Steven Madden Ltd (SHOO) 2002 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Steven Madden, Ltd., conference call sponsored by

. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. To register for a question, the participant should press 1. To withdraw the question, the participant should press pound. Any reproduction of this call in whole or in part is not permitted without prior written express--express written authorization of the Company. And, as a reminder, ladies and gentlemen, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms.

of

. Please go ahead.

o'brien: Thank you, operator. Good morning, everyone, and thank you for joining this discussion of Steven Madden, Ltd., third quarter results. By now you should have received a copy of the press release. If you have not, please call our offices at 212-850-5600 and we'll fax one out to you immediately.

Before we begin, I would like to remind you that statements in this conference call that are not statements of historical or current fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties and other unknown factors that could cause the actual results of the Company to be materially different than the historical results or from any future results expressed or implied by such forward-looking statements. The statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the SEC. Also, please refer to the earnings release for more information on risk factors that could cause actual results to differ. Finally, please note that any forward-looking statements used in this call today should not be relied upon as current after today's date.

I'd now like to turn the call over to Jaime Karson, Chief Executive Officer of Steven Madden, Ltd. Jaime, go ahead, please.

Thanks,

. Good morning, everyone, and thank you for joining us to review Steven Madden, Unlimited's operating results for the third quarter ended September 30th, 2002. With me to review our business are Richard Olicker, our President and Chief Operating Officer; and Arvind Dharia, our Chief Financial Officer.

Let me begin by saying that we are very pleased to report our results for the third quarter. A period during which we once again bucked the overall trend and posted solid performance virtually across the board.

As was the case during the preceding quarter, we not only exceeded our own expectations and analysts estimates, but also gained market share for all of our brands. Although the external environment certainly remained challenging and retail inventories and purchasing patterns continue to be broad but without depth, our unique business model enabled us to successfully navigate these conditions.

Specifically, our production and replenishment strategy continue to provide us with the ability to maximize opportunities in season, which sets us apart from the rest of the footwear industry. Focus and consistent execution enabled us to achieve a 32.4 percent increase in total sales for our combined wholesale and retail operating divisions.

In addition to driving top line growth, we are also effectively managing the business, maintaining our focus on cost control and efficiency improvements. For instance, during the quarter we were able to effectively leverage our infrastructure while continuing to nurture our newest brands. And this is reflected in the 230 basis point decline in operating expenses as a percentage of sales and the corresponding 16.8 percent increase in operating income.

These cumulative achievements generated a 16.8 percent increase in net income to 6.3 million versus 5.4 million last year. And a 12.2 percent increase in earnings per share to 46 cents from 41 cents last year.

Finally, it is very important to note that we remain in excellent financial health. At quarter end we had approximately 59.6 million in cash. Cash equivalents and investments securities on the balance sheet. No long term or short term debt and total stockholders equity of 123.5 million. Affording us financial flexibility and a strong foundation from which to build the future growth and diversification of our company.

Now I'd like to turn the call over to Richard Olicker, our President and Chief Operating Officer, to review the third quarter operating results in greater detail.

Thanks, Jamie, and good morning everyone. Let me begin with an overview of our overall financial performance.

Total net sales increased 32.4 percent to $93 million versus 70.2 million in the third quarter of 2001. Net income increased 16.8 percent to $6.3 million versus 5.4 million in the same period last year. Earnings per share increased 12.2 percent to 46 cents per share on 13,763,000 diluted shares outstanding compared with 41 cents per share on 12,166,000 diluted shares outstanding in the same period of 2001.

As Jamie summarized, our strong bottom line results were achieved through significant sales gains coupled with the operating leverage that resulted from holding the line on cost. Gross margin decreased to 39 percent versus 42.3 percent last year. The decline is attributable to our decision to clear slower moving

at wholesale to create open to buy for best sellers. Greater sales and advertising allowances and lower average selling prices at retail due to slower than planned boot sales. Also, due to the strength of our growing wholesale segments, particularly

Mens, our retail division, which generates higher gross margins than wholesale, represented a smaller percentage of our overall business in the third quarter. Retail represented 24 percent of the total versus 28 percent in the third quarter last year.

While we admittedly did not reach our internal margin goals for the third quarter, we are pleased with the significant improvement achieved over the second quarter margin results. This reflects our focus and careful management of planning, sourcing, and shipping processes. We continue to manage the business efficiently, as evidenced by the 230 basis point decrease in our operating expenses as a percent of sales. This reflects our focus on cost control and the ability to effectively leverage our infrastructure while continuing to drive our businesses and nurture our newest brand, Steve Madden Men.

