Inter Parfums, Inc. (IPAR) Q4 2017 Earnings Report, Transcript and Summary

Greetings, and welcome to the Inter Parfums' Fourth Quarter 2017 Conference Call and Webcast. 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. It is now my pleasure to introduce your host, Russ Greenberg, Executive Vice President and Chief Financial Officer. Thank you. You may begin.

Thank you, operator. Good morning and welcome to our 2017 fourth quarter conference call. Our format will be as usual, I will start the call with a financial overview and then Jean Madar, our Chairman and CEO, will discuss our current business, recent developments and some of our upcoming plans. After that, we will take your questions. Before proceeding further, I just want to remind listeners that this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results. These factors include, but are not limited to the risks and uncertainties discussed under the heading Forward-Looking Statements and Risk Factors in our Annual Report on Form 10-K and the reports we file from time-to-time with the Securities and Exchange Commission. We do not intend to, and undertake no duty, to update the information discussed. In addition, Regulation G, codifications for the use of non-GAAP financial measures, prescribes the condition for use of non-GAAP financial information in public disclosures. We believe that the presentation of the non-GAAP financial information, that is included in this discussion is an important supplemental measure of operating performance to investors. The information required to be disclosed for the presentation of non-GAAP financial measures is disclosed in our December 31, 2017 annual report on Form 10-K, which has been filed with the Securities and Exchange Commission. This information is available on our web site at www.interparfumsinc.com. When we refer to our European based operations, we are primarily talking about sales of Prestige Fragrance products conducted through our 73%-owned French subsidiary, InterParfums SA. When we discuss our United States based operations, we are primarily referring to sales of Prestige Fragrance products, conducted through our wholly-owned domestic subsidiaries. Moving on to comparable fourth quarter results; net sales were $149.5 million, up 10.9% from $134.8 million. At comparable foreign currency exchange rates, net sales increased 6%. Net sales by European based operations rose 15.5% to $115.4 million from $99.9 million. Net sales by U.S. based operations were $34.1 million, down 2.2% compared to $34.9 million. Gross profit margin was 66.1% compared to 63.7%. SG&A expenses as a percentage of net sales was 61.4% compared to 59%. Operating income was $4.8 million as compared to $5.4 million and net income attributable to InterParfums increased to 12% to $4.4 million compared to $3.9 million, and finally net income attributable to Inter Parfums Inc. per diluted share rose 11.1% to $0.14 from $0.13. Thus for the year as a whole, net sales increased 13.5% to $591.3 million, as compared to $521.1 million in 2016. At comparable foreign currency exchange rates, net sales increased 12.2%. Net income attributable to InterParfums increased 24.8% to $41.6 million or $1.33 per diluted share from 2016's $33.3 million or $1.07 per diluted share. We covered sales information in our Q4 sales release last month, so I will focus first on operating profitability factors. First up is currency fluctuation; despite the recent strengthening of the euro, exchange rates had only a minor effect on gross margins for 2017, as well as 2016. You will recall that a weaker dollar has a favorable impact on our net sales and a negative impact on gross margin, and this is because approximately 45% of net sales by our European operations are actually denominated in dollars, while all costs are incurred in euro. For 2018, if the euro to dollar exchange rate strengthens further, we may see a greater impact on gross margin. The catalyst of our gross margin expansion has been increasing sales by our European based operations, made through our own distribution subsidiaries. For example, Inter Parfums' luxury brands, which is responsible