Good afternoon and thank you for standing by. Welcome to the Deckers Brands’ Fourth Quarter and Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. [Operator Instructions] I would like to remind everyone that this conference call is being recorded. I will now turn the call over to Erinn Kohler, Senior Director, Investor Relations and Corporate Planning. Please go ahead.

Thank you everyone for joining us today. On the call is Dave Powers, President and Chief Executive Officer; and Steve Fasching, Chief Financial Officer. Before we begin, I would like to remind everyone of the company’s Safe Harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical facts are forward-looking statements and include statements regarding our anticipated financial performance, including, but not limited to, our projected revenue, margins, expenses, earnings per share, cost savings and operating profit improvement, as well as statements regarding our strategies for our products and brands. Forward-looking statements made on this call represent management’s current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including in the Risk Factors section of its annual report on Form 10-K and quarterly report on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements. With that, I will now turn it over to Dave.

Thank you, Erinn, and good afternoon, everyone. It gives me great pleasure to share with you that Deckers has achieved a significant milestone in its history. For the full fiscal year 2019, we reached over $2 billion in annual revenue in a very profitable manner. This accomplishment is a testament to the hard work that our team has put into our company and I am very proud of the results this dedication, discipline and focus have been able to produce. In addition to breaking through the $2 billion mark in topline revenue, the organization has successfully delivered on our long-term margin target a year ahead of schedule. A solid performance recorded in the fiscal year 2019 result. These results include, operating margin well beyond the prior target of 13%, driving more than the committed $100 million of operating profit improvement over the past two years and delivering returns on invested capital above the benchmark 20%. With the strides that the organization has made, especially in terms of earnings performance and cash generation, we believe that we are now positioned better than ever to invest in our brands and channels within key areas of opportunities for future growth. As a reminder, the areas of focus that we have identified include, investments in marketing to build awareness and adoption of the HOKA ONE, ONE brand and growing the UGG Men’s and UGG Women’s non-core category, as well as investment in technology to enhance e-commerce capabilities to evolve how we engage and grow with our consumers, and talent tools and analytic capabilities that will allow us to maximize the above opportunity. Today, I will share brand and channel level highlights from our fourth quarter performance and fiscal year 2019 in review before handing the call over to Steve to walk through our financial…

Thanks, Dave, and good afternoon, everyone. As Dave just walked you through, it was a very exciting year for Deckers, as we have achieved a number of significant milestones. Now I will take you through our fourth quarter and fiscal 2019 results in greater detail then provide our initial outlook on the first quarter and fiscal year 2020. Please note, throughout this discussion, where I refer to non-GAAP financial measures, I am referring to results before taking into account restructuring and other charges that our management believes are not core to our ongoing operating result. Also note, our non-GAAP results are not adjusted for constant currency with the exception of our direct-to-consumer comparable sales. A reconciliation between our reported GAAP results and the non-GAAP results can be found in our earnings release that is posted on our website under the Investors tab. Now to our results for the fourth quarter. Revenue was $394 million, down 1.6% from last year but above the high end of our guidance range by $20 million. The better than expected performance was driven by $15 million of earlier than anticipated wholesale shipments in the UGG brand, delivering spring summer product into the marketplace ahead of schedule and $5 million in our performance driven by domestic e-commerce sales for the UGG brand. Gross margin was 51.6%, up 360 basis points over last year. The gain in gross margin was due to continued improvement from our supply chain effort, better full price selling as we exited the prior quarter with very low levels of seasonal inventory in the marketplace and higher margins attained on close out sales as the channel is more tightly managed. These gains were partially offset by channel changes in the quarter largely due to timing of e-commerce revenue recognition with those sales recorded…

