Build-A-Bear Workshop, Inc. (BBW) Q4 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Build-A-Bear Workshop Fourth Quarter 2014 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Allison Malkin of ICR. Thank you. Ms. Malkin, you may now begin.

Good morning. Thank you for joining us. With me today are, Sharon Price John, CEO, and Voin Todorovic, CFO. For today’s call, Sharon will begin with a discussion of the fourth quarter results and outlook for 2015. Voin will review the financials and then we will take your questions. We ask that you limit your questions to one question and one follow-up. This way, we can get to everyone's questions during this one-hour call. Feel free to re-queue if you have further questions. Members of the media who maybe on our call today should contact us after this conference call with your questions. Please note the call is being recorded and broadcast live via the Internet. The earnings release is available on the Investor Relations portion of our corporate Web site and a replay of our call and webcast will be available later today on the IR site. Before I turn the call over to management, I will remind everyone that forward-looking statements are inherently subject to risks and uncertainties. Our actual results could differ materially from those currently anticipated due to a number of factors, including those set forth in the Risk Factors section in the Annual Report on Form 10-K, and we undertake no obligation to revise any forward-looking statements. And now, I would like to turn the call over to Sharon John, CEO.

Thanks, Allison. Good morning, everyone. Thank you for joining us today. We were pleased to deliver solid results in 2014 and believe that our strong fourth quarter represented the convergence of the key strategies that we have been driving throughout the year. For the fourth quarter we achieved a 9.9% increase in consolidated comparable store sales, expended retail gross margin by 730 basis points and delivered net income of $13 million versus adjusted net income of $7 million in the fourth quarter of 2013 and an increase of $6 million. In total, for the 2014 fiscal year we achieved an increase of 1.6% in a consolidated comparable store sale on top of a 5.1% increase in fiscal 2013. Expended retail gross margin by 450 basis points following a 220 basis point expansion in fiscal 2013 and delivered adjusted net income of $16.5 million versus adjusted net income of $3 million in fiscal 2013, an increase of $13.5 million. The continued disciplined execution of our stated strategies is the primary contributor to our improved results for the quarter and for the year. As we stated, our plan for 2014 focused on four key strategies. Optimizing our real estate, refining our consumer value equation, rationalizing our expenses structure and establishing the groundwork to further leverage our core competencies and brand equity. Throughout the year we believe we have successfully and consistently delivered against these strategies. First, we have continued to execute the real estate optimization plan that was initiated in late 2012. At that time 22% of our North American retail stores were unprofitable. In contrast, we ended 2014 with 98% of all stores generating a positive four-wall contribution margin. Specifically, we generated margin of over 19% in our North American stores which is almost double the margin we achieved in 2012. The results show significant progress towards reaching our stated goal of a 20% to 22% four-wall profit margin. Simultaneously with the closing of underperforming stores, we have selectively opened stores in new format to take advantage of high-traffic tourist locations. An example of our ongoing opportunistic approach to non-traditional real estate is the fourth quarter opening of five temporary shop-in-shops within key Macy's locations, including the Herald Square in New York City flagship store. This initiative not only added sales in the quarter but also increased our brand exposure to the hundreds of thousands of tourists and local consumers to visit Macy's as a part of their holiday tradition. Second, we have continued to successfully refine our consumer value equation. We balanced the tactics of reducing discounts and taking selective price increases with an integrated brand building marketing effort designed to drive more profitable sales and elevate product stories. During the fourth quarter, our Merry Mission Christmas campaign was a great example of how this new brand building marketing approach can generate both sales and margin for our company. We positioned our proprietary Merry Mission Reindeer product as intellectual property and buoyed it with exclusive advertising and a mobile app. This approach elevated the perceived value of the line enabling parity retail pricing with our licensed offerings for the first time. By doing this we increased average transaction value and added margin. The app which extended our brand interaction by creating play beyond the plush had over 1.5 million game sessions. This along with the strength of our other proprietary and licensed properties, namely Disney's Frozen and Nickelodeon's Teenage Mutant Ninja Turtles fueled our 9.9% comparable store sales increase in the fourth quarter. The combination of real estate optimization and refinement of the consumer value equation was instrumental to our North American sales per square foot improvement of $409, up from $381 in 2013 moving us closer to our stated sales per square foot goal of $450 to $500. Third, we have continued to manage our expenses and successfully expand our margins. The fourth quarter marked the first period where we were able to comprehensively value engineer our product offering from the planning stage versus cost reducing the line midway through the development process. This effort combined with the strategic price increases help to drive a 730 basis point expansion in retail gross margin for the quarter and a 450 basis point expansion in retail gross margin for the year. And fourth, we started to lay the groundwork for the expansion and creation of new revenue streams. In 2014 we expanded into new international