Wolverine World Wide Inc (WWW) 2013 Q3 法說會逐字稿

Good morning, and welcome to Wolverine Worldwide's 2013 third-quarter earnings conference call.

(Operator Instructions)

This call is being recorded at the request of Wolverine Worldwide. If anyone has any objections, you may disconnect at this time.

I would now like to introduce Ms. Christi Cowdin, Director of Investor Relations and Communications for Wolverine Worldwide. Ms. Cowdin, you may proceed.

Thank you, Amy. Good morning, everyone, and welcome to our third-quarter 2013 conference call. On the call today are Blake Krueger, our Chairman, CEO and President; and Don Grimes, our Senior Vice President and CFO.

Earlier this morning, we announced our financial results for the third quarter of 2013. If you did not yet receive a copy of the press release, please call Jessica VanSolkema at 616-233-0500 to have one sent to you. The release is also available on many news sites, or it can be viewed from our corporate website at WolverineWorldWide.com.

This morning's press release included non-GAAP disclosures, and these disclosures were reconciled with attached tables within the body of the press release. Today's comments during the earnings call will include some additional non-GAAP disclosures. There was a posting at our corporate website that will reconcile these non-GAAP disclosures to GAAP. To view this document, please go to our corporate website, WolverineWorldWide.com, click on Investor Relations in the navigation bar, click on webcast at the top of the Investor Relations page, and then click on the link to the file called WWW Q3 2013 conference call supplemental tables, which is located below the webcast link.

Before I turn the call over to Blake to comment on our results, I'd like to remind you that the predictions and projections made in today's conference call regarding Wolverine Worldwide and its operations may be considered forward-looking statements by Securities laws. And as a result, we must caution you that, as with any prediction or projection, there are a number of factors that could cause results to differ materially. These important risk factors are identified in the Company's SEC filings and also in our press releases.

With all that being said, I would now like to turn the call over to Blake.

Thanks, Christi. Good morning, everyone, and thanks for joining us today. This morning, we reported outstanding results behind strong earnings leverage. For the third quarter, revenue was up 9% over the prior year's pro forma result, an all-time record for the Company. Gross margin grew 70 basis points to 39.9%; and earnings per share, adjusted for acquisition- and integration-related expenses, increased over 60% versus last year to $1.16 per share.

In addition to our record-setting financial performance, the timing of this earnings call marks another important milestone in our Company's history. Tomorrow is the one-year anniversary of the addition of four iconic brands to the Wolverine Worldwide family -- Sperry Top-Sider, Saucony, Keds and Stride Rite. Wolverine has made a number of successful acquisitions in our 130-year history, but the addition of our Boston-based brands has truly been a game-changer for our Company. I'm excited to share some of our achievements over the last year, but before I get to that, I'd like to share some brief highlights from the quarter, which Don will then cover in more detail.

Our diverse portfolio of global lifestyle brands continues to resonate with consumers, and our robust business model delivered strong financial results, despite a challenging retail and macroeconomic environment. Domestically, the market has remained tepid, as conflicting messages on the economic recovery have caused retailers to be cautious with their buying in particular, and consumers to be measured with their spending. Outside the US, Europe has recently begun to show signs of stabilization, and economic forecasts are now calling for limited growth in 2014.

Despite the continuing macroeconomic challenges, our performance this quarter again demonstrated the effectiveness of our business model, and the importance of bringing compelling product to our global consumers. As you will hear from Don in a few minutes, our updated guidance for fiscal 2013 reflects our confidence in delivering great results in any economic environment.

Revenue performance in the quarter was driven primarily by growth in the lifestyle and performance groups, highlighted by excellent double-digit growth from Sperry Top-Sider and Merrell. The lifestyle group, consisting of Sperry Top-Sider, Hush Puppies, Keds and the Stride Rite children's group, had another solid quarter, delivering high-single-digit revenue growth compared with 2012 pro forma results. Sperry continued to build on its momentum from the first half of the year, posting very strong double-digit revenue growth in the quarter.

Keds also delivered impressive double-digit revenue growth, as the brand and product are resonating with its targeted consumer. In addition to Taylor Swift, the Keds team has established partnerships with Kate Spade and Hollister to expand the brand into key style segments to reach new consumers, especially young consumers. In the fourth quarter, Keds will begin to roll out kiosks in important US regional malls to present our full expression of the brand, and to continue to get closer to its core consumer. The strategic marketing investments we are making in this classic American brand are paying off.

The performance group, consisting of Merrell, Saucony, Chaco, Cushe, and Patagonia Footwear, posted strong double-digit revenue growth in the quarter compared with 2012 pro forma results, driven by excellent double-digit growth from Merrell, Saucony, Chaco, and Cushe.

Merrell remains the category leader in outdoor footwear. We're also very excited about the addition of Gene McCarthy as President of Merrell, which we announced earlier in the quarter. Gene is a recognized leader in the footwear and apparel sectors, and he has already levered his extensive industry and leadership experience to impact and help drive the Business.

The heritage group, consisting of the Wolverine brand, Cat Footwear, Bates, Sebago, Harley-Davidson footwear, and HyTest posted a slight revenue gain versus the prior year. Growth from Harley-Davidson, Cat Footwear, and the Wolverine brand were offset by revenue declines in Bates, HyTest and Sebago. Overall, a very strong growth quarter for our 16-brand portfolio.

The past 12 months have been critical, as we have positioned the new Wolverine Worldwide for future success. Fundamentally, we are a different and much larger Company than a year ago. Wolverine's focus, and the foundation for our success, has always been our people, combined with our relentless pursuit of innovative ideas and products, all with a mindset to drive growth on a global basis.

I'm pleased to share some of our achievements over the past year, and thoughts on the future. First, the integration of our Boston-based brands has been a resounding success, from the conversion of the back-room IT systems to the consolidation of sourcing operations, to the early retirement of transition service agreements with the former parent company of these brands, we achieved results that were ahead of schedule, and on or below budget.

From the day we signed the merger agreement, we were mindful of the potential complexity of the integration process. We've done it many times before, albeit on a smaller scale. Our team developed a plan to attack the integration process with the same energy and passion we have for growing our brands. We now operate as one Company, share best practices, and most importantly, utilize and deploy talent within the Business across our brands.

In January, we migrated from four brand operating groups to three. This structure has allowed us to strategically organize our brands around target consumers, distribution channels, and retail customers. It has also allowed for a more efficient operating platform, and supports our vision of creating industry-leading global brands.

