Wolverine World Wide Inc (WWW) 2014 Q4 法說會逐字稿

Good morning, and welcome to Wolverine Worldwide's fourth-quarter and full-year 2014 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.

(Operator Instructions)

I would now like to introduce Mr. Chris Hufnagel, Vice President of Strategy, Investor Relations and Communications for Wolverine Worldwide. Mr. Hufnagel, you may proceed.

Thank you, Andrew. Good morning and welcome to our fourth-quarter and full-year 2014 conference call. On the call today are Blake Krueger, our Chairman, Chief Executive Officer, and President, and Don Grimes, our Senior Vice President and Chief Financial Officer.

Earlier this morning we announced our financial results for the fourth quarter and full year of 2014. The release is available on many news sites or it can be viewed from our corporate website at www.wolverineworldwide.com. If you would prefer to have a copy of the news release sent to your directly, please call Tyler Deur at 616-233-0500.

This morning's press release included non-GAAP disclosures and these disclosures were reconciled with attached tables within the body of the release. Comments during today's earnings call will include some additional non-GAAP disclosures. There is a document posted on our corporate website entitled WWW Q4 2014 conference call supplemental tables, that will reconcile these non-GAAP disclosures to GAAP. The document is accessible under the Investor Relations tab at our corporate website, www.wolverineworldwide.com, by clicking on the webcast link at the top of the page.

Before I turn the call over to Blake to comment on our results, I'd like to remind you that predictions and projections made during today's conference call regarding Wolverine Worldwide and its operations are forward-looking statements under US 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 in our press releases. With that being said, I'd like to turn the call over to Blake Krueger. Blake?

Thanks, Chris. Good morning everyone and thanks for joining us today. Earlier this morning we reported our fourth quarter and full year 2014 financial results, highlighted by a strong finish to the year which contributed to our fifth consecutive year of record revenue, record adjusted full-year earnings and another year of record cash flow. Our strong business model includes a diverse brand portfolio, an expansive geographic footprint, a strong operations platform, and a disciplined approach to managing the business.

For the quarter, revenue was up 9.2%, over 10% on a currency neutral basis, with earnings per share increasing over 36% to $0.30 per share. For the full year, we delivered record revenue of $2.76 billion, representing growth of 2.6% versus the prior year. Adjusted diluted earnings per share for the full year were $1.62, representing growth of 13.3%, and excellent earnings leverage.

Before Don and I outline our expectations for 2015, I'd like to briefly talk about some of the highlights from 2014. Specifically, we re-energized and repositioned our Sperry and Merrell brands, which led to accelerated momentum in the back half of the year. Our meaningful progress here positions us well as we move forward. And we expect stronger growth from both brands in 2015.

We expanded our already expansive international footprint, especially for our newest brands, Sperry, Saucony and Keds. Since the closing of the acquisition, we've executed approximately 70 agreements for these 3 brands, opened almost 400 stores and shop-in-shops, and increased global pairs by over 50%. Last year we drove very strong double-digit revenue growth in our international segment for these brands.

We also maintained, and in many cases accelerated, the momentum in several of our other key brands, including Cat, Saucony, Wolverine, Keds and Chaco. We initiated our strategic realignment plan to better position our direct to consumer operations for the new consumer reality, improved profitability and accelerated growth in future years.

We announced a multi-year investment plan to drive growth through initiatives focused on consumer demand creation, omnichannel transformation and international expansion. We delivered exceptionally strong cash flow, allowing us to make significant progress in paying down debt and leaving us well positioned to fund organic growth initiatives and pursue appropriate acquisition opportunities.

Finally, we attracted and promoted great talent across the organization. As we enter 2015, we have assembled the strongest and deepest team in the Company's history. I'm very pleased with our performance in 2014 and even more excited about the strong finish we had in the fourth quarter, and the momentum we've carried into the new year.

I'll now provide some highlights of our 2014 performance by operating group. First, the Lifestyle group delivered revenue of $279.3 million for the fourth quarter, an increase of 5.3% compared to the prior year. Mid-teens revenue growth from Keds and high-single digit growth from Sperry and Stride Rite were partially offset by a double-digit revenue decline from Hush Puppies. For the full year, the group delivered revenue of $1.06 billion, representing a decline of 2.5% versus the prior year.

Sperry's strong close to the year was well above our expectations entering the quarter. Excluding the impact of Sperry's strategic distribution decisions, the brand experienced a low single-digit revenue decline for the full year, a solid result given some of the challenges we experienced earlier in the year.

The women's business is beginning to show signs of improvement, as strong sales of cold and wet weather boots and vulcanized product helped drive the brand's fourth-quarter gain. As we look ahead, the brand is focused on driving further momentum in the women's business by introducing fresh boat shoe silhouettes and expanded product offerings.

The men's business remains strong, and the continued resurgence in the brand's authentic original boat shoe is helping to drive positive results. The men's premium Gold Cup collection is also generated positive sell-through across multiple channels.

Just yesterday Sperry launched a new brand platform, Odyssey's Await. The platform was introduced to our international partners and key domestic accounts over the last several months. Reaction has been simply outstanding, and the brand is excited to support this month's launch of the new platform with a comprehensive media and digital campaign. The new and expanded brand leadership team has developed a great platform and we can't wait for consumers to experience the new product and marketing story to come from Sperry.

Keds continued to build on its global momentum during 2014 and remains one of the fastest growing brands in our portfolio. The Brave Girl initiative, supported by the brand's partnership with Taylor Swift and other fashion collaborations including Kate Spade, has certainly fueled excitement for the brand. Fourth-quarter growth was driven by momentum across the brand's expanded product offerings.

During the quarter, Keds also implemented several consumer initiatives to coincide with the launch of Taylor Swift's new album, 1989, and the brand now has over 2.5 million fans across a variety of social media platforms. Looking to 2015, Keds plans to introduce new silhouettes in fresh colors and materials, diversify several of its fast growing categories, and continue to expand its international footprint.

Lastly, the Stride Rite Children's Group. The brand rebounded from a challenging third quarter, as growth in the US wholesale business, strong e-commerce growth, and improved performance across the brick and mortar fleet drove the majority of Q4 gains. While store traffic continued to be challenging in the quarter, albeit better than the prior three quarters, higher average transaction size and improved conversion had a positive impact on the business. As consumer demand continues to shift from stores to online, especially mobile, the brand is elevating the consumer shopping experience through in-store ordering and other omnichannel initiatives.

