Steven Madden, Ltd. (SHOO) Q2 2024 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Q2 2024 Steven Madden Limited Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Danielle McCoy, Vice President of Corporate Development and Investor Relations. Please go ahead.

Thanks, Tanya and good morning everyone. Thank you for joining our second quarter 2024 earnings call and webcast. Before we begin, I’d like to remind you that our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our press release issued earlier today and filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. The financial results discussed on today’s call 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 me on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer; and Zine Mazouzi, Chief Financial Officer. With that, I’ll turn the call over to Ed. Ed?

Alright. Well thanks, Danielle, and good morning, everyone, and thank you for joining us to review Steve Madden’s second quarter 2024 earnings. We delivered strong results in the second quarter with revenue increasing 18% and adjusted diluted EPS rising 23% compared to the same period in 2023. This performance was driven by exceptional growth in the accessories and apparel categories and robust gains in international markets and direct-to-consumer channels, demonstrating our team’s ongoing execution of our strategy for long-term growth and value creation. The foundation of that strategy is creating deeper connections with our consumers through the combination of outstanding product and effective marketing, thereby enabling our success with our 4 key business drivers. Our first key driver and what we continue to view as our largest long-term growth opportunity is expanding our business in international markets. Revenue in International grew 13% in the second quarter compared to the same period in the prior year, and we are on track to achieve mid-teens percentage revenue growth for the full year. The EMEA region continues to be the biggest driver of growth. We expect EMEA revenue to be up more than 20% in 2024. In Europe, we continue to outperform the competition and take share in a challenging retail market. We also converted our distributor business in Southeastern Europe, including Serbia and Croatia to a joint venture with our partner fashion company in the second quarter. In May, we opened a new store in Galerija Belgrade, the largest and most important mall in the region, and we now operate 4 Steve Madden stores through the UJV. We are also gaining traction with our new joint venture in the Middle East and expect to end the year with 35 stores in that region, up from 27 at the start of the year. And our JV in South Africa continues to drive exceptional brand heat and outstanding growth on the top and bottom lines. In our Americas region, we’ve seen a nice rebound in Canada after a tough 2023, driven by strong growth in direct-to-consumer channels. And in Mexico, where we have built Steve Madden into a clear leader in the market, our strong momentum continues. We are on pace for another year of double-digit percentage revenue growth there. We also converted our distributor for certain countries in Latin America to the joint venture model in the second quarter. This JV covers Central America, Ecuador, Colombia, the Dominican Republic, Paraguay and Bolivia and currently operates 10 Steve Madden stores. Our second key business driver is growing our business outside of footwear. In the second quarter, overall accessories and apparel revenue rose 74% or 27% excluding the newly acquired Almost Famous business. Our Steve Madden handbag business remains a standout with revenue increasing more than 30% in the quarter compared to the same period of the prior year. We continue to see success with structured mini satchels and cross-bodies as well as on-trend materials like denim and quilting. We are also making strong progress in building our Steve Madden Apparel business. Steve Madden Apparel revenue grew nearly 80% in the quarter. And importantly, overall sell-through performance for spring was strong, making us the leading brand in our department for the season in a number of our largest wholesale accounts. Based on this performance, we are positioned for a significant door expansion and expanded assortments within existing doors for Steve Madden Apparel as we look to 2025. Turning to Almost Famous. Our new acquisition contributed $45 million in revenue in the quarter. The introduction of Madden Girl apparel through the Almost Famous platform is progressing nicely. After a successful launch at Macy’s in Q1, we added Kohl’s for back-to-school, and we’ll be expanding to a number of additional retailers for fall. Madden NYC Apparel also continues to see robust sell-through performance and a strong increase in orders compared to the prior year. Our third key business driver is expanding our direct-to-consumer business, led by digital. DTC revenue grew 6% in the second quarter, including a 4% increase on a comp basis, and we remain on track to achieve our plan of high single-digit growth in DTC for the year. We also drove gross margin expansion in DTC for the second consecutive quarter as our strong product assortments and disciplined inventory management enabled us to reduce promotional activity despite the challenging retail environment. Finally, our fourth key business driver is strengthening our core U.S. wholesale footwear business. Revenue in this business rose 2% in the quarter. Our private label business saw another quarter of strong growth, but this was partially offset by a decline in the branded business as many of our largest wholesale customers continue to take a cautious approach to orders. While this business remains important for us, our strong overall results, despite a muted performance in the U.S. wholesale footwear business demonstrate the progress and impact of our efforts to diversify our business over the last several years and reduce our reliance on wholesale footwear in the U.S. In pre-COVID 2019, U.S. wholesale footwear revenue – excuse me, represented 55% of our consolidated revenue. This year, we expect that business to make up less than 40% of our overall business as we have shifted our business mix to include a meaningfully higher penetration of revenue in international markets, accessories and apparel categories and direct-to-consumer channels. So overall, our strong performance in the second quarter demonstrates the soundness of our strategy and our team’s disciplined execution of that strategy. Looking ahead to the balance of the year, while the operating environment remains choppy, we are on track to meet our financial goals for 2024. And looking out further, we remain confident that the continued execution of our strategy will enable us to drive sustainable, profitable growth and significant value for our stakeholders over the long term. And now I’ll turn it over to Zine to review our second quarter financial results in more detail and provide our outlook for 2024.