As Steve mentioned, the upcoming fiscal year is about positioning our brand to drive elevated levels of topline growth in future period, while maintaining top tier levels of profitability. Our strategies are working. We have delivered our long-term targets a year early and the organization will remain focused on investing in our strategic growth driver. This includes, building awareness of the HOKA ONE ONE brand, growing UGG Men’s and UGG Women’s noncore categories, enhancing e-commerce capabilities to evolve how we engage with our consumers, as well as investing in analytics and technology that will allow us to maximize the above opportunity. We will deliver strategic growth in these areas by investing in demand creation and leveraging the right marketing tactic at optimized levels. Deckers is adding new capabilities that will amplify personalization within consumer touch point, allowing our brands to build stronger relationships with both new and existing audiences, resulting in an even greater affinity for our brand. We have also added competencies that will enhance our ability to measure marketing effectiveness, ultimately empowering our teams to easily shift investment to improve both short and long-term return. As we look out into fiscal ‘20, investments in innovation are critical to enable our organization to deliver higher topline growth in the future. I am excited to share more with the progress we are making with innovation later in the year. With our fiscal 2020 guidance including operating margins of 14.2% to 14.5%, Deckers remains at top tier levels of profitability among our peer group, even with the strategic and reinvestment and is dedicated to maintaining this data as we drive healthy revenue growth. As I reflect on our success in fiscal 2019, I am proud of our financial performance and equally proud of the work our teams have done to operate our business in a sustainably minded way. We have made great progress in advancing our sustainable development goals. In particular, we are investing in the communities in which we operate globally, promoting diversity and inclusion across our organization and working to preserve the environment for future generations. With continued organizational success, we have the ability to be leaders in this space by advancing sustainable business practices to deliver value both financial and environmental to all stakeholders. This has been an exceptional year and I’d like to thank all of our employees, customers, shareholders, Board of Directors and their families for their support and helping us drive to these levels of performance well ahead of our original plan. I believe our results demonstrate the strength of the foundation we have built, our commitment to making improvements in the business and delivering value to all of our stakeholders. I am incredibly proud of our accomplishments and look forward to continue success in the years ahead. With that, I will turn the call over to the operator for Q&A. Operator?

[Operator Instructions] The first question comes from Camilo Lyon with Canaccord Genuity. Please go ahead.

Thank you. Hi, guys. Great job on a great year.

Thanks, Camilo.

Thanks, Camilo.

You guys have done a great job with the UGG allocation strategy at wholesale, as well as the segmentation strategy. At the same time you have been very upfront about the benefits that you received from a long and cold winter. So as you think and delve deeper into the outlook that you have provide -- can you just help us understand perhaps by brand and particularly the UGG brand, how that all fit into this 4% to 5% topline growth figure? In other words, we are thinking about UGG and the further steps you will take with the allocation strategy. If we have a seasonally warmer winter, how protected are you from that potential relative to the guidance laid out?

Yeah. It’s a good question, Camilo. I will try to answer as many of those details as I can. I think, what we have learned over the last couple of years is planning for what we would be in kind of a normalized winter and retail environment has served us well and we are going to continue on that strategy. That being said, if things are more favorable, we have the inventory in the right places to be able to capture that and then we also have some protection and the downside if we need to be a little bit more promotional. I think what you have seen in the guidance from an UGG perspective and in the margin where we put in roughly 100 basis points or 450 basis points decline versus last year, some of that is mitigating in case there is less unfavorable weather conditions. At the same time, the managed growth in North America will be continuing. It’s a healthy environment. It’s very healthy from an inventory standpoint and margins with healthy sell-throughs at wholesale and then our own DTC channels. At the same time we have work to do internationally and so what you are seeing us do for the U.K. market in particular is employ the same strategy that work in North America over the last couple of years, which is a really tightly controlled segmentation and allocation strategy to make sure that we are maintaining a healthy positioning in the market. The inventories are clean and we are segmenting the right product at the right level in each of the accounts in that market, and at the same time, investing in some additional marketing to improve brand health in that region. So, it’s a balance going into this year. The UGG brand is in great standing in North America with little bit work to do in the European market. But overall, we think this is a healthy projection looking into the end of the year with growth in the right categories, which are non-core women’s footwear and men’s, and we think that if there is a better than planned winter with regards to weather in the holiday season that will be well-positioned to capture that upside.

