Under Armour, Inc. (UAA) Q2 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Under Armour Inc. Second Quarter Earnings Webcast and Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Tom Shaw. Sir, you may begin.

Thanks, and good morning to everyone joining us on today's second quarter conference call. During the course of this call, we'll be making projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. These risks or uncertainties that are described in our press release and in the Risk Factors section of our filings with the SEC. The company assumes no obligation to update forward-looking statements to reflect events or circumstances after the day on which the statement is made or to reflect the occurrence of unanticipated events. Joining us on today's call will be Kevin Plank, Chairman, CEO and President; followed by Brad Dickerson, our Chief Financial Officer, who will discuss the company's financial performance for the second quarter, followed by an update to our 2012 outlook. After the prepared remarks, Kevin and Brad will be available for a Q&A session that will end at approximately 9:30 a.m. Finally, a replay of this teleconference will be available on our website at approximately 11:00 a.m. Eastern Time today. And with that, I'll turn it over to Kevin Plank.

Thanks, Tom, and good morning, everyone. The U.S. athletic business is in a very strong upcycle and our second quarter results speak to Under Armour's contribution to that growth. With revenues up 27% in the quarter, it's clear that our growing capacity to innovate and add value for the athlete is working. Equally important, our results today in 2012 are strong evidence that when we add that value for the athlete, we do not see consumer resistance to price. Our innovation agenda, combined with our improved ability to sequence product, is enabling us to broaden both our distribution and our share of closet while maintaining our premium brand position. We are growing on multiple fronts. We're growing our core categories like baselayer and [Audio Gap] We're seeing strong results in kids, golf and outdoor. We're expanding our distribution in categories like underwear, where we believe we're just scratching the surface of this major growth opportunity for the brand. And we're getting meaningful traction in Footwear, as we launched UA Spine just last month. While it's always easier to look for one single piece of compelling news on these conference calls, for Under Armour, the reality is that the whole is greater than the sum of its parts. And that has been a hallmark of our 20-plus percent top line growth over the past 9 quarters. We don't talk about it as maturing because we know we are still in the early stages of where our brand can go. But we built a product engine that is starting to take full advantage of the strong equity we have built over the years in the Under Armour brand. But I do want to talk a bit this morning about some of the parts that are working particularly well. I'll start, as I…

Thanks, Kevin. I'd now like to spend some time discussing our second quarter financial results, followed by our updated 2012 outlook. Our net revenues for the second quarter of 2012 increased 27% to $369 million. Apparel grew 23% to $253 million during the quarter, and we experienced relatively balanced growth across our Men's, Women's and Youth categories. Training and baselayer continued to drive our Men's business but we also saw strength in golf and underwear, with underwear introduced to 250 Macy's stores early this Spring. In Women's, we are seeing strong traction in our Studio line and the successful Armour Bra launch is helping drive our overall Sports Bra category. Our Direct-to-Consumer net revenues increased 35% for the quarter, representing approximately 29% of net revenues compared to 27% in the prior year period. In our retail business, we opened 8 new Factory House stores during the second quarter, increasing our Factory House store base to 92, up 28% from 72 locations at the end of the second quarter in 2011. While we are still experiencing solid growth on the e-commerce side, we are working through some conversion challenges to our new platform that we launched November. I'll provide additional color on our guidance. Second quarter Footwear net revenues increased 44% to $67 million from $47 million in the prior year, representing nearly 18% of net revenues. Growth during the period was driven by new introductions in performance running Footwear, including the initial sell-in of our new UA Spine platform, as well as strong performance with our football cleats, led by the $130 Highlight cleats. Our accessories net revenues during the second quarter increased 21% to $39 million from $32 million in the prior year period, led by strong performance across our bags business. International net revenues increased 48% to $21…

[Operator Instructions] Our first question comes from Eric Tracy of Janney Capital.

I guess we would start with the Footwear. Obviously, it came in sort of ahead of plan. I think it was really supposed to kick in in FY '13, so maybe talk about, obviously, the contributions from Charge RC, Highlights and obviously the launch of Spine. Does that give you kind of greater comfort to accelerate that business a little bit faster and the opportunities to sort of capitalize on that, relative to, clearly, a little bit of the dilution on the margin side? And maybe Brad, for you, how we should think about that relative to what's going on in e-commerce? And then on the positive side, the supply chain, just thinking about the margin dynamics with those businesses?