for the U.S. distribution, has been growing sales of our two largest brands, Montblanc and Jimmy Choo, as well as the very fast growing Coach brand. Also of note, Rochas brand fragrances are concentrated in France, where we sell directly to retailers, and Spain, where we sell to retailers through our own distribution subsidiary. For the year, our consolidated gross margin was 63.6%, up from 2016's 62.7%. For our European operations, gross margin was 67.1%, up from 66.4% in 2016, while for the United States operations, gross margin was 49.3% compared to 49.7% in 2016, and that slight decline was attributable to higher promotional product sales within the overall sales mix. With the seasonal increase in advertising and promotion around the holidays, our SG&A expense is historically highest in the fourth quarter, and as we reported yesterday, 2017 was no exception. Promotion and advertising included an SG&A expense aggregated $123.7 million or 20.9% of net sales, essentially in line with our 21% projection. In 2016, that amount as $99 million or 19% of net sales. For the year, operating income rose 17.9% to $78.6 million and that's compared to $66.7 million in 2016. There were impairment loss taken in both years' fourth quarter, and in 2017, we set in motion a plan to discontinue several of our small mass market product lines over the next few years. In that regard, as of December 31, 2017, we recorded an impairment loss of $2.1 million and increased our inventory obsolescence reserves by $1.5 million relating to those mass market product lines. Excluding the gain from the buyout of the Balmain license in 2016 and the impairment losses in both 2017 and 2016, as well as the additional inventory reserve, income from operations would have aggregated $81.2 million in 2017, which is an increase of 20% as compared to 2016; and in 2016, income from operations would have aggregated $67.7 million. Operating margins would have aggregated 13.7% and 13% in 2017 and 2016 respectively. We are therefore getting closer to our operating margin goal of at least 14%. We gave the subject of taxes a great deal of space in our 2017 10-K. None of which is complex, but all of it makes for a complex comparison. Our effective income tax rate was 29.2% and 35.5% in 2017 and 2016 respectively. In 2016, and as we have reported in SEC filings and releases, there was a $1.4 million non-recurring tax settlement, attributable to InterParfums SA. For 2017, on the plus side, we filed for a refund claim of $3.6 million for taxes paid on dividends, which was deemed unconstitutional by the French courts. For 2017 on the minus side, after making reasonable estimates of the effects of tax act and arriving at our initial analysis in the fourth quarter of 2017, we recorded a $1.1 million tax expense relating to the revaluation of deferred tax assets and liabilities, that was caused by the new lower U.S. corporate tax rate. We will save you the time of calculating a normalized rate, by reporting that excluding the effects of the tax act and the claim for refund, and the 2016 settlement, our actual tax effective rate was 32.4%, 32.7% and 35.6% in 2017, 2016, and 2015 respectively. One last thing, just to clarify, in 2017, after considering the non-recurring items, including the impairment charge, the inventory reserve, as well as the tax adjustments, or net of taxes and any applicable minority interest, there was really no effect on our diluted EPS. These plus and minus factors, in essence, cancelled each other out, and the details of those calculations are included in the MD&A section of our 2017 10-K, which we filed yesterday. Lastly, we closed the year with a working capital of $382 million, including approximately $278 million in cash, cash equivalents and short term investments. A working capital ratio of nearly 3.3 to 1, and only $60.6 million of long term debt, including current maturities, which was incurred in connection with the acquisition of the Rochas brand. Based upon a full time staff of 355 worldwide, we generated nearly $1.7 million in net sales per employee, in 2017, and our CapEx was only $3 million. Jean, please continue.