Moving now to the Performance Group. Our second largest operating group delivered revenue of $273.6 million in the fourth quarter, an increase of 8.9% compared to the prior year. Very strong double-digit growth from Chaco, strong double-digit growth from Saucony, and mid single-digit revenue growth from Merrell, were the highlights for the group. For the full year, the group delivered revenue of $990.7 million, representing growth of 4.8% versus the prior year.

Saucony had a great 2014 and closed the year by delivering strong double-digit revenue growth for the fourth quarter, outpacing the overall run specialty channel. The brand's franchise running model and the steady introduction of new technologies helped Saucony gain momentum in this important channel. The Kinvara 5 was named the international shoe of the year and the Triumph ISO series, the brand's latest innovative and patented cushioning and fit platform, received the editor's choice award from Runners World.

Very strong double-digit growth in the quarter across EMEA, Latin America and Asia-Pacific, was driven by demand for both technical running product and the Saucony Originals collection. Today, nearly a third of the brand's revenue is generated from outside the US, up significantly from the time of the acquisition. In 2015, Saucony will expand the ISO series, with the introduction of the Zealot for spring, and a new silhouette to the collection, the Redeemer, in the fall.

Merrell generated nice momentum in the fourth quarter, with growth accelerating to a mid single-digit rate. Strong wholesale growth in the US, Canada and Asia-Pacific was partially offset by softer results in Latin America and EMEA. The brand experienced meaningful revenue growth in its direct to consumer business, with combined growth for stores and e-commerce up double digits.

Merrell's performance outdoor category continued to deliver, achieving its sixth consecutive quarter of double-digit growth. Consumer demand for speed and light hiking product helped drive strong sell-through across global markets. Merrell's active lifestyle product category also grew in the quarter, primarily driven by growth in the men's business.

In January, the brand used the Sundance Film Festival in Park City, Utah, to introduce the new Capra collection. Which is pinnacle top of the mountain hiking product within the performance outdoor category. The Capra collection will be introduced globally on March 12.

Finally, the Heritage Group delivered revenue of $221.5 million in the fourth quarter, a strong increase of 14.4% compared to the prior year. Very strong double-digit growth from CAT and Harley-Davidson, along with double-digit growth from Wolverine, Bates and HYTEST, was only partially offset by a high-single digit revenue decline from Sebago. For the full year, the Heritage Group delivered revenue of $607 million, representing growth of 7% versus the prior year.

CAT Footwear had an exceptional quarter and full year, with growth coming from every major geographic region. The North American business continues to capitalize on the momentum from the next gen industrial product, driving positive returns for the work category across both genders. Globally, Lifestyle product continued to post excellent gains. CAT is simply firing on all cylinders right now.

The Wolverine brand delivered another strong performance in Q4 and the full year, driven by growth across all three of the brand's product segments, outdoor, heritage, and core work. The brand also drove nice double-digit growth in its apparel business during the fourth quarter, as it continued to emphasize a full head to toe story in its marketing campaigns and offerings at retail. Moving forward, Wolverine will continue to capitalize on momentum in top tier accounts through its made in USA strategy, and will also grow the heritage business globally, behind the strength of the 1,000 mile and Wolverine Since 1883 collections.

As a Company, we're obviously very pleased with how we finished the year and excited about the momentum we carry into 2015. With that, I'd like to talk a little bit more about the year ahead. Our Company is in a very good place today, our brands are strong, our business model is diverse. And our shareholders have consistently benefited from a robust earnings engine. But we face some macro head winds headwinds as we move into 2015.

Because of our global footprint, a significantly stronger US dollar will put pressure on our reported revenue and earnings in 2015. In addition, non-cash pension expense will be up significantly due to the impact of lower market interest rates and updated mortality tables. We expect our 2015 currency neutral revenue growth to reach mid- to high-single digits, and earnings are expected to grow at a double-digit pace, excluding the impact of the non-cash pension expense and the much stronger US dollar.

In spite of these headwinds, we are committed to maximizing the global opportunities for our brands. As we announced last month, we are embarking on a multi-year investment initiative designed to accelerate the global growth of the most strategically important brands, along with omnichannel initiatives in our direct to consumer business. Don will provide more detail on these initiatives in a minute.

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 drive growth by maintaining a fanatical focus on innovation, especially product creation; focusing on developing deeper connections with consumers and creating strong global demand for our products; expanding and strengthening our extensive global distribution footprint; continuing to invest in consumer direct initiatives, specifically digital investments that support the omnichannel experience; expanding the Lifestyle opportunities for our largest brands; building the very best team in the industry; and finally, executing against our business model which mitigates the risks associated with an ever-changing global marketplace.

I'm very pleased with the record results we delivered in 2014 and the momentum we carry into 2015. I want to sincerely thank the 6,500 Wolverine team members around the world for their continued hard work and dedication to our brands as they strive to build the most admired family of performance and lifestyle brands on earth. Thanks for another great year.

I'll now turn the call over to Don Grimes, our Senior Vice President and CFO, who will provide additional commentary on our performance in both the fourth-quarter and the full-year 2014. As well as provide more detail regarding our guidance and expectations for 2015. Don?

Thank you, Blake, and thanks to all of you for joining us on the call today. In FY14, Wolverine delivered its fifth consecutive year of record revenue, as well as record adjusted earnings and another year of record free cash flow. The combined power of our brands, diversified business model, and strong international footprint continue to deliver solid results.

I'd like to underscore Blake's comments about how pleased we are with the very strong close to the fiscal year, and that we're very excited about the brand building investments and growth prospects for FY15 and beyond. Our business is well positioned and our brands have significant global growth opportunities, and we believe that now is the right time to accelerate investments behind our key brands. Driving brand awareness, enhancing our omnichannel platform to respond to consumer's evolving shopping patterns, and further investing behind our international business, will all better position the Company for accelerated growth.

I'll now provide more details on the quarter and FY14, ended January 3, 2015, and conclude my prepared remarks by outlining the Company's expectations for FY15, including some commentary on the first quarter. I'd like to remind you that all current and prior year financial results discussed today have been adjusted to exclude integration expenses related to the PLG acquisition, restructuring charges related to the 2013 closure and sale of our Dominican Republic manufacturing facilities, restructuring charges related to the Company's strategic realignment plan and costs associated with fiscal 2013's debt refinancing.