markets for the first time in over three years with the opening of two stores by our franchise partner in Turkey. We also elevated and expanded our franchise agreements in Germany adding two additional countries for future development, Switzerland and Austria. In addition, we started to make key investments to upgrade our IT infrastructure and supply-chain with the goal of continuing to improve productivity and efficiency. During the coming year, we will begin to evolve our 2014 strategies and stated goal of sustained profitability to sustained profitable growth. Through a combination of continuous improvement of current initiatives and strategic expansion into additive opportunities, we will focus on the following four key strategies for 2015. One, expand into more places. During the year we expect to open stores in high potential destinations such as tourist locations, outlet malls and shop-in-shops. Given that these types of locations tend to over index on key metrics versus our traditional mall stores. In the back half of the year, we will also start to update our aging store fleet and systematically rollout a new store design that has been developed to improve productivity while refreshing our brand look to be more relevant to the millennial consumer. We will update stores with our new design primarily in conjunction with natural lease events including new store openings, relocations and lease required remodels. We will also continue to leverage the current momentum of our owned and operated retail business to enter new global markets with both a restructured franchise model and organic corporate expansion. To this end, we are pleased to share that we recently restructured the Nordic franchise arrangement which included converting the store in Tivoli Gardens, one of Denmark's most popular tourist destinations, into an owned and operated enterprise. Two, target more people. We will continue to drive our core consumer business with an evolved segmentation, product development and marketing strategy. We will focus on initiatives that increase trial and repeat visits from the 3 to 12-year old core consumer who currently represents over 60% of our sales. We will also strategically expand our effort to the over 12-year-old consumer base with a focus on less price-sensitive categories including giftable, affinity and collectible products. This consumer currently represents approximately 20% of our sales and has a tendency to over index for online purchases. Therefore, we expect to leverage our e-commerce business to efficiently target this segment. Three, develop more products. We will continue to develop more high impact, proprietary product stories coupled with elevated marketing programs that tend to garner higher price points, drive add-on purchase and create play beyond the plush. We also intend to strategically expand our brand presence and generate new sales and profit streams by launching an outbound licensing program. Licensing will enable us to extend our brand reach with new offerings in relevant categories and will provide consumers with products beyond the plush. .: To date, our first quarter 2015 comparable store sales are positive. Key contributors are the impact of the redemption of holiday gift cards and the implementation of our strategies including the launch of fresh new offerings of proprietary and seasonal products and the continuing performance of key license properties that we accurately anticipated would remain relevant after the holiday sales period, such as Frozen. Of note, this past Valentine's Day was the third largest single sales day in our history and represented the highest average daily store sales since 2006. Buoyed by the holiday falling on a Saturday, we further fueled this opportunity by leveraging our interactive, personalized store experience to create an integrated marketing effort designed to appeal to kids, parents, grandparents and teens who wanted to create a furry friend for someone special in their life. Our campaign called Share your Heart paid homage to our iconic and holiday appropriate heart ceremony an emphasized adding a personalized message to your furry friends with our record a sound accessory. We also partnered with the Make-A-Wish Foundation for the second year in a row to enable our guests to share their hearts and their support for children with life threatening illnesses. To drive our boys business during the Valentine period, we built on our historically successful superhero product lines with the launch of a new Hulk Bear in advance of the May 1st release of Marvel's Avengers: Age of Ultron movie. This super cute buffed up Hulk was also a natural giftable for our over 12-year old guests who wanted to send a message of strong affection for someone special. To drive sales for the remainder of the first quarter, we will take advantage of the Easter shift back to the first quarter with the introduction of an innovative brand building TV advertising campaigns timed with the Easter season and the arrival of our proprietary spring collection. We will launch a new Build-A-Bear product line called Promise Pets, a more realistic breed based plush primarily targeted to the older girl and boy segments. Promise Pets is supported with an age appropriate free mobile app that allows the child to bring the product to life and virtually care for their new furry friend further building on our goal of extending brand interaction and creating play beyond the plush. We will introduce the first of a series of limited edition collectible Disney Princess bears created to appeal to both the younger girl and the over 12 collector segments. The initial offering will be the Cinderella Bear which we expect to benefit from heightened character awareness due to Disney's March 13th release of the live action Cinderella film. And we will continue to drive our boys business by systematically launching new Avengers characters building up to the film's release. Overall, our outlook for the quarter remains positive and we continue to expect to leverage the momentum from 2014. Now I would like to turn the call over to Voin to review our 2014 financials in more detail.