Yes, I'll take the first part then. Innovation is the name of the game, and that's what really coming through and that's we're looking to see we're going to win. You'll hear a theme coming from me that basically says, when we innovate, we win. And I think that's what's happening in Footwear right now and what we're beginning to see. So first off, around Spine, we're not -- we're very excited about the launch that we had. We had a great event up in New York and the product hitting retail shelves right now. I wouldn't say it's as much of a launch as much as it's rolling in and so we're tempering expectations as we're looking at that. But more importantly, I think demonstrating some of maturities the brand has reached with recognizing that the definition of success is not going to come in the first day or weeks or even months. But what you'll see from us is a much more comfortable brand with the ability to show the consistency and the continuity of our belief in this product. So this is a 3, 6, 12, really 24 months that we believe getting behind this technology not only putting great product in the market but great marketing and storytelling to tell the consumer about it. So we're pretty pleased, I think, with how we're positioned there and especially how many of our partners are supporting that program as well and not saying this is this something -- is it then how do we see success. At the same time, some of the early reads and anecdotal things, great feedback on the products. A lot of big excitement around it. And we'll let ourselves define and see how that goes. As far as just holistically about Under Armour…

So Eric, on the economics between Footwear and e-commerce. If we take a look at our baseline gross margins last year, about 48.4%, and use that as a baseline. Footwear's gross margins are probably about the same distance below that, as e-commerce margins are above that, relative to the economic model. However, when you look at gross margins and then point on to operating margin, the model changes a little bit where our Footwear SG&A costs are relatively fixed. So additional revenues in Footwear at the back half of the year, although they will impact gross margin, there's not a lot more SG&A that goes into delivering those additional Footwear revenues. E-commerce side, however, though, the SG&A model is a lot more variable, especially around the demand drivers that point us to sales on the e-commerce side. So even though gross margins are much higher, the SG&A model and e-commerce is much higher also because of that. So we look at the back half of the year from a gross margin perspective and obvious impact to gross margins with Footwear increasing and e-commerce decreasing, relative to our expectations. But we were able to call up the operating margin for the year, operating the profit for the year, because of those [indiscernible] economic models worked between the part of our Footwear and SG&A and the variable part of e-commerce and SG&A.

Okay, great. This is really helpful. I mean, Kevin, for you kind of a little bit bigger picture question. Obviously, you've been very tactical about the investments made around the London Olympics, but as we think forward to the '14, World Cup in '16, Olympics in Brazil, maybe talk about sort of how you feel like you guys are positioned? Is there an opportunity to sort of more fully capitalize and make some investments around those big platforms? And obviously, now making an investment in Tottenham from a soccer perspective as you look to penetrate Latin America and specifically Brazil, how you think about that business over the next few years?

I think one of the worst things we can do is get caught up with a game of keeping up with the Joneses. And so we're very clear, I think, on the brand of a, who we are and probably just as importantly, where we are in time. And so, with 27% growth in the quarter, I think we're doing the things that we need to do to protect our business, and more importantly, to really innovate and grow our business. So we feel good about where we are right now. That being said, there's opportunity for us. As we continue to look and build out the global stage and I said many times that our expectation is to be a global brand and we define that when more than half of our revenues will come from outside of our home country. And so sitting here with roughly 90% of our revenues coming from the U.S., it obviously, it plays well in times like now with the growing U.S. market and taking not only exposure of overseas but we've been investing there for a while and we think we're going to have the ability to really start picking up some of the investments that we've made in places like Asia and places like Europe. And it's going to be a matter of time. And so I think all these things are cyclical with any of these other markets. They're great sports markets and they're great opportunities for us. And I can tell you, we've got a team of committed people outside of the United States that are working like crazy to make Under Armour important, relevant to those consumers outside of the U.S. That being said, we've got great assets with the Olympics and we've got Michael Phelps and we've…

Our next question comes from Sharon Zackfia, William Blair. Sharon Zackfia - William Blair & Company L.L.C., Research Division: I was hoping you could provide some additional information on e-commerce. I don't recall you talking about some challenges with the new launch previously. I might have just forgotten. So if you could help us understand where the conversion is now on the traffic you're getting to the website or where maybe it was prelaunch and the challenges and kind of fixing what seems to be a speed issue on the website?

