Wolverine World Wide Inc (WWW) 2013 Q4 法說會逐字稿

Good morning, and welcome to Wolverine World Wide's 2013 fourth-quarter and full year earnings conference call. All participants will be in a listen-only mode until the question-and-answer session of the conference call.

This call is being recorded at the request of Wolverine World Wide. 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 World Wide. Ms. Cowdin, you may proceed.

Thank you, Denise. Good morning, everyone, and welcome to our fourth-quarter and full year 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 fourth-quarter and full year 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 www.WolverineWorldWide.com.

This morning's press release included non-GAAP disclosures, and these disclosures are 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 is a posting at our corporate website that will reconcile these non-GAAP disclosures to GAAP. To view the document, please go to our corporate website, WolverineWorldWide.com, click on Investor Relations in the navigation bar, click on Webcasts at the top of the Investor Relations page, and then finally, click on the link to the file called WWW Q4 2013 conference call supplemental tables, which will be 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 World Wide and its operations may be considered forward-looking statements by securities laws. 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. And with all of 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. Earlier this morning, we reported our fourth-quarter and full-year 2013 financial results, highlighted by record adjusted full-year earnings per share and a fourth consecutive year of record revenue, concluding an extraordinary year for the Company.

Our global brand building model, established in 1959 when we took the Hush Puppy brand international, continues to deliver consistent top and bottom line results in virtually any economic or retail environment. For the full year, we delivered solid revenue growth of 5.6% over the prior year's pro forma revenue, and growth of 64% versus the prior year's reported revenue.

For the full year, our adjusted earnings per share were $1.43 on a post stock split basis, representing growth of 25.4% versus our 2012 results. This year's solid revenue growth and strong earnings performance are further evidence of the strength of the Wolverine portfolio, the diversity of our global business model, and our disciplined approach to managing the business.

While our financial results were exceptional, given the realities that exist in today's marketplace, 2013 was a successful year for many other reasons as well. I'd like to just take a moment to walk you through some of the team's accomplishments, before we get into specifics relating to our performance in the quarter and past year, in addition to our outlook for 2014.

For all intents and purposes, the integration effort related to our acquisition of the Sperry Top-Sider, Saucony, Keds, and Stride Rite brands in October 2012 is complete, and today, our brands operate as one Company on one global platform. As you can imagine, the integration of about $1 billion collection of brands is no easy task, and I'm happy to report that this heavy work is behind us.

This challenging task could not have been completed so quickly, professionally, and frankly, so well, without the hard work, long hours and dedication of our teams in Michigan, Boston, and around the world. We were aggressive in the integration goals we set for ourselves at the outset, aggressive in our time lines, and aggressive in our budget.

We met or exceeded each target that we established, a tremendous accomplishment that sets the stage for future growth. The past 24 months have only confirmed my long-standing belief that one of our core competencies is executing on brand acquisitions and integration, a skill developed over the last 20 years that has helped transform the Company into what it is today.

I'll now provide some additional insight into some of our largest brands, and their performance this year. Initially, I'll focus my comments on two of our biggest brands, Sperry Top-Sider and Merrell, and then provide you with a little more detail on the very important next-tier brands, and finally, provide some commentary on how we're viewing the consumer and global marketplace as we enter 2014. Later, Don will provide additional detail on our performance in both the fourth quarter and full year, as well as our guidance for 2014.

First, Sperry Top-Sider. Sperry's growth over the last five years has been nothing short of spectacular. The brand gained meaningful market share in 2013, and today is the number-one casual footwear brand in America.

Full-year revenue growth for the brand was in the mid-teens, with growth coming from every region of the world, and every channel of distribution. We also saw exceptional performance in the brand's consumer direct business, with over 45% growth across both our brick and mortar locations, and e-commerce channels.

During 2013, we also made significant investments to build out the full Sperry Top-Sider lifestyle assortment. We have seven license agreements in place today for everything from swim suits to sunglasses, and our most exciting initiative, the introduction of a full range of Sperry apparel, via license agreement with Li & Fung, is scheduled to launch this coming fall. We continue to see strong consumer loyalty for Sperry as a lifestyle brand, whether it's updated footwear offerings such as boots, flats and sandals, or our newest apparel and accessory initiatives.

While Sperry had an outstanding year, the brand finished the fourth quarter with a high single digit revenue decline. It is important to remember that 2013 fourth-quarter results are being compared against the fourth quarter of 2012, which was Sperry's strongest quarter during that year, with year over year growth of 35%.

Having said that, the Q4 results were not caused by one factor, but rather by a perfect storm of events, some beyond our control, all of which impacted the final few months of the year. First, the retail environment in the US, which is Sperry's largest market by a wide margin, was clearly under pressure in the fourth quarter, and we believe the tepid holiday results across the footwear and apparel sectors proves this out. National mall traffic was down double digits, with consumers spending less in a shopping environment that was extremely promotional for a sustained period of time.

On top of the challenging US retail environment, we experienced an historic early and harsh start to a winter, which is now referred of to by some as the winter of a generation. This dramatic shift in weather, coupled with a shift in demand towards boots, caused the consumer to quickly transition from warm weather casual offerings directly into boots. As a result, the US market for brown shoes and casual footwear brands was negatively impacted.

Sperry had trend-right boot styles in the marketplace, but we simply didn't have enough to satisfy the heightened and prolonged demand, and as a result, the brand's winter weather inventories were exhausted in early December. The weakness in casual shoe demand impacted the US women's business in Q4. However, our Sperry men's business, including the more premium Gold Cup collection, remained relatively stable.

In addition to the external influences just mentioned, we also had some internal factors that contributed to the soft performance for Sperry in the fourth quarter. In our continuing efforts to elevate distribution for the brand, we made the decision to close certain accounts; clearly, the right decision for the brand in the long term, but this lower door count negatively impacted our top line results in Q4.

At the same time, we had some self-inflicted misses in women's, and to a lesser extent men's fashion product, specifically in our vulcanized assortment, which accounted for the largest portion of the Q4 revenue decrease. While the fourth quarter didn't meet our original expectations, Sperry Top-Sider had a tremendous year, the brand remains strong, and our key retail partners remain incredibly supportive and are looking to grow their future Sperry business.

As a testament to this strength Sperry recently received a Footwear Plus brand of the year award, as determined by an independent vote of thousands of US retailers. Looking ahead for Sperry, we're encouraged by some of the early Q1 reads at retail, which reflects the continued importance of the brand for US retailers, and our efforts to back-fill some of the product opportunities that we missed in the fall.

Certainly the continuing record-setting harsh winter will have an impact on Sperry's first-half results. However, in those few corners of the country that have experienced something approaching a normal spring, we've seen a strong consumer reaction to the new Sperry line, with weekly retail sell-throughs in the mid to high single digit range at key retailers.