One of our most important integration projects is the migration of the wholesale and retail businesses for our new brands onto SAP. I'm pleased to report that the SAP wholesale integration was completed in the third quarter, and for all intents and purposes, it was seamless, with no negative impact to our Business. The SAP retail rollout is in progress, again, with no surprises, and is on track to be completed by year end. This will complete the SAP integration project, and all of our business units will be operating on a common platform going forward.

During our second-quarter earnings call, I highlighted one of our main post-closing goals of leveraging our established global partnerships to accelerate international growth for our new brands. We continued to make progress on this front during the quarter by signing and executing distribution agreements covering 14 key growth markets, bringing the total number of new agreements since closing to nearly 35, covering 67 countries.

As just one example, we are exceptionally pleased to announce that we have recently signed a new multi-year agreement with the E-Land Group for distribution of the Sperry Top-Sider and Keds brands in China. E-Land is one of South Korea's largest conglomerates, and has extensive operations in China, specializing in fashion, retail and distribution, having successfully launched and built numerous lifestyle brands with more than 10,000 stores worldwide.

This new partnership will enable the Sperry Top-Sider and Keds brands to maximize the China opportunity. Planned distribution channels include stand-alone mono-branded retail stores, brand-specific shop-in-shops, and other wholesale distribution with multi-branded fashion boutiques and retailers. The first Sperry Top-Sider stores are opening in Shanghai this Fall, with additional store rollouts in key cities in the coming months. Our efforts to expand global distribution for our brands will obviously continue, and begin to meaningfully impact results over the next several years.

As a Company, we've had a long history of delivering game-changing innovation, inventing the world's first casual footwear brand with Hush Puppies, taking a global view and expanding into international markets over 50 years ago, revolutionizing work boots with patented comfort technologies, creating the after-sport category, and now nearly doubling the size of our Company by adding four world-class brands to our portfolio. Strategically, we remain focused on leveraging our diversified portfolio of global lifestyle brands, which cover all ages, genders and most product categories. We're going to do this by maintaining a fanatical focus on innovation, especially product innovation; expanding our already-extensive global footprint; focusing on creating stronger connections with our targeted consumer groups; expanding the lifestyle and direct-to-consumer opportunities for our largest brands; and executing against our business model, which mitigates the risks associated with a volatile global marketplace.

Let me close by saying that the past 12 months have been the most transformative period in the Company's 130-year history, and we're excited to tell you more about it, and more about where we are, and more importantly, where we're going. On October 15, we'll be hosting an Investor Day in New York City, which will also be webcast on the Company's corporate website. This event will serve as a platform to introduce our investors in the Street to the new Wolverine Worldwide, and will include information about our corporate and brand initiatives, and longer-range financial projections. This will be done in a series of presentations by the Company's leadership team. It's an exciting time to be part of Wolverine Worldwide, and our entire leadership team and I are privileged to lead the Company into a new era of growth and opportunity.

Earlier in my remarks, I mentioned that the foundation for our success as a Company has been and always will be our people. I'd like to take this opportunity to personally thank our dedicated and talented team of over 8,000 associates around the world for the countless hours and the colossal effort in bringing our vision for the new Wolverine Worldwide to fruition. I am continuously inspired by the talent we have in the Business, their enthusiasm for our brands and consumers, and perhaps more importantly, by their collective desire to win. Their relentless focus and pursuit of excellence is truly extraordinary, and without our team, our achievements and successes throughout the past year would not have been possible.

I'll now turn the call over to Don Grimes, our Senior Vice President and CFO, who will provide additional detail on our financial performance during the quarter and outlook for the balance of the year. Don?

Thank you, Blake, and thanks to all of you for joining us today. Blake's comments focused on the Company's strategic direction, and the terrific progress we've made over the last year in successfully integrating the four new brands while maintaining, if not accelerating, the momentum of all of our brands in the marketplace.

A powerful combination of disciplined execution, operational excellence, and outstanding brand performance has helped elevate the profile for Wolverine Worldwide. Our progress to this point has been exceptional. As we turn our attention from acquisition and integration to business optimization, I'd like to echo Blake's enthusiasm about the very bright outlook for our 16-brand portfolio.

Earlier this morning, we were very pleased to announce record financial results for the Company's third fiscal quarter that ended September 7, 2013. This represents the third full fiscal quarter for the Company that includes results from the Sperry Top-Sider, Saucony, Stride Rite and Keds brands, which were acquired almost exactly one year ago today. Let me remind everyone that unless otherwise noted, all financial results in my comments are adjusted to exclude acquisition-related transaction and integration expenses.

Turning to the third quarter's revenue results, consolidated revenue was a record $716.7 million, representing growth of 103% versus prior-year reported revenue, and excellent 9% growth versus prior-year pro forma revenue. Foreign exchange had minimal impact on the quarter's revenue growth. As we expected going into the quarter, retailers did in fact place orders closer to need, and our at-once shipments as a result were up almost 20% in the quarter.

Demonstrating the broad strength of our portfolio, we were pleased to see growth from all major geographic regions. Revenue in the US, our largest market, grew in the upper-single digits in the quarter versus prior-year pro forma revenue, and has grown at a double-digit rate through the first three quarters.

Revenue from the EMEA, Latin America and Asia Pacific regions all grew at a double-digit pace in the quarter, again, versus prior-year pro forma revenue. It's very gratifying to see the nice performance from Europe. Although only one quarter, the results help underscore our belief that we're past the low point of that region's recent economic difficulties.

Turning now to the results by operating group and brand, the lifestyle group, which again consists of the Sperry Top-Sider, Hush Puppies, Stride Rite and Keds brands, delivered revenue of $295.8 million in the quarter, a strong 9.6% increase over the prior year's pro forma revenue. Both Keds and Sperry Top-Sider generated impressive double-digit revenue growth.

Sperry has now grown its global business at a double-digit rate for 16 consecutive quarters, quite an accomplishment. The brand's men's business was very strong across all channels in the quarter, but the women's business was cycling against exceptionally strong shipments in the prior year of sequin and vulcanized product, business that wasn't repeated this year.

Direct-to-consumer results for Sperry Top-Sider in the quarter were simply phenomenal. Comp-store sales grew over 20% on the strength of significantly higher conversion, and higher average ticket. We project that we will end the fiscal year with approximately 50 Sperry Top-Sider specialty and outlet stores, capitalizing on the great momentum of the brand.