Thanks, Sharon and good morning everyone. We are pleased to report our eighth consecutive quarter of improved operating results including positive comparable store sales, expanded retail gross margin and increased net income for both the fourth quarter and fiscal year 2014, demonstrating the disciplined execution of our strategies. Before I continue, as a reminder, fiscal 2014 was comprised of 53 weeks compared to 52 weeks in fiscal 2013. The 53rd week is included in our 2014 fourth quarter results. For the fourth quarter net retail sales were $130 million compared to $106 million in the prior year, an increase of 23% excluding the impact of foreign exchange. Consolidated comparable store sales rose 9.9% driven by 12% increase in transaction value with gains in both average unit retail and units per transaction, partially offset by a decrease in transactions as we experienced lower conversion on foot traffic. By geography, comparable store sales increased 8.5% in North America and 14% in Europe. Comparable store sales are compared to the 14-week period ended January 4, 2014. Our e-commerce business increased by 9% excluding the impact of foreign exchange with continued improvement in profitability. The fourth quarter also benefited from an adjustment to deferred revenue related to our loyalty program which was approximately 1% of net retail sales for the quarter. Retail gross margin expanded 730 basis points to 52.2%. This was a result of a 420 basis point increase in merchandise margin and improved efficiencies in the supply chain. The remaining 310 basis points of expansion was attributable to leverage and fixed occupancy expenses driven by improved sales performance including the impact of the 53rd week and the deferred revenue adjustment. SG&A was $56 million or 42.9% of total revenues, including $1 million in management transition, asset impairment and store closing expenses. This compares to $44 million or 40.9% of total revenues last year which included $1.5 million in management transition, store closing and asset impairment expenses. Excluding these costs, SG&A was 42.1% of total revenues in the fourth quarter this year, an increase of 260 basis points. The additional expenses were related to increased performance-based compensation and higher investment in elevated brand marketing to drive store traffic. Adjusted net income per diluted share improved to $.73 from $.40 last year. For the fiscal year net retail sales were $388 million compared to $373 million last year, an increase of 3.4% excluding the impact of foreign exchange. Our consolidated comparable store sales rose 1.6% primarily driven by a 7.3% increase in transaction value. That included gains in both average unit retail and units per transaction partially offset by a decrease in transactions. By geography comparable store sales grew 1.4% in North America and 2.3% in Europe. E-commerce sales increased 3.5% excluding the impact of foreign exchange with significant improvement in profitability. Retail gross margins for the year increased 450 basis points to 45.6% driven by 370 points of expansion in merchandise margin and improved efficiencies in the supply chain. The remaining 80 points of expansion came from leverage on fixed occupancy expenses driven by improved sales performance, including the impact of the 53rd week and the deferred revenue adjustment. SG&A was $164 million or 41.9% of revenue including $2 million