I think that we've seen some positive signs that give us hope for fall in the boot category.

Some newness in the category.

Boots were a little bit better in Europe this past fall than they were in the U.S. and sometimes Europe can be a leading indicator.

So I think that there -- we feel better about it than we did, let's say, a year ago.

But nevertheless, we're certainly not ready to put a stake in the ground and say that the boot category is going to inflect this year.

So I think we're -- if you look at our forecast, we're really think about it as sort of flattish to 1 year ago.

We will go next to Tom Nikic with Wells Fargo.

I was just kind of wondering on the gross margins.

I think 3 months ago, you were calling for, I guess, flattish sort of gross margins for the full year.

And you were down in Q1.

I would assume that with, I guess, less noise around the Payless business, the private label penetration would still be higher year-over-year for the balance of the year.

So -- I mean, should we kind of think about gross margins maybe being down on a full year basis?

Or just -- I mean, kind of -- how should we think about gross margins going forward?

Yes.

Actually, Tom, we continue to believe that gross margin should be flat for the full year.

And -- well, you're right, they were down modestly in Q1, driven by this increase in Payless.

That was -- we had planned for gross margins to be down in Q1.

And in fact, they were down less than we anticipated.

So we're actually running a little bit ahead of where we thought we'd be in terms of gross margin so far this year.

Got it.

And you also spoke about really strong -- I think, you said outstanding international growth.

Sorry, if I missed it, did you actually quantify how much your international business was up?

It was up about 36% in the quarter.

We'll go next to Jeff Van Sinderen with BR -- excuse me, B. Riley FBR.

Just a follow-up on international, Ed.

Anything you can give us in terms of what you see driving that?

What's driving the acceleration there?

And I guess, what you expect to see for the remainder of the year in international?

Yes.

I mean, it's a pretty positive story all the way around on international.

The owned markets are doing very well.

So both Canada and Mexico are performing for us and that's both top and bottom line.

Our SM Europe JV is growing very rapidly and is also very profitable already.

So we feel very good about what we're seeing there.

And then, our distributor business is also growing.

We're growing with -- in the Middle East.

We are growing with Italy, which is not -- which we do still as a distributor, not as part of our SM Europe JV.

India is growing.

So we've got a lot of good things happening on that front.

And then, of course, the SM Asia business was a very small contributor this quarter, but we expect that to be a larger contributor going forward.

Okay, good.

And then, just if we can circle back to categories.

Obviously, sneakers has been amazing for you.

And I know you mentioned sandals.

Do you see the other trends emerging that you think might be able to fuel more growth in other categories of your business outside of sneakers this year?

Look, those are the big 2 right now.

There are some things -- I would say, the dress category, if you look at that, it's kind of mixed.

I would say, it's sort of hits and misses there.

And then we talked about what we're looking at for boots.

So that pretty much covers the main categories.

I would say casuals -- there's also some casuals.

That's a category that we think can pick up a little bit in Q2 as well.

We'll go next to Janine Stichter with Jefferies.

I was hoping to see if you could dig a little bit more into the wholesale accessories category.

Looks like you saw a really nice resurgence there and you're lapping some easier comparisons ahead.

So can you just talk about anything you're doing differently there?

And then, how we should think about the cadence of that growth for the rest of the year?

Yes, and I think that the 2 things that we would really highlight are, one, the Steve Madden handbag business; and then two, that private label business.

So on the Steve Madden handbag front, that's a business where we've had some nice momentum.

It was up double-digits in 2017 and had a nice strong double-digit growth number in Q1.

Just feel really good about the product assortment there.

We've got a nice balance in the real fashion-forward products, but also some core products that can really drive volume for us.

And also seeing very nice expansion in both the regular price channels as well as the off-price channels.

We've got -- seen very nice growth at Macy's for instance.

So we feel very good about Steve Madden handbags.

And then, I should also say that in Madden Girl handbags, our diffusion line, is also growing.

So it's a very positive story on that side of the business.

And then, our private label business on the handbag side is also really seeing strong growth and, particularly, just driving big numbers at Walmart right now.

Great, okay.

