Steven Madden Ltd (SHOO) 2013 Q1 法說會逐字稿

Good day, everyone, and welcome to the Steve Madden, Ltd.

first-quarter 2013 earnings conference call.

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, ma'am.

Thank you.

Good morning, everyone.

Thank you for joining us today for the discussion of Steve Madden's first-quarter 2013 earnings results.

Before we begin I would like to remind you that statements made in this conference call that are not statements of historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

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

The statements contained herein are also subject generally to other risks and uncertainties as 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 information on risk factors that could cause actual results to differ.

Finally, please note that any forward-looking statements used in today's 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, everyone, and thank you for joining us today.

We are pleased to have reported solid first-quarter results in line with expectations despite some significant headwinds, both external and Company specific.

It has been well documented by other brands and retailers that unusually cold weather in Q1 negatively impacted sales of spring items such as sandals, particularly in comparison to last year when first-quarter weather was unseasonably warm.

In addition, as discussed on our last call, we lost two private label customers in our Topline division and discontinued our Big Buddha footwear business, making for a difficult comparison with last year's first quarter.

Nevertheless, our net sales in the quarter grew 4.9% to $278.9 million and net income increased 7% to $23.4 million or $0.52 per diluted share.

We believe that this solid performance in the face of some challenging circumstances is a testament to the power of our brands, the durability of our business model and the strength of our current product assortments.

Before going through a more detailed review of the financial results for the quarter and discussing our outlook for 2013, I'd like to touch on some highlights from the quarter.

First, our new strategy at Macy's continues to produce excellent results.

As you will recall, in the middle of last year we transitioned Steve Madden footwear to the Impulse department at Macy's from its previous position in the junior department while continuing to sell our Madden Girl footwear in juniors.

This strategy enabled us to put more elevated Steve Madden product into Macy's and has resulted in significantly higher sell-through rates for both brands.

As a result we saw double-digit percentage increases in shipping to Macy's for both Steve Madden and Madden Girl footwear in the first quarter.

Going forward we remain on track to add full assortment Steve Madden table doors for the fall as well as increase the number of SKUs offered in non-table doors, which should drive continued growth of Macy's in the back half.

Second highlight in the quarter was the continued momentum in our wholesale accessories segment.

Net sales for this business increased 19% in Q1.

Handbags remain the strongest accessories category with healthy increases across all three branded handbag divisions as well as private label.

Steve Madden and Betsey Johnson handbags were particular standouts; sales for each grew more than 40% in the quarter compared to the prior year period.

Our international business also had another strong quarter of growth, stemming both from our business through partners and our owned Canadian operation.

We saw rapid growth with our partners in Europe, particularly in the UK, the Netherlands and Germany.

We also had a significant increase in the UAE where our partner ended the quarter with 23 Steve Madden retail stores, up from 12 at the end of the first quarter last year.

Turning to SM Canada, we remain very pleased with the performance of there since we took direct control of the business in February 2012.

During the first quarter we opened our second Steve Madden store in Calgary bringing us to 13 Canadian stores versus seven stores when we acquired SM Canada a little over a year ago and the stores are performing very well.

Although SM Canada will not be included in our reported comp store sales figures until next quarter, our Canadian stores were up 7.9% on a store-for-store basis for the quarter, outperforming our US store base.

Canadian stores also achieved higher four wall contribution margins than their US counterparts.

As I mentioned on last quarter's call, we are also focused on developing our newer brands and we made nice progress on that front during the quarter.

Mad Love footwear and accessories are off to a great start at Target where the products are in all doors and online and we've seen excellent initial sell-throughs.

Superga also continues to perform well.

During the first quarter sales more than doubled versus the same period last year as a result of strong growth at retailers such as Zappos, Nordstrom's and Bloomingdale's.

Sell-throughs have been good and we expect them to only get better as the weather warms up.

Finally, let me touch on our US retail stores where we delivered solid performance despite extremely challenging traffic trends.

Overall comp store traffic was down double-digits on a percentage basis for the quarter, which we attribute primarily to the much less favorable weather in Q1 compared to last year's first quarter.

However, thanks to an outstanding product assortment with particular strength in the booty category, we were able to drive a dramatic improvement in conversion, which, combined with an increase in average unit retail, enabled us to achieve comparable store sales growth of 3% for the quarter, which we consider to be a major win in light of the soft traffic.

With that let's turn to the details of the financial results for the quarter.

Consolidated net sales in Q1 grew 4.9% over the prior year period to $278.9 million including a strong gain in retail and a more moderate gain in our wholesale business.

Wholesale net sales rose 2.2% in the quarter to $233.9 million compared to $228.9 million in the first quarter of last year.

Within wholesale footwear net sales were $189.2 million, down slightly from $191.5 million in Q1 2012.

The decrease was due to a $14 million sales decline at Topline due to -- one, reduced shipments to Payless as we anniversaried the initial sell-in of a major part of the Brashh program; two, the loss as expected of two private label customers that compete with Steve Madden and elected not to go forward with Topline after we acquired it; and three, weakness in Report where we are repositioning the business after its poor performance in 2012.

The decrease at Topline was partially offset by strong growth in international and in our Adesso-Madden private-label footwear business.

Wholesale accessories net sales were $44.7 million, a 19.3% increase over Q1 2012.

As I said earlier, this was driven by continued robust growth in both Steve Madden and Betsey Johnson handbags.

In our Retail division net sales increased 21.7% to $45.1 million.

As I stated earlier, comparable store sales grew 3% for the quarter on top of an 11.9% increase in the prior year period.

We opened one Steve Madden full price store in Canada in the quarter bringing us to 110 Company operated stores including 11 outlets and three Internet stores.

Turning to other income, our commission and licensing income net of expenses was $4.4 million in Q1 versus $4.5 million in last year's first quarter.

First cost commission income net of expenses was $2.3 million in the quarter, approximately flat with last year's first quarter.

Increases at Kohl's and Sears were offset by the loss of Baker's as a customer.

Licensing royalty income net of expenses was $2.1 million, also approximately flat to last year's first quarter.

Royalty income for both the Steve Madden brand and the Betsey Johnson brand was in line with Q1 2012.

Consolidated gross margin for the quarter was 36.8% as compared to 36.1% in last year's first quarter.

Wholesale gross margin was flat at 32.3%.

Gross margin in the Retail division was 60.3%, up from 60.1% in the first quarter of 2012, driven by an increased mix of sales from the higher margin SM Canada retail business.

Operating expenses were $70.5 million in the first quarter or 25.3% of net sales compared to $65.2 million or 24.5% of net sales a year ago.

Operating expenses as a percentage of sales increased versus last year due to an increased mix of retail which has higher operating expenses as a percentage of sales than the wholesale business.

Net income for Q1 was $23.4 million or $0.52 per diluted share compared to $21.9 million or $0.50 per diluted share in the first quarter 2012.

Turning to our balance sheet, as of March 31, 2013 we had $277.9 million in cash and marketable securities and no debt.

We ended the quarter with inventory of $58.6 million, up 10% compared to last year.

Our consolidated inventory turn for the last 12 months was 10.5 times, down slightly from 10.6 times in the prior 12 months due to the increased mix of retail which had slower inventory turns than wholesale.

FX in Q1 was $4.2 million and during the quarter we purchased approximately 252,000 shares for $11.1 million or an average price of $44.17 per share.

Now turning to guidance -- for fiscal 2013 we continue to expect net sales to increase 6% to 8% compared to fiscal 2012.

Diluted EPS is expected to be in the range of $2.95 to $3.05.

And in Q2 we expect top- and bottom-line growth to be similar to slightly better than Q1.

In conclusion, we've had a solid start to the year in a challenging environment.

Our foundation, our brands and our business model is strong and we believe we are well positioned to drive sales and earnings growth in the balance of 2013 and beyond.

And now I like to turn it over to the operator for questions.

(Operator Instructions).

Camilo Lyon, Canaccord Genuity.

Nice job on a tough quarter.

I was hoping you could talk a little bit about what you are seeing in the promotional environment here in Q2 in general industry inventory levels particularly in the sandals category.

And how you might think that influences your need or your desire to continue to drive traffic.

And if there is any increased promotions that others are engaging in to drive traffic.

Yes.

Well, certainly -- it is a good question.

Certainly there was a very slow start to the sandal season this year and we did not deliver a lot of sandals early.

We really went after the booty category in the first quarter which turned out to be a good move for us.

There were certainly others out there who've had a lot of sandals on the floor for some time now and are feeling probably a little bit backed up with their sandal inventory.

So we do expect that there is going to be a fairly heavy promotional environment in Q2 and that is something that we've factored into our guidance that we've put forth today.

Is there one channel that is particularly heavy in the category or is it pretty widespread across retail?

Yes, I think that is really sort of an industry-wide and it goes across channels.

Everybody had had the same weather issue and the same sandal issue.

And I would assume that would be this case for geography as the warm weather climates are already cleaner on inventory versus the colder weather climates?

That's right.

Okay.

And then can you talk a little bit about just how we should think about the year with respect to puts and takes around the gross margin?

It seems like there were some changes in how the gross margin unfolded in Q1.

And if that reflects more of the Adesso business doing much better, how that plays off of direct sourcing, the Topline contribution -- any color on that would be helpful.

Yes, so in first quarter we came in really right where we expected to.

As you recall, in the first quarter we said that we were expecting gross margins to be up 15 to 100 basis points for the year and we came in at about a 70 basis point improvement.

One of the things that we are seeing though is that our Adesso-Madden private label wholesale business is growing faster than we anticipated this year.

That is obviously a lower margin business.

So what that means is that I think that is really pushing us towards the higher end of our sales guidance but towards the lower end of our gross margin guidance.

So the higher end of the 6% to 8% sales guidance that we have maintained, but probably toward the lower end of that 50 to 100 gross margin guidance.

Great.

And then on that point, on the Adesso business, can you extract what the contribution was from Mad Love?

Yes.

I don't want to get into sales contributions from specific businesses, but it was -- Mad Love is doing very, very well.

The sell-throughs have been great and Target is really excited about it.

And how about the ex Mad Love business?

That also seemed to do pretty well.

Yes, even excluding Mad Love we are growing over 20% in the Adesso-Madden private label wholesale business.

Okay, great.

And then just the last question I have, I think you are reducing the price on the Hilight sneaker wedge here in June or July.

What is typically been the response when you have done that kind of move on a pretty popular shoe?

Yes, we are taking that from approximately $150 to approximately $100 and that is something that -- that $99 or $100 price point has really been a magic price point for us for some big items.

A good example is our -- the lace up booty that we had so much success with a few years ago when we took to that to $100, that really, really spiked the volume and that is something that we're hoping will repeat itself with this item.

Great.

Best of luck in the second quarter.

Thanks.

Jeff Van Sinderen, B. Riley.

Good morning and let me add my congratulations as well.

I guess my first question is have you seen any change in your business trend in the last couple of weeks in your retail stores?

Just wondering if we can gauge anything there.

I'm wondering if sandals maybe is picking up in some regions with the weather starting to break.

And then also maybe you can just generally touch on the magnitude of difference in geographical performance in warmer markets versus colder markets -- we can start there.

Yes, so maybe I will take the latter part of the question first.

Yes, we did see pretty significant differences in geographical regions in first quarter.

We had regions that were down 10 in comp and we had regions that were up 10 in comp.

And obviously it was the colder weather regions where we performed poorly and the warmer weather regions where we did better.

We have seen some nice improvement over the last couple weeks; we have actually made our sandal plan the last two weeks in our own retail stores really for the first time all year.

And we have seen some nice improvement in the traffic as well.

And particularly what is exciting for us, as you know, we are very heavily exposed to New York City in our retail stores and last week in particular we saw a real nice improvement in the traffic in New York City.

So that is a good sign for us.

Okay, great to hear.

And then any other color from your retail partners given kind of the soft and erratic traffic pattern so far this year?

Any thoughts I guess on how that is impacting their plans and maybe if that helps you because of your short lead times?

Well, certainly I think people -- it does make them a little bit more cautious.

And anytime you have a slow start to the spring business the way the industry did in the first quarter it is going to impact second-quarter reorders on sandals and other spring items to some degree.

Fortunately we are -- I think that we have really outperformed the competition.

Our sell-throughs have been in those cases much better than our peers and so we don't think we are going to be hurt the same way some others might be.

I don't think we can say it is good for us though; I think this is a situation where just as the rising tide lifts all boats, a receding tide brings them all down a little bit.

Got it.

Okay thanks very much and good luck for the rest of the quarter.

Danielle McCoy, Brean Capital.

Congrats on a great quarter.

I was wondering if you could give us an update on jewelry and watches for Steve Madden.

Yes, so we are pretty excited about those new categories.

Our partner, Haskell, has been showing the new product to retailers, getting good response.

The jewelry is going to hit stores in Q3 and we expect the watches to hit stores in Q4.

And the distribution will be similar to the normal Steve Madden distribution, better department stores and specialty stores.

Okay, great.

So first quarter the tax rate came in a little bit lower than we had expected.

How should we look at that going forward?

Yes, that was related to some earnings that we reinvested indefinitely in our foreign affiliates.

I think that it's going to go up a little bit from where -- the rate that you saw in first quarter, so I would use 37.5% for the full year.

Okay, great.

And just switching to the process of converting to the direct sourcing model.

How far along are you and are you still expecting to see the 40 basis point gain from gross margins as you had spoke about in the previous quarters?

Yes, we are right on target there.

We are up north of 15% of our legacy whole -- footwear business, rather, going direct.

And we are still on target to achieve the gross margin benefits.

All right, great.

Thanks, guys, good luck.

Corinna Friedman, Wedbush Securities.

Also on the jewelry and watches, will that be in the retail stores as well?

We have not yet determined that.

We haven't bought any for our retail stores yet.

Okay.

And then store opening plans --?

I'm sorry, Corinna, over time it will be, but we are just trying to figure out the appropriate launch date.

Okay.

What was the second part of your question?

Store opening plans for the rest of the year, what are you targeting for the balance of the year?

Yes, so there is no change; we are still looking at four to six full-price stores for the year of which we have already done one and five to seven outlets.

Okay, great.

Those are my questions.

Thank you.

Scott Krasik, BB&T Capital Markets.

So if your private label business was up big and your Macy's business was up double-digits, what was some of your other big major business?

Was it down, was it flat and what was the function of that?

Yes, as I mentioned in the prepared remarks, the big decline was the Topline business, that was down $14 million in net sales.

And of course, remember, we discontinued Big Buddha as well.

Now if you backed out Topline and Big Buddha admittedly that is cherry picking, but then we were up actually 10% in wholesale footwear in the quarter.

But Topline was really the counterweight to the growth that we had in Adesso-Madden and Macy's and international.

Okay, so other big retailers like Nordstrom and DSW, they were still positive just not -- you didn't call it out because it wasn't as strong as Macy's, was that --?

That's right.

They were in line with where they have been.

Macy's was a step up.

Okay, all right, good.

Then if we could just go through -- you did such a good job breaking up the pieces of the wholesale gross margin last quarter.

Topline gross margin was up, you had a big lift from Steve Madden Women's in the mix, you got the direct sourcing benefit, Canada benefited.

Can you just sort of go through -- did these things not recur in terms of the gross margin lift year over year?

Yes, as you recall when we talked about it in the last call, a lot of that was a function of what we were anniversarying from the prior year.

We were really through all that starting this year.

And it was really much more of an apples-to-apples comparison.

And we in fact came in flat on the wholesale gross margin versus the year before.

Right, so what benefit I guess was direct sourcing, what benefit was Canada?

Can you break any of those out?

Sure.

Direct sourcing probably got us 20 to 30 basis points.

Canada was a much more modest impact because, keep in mind, we acquired a Canada in the middle of the quarter last year so you really only had January where it was non-comp.

I don't have the number of the top of my head, but it was more modest.

We did say that the improvement in retail from 60.1% to 60.3% was primarily driven by the inclusion of the SM Canada retail business, which is higher margin.

Okay.

And then we were -- going the other direction we were slightly lower in Steve Madden Women's wholesale business in first quarter than we were a year ago.

Keep in mind the year-ago margin was actually our highest quarterly gross margin ever; we were shipping in all those sandals, of course we gave some of that back in Q2 when sandals slowed up.

So we are expecting to be -- as we were a little bit lower in Q1 we are expecting to be a little bit higher in Steve Madden Women's wholesale gross margin in Q2.

Okay, all right.

Then you alluded to the highlight price cut.

What contribution are you expecting out of the wedge sneaker in general?

Is it the most important category for you as you head into fall and maybe talk about is there anything else that you expect to be really meaningful?

Well, it is an important trend, but it is certainly -- I would not characterize it as the most important trend.

It has been running -- it was about 7% of our women's sales in retail Q1 and we think it will be more like 9% in Q2.

But I would say that probably some of the most important things that are happening right now -- I would point to dress, dress is picking up.

That is a category that has been weak for the last year or so, but we are seeing some real nice and improvement in that category.

And one of the things that's interesting there is that we are getting a lot of success with single sole dress shoes.

Now we are -- as you know, it's really been all about platforms for the last few years in the dress category.

