Good morning, ladies and gentlemen and welcome to the Steve Madden Limited Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Danielle McCoy.

Thanks, Phyllis and good morning, everyone. Thank you for joining our third quarter 2021 earnings call and webcast. Before we begin, I'd like to remind you that during our call, we may make certain forward-looking statements as defined in the federal securities laws regarding our expectations or predictions about the future. Generally, these statements relate to projections involving anticipated revenues, earnings or other aspects of the company's operating results. Such statements may also include discussions involving the ongoing COVID-19 pandemic including its current and expected impact on our business operations and results, as well as the company's plans to response to such uncertain and dynamic events. Because these statements are based on current assumptions and expectations, they involve known and unknown risks, uncertainties and factors not within the company's control. And as such, our actual performance and results may differ materially from these statements. Our annual report and other reports filed with the SEC from time to time include detailed discussions of the risks the company faces, and we urge you to refer to these. Any forward-looking statements represent our judgment as of the time of this call and cannot be relied upon as current after today's date. We disclaim any intent or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable law. The financial results discussed are on an adjusted basis, unless otherwise noted. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release. Joining the call today are Ed Rosenfeld, Chairman and Chief Executive Officer and Zine Mazouzi, Chief Financial Officer. With that, I'll turn the call over to Ed. Ed?

Thanks, Danielle. Good morning, everyone. And thank you for joining us to review Steve Madden's third quarter 2021 results. In the third quarter, we delivered the highest quarterly sales and earnings in our history, with revenue increasing 5% and diluted EPS increasing 22% compared to pre-pandemic third quarter 2019, results that demonstrate the company's disciplined execution of its key strategic priorities. Our number one priority as always is to create trend-right product and get it to market ahead of our competition. And I could not be happier with our team's performance on that front. We have relied on our proven model, which combines our talented design teams led by Steve, our test and react strategy and our industry leading speed to market capability to deliver trend-right product assortments that are winning with the consumer and enabling us to outperform the competition and take market share, particularly in our flagship Steve Madden brand. We're also supporting this great product with increased investment in marketing. In addition to continuing to scale our digital marketing efforts to drive our e-commerce business, last month we also launched our largest brand campaign in years, called the Madden Verse, the campaign features 3D avatars of artists and social media favorites Normani, Sydney Sweeney, Nessa Barrett, Justine Skye and Jordan Alexander, bold, creative, empowered and authentic women that embody the spirit of the Steve Madden brand. The campaign harkens back to our iconic big head girl ads from the 90s, reflecting the same fun and rebellious attitude, but with modern elements like avatars and immersive content that includes an augmented reality shoe try on feature and Instagram filters that enable consumers to morph into the avatars of their favorite artist. This combination of outstanding product and enhanced marketing is driving deeper connections with consumers, which in turn…

Thanks, Ed. And good morning, everyone. Our consolidated revenue in the third quarter was $528.7 million, a 52.4% increase, compared to 2020, and a 5.3% increase versus 2019. Our wholesale revenue was $402 million, up 41.6%, compared to the prior year, and down 4.6% compared to 2019. His results included a significant impact from shipments that moved out into the fourth quarter due to supply chain delays. We estimate Q3 wholesale revenue would have increased low single digits to 2019, if not for those move outs. Wholesale footwear revenue was $304.2 million, a 42.6% increase from 2020, and a 3.7% decline from 2019. In the U.S., the Steve Madden women's business was a standout increase in 25% compared to 2019. Betsey Johnson and Dolce Vita also had strong gains to 2019, these increases were offset by the absence of the Kate Spade footwear license we had in 2019, as well as declines to 2019 in Blondo, Anne Klein and private label. Outside the U.S., strong performance in Europe was offset by softness in Canada, due to a slower recovery from the pandemic and the impact of the supply chain delays. Wholesale accessories and apparel revenue was $97.8 million, up to 38.7% to last year, and down 7.4% versus 2019. When comparing to 2019, the decline in the segment was primarily driven by supply chain delays, partially offset by an increase in apparel as a result of only owned in BB Dakota for a portion of the quarter in 2019. We expect both wholesale footwear and wholesale accessories and apparel to show strong double-digit growth versus 2019 in the fourth quarter. In our Retail segment, revenue was $123.1 million, a 108.6% increase, compared to 2020, and a 62.5% increase compared to 2019. E-commerce was the primary driver of direct-to-consumer growth versus…

