Steven Madden Ltd (SHOO) 2010 Q3 法說會逐字稿

Good day, everyone, and welcome to the Steve Madden third quarter 2010 earnings conference call.

As reminder, today's call is being recorded.

For opening remarks and introductions, I would like to turn the call over to Jean Fontana of ICR.

Please go ahead, Ms.

Fontana.

Thank you.

Good morning, everyone.

Thank you for joining us for the discussion of Steve Madden's third quarter 2010 earnings results.

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 under the meaning of the Private Securities and Litigation Reform Act of 1995.

Such forward-looking statements involve known and unknown risks and uncertainties, and other unknown facts that could cause actual results to be materially different from historical results or any future results expressed or implied by such forward-looking statements.

Statements contained herein are also subject to generally 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 today's earnings release for more information on risk factors.

This could cause actual results to differ.

Finally, please note that any forward-looking statements in this -- used in this conference call cannot be relied upon as current after this date.

I would now like to turn the call over to Ed Rosenfeld, Chairman and CEO of Steve Madden.

Thanks, Jean.

Good morning, and thank you for joining us today.

We are pleased to have delivered the highest quarterly sales and earnings in our Company's history in third quarter 2010.

Consolidated net sales rose 31% to $184.1 million, and operating profit grew 32% to $37.4 million, or 20.3% of net sales.

Our performance reflects continued momentum in our core businesses, as well as significant contributions from our newer business centers.

Our wholesale business continued its strong performance, with net sales increasing 37% to $153.1 million, as compared to $112 million in the third quarter of last year, driven by strong gains in both the footwear and accessories businesses.

On the footwear side, sales grew 34% to $123.3 million versus $92.2 million last year, driven by robust increases in the Madden Girl, Steve Madden Men's, and international divisions, as well as by the contribution from Madden, our new men's brand that we introduced in December of 2009.

Net sales also benefited from the transition of our footwear business with Wal-Mart from a buying agency model to a selling agency model, which means its revenue is now recorded on the top line and not in the other income line on the income statement.

Madden Girl recorded the biggest sales increase in dollars in the quarter, as continued strong sell-throughs at retail resulted in increased investment in the brand from all of Madden Girl's largest customers.

International was our fastest-growing division on a percentage basis, recording a 99% topline increase in the quarter.

In addition to over 100% year-over-year increases in existing territories Asia and Mexico, we also had contributions from four new territories that we launched in the last six months.

Saudi Arabia, Australia, Russia, and Central America.

Our men's business was another bright spot.

In addition to a strong increase in our Steve Madden Men's business, we also continued to rollout our new Madden brand.

Madden made its first shipments to Macy's in the quarter and we believe Macy's is a very promising account for the Madden brand.

In wholesale accessories, net sales grew 51% to $29.8 million the quarter, compared to $19.8 million a year ago.

In addition to the sales contribution from Big Buddha, which we acquired in February of this year and which is performing ahead of expectations, our accessories segment recorded 26% organic growth on the topline in the quarter.

This outstanding performance was driven by healthy gains in Steve Madden and Betsey Johnson handbags and belts, as well as a big increase in our private label handbag business with Wal-Mart, through our Madden Zone division.

In our retail division, net sales increased 10% to $31.1 million versus $28.2 million in last year's third quarter, despite the fact that we have had six net store closings since the end of third quarter last year.

Thanks to Steve and his team, we believe our stores have never looked better in terms of merchandise assortment.

The on trend product in our stores translated into outstanding results.

We delivered a comparable store sales increase of 15.7% for the quarter, driven by increases in both units and AUR.

Booties and pumps were the main product drivers.

For the 12 months ended September 30, 2010, our retail stores did $710 in sales per square foot.

This compares to $628 in sales per square foot for stores opened for the 12 months ended September 30, 2009, and represents the first time our sales per square foot has been over $700 since the beginning of 2007.