Let me now review what happened in each division during the quarter. The Company's Wholesale Division is comprised of five brands - Steve Madden Women, Steve Madden Men, l.e.i., Stevies, and David Aaron. For the second quarter, Wholesale revenues showed particular strength, increasing an exceptional 41 percent to $70.7 million versus 50.3 million in the third quarter last year.

Strategies designed to generate sales growth in our flagship core women's brand succeeded in the quarter as revenues for Steve Madden Women increased 19 percent to $33.3 million. This success was based on a renewed focus on fine-tuning the breadth in our concept shop assortment and in seeking a balance between junior and crossover product. Euro-casuals were strong sellers in the quarter; however, boot sales were softer than planned. The weather was unseasonably warm, and the industry in general focused on single-sole, pointy-toe boots, which did not enjoy the anticipated success. Even within this environment, we were able to capitalize on a shortage of Steve Madden Classic platform round-toe boots, which performed well throughout back-to-school and continue to perform.

Steve Madden Men's continued its extraordinary assent in the third quarter with revenues increasing 360 percent to $14.8 million. We are rapidly becoming a casual destination brand, and we are using this platform as a launching pad into new categories such as sport and dress. Men's now offers an expansive open-stock replenishing program out of which approximately 60 percent of our third quarter sales were derived. We continued to receive generous sales plans, in particular those projected by Federated and all

divisions.

was also added as a new customer in the quarter.

Revenues for l.e.i. increased 16 percent to $15.3 million. Driving growth were comp store increases at J.C. Penney, Famous Footwear, and Kohl's. Classifications that drove sales included euro-inspired casual footwear and lug-bottom casuals. Boot sales were below planned. l.e.i. customers were not ready for pointy-toe looks.

Revenues for the Stevies brand increased 12 percent to $3.9 million. Stevies had strong sell-throughs on casuals and the introduction of our boys' product was well received, but mirroring the grownup trend, boot sales were disappointing in the quarter. During the quarter, Stevies further rolled out with the

leased children's department and added

, the

children's division as a new customer. In addition to continuing to sell the product into Limited Too and the

as well as department stores such as Nordstrom and Filene's, we launched an initiative to add strong independence to the

distribution this quarter with very good initial acceptance.

Revenues for David Aaron increased 42 percent to $3.4 million. The significant growth was achieved through inclusion of sales from the newly introduced season branded product, which is in its first quarter of revenue contribution within the David Aaron division. Mid-heel dress shoes drove the business and increases came from growth at major department stores, most notable from Bloomingdale's.

Moving onto our retail division, as of September 30th, 2002, there were 77 stores in operation including our Internet store. Retail sales in the quarter increased 11.5 percent to $22.3 million versus 20 million during the same period in 2001.

We are also pleased to report a 1.3 percent comp store gain for the quarter. We consider this a good performance in light of a challenging back-to-school period, late-breaking fall season and a lackluster September, the combination of which lead to early and aggressive promoting at retail overall.

It is particularly noteworthy that although our average selling price decreased by 10 percent in the quarter, our unit sales volume increased by a healthy 14 percent. The warmer weather, particularly in the East, helped drive sales of buy-now, wear-now sandals, but hindered the sale of full-price clothes, shoes and boots.

In short, we take this as proof that traffic in our stores was strong and our customers were there and engaged; however, they were buying clothes that you need and this is indicative of the cautious forward-spending pattern that retail is seeing as a whole.

Productivity of our stores also remained strong. We generated average sales of $700 per square foot for the 12 months ended September 30th, 2002.

With respect to new store openings, in July, we opened two stores, one in Pembroke, Florida and the other in Scottsdale, Arizona. In August, we opened another two locations, one in Fashion Valley, San Diego, and the other in Stonebriar, Texas. We have a very attractive, I'm sorry, a very active opening schedule for November, including locations at the fashion show in Las Vegas, Topanga, California, Horton Plaza in San Diego and Lakeside in Louisiana. This will leave us on plan to end the year having opened 10 stores, and will bring us to a total of 81 for the chain, including the Internet store at year's end.

The Internet store remains large as far as revenues for the third quarter exceeding $million. Last week we released our most recent update to the site, uniting all three domain names into one site, creating one comprehensive brand and making all genders of product available to all of our Internet shoppers.