The Keds turnaround continues, fueled by the powerful momentum from both the partnership with Taylor Swift, and the product collaboration with Kate Spade. As Blake mentioned, Keds also recently introduced exclusive product offerings and partnership with teen retailer Hollister, a significant step in the brand's strategy to expand market share, and reach a broader and younger base of consumers.

Hush Puppies had mixed results during Q3, as excellent double-digit revenue growth in the US and Latin America, and a solid gain in Asia Pacific, were more than offset by continued challenges for the brand in Europe and Canada. The Stride Rite wholesale business delivered its strongest revenue quarter ever, illustrating the brand's successful transformation, and ongoing focus on building strong and lasting connections with consumers, with an unmatched portfolio of children's footwear brands.

Our performance group, consisting of Merrell, Saucony, Chaco, Cushe, and Patagonia footwear, posted revenue of $254.1 million, an impressive gain of 13.4% compared to prior-year pro forma revenue. The outstanding results were well balanced, as Merrell, Saucony, Chaco, and Cushe all generated double-digit revenue growth in the quarter. Merrell's strong results in the quarter reflect growth from each of the performance outdoor, outside athletic, and active lifestyle categories, with the latter being especially gratifying because we've been working very hard to regain traction with the brand's casual offerings.

Saucony had another impressive quarter, and continues to deliver with innovative products that stand out in the marketplace, including Omni 12, an Editor's Choice from Runner's World Magazine, and Carrera, the best cross-country shoe from Running Network. Saucony continues to gain market share in the all-important run specialty channel, growing at more than twice the rate of the overall category, and was the number-two brand in that channel for the first time in the month of August.

Chaco had a strong Q3 compared to the prior year, driven by strong at-once demand for the classic Z-sandals, and a nice lift from the My Chacos initiative, which are customizable Chaco sandals available online at Chacos.com. And Cushe had a notable double-digit increase this quarter, and continued to gain traction in the US with important retailers such as REI, Dillards and Flip Flop Shops.

The heritage group, consisting of Wolverine, Cat Footwear, Bates, Sebago, Harley-Davidson footwear and HyTest, had revenue of $144.6 million, up slightly compared to the prior year. The global Cat Footwear business had a solid quarter, as double-digit growth in the US was driven by strong at-once demand. The increase for the Wolverine brand was driven mainly by improvement in Canada, and better business in EMEA. And Harley-Davidson delivered another quarter of growth, driven by the success from the brand's new lifestyle offerings.

Gross margin of 39.9% in the quarter was up 70 basis points over the prior year's reported gross margin. The excellent gross-margin performance was driven by a greater percentage of business from high-margin consumer-direct operations, and select price increases that were instituted earlier in the year. These benefits were only partially offset by higher product cost, incremental LIFO expense, and negative variances on FX forward contracts. We believe there is a real opportunity to continue to drive organic gross-margin expansion via strategic sell-in price increases, while leveraging with our third-party factory base the full power of our 100-million-units-per-year brand portfolio.

The Company reported operating expenses in the third quarter of $199.7 million, which included $7.4 million of acquisition-related transaction and integration expenses, primarily related to transitional headcount cost and professional services in support of our successful migration of the newly acquired brands to our SAP platform. Excluding the transaction and integration expenses, SG&A was $192.3 million, or 26.8% of sales versus 25.3% of sales in the prior year.

Compared to the prior year, the SG&A increase in the quarter includes $4.6 million of amortization expense related to purchase price accounting, $9 million of incremental pension and incentive-comp expense, increases in brand-building investments, and the impact of a higher portion of business coming from consumer-direct channels.

Due to the SAP conversion late in Q3, the Company took a measured approach to discretionary spending as a contingency against any shipment delays or other major issues that might have resulted from the system change. As a testament to the extraordinarily detailed planning that accompanied the project, the conversion went very smoothly, without any significant issues. A portion of the deferred discretionary expenses will occur in Q4.

Net interest expense in Q3 was $11.9 million, consisting of both interest expense on the outstanding debt, and amortization of debt fees that were capitalized at closing and are being amortized over the life of the respective loan.

The reported effective tax rate for the quarter was 25.9%, and reflects the benefit from the deductibility of the acquisition-related expenses, primarily in high statutory tax rate jurisdictions. Excluding acquisition-related expenses, the effective tax rate in the quarter was 27.7%, and that rate reflects a catch-up amount in the quarter for a full-year forecast that now skews taxable income more to higher tax jurisdictions than did the previous forecast.

Fully diluted weighted average shares outstanding for the third quarter were 49.6 million shares. Fully diluted earnings for the quarter were $1.16 per share, a 61.1% increase versus the prior year's $0.72 per share, an exceptional result.

Recall that we announced in July a 2-for-1 stock split to be paid in the form of a stock dividend on November 1 to shareholders of record on October 1. These quarterly earnings numbers are not adjusted for the upcoming stock split.

The outstanding earnings results in the quarter were driven by strength in our legacy business, and excellent earnings accretion from the PLG acquisition of $0.35 per share. Please be reminded that we are calculating accretion by subtracting incremental interest expense, amortization expense related to purchase price accounting for long-lived intangible assets, and net synergies from the operating income of the acquired brands, all on an after-tax basis. Earnings accretion in Q4 will be impacted by both the seasonality of the PLG Brands business, and the shift of certain discretionary expenses into the latter part of the year.

Switching gears to the balance sheet, total accounts receivable and inventories at quarter end were each up over the prior year by more than 70%, due to the inclusion of our four new brands. Days sales outstanding were up modestly over the prior year, due to a different mix of customers and credit terms resulting from the new brand acquisitions. Inventories at quarter end, although up versus the prior year, were below our forecast due to strong at-once orders, particularly in the last few weeks of the quarter.

We finished the quarter with cash and cash equivalents of $147.8 million, and net debt just under $1 billion, at $994.3 million. The first quarter end since the transaction closed, at which net debt has been below $1 billion, and a full $179 million lower than net debt just one year ago, reflecting both the powerful cash-flow generation of our Business and the Company's commitment to use this cash flow to deleverage as quickly as possible.

To that end, in addition to the mandatory principal amortization, we made a $35-million voluntary principal payment on our term loan B in the quarter. Operating free cash flow through the first three quarters of the year was $95.6 million, including $22.7 million of operating free cash flow in Q3.

Further to the balance sheet and our capital structure, as Blake noted in his comments, tomorrow marks the one-year anniversary date of the closing of the PLG acquisition. And that milestone, combined with our strong operating performance in the year since closing, is providing a great opportunity to refinance our interest-bearing debt.