We closed two stores in the quarter, ending Q3 with 82 Company-owned retail locations including our Internet store.

Consolidated gross margins for third quarter decreased to 42.1% from 44% in the comparable period last year, as a decline in wholesale gross margin was partially offset by an increase in retail gross margin.

Wholesale gross margin decreased to 38.8% in Q3 from 41.2% in the same period last year.

Approximately half of the decline was related to mix shifts, including the growth in our international business and the inclusion of our footwear business with Wal-Mart in the sales line.

Both of these businesses carry a significantly lower gross margin than our wholesale average.

The other roughly half of the gross margin decline was attributable to more off-price sales versus a year ago, driven by a couple product categories that did not perform to expectation.

Gross margin in the retail division was 58.1% in the third quarter of 2010, compared to 55.2% in the third quarter of last year.

The 290 basis point increase was driven primarily by reduced promotional activity.

Turning to other income, commission and licensing income net of expenses increased 15% to $6.6 million in the quarter, as compared to $5.7 million in last year's third quarter.

Net commission income from our first cost business was $5.6 million, 15% increase over last year's figure of $5 million, as strong growth from Kohls, Bakers, Kmart, and Target was enough to offset the effect of moving our Wal-Mart footwear revenue into the sales line.

Net royalty income from our licensing business was up 29% in the quarter to $1 million, driven by the outerwear, sunglasses, bedding and apparel categories.

Operating expenses totaled $46.7 million in the third quarter, or 25.4% of net sales, compared to $39.1 million or 27.9% of net sales a year ago.

The 250 basis point year-over-year improvement was primarily due to leverage on higher sales.

Operating income for the third quarter of 2010 rose to $37.4 million, or 20.3% of net sales, compared to $28.3 million or 20.2% of net sales in last year's third quarter.

Net income increased 29% in the quarter to $22.9 million, or $0.81 per diluted share, compared to $17.8 million or $0.64 per diluted share in third quarter 2009.

Turning to our balance sheet, as of September 30, 2010, we had approximately $153 million in cash and marketable securities and no debt, with inventory of $44.5 million, up from $29.7 million in the third quarter of last year.

The increase in inventory is on top of a 27% decline in last year's third quarter, due in part to a shift in timing of shipments.

We are comfortable with our current inventory levels.

Our inventory turn for the last 12 months increased to 9.7 times, up from 9.5 times a year ago.

Accounts receivable and due from factor totaled $94.7 million at the end of the third quarter, reflecting average collection in 55 days.

Total stockholders equity as of September 30, 2010, was $334.3 million.

In addition to delivering solid financial results in the quarter, we also made progress on a number of new initiatives which we believe provide meaningful growth potential going forward.

I would like to touch on those now.

First, in July we made our first shipments of Material Girl footwear, handbags and belts, as well as our first deliveries of Big Buddha footwear.

Material Girl is a new juniors brand carried exclusively at Macy's.

We are currently in approximately 200 Macy's stores with Material Girl product.

Big Buddha footwear is capitalizing on the success of Big Buddha handbags, with distribution in specialty stores, better department stores and shoe chains.

We are pleased with the initial performance of both of these brands and believe they represent significant growth opportunities for the Company.

Second, we moved ahead with our plans to test an outlet store concept.

We hired an experienced executive to lead this effort in third quarter, and we expect to open our first outlet store in the Tanger Outlet Center in Riverhead, New York, later this month.

We are also close to signing approximately five more leases for outlets that are scheduled to open in 2011.

Third, we continue to expand our network of international distributors.

We signed new partnership agreements for Benelux and Dubai in the quarter.

We will launch Steve Madden in these territories in early 2011.

In addition, we are currently in discussions with potential partners in South Africa and India, and hope to be able to launch those territories in 2011 as well.

And last but not least, in early October we acquired the Betsey Johnson and related brand names.

We are very excited about the potential of the Betsey Johnson brand and the opportunities this transaction provides our Company.