We also made the site easier to navigate and gave surfers easier access to one-stop shopping. We are committed to making these regular updates, many of which are the direct results of suggestions and requests of our customers.

Moving to other income, the company's commission and licensing fee income increased 11 percent to 1.8 million for the quarter. For our private label division Adesso-Madden revenues increased three percent, contributing $1,239,000 to the other income line.

The division continued its growth with Target, Wal-Mart, JC Penney and Mervyns. Adesso also added men's product to its assortment mix for this quarter and now functions as a buyer's agent for men's, women's, and children's product for major importers.

We're also very proud to announce that Adesso-Madden received Wal-Mart's specialty retailing supplier award for the second quarter of 2002. This is a great achievement that defines us as among the best in service to the best in retailing in the world and we are very proud of our team.

Licensing income increased 33 percent, to $580 thousand, as a result of the increased royalty revenue generated by the increased shipment of licensed product. In particular, Steve Madden handbags are having an extremely successful season and are currently among the top junior handbag performers at Macy's where we now command dedicated floor space. We continue to diligently work toward concluding new license arrangements, but we are proceeding on a methodical basis in pursuit of the strongest brand building opportunities.

Turning for a moment to marketing, this continues to be integral to driving our business within our stores. In the third quarter some of the Company's marketing highlights were our promotions in conjunction with MTVs Video Music Award. Entrants were invited to win a date with Kyle

from MTV's Real World series. Kyle, who has attained major celebrity status, not only accompanied the winner to the VMAs at Radio City, but also made an appearance at our Roseville field store

. In addition to our retail advertising, the Company had a very attractive marketing calendar--a very active, I'm sorry--again, marketing calendar during the quarter. Our Chick Walker commercial ran on MTV throughout the quarter and during the VMAs during September. We continued our consumer magazine presence in books that included "Seventeen", "'N Style", "Hey, People", "Cosmo", "YM" and "Lucky". The campaign also included outdoor media with the introduction of our Soho billboard, as well as subway posters, bus shelters and

postings. The brand continues to be very active with its grass-roots efforts that included our sponsorship of Clear Channels Concert series which began in Atlanta in July. Stevies also sponsored the 31-city Aaron Carter tour. In conjunction with Limited Too we ran a contest giving winners the chance to model onstage with Aaron Carter during his concert. This complemented a full calendar of college events, fashion shows and charity events, which all assisted in raising the visibility of the Steve Madden brands. Press and editorial coverage for the brand was extensive in the third quarter. Fashion editors and producers in a wide variety of consumer magazines and television featured our back-to-school and fall products.

With respect to our overall financial condition, we have maintained a pristine balance sheet, which speaks volumes to the health and viability of our Company. As of September 30th, 2002, our cash, cash equivalents and investment securities were $59.6 million. Inventories were at $24.8 million versus 21.8 million last year. Now, inventory turn was eight times in the 12 months ending September 30th, 2002, versus the seven time turn for the same period last year. Accounts receivable was $36.8 million versus 33.5 million last year. Working capital was at $94 million, total equity was at 123.5 million, diluted shares outstanding was 13.8 million shares.

Now let me turn the call back over to Jaime, who'll provide some closing remarks.

Thanks, Richard. This was another outstanding quarter for Steven Madden, Ltd. and we are extremely encouraged by our performance year-to-date. As we move into the final stretch of 2002, we are energized and excited about the direction or our business. As I've stated in the past, we are first and foremost committed to our existing business and are intent on further strengthening our core brands. But importantly, we are also focused on identifying new areas of growth and diversifying our business. That said, we are currently evaluating several opportunities to expand the Steve Madden brand into other categories, such as women's and men's jeans, apparel, cosmetics, and fragrances. We are carefully weighing our options, mindful of the importance of selecting the right partners and developing the right opportunities to expand our brands into additional categories.

We are also continuing to evaluate several opportunities to expand into international markets. Again, we are taking a methodical approach to this endeavor, as we are presented with many different opportunities. But we are excited by the prospects of selling our products in Asia, Europe, and other parts of the world. As you may recall, we previously announced that we entered into exclusive arrangements to distribute product in South Korea, as well as Central and South America. These ventures, even in their early stages, are showing very good results, and we believe this bodes well for similar arrangements elsewhere in the world.