Well, thank you Russ, and good morning everyone. The beginnings for us is landing the GUESS license. Last month, we signed a 15 year exclusive worldwide license with this iconic fashion company. GUESS was established in 1981, and it began as a jeans company and has successfully grown into a global lifestyle brand. Over the past 35 years, GUESS has gained global recognition with presence in wholesale, e-commerce and over 1,700 retail locations worldwide, with amazing ambassadors to promote the brand. The [indiscernible] business, has a personal fashion identity, smart, confident, glamorous, strong and adventurous. This is the ideal plan for magic we do, when we develop fragrance. We intend to fine tune, as well as build upon the existing GUESS fragrance portfolio of men's and women's scent, and plan to launch our first new product into our GUESS brand in early 2020. As we typically do when new products are launched, we plan to make a major investment in A&P to ensure initial success and longevity of the new scent and collections. That said, we do not envision a significant change in our SG&A as a percent of sales, with the addition of GUESS. Both companies have agreed not to disclose the specifics of our agreement; but I can assure you, the terms are in line with brands that have strong legacy fragrance business, which is nearly 30 years old. We are purchasing existing inventory from the prior licensee during the first week of April, and we continue to sell existing lines of GUESS fragrance. As stated in our news release yesterday, once we purchase the GUESS inventory from the brand's former licensee and determine, how long it will take to build new inventory, we plan to increase our 2018 guidance to factor in the GUESS contribution, which we anticipate will begin as early as the second quarter of this year. Our target date for announcing the expected increase in our sales and earnings guidance to include GUESS is when we announce our 2018 first quarter results in May. Thus for the time being, we are maintaining our previously disclosed 2018 guidance, which calls for net sales of approximately $620 million and net income attributable to Inter Parfums, Inc. of approximately $1.44 per diluted share. Guidance for 2018 assumes the dollar remains at current level. You are probably wondering if further licensing agreement are in our plan, and the answer is yes, we are always on the lookout for growth opportunities in terms of new license and acquisition, that fit our business model and makes sense. Moving along to other topics; as mentioned in our news release yesterday, we had year-over-year sales gain in all of our markets in 2017, the year in which North America emerged as our largest market, having spent nearly 21% [ph] of net sales on advertising and promotion, we had one overriding goal in mind, growing market share. This is just at last year and in [Indiscernible]. Earlier this month, Citi Research published another review of the fragrance industry. From Citi and Euromonitor [ph] research, we see that globally, our $49.5 billion industry grew at a rate of 6.5% in 2017. Our sales rose 13.5%. The five year compounded annual growth rate of the industry was 5.2%, while ours was 10.9%. We have talked about European brand sales in our releases, but I want to emphasize two special winners, one is Jimmy Choo, which had a 20% increase in fragrance sales in 2017, surpassing the $100 million mark in sales. Sharing the spotlight with Jimmy Choo was Montblanc, which continues to exceed our expectation. While I am on the subject of Jimmy Choo, on the previous call, a subject of our license came up, because the brand was sold to Michael Cors. As we announced in December 2017, our license agreement was amended and 10 more years were added, so we are the fragrance licensee for the Jimmy Choo brand, at least through 2031. We are also extremely pleased with Coach brand sales, which had year-over-year growth of 149%, quickly making it our fourth largest brand. This was achieved in less than two years, and without the benefit of the legacy fragrance business. Some of our new entries of 2018 have already debuted, including [indiscernible], Coach Floral and just last week, we introduced Modern Princess Eau Sensuelle by Lanvin. Additionally, for our European operations, we added extensions of Jimmy Choo's Women Signature fragrance in the pipeline. Along with our new extensions of our super hit Éclat d’Arpège by Lanvin, and the Coach signature scents for men, which also welcome a new family member this year. Moving down to U.S. operations; with the recent introduction of Bella Blanca by Oscar de la Renta, our 2018 launch schedule is on track with new products for Abercrombie Hollister, Dunhill, and Anna Sui coming to market throughout the year. Others in the pipeline are Dunhill Century [ph], a new fragrance family debuting in the summer. For the first quarter of 2018, we are scheduled two brand extensions for Abercrombie and Fitch, [indiscernible] in the second half of 2018, with Abercrombie and Fitch [indiscernible] extension owner. In the second half of 2018, we will introduce an entirely new fragrance for Hollister. Lastly, we have a [indiscernible], a brand extension for Anna Sui, debuting in the summer. I want to share some happy news with you. Last month, our company celebrated our 30 years as a public company, by ringing the opening bell on NASDAQ on February 14th. The NASDAQ representative reminds us that at the time of our IPO, our market cap was $7.5 million, and we had total sales of $4.5 million. We have come a long way. There is a photo of the event on the homepage of our web site. In closing, we have what it takes to build on our success. A diverse portfolio of brand, a distribution network encompassing 100 countries, and industry-wide reputation for growing fragrance franchises, that enhance each brand and each brand owners, a very strong balance sheet and [indiscernible] organization. Now operator, please open the line for questions.