We took over licensing agreements with a number of licensees, including for jewelry, intimate apparel, swimwear, eyewear, outerwear and legwear.

These businesses currently generate approximately $3.5 million in annual royalty income.

In addition, we of course no longer have to pay royalty on our Betsey Johnson and Betseyville handbag and belt business, which at our current level of sales saves us approximately $1.5 million per year.

We have also signed three new licensing agreement for Betsey Johnson so far.

We have Betsey Johnson LLC, the Company that formerly owned the brand, the license to market Betsey Johnson and Betsey Johnson Collection apparel, and a license to operate Betsey Johnson retail stores.

And we gave Cejon Accessories a licence for Betsey Johnson cold weather accessories.

And, of course, we are also hard at work on Betsey Johnson shoes.

We plan on showing Betsey Johnson footwear at the December shoe show and making initial shipments to customers by the beginning of April.

Overall, we expect the transaction to be slightly accretive to EPS in Q4 2010, and to add approximately $0.10 in diluted EPS in fiscal 2011.

Before I turn to guidance, I would like to provide an update regarding rising costs in China.

We are currently seeing increases in our cost of goods from southern China, averaging approximately 5% to 8%.

As I discussed in the last call, we are working to mitigate this pressure by moving more production to the North of China, where costs remain lower, and to a lesser extent by shifting some production to other countries, such as Mexico.

We are also raising prices on select items with fresh materials or styling, and have so far not seen resistance to these price increases.

Putting this all together, the net impact of all these changes on gross margin was negligible in Q3 and we expect that to be the case in Q4 as well.

Now, on to guidance.

For fiscal 2010, we currently expect net sales will increase 24% to 25% compared to fiscal 2009.

Diluted EPS is expected to be in the range of $2.57 to $2.62.

This compares to previous guidance of diluted EPS in the range of $2.45 to $2.55.

In conclusion, it is an exciting time at Steve Madden.

Our core business has great momentum, our recent initiatives are bearing fruit, and we continue to add new growth vehicles.

We look forward to reporting back to you again after our fourth quarter.

Now I would be happy to answer any questions that you may have.

Thank you so much.

(Operator Instructions).

And we'll go first to Scott Krasik with BB&T Capital Markets.

Hello, good morning, Ed.

Good morning, Scott.

Maybe talk about, was there any change in the cadence of sales, or the momentum around boots.

Obviously, a lot of people reported very early strong momentum.

Did you see that tail off at all in September?

And then maybe any color that you could give, either out of your own stores, or what you're hearing from your retailers in terms of sell-through on boots now?

Yes, boots and booties continue to be very strong for us.

This year, as compared to last year, there has been a little bit of a shift from boots into booties, which the booties do carry a slightly lower AUR.

But the sell-throughs have been very strong.

We have a lace-up bootie right now that's about as hot an item as we've had here at Steve Madden.

We still feel very good about that category.

And at least relative to early momentum in the late summer, early fall, it just continues to build, you accelerate, or it stayed the same?

I think, particularly in our retail stores, we had boot and booties -- more boots and booties selling earlier in season this year than we did last year.

But the momentum has continued to be strong.

Good.

Okay.

And then, comment on the gross margin.

The wholesale gross margin seemed to inflect a little earlier than we thought.

What was the reason for the off-price sales, or does it just reflect the fact that you had so few last year that it was just such a clean margin last year?

I think it was a couple things.

One is, we did have a very tough comparison.

Last year it was very, very clean.

So that was part of it.

But we did have a couple of categories, I mentioned, that didn't perform up to expectation.

I talked about this in our Board meeting the other day.

I said to our Board that the fashion business has a way of keeping you humble.

Because I think our brand is basically the hottest shoe brand in the market, and I think our product overall is better than it has ever been, but we did have a couple of categories that didn't perform.

The one was -- as we expected, one was flat suede boots.

That is something that we have had a lot of success with for a couple of years, and it just slowed up faster than we anticipated.