And then also just anything you can share on the Men's business.

What you're seeing there?

And kind of what inning you feel like you're in terms of the long-term growth path?

Yes.

So as you know, Men's has been a strong grower for us recently.

We expect to have another year of very solid growth in that business in 2018.

We were actually down a little bit in Q1 just based on timing.

We think we'll make that up in Q2.

But overall, feel very good about that business.

And as you point out, relative to the Women's business, it's not as mature.

So we still feel we have quite a bit of runway there, both in the U.S. and of course, in the international markets.

As to what inning, I don't know, maybe the fourth.

And -- but really feel good about what we're doing there.

As I said, we've strengthened the product assortment, and we've also been investing more in marketing there and we're going to continue to do that.

And we'll go next to Dana Telsey with Telsey Advisory Group.

Can you talk a little bit about the shift of Payless and how that's transitioning and anything you're seeing there?

And also progress on the Anne Klein business and how that's developing?

Sure.

So -- after Payless emerged from bankruptcy, they have -- it looks like they've attempted to sort of shrink their vendor base and really focus on a few key vendors, and we're one of them.

And so that business has come back very strong.

And is, in fact, running ahead of where it was prior to them going bankrupt.

And so we had a very nice increase in that business in Q1.

We expect to be up significantly in Q2 as well.

And then, I think what you're asking about is in the back half, based on a new buying agency agreement with them, we will be changing how we account for that business.

So it will be moving -- we'll no longer recognize the top line sales and that will move into that commission and licensing fee income line net of expenses.

And that's really just an accounting change.

It doesn't change anything about the profitability for us.

And so that business, again, on an apples-for-apples basis, will be up in the back half as well, but the accounting part will be different.

And then Anne Klein, I think we're making progress there.

We've got the team in place, working hard and getting prepared for our fall 2018 launch.

And we've been speaking to all the retailers.

I think they're pretty excited about our involvement and particularly our speed-to-market capability and how we can bring that to the Anne Klein business.

So very excited about getting started with that brand.

We'll go next to Chris Svezia with Wedbush.

I guess, just curious, you did a little over 6% revenue growth in the first quarter.

Your guidance is 5% to 7% for the year.

I think initially, when you gave the guidance, you felt growth would be stronger in the back half.

Obviously, you had a strong Q1.

Anything else we should be thinking about in terms of total revenues and cadence as we go through the balance of the year?

Should we still see incremental acceleration or is it a little bit more balanced now that you've had such a strong Q1?

Well, I guess, it should be fairly balanced.

Keep in mind, that part of what drove the Q1 growth was that growth in the private label business with Payless.

So that is, obviously, lower margin.

So I think when we were talking about the seasonality before, we were mostly talking about earnings.

And so with respect to sales, yes, I guess, it should be relatively consistent throughout the year.

Okay.

On your company-owned retail, I know that you don't give comp, but I guess I'm curious, if you took out the boot business, you'd be up roughly 3%.

Comparisons get easier.

Is there any reason to think that the retail segment couldn't comp or anything in terms of puts and takes we should think about with regard to the retail business as we think about comp in general for the year?

Well, I mean, I guess, the one thing I will point out is that, in fairness, we also did have about a 250 basis point favorable impact in Q1 from the earlier Easter.

So that -- as we look at Q2, that's a headwind.

On the other hand, we also had about 150 basis point negative impact from the Nor'easters in Q1.

So we can probably play this game for a long time going back with all the puts and takes.

But certainly, at least with Q2, we do start with about a 250 basis point headwind from the Easter.

Okay.

And then, just finally, I'm just curious, Madden NYC at Kohl's, any update on that?

How it's performing?

Number of stores you're in?

Just any color around that.

Yes.

That continues to be going quite well.

We took selected -- we launched in 450 doors a year ago.

We took selected styles to 800 doors this spring.

We are beating plan this spring.

Kohl's seems very happy with the performance.

We're going to be testing Madden NYC Kids in about 20 doors for fall.

And if that goes well, we think that could be a significant opportunity.

So we're very pleased with what we're seeing there.

We will go next to Sam Poser with Susquehanna.