of management transition, asset impairment and store closing expenses. This compares to $161 million or 42.4% last year which included $5 million of management transition, store closing and asset impairment expenses. Excluding these costs, SG&A was 41.3%, a 30 basis point increase. Pretax income improved to $16 million from a pretax loss of $2 million in fiscal 2013 and $18 million increase year-over-year. Income tax expense was $1.7 million for an effective tax rate of 10.4%. The 2014 tax expense and effective tax rate reflect the full release of the valuation allowances in foreign jurisdictions as well as the portion of the U.S. valuation allowance. We currently expect to see a reversal of the remaining U.S. valuation allowance in fiscal 2015 which would result in an overall tax benefit for the year. Net income improved to $14 million or $.81 per diluted share compared to net loss of $2 million or $.13 per share last year. Adjusted net income improved to $16.5 million or $.93 per diluted share compared to last year's adjusted net income of $3 million or $.17 per diluted share. Turning to the balance sheet. At year-end, consolidated cash was $65 million, up $21 million from last year. The increase in cash is attributable to our improved operating performance and reduced capital spend. The majority of our cash at year-end was domiciled outside the U.S. In addition, during the year we had no borrowings on our credit facility. During 2014, we repurchased 327,000 shares of our common stock for $3.4 million, leaving approximately $3.8 million of availability under the current stock repurchase program. For the 2014 fiscal year capital expenditures totaled $11 million primarily related to the refresh and opening of stores and IT infrastructure. This compares to $19 million in the prior year. Depreciation and amortization was $18 million in fiscal 2014. For fiscal 2015 we expect capital expenditures to be in the range of $20 million-$25 million. As Sharon mentioned, we will begin to update our aging store fleet and systematically rollout the new store design that has been developed to improve our productivity while refreshing our brand look. The majority of the store spend is expected to occur in the back half of 2015. Separately, we will continue to invest in IT infrastructure throughout the year. Depreciation and amortization is expected to be $16 million-$18 million. Consolidated inventories at quarter end totaled $52 million compared to $50 million last year, an increase of 3.4%. This change was driven by an approximate 10% increase in units partially offset by a decrease in average unit cost as we realize benefits from our ongoing value engineering initiative. The increase also partially reflects the proactive adjustment of our manufacturing lead times in order to mitigate anticipated first quarter disruption of shipments at West Coast port which positioned us well for the start of 2015. Finally, as you model 2015 the full-year should reflect an adjustment for the 2014 53rd week. For modeling purposes, this adjustment should represent an average week of sales with a higher flow through. Also note, due to the timing of Easter falling on April 5 this year, the majority of the sales for this holiday will occur in this year's first quarter versus the second quarter last year. And now I would like to turn the call over to the operator to begin the question-and-answer portion of the call.