It seems that leather is so much stronger than suede this year.

And then the second was woods.

That is something where we got very strong tests in our retail stores, and then when we got into wholesale, it really just dropped dead.

And that's going to happen sometimes.

We think the test and react model is great, and helps us to mitigate a lot of fashion risk, but it is not going to be perfect, and sometimes you are going to have something die like that.

Okay.

And then, any visibility, obviously you guys work pretty close to season, but we seem to be at the end of a sandal cycle.

Last year you got some good early reads on pumps.

Are retailers still excited about pumps for spring, or are boots going to drive early spring sales?

What is your outlook in terms of fashion direction?

Yes, I think pumps -- people still feel good about pumps, and we have some other things that we're pretty excited about.

We have just started -- Rob Schmertz, of course, and he was very excited yesterday about some early spring tests we have gotten in our Florida stores.

Of course, I'm not going to tell you what those are, for competitive reasons, but we feel good about our spring product.

All right, great, thanks very much.

Our next question will come from Steve Marotta with CL King.

Good morning, Ed.

Your sales aggregate was up 31% on a year-over-year basis, excluding the Big Buddha acquisition, and the reclassification of Wal-Mart.

What was organic sales up year-over-year for the quarter?

Well, Big Buddha added about $5 million in the quarter.

I think, between the two of them, you are talking about roughly $10 million in sales.

Okay.

And can you comment a little bit on inventory levels year-over-year?

If I heard you correctly, it was up 50%?

Yes, that's right.

One of the things that you have to look at there is that the number last year was sort of artificially depressed.

Last year, our Q3 inventory was down 27% year-over-year despite the fact that we were growing sales in Q4 the following -- the upcoming quarter by 17%.

And in fact, a year ago on this call we talked about how that was unusual, and due in large part to a change in the timing of deliveries.

So, I think it's probably most useful to look at this on sort of a two-year stacked basis.

On that basis, inventory on the two-year stack is up 9%, while Q4 sales, based on our guidance, are up about 30%.

So we do still continue to feel comfortable with inventory levels.

At the end of Q3, we had about five weeks of wholesale inventory, and about 11 to 12 weeks of retail, which we feel comfortable with.

Okay.

Is any of the slower growing categories that you referenced during the third quarter, is any of that inventory building up currently?

Or do you feel that you are out of that, and that everything is as clean as it can be?

Yes, we have moved through most of that already.

Okay.

Last question is, pricing from China, you mentioned in the 5% area, you are seeing it right now.

Do you have projections, or have you thought about next year, and where those costs are going, and raw material as well as labor?

Yes, I think for the overall cost, we are still looking at that sort of 5% to 8% number.

It's obviously been trending up a little bit, so does that end up more towards the higher end of that range for next year?

That's certainly possible.

Okay.

Lastly, your ability to price at the lower end, the mid-tier and lower, like a Kohl's and Penny's and Wal-Mart, do you find that to be different than what you are experiencing at Macy's and above?

You mean to increase price?

Correct.

To pass along the cost increases.

Yes, I think generally speaking, as you go to the more value priced channels, it is going to be more difficult.

But the good news for us is that we are, our product is fashion.

I think it's easier to take price when you have fashion, and when you have new, fresh looks than if you are doing real basic product, those kind of accounts.

Terrific.

Thanks much.

Thanks.

Our next question comes from Camilo Lyon with Wedbush Securities.

Hello, Ed, how are you?

Good morning.

I was hoping you could expand a little bit on the Betsey Johnson opportunity, particularly as it applies to the wholesale footwear business next year, and where you think you can really ramp that up.

Yes, sure.

If we just take a step back, the Betsey Johnson transaction is something we're really, really excited about.

We think it was a pretty special opportunity to get control of a brand, an iconic brand like Betsey Johnson at a very attractive valuation.

I don't think it's too often that you're going to be able to pay $27.5 million, and get an authentic designer brand with the kind of following that Betsey Johnson has.

