G-III Apparel Group, Ltd. (GIII) Q3 2014 Earnings Report, Transcript and Summary

Welcome to the Third Quarter Fiscal 2014 G-III Apparel Group Earnings Conference Call. My name is Dawn, and I will be the operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Neal Nackman. Mr. Nackman, you may begin.

Thank you. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and actual results may differ materially from those expressed or implied in forward-looking statements. The important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to adjusted EBITDA and non-GAAP net income per share, which are both non-GAAP financial measures. We've provided a reconciliation of GAAP net income per share to non-GAAP net income per share, and of GAAP net income to adjusted EBITDA in our press release and on our website. I will now turn the call over to our Chairman, President and Chief Executive Officer, Morris Goldfarb.

Good morning, and thank you for joining us to discuss our third quarter. With me today are Sammy Aaron, our Vice Chairman; Wayne Miller, our Chief Operating Officer; Neal Nackman, our Chief Financial Officer; and Jeff Goldfarb, our Director of Strategic Planning. We had a very strong third quarter for both sales and profits. We shipped extremely well this quarter, including outerwear, which is key to our third quarter results. Our strength is evident across the board. Our designs are resonating, and our product lines have been well received. Our specialty retail operations are also performing at a high level. Wilsons comped up double digits against the double-digit increase last year. Our Vilebrequin stores also performed well. In addition, we've added another strategic and synergistic growth opportunity with our acquisition of G.H. Bass & Co. Here are a few of our major highlights for the first -- for the third quarter. Revenues in the quarter were up 23% to $669 million. We're pleased to have delivered net income per share of $2.85 in the quarter. This was beyond our expectation and is an increase of 20% compared to last year's third quarter net income per share of $2.37. We're raising our guidance for the year to fully incorporate our outperformance in the third quarter, which now includes expected dilution from G.H. Bass. We're really pleased with the progression of the season thus far. Our designs and our price points are on target. The weather has cooperated, and our mix of brands is as strong as ever. Standout performances in outerwear include Calvin Klein, Guess, Tommy Hilfiger and Levi's. This has been a very good coat season thus far with consistent demand and good turning inventory that supports the continuation of that trend into the fourth quarter. I'll note that we've diversified well, and coats now represent just over 1/2 of our third quarter volume. Our team sports business had a very strong quarter. We're quite pleased with this business and look for further growth next year. Our dress business is also strong for the quarter. As we've previously discussed, the combination of great brands, quality and price is a winning formula. Key standouts in this business were Calvin Klein, Eliza J, Guess?, and Vince Camuto. Our overall dress business was up 12% over the last year. Our sportswear business was excellent. Calvin Klein Sportswear was up almost 40% in the quarter, and Calvin Klein Performance grew better than 55%. Calvin Klein Sportswear is now in 890 doors, and Performance in 1,100 doors. Our Kensie contemporary sportswear business is also doing well and is now in 900 doors. We're pleased with the momentum these businesses are showing. Our Calvin Klein Suits and Suit separate business is also very strong, almost doubling compared to last year. We continue to hold a commanding lead amongst other department store resources in that category, and we believe we can sustain our momentum through the holiday season and build on that for spring. These products are now in over 1,200 doors. Our Ivanka Trump apparel collection has begun shipping to department stores, and we have product in over 200 doors now. With the new showroom and great personnel in place, we're quite excited about the Ivanka Trump brand as we head into next year. Our Calvin Klein handbag business is also nearly double during the quarter with added door growth, increasing exposure. Our door count is now over 1,000 doors. We're excited to continue to add fully fixtured handbag shops to support this business. We expect to have 30 by year-end. These range between 300 and 500 square-feet and are great for the brand and our handbag business. We're continuing to improve our Andrew Marc business. We've installed a new president, and we have -- we have a much improved line and business in 2014. In addition, we're opening a brand-new showroom for Andrew Marc in New York City offices this month. Moving onto Vilebrequin. We have continued to make investments to position this brand for what we see is a solid global opportunity. On the product side, we now have introduced women's swimwear although it's still too early to evaluate. We've launched suntan lotions and sandals. We've seen good results from some of these new Vilebrequin men's swimwear designs that we introduced to broaden our demographic reach. We're also investing in our retail strategy. We have a new showcase store and showroom that opened in Paris last week. Our U.S. retail business has been particularly strong, and global comps are up in the mid-single digits. As we go forward, we will continue to make investments across the business in staffing, marketing, stores and systems. Our Wilsons retail business is clearly showing the benefits of the investments and the improvements we've made over the past 2 years. Comps for the quarter were up 10% against the comp gain of 19% last year with momentum continuing through November and clearly through Black Friday. We're looking forward to the results from our full-price store test, and we have 18 stores open in time for the holiday season. We continue to believe that we have a substantial growth opportunity with Wilsons full price retail. At the beginning of November, we closed on the strategic acquisition of the G.H. Bass business from PVH. This is a well-known, iconic footwear brand founded in 1876 that we believe will support growth. We also believe we can improve the productivity of the Bass stores as we were able to do with Wilsons. We are already working on a significant product line improvement. In addition, once the transitional service agreement we have with PVH concludes in July of 2014, we expect to create significant integration cost savings. As we've discussed before, the ability to complete this kind of integration project constitutes a core competency for us. While we expect some dilution from the operation of the Bass business in the fourth quarter, we're confident that this acquisition will be accretive next year and then become another solid means of growth for retail and wholesale. I will reserve some comments for closing, but I will now turn the call over to Neal to discuss our financial performance in some detail.

