Skechers USA Inc (SKX) 2004 Q4 法說會逐字稿

Good day and welcome to the SKECHERS USA Inc. fourth-quarter 2004 earnings conference call.

Today's call is being recorded.

At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation.

It is now my pleasure to turn the floor over to your host, Mr. Andrew Greenebaum of Integrated Corporate Relations.

Please go ahead.

Thank you.

Good afternoon, and thank everyone for attending SKECHERS' fourth-quarter and year-end conference call.

I'll now read the Safe Harbor statement.

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

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

There can be no assurance that the actual future results, performance 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 and the Company's latest annual report to stockholders, as well as the Company's filings on Form 8-K and other federal securities laws for a description of the other important factors that may affect the Company's business, results of operations and conditions.

And now, I'll turn it over to SKECHERS' Chief Financial Officer, David Weinberg.

Thank you, Andrew.

Good afternoon, and thank you for joining us today to review SKECHERS' fourth-quarter and fiscal 2004 year-end results.

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

Year-end 2004 sales were 920.3 million, with fourth-quarter sales totaling 206.5 million, which was more than 20 million above the original guidance we gave in October, and ahead of our February 1st preannouncement, when we said revenues would be in excess of 200 million.

Net income for 2004 was 23.6 million, versus a net loss of 11.9 million in 2003, a $35.5 million improvement from the prior year.

The higher-than-forecasted sales and profitability for the quarter is primarily attributable to the careful management of expenses, the stronger-than-anticipated sales of in-line products, less markdowns and returns, a strong at-once holiday business and both international and retail sales being ahead of projections, which, for the case of international, is in part due to the shift of some January sales to December.

The result is an improved gross margin of 39.9 percent and diluted earnings per share of 5 cents for the quarter, and 44.4 percent and diluted earnings per share of 59 cents for the year.

The Company benefited in the quarter from a $4 million tax benefit, due to improved profitability in our international operations.

We would also like to note that for the quarter, our earnings from operations were 1.8 million, compared to a loss of 13.8 million in 2003.

After accounting for interest, legal settlements and taxes, net earnings were 2.1 million, versus a loss of 12.3 million in the prior year.

We are very pleased with the significant improvement in our business in 2004, from a financial, operational and product perspective.

We successfully transformed from a difficult year in 2003, where we had an earnings loss, to a profitable 2004 with double-digit sales growth in our retail and international segments, improved margins driven by better product acceptance and a reduction in closeouts and markdowns over 2003.

To achieve this success, we focused our objectives on better maximizing the potential and growth of existing initiatives.

This included building our existing product lines with updates to proven sellers and creating new styles that we believe will be core to the line in the coming season.

Also in 2004, we introduced our new fashion lines, Rhino Red, Rhino Unlimited and 310 Motoring, with unique products targeted at the cross-cultural consumer in the right independent and specialty stores, as well as in key department stores.

We also focused on maximizing the profitability of our existing retail stores and international subsidiaries, rather than expanding into new markets.

Focusing on our key strengths, we were able to meet our objectives of returning to profitability and growing to a 900 million plus business again.

Key initiatives and achievements in 2004 include the following -- a return to profitability, with a 35.5 million net income increase on total sales increases of 85.3 million, evidencing the operating leverage inherent in our business; a further improved balance sheet, where we finished the year with more than 137 million in cash and current and on-plan inventory; the launch of new marketing initiatives, including the global "We Put the S in Action" campaign; and superstar Christina Aguilera in a dual-image international campaign, which we extended for another six months internationally and also, now, domestically; improved sales for many of our key lines, including SKECHERS Sport for men and women; and the successful launch of our multicultural fashion lines, Rhino Red, Rhino Unlimited and 310 Motoring; double-digit growth in both our international subsidiaries and distributor businesses; and double-digit growth in both our SKECHERS domestic and international retail stores.

Now, I would like to expand on our 2004 achievements in our four revenue channels -- domestic wholesale, international, retail and licensing.

First, domestic wholesale.