As we preliminary reported last month, consolidated revenue in the fourth quarter was a record $808.9 million, representing growth of 9.2% versus the prior year. As noted by Blake, the excellent performance was driven by mid-teens revenue growth from the Heritage Group, high single-digit revenue growth from the Performance Group, and mid single-digit revenue growth from the Lifestyle Group. As noted by Blake, we were extremely pleased that 9 of our 16 brands delivered double-digit growth in the quarter.

Foreshadowing what looks to be a continuing focus point for many companies in 2015, foreign exchange had a $6.6 million unfavorable impact on fourth-quarter reported revenue. As a result, constant currency revenue grew just over 10% in the quarter versus the prior year.

Recall that this past fiscal fourth quarter benefited from an extra week this year. We will revert to our standard 52 week fiscal year and 16 week fiscal fourth quarter in the current year.

For the full year, reported revenue was a record $2.76 billion, representing an increase of 2.6% versus the prior year's reported revenue of $2.69 billion. High-single digit growth from the Heritage Group and mid single-digit growth in the Performance Group was offset, partially offset by the expected low single-digit revenue decline from the Lifestyle Group.

Foreign exchange had a negative impact on full-year revenue growth of 20 basis points. Further illustrating the strength of our brand portfolio and diverse geographic footprint, we were very pleased to see full-year revenue growth from nearly every major geographic region, with the exception of Canada where our results were significantly impacted by a strengthening US dollar. While the US, our largest market, representing 72% of full-year revenue and 51% of global unit volume, delivered very slight revenue growth for the full year, we were encouraged by the high single-digit growth in the fourth quarter.

Full-year revenue growth in the other geographic regions included double-digit growth in Asia-Pacific, high single-digit growth in EMEA, and mid single-digit growth in Latin America. These international regions continue to be critical to growth across our portfolio. The solid organic growth we experience in these regions provides further evidence that the investments we're making are paying dividends.

Adjusted gross margin for the full year was 39.4%, a decrease of 40 basis points compared to the prior year. The decline in gross margin was driven primarily by a higher mix of lower margin top line international revenue, incremental LIFO expense, and the impact of inventory liquidation related to the strategic realignment plan. Selling price increases outpaced product cost increases for the full year.

Adjusted operating expenses for the full year were $815.2 million, a decrease of 1.8% versus the prior year. As a percentage of revenue, adjusted operating expenses were 29.5%, a decrease of 130 basis points compared to 30.8% in the prior year. The SG&A leverage helped drive full-year adjusted operating margins to 9.9%, a 90 basis point improvement over the prior year.

Full-year net interest expense was $45.4 million, $6.6 million lower than the prior year, driven primarily by lower average outstanding principal balances which reflect both mandatory principal amortization of approximately $50 million and additional voluntary principal payments of $200 million during the year.

Consolidated net debt at year end was down almost $260 million versus the prior year, and down almost $500 million compared to 2 years ago, when the PLG acquisition closed, representing outstanding operating discipline and free cash flow generation beyond our initial expectations.

Our year-end leverage ratio as defined in our credit agreement was 2.35, down from 4.0 in October of 2012. The adjusted effective tax rate for the full year was 26.2%, up 220 basis points compared to the prior year and slightly higher than we estimated when we provided preliminary earnings last month. The increase reflects a modestly negative jurisdictional mix shift and a lower net tax benefit from discrete items that inevitably surface and are recorded during the course of a fiscal year. The reported effective tax rate for the year was also 26.2%.

Diluted weighted average shares outstanding for FY14 were approximately 100 million. Adjusted diluted earnings for the full year increased 13.3% to $1.62 per share. Reported diluted earnings for the full year were $1.30 per share. Fourth-quarter adjusted diluted earnings per share increased 36.4% to $0.30. Reported diluted earnings per share were $0.10 for the quarter.

Turning to the balance sheet. Year-end trade accounts receivable were down 21.5% to $313 million. An expected increase in year-end receivables driven by the strong close to the fiscal year was more than offset by a nice reduction in DSOs, and the Company's new accounts receivable financing facility that was put in place at the end of 2014. This new facility enables us to more immediately monetize receivables from large credit-worthy domestic customers, and we use these proceeds to prepay term loan debt in the quarter.

Inventories decreased $14.2 million, or 3.3% versus the prior year, aided by strong at once shipments in Q4 leaving our inventory levels in a solid position as we head into FY15. Strong fourth-quarter sales in retail resulted in clean inventory positions for our retailers as well. After full-year capital expenditures of $30 million, I'm pleased to report that free cash flow for the full year was a record $279.8 million, an increase of 78%, or $122 million over the prior year, with approximately $64 million of that increase coming from the accounts receivable financing facility that I just mentioned.

Adjusting for the benefit from the AR financing facility, free cash flow still increased 37% compared to the prior year. Even with the aggressive debt pay down during the year, we ended the year with cash and cash equivalents of $224 million and net debt at year end was $677 million. We remain focused on our previously stated objectives for cash, investing behind our brands to fuel organic growth, maintaining our cash dividend, paying down debt and pursuing strategic acquisition opportunities.

Given our significant deleveraging, and depending on market conditions, we will begin to assess opportunities to share cash flow with shareholders in the form of share buybacks in the fiscal year. Recall that the Company's authorized to repurchase up to $200 million of common stock on the open market through early 2018, although the actual dollar amount of annual share buybacks are constrained by our credit agreements.

Turning to our 2015 full-year guidance. In Blake's remarks, he discussed several factors impacting our positive view of the business for the upcoming year, including our plans to capitalize on the current momentum of several of our brands through incremental brand building investments. However, like most global companies, we're facing the macro challenge of a much stronger US dollar, and the impact that's expected to have on reported revenue and earnings.

I'd like to share the core factors that have helped form our revenue outlook for 2015. These include: improving demand for footwear, apparel and accessories as consumer spending benefits from a modestly stronger US economy, and the expectation of continued low gas prices; a more pronounced shift in consumer shopping preferences, particularly here in the US from traditional brick and mortar retailers to digital platforms, including e-commerce and mobile; a choppy recovery in Continental Europe, and continued challenges in Russia and certain South American markets, offset by strong growth in our other international markets, particularly Asia-Pacific.

Accelerated growth from our largest brands, including anticipated mid to high single-digit full-year growth for Sperry and high single-digit constant currency growth from Merrell; headwinds related to the exit of the Patagonia footwear license and the impacted retail store closures associated with the Company's strategic realignment plan. Combined, these two items are negatively impacting expected year-over-year revenue growth by approximately 200 basis points.