Thank you, Morris. Net sales for the third quarter ended October 31, 2013 increased 23% to $669 million from $543 million in the same period last year. Net sales of licensed products increased 25% to $505 million from $402 million, primarily driven by increased sales in our Calvin Klein licensed product categories, more significantly in our Women's Suits, Sportswear, Performance and Handbag lines. Net sales of non-licensed products increased to $125 million this quarter from $109.5 million in the comparable quarter of last year. This increase is primarily attributable to including a full quarter of net sales from our Vilebrequin business in the current year compared to less than 2 months in the prior year's quarter. The prior year's results included Vilebrequin from August 6, the date of acquisition through September 30, 2012. We do consolidate Vilebrequin's operations based on a calendar quarter. Net sales of our retail operations increased 24% to $55.4 million from $44.7 million in the prior year's third quarter as a result of the combination of an increased store count, as well as a comparative store sales increase of 10.1%. Much as anticipated, our overall gross margin percentage was 34% for the third quarter compared to 35% for last year's third quarter. The gross margin percentage in our licensed product segment was 30.9% this quarter compared to 32.9% for the prior-year period. The gross margin percentage in our non-licensed product segment was 34.9% compared to 32.5% in the prior year, which is primarily attributable to our Vilebrequin business, which operates at a higher gross margin percentage than our other non-licensed businesses. The gross margin percentage in our retail segment was 50.3% compared to 49.8% in the prior year's quarter. Selling, general and administrative expenses increased to $125 million in the quarter ended October 31, 2013 from $106 million in the same period last year. This increase is primarily attributable to increased personnel costs, advertising expenses and facility costs, which are primarily related to our increased profitability, increased sales volume, store growth in our retail business and the addition of the Vilebrequin business for the full quarter this year. Net income for the third quarter was $59.6 million or $2.85 per diluted share compared to $48.3 million or $2.37 per diluted share in the same period last year. On an adjusted basis, excluding expenses associated with the acquisition of G.H. Bass & Co. and other potential transactions in the current quarter, and expenses related to the acquisition of Vilebrequin in the prior year's period, non-GAAP net income per diluted share increased 19% and was $2.88 for the quarter compared to $2.43 in the prior year's quarter. Regarding our balance sheet. Our balance sheet remains in very good shape. Accounts receivable increased 10% to $398 million from $363 million at the end of the prior year's quarter. Inventory increased 5% to $323 million. Our revolving bank debt, less cash on hand balance, decreased to $186 million from $225 million at the end of last year's third quarter. In addition, we also have approximately $20 million in long-term debt relating to promissory notes issued as part of the purchase price of Vilebrequin. We have spent approximately $15 million on capital expenditures during the first 9 months of our fiscal year, and expect our capital expenditures to be between $20 million and $25 million for the full fiscal year, primarily for additional retail stores at Wilsons and Vilebrequin, fixturing costs at departmental stores and leasehold improvements in one of our New Jersey distribution centers. Lastly, I would like to discuss our revised guidance for the full fiscal year ending January 31, 2014. We are now forecasting net sales of approximately $1.73 billion, up from our previous forecast of $1.61 billion, resulting in an increase approximately 24% from $1.4 billion of net sales in fiscal 2013. We now expect net income per diluted share for fiscal 2014 in the range of $3.47 to $3.57 per diluted share compared to a previous guidance of a range of $3.30 to $3.40, and to net income per diluted share of $2.80 in fiscal 2013. We're now forecasting non-GAAP net income per diluted share for fiscal 2014 of between $3.50 and $3.60, up from our previous forecast range of between $3.30 and $3.40. Our revised guidance compares to non-GAAP net income of $2.92 per diluted share in fiscal 2013. We are forecasting adjusted EBITDA for fiscal 2014 to grow between 22% and 25% to between $139 million and $142.5 million compared to $114 million in fiscal 2013. The full year guidance includes a projected net loss of $0.10 to $0.15 per share in the fourth quarter in connection with the operations of our newly acquired G.H. Bass & Co. business. That concludes my comments, and I will now turn the call back to Morris for closing remarks.