Thanks, Ed, and good morning, everyone. In the second quarter, our consolidated revenue was $523.6 million, a 17.6% increase compared to the second quarter of 2023. Excluding Almost Famous, consolidated revenue grew 7.5% compared to the same period in the prior year. Our wholesale revenue was $385.3 million, up 22.5% compared to the second quarter of 2023. Excluding Almost Famous, wholesale revenue increased 8.2% compared to the same period in the prior year. Wholesale footwear revenue was $237 million, a 0.9% increase from the comparable period in 2023 with strong growth in the private label business, partially offset by softness in the branded business. Wholesale accessories and apparel revenue was $148.3 million, up 86% to the second quarter last year or 29.8% excluding Almost Famous. Both our Steve Madden handbag and apparel businesses had outstanding growth compared to the same period last year. In our direct-to-consumer segment, revenue was $136.4 million, a 6.4% increase compared to the second quarter of 2023, including a strong gain in brick-and-mortar and a more modest increase in e-commerce. We ended the quarter with 273 company-operated brick-and-mortar retail stores, including 68 outlets, 5 e-commerce websites and 27 company-operated concessions in international markets. Turning to our licensing segment. Our licensing royalty income was $1.8 million in the quarter compared to $2.5 million in the second quarter of 2023. Consolidated gross margin was 41.5% in the quarter versus 42.6% in the comparable period of 2023. Excluding Almost Famous, consolidated gross margin increased 10 basis points year-over-year. Wholesale gross margin was 33.1% compared to 33.6% in the second quarter of 2023. And excluding Almost Famous, wholesale gross margin was also up 10 basis points year-over-year. Direct-to-consumer gross margin was 64.3%, up 60 basis points from the comparable period in 2023, driven by a reduction in promotional activity. Operating expenses as a percentage of revenue was 31.1%, down from 32.6% in the second quarter of 2023. Operating income for the quarter was $54.5 million or 10.4% of revenue, up from $44.5 million or 10% of revenue in the comparable period in the prior year. The effective tax rate for the quarter was 23.4% compared to 23.8% in the second quarter of 2023. Finally, net income attributable to Steve Madden Limited for the quarter was $41.2 million or $0.57 per diluted share compared to $34.9 million or $0.47 per diluted share in the second quarter of 2023. Moving to the balance sheet. Our financial foundation remains strong. As of June 30, 2024, we had $192.2 million of cash, cash equivalents and short-term investments and no debt. Inventory at the end of the quarter was $241.6 million, up 16.3% to the prior year, and our CapEx in the second quarter was $5.3 million. During the second quarter, the company spent $38.2 million on repurchases of its common stock, including shares acquired through the net settlement of employees’ stock awards. The company’s Board of Directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on September 23, 2024, to stockholders of record as of the close of business on September 13, 2024. Turning to our outlook. We are maintaining our annual guidance. We continue to expect revenue for 2024 to increase 11% to 13% compared to 2023, and we continue to expect diluted EPS to be in the range of $2.55 to $2.65. Now I’d like to turn the call over to the operator for questions. Tanya?

Certainly. [Operator Instructions] It will come from Aubrey Tianello of BNP Paribas. Your line is open.

Hey, good morning. Thanks for taking the questions. Can you hear me okay?

Yes, good morning.