As a result of our 2003 effort to redevelop many of our existing product lines and a focus on updating proven styles, as well as develop new looks closely linked with current trends, a fresh stream of new product came to market in 2004.

Each product category had key new styles that drove sales, including the phenomenal SKECHERS Active Bikers for women, which first appeared on our international advertisements featuring Christina Aguilera, and is now the primary shoe in our current domestic advertisements; the SKECHERS Sport Vigor performance sneaker for men and the SKECHERS Sport Premium for women, both advertised domestically in 2004; and the SKECHERS Kids Ventilators for boys and the SKECHERS Bikers and Bugaboos for girls.

In addition to the new styles, updates to the historically successful styles again proved successful.

These include the slip-on SKECHERS Sport Stamina for men, SKECHERS USA Critics for men and the SKECHERS USA Heatwaves and Somethin' Else from SKECHERS Donut Outsoles, both for women.

We also saw strong improvement in our SKECHERS Work line, which was expanded with an always-in-stock program that guarantees retailers the constant availability of key styles.

In 2004, we also launched a fashion division for adults and children.

This division includes the already existing Mark Nason and Michelle K lines, as well as the addition of the new lines Rhino Red, Rhino Unlimited and 310 Motoring, all launched for back-to-school fall 2004.

These five lines, plus the counterparts for Michelle K, Rhino and 310 children's lines, branded separate from SKECHERS, broaden our consumer base and our shelf space without detracting from existing SKECHERS business.

The Mark Nason collection was positively impacted by a more focused product offering and an advertising campaign that produced strong sales on the advertised boot, which retailed for approximately $280, as well as other key styles.

In the Michelle K brand, we added a children's line, Michelle K Girl, and focused our attention on growing the casual and EuroSport offering.

In regards to our licensed footwear for the Mark Ecko brand -- Rhino Unlimited and Rhino Red -- and the automotive-inspired brand 310 Motoring, we see great potential for these cross-cultural brands, and are very pleased with initial sales.

We believe we are just scratching the surface with these new brands, and will have a better idea for their true potential after the second season, which is spring 2005.

We are continuing to explore new opportunities similar to 310 Motoring and Mark Ecko footwear to further build our business.

One such opportunity is with the Retro Fox apparel line, which is launching in department stores in spring 2005.

Earlier this month, we signed an agreement with the parent company, Billant Apparel, to launch Retro Fox footwear with expected deliveries of holiday 2005 were spring 2006.

We see this is complementary to our businesses, and believe we can further leverage our existing infrastructure.

Through improving and expanding our product offering, we sold more in-line products, which reduce the amount of closeout business in 2004.

This resulted in a more than 10 percent increase in our average price per pair, and improved margins.

We also believe our concentrated advertising efforts positively impacted sales.

In 2004, we launched our action print campaign for SKECHERS, which is now in phase three for 2005, and new print ads for Mark Nason, Michelle K Sport and 310 Motoring.

We then took many of our print advertisements to places where customers shop -- mall kiosks -- and where they frequent daily -- bus benches and bus boards.

In regards to television advertising, we continued with our kids commercials and Nickelodeon program sponsorships, and began sponsoring key programming on ESPN and ESPN2, with dedicated television spots for 310 Motoring, SKECHERS Sport and SKECHERS Work.

We believe the ESPN and Nickelodeon programming sponsorship and the ramped-up mall kiosks are both an impactful and cost-effective medium to reach more consumers.

We are extremely pleased with the momentum we experienced within our domestic wholesale business in 2004, and early indicators point to the trend continuing in 2005.

These indicators include a double-digit increase in domestic backlog, double-digit sell-through's with key accounts and a strong reaction from accounts to our product lines at WSA and Magic earlier this month, where we experienced improved orders from the prior year.

Given our expectations for the quarter in our strong existing and new product categories, we believe the momentum will continue in our wholesale business and result in a year-over-year improvement.

However, the magnitude of our growth cannot be determined until the close of the first quarter.