Yeah.

Speaking to the other brands real quick, we are super excited about the opportunity that we have developed within the Koolaburra brand. Had an exceptional year last year just over the $40 million mark with high full price sales through and healthy margins and a profitable business for us. Retails we are very pleased and the order book as we saw or just heard for this fall is very healthy for that brand and we see it as an incremental sales to the UGG brand and new in distant channels from our distributor UGG. And obviously the growth, the exceptional result for HOKA. We see that continuing, but that’s in a very strategic and controlled manner built for the long-term health of the brand and really driving growth through the existing distribution both internationally and U.S., and then continuing to drive business and data capture to our e-commerce site.

Yeah. I think just to add on to that and kind of what you are alluding to Camilo. Is there upside and I think as Dave said, there is probably a little bit upside related to weather related to UGG, right? Because that’s where we are going to kind of see potential upside. With the segmentation and allocation strategy that we have been implementing in North America, as well as now Europe, that’s going to be somewhat limited in terms of what further upside there may be, because that’s a controlled strategy in terms of how we want to go. So I wouldn’t -- if weather conditions are similar to what we experienced in FY19, absolutely there’s upside from a revenue perspective and from a margin perspective. But as I said in the prepared remarks, we are not going to play into that. So always a little bit upside. But I’d say, as we have gotten more dialed in with our strategy and allocation and segmentation, not a lot, I would say, in terms of related to UGG. Pretty well as indicated by our backlog, we are booked for the season. So there is some kind of further upside. But to bring additional product well above that would be challenging. So, overall, a little bit but don’t go too crazy in terms of what you think that further upside could be.

Okay. Thank you for that detail. It’s great. So it sounds like on the weather related UGG product, you are planning for that business to be both conservative and promotionally driven?

Correct. There is a more promotional component factored in and that’s part of the gross margin take-back.

Got it. And then, if you can just step back, you have talked about hitting your margin target a year early, the continued supply chain benefits. You are now stepping up your SG&A component and invest behind some of these opportunities that you have called out. Where do you think your margins can settle out at if you did a 16% this year, but you are looking to do kind of below 14%. What’s the right level of operating margin that can deliver on a more consistent basis?

Yeah. It’s a good question. It’s one that we have talked a lot about. And I think, the way we have looked at it, part of delivering our plan a year ahead of schedule. We always had the investment in FY20 and that’s why we were able to bring through some of that additional profit. So as we were able to capture those savings and improvements in our business a year early, that’s why you are seeing that flow through really and the 16% operating margin. As we look going forward, we also recognize that we are delivering top tier performance among our peer group and to be competitive, we know we have to make these investments. So to sustainably drive topline growth, it’s important for us to put those investment dollars in, as Dave talked about, in marketing, in IT, in innovation to drive some of the product development that’s going to help us propel topline growth. So, as we look at it, what we are guiding and some of the factors, that 14.2% to 14.5% is a good number we believe for FY20. There might be a little bit of upside and that’s kind of how we are looking at the business. So part of this and over delivery is all related to the strategy and the timing of when we were going to make those investments. And so being able to capture that early in FY19 is what really drove us above what we would normally expect. Now as we get into kind of the strategy of investments, that’s why you are seeing that setback.

Yeah. And I’d just add on to what Steve said. I do believe now is the right time to start investing. As you know, the last two years, three years, we have been working on infrastructure and efficiencies and operationalizing the business, improving SG&A as a percentage of total sales. In the meantime, we have been strengthening the brands and controlling our marketplace. And we believe based off the strength of new categories in UGG, the emergence of the men’s business and the strength of HOKA and the success we are seeing in digital marketing. Now, it’s the time to really start investing and so we want to make sure that we are feeling future growth for the out years. Now we continue this top tier performance both from an operating perspective, but also start returning to higher levels of growth and revenue.