[Operator Instructions]. Your first question comes from the line of Camilo Lyon with BTIG. Please proceed with your question.

Thank you. Good morning, everyone. Great job on the quarter. I want to start out with the guidance. The Q4 guide is a very strong guidance. I think you raised about the fourth quarter EPS by about $0.15 or so implied above current street estimates. And I think sales are implied to be up 27% versus 19. Again, that's compared to up 5% in Q3. Can you unpack what's driving that acceleration maybe parse out the later shipments that slipped from Q3 into Q4, how much of is it reorders, the splits between wholesale and DTC?

Sure, well, good morning, Camilo. Thanks for the question. So in terms of what gives us confidence to raise the guidance like this. It's really the strength and the momentum and the brand heat that we're seeing in the flagship Steve Madden brand. So if you look at where we have raised our internal forecasts versus where we were three months ago, the two big areas are our direct-to-consumer business, which continues to have just incredible momentum in both digital and brick-and-mortar channels. And then also that Steve Madden Women U.S. wholesale footwear business that we called out earlier was up 25% to 19% in Q3, and we anticipate we'll see even faster growth compared to 19% in Q4. In terms of the acceleration of the business from Q3 to Q4, that's really about the acceleration in our wholesale business, the DTC. We think it's going to grow even faster than wholesale, but it's been growing at a very rapid clip, you said that was up 62% to 2019 in Q3, but wholesale, which was down about 5% in Q3 to 19%, we're forecasting to be up mid-teens to low 20s versus 19 in Q4 and that's really just a function of our wholesale customers catching up to these incredible sell throughs that we've had, we've been talking to you all year, about how if you're compared to 19, our sell throughs were dramatically outpacing our shipping and our stock levels at the wholesale customers. And you're seeing that now catch up. You asked about the move outs, the impact of the move outs, there is some benefit to Q4 for move outs from Q3, we anticipate -- we expect that excuse me, we estimate that about $30 million of wholesale shipments moved out from Q3 to Q4. However, we've also built into our forecasts an assumption of about $20 million falling out of the end of Q4 into Q1. So the net impact there is relatively modest only about $10 million.

That's great color. Thank you for that. As a follow-up to that line of questioning, how does this impact the conversation for the first half of 2022 with your wholesale partners? And then my second question really is more of a broader kind of question on your digital strategy, if you could just give us kind of an update on the progress that you've made with your digital strategy, where were you say three years ago versus where you are today from a sales and profitability perspective that'd be very helpful.

Sure, yes, so as we go into the first part of '22, obviously the success that we're having at retail, the sell throughs that we're seeing, obviously positions us well with our wholesale customers for nice open to buy commitments for the first part of '22. I think we're not putting out '22 guidance today. So I'm not going to put numbers around that. But certainly, we do feel good about how we're positioned we've been an outperformer in terms of sell through. And we're taking share in that wholesale channel and expect to for the first part of '22. In terms of digital, as you know, that has been really a top priority for our company over the last few years. And we have specifically with respect to our owned and operated e-commerce business, we have invested in talent, we have invested in digital marketing, and we have invested in ongoing site enhancements. And then we have connected that to our strong brands and outstanding product. And the combination of all of that has yielded some really powerful results. So you asked about where we were three years ago 2018, we were doing a little over $15 million, I think it's about $56 million in revenue in our owned and operated e-commerce business. And it was making a single-digit operating margin. So the profit contribution there was less than $5 million. In three years later 2021, we are going to approach $250 million in owned and operated e-commerce revenue with a 20% operating margin contribution. So I don't think it's overstating it to say that that over that three year period, that's a fundamental change in the complexion of our business. And I think it also really meaningfully improves our growth opportunities that we have going forward because we really feel like we're still in the early stages of this digital journey.