Great. Thanks so much. I wanted to start out with the 11% to 13% revenue growth guidance for the year. Just curious whether there are any changes to the composition of that guide from a segment perspective or from what you’re expecting from Almost Famous?

No, really in the same place as we were before. So still low-to mid-singles in wholesale, high singles and DTC. And if we exclude Almost Famous overall, it’s still mid-singles, so really in the same place.

Perfect. And then on the accessories and apparel side, I think next quarter, you start lapping some of the really strong growth in the handbags category. How should we think about the organic growth rate in the accessories and apparel segment, going forward, into the back half of the year?

Yes, that’s right. We do start to lap much tougher comparison. So we have built into the guidance a slowdown in that business. In fact, in the back half, excluding Almost Famous, the guidance assumes kind of low singles wholesale accessories and apparel. I do think, given the momentum that if you’re looking for sources of potential upside that could be one, but that’s how we built the forecast.

Got it. Very clear. Thank you.

Thanks, Aubrey.

[Operator Instructions] Our next question will be coming from Sam Poser of Williams Trading. Your line is open.

Thanks. Good morning. Thanks for taking my questions everybody. What is the apples-to-apples store count? Because you said that you – your business is up 60%, but you were up 4%. I’m just a little confused, because it looked like your store count is significantly up, and I’m trying to figure out sort of a comp and so on, on your DTC?

So we had 273 stores at the end of this Q2. A year ago, we had 242. But keep in mind, we opened – we added 14 stores through those new JVs that came on at the tail-end of the year – tail end of the second quarter and didn’t contribute much revenue in the quarter. So again, if you’re looking at comp versus total, the comp was 4% or 4.1% to be exact. And the overall revenue growth in DTC was 6.4%.

And then how much of that was driven by – and how does that – when you look at the comp and the breakdown of that between e-commerce, full-line stores and outlets? I mean, how do we think about that?

So brick-and-mortar comp was 7% in the quarter. Digital was 1%. And then if you’re looking in the U.S. at outlets versus full price, outlet was still performed better than full price, although that gap has narrowed significantly. Now there was a period there where we were running – outlet was running 1,000 basis points or more higher comp than full price. There was only about a 300 basis point difference this time.

Okay. And thank you and then secondly, on the branded footwear business, how do you keep the Steve Madden all this apparel going with – like how do you intend to get the Steve Madden and Dolce Vita and sort of the better brand businesses turned given the, say, the cautiousness of your largest – your larger customers these days?

Yes. Look, it certainly has been a challenging environment in that U.S. branded wholesale footwear channel. And to your point, our customers have taken a pretty cautious approach. But I think what we need to do is focus on – and what we are doing is just focusing on what we can control, and that’s delivering the right product that resonates with consumers. And we think we’re doing that. We feel very good about our product assortments. The most recent market week that I think you attended Sam, in June, The Shoe Show, the reaction to our collections from the wholesale customers was very, very strong. We feel we’ve got an equally impressive collection to show next week. And we’re just going to keep delivering the right products. And history tells us that when we do that, eventually, we’ll see that in the numbers in the wholesale channel.

Thank you very much.

Thank you, Sam.

Our next question will be coming from Tom Nikic of Wedbush Securities. Your line is open, Tom.

Hi, good morning. Thanks for taking my question. I’d like to ask on gross margins, Zine, I think at the start of the year, you were talking about gross margins being down 70 basis points. Obviously, it’s been worse than that in the first half, largely due to the Almost Famous mix? Like should we still think about gross margins for the year is down 70%?

Yes. We’re still maintaining that 41.4% gross margin, down 70%, and the impact, as you know, coming from Almost Famous is driving that margin down.

Got it. Alright. And then, if I could follow up on Sam’s question about the branded footwear. I think obviously, it’s been a tough environment. I guess like, in your view, Ed, like what are inventory levels in the channel, like are the wholesale partners lean but still nervous, like do you feel like maybe they’ve got more clearance inventory than they want? I guess, just – is it just like kind of general macro fear that’s causing the caution there just, I guess, kind of help us understand like why it’s so slow to recover and even against pretty big declines from a year ago? You’re still seeing pressure there?