And take over, day one, a licensing business that is generating $3.5 million of annual royalty income, and save yourself $1.5 million of annual royalty income on the handbags and belts, and get to do a shoe opportunity which you think is very big.

You mentioned that we would be disappointed if we can't do sort of $10 million, year one.

And I think that really, that should be a $20 million business over a couple of years for us, pretty quickly.

And we have already signed a couple new licenses.

We are going to have additional licensing income from the apparel, and from the cold weather accessories, and we think that there is a big opportunity in a lot of these categories to really supercharge the growth here by taking the prices down a little bit.

Without, of course, cheapening the brand or doing anything to hurt the integrity of the brand.

So this is something we are really, really excited about.

And we talked about $0.10 of accretion for next year, but we really think that two to three years out, that could be $0.20 or $0.30.

Sounds great.

And what about the opportunities to go into different distribution channels.

What does that look like?

With Betsey Johnson?

Yes.

Well, our feeling right now is that we want to keep Betsey Johnson in the existing distribution channels.

So it is going to be primarily focused on the better department stores, the Nordstroms, Dillards, Macy's of the world.

But as I said, we do believe there's an opportunity within those same distribution channels to bring the prices down a little bit.

In shoes, for instance, if the average prices right now are about $150 to $240, we are going to be doing shoes, the bulk of them will be in the $90 to $150 range.

And I think you already said that you're working on that already for spring deliveries?

Is that right, spring 2011 deliveries?

Yes, we would be hoping to ship sort of March 25.

Got it.

And then just lasty, on the gross margin side as it relates to the international business.

Were the gross margin pressures there just because of the -- were driven mainly by the distributors, a lower margin business?

That's right.

Our international business is always going to be meaningfully lower than the wholesale average because we go through these third-party distributors.

Got you.

And any sense as to what the delta is, roughly, between the two?

The margin -- .

We really have not disclosed that, but it is significantly lower.

Okay, got it.

Thanks.

Good luck.

Thanks.

Our next question comes from Jeff Van Sinderen with B.

Riley.

Good morning.

Just to clarify, Ed, on the merchandise that flowed into the off-price channel, it sounds like you do not expect a similar increase in off-price for Q4?

Is that a fair statement?

No, you will not have the same kind of impact that you had in Q3.

Okay.

Good to hear.

And then maybe you can just talk a little bit about where you are with the full price retail stores.

I know you've closed some, and you're getting really strong performance out of your existing comp store base.

How many more in the fleet of full price do you think you want to close?

And then also, are you seeing some better locations to perhaps open a few more full price?

And then also, if you can just comment on the outlet store opportunity.

Sure.

As you said, we are seeing much, much better trends out of our retail stores, and we are really pleased with the progress we've made there.

In terms of continued closures, we're looking at probably four to six closings next year.

And beyond that, it's really too early to say.

But that is a smaller number of closings than we have had the last few years.

We did seven in 2008, seven in 2009, and eight this year.

And then, in terms of full price openings, we have two leases signed right now, one for Q4 and one for -- for a Q4 open, and one for next year.

We are going to continue to be opportunistic about opening those retail stores, too, especially now that we feel a little bit better about our model, and the returns that we're getting out of the retail stores.

And then, in terms of outlets.

We are opening that first store in Riverhead in a few weeks, and we're pretty close on about five other deals for places like Orlando, Vegas, Houston, et cetera, that would be opening in 2011.

Once we get those five to six stores open, I think we will have a real good test, and can really evaluate this outlet business.

Okay, great.

And then the two openings that you mentioned for full price.

Generally, as you are looking at new openings, and working out deals with the landlords, are you getting a lot better terms on some of these, or are they similar?

Any color you can give us there?

You are certainly getting better deals than some of the ones we signed at the height of the market.

But they're still tough, dealing with these mall guys.

It's not quite as good as you might think.

Got it, okay.

Thanks very much, and good luck.