And finally, as just mentioned, a significantly stronger US dollar. In fact, a much stronger dollar particularly against the Euro and Canadian dollar, than we were anticipating when we provided our initial FY15 outlook early last month. Based on these key considerations, we're now forecasting consolidated revenue for FY15 in a range of $2.82 billion to $2.87 billion, representing reported growth in the range of approximately 2% to 4% versus the prior year, and constant currency growth in the range of approximately 5% to 7%.

As it relates more specifically to the Company's previously announced strategic realignment plan, the team continues to engage in discussions with our partners and major real estate developers. We closed 58 retail locations in connection with this plan during the year. We continue to evaluate the balance of the previously announced estimate of 140 total store closures. At this point, these locations are still anticipated to close during 2015 with the vast majority closed toward the end of the year.

We're very excited to embark on an important 2015 initiative designed to drive demand creation over the most important brands in our portfolio. As we announced last month, we intend to incrementally invest approximately $30 million in brand building initiatives in the fiscal year and importantly, maintain that level of investment going forward. Approximately three-fourths of the incremental investment is planned squarely behind new and expanded marketing investments designed to drive brand awareness and brand engagement for Sperry, Merrell, and to a lesser extent Saucony and Keds.

The remaining investments are planned behind omnichannel initiatives and consumer direct operations, and investments to drive growth across our international operations. We can't over emphasize the very positive early reaction from key retail partners to the new brand platforms, marketing execution plans and importantly, upcoming product introductions. Although we expect to drive some incremental revenue and gross profit in FY15 from the investment program, the majority of the return is expected to be realized in FY16 and beyond.

Further to our expected operating expenses, a meaningfully lower year end discount rate and revised mortality tables are driving an approximate $16 million increase in non-cash pension expense, to approximately $28 million for the full fiscal year. Although we expect to drive modest full-year gross margin expansion, the incremental brand building investments and pension expense are expected to result in a full-year adjusted operating margin decline of approximately 80 basis points. Approximately half of the operating margin decline is due to foreign exchange.

We're forecasting net interest expense of approximately $40 million for FY15, an effective tax rate of approximately 27.5% and diluted weighted average shares outstanding of approximately 101 million, with the latter assuming no share repurchases during the year. Based on the expected negative foreign exchange environment, incremental pension expense and the incremental brand investment initiatives, we're now forecasting FY15 adjusted diluted earnings in the range of $1.53 to $1.60 per share.

Foreign exchange is expected to negatively impact reported earnings by $0.18 per share, so constant currency earnings are expected in the range of $1.71 to $1.78 per share. Growth in the range of 5.6% to 9.9%. Again, embedded in the reported and constant currency earnings outlook is incremental pension expense of $0.11 per share, and incremental brand investments of approximately $0.21 per share.

We're forecasting full-year depreciation and amortization of approximately $50 million, and adjusted EBITDA in the range of $350 million to $360 million. As we previously stated and as is supported by you the adjusted EBITDA forecast, we expect our net leverage ratio to be below 2 by the end of FY15.

Finally, capital expenditures are expected in the range of $45 million to $50 million, primarily for investments in information technology, distribution facility enhancements and investments in our consumer direct platform, designed to elevate our omnichannel capabilities. While the guidance I've just taken you through covers expectations for the full fiscal year, I'd like to provide a little color on our expectations for the first quarter that ends March 28.

Based on quarter-to-date results and anticipated business over the balance of the quarter, we expect low single-digit reported revenue growth and mid single=digit constant currency revenue growth. Both of these revenue outlooks reflect the impact of retail store closures and the Patagonia exit. Based on expected negative FX, and the timing of incremental brand investments, we expect Q1 reported and adjusted earnings in the range of $0.32 to $0.36 per share, and constant currency earnings in the range of $0.35 to $0.39 per share.

Related to our Q1 guidance, as you're all well aware, port operations on the West Coast were again shut down this past weekend. We're mindful of the situation and monitoring the progress of the negotiations very closely. We've been very proactive during this labor dispute, bringing product in early when possible and diversifying ports of entry in order to mitigate the potential risk to our operations. We currently expect the situation to have a modest negative impact on end of quarter shipments, and that expectation is reflected in the revenue and earnings outlook just mentioned.

As it relates to the balance of the year, based on how the backlog is shaping up and expectations for performance from our DTC business, we expect stronger revenue growth in the second half of the year than the first, with particular strength in the third fiscal quarter. However, the expected timing of our incremental brand investments and the negative impact of pension and FX, mean that we will likely report modestly negative earnings growth in each of the first three fiscal quarters.

Again, the benefits from the brand building investment program are expected to be realized primarily in FY16 and beyond. Taking a medium- to long-term view of the business, these are investments we're making today in order to drive accelerated growth in the future and we're very excited about it.

Thanks for your time this morning. I'll now turn the call back over to the operator to take some questions.

We will now begin the question-and-answer session.

(Operator Instructions)

The first question comes from Jay Sole from Morgan Stanley. Please go ahead.

Hi. Good morning.

Good morning.

Good morning, Jay.

Just wanted to ask you two questions on the guidance for 2015. Could you talk about what's baked in for growth within the US versus growth outside the US?

Can you maybe give a little more color, you mentioned gross margin should be up in the year. Could you talk about what's driving that. Is it product cost? Is it mix? That would be great. Thank you.

As it relates to US growth versus non-US growth? We eeked out just the smallest amount of growth in the US for the full fiscal year. We certainly expect stronger growth in the US, even with the impact of the 58 stores that were closed toward the end of FY14. So the US growth, given that factor would be kind of in the low-mid single-digit range, with stronger organic growth outside the United States.

As it relates to the FY15 gross margin outlook, there are a number of factors that are shaping our expectation of modest growth margin expansion. We certainly have more aggressive pricing across some of our key brands, that is certainly supported by the incremental marketing investment. It's interesting, when you step forward with a robust incremental marketing plan, your ability to get price increases through the retailers is enhanced. We are forecasting favorable brand mix, faster growth from our higher gross margin brands than the lower gross margin brands.

We're seeing a modest benefit from lower crude oil prices, and that benefit coming through in lower raw material cost, as well as lower freight cost, particularly in the back half of the year. We expect less of a negative impact from inventory liquidations related to store closures. Even though we're closing, anticipate closing more stores in FY15 at the end of the year than we did in 2014, the inventory liquidation will be in a more rational orderly fashion throughout the course of the year and less of a negative impact from that.