[Operator Instructions]. Our first question comes from the line of Linda Bolton-Weiser with DA Davidson. Please proceed with your question.

Hi. Thank you. So congratulations on the GUESS license. So we were able to find some information just a little bit, about the sales level way back when Parlux used to market it, and we saw that there was a level of at least $46 million of sales. Do you have a good historical knowledge, if was that the actual peak sales for guess, or were there points where it was actually higher? And your comments about it being the biggest in your U.S. based operations? It does indicate that it's over $20 million is what you are thinking in terms of annualized run rate revenue. So can you give a little more color on -- is my thinking correct here that it could be $20 million, $30 million, even $35 million of annualized run rate, right off the bat?

As I said in my comments, we will give you more information on GUESS, when we release our first quarter. But we -- I am confirming the information about the historical sales as you mentioned Linda, and we see that in the next 24 months, and that is normalized in terms of inventory and distribution, which should be around $50 million or so for GUESS. Russ, do you have a comment?

Yeah. I really can't talk. Parlux was a public company, so I am sure that those numbers that they have disclosed, those are correct. With respect to other sales data, we are not sure of the accuracy of any of the data that we had heard. But as Jean said, in two years from now, we think that this business can be built, so that it should approximate somewhere close to that overall $50 million number.

Okay. And then, I know in the past sometimes, when you have acquired something, where there is an existing line, you feel like sometimes you want to clean out some of the product line or the SKUs or something, and I see that there are very low priced SKUs that are being sold under the GUESS brand, $13 to $15 at the retail price. That seems quite a bit lower than the Prestige price point you're used to. So can you comment on what your thoughts are on what you might want to do initially with it?

You're right. We are going to have to decide here, have a look at the portfolio. We are going to have to clean up some of the dissolution. That's why we have a very long term license, we have a 15 year license, so we'd take the time, and I want to use the next 12 months to clean up. We have got to come up with a new fragrance, with a new line of fragrance in, I would say, around 18 months from now. And the goal will be this year to put back GUESS with a fancy, affordable, luxury segments. We want to be the -- maybe the first guy to -- the first level of selective distribution. We see the price could be higher than where they are today.

Okay. And then, is there any way that you could comment -- did the Coach Floral launch occur here in the first quarter, and how significant is that? Is that a minor flanker, or is that kind of more major than maybe what I am thinking? And how is the trend of the business? We are almost done with the first quarter, is there anything you can say how things are trending after a very good holiday that you had?

No, we are not going to comment on the first quarter. Yes, Coach is doing great, not only the flanker, but we are rolling out worldwide, and Coach is doing a little bit better than our actual projections.

Okay. And then just one final one, I notice that your yearend inventory was up about 40% or so year-over-year, why would that be? Is that with the anticipation of the launches here in the first half, or what's going on with that?

Yeah. Our inventory levels are always a function of when new products are being launched into the marketplace. When you look overall at where we are from a business standpoint, turnover and things of that sort are very-very consistent, not only for our inventory, but also for receivables. So it's really a function of what is needed to cover the anticipated sales of the next three to six months.

Okay. Thank you very much.

Thank you, Linda.

Thank you, Linda for your questions.

Thank you. Our next question comes from Joe Altobello with Raymond James. Please proceed with your question.

Thanks. Hey guys, good morning. First question on the gross margin, that was the biggest surprise for us, since the dollar has been weaker, as you noted, and I think you have mentioned in your last earnings call, that you didn't see a ton of upside on the gross margin number. So if you could just tell us a bit first, what percent of your sales today are through your own distribution subsidiaries, versus where that was, let's say, a year ago?

That's information that we haven't disclosed. So I can't just throw that out here. But needless to say, there is a little bit of anomaly, because one would have ordinarily expected the gross margin to decline a little bit, because of the strength of the euro against the dollar. But it is being mitigated to a great extent, because some of the biggest markets that are growing, as Jean mentioned, North America, is now the largest market that we have, and in addition the brands that are growing, as I mentioned, Rochas and Coach, these are brands that the distribution is -- the growth of the distribution is significant, and within our distribution subsidiaries. So that is what's causing this anomaly. Again, as we grow different brands, in different markets around the world, this trend, I am not really expecting it to continue. This was a consolidation year, that was not a major launch from some of the major brands, therefore the impact actually showed a little bit more than we originally expected. But I do not expect significant gross margin expansion, as a result of product mix going into the future.

Okay, understood.

And let's not forget, that fourth quarter, as you said -- are shifting in the third quarter, so this could explain also why the fourth quarter was higher than anticipated.

That's also a good point. In terms of the mass brands that you guys are discontinuing, could you quantify how much sales they represent, and maybe if that was anticipated in your original guidance of $620 million.

The sales are --

Today, the sales are less than $10 million, and historically, the company always kept the mass or semi-mass products. So we have seen that in the next two or three years, there is no reason for the company to continue selling these products which is less than $10 million. So we wanted to start cleaning the inventory. And also, the trademarks associated with these segments.

Okay. And that's in your guidance for this year, $620 million?

It is.

Yes.

One last one, the expected rate for 2018 Russ?

Off the top of my head, I don't remember if it was disclosed or not, and I think when we changed our guidance, we might have come up with an effective tax rate. I don't have that information right in my fingertips right now, but I would imagine, it's going to be somewhere around 14 points below the -- I am sorry, it's not. I don't have that information in front of me, I will try to put it together and get it to you.

Okay. Thank you guys.

Thank you. Our next question comes from Jason Gere with KeyBanc Capital Markets. Please proceed with your question.