We will give more detail on our performance for the quarter and our expectations for back-to-school on the first-quarter conference call.

Now, moving on to international, SKECHERS' international division is divided into three businesses -- international wholesale direct through our eight subsidiaries, company-owned retail stores and international distributors.

Through these three businesses, we sell our product into more than 100 countries and territories around the world.

Our objective in 2004 was to grow the top line of international and increase profitability through product and merchandising efforts, as well as marketing.

The result is a year-over-year increase of approximately 35 percent in our subsidiary business, almost 45 percent in our international retail business and nearly 25 percent in our distributor business.

We are very pleased with the strides we have made internationally over the past year.

Through our subsidiaries, we handle the marketing, sales and distribution of our product in 12 European countries in Canada.

Six out of our seven European subsidiaries achieved stronger sales year over year, with most growing significantly, including one of our largest subsidiaries, Germany, which was up more than 45 percent for the year.

France was the exception; and, although our sales in France did not improve year over year, our fourth-quarter retail sales in Paris were up double digits, which we believe is a positive indicator for our business turning around in this country.

In Canada, wholesale sales were up more than 100 percent, which we believe is attributable to the strength of our brand and our efforts to maximize our potential in the subsidiary business that had its second anniversary in November 2004.

With regards to international company-owned retail stores, at the close of 2004 we operated 10 stores in six European countries and one store in Canada.

Of these 11 stores, four were opened in 2003, which in part accounts for our year-over-year growth.

We are pleased with our overall comp-store gains for the year, including in key stores such as Oxford Street and the Les Halles District of Paris.

We believe our international stores are effective brand building tools showcasing a more complete offering in the SKECHERS lifestyle setting.

Our international distributor business has grown in many parts of the world, from South America and Eastern Europe to the UAE, the Philippines and Russia, among others.

The growth of many of these businesses in the past year may be in part due to the addition of distributor-owned retail stores, which, like our company-owned stores, are excellent brand-building tools, and also a means to showcase an extensive offering of products.

The growth in Central and South America is primarily due to our Panamanian distributor, who handles the sales of our product in Panama, El Salvador, Guatemala, Ecuador, Peru and Venezuela.

In support of the SKECHERS business in the region, this distributor has opened one or more stores in each of these countries.

Similarly, our two distributors in Russia have each opened stores in Moscow, and have seen improvement in their businesses, as has our South Korean distributor, who relaunched the brand and opened a store in Seoul in 2004.

Other distributors are also planning to open stores, including our UAE distributor, who is planning one in a newly-constructed mall in Dubai in spring 2005.

Using SKECHERS images and company guidelines, six distribution partners have opened nine retail stores in eight countries in 2004, bringing the total distributor-operated SKECHERS stores to 29.

To further support our international business, we launched a new advertising campaign starring global superstar Christina Aguilera in 2004.

The dual-image ads feature Christina in two distinct SKECHERS styles, and serve to expand our offering to consumers.

We have extended our agreement for an additional six months with Ms. Aguilera, who will now appear in international ads through June 2005.

In addition to the ads featuring Ms. Aguilera, we are also supplementing our international marketing with our Action campaign and with some unique advertorial opportunities.

We believe our international momentum will continue in 2005 due to early indicators, including our international retail store comps, which are up double digits from the prior year, and our international wholesale backlog, which also has a double-digit increase over last year.

In 2004, our focus with our retail stores was to profitably grow our business in existing stores by both growing revenues and controlling expenses, and review underperforming stores as leases came up for renewal.

In 2004, we opened four retail stores and closed four others, keeping our total number of domestic SKECHERS stores to 114.

I am pleased to report that we reached our objective of developing a more profitable business in 2004, and have improved comp-store sales in each of our store types -- concept, outlet and warehouse outlet.

In 2005, we will continue to work towards building a more profitable retail business, and plan to open approximately 7 to 10 new stores in desirable locations, with the goal of further building brand awareness in these markets and being profitable.

These stores include a store in the Greater Seattle region, which is our first location in the Pacific Northwest, and two additional locations in the South.