Thank you again for joining us. It is gratifying to continue to report on our ongoing success. As Neal just described, we're confident that we will hold onto the gains we've made above our plan for the third quarter and stay on track with a good fourth quarter. As we think about next year and the future in more general terms, we believe that few things are important, and we try and remember that at some level, for all our complexity, our story remains simple. First, we remain very much a growth company. We're working to drive organic revenue growth and to add smart acquisitions that are accretive in the long-term. Second, we're focused on the principle of diversification. This has enabled us to generate strong results, maximize our opportunity, reduce our risk and broaden our potential. Third, we are going to continue to focus on building a great team, a strong group of partners and a powerful results-oriented culture. More than anything, this is what makes our company special. We're excited to deliver returns to our shareholders, and we look forward to continuing to do so for a long time to come. Operator, we're now prepared to take some questions.

[Operator Instructions] Our first question comes from Erinn Murphy from Piper Jaffray.

Morris, just the first question. If you think about just I mean very, very solid start to the outerwear season, what are your hearing from your key accounts? Are the retailers already reordering? I recognize you've had a very lean inventory position heading into this, but if the cooler weather continues, kind of what position are you to react as we get further into Q4 and into Q1?

Well, the reorders started coming quite a while ago. We've been shipping through reorders from early October on. Our ability to service the sensational reorders at this point are just not there. We've depleted a good deal of our inventory, whether dated or current, and we're in great shape. The sell-throughs at retail have been excellent. The inventory position is great, and the conversations about booking forward product has started already. We're beginning to plan an aggressive outerwear season for next year. Retailers are short of inventory at the end of this year and are planning a much larger business for next year. So the outerwear season could not have been any better for us.

That's great to hear. And then, just Neal, just a quick question on the gross margin. Recognizing you kind of guided that fairly conservatively. I mean, it was down about 100 bps. Could you just speak a little bit more about what some of the drivers were? And how should we think about that into the fourth quarter? It seems that more of that deceleration was from the licensed segment.

Yes, Erinn, that's exactly right. And we had anticipated that, we did as Morris indicated, we cleaned up inventories which probably cost us a little bit as far as the slightly more than what we had anticipated. But most of our gross margins across the company are holding up very well. I do expect that the non-licensed, if you looked on a year-to-date basis, you'd see we're -- it's about 30 basis points down. And I think that the year will play out fair for the non-licensed segment of our business. In terms of fourth quarter gross margins, we are going to be changing the mix of our business, we're adding G.H. Bass, so in total, we'll see gross margin lift, and I think our non-licensed and licensed businesses should be either flat, maybe give up a hair depending upon how we continue to move inventories. But our gross margins, in total, are where we've expected them and doing well.

That's helpful. And then just a last question for me, back to Morris, could you speak more about the Ivanka Trump line. You mentioned it's in about 200 doors so far, is that mostly Macy's? And then, how should we think about that pathway over the next several years for kind of door distribution gain? And then last, from a category perspective, can you just remind us what categories you do with her currently? And then are there opportunities to expand deeper into other categories over time?