Hey good morning guys or good afternoon. Jean, I guess the first question, you were talking about I think, when you factor in Guess, you were saying that SG&A would be pretty steady going forward. A&P spending, we have seen step-up last year in some of the big launches, 21%. So I guess I am just trying to think about, how we should think the next couple of years of A&P spending, the ROI you are getting on that, obviously, has been pretty good. Probably would anticipate a big step-up this year, but maybe 2019 with some of the bigger launches. So I was just trying to think about the tradeoff between core SG&A that you talked about with GUESS in there, and then maybe the A&P spending, with some new bigger launches coming on the GUESS line, and other launches that you have in the docket?

I think that A&P at 21% is what we can expect going forward. I think it's already at a high level. As you can notice, we have increased the percentage year-after-year. We are comfortable with this number now. We spent more than $120 million in A&P this year and that's why we are able to grow our sales faster than the market. But we think that -- I am comfortable with this number going forward.

Okay. That's fair. And then I guess the other question, the last question you talked about direct-to-consumer more on e-commerce, so I was just wondering if you could talk about what you are seeing in beauty in general, in terms of where customers are buying their fragrances between online, brick and mortar, and I know you have to support both channels there, but maybe if you could talk about the mix of the two, and how you see that progressing the next couple of years, and maybe what's changing in consumer behaviors, in terms of where they are buying their fragrances? Thank you.

Internet sales, obviously is growing at a faster pace, but we start from a smaller number. We have two types of internet sales, we have the web site of our retailers, so our retailers manage also a web site, and people buy from macys.com or sephora.com, and this is a big part of the business, and there are also some sales done by web sites that are specialized in fragrance. This business is still less [ph] than 10% of our total sales. Either we sell directly or we sell it through distributors. But definitely, it's growing at a faster pace, that's what I can tell you for now.

Okay, great. Thank you. That's all for me.

Thank you so much, Jason.

Thank you. Our next question comes from Wendy Nicholson with Citi Research. Please proceed with your question.

Hi.

Hello Wendy.

Hello. My question goes back to Russ, your comment in your remarks that you are now closing in on the long term margin target, that you have been checking that for a long time. So congratulations on that, that's awesome. But I guess the question is, where do we go from here? I think you have made the point several times that, advertising and promotion is probably going to stay in that 20%-ish range, but if I look at the other SG&A as a percentage of sales, you close in at almost 23% last year, and that's a bit higher than you were four, five years ago, and so I am wondering, do you think that given your larger sales base, is there room for operating loss? Do you think you can get your operating margin up kind of 14%, 15%, or the reinvestment opportunity is so significant, you kind of want to stay in the 13%, 14%, range? Does that make sense?

Yeah, I understand the question exactly. And you are 100% right, there is no reason to stay. Now that we have reached, what was an initial target, there is no reason why we can't exceed it, if in fact, we can continue to grow the top line. As Jean just mentioned, we think that 21%, which is up significantly from the little over 19% last year, and a little less than 18% the year before. 21% is a decent amount of funds that's being used to reinvest and to build market share. So if we can grow the top line sales and the numbers or enter into more license agreements like we have with GUESS, there is no reason that that operating margin can't -- the next target is going to be 15%. I think, you can max out somewhere, maybe it's around 15%, maybe even 16%, I think that's probably the highest we have ever had historically, for a year or so, where we might have just touched at that particular level. But clearly, we are expecting to gain additional operating leverage, as we continue to grow the top line.

Got it. And then just broader, congratulations on GUESS, it sounds like it's going to be a terrific addition, but you still got a ton of cash on the balance sheet, and I assume, there are no changes in terms of your capital allocation plans. You still want to keep the powder dry. But still you think you have got the management bandwidth internally, to continue to look for even more acquisitions above and beyond GUESS, do you think you need to hit a pause at some point, or kind of just -- what you are thinking about your ability to take on brands above and beyond GUESS? Thanks.

We do not want to pause at all to accelerate the [indiscernible]. We said for a long time, we can manage in our portfolio, more brands than what we have. We have the organization set in place. So GUESS is a perfect example, we are going to be able to absorb GUESS in a very short amount of time. The team has started to work in the last what, month or so, and we will be able to have some sales starting, as early as the next month, even though, in order to take advantage of events, it's going to take six months to 12 months. But we will not pause. We have other plans, other ideas, some are close to signing -- we are working on, and the cash that we have, we are not going to use a lot of this cash for GUESS, but I think, so it is very important to have it in our book, because opportunities will be available for us. Russ, do you want to complete?

No, I think you hit it. We are definitely not pausing at all. There are several different other initiatives that we are looking at. GUESS is a great addition for the U.S. side of our operations. We clearly have room to grow additional brands, either in the U.S. or even through InterParfums SA, our European subsidiaries.