We won't have the Patagonia inventory liquidation, which was put negative pressure on gross margin in the fourth quarter of 2014. Finally we'll have lower -- we anticipate having lower LIFO expense for the full fiscal year, which negatively impacted full-year gross margin in 2014. Number of factors that go into the gross margin outlook, Jay, but those are the primary ones.

Thanks so much.

The next question comes from Ed Yruma from KeyBanc. Please go ahead.

Hi. Good morning. Thanks for taking my questions. I guess Don, just first a clarification question on the delta in guidance between what you offered in January versus today, is it simply just a change in your underlying FX rates? Were there any other kind of underlying assumption changes?

Two, you provided a little bit of color commentary on the earnings growth throughout the year. Are there any things we should think about in terms of the cadence by which incremental brand building investments will kind of hit the P&L? Thanks.

The vast, vast majority of the change in outlook for 2015, Ed, is based on the change in FX environment between early in the calendar year and now. Particularly, the Euro and the Canadian dollar.

The Canadian dollar has weakened versus the US dollar by about almost 7% from where it was at the beginning of the year and the Euro has weakened by about 5% since the beginning of the year. So the vast majority is FX with only a small amount based on about $1 million of higher pension expense than we had anticipated when we gave our preliminary outlook.

And as it relates to the cadence of the marketing spend, we're looking at double-digit increases in marketing spend in each quarter of the fiscal year, Kind of mid teens increase in each of Q1 and Q2, that increase goes up to about 30% in Q3 and then comes back down to a mid-teens increase in Q4. So this is not a case, as has been the case in past years, where the marketing spend is back end weighted. We're coming out of the gates investing in order to drive some incremental business in the back half of the year, but to really get the maximum benefit we can in 2016 and beyond.

We have great programs to invest behind. We have great brands to invest behind. We are kind of coming out with an aggressive investment posture from the beginning of the fiscal year.

One other follow-up. In terms of FX you provided kind of the impact to revenue. You said half the operating margin decline is due to FX. How should we think about the interplay between SG&A and COGS? Thanks.

Based on our expectation for FX rates across the major currencies, we think SG&A will be favorably impacted, reported SG&A favorably impacted by $17 million year-over-year. The reason it's having a disproportionate impact on the cost of sales line, is in addition to having the translation impact, translating our foreign subsidiaries P&L into US dollars, but also there's a product cost impact.

So the product cost impact, as you know relates to buying our inventory in US dollars and then having it translated into local currency for the foreign operations. And so the product cost impact is about $16 million on top of whatever the translation impact is, so there's a disproportionate impact on the cost of sales line, but SG&A is benefiting by -- based on our current assumptions by $17 million year-over-year.

Thanks so much.

Thanks.

The next question comes from Christian Buss from Credit Suisse. Please go ahead.

I was wondering if you could talk about how you're thinking about the distributors and how they're responding to the currency impact. If you could talk about how that expectation flows through your revenue assumptions for the year, that would be helpful as well.

Yes, Christian. I guess as you know, most of the world buys their footwear in US dollars. So this kind of significant strengthening of the US dollar is certainly in most countries going to have an impact on cost of goods sold and, therefore, retail -- pricing at retail.

We expect our distributors are going to a take some price increases, just as we're going to take some price increases, probably more towards the second half. On the other hand, we source over 100 million pair of footwear a year, so we have a pretty large pencil and we're going to use our sourcing power maybe to re-engineer some footwear and to take some additional costs out of the supply chain as well.

That's helpful. And then a housekeeping question. How much did pension expense contribute to the SG&A rate in the fourth quarter?

It was about -- pension expense was about $8.5 million lower in the quarter. So that's about 1% of the revenue reported.

Okay. That's helpful. Thank you so much and best of luck.

Thanks, Christian.

The next question comes from Chris Svezia from Susquehanna Financial Group. Please go ahead.

Good morning, guys. Could you just maybe walk through -- two questions here. One, what rates are you assuming for the balance of the year, Don? Are you assuming they sort of stay consistent to where they are?

Maybe you could walk through your thoughts by operating group as to how it plugs into that revenue outlook for the year, between Lifestyle, Performance, and Heritage.

We actually have -- Chris, we have -- we're a lot closer to spot rates in terms of our planning rates this year than we have been in years past. We typically have a little more of a gap between the rates we're planning at and what current spot rates are. Given how the dollar so rapidly strengthened over the last several months, particularly against the Euro and the Canadian dollar, the rates that we're using are very close to spot rates. The dollar has weakened a little bit in the last week. There's the tiniest sliver between the rates we're using for plan but not much.

I will also say, partly in answer to your question, that people have asked us about what is the sensitivity of Wolverine's business that changes in FX rates and for your benefit, a 5% increase or decrease in the US dollar versus the currencies that we're most exposed to, the Euro, the Canadian dollar and the pound, has about a $21 million impact on reported revenue. And by the time that flows through the P&L, has about a $0.04 per share EPS impact.

So that gives you some measure. Meaning if the dollars strengthens or weakens, 5% from where it is today versus those three currencies, that's what you would expect to kind of flow through our P&L.

Then maybe, Chris, the second part of your question, how does this impact the various groups. Obviously, the Lifestyle group would probably have the littlest impact as a result of the US dollar, all things taken into consideration. Although they're having accelerated growth internationally at this point, it is still a relatively small base compared to -- for our Merrell brand, for example, or certainly our more established Hush Puppy brand.

As you know, over 80% of all Hush Puppy pairs are outside the United States but some of those pairs, unlike some of our other brands are sourced in local currencies. We would expect an impact on Hush Puppies a little bit, but not as much as you might ordinarily think, given the percentage of footwear outside the United States.

Can I just clarify on that? What I was more curious about, how does each lifestyle, performance and heritage tie into that 2% to 4%. Is it fair to say performance is at the top end; are they all at the upper end of the range? I'm trying to see where each one plugs in based on your sort of currency neutral thought process.

We tend to not break our revenue guidance down into operating group or brand level. Clearly, the Lifestyle Group, Chris, is going to be negatively impacted by the retail store closures, given that the majority of those were of the 58 that we closed, two-thirds or more were Stride Rite locations. So there would be a negative impact there for sure.