Yes. It’s a good question. I do not think at this point that it’s an issue with a lot of excess inventory in the channel. I think that overall, the inventories in the channel are reasonably well controlled. Obviously, I’m sure they are in categories where certain retailers have more inventory than they’d like. But if you look at overall inventory levels, they appear to be in line. Our inventory levels are certainly in line. Again, we think they’re too low. And we think that if they add more of our goods on the floor that we would do more business. But I don’t think that’s the issue. I think the bigger issue is that if you look at a lot of the big wholesale customers that are important for us in the U.S., the majority of them are still seeing soft sales and many of them still comping negatively and still are cautious on their overall sales forecast in footwear. And I think that’s leading them to continue to be cautious.

Understood. And if I could sneak one more in just on DTC, I believe you said you’re still expecting high single-digit growth for the full year. Given that you’ve got the contribution from the distributors that you turn the JV, which I assume converts some revenue from wholesale to retail unless the account – I don’t understand the accounting treatment. But if that’s the case, like should we assume that the comp growth that’s embedded in guidance is lower than what you saw in the first half?

No. No. We think that the comp – we expect comps to remain roughly in line with where they’ve been recently.

Understood. Alright. Thanks guys. Best of luck for the rest of the year.

[Operator Instructions] Our next question will be coming from Janine Stichter of BTIG. Your line is open, Janine.

Hi, good morning. I guess, I just had a question for Zine. I was wondering if you could comment on freight. What you’re seeing, I think you recently went through the process of renegotiating your contracts, so kind of just some visibility in terms of what you’ve locked in and what you’re seeing more broadly on the freight side?

Yes. Hi, Janine, we talked about the freight just to open in spring and all those up charges and everything that was happening before this recent development, and we were able to actually mitigate most of that in spring. And we negotiated our contracts as we normally do in April – and those contracts, as previously mentioned, were somewhere around the $1,500 range for imports from China. The current – what we’re seeing in the spot rate is, I think everybody is talking about it, rates are $7,000 to $9,000 at the spot. We’re able to use our relationship and continue to utilize at least 2/3 of our imports falling under our contractual rates. And the balance, we just negotiate in the spot and we typically come in below what is scores out there.

Great. That’s helpful color. And then maybe for Ed, on the wholesale business on the – or business in general, I would love to just hear how you’re thinking about where we are kind of in the product cycle. I know you’ve talked about some of the Casual Court Sneakers potentially being a little bit of a headwind for you with just how successful they’ve been. So where do you think we are in that? And maybe just speak a bit to what you’re seeing from a product trend standpoint?

Yes, I’m sorry. So the question – we were having a conversation. I just wanted Zine to – if we could just pause – can Zine just give you the impact on the frieghts because I think that’s important.

Yes. So the impact that we have built in our guide now is about 40 basis points. And if you recall, previously, we were talking about 20 that was already built in. So now it’s around 40 basis points, which is impacting us all in fall. So it’s a heavier impact on fall about 70 bps. And I’ll let Ed take the next question. If you can repeat it. That would be great.

I think it was just where we are at this point, correct?

Just to clarify, now so you’re maintaining the gross margin guide, but there’s a slightly bigger headwind for freight built in?

Correct.

Okay. Yes. And then on the second question, was just kind of where we are in terms of the fashion cycle. You talked about some of the Casual Court Sneakers maybe even a little bit into the fashion side of the business and being a headwind for the Madden brand. So just what you’re seeing product trend-wise and where you think we are in that fashion cycle?

Yes. Look, I think that we’ve got some interesting new fashion to capitalize on. We’ve also introduced some new sneakers recently that are getting a very good reaction in our direct-to-consumer channels. So we feel very good about that new sneaker package. Boots are running ahead in our DTC channels in July from where they were a year ago, although it’s obviously – I don’t want to draw too many conclusions from that, it’s early in the season, but that’s encouraging. And we see some interesting things happening in the dress category as well. So overall, it’s not the most robust fashion cycle I’ve ever seen, but I think that we feel pretty good that there are some things to capitalize on here.

Perfect. Thanks so much.

Thank you. [Operator Instructions] Our next question will come from Paul Lejuez of Citi. Your line is open.

Thanks, guys. I’m curious how you’d characterize the promotional environment out there both in the DTC channel, but also what you’re seeing in terms of the need for discounting on the wholesale side? And just how did that come in relative to what you planned for 2Q, just promos in general. I think on DTC, you said reduced promotional activity, but curious relative to plan, if this is what you thought?

