Good morning and welcome to the Wolverine Worldwide 2014 Third Quarter Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer session of the conference call. This call is being recorded at the request of Wolverine Worldwide. If anyone has any objections, you may disconnect at this time. I would now like to introduce Ms. Christi Cowdin, Director of Investor Relations and Communications for Wolverine Worldwide. Ms. Cowdin, you may proceed.

Good morning, everyone, and welcome to our third quarter conference call. On the call today are Blake Krueger, our Chairman, CEO and President; and Don Grimes, our Senior Vice President and CFO. Earlier this morning, we announced our financial results for the third quarter of 2014. This release is available on many new sites or can be viewed from our corporate website at www.wolverineworldwide.com. And if you would prefer to have a copy of the news release sent to you directly, please call, Tyler Deur at 616-233-0500. This morning's press release included non-GAAP disclosures and these disclosures were reconciled with attached tables within the body of the press release. Comments during today's earnings call will include some additional non-GAAP disclosure. There is a posting on our corporate website that will reconcile these non-GAAP disclosures to GAAP. To view the document, please go to our corporate website. wolverineworldwide.com, click on Investor Relations in the navigation bar, click on Webcast at the top of the page and then click on the link to the file named WWW Q3 2014 Conference Call Supplemental Tables. Before I turn the call over to Blake to comment on our results, I'd like to remind you that the predictions and projections made in today's conference call regarding Wolverine Worldwide and its operations may be considered forward-looking statements by securities laws. As a result, we must caution you that as with any prediction or projection, there are number of factors that could cause results to differ materially. These important risk factors are identified in the company's SEC filings and also in our press releases. And with all of that being said, I would now like to turn the call over to Blake.

Thanks, Christi. Good morning, everyone, and thanks for joining us today. Earlier this morning, we reported our third quarter financial results, highlighted by record earnings and adjusted earnings per share growth of 8.6%. Revenue met our expectations as we had anticipated and guided to flat revenue for the quarter. Our strong earnings performance reflects our team's disciplined execution against our global diversified business model, a model that helps mitigate risk as we are not dependent upon any single brand, channel, category, region, or consumer group. For the third quarter, revenue was $711.1 million, down less than 1% from the prior year, which was consistent with our expectations going into the quarter. The Performance Group comprised of Merrell, Saucony, Chaco, Cushe, and Patagonia Footwear; and the Heritage Group, which consists of Wolverine, Cat Footwear, Bates, Sebago, Harley-Davidson Footwear, and HyTest, delivered low and mid single-digit revenue increases respectively. These solid topline results were offset by the Lifestyle Group, consisting of Sperry Top-Sider, Hush Puppies, Keds, and the Stride Rite children's group, which posted a mid single-digit revenue decline compared to last year's third quarter. On a global basis, we had another exceptionally strong quarter of growth in Asia-Pacific, along with solid growth in Canada and EMEA . Latin America after a strong first half was down in the third quarter as several countries in the region experienced various political, economic, and currency headwinds. The US experienced a slight revenue decline mostly due to Sperry Top-Sider, which was up against a very strong quarter from a year ago when revenue grew approximately 20%, and Stride Rite where growth in the children's wholesale business was offset by the performance of the US stores and our decision to close unprofitable locations as part of our strategic realignment plan. The strategic realignment plan has been…

Thank you, Blake, and thanks all of you for joining us on the call today. As Blake noted, we're pleased to have delivered another quarter of solid earnings growth and excellent cash flow, driven by the global appeal of our brands and outstanding operating discipline. Collectively, we're focused on driving growth across our portfolio and we believe that our innovation pipeline, diversified business model and continued rigorous execution will deliver record full year revenue and earnings in fiscal 2014. I'll now provide more details on the quarter's results, discuss our revised full year outlook and update you on the strategic realignment plan for our consumer direct business that we announced in July. I'd like to remind you that our current and prior-year financial results discussed today have been adjusted to exclude integration expenses related to the PLG acquisition, restructuring charges related to the 2013 closure and sale of our Dominican Republic manufacturing facilities, restructuring charge related to the company's strategic realignment plan and costs associated with last year's debt refinancing. We reported revenue for the second quarter of $711.1 million, representing a slight decrease of 0.8% versus the prior year, but essentially in line with our expectations going into the quarter. The revenue result was driven by growth in Heritage and Performance Groups offset by the anticipated decline in our Lifestyle Group. We were pleased with solid revenue performances from many brands in the quarter, particularly Saucony, Keds, Chaco and Cat Footwear. Foreign exchange had a minimal impact on the revenue growth during the quarter, increasing reported revenue by approximately $1 million or 0.2% versus the prior year. Moving on to results by operating group, the Lifestyle Group delivered revenue of $277.9 million, a decrease of 6.7% compared to the prior year. Mid single-digit revenue declines from Stride Rite and…

(Operator Instructions) Our first question is from Ed Yruma of KeyBanc Capital Markets.