Thank you.

Our next question comes from Claire Gallacher with Capstone Investments.

Great, thank you.

Ed, I was wondering if you could give us an update on the Big Buddha footwear, and the Material Girl.

I realize the footwear just shipped in the last quarter, but any insights what you learned, and really the opportunity to grow the brands.

How big do you think they can get?

Door growth potential, just channel distribution, anything that you can provide would be helpful.

Sure.

So Material Girl, we went into about 200 doors.

Obviously, that is exclusive to Macy's.

We are doing shoes, handbags and belts.

We did $2 million in Q3.

I think we will do another $2 million in Q4.

And then for spring, it looks like they're going to expand the doors.

We are going to go to, I believe it's 320 doors.

So we'll be looking for growth there.

It's a little too early to say how big that can be next year.

We've been pleased with the performance of the shoes, the shoes have done quite well, and the belts have done very well, although that is a very small category.

The bags have been a little disappointing, so we need to improve the product there.

In terms of Big Buddha shoes, that was also about $2 million in Q3.

And we feel very good about the initial reads there, we think this is a big opportunity.

We like it because the product is very different from our other brands.

It's very different from Steve Madden and Madden Girl, and it's going to attract a different customer base, and it has gotten a great response so far.

And what channel is Big Buddha doing well in?

I mean, you're in different distribution channels there, right?

Yes.

Well, it's biggest customer right now is Baker's.

So we are going to do a lot of the -- some of the specialty retailers, we are going to sell people like the Buckle, and we would like to get into the Journeys, of course.

It is also going to go into better department stores, so it will be in Dillard's and Belk's.

We are going to show it to Nordstrom soon, and then, of course, it will be in shoe chains like DSW.

Okay, great.

Thanks so much.

Good luck.

Thank you.

Our next question will come from Sam Poser with Sterne Agee.

Hello, Ed.

Can you break out sort of the gives and takes on the gross margin in the quarter?

Okay.

You talked about mix, Wal-Mart, closeouts and international.

Yes, it is about 0.5 mix and about 0.5 closeouts.

And of the mix, it's about 0.5 the increase international, and 0.5 the inclusion of the Wal-Mart business in the top line.

Okay.

So just 50/50, 50/50 there.

And then, looking at your guidance, or the implied guidance in the fourth quarter, can you give us some idea of how you are looking at SG&A versus gross margin and so on?

Yes, we expect to see some sequential improvement in gross margin.

We expect to do better than the 42.1% that we did this quarter.

And on the SG&A line, you will see some leverage from last year, we are not getting the same kind of sales growth, so you're not going to see the same amount of leverage.

But in terms of dollar growth year-over-year, we should get that back into the single digits.

Sort of like slightly over mid-singles kind of?

That makes sense.

Yes, something like that.

Okay, great.

And then looking at your retail doors, you talked a little bit about the growth there.

What is the key thing that is driving that right now?

Is it key item driven, where you just put more inventory behind the bigger items?

Yes, really, I think the overall merchandise assortment is just much stronger, and we're doing a better job of planning the business, and getting the right shoes in the right stores at the right times in the right quantities.

We have made a lot of upgrades to our retail business over the last couple years.

We brought in some very experienced new people.

We have obviously put in the new merchandising allocation and planning system that we've talked about.

I think that is paying dividends.

But at the end of the day, it is because we have some real great items right now, as you pointed out.

Doing tremendous business with booties, tremendous business with pumps, and you are seeing the results.

And then lastly, thank you.

And lastly, could you just give us a little more detail.

Walk us through the international -- how much revenue is done internationally?

How you are looking at that -- what does, like, the five-year plan look like right now?

Sure.

We did almost $12 million in the quarter, which got us up to about $30 million over the last 12 months.

But again, it was up 99% in the quarter.

That was up after about a 50% gain last quarter.

So that business is really accelerating.

The biggest piece of it is our business in Asia with GRI, our partner over there, and that is about one-third of our international business right now.