We are very excited about this avenue for growth and look forward to making Steve Madden a truly global brand. With respect to our near-term outlook, although the external environment remains very challenging, and this hampers our enthusiasm, we take comfort in the strength of our business model. We remain cautiously optimistic about the balance of the year and are confident that we are positioned to achieve our annual earnings targets. In order to reflect the better-than-anticipated third quarter performance, we are raising our full-year EPS guidance to $1.38 to $1.42, from the previous $1.33 to $1.38 we provided at the end of the second quarter.

In short, we are proud of our performance to date and the teamwork that has made this possible and look forward to continued success. I hope that this call has been informative. Thank you for your time and your interest, and now I'd like to turn the call back to the operator for your business questions.

Thank you. Ladies and gentlemen, at this time, if you have a question, you will need to press the one. Your questions will be taken in the order they are received. If your question has already been answered, you may remove yourself from queue by pressing the pound key. Also, if you are using a speakerphone, please pick up the handset before pressing the buttons. One moment for the first question.

We'll take our first question from the site of

of Wachovia Securities.

All right, thanks. Hi guys, great quarter again.

Thanks,

.

Thanks,

.

Thank you,

.

Arvind, some questions for you financially. Can you give me a cash flow in Q3? I don't have a lot of notes in front of me; I'm on the road. And then also, where you expect to end the year from cash investments standpoint?

Cash flow at the end of the third quarter -- it was cash on hand you are asking, right?

Just a ...

Nine point six million. Year end, I'm expecting approximately 72 million.

72 million year end? What was the end of Q2 -- do you know offhand?

No, I'll get you later.

End of -- I remember 42 million something. Approximately 42 million.

That's that quarter. Can you also break down inventory real quick? Wholesale versus retail? The 24.8 million?

At the end of the third quarter, we have totaled 22.8 million. By breakdown, wholesale segments have

14.2 million, which compared to last year's third quarter 10.7 million, we increased 3.5 million. Retail, 10.6 million, compared to last year third quarter 11.1 million, which decreased 0.5 million.

And, speaking about ...

Increase in the wholesale 3.5

support our third quarter business approximately 45 million in wholesale.

OK. And what kind of - what kind of precautions are you taking regarding the West coast dock strike? Is part of that also in this inventory number and maybe

...

No, we accelerated as many receipts as we could starting with about three or four months back to minimize the impact of the dockworker. In addition to rerouting a lot of freight into East coast ports, we routed a little bit of freight through Mexico, we've added some storage capacity in Florida and in New Jersey, and we've been fortunate. The divisions most heavily impacted by the West coast are l.e.i. and our Men's Division, and these divisions were performing well enough so that retailers that were being asked for extensions were amenable to granting them.

Right.

So, some things fell in line for us, and other things were I think prepare - we were prepared for what eventually came about. We're continuing to accelerate receipts, by the way, and we're booking East coast vessels out for spring receipts. So we're doing what we can now to plan for what might happen after Taft-Hartley expires.

So, spring is an issue. When do you start receiving spring products?

We'll receive it in as early as November.

OK.

And as of yesterday, I was opening the gates to receive what we could in now, thinking that over the next 30 days or so the West coast ports should start getting to a more normalized flow. And whatever I can receive, even if it's a little 30 to 45 days early, I think that's prudent.

OK. And can you just - while I have you there, Richard, can you also talk about gross margins when you expect them to kind of flatten out year-over-year? Looks like there's obviously an opportunity in Q4 just because last year was, you know, a tough Q4, but maybe looking through to next year.

And then also, the environment in general, where there's good trends and where there's challenging trends, whether it be department store or specialty like

or specialty like independents, if there's any differences out there, and maybe even, you know, October versus September.

Let me try to break it down.

I don't see a terrifically improved environment for - from a gross margin standpoint. I'll point out from a trend, second to third, as I mentioned in the script, that we made some significant improvements to get to the 39 percent, even though that wasn't what our internal plan was. But as far as historical gross margins, I think the environment is a difficult one in which to achieve those. I mean we're, as you said, not looking at fourth quarter really as a historical norm.

The issue really,

, is at all levels of retail, it's a very tight environment where even at the specialty chains, they're buying much more - much closer to need, and they're - and they're buying it tightly, and they're buying it smart, and they're asking for assistance when they need to have it.

The consumer, also, is responding I think to a more buy-now, wear-now attitude. I think they were helped along this back-to-school with a - with an unseasonably warm and late-breaking fall. But even so, with the economic issues and consumer confidence issues, the threat of, you know, terrorists or war-related issues, I don't see a terrific environment in which to say I see us going back to the two-year old norms of margin improvement.

