Skechers USA Inc (SKX) 2013 Q4 法說會逐字稿

Greetings and welcome to SKECHERS USA's fourth quarter 2013 earnings conference call.

(Operator Instructions).

At this point, I would like to turn the conference over to SKECHERS.

Please, go ahead.

Thank you everyone for joining us on SKECHERS conference call today.

I will 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 statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.

Such forward-looking statements involve known and unknown risks.

Including, but not limited to global national and local economic, business and marketing conditions, in general and specifically as they apply to the retail industry and the Company.

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 filings with the USSecurities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on form 8-K, and all other reports filed with the SEC as required by federal securities laws, for a description of other significant risk factors that may affect the Company's business, results of operations and financial conditions.

With that, I would like to turn the call over to SKECHERS COO and CFO, David Weinberg.

David?

Good afternoon and thank you for joining us today to review SKECHERS fourth quarter and year end 2013 results.

2013 was a year driven by product innovation across multiple categories which resulted in net sales of $450.7 million for the fourth quarter, and $1.846 billion,for the first year.

13.9% and 18.3% improvements respectively.

The sales momentum we experienced in the fourth quarter was quite an achievement when considering the soft US retail environment in December and the strong growth of 39.7% in the fourth quarter of 2012.

The sales improvements came across all of our distribution channels, including double digit growth in our domestic wholesale, and Company owned retail stores, and single digit growth in our international and e-commerce businesses.

We are especially pleased with the growth in our domestic business in the fourth quarter.

This growth came in spite of severe weather that impacted retail in the mid-west and northeast as well as parts of the south.

We believe we achieved this success despite the unseasonably cold weather because of our diverse product offering including boots and lined footwear for the colder areas, and our sport product which performed in the unusually warm weather in the west as well as in other regions.

The product successes that we have been experiencing in the USare now translating internationally as we saw strong increases in key markets in the fourth quarter, including some that were previously impacted by struggling economies.

We would like to note, our effective tax rate for the year ended December 31, 2013, was 26%, which was down from the forecasted rate of 31.9% at the close of the third quarter.

This reduction caused our effective tax rate for the fourth quarter to be 2.3%.

The overall decrease in our tax rate from the third quarter was the result of slightly increased international, and slightly lower domestic profitability compared to the third quarter forecast.

We expect the improved international sales to continue to have positive impact on our 2014 tax rate, which we currently anticipate to be between 25% and 30%.

Fourth quarter sales and financial highlights include a 16% increase in our domestic wholesale business with a 19.1% in (inaudible) shipped,an 18.6% increase in our Company owned retail business, which included a 12.8% increase in comp store sales, a 5.6% increase in our international business with our subsidiary and joint venture sales increasing by 16.3%, a 9% increase in our e-commerce Sales, earnings from operations of $17.1 million, gross margin of 44.5%, and net earnings of $14.2 million and diluted earnings per share of $0.28.

Financial highlights for the year include net earnings of $54.8 million, and diluted earnings per share of $1.08.

In line inventories, which increased 5.7% from a year ago, a strong balance sheet with $372 million in cash or approximately $7.34 per share.

We believe our sales product and marketing are on point.

We are delivering exceptional product that consumers want and are expanding our reach.

This led to full year revenues of over $1.8 billion, an 18.3% increase.

Further, we believe this positive momentum will continue in 2014 due to our key performance indicators, including an approximate 30% increase in backlogs, and a strong performance in January 2014, including mid-single digit comp store sales increases in our domestic and international retail stores.

Now, turning to our business in detail.

In our domestic wholesale business, sales increased 16%, or $26.6 million for the quarter, versus the same period last year.

The growth for the quarter, as well as 22.9% growth for the full year, is a testament to the continued strength of our brand, and our reach to consumers in the USmarket.

Our intense focus on product development resulted in key initiatives from our multiple lines, including Skechers GO Walk, BOBS and SKECHERS Kids which included take downs of SKECHERS GO Run Ride and SKECHERS GO Walk.

The success of our product initiatives resulted in increase of 19.1% in pairs shipped in the quarter and 24.3% for the full year.

Among our SKECHERS lifestyle lines in the fourth quarter we experienced triple digit growth in our women's sport active, and double digit growth in our women sport, BOBS, winter boots, and men's work line.

To support our varied lifestyle product lines, we aired numerous commercials for the holiday selling season.