Yes, Sharon, this is Brad. Just to start that conversation, really, we were working through this as we went to the holiday season last year into the first quarter. So not really understanding how long it would take to work through these issues. It really didn't become apparent to us until the last few months, as we start getting into the back half of the year, that this continues to be a little bit of an issue. And obviously, the difference in volume of e-commerce in the back half of the year versus the front half of the year is vastly different. Really, the issue has been conversion. We have not seen as much of an issue in traffic at all, really. So that people are coming to the site, the growth in traffic is healthy. It really has been around conversion. And a lot of that we thought and are looking at relative to issues we had with speed and just to ease the shopability of the site. So we made some changes relative to speed recently in the last 3 weeks or so. We've seen some positive improvement so far based on that, but again I think it's too early to tell until we see a little bit more of a trend in the next few weeks, whether we think that's going to point in the right direction for us relative to conversion going forward. Also we made some minor changes around the ease of shopping to the site just to make it easier to get through the site. So I think in general, we've made some pretty good changes during the course of Q2. We've seen some positive impact to those in the short term, but we need to see a few more weeks of that to really make it look like a trend going forward that we can expect from -- to have higher expectations in the back half of the year.

And let me just underscore for that, too, this is not a brand issue either. We're getting plenty of traffic, increased traffic and, frankly, exceeding what we thought we would be seeing. We've been struggling a little bit on the conversion side and that's where -- just getting a little better on the functionality. So Brad brought up many of the things that our teams is doing. We've got people working really very hard and this is not the hard stuff either. It's easier said than done. But it's just a matter of applying the right technical and so we've got a great number of people internally, externally on it. And we expect to see the great growth that we've seen from our PPC channel very quickly, and go to the web and buy something. Sharon Zackfia - William Blair & Company L.L.C., Research Division: And just to be really clear because the fourth quarter obviously, is so important for e-commerce, are you modeling in that you see an improvement in that conversion by the holiday season, or are you modeling in somewhere in between historical conversion and where you're running now? Just help us understand where the risker opportunity might lie for the fourth quarter on that.

Sharon, what we have done is we've modeled in basically what we saw in Q1 and Q2 in the back half of the year. We have not anticipated any improvement in conversion. Again, although we made some changes recently and seen some slight improvements, we did not build that into our outlook going forward because I think we need to see 5 or 6 weeks of that versus a couple of weeks of that. So the back half of the year, right now, our expectation is similar in the front half of the year.

Our next question comes from Omar Saad of ISI Group.

This is Sam Lee in for Omar Saad. Congrats on a good quarter. Our first question was just on the apparel strength. It seems like, obviously, Footwear is very strong, but the apparel is still going strong as well, and seems to be coming as you're reducing the SKUs. And I guess our question is what does this mean for the supply chain leverage and the margin outlook for the rest of the year? And is there an opportunity to reduce SKUs further?

Yes. Sam, on the supply chain leverage and SKU productivity, we talked about this on last quarter's call, too, and the numbers has stayed relatively the same. We see about a 20% reduction in SKUs by the end of this year compared to the beginning of 2011. And that's right in line with what we've been talking about over the last few quarters. A lot of that benefit, if you have to think about it, especially on the apparel side, the fact that we can move and liquidate apparel through our outlet channel very profitably, the impact to gross margin, although there is a little bit of a benefit there, isn't as big of an impact as what you'll see in -- relative to just inventory management. So I would look at SKU productivity we kind of call it reducing noise in the supply chain, of just bringing productive SKUs in the supply chain versus nonproductive SKUs. And it just helps our focus around productivity. It also helps our focus around inventory management and creating less excess inventory, more so than it has a positive impact to gross margin. So kind of look at SKU productivity as a benefit to inventory management more so than margins. A lot of the other factors are working on to help gross margins.

And then also, I think you're seeing this double down on technology as well. And we've built a pretty good portfolio of big products and big SKU runs and things like our HeatGear T-shirts and ColdGear mocks and what we've been doing to add to that is things like game-changing pricing with our Armour Bra up in the nearly $60. ColdBlack's a new technology we just launched. I mean, I mentioned in my script about what we've done with the whole Cotton line again. Cotton that exist, Charged Cotton, Storm Cotton, didn't exist for this company just 2.5 years ago. And so adding categories like that with hundreds of millions of dollars that we can bring into our existing distribution and really things that makes sense for our brand without taking us to a different place from a perception standpoint, I think that's what makes us pretty excited. And then tackling that, we're talking about apparel, but looking at the upside that we see, the available opportunity and things like Footwear and accessories as we just become, frankly, more experienced and a little better at it. Just sometimes these things take time and I think that's what you're starting to see from our company is that, I'm not saying we have all the answers but we're starting to figure some things out.