This is Jessica Schmidt on for Ed. So on Sperry , now that you've gone through a difficult comparison, you have a stronger lifestyle collection, when do you expect the brand to return to growth? And I guess can you talk about how the new non-boat shoe offering is resonating with consumers and how this differs between men's and women's? Any early comments you can give on apparel line for holiday?

We remain excited about Sperry. We are expecting, as you know, the boat shoe silhouette has cooled a little bit, especially on the women's side over the past year, and Sperry, the dominant player in that particular category, also felt that drag. The Sperry business right now, the downward trend is stabilizing. We expect a return to probably a flat Q4 and a return to growth in 2015, and return to growth is not due to any single factor. Certainly, it's the expansion in the non-boat categories. We are seeing absolutely no retailer or consumer impediment to expanding that brand into other categories, especially in the casual and boots arena and inactive in performance. So whether it's Gold Cup, new categories of footwear and apparel, that has been placed in better department stores for spring '15, we're excited about the growth prospects. The international momentum, we expect that to continue at Sperry. Men's is a pretty solid business right now and seems to be improving, and we've got a new leadership team in place. So growth in stores in e-commerce new product category, international expansion, we all look at that coming into fruition in 2015. On the holiday season, it's no surprise the world is cooling down a little bit. The United States had a pretty lackluster, maybe a bit of a tepid back-to-school season. We had one brand, Keds that had a very strong back-to-school. We had some other brands like Stride Rite that was hurt by lower mall traffic for sure. But I think retailers' inventories this fall are more in line than they were last fall. On the other hand, I think retailers are cautiously optimistic and are looking forward to the holiday season, but they're more promotional than they were last year. So, I think our mindset, at least with respect to USA is consistent with that, cautiously optimistic and we look at just getting a new product out to the consumers.

The biggest impact for Sperry apparel in Q4 is going to be selling through our own retail stores. We're forecasting kind of mid-single-digit comp store sales gains for the Sperry Top-Sider fleet in Q4, and a big part of that assumes comp store sales growth is coming from the launch of apparel into the specialty stores in particular. Recall that it is a licensed program with our licensees. So, the wholesale sales of Sperry apparel, which will be more of a spring '15 launch, will impact our reported revenue only in a slight way via royalty revenue, but with that which we sell through our own retail stores obviously we get the full retail sale of that. So that's a big benefit for our expected Q4 performance of the brand.

Our next question is from Christian Buss of Credit Suisse.

I was wondering if you could provide some perspective on what you're seeing in the European market right now. And then as a follow-up, if you could talk a little bit about what your expectations are for order flow from your Asia-Pacific distributors, given some of the disruptions that we're hearing about there.

First, with respect to Europe right now, as you know, about half of our pairs in Europe are sold in the UK. So at the present time, the UK market is a pretty solid market for our brands. With respect to other European markets, there's been a little macro-slowdown in Germany in the export area, but Southern Europe, Italy, France, even Spain seems to be snapping back a little bit. We watch the macro numbers and predictions as close as anybody, and the EU zone is frankly predicted to be soft at the moment and approaching another recessionary cycle. But for our brands in Europe, Europe has been a very good year and the outlook for Europe is pretty good. With respect to order flow from our distributors and licensees in Asia-Pacific, nothing really has changed there. It's been normal for us. Asia-Pacific, as you know has been one of our strongest regions year-to-date and frankly we believe that strength is going to continue into Q4 and beyond. So we haven't seen any major disruptions in the order flow or our ability to get great product to our distributor partners in Asia-Pacific. You also have to remember, the 100 million pair a year, we do have a big pencil, we do have some sourcing clout and that certainly helps us in maybe a little bit of a volatile sourcing environment.