That's fantastic color. Thank you. Good luck with the close of the year.

Thank you.

Your next question comes from the line of Erinn Murphy with Piper Sandler. Please proceed with your question.

Great, thank you. Good morning, Ed, maybe just following up on that conversation. I was hoping you could share a little bit more about your new marketing campaign. What is the customer response been thus far and then how is it converting within the Madden footwear versus the handbag opportunities you spoke to?

Yes, thanks for asking about that, Erinn. So yes, we're excited about the new campaign that we feel really great about the response. We just felt like given the brand heat that we had in Steve Madden, and this really, really strong product assortment and what we're seeing in the brand overall but now is the time to throw gas on it and really step up with some exciting marketing. And we feel like we've done that here, the response has been great, fantastic digital and social engagement, we've had some viral moments on TikTok, which has been fun, big increase in the search interest for the brand online. And it's driving traffic and sales online but also into stores. So really just excited about the customer response. And so you asked about footwear versus handbags with respect to the campaign was that right?

Yes, just how it's converting because I'm just curious how you're seeing that customer come or convert against that campaign across the two categories?

Yes, I guess the campaign was more was certainly more footwear focused. So if you're talking about sales that we think are directly coming from the campaign, then that would certainly lean much more towards shoes. But in our direct-to-consumer channels, overall, our handbag growth is pretty explosive. And in fact, it's outpacing what we're seeing in shoes and we're really excited about that momentum in handbags particularly in direct-to-consumer channels.

Great. Got it and then my second question is around your supply chain. You guys have been very nimble with moving production into Mexico, Brazil, can you just kind of take a step back and give us kind of an overview of where your biggest concentrations are right now for production and then what are you seeing with the lead time and have you had to resort to air at all if you think about holiday and even early Spring deliveries, thanks.

Sure, yes, look the supply chain is no surprise, it has been a big headache for us as it has been for everybody else. As you point out, we did move close to half of the Steve Madden Women's inline production to outside of China or outside of Asia to Brazil and Mexico for Fall. And we think that's we're very pleased that we did that, it has not that those countries have been without their challenges, but we certainly think we're better off for having done that. If you look at the company overall of course, we're still majority in China with Cambodia would be our second largest country of origin. We make a lot of handbags there. And then we're spread out across a number of other countries. In terms of having to air, yes we have had to do to utilize more air freight. That's primarily in our direct-to-consumer segment and our retail business. A year ago for the year that was, it was probably about 17% of our goods were coming via air, this year-to-date, I think we're up around 30% Zine, is that right?

That's correct, 30% this year, 17% last year and it was about 11% the year before that.

Yes, so we have that utilize more air. And of course, that's been expensive because air freight rates are up significantly.

Great, thank you so much.

Your next question comes from the line of Paul Lejuez with Citi. Please proceed with your question.

Hi, this is Kelly Crago on for Paul, thanks for taking our question. I just want to follow-up on your conversation around the retail channel, just something you talked about where the penetration of that business overall could grow to over time, and where you believe retail EBIT margins could shake out longer-term, just given the strength, the E-com channel, and I think in the recent past, I think the retail business only reached maybe a high single-digit margin at best. So just curious where you think that could go longer-term? Thanks.

Yes, that's a really, thanks for the question, Kelly. That's something that we're really excited about. And if you look about at the business what it looks like this year versus pre-pandemic, that's a really significant shift. So back in 2019, our Retail segment was about 18% of our total sales. And this year, I think it's going to be up about 800 basis points, it'll be over a quarter of the business. And, more importantly, the profit contribution is up dramatically. So whereas it was only contributing about 5% of our profits back in 2019, this year, it'll be about a quarter of our profits. And so in terms of the EBIT margins there, even this year, we're on track to do mid-teens, or potentially even a little bit better than that, which we're very excited about.