The Ivanka Trump launch is working very, very well. Product is currently in Macy's, in approximately 100 doors. Bon-Ton has product in about 2 dozen doors. Nordstroms is in about 20 doors, and the Bay, including Lord & Taylor's in about 80 doors. Closer to 95 doors with Lord & Taylor. We're very pleased with it. The product classifications that we have currently are pretty much all of women's apparel, short of coats. We launched Suit separates and a little bit of sportswear and dresses. We have the ability of doing intimates. We've produced a collection of swimwear that is not yet in the stores, but we're very, very excited about this opportunity and this partnership. We will have Ivanka coats for fall of 2014. That negotiation has taken place, and we'll have some product in the stores for fall of '14. We've just built an amazing new showroom for the Ivanka collection. There's a good deal of spirit, both internally and our customer base. And more importantly, the retail consumer has adopted it immediately. So this will be a power brand for G-III.

Our next question comes from Edward Yruma from KeyBanc.

Morris, just really quickly. Historically, when you guys have had a really strong outerwear season, that was preceded by a weaker outerwear season. What kind of orders do you see in that following year? I know you indicated that the discussions were very, very positive thus far. But just historically, what kind of step-up do you see after a strong outerwear season?

The step-up that we basically see is an environment that's more adoptive to bringing products in earlier and planning their business to satisfy the misses and classifications that performed exceptionally well. The major callout was a shortage of down coats. So I would tell you, our down business that we've provided for on, I'd say, about a month ago, we've made some major, major commitments to satisfy the potential needs of our customers. It is basically a planning business, we're planning to satisfy the misses and classifications. So that's as best as I can respond to your question, Ed.

Got it. And as we think of our gross margin, I know you've obviously provided guidance for the year, but what's the potential upside scenario given that if sell-throughs remain strong, presumably you're going to have much lower markdown this quarter this year versus last year.

I don't know if I can quantify, and I think that it does run to one of the variables that we face as far as projecting out the fourth quarter. To the extent that we retail strongly, our markdown pressure becomes less, thus enhancing the gross margins, I think it's something that we face each quarter.

Got it. And one last follow-up. On the Wilsons business, are you impacted negatively by having tight inventories? Do you have enough inventory there to supply demand through the remainder of the season?

Wilsons has historically operated autonomously. Management submits a budget, and they work toward that budget. Wilsons was very aggressive on the outerwear business. Their inventory levels are in much better shape than the average retailer. They have the ability of continuing to blow out the fourth quarter. Their inventory levels are consistent with their stellar performance, so it's a good deal of opportunity for Wilsons.

Our next question comes from John Kernan from Cowen and Company.

I just wondered if you could give us some clues in terms of what the Bass contribution will be in terms of total top line. And what is the profitability potential line for the long term? And what do you guys can be able to do differently than PVH in terms of improving the profitability of this business?

Well, what we immediately did is we adopted what we believe in our portfolio can be a trophy. I don't want to speak to PVH's strategy, but they have some very important brands that maybe had greater leadership in their portfolio. We're integrating Bass with our Wilsons operation. The operating entity will be based in Minneapolis. Wilsons, at one point, operated 600 stores. Their physical plant can handle the integration, and the talent pool that's currently running Wilsons for us was basically there when Wilsons was a 600-store operation. So we believe that the synergistic value is incredible in the integration of Wilsons and G.H. Bass. The opportunity to better serve the apparel segment on Bass in 170 stores is huge for us. We've taken charge of sourcing and developing apparel, which is about 35% or 37% of the needs of the store. We took charge of that almost immediately, and you'll begin to see different product, different markdown cadence than PVH had adopted in running this business. And we've hired some dedicated talent to the store operations side, which was integrated into the PVH segment of retail. Our philosophy is that the store ops should be definitive to the brand, so we've allocated significant personnel into the Bass improvement. Footwear needs improvement as well, and we've begun to travel to different areas of the world to educate ourselves on the needs and the possibility of developing footwear internally. Currently, there's an existing license for the footwear. PVH is signing a license for the Men's Apparel segment of the business, and there's licensing -- and there's wholesale licensing opportunity that's not been taken advantage of by PVH that we plan on moving forward with. So this is a great brand for us. We see a good future with it.

Just in terms of the numbers, John, we expect top line, historically been running round $250 million will be there and make improvements to that is probably about $250 a square foot. And we think that no reason why it shouldn't operate at high-single digits in the low double-digit operating margin as we go forward.

Okay, that's really helpful. And back to last year's acquisition of Vilebrequin. Any update on the profitability there? I know when you bought the business, it was around a 15% operating margin, but you're making a lot of investments in retail and category expansion. When do you think the profitability for Vilebrequin will start to reach its potential?