But the performance group will benefit from another strong year of growth from Saucony, Chaco, and we talked about the mid single-digit revenue growth from Merrell, which is high single-digit on a constant currency basis. Beyond that level of commentary, we'll kind of stop there and let you kind of fill in the blanks.

All right. Thank you. All the best.

Thanks.

The next question comes from Erinn Murphy from Piper Jaffray. Please go ahead.

Great. Thanks, good morning. Just building on that last question, just as we think about the brand trajectory for both Sperry and Merrell in 2015, it seems like both of those even on a constant currency basis are a fairly stark acceleration. Could you maybe peel back what's driving that. Is it more units? Is it pricing?

Where are you also applying some incremental investments that you're making helping to drive that revenue? Are we seeing that throughout the year? Thank you.

First, with respect to Sperry, certainly we're very encouraged by the bounce we got in Q4 and we think the bounce is going to continue on to the new year. There's a number of different things driving that, the new brand platform, new product introductions. Our consumer-facing media spend for Sperry is going to increase about four-fold in 2015. So we expect that to have certainly some impact on 2015. But even for Sperry, most of that impact will be -- we will see in 2016 and beyond.

So we've got a new leadership team energized and in place there. Our inventories for Sperry are pretty lean at retail right now, which is also driving some of this performance in Q4 and what we expect in the coming years. And as you know, Sperry is still very early in its international development.

On the Merrell side, we're most encouraged by the demand creation objectives we have for this year. We've added new talent in the product area and we're focusing on our DTC business for Merrell. But at the end of the day, with Merrell, a lot of it comes down to simple product creation and that's been our focus over the last couple of years.

We know we have a few countries where Merrell has some established distributors, Russia, for example, that are going to be certainly impacted by some of the macro, political events. But overall, we see Merrell driving growth across its performance outdoor category as well as its active lifestyle category.

Erinn, just to follow up a little bit, going back to Sperry for a second. We've identified opportunities to take prices up a little more aggressively for certain collections. That certainly was very gratifying to see. That is a source of some of the revenue growth, but obviously has a disproportionate impact on the brand's gross margin. Still, very encouraged to see that.

And I would encourage -- I know you guys follow a lot of companies and a lot of different brands you track, but I would encourage you guys to go into the Sperry, Top-Sider.com website and look at the new Odyssey Await campaign that was just launched yesterday on the website. That's a much better -- you can get a better feel for the campaign than just having Blake and I describe it to you over the phone. If have you the time, I would encourage you to take the time to do that.

One clarification, Don, again for you. The 53rd week benefit, what was the -- in the fourth quarter, what was the benefit specific to Sperry?

For Sperry? We're quantifying the benefit, 53rd week to our DTC operation given that we did ship on the wholesale side in the a 53rd week, but a lot of those shipments we feel, we know, would have gone out in the 52nd week had the fiscal year only been 52 weeks. In terms of trying to quantify the wholesale lift is very difficult to do.

But the DTC lift was about $7.5 million just from the stores being open seven more days and the websites being open for consumer business seven more days. Of that $7.5 million, about $1.5 million was Sperry Top-Sider.

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

Thank you.

The next question comes from Scott Krasik from Buckingham Research. Please go ahead.

Hi, guys. Thanks. Can you hear me?

Yes, we can. Good morning, Scott.

Okay. No one else said thanks for doing conference call during industry trade show on the West Coast, so --

You're welcome.

Question on Merrell. You sort of addressed it a little bit. But it is about product. I think you have been increasing your investment in marketing for the last couple of years. The business is basically flat in the US.

Talk about the growth, how big you think Merrell can be, given that it does seem to be maturing in some of your biggest markets. And then just second, Latin America, we just always sort of penciled in double-digit growth there. Obviously wasn't in 2014. So just wondering what that is, the outlook for that region is as a whole.

Basically I'll address your second question first. Latin America over the last three to five years, we frankly have seen a lot of the governments there leaning left. Historically, that hasn't been especially good for business, whether it's consumer or soft goods or other industrial categories.

Certainly, we're all aware of the special challenges in Venezuela and Argentina, but it's also impacting some other countries in Latin America. And it's really some of those macro business and consumer headwinds that are really having an impact on the Merrell business in Latin America.

With respect -- you had questions on Merrell itself. I would say we were very encouraged, obviously, by Merrell's Q4. Mid-single digit overall revenue increase. I would say, even though the US market is Merrell's largest market, Merrell had an increase at the very high-single digit range in Q4. And that kind of bounce in our biggest market is certainly very encouraging.

The performance outdoor category continues to be very strong for Merrell. It had six consecutive double-digit increase in that category, quarterly increase. And active lifestyle, that was up in the mid-single digit range in the fourth quarter. We still don't believe we are where we want to be in the active lifestyle segment of the market, but it was encouraging to see a pretty significant bounce up there yet.

So as you know, we had our international meetings with our distributors. Everybody here in Grand Rapids in November, and the reaction to the new Merrell line was very good. Despite some of the currency headwinds we're encouraged globally as well.

I don't say this with any particular level of excitement, but the brand in the US, Merrell, when you adjust for the transfer of the Merrell kids business to Stride Rite which took place in the beginning of the year, if you adjust for that, the brand was up in the low-single digits in the US and faced a headwind of a pretty significant decline in the outside athletic category for the brand. Which really is less brand specific and more category specific. We're not adjusting the actual US growth for that, but that certainly was the biggest negative factor on the brand's growth in the US in 2014. And we don't expect it, obviously, to be as much of a negative impact on the brand's growth in 2015.

Okay. Thanks. And then just last, separately. What percentage of your EBIT comes from outside the US at this point?

Post PLG acquisition, when you factor in all the corporate expenses it's about half.

In terms of pairs, we would have about 54%, 55% of our pairs would be in the United States. Reported revenue would be in the low 70% range. But about 55% of pairs in the US and about 45% of pairs outside the US.

About half of our operating income, about half of our cash flow, free cash flow is typically outside the US. 2014 being an aberration given the benefit from the AR financing facility, that would be a US cash flow.

Thanks, guys, good luck.

The next question comes from Kate McShane from Citigroup. Please go ahead.

Thank you. Good morning.

Good morning, Kate.

I had two quick housekeeping questions. With the increase in marketing spend in 2015, can you tell us how much marketing spend is increasing in terms of percentage of sales, where we're going from on a percentage of sales basis from marketing?