Got it. And then I just need to dig into the gross margin a little bit. Could you talk about how much of a drag free was in 3Q? Would you expect that to be in the fourth quarter? And then when we think about the gross margin trajectory beyond 2021, do you expect some normalization there in 2022, that could lead to pressure or just any color on that line item, the puts and takes there, as you think about the future? Thanks.

Yes, let Zine take the freight, and then I'll address '22.

Okay, so thanks for the question. So for Q3, the freight was about 270 basis point drag on the margin. And the GSP was about 50 basis points. And for Q4, we're estimating that the freight will be somewhere around 260 basis points, which brings the year to about 230 basis points roughly.

So yes, so in terms of next year, again, not providing guidance yet, but I can give you some color on what we see as the puts and takes. Obviously, it's been -- there has been very low levels of promotional activity for us this year, and for the industry overall. So we're certainly going to work very hard to maintain that discipline going forward. But there are competitive dynamics at play and we'll have to see what that looks like for the industry overall next year. So potential point of pressure. We are also seen FOB price increases, factory price increases based on pressure on labor and as well as materials. So that's a bit of a headwind going into next year. However, on the other side, we are also raising our selling prices to combat that, and we also are hopeful certainly that GSP is going to get renewed, because that's been a significant headwind as Zine outlined, and then as we go into the back half of '22, we're also hopeful that there is somerelief of the freight pressure.

Got it. Thank you.

Thanks.

Your next question comes from the line of Tom Nikic with Wedbush Securities. Please proceed with your question.

Hi, good morning, everyone. Thanks for taking my question. And I kind of looking at your I guess in the wholesale segment, your first half of this year versus second half. And in the first half, I think your revenues versus '19 were still down something like 20%. As we look to the first half of 2022, like, I mean, do you think we get kind of back to pre-COVID levels? Is there like some reason why your first half revenues would be kind of your structurally lower than they were at pre-COVID, like anything like that I'm just trying to think about how to think about the spring season?

Well, we're not going to provide specific guidance. But obviously, we do think we have an opportunity for nice improvement in spring of '22 in wholesale, compared to what we did this year. And no, I don't think there is anything structural that would prevent us to get back to '19. Absent, if you recall, we had some like a one-time program that we didn't anniversary in the private label area back in Q2 of '19, which we talked about earlier this year. But putting that aside in the ongoing businesses, no, I think that we're certainly going to target to get back to '19.

Got it. Understood. And then I also want to touch on Europe. I think you've been pretty bullish on Europe this year. And I think earlier this year, you said you were targeting $55 million in revenue in Europe this year, which would have put it out about 3% of sales? Like A, Yes. Is Europe trending better than that? Like, should we think that Europe is going to come in somewhere better than that $55 million. And then B, I don't know, if you can talk longer term or like how meaningful do you think like Europe can be going to be 10% of sales, anything like that. Just any thoughts on Europe, bigger picture would be great. Thanks.

Yes, so we continue to have really strong momentum in Europe. So the $55 million you're referring to was for the SM Europe business that we -- the joint venture where we bought out the remaining interest earlier this year, and that business has continued to trend up. So it'll actually do north of $60 million this year, which puts it over 85% ahead of where it was in 2019. So very strong growth there. If you look at the EMEA region overall, we're going to be close to $100 million this year. And we continue to feel like we're in the very early innings in that region of our growth journey and in terms of what the opportunity is, it's multiples of what where we are today.

Thanks. Ed. Thanks very much and best of luck this holiday season.

Thanks, Tom.

Your next question comes from the line of Janine Stichter with Jefferies. Please proceed with your question.