Great. And if I could just sneak in the last one. So Dave last quarter, you alluded to given you are a point of committing build longer term mid single-digit growth algorithm on the topline, four to five this year. Are you ready to say that that’s where you actually put a kind of longer term one-year to three-year topline objective out there?

Yeah. I think we delivered 6% the last two years in a row, which is better than we guided to and expected to do or plan to do, 45% this year as you heard, as we just walk you through make sense. I think mid single-digit to low -- high single-digit growth over the next three years is what we are aiming for and that’s why you are seeing the investment in the business this year.

Yeah. I think one thing to note to Camilo is, as we look at the business, and I think, it’s important to call out that $15 million that we talked about where we shipped in Q4 versus Q1, really is up FY20 business. And so, if you were to equalize the two years, we would be showing more growth in FY20. So you would be removing that from the FY19 number and putting that $15 million in FY20. And what you would see is a shift and you would see growth in ‘20 over the growth that we showed in ‘19. So it gets a little skewed because of that early shipment. But what we are showing is growth year-on-year-on-year

Fantastic. Good job, guys. Good luck.

Okay. Thanks.

Thank you.

The next question comes from Jonathan Komp with Baird. Please go ahead.

Yeah. Hi. Thank you. Maybe just to follow-up with some of the discussions there, but maybe just a bigger picture question on the gross margin, I know you had a very strong year in the low 50s. Historically, when you look, your good year was closer to 50% and then a normal or even unfavorable year was more in the mid-40%s. So could you maybe just step back and kind of highlight a couple of the factors that you think are sustainable in terms of why 50% plus and maybe building that at the right level going forward?

Yeah. So I think when you look at the 51.5% that we delivered and FY19 and as we talked about, our ability to get to that level was really driven by a lot of the improvements that we have made in planning, supply chain efficiencies, the work that we have really been talking about really for the last two years. The additional components, the kind of the lift from what we are guiding FY22 -- to FY19, we will call kind of a better selling environment, cleaner channel inventory and the non-use of freight in FY19. So that kind of 100 basis points and 150 basis points setback we are seeing in FY20, are really those components that we do not expect to repeat themselves. They could, and if they do, we benefit from them, but from a more normalized, what we would say kind of operating mode. We think that 50%, 50.5% range is kind of the right range, which incorporates all the improvements that we have made and using some freight as we identify our products and try to bring them into market earlier. So we think there may be a slightly larger freight component and that’s part of also the set back. I think what’s also embedded and not clearly apparent in the guide is that, we have a currency fluctuation, which is a headwind in FY20 and we are largely overcoming that with kind of some continued improvement plans that we have for FY20. So we think that $50 million to $50.5 million in a normal operating year is kind of the right level based on all the work that we are doing in the last couple of years.

Yeah. And I would also add onto that because you referenced prior years of low end $45 million and best-in-class kind of $50 million range. Also keep in mind that we have been working hard to balance and diversify the business. So if you think about the UGG business today, it’s much more balanced business with growth in new categories. In men’s we are less reliant on just one item and one category of classics. Although, that’s still important and we still have the improvements that you have seen over the last couple of years. But in the business mix which is becoming more important is HOKA, which has healthy margins. And over the coming years the growth in e-commerce is going to be a benefit to margin as well. So I think all those things considered as Steve just mentioned and the way we balance the business, the team has done a great job there, I think this is the right level.

Okay. Great. That’s certainly helpful. Maybe one separate question then, a little bit more just put in perspective on the environment, certainly looks like seasonal fall, winter good, sold there well this year so far, channel inventories are clean, which you mentioned and that’s supporting the orders for next year. I want to ask, I mean, certainly, there’s other pockets of softness that others are reporting such in some of the department store chains. And I am just wondering is there any point where you see risk that softness in other parts of the business getting later end of the year with potentially risked some of the momentum you are seeing in your own categories or just any broader perspective on that dynamic?