Chris, as I think you know, we do almost 20% of our consolidated unit volume in the Asia-Pacific region, and that region has grown its revenue on a year-to-date basis north of 30%. So we're seeing very strong growth in that region and we expect that strong growth to maybe not that same rate, but that strong rate of growth to continue in Q4.

Our next question is from Erinn Murphy of Piper Jaffray.

Could you speak a little bit more about the strategic realignment plan? It sounds like you've been pretty pleased with what you've been able to accomplish thus far. Could you just speak to how this, as you're thinking about it, dovetails in year 2018 plan that you currently have out there?

Yes, we are on track to close the number of stores that we thought we would close in fiscal 2014 . As of today, we've actually closed 10 stores, seven of which closed late in Q3 and three more stores closed early in Q4, and we're on track to close the other expected 50 stores at year-end after the holiday shopping season. And that will leave an additional 80 stores to close in fiscal 2015. As it relates to the realignment plan and the impact on the 2018 target that we laid out about a year ago at our Investor Day, obviously closing 140 retail stores will represent a drag on the long-term revenue target, but the stores that we're closing were closed because they're not penciling today. They are rather negative today, are based on current trends. We would expect those stores to be full-on negative in the not-too-distant future. So as I indicated in our last earnings call closing money-losing stores and taking out some backroom costs that are needed to support a larger retail fleet that will become smaller after the store closures, that was about $8.5 million to $9 million of the $11 million that we're talking about, that in and of itself in a vacuum would give us more confidence in our ability to hit long-term earnings targets. So we're doing this in the best interest of the company and the shareholders. It's recognized a pretty significant sudden change in consumer shopping behavior and stores that were in great locations 10 years ago or longer when they first opened are in less ideal locations today. And so we're taking this move to close those money-losing stores and to redeploy those resources elsewhere.

So I guess in terms of your next update, it sounds like would you be looking to update the street maybe on the fourth quarter call as you think about kind of reestablishing that topline revenue guidance for the 2018 plan?

We probably wouldn't do it that early. The team collectively hasn't taken its eye off the 2018 aggressive revenue target. It's obviously a little more aggressive today, given the realignment plan and the reset year that we've had this year in the boat shoe silhouette. But we feel even more confident by our EPS target over the next four years.

Last winter, you were pretty confident about this year being another solid boot season. Could you just update us on how you're thinking about this winter season from a boot perspective?

Kind of taking a macro approach to begin with, there is a healthy and growing boot trend going on around the world. And it can be rain boot, it can be utility boots, it can be work boots, it can be fashion boots. At the moment, we don't see any signs of that abating. So we think this fall is going to be a very good boot season here in the US, but it's also going to be a great boot season around the world. I would say although we're seeing strong growth on the women's side in fashion boots, we're seeing probable growth at the three x levels in the men's fashion area. Men's fashion boots right now are clearly a trend here and clearly a trend in Asia-Pacific and EMA. So we think generally almost irrespective of the individual category, it's going to be a good boot season. And I'm not going to say a word about weather.

On the SG&A side you've done a great job year-to-date, really keeping that tight, and I think dollars have been down year-over-year for the entire year-to-date period. How should we think about the fourth quarter here and then what has been the biggest bucket that you've been able to defer year-to-date?

Obviously as a percent of revenue, the biggest wildcard would be in terms of SG&A as a percent of sales is what the revenue number is going to be. We expect to continue to operate in a very disciplined fashion. Year-to-date, the biggest benefit has been from lower pension expense, which obviously doesn't necessarily reflect operating discipline. But other discretionary spending in the areas of headcount adds, third-party spend, we've been able to really focus on that intently and respond to what's been more of a challenging topline environment than we had expected to go into the fiscal year. We expect that to continue in the fourth quarter, enable us to overcome the revenue shortfall versus the previous guidance and a slightly more modest gross margin outlook to still deliver earnings in a range we had talked about previously. So I think you'll see a continuation of what we've been able to deliver on a year-to-date, Erinn.

Our next question is from Jim Duffy of Stifel.

A couple of other things. First, operationally execution has been strong, cash flow continues to be strong, the brand portfolio momentum, however, generally lacking. Don, can you make necessary investments behind the brands without SG&A deleverage as we look out to 2015?