Great. And speaking of the Armour Bra, it looks like the Women's gross in second quarter was driven by Armour Bra and Studio line. Are you seeing an inflection in that business? And can you share with us some of your learnings and sort of where you see the opportunities in the back half of the year, and then as well as going into 2013?

When we went public in 2005, Women's was less than 20% of our total business. And today, it's nearly 30%. And at the same time, we've also added close to $1.5 billion in revenues. And so hats off, I think, to our team that's been working in there and just committed over and over. We've had everybody, we've had lots of people tell us what we can and what we can't be and it's good to see it just come through. Again, I think in any of these categories, and I want to be clear, we're a long way from declaring victory. I mean, we're doing better. I think, you're seeing, in items but there's a lot of work for us to do in terms of tightening up our presentation, how we're telling the stories at retail, how we're really selling the product. And you're seeing a full-forced effort, first and foremost in our existing retail partners. And so places like Dick's and Sports Authority and Finish Line and Sportswear, they've got a real heavy apparel focus for us and they've really given us the ability to tell our Women's story. I don't think that we're showing up great yet. I think we have a lot of work to do there. But we're also -- we're going to places where, frankly, women do have shopped traditionally in places like, into some of the department stores where we've been -- of China, really softened our brand and put products in a place that's prudent and appropriate for the consumer who's shopping there. And so a lot of times, I think, we're driving traffic to some of our existing partners. In other places, we're helping to fill out, I think, the perception of the Women's brand by showing up in partners like Bloomingdale's and showing up in partners like Nordstrom and many other key mall partners that we have as well.

Our next question comes from Jim Duffy of Stifel, Nicolaus. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: So Kevin, as you move beyond the Spring sales meetings, what are some of the key stories you expect to be drivers for the apparel business as you look out to '13?

Yes, I think a lot of what we've talked about, so as I mentioned, our innovation pipeline is full but we've got enough -- you can get caught up with newness, newness, newness. But we've got some pretty great stories from some of our heritage products that we have. As I mentioned, some of the reinvention you'll see coming into -- through fall and especially as we're looking at '13. Some of the reinvention you'll see around many of our baselayer categories. We just spent a little time talk talking on the Women's side about Armour Bra, but what Studio will mean for us is we started this product line off when we launched Studio, for instance, and I think we've learned a thing or 2 where we made the first products -- prototypes may look good and we tested them and we tested them again. And then we put our first plans together and the last thing we did is we cut our plans in half and we said, let's make sure we get it right. Let's deal in scarcity and you've seen us build on that because frankly, the good news about our platform, and not unlike I think the general theme of my script, was that we're much -- the whole is much greater than the sum of its parts right now. And that we're able to put that together, I think, especially on the Women's, where we don't have to take one swing for the fences, shot at anything but we can build ourselves up the right way. ColdBlack is a very cool technology that we just got the thing going. I think we're just beginning to tell that story, but it's T-shirt that can keep you or finish on a T-shirt for running or golf,…

We'll be more heavy in the back half of the year than we were in the front half of the year. We think we'll probably be somewhere in the 55% to 60% of units will be made for in the back half of the year. That compares to a number that was probably above 70% last year. Again, as we've been calling out, that's going to be a big part of liquidation of excess inventories during the back half of the year, as part of the Factory House. On the inventory side, I think we're really proud of where we got so far this year. Really, the drivers of that for the most part has been creation of less excess than we had last year. We actually created about 50% less units of excess than we did last year in the front half of the year. And we sold about 30% more units of excess in the front half than we did last year. So that's a big driver of where we're at with inventory right now. But we've always said there's a balance there of making sure that as we improve inventory and we focus on inventory management, we also have to focus on the flip side of fill rates and customer service, too. So we'll constantly be balancing that out going forward. Proud of where we're at, but still have some work to do, but really proud, again, where we're at in the Q2.

Our next question comes from Sam Poser of Sterne Agee. Sam Poser - Sterne Agee & Leach Inc., Research Division: A couple of things. Number one, on the gross margin, you gave some guidance by quarter on the SG&A. Can you give us some idea of how you see the gross margin playing out by quarter, Brad?