For women these included SKECH Air, BOBS from SKECHERS, and two commercials featuring Brooke Burke (inaudible), one for relaxed fit, and one for BOBS.

For men we had a SKECHERS sport commercial, and two relaxed fit commercials, one with Joe Montana, the other with Mark Cuban.

The continued success of BOBS, our charitable footwear line, has resulted in more than 6 million pair of shoes donated to children in need, including those impacted by the typhoon in the Philippines.

Our SKECHERS kids division was down 10.7% for the quarter, but flat for the year.

Based on our healthy backlog, the deliveries of our kids product for spring, and feedback from our account at our recent buy meetings, we believe our kids division will trend positive this spring and back to school for both our character based footwear for the younger kids, and lightweight sports footwear inspired by our successful adult collections.

We are pleased that we recently earned a 2013 excellence in design award for kids from Footwear Plus magazine.

As always, we supported our kids business over the holiday period with several commercials, including Twinkle Toes for girls, and Super Hot Lights for boys.

In our SKECHERS performance division, for the quarter we experienced double digit in our women's offering lead by SKECHERS GO Walk, and in our men's collection led by our running footwear.

Our focus in performance is continued to deliver innovative product that will appeal to runners at all levels.

To this end we received two honors from industry trade publications.

First, SKECHERS Go was named 2013 brand of the year by footwear news, and then we earned a 2013 excellence in design award for running, from Footwear Plus magazine.

We are continuing to work closely with Olympic marathon runner, Meb.

This quarter, we launched a new commercial for SKECHERS GO Run Ride 3, featuring Meb.

The SKECHERS performance division was also the official footwear and apparel sponsor for the Houston marathon in January.

Meb hosted the event and won the half marathon wearing his signature SKECHERS Go shoe.

The demand for our SKECHERS GO Walk and GO Walk 2 footwear remain strong and we're looking forward to delivering new innovations in this successful category this spring.

To support our SKECHERS GO Walk 2 footwear, we launched a new commercial over the holiday selling season which we will again air this spring.

In our domestic business, our fourth quarter was one of our strongest fourth quarters for incoming orders and the trend continued through January.

Our order rate and double digit backlog in our domestic business are positive indicators for what we believe will be a strong 2014 for our domestic business.

In the fourth quarter, our total international subsidiary joint venture and distributor sales increased by 5.6%, as a result of the strength of our diverse product initiatives.

Our subsidiary and joint venture sales improved by 16.3%, offset by our distributor sales which declined by 11.5%.

This decrease in our distributor business is due to the continuation of several factors we mentioned on previous conference calls.

Including political, currency and economic issues, primarily in South America.

The solid subsidiary growth is attributable to double digit improvements in our European regions, Canada and Brazil, and was offset by decreases in Chile and Japan.

We expect double digit increases shown this quarter to continue through 2014.

Our southeast Asia joint venture continue to perform very well.

For the quarter, sales increased over 50%, which includes doubling of our business in China.

We feel that the momentum is continues in the first quarter and will throughout the year.

In our international distributor business, several key partners experienced growth in the quarter, including triple digit growth in Indonesia, Mexico and Turkey, double digit growth in Russia, and single digit growth in Australia.

Additionally, Russia and Australia are two of our larger distribution partners and Mexico is quickly becoming one of our key distributors.

These increases were offset by decreases in several key markets due to timing issues, as well as ongoing political, currency, and economic issues.

We're pleased that many of the distributors negatively impacted are taking steps to improve their businesses.

While we expect distributor sales to be flat for the first quarter, we anticipate overall increases for the year.

At quarter end, there were 477 SKECHERS stores owned and operated by our joint ventures, licenses and distributors outside the US.

Of these, 313 are distributor owned or license SKECHERS retail stores around the world.

136 SKECHERS stores are in joint convenient store companies in Asia, including those run by licenses in the region, and an additional 28 Company licensed stores are in countries where we directly distribute our product; Brazil, Canada, Spain, Portugal and Ireland.

In the fourth quarter 34 stores opened including our first stores in New Zealand, Armenia, Hungary, Kazakstan, and Kenya where we now have two locations.

Additional store openings in the fourth quarter include six in Indonesia, three each in the Philippines and Malaysia, two each in India, Mexico, Spain, Singapore, Taiwan and Tailand, and one each in Australia, Egypt, Jordan, (inaudible), and Ireland.