We think we can. We think we are going to deliver a significantly higher rate of growth in 2015 than what we're going to deliver in 2014. I purposely noted in my comments that marketing spend in Q3 was flat. That's because I didn't want people to try to extrapolate adjusted SG&A being down as we were gutting the marketing budget, which we're not. So we're continuing to invest in our brands. Going forward, we have the opportunity to redeploy the realignment plan into driving both consumer direct as well as wholesale growth. We conducted an exercise here two weeks ago in which we had brands coming in and pitch their best and brightest ideas for 2015 to kind of compete for the dollars that are going to be freed up from the realignment plan benefits. It was a refreshing exercise that took place over the course of the full day. So we intend to incrementally invest in 2015, Jim, beyond what our level of investment is in 2014. But I think the approach we've taken in 2014 with year-to-date marketing spend being about flat with the prior year has been a prudent approach, given the challenge we were experiencing on the topline this year.

And then with respect to your acquisition commentary, so the existing portfolio is facing some challenges, you're going to do further restructuring. At this juncture, does it make sense to add additional brands into the mix and increase the complexity? Where is management and the Board's head with respect to that?

First of all, we have no near-term immediate plan to add any brands to the portfolio. We're certainly open-minded about the possibility now with our debt coming down that we're capable of adding brands in the portfolio, given our current capital structure. I don't think that the brand-specific challenges that we're experiencing is in any way related to the complexity of our current portfolio. The way we're structured with operating group leads, with the brands beneath them, I think we're actually structured very well to add additional brands and to further leverage our backroom infrastructure and our international infrastructure. That's not the issue. I think the brand-specific challenges we're working very hard to overcome and as Blake indicated in his response to the first question, we expect Sperry to return to growth in 2015. We expect Merrell's rate of growth, which will be on the full year basis this year kind of in the mid single-digit range to accelerate to a faster rate of growth next year. That will happen regardless of whether we add additional brands to the portfolio. So I think we're kind of looking at those things kind of separate, not in cognizant of any potential impact of the challenges in the current business as it relates to our ability to integrate a new brand. But I clearly think we have the ability to add the right medium-sized brand to the portfolio without in any way hurting the momentum we expect to generate next year on some of the larger brands in our current portfolio.

I would also say, Jim, we've proven over the last 20 years as we've added 12 brands to our portfolio that we're frankly excellent at selecting new brands and assimilating them, integrating them into the business and keeping them very distinct and letting them operating very distinctly in global markets. We probably have not acquired our last brands. We have a pretty firm set of acquisition criteria that we grade opportunities against and we're always looking for the appropriate white space opportunity.

Our next question is from Taposh Bari of Goldman Sachs.

A couple of housekeeping items on Sperry. Don, I think you had mentioned it was down 11% this quarter. What was your expectation?

About that. I never gave a specific number to you guys or investors after the Q2 earnings release. But I repeatedly said, just so everyone is clear, Q3 is going to be a very tough quarter for Sperry. It had a very strong back-to-school selling season last year, not a strong of a sell-through, which would kind of precipitate the problems that the brand had in Q4 and beyond. But we knew going into the quarter based on the order backlog that it was going to be a very tough quarter for the brand, likely down double-digit, as it was.

Can you give us a Sperry comp store sales performance by quarter for this year?

Q3 was down very low single-digits, especially in outlet and year-to-date down a little bit more than that, but not much more.

You're expecting it to be up mid single-digits in the fourth quarter, is that correct?

Yes, we are. In Q4, we're comping against the easier performance last year. The Sperry retail store started to calm down last year early Q4 and they were much stronger than that year-to-date through Q3 last year. So we have easier comps. We have the launch of apparel. The brand is restabilizing. So that's what's driving that comp store assumption.

And last one is Sperry international, I know it's a big part of the brand story. Can you just kind of frame how big international is today for that brand? I think (inaudible) would probably be best, given the differing kind of business models you operate internationally and maybe compare what that looks like versus when you first acquired it two years ago?