And that business was up 126% in Q3.

So it is really flying.

Obviously, the most important territory there is China.

We are up to about 110 locations with GRI, that's 16 freestanding stores, and then another 94 shop in shops.

We also have been launching all of these new territories.

Just in the last six months, we introduced, I think I mentioned this earlier, but Saudi Arabia, Australia, Russia and Central America, and then we have two new territories that are going to be launching early next year.

We've signed up with a group called the Landmark Group, which is the largest retailer in the Middle East for the UAE, and we've signed up with Macintosh, which is a proven retailer with 600 shoe stores in Benelux.

We are really excited about that, and relative to the traction that we are seeing internationally.

So, we really think this should be a $100 million business in the next four years or so.

And how do you structure those distributor agreements, or can you give us some idea?

Because I mean, over time I would think you'd want to run it, once you get the chance to set up an infrastructure to do so.

Yes, right now we do it all through these partnership agreements.

Our partners in the local territory, to the extent they are retail stores, they build the stores, they own the stores, they own the inventory, and we essentially sell them the goods on a direct from factory basis.

And then we get a percentage of their purchases, and we also get a percentage of their retail sales.

Right now, we think that is the right risk reward model for us.

Down the road, will we want to own these?

It is certainly possible, but right now we think this is the right model.

Thanks, Ed.

Good luck.

Thanks.

Our next question comes from Steven Martin with Slater Capital Management.

Hello, Ed.

Hello, Steve.

Betsey Johnson closed before or after the end of the quarter?

I believe it was the first week of fourth quarter.

Okay.

So when we look on -- so there was no impact on the income statement, other than maybe you accrued some interest on the note?

Right.

And there was -- it was actually about a $600,000 expense that we booked in Q3.

Because there were a couple agreements that they had with finders for licenses, so essentially they had agreements where they had to pay a certain percentage of their royalty income to the party that had found them the licensee.

And we bought a couple of those out, in connection with the transaction.

So that was the only real impact in Q3.

And were there legal fees and transaction costs that flowed into Q3, as well?

No, because those have been capitalized because it is a purchase, an asset purchase they were capitalizing.

Okay.

So then, on to the balance sheet.

What was Betsey Johnson's impact on the September 30 balance sheet?

You had bought the note, so cash was down.

So where is the note?

There is a line called note receivable on our balance sheet.

Okay.

It's not on the abbreviated one, that is why I was asking the question.

Okay.

I apologize.

It will be, obviously, in the 10-Q.

Okay.

Thanks a lot.

Our next question comes from Scott Krasik with BB&T Capital Markets.

Hello, Ed.

Thanks.

You guys actually do a pretty good job returning value to shareholders.

You have done a lot this year.

From a strategic perspective, do you have your hands full.

Are share buybacks a consideration at this point?

Any comment there would be great.

Yes, share buybacks are definitely still a consideration.

We did a little bit earlier this year, I believe it was in second quarter, we did about $5 million.

We still have about $45 million in our authorization.

I would say that in terms of uses of cash, our first priority would still be to do strategic acquisitions.

To the extent that we could find more things like Betsey Johnson and Big Buddha, that, we think, is our best use of cash.

We think those are going to provide us with really outsized returns on our investment.

But absent that, we will certainly continue to look at share repurchases.

Okay.

And in terms of anything on the horizon, strategic-wise?

We are always looking at things.

But there's nothing imminent.

Okay.

Thanks, Ed.

Thank you.

Our next question comes from Heather Boksen with Sidoti and Company.

Good morning.

Scott just asked my last question.

All of mine have been answered.

Thanks.

And with that, I would like to turn the call back over to our presenters for any final and closing remarks.

Okay, great.

Thanks, everybody, for joining us on the call, and we look forward to speaking to you again on the next call.

Thanks.

Once again, ladies and gentlemen, this does conclude today's call.

Thank you for your participation, and have a great day.