Yes. If you look at the guidance we gave, you can see that most of the back half of the year pressure will be in the fourth quarter and there's a couple of reasons for that. One, the fact that we are lowering our expectation around e-commerce. That business is very heavily weighted towards the fourth quarter. So from the change of guidance there, you would see that impact the fourth quarter more than anything. In addition, just year-over-year comps, it's a little tougher comp in Q4 than it is in Q3 last year versus last year. So that's part of the driver, too. And then obviously again, Factory House, big equation there. If we're going to lean heavy on Factory House and moving excess inventory in the back half of the year, again, if you look at Q3 versus Q4, there are Q4 business that are larger than the Q3 business. So when you look at the back half of the year, anticipate more pressure on Q4 than Q3. Sam Poser - Sterne Agee & Leach Inc., Research Division: You would expect gross margin likely to be down in the fourth quarter and up significantly in Q3 just based on the comparison?

Yes. Directionally, you're probably pretty close there, yes. Sam Poser - Sterne Agee & Leach Inc., Research Division: Okay. And then you talked about the rolling out of lots -- these many different programs and so on, especially with the innovations that you're speaking of. Can you talk about like the change, you talked about the tech tee and the innovation and raising it $2 and updating with product. Do you have other things of that nature in the hopper right now, looking ahead into next year, both, which I assume, will can both potentially help gross margins and give you an extra push on revenue without getting push back from the customer because your improving the product?

Why, I think it's doubling down on the categories that we've already demonstrated that we can lead. So the entire Cotton platform is a huge one for us where we launched Cotton because for us, it's a whole new manufacturing base. It's a whole new lead time, supply chain, and new -- it was new everything for us. And so as we're sitting here in year 2 and working on year -- seasons 3 and 4, we can be a lot more aggressive with how we can open those silhouettes up. And Cotton has been -- the consumers really voted for it. And so you'll see it, in addition from just having a $25 T-shirt and a $60 hooded fleece, to saying, okay, now we can have a $35 and a $40 version and you'll see those V-necks. I mean, this is not like huge innovation either. We wore a crewneck T-shirt at $25 and we had a V-neck at $30 and the thing blows out. So the consumer is looking for us to push and innovate a bit more, and our product team is highly focused on that as we continue to introduce more and more style as the consumer is looking to take on there off the field, and really I think showcase our brand a little more. At the same time, we're not going to show up at fashion week next year. It doesn't mean style and design, it's absolutely, it's an aspiration you'll see it come through from our company more and more. But we're very relevant and very, sorry, very aware of where we are. And so we're very aware I think of the cadence as to where and how fast we will go. And this is a long road that we have in front…

I think our apparel growth is up 20-plus percent for the past 6 and 7 or 8-plus quarters. And that's on us. When we think about new distribution and these other things that we've contemplated as well that we're executing on, the idea here isn't relegating anything to our sporting goods customers. First and foremost, what's happening within our existing consumer base? We were very proud, I think, of the close, if not consistent, double-digit comp growth that we're driving and delivering for these, and that's how we measure ourselves. And so we're not looking to cannibalize or take anything away from that. There are almost strategies that are mutually exclusive of one another where we feel an obligation to deliver that type of double-digit growth for our existing account base, first and foremost. And as we can complement that, where the consumer isn't having the ability of finding the Under Armour brand, that's where you'll see us open up new distribution where, frankly, they're not shopping at sporting goods and it's another way for us to get our brand to them. So we'll be very careful with that, too.

We have time for one more question from Camilo Lyon of Canaccord Genuity.

Kevin, I was hoping you could give us some early indications on how your experience has been with the department store channel, what's worked for you, what's not working, what changes can we expect to see in the back half?

I mean, they've been great. I think the partnerships are -- they're very new. And so we don't know a lot yet. But at the same time, we've had things like opening up our underwear program at 250 Macy's doors. The early reads that we have on that, frankly, are it's where you think you would be. We've got a brand called Under Armour who's based in, who's housed in baselayer and understanding compression and what that means and we should be the #1 player there, and that's the expectation. We've had a modest underwear business that's been successful, I think, in sporting goods where typically underwear has not been purchased, and I'm speaking on the Men's side. And then we introduced it on the Women's side as well and not typically the place where women like to go buy intimates either. And so as we expand ourselves and look at getting to more appropriate distribution, number one, we want to drive within our existing account base, first and foremost, but we see a huge opportunity to take over things like Herald Square in New York. We should be the #1 underwear brand, period. And so that's how we're thinking about it and, again, the #1 player today is hundreds of millions of dollars and I can tell you, our underwear business is not there yet. But based on some of the signs that we're seeing as we become more sophisticated, as we continue to expand our breadth, as we get into the right and appropriate doors, we believe, with every bit of confidence, that we can be that #1 player. So again, I think the story that we have goes beyond underwear. But it's giving us a great ability to really find and test and say, how is this distribution channel appropriate for the Under Armour brand and does the consumer get it. And so again, I want to reiterate is that the partners we've been dealing at the underwear level from the highest executives at Macy's across-the-board is everyone has been very open, very welcoming and really doing things and been a great partner to us. So I think we're excited about what that means. And then some of the other department stores and Nordstrom, they've been consistent. We've had our Women's assortment in there and I think you'll see us open up with some Men's golf and some other things that make sense to the consumer. But again, underscoring all this about without coming back and making sure, I wouldn't say protecting, but continuing to drive our existing account base. So we're not looking to give in anywhere or concede anything. We think we can win in a lot of different places but it means, I think doing it the right way, doing it in a prudent way, and doing it with the right patience and cadence.