When we take a look back and take a look at Sperry kind of year-to-date in 2012 before we acquired the brand with right about now and year-to-date this year, as you know, it takes a little while to get ramped up. But the revenue this year is up almost 23% internationally for Sperry compared to a much lower figure in '13, for example. Units are up almost five times on a year-to-date basis what they were year-to-date in 2012. Number of countries is up from about 60 at that time to about 100 today. So we're starting to gain momentum. I would say on the international front, Sperry this year will become one of our fastest growing brands. And just to return to Sperry a little bit, to put things in perspective, we expect Sperry sales after four years of [ph] ricochet growth to be down 7% or 8% this year. But more than half of that is due to our decision to really exit one family channel account about 18 months ago. So really even with this year mostly behind Sperry, we expect Sperry's real decline this year to be more in the 3% range for the brand, certainly less than $20 million when you compare it to $2.7 billion or $2.8 billion in overall sales for the company.

And just to return to international for a quick second, the 23% growth internationally this year, is that kind of where you were expecting that growth to be? And how do we think about that growth over the next couple years? Does it accelerate or is that the natural growth rate as you expand that brand overseas?

I would say it's still not on a huge pace of business, but we would expect that that pace is probably ahead of our expectations going into the year and we would expect it to continue or maybe even accelerate. I think when you compare Sperry where it's currently at in its global cycle compared to Merrell, even last year from Q3 to Q3, Merrell had over 1,000 additional dedicated points of distribution created around the world out of a total of 2,400. So in my mind, even Merrell today is still early on its growth path internationally and of course Sperry is a couple of steps behind Merrell.

Our next question is from Mitch Kummetz of Robert Baird.

I guess I'm still a little confused that the revenue guidance has gone down $30 million. How much of that is specific to Sperry versus anything else that you're seeing within the company? And then as it relates to the Sperry guidance, I know that, Don, you previously were expecting growth in Q4 and now you're saying flat, so could you specifically address what's changed on the Sperry guidance as well.

The biggest drivers in our changed revenue guidance or lower revenue guidance not surprisingly the biggest drivers are the larger brands in the portfolio. We had slightly less fewer contract conversions for our Merrell brand in Q3. And so we've taken down our assumptions regarding at-once orders for the brands in Q4. We still expect the brand to grow mid single-digits full year and grow at a rate that's in excess of the growth rate we delivered in 2013, but lower than we had forecasted when we were going into the Q2 earnings call. Sperry wholesale was a little bit softer. The orders that came into Q3 were a little bit softer than we had expected for Q4. So our outlook for Sperry wholesale in Q4 is a little bit lighter than we had previously thought. And then finally Stride Rite children's group on the brick and mortar front in particular, we have more conservative comp store sales assumptions in Q4 related to Stride Rite than we had in July. So those three brands comprised the bulk of the changed revenue outlook from where we were in July.

And then, Blake, I think in your prepared remarks, you'd said that Merrell spring orders were up and up nicely. I don't know if that was in relation to a special collection or was that Merrell orders across the brand? So if you could clarify that. And then to the extent that you're addressing spring orders, is there any way you could talk about spring orders for the overall company or Sperry in particular? And then, Don, just lastly, sales earnings impact of the 17th week, could you quantify that for us?

With respect to the Merrell momentum right now, Merrell had several quarters now of strong double-digit growth in its outdoor performance category. So the heart of the Merrell business continues to grow very nicely at a double-digit pace. We see Capra and some other introductions, especially in the All Out collection, contributing to maintain momentum there for Merrell. Outside athletic with the shrinking a bare foot has been a different story. Lifestyle had low single-digit growth overall in Q3. But the men's business in the lifestyle, which would be the more casual segment of the line, has been also very strong. So when it comes to orders, we see this trend continuing over the next couple of quarters and then we've got obviously introductions planned for the second half of the year.

As it relates to Merrell, Mitch, we based on the backlog for the brand going into the quarter and our assumptions regarding at-once, we expect Q4 for Merrell to be the strongest rate of growth of any quarter in the fiscal year. So I think the tide is turning on Merrell and things are going to be a lot stronger in Q4 and then going into 2015. Obviously Merrell like all the brands in the portfolio is benefiting from the extra week in the fiscal year in the fourth quarter this year. It's easier to quantify that the lift on the consumer direct side, which we've done and we calculated, the extra week is worth about and given when it occurs between December 27th and January 3rd to about $10 million of incremental revenue to the quarter and the fiscal year. Minimal if any contribution to earnings, given that it's on the consumer direct side of the business, which is not the most profitable piece of our business anyway. On the wholesale side, it's more difficult to quantify. I can't say that having an extra week doesn't have any wholesale revenue benefit, but it's less easy to quantify. So we haven't really attempted to do so. So we just talked about the benefit we have calculated and estimated on the consumer direct side of business.