Yeah. I have seen some of the recent reports of kind of wholesale department store challenges. I think, our performance in those channels over the last two quarters has been very strong. The inventories are clean. The sell-throughs have been very healthy. The order book going into the back half of the year is good as well. And I think we are well-positioned to be successful in those channels, but despite some macro challenges they may have. We are certainly not immune to those, but I think the strength of our brands particularly our UGG brand in the back half of the year bodes well for the success of that business. There’s obviously an athletic trend going on out there and we are starting to gain some momentum in sneakers and carriers of that sort. But the innovation of the UGG brand through slippers and hybrid slippers and winter boots has been very strong as well. So, while that athletic trend is going on, we are having success in our own way and different you need categories and capitalizing on that. I think we still have challenges in Europe. I think that’s one thing we are working through and hence, the conservative nature of the guide from a European perspective and cleaning up that marketplace. If I was to say, there’s a risk somewhere that we see in the business for the back half of the earth is the potential there to continue to be soft, particularly with some of the macro level environmental things that are going on in that region. Does that make sense?

Yeah. I think just one other thing Jon, and I think, Dave, what he just said was kind of spot on. I think there one there’s always risk, right? You are never quite certain to what may happen with retail or other factors that may influence it. But I think one thing and it’s really demonstrated by our results coming out of this year is how well our brands have performed with retailers.

Yeah.

And I think that speaks to the strength of our brands in what we are doing. I think with our strong backlog, it’s showing a commitment on the part of our sale partners and their commitment to our brands that we are resonating with consumers and our products are selling through well and that’s further demonstrated really by the clean inventory.

It’s all very encouraging to hear. Best of luck.

Okay. Thanks, Jon.

Thanks.

Thanks, gentlemen.

The next question comes from Sam Poser with Susquehanna. Please go ahead.

Thank you for taking my question. I have a few. First of all, your Teva business, you are getting a lot of press there. So can you give us some idea given the switch of Teva over to the -- to a distributor model, what sort of -- what the wholesale equivalent sales would look like both in the fourth quarter results and in the full year guidance?

Yeah. In terms of switching, we have -- we didn’t give that number out, it’s probably about I would say kind of $5-ish million.

$5 million.

Yeah. it’s -- so it’s important I would say to the brand and they are overcoming that with what we are providing in our guidance. And so that’s why kind of again on the surface what might not look like significant growth. The brand is still growing because they are overcoming really that switch.

Just in Europe?

Yeah.

And you will see positive improvements from a unit perspective as a result of that, but obviously, the revenue hit is being overcome.

Thank you. And then, secondly, two things to focus, number one, could you talk about other collaborations that you are working on all success are not or -- what you had recently? And then also, as a the business grows, I mean, sort of what are the step ups as far as getting more scale to even potentially take more this time?

Yeah. I think some of the collaborations that you have seen, Engineered Garments and a few others, those have been successful at creating energy and excitement for the brand with a broader consumer base. And I think it’s important to keep in mind that, brands are seeking out HOKA, because they want to work with HOKA, because of its performance, provisioning and the authenticity in the running space. They will continue to do that in a very strategic and selective way. We are not looking to use collaborations as a huge revenue driver. I think that the brand is not in that situation right now. We still want to stay remain true to this core running, community and performance based authenticity of the brand. So we will use those and we will continue to do those at the high end of the distribution chain and using key partners to bring some of that product from a Lifestyle perspective to the marketplace, but the real focus remains on the Performance categories and continue expand that. Right now with your question on growth, we are seeing tremendous success with the current distribution strategy. We think that’s right and continuing that for the short-term at least through the next couple of years and really driving improvements in their e-commerce where we can continue to cultivate the life time value of that consumer. So we know there’s bigger opportunities out there in the big box and broader distribution. We are keeping an eye on that. But we think the right thing right now is to grow this brand strategically in a healthy way with high margins and high sell-through and create some demand and desire for the consumer versus blowing us out to a broader distribution at this time.