You, historically -- we've seen some of the reemergence of some of this chunky, clunky kind of looks and you have some old heritage styles that I believe are starting to perform well.

Do you see that as an emerging trend or a reemerging trend for lack of a better way to put it?

Yes, I think it's certainly one of the things that we're seeing.

And obviously, to your point, that plays to our strength.

And I guess, when you look at the fall Steve Madden orders that are giving you your -- you're thinking flat on the boot business and don't see that emerging.

I mean, when we're thinking about orders, let's say, August onward, right now, I mean -- in Steve Madden, how much of that is actually placed as a percent at this time?

As you know, we work very close to season.

So we don't know nearly as much about that time frame as probably most of our peers.

So I don't know what the percentage is, but there's a lot of that -- a lot of wood to chop.

Right.

I mean, so when you look at the order -- the places where you do have orders, which would be in your private label, your -- in Madden Girl, in Men's and so on, I guess, how much of this guidance is, sort of -- because you can react, I mean, are you telling us what you see now, but there's a lot of orders still to be written?

And I would assume a lot of orders still to be written.

Yes.

We know a lot about Q2.

We know something about Q3, but there's still a heck of a lot of work to do for Q3.

Okay.

And then, you have been acquisitive.

I guess, the question is, what -- how -- to what size company would you look for?

I mean, you've done generally smaller acquisitions over the years at good value.

How much -- I mean, how big would you be willing to go, assuming that it's a good value?

Look, I mean, we're -- it really all depends on the transaction and the individual company and the valuation, et cetera.

So we certainly have the wherewithal to do deals that are much larger than anything we've done to date.

We're open to looking at them.

Would we do $1 billion deal that's truly transformational?

I think that's probably unlikely, but we'll never say never.

But if we found exactly the right transaction, we'd look at it.

And what -- when you think about your overall business, you talked about how Anne Klein was a good fit within your stable of brands and so on.

I mean, what type of thing, without giving anything -- I mean, what type of thing sort of do you think about as far as a niche addition?

Not necessarily a brand name, but a category or so on.

Where do you feel like you have another opportunity to round it out more?

There are plenty of parts of the business where brands or certain categories that could be complementary.

I still think that we can do more in, what I would call, that traditional Women's business, meaning less the young trendy part of the market that we focus on in Steve Madden and maybe more -- product for a more sophisticated or mature customer.

There's also categories of footwear.

We don't have a lot in comfort, for instance.

We've had tremendous success with Blondo in the waterproof boot category, which -- and that has some sort of comfort functionality, but we don't have a true comfort brand.

So -- look, there's lots of different things we'd look at, but it's very hard for me to speculate.

We will go next to Steve Marotta with CL King & Associates.

I just have one follow-up question to a question that was asked earlier regarding, essentially, the colder weather that we've seen within the first quarter and how much that could fill in the second quarter.

Ed, you commented that inventories within the channel currently appear to be relatively stable or relatively in line.

I remember, I think, it was a couple of years ago where similar weather patterns negatively affected -- increased promotions materially from a competitive standpoint.

You had to match them and the second quarter gross margin came in, it was a little bit under pressure due to that.

Have you seen anything from a promotional cadence competitively that may lead you to believe that warmer weather fashions is backing up at all within the channel?

No.

At this point, we are not seeing anything unusual from a promotional standpoint.

And the other question I had relates to EPS.

I think it was -- on your last call, you mentioned -- and I'm working from memory, so forgive me, but I think the split from an EPS standpoint for the year was about 40%-60%.

Is that still operable given what was an EPS beat in the first quarter?

It's still close.

I mean, you're right.

We beat by a little bit in Q1.

We've maintained the year.

So maybe it's 42%-58% or something.

I have to be honest, we haven't done that calculation, but it's in that range.

No questions remaining.

I'd like to turn the call back to Mr. Rosenfeld for any additional comments or closing marks.

Great.

Well, thanks very much for joining us on the call this morning and we look forward to speaking with you all on the second quarter earnings all.

Have a great day.

Thank you, sir.

Again, that does conclude today's conference.

Thank you for your participation.

You may disconnect at this time.