The positive reaction is focused on the entire expanded product range from new boat shoe products, to flats, casuals, espadrilles, and sandals. We remain very bullish about the power of the Sperry brand, and its future growth opportunities in the US and around the world.

Moving to Merrell. Merrell is our largest brand in terms of revenue and earnings contribution, and the dominant leader in the outdoor footwear industry.

As you all know, we spent considerable time and effort this past year working with the team to get the brand back on its historical growth track. This included restructuring our product development team around our three key footwear categories: performance outdoor, outside athletic and active lifestyle. At the same time, we brought in new talent to provide a fresh perspective to our product creation team.

We also recruited an industry veteran to lead the brand on its ascent to become the first $1 billion brand in our portfolio. These investments are already paying off, and I'm pleased to report that Merrell's growth accelerated in the back half of 2013, exceeding our internal expectations, and the guidance we provided throughout the year. This momentum has continued into 2014, especially in the US, Merrell's largest market.

Merrell has its momentum back. The Merrell brand, with over 170 global concept stores at year-end, is well on its way to becoming a global lifestyle brand, but we believe we have an opportunity to accelerate progress in our apparel and accessories initiatives. I'm happy to report that we have recruited a new Head of Apparel and Accessories for Merrell. This new leader is charged with accelerating our momentum in these key product categories, and providing new opportunities for our consumers to participate in the brand, by bringing innovative apparel and accessories to the marketplace.

We spend a lot of time talking about Merrell and Sperry, for obvious reasons. They're our largest brands, and both are leaders in their respective markets. But we are much more than just a two-brand Company.

This morning I want to spend a little extra time discussing the next tier of our brands within our portfolio. Very important, in terms of current revenue and profit generation, but also for their future growth potential. This tier includes our Saucony, Wolverine, Cat Footwear, Stride Rite, Hush Puppies, and Keds brands.

This set of brands generates nearly 50% of total Company revenues, and almost 45% of total brand contribution, far larger than either Merrell or Sperry Top-Sider alone. Each brand has its own unique consumer target, geographic reach and distribution strategy.

The diversity of our portfolio is clearly one of our competitive advantages, and our success is not tied to any single consumer group, fashion trend, region, or channel of distribution. These six brands are some of the most diverse in our portfolio, from Saucony, which is the leader in run specialty, with a track record of bringing new, innovative product to market each season, to Wolverine and Cat Footwear, the former being the number-one work boot brand in the US, and an emerging fashion brand in upscale men's retail locations, and the latter being a dominant global work and lifestyle brand, with about 90 specialty stores throughout the world.

To Stride Rite, which is the premium children's footwear brand in the US, with a strong wholesale business, and over 300 retail locations across the US. To Hush Puppies, one of the world's leading casual footwear brands, with over 18 million pairs sold annually, and almost 750 global specialty stores at year-end. And finally, to Keds, one of our newly-acquired brands that is in the early stages of a brand renaissance with brave girls around the world, driven by a multi-year partnership with Taylor Swift.

Our diverse portfolio drives our consistent financial results, and enables us to reach a broad range of consumers around the world. While we are focused on driving global growth in our two largest brands, we are also focused on growing this next tier, so each can become an even stronger contributor to the top and bottom line, and eventually be considered one of our big, dominant brands.

Before I turn the call over to Don, I'd like to talk a little bit about the year ahead. From a geographic perspective, we expect to see continued strong growth in Latin America and Asia-Pacific. These regions represent tremendous growth opportunities across all of the brands in our portfolio, especially for our newly-acquired brands, where we expect to see strong growth and meaningful revenue contributions take hold in 2015.

Europe has shown signs of stabilization, and we believe 2014 will see a return to measured growth across the EMEA region. In the US, a market that has grown in importance with the acquisition of our Boston-based brands, we are enthusiastic about the full year, but are mindful that a number of factors continue to impact the US consumer in the short term, and as a result, expect that retail will continue to be sluggish in the first half of the year.

Certainly, the continuation of the harsh weather is also contributing to a weak start for the industry. Across our portfolio, we expect revenue to accelerate in the second half and our full-year guidance points to annual growth in the mid single digit range. At the same time, we expect to deliver even stronger double-digit earnings growth for the year, driven by gross margin expansion and disciplined investments in people, marketing and product creation.

We have a long and consistent track record of managing the business to deliver strong earnings leverage, and expect this to continue in 2014. Strategically in this new year, 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 drive growth by maintaining a fanatical focus on innovation, especially product creation; expanding our already extensive global distribution footprint; focusing on forging stronger connections with our consumers, with an emphasis on consumer direct initiatives, by creating amazing experiences in stores and online; expanding the lifestyle opportunities for our largest brands; and executing against our business model, which mitigates the risk associated with an ever-changing global marketplace. Our portfolio is the strongest and broadest in the industry, and our team's execution against our business model continues to deliver exceptional results for our shareholders.

I'll now turn the call over to Don Grimes, our Senior Vice President and CFO, who will provide some additional commentary on our performance in both the fourth quarter and the full year, as well as provide more detail regarding our guidance and expectations for 2014. Don?

Thank you, Blake, and good morning everyone. Earlier this morning we reported our FY13 fourth-quarter and full-year financial results, highlighted by record full-year adjusted earnings per share, and the fourth consecutive year of record revenue. I'd like to underscore Blake's comments about this being a special year, one that saw us successfully integrate the largest acquisition in the Company's history, while still delivering outstanding financial results.

And as we enter 2014, we have positioned our portfolio, both established brands and those more recently acquired, to deliver meaningful and sustainable growth, whether it's Wolverine, Merrell, Sperry, Hush Puppies, Keds or others, our brands each have authentic heritage and global lifestyle appeal, and our Company has the operational expertise to succeed in the global marketplace. I'm pleased to provide more color on both the quarter and the full fiscal year ended December 28, 2013, then I'll wrap up my comments by outlining the Company's expectations for 2014, including the first fiscal quarter.

Unless otherwise noted, all financial results discussed today have been adjusted for transaction and integration expenses related to the PLG acquisition, restructuring charges related to the exit from the Company's manufacturing operations in the Dominican Republic, non-cash retail store impairment charges, and expenses related to our very successful October 2013 debt refinancing. All references to earnings per share reflect the Company's 2 for 1 stock split that occurred this past November.

As we preliminarily reported last month, consolidated revenue in the fourth quarter was a record $740.8 million, representing growth of 13.6% versus prior-year reported revenue, and growth of 0.6% versus prior-year pro forma revenue. For the full year, reported revenue was a record $2.69 billion, an increase of 64% versus the prior full-year reported revenue, and an increase of 5.6% versus the prior year pro forma revenue. Foreign exchange fluctuations negatively impacted full-year reported revenue by just under $2 million.