We will also continue to examine the profitability of existing store leases come up for renewal.

We continue to believe that our retail stores are ideal avenues to test product and build brand recognition, while showcasing our comprehensive offering of SKECHERS product.

And finally, we would like to discuss our licensing initiatives.

We believe that selective licensing of the SKECHERS brand name and our other branded lines to non-footwear manufacturers broadened and enhanced the brand without requiring capital investments or additional operating expense.

At the year end 2004, we had 11 active domestic and international licensing agreements.

These agreements are for apparel, accessories, loungewear and swimwear.

The first SKECHERS licensed product brought to market was SKECHERS Kids apparel for boys and girls from Kids Headquarters in back-to-school 2003.

Since its initial launch, we have expanded the agreement to include toddler and infant apparel, kids' daywear and sleepwear and, most recently, swimwear, which will launch in 2005.

We are extremely pleased with the sales of our SKECHERS Kids licensed goods in the United States.

Due to the successful launch of SKECHERS Kids domestically, we decided to extend our reach further by signing a licensing agreement with Multigroup Inc., for design and distribution of SKECHERS Kids apparel in Canada.

While we feel adult apparel is a natural extension of our brand, we have not found a suitable partner that shares our vision.

As with all our licensed merchandise, the heritage and integrity of the brand is vital.

We are testing our apparel launches in international regions, including Japan and Israel, and we will continue to assist new opportunities to license our many brand names.

Now, turning to our fourth-quarter and year-end 2004 numbers.

For the fourth quarter, net sales were 206.5 million, compared to 175.3 million last year.

We believe these stronger sales were a combination of better sell-throughs in our own retail stores, as well as with wholesale accounts; fresh, trend-right product in the our existing lines; and the launch of our three new brands; less markdowns and returns; a strong at-once holiday business and a shift in international sales from January to December.

Gross profit for the fourth quarter increased over 39 percent to 82.5 million versus 59.1 million in the same period a year ago.

Fourth-quarter gross margins were 39.9 percent, compared to last year's gross margin of 33.7 percent.

This improvement reflects the combination of better sell-throughs of in-line product, as well as a significant decrease in markdowns and allowances versus the prior year.

Total operating expenses as a percentage of sales decreased to 40.1 percent from 42.8 percent in the fourth quarter of fiscal 2003, due to our continued focus on managing expenses, as well as the benefit of positive operating leverages from the increased sales.

Fourth-quarter selling expenses were 18.7 million or 9.1 percent of sales, as compared to 17.6 million or 10 percent of sales in the prior-year period, as we achieved positive operating leverage.

On a percentage basis, advertising expense was 6.4 percent of sales, as compared to 5.9 percent last year.

General and administrative expenses were 64.1 million, representing 31 percent of sales, compared to a 57.4 million or 32.7 percent of sales in last year's fourth quarter.

Again, we saw positive operating leverage in G&A as a percent of sales.

The increase of 6.7 million for the quarter is in part attributable to salaries, temporary health and payroll costs associated with higher revenues and an expanded store base in 2004 versus the prior year.

Warehouse and distribution costs were also higher, due to increased volume and freight costs during the quarter.

Net income for the fourth quarter was 2.1 million, compared to a net loss of 12.3 million in the prior-year period.

Net income per diluted share was 5 cents on approximately 40.2 million shares outstanding, compared to a diluted loss per share of 33 cents on approximately 37.9 million average shares outstanding in the fourth quarter of last year.

And now, turning to our results for the year, net sales for the fiscal year ended December 31, 2004 were 920.3 million versus 835 million for 2003, an increase of over 10 percent.

Gross profit for the full year 2004 was 372.2 million, compared to 317.7 million in 2003, an increase of 17.2 percent.

Gross margins for the year 2004 were 40.4 percent, compared to 38 percent in the prior year.

Total operating expenses as a percent of sales for fiscal year 2004 were 35.7 percent, compared to 38.7 percent in 2003, a 300 basis point decline.