So this year, can you maintain at this year level, the 39 percent level going forward?

Yes, we're going, we're going to that level.

OK. OK. As your overall environment, whether it be farm stores or specialty, October, it sounds, you know, from that point, that business has gotten better in October. Can you comment on either your own business and owned store or department stores, anything you can give us

?

You know, we don't report monthly on retail, but we've seen a dramatic turn for the better in the overall retail trend.

OK, that's helpful.

And it has moved with the weather.

Yes. And then finally, just next year, can you give us an outlook in terms of your goals at least for sales growth, earnings growth, and maybe what you're, you know, the main driver of sales will be next year? Is it men's again or is it just everything?

OK, you know,

, for fiscal 2003, we're definitely looking forward to building on the successes that we've enjoyed thus far, but we are also very cautious given what's going on in the world. And you know, what we're, as we're working through our plan, and we want to also see how the balance of the year plays out, but we believe that, and based on our current expectations, that we can achieve top line growth of approximately 11 to 14 percent, and that should translate into a net income growth of approximately 13 to 15 percent.

And also

, this top line growth, mostly driven by men's wholesale and the retail.

men's wholesale and Steve Madden retail.

That's right.

How many stores next year?

We will be next year ...

Add another 10.

Other 10, that's over 90 stores.

OK, guys, thanks a lot. Great job.

Thanks

.

We'll take our next question from the site of

of

. Go ahead please.

Hi guys. Congratulations on the solid quarter.

Thanks

.

Thank you.

Just a couple of quick questions here, as far as there outlines that are, either under performing or over performing the others as far as margin standpoint goes?

Well we released on the Q, you'll see the margins by division. I would say that

, the David Aaron division was an under performer from a margin standpoint and also exceed plan in terms of markdowns and allowances, because we were cleaning up that division to effectively make way for the introduction of Steven.

OK. And as far as men's, you say, men's is going to drive a lot of the growth along with retail in '03. Do you expect this to be through a great increase in the number of doors or expect excellent sell-through?

I would say that the door growth is going to moderate down to a very flat curve and you'll see most of the growth, well, also the overall growth will moderate dramatically from today of course. But I see line extension really as the, and comp door growth, as the avenues for growth in men.

OK. I think that's it. All right. Thanks a lot.

Thank you

.

All right. Bye.

Folks, again, if you'd like to ask a question, please press 1 now on your touchtone phone.

We'll take our next question from the site of Mr. John

of Wells Fargo. Go ahead, please.

Morning, gentlemen. This is Christopher

for John

. Congratulations on a great quarter. I have just one quick question for you. I was just curious if you'd give a more specific--with regard to your market share gain that you guys saw in the quarter, particularly in your wholesale division obviously, can you just clarify a little bit as to where the gains were coming from? Whether it was mostly department--department stores, specialty stores, and how much of that growth was from new accounts or from existing accounts?

Let's see. You gotta kind of break it down by division, Chris, to really get an accurate picture. Looking at Steve Madden Women's wholesale, I would say it was department store and it was A-level department store where we were better at fine-tuning the assortment mix at the concept shop locations.

OK.

Or at the A-doors that didn't have concept shops, but that we would target for concept shops in the future. In Madden Men's it was certainly the continuation of door expansion.

right.

, it was more comp store increases and some door expansion, for example, with the Kohl's of the world. But strictly within the confines of the quarter, comp store increases and line assortment expansion in l.e.i. In Stevies I would say it's, for the most part, it is not door expansion, it was comp store increases and, again, at David Aaron I pretty much said it's a limited universe, but it's all department store growth.

OK. Alright, terrific. Thank you very much, gentlemen.

Bye, bye.

Once again, if you'd like to ask a question, press 1.

We'll take our next question from the site of Justin

of Lord Abbott. Go ahead, please.

Hey, guys, just a couple of questions for you. First, on the discussion about average selling prices being down. Is there any way you can try to ballpark how much of it is, maybe, you know, the buy-now issue you talked about, weather related versus, you know, fashion orientation and just a shift on that regard. And then finally, you know, is there any customers that may be shifting down just from a value orientation standpoint? Maybe try to prioritize those three factors as to what's causing ASPs to go down?