The investment is still significant in Vilebrequin. We're aggressive in opening locations. We've formed an alliance with a franchisee in Korea this week and we'll see some stores opening in Korea. The first one in Seoul, the second one is in Jeju Island and the duty-free location by the end of 2014. We're spending time in developing the China market. And in the struggles that the European market is encountering, we still posted mid-single digit increases. So the full potential of this brand probably won't benefit us, I would say, for another 18 months. We've got licensing that we're negotiating with providers for. There's an appetite to license this brand to classifications that really merit some consideration, and we're going through that internally right now. So we, again, see this as a growth potential for the future. And this, again, would be one of our trophy pieces.

Okay, that's helpful. And if I could just sneak one more question in. The performance and active wear has been a really healthy category for people for brands doing it correctly. How large is the CK performance business right now? And how big do you think this business can become?

Well, we've reached at wholesale just over $100 million, and we've pretty much doubled the size of this business in the last year. We're doing some buildouts that will continue to grow this area of business. We've opened 3 retail locations in the United States and approximately 20 in China. China is still a work in progress. We're getting great recognition for our development there with the joint venture partner. But premature to talk about profitability. It's still an investment in China, and we're very proud of it. We're negotiating with several other, call it partnership, relationships in different parts of the world as well. So we believe that the performance side of this business will continue to grow, and we believe it's got the potential of being a $250 million business, retail and wholesale blended.

[Operator Instructions] Our next question comes from David Glick from Buckingham Research.

I just was wondering, in Q4, the $0.10 to $0.15 loss from Bass, I'm just trying to get some sense for how much of that is being driven by the transition services agreement, which, you said, expires next July. So I'm trying to get a sense of that sort of impact for the next 3 quarters. And how much is, really, the performance, which, obviously, you have a strategy to turn around? I was wondering if you could give some color on that.

Dave, I don't know if we're going to give you the specifics on it. I think what you've capsulated is correct. We expect to have higher transition services, expenses for at least the next 2 quarters. It is going to impact us, we think certainly by the second half of next year. We come out from under that. As far as the operations of the business as Morris said, we're making lots of changes, and we've got some things to improve there. So I don't think it's fair to split that dime just yet. But we should see improvement in terms of SG&A expenses in the second half of next year.

Okay. And then to follow-up, the $0.03 charge in Q3, I think I heard you say it was from the Bass transaction and potential acquisitions. So I want to make sure I understood that correctly. And then, is that all -- did that all show up in the SG&A line.

Yes, it does.

Okay. And then Morris, a final question. When you listen to your results and the sell-throughs, you would think that the retail trends in department stores were very, very strong. I just wondered if you could give us some perspective because obviously, the headlines are one thing and your performance is another. If you can maybe give us some perspective on kind of what you're seeing last couple of months versus what we're seeing earlier in the year.

I listened to the same news that you do, David. And they -- the news is not the same as ours internally. We have a very, very huge market share in the coats business. We -- I guess, we benefited with appropriate weather. The climate was right for what we produced. Our pricing was right. Our brands were appropriate. The hard work that we did on design worked out for us. We seem to have been operating on all cylinders in the coat area. All our brands have performed, and they also have different demographics. We've hired a whole team of planners in our company that has made our business a little bit more scientific than it has been historically. That's worked for us. We've learned from operating sportswear businesses is now how to apply the planning process in even the seasonal business such as coats. So it's worked for us partly because we're in the right classifications, partly because we're good at what we do. We're well-financed. We've built appropriate surroundings for our products. We've spent a good deal of money in showcasing the product that we're proud of. And we're doing the same thing in every segment of our business. Dresses, if you look at our Calvin Klein Dress business, I was on the phone with our largest account yesterday, and she said, "It's just a phenomenon." Just the more she buys, the more she needs. The product just sells incredibly well, and it's not dresses across the board, it's us. We're positioned right at retail. We designed appropriately. We utilize brands as an opportunity to showcase our product, but the business is not driven just by the brand. We marry amazing product to the brand, and then that concept really works. We've created shop in shops that have really shown their potential, and there's a good deal that we've learned over the last 3 years that we begin to apply to our other businesses. So that might be an advantage for the rest. I'm a little long-winded, but, I guess, you can tell we're excited with how we've done and how we have performed. And, I guess, the ending answer might be we're better than the field. So thank you for the question.