Hi, good morning, I was hoping you could talk a little bit about the trends by product category. I know you've had a bit of a head start in the dress shoes category. Curious, what you saw and felt through there. And if you feel like the competition has started to catch up at all. And then initial rebound boost and what you're seeing in that category. Thank you.

Yes, so dress shoes continues to be an outstanding category for us. We have seen some of our competitors get some more product out there in the category, but it has not slowed down our performance at all. And we're seeing success with really a range of products within that category. So opened up dress, closed up dress, various heel heights, it's just been a fantastic category for us, and particularly in our direct-to-consumer channels really driving a significant driver. And then boots are also performing very well for us, doing great with boots, Chelsea boots, so that western boots performing a bunch of things happening there too. And that's a very strong category as well.

Great, and then just the follow up on the price increases, is that something you've taken already or something we should expect more just spraying it and maybe to quantify the magnitude?

Yes, so for fall, I think we have layered on some price increases, we've done it selectively, if you were to look at it as an average is probably low single digits. But again, that's our initials, the AURs are much more significantly than that, because of the lack of discounting. So if you look at our retail segment, our direct-to-consumer channels, our AURs are up 20% plus versus '19. But as we go into spring, we're going to take a little bit more price on the initials and I think you could see that looking more like 5% to 10%.

Great color. Thank you.

Thank you.

Your next question comes from the line of Marni Shapiro with Retail Tracker. Please proceed with your question.

Hi, guys, congratulations, amazing quarter, and the stores look outstanding when they're in stock.

Hi, Marni.

I think you just said your spring, I just want to make sure I heard this right, spring initials could be up 5% to 10%. Are you expecting to layer in some level of promotion and some normalcy a promotion so that your AURs end up about the same as the back half of this year? Or you expecting the promotion should remain pretty clean to the back half of this year and into spring? So it would assume that AUR won't be up even more?

Our plan is to continue to have very controlled promotional activity.

And even through holiday?

Yes, it doesn't mean none. You know, because they expect some level of promo activity during holiday, but certainly, compared to where we were a pre-pandemic, less promotions.

And can I just ask you one sort of bigger picture question. You guys have some really unbelievable sold out products. And I see them across the board, whether it's online at your wholesale DTC or own DTC in department stores, in your own stores. I'm listening to customers chase products down for like the last very last shoe in a chain of stores. When you get in a reorder, and I'm going to pick on the Max, it's on my screen right now, when you get in the reorder or delivery of that, how company wide how do you prioritize where that delivery goes? If the Black Maxima comes in, does it go first to your own stores, your own DTC, wholesale DTC? How does that all factor in, so that you're keeping your wholesale partners happy, but feeding the best margin businesses? How does that work?

Well, it's a balancing act for sure. Look, the Maxima throughout the year has been in and out of stock going back to the early parts of the year. And one of the things we've been doing on our own website is taking a lot of pre-orders so or back orders. So customers are placing orders. So those customers as soon as we get the product in, then we're getting it out to those ecommerce customers who have already placed the order. And we're obviously prioritizing our own direct-to-consumer channels. But we also take care of our best wholesale customers, our full price wholesale customers, because that remains an important business for us, and we need them to be successful as well.

Okay, great. Best of the luck for the holiday you guys.

Thank you.

Your next question comes from the line of Jay Sole with UBS. Please proceed with your question.

Great, thanks so much. And I'm wondering if you can just elaborate a little bit on, if where we are in the whole return to work or return to parties cycle? Because it seems like there's a lot of things going on. There's a lot of fashion trends, there's a rebound from the pandemic, there's market share gains. So just wondering how you feel about those different things specifically, like if you still see a lot of rebound potential in the whole where to work and return to group events, type business?