More specifically, we have been working the past couple of months to amend and extend our current senior secured credit agreement, the result of which will be an increase in our lower-cost term loan A to $775 million, the retirement of our higher-cost term loan B, the maturity of the credit agreement being extended one year to October 2018, and the modification of a handful of other terms and conditions, all to the Company's benefit. We expect to close on the refinancing later this week, and the result will be a reduction in annualized cash interest of approximately $4 million.

The refinancing will result in a charge in Q4 related to the early extinguishment of debt of approximately $21 million. The vast majority of this charge is a non-cash write-off of a portion of the debt fees that we capitalized on the transaction closing date last year, with only about $1.2 million related to cash costs associated with the refinancing.

As a result of this charge, fiscal-2014 interest expense will be further lowered by an approximate $3-million reduction in the amortization of capitalized debt fees. Even with the incremental cost of the interest rate swap arrangement that kicks in this month, this timely refinancing, along with pricing reductions driven by our lower leverage, will help lower our full-year interest expense next year by approximately $8 million, an excellent result.

Turning to our outlook for the balance of the year, the excellent 9% revenue growth in Q3 raised our year-to-date revenue growth to 7.7%, solid performance in the context of a European economy that is still struggling, and the uncertainty that surrounds the US market. That said, given cautionary commentary by some key US and European retail partners regarding the holiday season, we believe it's prudent to narrow our full-year revenue guidance to a range of $2.71 billion to $2.73 billion, representing full-year growth in the range of 6.4% to 7.1% versus 2012 pro forma revenue.

This full-year range results in guidance for the fourth fiscal quarter of $760 million to $780 million for a growth versus prior-year pro forma revenue in the range of 3.2% to 6%. Due to the very strong year-to-date earnings performance, we're increasing our expectations for full-year earnings to a range of $2.73 to $2.83 per share, growth in the range of 19.2% to 23.6%, versus the prior-year earnings per share of $2.29.

Further adjusting for the non-recurring tax benefits recorded in the prior year, our increased full-year earnings guidance represents growth in the range of 30% to 34.8%. Included in this outlook is the expectation of full-year accretion from the PLG acquisition of approximately $0.75 per share, outstanding results in the first full year of ownership. The increased full-year earnings guidance suggests Q4 earnings in the range of $0.30 to $0.40 per share, compared to prior-year earnings of $0.48 per share.

In addition to the expectation of modest earnings dilution from the PLG acquisition in the quarter, there are several other items that, in the aggregate, will negatively impact year-over-year earnings growth by approximately $0.23 per share. Including A, an unusually low 7% effective tax rate in the prior year's fourth quarter versus the normalized effective tax rate this year, a difference of approximately $0.10 per share. B, $5.5 million or $0.07 per share of incremental incentive-comp expense, as normalized levels of incentive comp this year are being compared against unusually low incentive-comp expense in the prior year. C, $3 million or $0.04 per share of incremental non-cash pension expense, an item we've been noting all fiscal year. And finally, D, approximately 2 million more weighted average shares outstanding in the quarter this year versus last, which is worth about $0.02 per share.

Not included in the earnings guidance just mentioned are the transaction and integration expenses associated with the PLG acquisition, and the debt extinguishment charges related to the opportunistic refinancing that I discussed. Also not included in the guidance is the impact of an important initiative related to our owned manufacturing operations.

Over the last few years, the Company's owned manufacturing footprint has included two locations in the Dominican Republic. The factories in the DR focus production today primarily on Sebago- and Wolverine-branded product. After careful study and deliberation over the last several months, we are announcing today that we have decided to no longer operate our own factories in the Dominican Republic.

While this decision will result in the closure of one factory, we're still in the process of evaluating strategic alternatives for a second factory in Santo Domingo, including a possible sale to a third party. This strategic decision is based on both the benefits of sourcing from larger, more efficient producers, and by our desire to focus on our core competencies of creating innovative product and building enduring global lifestyle brands.

We expect the total charge related to the initiative to be in the range of $7 million to $10.4 million, of which approximately $5.1 million to $7.1 million will be non-cash. We expect most of these amounts will be recorded in the fourth fiscal quarter. We estimate annualized pre-tax savings of approximately $4 million, although the 2014 benefit will be a bit less, due to the timing of the contemplated actions. All in all, a very positive development for the Company and for our shareholders.

Thanks to everyone for listening this morning. We'll now turn the call back over to the operator to take your questions.

(Operator Instructions)

Our first question comes from Christian Buss at Credit Suisse.

Congratulations on a very nice quarter. I'd love it if you could provide some perspective on the rebound in the Merrell business, and how that business performed regionally. If you could talk about the expectations for Merrell going forward, as well, that will be very helpful.

We can provide a little insight there. Obviously, Merrell had a great quarter, double-digit revenue increase. I would say that this was also reflected in Merrell's retail doors as well as its e-commerce business, so it was across-the-board by channel and one of the most encouraging things, frankly, in the quarter was the fact that this was across all three product categories, strong performance in performance outdoor, really up double digits there, strong performance in outside athletic, the M-Connect collection, et cetera, again double digits.

And a positive for the first time in several quarters in the active lifestyle, the casual arena, so a really good performance, compelling product across-the-board for Merrell. I would also say that just to give you a geographic slice, EMEA and Latin America were very strong in the quarter for Merrell.

And Christian I will add to that the very strong performance in the quarter after, what was somewhat of a tough Q2 for the reasons we talked about in the last earnings call has brought the year-to-date growth for the brand up into the low single-digit range and that's consistent with the guidance that we had offered in the last earnings call regarding our full-year outlook for the brand, so it's a nice turnaround for the brand for sure.

That's great to hear, congratulations.

Our next question comes from Edward Yruma at KeyBanc Capital Markets.

Congrats on a nice quarter. The $0.10 delta in or the $0.10 range in Q4 guidance is a little bit wider than you have normally had for one quarter, so wanted to dig in on that. And I know that you had I believe earlier this year a bucket of marketing expenses that were deferred from the first half to the second half. And you also said there were expenses going from Q3 to Q4. So have some of the expenses been pushed off to next year? Thanks.

Yes, as it relates to the guidance, you're right. We did have a $0.05 range last year going into the quarter. I will say that we are a larger more complicated Company this year, with the addition of the PLG acquisition. So we felt like a $0.10 range is probably appropriate going into our fourth quarter, which remember, is a 16-week fiscal quarter for us that includes an additional four weeks versus the first three fiscal quarters. So that's the reasoning behind that.