Sure, sure. And any color on...

I think I answered it.

On Wilsons full price stores, I've seen a few of them in malls. What's your early take?

It's kind of early. The stores that have been open a year are doing very well. The new stores that we've opened still need a little time before I can give you a clear call out that it's an absolute, too. The -- as I said, we have about half a dozen that were opened a year ago. Those are doing well. And then we have 12 that we've opened recently. It's too early to judge.

Our next question comes from Rick Patel from Stephens.

Can you talk about the outlook for the handbag business? You've obviously, made a lot of progress there with Calvin Klein over the last year. How should we think about the incremental runway left for this business, and perhaps your opportunity for other brands?

The runway for the handbag business is -- I think I stated 2 years ago that we have the ability of reaching $200 million in volume on the handbag business. I still stand by that. That may be a low number. We're doing very, very well. We're building market share. And again, consistent with my comments to David a couple of minutes ago, we've learned about the significance of store buildouts. We've learned a good deal about positioning within retail stores. And with those learnings, we negotiate differently for the space at retail, and we're -- we've gotten much better on how we build out locations, and we see immediate benefit when we execute well on our decisions of where we belong in this store, how we price in this store and the size of the space allocated to us. So for the Calvin piece, we are well on our way. As far as adding elements of that business or building on that platform, we've had a soft launch on Kensie, which is doing just okay. Andrew Marc is -- has got a little bit of product out there, but we haven't even scratched the surface of the potential of the handbag and accessory business yet. Calvin is really the only important segment of business that we operate.

Great. And then can you talk about the outlook for sourcing cost from both a material and labor perspective? How should we think about your ability to pass through any inflationary pressure that may come up, given your pricing strategies?

Well, generally, the commodities that we're in are not unique to us. We are the dominant provider of outerwear. We buy more outerwear than, probably, anybody in the country. So we believe we negotiate at least as good as the next contender. So if there's a price increase, it really is common to everybody producing the commodity. We've been very competitive. We buy timely. We pay our bills on time and we're the buyer of choice in most of the factories that we deal with. So we buy competitively. We've got warehouses that are positioned throughout the country that can help the factory needs of producing early. We receive goods, and as you've seen before, our inventory levels sometimes peak at the times of the year where it seems inappropriate. But they are appropriate because of strategies and buying right, buying on time. So we are very competitive. We don't see any pressure going forward that would impact a major price change at retail. And even in times where prices were increased significantly, there was not a major impact on our margins.

And any initial read on the spring season and how that's shaping up?

Spring season is good. The -- clearly, we're not in a major coat cycle for spring, but our dress business is good. Our sportswear business, our Suits Separates, we have a new classification of swimwear that we're shipping. And we're feeling good about our spring business.

Our next question comes from Mike Richardson from Sidoti & Company. Michael Richardson - Sidoti & Company, LLC: Actually, most of my questions have been answered. I just have really one quick one. I'm just wondering how G.H. Bass gross margin compares to Wilsons?

I guess, the short answer, it doesn't. We have a lot of work to do. The margin is short, and this is a bad time to ask because in -- we just acquired the business November 4. We transitioned -- the business transitioned over to G-III, and a good deal of what we're looking at is liquidation. So to compare margins in a company that's in liquidation versus one that is in aggressive profit mode, I'd say, the timing is wrong now. But I'd be better suited to answer your question after the second quarter of next year. For the long term, I think what we have in Bass is similar retail margins, and we have a wholesale opportunity that Wilsons does not. And we also have a licensing revenue stream that's likely to occur with Bass. So this, as I said earlier, will be a very, very nice acquisition for G-III. Michael Richardson - Sidoti & Company, LLC: Okay. I think Neal mentioned longer term. He thought that it could have certainly low double-digit operating margin. Did I hear that correctly?

Yes.

At this time we have no further questions. I'll now turn the call back to Morris Goldfarb for closing remarks.

I thank you all for listening. I encourage you to stay with us. We have many great things to come. We want to thank all our valued partners. Our licensors have been amazing in helping us develop our business, and develop the profits that we're showing today. And we -- primarily I'd like to think PVH for their support of G-III continuously. So thank you very much for listening, and tune in, we have a lot more coming. Have a good day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.