Got it. Terrific. Thank you very much.

Thank you so much.

Thank you. Our next question comes from Ashley Hogan with Jefferies. Please proceed with your question.

Hi. This is Ashley on for Steph Wissink. Thanks for taking our question. In regards to the GUESS license, how should we think about distribution of the brand? And then also, as you guys pull back from the mass fragrance, is there something in the mass fragrance business, that it's just [ph] maybe in the long term state of underperformance?

Jean, do you want to take the first part about GUESS, and then I could address the mass?

Yeah. For GUESS, the brand has great recognition outside of the U.S. We have -- I was just last week in Russia, checking potential for GUESS business and GUESS is opening a lot of stores in Russia, and I think we can expect a lot of business coming from this part of the world. We will position GUESS as a luxury brand outside of the U.S. In the U.S., it's a different story, because GUESS is not sold in the GUESS -- department stores. So we are going to really put [indiscernible] on selling GUESS stores. We have a very large presence, from a merchandising point of view, in GUESS stores, and that outside of the U.S., GUESS is definitely considered as a very important American brand. So the second brand that we announced internationally, such as Abercrombie or other brands that we have in our portfolio. Russ, you want to answer the second part of the question regarding the mass market?

Yeah. The mass market business that is remaining, is really a legacy business for the company that goes back to the 1990s. This is not a business that we have really been concentrating significantly on, over the last, at least 15 to 16 years. So it has been in a somewhat of a steady decline. It's just at a point now, that as we mentioned, the sales data is under $10 million for a company that's doing almost $600 million, it clearly -- it doesn't make sense for us to concentrate on that. So we have just made a cognitive decision that, certain lines that are not really generating the profitability that they should, should easily be discontinued. It also enables us to reallocate warehouse space and things of that sort, to be more efficient, if you will, and that's kind of where the mass market business has been for quite some time now.

Great. Thank you.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Hamed Khorsand with BWS Financial. Please proceed with your question.

Hi. Just a couple of questions here. I didn't hear in your comments earlier, is there a new Montblanc coming out, is that still a long time for this year?

A new family fragrance for Montblanc is not going to come out until 2019, maybe even early 2020. What we have launched over last year and this year are, we will call them flankers, but Montblanc is such a strong brand, that these flankers have actually significantly been outperforming even our own expectations. Montblanc Legend Spirit and Montblanc Legend Night this year, clearly have exceeded all expectations. Jean, anything to add there?

Yes, yes, yes. Montblanc Legend Night is a fragrance that we are launching. But it's what we call, a flanker. The new franchise, a new pillar for Montblanc will happen next year, beginning of next year, which will be the third pillar for Montblanc.

Can you hear me? Hello?

And then my other question was going to be, any changes to marketing plans, just kind of what you have learned from last year, one for your existing business and two, if there is any change to that plan, now that GUESS will be part of the lineup?

No changes. We continue to -- we will support all the existing brands in our portfolio, either from our France subsidiaries of Montblanc, Lanvin and Jimmy Choo, of course, Rochas and Coach, or in the U.S. with Oscar de la Renta, Anna Sui, and Abercrombie and Hollister. So absolutely no changes. GUESS will transcend our presence in stores internationally and domestic, but no particular changes to our strategy.

Okay. And then as far as the marketing goes and the ad spend, and last, you had said it felt like you were generating more sales per ad dollar spent, is that because of the mix as far as going direct with your distribution and changing up how you were doing advertising, versus the retailers doing advertising, any details you could give on that?

No. But I don't think that we generated more sales per dollar being spent last year. I think it has been quite the same. Stayed there for a long time. We need to reinvest some of our profit into advertising in order to maintain the growth for each of our brands. Russ, you have something to add?

No. I think that you are exactly right. I really don't see a change at all. The investment level today is the level we intended to get to, because of the importance of reinvesting in our brands.

Thank you.

Thank you so much Hamed.

Thank you. There are no further questions. I'd like to turn the call back over to Russ Greenberg for any closing remarks.

Thank you. And just a quick note, I will be a presenter at the D.A. Davidson Brands and Experience Forum in Chicago on June 14th, and I will also present at the Jefferies Consumer Conference in Nantucket on June 20. I want to take this opportunity to thank you all for tuning in to our call, and if you have any further questions, please just as usual, contact my office, and have a great day. Thank you very much.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.