You're right, we did talk during the Q2 call about some marketing spend and headcount adds that were more in the G&A area being deferred into the second half of the year from the first half of the year, and then the issue that I talked about with some caution on discretionary spending in Q3 as we approached the SAP conversion did cause some of those expenses to shift into Q4. But I would say very little of those expenses have been shifted into 2014 from 2013, so we still expect investment behind our brands to be relatively robust in the fourth quarter.

Got it and one follow-up, not to parse semantics, but I think last quarter you said that Sperry sales were extremely strong, and this quarter you said they were very strong. I guess if you could dimensionalize the relative growth rates, and if you seen any change in trend? Thank you.

I'll let Don handle that one.

I need to read our transcript more closely from the prior quarter before doing the current. I would say that it's still a very strong rate of double digit growth but at a rate that's probably a little bit lower than Q2, but still a rate of growth that we're very pleased with.

Great, thanks so much.

Our next question comes from Jim Duffy at Stifel.

Don, it looks like some moving parts on the GAAP guidance. Can you explain that, please? I'm struggling, I understand you have this incremental manufacturing restructuring, I'm just trying to follow all of the pieces there.

Yes, the GAAP guidance versus the last time would include the early extinguishment of the debt and the charge related to the Dominican Republic manufacturing initiative. I think the transaction integration expenses, if they changed from the last guidance changed only a very small amount, like a $1 million or $1.5 million, so what we have in the supplemental tables accompanying the earnings release, we included the midpoint of the range that we gave for the DR charge, and the midpoint of the range we had for the early extinguishment of debt charge. So beyond that, can you be more specific Jim? Because I can't be more specific.

Well what I'm struggling with it looks like the manufacturing restructuring is a new charge that wasn't previously contemplated.

That's correct.

Does that bring, if you strip that out, does the GAAP guidance go down on an apples-to-apples basis?

That would be included in the GAAP guidance but not included in the $2.73 to $2.83 adjusted guidance.

Okay.

So the $2.73 to $2.83 is our adjusted EPS guidance that does not include transaction and integration expenses that are non-recurring in nature, does not include the charge related to the early extinguishment of debt, and does not include the charge related to the DR activity.

Okay, so the guidance which excludes those charges goes up, but you do have some incremental charges with this manufacturing restructuring?

That's correct, so the GAAP guidance, which I didn't really speak to specifically, is in the tables accompanying the earnings release, that would have gone down because of the charges that we're announcing today, that weren't in the previous GAAP guidance.

Got you, okay. And then the gross margin was off of the first half rate despite what seems to be pretty good performance from a growing direct-to-consumer business. That caught me by surprise. Can you quantify the FX impact?

Yes, FX was about 70 basis points negative.

Okay.

Certainly bigger than a bread basket, and I will say that we're very pleased with the 70 basis points improvement of gross margin. I know there were some analyst notes out there that were contemplating the consensus for -- the sell-side was contemplating more gross margin expansion than the 70 basis points.

I will say that the contribution of the incremental PLG consumer direct business in the quarter was muted somewhat by some sluggish comp store sales performance by Stride Rite, exceptionally strong performance in Sperry Top-Sider, which has some of the highest brick and mortar gross margin across the retail fleet, but the Stride Rite business did struggle a bit because back-to-school is a big, it's the biggest season for Stride Rite, and as you know from everything you read, the back-to-school shopping season was not as robust as we had all hoped for.

Got you, okay and then some of the benefits you hope to get from consolidating buying power and so forth on gross margin, when should we expect to see those begin to flow through the P&L?

I would say some of those are flowing through the P&L this year. It's difficult to quantify those, it hasn't been a call out that we've made. But those will continue in 2014, as we make additional strategic decisions about how to consolidate our factory base where appropriate, and to not have too much concentration with any one factory group. So I think you'll still see in those flow through in 2014, and quite frankly, for years to come as we continue to leverage the clout and the power we represent.

Our next question comes from Kate McShane at Citi Research.

It sounds like you're going to be a little bit more aggressive on price increases going forward, and I think you mentioned, too, price increases helped you during the quarter. Can you go into more detail on how you're approaching this across your portfolio, and what level of price increases can we expect? And within that, can you comment at all on the inflation you're seeing in the supply chain currently and how the closure of the factories could help with your costs?

Yes, let me comment on the latter part of your question first. I think the overall sourcing environment right now remains frankly very stable.

Leather is still high, although it's down about 10% from its high tide mark. Oil and petroleum-based products have settled into a livable range, and overall pricing from Asia Pacific appears to be fairly stable. So in that regard, it's good news for us, and it's probably good news for the entire industry.

I would say, obviously, when you're sourcing 100 million pair of better grade product you have some leverage that might not be available to some of our smaller competitors. As far as price increases are concerned, we're constantly looking at that, in the context of a price-value equation for the ultimate consumer, so there may be value in a $350 Wolverine 1000 Mile boot. There may be value in a $50 Cushe slipper, and so we're constantly evaluating the price-value relationship, and where appropriate, especially when we introduce new products, we're not shy and capable of taking price increases.

It's a little bit harder for some brands in their carryover product, especially for example, in the work boot arena, but we're always looking at providing our consumers with a great value, irrespective of what the price is, and we do look at it brand by brand, and collection by collection, at that kind of a detailed level.

Thank you.

Next question comes from Taposh Bari.

You referenced a choppy retail environment, and it's hard to really appreciate the underlying business given the moving parts in your Company. But I was hoping you could talk more specifically about what you're seeing in the US, as we're now nine months into the year. Spring/summer had weather as a noise. What's happening over the past couple months there?

Yes, I'll give you my current view of the US market, and I think as we all know back-to-school was pretty tepid and inconsistent. Some brands did okay when they were there with a good value and a good and they had brand heat, and some brands and retailers struggled.

We probably think that's going to be a bellwether for the holiday season. Right now we're expecting the holiday season whether it's the six fewer days, the mindset of the consumer, the mindset of retailer to be a bit more promotional. It's certainly going to be shorter, and probably a little bit more challenged than normal.

The consumer in my mind is hunkering down a bit, and I don't, it's hard to quantify that in terms of is that the government shut down, is that lack of compelling fashion trends, is that lackluster performance of our economy here in the USA, is it just general uncertainty, but certainly, we seen that reflected in the last four to six weeks in mall traffic counts, traffic counts through our own retail stores. And that's one of the reasons frankly why we narrowed our revenue guidance for Q4.