And as you know, we don't comment on specific order backlog or order position. I will say that it is certainly better than it was a year ago at this time.

Our next question is from Danielle McCoy of Wunderlich Securities.

Can you just talk a little bit more about some of the extensions of the lifestyle collections that you guys have been doing in some of your larger brands?

Frankly, Merrell is a good example. When we acquired the Merrell brand, it was essentially a men's hiking boot brand. Since then, about half of its business today is in the women's side of the business and many categories and performance outdoor, lifestyle, casual or even athletic. So Merrell continues to go down all three of those product development lanes and will bring forth some fresh new product in each of those particular categories. Sperry of course had ricochet growth based on the boat shoe silhouette. I will say that the boat shoe silhouette is still a staple in virtually every person's closet here in America. And there's certainly no brand drag or impediment to the Sperry brand. We've seen a pretty quick pickup on just about everything we offer in adjacent categories for Sperry. It can be winter boots. It can be women's (inaudible). It can be more casual product in both the men's and women's side. The Gold Cup collection, which has historically been really only men's, we're going to introduce women's this fall. It also has a product range that's certainly broader than just boat shoes. So again, the consumer and retailers are inviting Sperry to participate in adjacent product categories. And we plan to take advantage of that.

And could you guys just give us a little bit of color on what you are seeing in the M&A market?

Let's be frank. Things are expensive in the United States. Brands are expensive than Europe. There is increasingly foreign piles of capital that have built up over the last decade or so that are also interested in real brands. As you know, we're always interested in real authentic heritage brands. Our own research indicates that those are precisely the type of brands that appeal to today's millennial consumer. They're looking for something real that's been around, stands for something and has withstood the test of time. So there's been a pretty continuous stream over the last two years of brands and opportunities coming on the market and we really don't see that changing anytime soon.

There's no shortage of brands that are out there available to be evaluated. There's no shortage of investment bankers that want to get in front of Blake and me to pitch ideas. Some are real live deals and some are more theoretical in nature, looking to match a buyer and a seller. We've been pretty disciplined over the years with our acquisition approach. We bought Chaco and Cushe in early '09 and the next acquisition we did closed almost four years later. Not that we didn't look at anything over the interim period, but we looked at and felt it wasn't the right fit or wasn't the right price or a combination of the two. So even though we commented on our increased interest in adding other brands to portfolio, we're still going to take a very disciplined and measured approach and make sure that whatever we do add is the right brand, fits in well from a strategic standpoint and is at the right price of course.

As you know, some of the best acquisitions you do are the ones you don't do and have the fortitude to do. But certainly as we look ahead, we know that M&A and acquisitions is the core competency of the company.

Our next question is from Chris Svezia of Susquehanna Financial Group.

First, could you maybe just touch on the women's Merrell business, lifestyle in particular, just sort of what's going on there? Second question is just regards to Sperry. I guess a lot of buckets, men's, kid's, women's, retail stores. Could you just talk about kind of the growth profile for each of those as you sort of look forward? Is women's a growth driver as we go into next year, or is it really men's accelerating, kid's moderate, you've got retail stores, maybe just walk through that as well?

The Merrell women's lifestyle business has been a bit of a soft spot for the brand. Recently the brand has added some new design talent and is refocusing its efforts on the whole women's side. As you know, that business is about 50% of the Merrell total. The women's performance side has done quite nicely, but we certainly have room for improvement on the women's side. I would say we probably had some misses in just core casuals and the sandal area in particular.

Encouragingly, the active lifestyle category in total delivered growth in Q3, Chris, with strong growth on the men's side of the business more than offsetting decline on the women's side of the business, but still a lot of work to be done there and we're working hard at it.