And also, do you have an update on the number of distributor sign-ups for the PLG brands and what the goal is for 2015?

Yes, let me give you -- let me answer your second question first. Don's doing a few call calculations for your first here. We're encouraged. The PLG brands are beginning to have some meaningful international business. The number of countries since the closing is up nearly 40%.

I think our pairs are up over 50%. Stores and shop-in-shops are up close to 60% since the time of the closing. As you know, it's a bit of a slow build to get going, but once you get the momentum it's almost like an annuity. So we don't have specific targets in terms of numbers for 2015. Obviously we have some regions like Asia-Pacific which are certainly top of mind for Keds and Sperry, for example.

Going back to your first question, Kate, our marketing spend as a percent of sales in 2014 across the portfolio, of course it can differ pretty dramatically by brand, was 4.6%. Based on the $30 million incremental investment program, the portion of that will be classified as marketing, we would expect that percentage to go up 80 basis points across the portfolio as a whole.

And for certain brands, the biggest part of the incremental investment plan is minus Sperry brand. Sperry marketing as a percent of revenue would show a more disproportionate impact. But across the portfolio as a whole, about 80 basis points.

Okay. Thank you.

(Operator Instructions)

The next question comes from Danielle McCoy from Wunderlich Securities. Please go ahead.

Good morning, guys. Thanks for taking my questions. I was just wondering if you can go into a little bit more detail with some of the rebranding that we're seeing in Sperry and Merrell, and kind of the feedback you've been getting from your key retail partners. Is this leading to any new distribution, just expansion of doors within old distribution or expansion within existing doors?

Maybe I'll talk briefly about Sperry first. As you know, the US remains Sperry's largest market. So in the US market, the new marketing push, the new brand platform certainly for 2015, is going to have the biggest impact in the USA.

I think from the product side, Sperry is focused on being famous for boat. It's as you know, the boat shoe silhouette, it is the dominant player and it's frankly the job of that special brand to keep that silhouette fresh and in front of the consumer.

But I think it's also focused on elevating the -- and expanding the Gold Cup platform, having a bigger presence in volcunizing sneakers, and both the men's and women's boots category had an exceptional performance in Q4. We're not seeing any consumer or retailer pushback for Sperry's expansion into adjacent product categories. So that's all very, very encouraging.

The new brand platform, I think is also targeting a younger consumer with the Paul Sperry collection. That collection currently has been and is under development. It's going to be introduced for spring 2016, probably will be introduced late this fall for spring 2016. So that's been a major focus of the new product team at Sperry.

So we've reviewed the new brand platform, the category and product pushes in development with our international partners and in more than a handful of our key US accounts over the last three or four months. Their response has been frankly very, very positive.

When you talk about getting new points of distribution, I would say that one of the benefits of the new marketing campaign and the investment behind that is really getting new countries of distribution. The outside North America Sperry grew its wholesale revenue 26% in 2014.

And the percent of wholesale that was outside of North America increased 200 basis points year-over-year. So we're getting that kind of momentum and just having the new marketing campaign, newly signed international distributors get more charged up about it when you have a new, more evocative marketing campaign. That's really where we'll see the benefit as we go forward.

Overall for Sperry, it's more doors, internationally for sure and a few more doors domestically but especially domestically, it's increased shelf space.

Okay. Great. Then just a housekeeping question. What should we be looking at as far as D&A for the year?

$50 million.

Okay. Great. Thanks so much. Good luck, guys.

Thanks.

The next question comes from Mitch Kummetz from Robert Baird. Please go ahead.

Thanks for taking my questions. It was up double-digits for the quarter. I think it's been up double-digits each quarter this year.

I'm sorry, Mitch. We missed the first part. What are you talking about?

Are you talking about Keds?

CAT. Is there any way you could give us a sense as to how big that brand is now. I know you don't like to break out brands. You talked a little bit in the past specifically about Merrell and Sperry.

But just given the growth that you've been experiencing at Cat, I think it would be helpful to give us a sense as to how big that business is and just remind us what's driving the double-digit growth. You've been experiencing for a while here.

Mitch, as you know, CAT, really when we took over the global license for that brand 20 years ago, it was largely a work brand here in the US and a lifestyle, urban lifestyle brand outside the US. And certainly those two lines have merged over the last couple of decades and I think it's helping, both categories are frankly helping to fuel CAT's growth. We're seeing really a tremendous uptick across the world, really all regions including the US.

US would still be a little more focused on work as a market, but we've seen big upticks as well in the CAT woman's business. I think part of the success and growth in CAT over the last couple years has also been driven by its international standalone concept stores. So we're up to about 108 Cat concept stores around the world. These are not just footwear stores. They're lifestyle stores, featuring apparel, bags, and other accessories, although in the stores well over half of all sales are tied directly to footwear.

So I think that kind of DTC initiative is having an impact on the CAT brand and the active and casual footwear styles internationally is having a positive impact. I would also say internationally and domestically I haven't really seen any falloff in the boot trend. And of course the boot trend is the heart of the CAT business.

And so CAT is certainly benefiting from that continuing trend. So it's really -- the CAT business is certainly a significant contributor to us on the top line, but even a more significant contributor on the bottom line because of the way we report international revenue.

And just to frame the size of it, Mitch, by the way. Blake didn't answer that question specifically. He's well trained.

I practice.

But what I will say is that both CAT and Wolverine, the two biggest brands within the Heritage Group, are materially larger than our Keds brand. I think you have a sense of the size of the Keds business. They're each materially smaller than our Saucony brands. They're each individually less than 10% of the Company's consolidated revenue.

Okay. That's helpful. Then just drill down a little bit on Sperry, get a better sense of where that business is today. Could you tell us what percent of sales are coming from outside the US? I know you launched -- I think you launched apparel this past fall.

Could you say what percentage of the business is non-footwear at this point? Can you also kind of speak to the boat, non-boat percentage, and all of this would be for the full year 2014.

Let me see if I can answer a few of those questions. I would say the boat shoe category for men's in the US now, I'll talk about Sperry's largest market, has stabilized and we saw growth in men's, certainly at the wholesale level in the US in Q4.

The women's business continues to find bottom in the pure boat shoe silhouette category, although the women's casual business in Q4 was flat and the boot business was up very strong triple digits.

As a brand we kind of feel like the fashion component of the boat shoe for Sperry has kind of found bottom, if you want to view it that way. And it appears to be only upside certainly on the men's side in the near future.