Illustrating our diverse geographic footprint and the broad strength of our brand portfolio, we were pleased to see full-year growth from every major geographic region, with the exception of the still-challenging EMEA region. Earlier in the year, we had guided to flattish full-year revenue performance from EMEA, which was a nice improvement from FY12, and while the region finished with revenue slightly down versus the prior year, we are very encouraged by signs of stabilization in the back half of the year, performance that included modest growth in the fourth quarter.

Full-year revenue in the US and Canada grew in the mid single digits, compared to prior-year pro forma revenue. Latin America grew at a robust pace throughout the year, and we are pleased to note that this region, along with the Asia-Pacific region, generated strong double-digit growth in the fourth quarter versus prior-year pro forma revenue, a sign of good organic momentum heading into 2014, and further evidence that the investments we're making in these regions are paying dividends.

Turning now to the results by operating group and brand. First, the lifestyle group, which consists of the Sperry Top-Sider, Hush Puppies, Stride Rite and Keds brands.

The lifestyle group delivered full-year revenue of $1.09 billion, an excellent 9.4% increase over the prior year's pro forma revenue. For the group, wholesale revenue growth was particularly strong in North America, where each of the four brands generated impressive double-digit growth for the full year.

Sperry Top-Sider grew its business across both genders for the full year, with slightly faster growth from men's offerings. As discussed by Blake, after 16 consecutive quarters of not just double-digit growth by strong double-digit growth, such as the 35% growth in the prior year's fourth quarter, Sperry experienced a high single digit revenue decline in Q4, which despite the air cover provided by the weather and tough consumer retail environment, was a disappointing close to what was otherwise a phenomenal year for the brand.

While the US consumer slowdown and weather patterns are not factors we can control, we are responsible for delivering to market compelling, fashionable, and innovative product that will command the attention of consumers. Although we expect that the continuing weather and macroeconomic challenges will negatively impact Sperry's results in the first half of the year, we also expect the brand to resume growth in the latter half, and we are implementing a series of course corrections, from design talent to marketing programs to distribution strategies, that should help position the brand for growth for years to come.

The Keds brand had an outstanding year, with impressive full-year double-digit growth that continued in the fourth quarter. The Taylor Swift partnership and other collaborations, such as those with Kate Spade and Hollister, have certainly fueled excitement for the Keds brand, and the team is now focused on the new opportunities to capitalize on its current momentum. 2013 marked a return to a meaningful fall-winter business for Keds, as the brand had very strong performance for back-to-school and holiday.

Strategic growth with key accounts in influential retailers in the US was paired with strong international expansion, via new and upgraded distributor partnerships in Latin America and Asia-Pacific. Keds is clearly on a roll, and we expect the brand's great momentum to carry into FY14.

Hush Puppies had mixed results for the year, as excellent double-digit revenue growth in the US and mid to upper single digit growth in Latin America and Asia-Pacific were partially offset by a challenging year in Europe, with the latter impacted by the bankruptcy of the one of the brand's most significant retail customers. We were pleased to see the Hush Puppies Canadian business rebound in Q4, with very strong double-digit growth.

The Stride Rite children's group had low single digit revenue growth for the year. With solid growth in the US wholesale business, partially offset by challenges in the consumer direct business, particularly in the fourth quarter, when the brand felt the impact of decreased mall traffic and a softer holiday selling season.

Turning to our performance group, which consists of Merrell, Saucony, Chaco, Cushe and Patagonia footwear, this group posted full-year revenue of $945.8 million, solid growth of 5.3%, compared to prior-year pro forma revenue. Saucony and Chaco each grew their full-year revenue at a double-digit clip, while Merrell delivered mid single digit full year revenue growth, slightly better than our expectations, with accelerated growth in the back half of the year.

Merrell delivered solid results in 2013, especially when viewed through the lens of a material contraction in the outdoor footwear category in the US. Performance that was consistent with the guidance we provided throughout the year.

In addition to a revenue increase from wholesale footwear in almost every region, Merrell also saw growth in apparel, accessories and its consumer direct channels, both e-commerce and brick and mortar. The brand essentially exhausted its inventory of boots and cold weather products well before Christmas. The well-documented weather patterns had a positive impact on the brand's US business, and inventories are very clean headed into late winter and spring.

Under the new brand leadership, Merrell is focused on growing its performance outdoor business through innovation and more effective consumer marketing, stabilizing its trail running business, with compelling outside athletic product, and returning its important active lifestyle line to meaningful growth with fresh new offerings. Saucony posted double-digit growth for the full year, with the strongest growth coming from the US, EMEA and Asia-Pacific regions.

During the fourth quarter, the brand continued its recent award-winning ways as both the Guide 7 and Triumph 11 were honored as Editor's Choice selections by Runner's World Magazine. Looking ahead, Saucony will continue to focus on innovation and performance by expanding its leadership position in run specialty, further penetrating the influential sporting goods channel where significant opportunity remains, and taking advantage of the resurgence in its Saucony originals business, in both the US and international markets.

Chaco had an impressive year with low double-digit growth. Momentum for the classic Z sandals built throughout the year and into Q4, particularly with the younger consumer.

The My Chacos custom product continues to be a standout initiative for the brand. These are high gross margin, made to order, made in the USA, custom Chacos. The brand is excited about what's coming in 2014, including ReversiFlips, where consumers can change out the uppers, From the Vault product, that will feature limited editions of classic product, an expanded emphasis on social media, and a marketing tour to celebrate the brand's heritage that will reach many of its fiercely loyal customers.

The heritage group, consisting of Wolverine, Cat Footwear, Bates, Sebago, Harley-Davidson Footwear and HyTest had full-year revenue of $567.4 million, up slightly compared to the prior year. The global Cat Footwear business grew mid single digits, with very solid double-digit growth in North America, and exceptional growth in Latin America.

Caterpillar is a brand that resonates with consumers around the world, standing for strength, durability and value. Those brand attributes resonate in particular with loyal Hispanic consumers, and as a result, we remain very optimistic about the brand's continued accelerated growth in central and South America.

In 2013, our partners opened 40 new Cat monobrand specialty stores around the world, 18 of which were in Latin America, bringing the total Cat retail footprint to 89 standalone specialty stores. The brand also benefited from a resurgent boot trend, and as a result saw great results from core styles, such as the Colorado, with both male and female consumers.

The full-year growth for the Wolverine brand was driven by excellent performance from the heritage product lines, such as the 1000 Mile and 1883 collections, along with a strong second half for the work boot business. Harley-Davidson had an outstanding 2013, as the brand delivered solid double-digit growth in its lifestyle offerings, highlighted by a nod to Western influences in its men's and women's boots.

Shifting back to the Company's consolidated results, adjusted gross margin, which excludes charges related to the sale or closure of the Company's two factories in the Dominican Republic, increased nicely for the full year to 39.8%, a gain of more than 120 basis points versus the prior year. This impressive performance was driven by a mix shift towards higher-margin consumer direct channels, select price increases taken at the beginning of the year, efficiency gains in our own manufacturing operations, and lower full year LIFO expense.