Three stores closed in the quarter, one each in Croatia, the Netherlands and Honduras.

Five distributor joint venture licensed SKECHERS stores have opened this quarter, an additional 20 are planned for the first quarter, and another 100 to 110 for the remainder of the year, bringing our total to approximately 600 distributor, joint venture, or licensed SKECHERS stores.

We believe the momentum that we are experiencing in the USis translating positively around the globe.

First to our subsidiary and joint ventures, and then to our distributors.

We are also seeing some markets, especially in Europe, bouncing back from the economic issues they faced over the last few years and believe our moderately priced product is resonating in these countries.

We're also pleased with the continued growth in key countries like Canada, Australia, and Russia and the positive turn in the newer markets like Brazil and China, two countries in which we are establishing a strong footprint.

Based on our backlog, the reactions to our key initiatives and the opening of additional retail stores, we believe the international business will be up double digits for the year.

For the quarter, total sales in our Company owned retail business increased by 18.6%, with domestic sales improving by 16%, and international sales by 34.2%, which included positive domestic store sales of 13.2%, and international comp store sales of 10.8%, for a combined increase of 12.8% to comp store sales.

At quarter end we had 390 company owned SKECHERS retail stores.

In the fourth quarter we opened 20 stores of which 14 are domestic, and six are international locations.

These included new concept stores in India, Indiana, New Jersey, Massachusetts and Ohio as well as Canada, Chile, France and the UK.

In the first quarter we've already opened three stores, including another concept store in Chile bringing our total store count in Chile to 25.

We plan to open another seven stores this quarter and approximately 60 to 70 for the full year worldwide.

We view our SKECHERS retail stores as profitable branding vehicles, and along with opening new stores we continue to remodel key locations.

A small part of our total sales e-commerce and licensing contributed to our revenue in the quarter.

SKECHERS e-commerce business in USincreased 9% in the fourth quarter.

Our licensing division generated $2.9 million in revenue in the fourth quarter from our licensees including SKECHERS brand of eye wear, socks and backpacks, as well as footwear.

Now, turning to our fourth quarter and full year 2013 numbers in more detail.

As I discussed earlier fourth quarter sales increased 13.9% to $450.7 million, compared to $395.6 million in the fourth quarter of 2012.

The increase is due to the strong product successes we were experiencing across our multiple product categories which have resulted in double digit increases in our domestic wholesale, Company owned retail stores, our e-commerce businesses, international subsidiaries and joint ventures.

Fourth quarter growth profit increased to $200.6 million or 44.5% of sales compared to gross profit of $168.5 million, or 42.6% of sales in the prior-year period.

The improved profitability in higher gross margin was due to combination of increased sales and strong sales for our product.

Fourth quarter selling expenses were $33.5 million, or 7.4% of sales, compared to $31.1 million, or 7.9% of sales in the prior year.

The dollar increase was primarily due to increased advertising, trade show expenses, and sales commissions in order to support our product lines both domestically and internationally.

For the fourth quarter, G&A expenses were $153 million, or 33.9% of sales, compared to $132 million or 33.4% of sales in the prior year.

$14 million of the $21 million increase in G&A was due to expansion of our retail and southeast Asia joint venture operations.

During the fourth quarter of 2013, earnings from operations were $17.1 million, compared to $8 million in the fourth quarter the of 2012.

Net income during the quarter was $14.2 million, compared to $4 million in the prior-year period.

Net income per diluted share was $0.28 on approximately $50.7 million average shares outstanding, compared to $0.08 on approximately $50.3 million average shares outstanding in the prior year period.

I would also like to add that due to increased international and slightly lower domestic profitability, our effective tax rate for the 12 month period ending December 31, 2013, was 26%, which was down from the forecasted rate of 31.9% at September 30, 2013.

This caused our effective tax rate for the fourth quarter to be 2.3%.

As I mentioned earlier, we expect the improved international sales to continue to have a positive impact on our 2014 tax rate, which we expect to be between 25% and 30%.

In the fourth quarter we recorded an income tax expense of $400,000 compared to $3 million in the prior-year period.

Now, turning to our full year results.

Net sales for the 12 month period ending December 31, 2013, increased 18.3%, to $1.846 billion compared to $1.56 billion in the prior-year period.