(Operator Instructions) Our first question is from the line of Stephanie Wissink with Piper Jaffray. Please go ahead with your question.

Voin, I will start with my follow-up first and then Sharon, a question for you. On the product margins that you mentioned, I think, up 400 basis points particularly from the value engineering. Can you talk a little bit more about what the balance of the year might look like in terms of opportunities on the [raw] [ph] product cost? And then Sharon my question for you, just coming off of multiple days of toy fair this weekend, there is a lot of talk around the entertainment slate for 2015. Could you help us look beyond the first quarter, beyond Avengers and talk a little bit about what you see coming through the balance of the year? Thank you.

Okay. From the gross margin perspective we are very pleased with the performance that we have seen in Q4. We expect to continue to see some of the pricing benefit that we are seeing in margin expansion in the first half of the year. As you can realize from the stuff that we reported over last few quarters, our margin has expanded significantly more in the second half of the year. So as we are starting to annualize those things in 2015, there is going to be wraparound impact of that margin expansion and pricing activities that we took last year.

Yes, Stephanie. So the entertainment slate, yes, clearly having great partners is a key part of our strategy and we have done a great job at building those relationships over time. This particular year is a very powerful year for us. I mentioned that we the Cinderella collectible doll. A collectible bear that will be out for the live action film. That is an important new approach for us in that it will be an $80 product in a limited edition. So we really are pushing into the strategy that we discussed earlier about the collectible business, the affinity business, the over 12 opportunity. And the product is all inclusive. So it will come in its own unique package with an exclusive dress, wig, shoes etcetera. So we are really excited about that. And then we do follow on with Avengers. We also have Minions for the summer. We are very excited about that. We have a lot of good early buzz on that. We have new product for Frozen which we expect to continue to be powerful. And then in the fourth quarter we have Star Wars.

Our next question comes from the line of Gerrick Johnson with BMO Capital Markets. Please proceed with your question.

I was wondering if we could talk about the increase of value of transactions. Is that driven by more add-ons like clothes and shoes or is that from selling more higher priced bears?

It's a combination of both things Gerrick. As we mentioned we have taken selective price increases basically in two different strategies I think we have talked about before. One being selective price increases as it relates to licensed products in some of our key proprietary products taking it to a higher price point. And then the price banding where we took our entry-level price point from $10 to $12. But we also have with the marketing of comprehensive story, we are seeing add-on purchases increase as well. So it's not just the dollars per transaction, it's also the unit dollars and it's the units per transaction.

Okay. Great. So what's the percent of your bear sales now that are licensed versus proprietary and how does that compare to say last year or maybe even a couple of years before that?

Yes. I think that we have mentioned in the past that we have a range that we look at, some 30% to 40% this year. With the powerful license roster that we had it was on the higher end of the range and certainly hits the top edges in the fourth quarter when you have the combination of a Frozen which is one of the biggest licenses to ever hit in a single year and Turtles. But for the year, we are just on the higher end of the range. In the past it's been in that same range, down the 30%, up to 40% depending on the power of the film or the property itself.

Thank you. Our next question is from the line of Alex Fuhrman with Craig-Hallum. Please proceed with your question.

Congratulations on a great year. I was hoping to get a little bit of more clarity on what comps could look like in the first quarter. I mean it sounds like they are positive so far and obviously you are going to get that benefit from the calendar shift of Easter. I mean what does that kind of end up looking like then for Q1 and then how should we think about Q2 with the calendar shift as well.

Yes. So we are positive year-to-date. We did have a great Valentine's and we actually had a good January given the increase in the gift card sales coming out of the fourth quarter of last year. We feel very good about the quarter. We don’t give exact guidance on quarter-to-quarter comps but the shifts should be beneficial to us. I will just caution that like a lot of retailers we have experienced some hit and miss with some of the weather. We have managed just to fight through it thus far. And although I think we have planned very robustly to manage through some of the port issues, if they remain chronic or become more acute, we are not completely immune. But we have done quite well on mitigating it.

Okay. That’s very helpful. Thanks. And then as a follow-up, it was very interesting to hear what you mentioned about Denmark. Was there something kind of unique about that franchise that made that an interesting opportunity to bring that in house or is that perhaps maybe the international strategy? As you think about new organic stores you are also potentially going to be bringing more comprehensive markets in-house?