These positives were only partially offset by some higher product costs, a lower percentage of revenue from higher-margin third party distributor and licensee business, and unfavorable variances on FX forward contracts. We reported operating expenses of $872.2 million for the full fiscal year, which included $41.5 million of acquisition-related transaction and integration expenses, as well as approximately $800,000 of non-cash retail store impairment charges.

Adjusted SG&A of $830 million was 30.8% of sales, compared to 29.4% of sales in the prior year. The expected increase was driven by incremental pension expense, incremental non-cash amortization expense related to purchase price accounting for the PLG acquisition, normalized incentive comp expense, and the impact of our business mix skewing more towards higher SG&A consumer direct channels.

Full year net interest expense was $52 million, reflecting the impact of required principal reductions of approximately $30 million, and additional voluntary principal payments of $85 million. The decline in our leverage ratio throughout the year resulted in a 50 basis point reduction in the interest rate on our term loan debt, and a successful refinancing this past October, which provided a modest benefit to Q4 interest expense, will provide a much more significant benefit to FY14.

The Company's reported effective tax rate for the full year was 20.9%, and reflects a benefit from the deductibility of the acquisition-related expenses, and high statutory tax rate jurisdictions. The adjusted effective tax rate for the full year was 24%, slightly lower than we had forecast going into the quarter.

During the year, we shared cash with our shareholders in the form of dividend payments, totaling $23.7 million. We had no share repurchase activity under our previous share repurchase authorization.

That four-year authorization has expired, and as we announced last week, has been replaced by a new $200 million share repurchase program. Despite the new share repurchase authorization, our priorities for cash remain the same: invest in our brands to fuel future growth, maintain a stable cash dividend, aggressively deleverage the balance sheet, and when the opportunity is right, add strategically compelling brands to the portfolio.

Fully diluted weighted average shares outstanding for the full year were 98.9 million. Adjusted fully diluted earnings for the full year were a record $1.43 per share, growth of 25.4% versus the prior year's adjusted earnings of $1.14 per share, and above the high end of the earnings guidance that we provided in October, and spoke to in our pre-announcement last month. Fourth-quarter adjusted fully diluted earnings were $0.22 per share, versus $0.24 per share in the prior year.

Incremental pension and incentive comp expenses, a meaningfully higher tax rate, and higher share count all negatively impacted Q4 earnings. As expected, given the seasonality of the new brands' businesses, the PLG acquisition was approximately $0.11 per share dilutive to earnings in the quarter. On a full-year post-stock split basis, the acquisition was $0.34 per share accretive to earnings, simply outstanding performance in the first full year after transaction closing.

Turning to the balance sheet, year-end inventory was down 8.2%, driven partly by robust reorders for boot and other cold weather product, and partly by an intense focus on managing the most significant component of our networking capital. We're pleased that our inventories across the portfolio are in excellent shape as we begin FY14.

Total accounts receivable were up at year-end, due to Q4 sales growth being skewed to the last month of the year, and some customer payment delays at year-end, most of which have already been cleaned up. After full-year capital expenditures of $41.7 million, we generated record free cash flow of just under $158 million in FY13. And we finished the year with cash and cash equivalents of more than $214 million, resulting in net debt of just under $936 million at year end, a decrease of almost $143 million, compared to the prior year end.

Let me shift my focus now to our 2014 full-year guidance. In Blake's remarks, he discussed many of the reasons for the sluggish revenue growth in the after quarter, and some of the challenges facing the business as we enter the new year.

I won't repeat all the details, but I want to share the core factors that have helped form our revenue outlook for 2014. These include expectations for a sluggish and uncertain US retail environment, and the related impact on consumer buying behavior. Lower traffic for brick and mortar retailers, partially offset by continued strong growth in e-commerce channels.

A measured but slow recovery in Europe, and stable economic growth in Latin America and Asia-Pacific. A slightly stronger US dollar throughout the year. And finally, negative pressure on casual footwear, primarily attributable to the continuing harsh weather patterns in the US that will challenge our Sperry Top-Sider and other warm weather casual brands, particularly in the first half of the fiscal year.

Additionally, as Blake mentioned, in order to protect its long-term growth potential in the US, the Sperry brand made the decision last year to exit certain retail distributions, the full effect of which will be realized in 2014. This combination of factors is expected to result in stronger performance for the brand in the second half of the fiscal year than the first half, and flattish revenue growth for the year, taken as a whole.

Based on these key considerations, we're forecasting full year 2014 revenue in the range of $2.775 billion to $2.85 billion, representing growth in the range of 3% to 6% versus reported 2013 revenue of $2.69 billion, consistent with the preliminary outlook we provided last month. We expect the full-year revenue growth to be weighted to the second half of the year, in particular, our 17-week fiscal fourth quarter.

We're forecasting slight full-year consolidated gross margin expansion based on continued positive mix shift towards our higher-margin consumer direct business, and higher-margin third-party distributor business, select price increases, and partial year benefits from the closure of our Dominican Republic factories. We expect to deliver modest full-year operating expense leverage during 2014, driven by both a full year of integration synergies, primarily in the IT and corporate accounting areas, and a significant reduction in non-cash pension expense.

Continued investment in key brand initiatives, especially investments to drive growth in e-commerce channels, and higher expected incentive comp expense will only partially offset these positive factors. We're forecasting net interest expense of approximately $47 million for FY14, which reflects the benefits from the October debt refinancing, lower average principal balances, and lower average pricing on our outstanding debts.

We're projecting a full-year effective tax rate of approximately 28%. The increase in the year over year tax rate reflects a mix shift of taxable income to higher tax jurisdictions, and the absence of certain discrete items in 2014 that helped lower the 2013 tax rate. And we're projecting weighted average shares outstanding for the full year of approximately 100 million.

Excluding carryover expenses related to the final integration activities related to the PLG acquisition, and remaining restructuring charges related to the Company's own manufacturing operations, we expect FY14 full-year diluted earnings per share in a range of $1.57 to $1.63, which represents growth in the range of 10% to 14%, versus 2000 adjusted EPS of $1.43. Reported fully diluted EPS is expected to be in the range of $1.52 to $1.58.

We're forecasting full-year depreciation and amortization, including amortization of purchase price accounting intangible assets, of approximately $53 million, and adjusted EBITDA in the range of $350 million to $365 million. Capital expenditures are expected in the range of $45 million to $50 million, primarily for investments in consumer direct and information technology, and for expansions of our Louisville, Kentucky distribution facility, and Richmond, Indiana customer service center.

While the guidance I've just taken you through covers expectations for the full fiscal year, I'd like to provide a little more color on our expectations for the first quarter, and how we see the year unfolding. In addition to the sluggish macroeconomic outlook, and the continuing soft retail trends in the US, and unusual weather patterns, there are a number of other factors that will impact our Q1 revenue growth including the fact that we're cycling against a prior year launch of Merrell's M-Connect collection and a very strong selling quarter for Sperry Top-Sider, which was up 28% in last year's first quarter.