Gross profit was $818.8 million, or 44.4% of sales, compared to $683.3 million, or 43.8% of sales in the prior-year period.

Selling expenses were $153.5 million, compared to $134.9 million from last year.

G&A expenses were $579.4 million, compared to $533.2 million from last year.

Earnings from operations for the full year 2013 were $93.6 million, compared to $22.3 million in the same period last year.

Net income for the full year was $54.8 million compared to $9.5 million last year.

Diluted earnings per share were $1.08 on approximately 50.6 million average shares outstanding, compared to a diluted earnings per share of $0.19 on approximately 49.9 million shares, last year.

And now, turning to our balance sheet.

At December 31, 2013, we had $372 million in cash, or approximately $7.34 per share.

Trade accounts receivable at quarter end were $225.9 million, and our DSL at December 31, 2013 were 43 days versus 49 days at the end of the prior year.

Total inventory, including merchandise in transit, at December 31, 2013 was $358.2 million, representing an increase of $19.2 million or 5.7% from December 31, 2012.

Long-term debt at December 31, 2013, decreased to $116.5 million, compared to $128.5 million at December 31, 2012.

The decrease primarily relates to payments made on our distribution center equipment.

Shareholders equity at December 31, 2013, was $979.9 million, versus $919.1 million at December 31, 2012.

Book value, or shareholders equity per share, sit at approximately $19.38 as of December 31, 2013.

Working capital was $704.5 million versus $647.8 million at December 31, 2012.

Capital expenditures for the fourth quarter were approximately $11.8 million,of which $8.2 million related to 14 new domestic store openings and several store remodels and $2.3 million related to our international operations.

In summary, with our second highest net sales for both the fourth quarter and full year, and several industry honors, 2013 was a year of strong growth, innovation, and recognition.

We are pleased with our sales growth of 13.9% for the quarter.

Especially given that the increase is on top of last year's 39.7% gain in the fourth quarter, as well as the 18.3% growth for the full year.

We believe our strong performance across all of our distribution channels is the result of great accomplishments we made with the continued development of multiple successful product initiatives, including SKECHERS GO Walk, SKECHERS Kids, and BOBS from SKECHERS.

Our product is continuing to resonate in the US and around the world.

As we continue to expand our product offering, we are also planning to grow our 2013 year-end retail footprint beyond the more than 390 Company owned SKECHERS stores, and more than 480 distributor, joint venture and license stores, with another 70 to 80 company owned stores and 120 to 130 distributor, joint venture or licensed stores this year.

Bringing our total projected SKECHERS store count at the year end 2014 to approximately 1,070.

Further, the combination of significant growth from our newer markets, such as China and Brazil, the strength of our well established countries that are continuing to grow, and the improvements we're seeing in several challenged countries, makes us believe our international sales will grow double digits in 2014.

And while a small part of our total business, we are continuing to invest in our e-commerce platform as we have seen six consecutive quarters of growth.

Early key performance indicators including double digit backlogs, single-digit comp increases on domestic and international stores in January, and strong incoming orders in January, lead us to believe we will continue this positive momentum in 2014.

Our much improved profitability, operating leverage, cash balance of $372 million, and in-line inventory levels are indications of our determination to efficiently manage our business as we leverage our growth.

We are looking forward to building on our solid position in the global marketplace and capitalizing on our proven key initiatives.

We believe we will continue our momentum in 2014, and we are comfortable with the consensus numbers currently reported in the first quarter and full year.

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

Thank you.

Ladies and gentlemen, we will now be conducting a question-and-answer session.

(Operator Instructions).

Our first question is from Jeff Van Sinderen of B. Riley.

Please, go ahead.

First, let me say congratulations.

That's really impressive performance for Q4.

Especially in light of the challenging retail environment.

Thanks.

David, maybe you could just talk a little bit more about the feedback that you're getting from some of your retail partners on sell throughs?

Maybe touch on what product lines they're most enthusiastic about, maybe what they saw in Q4, and what they're enthusiastic about going into 2014.

And then maybe give us a little more color on what's driving the order book for the first half of this year?

Well, I think they relate to each other.

I think if you look at our order book we're up about 30% in backlog, it just shows we performed well, we performed well in a tough environment in Q4 for them, they're booking in advance.

Even though Easter is moved out a little bit this year.