Yes, it's a good question. It's hard to say exactly how far along we are. But I will say that in terms of the return to I think he called it return to party. We've been seeing that for some time. And if you look at the strength that we've had in dress shoes even started in spring, but continuing through now, I think that evidence -- that consumers are returning to going out and going to events etc. And our dress shoe penetration right now is running ahead of where it was in 2019. And actually, by a pretty significant margin. And but again, that's Steve Madden and that's really I think the end use there is going out. It's not necessarily going to work. I think that wear to work, dress shoe business is still not back to where it was pre-pandemic. And we'll have to see how that shakes out going forward, if it ever returns exactly to where it was.

Got it. Okay, thank you so much.

Your next question comes from the line of Laura Champine with Loop Capital. Please proceed with your question.

Hi, thanks for taking my question. It's about inventories, which I know there's a lot of talk about supply chain issues and out of stocks, but inventories were up 80%. I know you run them tight. Is that just to meet demand for some of the products you mentioned has been moved out into Q4? Or does this represent you getting a more adequate safety stock in place as we move into reorders?

So I guess first of all, I would say I don't think the right comparison is to where we were a year-ago. I think it probably makes sense to look back to 2019. And relative to '19, we were up about 36%. And as Zine outlined earlier, that's all driven by that that In-Transit number, which is up significantly. The on hand is actually down. But In-Transit, obviously, because of the much longer lead transit times is up. Zine, is there any other color you want to provide there?

No, I just add, it lines up nicely when you look at the In-Transit being up 229% And the on hand down 16%, as we said before. And you look at what we're guiding for Q4, as well as the shifts that we had for orders that were in our inventory at the end of Q3. But we're shipping in October, because of that $30 million that Ed had mentioned earlier. Everything lines up pretty nicely against our guidance, and we feel good about the health and balance of our inventory.

Got it. Just as a quick follow-up. How does this kind of gummed up system impact your strategy for inventory management this spring?

Well, we do have to place orders a little bit farther out than we normally do. We've also had to encourage our wholesale customers to place their orders farther out than they normally do, which they have done. So as you know, speed to market is really critical to our strategy. So we don't like the fact that our lead times are lengthened here. But the good news is we do feel that our relative advantage compared to the competition is maintained. So while our lead times are extended, everybody else is R2 and we still feel like the speed advantage that we have versus everybody else is intact.

Understood. Thank you.

Thanks Laura.

Thanks Laura.

Your next question comes from the line of Sam Poser with Williams Trading. Please proceed with your question.

Thanks for taking my question. Most have been answered. But I just want to ask, you talked about the choices about how you're going to allocate some of the products, where you got the hot stuff. Given the production -- the slow production and slow Transit that's happening. Are you making decisions with the off-price channel or with lower mart large -- lower margin accounts, where you're going to feed the full price businesses more to get the higher margin product made?

Yes, so as you would expect, our first priority is always feeding full price channels.

And also in the merch mart. I mean, it sounds like the merchandise margins were up like 450 basis points in the quarter. Is that right on a year-over-year basis?

Let me just run and Zine can follow-up. There is a mix shift also here. If you're looking at the consolidated number, there is a various mix shift from retail becoming a bigger percentage of the mix. So I don't think it can just necessarily take the consolidated number and then back out the freight and GSP, but certainly merch margins were up across wholesale and retail. Is there anything else you want to add?

Can you give us some idea of how much the -- can you give us the details on that especially on wholesale given?

Well, wholesale, I think Zine outlined about 280 basis points of pressure from freight and GSP that's versus '19. And the overall margins were down 30 bps to '19 in wholesale.

So, I mean, so you're just selling. Now that you sort of have this new normal going on with the merch margins. Going forward once the dust settles whenever that is. How do you go about sort of sustaining, especially in wholesale that much higher number than '19 for the pre-pandemic wants to stay?

I mean, that's mostly about inventory management and discipline around inventory and around markdowns, and that's something that we feel is a core strength of our company. And we're going to continue to lean on that.