Sperry will also feel the impact in Q1 of the modification to its distribution strategy that I mentioned earlier. Additionally and importantly, Easter falls a full three weeks later this year than last, which means that much of our business driven by that holiday will fall into our second fiscal quarter this year, versus the first fiscal quarter last year.

Finally, although we expect double-digit revenue growth from both the Asia-Pacific and Latin America regions for the full fiscal year, changes in the timing of shipments of certain significant distributor partners will negatively impact Q1 revenue growth. The end result of all this is that we expect consolidated Q1 revenue to be modestly down compared to the prior year. And while we have a great degree of confidence in our expectation of a solid double-digit earnings growth for the full year, we expect a soft start, with Q1 adjusted earnings per share expected in the range of $0.28 to $0.30 per share, driven by the challenging US retail conditions, unfavorable FX, brand investments planned for the quarter in support of future growth, and a higher tax rate and share count, all only partially offset by the benefit from lower pension expense.

Thanks for your time and attention this morning. That was certainly a lot of ground to cover but we wanted to provide as much detail as possible on 2013, and how we're viewing the year ahead.

I'll now turn the call back over to the operator, so we can take your questions. Operator?

(Operator Instructions)

Our first question will come from Kate McShane of Citi Research. Please go ahead.

I was wondering if you could walk us through some of the impacts on Sperry in Q4. Can you tell us what was the biggest drag?

Probably in terms of dollars, it would be, frankly, and setting aside some of the macro issues that we can't control, it would have been probably our fashion miss in the vulcanized arena in terms of overall dollars. We probably on the women's side with hindsight went a little too much bluing and sparkle and sequins in that whole category, and missed out on an opportunity to grow it.

We've since made those corrections. That would have been the largest self-inflicted design miss. We also had an impact from getting out of some, as Don mentioned, some family channel doors, and we had a tough compare to last year, 35%.

And for all of our brands, we noticed across our portfolio in the US only, it was a tough quarter for casual shoes and brown shoe brands. There's no other way to put it.

People seemed to go from sandals to boots in early September and they never got out of their boots. So there were a number of factors, but probably the miss we had in the vulcanized arena for Sperry was the biggest dollar impact.

Okay. Thank you. And then my follow-up question is on the international contribution that you mentioned in your prepared comments.

I think you mentioned that it would be more of a revenue driver starting in the second half and then most certainly in 2015. Can you update us where you are with your distributor sign-ups and what the brand composition is?

Yes. As I look over the portfolio and our percentage of sales in the US for our newly acquired brands, for example, you've seen a pretty steep fall-off in the overall percentage of -- for Saucony, for example, although still almost 70% of its business is anchored here in the United States, but certainly much less than closing. Probably the same thing for Keds as well, we've seen a fall-off.

To give you a little more detail maybe on Sperry, today, we made tremendous progress this past year, the past 18 months. We had international growth for Sperry, not on a huge base but a pretty good base, in the 15% to 20% range for this past year. We would, on a bigger base, plan on that accelerating up 20% to 25% for the coming year.

We have signed 15 to 20 new contracts for Sperry. We still only have Sperry in about 67 countries around the world, for example.

Most of our other more established brands, Cat Footwear, Hush Puppies, Merrell, we would have at least twice to 2.5 times that many countries. So it's still very, very early in the development, but we're happy with the steady-on growth we're getting in the international arena.

Our next question will come from Mitch Kummetz of Robert Baird. Please go ahead.

I guess on the sales guidance for the year, is there any way you could kind of speak to it by operating group. You've got three groups. Your guidance is for a 3% to 6% increase. Could you maybe kind of get us to that 3% to 6% when you talk about it by group or even by brand, Merrell and Sperry?

Yes, Mitch, I'll talk to it directionally. We don't really break the guidance down necessarily by brand or by operating group. But within the lifestyle group, we talked about the full year flat performance by Sperry Top-Sider, which being the biggest brand in the lifestyle group, obviously is going to impact the lifestyle group's full-year revenue growth, probably offset by continued strong double-digit growth out of Keds.

But across the three operating groups, the lifestyle group would probably be below, the weighted average revenue growth for the fiscal, with the performance group and the heritage group being on the higher end of that range, if you will. With some of the strongest growth coming out of the heritage group in particular, for Cat Footwear, which is we're counting on and we expect a nice growth from Cat in Europe, with the stabilization of Europe off of a lower base for 2013. So clearly, the performance group and the heritage group would deliver stronger growth for the full fiscal year than the lifestyle group.

I know you're expecting stronger growth in the back half than the first half, and some of that has to do with your international initiatives, but what visibility do you have on the back half at this point across your brands regarding fall orders? And I would think that fall orders on Sperry might be negatively impacted by the brand's performance this past fall holiday season, given the weather.

I would assume that maybe retailers take open to buy dollars away from casual, and put them more towards boots. Is that not what you're seeing in your order book?

I think overall, in the US, I think retailers after this past fall and, listen, the past two months, first two months of this fiscal year, are taking a little bit of a wait and see attitude. They're a little bit cautious.

Their inventories are pretty clean. They're extremely clean with boots and cold weather product, but they're taking a little bit of a wait and see approach. We've got some of our order book obviously in for fall.

We've also had meetings at the FFaNY show in New York 10 days ago, and have had many meetings with all of our key retailers. They've made their preliminary, some final selections on fall product from Sperry, Merrell and some of our other brands, and it's that -- that's where our confidence comes from, that kind of direct feedback straight from the retailers.

I would say we're getting better visibility into Q3, in particular, every week, Mitch, as orders are coming in for Q3 delivery. I will say we have -- we're going to have an easier comp in Q4 this year, obviously versus the 0.6% growth we had in Q4 F13, tougher comp in Q3 as our revenue was up over 9% in Q3.

But some of the visibility is quantitative in the form of orders coming in. And some of the visibility we're getting into the back half of the year, as Blake mentioned, is more qualitative, it's based on feedback from retailers from the shows that are taking place now. We feel good about our revenue guidance, but we do expect the growth to accelerate sequentially during the course of this fiscal year, and in particular, Q4.

The next question will come from Molly Iarocci of Stifel. Please go ahead.

This is Molly on for Jim today. Just wondering if you could speak to the trends that you're seeing at Sperry retail? Specifically I'm looking for the traffic trends and what beyond the weather is contributing to the softness quarter after quarter?

Yes, I mean, to with honest with you, I hate to keep mentioning weather. It's something that I really forbid our brand presidents and group presidents from doing, even though I do it. But frankly, weather is still a factor.

We're seeing negative traffic trends, not just in our stores, but across the entire industry. The FDRA published index, comp store index is down almost 9% in the first seven or eight weeks of the fiscal year. That's very unusual.