Basically because our products are in demand.

And we're filling up our pipeline.

So I think it's across the board.

As I said in the prepared comments, Women's Sport, Men's Sport our Performance Group , our Kids are all picking up, they're all positive.

It's not accentuating in one place it really is across the board and continues just as it did last year.

So I think it's all driving the order book and in fact the feedback we've gotten through these meetings we're having, the end of January, and it's still positive no one is pulling back and everyone continues moving forward it gives us a great bit of confidence in the quarter coming up.

That's great to hear.

And as we think about gross margin for Q1, the margin was actually better than we expected in Q4 and I'm just wondering if we should be modeling that up versus last year, or maybe which components you see driving that up or hopefully it's not going to be down, in Q1, anything to add there?

I think what drove the margins this quarter mostly is how hot we are and how hot the product is, but our big increase in southeast Asia, which he predominantly retail, raised it up because they have retail margins and we were up so strong with them.

Both top and bottom line.

And Europe kicked back some and because of our margins in Europe on a wholesale were slightly higher than a domestic margins, that was a positive.

As well as retail kept their margins up even though we had a slight flattening.

We comped up very strongly for October and November, and comped up mid-single digits for December when everybody else was having issues, so that kept it up.

And barring any issues for weather or changes that I haven't seen yet, I would think margins would be slightly up from last year, although maybe not quite as high as they were in Q4.

Okay.

And then I know you don't provide guidance but all else being equal would you expect to be able to leverage SG&A a little bit in the first half of this year?

And then, when you think about operating margin for first half, I think you said you were comfortable with the consensus out there, so I'm assuming you would be comfortable with something along the 5% or 6% operating margin for first half?

Yes.

I think that's true.

I think we will continue.

If you look at the expense growth this year it was only because of the store count grew so dramatically certainly in Q4, and at the end of Q3 which just opened up.

So basically we opened 36 stores predominantly through Q3 and Q4, which was part of the increase.

As well as China doubling their sales, which obviously led to increases.

Domestically we haven't had any big increases at all, so I think we do leverage we continue to leverage in China and probably at retail, since I don't know that we're going to open 20 stores in the first quarter.

So we should leverage that expense item as well.

So, yes, I think we do continue to leverage.

I think we're still on the same path we were on when we spoke at the last conference call, as we get closer to 2.2 and 2.3 we'll continue to leverage higher and higher.

Hopefully approaching that double digit operating margins as we get to the 2.2/2.3 range.

Okay.

Good.

Great to hear.

I'll let someone else jump in.

Thanks very much, and good luck for the rest of the quarter.

Thanks, Jeff .

Thank you.

The next question is from Sam Poser, of Sterne, Agee.

Please, go ahead.

Hi, David.

Happy Wednesday.

Can you tell me what you expect domestic wholesale to be?

You talked about the international growth.

What are you looking at domestic growth to be for the year?

We look for it to still be up double digits.

I think we're going to be up in the low - double digits in the first quarter, and unless weather is really a bigger factor, I don't know what's going on today.

As we go forward, I would expect that we would continue that through back to school and into the end of the year.

I still do expect double digit growth from our domestic wholesale business this year .

You're going to have a 20% store growth on the owned retail, give or take.

It looks like you're comfortable with the numbers on the street, but I'm on the high end, but it sounds like there might be a little wiggle room there if those are the kind of revenue numbers you're looking for.

Well, we are comfortable with the numbers on the street, and we are very confident, but given the weather situation as it begins now, especially as it concerns first quarter, there is always the possibility that the fill in rate won't be as high as we expect because people have booked pretty well and if stores are closed for an inordinate period of time there's going to be a transition period.

Also, first quarter is tough because Easter is moved out into April.

So we're pretty confident, and I guess if the weather were to pick up, and retail picked up in the US,I would tell you that there might be some room, but it's too early to tell, and given today I'm not even sure how many stores we have closed on the east coast today from what I saw on the TV this morning for the snowstorms so that always is a caveat out there.

It's already middle of February, so half the first quarter is already gone.

There's only so much time you can make that up at retail.

Okay.

Thank you.

The selling expenses seem like they're going to continue to grow modestly, but given the new stores, G&A looks like the investments there are going to keep that clicking along so you're going to lever more on your selling, I would think, than you on on your G&A if I'm thinking about that correctly.