Thanks for that, Blake. And I wanted to just quickly follow-up on just the international trajectory over the next 12 months, so the Sperry international being a key part of that acquisition; can you walk us through how the sell in and sell-through of that business evolves over the next 12 months? When are the big shipments going to start to take place internationally for that brand over the next year, and when should we start to see evidence of how the sell-through actually transpires?

Yes, I don't think you're going to see any step level increases. I think what you're going to see is a gradual build of the business over time. That's been our history as we brought over the last 15 years, seven or eight other brands into our portfolio.

Just to kind of give you, and many of these programs, whether they're for Sperry, whether they're for Saucony, whether they're for Keds, are very early in their development yet. Some of them have not even had their first season in country. Some of them are just completing an initial test season.

So far, the results are very good and encouraging. The whole world shops in the USA, so they know what's out here and they know what's happening here from a fashion and trend standpoint. So frankly it's a business we expect to build over time.

Despite our best efforts and we've been spending a lot of calories on that this year, this initiative, we've opened about 70 new countries to our new brands. Virtually all of these brands currently stand at about half the country number of our brands that have been in our portfolio longer.

So when I'm comparing them to Cat, Hush Puppy, Merrell, really Saucony, Sperry, Keds, and Stride Rite are all still very, very early on the international growth curve. So I'm sorry I can't quantify it any more than that, but we know the steady growth is going to be there, and we're working hard to accelerate it.

Taposh, I will add to that, that obviously enormous opportunities for growth for the new brands, Sperry and Keds in particular in Europe and South America, but getting China right for these brands and selecting the right partner in China was critically important. We thought given the size of that market and what it represents in terms of opportunity and our conversations with E-Land, partnering with them in China, started pretty much right after the acquisition closed last year. So those comments were included in Blake's prepared remarks very purposefully, to emphasize how important that was as we think for the brands' future growth to have the right partner in China, and we think that right partner is E-Land.

Great, can I sneak one more in?

Sure.

So you mentioned pretty strong comps at Sperry, sounds like an acceleration at the store base relative to Q2. Can you talk about just the sell-through rates within wholesale here in the US, how that transpired during the back-to-school season?

Yes, I mean, generally, we're pretty happy with the sell-through rates at Sperry, especially in the mall environment, and certainly as reflected in our own 48 Sperry retail stores, and the e-commerce site. So the Fall, even though a lot of people think of boat shoes and boat shoe derivatives is more of a Spring product, the Fall was obviously pretty strong for Sperry, Q3 so far.

As my comments indicated Taposh, there was stronger performance on the men's side of the business particularly the Gold Cup collection, which helped raise the average selling price for the men's side of the business more than the women's side. The ASP for the women's side was negatively impacted by the introduction of a broader sandal offering through the Summer and early Fall months, so that had a negative impact on ASP for the women's side of the business. But as I mentioned in my comments, the absence of the sequined vulcanized product this year, that was a big sell in item last year, had a negative impact on our revenue in the quarter, on the women's side of the business for Sperry.

Okay, I'll leave it at that. See you guys next week, thank you.

(Operator Instructions)

Our next question comes from Mitch Kummetz at Robert W. Baird.

A few things. Don, I think you of answered part of my first question, which was just to elaborate on the Sperry women's business. But I wasn't clear in your remarks whether, I mean it sounds like that business was still up, it just wasn't up as much as men's, is that correct?

Correct.

Okay, and then are there any other tough compares in that business, similar to the sequined vulcanized that we should be thinking about on a go-forward basis, to gauge what the growth trends on either the women's or the men's might be?

Yes, I would say on the women's side, the brands talked about some wet weather product that was introduced in last year's Q4 that sold in strongly, but didn't that particular product didn't sell-through quite as well. That's some product we won't anniversary as strongly this year in Q4, so that would be another drag on the business in Q4. That's probably the one call out I would mention.

Okay, and then on your implied Q4 sales guidance, up 3% to 6%, could you just provide us a little bit more color on how we should either think about that by operating group, or by channel or by geography? Is there anything, I know as of last quarter, you were seeing Merrell up low single digits, I'm wondering if that still applies for the year, and low single digits.

Yes, I guess initially, Mitch, I mean, our revenue guidance for Q4 is done in the context of the USA market being more important to the Company today, and given what we think is coming in the USA market, which is a somewhat tougher holiday season for a whole variety of different reasons, that's one of the things tempering our thoughts as far as Q4, frankly.

Yes, with over 70% of our reported revenue is now out of the US, with the PLG acquisition last year, so our reported results skewed much more to the US, and we've taken a fairly conservative view on reorders in Q4, which I know is a subject near and dear to your heart, Mitch. We don't want to go out with revenue guidance that it reflected a strong rebound going back to fourth quarter of fiscal 2010, for example, at-once orders, which were very strong the last six weeks of the year, so we've taken a more conservative view on at-once orders.

Our year-to-date growth rate in EMEA is still below where we think it will be on a full-year basis, so we're expecting slightly stronger growth in EMEA. Not necessarily strong enough that we had in Q3, but strong enough to bring the year to date growth to that flattish range that we had previously guided to. We expect that, as Blake indicated in the US, which is over 70% to be stable but not overly robust given the outlook for the holiday season. And our view on comp store sales in Q4 also reflects that level of conservatism, so does that help at all?

That helps quite a bit, thank you. Okay, I appreciate that. And then lastly, is there any way you can provide us a little bit of help in terms of how to think about margins for Q4? I haven't gone back to work out what's implied in the margins based on your sales and earnings guidance, but how should we think of gross margin versus SG&A to get to your earnings guidance, based on your sales outlook?

Yes, our year-to-date gross margin adjusted is up a little over 100 basis points. That would be a reasonably good barometer for what you might be looking for, for Q4, and a lot of it depends on what consumer direct is versus wholesale. There are even more moving pieces in our gross margin story now than there were prior to the acquisition last year, so it makes it a little bit more complicated to try to predict accurately, which is why I've tried to use qualitative modifiers rather than specific numbers.

But I would say the year-to-date gross margin improvement of I'm showing 113 basis points would be a reasonably close indicator of what Q4 would be. If it comes in at plus 80 basis points, don't skewer me for being off, because there are a lot of moving pieces, but that would be something that I would look at. And again we're expecting another quarter of SG&A deleverage, driven by the factors that I've cited in my remarks, all the things that are impacting year-over-year earnings growth, from higher incentive comp expense, pension expense, the purchase price amortization and things like that.

Got it. Thanks, good luck.

Our next question comes from Steve Marotta at CL King & Associates.