And when we turn to Sperry, we do see growth coming from any number of areas. We're going to continue to add Sperry stores ourselves, so will our international partners. We're going to continue to grow the e-commerce side of the business. As I stated earlier, we continue to see international momentum to be very strong in Sperry and that will continue. It's not on a huge base right now, but it's almost like an annuity that builds over time for us. The men's side of the business, including the boat shoe silhouette, has been less effective this year and has been much stronger than the women's side. So we see the men's business, especially it also has an additional anchor in Gold Cup, is performing nicely when we look to the future. And as I said earlier, retailers and consumers are picking up adjacent categories as Sperry expands into adjacent footwear categories. Certainly the new leadership team is bringing a new energy, passion, focus and digging in on a new brand platform for the brand. So frankly, we still see Merrell and Sperry as our first $1 billion brands.

And then just a quick housekeeping one. Pension expense, Don, as you sort of put your hat on thinking about next year, how do we think about that?

Still too much of a fiscal year left to really give an accurate estimate or projection of next year's pension expense. Based on where market interest rates have gone, despite decent year-to-date investment returns, I would expect pension expense to be at slight to moderate headwind in 2015, but I can't be more precise on that.

I'm going to hit you on the long-term growth target for a second. As you kind of step back in theory this year as year one of this plan and you kind of think out over the next several years and the teams are kind of focused on trying to hit those revenue growth targets there mathematically call it 10% or so in the next four years ballpark, as you think about that, you still think that's realistic or do you think it's sort of people are waiting for you to maybe set the bogey a little bit lower, because this year you started at 3% to 6% growth and you're going to do 2% growth? I'm just curious about when maybe you guys could say something along the lines of, hey, let's maybe be a little bit more realistic on the growth target.

We said in the last quarter's earnings call, given the realignment plan and closing 140 retail stores, given the exit of Patagonia, which is a small brand but is still a contributor to revenue, and given the soft start to the five-year time period that we've experienced from Sperry Top-Sider, some brands have overdelivered in the first year versus the forecast from a year ago like Cat and Chaco and Keds, but Sperry being the second biggest brand in the portfolio, its soft performance kind of coming out of the gate in that five-year time period certainly has been a hindrance. We said about as clearly as we could have said in last quarter's earnings call, although we're all working hard, it's less likely we're going to hit $4.1 billion in 2018 than we had thought a year prior. And I will repeat that as clearly as I can today, although we're working to deliver as much revenue growth as we can, given the changes in the business and some macroeconomic inflicted that we're going to deliver as much revenue growth and more importantly we're going to deliver as much profit and cash flow growth as we can. When you suggest that brands are heads down working as hard as they can to deliver 2018 revenue number, the brands are working to deliver the best performance they can the next quarter and the next fiscal year. So it's our job to kind of manage what the long-range financial outlook it. Yes, the brands have long-range strategies, but I don't think they're looking at their individual brand 2018 revenue number as the one focus they have. They're looking at next quarter, next year, next season, next two or three seasons. And so I think we want to be clear today that although we're working as hard as we can to deliver as much revenue as we can each fiscal year between now and 2018, given some of the developments we've experienced, it may be below $4.1 billion. But as Blake said in his response to a question earlier, the closing retail stores and doing some of the other things we're doing and making these investments to accelerate are digital growth as well as accelerating wholesale growth, we feel like we still have a good chance of hitting the EPS target that we laid out there for 2018.

Our next question is from Laurent Vasilescu of Macquarie.

I have a question on input costs. I believe during the Investor Day, it was mentioned that Wolverine would purchase about $300 million in leather for 2013. I was curious to know what that number stands for this year and whether prices continue to creep up. How much of a potential gross margin drag is leather for FY '14?

When you look around at the commodity, oil down, cotton down or at least stabilized, any number of other categories down, not so with leather. So leather continues to remain at virtually an all-time high. We frankly don't expect that to change any time soon. We see a lot of demand for leather coming from the automobile industry and several other industries. So we're doing what you would expect us to do to offset those input costs. One, a lot of our shoes are being reengineered with materials that are not leather or not 100% leather. Frankly, the millennial consumer is growing up mostly in non-leather shoes. And we are reengineering product, not taking the quality or aesthetics out, but reengineering the product as appropriate. And then we continue to diversify our factory base. Although we are in China far below the industry average in China and we're constantly on lookout for great factories or factories that we will open in conjunction with our existing factory partners in other countries that offer us a competitive advantage. I would say that maybe we'll get fortunate on the leather side. But leather is one of the commodities that frankly has continue to decline here over the last nine months.