Yes. I would say that the promo activity out there, we would characterize it as normal. It’s not super aggressive, but I wouldn’t characterize it as light either. And it came in pretty much where we expected it to. We had – I’m pretty pleased with the gross margin performance in Q2 all the way around. As you point out, we were ahead in DTC in gross margin compared to where we were a year ago. And in wholesale, if you back out the impact of Almost Famous, we were ahead there. And even if you drill down further in footwear, if you don’t – if you exclude the mix impact from the greater private label, we were up. And again, in accessories and apparel, if you exclude Almost Famous impact, we were up. So, all the way around, a nice organic improvement in gross margin in the quarter.

Got it. And then secondly, there is a lot of talk out there about higher tariff potential on imports in China. Can you just remind us of where you are just in terms of your current sourcing exposure to China? What percent of total sales is China to U.S. products specifically and just what the strategy and plan of attack would be if we do see higher tariffs? Thanks.

Sure. So the U.S. is about 81% of our total business. And of the goods that come into the U.S., about 75% of them currently come from China. So you may remember, several years ago, that number was about 95% coming from China. So we have brought that down a bit by diversifying to countries like Cambodia, Vietnam and Mexico. But as we’ve talked about previously, our philosophy here has been to migrate or diversify to these other countries methodically. So we don’t introduce risk that can come with moving too fast. But what we have done is worked very hard at establishing a factory base and a sourcing infrastructure in these alternative countries such that we feel that we are positioned to be able to step on the accelerator and move much more quickly if we have to. So right now, we’re obviously moving a little bit more aggressively out of China, and you’ll see that number come down a little bit faster than it has been coming down or that it has come down over the past few years. But also, again, we’ll be prepared such that if new tariffs were implemented, and we needed to move much faster, we feel we’re in a position to do that.

Got it. Is there a certain percentage that you just can’t get below when you think about China as a percent of total?

Well, no, I don’t think so. I mean I think that – but you obviously – the faster we go, the more risk is associated with that. And so, we’d like to do this methodically. I’d like to – if we could go forward and bring it down by 10% per year that I think is something we could do comfortably. And without a lot of risk to the sales or gross margin, if we have to go much faster than that, then it becomes more challenging.

Got it. And then just one follow-up, I think you said something was working well in July. Can you just repeat what you said? And any comments on quarter-to-date in general?

Something working well in July? Yes, I think we were talking about product trends. I think we’ve introduced a new sneaker package, which is doing very well in our DTC channels. And I also mentioned that boots are running ahead of LOI in DTC.

Thank you. Good luck.

[Operator Instructions] Our next question will be coming from Aubrey Tianello of BNP Paribas. And I’m sorry, Aubrey, your line is open. Sorry, Aubrey, you line is open. Moving to our next participant. Our next question will be coming from Laura Champine of Loop. Your line is open, Laura.

Thanks for taking the questions. Given that the results in the first half have been relatively strong, does your back half guidance imply a tougher Q4 just given the calendar and the election? Are you being relatively conservative on the macro? Or is this just the growth in purses and the lapping growth of Almost Famous?

I think it’s some of both. We do face much tougher comparisons in the back half than we do in the first half. So that’s reflected in the guidance. We also do have some meaningful headwinds in the back half that we didn’t have in the first half. So Zine called out the freight impact, that’s about $0.09 headwind in the back half that we built in from freight. And then there’s also a tax impact, which is about $0.08, almost all in Q4, that again, we didn’t have in the back half, so about $0.17 of headwinds there. And then in addition to that, I think we have tried to be relatively conservative about how we think about the macro, given all the uncertainty through the balance of the year.

And then to just maybe keep us more in line with your thinking. So the implication is earnings down in the back half of the year. Is that a more extreme impact in Q4 given the tax change? Or how should we think about the quarters assuming you’re willing to give that kind of granularity?

Yes, absolutely that the – Q4 is the quarter where you should see the decline because of the tax impact.

Got it. Thank you.

[Operator Instructions] Our next question will be coming from Corey Tarlowe of Jefferies. Your line is open.

Great. Thanks. Ed, maybe if you could just give us an update on Almost Famous and how that’s tracking versus expectations? That would be great. Thanks.