Great. And can you tell us about how the receptivity of some of the apparel in the Macy's doors has been? I know the Underwear has been pretty successful as you said, but how is the receptivity of the apparel done in those stores?

Look, I'm not sure we have much -- we have some Women's product in there, a little bit, but there's no, frankly, it's not really hitting our radar yet. And I think then there's a plan, but I think we want to find the right assortments and other right things like that. But there's no massive plans for us to expand on the apparel side. In saying that, I want to hedge that with you will see an apparel presence, but it's not really making our radar that we're bringing up and saying this is a huge growth opportunity for us today. We're not prepared to talk about that. But I think that, again, what you've seen is we're finding success with where we're going and before we try to unload and say we need to put x amount of product in x number of doors, we're going to learn and I think we like where we are.

Got it. And then just my final question, Brad, could you just remind us how you're positioning the back half sales guidance relative to weather? And where upside can come from if weather remotely normalizes?

Sure. Consistent with what we've talked before, we're looking at the back half the year whether relatively consistent to last year. So that was built into our original guidance. We took a conservative view to winter 2012 based on winter 2011. We haven't changed that outlook at all. So the increase in our guidance is not being driven by any expectations around weather whatsoever. Where the upside can be, obviously, is in our auto replenishment product where we have safety stock. So if the weather does gets cold, we have safety stock levels on the end-use product for cold-weather products and we'll be able to see some upside there, we'd have the inventory for that.

Our next question comes from Robby Ohmes of Bank of America Merrill Lynch.

Just 2 really quick ones. The marketing shift to the fourth quarter for, I guess, you guys said increased holiday efforts, can you give us any insight, what you're specifically thinking there that drove that shift? And the other co-question was international ex Japan, so it sounds like Japan really supported international this quarter. Can you remind us how you're thinking about international for the next 2 quarters and what could be driving it or not driving it the next 6 months?

Yes, Robby, the marketing shift was pretty straightforward. We weren't happy with the amount of funds we had last year in the fourth quarter on holiday to support our business. So it was again more around making sure we had some funds there, especially around key selling time frames, around Black Fridays and so forth, that we had some funds to, to make sure that we get our brand message out there for Q4. That's all there was.

And Robbie, on the international front, yes, our partners in Japan are just terrific. We got that right now as we're sitting here in year '12 or '13 of that relationship. And it just goes to show you, it takes time. I think there's a much broader message here that you see a lot of brands, particularly in the consumer space, that come and go and those have demonstrate they have the ability to run for the longer haul. Typically win just because you've been doing it and you have the ability to gain experience and knowing a little bit more about what you're doing and where you're heading. So we're still in the early learning stages of many of the markets that we're entering on a global basis. But obviously, I think when you look at the 5 growth drivers from the same message that we've been telling since we went public, grow Men's apparel, someday make Women's apparel larger than Men's apparel. Footwear, make footwear someday larger than our apparel businesses combined. And then taking those products stories country-by-country around the globe and where we don't find the appropriate distribution we're augmenting that with our own Direct-to-Consumer channel. International probably is one, as we look at, we're doing business in 61 countries today and I'm not sure we're doing as much business as we could. And so we're very excited about the addition of Charlie Maurath, who will join us in September of this year to head up our International efforts and Charlie is a pro. He comes with 20-plus years of industry experience and having done a big built businesses in our space and in our sector from a few hundred million dollars to several billion dollars. And so that's what we're looking at. When we look…

All right. Thanks, everyone, for joining us on the call today. We look forward to reporting to you our third quarter 2012 results, which tentatively has been scheduled for Thursday, October 25 at 8:30 a.m. Eastern Time. Thanks again and good bye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.