Don, could you quantify the SG&A expense that was delayed from Q3 into Q4?

It was in the single digit of millions, probably below $5 million, but big enough to talk about and call out.

Excellent, thank you, and also Blake, you mentioned Keds kiosks to open. I'm not sure if you said either in this quarter or next year, can you talk a little bit about that initiative? Number and cost there and opportunities?

Yes, this year, we're looking at a handful, maybe in the five to eight range. We've already opened one, I believe this past weekend in Natick Mall in Massachusetts and we'll be doing another five to seven of them yet this year, but we've already, we're already executing on that initiative.

How many can we think about roughly next year?

I'll let you know as soon as we know how the first five to eight actually do. The kiosks themselves look spectacular. They are frankly the best I've seen in a regional mall environment. The brand has a lot of heat right now, Taylor Swift and the affiliations with Hollister and Kate Spade, so it's a perfect environment this Fall for that kind of kiosk opportunity, but we're going to be evaluating it pretty closely, and we'll have more to report on certainly when we talk in February.

Excellent. That's helpful, thank you.

Our next question comes from Chris Svezia at Susquehanna.

So my first question, just want to circle back on Merrell. I'm curious, the growth rate was pretty impressive.

I do recall last third quarter Europe was challenging. So I'm curious if you can break out Merrell between what you saw internationally, Europe specifically, and what you saw in the US? And I'm obviously just curious about last time you quantified and threw out there a backlog number, so it's going to come back to haunt you now, so I'm curious how that looks at this point, any change I think you said a high single digit backlog number for Merrell?

Well I hope Don did that, and not me in the past. But I'll blame Don. But I would say Merrell had some easier comparisons in Europe, so we frankly expected a pretty good rebound in Europe in the quarter. They certainly exceeded our expectations.

Latin America was also very strong for Merrell. We've got several programs in Latin America that have Merrell concept stores, and those stores performed extremely well in the quarter.

Merrell delivered growth in the United States in the quarter which was very encouraging, and then like I said before, really the growth was not in any particular product category, but it was very strong performance outdoor outside athletic, but still growth in active lifestyle as well. So geographically, we would expect that kind of balance to continue.

What I'll add to that, Chris, is we are looking at a positive backlog across all three components of the Merrell business, but as we get orders on the books that go deeper into 2014, we're comparing against the full launch of the M-Connect collection last year which had a bit of additional pipeline sale. Plus all of the splash and it went along with the new product launch, that the current order book for Merrell would be somewhat negatively impacted, in the outside athletic category, even though it's still positive, but negatively impacted by the launch of M-Connect last year. So we're making great progress in performance outdoor and very gratifying progress with the active lifestyle, which we have been working so hard to get that back on track.

Okay, that's helpful, so in the quarter itself, just to clarify, it's fair to say, that international for Merrell grew much faster than US-based business?

Yes. That is fair. And part of that was again as you alluded to the easier comp in last year Q3, but I don't want that to be misinterpreted as the only source of growth for EMEA for the brand, or the portfolio as a whole.

And do you expect growth for the Merrell brand in the fourth quarter based on your guidance in the US? You mentioned broad base, so I just want to clarify that.

Yes, we usually don't give that kind of detail, but frankly, we do expect some growth, yes.

Last question I just had. I wanted to clarify something. What's the PLG accretion again? I heard a $0.75 number.

$0.75 is the number we're giving for the full year, approximately $0.75.

Okay, so then would that assume, I guess on the core business it's a little bit softer I think beforehand was $0.55 to $0.65? Do I have that correct or I'm just trying to--

We were at $0.55, a range of $0.55 to $0.65 before, and we're saying approximately $0.75 now so we compressed our earnings guidance of a range to $0.10 versus the $0.15 that it was before. If you look at the midpoint our midpoint went up about $0.11 a share, and I'd say that the top end of our accretion guidance went up $0.75 a share went from about $0.10 a share, so that would kind of force out that the pre-acquisition business is about the same range it was in our previous guidance.

Okay, very helpful, thank you very much.

Our next question comes from Scott Krasik at BB&T.

Hi everyone, thanks. Can you just parse out Europe a little bit more? So are you seeing any real strength, are you attributing all of the growth to the soft comparison? And I think you also said you had some timing shifts on the last conference call into Q3.

Yes, I mean, Europe from a macro standpoint, I think what we've talked about for the last two or three quarters is coming to fruition. We believe, absent some significant macroeconomic event that we can't control, and nobody can control, that the worst may be over in Europe. They're predicting some Eurozone GDP growth next year.

We're seeing better trading conditions in Northern Europe, and the UK as well. We believe that Southern Europe remains pretty challenged as we look ahead into the future, so that's our view in Europe that the worst frankly may be over, but it isn't going to be a hockey stick type recovery in Europe. It's going to be probably a slower recovery, similar to what we've experienced here in the United States.

But what I'll add, Scott, is that the growth rate in EMEA in the quarter was stronger than either in the US or Canada, and it's been many quarters in the row that we have not been able to make that statement that the growth rate in Latin America and Asia Pacific was even stronger, but as you'd expect given the smaller market share we have in those markets. But it was particularly pleasing to see that strong quarter out of EMEA, after what's been a tough couple of years. The timing shift that you referred to was worth a couple percentage points of growth year-over-year for the market, so even without that, or factoring that out of the equation EMEA would have still grown at a very strong rate.

Okay, that's helpful. Don, I think you've either talked directionally or specifically to legacy gross margins in the past?

I have. You're right. I don't know if we did in Q2. I'm thinking back to when we last commented on it. Our comments about the full fiscal year were that legacy gross margin would be up over the prior year, and we would expect an incremental gross margin contribution from the full-year inclusion of the PLG business, which is true. Both of those statements are still true.

Okay. And then you said Stride Rite comps were sluggish. Does that mean negative?

They were down low single digits.

Within the brand as a whole even though wholesale was very good?

No, I mean Stride Rite posted growth in the quarter. I think this was frankly the 11th quarter in a row, where the wholesale portion of the Stride Rite business had a double digit sales increase.

And then, so it was Stride Rite as a brand, was up, you're saying?

Yes. Modestly.

Okay, and then again I knew you'd shy away from backlog, but I'm sure your order book is probably complete or almost complete for Sperry for the Spring. Can you talk directionally to that?

We really can't. We probably could, but we don't want to. I would say that when we look at our Company, we've been predicting for a quarter or two now, just retailers also hunkering down a little bit, very stingy with future orders but expecting brand owners to be there with the product when they needed it at-once.