Well, I think the customer that's in our store is still the most insulated from a value sensitivity standpoint. I think on the overall global scheme, there is some value--there is some pressure coming from the value price point, assortment availability, and it's reflected in the health of the l.e.i. business. In our own stores, though, which is really what I spoke to as far as average selling prices, I would say that it was more weather than anything else. She was coming in wearing flip-flops and she was buying sandals that were on promotion because we were very, very late, if not past, the spring season. So we were getting her into the store, we were generating unit sales, but she wasn't really interested in boots, or closed-up casuals, for that matter. What we did see is that where we had the right boots--and they were kind of in the more classic field to Steve Madden, rounder toe, platform four-parts and stack heels--those kinds of products sold well as though they were fashion directed products. They didn't look like fashion directed from our perspective, but they were what the customer wanted, what that girl could wear to school as a back-to-school fall item. What was a big disappointment really, across all divisions, were pointy toe, single-sole, more dress boot looks.

OK, so it's weather ...

A little bit of everything is kind of the answer to your question. I -- on a Monday morning quarterback, I would have liked to have more round toe looks. I think I would have been more fashion right in my own stores and generated a little bit more healthy full-margin boot sales. I think that the weather hurt me in terms of -- I think that was the biggest issue, frankly, as to my average selling price.

So what therefore is your anticipation for the fourth into the -- fourth quarter into next year on that score, on ASPs? You know, if you tweak the fashion a little bit, and the weather becomes less of an issue, at least right now, do you think you can be more in a flattish ASP or you still think they're going to be down?

I think they're going to be somewhat down because of the promotional pressure at overall retail. So you only get a certain amount of time to sell through the inventory, and if it gets promotional early, your ASP gets -- you know, is impacted.

OK, and then just secondly on your store growth for next year. Have you guys talked about that yet at all? How many stores you plan on doing next year?

I think we're going to some -- between eight and 10 stores next year.

And the driving force behind that is what -- is it -- just in terms of growing the retail business, is it just wanting a more broad product assortment in your own stores? Is it part advertising? You know, maybe talk a little bit about that.

Again, you hit on some of the important -- it's a concept shop, it's a -- we like to look at our stores as advertising. It's addressing the top-tier demographic. It's at least sensitive from a price perspective customer, the most accepting of the fashion directed customer. We do a lot of testing in our stores. It mitigates what we do at wholesale. It all plays to -- it builds the brand image. We get to look cool and different in our stores in a way that we could never get to from an assortment standpoint at our major department store customers.

So it serves all of those functions and we're comfortable with about an eight to 10 store growth path for both where we find the locations, where they're affordable, where we can still be productive, and where we still have the demographic.

Is the retailer response to that pretty benign? Because, I mean, you guys are doing it, Kenneth Cole's doing it, Sketchers is doing it. Are the retailers -- the guys that you're selling wholesale, are they fairly indifferent to the whole shift from the wholesalers to the retail?

Well, we found that where there has been some initial concern, wherever we've opened, our department store businesses have improved. And the reason is, we share the information we learn in the retail stores with the assortment that we ship into those department stores.

Yes, OK.

And vice-versa. We look at the department store successes and we say that would be a good retail location for us.

OK, so what are the considerations for the cash buildup. Would you guys consider acquisitions or are you just going to continue to channel at retail?

We're looking at a lot of different things. We're very comfortable with our cash buildup right now as we go forward into next year. And we are looking at lots of opportunities to grow and diversify our business.

Fair enough, thank you.

Once again, if you'd like to ask a question, press one. We'll take our final question from the site of

of Pacific Growth Equities.

Good morning, great job on the quarter. Two quick questions - given the sales softness in the boot category season-to-date, could you speak to any additional markdown risk you see in that inventory?

There is some markdown risk in the inventory,

. We're seeing it absorbed. We're happy with the early October reads at retail. There's going to be some markdown risk that we need to absorb in the fourth quarter. We see it already. We're liquidating the inventory now. And the answer is "yes," because some of the backup orders, if you will, that were destined for department stores are no longer necessary - we're not doing ourselves any favor by shipping those

.

OK. And then lastly, could you share with us your comp expectations for the fourth quarter?

Our - I'm sorry?

Your same-store sales expectations for your Retail Division?

We historically don't project on a same-store sales basis by quarter. We do it annually, I believe.

OK, fair enough, then. Thanks.

Thanks,

.

There are no further questions. Please continue with any closing comments.

Thank you all for participating in the call, and we look forward to talking to you at the end of the year. Bye-bye.

Ladies and gentlemen, that does conclude our conference call for today. You may all disconnect your lines, and thank you for participating.