Selling expenses for the full year were 79.7 million or 8.7 percent of sales, compared to 84.7 million or 10.1 percent of sales in 2003, a nearly 150 basis point decline.

General and administrative expenses were 249 million or 27.1 percent of sales for the full year, versus 238.6 million or 28.6 percent of sales for the comparable period in 2003.

Advertising and related expenses were 6.1 percent for the year 2004, compared to 7.5 percent in 2003.

Additionally, we stated on our conference call for year end 2003 reducing the cost of our advertising and marketing expenses without diminishing the impact to consumers, primarily via trade show and in-store promotions, was an objective in 2004.

While we have additional trade show groups associated with the launch of new lines, we are keeping within our budget by limiting the changes within existing booths and eliminating our participation in certain regional tradeshows.

Net income for the year was 23.6 million, versus a net loss of 11.9 million in fiscal 2003.

Earnings per diluted share were 59 cents for fiscal year 2004, versus a loss per diluted share of 31 cents in fiscal 2003.

As discussed in the earnings release for the third quarter of 2004, the Company's annualized tax rate is based on projections of its domestic and international operating results for the year, and is highly sensitive to fluctuation in projected international earnings.

At the end of the third quarter of 2004, the Company reviewed its domestic and international earnings projections for the year, which resulted in a projected effective tax rate of 47.2 percent at the nine months ended September 30, 2004.

Due to better-than-projected domestic and international fourth-quarter results, as well as changes resulting from a detailed review of its cost structure, the Company recorded an effective tax rate of 39.2 percent for fiscal year 2004.

As a result, the Company benefited in the fourth quarter from a $4 million tax benefit, due to improved profitability in our international business.

For fiscal year 2005, the Company expects an effective tax rate in the range of 40 percent to 43 percent, and will continue to review its existing tax structure and business model for opportunities to lower its overall effective tax rate.

Turning to the balance sheet, as I mentioned earlier, at the year end, the Company was in excellent financial condition, with cash on the balance sheet of 137.7 million or $3.46 per share.

Net trade accounts receivable at the quarter end were approximately 120.5 million, as compared to 98.8 million at December 31, 2003.

Our DSOs at December 31, 2004 were 43 days, unchanged from December 31, 2003.

Inventory, both in the DC as well as in transit, at year end was on plan at 149.8 million, representing an increase of 1.8 million from September 30, 2004 and 11.8 million or 8.6 percent from December 31, 2003.

We continue to be very comfortable with our inventory level, given the sales and bookings we are seeing, as well as the overall demand we are seeing for our product.

Working capital was 313.9 million at year end, versus 275.1 million at December 31, 2003.

Long-term debt decreased to 113 million from 116 million at December 31, 2003.

Of this amount, 90 million is related to our convertible debt offering.

The remainder is related to mortgages on our distribution center and corporate headquarters, along with various capital lease obligations.

Shareholders' equity at December 31, 2004 totaled 294.9 million.

Depreciation and amortization for the full year 2004 was 20.5 million.

CapEx for the full year 2004 was approximately 17 million, primarily stemming from our new store openings and the purchase of our headquarters building for 11 million that we discussed on our call in October.

For 2005, CapEx is estimated at 7 to 10 million.

Now turning to guidance, in looking at 2005, we believe that first-quarter sales will be in the range of 235 million to 245 million, and earnings per share will be in the range of 21 cents to 26 cents per diluted share.

Based on early indicators, including our double-digit international and domestic backlogs, strong retail comps and a great response during both the WSA and Magic tradeshows, we believe our momentum will continue, and we will experience improved sales in the first quarter, and our sales will accelerate into back-to-school in fall '05.

We'll have a better indication of our continued performance on the first-quarter conference call, at which time we will have a clearer picture of the magnitude of our orders for back-to-school.

In closing, we are very pleased with our return to profitability in 2004 and the continued momentum we have experienced. 2004 was a solid year from a sales and earnings standpoint, and we believe we have further positioned the Company for longer-term profitability and growth.