So that wasn’t my question. My question really was from a production capacity. You had a big growth, 40%, I think, at 25%-ish growth next year. And it sounds like -- so what point do you hit a scale of production of number of shoes in the market where you are -- where you can do even better on price. I was more talking about from a sourcing perspective like that. I mean, do you have step up as far as number of players in the market that you would then get better pricing on as the brand grows?

Yeah. We have been working with the same partners over the last few years, strategically with a couple partners that can handle the complexity of the product and the improving innovation of the product over time and that relationship has been great and they have the ability to scale up as our business grows. They are seeing the potential of the HOKA brand. They are excited about it. They are willing to invest in additional sourcing of production facilities to do that and that’s one of the benefits of a strong platform at Deckers that we have great partners who see our potential and are willing to invest and grow with us over time. So that hasn’t surfaced as a concern from our supply chain teams and the brand, and I think, we are well-positioned to sustain this level of growth from a sourcing perspective.

And then last two. Europe and Asia, how long will they take to sort of get on the platform, the brand platform that the U.S. is on, you talked about working on the UK? And then, secondly…

Yeah.

…how much demand within your guidance, like, I mean, how much demand do you think you left on the table last year and sort of how much within your guidance you perceive you are leaving -- you will leave on the table with UGG, I guess, in the U.S. more than outside U.S. this year?

Yeah. I think, this year we just came off a healthy set of meetings last week with the international teams and talking about the game plans for international business. Europe and China are very different markets. One is the mono-brand market and one is obviously a complex wholesale market. So they require different strategies. But both of those will receive attention this year. I think that you will see -- start to see a turnaround in the business coming out of this year and going into FY21 returning back to growth in healthy way?

Thank you very much and continued success.

Thanks, Sam.

Thanks, Sam.

The next question comes from Rafe Jadrosich with Bank of America Merrill Lynch. Please go ahead.

Hi. Good afternoon. Thanks for taking my question.

Sure.

I just wanted to follow-up a little bit on Europe, can you talk about what are the changes you are making in the segmentation strategy will be similar to the U.S.? You have a lot of distribution that you need to close and then what would be the revenue impact for this year?

Yeah. It’s very much similar to what we did in the U.S. and we have been cultivating a little bit of some of the new distribution in the U.K. particularly following what we did with accounts like Foot Locker and Foot Action and in Urban Outfitters in North America. So we started some of that last year. I think the best way to think about it is, it requires a pull back of inventory in the marketplace that requires a repositioning of the classic -- core classic business in that marketplace through marketing PR in advance to highlight in a new way for that consumer and then segment product by accounts similar to what we did in North America. So we have an existing distribution network there that works very well for us, making sure that they are differentiated from some of the new accounts we are bringing on that are focused on a younger more sports style consumer and then augmenting that with the appropriate marketing in both those channels. In all honesty, we pull back on marketing a little bit last year in order to make sure that we are driving profitability in the right areas. Part of the reinvestment in marketing this year is focused on the U.K. marketplace in particular to bring back heat and energy to that business and then to take control distribution with the segment and offering is the formula that we are employing and has worked well in North America.

Thank you. And then in terms of HOKA, can you talk about the international opportunity and maybe what’s the mix of domestic versus international today and how do you see that changing?