Yes. Really pleased with the performance of Almost Famous so far and how that’s going. I mentioned the success that we’re having with Madden Girl and Madden NYC, the apparel brands that we’re running through that platform. So that’s very exciting to see. And then in terms of the overall financials, the revenue is really tracking right where we thought it would be. And so far, we are running a little bit ahead on profitability. So, some of the gross margin improvement and operating efficiencies that we were looking for are coming a little bit faster than we originally anticipated.

Great. And then maybe just on EMEA, you’ve highlighted that multiple times as a really significant growth driver for the business. Are there any regions specifically where you’ve seen outsized growth? Any specific products that are resonating in that – in the geography, just curious to see what you think of the success that you’ve seen there and what might drive that growth ahead? Thank you.

So over the last several years, the biggest driver has been Continental Europe, and that continues to outperform. But more recently, we’re getting a bigger contribution from the new joint venture in the Middle East as well as this joint venture in South Africa, which has just been red hot. And then in terms of products, what we do see is that we have a much higher penetration of fashion sneakers in that region, and that’s been a really critical growth driver for us is the performance that we’re having with our sneakers. And then secondarily, I would say we’re doing quite well with handbags in that region, and that’s been an important part of the growth story.

Great. Thank you so much.

Thank you.

[Operator Instructions] Our next question will be coming from Jay Sole of UBS. Your line is open, Jay.

Great. Thank you so much. Ed, you mentioned boots in your comments, just a few questions ago. Can you just talk about how you’re thinking about the boot business heading into 4Q, and how your retail partners are thinking about the boot business in Q4, just given what happened last year? And just given the choppy consumer environment that you said it before? Thanks.

Yes, it’s a good question. Look, I definitely will tell you that the industry and the wholesale customers, I think, are cautious overall on the fashion boot category. Our wholesale customers are planning that category conservatively. We have obviously built that into our forecast here. In terms of how we’re thinking about it, I think we’ve tried to take a fairly conservative look at that category as well, even in our DTC channels. Although I do feel good about the product assortment that we have and some of the early indications we have on those products. So certainly hoping that, that can be a source of potential upside.

Yes. Obviously, the company is always in a position to turn the inventory faster and get to market faster than everybody else. But, I mean, in this season, where last year was kind of tough, people taking a conservative approach. Are you – is there any way you’re going to find to maybe position a little inventory to chase some upside if it materializes, if the winter – if the weather is cold and if the – just if the environment cooperates?

Yes. We’ll always be prepared to chase if the opportunity arises. And obviously, we have our – it makes boots in Mexico and have the ability to move quite quickly when we’re working out of Mexico because of the reduced transit times. So we will have some ability to chase in that category if that opportunity is there.

Got it. Okay, thanks so much.

And our next question is a follow-up from Sam Poser of Williams Trading. Your line is open.

Thank you. Two things. One, when we think – are you anticipating that the branded footwear – wholesale branded footwear improves in the back half, given the response you mentioned from the retailers that sell the product a couple of months ago, and we’ll see the products again next week? And then if you can talk about how the EBIT margin in wholesale footwear? Because it works. I mean, because that’s really the story here, I would think that you have lower gross margin on the private label, but very little SG&A and then you have the – you have more SG&A attached to the higher margin – higher gross margin branded stuff. So, if you could just give us some color there? And I have one other question.

Sure. Yes, we do expect that the branded wholesale footwear business is going to be better in the back half than it was in the first half. It was obviously down in the first half, and we expect it to be up in the low singles in the back half. I would say, more flattish in Q3 and then improving in Q4. In terms of the EBIT margins in the wholesale footwear, I think you’ve hit the nail on the head that private label, obviously, has a much lower gross margin than the branded business, but it also has a lower operating expense structure. And so the gap between the EBIT margin is not as wide as the gap between the gross margins. Nevertheless, obviously, the branded business still has a considerably higher EBIT margin than the private label business. And so, we do see the wholesale footwear EBIT margin coming down this year because of that mix shift.

Got it. Thank you. And then, the boots – you mentioned that boots were selling. I know it’s early in July. But can you give us some idea of what type of boots people are responding to initially?

Yes. Honestly, this early in the season for competitive reasons, I’d rather not.

Understood. Thank you.

Thanks, Sam.

And I would now like to turn the conference back to Ed Rosenfeld for closing remarks.

Great. Well, thanks, everybody, for joining us today. Enjoy the rest of the day. We look forward to speaking with you on the next call.

And this concludes today’s conference call. Thank you for participating. You may now disconnect.