And then last, thank you. And then lastly, the -- your business with Walmart and Target that business. What does that look like now? Do they take possession at the factory, they shipping the goods? Can you give us a little color on that private label business?

Yes, so most of that business they take possession overseas. And so they're the ones bringing it over here. We do have part of that business where we land the goods. But again, most of it, they take possession overseas.

And how does that business looking these days?

It's doing well. The private label was down in Q3, because of move outs products that we were hoping to get out via tailwind of Q3 that fell into Q4. But we do anticipate, so it was down in both -- our private label was down in both shoes and accessories compared to '19 in Q3, but we expect to be up in both shoes and accessories in Q4.

Thanks very much. Continue success.

Thanks Sam.

Your next question comes from line of Susan Anderson with B. Riley. Please proceed with your question. Susan, your line is open.

Hello.

Can you hear me?

I can.

Okay, great. Sorry, I guess I was on mute. So just wanted to follow-up on the women's business in the part that you moved to Brazil and Mexico. I'm just curious, is that allowing you to be better in stock versus your peers? And are you still seeing some shelf space gains because of that? And then I'm just curious, are you able to chase it all with that business given is closer to North America? Or is it still tough given the supply chain issues?

All right. Yes, thanks for the question. I do think that we benefited from the shift of production to Brazil and Mexico. And our ability to chase is better there, particularly out of Mexico. Still I think, overall our ability at chase was not -- where it -- what it normally is. That's for sure. But Mexico did give us more opportunity to do that. And yes, I do think that that helped us overall versus the competition. But the big thing that's helping us against the competition is that we have shoes that the consumer really wants, and the sell throughs are great. And the consumer demand for the product is great. That's really the driver more than the country of origin the product.

Great. And then just one other follow-up question on the SG&A for fourth quarter. I guess should we think about it being up in similar magnitude as we saw in third quarter to '19 levels?

No. If you're comparing to '19, definitely the growth will be higher in Q4. Obviously, the sales versus Q4 are accelerating meaningfully and it's also a much higher, there's a higher penetration of retail or DTC in Q4, which carries a higher SG&A.

Got it. Okay, great. Thanks so much. Good luck this holiday.

Thank you.

Thank you.

Your next question comes from the line of Steve Marotta with C.L. King and Associates. Please proceed with your question.

Good morning, Ed, Zine and Danielle. I appreciate you taking the question. As it pertains and as you sort of answered this a little bit on for the last question, but I am curious as to the composition of carts from the Americas meaning Central and South America versus the Far East in the third quarter, and what you would expect in the fourth quarter and maybe how that looks next year. It doesn't have to be more specific numbers to the 10th of a percent. But I'd like to know from a composition standpoint, generally where it is now and where that will trend towards?

Well, look at -- I, again, when you look at the business overall, because we have a lot of business. We've talked a lot about the Steve Madden women's in line business, and that shift to Brazil and Mexico, but when you look at the business overall, we're still over 70% out of China. And then when you add in some of the other countries in Asia, that still makes up the bulk of the business. Brazil and Mexico getting bigger, but still single-digits as a percentage of the total. Because again, we don't -- as of now, we have not been doing anything in those countries in any of the private label areas or the more moderately priced businesses that we have. So that's still what it looks like today. And as of now, I think it is going to look somewhat similar to that next year. We will continue to diversify out of China. But right now, for instance, we had some of the stuff that was in Vietnam, we pulled back because of obviously the shutdowns that that were that that country were the south of Vietnam experienced over the last few couple months.

Single major sourcing differentials next year versus this year?

No, I think you'll still see Mexico and Brazil grow. But generally speaking, it will be similar.

Terrifically helpful. Thank you.

Thanks.

And at this time, there are no further questions. I would like to turn the call back over to management for any closing remarks.

Great. Well, thanks everybody for joining us this morning. And have a great day and we look forward to speaking with you on the fourth quarter call. Bye-bye.

This concludes today's conference. We thank you for participating. You may now disconnect.