Yeah. I think as you saw, we grew 59% international last year in HOKA. It continues to be incredible upside in that market. There’s strength and momentum in the European market. We have healthy distribution there. The brand is in a premium positioning and selling through well and as we expand into new categories you are going to see continued growth in Europe. China is early, early days. We don’t have awareness there yet. We don’t have a direct business. We really established to go after that market in a healthy way yet. So that’s down the road. But we are seeing real strong success year-to-date or so far in Japan where the brand is very positioned very well and as you know seen as a really desirable performance running brand in that marketplace. So, I think, the mix, I will let Steve to speak the exact mix or what that business looks like today. But we do see international being a significant driver of growth going forward, inclusive of e-commerce in those markets as well.

Yeah. I mean, roughly on the mix, it’s about two-thirds kind of domestic, one-third international at this point, with both areas still growing…

Still growing.

…internationally.

Yeah.

Okay. Thank you. And just the last question for me, you have been pretty aggressive buying your own stock the last couple of years. What’s sort of the strategy for share repurchase going forward and I know it’s not baked into your guidance or anything, but how should we think about it.

Yeah. So we don’t include any share repurchase in our agreement. As you know, we have recently expanded it in January to $350 million. We still view share repurchase as a great way to drive value back to our shareholders. We have been more aggressive as of late, really over the last two years. We think the $350 million gives us further opportunity. We don’t comment specifically on when to repurchase, but again see it as a great way.

Okay. Great. Thank you.

Yeah.

The next question comes from Tom Nikic with Wells Fargo. Please go ahead.

Hey, everybody. Thanks for taking my question. I just want to ask about the DTC channel. I know you are guiding to flat to slightly positive comps, but how should we think about store closures and any quantification around loss revenue related to the store closures would be tremendously helpful? Thanks.

Yeah. That is embedded in the guidance a little bit of loss revenue as a result of store closures. There will be net-net more closures than openings in FY20 and we are having great e-commerce strength which is offset by a softness in retail stores. So you are seeing that in the guidance for DTC. We are continuing to optimize the retail fleet, getting to the right level of stores that we think is best for the brand and the business overall to cover that that touch point for the consumer. Retail will remain an important part of our strategy going forward, particularly as word showcasing additional categories in a global scale. So we are still in the optimization mode of the retail fleet. But I think we are making great progress, I know we are making great progress. What we need to focus now on going forward is improving the experience in the store, driving traffic and leveraging that to help drive the e-commerce business over time.

Got it. And then, just one quick follow-up on the investments this year, which should drive, I guess, SG&A growth is a little bit higher than what we have seen in the last few years. Could you just remind us of what some of the big areas of investment are, I would imagine some of it is demand creation for HOKA and just various other initiatives? But just sort of a high level overview of what the investments are going towards would be great? Thanks.

Yeah. Happy to do that. So the biggest investment this year is around marketing. It’s a combination of really three things. One, is UGG to drive interest in growth in emerging categories, as well as I mentioned earlier, a little bit in the U.K. to reboot that market. HOKA is another beneficiary of invested dollars in marketing this year. We are seeing great return on ad spend in the HOKA brand, as well as creating awareness and buzz at a high level at the top of the funnel. We are going to continue to invest in that business, because we believe there’s potential -- tremendous potential upside for the brand and it’s all about getting shoes on feet, because we have learned that once you get a shoe the HOKA brand on someone they become consumers for a long time and then we can really build on that. So it’s a global approach for both of those brands are really driving awareness of new categories in HOKA for a long-term growth. In addition to that we are really focused on enhancing our digital marketing capabilities. We are adding some new capabilities this year around personalization for our consumers and our websites and social media. And then just better data and analytics capabilities from an IT perspective to be able to use some of those real time insights so we can make quicker more nimble decisions on marketing and product to market. So it’s a combination of those three areas from marketing and IT perspective, and then also investing on innovation across all of our brands. I think you saw the success of one of our most innovative products recently with just the Carbon X, a great example of how the innovation is working within the brands and feeling excitement and upside potential for all of our brands. We are continuing to invest in that area of the business as well.

All right. Sounds good. Best of luck this year.

All right. Thank you.

Yeah.

This concludes our question-and-answer session and the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.