With our continued momentum and the early indicators in our domestic, international and retail business segments, we're excited about the opportunities and growth we see for our company in 2005 and beyond.

Our brand is very strong.

Our advertising is focused, and our team is committed to continuing to grow the business profitably.

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

(OPERATOR INSTRUCTIONS).

John Shanley, Susquehanna Financial Group.

David, I wonder if you could -- you mentioned that forward orders in both domestic and international were up in the double digits.

Your last comment about first-quarter forward orders is -- are you getting an indication that a lot of that double-digit is going to be more pronounced for first-quarter delivery versus second-quarter delivery?

Yes.

We booked heavily into the first quarter.

April is not actually a strong shipping month for us in wholesale, so a big piece of our backlog is the first quarter.

Some will fall into April, and we don't really start shipping back-to-school strongly until early June -- end of May or early June.

So we have to believe the biggest part of our orders are for first quarter.

And the bookings that you got from WSA and some of the other tradeshows -- that was primarily, I assume, for the back half.

Is that correct?

Yes.

That's the beginning of bookings for back-to-school, and they were quite strong.

We're just a little bit leery about telling everybody how strong they were, just to make sure that they follow through for March and there is no timing shift, but the order-of-magnitude increase year over year was quite significant.

So it was above your expectations.

Is that a fair statement?

That's pretty fair.

Okay.

That's good enough.

Can you give us a sense of how much of your sales revenue in the fourth quarter and, actually, for the fiscal '04 period were derived from those five new lines that you added to the Company?

And is it likely that those five new lines are likely to be much stronger or much faster-growing revenue producers in '05 than the overall SKECHERS product offerings?

Yes.

Believe it or not, the increase from the new lines were actually quite small.

They are almost diminished.

They were great starts for first seasons to go in, but certainly not big enough to move the needle to that extent, as yet.

So I think it's fair to say that they got off to a quick start.

And as they start to accelerate -- because we do expect, obviously, on a percentage basis, that they will grow significantly faster than the balance of our wholesale business -- they are being quite well-received -- they should start to move the needle either for back-to-school or end-of-the-year '05.

So the majority of the momentum that you got in '04, for both the full year and the quarter, were really derived from the core SKECHERS product lines?

Absolutely, and that's the good news.

That is good news.

Can you give me an idea of your new store opening plans for '05, both domestically and internationally?

Well, right now we are planning to open between 7 and 10 stores, depending on availability and location.

So we will probably the right at that number for '05.

At this particular point, they don't include anything international.

We are just beginning to look now overseas internationally.

They usually take us a little longer to get started.

Where did you wind up at the end of '04, in terms of store numbers -- and if you have it, square footage?

That would be helpful.

Well, we very rarely -- we don't give square footage numbers out.

But as far as stores are concerned, we ended up with 125 -- 114 domestic and 11 international, of our own; and, as I mentioned before, 29 that are owned and operated by our distributors.

Is there any average size -- I'm just trying to project out in terms of what your new store opening may likely do, in terms of your revenue flow for '05.

Well, I don't think you can do that yet.

They are very different by our different business segments; and, since we have not announced the breakdown of whether they are concept, big box or outlet, it would be difficult to even give square footage on average, since the averages within those three are quite significantly different.

And the last question I have is, on the international front, can you give us a sense of sales growth momentum in Europe versus Asia, specifically with what your distributor is generating in Japan, and some of the other major markets in Asia?

While Japan is still our largest single distributor, and certainly by compares (ph) our largest international marketplace, the growth in Europe for our subsidiaries is significantly higher on a percentage basis.

It's only our second or third year, the first full year we have a full complement of countries over there.

So, needless to say, it has grown significantly faster in Europe.

And Japan -- while its growing nicely and we expect some double-digit growth in Japan, it's a more mature business for that distributor over there.

Dorothy Lakner, CIBC World Markets.

Going back to the stores a second, David, could you just give us the stores by concept, where you ended up in '04?

And then, a second question on where you are looking for licensing revenues to go in '05.