I think that it's really an extension of our current North American strategy in that when you think about what Build-A-Bear can really mean to people, it's about marking moments in time, creating memories. And that same sort of over index on key metrics and tourist locations applies also to doors like a Tivoli Gardens, where for those of you that aren't familiar, is a huge tourist attraction in Northern Europe for both in Denmark and some Northern German and Belgians. So it was an extremely successful door for us some years ago, up in the $5 million-$6 million range, that had not been performing at those levels and we had an opportunity to renegotiate some of that deal with our Nordic partner and take that to an owned and operated enterprise which we felt would be an excellent opportunity for us. And it's basically just an extension of the strategy because the same key metrics hold in place. So we are pretty excited about that. And we are looking at restructuring as we mentioned some of those franchise deals in key countries. And if it makes sense for us financially and strategically, we will continue to do that. It also leverages our U.K. operations. So it wasn’t really outside the scope of what we would be able to do in the normal course of business. We are managing it with our general manager of the U.K.

Okay. Great. That’s very helpful. Thank you very much.

Oh, and Alex, sorry. I am just going to add on, you had a second part of that question on the second quarter. Second quarter has historically been, whether Easter is in it or Easter is not, our smallest quarter. It is hard to cover on Easter, I mean on second quarter, particularly with an Easter shift.

Our next question comes from the line of Greg McKinley with Dougherty & Company. Please proceed with your question.

So, Sharon, you talked a little bit about your promotions strategy in your product offerings here for Q1. Can you tell us a little bit about what this TV marketing effort is going to be? How that compares and contrasts with what you have done in the past? And then just want to make sure I understand what are these products, these Promise Pets? And how many additional limited edition Disney collectibles are out there? Is this sort of a staged product line that we will see unfold over months of quarters?

Yes. Okay. So the TV strategy. One of the things that we were careful to do as we restructured the value equation for the consumer, was not just pull out the discounts and increase pricing without balancing that with increased marketing. Brand building, marketing. Because you have to give and take a little bit there. You have to balance it in a way that ultimately you increase your margins as well by not spending so much that you made up the difference or lost the difference. But you need to go back in and speak with the consumer again in a different way. So that brand building, over arching marketing story, and you will see a really great example of that as we go into the Easter timeframe, is resetting who we are and introducing ourselves to the millennial in a fresh new way. Very important. But that’s just one arm of our marketing strategy. The second arm is to build these stories, not just sell skews. We are not just churning out stuffed bears. This is a story building opportunity for us. It gives you a hook with the marketing, it helps to drive add-on purchases, it creates efficiencies in your marketing. And we have seen that that’s working. It worked very well with Reindeer story. So we believed in the Reindeer story and planned into something that had a broader opportunity in both scope and scale. So Promise Pets can be a perennial for us. It's not seasonal. It appeals to both boys and girls and it is a little bit of a different approach then the type of animal that we have had on our shelves in the past. It's not as cartoonish. It's pretty realistic but really cute. And you will be able to get your free app and download it. And that particular animal, whatever breed that you have purchased, comes to life on this app. And the kid gets to interact and pet and see it and care for the pet in a virtual way, but also have this tactile real friend that they can play with, carry with them, sleep with. Which is an important part of childhood. And kids still like to have that tactile interaction, it's not all virtual. So we believe that we can bring together the best of both worlds. We expect that we will be able to continue to update Promise Pets throughout the year and in the coming years with new breeds, just churning through new breeds. On your third question, which was the princess question, collectible question, the answer is yes. We do expect to have a continuous cadence of collectible dolls. And right now we are doing it in a limited edition way which is 30,000 collectible dolls of each one of the different princesses that we are planning. We are working hard in conjunction with Disney to plan these introduction in conjunction with some other entertainment opportunity that they may have slated, or marketing that they may have slated around the princesses. But you will see us start to bring these out as a series.

And when you say as a series, is it a princess series or we could see a series of these with other types of Disney property?

Well, right now it's a princess series. But clearly if this works for us and it's successful, we would continue it in fresh new way.

Our next question comes from the line of James Fronda with Sidoti & Company. Please proceed with your question.