That's probably true for Q1 but I think as we get to the back end of the year places like Brazil and China and joint venture in southeast Asia they'll start to leverage theirs as well.

I think as we go through the year we'll leverage both the selling and the G&A piece.

This is really a back up for Q4 based on retail and some southeast Asia.

So I don't know that increase will continue through the whole year.

We would have shown even more leverage had the weather not really taken back the sales in December.

We were tracking quite a bit ahead through October, November, going into what we anticipated to be very strong and shortened Christmas season that got sort of destroyed by the weather.

So we'll see what happens in that piece.

Right now we're feeling very comfortable on those pieces, and feel very good about retail and our international expansion.

Okay.

All right.

Thanks very much.

Thank you.

The next question is from Chris Svezia, of Susquehanna Financial Group.

Hey David how are you?

Hey, Christopher.

Nice job.

I guess first question, dare I ask this, but inventory, just surprised up 6%, great job, but just any thoughts, do you have enough inventory to meet demand or just kind of how we should think about that as we go through Q1?

I think our inventories are in great shape.

First of all, when we report a backlog like 30% we don't expect orders that are not in our pipeline.

Some of it is that he with used up some of this production capacity and we still have it all, and we still have some for an at once piece.

So, I would think we're situated very well on the inventory side for the business we've booked, and for some potential upside to the product remaining the hot and the weather stays good.

Okay.

Order book, I'm just curious your comment about continuing to see growth into January.

How big is January from a pre-book basis, and did it accelerate from that 30% or did it hold that 30% rate?

It held the 30% rate as far as backlog is concerned, maybe up slightly year-over-year.

We usually have some deterioration in January because it's not a big booking month and it's a pretty good shipping months.

Our big booking months are February and March but I think it's fair to say that this was the second largest January we've ever had of incoming orders on a worldwide basis.

Okay.

All right.

And then I'm curious on the gross margin.

You mentioned the Kids business was down 11% or 12% in the fourth quarter.

How much of that being down helped the gross margin based on the fourth quarter, and does that really revert itself is it going into this year?

I don't think that was the major contributing piece.

I'm sure they had slightly lower margins and it was slightly down.

I think the biggest cut was based on our southeast Asia and European business growing so dramatically that 16% up really did go through to the gross margin line.

Okay.

I know you touched slightly on Q1 on the gross margin but sustainability of that, I think Q1 gross margin was down around 100 basis points.

I don't remember the exact reason, but seems like you had some favorability in Q1 with international really kicking in.

I mean could that be up 50 basis, 50 to 100?

You're up 190 in Q4, or thereabouts.

I'm just curious.

Yes, it could be.

And Europe has gotten off to a very good start shipping and very good start at the stores.

And so has southeast Asia just coming back from Chinese New Years so if they hold, we certainly do have potential to increase the gross margin.

Okay.

And then last question I have just on the G&A real quick, you were up roughly $20 million in the fourth quarter.

As we think about just quarterly flow going forward, using $20 million increases in G&A, assuming double digit sales growth, is that too high?

Is that a little abnormal in the fourth quarter?

I think it's a little abnormal from the store count opening and also it's only $11 million over first quarter last year.

I don't know that the 11 goes to 20 for first quarter, given the additional growth.

And the stores remaining constant.

So it might if the store count continues to open at a very rapid pace, or China really out paces their projections, as well.

Okay.

And very last thing here, just on the tax rate.

As it pertains to your thoughts about looking at consensus and feeling comfortable what's out there for the year, previously we didn't have that assumption about the tax rate and that on an annualized basis adds $0.10 to $0.15 just on EPS alone.

How do you think about that?

Because that's a pretty big adjustment when we think about our numbers.

Yes.

And it's still a moving target as taxes usually are.

I would start to model 30% certainly and coming down if international could start to accelerator, or continue to accelerate.

All right.

Fair enough.

Nice job.

Talk to you soon.

Thank you.

Thank you.

The next question is from Scott Krasik, of BB&T Capital Markets.

Hi, David.

Hi, Scott.

Just a few questions on sales.

It was a little weird last year because you didn't have a big backlog and people chased and you ended up in a lot of sales in Q1 but it was done on an at once basis.

Is the backlog bigger because of the timing shift and how do you expect the at once business to look this year?

A lot of how the at once business looks, like I said before, will depend on how weather holds, because I think people still aren't booked sufficiently.