I was trying to remember even back to 2008 and 2009, whether we had a two month period with that kind of comp store decrease across around 15,000 shoe doors in the United States. So it's clearly having an impact.

I'm sitting here in Michigan, looking at six inches of fresh snow. Unfortunately, I think we're sending it all to the East Coast and the Northeast again, once again, over the next couple of days, so it's having an impact.

I would also say on the fashion side, there's been a bit of -- although it was fall for boots, boots, boots, other than the clear boot trend, which is attributable to a number of things, there isn't a single dominant fashion trend that's driving the consumer soft goods purchaser right now. So we're seeing mall traffic continues to be off when people can even get their vehicles to a mall, and we think it's going to continue.

There's going to be a little warm-up over the next week or two, but then back to colder than normal temperatures for two-thirds of the United States over the next three weeks. So pretty unusual year so far.

Molly, what I'll add to that is, in certain pockets of the country, as small as they might be, where warmer weather has already come or it stayed warm most of the winter, the sell-throughs of Sperry continue to be quite strong in those markets. That leads us to the conclusion that a lot of the softness in Q4 was weather driven. We'll take our share of the lumps as it relates to the product shortfall on the vulcanized product, but I think a lot of it is driven by weather.

Our expectations of a soft start to the fiscal year are also driven by what we expect -- what we're seeing right now, which is a continuation of the cold weather. Where it has been warmer, the sell-through has been quite strong.

The great thing about our portfolio is we've got a number of brands, so we've got some brands, Merrell for example, that benefits from this unusual weather too. So we've got to be for the sake of full disclosure, mention that as well.

Okay. Thank you. Good to know.

And then just real quick, wondering if you could update me, or update us, on number of Sperry stores exiting 2013? Any chance you could give us the fourth quarter comp, and the number of stores you're projecting to open in FY14? I know it's an initiative going forward.

We had a few bright spots in our direct to consumer area, certainly e-commerce overall for the Company. Certainly Q4 Merrell specialty stores, high single digit comp stores, was a significant bright spot for us.

The rest of our fleet, though, was negative comps certainly for Q4. As far as store numbers are concerned -- 49 or 50.

Just under 50 Sperry stores year-end. That's a combination of specialty and outlet and our expectations for 2014 are to open up probably in the low 20 range across the fleet with half, about half of those would be Sperry stores.

The next question will come from Taposh Bari of Goldman Sachs. Please go ahead.

Blake, I wanted to ask you just a question on the winter of a generation, as you described it. I guess where I'm a little confused is Saucony and Keds both, which in my opinion, are non-winter brands, it seemed like they performed pretty well in the fourth quarter. So I'm just curious to know why that was the case.

Yes, I mean, first of all, it always comes down to product, product, product, right? So Keds has a very laser-like focus, marketing and strategic plan to take that brand back to where it should be in the $200 million to $300 million range. That strategy, with Taylor Swift, Hollister, Kate Spade, new product introductions, is working.

I will say Keds was also in the US affected by the weather this fall. Keds had a pretty good fall, but it could have been much, much better.

Saucony, on the other hand, when we closed the transaction, had over 80% of its business here in the United States, closed the year with less than 70%. So Saucony had a pretty good Q4 in other areas of the world, frankly. EMEA's up to almost 20% of its total business and that run specialty channel tends to be a little less volatile, and a little less weather-related.

Certainly Saucony, like several of our brands, could use a little more spring, the whole industry can probably use a little more spring right now. But Saucony weathered the storm fairly well.

I would say for Keds, we made the investment to overcome the challenging weather, and for Saucony, it was more about geographic diversification.

That's helpful. Multi-part question on Sperry. You talk about distribution cleanup this past year. Can you tell us when that began, how much that hurt 2013 revenue growth for the brand?

And the second part of that question is, as you think about the tale of two halves for the Sperry brand for 2014, my impression is that it's somewhat of a Spring/back-to-school brand. I'm curious to know why first half in aggregate would be slower, and how do we think about what the growth rate of that brand ends like, as we look forward into the back half of 2014? Just trying to get a better view on the run rate of that business.

First of all, I think -- let me address the latter questions first. For the first half of this past year, Sperry's going to be going up against increases last year of around 30% for each of the first two quarters. So you've got to take their planned growth this year into that context.

We certainly have the weather that's continuing, the switch of Easter, the encouraging thing from our standpoint is retail sell-throughs at some of our good customers are three or four times greater in those areas that have received the warm weather. So Sperry this year is going into spring, and certainly in the fall with a more diversified product mix. Espadrilles, casual products, flats, and certainly more boots for next fall, and even some boots for spring.

So I think we're working hard to level out the seasonality of the Sperry brand in business. It has that kind of emotional suck with the consumer.

The consumer is certainly picking up those styles that go beyond boat at this point, and we're looking to accelerate that. What was the first part of your question.

It was seasonality. Your question, Taposh, suggests or implied that we communicated that we expect the back half revenue to be more than the front half.

Sperry still is more of a spring-summer brand than a fall-winter brand, although they've done a good job of balancing that out more over the last couple of years. What our comments were, that we expect year-over-year growth for the second half of the year to be stronger than the year-over-year growth in the first half of the year.

Our next question will come from Edward Yruma of KeyBanc. Please go ahead.

I was kind of wondering about the 8.5% long-term revenue growth rate that you've outlined for 2018. In light of how you guided for 2014, I know there's a lot of puts and takes, but how do you think about that longer term earnings -- longer term revenue growth, and how it relates to the longer term earnings growth target?

Certainly when we developed the long-range projections leading up to the Investor Day that we hosted in October, we didn't anticipate the flattish revenue growth in Q4, or the tough start to FY14 that we're expecting in Q1. What I will say, as it relates to our earnings growth potential, we haven't updated the five-year model, we're not sharing new five year numbers here today, but I remain confident in our ability to deliver the earnings growth that we talked about in October.

I think that we have a number of ways to deliver the earnings growth via more aggressive gross margin expansion and better management of our SG&A. So you're right, the revenue guidance for FY14 forces out even greater than 8.5% revenue growth in FY15 through FY18, which may or may not occur, but I do feel more confident in our ability to deliver the earnings that we talked about in October.

Got it. You had held up Sperry as an example of a brand that was able to be placed in different channels and remain integrity of brand. Obviously, you've started to rationalize the distribution footprint. Two quick ones.

What's the incremental drag from rationalizing the family channel in 2014? Then, two, how does that impact, or what were your test results for Merrell? I know you attempted to put in a family channel. How do you think about changing distribution for that brand longer term? Thanks.

I think just to give some -- to quantify the 2014 impact, it could be in the $20 million range for Sperry.

Few percentage points of growth.

At least a few percentage points of growth. And it didn't have really so much to do with the channel itself. It really had to do with the behavior and promotional cadence of one or two retailers within that channel, that was really inconsistent with the long-term growth of the brand.