We think licensing revenues will be pretty much flat to where they are now.

And we again warn that licensing revenues as we reported now is a net number, and we expect a rapidly increasing payment to Ecko and the Rhino and stores like that.

So we think it will be fairly flat.

It might be down slightly, but I think the fact that Rhino sales will grow so much that it will dilute from the royalty payments will lead to higher margins and greater bottom line, anyway.

We plan on receiving slightly higher licensing revenues than we did this year, but we anticipate paying significantly more.

And going to store count, we had domestically 36 concept, 46 outlet and 32 warehouse.

I'm sorry?

Say that again?

36 concept, 46 outlet and 32 warehouse, and the 11 internationally were predominantly concept.

Any other questions, Ms. Lakner?

Yes, just one more on the tax rate, David.

For '05, should we be using an even tax rate over the course of '05, or how should we look at that, given the fluctuations in '04?

Well, the fluctuations in '04 are based on projections.

I would like to believe that our international has hit that threshold, and it will be more steady throughout the quarters.

So I would tell you that in my models, I'm using a more even flow throughout the quarters in that 40 to 43 percent range.

Jim Sharteer (ph), Buckingham Research Group.

How much of the revenue shifted from January to December?

It was only in the international distributor portion, and it was somewhere between $4 and $5 million, I believe.

And then, for next year, do you expect Mark Ecko and/or 310 Motoring to be material to your EPS?

I think they can start becoming material the second half of this year, and I absolutely anticipate them becoming material for 2006.

Sam Poser, Mosaic Research.

Could you talk about the strength of the men's versus the women's business in the fourth quarter, domestically?

Strength -- you mean growth?

It was fairly equivalent.

Obviously, we are stronger in women's, and it takes more to move the needle, and we had a very strong quarter in women's.

But our men's kept up; our actual percentages to the whole hasn't shifted significantly between men's, women's and kids' from year over year, so that means they all had equivalent type quarters and years.

And then, can you talk about -- you mentioned your ASPs were up 10 percent.

What about your payers domestically?

Well, they were down slightly, which is the norm.

We didn't have an excess inventory and weren't moving pairs at cost.

Even our closeouts had higher pricing.

So while our pairs were down somewhat, it was more than made up for by the increased selling price, and certainly was up (ph) in the margins.

And could you talk about the store count we are expecting to see with the Mark Ecko product and the 310 Motoring, as we go through this year, or as you are seeing it play out right now?

You mean opening stores that are specifically Mark Ecko (multiple speakers)?

No, no, no.

Like retail door counts versus where it is now, or has been in 2004.

Oh, that is very difficult to say.

I think the retail door count will -- we are certainly getting some exposure, and we expect them to grow.

But we were tested in a significant number of stores, and I just think it's going to grow from there.

It's not hard to imagine that most of the people or those department stores that are having success will roll it out to significantly more doors, but we don't have a great deal for it now.

I would be surprised if they didn't, on average, be up significantly into the double-digit.

And your average selling price in the fashion group, as you put it, versus the regular SKECHERS line -- what is the difference there?

Oh, it's outrageous.

I told you the Mark Nason group was $280 for retail alone.

So, depending on where you look, you could say that they are significantly higher.

You could say that Mark Ecko and Rhino are probably 2, maybe 3 price points above the baseline SKECHERS. 310 is above that.

Michelle K is probably someplace around the -- just around the top end of the Ecko line or higher, and obviously, Mark Nason is just the top end of our line.

Justin Maurer, Lord Abbett.

A couple questions for you.

First, the other expense -- sorry if I missed it -- the $2 million in the quarter, what was that?

That was the legal settlement or net legal settlement, however you want to call it.

And the tax rate guidance, 40 to 43 -- now that you have seemingly reconciled the international piece this year, why would you expect that to trickle up a little bit?

Well, it depends on the relative movement.

We need to be sure of the profitability.

While I don't know that it will go to the top end, I'm trying to be as conservative as possible, given that there could be movement or slippage in international, even though I don't anticipate it right now.