And as a follow-up question, I think a number of Boston-based media outlets reported that there is a potential relocation of your Lexington office to a new Boston-based location over the next year or so. Can you possibly share some insights on how we should think about this potential move? Will this move allow for greater build-out of the Boston team? Are there any SG&A implications we should consider going forward? Any color would be great.

Well, let me tell you what you all know. Real estate is expensive in Boston. So it continues to be a very hot market. We are going to build or have someone build for us technically a state-of-the-art new facility just a few miles from our existing offices in Boston. We're not taking the lead to move our Boston headquarters from the Lexington area down to downtown or some other significant move like that. The building we're in now is a good building, but it's a building that is showing its age. It's not going to be conducive to team building or some of the transportation benefits as the new building. So we're very excited. We expect to be in our new offices in Boston in maybe a little less than two years. And I know the Boston team is excited about that as well.

Potentially all the capital for the build-out is provided by tenant improvement allowance provided by the developer, so no significant capital outlay on the part of the company for the new office space. And then in terms of the lease expense going forward, once we're in the new space, it's not significant to our overall SG&A.

And our next question is from Sam Poser of Sterne, Agee.

I just have a couple questions. What percent is international right now of the total Sperry business versus what it was when you bought it?

Recorded about 5%. Year-to-date, it was 8%. So it's going up about 200 basis points as a percentage of the total wholesale from last year to this year. And Blake is right. We did say consistently or repeatedly, it was about 5% international when we bought the brand.

How does that compare to what you were thinking when you gave the five-year plan a year ago?

I think right now, the overall growth for PLG brands for this year will be about on target internationally for our long-range plan. And we'll probably have some little goal to grow a little bit faster and some that will lag a little bit from our expectations a year ago.

You've said that most likely the $4.1 billion number is off the table for various reasons. Are you going to be giving us a revised 2018 plan sometime soon?

I personally don't see us doing that anytime soon. You may have taken the number off the table. I know our team collectively kind of have growth on their mind and in their eyes. And at least Don and I are so focused on that number, even though we probably feel a little better today about the earnings and cash flow, a number that we laid out a year ago.

Well, since I have to ask a tough question, at the Goldman Sachs conference, Don said point blank that that number was probably off the table. So there's some disconnect here.

Sam, I can't control Don.

The Merrell business, from what I understand, a lot of the changes take time and the big launch of the new team's impact is 2016 more than this year, you have a lot of competition from a lot of other people that seem to be doing pretty well, especially in the lifestyle part of the business, how do we look at how you don't sort of seed business to those people and have a tougher time getting it back regardless of how good your product may be when we get to 2016?

I think you got to remember, NPD and the FDRA just did a proprietary survey of over 100 brands on the men's side and over 120 brands on the women's side and Merrell came out as the brand with the highest brand loyalty rating of all those brands that they surveyed. So there continues to be a very loyal Merrell consumer out there and our job is to expose the brand to additional consumers, because, Sam, as you know, Merrell has one of the highest behind only usually one athletic brand intent to repurchase. So fundamentally, it hasn't changed. We are going to have opportunities in 2015 with Capra collection. The Pinnacle collection is just one of our initiatives. But fundamentally, you've got to be out there with great product, tell big product marketing stories and connect with your consumers. So those basics, those fundamentals haven't changed. That's why we're looking at mid single-digit, maybe upper single-digit growth for Merrell next year.

Lastly, the currency, you said it wasn't going to be much of a small headwind. I wonder why it's only that much, given how much the European currencies have become a headwind. And how should we think about that next year too, because it appears as if it should get significantly more challenging?

It was a small tailwind in Q3, Sam. And based on where current spot rates are and the rate that we used to forecast our rest of year revenue, if current spot rates hold, there'll be no impact on our revenue forecast. We already baked in where the dollar is versus the pound, euro and Canadian dollar into our revenue forecast. Given where rates are today for those three big currencies, there would be some headwind in 2015 in terms of year-over-year, but obviously rates can change quite quickly. And we'll provide more details on that once we actually give our official guidance for revenue.

The question-and-answer session has now ended. I would now like to turn the call over to Ms. Christi Cowdin. Ms. Cowdin, you may proceed.

Thank you. On behalf of Wolverine Worldwide, I'd like to thank everyone for joining us today. And as a reminder, our conference call replay is available on our website at wolverineworldwide.com and that replay will be available through December 5, 2014. Thanks and good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.