For Merrell, the family channel remains a very, very minute portion of its overall business. They're doing that through product segmentation and pretty strict discipline. So I would say the family channel remains a very small portion of the overall Merrell business here in the US.

And going back to the previous questioner if I can just for a second, there was only a very modest impact of that distribution rationalization in the fourth quarter of 2013, and most of the impact will be felt on a year-over-year basis in 2014.

Got it. Thanks so much.

The next question will come from Christian Buss of Credit Suisse. Please go ahead.

Yes, thank you. I was wondering if you could provide some color on how you expect the international expansion of the PLG brands to contribute in 2014?

Yes, I provided a little detail, a little bit earlier, with regard to the Sperry brand. I think there's big opportunity for Sperry, Saucony and Keds, probably a slower growth rate potential for Stride Rite children's group at this point, but we're very excited. It's hard to quantify right now, but we expect increased percentage growth over the next several years.

Certainly accelerated growth in Sperry, because as we have the ability to let our distributor partners open up lifestyle stores, as opposed to footwear-only stores, the Keds brand right now is hot, all of our international people frankly travel to the United States and look at what's happening. And that brand has a lot of potential, especially given the price point levels of that product for the global consumer.

And Saucony just continues to roll. And internationally, its performance shoes perform, but also we've seen the beginnings of a Saucony's original trend. And we've seen it in some other brands throughout the industry on the athletic side, but we're also seeing that for Saucony.

Christian, what I'll add to that is that the growth rate that we're forecasting outside the US for the four PLG Brands in 2014 is probably pretty obvious to everybody, is significantly in excess of the overall revenue growth that we're guiding for the Company. It's strong double-digit growth.

What I'll say is without giving a specific number for those four brands combined, the rate of growth that we expect to get in 2015 and 2016 would be a multiple of the growth rate that we have in 2014, so as we've alluded to in previous earnings calls, and I know we've spoken offline, it's somewhat of a slow build. You have to get the distributors signed up, get the distributors educated on the brand, get the initial orders for the initial season in place.

When distributors start opening up retail stores, things start to accelerate. That's the same pattern we saw with Hush Puppies back many years ago, with Merrell more recently than that, that's the way the model tends to play out.

That's helpful. As a follow-up, could I ask, in the past you've been very controlled with your SG&A spending. Given the difficult start to the year from a revenue standpoint, are there any SG&A management initiatives under way?

There always are, yes. We look at all the SG&A, and given the challenges on the top line, we've asked the brand teams to look at what expenses can be deferred to the second half of the year, in order to protect earnings for the full fiscal year, as well as deliver what we can in the first and second quarter.

But we're not going to delay making the right investments to fuel growth either in the back half of the year or in 2015. So we recognize this is a branded business. As important as product is, it's also important to talk to your consumers, and so we expect to continue to invest in marketing behind our brands.

Thank you very much. Good luck.

The next question will come from Erinn Murphy of Piper Jaffray. Please go ahead.

Just wanted to know if you could elaborate a little bit more on some of the regional trends you've seen in Europe, as you think about that as a return to gross market in 2014. And then as we just -- following up on the last question that relates to the international expansions of some of the PLG brands, can you just address where brand awareness is for Sperry in particular, both in Europe and Asia? Thanks.

Yes, to talk about Europe a little bit to begin with, I don't even like -- it's been no secret the UK has had the wettest and coldest spring and winter in 250 years, so the UK market, where we have a significant portion of our business is kind of also struggling with its own weather woes. Business has been fairly steady on, with growth in central and Northern Europe.

We've seen strong growth in Russia and several other ancillary markets, and we expect that to continue. I think you have to remember that the current forecast GDP growth next year for the Euro region is 1.4%. While that's an improvement, that doesn't normally -- that kind of GDP growth for the Eurozone doesn't lead to slingshot growth.

With respect to international awareness for Sperry, I would say it's still relatively low. We view that as an upside. I say it's low in regards to the consumer.

When you talk about distributors who operate in our industry, they're all aware of Sperry's success, number-one casual footwear brand position here in the United States. They all travel to the United States, they all shop the United States. And that's one of the reasons they're so enthusiastic about the brand.

But from a consumer standpoint, relatively low awareness in most regions. Maybe a little bit more in China, with our new distributor there rolling out stores and shop-in-shops, and a few other -- and in Australia, for example, and relatively little penetration at this point in Europe.

For Sperry itself, our two biggest growth regions next year internationally would probably be Asia-Pacific and Latin America. For Saucony though, for example, you'd probably have to put EMEA, the EMEA region as its number-one growth region. So pretty balanced approach across our four new brands.

Erinn, going back to the Sperry brand awareness question, what I would say in response is that Sperry's brand awareness outside the US is stronger and better today than Merrell's was back in the year 2000, when we really started the international push for Merrell. So I think we're at a better starting point for Sperry than we were for Merrell 13 or 14 years ago, and look at what we've done with Merrell in the last decade and-a-half.

Thank you. That's very helpful. Best of luck.

Next question will come from Steve Marotta with CL King and Associates. Please go ahead.

I just have one question. Don, just to verify, you mentioned that Sperry sales are expected to be flat in 2014, and that includes incremental gains from international distribution? Is that accurate?

That's correct.

I just wanted to verify. Thank you.

The next question will come from Chris Svezia of Susquehanna Financial Group. Please go ahead.

Not to beat a dead horse here but just on Sperry, my first question, you indicated you expected revenue growth down 10% in the first quarter, and maybe if you can just talk about the difference between the shift in Easter, weather and some of the product miscues, in terms of the impact on the first half business.

Let me address the latter portion. We had some design miscues in the vulcanized arena that really frankly hurt us in Q4, more on the women's side than the men's side. But still, some hurt on the men's side as well.

We've corrected those. We've added in some new design and product developmental talent there, so we think we've got that handled.

The early reads from retailers, that they've had a little bit of warm weather confirm that. The sell-through information that we get. What was the other part of your question?

Impact of the later Easter. In response --

On the Easter, I would say just generally it's going to -- the impact on our brands varies from brand to brand. When you take the Stride Rite children's group, three weeks is going to probably have a much more significant impact on that children's business.

It will have some impact on, frankly, all of our brands, maybe with the exception of our work and pure boot brands, but the biggest impact is going to be on the Stride Rite children's group. Although it will have some impact a little bit on our other brands as well.

I'll go back to the first part of your question, Chris. We did not say down 10% in Q1 or the first half. We did -- my comments, I said likely down in the first half, with stronger growth in the second half, results in flattish for the full year.

Flat could be low single digit growth. It could be flat. Somewhere in that ballpark.

Okay. Switching gears, just on Merrell, any comments you can make between the three buckets between the athletic piece, the outdoor piece and the lifestyle piece, about just what you're seeing out there, where the opportunity is, what's going on?

Yes, clearly Merrell had a very good Q4, had an excellent Q4 in the US business. It's by far its largest business. We saw really good performance in hiking and extended hiking styles, but we also -- across the whole performance outdoor category, it was pretty good.