On the apparel and accessories side, as you know we've had very strong licensing programs in swimwear, socks, eyewear, small leather goods, several other categories. We've decided to make a major shift in Sperry apparel, away from trying to create a business through our partner in the mid-tier department stores in the USA, and focus on Sperry's DTC business. That's its brick and mortar stores and its e-commerce business.

So we've made a shift there and it's really a shift to focus on the loyal Sperry consumer that's coming to our own e-commerce sites and to our Sperry stores. So that switch and change will occur mid-year this year and we expect apparel, in addition to these other categories, to contribute significantly to the uplift in the DTC business for Sperry. And I forgot, what was your other question?

International, I think Don you said the non-US Sperry was, did you say up 26% for the year? I don't know if I heard that correctly.

Non-North America. Sperry's wholesale business.

Where is non-North America as a percentage of total revenues for the year.

On the wholesale side it's high single-digits. If you look at outside of the United States, not just outside North America, outside United States it's right at low double-digits.

Thank you.

Thanks, Mitch.

The next question comes from Sam Poser from Sterne Agee. Please go ahead.

Good morning. Thank you for taking my question.

Good morning.

Hi. A couple questions. Number one, with Sperry and Merrell in the fourth quarter, how much of that increase, those increases may have come from increased distribution, number one? Number two, what were the Sperry same store sales for the fourth quarter? And number three, where do we stand, I have to ask the question, with the five year plan, the 2018 plan.

What was your third question, Sam, I missed it?

The 2018 targets.

On your first two questions, for Sperry I would say domestically, probably relatively small increase in Q4 came from new distribution for that brand. It was just improved sell-throughs in existing distribution. Additional shelf spaces especially in the boot area, and stronger results in DTC. When I look at for Q4, the DTC business for Sperry, I think that was your second question.

The same store sales, yes.

Yes, I mean, Sperry, of all of our formats, had probably the best performance in comp store increases, mid single-digit increases in Q4. So we saw --

I will say the Sperry specialty stores, in which there are more specialty stores than outlet stores, comped high single-digits. The outlet stores, of which there are 22, comped mid single-digits.

We were very pleased with our DTC performance for Sperry in Q4 and we expect that bounce to -- that bounce back to continue into the coming year.

As it relates to the long range financial outlook for 2018, obviously a lot of things have happened last year and a half that we didn't project or anticipate when we actually went out with 2018 financial targets. Probably the biggest single factor now is the significant strengthening of the US dollar, versus where we thought it would be a year and a half ago. We certainly didn't contemplate closing up to 140 retail stores. We didn't factor in the exit of the Patagonia footwear license, although a small brand, still one of the brands in the portfolio.

So what we will say as it relates to the 2018 target that we communicated in 2013, we are working as hard as we can and as diligently as we can to deliver as much revenue, as much earnings and as much cash flow as we can in 2018. We're going to try as hard as we can to hit those numbers. If we fall short it won't be because of a lack of effort. That's the kind of attitude we've had in years past.

But it's served the Company and the shareholders well. We continue to do that. We are not updating the long range financial targets today.

Don't know when in the future we will. All I'm going to say, we're working as hard a as we can to deliver as much as we can by 2018 and beyond.

Thanks. Just one last thing, Don. The $0.07 in the restructuring that's on your attachment on your website for 2015, that's the only really nonrecurring one-time that would be involved within the guidance of I think it's $1.46 to $1.54. Is that correct?

Yes. That is correct.

You would add $0.07 to both sides of that and that would give you what the guidance is on a GAAP basis, on a non-GAAP basis.

Subtract. $1.53 to $1.60 excludes the restructuring charges.

Got you. Okay. All right. Perfect. Thank you very much. Good luck.

Thank you.

The next question comes from Laurent Vasilescu from Macquarie.

During the 2013 Investor Day it was noted the international gross margin was around 45%. I was curious to know where it stands for 2014 and how should we think about it for 2015?

I don't have the international gross margin at my fingertips. That was kind of a point in time disclosure as opposed to something we consistently disclose. I think maybe the origin of your question was the impact of the higher mix of certain lower margin top line shipments in FY14.

We did note in the Investor Day presentation, correcting what I think was a misperception of our international business, that it was 100% very, very high gross margin royalty business. If you look at our international revenue across all brands in the portfolio, about two-thirds of the reported revenue is kind of lower than average top -- what we call top line or cost plus revenue and about one-third of the revenue is that kind of pure gross profit, almost 100% gross margin royalty revenue.

What we had in the fourth quarter and for all of FY14 was a disproportionately higher impact, higher mix from the lower margin top line revenue, which was a drag on gross margin. It was more top line revenue in our results in 2014 than we anticipated at the beginning of the year. Certainly even going into Q4 for that matter.

Okay. Great. In terms of the of West Coast port strike, could you potentially quantify the potential impact to maybe COGS or SG&A for the first half of 2015?

Yes, at this point it's very fluid and frankly hard to quantify. As you know, we've been very proactive through this long negotiation process. We basically, the West Coast strike had almost no impact on our Q4 performance whatsoever. I would say things have deteriorated in the new year here.

The President and the administration has finally gotten involved since the labor secretary out there, to try and solve the last major issue. I think there's only one last major issue outstanding.

I don't -- right now we're planning for the worst. So we diverted some shipments to up and down the coast from Vancouver and Tacoma, down to some other ports and we diverted some shipments over to the East Coast.

But quite honestly, there's been at least two occasions in the past where the Presidents have used their executive powers to end a West Coast strike or stop it, nip it in its bud, and I wouldn't be surprised if that happens again. I don't think the administration is going to let a single labor dispute have that kind of material impact on our economy as a whole.

Okay. Great. And in terms of --

I hope I'm right.

In terms of the guidance, I think there was some discussion in the prepared remarks about buyback for 2015. Does your FY15 guidance imply that buyback?

No, it does not. The share count that we're using, 101 million does not include any buybacks.

Okay. Thank you. Best of luck.

Thank you.

Thank you.

Thank you. The question-and-answer session has now ended. I would now like to turn the call over to Mr. Chris Hufnagel. Mr. Hufnagel, you may proceed.

Thank you, Andrew. On behalf of Wolverine Worldwide, I would like to thank you for joining us today. As a reminder, our conference call replay is available on our website at www.wolverineworldwide.com. The replay will be available until March 19, 2015. Thank you and good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.