And we are still selling some of the [overlapped] platforms that we have been sort of known for of late, but we are also getting some real nice hits on single sole dress shoes.

Our flat sandals, now that the weather has finally broken, we also feel very good about that category, particularly the sandals that we have with metallic plating and ornamentation, that is good.

Booties of course remain very important, we are still selling a lot of booties even now with the warm weather and we think that will become even more important again as we move into fall in the back-to-school period.

And then after that I would say is the wedge sneakers.

Okay, great color.

Thanks.

Good luck.

Taposh Bari, Goldman Sachs.

A question on capital allocation.

I think last quarter you had said you would either do a buyback or a deal this year.

It looks like you are now doing a buyback.

I guess the question is, are those two events mutually exclusive or is there still an opportunity for you to make a deal this year?

No, we are still evaluating both and they are certainly not mutually exclusive.

Okay.

And then just on the amount of the buyback, it seems -- I mean you clearly have the capacity to be more aggressive.

You do have some share or option dilution hitting your share count.

So how do we think about your approach or your philosophy towards buyback in light of what you did in the first quarter?

Yes, well, we did $11 million, we were just sort of getting started there.

What we have said though is I think we are going to be consistent with how we approached that in the past.

We are not going to commit to future buybacks because it's certainly something we are continuing to look at and I think there is a decent likelihood that we will do some more.

But it is always in the context of what our other alternatives for the cash are.

And so, to the extent that we find a great acquisition it is going to require a lot of capital that might prevent us from doing a buyback.

In the absence of that I think it is likely that we will do quite a bit more share repurchase.

Okay.

I just wanted to clarify your comment around second-quarter guidance.

What is the EPS base that you are using for 2Q?

I just wanted to make sure -- I just wanted to clarify what you had said.

I think you had said revenue and EPS growth rates at or slightly better than what you saw in the first quarter, is that correct?

That is correct.

And we are looking at $0.61 from a year ago.

Okay.

So if your EPS grew 3% in the first quarter you are saying 3% or slightly better than that over $0.61 for 2Q, is that right?

That's right.

Okay (multiple speakers).

Yes, I calculate -- I calculate the EPS a little different for Q1, but that is the right idea.

Okay.

And last one I have for you, Ed, is Steve Madden Women's wholesale footwear growth in the first quarter, what was that?

And what are you embedding for the full-year guidance for that business?

Yes, so it was a down -- Steve Madden Women's wholesale footwear in the US was down 2.5% in Q1.

What I would like to say though is I don't think that's indicative of the underlying strength of that business.

There's a couple things to remember there.

Number one, a year ago that business was up over 30% in Q1, that was our fastest quarterly growth rate in that business since 2004, so it was a very tough comparison.

But more specifically we did a test program with a new customer in Q1 last year, shipped about $4 million to that customer -- a very profitable business for us and did it well.

But we are not pleased with how our product was presented in that retail and we elected not to go forward with that retailer, not to anniversary that the program.

So if you back -- Q1 was the only time we shipped them.

So if you back that out we were actually up about 7.5% in Steve Madden Women's in Q1.

In terms of the full year, we are not going to provide guidance by individual brand.

But we continue to feel good about the momentum we have at Steve Madden.

Okay, so just so I am clear, it was down 2.5% in absolute terms, but if you back out that one time test ship in last year's first quarter it would've been up 7%?

Up 7.5%, that's right.

7.5%, okay, thank you.

Good luck.

Steve Marotta, CL King & Associates.

As it relates to the inventory being up 10% versus sales up 5%, can you disassemble that a little bit, offer a little bit more color?

Yes, most of that is driven by the heavier mix of retail this year.

Keep in mind that retail turns about once a quarter while wholesale turns about once a month.

So with retail making up a greater percentage of the mix the inventory is going to grow a little faster than sales.

So that was well within the bounds of your expectations?

Yes, and we feel comfortable with the inventory levels.

Great.

And lastly, as it relates to the decline at Topline, you gave specific reasons for it, was it within your original projections to be down $14 million at that business in the first quarter?

We were a couple million dollars shy, there was a couple million dollars of shipments that moved out in the second quarter from first.

So basically just a timing shift in that differential?

Yes, that's right.

Great, that's perfect.

Thank you very much.

Jane Leeson, KeyBanc.

This is Luke in for Jane, thanks for taking our question.