People did book earlier because they wanted to secure goods earlier even though Easter had moved out.

I don't need as big an at once business to be comfortable with the first quarter numbers so it's not even required.

If the at once business became anywhere near what it was last year, then indeed all these numbers would be conservative but I really don't anticipate that given the weather and the sale throughs that most people are reporting even throughout the middle of February.

So I think it's fair to say people have booked earlier but at a rate that would still show increases with much smaller at once components in first quarter.

Okay.

Obviously, on the comps in January, it was pretty good.

Was there anything with the acceleration last year in March because Easter was big what type of comp are you you expecting for Q1 and what is realistic?

We're still modeling mid-single digits but I think it can accelerate from there.

When we looked back at comps for last year they were in the mid-single digits for January and February and they were up significantly in March because of Easter.

Even with that, because the product is so well received and we're a spring house, our comp store sales were up in April, and that's against a non-Easter April.

So we think as the weather clears out and this product has as much demand as it has we could see acceleration certainly by the end of the month and going into March even with Easter in it but that still remains to be seen.

Okay.

In terms of bookings that you have for back to school already for those June deliveries, maybe talk about how those compare year-over-year.

We're up everywhere and we're certainly ahead of the game that far out.

But we haven't had the biggest piece of June book, that will come in February.

Okay.

It's kind of early to tell.

We have all positive reception on the lines from our pre lines and our big customers.

I'm sure if you do a channel check, you'll see we continue to perform well and anticipation is still very good for back to school, and I don't disagree with that.

Okay.

And then just to clarify Chris' question, so if we were using, I forgot I think it's $1.75, on a 33% or so tax rate, should we raise the EPS as we lower the tax rate or should we lower the EPS?

You know what, that depends.

I have to look at your model but 3% is too early to tell if we're going to be up or down 3%.

I think it's a good number just to use 30%, do whatever you like, use 3% as the cushion if it's a couple pennies means that much to you during the year you could use that as well.

We just use that as a small cushion as we go through.

We're expecting pretty significant growth so I don't know that will be the determining factor for this year.

Good luck.

Oh, last one, sorry.

You had talked about buying partners interest in your DC.

When do you expect that to happen?

I don't think we have a time or date yet because we're just beginning so it's kind of too early to discuss.

What we will be doing, if nothing else, is that we have a balloon payment that we don't plan on rolling over for the equipment, which is probably $50 million or $60 million decrease to our debt sometime through 2014.

So that will be one of the uses.

And we'll be talking to them about what to do with the distribution center.

Okay.

We'll let you know how that unfolds.

Thanks.

Thank you.

(Operator Instructions).

The next question is from Corinna Freedman, of Wedbush Securities.

Please, go ahead.

Hi David.

Hi.

Just a quick question on your CapEx.

What kind of level of a you planning for 2014, given the significant increase in stores?

Yeah, I think right now we're in the $35 million to $40 million range.

Okay.

And then if you could talk a little bit about the internet slowing from 30% growth last quarter to 9% this quarter, to what do you attribute that to, and what are you planning for that business going forward?

As we said before, our internet business we don't compete on price, so it's very difficult for us since we don't make necessarily specific product, we just compete on colors, assortments and inventory.

I think it's only up 9% because it had a big increase last year, which was the beginning of our growth for the company worldwide.

So we anticipate it will continue to grow, it will continue to prosper as the stores do because there's a lot of in demand product.

We don't foresee it being outrageously significant contributor because we do a lot of internet business with a lot of major customers of ours, so our big internet presence comes through our retail partners.

And I think you just endorsed mid-single digit comp for the first quarter.

Comps do get a little bit tougher for the second or third quarter.

What kind of level are you baking in for the balance of the year?

Well, I think they get somewhat easier in the second quarter because we'll have an Easter April against the non-Easter April last year, so for us that will be an increase and I think an increase in back to school.

So, we would like to believe that we're still in the mid-singles to maybe low-double digit comp store sales as we go into the back half of the year.

Thanks a lot.

Thank you.

Thank you.

Ladies and gentlemen, this does conclude the question-and-answer session.

I would now like to turn the call back over to SKECHERS for closing remarks.

Thank you again for joining us on today's call.

We would just like to note that today's call may have contained forward looking statements.

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

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

Again, thank you, and have a great day.