Certainly as our Company as a whole experienced that in Q3, across all of our brand portfolio, pretty strong double-digit increase in our at-once business in the quarter. That was certainly true for Sperry as well, so it may be the new normal that we're migrating to in this regard. We always would like more future orders, but we have a narrow and deep inventory philosophy and policy, and that served us pretty well in Q3.

That's actually really helpful. And just lastly, I mean international for Sperry it seems like it's mostly partner-based. Are there a lot of investments? Is this an accretive venture as you start out from day one? Is it dilutive? How do we think about Sperry international expansion?

As you know, our distributor model is almost always accretive from day one. There are investments. We do invest behind our partners in certain countries and regions, and we invest in adding additional people on the ground real-time in various regions, and around the world. But our model is almost always accretive from day one. I would say, at this point though, you have to remember, Sperry today is still a 90%-plus US business so very early in our efforts to expand that brand around the world.

Okay, thanks so much.

Our next question comes from Sam Poser at Sterne Agee.

Scott just covered a bunch of them. You had called out, I think on the Q1 call, that the accretion you're expecting $0.70 to $0.90 for 2014. Can you give us an update for where you are given that you're at $0.75, you're modeling $0.75 for this year?

Yes, we're not giving specific 2014 accretion guidance. We'll talk to that when we give our official 2014 guidance, and we announce our Q4 results. Although I will say it's probably fair to assume that our range of accretion for next year will be north of the $0.75 per share that we're forecasting for 2013.

One item that I mentioned during my prepared remarks, Sam, is the lower interest expense year-over-year, of the $8 million which is about $0.11 per share. That will be obviously an add to the full-year accretion next year versus this year, and we obviously are going to expect organic operating income growth from the newly-acquired brand. So that would be additive as well to the $0.75 but the specific number itself or the range will be disclosed when we give you our official guidance in a few months.

And just ask why did you, what made you decide to change the discussion of that? Given that you did put it out there once before.

When we put it out there, I'm sorry when you say we changed the discussion, we--

Well you put a number of $0.70 to $0.90 out and haven't updated that number since. I was just wondering if you felt comfortable of $0.70 to $0.90 six months ago or five months ago, why not continue to update it as you have the other accretion numbers?

Yes, I think Sam it's as simple as we wanted to give you and the world our best view at that time as to what we thought year one was going to be, and year two. We're going to have, we don't have year one quite under our belt yet, but we're going to have 2013 under our belt, and we're going to know a lot more when we get to the end of this fiscal year. And whatever number we give you next year will probably be more accurate than what we were able to tell you about 2014 a year ago.

It's going to be higher than $0.70 to $0.90. How much higher we aren't disclosing yet, because we don't know for sure yet. We're going into our 2014 planning sessions with our business units over the next few weeks, and we'll have a much better, much clearer view of 2014 once we get through the tos-and-fros of that.

Let us get a chance to get through the holiday season and this year, and then we'll give everybody some additional insight.

And when you look at the women's Sperry business, you talked about that, it would be a deceleration. Is that a fair statement? Given the mix and everything?

When you look at the women's business going forward, I mean, how do you think about, how do you think about the apples-to-apples growth trajectory there, and on the Merrell brand? You commented that you felt the Merrell brand was a double-digit increase for some time. Anything change in the way of looking at it, and how are you thinking about those two brands over the longer term?

I guess over the longer term we view each of those brands as $1 billion brands. As you know, Sam, we don't have a lot of them in our industry. But just to focus on Sperry when I look at the women's business today, obviously Sperry is dominant in boat shoe and boat shoe derivatives, both men's and women's. More recently the men's business has been stronger for the reasons that Don talked about, but we see a lot of opportunities in women's, whether it's in boots, whether it's in core casuals, whether it's in flats and ballerinas or wedges.

Where we started to introduce and expand the product categories we've had a lot of success, and we frankly just need to execute and do more of that for the Sperry brand. Certainly, there's been no pushback from the consumer, young or old, male or female, regarding the Sperry brand. Merrell, we also view as $1 billion brand. We view both of these brands as making inroads, significant inroads into the lifestyle arena, so they're both going to be, and are today lifestyle brands.

For Sperry, I think [Lean Fong] will be coming out with a significant apparel program to help drive that brand, and already Sperry is seeing a lot of success in its license businesses, swim wear, sunglasses, watches, socks, they've had a lot of success, and that's also helped drive the strong double-digit increase in comp stores for that brand. So nothing really has changed from a longer term perspective. We see each of those brands as $1 billion brands.

Just a couple additional comments on Sperry, Sam, to helped you out. I think there's a difference between a deceleration of a growth rate and a negative growth rate, and when the brand has grown globally, and most of that growth in the US, at 40%, 57%, and 32% each of the last three full fiscal years, it's perhaps not surprising to see that rate of growth. That the law of large numbers eventually comes into play, it's not surprising to see that rate of growth decelerate a bit.

As it relates to our outlook for the brand for Q4 in particular, I think it's important for everyone to note that last year's Q4, based on the strength of very strong at-once orders, the brand was up almost 40% in the fourth quarter last year, so that's a second data point. And the strength of the brand we think is best reflected by the performance of the Sperry specialty stores, and the overall Sperry retail fleet, as I mentioned, the comp store sales performance in Q3 was up over 20%, which shows how the brand we think is still resonating with consumers. The ultimate expression of the brand's lifestyle positioning is there in the Sperry specialty stores, and the consumers are really responding to that.

Our next question comes from Danielle McCoy at Brean Capital.

Congrats on a great quarter. Just quickly, can you give us a little update on Hush Puppies and some of the new initiatives and product offerings, and what's driving the double digit US growth there?

Yes, obviously the USA business, which was pretty flat for a number of years has had a pretty significant multi-quarter turnaround now. Fundamentally it's driven by product, dress casual product, they've got a couple of styles that have been extremely well received in a number of distribution channels.

When one of those styles appears on the front page of Oprah's Magazine, it's amazing what that can do for the brand and for our inventory position in that particular collection. So, fundamentally, Hush Puppies has been driven by better product, and I would say, a more focused view on their core consumer, here in the USA.

Okay, great. Thanks guys, good luck.

At this time, we have no further questions. I would like to turn the call over to Ms. Christi Cowdin. Ms. Cowdin, you may proceed.

Thank you. Thanks, everyone for joining us today, and as a reminder our conference call replay is available on our website at WolverineWorldWide.com. Thanks and good day.

The conference has now concluded. Thank you for attending. You may now disconnect.