And then, any sense of advertising?

You guys did a great job this year, kind of keeping a control on that.

Do you still like it to be in the low 6's, or where do you think that --?

I don't know that we don't consider it really the low 6's.

We don't think it's changed significantly.

What has really changed is the way we look.

Originally, we were predominantly a wholesale business, and being 8 to 10 percent of what the 40 plus margin business you can do that.

Now that we've got some significant retail and international distributors that don't have the margins to support 8 to 10 percent, we are really gearing somewhere in the 8 to 10 percent of our wholesale business, and then divvying out what we need for international in our stores.

So we expect the images to keep up there, and we expect to be seen everywhere, every month.

But I think the dollar to the whole certainly will be relative to which division grows faster.

If wholesale grows faster, the percentage might increase; if retail, obviously, or distributors grow faster, that percentage will decline, because it doesn't require any more advertising.

Based on what you are seeing, between, hopefully, some comp momentum at retail plus a few additional stores, you would think, anyway, that retail, given the smaller base it's building off of as well, should be growing faster, right?

So it that -- do you think that percentage can kind of hold in there, given those dynamics?

Well, I think the original analysis -- I don't believe retail is growing at a faster rate, simply because there is no additional store count until the end of the year, and they won't comp up as much as we are going to increase in wholesale, both domestically and internationally.

But I do agree, when you come to the point, we should keep the percentages pretty close to where they are today, give or take a couple.

And then, just lastly -- of course, appreciating the conservatism, as always -- first quarter, just picking the midpoint would be up about 8.5 percent, yet you had just said earlier about the double-digit backlogs would mostly ship in the first quarter.

Any part of that falls into the second quarter?

Or, again, just (multiple speakers)?

No;

I think that's just a read on -- as you have a higher backlog coming into the quarter, you would anticipate less at-once business to fill in.

We had a pretty good at-once business last year in the first quarter.

So I don't expect that to comp, because people were aware of us this year and placed their orders.

So we would have to have an even better retail year to get the at-once business up to the place of last year.

And, like I said, being conservative, we just want to account somewhat for that.

And the stores have been growing very well.

There's no new stores, so comp-store sales being up 8 to 10 percent would be a nice push for the first quarter.

I don't know that they can get much higher than that, anyway, and that's obviously a part of our base.

(OPERATOR INSTRUCTIONS).

Dorothy Lakner, CIBC World Markets.

David, could you -- I don't think you gave this in your presentation, but the mix of business by domestic, international, retail, your different channels of distribution?

Like I said, it hasn't changed significantly from the year before.

We are just short of 60 percent domestic wholesale.

The other two are broken down fairly evenly, at least on an annual basis, between retail and international.

So 20 and 20?

Give or take.

Yes.

And your goal on retail, I think, at one point, that had been 30 -- 25, 30 percent?

We said -- no, I never said -- I don't think we've ever really gone that high.

We said -- but we would like both businesses to be 20, 25 percent of the whole.

And as we are getting close to there, now we would like all the businesses together to just grow 20, 25 percent a year; we would be happy.

Justin Maurer, Lord Abbett.

Dave, just on the licensing line, just given what you said about the Ecko hopeful growth there, could you actually see that down, do you think, or do you still think there's enough going on?

I think, net-net, it could be even, it could be down slightly.

Like I said, it's difficult to forecast Ecko for the second half, but I do anticipate it growing significantly.

If it grows as large as I think it can, there will be some downward pressure on that line, but you'll see it in increased margins and increased operating margin, anyway.

And, gentlemen, we have no further questions at this time.

I would like to turn the call back over to Mr. Greenebaum for any additional or closing remarks.

Thank you for joining us today on the call.

Again, I would like to note that today's call may contain forward-looking statements.

As a result of various risk factors, actual results could differ materially from those projected in such statements.

These factors are detailed in SKECHERS' filings with the SEC.

Again, thank you and have a good day.

Once again, ladies and gentlemen, that does conclude today's conference.

You may now disconnect.