As we look at wholesale going forward in kind of a slower growth this year how do we think about the trajectory of the wholesale segment taken as a whole and anything in particular given throughout the rest of the year?

You mean the quarterly trajectory?

Yes, sorry.

Yes.

Yes.

Well, I think you are going to see it improve in the back half.

We talked a lot in the last call about how we had some drags in the first half not only Topline but also the discontinuation of the Big Buddha footwear line.

And so, you should see that growth rate improve in the back half, get back up into the high-single-digits.

Okay.

And anything outside of the -- kind of lapping the Topline changes and things we have talked about?

Any other big call outs for the back half?

We do have some businesses that seem to be gathering momentum.

I think Madden Girl in particular is really picking up steam.

We talked about Report should improve in the back half.

Betsey Johnson shoes is getting better; we've got this bridal package that is performing well and creating some nice buzz for that brand.

We've got a new smaller brand called Freebird which is some higher-priced boot product out of Mexico that is making some noise and should be additive in the back half.

So we have got some nice things happening in the back half.

Great, thanks, Ed.

Chris Svezia, Susquehanna.

Just a quick question -- a couple questions.

One, just in the dress category, what do you think is driving that in terms of the pickup in momentum?

Is that just after it has underperformed that suddenly customers are coming back to it?

Just any thoughts about what's driving that growth or improvement?

Yes, well, as I said earlier, we were just showing -- in our grid of business it was really all about platforms for a few years.

And I think that that trend started to run its course.

Some of the girls had them in the closet and got a little tired of it and so there was a bit of a slowdown for about a year.

But now we have got these single sole shoes which are new again and that has created some nice buzz and momentum in the category.

Okay.

And I'm just curious on Macy's, what you have done there in terms of the migration in the Impulse category.

Is there any other account you guys are looking at that you could do something similar with in terms of that type of rotation?

Or is that just Macy specific given their size and given what they do in footwear for you guys?

Yes, there is not really any other meaningful customer.

We have already made that type of change with whatever customer was available.

I think Macy's was the big one.

Okay.

And on -- when you guys think about the boot business for the back half of the year, just what are retailers coming back to you -- what are they saying, what is sort of their response to product?

Laces has been important, booties you have obviously called out.

Just help us think about that category for fall and maybe some thoughts about ASPs within that category?

Yes, I think that people feel good about the category overall if we consider boots and booties one category.

But they tend to be pretty focused on booties.

So you could see ASPs down a touch if booties make up a bigger percentage of the total relative to tall shaft boots.

Okay.

And then lastly, I'm just curious, on the retail piece, Canada -- I mean why to some degree is that more productive and profitable?

Is it just something structurally in Canada that makes it that way?

I know you have made a lot of progress domestically on the retail piece.

Just curious why that is in Canada?

Yes, there is a very simple reason, that we get more for the shoes in Canada.

We charge 25% to 30% more for the same item in Canada.

I see, I got it.

Okay, that is helpful.

Thank you very much, Ed, all the best.

Sam Poser, Sterne, Agee.

Hi, Ed, it is Ben Shamsian in for Sam.

Good morning.

A couple of questions.

SG&A came in better than our estimates.

Are you guys doing anything there in terms of holding the fort on that one?

There is nothing unusual?

I mean we continue to do our best to control expenses and obviously our sales growth is a little slower in the first half than where we have been running, so we have been even more focused on controlling expenses.

But there are no major cost cuts or anything unusual there.

Got it.

And you are guidance, the last time you talked about your comp guidance low-singles to mid-singles and the wholesale footwear business being up 4 -- is that about the same now or has anything changed there?

Yes, I think that the wholesale business overall for the year we are looking at 4 to 6 and no real change in the comp guidance.

Okay.

And how are you positioned for the Nordstrom's sale this year in terms of SKUs or anything different versus last year?

Yes, we are in good shape.

We have more in anniversary than we did a year ago, so we are excited about that.

Got it.

All right, thank you.

Good luck.

Scott Krasik, BB&T Capital Markets.

Hi, this is Kelly now for Scott.

Just a quick follow-up on share repurchases.

Is there any share repurchases implicit in your guidance or your outlook for the year?

Nothing other than what we have already done.

Okay, great.

Thanks.

Mr. Rosenfeld, it appears there are no more questions at this time.

I would like to turn it back to you for any closing remarks.

Great, well, thanks, everybody, for joining us.

And we look forward to speaking to you on the next call.

This concludes today's conference.

Thank you for your participation.