We have some new introductions coming in the outside athletic category. The barefoot, what I will call the barefoot component of that category has stabilized at retail. Merrell has and continues to have a large chunk of that business, which is very good.

But Merrell is also extending its range to include many more styles with additional and more cushioning. Active lifestyle, as you know, we had stumbled over a period of a couple of years with Merrell in the active lifestyle arena, casual shoes, and those shoes have seen a noticeable pickup, not only in Q4.

But the new talent and direction we've put into the design and product creation team is also having a beneficial impact, we believe, on 2014. We would look to 2014 to grow on all three of those channels, maybe our growth might be greatest right now in the performance outdoor channel, which Merrell dominates.

Okay. All the best to you. Thanks.

Our next question comes from Danielle McCoy of Brean Capital. Please go ahead.

I guess just with Keds, can you give us a little bit more color on some things that we can expect to see next year? Some new product innovations, maybe some extensions of categories, in order to continue to gain traction and spread awareness?

Yes. Well, just to focus on fall a little bit, as you know, Keds has been a vulcanized brand in the $30 to $60 range for most of its brand life. We're seeing a good pickup from retailers for Keds boots, for example, really the first $100 product on waterproof boots that Keds ever had in its line.

So Keds is continuing its affiliations and collaborations, Kate Spade, Hollister, Taylor Swift. They're staying in front of their consumer, they're staying relevant to their consumer, they're extending the product range. They are still focused on the women's, women's, women's category, and we expect the accelerated growth, frankly, to continue.

We've got a new partner for some key countries in Europe for Keds. We've got some new partners that are going to be -- that have some pretty aggressive plans and Asia specific -- Asia, really the whole Asia region for Keds. So we're excited about the international opportunities.

But it's still a largely at this point about an 80% USA brand as we look back at 2013. But Keds had very strong double-digit growth for Q4, despite the weather conditions, and also for the full fiscal year.

Great. Thanks so much. Good luck.

The next question will come from Scott Krasik of BB&T Capital Markets.

This is Kelly for Scott. In terms of just the gross margin outlook for the year, could you talk about the cadence, as it relates to H1 versus H2? Particularly in Q1, given these headwinds with your higher-margin businesses, Merrell going up against M-Connect launch last year and the difficulty with Sperry in the first half, and also given direct to consumer seems to be a little weaker than you'd like to see.

That's my first question. Thank you.

That's actually a very good question. We expect, of the slight full-year gross margin expansion, we would expect more of that to come in the back half of the year than the first for the reasons that you cited, which are spot on, but also because of the benefit from the Dominican Republic restructuring is a back half benefit, because that's when we will be selling footwear sourced from lower cost producers, than what we produced ourselves in the Dominican Republic in late 2013. So more of a second-half gross margin expansion than a first half.

Okay. And then just as relates to SG&A throughout the year, could you quantify the magnitude of the pension expense benefit, and so we could tease out what the growth rate would be ex that for --

The pension benefit is -- year-over-year is just over $20 million, but it's -- if you take that in context of the expected higher tax rate, and expected higher share count, and expected higher incentive comp expense. And the incentive comp expense by the way is not just because we're paying each other more, it's also a second year of our new Boston based colleagues being on some of the Wolverine incentive plans, which is driving that incremental incentive comp. If you net the higher tax rate, higher share count and the impact on the incentive comp expense, it washes out what the lower pension expense, but it is quite a sizable year-over-year reduction in pension expense.

Lastly, we talked about the bookings for fall as relates to Sperry, could you give us a little more color on Merrell, given that Q4 was actually -- obviously was a very strong quarter, and are you seeing any difference in how retailers are looking to take orders for fall, maybe a little earlier than they have been the last couple years?

Not really for Merrell. I think it's fundamentally improvements in the product creation and a fresh product that's driving the Merrell success.

You have to remember that Merrell is a performance brand. They have performance features whether it's casual footwear in the active lifestyle category, or outside athletic category, or certainly their dominant performance outdoor category.

That is all -- the current conditions at retail and the weather conditions have certainly played to Merrell's strength. But it's fundamental just bringing more exciting product to market.

Thank you.

The next question will come from Sam Poser of Sterne Agee. Please go ahead.

I just was wondering a couple things. You talked about a lot of the other brands for the fourth-quarter sales. Could you talk about Merrell's fourth quarter sales, what kind of increase that was?

Yes, we can't give you specifics, Sam, but it certainly -- as we mentioned, it beat our expectations. It was higher than Merrell's growth rate for all of 2013, which was maybe upper single, low single digits, or lower mid single digit range. So it was certainly above that overall.

From my standpoint, seeing the very strong performance of Merrell specialty stores in Q4 is a sign of momentum for the brand, as well as just their overall high single digit growth rate in Q4 in the USA, which is their largest market. We see the overall global momentum for the Merrell brand continuing to build.

Okay. Two other things. One, could you give us some background numbers for Merrell and Sperry, or percentages? And can you talk about how you're thinking about the outside athletic business for Merrell over the long term?

Is that something that you could just let Saucony do a lot of that business because they're really an outdoor running brand, and somebody said to me a lot of the outdoor retailers are starting to look to the running brands for more of the outdoor product for running knowledge, versus the outdoor brands now. And that's a big change in the way some of these larger retailers are looking at things.

Sam, as you know, we don't give specific -- we don't talk about order backlog anymore, give any kind of specific percentages there. I will say that Merrell has a long heritage in trail running, from the very inception of the brand.

And so they are looking and not just at hiking and performance outdoor, they're looking at trail, and to a lesser extent, road running, as big opportunities for the brands. There are a number of outdoor brands that play in that category as well as traditional athletic brands, but they are focused on that, and certainly focused on that beyond what we all refer to as the barefoot subcategory.

I mean, I would say that I agree with what Blake said obviously, that Merrell's DNA for the outside athletic is in trail running. I don't think we would expect Merrell to cede the road running business to Saucony, just because Saucony is so much bigger in road running than Merrell. I think there's an opportunity for both.

Having said that, I will say I don't think the brand team views road running as the biggest source of growth for the brand going forward, but I don't think the plan is to exit that part of the business either. Just so I'm clear, the first part of your question, were you asking about order backlog, or were you asking about something else, Sam? I missed that.

I asked to get some direction on order backlog for those two periods.

I didn't hear you say backlog. Sorry. I'll stand by Blake's answer to that question.

Thank you.

Anything else?

No, thanks very much.

This will conclude our question-and-answer session. I would like to turn the call back over to Ms. Christi Cowdin for her closing remarks.

Thank you. On behalf of Wolverine World Wide, I'd like to thank everyone for joining us today and as a reminder, our conference call replay is available on our website, WolverineWorldWide.com, and that replay will be available until April 11, 2014. Thanks and good day.

Thank you.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect.