Skechers USA Inc (SKX) 2004 Q1 法說會逐字稿

Good afternoon and welcome to the Skechers USA Incorporated First Quarter 2004 Conference Call.

At this time, all lines are placed on a listen-only mode and the floor will be open for your questions following the presentation.

It is now my pleasure to introduce your host, Mr. Andrew Greenebaum from Integrated Corporation Relations.

Sir, the floor is yours.

Thank you and thank you everyone for attending Skechers First Quarter Conference Call.

I'll now read the Safe Harbor Statement.

Certain statements contained herein including without limitation statements addressing the beliefs, plans, objectives, estimates or expectations of the company or future results or events may constitute forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995 as amended.

Such forward-looking statements involved known and unknown risks, including, but are not limited to the general economic and business conditions and conditions in the retail industry.

There can be no assurances that the actual future results, performances or achievements expressed or implied by such forward-looking statements will occur.

Users of forward-looking statements are encouraged to review the company's latest annual report on Form 10-K, its filings on Form 10-Q, management's discussion and analysis in the company's latest annual report to stockholders, the company's filings on Form 8-K, and other federal securities law filings for a description of the other important factors that may affect the company's business, results of operations and financial conditions.

And now, I'll turn the call over to Skechers Chief Financial Officer, David Weinberg.

Thanks Andrew.

Good afternoon and thank you for joining us today to review Skechers first quarter 2004 results.

As always, we will open the call to questions following my prepared comments.

For the first quarter of 2004, sales were 221.5 million, compared to 208.6 million for the same period last year.

Diluted earnings per share were 18 cents.

The increase in revenues this quarter was primarily due to our international, retail and licensing business.

We are pleased with our performance and believe that based upon these positive trends, we should continue to see steady sales increased for the balance of the year.

We believe our business will also benefit from initiatives being launched in 2004, including three new footwear and two apparel lines.

Highlights for the first quarter 2004 include, increased sales for key men's and women's divisions, and a positive reception to our new and existing brands at WSA and GDS in February and March respectively.

Significant improvements in key international markets from both our subsidiary and distribution channels brings us closer to our previously stated goal of having international sales represent 25-305% of our total business in the next three years.

Increased sales in our Skechers concept, outlet and warehouse store divisions, SG&A expenses down about 1% as a percentage of sales and cash on the balance sheet in excess of 115 million at the close of the quarter, and most importantly, our greatly improved inventory position, due to inventory control initiatives implemented in 2003 as well as increased demand for our product in the first quarter of 2004.

Now I'd like to expand on our first quarter 2004 achievements in our four revenue channels: domestic wholesale, international, retail, and licensing.

First, domestic wholesale, as I mentioned on our year-end conference call for the 2004 season, our production and design teams have redeveloped many of our existing lines, focusing on updating proven styles as well as developing new styles.

This dedication to delivering trend-right product, coupled with a stronger retail environment, has resulted in an increase in pair shift in the first quarter 2004 over the first quarter 2003, an improvements in key men's and women's divisions.

While we recognize there is still room for improvement across all our lines, we are pleased with our men's sport business, which saw increases lead by the new styles, Vigor and Endurance and proven sellers such as premium, stamina and energy.

We are also pleased with improvement in our women's line, including our growing something else from Skechers for junior, Skechers USA, Michelle Kay (ph), and Michelle Kay for sport, which is performing well since the launch of a supporting ad featuring the designer Michelle Kay.

Based on our sell-throughs at retail for women's Skechers sport, our backlog has significantly increased.

We believe our new men's and women's spring campaign, we put the S in Actions, which began appearing in April, will generate more excitement among consumers, and increased demand for our brand.

We believe our Skechers kids print campaign, we put the S in Q, and our commercial Parashoe (ph), both of which support our kids apparel and footwear will also increase brand awareness.

Early indicators from trade shows, account reactions and orders booked, in addition to our own retail stores performance, leads us to believe that our domestic wholesale business will continue this positive trend.

We believe our wholesale channel will further be boosted by sales with the introduction of three new footwear lines, launching for back-to-school 2004, expected to be in stores in May, Rhino Unlimited, Rhino Red and 310 Motoring.

While these targeted brands are to a specific market, we believe the strong brand association and loyal followers should create a demand for the product, especially for the footwear lines of Ecko Unlimited and Ecko Red.

While we recognize that the retail environment has improved in 2004, we believe our positive results are indicative of our marketing efforts, sales supports, trend-right products and brand equity.

Again, given early indicators, including sell-through rates from accounts and orders shipping for the close of spring '04, we believe the momentum should continue.

Turning to our international channel, we are pleased with our international business as we have experienced sales increases with our subsidiary and distributor channels.

At the close of first quarter 2004, our international business increased to almost 20% of total sales, bringing us closer to our goal of international sales representing 25-30% total sales in the next three years.

In regard to our subsidiaries, we saw an increase in our sales in the first quarter.

This resulted in part from the conversion of our Canadian distributor to a subsidiary, and the establishment of new subsidiaries in Italy and the Benelux region a year ago.

Further several of our already established subsidiaries, most notably the United Kingdom and Germany, also experienced positive sales and appeared to be on a steady growth track.

While our Layal (ph) Paris retail location is showing increasing sales, we have not experienced the same positive results in our wholesale business in France as we have in the rest of Europe.

We will continue to address our business in France and believe we can be as successful there as the balance of continents.

Like our domestic business, our subsidiaries are supported by multiple marketing vehicles.

From advertisements and point of purchase materials, both now featuring global superstar Christina Aguilera to trade shows to Skechers owned and operated international retail stores.

We currently have 11 Skechers retail stores in six counties where we have subsidiaries.

Keeping with our domestic business model, we believe there is synergy from having a direct retail presence.

With regard to our distributor business, we have seen an improvement in our sales due to a stronger global economy, the availability of more trend-right products for key markets, our advertising support featuring Christina Aguilera and the addition of 18 distributor-owned Skechers retails stores in 12 countries in 2003 and one in the first quarter of 2004.

The Skechers distributor stores, which now number 21, reflect the design and look of Skechers own retail stores and we view these stores as an extension of our marketing and branding effort.

Turning to retail, the increased store base of 24 Skechers owned and operated retail stores since March 31st, 2003, including the prime locations of Las Vegas Fashion Show Mall, the Allstat District of Dugledorf (ph), and Calvastrat Street (ph) in Amsterdam resulted in an increase in total sales for retail.

Additionally, we have seen an increase in demand for our products across all retail store formats.

We believe we have already opened retail stores in prime locations across North America and Europe and therefore plan to curtail our retail expansion and open just four additional stores in 2004.

Our retail focus will be on increasing the sales in our existing brand building retail locations and maximizing their potential profit.

Now in terms of licensing.

Skechers licensed merchandise realized a successful launch during back-to-school 2003, anchored by Skechers kids apparel.

Royalties generated from our licensing arrangements for the quarter was just over $1 million, which reflect the sales of our initial license merchandise.

With more than 10 licensing agreements signed, many of which are in the development stage, with product launching and back-to-school 2004, through spring 2005, we see tremendous profit potential from these initiatives.

Our 13 unique brands provide an incredible flexibility and opportunity for further licensing partnerships.

While we expect to develop new licensing opportunities in the future, we are presently focused on developing our existing agreement, including Skechers USA Apparel with Paul Deville, PDI, Michelle Kay apparel with Coral Industries, Something Else From Skechers apparel with Federal Jeans, 310 Motoring apparel with Signature Apparel, Skechers kids socks and hosiery with United Leg wear, Skechers Watches with Fada Industries, women's junior, women's and junior swimwear with Christina America, and our most recent addition, Something Else from Skechers Junior and Skechers Women's and Men's loungewear and sleepwear with Signature Apparel.

As well as being profitable, we see our licensed merchandise as ideal brand-building tools as they reinforce our brands as a complete lifestyle, domestically and in select international markets.

Now turning to our first quarter numbers.

For the first quarter, sales were 221.5 million, compared to 208.6 million last year.

The higher revenues in 2004 were due primarily to our continued strength in our international business, and company-owned retail stores, as well as licensing royalties.

We experienced an increase in domestic wholesales units, shipped for the quarter, but sales decrease slightly due to lower average selling price.

Gross profit was 89.7 million versus 90.3 million in the same period a year ago.

First quarter gross margin was 40.5% compared to last year's gross margin of 43.3%.

We are pleased with the margins and as discussed in previous calls, feel that a 40% gross margin is appropriate for our business.

Total operating expenses, as a percentage of sales, decreased to 34.9% compared to 35.8% in the first quarter of fiscal 2003.

We have a relatively fixed operating expense structure, but saw some positive leverage with the increased sales.

First quarter selling expenses decreases significantly to 16.1 million as compared to 17.6 million in the prior year period, primarily due to a reduction in trade show expenditures, and advertising and promotion costs.

On a percentage basis, selling expenses decreased to 7.3% from 8.4% in the first quarter of 2003.

We anticipate our advertising to be within our historical range of 8-10% of sales for the 2004 fiscal year.

As last year, advertising expense in the second quarter will be significantly higher than in the first quarter.

General and administrative expenses were 61.1 million compared to 57.1 million last year.

These expenses, while flat on a percentage basis were up in real dollars due to a variety of initiatives including the cost associated with managing three new subsidiary businesses, Italy, Canada and the Benelux region, an increase store base of 24, year-over-year and the building of four new brands, Rhino Unlimited, Rhino Red, 310 Motoring and Michelle Kay sport.

Net income for the first quarter was seven million compared to net earnings of 8.5 million in the prior year period.

Diluted earnings per share were 18 cents on approximately 42.5 million diluted shares outstanding, compared to diluted earnings per share of 22 cents on approximately 41.5 million shares outstanding on the first quarter of last year.

Our balance sheet continues to improve.

At March 31st, 2004, cash stood at 115.6 million.

Trade accounts receivable at quarter end were 129 million and our DSO's at March 31st, 2004 were 47 days versus 48 days at March 31st, 2003.

Inventory at quarter end was 112 million, representing a substantial decrease of 26 million from 138 million at fiscal year-end 2003, and down over 62 million from the same period last year.

We believe that these positive figures are indicative of our focus with regard to our inventory control initiatives in the third and fourth quarters of 2003, and a result of a positive sales momentum we are presently experienced.

Working capital totaled 291 million at quarter end versus 291.8 million at March 31st, 2003.

Long-term debt was 118.5 million.

Shareholders equity at quarter end was 265.1 million.

Capital expenditures for the first quarter of 2004 were approximately $1.3 million.

We expect cap ex to be around $4, four to six million for the full year.

And now turning to guidance.

We currently expect second quarter sales to be between 230 and 240 million, and diluted earnings per share to be in the range of 12-17 cents.

As discussed, we are pleased with our performance in the first quarter and believe that the strength and relevance of our brand and product will continue in the marketplace.

Of particular note, the back-to-school shipping period occurs over both our second and third quarters, and as such, shift in the timing of when goods ship may cause sales to move between the two quarters.

Based on early indicators, we believe we will see an improvement in our second quarter year-over-year.

In the first quarter 2004, our sales decline abated and resurgence occurred for our diversified product offering, domestically and internationally.

We continue to see the relevance of our brand increasing, augmented by a stronger retail environment.

Additionally we believe our product lines with trend-right and core styles and the powering up of our advertising for back-to-school will positively impact sales.

Again, we are pleased with our first quarter performance, our significantly reduced inventory levels, increased cash position and improved sales.

These factors, combined with positive early indications for the second quarter give us confidence the momentum that we are experiencing now should continue for the remainder of the year.

As always we will continue to focus on making all areas of the business more profitable, growing our recent initiatives and further building the brand equity to insure Skechers' continued relevance over the coming years.

And now I would like to turn the call over to the operator to begin the question-and-answer portion of our conference call.

Thank you.

The floor is now open for questions. [OPERATOR INSTRUCTIONS] We also ask while posing your question, you please pick up your handset to provide optimum sound quality.

Once again, that's star-one for any questions you may have.

Please hold while we poll for our first question.

Our first question comes from Jeff Feinberg (ph) from JLF Asset Management.

Thank you.

Good morning.

Congratulations David.

Good morning.

Thanks.

Just a couple quick questions if I may.

The first is last conference call you told us that the bookings were starting to pick up a little bit and that we were getting close to flat.

Can you provide us your sense in terms of how our bookings stand?

Are we actually ahead of last year now at this point?

Well you know, we don't usually comment, but given that this is a transition, yes, our bookings are ahead at the third quarter and they continue to improve, booking, we mean backlog specifically, not the order rate, but backlog has increased at bookings have increased, at the end of the third quarter and continue to increase as we move through April.

Terrific.

That's a nice change.

Congrats.

The other thing, with regard to the licensing business, can you provide us a little bit of an update there, in terms of thought process, what kind of opportunity is this with licensing?

As I understand it, that's essentially pure profit and I wanted to understand how that's trending.

Like we said, we did $1 million in the first quarter.

Our initial guesstimate last year, we though we'd only do somewhere less than $3 million for the year, so we're certainly ahead of schedule.

And most of the licensing opportunities haven't hit the marketplace yet, specifically Michelle K and something else that won't start until back-to-school.

And our very big license, which would be Paul DeVrill (ph), which is obviously a very key player, won't even start to show until back-to-school and deliver, we hope, very largely for spring.

So, I think it's fair to say that the million dollars could be a benchmark quarter by quarter going through this year, starting to increase in the fourth quarter and then certainly starting to increase even further in the first quarter of 2005.

Is there a simple way, not at all a projection, but just to understand, what is the licensing opportunity for Skechers if the various initiatives do hit this $10, $15, $20 million opportunity.

All of the above.

OK.

And then finally...

The only question is obviously when, and I think that's more 2005 or going into the second half of 2005 as it's established in a marketplace kind of scenario.

That's what I'm really talking about.

OK.

And finally, with regard to the guidance, if you could just flush the guidance out a little bit.

If I understand correctly, because of the positive bookings and backlog and sales trends you mentioned, you're indicating that your sales should grow from Q1 to Q2.

Is the thought process, because you have the profits declining from Q1 to Q2, is the thought process just to be conservative at this point and wait to see how the sell-throughs develop?

Well, that's part A. We try to be conservative.

We're always leery, as we said in the past, of this June/July phenomenon since we don't deliver and don't have control of the trucks, it's not usually significant whether trucks leave June 30th or July 1st for our customers in control.

It obviously is for us.

And the second issue is, we have increased advertising, obviously, which will be significant for same dollar overhead on the G&A side for second quarter.

Second quarter is historically among our largest advertising pieces.

So, that's the reason for sequential earnings being forecasted slightly down quarter-over-quarter.

But like I said, as we go, and a lot of things can happen with that June/July dynamic.

We are starting to increase April.

So, whether it's June or July, we still anticipate some positive results.

And just to understand, it sounds like you assumed, in this particular guidance, to be conservative, the majority of the business gets done in July so there will be no disappointments?

Well, we try to be as careful as we can because we've seen things happening, orders happening later.

In the first quarter, usually January, because the spring shipments and bookings is among our strongest months of the quarter, and this year it was our weakest.

February/March came on stronger.

The move to buy things closer to the vest for back-to-school, which would obviously mean late June/July shipment, could create a shift from prior years from June to July, and we're trying to be as conservative as we can.

OK.

Thank you so much.

Our next question comes from David Turner from BB&T Capital Market.

Thanks.

Good afternoon.

I've got to ask about the roughly 30% increase in accounts receivable.

Is that, in any way, tied to what you just mentioned, the buying activity happening closer to need or kind of an at-once mix versus a futures mix?

I don't think that has too much to do with the at-once/futures.

That would certainly apply if it were certainly significantly hotter this year than last year.

But as I just told Jeff on the previous question, we shipped a little later in the year.

People want it later.

We shipped more in February/March as opposed to January in percentages.

And obviously, that leaves a higher receivable balance at the end.

I think you can see that specifically when we said our DSOs are actually a down a day, even with the increase in receivables.

Right.

So, it's basically a timing issue.

People that get it today would be coming inline.

Absolutely.

We collect more in April, and April is not one of our bigger shipping months.

OK.

And I guess, just to touch on guidance as well, to make sure that I understand it, under what scenario would the $.12 be realistic?

That seems like it's tied to sales.

You've got to read on expenses, so you really just find an increase in backlog and strong demand, it's really tied to sales.

Well, it's tied to sales and it's tied to the same type of overhead we see in the first quarter other than our advertising.

We're a lot more in-store and we're a lot more advertising the second quarter.

So, if you take this $230 million scenario and the $222 million scenario that is Q1 and factor in some of this advertising expense and some other expenses that are just Q2, we usually have a little higher expenses for the same volume in Q2 shipping-wise from the warehouse because we're so concentrated in June, it doesn't split out as evenly as January, February and March.

We carry overhead for April and May and then we have to pay some overtime to get everything out in June.

So, those are the two little dynamics and differences between Q1 and Q2 for the advertising and the G&A.

So, it's not a matter of, I guess, you could argue, you didn't pull any sales in the first quarter which would put you closer to the $.12.

It's just how they flow basically.

There wasn't any shifting of revenues, I guess?

No, not that I could tell.

And last question, just a housekeeping really, the tax rate was a little higher than it's been, understandably, despite an increase in the international business, which is lower, so, is the 40% closer to where it's going to be for the year or is there a better number than that?

I think, for the time being, the reason the rate is back up to 41% is exactly because of Europe.

Our tax planning is such that Europe is a more tax advantaged place for profits than the United States.

With the build of infrastructure that we've put in and just the startup business and the Benelux, Italy, and some decreases in France, they're not as profitable, as a percentage of our whole, as they were last year.

We think they leverage quite quickly.

And as they start to move, which hopefully is the second half, which we should see a decrease in tax rates.

So, that is dependent on how much of our profit is moved overseas.

OK.

Thank you very much.

Our next question comes from John Zolidis from Buckingham Research.

I know it's John Zolidis.

Hey, Dave.

Good morning, thanks.

Good morning.

I know that's a tough one to say.

A question on some of the new initiatives you've got there in terms of the four new footwear lines, the Mark Echo (ph), the 310 and the Michelle K Sport, I was wondering if you can give us kind of a ballpark figure in terms of what you think those can bring, if they can be added to the top line over the, say, the next year or so?

It's difficult to say, and we're leery, but leave it to say, I'll repeat what we said, somebody asked me on the last conference call if Mark Echo, I believe he said, could the Echo line be $25 million, and I told him we'd be significantly disappointed if it was $25 million.

And I would tell you now that if you put those four lines together, we'd be significantly disappointed if, in the next two years, there weren't at least two or three times that $25 million number or higher than that.

We think Mark Echo has unbelievable potential.

It's even hard to put your fingers on it.

They're such a successful power brand and it just seems to be getting stronger and stronger and they have such a great following in the department store.

And that transition world, it's almost unlimited what you can do with that line if you bring the right things to market.

We'll have a better feel, obviously, we're going to deliver the first portions in May and June, so, as we have this conference call in July we'll have a better feel of that the product is like and how it's checking out at retail.

OK.

I guess that makes sense at this point.

We don't have any information on sell-through rates.

But you have shown it at a couple of the trade shows, as well as 310.

I'm kind of curious how the response has been, from the retailers, for those new product lines.

The retailers seem to be as excited as we are.

They're all selling the (inaudible) brand that well, and they know what the potential for the footwear is, and they can hardly wait.

They've pushed us as hard as anybody to get it marketed as quickly as possible.

But, because we want to get it right, and make sure the first hit is as good as we can make it.

And again, the distribution for that product is mostly additive to what Skechers is currently in?

Well, Skechers is already in most of those channels of distribution, but in levels that we'd like to be significantly higher.

So, it's certainly marginal business because it's different.

We think it's somewhat a different consumer, but it's in where we're the smallest, so to speak, so there's plenty of room for growth.

Great.

All right, thanks a lot, and good luck for the next quarter.

Thank you.

Our next question comes from Justin Mauer (ph) from Lord Abbott.

Hi, David.

Hi, Justin.

You know I'm not going to push you on guidance.

I won't even go there.

Comps at retail?

Order of magnitude anyway?

Well, we only announce them at year-end.

I think it's fair to say that, since year-end they've only increase.

So, we're showing positive comps, probably on order of what you read around retail venues in general.

And they've continued for us in April.

So, we're very happy with the retail venues.

And that's in all three levels of distribution.

So, they're all kind of confirming.

OK.

And just relative to your comment on the advertising expense, 8 to 10, first quarter it was seven and change selling expense, which, obviously, would include that, so running below that.

It's two questions, I guess.

Number one, were there any amounts that you guys purposely shifted the second quarter?

I know it tends to be a little bit lumpy quarter for you anyway.

But more importantly, were you guys planning more conservatively to start the year, and now that you're seeing the response you're decided to step it up a little bit, or maybe talk us through that a little bit.

I think we don't purposely shift or do anything to the plan.

We just plan our business basically.

And I think if you look at last year, you'll see the same dynamic.

We're not telling you anything new.

I think, two years ago, when, for some reason, we had some more advertising in March as opposed to April, but we gear it towards second quarter for two reasons.

A: Spring is really at retail in April for Easter and everything that goes with it, and then it's the beginning of back-to-school.

So, we sort of have two seasons that we're going to transition through, and we always have higher expenditures in the second quarter than the first quarter in advertising.

I was just sort of laying it out.

It's not a shift of anything.

OK.

But I guess, to the point of, if you're running seven and change for total selling expenses to the first quarter, it's obviously going to have to ramp up pretty dramatically to get you to an 8 to 10 band for the year.

And you ended last year, what, just a touch over 10, in total selling expenses, not just advertising.

So, I'm just trying to get a sense of where you think the two, not just advertising, but advertising with the balance of selling expenses may shake out for the full year.

I would say still in that 8% to 10% range unless we do explode like it's possible in the second half of the year, in which case, we've already put most of our advertising for Q2, Q3 to bed.

So, the only difference in percentage would be a surprise on the top line.

Got you.

OK, great.

Good luck.

Thanks.

Once again, as a reminder, please press star, one for any further questions.

Our next question comes from Harris Hall from Wedbush.

Congrats, guys, especially on the inventory management.

My question was following up, again, on the ad spending.

In dollar terms, it's ranged between $20 and $30 million.

Can you give us a little better sense of what you're planning on spending in the second quarter?

Is it going to be closer to $22 million or closer to $29 million.

I don't think it will be closer to $29 million.

It will be on the lower end of, if you look at last year, it will be significantly...

It was 29 last year.

Sorry?

It was 29 last year.

Well, that's what I said, if you look at last year, it will be significantly below last year, but it will just be significantly above first quarter .

OK.

And the other thing, you said we should expect a 40% gross margin going forward.

I know that your gross margin has suffered as you were clearing all that inventory last year.

We kind of expected it to be north of 40%, more in line with what you did the first quarter of '03 or the bulk of '02.

Can you give us a little more color on why we should expect the gross margins to permanently be lower?

We target 40 and we've come in above.

Last year's first quarter of 43% was artificially high.

It's the highest we've ever had.

So, I don't know that you could say that that's sustainable or what it was.

We've, historically, been in the 41% to 42% range.

Two things have happened.

Some of it is the change in our business.

Our kid's business, which is a slightly lower market, has gotten considerably higher.

And we anticipate that our distributors, which is a slightly lower margin, are growing at a faster rate than the core business this year.

But aside from that, the big issues that, and I'm sure you've read, is freight costs from the Orient are up significantly over the last two years, which we do put as part of our cost of goods and gross margin, and they've gone up.

On order, probably, a more significant percentage dent than we've seen over the last couple years, which is part of the reason that they've declined over the last couple years.

It wasn't only closeout.

That's a smaller piece.

So, we have increased rate charges, both here and increased rate charges to Europe from just the normal economics.

So, while we don't say that we will be exactly at 40, we target 40 as a minimum, and we try to maximize it so that there's a possibility we could be higher.

We came in at 40.6 for the first quarter and I don't know that that's significantly outside the norm.

OK.

And I assume you're getting some kind of currency benefit too.

We're getting some kind of currency benefit, but only part of our international business has the currency benefit.

We sell all our distributors in dollars, so that there's no currency benefit there.

So, the currency benefit is only from the European, which is now a smaller piece.

So, it's not significant enough to move the needle significantly.

But it is a piece, and if the Euro stays where it is, as that business grows, we'll get more and more benefit.

OK, great.

And congratulations again, especially on the expense management.

Thank you.

This will end our Q&A session.

I'll turn the floor back over to David Weinberg for any closing comments.

I guess there's nothing further to say.

We've answered everything.

We'll be here for more questions.

It's just to reiterate how positive everybody here feels about it, about the earnings release, about our backlog, about our business at retail, about our sell-throughs.

And we anticipate to have more clarity and a better idea of this significant growth as we move into the second half of the year.

We obviously came into the first half of the year treading lightly, not trying to push the envelope on anything, getting our inventory in management and expenses under control.

We feel we have our inventory under control, our expenses under control, and we're starting to get hot at retail, which should be a good sign for the second half.

And I'm sure as we get here after the second quarter we'll have more clarity on those issues.

We'd like to thank everybody, again, for joining us, at least for the next three months.

Thank you for joining today's Skechers USA, Inc. conference call.

You may disconnect your lines.

Have a great day.