Just on, I guess low overall oil prices, do you think that had a significant impact for the fourth quarter and do you think it will have a big impact for you guys in 2015?

Yes, so like we got a little bit of a benefit but it's really not significant and we really don’t expect it to be significant in 2015.

Okay. On either the top or bottom line, correct?

Correct.

[Operator Instructions] The next question is from the line of Gerrick Johnson with BMO. Please proceed with your question.

Question on Easter. It falls on the 5th and New York City schools are off the week after. Isn't that when you usually get the nice lift, is when the kids are off from school. So I am kind of wondering how it's more of a first quarter event as opposed to second quarter?

Okay. Good point. But the first quarter sales of the pre-Easter product when kids wake up and have something in a basket. That’s going to happen in first quarter. And we do quite a few [bunny] [ph] sales. So all of those sales will come before. The spring break should buoy us in the second quarter assuming kids don’t stay in schools like they did last year because of the weather. And they lost so many school days last year that we actually lost a lot of our spring breaks, particularly in the polar vortex affected areas, which did affect our sales in a negative way in second quarter. So there might be an opposite effect for us this year assuming that kids stay out of school for the spring breaks.

Okay. That makes a lot of sense. And then on the new remodeled stores that will be appealing to millennial moms. What about these new stores will make them appealing to those moms?

Well, we have done a complete brand refresh which takes -- from the logo through the color palette. That brings us sort of up-to-date. If you look at where we have been in the past from color palette to logo to typeface, it looked as if it was created in the 1990s, and it was. And we haven't really touched the brand since the beginning. And most major -- most great brands do continuously update and tweak their brand and brand look. We have also re-looked at the entire process and flow to make sure that people get through the process in a way that may feel like that each stop is beneficial an exciting and that we are driving either affinity in some way or an add-on purchase, and to make it more efficient for us. And we are also interestingly, and I mentioned this at the ICR presentation, we are taking what is probably our most iconic, most eye-catching element of the store, which is our [stuffer] [ph]. Certainly the most unique element of our store. Pulling it up towards the front of the store and making it a lot more prominent to make sure that people know that something is fresh and new inside. So I think when you get into one of these stores and when we start to remodel, we will be sure and tell you guys where they are located. I think you will see how big a [stop] [ph] that it really feels different but in fresh without losing the core essence of who we are.

Thank you. [Operator Instructions] Our next question is from the line of Greg McKinley with Dougherty. Please proceed with your question.

Sharon, we talked about launching outbound licensing. Can you give us some examples of how that may show up? What should we be looking for and when?

Yes. You should be looking for things more in the fourth quarter of this year. And, clearly, our priorities would be categories where we have been successful in the past. We have had out-licensing in the past in categories that are close in to our brand equity. So some of the things that we have done well in the past with certain segments of apparel, arts and crafts, snack foods and candy. And we are all in the process with great partners. We have identified partners. It just takes a while to develop these products and get them out on the shelf.

Okay. Thank you. And then it seems like your seasonal stores were, I am guessing, highly successful, not just in terms of generating revenues but exposing the brand. Can you or will you help us understand the degree to which those impacted your Q4 revenues?

Well, it was only 5 shop-in-shops. So it was comparatively not that material in a purest revenue form. But we feel we believe that it was material in an impact way. And now we also believe that we have exposed the brand to a lot of new consumers. We are still working with Macy's. They are wonderful partners of ours. And it's another one of those ways where we can integrate and elevate relationships. You probably know, we for years have had the Macy's float in the Thanksgiving Day parade. And it helps us to pull that whole story together and helps us to have presence in areas that would otherwise be very difficult in some of these downtown core big cities if they weren't for a shop-in-shop deal on a percent rent basis.

Thank you. There are no additional questions at this time. I will turn the floor back to Sharon John for additional comments.

Thanks, guys. Really appreciate everyone joining us today and we look forward to updating you on our progress in the first quarter 2015 when we have our next call. Have a great day.